UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended March 31, 2011
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to .
Commission File Number 333-48225
NBC Acquisition Corp.
(Exact name of registrant as specified in our charter)
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Delaware
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47-0793347 |
(State or other jurisdiction of
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(I.R.S. Employer |
incorporation or organization)
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Identification No.) |
4700 South 19th Street
Lincoln, NE 68501-0529
(Address of principal executive offices)
(402) 421-7300
(Registrants telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule
405 of the Securities Act. Yes o No þ
Indicate by check mark if the registrant is not required to file reports pursuant to Section
13 or Section 15(d) of the Act.
Yes þ No o
Indicate by check mark whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes o No o (NOTE: NBC Acquisition
Corp. is a voluntary filer and is not subject to the filing requirements of Section 13 or 15(d) of
the Securities and Exchange Act of 1934. Although not subject to these filing requirements, NBC
Acquisition Corp. has filed all reports required under Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months.)
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files). o
Yes o No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation
S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of
registrants knowledge, in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K. þ
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act. Large accelerated filer o Accelerated filer o Non-accelerated filer þ (do
not check if a smaller reporting company) Smaller reporting company o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act). Yes o No þ
Market value of the registrants voting stock held by non-affiliates of the registrant Not
applicable as registrants stock is not publicly traded.
There were 554,094 shares of common stock outstanding as of July 14, 2011.
DOCUMENTS INCORPORATED BY REFERENCE: None
Total Number of Pages: 118
Exhibit Index: Page 113
PART I.
ITEM 1. BUSINESS.
References in this Annual Report on Form 10-K to the Company refer to NBC Acquisition Corp.,
to NBC refer to Nebraska Book Company, Inc., a wholly-owned subsidiary of the Company, and to
we, our, ours, and us refer collectively to the Company and its subsidiaries, including
NBC, except where otherwise indicated and except where the context requires otherwise.
The Company was formed for the purpose of acquiring all of the outstanding capital stock of
NBC, effective September 1, 1995. The Company does not conduct significant activities apart from
its investment in NBC. Operational matters discussed in this report, including the acquisition of
college bookstores and other related businesses, refer to operations of NBC.
On March 4, 2004, Weston Presidio (Weston Presidio Capital III, L.P., Weston Presidio Capital
IV, L.P., WPC Entrepreneur Fund, L.P., and WPC Entrepreneur Fund II, L.P.) gained a controlling
interest in us through (i) the formation of two new corporations, NBC Holdings Corp. and New NBC
Acquisition Corp.; (ii) a $28.2 million equity investment by Weston Presidio in NBC Holdings Corp.,
funds for which were ultimately paid to us in the form of a capital contribution; (iii) Weston
Presidios purchase of 36,455 shares of our common stock directly from our holders; (iv) the
cancellation of 870,285 shares of our common stock upon payment by us of merger consideration of
$180.4 million to the shareholders of record for such shares; (v) the exchange of 397,711 shares of
our common stock for 512,799 shares of New NBC Acquisition Corp. capital stock in the merger of the
two entities with us as the surviving entity; and (vi) the exchange of 512,799 shares of our common
stock by Weston Presidio and current and former members of NBC management for a like number of
shares of NBC Holdings Corp. capital stock. Payment of the $180.4 million of merger consideration
was funded through proceeds from the $28.2 million capital contribution, available cash, and
proceeds from $405.0 million in new debt financing, of which $261.0 million was used to retire
certain debt instruments outstanding at March 4, 2004 or to place funds in escrow for untendered
debt instruments called for redemption on March 4, 2004 and redeemed on April 3, 2004. Throughout
this Annual Report, we generally refer to all of the steps comprising this transaction as the
March 4, 2004 Transaction.
On April 27, 2004, we filed Registration Statements on Form S-4 with the Securities and
Exchange Commission (the SEC) for purposes of registering debt securities to be issued in
exchange for the Senior Subordinated Notes and Senior Discount Notes arising out of the March 4,
2004 Transaction. The SEC declared such Registration Statements effective on May 7, 2004. All
notes were tendered in the offers to exchange which were completed on June 8, 2004.
On October 2, 2009, in conjunction with the completion of NBCs offering of the Senior Secured
Notes and payment in full of the Term Loan, NBC entered into the ABL Credit Agreement which
provided for the ABL Facility and replaced the Revolving Credit Facility (collectively the
Refinancing).
On January 8, 2010, NBC filed a Registration Statement on Form S-4 with the SEC for purposes
of registering debt securities to be issued in exchange for the Senior Secured Notes arising out of
the Refinancing. The SEC declared the Registration Statement effective on February 8, 2010. All
notes were tendered in the offer to exchange that expired on March 15, 2010.
Bankruptcy Proceedings
On June 27, 2011 (the Petition Date), we and NBC and all of its subsidiaries (the Debtors)
filed voluntary petitions for reorganization relief under chapter 11 of the United States
Bankruptcy Code (the Bankruptcy Code) in the United States Bankruptcy Court for the District of
Delaware (the Court). The reorganization cases are being jointly administered as Case No.
11-12005 under the caption in re Nebraska Book Company. Inc., et al. (hereinafter referred to as
the Chapter 11 Proceedings). We continue to operate our businesses as debtors-in-possession
under the jurisdiction of the Court and in accordance with the applicable provisions of the
Bankruptcy Code and orders of the Court.
The Chapter 11 Proceedings were initiated in response to our inability to fully refinance our
existing debt and vendors unwillingness to extend credit to us under normal terms due to
uncertainties with respect to refinancing.
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As part of the Chapter 11 Proceedings and as discussed further below, our goal is to develop
and implement a plan of reorganization that meets the standards for confirmation under the
Bankruptcy Code. Confirmation of a plan of reorganization or other arrangement could materially
alter the classifications and amounts reported in the consolidated financial statements, which
do not give effect to any adjustments to the carrying values of assets or amounts of liabilities
that might be necessary as a consequence of confirmation of a plan of reorganization or other
arrangement or the effect of any operational changes that may be implemented. Under Section 362 of
the Bankruptcy Code, the filing of a bankruptcy petition automatically stays most actions against a
debtor, including most actions to collect pre-petition indebtedness or to exercise control over our
property. Subsequent to the Petition Date, we received approval from the Court to pay or otherwise
honor certain pre-petition claims of certain critical vendors, certain customer programs, and
certain other pre-petition claims. Additionally, we have been paying and intend to continue to pay
undisputed post-petition claims in the ordinary course of business. Accordingly, although
commencement of the Chapter 11 Proceedings triggered defaults on substantially all of our debt
obligations, creditors are stayed from taking any actions as a result of such defaults. Absent an
order of the Court, substantially all of our pre-petition liabilities are subject to settlement
under a plan of reorganization. As a result of the Chapter 11 Proceedings, the realization of
assets and the satisfaction of liabilities are subject to uncertainty. Additional details
regarding the status of our Chapter 11 Proceedings are included in Note C to the consolidated
financial statements in Item 8, Financial Statements and Supplementary Data.
We are paying, and intend to continue paying, claims arising after the Petition Date in the
ordinary course of business. We are currently funding post-petition operations under a $200.0
million Superpriority Debtor-In-Possession Credit Agreement (the DIP Credit Agreement),
consisting of a $125.0 million debtor-in-possession term loan facility (the DIP Term Loan
Facility) and a $75.0 million debtor-in-possession revolving facility (the DIP Revolving
Facility). We have retained, pursuant to Court approval, legal and financial professionals to
advise us in connection with the Chapter 11 Proceedings and certain other professionals to provide
services and advice in the ordinary course of business. From time to time, we may seek Court
approval to retain additional professionals.
We have incurred and expect to continue to incur significant costs associated with the Chapter
11 Proceedings and our reorganization.
Plan of Reorganization
In order for us to emerge successfully from the Chapter 11 Proceedings, we must obtain
approval from the Court and our creditors for a plan of reorganization, which will enable us to
transition from the Chapter 11 Proceedings into ordinary course operations outside of bankruptcy.
In connection with a plan of reorganization, we also may require a new credit facility, or exit
financing. Our ability to obtain such approval and financing will depend on, among other things,
the timing and outcome of various ongoing matters in the Chapter 11 Proceedings. A plan of
reorganization determines the rights and satisfaction of claims of various creditors and security
holders, and is subject to the ultimate outcome of negotiations and Court decisions ongoing through
the date on which the plan of reorganization is confirmed.
On June 27, 2011, we filed with the Court a restructuring support agreement, which contained a
proposed plan of reorganization (the Plan). The Plan calls for the issuance of new senior
secured notes, new senior unsecured notes and the split of new common equity interests in us
between the holders of the Pre-Petition Senior Subordinated Notes (78%) and the holders of the
Pre-Petition Senior Discount Notes (22%). The ultimate recovery to creditors and/or our
shareholders, if any, will not be determined until confirmation of a plan of reorganization.
Going Concern
Our audited consolidated financial statements for the year ended March 31, 2011 have been prepared assuming that we will
continue as a going concern. However, our ability to: (i) comply with terms of the DIP Credit Agreement;
(ii) comply with various orders entered by the Court in connection with the Chapter 11 Proceedings;
(iii) maintain adequate cash on hand; (iv) generate sufficient cash from operations; (v) achieve
confirmation of a plan of reorganization under the Bankruptcy Code; (vi) obtain financing
to facilitate an exit from bankruptcy; and (vii) achieve profitability
following such confirmation is uncertain and would have a material impact on our financial statements.
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General
We sell or rent a variety of new and used textbooks and sell general merchandise, such as
apparel, general books, sundries and gift items, through our nationwide chain of bookstores on or
adjacent to college campuses. We also engage in these activities on the internet through hundreds
of websites operated by us as well as numerous third-party websites. We believe we are also one of
the largest wholesale distributors of used college textbooks in North America, offering
approximately 107,000 textbook titles and selling over 6.1 million books annually, primarily to
bookstores serving campuses located in the United States. We are also a provider of distance
education materials to students in non-traditional courses, which include correspondence and
corporate education courses. Furthermore, we provide the college bookstore industry with a variety
of services including proprietary information and e-commerce systems, in-store promotions, buying
programs, and consulting services. With origins dating to 1915 as a single bookstore operation, we
have built a consistent reputation for excellence in order fulfillment, shipping performance and
customer service.
We entered the wholesale used textbook market following World War II, when the supply of new
textbooks could not meet the demand created by the return of ex-GI students. We became a national,
rather than a regional, wholesaler of used textbooks as a result of our purchase of The College
Book Company of California. During the 1970s, we continued our focus on the wholesale business.
However, realizing the synergies that exist between wholesale operations and college bookstore
operations, in the 1980s, we expanded our efforts in the college bookstore market to primarily
operate bookstores on or near larger campuses, typically where the institution-owned college
bookstore was contract-managed by a competitor or where we did not have a significant wholesale
presence. In the last several fiscal years, we have revised our college bookstore strategy to
expand our efforts in the contract-management of on-campus institutional bookstores. Today, we
service the college bookstore industry through our Bookstore, Textbook, and Complementary Services
Divisions.
Bookstore Division. College bookstores are a primary outlet for sales and rental of new and
used textbooks to students. We also sell a variety of other merchandise including apparel, general
books, sundries, and gift items. In addition to in-store sales and rentals, we sell and rent
textbooks and sell other merchandise on the internet through our own bookstores websites as well
as numerous third-party websites. As of March 31, 2011, we operated 292 college bookstores on or
adjacent to college campuses. Of these 292 bookstores, 154 were leased from the educational
institution that they serve (also referred to as contract-managed) and 138 were owned or leased
off-campus bookstores. On May 1, 2006, we acquired 101 college bookstore locations, 98 of which
were contract-managed, through the acquisition of all of the outstanding stock of College Book
Stores of America, Inc. (CBA). CBA began providing contract-management services to small to
medium-sized colleges and universities nationwide in 1984.
Our college bookstores are located on or near college campuses of all sizes, including some of
the nations largest campuses, such as: Arizona State University; Ohio State University; University
of Florida; Michigan State University; Texas A&M University; University of Central Florida;
Pennsylvania State University; University of Michigan; Florida State University; and University of
Arizona. In addition to generating profits, our Bookstore Division provides an exclusive source of
used textbooks for sale across our wholesale distribution network.
Textbook Division. We believe we are one of the largest wholesale distributors of used college
textbooks in North America. Our Textbook Division consists primarily of selling used textbooks to
college bookstores and on the internet through third-party websites, buying them back from students
or college bookstores at the end of each school semester and then reselling them to college
bookstores and on the internet. We purchase used textbooks from and resell them to college
bookstores on or near college campuses of all sizes, including many of the nations largest
campuses, such as: University of Virginia; Oregon State University; University of Texas; University
of Illinois; University of Washington; University of Southern California; and Long Beach State
University. Historically, because the demand for used textbooks has consistently outpaced the
supply, Textbook Division sales have been determined primarily by the amount of used textbooks that
we could purchase. Our strong relationships with the management of college bookstores nationwide
have provided important access to valuable market information regarding the campus-by-campus supply
and demand of textbooks, as well as an ability to procure large quantities of a wide variety of
textbooks. We provide an internally-developed Buyers Guide to our Textbook Division customers.
This guide lists details such as author, new copy retail price, and our repurchase price for
approximately 51,000 textbook titles.
Complementary Services Division. With our acquisition of Specialty Books, Inc. (Specialty
Books) in May 1997, we entered the distance education market, which consists of providing
education materials to students in private high schools, non-traditional colleges and other courses
(such as correspondence courses, continuing and corporate education courses and courses offered
through electronic media such as the internet).
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Other services offered to college bookstores include the sale of computer hardware and
software, such as our turnkey bookstore management software that incorporates point of sale,
inventory control and accounting modules, and related maintenance contracts. We have installed our
proprietary total store management system at over 980 college bookstore locations, and we have an
installed base of approximately 190 college bookstore locations for our textbook management control
systems. In total, including our own bookstores, almost 1,200 college bookstore locations use our
bookstore management software products.
On July 1, 2003, we acquired all of the outstanding shares of common stock of
TheCampusHub.com, Inc. (CampusHub), an entity that was affiliated with us through common
ownership. CampusHub is no longer separately incorporated and is instead represented as our
internet services division, a part of our Complementary Services Division. Our internet services
division provides college bookstores with our WebPRISM product, a proprietary software platform
designed to provide bookstores a way to sell in-store inventory and virtual brand name merchandise
over the internet. This technology is utilized at approximately 660 bookstores, including our own
bookstores.
We also provide centralized buying, consulting and store design services to assist college
bookstores with their operations.
Industry Segment Financial Information
Revenue, operating profit or loss, and identifiable assets attributable to each of our
reportable segments are disclosed in the notes to the consolidated financial statements presented
in Item 8, Financial Statements and Supplementary Data of this Annual Report on Form 10-K. We make
our periodic and current reports available, free of charge, through
www.nebook.com as soon as
reasonably practicable after such material is electronically filed with the SEC. Information
contained on our website is not a part of this Annual Report on Form 10-K.
The website for documents relating to the Chapter 11 Proceedings is located at
www.kccllc.net/nbc.
Business Strategy
Our objective is to strengthen our position as a leading provider of products and services to
the college bookstore market, thereby increasing revenue and cash flow. In order to accomplish our
goal, we intend to pursue the following strategies:
Capitalize on college bookstore opportunities. We intend to increase revenues for our
Bookstore Division by opening or contract-managing additional bookstores at selected college
campuses and by offering enhanced textbook rental programs, digital content options, general
merchandise, specialty products and services at our existing bookstores. We intend to pursue
revenue growth and expand the buyback of used textbook inventory through the increased use of
technology. We intend to enhance our ability to capitalize on internet activity by continuing to
sell on third-party marketplaces. We also intend to increase both in-store and internet
transactions through the introduction and use of a national brand, Neebo, and a national website,
Neebo.com. Neebo.com currently enables us to have one website which combines the inventories of
all of our bookstores into a single presentation. Moving forward, our individual bookstore
websites will become a part of the overall Neebo.com website, increasing efficiency and
effectiveness of our online offerings.
Re-establish growth in the Textbook Division. We expect the Textbook Division to continue to
be a primary contributor of revenues and cash flows, primarily as a result of an expected increase
in college enrollments, continued utilization of used textbooks, and through the expansion of our
own Bookstore Division, which should provide an additional supply of used textbooks. In fiscal
year 2011, we launched a program to assist customers in renting textbooks in their bookstores and
in turn, these customers agree to supply us with the textbooks. Additionally, our commission
structure is designed to reward customers who make a long-term commitment to supplying us with a
large portion of their textbooks, and we continue to change and enhance our marketing campaign to
increase student awareness of the benefits of buying and selling used textbooks. Finally, we
expect to continue to utilize technology to enhance our ability to acquire and sell used textbooks
in this division.
Increased market penetration through technology solutions. We intend to continue generating
incremental revenue through the sale of our turnkey bookstore management software that incorporates
point of sale, inventory control and accounting modules. The installation of our software, along
with e-commerce technology offered through our internet services division also increases the
channels through which we can access the college and university market.
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Expansion of other services programs. We intend to continue to develop and provide other
services that enhance the college bookstore business, such as distance education distribution, our
centralized buying group, store design consulting and other technology-related programs.
Industry Overview
Based on recent industry trade data from the National Association of College Stores, we
believe the college bookstore industry remains strong, with approximately 4,500 college bookstores
generating annual sales of approximately $10.3 billion in the 2009-10 academic year to college
students and other consumers in the United States. Sales of textbooks and other education
materials used for classroom instruction comprise approximately sixty-two percent of that amount.
We expect this market will continue to grow as a result of continuing increases in enrollment at
U.S. colleges as estimated by the U.S. Department of Education. The United States Department of
Education projects that total enrollment in the United States colleges will increase from 18.2
million in 2008 to 19.0 million in 2012.
College bookstore market. College bookstores generally fall into three categories:
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institutional bookstores that are primarily owned and operated by institutions of
higher learning, generally located on-campus; |
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contract-managed bookstores owned by institutions of higher learning and managed by
outside, private companies, typically found on-campus; and |
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independent privately owned and operated bookstores, generally located off campus. |
Wholesale textbook market. We believe that used textbooks will continue to be attractive to
both students and college bookstores. Used textbooks provide students with a lower-cost
alternative to new textbooks and bookstores typically achieve higher margins through the sale of
used rather than new textbooks.
The pricing pattern of textbook publishing accounts for a large part of the growth of the used
textbook market. Because of copyright restrictions, each new textbook is produced by only one
publisher, which is free to set the new copy retail price and discount terms to bookstores. Based
on our experience, publishers generally offer new textbooks at prices that enable college
bookstores to achieve a gross margin of 23.0% to 25.0% on new textbooks. Historically, the high
retail costs of new textbooks and the higher margins achieved by bookstores on the sale of used
textbooks have encouraged the growth of the market for used textbooks.
The used textbook cycle begins with new textbook publishers, who purposely plan obsolescence
into the publication of new textbooks. Generally, new editions of textbooks are produced every two
to four years. In the first year of a new edition, there are few used copies of a new edition
available. In the second and third years, used textbooks become increasingly available.
Simultaneously, publishers begin to plan an updated edition. In years four and beyond, at the end
of the average life cycle of a particular edition, as publishers cut back on original production,
used textbooks generally represent a majority (in unit terms) of the particular edition in use.
While the length of the cycle varies by title (and sometimes is indefinite, as certain titles are
never updated), the basic supply/demand progression remains fairly consistent.
College bookstores begin to place orders with used textbook wholesalers once professors
determine which textbooks will be required for their upcoming courses, usually by the end of May
for the fall semester and the end of November for the spring semester. Bookstore operators must
first determine their allocation between new and used copies for a particular title but, in most
cases, they will order an ample supply of used textbooks because: (i) used textbook demand from
students is typically strong and consistent; (ii) many operators only have access to a limited
supply from wholesalers and believe that not having used textbook alternatives could create
considerable frustration among students and with the college administration; (iii) bookstore
operators earn higher margins on used textbooks than on new textbooks; and (iv) both new and used
textbooks are sold with return privileges, eliminating any overstock risk (excluding freight
charges) to the college bookstore.
New textbook ordering usually begins in June (for the fall semester), at which time the store
operator augments its expected used textbook supply by ordering new textbooks. By this time,
publishers typically will have just implemented their annual price increases. These regular price
increases allow us and our competitors to buy used textbooks based on old list prices (in May) and
to almost simultaneously sell them based on new higher prices, thereby creating an immediate margin
increase.
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While price is an important factor in the store operators purchasing decision, available
supply, as well as service, usually determine with which used textbook wholesaler a college
bookstore will develop a strong relationship. Used textbook wholesalers that are able to
significantly service a college bookstore account typically receive preferential treatment from
store operators, both in selling and in buying used textbooks. Pure exclusive supply arrangements
in our market are rare; however, in the past nine to ten fiscal years, we have been marketing
certain supply programs to the industry. These programs reward customers who make a long-term
commitment to supplying us with a large portion of their books through enhanced commissions,
express returns, and book-buy promotion ideas and marketing materials. At the end of fiscal year
2011, over 460 bookstores were participating in these programs. Since we are usually able to sell
or rent a substantial majority of the used textbooks we are able to purchase, our ability to obtain
sufficient supply is a critical factor in our success.
Products and Services
Bookstore Division. As of March 31, 2011, we operated 292 college bookstores on or adjacent
to college campuses. These bookstores sell and rent a wide variety of used and new textbooks and
sell general books and assorted merchandise, including apparel, sundries and gift items. Over the
past three fiscal years, external customer revenues (revenues excluding intercompany revenues) of
our bookstores from activities other than used and new textbook sales and rentals have been between
16.6% and 19.1% of total revenues. We have been, and intend to continue, selectively expanding our
product offerings at our bookstores in order to increase revenues and profitability. We have also
installed, and are continually improving, software that provides e-commerce capabilities in all of
our own bookstores, thereby allowing our bookstores to further expand product offerings and compete
with other online textbook and general merchandise sellers. All of our bookstores sell and rent
through Neebo.com. All of our bookstores sell and rent through their own websites which will
continue as part of the new branded website, Neebo.com. In addition, many stores also sell
textbooks and general merchandise through third-party websites that are popular among college
students such as Amazon.com and Half.com.
Textbook Division. Our Textbook Division is engaged in the procurement and redistribution of
used textbooks on college campuses primarily across the United States and through third-party
websites. The portion of the used textbook business that our division operates in is limited to
certain stores, certain textbooks and certain third-party websites. In general, the portion of the
college bookstore market that our Textbook Division cannot access includes those contract-managed
stores that are not operated by us that sell their used textbooks to affiliated companies,
institutional and independent bookstores, to the extent that such used textbooks are repurchased
from students and are retained by the bookstore for resale without involving a wholesaler and
third-party websites that we do not buy and sell used textbooks through.
We publish the Buyers Guide, which lists approximately 51,000 textbooks according to author,
title, new copy retail price, and our repurchase price. The Buyers Guide is an important part of
our inventory control and textbook procurement system. We update and reprint the Buyers Guide nine
times each year and make it available in both print and various electronic formats, including on
our proprietary software applications. A staff of dedicated professionals gathers information from
all over the country in order to make the Buyers Guide into what we believe to be the most
comprehensive and up-to-date pricing and buying aid for college bookstores. We also maintain a
database of approximately 169,000 titles in order to better serve our customers.
Complementary Services Division. Through Specialty Books, we have access to the market for
distance education products and services. Currently, we provide students at approximately 11
colleges and private high schools with textbooks and materials for use in distance education and
other education courses, and we are a provider of textbooks to non-traditional programs and
students such as correspondence or corporate education students. We believe the fragmented distance
education market represents an opportunity for us to leverage our fulfillment and distribution
expertise in a growing sector of the industry. Beyond textbooks, we offer services and specialty
course materials to the distance education marketplace. Students are provided a web portal
allowing them a secure and easy-to-use method for obtaining their course materials. Over the past
three fiscal years, external customer revenues of Specialty Books have been between 42.3% and 54.9%
of total Complementary Services Division revenues.
Other services offered to college bookstores include services related to our turnkey bookstore
management software that incorporates point of sale, inventory control and accounting modules, the
sale of other software and hardware, and the related maintenance contracts. These services generate
revenue and assist us in gaining access to new sources of used textbooks. We have installed our
proprietary total store management system at over 980 college bookstore locations, and we have an
installed base of approximately 190 college bookstore locations for our textbook management control
systems. In total, including our own bookstores, almost 1,200 college bookstore locations use our
bookstore management software products. In addition, we have developed software
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for e-commerce
capabilities, which allows college bookstores to launch their own e-commerce site and effectively compete against other online textbook and general merchandise sellers by offering
textbooks and both traditional and non-traditional store merchandise online. Presently, there are
approximately 660 stores, including our own stores, licensing our e-commerce technology. We also
offer a digital delivery solution which allows a college bookstore to offer students the option of
purchasing e-books in addition to new and used textbooks. On April 14, 2008, we announced an
agreement with CourseSmart, a comprehensive supplier of digital course materials, which establishes
us as CourseSmarts preferred supplier of e-books to the college bookstore community. Further, on
June 21, 2011, we announced a partnership with SharedBook, Inc., an organization focused on the
assembly and composition of custom digital content, which provides us with new capabilities in the
customization and distribution of digital course materials.
Connect 2 One is a buying group which has established substantial purchasing clout by
aggregating the purchasing power of approximately 660 participating stores in addition to our own
bookstores (C2O). Through C2O, we are able to offer a variety of products and services to
participating college bookstores. C2O negotiates apparel, supplies, gifts, and general merchandise
discounts and develops and executes marketing programs for its membership. Other C2O marketing
services include a freight savings program, a credit card processing program, a shopping bag
program, and retail display allowances for magazine displays. Additionally, the C2O staff of
experienced professionals consults with the management and buyers of member bookstores. Consulting
services offered include strategic planning, store review, merchandise assortment planning, buyer
training, and help with other operational aspects of the business. While consulting has
historically represented a relatively small component of C2Os business, it is nonetheless
strategically important to the ongoing success of this aspect of our business.
We also provide consulting and store design services to assist college bookstores in store
presentation and layout.
Business Description
Bookstore Division. An important aspect of our business strategy is a program designed to
reach new customers through the opening of bookstores adjacent to college campuses or the
contract-management of bookstores on campus. In addition to generating sales or rentals of new and
used textbooks and sales of general merchandise, these outlets enhance our Textbook Division by
increasing the inventory of used books purchased from the campus.
A desirable campus for a company-operated, off-campus college bookstore is one on which our
Textbook Division does not currently buy or sell used textbooks either because a competitor
contract-manages the colleges bookstore or the college bookstore does not have a strong
relationship with us. We generally will not open a location on a campus where we already have a
strong relationship with a college bookstore serving that campus because some college bookstores
may view having a competing location as a conflict of interest. A desirable campus for
contract-management is one where the current contract-management service is being provided by a
competitor of ours and the contract is expiring.
We tailor each of our own bookstores to fit the needs and lifestyles of the campus on which it
is located. Individual bookstore managers are given significant planning and managing
responsibilities, including, hiring employees, controlling cash and inventory, and purchasing and
merchandising product. We have staff specialists, or contracts with external specialists, to
assist individual bookstore managers in such areas as store planning, merchandise purchasing and
layout, inventory control and media buying.
As of March 31, 2011 we operated 292 college bookstores nationwide, having expanded from 139
bookstores at the beginning of fiscal year 2007. During fiscal year 2011, we completed the
acquisition of six bookstore locations, initiated the contract-management of thirteen bookstore
locations and established the start-up of two bookstore locations.
9
The table below highlights certain information regarding our bookstores added and closed in
the respective year ending March 31.
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bookstores |
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|
|
|
|
|
Bookstores Open |
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|
Bookstores |
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|
Lost/Closed |
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|
Bookstores at |
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|
|
at Beginning of |
|
|
Added During |
|
|
During Fiscal |
|
|
End of Fiscal |
|
Fiscal Year |
|
Fiscal Year |
|
|
Fiscal Year |
|
|
Year |
|
|
Year |
|
2007 |
|
|
139 |
|
|
|
120 |
|
|
|
15 |
|
|
|
244 |
|
2008 |
|
|
244 |
|
|
|
23 |
|
|
|
7 |
|
|
|
260 |
|
2009 |
|
|
260 |
|
|
|
24 |
|
|
|
7 |
|
|
|
277 |
|
2010 |
|
|
277 |
|
|
|
20 |
|
|
|
17 |
|
|
|
280 |
|
2011 |
|
|
280 |
|
|
|
21 |
|
|
|
9 |
|
|
|
292 |
|
We plan to continue increasing the number of bookstores in operation. Our focus will be
to pursue opportunities to contract-manage additional institutional stores. In determining to
pursue opportunities to contract-manage a campus bookstore, we look at: (i) the size of the market;
(ii) the competitive status of the market; (iii) the availability of top quality management; and
(iv) certain other factors, including personnel costs. As mentioned previously, on May 1, 2006,
we acquired 101 college bookstore locations, 98 of which were contract-managed, through the
acquisition of all of the outstanding stock of CBA.
Wholesale Procurement and Distribution. Historically, because the demand for used textbooks
has consistently exceeded supply, our sales have been primarily determined by the amount of used
textbooks that we can purchase. As a result, our success has depended primarily on our inventory
procurement, and we continue to focus our efforts on obtaining inventory. In order to ensure our
ability to both obtain and redistribute inventory, our Textbook Division strategy has emphasized
establishing and maintaining strong customer and supplier relationships with college bookstores
through our employee account representatives. These 26 account representatives (as of March 31,
2011) are responsible for procuring used textbooks, marketing our services on campus, purchasing
overstock textbooks from bookstores and securing leads for sale of our systems products. We have
been able to maintain a competitive edge by providing superior service, made possible primarily
through the development and maintenance of ready access to inventory, information and supply.
Other components of the Textbook Division strategy and its implementation include: (i) selectively
paying a marginal premium relative to competitors to entice students to sell back more textbooks to
us; (ii) gaining access to competitive campuses (where the campus bookstore is contract-managed by
a competitor) by opening off-campus, company-owned college bookstores; (iii) using technology to
gain efficiencies and to improve customer service; (iv) maintaining a knowledgeable and experienced
sales force that is customer-service oriented; (v) providing working capital flexibility for
bookstores making substantial purchases; (vi) establishing long-term supply arrangements by
rewarding customers who make a long-term commitment to supplying us with a large portion of their
textbooks; (vii) providing working capital flexibility for bookstores that offer textbook rentals
to students and that agree to supply us with textbooks, and (viii) purchasing and selling textbooks
over the internet through third-party websites.
The two major used textbook purchasing seasons are at the end of each academic semester, May
and December. Although we make textbook purchases during other periods, the inventory purchased in
May, before publishers announce their price increases in June and July, allows us to purchase
inventory based on the lower retail prices of the previous year. The combination of this purchasing
cycle and the fact that we are able to sell our inventory in relation to retail prices for the
following year permits us to
realize additional gross profit. We advance cash to our representatives during these two
periods, and the representatives in turn buy textbooks directly from students.
After we purchase the textbooks, we arrange for shipment to our warehouse in Nebraska via
common carrier. At the warehouse, we refurbish damaged textbooks and categorize and shelve all
other textbooks in a timely manner, and enter them into our online inventory system.
Customers place orders by phone, mail, fax or other electronic method. Upon receiving an
order, we remove the textbooks from available inventory and hold them for future shipping.
Customers may generally return textbooks within 60 days after the start of classes (90 days for
certain customers participating in the exclusive supply program). External customer returns over
the past three fiscal years have averaged approximately 24.6% of sales and generally are
attributable to course cancellations or overstocking. The majority of returns are textbooks that
we are able to resell for the next semester.
10
Information Technology. We believe that we can enhance efficiency, profitability, and
competitiveness through investments in technology. Because our solutions create a competitive
advantage, establish efficiencies, and ensure cost-effectiveness of both our operations and the
operations of our bookstore customers and suppliers, we have patents on some of our proprietary
software applications and some are currently in patent pending status with the United States Patent
and Trademark Office. Additionally, we have registered trademarks for many of our software product
names where brand recognition may be an important factor.
The center of our technology infrastructure revolves around PRISM, WinPRISM and WebPRISM, our
proprietary college store management, textbook management, point of sale, inventory control
systems, and e-commerce software. With more than a combined 25 years of availability in the
marketplace, these proven software applications are maintained and continuously enhanced by a
dedicated team of development and support professionals. Our technology operations process order
entry, control inventory, generate purchase orders and customer invoices, generate various sales
reports, and process and retrieve textbook information. In addition, we have developed integrated
e-commerce software and service solutions allowing college bookstores to launch their own
e-commerce site and effectively compete against other online textbook and general merchandise
sellers by offering both print and digital textbooks and both traditional and non-traditional store
merchandise online. We also develop, license or obtain certain rights related to other software
designed to strengthen our e-commerce capabilities, including the capability for our bookstores to
efficiently buy and sell inventory through third-party websites that are popular among college
students such as Amazon.com and Half.com. In January of 2011, we launched our national online
presence, Neebo.com, which consolidates our bookstore inventories onto one website and allows our
bookstores to transact business online more efficiently and effectively.
In addition to using our technology for our own benefit through management and inventory
control, we license the use of certain technology to bookstores. The use of our software by
bookstore customers and suppliers helps solidify the business relationship, resulting in increased
sales and access to additional inventory.
We conduct training courses for all systems users online and at our headquarters in Lincoln,
Nebraska. Classes are small and provide hands on training for the various systems. Printed
reference manuals and training materials accompany each system. The customer support call center is
staffed with approximately 60 experienced personnel. Support is offered via website, e-mail, and
toll-free phone numbers. While support hours vary per product and time of year, after-hours pager
support is available for mission-critical systems.
Beginning late in fiscal year 2008, we embarked on a project to replace our
internally-developed general ledger system with a general ledger/business planning and
consolidation solution from SAP. During fiscal year 2009, the new solution was put into place and
utilized for internal management reporting and the fiscal year 2010 budgeting process. The new
solution was fully integrated in fiscal year 2010 and, among other things, provides us with greater
flexibility in recording and analyzing our operating results and streamlining our budgeting process
and is utilized for external financial reporting purposes.
Customers
Our college bookstores are located at college campuses of all sizes, including some of the
nations largest campuses, such as: Arizona State University; Ohio State University; University of
Florida; Michigan State University; Texas A&M University; University of Central Florida;
Pennsylvania State University; University of Michigan; Florida State University; and University of
Arizona.
We sell our Textbook and certain Complementary Services Division products and services to
college bookstores throughout North America, primarily throughout the United States. Our Textbook
Division purchases from and resells used textbooks to college bookstores at college campuses of all
sizes, including many of the nations largest campuses, such as: University of Virginia; Oregon
State University; University of Texas; University of Illinois; University of Washington; University
of Southern California; and Long Beach State University. Our 25 largest Textbook Division
customers accounted for approximately 2.7% of our fiscal year 2011 consolidated revenues. No
single Textbook Division customer accounted for more than 1.0% of our fiscal year 2011 consolidated
revenues.
Our distance education program is, among other things, a primary supplier of textbooks and
educational material to students enrolled in online courses offered through approximately 11
colleges and private high schools. For the fiscal years ended March 31, 2011, 2010 and 2009, one
institution accounted for approximately 71%, 68% and 69%, respectively, of distance education
program external customer revenues.
11
No single customer accounted for more than 10.0% of our consolidated revenues in fiscal year
2011, 2010 or 2009.
Competition
We compete with a variety of other companies and also individuals, all of whom seek to provide
products and/or services to the college marketplace. Our main corporate competitors, who provide
products and services to colleges and universities, college bookstores and directly to students,
are Follett Higher Education Group (Follett) and MBS Textbook Exchange/Barnes & Noble College
Booksellers (MBS). MBS Textbook Exchange and Barnes & Noble College Booksellers are affiliated
companies with certain common ownership.
Our Bookstore Division competes with:
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Follett, MBS and a number of smaller companies for the opportunity to contract-manage
institutional college bookstores (Follett and MBS contract-manage more than 800 and 600
stores, respectively); |
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other college bookstores located at colleges and universities that we serve; |
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a number of entities that rent or sell textbooks, sell e-books, other digital content
and other merchandise directly to students through e-commerce bypassing the traditional
college bookstore; |
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student-to-student transactions that take place on campus and over the internet; and |
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course packs and electronic media as a source of textbook information, such as
on-line resources, e-books, print-on-demand textbooks and CD-ROMs which may replace or
modify the need for students to purchase textbooks through the traditional college
bookstore. |
Our Textbook Division competes in the used textbook market, which includes the purchase and
resale of used textbooks. We compete with:
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college bookstores who normally repurchase textbooks from students to be reused on
that campus the following semester or term; |
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student-to-student transactions that take place on campus and over the internet; |
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other wholesalers who purchase used textbooks from students and then resell them to
other college bookstores; and |
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a number of individuals and companies that buy textbooks directly from students
through e-commerce, or in person, bypassing the traditional college bookstores who are
the Textbook Divisions suppliers and customers. |
Our Textbook Division competes in the wholesale business with Follett and MBS, and certain
smaller regional companies including Budgetext, Texas Book Company, Tichenor College Textbook
Company, and South Eastern Book Company. We believe that our market share of the independent and
non-contract-managed institutional stores is comparable to that of Follett and MBS individually.
Many of Folletts and some of MBSs college bookstores are located on smaller campuses. The size
of the campus and their presence there have precluded us from entering these markets, which in turn
affects both our ability to buy books and our ability to add new accounts.
Our Complementary Services Division competes with:
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MBS in the sale and installation of college bookstore information technology; |
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MBS in the distance education textbook distribution market; |
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college bookstores that provide their own e-commerce solution in competition with our
internet services division; |
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the Independent College Bookstore Association (ICBA) in the centralized buying
service business (participation by college bookstores in C2Os or ICBAs centralized
buying service is voluntary, and college bookstores may, and some do, belong to both
buying associations); and |
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a variety of smaller organizations and individuals involved in these businesses and
others such as marketing services and consulting services. |
12
Governmental Regulation
We are subject to various federal, state and local health and safety laws and regulations.
Generally, these laws establish standards for vehicle and employee safety. These laws include the
Occupational Safety and Health Act. Future developments, such as stricter employee health and
safety laws and regulations thereunder, could affect our operations. We do not currently
anticipate that the cost of our compliance with, or of any foreseeable liabilities under, employee
health and safety laws and regulations will have a material adverse affect on our business or
financial condition.
Insurance
We maintain general liability, property, workers compensation and other insurance
in amounts and on terms that we believe are customary for companies similarly situated. In
addition, we maintain excess insurance where we reasonably believe it is cost effective.
Employees
As of March 31, 2011 we had a total of approximately 2,700 employees, of which approximately
1,100 were full-time, approximately 700 were part-time and approximately 900 were temporary. We
have no unionized employees and believe that our relationship with our employees is satisfactory.
In view of the seasonal nature of our Textbook Division, we use seasonal labor to improve
operating efficiency. We employ a small number of flex-pool workers who are cross-trained in a
variety of warehouse functions. Temporary employees augment the flex-pool to meet periodic labor
demands.
Geographic Financial Information
Revenues from external customers and long-lived assets, all of which are attributable to
domestic operations, are disclosed in the notes to the consolidated financial statements presented
in Item 8, Financial Statements and Supplementary Data of this Annual Report on Form 10-K.
ITEM 1A. RISK FACTORS.
This Annual Report on Form 10-K contains forward-looking statements within the meaning of the
Securities Litigation Reform Act of 1995 that involve risks and uncertainties. Our actual results
could differ materially from those anticipated in these forward-looking statements as a result of a
number of factors, including, but not limited to, those set forth in the following cautionary
statements and elsewhere in this Annual Report on Form 10-K.
We are subject to a number of risks and uncertainties associated with the Chapter 11
Proceedings. For the duration of the Chapter 11 Proceedings, our operations and our ability to
execute our business strategy will be subject to the risks and uncertainties associated with our
being in bankruptcy. These risks include:
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our ability to obtain approval of the Court with respect to motions filed in the
Chapter 11 Proceedings from time to time; |
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our ability to obtain and maintain normal trade terms with suppliers and service
providers and maintain contracts that are critical to our operations; |
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our ability to attract, motivate and retain key employees; |
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our ability to attract and retain customers; |
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our ability to attract and retain the contract-management of on-campus bookstores; |
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our ability to fund and execute our business plan; and |
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our ability to obtain creditor and Court approval for, and then to consummate, a plan
of reorganization to emerge from bankruptcy. |
13
We will also be subject to risks and uncertainties with respect to the actions and decisions
of the creditors and third parties who have interests in the Chapter 11 Proceedings that may be
inconsistent with our restructuring and business goals.
These risks and uncertainties could affect our business and operations in various ways. For
example, negative events or publicity associated with the Chapter 11 Proceedings could adversely
affect our sales and relationships with our customers, as well as with our suppliers, employees and
the administration of colleges where we operate the on-campus bookstore, which in turn could
adversely affect our operations and financial condition. In addition, pursuant to the Bankruptcy
Code, we need approval of the Court for transactions outside the ordinary course of business, which
may limit our ability to respond timely to certain events or take advantage of certain
opportunities. Because of the risks and uncertainties associated with the Chapter 11 Proceedings,
we cannot predict or quantify the ultimate impact that events occurring during the reorganization
process will have on our business, financial condition and results of operations.
As a result of the Chapter 11 Proceedings, the realization of assets and the satisfaction of
liabilities are subject to uncertainty. While operating as debtors-in-possession, and subject to
approval of the Court, or otherwise as permitted in the normal course of business, we may sell or
otherwise dispose of assets and liquidate or settle liabilities for amounts other than those
reflected in the consolidated financial statements in Item 8, Financial Statements and
Supplementary Data. Further, a confirmed plan of reorganization could materially change the
amounts and classifications of assets and liabilities reported in the consolidated financial
statements included in Item 8, Financial Statements and Supplementary Data. The historical
consolidated financial statements do not include any adjustments to the reported amounts of assets
or liabilities that might be necessary as a result of confirmation of a plan of reorganization.
Our audited consolidated financial statements for the year ended March 31, 2011 have been prepared assuming that we will
continue as a going concern. However, our ability to: (i) comply with terms of the DIP Credit Agreement (ii)
comply with various orders entered by the Court in connection with the Chapter 11 Proceedings;
(iii) maintain adequate cash on hand; (iv) generate sufficient cash from operations; (v) achieve
confirmation of a plan of reorganization under the Bankruptcy Code; (vi) obtain financing to facilitate
an exit from bankruptcy; and (vii) achieve profitability
following such confirmation is uncertain and would have a material impact on our financial statements.
There can be no assurance that we will be able to remain in compliance with the requirements
of the DIP Credit Agreement or that the lending commitments under the DIP Credit Agreement will not
be terminated by our lenders. In addition to standard financial covenants and events of default,
the DIP Credit Agreement provides for events of default specific to the Chapter 11 Proceedings,
including, among others, defaults arising from our failure to maintain certain financial covenants
including a minimum liquidity and cumulative consolidated EBITDA or our failure to obtain Court
approval for a plan of reorganization acceptable to our lenders. The occurrence of an event of
default under the DIP Credit Agreement would give our lenders the right to terminate their lending
commitments and exercise other remedies available to them under the DIP Credit Agreement.
If the DIP Credit Agreement is terminated or our access to funding is restricted or
terminated, it is likely that we would not have sufficient cash available to meet our operating
needs or satisfy our obligations as they become due. In this event, we would
be required to seek a sale of all or a portion of our assets pursuant to Section 363 of the
Bankruptcy Code or to convert the Chapter 11 Proceedings into liquidation under chapter 7 of the
Bankruptcy Code.
We face competition in our markets, which could adversely impact our revenue levels, profit
margins and ability to acquire an adequate supply of used textbooks. Our industry is highly
competitive. A large number of actual and potential competitors exist, some of which are larger
than us and have substantially greater resources than us. Revenue levels and profit margins could
be adversely impacted if we experience increased competition in the markets in which we currently
operate or in markets in which we will operate in the future.
14
We are experiencing growing competition from alternative sources of textbooks for students and
alternative media (such as on-line resources; publishers selling or renting directly to students;
print-on-demand textbooks; CD-ROMs; and websites designed to rent or sell textbooks and sell
e-books, other digital content and other merchandise directly to students) and from the use of
course packs (which are collections of copyrighted materials and professors original content which
are produced by college bookstores and sold to students), all of which have the potential to reduce
or replace the need for textbooks sold through college bookstores. A substantial increase in the
availability or the acceptance of these alternatives as a source of textbooks and textbook
information could significantly reduce college students use of college bookstores and/or the use
of traditional textbooks and thus adversely impact our revenue levels and profit margins.
We are also experiencing growing competition from technology-enabled student-to-student
transactions that take place over the internet. These transactions, whereby a student enters into
a transaction directly with another student for the sale and purchase of a textbook, provide
competition by reducing the supply of textbooks available to us for purchase and by reducing the
sale of textbooks through college bookstores. While these transactions have occurred for many
years, prior to the internet these transactions were limited by geography, a lack of information
related to pricing and demand, and other factors. A significant increase in the number of these
transactions could adversely impact our revenue levels and profit margins.
Over the years, an increasing number of institution-owned college bookstores have decided to
outsource or contract-manage the operation of their bookstores. The leading managers of these
bookstores include two of our principal competitors in the wholesale textbook distribution
business. Contract-managed bookstores primarily purchase their used textbook requirements from and
sell their available supply of used textbooks to their affiliated operations. A significant
increase in the number of contract-managed bookstores operated by our competitors, particularly at
large college campuses, could adversely affect our ability to acquire an adequate supply of used
textbooks.
We believe all of these competitive factors have contributed to a decline in textbooks sold in
the Textbook Division.
Further deterioration in the economy and credit markets, a decline in consumer spending or
other conditions may adversely affect our future results of operations. As widely reported, the
global credit markets and financial services industry have been experiencing a period of upheaval
characterized by the bankruptcy, failure, collapse or sale of various financial institutions,
diminished liquidity and credit availability, declines in consumer confidence, declines in economic
growth, increases in unemployment rates, uncertainty about economic stability and intervention from
the United States federal government. There can be no assurance that there will not be further
deterioration in credit and financial markets and confidence in economic conditions or that any
recovery will be sustained. While the ultimate outcome of these events cannot be predicted, it may
decrease student enrollment in colleges and universities due to the lack of financial aid and other
sources of funding for education. Spending by students on textbooks and other general merchandise
may also decrease due to the economic downturn.
We may not be able to continue to receive funds from NBC, our sole operating subsidiary, to
permit satisfaction of our obligations. We are a holding company and as such conduct substantially
all of our operations through NBC and its subsidiaries. Consequently, we do not have any income
from our own operations and do not expect to generate income from our own operations in the future.
As a result, our ability to meet our debt service obligations will substantially depend upon NBC
and its subsidiaries cash flow and distribution of funds to us as dividends, loans, advances or
other payments.
We may be unable to obtain a sufficient supply of used textbooks, which could adversely impact
our revenue levels and profit margins. Our ability to purchase a sufficient number of used
textbooks largely determines our used textbook sales for future periods. Successfully acquiring
books typically requires a visible presence on college campuses at the end of each semester, which
requires hiring a significant number of temporary personnel, and having access to sufficient funds
under a revolving credit facility or other financing alternatives to purchase the books. Textbook
acquisition also depends upon college students willingness to sell their used textbooks at the end
of each semester. The unavailability of sufficient personnel or credit,
or a shift in student preferences, could impair our ability to acquire sufficient used
textbooks to meet our sales objectives, thereby adversely impacting our revenue levels and profit
margins.
We may not be able to successfully open or contract-manage additional bookstores or integrate
those additional stores, which could adversely impact our ability to grow revenues and profit
margins. Part of our business strategy is to expand sales for our college bookstore operations by
either opening privately-owned bookstores or being awarded additional contracts to manage
institutional bookstores. We may not be able to identify additional private bookstore
opportunities or we may not be successful in competing for contracts to manage additional
institutional bookstores. Due to the seasonal nature of business in our bookstores, the
operations of the private bookstores or newly contract-managed bookstores may be affected by the
time of the fiscal year when a bookstore is opened or contract-managed by us. The process may
require financial resources that would otherwise be available for our
15
existing operations. Our
integration of these future bookstores may not be successful; or, the anticipated strategic
benefits of these future bookstores may not be realized or may not be realized within time frames
contemplated by our management. Start-up and additional contract-managed bookstores may involve a
number of special risks, including, but not limited to, adverse short-term effects on our reported
results of operations, diversion of managements attention, standardization of accounting systems,
dependence on retaining, hiring and training key personnel, unanticipated problems or legal
liabilities, and actions of our competitors and customers. If we are unable to successfully
integrate our future bookstores for these or other reasons, anticipated revenues and profit margins
from these new bookstores could be adversely impacted.
We may not be able to successfully renew our contract-managed bookstores on profitable terms,
which could adversely impact our profit margins. As we expand our operations in
contract-management of institutional bookstores, we will increasingly be competing for the renewal
of our contracts for those stores as the current contracts expire. Our contracts are typically for
1 to 5 years, with various renewal and cancellation clauses. We may not be successful in renewing
our current contracts or those renewals may not be on terms that provide us the opportunity to
improve or maintain the profitability of managing the bookstore. If we are unable to successfully
renew our contracts on profitable terms, our profit margins could be adversely impacted.
Publishers may not continue to increase prices of textbooks annually, which could adversely
impact our revenue levels and profit margins. We generally buy used textbooks based on publishers
prevailing prices for new textbooks just prior to the implementation by publishers of their annual
price increases (which historically have been 4% to 5%) and resell these textbooks shortly
thereafter based upon the new higher prices, thereby creating an immediate margin increase. Our
ability to increase our used textbook prices each fiscal year depends on annual price increases on
new textbooks implemented by publishers. The failure of publishers to continue annual price
increases on new textbooks could adversely impact our revenue levels and profit margins. In recent
periods, annual increases in prices have allowed us to partially offset a decline in unit sales,
however there is no guarantee that this will continue.
Publisher practices regarding new editions and materials packaged with new textbooks could
change, thereby reducing the supply of used textbooks available to us and adversely impacting our
revenue levels and profit margins. Publishers have historically produced new editions of textbooks
every two to four years. Changes in the business models of publishers to accelerate the new
edition cycle or to significantly increase the number of textbooks with other materials packaged or
bundled with them (which makes it more difficult to repurchase and resell the entire package of
materials) could reduce the supply of used textbooks available to us, thereby adversely impacting
our revenue levels and profit margins.
The loss or retirement of key members of management may occur, which could negatively affect
our ability to execute our current strategy and/or our ability to effectively react to changing
industry dynamics, thereby adversely impacting our revenue levels and profit margins. Our future
success depends to a significant extent on the efforts and abilities of our senior management team.
The loss of the services of any one of these individuals could negatively affect our ability to
execute our current strategy and/or our ability to effectively react to changing industry dynamics,
thereby adversely impacting our revenue levels and profit margins.
Our wholesale and bookstore operations are seasonal in nature a significant reduction in
sales during our peak selling periods could adversely impact our ability to repay the DIP Revolving
Facility, thereby increasing interest expense and adversely impacting revenue levels by restricting
our ability to buy an adequate supply of used textbooks. Our wholesale and bookstore operations
experience two distinct selling periods and our wholesale operations experience two distinct buying
periods. The peak selling periods for the wholesale operations occur prior to the beginning of each
school semester in July/August and November/December. The buying periods for the wholesale
operations occur at the end of each school semester in May and
December. The primary selling periods for the bookstore operations are in August/September and
January. In fiscal year 2011, 46% of our annual revenues occurred in the second fiscal quarter
(July-September), while 31% of our annual revenues occurred in the fourth fiscal quarter
(January-March). Accordingly, our working capital requirements fluctuate throughout the fiscal
year, increasing substantially in May and December as a result of the buying periods. We may fund
our working capital requirements primarily through the DIP Revolving Facility while in chapter 11.
We intend to repay the DIP Revolving Facility with cash provided from operations. A significant
reduction in sales during our peak selling periods could adversely impact our ability to repay the
DIP Revolving Facility, increase the average balance outstanding under the DIP Revolving Facility
(thereby resulting in increased interest expense), and restrict our ability to buy an adequate
supply of used textbooks (thereby adversely impacting our revenue levels).
16
We are controlled by one principal equity holder, which has the power to take unilateral
action and could have an interest in pursuing acquisitions, divestitures and other transactions,
even though such transactions might involve risks to other affected parties. Weston Presidio
beneficially owns approximately 82.0% of our issued and outstanding common stock (after taking into
account for such percentage calculation options outstanding and options available, if any, for
future grant under the 2004 Stock Option Plan). As a result, Weston Presidio is able to control
all matters, including the election of a majority of our board of directors, the approval of
amendments to NBCs and our certificate of incorporation and the approval of fundamental corporate
transactions such as mergers and asset sales. The interests of Weston Presidio may not in all cases
be aligned with the interests of other affected parties. In addition, Weston Presidio may have an
interest in pursuing acquisitions, divestitures and other transactions, including selling us, that,
in its judgment, could affect its equity investment, even though such transactions might involve
risks to other affected parties.
Our substantial indebtedness could limit cash flow available for our operations and could
adversely affect our ability to service debt or obtain additional financing, if necessary. As of
March 31, 2011, we had total outstanding debt of approximately $454.1 million and expect to
continue to have material debt outstanding even after emerging from the Chapter 11 Proceeding. Our
level of indebtedness could have important consequences. For example, it could:
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make it more difficult to pay our debts as they become due, especially during general
negative economic and market industry conditions because if our revenues decrease due to
general economic or industry conditions, we may not have sufficient cash flow from
operations to make our scheduled debt payments; |
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limit our flexibility in planning for, or reacting to, changes in our business and
the industry in which we operate and, consequently, places us at a competitive
disadvantage to our competitors with less debt; |
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require us to dedicate a substantial portion of our cash flow from operations to
service our debt, thereby reducing the availability of our cash flow to fund working
capital, capital expenditures, acquisitions and other general corporate purposes; |
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limit our ability to make strategic acquisitions, invest in new products or capital
assets or take advantage of business opportunities; |
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limit our ability to obtain additional financing, particularly in the current
economic environment; and |
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render us more vulnerable to general adverse economic, regulatory and industry
conditions. |
A portion of our goodwill recently became impaired and we may be required to write down
additional amounts of goodwill or identifiable intangibles and record impairment charges if future
circumstances indicate that goodwill or identifiable intangibles are impaired. We monitor relevant
circumstances, including industry trends, general economic conditions, and the potential impact
that such circumstances might have on the valuation of our goodwill and identifiable intangibles.
It is possible that changes in such circumstances, or in the numerous variables associated with the
judgments, assumptions and estimates made by us in assessing the appropriate valuation of our
goodwill and identifiable intangibles, could in the future require us to further write down a
portion of our goodwill or write down a portion of our identifiable intangibles and record related
non-cash impairment charges. We evaluate the impairment of the carrying value of our goodwill and
identifiable intangibles in accordance with applicable accounting standards, including the
Intangibles Goodwill and Other and Property, Plant and Equipment Topics of the Financial
Accounting Standards Board (FASB) Accounting Standards Codification (Codification). In
accordance with such standards, we evaluate impairment on goodwill and certain identifiable
intangibles
annually and evaluate impairment on all intangibles whenever events or changes in circumstances
indicate that the carrying amounts of such assets may not be recoverable. Our evaluation of
impairment is based on a combination of our projection of estimated future cash flows and other
valuation methodologies. We recorded impairment charges of $89.0 million and $107.0 million to
reduce the carrying value of goodwill to its estimated fair value at March 31, 2011 and 2009,
respectively. We completed our annual test for impairment during the fourth quarter for the year
ended March 31, 2010 and no impairment was indicated. The goodwill impairment charge is described
in greater detail in Note G to the consolidated financial statements in Item 8, Financial
Statements and Supplementary Data.
17
Our operations are subject to various laws, rules and regulations relating to protection of
the environment and of human health and safety. Our operations are subject to federal, state and
local laws relating to the protection of the environment and of human health and safety. As an
owner and operator of real property, we can be found jointly and severally liable under such laws
for costs associated with investigating, removing and remediating any hazardous or toxic substances
that may exist on, in or about our real property. This liability can be imposed without regard to
whether the owner or operator had knowledge of, or was actually responsible for causing, the
conditions being addressed. Some of our properties may have been impacted by the migration of
hazardous substances released at neighboring third-party locations. In addition, it is possible
that we may face claims alleging harmful exposure to, or property damage resulting from, the
release of hazardous or toxic substances at or from our locations or otherwise related to our
business. Environmental conditions relating to any former, current or future locations could
adversely impact our business and results of operations.
Increases in the price of raw materials used by our suppliers or the reduced availability of
raw materials to our suppliers could increase their cost of goods, which could be passed on to us
through higher prices in new textbooks, clothing and general merchandise, which may decrease our
profitability. The principal raw materials used by our suppliers are paper, various fabrics and
plastics. The prices we pay our suppliers for new textbooks, clothing and general merchandise are
dependent in part on the market price for raw materials used to produce them. The price and
availability of such raw materials may fluctuate substantially, depending on a variety of factors,
including demand, crop yields, weather, supply conditions, transportation costs, energy prices,
work stoppages, government regulation, economic climates and other unpredictable factors. Any and
all of these factors may be exacerbated by global climate change. Fluctuations in the price and
availability of raw materials to our suppliers have not materially affected our profitability in
recent years. However, increases in raw material costs, together with other factors, might cause
an increase in the cost of goods for our suppliers which may be passed onto us through higher
prices.
ITEM 2. PROPERTIES.
At March 31, 2011, our Bookstore Division locations consisted of the following: (i) 6 owned
off-campus bookstore locations, (ii) 132 leased off-campus bookstore locations, and (iii) 154
leased on-campus (contract-managed) bookstore locations serving university and post-graduate
educational institutions throughout the United States. These institutions serve more than 2
million students. We own our two Textbook Division warehouses (totaling 253,000 square feet) in
Lincoln, Nebraska (one of which is also the location of our headquarters). Our distance education
program was moved from Athens, Ohio to one of our warehouses in Lincoln, Nebraska in March, 2011.
ITEM 3. LEGAL PROCEEDINGS.
From time to time, we are subject to legal proceedings and other claims arising in the
ordinary course of our business. We believe that currently we are not a party to any litigation
the outcome of which would have a material effect on the consolidated financial statements. We
maintain insurance coverage against claims in an amount which we believe to be adequate.
On the Petition Date, we filed voluntary petitions in the Court seeking reorganization relief
under the provisions of the Bankruptcy Code. Our chapter 11 cases have been assigned to the
Honorable Peter J. Walsh and are being jointly administered as Case No. 11-12005. We continue to
operate our business as debtors-in-possession under the jurisdiction of the Court and in accordance
with the applicable provisions of the Bankruptcy Code and the orders of the Court. See Note C to
the consolidated financial statements in Item 8, Financial Statements and Supplementary Data.
Under Section 362 of the Bankruptcy Code, the filing of a bankruptcy petition automatically
stays most actions against a debtor, including most actions to collect pre-petition indebtedness or
to exercise control over our property. Absent an order of the Court, substantially all
pre-petition liabilities are subject to settlement under a plan of reorganization.
Under Section 365 of the Bankruptcy Code, we may assume, assume and assign or reject certain
executor contracts and unexpired leases, subject to the approval of the Court and certain other
conditions. In general, if we reject an executor contract or unexpired lease, it is treated as a
pre-petition breach of the lease or contract in question and, subject to certain exceptions,
relieves us of performing any future obligations. However, such a rejection entitles the lessor or
contract counterparty to a pre-petition general unsecured claim for damages caused by the breach
and accordingly, the counterparty may file a claim against us for damages. In addition, our plan
of reorganization will determine the rights and satisfaction of claims of various creditors and
security holders, but the ultimate settlement of those claims will continue to be subject to
the uncertain outcome of litigation, negotiations and Court decisions up to and for a period of
time after a plan of reorganization is confirmed. At this time, it is not possible to predict with
certainty the effect of the Chapter 11 Proceedings on our business.
18
ITEM 4. RESERVED AND REMOVED.
PART II
ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES.
On June 27, 2011, we filed voluntary petitions in the Court seeking reorganization relief
under the provisions of the Bankruptcy Code. Our plan of reorganization will determine the rights
and satisfaction of claims of various creditors and security holders, but the ultimate settlement
of those claims are subject to various uncertainties. Under any plan of reorganization, our
presently outstanding equity securities could have no value and be canceled and we urge that
caution be exercised with respect to existing and future investments in any security of ours.
Further, on June 27, 2011, we filed with the Court a restructuring support agreement, which
contained a proposed plan of reorganization (the Plan). The Plan calls for the issuance of new
senior secured notes, new senior unsecured notes and the split of new common equity interests in us
between the holders of the Pre-Petition Senior Subordinated Notes (78%) and the holders of the
Pre-Petition Senior Discount Notes (22%).
As of July 14, 2011, based upon the number of holders on record, there were 5 holders of NBC
Acquisition Corp. common stock, those holders being four funds affiliated with Weston Presidio
(which held a total of 36,455 shares) and NBC Holdings Corp., a corporation formed by Weston
Presidio as part of the March 4, 2004 Transaction. As of July 14, 2011, NBC Holdings Corp.s
issued and outstanding capital stock totaled 513,439 shares and held 517,639 shares of NBC
Acquisition Corp. common stock. There are 28 holders on record of NBC Holdings Corp. capital
stock, including the four funds affiliated with Weston Presidio and current and former members of
our management group. As of July 14, 2011, there were also options granted and outstanding under
the 2004 Stock Option Plan, held by 45 current and former members of our management group, to
purchase 89,241 shares of NBC Holdings Corp. capital stock. As discussed in Item 7, Managements
Discussion and Analysis of Financial Condition and Results of Operations and Item 8, Financial
Statements and Supplementary Data, the payment of dividends is subject to various restrictions
under our debt instruments. As a result, no dividends were declared on our common stock during
fiscal year 2011 and 2010. There is no established public trading market for the NBC Acquisition
Corp. common stock.
On March 31, 2006, 4,200 shares of NBC Holdings Corp. capital stock were issued for $0.01 per
share to certain officers and directors of the Company (the Officers) pursuant to a stock
repurchase agreement and on that same date NBC Holdings Corp. purchased 4,200 shares of our common
stock for an aggregate of $42. The shares issued to NBC Holdings Corp. were subject to the same
conditions as those issued to the Officers. These shares were issued pursuant to an exemption from
registration claimed under Section 4(2) of the Securities Act of 1933, as amended. These shares
became fully vested on September 30, 2010 and the 4,200 shares of NBC Holdings Corp. were
repurchased and retired.
We and NBC Holdings Corp. have separate understandings that (a) with respect to each option
granted by NBC Holdings Corp., pursuant to its 2004 Stock Option Plan, we have granted, and will
continue to grant, an option to purchase an equivalent number of shares of our common stock at the
same exercise price to NBC Holdings Corp. and (b) with respect to each share of capital stock
issued by NBC Holdings Corp., pursuant to its 2005 Restricted Stock Plan, we have issued, and will
continue to issue, an equivalent number of shares of our common stock at the same purchase price
per share to NBC Holdings Corp.
Additional information regarding equity compensation plans can be found in Item 12, Security
Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
19
ITEM 6. SELECTED FINANCIAL DATA.
The following table sets forth our selected historical consolidated financial and other data
and should be read in conjunction with Item 7, Managements Discussion and Analysis of Financial
Condition and Results of Operations and the consolidated financial statements and the related notes
thereto included in Item 8, Financial Statements and Supplementary Data. The selected historical
consolidated financial data was derived from our audited consolidated financial statements.
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Fiscal Years Ended |
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March 31, |
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March 31, |
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March 31, |
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March 31, |
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March 31, |
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2011 |
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2010 |
|
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2009 |
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2008 |
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2007 |
|
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(dollars in thousands) |
|
Statement of Operations Data: |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
598,430 |
|
|
$ |
605,494 |
|
|
$ |
610,716 |
|
|
$ |
581,248 |
|
|
$ |
544,428 |
|
Costs of sales (exclusive of depreciation shown below) |
|
|
366,160 |
|
|
|
370,196 |
|
|
|
371,369 |
|
|
|
354,140 |
|
|
|
332,444 |
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|
|
|
|
|
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|
|
|
|
|
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|
Gross profit |
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|
232,270 |
|
|
|
235,298 |
|
|
|
239,347 |
|
|
|
227,108 |
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|
211,984 |
|
Operating expenses: |
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Selling, general and administrative (1) |
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176,844 |
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|
161,858 |
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|
|
168,315 |
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|
|
157,193 |
|
|
|
143,096 |
|
Closure of California warehouse (2) |
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(36 |
) |
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|
774 |
|
Depreciation |
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|
8,579 |
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|
|
8,517 |
|
|
|
7,603 |
|
|
|
7,209 |
|
|
|
5,916 |
|
Amortization |
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|
8,626 |
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|
|
10,853 |
|
|
|
11,384 |
|
|
|
10,443 |
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|
|
9,613 |
|
Goodwill impairment (3) |
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|
89,000 |
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|
|
|
|
|
|
106,972 |
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|
|
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|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
Income (loss) from operations |
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|
(50,779 |
) |
|
|
54,070 |
|
|
|
(54,927 |
) |
|
|
52,299 |
|
|
|
52,585 |
|
Other expenses (income): |
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|
|
|
|
|
|
|
|
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|
|
|
|
|
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|
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Interest expense |
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|
51,204 |
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|
|
49,405 |
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|
|
41,603 |
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|
|
41,659 |
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|
|
40,410 |
|
Interest income |
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|
(176 |
) |
|
|
(180 |
) |
|
|
(427 |
) |
|
|
(1,332 |
) |
|
|
(1,643 |
) |
Loss on early extinguishment of debt (4) |
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|
3,066 |
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|
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Loss on derivative instrument (5) |
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|
|
|
|
|
102 |
|
|
|
198 |
|
|
|
225 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Income (loss) before income taxes |
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|
(101,807 |
) |
|
|
1,779 |
|
|
|
(96,205 |
) |
|
|
11,774 |
|
|
|
13,593 |
|
Income tax expense (benefit) |
|
|
(3,497 |
) |
|
|
(532 |
) |
|
|
4,289 |
|
|
|
4,558 |
|
|
|
5,700 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Net income (loss) |
|
$ |
(98,310 |
) |
|
$ |
2,311 |
|
|
$ |
(100,494 |
) |
|
$ |
7,216 |
|
|
$ |
7,893 |
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|
|
|
|
|
|
|
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|
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|
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|
Earnings (loss) Per Share: |
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|
Basic |
|
$ |
(180.66 |
) |
|
$ |
1.33 |
|
|
$ |
(181.79 |
) |
|
$ |
13.02 |
|
|
$ |
14.25 |
|
Diluted |
|
|
(180.66 |
) |
|
|
1.32 |
|
|
|
(181.79 |
) |
|
|
12.61 |
|
|
|
13.89 |
|
Other Data: |
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|
|
|
|
|
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|
|
|
|
|
|
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|
Adjusted EBITDA (6) |
|
$ |
55,426 |
|
|
$ |
73,440 |
|
|
$ |
71,032 |
|
|
$ |
69,951 |
|
|
$ |
68,114 |
|
Net cash flows from operating activities |
|
|
12,827 |
|
|
|
30,831 |
|
|
|
26,356 |
|
|
|
21,101 |
|
|
|
27,516 |
|
Net cash flows from investing activities |
|
|
(16,307 |
) |
|
|
(8,766 |
) |
|
|
(14,898 |
) |
|
|
(22,179 |
) |
|
|
(32,809 |
) |
Net cash flows from financing activities |
|
|
(1,046 |
) |
|
|
(5,131 |
) |
|
|
3,254 |
|
|
|
(2,578 |
) |
|
|
4,893 |
|
Capital expenditures |
|
|
5,664 |
|
|
|
5,411 |
|
|
|
7,979 |
|
|
|
7,261 |
|
|
|
6,543 |
|
Business acquisition expenditures (7) |
|
|
9,461 |
|
|
|
2,848 |
|
|
|
6,321 |
|
|
|
14,682 |
|
|
|
25,874 |
|
Number of bookstores open at end of the period |
|
|
292 |
|
|
|
280 |
|
|
|
277 |
|
|
|
260 |
|
|
|
244 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Balance Sheet Data (At End of Period): |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
56,447 |
|
|
$ |
60,973 |
|
|
$ |
44,038 |
|
|
$ |
29,326 |
|
|
$ |
32,983 |
|
Working capital (8) |
|
|
(280,838 |
) |
|
|
168,190 |
|
|
|
151,149 |
|
|
|
136,729 |
|
|
|
130,389 |
|
Total assets |
|
|
508,307 |
|
|
|
616,271 |
|
|
|
609,088 |
|
|
|
703,364 |
|
|
|
697,005 |
|
Total debt, including current maturities |
|
|
454,118 |
|
|
|
454,624 |
|
|
|
449,411 |
|
|
|
452,204 |
|
|
|
445,098 |
|
Redeemable preferred stock (9) |
|
|
13,601 |
|
|
|
11,806 |
|
|
|
10,233 |
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes share-based compensation of $448, $1,107, $1,289, $1,041 and $997 for the
fiscal years ended March 31, 2011, 2010, 2009, 2008, and 2007, respectively. |
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(2) |
|
Closure of California warehouse expenses are attributable to costs associated with the
October 27, 2006 closure of our California warehouse facility, including one-time
termination benefits, costs to terminate contracts and costs of consolidation/relocation.
Payments of one-time termination benefits extended through April, 2008 and were slightly
lower than the remaining accrual for such benefits at March 31, 2007, resulting in an
adjustment to the accrual during fiscal year 2008. |
|
(3) |
|
We determined in the first step of our annual goodwill impairment test conducted at
March 31 that the carrying value of certain reporting units exceeded their fair values,
indicating that goodwill may be impaired for fiscal years ended 2011 and 2009. Having
determined that goodwill may be impaired, we performed the second step of the goodwill
impairment test. As a result, we recorded impairment charges of $89,000 and $106,972 in
fiscal years 2011 and 2009, respectively,
which reduced our goodwill carrying value to $129,437 and $215,436 as of March 31, 2011 and
2009, respectively. See Note G to the consolidated financial statements in Item 8, Financial
Statements and Supplementary Data. |
20
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|
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(4) |
|
The loss on early extinguishment of debt for the fiscal year ended March 31, 2010
relates to the write-off of debt issue costs as a result of the termination of the Term
Loan and Revolving Credit Facility. See Note I to the consolidated financial statements in
Item 8, Financial Statements and Supplementary Data. |
|
(5) |
|
Our interest rate swap agreement expired on September 30, 2008. |
|
(6) |
|
EBITDA is defined as earnings before interest, taxes, depreciation, and amortization.
Adjusted EBITDA is EBITDA adjusted for goodwill impairment and for loss on early
extinguishment of debt. There was no goodwill impairment or loss on early extinguishment
of debt in fiscal years 2008 and 2007; therefore, Adjusted EBITDA equals EBITDA for those
years. As we are highly leveraged and as our equity is not publicly-traded, management
believes that the non-GAAP measures, EBITDA and Adjusted EBITDA, are useful in evaluating
our results and provide additional information for determining our ability to meet debt
service requirements. That belief is driven by the consistent use of the measures in the
computations used to establish the value of our equity over the past 15 years and the fact
that our debt covenants also use those measures, as further described later in this Item,
to measure and monitor our financial results. Due to the importance of EBITDA and Adjusted
EBITDA to our equity and debt holders, our chief operating decision makers and other
members of management use EBITDA and Adjusted EBITDA to measure our overall performance, to
assist in resource allocation decision-making, to develop our budget goals, to determine
incentive compensation goals and payments, and to manage other expenditures among other
uses. |
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With respect to covenant compliance calculations, EBITDA, as defined in the Pre-Petition ABL
Credit Agreement (hereinafter, referred to as Credit Facility EBITDA), includes additional
adjustments to EBITDA. Credit Facility EBITDA is defined in the Pre-Petition ABL Credit
Agreement as: (1) consolidated net income, as defined therein; plus (2) the following items,
to the extent deducted from consolidated net income: (a) income tax expense; (b) interest
expense, amortization or write-off of debt discount and debt issuance costs and commissions,
discounts and other fees and charges associated with indebtedness; (c) depreciation and
amortization expense; (d) amortization of intangibles and organization costs; (e) any
non-cash extraordinary, unusual or non-recurring expenses or losses; (f) any other non-cash
charges; and (g) charges incurred on or prior to September 30, 2010 in connection with the
restricted stock plan not to exceed $5.0 million in the aggregate; minus (3) the following
items, to the extent included in the statement of net income for such period; (i) interest
income; (ii) any extraordinary, unusual or non-recurring income or gains; and (iii) any other
non-cash income. Credit Facility EBITDA is utilized when calculating the pro forma fixed
charge coverage ratio under the Pre-Petition ABL Credit Agreement. The pro forma
consolidated coverage ratio under the indentures to the Pre-Petition Senior Discount Notes,
the Senior Subordinated Notes and the Pre-Petition Senior Secured Notes uses EBITDA and the
indentures define EBITDA similar to Credit Facility EBITDA except that charges incurred in
connection with the restricted stock plan are not added back to consolidated net income. See
Note I to the consolidated financial statements in Item 8, Financial Statements and
Supplementary Data, for disclosure of certain of our financial covenants. |
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|
There are material limitations associated with the use of EBITDA and Adjusted EBITDA. EBITDA
and Adjusted EBITDA do not represent and should not be considered as alternatives to net cash
flows from operating activities or net income as determined by accounting principles
generally accepted in the United States of America (GAAP). Furthermore, EBITDA and
Adjusted EBITDA do not necessarily indicate whether cash flows will be sufficient for cash
requirements because the measures do not include reductions for cash payments for our
obligation to service our debt, fund our working capital, make capital expenditures and make
acquisitions or pay our income taxes and dividends; nor are they a measure of our
profitability because they do not include costs and expenses such as interest, taxes,
depreciation, amortization, goodwill impairment, and loss on early extinguishment of debt,
which are significant components in understanding and assessing our financial performance.
Even with these limitations, we believe EBITDA and Adjusted EBITDA, when viewed with both our
GAAP results and the reconciliations to operating cash flows and net income, provide a more
complete understanding of our business than otherwise could be obtained absent this
disclosure. EBITDA and Adjusted EBITDA measures presented may not be comparable to similarly
titled measures presented by other companies. |
21
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|
|
The following presentation reconciles net income (loss), which we believe to be the closest
GAAP performance measure, to EBITDA and Adjusted EBITDA and reconciles EBITDA and Adjusted
EBITDA to net cash flows from operating activities, which we believe to be the closest GAAP
liquidity measure, as presented in the Consolidated Statements of Cash Flows included in Item
8, Financial Statements and Supplementary Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended |
|
|
|
March 31, |
|
|
March 31, |
|
|
March 31, |
|
|
March 31, |
|
|
March 31, |
|
|
|
2011 |
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
|
(dollars in thousands) |
|
Net income (loss) |
|
|
(98,310 |
) |
|
|
2,311 |
|
|
|
(100,494 |
) |
|
|
7,216 |
|
|
|
7,893 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
|
51,028 |
|
|
|
49,225 |
|
|
|
41,278 |
|
|
|
40,525 |
|
|
|
38,992 |
|
Income tax expense (benefit) |
|
|
(3,497 |
) |
|
|
(532 |
) |
|
|
4,289 |
|
|
|
4,558 |
|
|
|
5,700 |
|
Depreciation and amortization |
|
|
17,205 |
|
|
|
19,370 |
|
|
|
18,987 |
|
|
|
17,652 |
|
|
|
15,529 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA |
|
|
(33,574 |
) |
|
|
70,374 |
|
|
|
(35,940 |
) |
|
|
69,951 |
|
|
|
68,114 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill impairment |
|
|
89,000 |
|
|
|
|
|
|
|
106,972 |
|
|
|
|
|
|
|
|
|
Loss on early extinguishment of debt |
|
|
|
|
|
|
3,066 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA (6) |
|
$ |
55,426 |
|
|
$ |
73,440 |
|
|
$ |
71,032 |
|
|
$ |
69,951 |
|
|
$ |
68,114 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation |
|
|
448 |
|
|
|
1,107 |
|
|
|
1,288 |
|
|
|
1,041 |
|
|
|
997 |
|
Interest income |
|
|
176 |
|
|
|
180 |
|
|
|
427 |
|
|
|
1,332 |
|
|
|
1,643 |
|
Provision for losses on receivables |
|
|
2,194 |
|
|
|
1,399 |
|
|
|
1,367 |
|
|
|
468 |
|
|
|
834 |
|
Cash paid for interest |
|
|
(44,905 |
) |
|
|
(37,572 |
) |
|
|
(39,124 |
) |
|
|
(31,755 |
) |
|
|
(31,388 |
) |
Cash (paid) refunded for income taxes |
|
|
1,278 |
|
|
|
(3,155 |
) |
|
|
(9,930 |
) |
|
|
(13,031 |
) |
|
|
(6,551 |
) |
(Gain) loss on disposal of assets |
|
|
(132 |
) |
|
|
235 |
|
|
|
125 |
|
|
|
285 |
|
|
|
(1 |
) |
Changes in operating assets and
liabilities, net of effect of
acquisitions (10) |
|
|
(1,658 |
) |
|
|
(4,803 |
) |
|
|
1,171 |
|
|
|
(7,190 |
) |
|
|
(6,132 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Flows from Operating Activities |
|
$ |
12,827 |
|
|
$ |
30,831 |
|
|
$ |
26,356 |
|
|
$ |
21,101 |
|
|
$ |
27,516 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7) |
|
Business acquisition expenditures represent established businesses purchased by us. |
|
(8) |
|
Working capital is defined as current assets minus current liabilities. NBCs three
Pre-Petition principal tranches of debt (the Pre-Petition Senior Secured Notes, the
Pre-Petition ABL Facility and the Pre-Petition Senior Subordinated Notes) each were set to
mature within a period of six months of each other. The Pre-Petition ABL Facility was set
to mature on the earlier of October 2, 2012 or the date that was 91 days prior to the
earliest maturity of the Pre-Petition Senior Secured Notes (which were set to mature on
December 1, 2011), the Pre-Petition Senior Subordinated Notes (which were set to mature on
March 15, 2012), the Pre-Petition Senior Discount Notes (which were set to mature on March
15, 2013), or any refinancing thereof, effectively September 1, 2011. See Notes C and I to
the consolidated financial statements in Item 8, Financial Statements and Supplementary
Data. |
|
(9) |
|
In conjunction with the Pre-Petition Senior Credit Facility amendment in February,
2009, we issued 10,000 shares of preferred stock. See Note K to the consolidated financial
statements in Item 8, Financial Statements and Supplementary Data. |
|
(10) |
|
Changes in operating assets and liabilities, net of effect of acquisitions includes the
changes in the balances of receivables, inventories, prepaid expenses and other current
assets, other assets, accounts payable, accrued employee compensation and benefits, accrued
incentives, accrued expenses, deferred revenue, and other long-term liabilities. |
22
ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussions should be read in conjunction with the consolidated financial
statements and the related notes thereto included in Item 8, Financial Statements and Supplementary
Data, and other information in this Annual Report on Form 10-K.
Executive Summary
Overview
Acquisitions. Our Bookstore Division continues to grow its number of bookstore locations
through acquisitions and start-up locations. We acquired six bookstore locations and initiated the
contract-management of thirteen bookstore locations in fifteen separate transactions and
established the start-up of two bookstore locations during the fiscal year ended March 31, 2011.
We believe there are attractive opportunities for us to continue to expand our chain of bookstores
across the country.
Revenue Results. Consolidated revenues for the fiscal year ended March 31, 2011 decreased
$7.1 million, or 1.2%, from the fiscal year ended March 31, 2010. This decrease was primarily due
to a decrease in revenues in the Textbook and Bookstore Divisions. Revenues in the Textbook
Division decreased primarily as a result of a decrease in units sold. Revenues decreased in the
Bookstore Division primarily due to a decrease in same-store sales.
Adjusted EBITDA Results. Consolidated Adjusted EBITDA for the fiscal year ended March 31,
2011 decreased $18.0 million, or 24.5%, from the fiscal year ended March 31, 2010. The Adjusted
EBITDA decrease is primarily attributable to a decrease in our Bookstore Division Adjusted EBITDA.
Adjusted EBITDA in the Bookstore Division was down due primarily to lower revenues and higher
selling, general and administrative expenses. Adjusted EBITDA in the Textbook Division was also
down due primarily to lower revenues and higher selling, general and administrative expenses.
EBITDA and Adjusted EBITDA are considered non-GAAP measures, and therefore you should refer to the
more detailed explanation of these measures that is provided later in this Item.
EBITDA is defined as earnings before interest, taxes, depreciation, and amortization.
Adjusted EBITDA is EBITDA adjusted for goodwill impairment and for loss on early extinguishment of
debt. As we are highly-leveraged and as our equity is not publicly-traded, management believes
that the non-GAAP measures, EBITDA and Adjusted EBITDA, are useful in evaluating our results and
provide additional information for determining our ability to meet debt service requirements. That
belief is driven by the consistent use of the measures in the computations used to establish the
value of our equity over the past 15 years and the fact that our debt covenants also use those
measures, as further described later in this Item, to measure and monitor our financial results.
Due to the importance of EBITDA and Adjusted EBITDA to our equity and debt holders, our chief
operating decision makers and other members of management use EBITDA and Adjusted EBITDA to measure
our overall performance, to assist in resource allocation decision-making, to develop our budget
goals, to determine incentive compensation goals and payments, and to manage other expenditures
among other uses.
With respect to covenant compliance calculations, Credit Facility EBITDA, as defined in the
Pre-Petition ABL Credit Agreement, included additional adjustments to EBITDA. Credit Facility
EBITDA was defined in the Pre-Petition ABL Credit Agreement as: (1) consolidated net income, as
defined therein; plus (2) the following items, to the extent deducted from consolidated net income:
(a) income tax expense; (b) interest expense, amortization or write-off of debt discount and debt
issuance costs and commissions, discounts and other fees and charges associated with indebtedness;
(c) depreciation and amortization expense; (d) amortization of intangibles and organization costs;
(e) any non-cash extraordinary, unusual or non-recurring expenses or losses; (f) any other non-cash
charges; and (g) charges incurred on or prior to September 30, 2010 in connection with the
restricted stock plan not to exceed $5.0 million in the aggregate; minus (3) the following items,
to the extent included in the statement of net income for such period; (i) interest income; (ii)
any extraordinary, unusual or non-recurring income or gains; and (iii) any other non-cash income.
Credit Facility EBITDA was utilized when calculating the pro forma fixed charge coverage ratio
under the Pre-Petition ABL Credit Agreement. The pro forma consolidated coverage ratio under the
indentures to the Pre-Petition Senior Discount Notes, the Pre-Petition Senior Subordinated Notes
and the Pre-Petition Senior Secured Notes used EBITDA and the indentures defined EBITDA similar to
Credit Facility EBITDA except that charges incurred in connection with the restricted stock plan
were not added back to consolidated net income. The DIP Credit Agreement also defines EBITDA
similar to the Pre-Petition ABL Credit Agreement except that it excludes professional fees related
to the
reorganization and proceedings under chapter 11. See Note I to the consolidated financial
statements in Item 8, Financial Statements and Supplementary Data, for disclosure of certain of our
financial covenants.
23
There are material limitations associated with the use of EBITDA and Adjusted EBITDA. EBITDA
and Adjusted EBITDA do not represent and should not be considered as alternatives to net cash flows
from operating activities or net income as determined by GAAP. Furthermore, EBITDA and Adjusted
EBITDA do not necessarily indicate whether cash flows will be sufficient for cash requirements
because the measures do not include reductions for cash payments for our obligation to service our
debt, fund our working capital, make capital expenditures and make acquisitions or pay our income
taxes and dividends; nor are they a measure of our profitability because they do not include costs
and expenses such as interest, taxes, depreciation, amortization, goodwill impairment, and loss on
early extinguishment of debt, which are significant components in understanding and assessing our
financial performance. Even with these limitations, we believe EBITDA and Adjusted EBITDA, when
viewed with both our GAAP results and the reconciliations to operating cash flows and net income,
provide a more complete understanding of our business than otherwise could be obtained absent this
disclosure. EBITDA and Adjusted EBITDA measures presented may not be comparable to similarly
titled measures presented by other companies.
Reorganization under Chapter 11 of the U.S. Bankruptcy Code
On the Petition Date, we filed voluntary petitions for reorganization relief under the
Bankruptcy Code in the Court. The Chapter 11 Proceedings are being jointly administered as Case
No. 11-12005 under the caption In re Nebraska Book Company Inc., et al. We continue to operate
our business as debtors-in-possession under the jurisdiction of the Court and in accordance with
the applicable provisions of the Bankruptcy Code and orders of the Court.
The Chapter 11 Proceedings were initiated in response to our inability to fully refinance our
existing debt and vendors unwillingness to extend credit to us under normal terms due to
refinancing uncertainties. Under Section 362 of the Bankruptcy Code, the filing of a bankruptcy
petition automatically stays most actions against a debtor, including most actions to collect
pre-petition indebtedness or to exercise control over our property. Subsequent to the Petition
Date, we received approval from the Court to pay or otherwise honor certain pre-petition
obligations generally designed to stabilize our operations including employee obligations, tax
matters, and from limited available funds, pre-petition claims of certain critical vendors, certain
customer programs, and certain other pre-petition claims. Additionally, we have been paying and
intend to continue to pay undisputed post-petition claims in the ordinary course of business.
Chapter 11 Financing
We are currently funding post-petition operations under a $200.0 million DIP Credit Agreement,
consisting of a $125.0 million DIP Term Loan Facility and a $75.0 million DIP Revolving Facility.
Plan of Reorganization
To successfully emerge from the Chapter 11 Proceedings, in addition to obtaining exit
financing, the Court must confirm a plan of reorganization, which determines the rights and
satisfaction of claims of various creditors and security holders. The plan of reorganization and
related disclosure statement (the Disclosure Statement) will outline a proposal for the
settlement of claims against us based on an estimate of the overall enterprise value. On June 27,
2011, we filed with the Court a restructuring support agreement, which contained a proposed plan of
reorganization (the Plan). The Plan calls for the issuance of new senior secured notes, new
senior unsecured notes and the split of new common equity interests in us between the holders of
the Pre-Petition Senior Subordinated Notes (78%) and the holders of the Pre-Petition Senior
Discount Notes (22%). The ultimate recovery to creditors and/or our shareholders, if any, will not
be determined until confirmation of a plan of reorganization.
Because a Court confirmed plan of reorganization will determine the rights and satisfaction of
claims of various creditors and security holders, the ultimate settlement of such claims are
subject to various uncertainties. Accordingly, no assurance can be provided as to what values, if
any, will be ascribed in the Chapter 11 Proceedings to these or any other constituencies in regards
to what types or amounts of distributions, if any, will be received. If certain requirements of
the Bankruptcy Code are met, a plan of reorganization can be confirmed without acceptance by all
constituents and without the receipt or retention of any property on account of all interests under
the plan. Under any Plan, our presently outstanding equity securities could have no value and be
canceled and we urge that caution be exercised with respect to existing and future investments in
any security of ours. See the discussion of certain risks and uncertainties related to our Chapter
11 Proceedings and reorganization at Item 1A, Risk Factors.
24
Challenges and Expectations
We expect that we will continue to face challenges and opportunities similar to those which we
have faced in the recent past and, in addition, new and different challenges and opportunities. We
have experienced, and we believe we will continue to experience, increasing competition from
alternative sources of textbooks for students, including renting of textbooks from both online and
local campus marketplace competitors and alternative media, increasing competition for the supply
of used textbooks from other companies, including other textbook wholesalers and from
student-to-student transactions, competition for contract-management opportunities and other
challenges. We also believe that although there continues to be attractive opportunities related
to contract-management of bookstores, we may not be successful in competing for contracts to manage
additional institutional bookstores. Finally, we are uncertain what impact the current economy
might have on our business. We expect that our capital expenditures will remain modest for a
company of our size.
Fiscal Year Ended March 31, 2011 Compared With Fiscal Year Ended March 31, 2010.
Revenues. Revenues for the fiscal years ended March 31, 2011 and 2010 and the corresponding
change in revenues were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended |
|
|
Change |
|
|
|
March 31, 2011 |
|
|
March 31, 2010 |
|
|
Amount |
|
|
Percentage |
|
Bookstore Division |
|
$ |
468,536,378 |
|
|
$ |
472,492,275 |
|
|
$ |
(3,955,897 |
) |
|
|
(0.8 |
)% |
Textbook Division |
|
|
135,498,618 |
|
|
|
140,592,220 |
|
|
|
(5,093,602 |
) |
|
|
(3.6 |
)% |
Complementary Services Division |
|
|
35,397,826 |
|
|
|
35,470,836 |
|
|
|
(73,010 |
) |
|
|
(0.2 |
)% |
Intercompany Eliminations |
|
|
(41,002,655 |
) |
|
|
(43,061,718 |
) |
|
|
2,059,063 |
|
|
|
(4.8 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
598,430,167 |
|
|
$ |
605,493,613 |
|
|
$ |
(7,063,446 |
) |
|
|
(1.2 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
For the fiscal year ended March 31, 2011, Bookstore Division revenues decreased $4.0 million,
or 0.8%, from the fiscal year ended March 31, 2010. The decrease in Bookstore Division revenues
was attributable to a decrease in same-store sales and to a decrease in revenues as a result of
certain store closings, which were partially offset by additional revenues from new bookstores.
Same-store sales for the fiscal year ended March 31, 2011 decreased $31.4 million, or 6.9%, from
the fiscal year ended March 31, 2010, primarily due to decreased new and used textbook revenues.
The same-store sale decrease in new and used textbooks is partly attributable to the rental program
implemented in the fourth quarter of fiscal 2010 in our off-campus bookstores and extended to all
of our bookstores in fiscal 2011. The rental amount for a textbook is less than the sales amount,
which results in lower textbook revenues. If the books rented would have been sold instead, we
estimate that same-store sales would have been approximately $15.7 million higher, lowering the
same-store sales decrease to 3.4% for the current fiscal year. We define same-store sales for the
fiscal year ended March 31, 2011 as sales, including internet sales, from any store, even if
expanded or relocated, that has been operated by us since the start of fiscal year 2010. In
addition, revenues declined $4.1 million as a result of certain lost contract-managed stores and
store closings since April 1, 2009. We have added 41 bookstore locations through acquisitions or
start-ups since April 1, 2009. The new bookstores provided an additional $31.6 million of revenue
for the fiscal year ended March 31, 2011.
For the fiscal year ended March 31, 2011, Textbook Division revenues decreased $5.1 million,
or 3.6%, from the fiscal year ended March 31, 2010, due to an approximate 4.2% decrease in units
sold primarily as a result of a decrease in our supply of textbooks and an approximate 0.6%
decrease in the average price per book sold primarily as a result of a decrease in higher demand,
higher priced textbooks available for sale, which were partially offset by an increase in revenues
from textbook rentals to third-parties as a result of an increase in student demand for textbook
rentals. Complementary Services Division revenues decreased $0.1 million, or 0.2%, from the year
ended March 31, 2010, as decreases in the distance education business were mostly offset by an
increase in revenues from our systems and e-commerce businesses. Intercompany eliminations for the
fiscal year ended March 31, 2011 decreased $2.1 million from the fiscal year ended March 31, 2010.
Gross profit. Gross profit for the fiscal year ended March 31, 2011 decreased $3.0 million,
or 1.3%, to $232.3 million from $235.3 million for the fiscal year ended March 31, 2010. The
decrease in gross profit was primarily attributable to the decrease in revenues in the Bookstore
Division. The consolidated gross margin percentage decreased slightly to 38.8% for the fiscal year
ended March 31, 2011 from 38.9% for the fiscal year ended March 31, 2010 primarily due to a small
decrease in gross margin percentage in the Bookstore Division.
25
Selling, general and administrative expenses. Selling, general and administrative expenses for
the fiscal year ended March 31, 2011 increased $14.9 million, or 9.3%, to $176.8 million from
$161.9 million for the fiscal year ended March 31, 2010. Selling, general and administrative
expenses as a percentage of revenues were 29.6% and 26.7% for the fiscal years ended March 31, 2011
and 2010, respectively. The increase in selling, general and administrative expenses includes a
$3.7 million increase in shipping and commission expense primarily due to increased sales on the
internet involving third-party websites, a $3.3 million increase in rent expense primarily due to
an increase in the number of bookstores, a $2.6 million increase in consulting services related to
refinancing efforts, expense reduction and top line growth initiatives such as inventory and
pricing optimization, and a $2.1 million increase in personnel expenses primarily related to $1.6
million in personnel costs resulting from a voluntary early retirement plan and severance expenses.
Also included in selling, general and administrative expenses were $0.4 million and $1.1 million
of share-based compensation expense for the fiscal years ended March 31, 2011 and 2010,
respectively.
Earnings before interest, taxes, depreciation, amortization, goodwill impairment, and loss on
early extinguishment of debt (Adjusted EBITDA). Adjusted EBITDA for the fiscal years ended March
31, 2011 and 2010 and the corresponding change in Adjusted EBITDA were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended |
|
|
Change |
|
|
|
March 31, 2011 |
|
|
March 31, 2010 |
|
|
Amount |
|
|
Percentage |
|
Bookstore Division |
|
|
33,905,906 |
|
|
$ |
45,685,171 |
|
|
$ |
(11,779,265 |
) |
|
|
(25.8 |
)% |
Textbook Division |
|
$ |
34,710,745 |
|
|
|
37,050,519 |
|
|
|
(2,339,774 |
) |
|
|
(6.3 |
)% |
Complementary Services
Division |
|
|
2,764,283 |
|
|
|
2,301,001 |
|
|
|
463,282 |
|
|
|
20.1 |
% |
Corporate Administration |
|
|
(15,955,066 |
) |
|
|
(11,597,268 |
) |
|
|
(4,357,798 |
) |
|
|
(37.6 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
55,425,868 |
|
|
$ |
73,439,423 |
|
|
$ |
(18,013,555 |
) |
|
|
(24.5 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Bookstore Division Adjusted EBITDA decreased $11.8 million, or 25.8%, primarily due to lower
revenues and to higher selling, general and administrative expenses. The $2.3 million, or 6.3%,
decrease in Textbook Division Adjusted EBITDA was primarily due to the previously mentioned
decrease in revenues and to higher selling, general and administrative expenses. Complementary
Services Division Adjusted EBITDA increased $0.5 million primarily due to improved results in our
systems business which was mostly offset by lower results in our distance education business.
Corporate Administrations Adjusted EBITDA loss increased $4.4 million primarily due to a $2.5
million increase in consulting services and $1.6 million of costs associated with a voluntary early
retirement program and severance expense.
26
For an explanation of why EBITDA and Adjusted EBITDA are useful measures in evaluating our
operating results and how they provide additional information for determining our ability to meet
debt service requirements, see Adjusted EBITDA Results earlier in this Item. The following
presentation reconciles net income (loss), which we believe to be the closest GAAP performance
measure, to EBITDA and Adjusted EBITDA and reconciles EBITDA and Adjusted EBITDA to net cash flows
from operating activities, which we believe to be the closest GAAP liquidity measure, and also sets
forth net cash flows from investing and financing activities as presented in the Consolidated
Statements of Cash Flows included in Item 8, Financial Statements and Supplementary Data:
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended |
|
|
|
March 31, 2011 |
|
|
March 31, 2010 |
|
Net income (loss) |
|
|
(98,309,733 |
) |
|
|
2,311,287 |
|
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
|
51,027,654 |
|
|
|
49,224,513 |
|
Income tax benefit |
|
|
(3,496,878 |
) |
|
|
(532,388 |
) |
Depreciation and amortization |
|
|
17,204,825 |
|
|
|
19,370,252 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA |
|
|
(33,574,132 |
) |
|
|
70,373,664 |
|
|
|
|
|
|
|
|
|
|
Goodwill impairment |
|
|
89,000,000 |
|
|
|
|
|
Loss on early extinguishment of debt |
|
|
|
|
|
|
3,065,759 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA (1) |
|
$ |
55,425,868 |
|
|
$ |
73,439,423 |
|
|
|
|
|
|
|
|
|
|
Share-based compensation |
|
|
447,826 |
|
|
|
1,106,882 |
|
Interest income |
|
|
175,859 |
|
|
|
180,709 |
|
Provision for losses on receivables |
|
|
2,193,739 |
|
|
|
1,399,466 |
|
Cash paid for interest |
|
|
(44,905,405 |
) |
|
|
(37,572,221 |
) |
Cash (paid) refunded for income taxes |
|
|
1,278,671 |
|
|
|
(3,155,473 |
) |
(Gain) loss on disposal of assets |
|
|
(131,591 |
) |
|
|
235,803 |
|
Changes in operating assets and liabilities, net of effect of acquisitions (2) |
|
|
(1,657,825 |
) |
|
|
(4,803,359 |
) |
|
|
|
|
|
|
|
Net Cash Flows from Operating Activities |
|
$ |
12,827,142 |
|
|
$ |
30,831,230 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Flows from Investing Activities |
|
$ |
(16,306,546 |
) |
|
$ |
(8,765,940 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Flows from Financing Activities |
|
$ |
(1,045,841 |
) |
|
$ |
(5,131,133 |
) |
|
|
|
|
|
|
|
|
|
|
(1) |
|
March 31, 2011 Adjusted EBITDA includes an adjustment for goodwill
impairment and March 31, 2010 Adjusted EBITDA includes an adjustment
for loss on early extinguishment of debt. See Note G and Note I to
the consolidated financial statements in Item 8, Financial Statements
and Supplementary Data. |
|
(2) |
|
Changes in operating assets and liabilities, net of effect of
acquisitions, include the changes in the balances of receivables,
inventories, prepaid expenses and other current assets, other assets,
accounts payable, accrued employee compensation and benefits, accrued
incentives, accrued expenses, deferred revenue, and other long-term
liabilities. |
Amortization expense. Amortization expense for the fiscal year ended March 31, 2011 decreased
$2.3 million to $8.6 million from $10.9 million for the fiscal year ended March 31, 2010, primarily
due to a decrease in amortization of software development costs primarily as a result of certain
capitalized technologies becoming fully amortized and to a decrease in amortization of covenant not
to compete agreements arising from bookstore acquisitions primarily as a result of expiration of
the agreements.
Goodwill impairment. During the fourth quarter of 2011, we recognized a non-cash charge of
$89.0 million related to the impairment of goodwill. The impairment, which was determined during
our 2011 annual impairment testing of goodwill
conducted at March 31, was primarily due to lower operating results as discussed earlier. No
impairment charge was recorded for the year ended March 31, 2010. See the Goodwill and Intangible
Assets critical accounting policy later in this Item.
27
Interest expense, net. Interest expense, net for the fiscal year ended March 31, 2011
increased $1.8 million, or 3.7%, to $51.0 million from $49.2 million for the fiscal year ended
March 31, 2010, due primarily to a $1.3 million increase in interest on the Pre-Petition Senior
Secured Notes, which replaced the Term Loan, and a $0.8 million increase in amortization of
additional prepaid loan costs related to the issuance of the Pre-Petition Senior Secured Notes and
entering into the Pre-Petition ABL Credit Agreement in October of 2009.
Loss on early extinguishment of debt. The loss on extinguishment of debt of $3.1 million for
the fiscal year ended March 31, 2010 relates to the write-off of debt issue costs as a result of
the termination of the Term Loan and Revolving Credit Facility in October of 2009.
Income taxes. Income tax benefit for the fiscal year ended March 31, 2011 increased $3.0
million to $3.5 million from $0.5 million for the fiscal year ended March 31, 2010. Our effective
tax rate for the fiscal years ended March 31, 2011 and 2010 was 3.4% and (29.9)%, respectively.
Our effective tax rate for the fiscal year 2011 differs from the statutory tax rate primarily as a
result of a pre-tax earnings charge for non-deductible goodwill impairment. Excluding the impact
of the goodwill impairment charge, which was all attributed to non-deductible goodwill and as such
is treated as a permanent difference for income tax purposes, our effective tax rate would have
been 33.2% for the fiscal year ended March 31, 2011. Our effective tax rate for fiscal year 2010
differs from the statutory tax rate primarily due to the adjustment of the deferred tax rate and
the change in NOL carryforward benefit. The effective tax rate would have been 72.3% without the
effect of the adjustment to the deferred tax rate and change in NOL carryforward benefit. The high
effective tax rate in fiscal year 2010 was due to relatively low pre-tax income and to certain
states taxing on a gross receipts methodology and increased interest expense which is not
deductible in some states for state taxes.
Fiscal Year ended March 31, 2010 Compared With Fiscal Year ended March 31, 2009.
Revenues. Revenues for the fiscal years ended March 31, 2010 and 2009 and the corresponding
change in revenues were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended |
|
|
Change |
|
|
|
March 31, 2010 |
|
|
March 31, 2009 |
|
|
Amount |
|
|
Percentage |
|
Bookstore Division |
|
$ |
472,492,275 |
|
|
$ |
472,038,009 |
|
|
$ |
454,266 |
|
|
|
0.1 |
% |
Textbook Division |
|
|
140,592,220 |
|
|
|
147,287,779 |
|
|
|
(6,695,559 |
) |
|
|
(4.5 |
)% |
Complementary Services Division |
|
|
35,470,836 |
|
|
|
34,233,883 |
|
|
|
1,236,953 |
|
|
|
3.6 |
% |
Intercompany Eliminations |
|
|
(43,061,718 |
) |
|
|
(42,843,490 |
) |
|
|
(218,228 |
) |
|
|
0.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
605,493,613 |
|
|
$ |
610,716,181 |
|
|
$ |
(5,222,568 |
) |
|
|
(0.9 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
For the fiscal year ended March 31, 2010, Bookstore Division revenues increased $0.5 million,
or 0.1%, from the fiscal year ended March 31, 2009. The increase in Bookstore Division revenues
was primarily attributable to the addition of 44 bookstore locations through acquisitions or
start-ups since April 1, 2008. The new bookstores provided an additional $21.6 million of revenue
for the fiscal year ended March 31, 2010. Same-store sales for the fiscal year ended March 31,
2010 decreased $11.5 million, or 2.6%, from the fiscal year ended March 31, 2009, primarily due to
decreased new and used textbook revenue and to a smaller decrease in clothing and insignia wear
revenues. The same-store sales decrease in new and used textbooks is partly attributable to the
rental program implemented in the fourth quarter of fiscal 2010 in our off-campus bookstores. If
the textbooks rented would have been sold instead, we estimate that same-store sales would have
been approximately $4.4 million higher, lowering the same-store sales decrease to 1.6% for the
current fiscal year. We define same-store sales for the fiscal year ended March 31, 2010 as sales,
including internet sales, from any store, even if expanded or relocated, that has been operated by
us since the start of fiscal year 2009. Finally, revenues declined $9.6 million as a result of
certain lost contract-managed bookstores and store closings since April 1, 2008.
For the fiscal year ended March 31, 2010, Textbook Division revenues decreased $6.7 million,
or 4.5%, from the fiscal year ended March 31, 2009 due primarily to an approximate 4.8% decrease in
units sold, which was slightly offset by an approximate 0.2% increase in the average price per book
sold and an increase in revenues from textbook rentals to third-parties.
Complementary Services Division revenues increased $1.2 million, or 3.6%, from the year ended
March 31, 2009, as increases in the distance education and e-commerce services businesses were
mostly offset by a decrease in revenues from our consulting business. Intercompany eliminations
for the fiscal year ended March 31, 2010 decreased $0.2 million from the fiscal year ended March
31, 2009.
28
Gross profit. Gross profit for the fiscal year ended March 31, 2010 decreased $4.0 million,
or 1.7%, to $235.3 million from $239.3 million for the fiscal year ended March 31, 2009. The
decrease in gross profit was primarily attributable to the decrease in revenues in the Textbook
Division. The consolidated gross margin percentage decreased slightly to 38.9% for the fiscal year
ended March 31, 2010 from 39.2% for the fiscal year ended March 31, 2009 primarily due to a
decrease in the gross margin percentage in the Textbook Division.
Selling, general and administrative expenses. Selling, general and administrative expenses for
the fiscal year ended March 31, 2010 decreased $6.4 million, or 3.8%, to $161.9 million from $168.3
million for the fiscal year ended March 31, 2009. Selling, general and administrative expenses as a
percentage of revenues were 26.7% and 27.6% for the fiscal years ended March 31, 2010 and 2009,
respectively. The decrease in selling, general and administrative expenses includes a $10.3
million decrease in personnel costs and a $1.6 million decrease in advertising and travel expenses,
which were primarily due to cost cutting measures implemented during the last quarter of fiscal
2009. These decreases were partially offset by a $4.2 million increase in commission expense,
primarily due to an increase in sales on the internet involving third-party websites and a $1.8
million increase in rent, primarily due to an increase in the number of bookstores in the Bookstore
Division.
Earnings before interest, taxes, depreciation, amortization, goodwill impairment, and loss on
early extinguishment of debt (Adjusted EBITDA). Adjusted EBITDA for the fiscal years ended March
31, 2010 and 2009 and the corresponding change in Adjusted EBITDA were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended |
|
|
Change |
|
|
|
March 31, 2010 |
|
|
March 31, 2009 |
|
|
Amount |
|
|
Percentage |
|
Bookstore Division |
|
$ |
45,685,171 |
|
|
$ |
44,029,528 |
|
|
$ |
1,655,643 |
|
|
|
3.8 |
% |
Textbook Division |
|
|
37,050,519 |
|
|
|
39,009,073 |
|
|
|
(1,958,554 |
) |
|
|
(5.0 |
)% |
Complementary Services Division |
|
|
2,301,001 |
|
|
|
1,320,700 |
|
|
|
980,301 |
|
|
|
74.2 |
% |
Corporate Administration |
|
|
(11,597,268 |
) |
|
|
(13,326,971 |
) |
|
|
1,729,703 |
|
|
|
13.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
73,439,423 |
|
|
$ |
71,032,330 |
|
|
$ |
2,407,093 |
|
|
|
3.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Bookstore Division Adjusted EBITDA increased $1.7 million, or 3.8%, primarily due to lower
selling, general and administrative expenses. The $2.0 million, or 5.0%, decrease in Textbook
Division Adjusted EBITDA was primarily due to the previously mentioned decrease in revenues and
gross profit, which were partially offset by a decrease in selling, general and administrative
expenses primarily as a result of cost cutting measures implemented during the last quarter of
fiscal 2009. Complementary Services Division Adjusted EBITDA increased $1.0 million primarily due
to improved results in our e-commerce and distance education businesses which were partially offset
by lower results in our consulting business. Corporate Administrations Adjusted EBITDA loss
decreased $1.7 million primarily due to expenses incurred in the prior year that were not incurred
again in fiscal 2010, including $1.1 million of costs associated with a voluntary early retirement
program and severance.
29
For an explanation of why EBITDA and Adjusted EBITDA are useful measures in evaluating our
operating results and how they provide additional information for determining our ability to meet
debt service requirements, see Adjusted EBITDA Results earlier in this Item. The following
presentation reconciles net income (loss), which we believe to be the closest GAAP performance
measure, to EBITDA and Adjusted EBITDA and reconciles EBITDA and Adjusted EBITDA to net cash flows
from operating activities, which we believe to be the closest GAAP liquidity measure, and also sets
forth net cash flows from investing and financing activities as presented in the Consolidated
Statements of Cash Flows included in Item 8, Financial Statements and Supplementary Data:
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended |
|
|
|
March 31, 2010 |
|
|
March 31, 2009 |
|
Net income (loss) |
|
|
2,311,287 |
|
|
|
(100,494,023 |
) |
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
|
49,224,513 |
|
|
|
41,279,082 |
|
Income tax expense (benefit) |
|
|
(532,388 |
) |
|
|
4,288,620 |
|
Depreciation and amoritzation |
|
|
19,370,252 |
|
|
|
18,986,651 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA |
|
|
70,373,664 |
|
|
|
(35,939,670 |
) |
|
Goodwill impairment |
|
|
|
|
|
|
106,972,000 |
|
Loss on early extinguishment of debt |
|
|
3,065,759 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA (1) |
|
$ |
73,439,423 |
|
|
$ |
71,032,330 |
|
|
|
|
|
|
|
|
|
|
Share-based compensation |
|
|
1,106,882 |
|
|
|
1,288,543 |
|
Interest income |
|
|
180,709 |
|
|
|
426,536 |
|
Provision for losses on receivables |
|
|
1,399,466 |
|
|
|
1,366,979 |
|
Cash paid for interest |
|
|
(37,572,221 |
) |
|
|
(39,123,694 |
) |
Cash paid for income taxes |
|
|
(3,155,473 |
) |
|
|
(9,930,165 |
) |
Loss on disposal of assets |
|
|
235,803 |
|
|
|
124,871 |
|
Changes in operating assets and liabilities, net of effect of acquisitions (2) |
|
|
(4,803,359 |
) |
|
|
1,170,551 |
|
|
|
|
|
|
|
|
Net Cash Flows from Operating Activities |
|
$ |
30,831,230 |
|
|
$ |
26,355,951 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Flows from Investing Activities |
|
$ |
(8,765,940 |
) |
|
$ |
(14,898,403 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Flows from Financing Activities |
|
$ |
(5,131,133 |
) |
|
$ |
3,254,464 |
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
March 31, 2010 Adjusted EBITDA includes an adjustment for loss on early
extinguishment of debt and March 31, 2009 Adjusted EBITDA includes an adjustment for
goodwill impairment. See Note G and Note I to the consolidated financial statements in
Item 8, Financial Statements and Supplementary Data. |
|
(2) |
|
Changes in operating assets and liabilities, net of effect of acquisitions,
includes the changes in the balances of receivables, inventories, prepaid expenses and
other current assets, other assets, accounts payable, accrued employee compensation and
benefits, accrued incentives, accrued expenses, deferred revenue, and other long-term
liabilities. |
Depreciation expense. Depreciation expense for the fiscal year ended March 31, 2010 increased
$0.9 million, or 12.0%, to $8.5 million from $7.6 million for the fiscal year ended March 31, 2009,
due primarily to new bookstores added since April 1, 2008 and bookstore remodeling projects.
Amortization expense. Amortization expense for the fiscal year ended March 31, 2010 decreased
$0.5 million, or 4.7%, to $10.9 million from $11.4 million for the fiscal year ended March 31,
2009, primarily due to a $0.5 million decrease in amortization of covenant not to compete
agreements arising from bookstore acquisitions.
Goodwill impairment. During the fourth quarter of 2009, we recognized a non-cash charge of
$107.0 million related to the impairment of goodwill. The impairment, which was determined during
our 2009 annual impairment testing of goodwill
conducted at March 31, was due to the economic downturn and changes in some variables
associated with the judgments, assumptions and estimates made by us in assessing the valuation of
our goodwill, including lower market multiples. No impairment charge was recorded for the year
ended March 31, 2010.
30
Interest expense, net. Interest expense, net for the fiscal year ended March 31, 2010
increased $7.9 million, or 19.2%, to $49.2 million from $41.3 million for the fiscal year ended
March 31, 2009, due primarily to a $5.7 million increase in interest on the Term Loan and
Pre-Petition Senior Secured Notes mainly due to higher interest rates and a $2.6 million increase
in amortization of additional prepaid loan costs related to the issuance of the Pre-Petition Senior
Secured Notes and entering into the Pre-Petition ABL Credit Agreement. These increases were
partially offset by a $0.6 million decline in interest on the Revolving Credit Facility due to
lower outstanding indebtedness.
Loss on early extinguishment of debt. The loss on early extinguishment of debt of $3.1
million for the fiscal year ended March 31, 2010 relates to the write-off of debt issue costs as a
result of the termination of the Term Loan and Revolving Credit Facility.
Income taxes. Income tax benefit for the fiscal year ended March 31, 2010 increased $4.8
million to $0.5 million from an expense of $4.3 million for the fiscal year ended March 31, 2009.
Our effective tax rate for the fiscal years ended March 31, 2010 and 2009 was (29.9)% and (4.5) %,
respectively. Our effective tax rate for fiscal year 2010 differs from the statutory tax rate
primarily due to the adjustment to the deferred tax rate and change in NOL carryforward benefit.
The effective tax rate would have been 72.3% without the effect of the adjustment to the deferred
tax rate and change in NOL carryforward benefit. The high effective tax rate in fiscal year 2010
was due to relatively low pre-tax income and to certain states taxing on a gross receipts
methodology and increased interest expense which is not deductible in some states for state taxes.
Our effective tax rate for fiscal 2009 differs from the statutory tax rate primarily as a result of
a pre-tax earnings charge for non-deductible goodwill impairment. Excluding the impact of the
goodwill impairment charge, which was all attributable to non-deductible goodwill and as such is
treated as a permanent difference for income tax purposes, our effective tax rate would have been
39.8% for the fiscal year ended March 31, 2009.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Managements Discussion and Analysis of Financial Condition and Results of Operations
discusses the consolidated financial statements, which have been prepared in accordance with
accounting principles generally accepted in the United States of America. The preparation of these
consolidated financial statements requires us to make estimates and assumptions that affect the
reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities
at the date of the consolidated financial statements and the reported amounts of revenues and
expenses during the reporting period. On an on-going basis, we evaluate our estimates and
judgments, including those related to returns, bad debts, inventory valuation and obsolescence,
goodwill and intangible assets, rebate programs, income taxes, and contingencies and litigation.
We base our estimates and judgments on historical experience and on various other factors that
management believes to be reasonable under the circumstances, the results of which form the basis
for making judgments about the carrying values of assets and liabilities that are not readily
apparent from other sources. Actual results may differ from these estimates under different
assumptions or conditions. We believe the following critical accounting policies, among others,
affect our more significant judgments and estimates used in the preparation of the consolidated
financial statements:
Revenue Recognition. We recognize revenue from Textbook Division sales at the time of
shipment. We have established a program which, under certain conditions, enables our customers to
return textbooks. We record reductions to revenue and costs of sales for the estimated impact of
textbooks with return privileges which have yet to be returned to the Textbook Division. External
customer returns over the past three fiscal years have ranged from approximately 22.9% to 26.4% of
sales. Additional reductions to revenue and costs of sales may be required if the actual rate of
returns exceeds the estimated rate of returns. Consistent with prior years, the estimated rate of
returns is determined utilizing actual historical return experience. The accrual rate for customer
returns at March 31, 2011 was approximately 26.2% of Textbook Division gross external sales with
estimated product returns at March 31, 2011 of $4.9 million.
Bad Debts. We maintain allowances for doubtful accounts for estimated losses resulting from
the inability of our customers to make required payments. Consistent with prior years, in
determining the adequacy of the allowance, we analyze the aging of the receivable, the customers
financial position, historical collection experience, and other economic and industry factors. Net
charge-offs over the past three fiscal years have been between $1.1 million and $2.2 million, or
0.2% to 0.5%, of revenues. We have maintained an allowance for doubtful accounts of approximately
$1.3 million, or 0.3%, of revenues over the past three fiscal
years. If the financial condition of our customers were to deteriorate, resulting in an
impairment of their ability to make payments, additional allowances may be required.
31
Inventory Valuation and Obsolescence. Inventories, including rental inventory, are stated at
the lower of cost or market. The cost of used textbook inventories is determined using the
weighted-average method. Our Bookstore Division uses the retail inventory method to determine cost
for new textbooks and non-textbook inventories. The cost of other inventories is determined on a
first-in, first-out cost method. Consistent with prior years, we account for inventory
obsolescence based upon assumptions about future demand and market conditions. At March 31, 2011,
used textbook inventory was subject to an obsolescence reserve of $2.4 million. The obsolescence
reserve at March 31, 2010 and 2009 was $2.3 million and $2.4 million, respectively. If actual
future demand or market conditions are less favorable than those projected by us, inventory
write-downs may be required. In determining inventory adjustments, we consider amounts of
inventory on hand, projected demand, new editions, and industry factors.
Goodwill and Intangible Assets. The March 4, 2004 Transaction and our acquisitions of college
bookstores result in the application of the acquisition method of accounting as of the acquisition
date. In certain circumstances, our management performs valuations where appropriate to determine
the fair value of assets acquired and liabilities assumed. The goodwill in such transactions is
determined by calculating the difference between the consideration transferred and the fair value
of net assets acquired. We evaluate the impairment of the carrying value of our goodwill and
identifiable intangibles in accordance with applicable accounting standards, including the
Intangibles Goodwill and Other and the Property, Plant and Equipment Topics of the FASB ASC. In
accordance with such standards, we evaluate impairment on goodwill and certain identifiable
intangibles annually at March 31 and evaluate impairment on all intangibles whenever events or
changes in circumstances indicate that the carrying amounts of such assets may not be recoverable.
We are required to make certain assumptions and estimates regarding the fair value of intangible
assets when assessing such assets for impairment. We evaluate goodwill at the reporting unit level
and have identified our reportable segments, the Textbook Division, Bookstore Division and
Complementary Services Division, as our reporting units. Our reporting units are determined based
on the way management organizes the segments for making operating decisions and assessing
performance. Management has organized our reporting segments based upon differences in products
and services provided. The Bookstore Division and Textbook Division reporting units have been
assigned goodwill and are thus required to be tested for impairment.
In the first step of our goodwill impairment test conducted at March 31, 2011, fair value was
determined using a combination of the market approach, based primarily on a multiple, and the
income approach, based on a discounted cash flow model. In applying weights to the methods used at
March 31, 2011, we believe that the discounted cash flow model captures our estimates regarding the
results of our future prospects, however, we also considered the markets expectations based on
observable market information. The multiple approach requires that we estimate a certain valuation
multiple of revenue and EBITDA for each reporting unit derived from comparable companies to
estimate the fair value of the reporting unit. The discounted cash flow model discounts projected
cash flows for each reporting unit to present value and includes critical assumptions such as
long-term growth rates, projected revenues and earnings and cash flow forecasts for the reporting
units, as well as an appropriate discount rate. Discount rates were determined separately for each
reporting unit by estimating the weighted average cost of capital using the capital asset pricing
model. The multiples applied to our trailing twelve month and next twelve month revenue were 0.3x
and 0.4x and to EBITDA were 7.2x and 6.9x, respectively, for the Bookstore Division. The multiples
applied to our trailing twelve month and next twelve month revenue were 1.1x and 1.0x and to EBITDA
were 5.3x and 5.2x, respectively, for the Textbook Division. The discounted cash flow model
assumed a discount rate of 12.5% and 11.6% for the Bookstore and Textbook Divisions, respectively,
based on the weighted-average cost of capital derived from public companies considered to be
reasonably comparable to ours. The discounted cash flow model also assumed a terminal growth rate
of 3.5% and 1.0% for Bookstore and Textbook Divisions, respectively.
Estimated fair value for our goodwill impairment test conducted for fiscal years ended March
31, 2010 and 2009 was determined using the market approach based primarily on comparable company
EBITDA multiples. The fair value was also calculated using the income approach, based on a
discounted cash flow model, and was compared to and supported the fair value based upon the EBITDA
multiple approach. We believe the methods used in the past and the method used at March 31, 2011
have relative merits but using a weighting of the market and income approaches provides a better
estimate of fair value.
If we fail the first step of the goodwill impairment test, we are required, in the second
step, to estimate the fair value of reporting unit assets and liabilities, including intangible
assets, to derive the fair value of the reporting units goodwill.
32
We determined in the first step of our goodwill impairment test conducted at March 31, 2011
that the carrying values of the Bookstore and Textbook Divisions exceed their fair values,
indicating that goodwill may be impaired. Having determined that goodwill may be impaired, we
performed the second step of the goodwill impairment test which involves calculating the implied
fair value of goodwill for each reporting unit by allocating the fair value of the reporting unit
to all of its assets and liabilities other than goodwill and debt (including both recognized and
unrecognized intangible assets) and comparing the residual amount to the carrying value of
goodwill. Appraisals were used to estimate fair value of our property and equipment, the excess
earnings income approach was used to estimate fair value for Customer Relationships in the Textbook
Division and the relief from royalty market approach was used to estimate fair value for Tradename
in the Textbook Division. Carrying value was assumed to approximate fair value for all other
assets and liabilities due to their short-term nature. As a result, we recorded an impairment
charge of $89.0 million. The carrying value of goodwill in excess of the implied fair value was
approximately $62.0 million and $27.0 million for the Bookstore and Textbook Divisions,
respectively. Remaining goodwill at March 31, 2011 assigned to the Bookstore Division was $121.8
million and to the Textbook Division was $7.6 million.
The use of different assumptions, estimates, or judgments in either step of the goodwill
impairment testing process could materially increase or decrease the fair value of the reporting
unit and/or its net assets and, accordingly, could materially increase or decrease any related
impairment charge. If we had used a growth rate and discount rate that were increased or decreased
by 50 basis points and EBITDA and revenue multiples that were increased or decreased by 10.0%, we
would have recorded an impairment charge as low as $38.0 million or as high as $82.0 million in the
Bookstore Division and as low as $12.0 million or as high as $40.0 million in the Textbook
Divisions.
In fiscal 2010, we identified no goodwill impairment. At March 31, 2010, the fair value of
the Textbook Division exceeded the carrying value of $210.7 million by 4.8% and the Bookstore
Division fair value exceeded the carrying value of $244.5 million by 4.7%.
In fiscal 2009, we recorded goodwill impairment of $107.0 million, of which $40.0 million and
$67.0 million were charged to the Bookstore and Textbook Divisions, respectively.
The impairment test for intangible assets not subject to amortization involves a comparison of
the estimated fair value of the intangible asset with its carrying value. If the carrying value of
the intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to
the excess. The impairment evaluation for indefinite lived intangible assets, which for us is our
tradename, is conducted at March 31 each year or, more frequently, if events or changes in
circumstances indicate that an asset might be impaired. Significant judgments and assumptions
inherent in this analysis include assumptions about appropriate long-term growth rates, royalty
rates, discount rate, and cash flow forecasts. The royalty rate and pre-tax discount rate used in
this analysis were 3.8% and 13.6%, respectively. Such assumptions are subject to change as a
result of changing economic and competitive conditions. If we had used a royalty rate and discount
rate that were increased or decreased by 0.5% we still would have reached the same conclusion of no
impairment. The estimated fair value of our tradename at March 31, 2011 exceeded the carrying
value by approximately 34.0%. We conducted our annual assessment of indefinite lived intangibles
in the fourth quarter and no impairment was indicated.
We are also required to make certain assumptions and estimates when assigning an initial value
to covenants not to compete arising from bookstore acquisitions. Changes in the fact patterns
underlying such assumptions and estimates could ultimately result in the recognition of impairment
losses on intangible assets.
We monitor relevant circumstances, including industry trends, general economic conditions, and
the potential impact that such circumstances might have on the valuation of our goodwill and
identifiable intangibles. It is possible that changes in such circumstances, or in the numerous
variables associated with the judgments, assumptions and estimates made by us in assessing the
appropriate valuation of our goodwill and identifiable intangibles, including a further
deterioration in our financial performance or the economy or debt markets or a significant delay in
the expected recovery, could in the future require us to further write down a portion of our
goodwill or write down a portion of our identifiable intangibles and record related non-cash
impairment charges.
Accrued Incentives. Our Textbook Division offers certain incentive programs to its customers
that allow the participating customers the opportunity to earn rebates for used textbooks sold to
the Textbook Division. The rebates can be redeemed in a number of ways, including to pay for
freight charges on textbooks sold to the customer or to pay for certain products or services we
offer through our Complementary Services Division. The customer can also use the rebates to pay
for the cost of textbooks sold by the Textbook Division to the customer; however, a portion of the
rebates earned by the customer are forfeited if the
customer chooses to use rebates in this manner. If the customer fails to comply with the
terms of the program, rebates earned during the year are forfeited. Significant judgment is
required in estimating the expected level of forfeitures on rebates earned. Although we believe
that our estimates of anticipated forfeitures, which have consistently been based upon historical
experience, are reasonable, actual results could
33
differ from these estimates resulting in an
ultimate redemption of rebates which differs from that which is reflected in accrued incentives in
the consolidated financial statements. At March 31, 2011, actual forfeitures for the last three
fiscal years ranged between 6.4% and 17.9% of total rebates earned within the same year. After
adjusting for estimated forfeitures, rebates earned are accrued at a rate of approximately 13.5% of
the dollar value of eligible textbooks purchased by the Textbook Division. Accrued incentives at
March 31, 2011 were $5.8 million, including estimated forfeitures, however, if we accrued for
rebates earned and unused as of March 31, 2011, assuming no forfeitures, our accrued incentives
would have been $6.5 million.
Income Taxes. We account for income taxes by recording taxes payable or refundable for the
current fiscal year and deferred tax assets and liabilities for future tax consequences of events
that have been recognized in the consolidated financial statements or the consolidated income tax
returns. Significant judgment is required in determining the provision for income taxes and
related accruals, deferred tax assets, and deferred tax liabilities. In the ordinary course of
business, there are transactions and calculations where the ultimate tax outcome is uncertain.
Additionally, the consolidated income tax returns are subject to audit by various tax authorities.
Although we believe that our estimates are reasonable, actual results could differ from these
estimates resulting in a final tax outcome that may be different from that which is reflected in
the consolidated financial statements.
LIQUIDITY AND CAPITAL RESOURCES
Financing Activities
Implications of Chapter 11 Proceedings
Under section 362 of the Bankruptcy Code, the filing of a bankruptcy petition automatically
stays most actions against a debtor, including most actions to collect pre-petition indebtedness or
to exercise control over our property. Absent an order of the Court, substantially all
pre-petition liabilities are subject to settlement under a plan of reorganization. Substantially
all of our pre-petition debt is in default, including $200.0 million principal amount due under the
Pre-Petition Senior Secured Notes, $175.0 million principal amount under the Pre-Petition Senior
Subordinated Notes and $77.0 million principal amount under the Pre-Petition Senior Discount Notes.
Information related to our debt and related agreements is set forth in Note I to the
consolidated financial statements at Item 8, Financial Statements and Supplementary Data.
Pre-Petition Debt
On October 2, 2009, in conjunction with the completion of NBCs offering of the Pre-Petition
Senior Secured Notes and payment in full of the Term Loan, NBC entered into the Pre-Petition ABL
Credit Agreement which provided for the Pre-Petition ABL Facility and replaced the Revolving Credit
Facility, effectively terminating the Senior Credit Facility. The Pre-Petition ABL Facility was
secured by a first priority interest in substantially all of our and our subsidiaries property and
assets, which also secured the Pre-Petition Senior Secured Notes on a second priority basis. The
Pre-Petition ABL Facility was scheduled to mature on the earlier of October 2, 2012 and the date
that was 91 days prior to the earliest maturity of the Pre-Petition Senior Secured Notes (due
December 1, 2011), the Pre-Petition Senior Subordinated Notes (due March 15, 2012), the
Pre-Petition Senior Discount Notes (due March 15, 2013), or any refinancing thereof, effectively
September 1, 2011. Borrowings under the Pre-Petition ABL Facility were subject to the Eurodollar
interest rate, not to be less than 1.5%, plus an applicable margin ranging from 4.25% to 4.75%, or
the base interest rate plus an applicable margin ranging from 3.25% to 3.75%. In addition, the
applicable margin increased 1.5% during the time periods from April 15 to July 14 and from December
1 to January 29 of each year. There also was a commitment fee ranging from 0.75% to 1.0% for the
daily average unused amount. Costs of $10.2 million associated with the issuance of the
Pre-Petition Senior Secured Notes and entering into the Pre-Petition ABL Credit Agreement were
capitalized as debt issue costs to be amortized to interest expense over the remaining life of the
debt instruments. Debt issue costs of $3.1 million were written off as a result of the termination
of the Term Loan and Revolving Credit Facility.
Effective February 3, 2009, the Senior Credit Facility, which has been terminated as described
earlier, was amended to, among other things, (i) extend the maturity date of the Revolving Credit
Facility to May 31, 2010, (ii) decrease the maximum borrowing capacity under the Revolving Credit
Facility from $85.0 million to $65.0 million, (iii) amend certain definitions and
financial covenants under the Senior Credit Facility, including limiting future acquisitions
to contract-managed stores, and (iv) increase the interest rate on the Term Loan and Revolving
Credit Facility. The applicable margin on the Revolving Credit Facility and Term Loan increased to
6.0% on Eurodollar borrowings and 5.0% on base rate borrowings. The Eurodollar interest rate was
not to be less than 3.25% plus the applicable margin. The interest rate on base rate borrowings
was the greater of a) prime rate, b) federal funds rate plus 0.5%, or c) the one-month Eurodollar
loan rate plus 1.0%, not to be less than 4.25%, plus the applicable margin. The commitment fee
rate increased to 0.75%. The modifications to the Senior Credit Facility resulted in the payment
of $4.0 million in costs associated with such modifications, which were capitalized as debt issue
costs to be amortized to interest expense over the remaining life of the debt instruments.
34
In conjunction with the Senior Credit Facility amendment on February 3, 2009, we entered into
a Stock Subscription Agreement with NBC Holdings Corp. (Holdings), pursuant to which Holdings
purchased 10,000 shares of a newly created series of our preferred stock, par value $0.01 per
share, for $1,000 per share, for an aggregate purchase price of $10.0 million. Subject to
applicable restrictions under our debt agreements, the holders of the preferred stock are entitled
to receive mandatory cumulative dividends from the date of issuance at a rate of 15% of the
liquidation preference, which is equal to $1,000 per share, as adjusted. The Series A Preferred
Stock has a redemption feature that allows for redemption at the option of the holders of a
majority of the shares, on occurrence of a Change of Control, at a redemption price per share equal
to the liquidation preference plus accrued and unpaid dividends subject to the restrictions and
limitations under our debt agreements.
Following our chapter 11 filing on June 27, 2011, our primary liquidity requirements are for
debt service under the DIP Credit Agreement, for working capital, for income tax payments, and
capital expenditures. We have historically funded these requirements primarily through internally
generated cash flows and funds borrowed under our revolving credit facility. At March 31, 2011,
our total indebtedness was $454.1 million, consisting of a $75.0 million Pre-Petition ABL Facility
which was unused at March 31, 2011, $200.0 million of Pre-Petition Senior Secured Notes with
unamortized discount of $0.4 million, $175.0 million of Pre-Petition Senior Subordinated Notes,
$77.0 million of Pre-Petition Senior Discount Notes, and $2.5 million of other indebtedness,
including capital lease obligations.
Principal and interest payments under the Pre-Petition ABL Facility, the Pre-Petition Senior
Secured Notes, the Pre-Petition Senior Subordinated Notes, and the Pre-Petition Senior Discount
Notes represented significant liquidity requirements for us. An excess cash flow payment of $6.0
million for fiscal year ended March 31, 2009 under the Senior Credit Facility was paid in September
2009.
Loans under the Senior Credit Facility were subject to interest at floating rates based upon
the borrowing option selected. On July 15, 2005, NBC entered into an interest rate swap agreement
to essentially convert a portion of the variable rate Term Loan into debt with a fixed rate of
6.844% (4.344% plus an applicable margin as defined by the Senior Credit Facility). This agreement
was effective as of September 30, 2005 and expired September 30, 2008.
The Pre-Petition Senior Secured Notes required semi-annual interest payments at a fixed rate
of 10.0% and were set to mature on December 1, 2011. Interest payments on the Pre-Petition Senior
Secured Notes will be paid monthly while under chapter 11. The Pre-Petition Senior Subordinated
Notes required semi-annual interest payments at a fixed rate of 8.625% and were set to mature on
March 15, 2012. The Pre-Petition Senior Discount Notes required semi-annual cash interest payments
commencing September 15, 2008 at a fixed rate of 11.0% and were set to mature on March 15, 2013.
Interest payments on the Pre-Petition Senior Subordinated Notes and Senior Discount Notes ceased as
of the Petition Date.
The DIP Credit Agreement requires monthly interest payments at a floating rate based upon the
borrowing option selected.
Investing Cash Flows
Our capital expenditures were $5.7 million, $5.4 million and $8.0 million for the fiscal years
ended March 31, 2011, 2010 and 2009, respectively. Capital expenditures consist primarily of
leasehold improvements and furnishings for new bookstores, bookstore renovations, computer upgrades
and miscellaneous warehouse improvements. The Pre-Petition ABL Credit Agreement did not have a
limitation on capital expenditures other than as part of the fixed charge coverage ratio. We
expect capital expenditures to be between $6.5 million and $7.5 million for fiscal year 2012.
Business acquisition and contract-management renewal expenditures were $9.5 million, $2.8
million and $6.3 million for the fiscal years ended March 31, 2011, 2010 and 2009, respectively.
During the fiscal year ended March 31, 2011, nineteen bookstore locations were acquired in fifteen
separate transactions (thirteen of which were contract-managed locations). During
the fiscal year ended March 31, 2010, fourteen bookstore locations were acquired in eleven
separate transactions (all of which were contract-managed locations). During the fiscal year ended
March 31, 2009, we acquired twenty-two bookstore locations in nineteen separate transactions
(nineteen of which were contract-managed locations). Our ability to make acquisition expenditures
was subject to certain restrictions under the Pre-Petition ABL Credit Agreement.
35
During the fiscal years ended March 31, 2011, 2010 and 2009, we capitalized $1.6 million, $0.6
million and $0.6 million, respectively, in software development costs associated with new software
products and enhancements to existing software products.
In addition to the previously mentioned business acquisition and contract-management renewal
expenditures, the contract-managed acquisition costs during prior years included $0.6 million of
unpaid consideration. The purchase price of one of the bookstores during the fiscal year ended
March 31, 2008 included $0.7 million of contingent consideration, which is paid to the previous
owner on a monthly basis and is calculated as a percentage of revenues generated by the acquired
bookstore each month. Such payments have totaled $0.4 million from purchase date through the
fiscal year ended March 31, 2011.
Operating Cash Flows
Our principal sources of cash to fund our future operating liquidity needs will be cash from
operating activities and borrowings under the DIP Revolving Facility and DIP Term Loan Facility.
Usage of the DIP Revolving Facility to meet our liquidity needs will fluctuate throughout the
fiscal year due to our distinct buying and selling periods, increasing substantially at the end of
each college semester (May and December). For the fiscal year ended March 31, 2011,
weighted-average borrowings under our pre-petition revolving credit facilities approximated $1.5
million, with actual borrowings ranging from a low of no borrowings to a high of $20.7 million.
Net cash flows from operating activities for the fiscal year ended March 31, 2011 were $12.8
million, down $18.0 million from $30.8 million for the fiscal year ended March 31, 2010. The
decrease in net cash flows from operating activities is due primarily to lower operating results,
an increase in cash paid for interest primarily as a result of timing of cash interest payments on
pre-petition debt, and payments in connection with shares issued under the 2005 Restricted Stock
Plan, which vested on September 30, 2010. These decreases in cash flow from operations were
partially offset by lower cash payments for income taxes and a lower investment in inventories due
to the timing of publisher returns. Net cash flows from operating activities for the fiscal year
ended March 31, 2010 were $30.8 million, up $4.4 million from $26.4 million for the fiscal year
ended March 31, 2009. The increase in net cash flows from operations was due primarily to a
decrease in accounts receivable as a result of a decrease in Bookstore Division receivables from
publishers for returns and a decrease in income taxes paid during the fiscal year ended March 31,
2010. The increase in net cash flows was partially offset by an increase in payments for
inventories partially due to increased rental book inventories in the Bookstore Division at March
31, 2010.
As of March 31, 2011, we had $56.4 million in cash available to help fund working capital
requirements. At certain times of the year, we also invest in cash equivalents. Any investments
in cash equivalents were subject to restrictions under the Pre-Petition ABL Credit Agreement. The
Pre-Petition ABL Credit Agreement allowed investments in (1) certain short-term securities issued
by, or unconditionally guaranteed by, the federal government, (2) certain short-term deposits in
banks that have combined capital and surplus of not less than $500 million, (3) certain short-term
commercial paper of issuers rated at least A-1 by Standard & Poors or P-1 by Moodys, (4) certain
money market funds which invest exclusively in assets otherwise allowable under the Pre-Petition
ABL Credit Agreement and (5) certain other similar short-term investments. Although we invest in
compliance with the restrictions under our credit agreement and generally seek to minimize the risk
associated with investments by investing in investment grade, highly liquid securities, we cannot
give assurances that the cash equivalents that are in or will be selected to be in our investment
portfolio will not lose a portion of their value or become impaired in the future.
Covenant Restrictions
We have a substantial level of indebtedness. Our debt agreements impose significant financial
restrictions, which could prevent us from incurring additional indebtedness and taking certain
other actions and could result in all amounts outstanding being declared due and payable if we are
not in compliance with such restrictions. Access to borrowings under the Pre-Petition ABL Facility
was subject to the calculation of a borrowing base, which was a function of eligible accounts
receivable and inventory, up to the maximum borrowing limit (less outstanding letters of credit).
The Pre-Petition ABL Credit Agreement restricted our ability and the ability of certain of our
subsidiaries to incur additional indebtedness, dispose of assets, make capital expenditures,
investments, acquisitions, loans or advances and pay dividends, except that, among other things,
NBC could pay dividends to us (i) in an amount not to exceed the amount of interest required to be
paid on the Pre-Petition Senior Discount Notes and (ii) to pay corporate overhead expenses not to
exceed $250,000 per fiscal year and any taxes we owed. In addition, under the
Pre-Petition ABL Facility, if availability, as defined in the Pre-Petition ABL Credit
Agreement, was less than the greater of 20% of the total revolving credit commitments and $15.0
million, we were required to maintain a fixed charge coverage ratio of at least 1.10x measured for
the last twelve-month period on a pro forma basis in order to maintain access to funds under the
Pre-Petition ABL Facility. At March 31, 2011, we had up to $75.0 million of total revolving credit
commitments under the Pre-Petition ABL Facility (less outstanding letters of credit and subject to
a borrowing base). The calculated borrowing base as of March 31, 2011 was $32.8 million, of which
$0.7 million was outstanding under a letter of credit and $32.1 million was unused. At March 31,
2011, our pro forma fixed charge coverage ratio was 1.1x.
36
The indenture governing the Pre-Petition Senior Discount Notes restricted our ability and the
ability of certain of our subsidiaries to pay dividends or make certain other payments, subject to
certain exceptions, unless certain conditions were met, including (i) no default under the
indenture had occurred, (ii) we and certain of our subsidiaries maintained a consolidated coverage
ratio of 2.0 to 1.0 on a pro forma basis and (iii) the amount of the dividend or payment could not
exceed 50% of aggregate income from January 1, 2004 to the end of the most recent fiscal quarter
plus cash proceeds received from the issuance of stock less the aggregate of payments made under
this restriction (the Restricted Payment Calculation). If we did not meet the preceding
conditions, we could still pay dividends or make certain other payments up to $15.0 million in the
aggregate. At March 31, 2011, our pro forma consolidated coverage ratio was 1.1 to 1.0 and the
amount distributable under the Pre-Petition Senior Discount Notes was $15.0 million.
The indentures governing the Pre-Petition Senior Subordinated Notes and the Pre-Petition
Senior Secured Notes contained similar restrictions on the ability of NBC and certain of its
subsidiaries to pay dividends or make certain other payments. In addition, under the indentures to
the Pre-Petition Senior Subordinated Notes and the Pre-Petition Senior Secured Notes, if there was
no availability under the Restricted Payment Calculation, but NBC maintained the 2.0 to 1.0
consolidated coverage ratio on a pro forma basis, NBC could make dividends to us to meet the
interest payments on the Pre-Petition Senior Discount Notes. If NBC did not maintain the 2.0 to
1.0 ratio on a pro forma basis, it could still make payments, including dividends to us, up to
$15.0 million in the aggregate. At March 31, 2011, NBCs pro forma consolidated coverage ratio
calculated under the indenture to the Pre-Petition Senior Subordinated Notes was 1.3 to 1.0 and the
ratio calculated under the indenture to the Pre-Petition Senior Secured Notes was 1.5 to 1.0. The
pro forma consolidated coverage ratio calculated under the indenture to the Pre-Petition Senior
Subordinated Notes differed from the ratio calculated under the indenture to the Pre-Petition
Senior Secured Notes because the indenture to the Pre-Petition Senior Subordinated Notes excluded
debt issue cost amortization only for debt instruments outstanding at the March 4, 2004 Transaction
date from the calculation, whereas the indenture to the Pre-Petition Senior Secured Notes excluded
the higher debt issue cost amortization for the Pre-Petition Senior Secured Notes and the
Pre-Petition ABL Facility, which were issued in October of 2009, from the same calculation. At
March 31, 2011, the amount distributable by NBC under the most restrictive indenture was $2.3
million after applying $12.8 million in dividends NBC paid to us for the March 15, 2010, September
15, 2010 and March 15, 2011 interest on the Pre-Petition Senior Discount Notes.
As of March 31, 2011, we were in compliance with all of our debt covenants, however, due to
the chapter 11 bankruptcy filing on June 27, 2011, substantially all of our pre-petition debt is in
default, including $200.0 million principal amount due under the Pre-Petition Senior Secured Notes;
$175.0 million principal amount under the Pre-Petition Senior Subordinated Notes and $77.0 million
principal amount under the Pre-Petition Senior Discount Notes.
Our debt covenants used Credit Facility EBITDA in the ratio calculations mentioned above. For
a discussion of EBITDA, Adjusted EBITDA and Credit Facility EBITDA, see Adjusted EBITDA Results
earlier in this Item and for a presentation reconciling EBITDA and Adjusted EBITDA to net cash
flows from operating activities, which we believe to be the closest GAAP liquidity measure, see
Fiscal Year Ended March 31, 2011 Compared With Fiscal Year Ended March 31, 2010 and Fiscal Year
Ended March 31, 2010 Compared With Fiscal Year Ended March 31, 2009 earlier in this Item.
The DIP Credit Agreement contains, among other things, conditions precedent, covenants,
representations and warranties and events of default customary for facilities of this type. Such
covenants include the requirement to provide certain financial reports and other information, use
the proceeds of certain sales or other dispositions of collateral to prepay outstanding loans,
maintenance of certain financial covenants (including a minimum liquidity and cumulative
consolidated EBITDA test), certain restrictions on the incurrence of indebtedness, guarantees,
liens, acquisitions and other investments, mergers, consolidations, liquidations and dissolutions,
dividends and other repayments in respect of capital stock, capital expenditures, transactions with
affiliates, hedging and other derivatives arrangements, negative pledge clauses, payment of
expenses and disbursements other than those reflected in an agreed upon budget, and subsidiary
distributions, subject to certain exception.
37
Sources of and Needs for Capital
We are currently funding post-petition operations under the DIP Credit Agreement, which
consists of a $125.0 million DIP Term Loan Facility and a $75.0 million DIP Revolving Facility.
Borrowings under the DIP Credit Agreement may be used to finance working capital purposes,
including without limitation, for the payment of fees and expenses incurred in connection with
entering into the DIP Credit Agreement, the Cases and the repayment of loans outstanding under the
Pre-Petition ABL Credit Agreement.
Liquidity after Chapter 11 Bankruptcy Filing
We have incurred and expect to continue to incur significant costs associated with the Chapter
11 Proceedings and our reorganization. Following our bankruptcy filing on June 27, 2011, our most
significant sources of liquidity are funds generated by borrowings under the DIP Credit Agreement
and cash generated by operating activities. Our working capital requirements fluctuate throughout
the fiscal year, increasing substantially in May and December as a result of the buying periods.
In addition to standard financial covenants and events of default, the DIP Credit Agreement
provides for events of default specific to the Chapter 11 Proceedings, including, among others,
defaults arising from our failure to maintain certain financial covenants including a minimum
liquidity and cumulative consolidated EBITDA or our failure to obtain Court approval for a plan of
reorganization acceptable to our lenders. The occurrence of an event of default under the DIP
Credit Agreement would give our lenders the right to terminate their lending commitments and
exercise other remedies available to them under the DIP Credit Agreement.
Liquidity prior to Chapter 11 Bankruptcy Filing
As of March 31, 2011, we had up to $75.0 million of total revolving credit commitments under
the Pre-Petition ABL Facility (less outstanding letters of credit and subject to a borrowing base).
The calculated borrowing base as of March 31, 2011 was $32.8 million, of which $0.7 million was
outstanding under a letter of credit and $32.1 million was unused. Amounts drawn under the
Pre-Petition ABL Facility could have been used for working capital and general corporate purposes
(including up to $10.0 million for letters of credit), subject to certain limitations.
On October 2, 2009, in conjunction with the completion of NBCs offering of the Pre-Petition
Senior Secured Notes and payment in full of the Term Loan, we entered into the Pre-Petition ABL
Credit Agreement which provides for the Pre-Petition ABL Facility and replaced the Revolving Credit
Facility (collectively the Refinancing). Although our overall indebtedness did not materially
increase upon consummation of the Refinancing, our liquidity requirements have increased, primarily
due to increased interest payment obligations. After giving effect to the Refinancing, NBCs three
principal tranches of debt (the Pre-Petition Senior Secured Notes, the Pre-Petition ABL Facility
and the Pre-Petition Senior Subordinated Notes) each were set to mature within a period of six
months of each other. The Pre-Petition ABL Facility was set to mature on the earlier of October 2,
2012 and the date that was 91 days prior to the earliest maturity of the $200.0 million
Pre-Petition Senior Secured Notes (which were set to mature on December 1, 2011), the $175.0
million Pre-Petition Senior Subordinated Notes (which were set to mature on March 15, 2012), the
$77.0 million Pre-Petition Senior Discount Notes (which were set to mature on March 15, 2013), or
any refinancing thereof, effectively September 1, 2011. As previously disclosed, the commencement
of the Chapter 11 Proceedings triggered defaults on substantially all of our debt obligations
however creditors are stayed from taking any action as a result of such defaults.
Our ability to satisfy our debt obligations and to pay principal and interest on our debt,
fund working capital and make anticipated capital expenditures will depend on our future
performance and maintaining normal terms with our vendors, which is subject to general economic
conditions and other factors, some of which are beyond our control. We believe that funds
generated from operations, existing cash, vendor payment terms, and borrowings under the DIP Term
Loan Facility and DIP Revolving Facility will be sufficient to finance our current operations, cash
interest requirements, income tax payments, planned capital expenditures, and internal growth;
however, as noted previously, we cannot give assurance that we will generate sufficient cash flow
from operations or that future borrowings will be available under the DIP Term Loan Facility and
DIP Revolving Facility in an amount sufficient to enable us to fund our liquidity needs.
NBC Holdings Corp., a Delaware corporation and our parent, and us have separate understandings
that (a) with respect to each option granted by NBC Holdings Corp., pursuant to its 2004 Stock
Option Plan, we have granted, and will continue to grant, an option to purchase an equivalent
number of shares of its common stock at the same exercise price to NBC Holdings Corp. and (b) with
respect to each share of capital stock issued by NBC Holdings Corp., pursuant to its 2005
Restricted Stock Plan, we have
issued, and will continue to issue, an equivalent number of shares of its common stock at the
same purchase price per share to NBC Holdings Corp.
38
Off-Balance Sheet Arrangements
As of March 31, 2011, we had no off-balance sheet arrangements that have or are reasonably
likely to have a current or future effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, cash flow, capital expenditures
or capital resources.
Contractual Obligations
The following tables present aggregated information as of March 31, 2011 regarding our
contractual obligations and commercial commitments:
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Payments Due by Period |
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Contractual |
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2-3 |
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4-5 |
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After 5 |
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Obligations |
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Total |
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1 Year |
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Years |
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Years |
|
|
Years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt (1) |
|
$ |
451,820,685 |
|
|
$ |
451,697,680 |
|
|
$ |
123,005 |
|
|
$ |
|
|
|
$ |
|
|
Interest on long-term debt |
|
|
43,593,046 |
|
|
|
43,580,555 |
|
|
|
12,491 |
|
|
|
|
|
|
|
|
|
Capital lease obligations |
|
|
2,297,183 |
|
|
|
505,562 |
|
|
|
740,433 |
|
|
|
581,993 |
|
|
|
469,195 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest on capital lease obligations |
|
|
555,067 |
|
|
|
158,353 |
|
|
|
238,465 |
|
|
|
130,060 |
|
|
|
28,189 |
|
Operating leases |
|
|
85,556,000 |
|
|
|
21,922,000 |
|
|
|
31,035,000 |
|
|
|
18,280,000 |
|
|
|
14,319,000 |
|
Purchase obligations |
|
|
2,300,000 |
|
|
|
2,300,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
586,121,981 |
|
|
$ |
520,164,150 |
|
|
$ |
32,149,394 |
|
|
$ |
18,992,053 |
|
|
$ |
14,816,384 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
Amount of Commitment Expiration Per Period |
|
Other Commercial |
|
Amounts |
|
|
Less Than |
|
|
2-3 |
|
|
4-5 |
|
|
Over 5 |
|
Commitments |
|
Committed |
|
|
1 Year |
|
|
Years |
|
|
Years |
|
|
Years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unused line of credit (2) |
|
$ |
75,000,000 |
|
|
$ |
75,000,000 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Does not include the effect of $0.4 million of unamortized discount for the
Pre-Petition Senior Secured Notes. Substantially all of our pre-petition debt is in
default, including $200.0 million principal amount due under the Pre-Petition Senior
Secured Notes; $175.0 million principal amount under the Pre-Petition Senior Subordinated
Notes and $77.0 million principal amount under the Pre-Petition Senior Discount Notes. See
Notes C and I to the consolidated financial statements at Item 8, Financial Statements and
Supplementary Data. |
|
(2) |
|
Interest is not estimated on the line of credit due to uncertainty surrounding the
timing and extent of usage of the pre-petition line of credit. |
We have recorded other long-term liabilities of $1.6 million, which consist primarily of
certain lease related liabilities of $0.7 million to appropriately recognize rent expense over the
rental term, deferred payments related to acquisitions of $0.5 million, deferred compensation of
$0.3 million and accrued liabilities of $0.1 million related to a voluntary early retirement plan,
which are excluded from the preceding table primarily because we cannot reasonably estimate the
timing of the long-term payments.
Transactions with Related and Certain Other Parties
In accordance with NBCs debt covenants, NBC declared and paid $8.5 million in dividends to us
during the fiscal years ended March 31, 2011, 2010 and 2009 to provide funding for interest due and
payable on our $77.0 million 11% Pre-Petition Senior Discount Notes.
In conjunction with the Senior Credit Facility amendment on February 3, 2009, we entered into
a Stock Subscription Agreement with Holdings, pursuant to which Holdings purchased 10,000 shares of
a newly created series of our preferred stock, par value $0.01 per share, for $1,000 per share, for
an aggregate purchase price of $10.0 million. As a result of the Stock Subscription Agreement, we
made a $10.0 million capital contribution to NBC.
39
Impact of Inflation
Our results of operations and financial condition are presented based upon historical costs.
While it is difficult to accurately measure the impact of inflation due to the imprecise nature of
the estimates required, we believe that the effects of inflation, if any, on our results of
operations and financial condition have not been material. However, there can be no assurance that
during a period of significant inflation, our results of operations will not be adversely affected.
Accounting Standards Not Yet Adopted
In December 2010, the FASB issued Accounting Standards Update 2010-28, Intangibles
Goodwill and Other (Topic 350) When to Perform Step 2 of the Goodwill Impairment Test for
Reporting Units with Zero or Negative Carrying Amounts (Update 2010-28). Update 2010-28 amends
the criteria for performing Step 2 of the goodwill impairment test for reporting units with zero or
negative carrying amounts and requires performing Step 2 if qualitative factors indicate that it is
more likely than not that a goodwill impairment exists. Update 2010-28 becomes effective for us in
fiscal year 2012 and any impairment to be recorded upon adoption will be recognized as an
adjustment to beginning retained earnings. Early adoption is not permitted. Management has not yet
determined if the update will have a material impact on the consolidated financial statements.
In October 2009, the FASB issued Accounting Standards Update 2009-13, Revenue Recognition
(Topic 605) Multiple Deliverable Arrangements (Update 2009-13). Update 2009-13 addresses the
accounting for multiple-deliverable arrangements to enable vendors to account for products or
services (deliverables) separately rather than as a combined unit. The update addresses how to
separate deliverables and how to measure and allocate arrangement considerations to one or more
units of account. Update 2009-13 becomes effective prospectively for revenue arrangements entered
into or materially modified in fiscal years beginning on or after June 15, 2010, with earlier
application permitted. An entity may elect to adopt the standard on a retrospective basis. We
expect to apply this standard on a prospective basis beginning April 1, 2011. Management does not
expect that the update will have a material impact on the consolidated financial statements.
In October 2009, the FASB issued Accounting Standards Update 2009-14, Software (Topic 985)
Certain Revenue Arrangements That Include Software Elements (Update 2009-14). Update 2009-14
clarifies what guidance should be used in allocating and measuring revenue for vendors that sell or
lease tangible products in an arrangement that contains software that is more than incidental to
the tangible product as a whole. The amendments in this update do not affect software revenue
arrangements that do not include tangible products nor do they affect software revenue arrangements
that include services if the software is essential to the functionality of those services. Update
2009-14 becomes effective prospectively for revenue arrangements entered into or materially
modified in fiscal years beginning on or after June 15, 2010, with earlier application permitted.
An entity may elect to adopt the standard on a retrospective basis. We expect to apply this
standard on a prospective basis beginning April 1, 2011. Management does not expect that the
update will have a material impact on the consolidated financial statements.
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
Certain statements contained or incorporated in this Annual Report on Form 10-K made by us
which are not statements of historical fact constitute Forward-Looking Statements within the
meaning of the Private Securities Litigation Reform Act of 1995 (the Reform Act). Forward-looking
statements give current expectations or forecasts of future events. Words such as anticipate,
expect, intend, plan, believe, seek, estimate and other words and terms of similar
meaning in connection with discussions of future operating or financial performance signify
forward-looking statements. These statements reflect our current views with respect to future
events and are based on assumptions and estimates, which are subject to risks and uncertainties
including those discussed in Item 1A, Risk Factors, and elsewhere in this report. Accordingly,
undue reliance should not be placed on these forward-looking statements. Also, these
forward-looking statements represent our estimates and assumptions only as of the date of this
report. We do not intend to update any of these forward-looking statements to reflect circumstances
or events that occur after the statement is made and qualifies all of its forward-looking
statements by these cautionary statements.
40
You should understand that various factors, in addition to those discussed elsewhere in this
document, could affect our future results and could cause results to differ materially from those
expressed in such forward-looking statements, including:
|
|
|
our ability to satisfy our future capital and liquidity requirements; our ability to
access the credit and capital markets at the times and in the amounts needed and on terms
acceptable to us; our ability to comply with covenants applicable to us; and the
continuation of acceptable supplier payment terms; |
|
|
|
the potential adverse impact of the Chapter 11 Proceedings on our business, financial
condition or results of operations, including our ability to maintain contracts and other
customer and vendor relationships that are critical to our business and the actions and
decisions of our creditors and other third parties with interests in the Chapter 11
Proceedings; |
|
|
|
our ability to maintain adequate liquidity to fund our operations during the Chapter 11
Proceedings and to fund a plan of reorganization and thereafter, including obtaining
sufficient exit financing; maintaining normal terms with our vendors and service
providers during the Chapter 11 Proceedings and complying with the covenants and other
terms of our financing agreements; |
|
|
|
our ability to obtain court approval with respect to motions in the Chapter 11
Proceedings prosecuted from time to time and to develop, prosecute, confirm and consummate
one or more plans of reorganization with respect to the Chapter 11 Proceedings and to
consummate all of the transactions contemplated by one or more such plans of reorganization
or upon which consummation of such plans may be conditioned; |
|
|
|
increased competition from other companies that target our markets; |
|
|
|
increased competition from alternative sources of textbooks for students and alternative
media, including digital or other educational content sold or rented directly to students
and increased competition for the purchase and sale of used textbooks from
student-to-student transactions; |
|
|
|
further deterioration in the economy and credit markets, a decline in consumer spending,
and/or changes in general economic conditions in the markets in which we compete or may
compete; |
|
|
|
our inability to successfully start-up or contract-manage additional bookstores or to
integrate those additional bookstores and/or to cost-effectively maintain our current
contract-managed bookstores; |
|
|
|
our inability to purchase a sufficient supply of used textbooks; |
|
|
|
changes in pricing of new and/or used textbooks or in publisher practices regarding new
editions and materials packaged with new textbooks; |
|
|
|
the loss or retirement of key members of management; |
|
|
|
the impact of seasonality of the wholesale and bookstore operations; |
|
|
|
goodwill impairment or impairment of identifiable intangibles resulting in a non-cash
write down of goodwill or identifiable intangibles; and |
|
|
|
other risks detailed in our SEC filings, all of which are difficult or impossible to
predict accurately and many of which are beyond our control. |
The risks and uncertainties and the terms of any reorganization plan ultimately confirmed can
affect the value of our various pre-petition liabilities, common stock and/or other securities. No
assurance can be given as to what values, if any, will be ascribed in the bankruptcy proceedings to
each of these constituencies. A plan of reorganization could result in holders of our liabilities
and/or securities receiving no value for their interests. Because of such possibilities, the value
of these liabilities and/or securities is highly speculative. Accordingly, we urge that caution be
exercised with respect to existing and future investments in any of these liabilities and/or
securities.
41
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Our primary market risk exposure is, and is expected to continue to be, fluctuation in
interest rates. Our exposure to market risk for changes in interest rates related to our
short-term investments and borrowings under the Pre-Petition ABL Facility. Exposure to interest
rate fluctuations for our long-term debt was managed by maintaining fixed interest rate debt
(primarily the Pre-Petition Senior Subordinated Notes, the Pre-Petition Senior Secured Notes and
the Pre-Petition Senior Discount Notes). Because we pay fixed interest on our notes, market
fluctuations do not impact our debt interest payments. However, the fair value of our notes
fluctuates as a result of changes in market interest rates, changes in our credit worthiness and
changes in the overall credit market.
The following table presents quantitative information about our market risk sensitive
instruments, which include the Pre-Petition Senior Discount Notes, the Pre-Petition Senior
Subordinated Notes, the Pre-Petition Senior Secured Notes, capital lease obligations, and other
long-term debt:
|
|
|
|
|
|
|
|
|
|
|
Fixed Rate Debt |
|
|
|
|
|
|
|
Weighted- |
|
|
|
|
|
|
|
Average |
|
|
|
Principal |
|
|
Interest |
|
|
|
Cash Flows (1) |
|
|
Rate |
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended March 31: |
|
|
|
|
|
|
|
|
2012 |
|
$ |
452,203,241 |
|
|
|
9.63 |
% |
2013 |
|
|
461,247 |
|
|
|
8.63 |
% |
2014 |
|
|
402,192 |
|
|
|
8.46 |
% |
2015 |
|
|
273,739 |
|
|
|
8.29 |
% |
2016 |
|
|
308,254 |
|
|
|
8.29 |
% |
Thereafter |
|
|
469,195 |
|
|
|
8.29 |
% |
|
|
|
|
|
|
|
Total |
|
$ |
454,117,868 |
|
|
|
9.62 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value as of March 31, 2011 (2) |
|
$ |
377,465,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Principal cash flows represent scheduled principal payments and are adjusted for
certain optional prepayments, if any, to be applied toward principal balances. Does not
include the effect of $0.4 million of unamortized discount for the Pre-Petition Senior
Secured Notes. |
|
(2) |
|
Due to the chapter 11 bankruptcy filing on June 27, 2011, substantially all of our
pre-petition debt is in default. See Notes C and I to the consolidated financial
statements included in Item 8, Financial Statements and Supplementary Data. |
42
Certain quantitative market risk disclosures have changed since March 31, 2010 as a result of
market fluctuations, movement in interest rates and principal payments. The following table
presents summarized market risk information:
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
March 31, |
|
|
|
2011 |
|
|
2010 |
|
Carrying Values: |
|
|
|
|
|
|
|
|
Fixed rate debt |
|
$ |
454,117,868 |
|
|
$ |
454,624,262 |
|
Fair Values: |
|
|
|
|
|
|
|
|
Fixed rate debt (1) |
|
$ |
377,465,000 |
|
|
$ |
438,537,000 |
|
Overall Weighted-Average Interest Rates: |
|
|
|
|
|
|
|
|
Fixed rate debt |
|
|
9.62 |
% |
|
|
9.73 |
% |
|
|
|
(1) |
|
Due to the chapter 11 bankruptcy filing on June 27, 2011, substantially all of our
pre-petition debt is in default. See Notes C and I to the consolidated financial
statements included in Item 8, Financial Statements and Supplementary Data. |
43
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Index to Consolidated Financial Statements of NBC Acquisition Corp.
44
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
NBC Acquisition Corp.
Lincoln, NE
We have audited the accompanying consolidated balance sheets of NBC Acquisition Corp. and
subsidiary (Debtor-in-Possession as of June 27, 2011) (the Company) as of March 31, 2011 and
2010, and the related consolidated statements of operations, stockholders equity (deficit), and
cash flows for each of the three years in the period ended March 31, 2011. Our audits also included
the financial statement schedules listed in the Index at Item 15. These financial statements and
financial statement schedules are the responsibility of the Companys management. Our
responsibility is to express an opinion on the financial statements and financial statement
schedules based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. The
Company is not required to have, nor were we engaged to perform, an audit of its internal control
over financial reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the Companys internal control
over financial reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects,
the financial position of NBC Acquisition Corp. and subsidiary (Debtor-in-Possession as of June 27,
2011) as of March 31, 2011 and 2010, and the results of their operations and their cash flows for
each of the three years in the period ended March 31, 2011, in conformity with accounting
principles generally accepted in the United States of America. Also, in our opinion, such financial
statement schedules, when considered in relation to the basic consolidated financial statements
taken as a whole, present fairly in all material respects the information set forth therein.
As discussed in Notes A and C to the consolidated financial statements, on June 27, 2011, the
Company filed for reorganization under the Bankruptcy Code. The accompanying financial statements
do not purport to reflect or provide for the consequences of the bankruptcy proceedings. In
particular, such consolidated financial statements do not purport to show (1) as to assets, their
realizable value on a liquidation basis or their availability to satisfy liabilities; (2) as to
prepetition liabilities, the amounts that may be allowed for claims or contingencies, or the status
and priority thereof; (3) as to stockholder accounts, the effect of any changes that may be made in
the capitalization of the Company; or (4) as to operations, the effect of any changes that may be
made in its business.
The accompanying consolidated financial statements for the year ended March 31, 2011 have been prepared assuming that the Company
will continue as a going concern. As discussed in Notes A and C to the consolidated financial
statements, the Companys ability to comply with the terms and conditions of the Superpriority
Debtor-In-Possession Credit Agreement, obtain confirmation of a plan of reorganization under the
Bankruptcy Code, and to obtain financing to facilitate an exit from Bankruptcy raise substantial
doubt about its ability to continue as a going concern. Managements plans concerning these
matters are also discussed in Notes A and C to the consolidated financial statements. The
consolidated financial statements do not include any adjustments that might result from the outcome
of this uncertainty.
/s/ DELOITTE & TOUCHE LLP
Omaha, Nebraska
July 14, 2011
45
NBC ACQUISITION CORP.
(DEBTOR IN POSSESSION AS OF JUNE 27, 2011)
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
March 31, |
|
|
|
2011 |
|
|
2010 |
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
56,447,380 |
|
|
$ |
60,972,625 |
|
Receivables, net |
|
|
54,966,305 |
|
|
|
57,987,794 |
|
Inventories |
|
|
90,114,197 |
|
|
|
97,497,689 |
|
Recoverable income taxes |
|
|
7,398,901 |
|
|
|
2,435,287 |
|
Deferred income taxes |
|
|
5,172,819 |
|
|
|
6,247,559 |
|
Prepaid expenses and other assets |
|
|
7,200,472 |
|
|
|
4,070,281 |
|
|
|
|
|
|
|
|
Total current assets |
|
|
221,300,074 |
|
|
|
229,211,235 |
|
PROPERTY AND EQUIPMENT, net of depreciation & amortization |
|
|
39,391,650 |
|
|
|
42,155,424 |
|
GOODWILL |
|
|
129,436,730 |
|
|
|
215,571,126 |
|
CUSTOMER RELATIONSHIPS, net of amortization |
|
|
74,161,300 |
|
|
|
79,902,820 |
|
TRADENAME |
|
|
31,320,000 |
|
|
|
31,320,000 |
|
OTHER IDENTIFIABLE INTANGIBLES, net of amortization |
|
|
5,973,049 |
|
|
|
5,295,324 |
|
DEBT ISSUE COSTS, net of amortization |
|
|
4,211,013 |
|
|
|
9,964,874 |
|
OTHER ASSETS |
|
|
2,513,165 |
|
|
|
2,850,632 |
|
|
|
|
|
|
|
|
|
|
$ |
508,306,981 |
|
|
$ |
616,271,435 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS
EQUITY (DEFICIT) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES: |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
20,005,468 |
|
|
$ |
26,387,040 |
|
Accrued employee compensation and benefits |
|
|
8,609,377 |
|
|
|
9,401,468 |
|
Accrued interest |
|
|
7,666,970 |
|
|
|
7,666,997 |
|
Accrued incentives |
|
|
5,850,936 |
|
|
|
6,313,933 |
|
Accrued expenses |
|
|
6,396,689 |
|
|
|
9,051,651 |
|
Deferred revenue |
|
|
1,405,802 |
|
|
|
1,299,960 |
|
Current maturities of long-term debt |
|
|
451,697,680 |
|
|
|
54,403 |
|
Current maturities of capital lease obligations |
|
|
505,562 |
|
|
|
846,053 |
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
502,138,484 |
|
|
|
61,021,505 |
|
LONG-TERM DEBT, net of current maturities |
|
|
123,005 |
|
|
|
451,343,069 |
|
CAPITAL LEASE OBLIGATIONS, net of current maturities |
|
|
1,791,621 |
|
|
|
2,380,737 |
|
OTHER LONG-TERM LIABILITIES |
|
|
1,567,913 |
|
|
|
2,278,963 |
|
DEFERRED INCOME TAXES |
|
|
42,072,157 |
|
|
|
40,401,490 |
|
COMMITMENTS (Note I) |
|
|
|
|
|
|
|
|
REDEEMABLE PREFERRED STOCK |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series A redeemable preferred stock, $.01 par value,
20,000 shares authorized, 10,000 shares issued and
outstanding, at redemption value |
|
|
13,601,368 |
|
|
|
11,805,888 |
|
STOCKHOLDERS EQUITY (DEFICIT): |
|
|
|
|
|
|
|
|
Common stock, voting, authorized 5,000,000 shares of
$.01 par value; issued and outstanding 554,094 shares |
|
|
5,541 |
|
|
|
5,541 |
|
Additional paid-in capital |
|
|
111,281,289 |
|
|
|
111,203,506 |
|
Note receivable from stockholder |
|
|
(92,675 |
) |
|
|
(92,755 |
) |
Accumulated deficit |
|
|
(164,181,722 |
) |
|
|
(64,076,509 |
) |
|
|
|
|
|
|
|
Total stockholders equity (deficit) |
|
|
(52,987,567 |
) |
|
|
47,039,783 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
508,306,981 |
|
|
$ |
616,271,435 |
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
46
NBC ACQUISITION CORP.
(DEBTOR IN POSSESSION AS OF JUNE 27, 2011)
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended |
|
|
Year Ended |
|
|
Year Ended |
|
|
|
March 31, |
|
|
March 31, |
|
|
March 31, |
|
|
|
2011 |
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUES, net of returns |
|
$ |
598,430,167 |
|
|
$ |
605,493,613 |
|
|
$ |
610,716,181 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COSTS OF SALES (exclusive of depreciation shown below) |
|
|
366,159,699 |
|
|
|
370,195,916 |
|
|
|
371,369,240 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
232,270,468 |
|
|
|
235,297,697 |
|
|
|
239,346,941 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
|
176,844,600 |
|
|
|
161,858,274 |
|
|
|
168,314,611 |
|
Depreciation |
|
|
8,579,092 |
|
|
|
8,517,004 |
|
|
|
7,602,631 |
|
Amortization |
|
|
8,625,733 |
|
|
|
10,853,248 |
|
|
|
11,384,020 |
|
Goodwill impairment |
|
|
89,000,000 |
|
|
|
|
|
|
|
106,972,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
283,049,425 |
|
|
|
181,228,526 |
|
|
|
294,273,262 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) FROM OPERATIONS |
|
|
(50,778,957 |
) |
|
|
54,069,171 |
|
|
|
(54,926,321 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER EXPENSES (INCOME): |
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
51,203,513 |
|
|
|
49,405,222 |
|
|
|
41,603,618 |
|
Interest income |
|
|
(175,859 |
) |
|
|
(180,709 |
) |
|
|
(426,536 |
) |
Loss on early extinguishment of debt |
|
|
|
|
|
|
3,065,759 |
|
|
|
|
|
Loss on derivative financial instrument |
|
|
|
|
|
|
|
|
|
|
102,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
51,027,654 |
|
|
|
52,290,272 |
|
|
|
41,279,082 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) BEFORE INCOME TAXES |
|
|
(101,806,611 |
) |
|
|
1,778,899 |
|
|
|
(96,205,403 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME TAX EXPENSE (BENEFIT) |
|
|
(3,496,878 |
) |
|
|
(532,388 |
) |
|
|
4,288,620 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS) |
|
$ |
(98,309,733 |
) |
|
$ |
2,311,287 |
|
|
$ |
(100,494,023 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EARNINGS (LOSS) PER SHARE: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
(180.66 |
) |
|
$ |
1.33 |
|
|
$ |
(181.79 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
$ |
(180.66 |
) |
|
$ |
1.32 |
|
|
$ |
(181.79 |
) |
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
47
NBC ACQUISITION CORP.
(DEBTOR IN POSSESSION AS OF JUNE 27, 2011)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note |
|
|
Retained |
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
Receivable |
|
|
Earnings |
|
|
Other |
|
|
|
|
|
|
|
|
|
|
Common |
|
|
Paid-in |
|
|
From |
|
|
(Accumulated |
|
|
Comprehensive |
|
|
|
|
|
|
Comprehensive |
|
|
|
Stock |
|
|
Capital |
|
|
Stockholder |
|
|
Deficit) |
|
|
Income (Loss) |
|
|
Total |
|
|
Income (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, April 1, 2008 |
|
$ |
5,541 |
|
|
$ |
111,098,666 |
|
|
$ |
(97,517 |
) |
|
$ |
35,912,115 |
|
|
$ |
(748,000 |
) |
|
$ |
146,170,805 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment on stockholder note |
|
|
|
|
|
|
|
|
|
|
9,752 |
|
|
|
|
|
|
|
|
|
|
|
9,752 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest accrued on stockholder note |
|
|
|
|
|
|
|
|
|
|
(4,950 |
) |
|
|
|
|
|
|
|
|
|
|
(4,950 |
) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(100,494,023 |
) |
|
|
|
|
|
|
(100,494,023 |
) |
|
|
(100,494,023 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation attributable to stock options |
|
|
|
|
|
|
43,416 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43,416 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative preferred dividend |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(233,334 |
) |
|
|
|
|
|
|
(233,334 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss, net of taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain on interest rate swap agreement, net of taxes of $473,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
748,000 |
|
|
|
748,000 |
|
|
|
748,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, March 31, 2009 |
|
|
5,541 |
|
|
|
111,142,082 |
|
|
|
(92,715 |
) |
|
|
(64,815,242 |
) |
|
|
|
|
|
|
46,239,666 |
|
|
$ |
(99,746,023 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment on stockholder note |
|
|
|
|
|
|
|
|
|
|
4,869 |
|
|
|
|
|
|
|
|
|
|
|
4,869 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest accrued on stockholder note |
|
|
|
|
|
|
|
|
|
|
(4,909 |
) |
|
|
|
|
|
|
|
|
|
|
(4,909 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,311,287 |
|
|
|
|
|
|
|
2,311,287 |
|
|
|
2,311,287 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation attributable to stock options |
|
|
|
|
|
|
61,424 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
61,424 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative preferred dividend |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,572,554 |
) |
|
|
|
|
|
|
(1,572,554 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, March 31, 2010 |
|
|
5,541 |
|
|
|
111,203,506 |
|
|
|
(92,755 |
) |
|
|
(64,076,509 |
) |
|
|
|
|
|
|
47,039,783 |
|
|
$ |
2,311,287 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment on stockholder note |
|
|
|
|
|
|
|
|
|
|
4,869 |
|
|
|
|
|
|
|
|
|
|
|
4,869 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest accrued on stockholder note |
|
|
|
|
|
|
|
|
|
|
(4,789 |
) |
|
|
|
|
|
|
|
|
|
|
(4,789 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(98,309,733 |
) |
|
|
|
|
|
|
(98,309,733 |
) |
|
|
(98,309,733 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation attributable to stock options |
|
|
|
|
|
|
77,783 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
77,783 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative preferred dividend |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,795,480 |
) |
|
|
|
|
|
|
(1,795,480 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, March 31, 2011 |
|
$ |
5,541 |
|
|
$ |
111,281,289 |
|
|
$ |
(92,675 |
) |
|
$ |
(164,181,722 |
) |
|
$ |
|
|
|
$ |
(52,987,567 |
) |
|
$ |
(98,309,733 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
48
NBC ACQUISITION CORP.
(DEBTOR IN POSSESSION AS OF JUNE 27, 2011)
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended |
|
|
Year Ended |
|
|
Year Ended |
|
|
|
March 31, |
|
|
March 31, |
|
|
March 31, |
|
|
|
2011 |
|
|
2010 |
|
|
2009 |
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(98,309,733 |
) |
|
$ |
2,311,287 |
|
|
$ |
(100,494,023 |
) |
Adjustments to reconcile net income (loss) to net cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation |
|
|
447,826 |
|
|
|
1,106,882 |
|
|
|
1,288,543 |
|
Provision for losses on receivables |
|
|
2,193,739 |
|
|
|
1,399,466 |
|
|
|
1,366,979 |
|
Depreciation |
|
|
8,579,092 |
|
|
|
8,517,004 |
|
|
|
7,602,631 |
|
Amortization |
|
|
8,625,733 |
|
|
|
10,853,248 |
|
|
|
11,384,020 |
|
Goodwill impairment |
|
|
89,000,000 |
|
|
|
|
|
|
|
106,972,000 |
|
Loss on early extinguishment of debt |
|
|
|
|
|
|
3,065,759 |
|
|
|
|
|
Amortization of debt issue costs and bond discount |
|
|
6,298,135 |
|
|
|
5,215,808 |
|
|
|
2,461,345 |
|
Loss on derivative financial instrument |
|
|
|
|
|
|
|
|
|
|
102,000 |
|
(Gain) loss on disposal of assets |
|
|
(131,591 |
) |
|
|
235,803 |
|
|
|
124,871 |
|
Deferred income taxes |
|
|
2,745,407 |
|
|
|
(4,122,157 |
) |
|
|
(1,947,665 |
) |
Changes in operating assets and liabilities, net of effect of acquisitions: |
|
|
|
|
|
|
|
|
|
|
|
|
Receivables |
|
|
822,961 |
|
|
|
1,252,806 |
|
|
|
(5,271,324 |
) |
Inventories |
|
|
11,441,862 |
|
|
|
(2,874,880 |
) |
|
|
8,101,584 |
|
Recoverable income taxes |
|
|
(4,963,614 |
) |
|
|
434,296 |
|
|
|
(2,846,510 |
) |
Prepaid expenses and other assets |
|
|
(3,118,275 |
) |
|
|
30,593 |
|
|
|
(1,400,805 |
) |
Other assets |
|
|
337,467 |
|
|
|
462,071 |
|
|
|
275,316 |
|
Accounts payable |
|
|
(6,518,606 |
) |
|
|
(376,486 |
) |
|
|
(2,132,402 |
) |
Accrued employee compensation and benefits |
|
|
(792,091 |
) |
|
|
(4,378,741 |
) |
|
|
1,679,569 |
|
Accrued interest |
|
|
(27 |
) |
|
|
6,617,193 |
|
|
|
18,579 |
|
Accrued incentives |
|
|
(462,997 |
) |
|
|
203,233 |
|
|
|
(998,157 |
) |
Accrued expenses |
|
|
(2,654,962 |
) |
|
|
516,894 |
|
|
|
1,104,983 |
|
Income taxes payable |
|
|
|
|
|
|
|
|
|
|
(847,370 |
) |
Deferred revenue |
|
|
105,842 |
|
|
|
340,686 |
|
|
|
96,280 |
|
Other long-term liabilities |
|
|
(819,068 |
) |
|
|
20,465 |
|
|
|
(284,493 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash flows from operating activities |
|
|
12,827,100 |
|
|
|
30,831,230 |
|
|
|
26,355,951 |
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment |
|
|
(5,663,780 |
) |
|
|
(5,410,976 |
) |
|
|
(7,979,371 |
) |
Acquisitions, net of cash acquired |
|
|
(9,461,308 |
) |
|
|
(2,847,608 |
) |
|
|
(6,320,772 |
) |
Proceeds from sale of property and equipment |
|
|
452,180 |
|
|
|
141,167 |
|
|
|
35,503 |
|
Software development costs |
|
|
(1,633,638 |
) |
|
|
(648,523 |
) |
|
|
(633,763 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash flows from investing activities |
|
|
(16,306,546 |
) |
|
|
(8,765,940 |
) |
|
|
(14,898,403 |
) |
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of long-term debt |
|
|
|
|
|
|
199,000,000 |
|
|
|
|
|
Proceeds from issuance of preferred stock |
|
|
|
|
|
|
|
|
|
|
10,000,000 |
|
Payment of financing costs |
|
|
(66,660 |
) |
|
|
(10,190,217 |
) |
|
|
(3,961,811 |
) |
Principal payments on long-term debt |
|
|
(54,401 |
) |
|
|
(193,125,225 |
) |
|
|
(2,070,654 |
) |
Principal payments on capital lease obligations |
|
|
(929,607 |
) |
|
|
(820,560 |
) |
|
|
(722,823 |
) |
Borrowings under revolving credit facility |
|
|
44,200,000 |
|
|
|
85,000,000 |
|
|
|
200,600,000 |
|
Payments under revolving credit facility |
|
|
(44,200,000 |
) |
|
|
(85,000,000 |
) |
|
|
(200,600,000 |
) |
Proceeds from payment on note receivable from stockholder |
|
|
4,869 |
|
|
|
4,869 |
|
|
|
9,752 |
|
|
|
|
|
|
|
|
|
|
|
Net cash flows from financing activities |
|
|
(1,045,799 |
) |
|
|
(5,131,133 |
) |
|
|
3,254,464 |
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |
|
|
(4,525,245 |
) |
|
|
16,934,157 |
|
|
|
14,712,012 |
|
CASH AND CASH EQUIVALENTS, Beginning of period |
|
|
60,972,625 |
|
|
|
44,038,468 |
|
|
|
29,326,456 |
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, End of period |
|
$ |
56,447,380 |
|
|
$ |
60,972,625 |
|
|
$ |
44,038,468 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION: |
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid (refunded) during the period for: |
|
|
|
|
|
|
|
|
|
|
|
|
Interest |
|
$ |
44,905,405 |
|
|
$ |
37,572,221 |
|
|
$ |
39,123,694 |
|
Income taxes |
|
|
(1,278,671 |
) |
|
|
3,155,473 |
|
|
|
9,930,165 |
|
Noncash investing and financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain on interest rate swap agreement, net of income taxes |
|
$ |
|
|
|
$ |
|
|
|
$ |
748,000 |
|
Deferred taxes resulting from unrealized gain on interest rate swap agreement |
|
|
|
|
|
|
|
|
|
|
473,000 |
|
Unpaid consideration associated with bookstore acquisitions |
|
|
|
|
|
|
574,465 |
|
|
|
155,000 |
|
See notes to consolidated financial statements.
49
NBC ACQUISITION CORP.
(DEBTOR IN POSESSION AS OF JUNE 27, 2011)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. NATURE OF OPERATIONS
NBC Acquisition Corp. (the Company) does not conduct significant activities apart from its
investment in Nebraska Book Company, Inc. (NBC). Operational matters discussed in this report,
including the acquisition of college bookstores and other related businesses, refer to operations
of NBC. References to the Company and NBC are used interchangeably when discussing such
operational matters. NBC participates in the college bookstore industry primarily by operating its
own college bookstores, by providing used textbooks to college bookstore operators, by providing
distance education products and services, and by providing proprietary college bookstore
information and e-commerce systems, consulting and other services. On March 4, 2004, Weston
Presidio formed NBC Holdings Corp. and acquired the controlling interest in us through a series of
steps which resulted in Weston Presidio owning a substantial majority of our common stock (referred
to as the March 4, 2004 Transaction).
Reorganization under Chapter 11 of the U.S. Bankruptcy Code
On June 27, 2011 (the Petition Date), we, NBC and all of its subsidiaries filed voluntary
petitions for reorganization relief under chapter 11 of the United States Bankruptcy Code (the
Bankruptcy Code) in the United States Bankruptcy Court for the District of Delaware (the
Court). The reorganization cases are being jointly administered as Case No. 11-12005 under the
caption In re Nebraska Book Company, Inc., et al (hereinafter referred to as the Chapter 11
Proceedings). We continue to operate our business as debtors-in-possession under the
jurisdiction of the Court and in accordance with the applicable provisions of the Bankruptcy Code
and orders of the Court.
The Chapter 11 Proceedings were initiated in response to our inability to fully refinance our
existing debt and vendors unwillingness to extend credit to us under normal terms. Under section
362 of the Bankruptcy Code, the filing of a bankruptcy petition automatically stays most actions
against a debtor, including most actions to collect pre-petition indebtedness or to exercise
control over our property. Subsequent to the Petition Date, we received approval from the Court to
pay or otherwise honor certain pre-petition obligations generally designed to stabilize our
operations including employee obligations, tax matters, and from limited available funds,
pre-petition claims of certain critical vendors, certain customer programs, and certain other
pre-petition claims. Additionally, we have been paying and intend to continue to pay undisputed
post-petition claims in the ordinary course of business. Additional details regarding the status
of our Chapter 11 Proceedings are included in Note C.
Going Concern
Our audited consolidated financial statements for the year ended March 31, 2011 have been prepared assuming that we will
continue as a going concern. However, our ability to: (i) comply with terms of the DIP Credit Agreement; (ii) comply with various orders
entered by the Court in connection with the Chapter 11 Proceedings; (iii) maintain adequate cash on
hand; (iv) generate sufficient cash from operations; (v) achieve confirmation of a plan of
reorganization under the Bankruptcy Code; (vi) obtain financing to facilitate an exit from
bankruptcy; and (vii) achieve profitability following such confirmation is uncertain and would have a material impact on our financial statements.
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Our and our subsidiarys significant accounting policies are as follows:
Principles of Consolidation: The consolidated financial statements include our accounts and
NBCs accounts (we, our, or us). All intercompany balances and transactions are eliminated in
consolidation.
Chapter 11 Financing: Financial reporting applicable to companies in the Bankruptcy Code
generally does not change the manner in which financial statements are prepared. However, it does
require, among other disclosures, that the financial statements for periods subsequent to the
filing of the chapter 11 petition distinguish transactions and events that are directly associated
with the reorganization from the ongoing operations of the business. We intend to reflect
necessary changes in our first quarter financial statements for the quarter ended June 30, 2011.
50
Substantially all of our pre-petition debt is in default, including $200.0 million principal
amount due under the Pre-Petition Senior Secured Notes; $175.0 million principal amount under the
Pre-Petition Senior Subordinated Notes and $77.0 million principal amount under the Pre-Petition
Senior Discount Notes. The Pre-Petition Senior Subordinated Notes and Pre-Petition Senior Discount
Notes will be classified as liabilities subject to compromise in our condensed consolidated
financial statements for the quarter ended June 30, 2011.
Basis of Presentation: Our financial statements have been prepared in conformity with
accounting principles generally accepted in the United States (GAAP), consistently applied and on
a going concern basis, which contemplates the continuity of operations, realization of assets and
satisfaction of liabilities in the normal course of business. However, as a result of the Chapter
11 Proceedings, such realization of assets and satisfaction of liabilities, without substantial
adjustments to amounts and or changes of ownership, is highly uncertain. Given this uncertainty,
there is substantial doubt about our ability to continue as a going concern. Our financial
statements do not include any adjustments related to assets or liabilities that may be necessary
should we not be able to continue as a going concern.
Revenue Recognition: Our revenue recognition policies, by reporting segment, are as follows:
Bookstore Division The Bookstore Divisions revenues consist primarily of the sale or
rental of new and used textbooks, as well as the sale of a variety of other merchandise
including apparel, general books, sundries, and gift items. Such sales occur primarily
over-the-counter or online with revenues being recognized at the point of sale or upon
shipment. We implemented a rental program for new and used textbooks in fiscal 2010 and
revenues associated with that program are recognized at the time of rental.
Textbook Division The Textbook Division recognizes revenue from the sale of used textbooks
when title passes (at the time of shipment), net of estimated product returns. The Textbook
Division has established a program which, under certain conditions, enables its customers to
return the used textbooks. The effect of this program is estimated utilizing actual
historical return experience, and revenues are adjusted accordingly.
Complementary Services Division Complementary Services Division revenues come from a
variety of sources, including the sale of distance education materials, the sale of computer
hardware and software (and licensing thereof), software maintenance contracts, membership
fees, and a variety of services provided to college bookstores. Revenues from the sale of
distance education materials and computer hardware/software (and licensing thereof) are
recognized at the time of delivery. Software maintenance contracts and membership fees are
generally invoiced to the customer annually, with the revenues being deferred and recognized
on a straight-line basis over the term of the contract. Revenues from the various services
provided to college bookstores are recognized once services have been rendered.
Shipping and Handling Fees and Costs: Amounts billed to a customer for shipping and handling
have been classified as revenues in the consolidated statements of operations and approximated $8.9
million, $7.6 million and $6.1 million for the fiscal years ended March 31, 2011, 2010 and 2009,
respectively. Shipping and handling costs are included in operating expenses in the consolidated
statements of operations and approximated $12.8 million, $11.0 million and $10.4 million for the
fiscal years ended March 31, 2011, 2010 and 2009, respectively.
Sales Tax Collections: We account for sales tax collected from customers and remitted to the
applicable taxing authorities on a net basis, with no impact on revenues and any differences
between amount collected and amount remitted being recorded in selling, general and administrative
expenses.
Advertising: Advertising costs are expensed as incurred and approximated $7.3 million, $6.3
million and $7.0 million for the fiscal years ended March 31, 2011, 2010 and 2009, respectively.
Use of Estimates: The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could differ from the
estimates.
Cash and Cash Equivalents: Cash and cash equivalents consist of cash on hand and in regular
checking accounts and an overnight sweep account at the bank as well as, at certain times of the
year, short-term investments in treasury notes with maturities of three months or less when
purchased.
51
Accounts Receivable and Allowance for Doubtful Accounts: We maintain allowances for doubtful
accounts for estimated losses resulting from the inability of our customers to make required
payments. In determining the adequacy of the allowance, we analyze the aging of the receivable,
the customers financial position, historical collection experience, and other economic and
industry factors. If the financial condition of our customers were to deteriorate, resulting in an
impairment of their ability to make payments, additional allowances may be required. Credits for
returned books requested and pending approval by publishers are classified as accounts receivable.
Inventories: Inventories, including rental inventory, are stated at the lower of cost or
market. The cost of used textbook inventories is determined using the weighted-average method. Our
Bookstore Division uses the retail inventory method to determine cost for new textbooks and
non-textbook inventories. The cost of other inventories is determined on a first-in, first-out
cost method. We account for inventory obsolescence based upon assumptions about future demand and
market conditions. If actual future demand or market conditions are less favorable than those
projected by us, inventory write-downs may be required. In determining inventory adjustments, we
consider amounts of inventory on hand, projected demand, new editions and other industry factors.
Property and Equipment: Property and equipment are stated at cost. Depreciation is determined
using the straight-line method. The majority of property and equipment have useful lives of one to
seven years, with the exception of buildings which are depreciated over 39 years and leasehold
improvements which are depreciated over the remaining life of the corresponding lease, or the
useful life, if shorter. We do not consider renewal options for the determination of the
amortization period for leasehold improvements unless renewal is considered reasonably assured at
the inception of the lease.
Goodwill: Goodwill arose as a result of the March 4, 2004 Transaction and the acquisition of
bookstore operations subsequent thereto. The goodwill in such transactions is determined by
calculating the difference between the consideration transferred and the fair value of net assets
acquired. We evaluate the impairment of the carrying value of our goodwill and identifiable
intangibles in accordance with applicable accounting standards, including the Intangibles
Goodwill and Other and Property, Plant and Equipment Topics of the FASB ASC. In accordance with
such standards, goodwill is not amortized but rather tested at least annually at March 31 for
impairment and we evaluate impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. We evaluate goodwill at the reporting unit level and have
identified our reportable segments the Textbook Division, Bookstore Division and Complementary
Services Division as our reporting units. Our reporting units are determined based on the way that
management organizes the segments for making operating decisions and assessing performance.
Management has organized our operating segments based upon differences in products and services
provided. The Bookstore Division and Textbook Division reporting units have assigned goodwill and
are thus required to be tested for impairment.
In the first step of our goodwill impairment test conducted at March 31, 2011, fair value was
determined using a combination of the market approach, based primarily on a multiple, and the
income approach, based on a discounted cash flow model. In applying weights to the various methods
used at March 31, 2011, we believe that the discounted cash flow model captures our estimates
regarding the results of our future prospects, however, we also considered the markets
expectations based on observable market information. The multiple approach requires that we
estimate a certain valuation multiple of revenue and EBITDA for each reporting unit derived from
comparable companies to estimate the fair value of the reporting unit. The discounted cash flow
model discounts projected cash flows for each reporting unit to present value and includes critical
assumptions such as long-term growth rates, projected revenues and earnings and cash flow forecasts
for the reporting units, as well as an appropriate discount rate. Discount rates were determined
separately for each reporting unit by estimating the weighted average cost of capital using the
capital asset pricing model.
Estimated fair value for our goodwill impairment test conducted for fiscal years ended March
31, 2010 and 2009 was determined using the market approach based primarily on comparable company
EBITDA multiples. The fair value was also calculated using the income approach, based on a
discounted cash flow model, and was compared to and supported the fair value based upon the EBITDA
multiple approach. We believe the methods used in the past and the methods used at March 31, 2011
have relative merits but using a weighting of the market and income approaches provide a better
estimate of fair value.
If we fail the first step of the goodwill impairment test, we are required, in the second
step, to estimate the fair value of reporting unit assets and liabilities, including intangible
assets, to derive the fair value of the reporting units goodwill.
We monitor relevant circumstances, including industry trends, general economic conditions, and
the potential impact that such circumstances might have on the valuation of our goodwill and
identifiable intangibles. It is possible that changes in such circumstances, or in the numerous
variables associated with the judgments, assumptions and estimates made by us in assessing the
appropriate valuation of our goodwill and identifiable intangibles, including a further
deterioration in the economy or debt
markets or a significant delay in a recovery, could in the future require us to further write
down a portion of our goodwill or write down a portion of our identifiable intangibles and record
related non-cash impairment charges.
52
Identifiable Intangibles Customer Relationships: The identifiable intangible asset for
customer relationships is attributable to the non-contractual long-term relationships we have
established over the years with customers in our Textbook and Complementary Services Divisions.
This identifiable intangible is amortized on a straight-line basis over an estimated useful life of
20 years. We test our customer relationship intangible for impairment whenever events or changes
in circumstances indicate that the carrying amount may not be recoverable. In accordance with the
Property, Plant and Equipment Topic of the FASB ASC, an impairment loss would be recognized if the
carrying amount of an intangible asset is not recoverable and its carrying amount exceeds its fair
value.
Identifiable Intangibles Tradename: The identifiable intangible asset for tradename
relates to the trademark owned on the name Nebraska Book Company and the corresponding logo.
This identifiable intangible has an indefinite useful life; and, thus, is not amortized but rather
tested at least annually for impairment. In accordance with the Intangibles Goodwill and Other
Topic of the FASB ASC, an impairment loss shall be recognized in an amount equal to the excess of
the carrying amount of an intangible asset over its fair value. The impairment analysis is
conducted annually at March 31 or, more frequently, if events or changes in circumstances indicate
that the asset may be impaired. We completed our test at March 31, 2011, and we determined that
the intangible asset for tradename was not impaired.
Other Identifiable Intangibles Developed Technology: Our primary activities regarding the
internal development of software revolve around its proprietary college bookstore information
technology (PRISM and WinPRISM) and e-commerce technology (WebPRISM), which are used by our
Bookstore Division and also marketed to the college bookstore industry and other businesses. As
this internally developed software is intended for both internal use and sale to external
customers, we adhere to the guidance in the Software and Internal-Use Software Topics of the FASB
ASC.
Development costs included in the research and development of new software products and
enhancements to existing software products associated with our proprietary college bookstore
information technology and e-commerce technology are expensed as incurred until technological
feasibility has been established. After technological feasibility is established, additional
development costs are capitalized and amortized on a straight-line basis over the lesser of six
years or the economic life of the related product. Recoverability of such capitalized costs is
evaluated based upon estimates of future undiscounted cash flows. We test our developed technology
intangible for impairment whenever events or changes in circumstances indicate that the carrying
amount may not be recoverable.
Development costs also include the development of new software products and enhancements to
existing software products used solely for internal purposes. Such costs are expensed until the
preliminary project stage is completed and the project has been authorized by management, at which
point subsequent costs are capitalized until the project is substantially complete and ready for
its intended use. These costs, capitalization of which totaled $1.6 million for the fiscal year
ended March 31, 2011 and $0.6 million for the fiscal years ended March 31, 2010 and 2009, are
amortized on a straight-line basis over a period up to six years.
Amortization of the capitalized costs associated with developed technology totaled $0.5
million for the fiscal year ended March 31, 2011 and $2.1 million for the fiscal years ended March
31, 2010 and 2009.
Other Identifiable Intangibles Covenants Not to Compete: The identifiable intangible asset
for covenants not to compete represents the value assigned to such agreements, which are typically
entered into with the owners of college bookstores acquired by us. This identifiable intangible is
amortized on a straight-line basis over the term of the agreement, which ranges from 2 to 15 years.
We test our covenants not to compete intangible for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable.
Other Identifiable Intangibles Contract-Managed Relationships: The identifiable intangible
asset for contract-managed relationships generally represents payments made at the time of contract
signing or renewal to institutions that contract with us to manage the on-campus bookstore. This
identifiable intangible is amortized on a straight-line basis over the term of the agreements,
which range from 1 to 15 years. We test our contract-managed relationships intangible for
impairment whenever events or changes in circumstances indicate that the carrying amount may not be
recoverable.
Other Identifiable Intangibles Other: The other identifiable intangible asset relates to
an agreement whereby we agreed to pay $1.7 million over a period of 36 months, beginning September
1, 2007, to a software company in return for certain rights
related to that companys products that are designed to enhance web-based sales. This
identifiable intangible was amortized on a straight-line basis over the 36 month base term of the
agreement.
53
Debt Issue Costs: The costs related to the issuance of debt are capitalized and amortized to
interest expense using the effective interest method over the lives of the related debt.
Accumulated amortization of such costs as of March 31, 2011 and 2010 was approximately $14.0
million and $8.2 million, respectively and $3.1 million of such costs were written off during the
fiscal year ended March 31, 2010 in conjunction with the termination of the Term Loan and Revolving
Credit Facility under the Senior Credit Facility. See also long-term debt which is disclosed in
Note I.
Accrued Incentives. Our Textbook Division offers certain incentive programs to its customers
that allow the participating customers the opportunity to earn rebates for used textbooks sold to
the Textbook Division. As the rebates are earned by the customer, we recognize the rebates based
on historical rates of usage and forfeitures and the balance of earned but unused rebates is
recorded as accrued incentives. Accrued incentives at March 31, 2011 were $5.8 million, including
estimated forfeitures, however, if we accrued for rebates earned and unused as of March 31, 2011,
assuming no forfeitures, our accrued incentives would have been $6.5 million.
Derivative Financial Instruments: Interest rate swap agreements have historically been used
by us to reduce exposure to fluctuations in the interest rates on NBCs variable rate debt. Such
agreements were recorded in the consolidated balance sheet at fair value. Changes in the fair
value of the agreements were recorded in earnings or other comprehensive income (loss), based on
whether the agreements were designated as part of the hedge transaction and whether the agreements
were effective in offsetting the change in the value of the interest payments attributable to NBCs
variable rate debt.
Fair Value of Financial Instruments: The carrying amounts of financial instruments including
cash and cash equivalents, accounts receivable, and accounts payable approximate fair value as of
March 31, 2011 and 2010, because of the relatively short maturity of these instruments. The fair
value of long-term debt, including the current maturities, was approximately $377.5 million and
$438.5 million as of March 31, 2011 and 2010, respectively, as determined by quoted market values
and prevailing interest rates for similar debt issues.
Share-Based Compensation: On April 1, 2006, we adopted SFAS No. 123 (revised 2004),
Share-Based Payment (SFAS No. 123R), codified in the Compensation Stock Compensation Topic of
the FASB ASC. The Topic focuses primarily on accounting for transactions in which an entity
obtains employee services in share-based payment transactions and requires an entity to, in most
cases, measure and recognize the cost of such services based on the grant-date fair value of the
award. This Topic eliminates the intrinsic value method of accounting for share-based compensation
by us for transactions occurring after March 31, 2006.
We account for our share-based compensation arising from transactions occurring prior to April
1, 2006 under the provisions of the Compensation Stock Compensation Topic of the FASB ASC
utilizing the intrinsic value method. Under this method, compensation expense is recorded on the
date of grant only if the current market price of the underlying stock exceeds the exercise price.
The Topic establishes accounting and disclosure requirements using a fair-value-based method of
accounting for share-based employee compensation plans. For purposes of measuring share-based
compensation, we are considered a nonpublic entity as defined in the Topic. As allowed by the
Topic, we elected to continue to apply the intrinsic-value-based method of accounting for options
granted prior to April 1, 2006 and used the minimum value method for pro forma disclosure of the
impact of accounting standard changes.
Nonvested Stock: Under the NBC Holdings Corp. 2005 Restricted Stock Plan, 4,200 shares of NBC
Holdings Corp. capital stock were issued on March 31, 2006 for $0.01 per share to certain of our
officers and directors. Certain restrictions limited the sale or transfer of these shares (as more
fully described in Note Q to the consolidated financial statements). Such shares were subject to
both call rights on behalf of NBC Holdings Corp. and put rights on behalf of the officers and
directors once vested (as more fully described in Note Q to the consolidated financial statements).
The shares vested on September 30, 2010 (the vesting date). Due to the existence of the put
rights, share-based compensation was recognized from March 31, 2006 through the vesting date and
recorded as other long-term liabilities or accrued expenses in the consolidated balance sheets,
as appropriate.
Income Taxes: We provide for deferred income taxes based upon temporary differences between
financial statement and income tax bases of assets and liabilities, and tax rates in effect for
periods in which such temporary differences are estimated to reverse.
54
Tax benefits are recorded only for tax positions that are more likely than not to be sustained
upon examination by tax authorities. The amount recognized is measured as the largest amount of
benefit that is greater than 50% likely to be realized upon
ultimate settlement. Unrecognized tax benefits are tax benefits claimed in our tax returns
that do not meet these recognition and measurement standards. Although the statute of limitations
varies by state, generally starting with fiscal year 2007, tax years remain open and subject to
examination by either the Internal Revenue Service or a number of states where we do business.
Interest and penalties associated with underpayments of income taxes are classified in the
consolidated statements of operations as income tax expense.
Earnings Per Share: Basic earnings per common share (EPS) data is computed by dividing
earnings after the deduction of preferred stock dividends by the weighted-average number of common
shares outstanding during the period. Diluted EPS is calculated by dividing earnings after the
deduction of preferred stock dividends by the weighted-average number of common shares outstanding
and potential common shares including stock options, if any, with a dilutive effect.
Redeemable Preferred Stock: Redeemable Preferred Stock is classified outside of permanent
equity due to its redemption features that are outside our control and is measured at redemption
value which includes accumulated and unpaid dividends. The number of shares of Preferred Stock
issued and outstanding were 10,000 for fiscal years ended March 31, 2011 and 2010. Accumulated
dividends for the period reduce earnings or increase losses for purposes of calculating EPS and
were $1.8 million, $1.6 million and $0.2 million at March 31, 2011, 2010 and 2009, respectively.
Common Stock Shares Issued and Outstanding: The number of shares of Common Stock issued and
outstanding were 554,094 for fiscal years ended March 31, 2011 and 2010.
Comprehensive Income (Loss): Comprehensive income (loss) includes net income (loss) and other
comprehensive income (losses). Other comprehensive income (losses) consists of unrealized gains
(losses) on the interest rate swap agreement, net of taxes.
Accounting Standards Not Yet Adopted: In December 2010, the FASB issued Accounting Standards
Update 2010-28, Intangibles Goodwill and Other (Topic 350) When to Perform Step 2 of the
Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts (Update
2010-28). Update 2010-28 amends the criteria for performing Step 2 of the goodwill impairment test
for reporting units with zero or negative carrying amounts and requires performing Step 2 if
qualitative factors indicate that it is more likely than not that a goodwill impairment exists.
Update 2010-28 becomes effective for us in fiscal year 2012 and any impairment to be recorded upon
adoption will be recognized as an adjustment to beginning retained earnings. Early adoption is not
permitted. Management has not yet determined if the update will have a material impact on the
consolidated financial statements.
In October 2009, the FASB issued Accounting Standards Update 2009-13, Multiple Deliverable
Arrangements (Update 2009-13). Update 2009-13 addresses the accounting for multiple-deliverable
arrangements to enable vendors to account for products or services (deliverables) separately rather
than as a combined unit. The update addresses how to separate deliverables and how to measure and
allocate arrangement considerations to one or more units of account. Update 2009-13 becomes
effective prospectively for revenue arrangements entered into or materially modified in fiscal
years beginning on or after June 15, 2010, with earlier application permitted. An entity may elect
to adopt the standard on a retrospective basis. We expect to apply this standard on a prospective
basis beginning April 1, 2011. Management does not expect that the update will have a material
impact on the consolidated financial statements.
In October 2009, the FASB issued Accounting Standards Update 2009-14, Certain Revenue
Arrangements That Include Software Elements (Update 2009-14). Update 2009-14 clarifies what
guidance should be used in allocating and measuring revenue from vendors that sell or lease
tangible products in an arrangement that contains software that is more than incidental to the
tangible product as a whole. The amendments in this update do not affect software revenue
arrangements that do not include tangible products nor do they affect software revenue arrangements
that include services if the software is essential to the functionality of those services. Update
2009-14 becomes effective prospectively for revenue arrangements entered into or materially
modified in fiscal years beginning on or after June 15, 2010, with earlier application permitted.
An entity may elect to adopt the standard on a retrospective basis. We expect to apply this
standard on a prospective basis beginning April 1, 2011. Management does not expect that the
update will have a material impact on the consolidated financial statements.
C. VOLUNTARY REORGANIZATION UNDER CHAPTER 11 OF THE UNITED STATES BANKRUPTCY CODE
On the Petition Date, we filed voluntary petitions for reorganization relief under the
Bankruptcy Code in the Court. The Chapter 11 Proceedings are being jointly administered as Case
No. 11-12005 under the caption in re Nebraska Book Company Inc., et al. We continue to operate
our businesses as debtors in possession under the jurisdiction of the Court and in accordance
with the applicable provisions of the Bankruptcy Code and orders of the Court.
55
Implications of Chapter 11 Proceedings
Under section 362 of the Bankruptcy Code, the filing of a bankruptcy petition automatically
stays most actions against a debtor, including most actions to collect pre-petition indebtedness or
to exercise control over our property. Absent an order of the Court, substantially all
pre-petition liabilities are subject to settlement under a plan of reorganization. While operating
as debtors-in-possession under the Bankruptcy Code and subject to approval of the Court or
otherwise as permitted in the ordinary course of business, we may sell or dispose of assets and
liquidate or settle liabilities for amounts other than those reflected in the consolidated
financial statements. Further, a confirmed plan of reorganization or other arrangement could
materially change the amounts and classifications in the historical consolidated financial
statements.
Subsequent to the Petition Date, we received approval from the Court to pay or otherwise honor
certain pre-petition obligations generally designed to stabilize our operations including employee
obligations, tax matters, and from limited available funds, pre-petition claims of certain critical
vendors, certain customer programs, and certain other pre-petition claims. Additionally, we have
been paying and intend to continue to pay undisputed post-petition claims in the ordinary course of
business.
On June 27, 2011, we filed with the Court a restructuring support agreement, which contained a
proposed plan of reorganization (the Plan). The Plan calls for the issuance of new senior
secured notes, new senior unsecured notes and the split of new common equity interests in us
between the holders of the Senior Subordinated Notes (78%) and the holders of the Senior Discount
Notes (22%). The ultimate recovery to creditors and/or our shareholders, if any, will not be
determined until confirmation of a plan of reorganization.
Chapter 11 Financing
We are currently funding post-petition operations under a $200.0 million Superpriority
Debtor-In-Possession Credit Agreement (the DIP Credit Agreement), consisting of a $125.0 million
debtor-in-possession term loan facility (the DIP Term Loan Facility) and a $75.0 million
debtor-in-possession revolving facility (the DIP Revolving Facility). For additional details
related to the DIP Credit Agreement see Note I.
Going Concern
Our audited consolidated financial statements for the year ended March 31, 2011 have been prepared assuming that we will
continue as a going concern. However, our ability to: (i) comply with terms of the DIP Credit Agreement; (ii) comply with various orders
entered by the Court in connection with the Chapter 11 Proceedings; (iii) maintain adequate cash on
hand; (iv) generate sufficient cash from operations; (v) achieve confirmation of a plan of
reorganization under the Bankruptcy Code; (vi) obtain financing to facilitate an exit from
bankruptcy; and (vii) achieve profitability following such confirmation is uncertain and would have a material impact on our financial statements.
D. RECEIVABLES
Receivables are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
|
2011 |
|
|
2010 |
|
Trade receivables, less allowance for doubtful accounts of $1,283,360 |
|
$ |
28,251,599 |
|
|
$ |
30,944,300 |
|
Receivables from book publishers for returns |
|
|
23,041,274 |
|
|
|
22,148,190 |
|
Advances for book buy-backs |
|
|
1,279,026 |
|
|
|
1,675,625 |
|
Other |
|
|
2,394,406 |
|
|
|
3,219,679 |
|
|
|
|
|
|
|
|
|
|
$ |
54,966,305 |
|
|
$ |
57,987,794 |
|
|
|
|
|
|
|
|
Trade receivables include the effect of estimated product returns. The amount of estimated
product returns at March 31, 2011 and 2010 was $4.9 million and $5.3 million, respectively.
56
E. INVENTORIES
Inventories are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
|
2011 |
|
|
2010 |
|
Bookstore Division |
|
$ |
62,076,174 |
|
|
$ |
68,765,952 |
|
Textbook Division |
|
|
26,211,651 |
|
|
|
26,132,007 |
|
Complementary Services Division |
|
|
1,826,372 |
|
|
|
2,599,730 |
|
|
|
|
|
|
|
|
|
|
$ |
90,114,197 |
|
|
$ |
97,497,689 |
|
|
|
|
|
|
|
|
Textbook Division inventories include the effect of estimated product returns. The amount of
estimated product returns at March 31, 2011 and 2010 was $2.3 million and $2.4 million,
respectively.
General and administrative costs associated with the storage and handling of inventory
approximated $9.8 million and $9.9 million for the fiscal years ended March 31, 2011 and 2010,
respectively, of which $1.9 million and $2.0 million was capitalized into inventory at March 31,
2011 and 2010, respectively.
F. PROPERTY AND EQUIPMENT
A summary of the cost of property and equipment follows:
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
|
2011 |
|
|
2010 |
|
Land |
|
$ |
3,537,858 |
|
|
$ |
3,565,382 |
|
Buildings and improvements |
|
|
25,616,853 |
|
|
|
25,774,209 |
|
Leasehold improvements |
|
|
17,270,358 |
|
|
|
16,207,697 |
|
Furniture and fixtures |
|
|
18,252,704 |
|
|
|
17,153,671 |
|
Information systems |
|
|
16,400,952 |
|
|
|
14,640,695 |
|
Automobiles and trucks |
|
|
369,693 |
|
|
|
231,743 |
|
Machinery |
|
|
497,232 |
|
|
|
351,011 |
|
Projects in process |
|
|
136,988 |
|
|
|
83,703 |
|
|
|
|
|
|
|
|
|
|
|
82,082,638 |
|
|
|
78,008,111 |
|
Less: Accumulated depreciation &
amortization |
|
|
(42,690,988 |
) |
|
|
(35,852,687 |
) |
|
|
|
|
|
|
|
|
|
$ |
39,391,650 |
|
|
$ |
42,155,424 |
|
|
|
|
|
|
|
|
G. GOODWILL AND OTHER IDENTIFIABLE INTANGIBLES
As discussed in Note A, on March 4, 2004, Weston Presidio acquired the controlling interest in
us through a series of steps which resulted in Weston Presidio owning a substantial majority of our
common stock. The March 4, 2004 Transaction was accounted for as a purchase at NBC Holdings Corp.
with the related purchase accounting pushed-down to us and NBC as of the date of the transaction.
The excess of the purchase price over the historical basis of the net assets acquired was applied
to adjust net assets to their fair values, as determined in part using an independent third-party
appraisal. The allocation of the excess purchase price included establishing identifiable
intangibles for customer relationships of $114.8 million and tradename of $31.3 million; adjusting
the carrying value of developed technology at March 4, 2004 to a fair value of $11.4 million; and
adjusting the carrying value of goodwill at March 4, 2004 to a fair value of $269.1 million, of
which $25.3 million is deductible for income tax purposes. The weighted-average amortization
period for the identifiable intangibles subject to amortization is approximately nineteen years,
including twenty years for customer relationships and approximately five years for developed
technology.
57
For the fiscal year ended March 31, 2011, nineteen bookstore locations were acquired in
fifteen separate transactions. The total purchase price, net of cash acquired, of such
acquisitions was $8.7 million, of which $2.8 million was assigned to goodwill,
$0.5 million was assigned to covenants not to compete with a weighted-average amortization
period of approximately three years, and $1.0 million was assigned to contract-managed
relationships with a weighted-average amortization period of approximately five years. The
weighted-average amortization period for all covenants not to compete and contract-managed
relationships entered into in connection with acquisitions occurring during the fiscal year ended
March 31, 2011 was approximately five years. Costs incurred to renew contract-managed
relationships during the fiscal year ended March 31, 2011 were $0.4 million with a weighted-average
amortization period of approximately five years before the next renewal of such contracts. As of
March 31, 2011, $0.6 million of prior year contract-managed relationships costs remained to be
paid. During the fiscal year ended March 31, 2011, we paid $0.4 million of previously accrued
consideration for bookstore acquisitions and contract-managed relationships occurring in prior
fiscal years.
Effective September 1, 2007, we entered into an agreement whereby we agreed to pay $1.7
million over a period of thirty-six months to a software company in return for certain rights
related to that companys products that are designed to enhance web-based sales. This other
identifiable intangible was being amortized on a straight-line basis over the thirty-six month base
term of the agreement. The asset and corresponding liability were recorded based upon the present
value of the future payments assuming an imputed interest rate of 6.7%, resulting in a discount of
$0.1 million which was recorded as interest expense over the base term of the agreement utilizing
the effective interest method of accounting.
For the fiscal year ended March 31, 2010, fourteen bookstore locations were acquired in eleven
separate transactions. The purchase price, net of cash acquired, of such acquisitions was $2.9
million, of which $0.1 million was assigned to goodwill, $0.1 million was assigned to covenants not
to compete with a weighted-average amortization period of two years, and $0.5 million was assigned
to contract-managed relationships with a weighted-average amortization period of approximately
three years. The weighted-average amortization period for all covenants not to compete and
contract-managed relationships occurring during the fiscal year ended March 31, 2010 was
approximately three years. Costs incurred to renew contract-managed relationships during the
fiscal year ended March 31, 2011 were $0.3 million with a weighted-average amortization period of
approximately three years before the next renewal of such contracts.
Goodwill assigned to corporate administration represents goodwill arising out of the March 4,
2004 Transaction, as all goodwill was assigned to corporate administration. As is the case with a
portion of our assets, such goodwill is not allocated between our reportable segments when
management makes operating decisions and assesses performance. We have identified the Textbook
Division, Bookstore Division and Complementary Services Division as our reporting units. Such
goodwill is allocated to our Bookstore Division and Textbook Division reporting units for purposes
of testing goodwill for impairment and calculating any gain or loss on the disposal of all or,
where applicable, a portion of a reporting unit.
The changes in the carrying amount of goodwill, in total, by reportable segment and assigned
to corporate administration, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bookstore |
|
|
Corporate |
|
|
|
|
|
|
Division |
|
|
Administration |
|
|
Total |
|
Balance, April 1, 2009 |
|
$ |
53,346,251 |
|
|
$ |
162,089,875 |
|
|
$ |
215,436,126 |
|
Additions to goodwill: |
|
|
|
|
|
|
|
|
|
|
|
|
Bookstore acquisitions |
|
|
135,000 |
|
|
|
|
|
|
|
135,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2010 |
|
|
53,481,251 |
|
|
|
162,089,875 |
|
|
|
215,571,126 |
|
Additions to goodwill: |
|
|
|
|
|
|
|
|
|
|
|
|
Bookstore acquisitions |
|
|
2,865,604 |
|
|
|
|
|
|
|
2,865,604 |
|
Impairment |
|
|
|
|
|
|
(89,000,000 |
) |
|
|
(89,000,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2011 |
|
$ |
56,346,855 |
|
|
$ |
73,089,875 |
|
|
$ |
129,436,730 |
|
|
|
|
|
|
|
|
|
|
|
58
The following table presents the gross carrying amount and accumulated impairment charge of
goodwill:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross carrying |
|
|
Accumulated |
|
|
Net carrying |
|
|
|
amount |
|
|
impairment |
|
|
amount |
|
Balance, April 1, 2009 |
|
$ |
322,408,126 |
|
|
$ |
(106,972,000 |
) |
|
$ |
215,436,126 |
|
Additions |
|
|
135,000 |
|
|
|
|
|
|
|
135,000 |
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2010 |
|
$ |
322,543,126 |
|
|
$ |
(106,972,000 |
) |
|
$ |
215,571,126 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance April 1, 2010 |
|
$ |
322,543,126 |
|
|
$ |
(106,972,000 |
) |
|
$ |
215,571,126 |
|
Additions |
|
|
2,865,604 |
|
|
|
|
|
|
|
2,865,604 |
|
Impairment |
|
|
|
|
|
$ |
(89,000,000 |
) |
|
|
(89,000,000 |
) |
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2011 |
|
$ |
325,408,730 |
|
|
$ |
(195,972,000 |
) |
|
$ |
129,436,730 |
|
|
|
|
|
|
|
|
|
|
|
We perform a test for impairment annually at March 31 or more frequently if impairment
indicators exist. Goodwill impairment testing is a two-step process. The first step involves
comparing the fair value of our reporting units to their carrying amount. If the fair value of the
reporting unit is greater than the carrying amount, there is no impairment. If the reporting
units carrying amount is greater than the fair value, the second step must be completed to measure
the amount of impairment, if any. The second step involves calculating the implied fair value of
goodwill by allocating the fair value of the reporting unit to all of its assets and liabilities
other than goodwill and debt (including both recognized and unrecognized intangible assets) and
comparing the residual amount to the carrying value of goodwill. If the implied fair value of
goodwill is less than the carrying value of goodwill, an impairment loss is recognized equal to the
difference.
We determined in the first step of the goodwill impairment test conducted at March 31, 2011,
that the carrying value of the Bookstore and Textbook Divisions exceeded their fair values,
indicating that goodwill may be impaired. Having determined that goodwill may be impaired, we
performed the second step of the goodwill impairment test. As a result, we recorded an impairment
charge of $89.0 million in fiscal year 2011. The carrying value of goodwill in excess of the
implied fair value was approximately $62.0 million and $27.0 million for the Bookstore and Textbook
Divisions, respectively. The impairment charge reduced our goodwill carrying value to $129.4
million as of March 31, 2011.
Fair value was determined using a combination of the market approach, based primarily on a
multiple, and the income approach, based on a discounted cash flow model. The market approach
requires that we estimate a certain valuation multiple of revenue and EBITDA for each reporting
unit derived from comparable companies to estimate the fair value of the reporting unit. The
discounted cash flow model discounts projected cash flows for each reporting unit to present value
and includes critical assumptions such as long-term growth rates, projected revenues and earnings
and cash flow forecasts for the reporting units, as well as an appropriate discount rate. Discount
rates were determined separately for the reporting units using the capital asset pricing model.
The multiples applied to our trailing twelve month and next twelve month revenues were 0.3x and
0.4x and to EBITDA were 7.2x and 6.9x, respectively, for the Bookstore Division. The multiples
applied to our trailing twelve month and next twelve month revenues were 1.1x and 1.0x and to
EBITDA were 5.3x and 5.2x, respectively, for the Textbook Division. The discounted cash flow model
assumed a discount rate of 12.5% and 11.6% for the Bookstore and Textbook Divisions, respectively,
based on the weighted average cost of capital derived from public companies considered to be
reasonably comparable to ours. The discounted cash flow model also assumed a terminal growth rate
of 3.5% and 1.0% for the Bookstore and Textbook Divisions, respectively.
In the second step of the goodwill impairment test conducted at March 31, 2011, we estimated
the fair value of our intangible assets Tradename and Customer Relationships in the Textbook
Division using the relief-from-royalty market approach and excess earnings method income approach,
respectively. Appraisals were used to estimate fair value of our property and equipment. Carrying
value was assumed to approximate fair value for all other assets and liabilities due to their
short-term nature.
In fiscal 2010, we identified no goodwill impairment. In fiscal 2009, we recorded goodwill
impairment of $107.0 million, of which $40.0 million and $67.0 million were charged to the
Bookstore and Textbook Divisions, respectively.
59
The following table presents the gross carrying amount and accumulated amortization of
identifiable intangibles subject to amortization, in total and by asset class:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2011 |
|
|
|
Gross |
|
|
|
|
|
|
Net |
|
|
|
Carrying |
|
|
Accumulated |
|
|
Carrying |
|
|
|
Amount |
|
|
Amortization |
|
|
Amount |
|
Customer relationships |
|
$ |
114,830,000 |
|
|
$ |
(40,668,700 |
) |
|
$ |
74,161,300 |
|
Developed technology |
|
|
15,342,410 |
|
|
|
(12,673,678 |
) |
|
|
2,668,732 |
|
Covenants not to compete |
|
|
1,458,300 |
|
|
|
(739,880 |
) |
|
|
718,420 |
|
Contract-managed relationships |
|
|
5,217,261 |
|
|
|
(2,631,364 |
) |
|
|
2,585,897 |
|
Other |
|
|
1,585,407 |
|
|
|
(1,585,407 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
138,433,378 |
|
|
$ |
(58,299,029 |
) |
|
$ |
80,134,349 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2010 |
|
|
|
Gross |
|
|
|
|
|
|
Net |
|
|
|
Carrying |
|
|
Accumulated |
|
|
Carrying |
|
|
|
Amount |
|
|
Amortization |
|
|
Amount |
|
Customer relationships |
|
$ |
114,830,000 |
|
|
$ |
(34,927,180 |
) |
|
$ |
79,902,820 |
|
Developed technology |
|
|
13,709,789 |
|
|
|
(12,137,672 |
) |
|
|
1,572,117 |
|
Covenants not to compete |
|
|
3,416,000 |
|
|
|
(2,268,172 |
) |
|
|
1,147,828 |
|
Contract-managed relationships |
|
|
4,555,740 |
|
|
|
(2,200,557 |
) |
|
|
2,355,183 |
|
Other |
|
|
1,585,407 |
|
|
|
(1,365,211 |
) |
|
|
220,196 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
138,096,936 |
|
|
$ |
(52,898,792 |
) |
|
$ |
85,198,144 |
|
|
|
|
|
|
|
|
|
|
|
Information regarding aggregate amortization expense for identifiable intangibles subject to
amortization is presented in the following table:
|
|
|
|
|
|
|
Amortization |
|
|
|
Expense |
|
|
|
|
|
|
Fiscal year ended March 31, 2011 |
|
$ |
8,625,733 |
|
Fiscal year ended March 31, 2010 |
|
|
10,853,248 |
|
Fiscal year ended March 31, 2009 |
|
|
11,384,020 |
|
|
|
|
|
|
Estimated amortization expense for the fiscal years ending March 31: |
|
|
|
|
2012 |
|
$ |
7,709,753 |
|
2013 |
|
|
7,164,848 |
|
2014 |
|
|
6,734,331 |
|
2015 |
|
|
6,521,059 |
|
2016 |
|
|
6,177,342 |
|
Identifiable intangibles not subject to amortization consist solely of the tradename asset
arising out of the March 4, 2004 Transaction which is recorded at $31,320,000. The tradename was
determined to have an indefinite life based on our current intentions. The impairment for
intangible assets not subject to amortization involves a comparison of the estimated fair value of
the intangible asset with its carrying value. If the carrying value of the intangible asset
exceeds its fair value, an impairment loss is recognized in an amount equal to the excess. The
impairment evaluation for tradename is conducted at March 31 each year or, more frequently, if
events or changes in circumstances indicate that an asset might be impaired. The royalty rate and
pre-tax discount rate used in this analysis performed at March 31, 2011 were 3.8% and 13.6%,
respectively. We completed our test at March 31, 2011, 2010 and 2009 and determined there was no
impairment.
60
Identifiable intangibles subject to amortization consist of customer relationships, developed
technology, covenants not to compete, contract-managed relationships and other intangibles. These
intangibles are tested for impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable.
H. ACCRUED EXPENSES
Accrued expenses are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
|
2011 |
|
|
2010 |
|
Accrued rent |
|
$ |
5,892,171 |
|
|
$ |
4,285,622 |
|
Accrued share-based compensation |
|
|
|
|
|
|
4,257,652 |
|
Accrued property taxes |
|
|
504,518 |
|
|
|
508,377 |
|
|
|
|
|
|
|
|
|
|
$ |
6,396,689 |
|
|
$ |
9,051,651 |
|
|
|
|
|
|
|
|
Accrued share-based compensation was the liability recognized for the shares issued under the
2005 Restricted Stock Plan, which vested September 30, 2010, and the Restricted Stock Special Bonus
Agreement, which was paid during the fiscal year ended March 31, 2011 and is described in further
detail in Note Q.
I. LONG-TERM DEBT
Pre-Petition Debt
Details regarding each of our instruments of indebtedness are provided in the following table:
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
|
2011 |
|
|
2010 |
|
|
|
|
|
|
|
|
|
|
Senior Secured Notes, second-priority to
ABL Facility, unamortized bond discount
at March 31, 2011 and 2010 of $362,868
and $840,482, respectively, principal
due December 1, 2011, interest payments
accrue at fixed rate of 10.0% and are
payable semi-annually on December 1 and
June 1 beginning December 1, 2009 |
|
$ |
199,637,132 |
|
|
$ |
199,159,518 |
|
Senior Subordinated Notes, unsecured,
principal due on March 15, 2012,
interest payments accrue at a fixed
rate of 8.625% and are payable
semi-annually on March 15 and September
15 beginning September 15, 2004 |
|
|
175,000,000 |
|
|
|
175,000,000 |
|
|
|
|
|
|
|
|
|
|
Senior Discount Notes, unsecured,
principal due on March 15, 2013,
interest accreted at a rate of 11.0% to
a face amount of $77.0 million on March
15, 2008, interest payments accrue
beginning March 15, 2008 at a fixed rate
of 11.0% and are payable semi-annually
on March 15 and September 15 beginning
September 15, 2008 |
|
|
77,000,000 |
|
|
|
77,000,000 |
|
|
|
|
|
|
|
|
|
|
Mortgage note payable with an insurance
company assumed with the acquisition of
a bookstore facility, due December 1,
2013, monthly payments of $6,446
including interest at 10.75% |
|
|
183,553 |
|
|
|
237,954 |
|
|
|
|
|
|
|
|
|
|
|
451,820,685 |
|
|
|
451,397,472 |
|
Less current maturities of long-term debt |
|
|
(451,697,680 |
) |
|
|
(54,403 |
) |
|
|
|
|
|
|
|
Long-term debt |
|
$ |
123,005 |
|
|
$ |
451,343,069 |
|
|
|
|
|
|
|
|
61
Chapter 11 Financing
Subsequent to the Petition Date, we entered into a Superpriority Debtor-In-Possession Credit
Agreement (the DIP Credit Agreement) which, among other things provides up to $200.0 million of
financing to us as debtors and debtors in possession under the Bankruptcy Code under the terms of a
$125.0 million debtor-in-possession term loan facility and a $75.0 million debtor-in-possession
revolving facility. The DIP Credit Agreement is guaranteed by us, NBC Holdings and each of the
domestic subsidiaries of NBC. Borrowings under the DIP Credit Agreement are to be used to finance
working capital purposes, including, for the payment of fees and expenses incurred in connection
with entering into the DIP Credit Agreement, the Cases and the transactions contemplated, the
repayment of loans outstanding under the Pre-Petition ABL Credit Agreement.
Borrowings under the DIP Credit Agreement are secured by a perfected first priority security
interest on substantially all of our property and assets.
The DIP Credit Agreement matures and expires on the earliest to occur of (a) one year from the
initial closing date, (b) the date that is five business days after the Petition Date (or such
later date as the administrative agent may agree in its sole discretion) if entry of the interim
order has not occurred by such date, (c) the date that is thirty-five days (or such later date as
the administrative agent may agree in its sole discretion) after the Petition Date if entry of the
final order has not occurred by such date, (d) the effective date of the plan of reorganization and
(e) the acceleration of the loans under the DIP Credit Agreement and, in connection, the
termination of the unused term loan or revolving credit facility commitments in accordance with the
terms.
Each loan bears interest at the Eurodollar rate or the base rate plus an applicable margin.
The base interest rate is the greater of a) prime rate, b) federal funds rate plus 0.5%, or c) the
one-month Eurodollar loan rate plus 1.0%. The applicable margin with respect to term loans is 6.0%
in the case of base rate loans and 7.0% in the case of Eurodollar Loans. The applicable margin
with respect to revolving credit loans is 2.5% in the case of base rate loans and 3.5% in the case
of Eurodollar loans. In the case of the term loans only, the base rate shall not be less than
2.25% and the Eurodollar rate shall not be less than 1.25%. Upon the occurrence and during the
continuation of an event of default, (i) all outstanding loans and reimbursement obligations
(whether or not overdue) bear interest at the applicable rate plus 2.0%, (ii) the letter of credit
commission payable pursuant to the DIP Credit Agreement will be increased by 2.0% and (iii) if all
or a portion of any interest payable or any commitment fee or other amount payable is not paid when
due, it will bear interest at the rate applicable to base rate loans plus 2.0%. NBC will also pay
a fee of 0.5% on the amount committed to the revolving facility.
The DIP Credit Agreement contains, among other things, conditions precedent, covenants,
representations and warranties and events of default customary for facilities of this type. Such
covenants include the requirement to provide certain financial reports and other information, use
the proceeds of certain sales or other dispositions of collateral to prepay outstanding loans,
maintenance of certain financial covenants (including a minimum liquidity and cumulative
consolidated EBITDA test), certain restrictions on the incurrence of indebtedness, guarantees,
liens, acquisitions and other investments, mergers, consolidations, liquidations and dissolutions,
dividends and other repayments in respect of capital stock, capital expenditures, transactions with
affiliates, hedging and other derivatives arrangements, negative pledge clauses, payment of
expenses and disbursements other than those reflected in an agreed upon budget, and subsidiary
distributions, subject to certain exceptions.
Pre-Petition Debt
Indebtedness at March 31, 2011 included an amended and restated bank-administered credit
agreement (the Pre-Petition ABL Credit Agreement), which provided for a $75.0 million
asset-based revolving credit facility (the Pre-Petition ABL Facility), which was unused at March
31, 2011; $200.0 million of 10.0% senior secured notes (the Pre-Petition Senior Secured Notes)
issued by NBC at a discount of $1.0 million with unamortized bond discount of $0.4 million at March
31, 2011 (effective rate of 10.14%); $175.0 million of 8.625% senior subordinated notes (the
Pre-Petition Senior Subordinated Notes) issued by NBC; $77.0 million of 11.0% senior discount
notes (the Pre-Petition Senior Discount Notes) issued at a discount of $27.0 million, and other
indebtedness. The Pre-Petition ABL Facility was scheduled to expire on the earlier of October 2,
2012 or the date that was 91 days prior to the earliest maturity of the Pre-Petition Senior Secured
Notes (due December 1, 2011), the Pre-Petition Senior Subordinated Notes (due March 15, 2012), the
Pre-Petition Senior Discount Notes (due March 15, 2013), or any refinancing thereof, effectively
September 1, 2011.
On October 2, 2009, in conjunction with the completion of NBCs offering of the Pre-Petition
Senior Secured Notes, we entered into the Pre-Petition ABL Credit Agreement which provided for the
Pre-Petition ABL Facility mentioned previously. The Pre-Petition ABL Facility was secured by a
first priority interest in substantially all of our and our subsidiaries property and assets,
which also secured the Pre-Petition Senior Secured Notes on a second priority basis. Borrowings
under the Pre-Petition ABL Facility were subject to the Eurodollar interest rate, not to be less
than 1.5%, plus an applicable margin ranging from 4.25%
to 4.75%, or a base interest rate. The base interest rate was the greater of a) prime rate,
b) federal funds rate plus 0.5%, or c) the one-month Eurodollar loan rate plus 1.0%, not to be less
than 2.5%, plus an applicable margin ranging from 3.25% to 3.75%. In addition, the applicable
margin increased 1.5% during the time periods from April 15 to June 29 and from December 1 to
January 29 of each year. There also was a commitment fee for the average daily unused amount of
the Pre-Petition ABL Facility ranging from 0.75% to 1.0% of such unused amount. The average
borrowings under the Pre-Petition ABL Facility for the fiscal year ended March 31, 2011 was $1.5
million at an average rate of 7.9%.
62
The Pre-Petition Senior Secured Notes pay cash interest semi-annually and mature on December
1, 2011. The Pre-Petition Senior Subordinated Notes pay cash interest semi-annually and mature on
March 15, 2012. The Pre-Petition Senior Discount Notes, which became fully-accreted on March 15,
2008 and began to pay cash interest semi-annually on September 15, 2008, mature on March 15, 2013.
Prior to entering into the Pre-Petition ABL Credit Agreement and issuing the Pre-Petition
Senior Secured Notes on October 2, 2009, indebtedness included an amended and restated
bank-administered senior credit facility amended on February 3, 2009 (the Senior Credit Facility)
provided to NBC through a syndicate of lenders, which consisted of a term loan (the Term Loan)
and a revolving credit facility (the Revolving Credit Facility). Borrowings on the Term Loan and
Revolving Credit Facility were subject to the Eurodollar interest rate or the base interest rate.
The Eurodollar interest rate was not to be less than 3.25% plus the applicable margin of 6.0%. The
base interest rate was the greater of a) prime rate, b) federal funds rate plus 0.5%, or c) the
one-month Eurodollar loan rate plus 1.0%, not to be less than 4.25%, plus the applicable margin of
5.0%. Accrued interest on the Term Loan and Revolving Credit Facility was due quarterly.
Additionally, there was a 0.75% commitment fee for the average daily unused amount of the Revolving
Credit Facility. The average borrowings under the Revolving Credit Facility and the ABL Facility
were $4.0 million at an average rate of 8.8% for the fiscal year ended March 31, 2010.
Prior to the February 3, 2009 amendment, the interest rate on the Term Loan was Prime plus an
applicable margin of up to 1.5% or, on Eurodollar borrowings, the Eurodollar interest rate plus an
applicable margin of up to 2.5%. The Revolving Credit Facility interest rate was Prime plus an
applicable margin of up to 1.75% or, on Eurodollar borrowings, the Eurodollar interest rate plus an
applicable margin of up to 2.75%. Accrued interest on the Term Loan and Revolving Credit Facility
is due quarterly. Additionally, there was a 0.5% commitment fee for the average daily unused
amount of the Revolving Credit Facility. The average borrowings under the Revolving Credit
Facility for the fiscal year ended March 31, 2009 was $16.9 million at an average rate of 5.8%.
The Senior Credit Facility stipulated that excess cash flows, as defined therein, would be
applied towards prepayment of the Term Loan. An excess cash flow payment of $6.0 million was paid
in September of 2009 for fiscal year ended March 31, 2009.
A loss from early extinguishment of debt totaling $3.1 million was recorded for the fiscal
year ended March 31, 2010 related to the write-off of debt issue costs as a result of the
termination of the Term Loan and Revolving Credit Facility under the Senior Credit Facility.
The Pre-Petition ABL Credit Agreement required us to maintain certain financial ratios and
contained a number of other covenants that among other things, restricted our ability and the
ability of certain of our subsidiaries to incur additional indebtedness, dispose of assets, make
capital expenditures, investments, acquisitions, loans or advances and pay dividends, except that,
among other things, NBC could pay dividends to us (i) in an amount not to exceed the amount of
interest required to be paid on the Pre-Petition Senior Discount Notes and (ii) to pay corporate
overhead expenses not to exceed $250,000 per fiscal year and any taxes we may owe. In addition,
under our Pre-Petition ABL Facility, if availability, as defined in the Pre-Petition ABL Credit
Agreement, was less than the greater of 20% of the total revolving credit commitments and $15.0
million, we were required to maintain a fixed charge coverage ratio of at least 1.10x measured for
the last twelve-month period on a pro forma basis in order to maintain access to funds under the
Pre-Petition ABL Facility. The calculated borrowing base as of March 31, 2011 was $32.8 million,
of which $0.7 million was outstanding under a letter of credit and $32.1 million was unused. At
March 31, 2011, our pro forma fixed charge coverage ratio was 1.1x.
The indenture governing the Pre-Petition Senior Discount Notes restricted our ability and the
ability of certain of our subsidiaries to pay dividends or make certain other payments, subject to
certain exceptions, unless certain conditions were met, including (i) no default under the
indenture had occurred, (ii) we and certain of our subsidiaries maintained a consolidated coverage
ratio of 2.0 to 1.0 on a pro forma basis and (iii) the amount of the dividend or payment could not
exceed 50% of aggregate income from January 1, 2004 to the end of the most recent fiscal quarter
plus cash proceeds received from the issuance of stock less the aggregate of payments made under
this restriction (the Restricted Payment Calculation). If we did not meet the preceding
conditions, we could still pay dividends or make certain other payments up to $15.0 million in the
aggregate. At March
31, 2011, our pro forma consolidated coverage ratio was 1.1 to 1.0 and the amount
distributable under the Pre-Petition Senior Discount Notes was $15.0 million.
63
The indentures governing the Pre-Petition Senior Subordinated Notes and the Pre-Petition
Senior Secured Notes contained similar restrictions on the ability of NBC and certain of its
subsidiaries to pay dividends or make certain other payments. In addition, under the indentures to
the Pre-Petition Senior Subordinated Notes and the Pre-Petition Senior Secured Notes, if there was
no availability under the Restricted Payment Calculation, but NBC maintained the 2.0 to 1.0
consolidated coverage ratio on a pro forma basis, NBC could make dividends to us to meet the
interest payments on the Pre-Petition Senior Discount Notes. If NBC did not maintain the 2.0 to
1.0 ratio on a pro forma basis, it could still make payments, including dividends to us, up to
$15.0 million in the aggregate. At March 31, 2011, NBCs pro forma consolidated coverage ratio
calculated under the indenture to the Pre-Petition Senior Subordinated Notes was 1.3 to 1.0 and the
ratio calculated under the indenture to the Pre-Petition Senior Secured Notes was 1.5 to 1.0. The
pro forma consolidated coverage ratio calculated under the indenture to the Pre-Petition Senior
Subordinated Notes differed from the ratio calculated under the indenture to the Pre-Petition
Senior Secured Notes because the indenture to the Pre-Petition Senior Subordinated Notes excluded
debt issue cost amortization only for debt instruments outstanding at the March 4, 2004 Transaction
date from the calculation, whereas the indenture to the Pre-Petition Senior Secured Notes excluded
the higher debt issue cost amortization for the Pre-Petition Senior Secured Notes and the
Pre-Petition ABL Facility, which were issued in October of 2009, from the same calculation. At
March 31, 2011, the amount distributable by NBC under the most restrictive indenture was $2.3
million after applying $12.8 million in dividends NBC paid to us for the March 15, 2010, September
15, 2010 and March 15, 2011 interest on the Pre-Petition Senior Discount Notes.
At March 31, 2011, we were in compliance with all of our debt covenants, however, due to the
chapter 11 bankruptcy filing on June 27, 2011, substantially all of our pre-petition debt is in
default, including $200.0 million principal amount due under the Pre-Petition Senior Secured Notes;
$175.0 million principal amount under the Pre-Petition Senior Subordinated Notes and $77.0 million
principal amount under the Pre-Petition Senior Discount Notes.
At March 31, 2011, the aggregate maturities of long-term debt for the next five fiscal years
were as follows:
|
|
|
|
|
Fiscal |
|
|
|
|
Year |
|
|
|
|
|
|
2012 |
|
$ |
451,697,680 |
|
2013 |
|
|
67,387 |
|
2014 |
|
|
55,618 |
|
2015 |
|
|
|
|
2016 |
|
|
|
|
J. LEASES AND OTHER COMMITMENTS
We have 7 bookstore facility leases classified as capital leases. These leases expire at
various dates through fiscal year 2018 and contain options to renew for periods of up to ten years.
Capitalized leased property included in property and equipment was $1.8 million and $2.6 million,
net of accumulated depreciation at March 31, 2011 and 2010, respectively.
We also lease bookstore facilities and data processing equipment under noncancelable operating
leases expiring at various dates through fiscal year 2024, many of which contain options to renew
for periods of up to ten years. Certain of the leases are based on a percentage of sales, ranging
from 0.0% to 15.0%.
64
Future minimum capital lease payments and aggregate minimum lease payments under noncancelable
operating leases for the fiscal years ending March 31 are as follows:
|
|
|
|
|
|
|
|
|
|
|
Capital |
|
|
Operating |
|
Fiscal Year |
|
Leases |
|
|
Leases |
|
2012 |
|
$ |
663,914 |
|
|
$ |
21,922,000 |
|
2013 |
|
|
529,925 |
|
|
|
17,440,000 |
|
2014 |
|
|
448,973 |
|
|
|
13,595,000 |
|
2015 |
|
|
350,765 |
|
|
|
10,857,000 |
|
2016 |
|
|
361,288 |
|
|
|
7,423,000 |
|
Thereafter |
|
|
497,385 |
|
|
|
14,319,000 |
|
|
|
|
|
|
|
|
Total minimum lease payments |
|
|
2,852,250 |
|
|
$ |
85,556,000 |
|
|
|
|
|
|
|
|
Less amount representing interest at 8.6% |
|
|
(555,067 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Present value of minimum lease payments |
|
|
2,297,183 |
|
|
|
|
|
Less obligations due within one year |
|
|
(505,562 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Long-term obligations |
|
$ |
1,791,621 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total rent expense for the fiscal years ended March 31, 2011, 2010 and 2009 was $38.4 million,
$35.1 million and $33.3 million, respectively. Percentage rent expense, above the guaranteed rent
minimum amount, for the fiscal years ended March 31, 2011, 2010 and 2009 was approximately $13.4
million, $11.4 million and $10.0 million, respectively.
K. REDEEMABLE PREFERRED STOCK
In conjunction with the Senior Credit Facility amendment on February 3, 2009, we entered into
a Stock Subscription Agreement with NBC Holdings Corp. (Holdings), pursuant to which Holdings
purchased 10,000 shares of a newly created Series A Preferred Stock, par value $0.01 per share, for
$1,000 per share, for an aggregate purchase price of $10.0 million. Mandatory cumulative dividends
compound annually on December 31 at a rate of 15% of the liquidation preference, which is equal to
$1,000 per share, as adjusted.
The preferred stock may be redeemed at the option of the holders of a majority of the Series A
Preferred Stock, on the occurrence of a Change of Control, as defined in our First Amended and
Restated Certificate of Incorporation, at a redemption price per share equal to the liquidation
preference plus accrued and unpaid dividends; subject to the restrictions or limitations in our
debt agreements. Until such time we are able to redeem all shares of Series A Preferred Stock, the
holders of shares that remain outstanding have all rights, powers, privileges and preferences
including the right to receive dividends at the rate of 17.5% per annum.
Due to the nature of the redemption feature, we have classified the Preferred Stock as
temporary equity and have measured the Preferred Stock at redemption value. As of March 31, 2011,
there have been no changes in circumstance that would require the redemption of the Series A
Preferred Stock or permit the payment of cumulative preferred dividends. Unpaid accumulated
dividends at March 31, 2011 were $3.6 million and are included in the redemption value of the
Preferred Stock.
L. FAIR VALUE MEASUREMENTS
The Fair Value Measurements and Disclosures Topic of the FASB ASC defines fair value,
establishes a framework for measuring fair value, and expands disclosures about fair value
measurements. The standard excludes lease classification or measurement (except in certain
instances).
A three-level hierarchal disclosure framework that prioritizes and ranks the level of market
price observability is used in measuring assets and liabilities at fair value on a recurring basis
in the statement of financial position. Market price observability is impacted by a number of
factors, including the type of asset or liability and its characteristics. Assets and liabilities
with readily available active quoted prices or for which fair value can be measured from actively
quoted prices generally will have a higher degree of market price observability and a lesser degree
of judgment used in measuring fair value.
The three levels are defined as follows: Level 1 inputs to the valuation methodology are
unadjusted quoted prices for identical assets or liabilities in active markets; Level 2 inputs to
the valuation methodology include quoted prices for similar
assets and liabilities in active markets and inputs that are observable for the asset or
liability, either directly or indirectly, for substantially the full term of the financial
instrument; and Level 3 inputs to the valuation methodology are unobservable and significant to
the fair value measurement.
65
The Fair Value Measurements and Disclosures Topic of the FASB ASC also applies to disclosures
of fair value for all financial instruments disclosed under the Financial Instruments Topic of the
FASB ASC. The Financial Instruments Topic requires disclosures about fair value for all financial
instruments, whether recognized or not recognized in the statement of financial position. For
financial instruments recognized at fair value on a recurring basis in the statement of financial
position, the three-level hierarchal disclosure requirements also apply.
Our long-term debt is not measured at estimated fair value on a recurring basis in the
statement of financial position so it does not fall under the three-level hierarchal disclosure
requirements. The estimated fair value of the Pre-Petition Senior Subordinated Notes, the
Pre-Petition Senior Discount Notes and the Pre-Petition Senior Secured Notes, all of which are at a
fixed rate, was determined utilizing the market approach based upon quoted prices for these
instruments in markets that are not active. Other fixed rate debt (including capital lease
obligations) estimated fair values are determined utilizing the income approach, calculating a
present value of future payments based upon prevailing interest rates for similar obligations.
At March 31, 2011 and 2010 we did not have any funds drawn under our revolving line of credit.
Estimated fair values for our long-term fixed rate debt at March 31, 2011 and March 31, 2010 are
summarized in the following table:
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
March 31, |
|
|
|
2011 |
|
|
2010 |
|
Carrying Values: |
|
|
|
|
|
|
|
|
Fixed rate debt |
|
$ |
454,117,868 |
|
|
$ |
454,624,262 |
|
|
|
|
|
|
|
|
|
|
Fair Values: |
|
|
|
|
|
|
|
|
Fixed rate debt |
|
$ |
377,465,000 |
|
|
$ |
438,537,000 |
|
Due to the chapter 11 bankruptcy filing on June 27, 2011, substantially all of our pre-petition
debt is in default. See Notes C and I.
M. NOTE RECEIVABLE FROM STOCKHOLDER
The note receivable from stockholder reflected as a component of stockholders equity pertains
to the remaining balance of a note obtained from an NBC executive officer in conjunction with the
issuance of shares of our common stock in January, 1999. The note, which was due to mature in
January, 2011, was amended in December, 2010 to extend the maturity date to January, 2013. The
note is payable at maturity and bears interest at 5.25%.
N. INCOME TAXES
The provision (benefit) for income taxes consists of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended |
|
|
|
March 31, 2011 |
|
|
March 31, 2010 |
|
|
March 31, 2009 |
|
Current: |
|
|
|
|
|
|
|
|
|
|
|
|
Federal |
|
$ |
(6,717,324 |
) |
|
$ |
1,646,948 |
|
|
$ |
4,984,002 |
|
State |
|
|
475,039 |
|
|
|
1,942,821 |
|
|
|
1,252,283 |
|
Deferred |
|
|
2,745,407 |
|
|
|
(4,122,157 |
) |
|
|
(1,947,665 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(3,496,878 |
) |
|
$ |
(532,388 |
) |
|
$ |
4,288,620 |
|
|
|
|
|
|
|
|
|
|
|
66
The following represents a reconciliation between the actual income tax expense and income
taxes computed by applying the Federal income tax rate to income before income taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended |
|
|
|
March 31, 2011 |
|
|
March 31, 2010 |
|
|
March 31, 2009 |
|
Statutory rate |
|
|
34.0 |
% |
|
|
34.0 |
% |
|
|
34.3 |
% |
Goodwill impairment |
|
|
(29.7 |
) |
|
|
|
|
|
|
(44.3 |
) |
Valuation allowance |
|
|
(0.9 |
) |
|
|
|
|
|
|
|
|
Adjustment to state deferred tax rate |
|
|
0.4 |
|
|
|
(81.6 |
) |
|
|
|
|
NOL carryforward benefit |
|
|
|
|
|
|
(20.6 |
) |
|
|
|
|
State income tax effect |
|
|
(0.1 |
) |
|
|
22.5 |
|
|
|
6.2 |
|
Meals and entertainment |
|
|
(0.1 |
) |
|
|
6.5 |
|
|
|
1.4 |
|
Non-deductible debt discount accretion |
|
|
(0.1 |
) |
|
|
3.2 |
|
|
|
0.5 |
|
Other |
|
|
(0.1 |
) |
|
|
6.1 |
|
|
|
(2.6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
3.4 |
% |
|
|
(29.9 |
)% |
|
|
(4.5 |
%) |
|
|
|
|
|
|
|
|
|
|
For fiscal year ended March 31, 2011, our effective tax rate would have been 33.1%, excluding
the impact of the goodwill impairment charge, which was all attributed to non-deductible tax
goodwill and as such treated as a permanent difference for income tax purposes. Excluding the
impact of the adjustment to the state deferred tax rate of $1.5 million, or (81.6%), and the NOL
carryforward benefit of $0.4 million, or (20.6%), the effective tax rate would have been 72.3% for
fiscal year ended March 31, 2010. The high effective tax rate in fiscal year 2010 was due to
relatively low pre-tax income, to certain states taxing on a gross receipts methodology and
increased interest expense which is not deductible in some states for state taxes. For the fiscal
year ended March 31, 2009, our effective tax rate would have been 39.8%, excluding the impact of
the goodwill impairment charge, which was all attributed to non-deductible tax goodwill and as such
treated as a permanent difference for income tax purposes.
The components of the deferred tax assets (liabilities) consist of the following:
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
|
2011 |
|
|
2010 |
|
Deferred
income tax assets (liabilities), current: |
|
|
|
|
|
|
|
|
Vacation accruals |
|
$ |
1,021,060 |
|
|
$ |
1,053,004 |
|
Inventories |
|
|
1,295,657 |
|
|
|
1,176,603 |
|
NOL carryforward benefit |
|
|
|
|
|
|
759,526 |
|
Allowance for doubtful accounts |
|
|
475,750 |
|
|
|
488,432 |
|
Product returns |
|
|
1,052,254 |
|
|
|
1,140,441 |
|
Incentive programs |
|
|
2,162,773 |
|
|
|
2,391,251 |
|
Other |
|
|
(834,675 |
) |
|
|
(761,698 |
) |
|
|
|
|
|
|
|
|
|
|
5,172,819 |
|
|
|
6,247,559 |
|
|
|
|
|
|
|
|
Deferred income tax assets (liabilities), noncurrent: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental textbook assets |
|
|
(1,926,312 |
) |
|
|
|
|
Deferred compensation agreements |
|
|
112,358 |
|
|
|
140,707 |
|
Interest on Senior Discount Notes |
|
|
9,805,559 |
|
|
|
10,065,529 |
|
Goodwill amortization |
|
|
(11,492,248 |
) |
|
|
(10,270,824 |
) |
Covenants not to compete |
|
|
1,606,013 |
|
|
|
1,608,593 |
|
Identifiable intangibles |
|
|
(40,056,937 |
) |
|
|
(42,496,001 |
) |
Property and equipment |
|
|
(466,635 |
) |
|
|
(492,925 |
) |
NOL carryforward benefit |
|
|
1,126,272 |
|
|
|
|
|
NOL valuation allowance |
|
|
(899,808 |
) |
|
|
|
|
Other |
|
|
119,581 |
|
|
|
1,043,431 |
|
|
|
|
|
|
|
|
|
|
|
(42,072,157 |
) |
|
|
(40,401,490 |
) |
|
|
|
|
|
|
|
|
|
$ |
(36,899,338 |
) |
|
$ |
(34,153,931 |
) |
|
|
|
|
|
|
|
67
At March 31, 2011, we had net operating loss (NOL) carryforwards for state income tax
purposes of approximately $31.8 million, which will expire on various dates, if unused, beginning
in 2012 through 2031. We have recorded a deferred tax asset for the NOL carryforwards of $1.1
million and have established a valuation allowance of $0.9 million against the deferred tax asset.
We had no unrecognized tax benefits as of March 31, 2011 and 2010. Interest and penalties for
underpayments of income taxes were $1,232 and $7,477, respectively, paid in the fiscal year ended
March 31, 2011; $8,833 and $10,543, respectively, paid in the fiscal year ended March 31, 2010; and
$2,250 and $6,100, respectively, paid in the fiscal year ended March 31, 2009.
O. RETIREMENT PLANS
Our subsidiary participates in and sponsors a 401(k) compensation deferral plan. The plan
covers substantially all employees. The plan provisions include employee contributions based on a
percentage of compensation along with a company matching feature (100% of the employees
contribution up to 1% of their total compensation plus 50% of the employees contribution on the
next 5% of their total compensation). NBCs contributions for the fiscal years ended March 31,
2011, 2010 and 2009 were $1.5 million, $1.5 million and $2.4 million, respectively.
When NBC acquired College Book Stores of America, Inc. (CBA) on May 1, 2006, CBA had an
Employee Stock Ownership Plan (the Plan). NBC acquired all the issued and outstanding shares of
CBA stock owned by the Plan. The Plan was frozen and converted to a qualified profit sharing plan.
There have been no contributions to the Plan since May 1, 2006, and there will be no future
contributions to this Plan. The majority of Plan assets were distributed to participants during
fiscal year 2010 and final distribution occurred in January 2011. The Plan assets, which were not
included in the consolidated financial statements, were invested by the trustee, primarily in fixed
income investments.
P. DEFERRED COMPENSATION
NBC has a non-qualified deferred compensation plan for selected employees. This plan allows
participants to voluntarily elect to defer portions of their current compensation. The amounts can
be distributed upon either death or voluntary/involuntary resignation or termination. Interest is
accrued at the Prime rate adjusted semi-annually on January 1 and July 1 and is compounded as of
March 31. The liability for the deferred compensation totaled $0.4 million as of March 31, 2011 and
2010. One of the plan participants retired effective May, 2011. The deferred compensation will be
paid in one annual installment plus interest on January 1, 2012 and is included in current
liabilities at March 31, 2011.
Q. SHARE-BASED COMPENSATION
In conjunction with the March 4, 2004 Transaction, NBC Holdings Corp. established the 2004
Stock Option Plan, which was amended on August 13, 2008 and January 14, 2010 to increase the number
of options available for issuance under the Plan. On September 29, 2005, NBC Holdings Corp.
adopted the NBC Holdings Corp. 2005 Restricted Stock Plan to provide for the sale of NBC Holdings
Corp. capital stock to certain of our officers and directors. Details regarding each of the plans
are as follows:
2004 Stock Option Plan This plan, established and amended by NBC Holdings Corp., provides
for the granting of options to purchase 100,306 shares of NBC Holdings Corp. capital stock to
selected employees, officers, and employee directors of ours and our affiliates. Additional shares
may be issued upon changes in the capitalization of the Company and upon approval of a committee
designated by our Board of Directors (the Committee). All options granted are intended to be
nonqualified stock options, although the plan also provides for incentive stock options. This plan
provides for the granting of options at the discretion of the Committee. Vesting schedules of
options may vary and are determined at the time of grant by the Committee. Subject to certain
exceptions, stock options granted under this plan are to be granted at an exercise price of not
less than fair market value on the date the options are granted and expire ten years from the date
of grant. At March 31, 2011, there were 10,425 options available for grant under this plan. With
respect to each option granted by NBC Holdings Corp., we and NBC Holdings Corp. have an
understanding that pursuant to the 2004 Stock Option Plan, we have granted, and will continue to
grant, an option to purchase an equivalent number of shares of our common stock at the same
exercise price to NBC Holdings Corp.
No share-based compensation expense was recognized at the time of grant for the options
granted to employees prior to April 1, 2007, as the exercise price was greater than or equal to the
estimated fair value (including a discount for the holders minority
interest position and illiquidity of NBC Holdings Corp.s capital stock) of NBC Holdings
Corp.s capital stock on the date of grant.
68
On March 4, 2010, our Board of Directors approved the grant of 5,000 options available for
issuance under the 2004 Stock Option Plan. The options, which have an exercise price of $85 per
share, vest 25% on each of April 26, 2010, 2011, 2012, and 2013. The options expire on April 26,
2020. The fair value of such options was estimated on the date of grant under the calculated value
method using a closed-form option valuation model that contained the following assumption
expected volatility of 30.9%, no expected dividends, an expected term of four years, and a
risk-free rate of 2.1%. As the stock underlying such options is not publicly traded, the expected
volatility was based upon quarterly observations of the Dow Jones Global Index for Small Cap
General Retailers over the four year period ended April 15, 2010. This index was selected as one
which fit the industry in which we operate, and the volatility of that index was calculated
utilizing a standard deviation formula. The expected term was an estimate of the period of time
that such options granted are expected to remain outstanding after considering the vesting period
and historical experience. The risk-free rate was based upon the April 26, 2010 estimated yield of
a U.S. Treasury constant maturity series with a four year term.
On February 3, 2010, our Board of Directors approved the grant of 4,238 options available for
issuance under the 2004 Stock Option Plan. The options, which have an exercise price of $85 per
share, vest 25% on each of February 3, 2010, 2011, 2012, and 2013. The options expire on February
3, 2020. The fair value of such options was estimated on the date of grant under the calculated
value method using a closed-form option valuation model that contained the following assumption
expected volatility of 27.8%, no expected dividends, an expected term of four years, and a
risk-free rate of 1.9%. As the stock underlying such options is not publicly traded, the expected
volatility was based upon quarterly observations of the Dow Jones Global Index for Small Cap
General Retailers over the four year period ended February 3, 2010. This index was selected as one
which fit the industry in which we operate, and the volatility of that index was calculated
utilizing a standard deviation formula. The expected term was an estimate of the period of time
that such options granted are expected to remain outstanding after considering the vesting period
and historical experience. The risk-free rate was based upon the February 3, 2010 estimated yield
of a U.S. Treasury constant maturity series with a four year term.
On October 12, 2007, our Board of Directors approved the grant of 4,917 options available for
issuance under the 2004 Stock Option Plan. The options, which have an exercise price of $205 per
share, vest 25% on each of October 12, 2007, 2008, 2009 and 2010. The options expire on October
12, 2017. The fair value of such options was estimated on the date of grant under the calculated
value method using a closed-form option valuation model that contained the following assumptions
expected volatility of 13.1%, no expected dividends, an expected term of four years, and a
risk-free rate of 4.3%. As the stock underlying such options is not publicly traded, the expected
volatility was based upon quarterly observations of the Dow Jones Global Index for Small Cap
General Retailers over the four year period ended October 12, 2007. This index was selected as one
which fit the industry in which we operate, and the volatility of that index was calculated
utilizing a standard deviation formula. The expected term was an estimate of the period of time
that such options granted are expected to remain outstanding after considering the vesting period
and historical experience. The risk-free rate was based upon the October 12, 2007 estimated yield
of a U.S. Treasury constant maturity series with a four year term.
As a result of employee resignations, 313 options granted prior to April 1, 2007, 200 options
granted October 12, 2007 and 150 options granted February 3, 2010 have been forfeited.
69
Specific information regarding share-based compensation for stock options granted after March
31, 2007 is presented in the following table:
|
|
|
|
|
Stock Options Granted October 12, 2007: |
|
|
|
|
General information: |
|
|
|
|
Grant date calculated fair value per option |
|
$ |
38.23 |
|
Shares at March 31, 2011: |
|
|
|
|
Vested |
|
|
4,717 |
|
Nonvested |
|
|
|
|
|
|
|
|
Total |
|
|
4,717 |
|
|
|
|
|
Unrecognized share-based compensation at March 31, 2011 |
|
$ |
|
|
Period over which unrecognized share-based compensation
will be realized (in years) at March 31, 2011 |
|
|
|
|
|
|
|
|
|
Stock Options Granted February 3, 2010: |
|
|
|
|
General information: |
|
|
|
|
Grant date calculated fair value per option |
|
$ |
13.87 |
|
Shares at March 31, 2011: |
|
|
|
|
Vested |
|
|
2,296 |
|
Nonvested |
|
|
1,942 |
|
|
|
|
|
Total |
|
|
4,238 |
|
|
|
|
|
Unrecognized share-based compensation at March 31, 2011 |
|
$ |
26,930 |
|
Period over which unrecognized share-based compensation
will be realized (in years) at March 31, 2011 |
|
|
1.8 |
|
|
|
|
|
|
Stock Options Granted April 26, 2010: |
|
|
|
|
General information: |
|
|
|
|
Grant date calculated fair value per option |
|
$ |
17.09 |
|
Shares at March 31, 2011: |
|
|
|
|
Vested |
|
|
2,396 |
|
Nonvested |
|
|
2,604 |
|
|
|
|
|
Total |
|
|
5,000 |
|
|
|
|
|
|
|
|
|
|
Unrecognized share-based compensation at March 31, 2011 |
|
$ |
44,507 |
|
|
|
|
|
|
Period over which unrecognized share-based compensation
will be realized (in years) at March 31, 2011 |
|
|
2.1 |
|
|
|
|
|
|
|
|
Fiscal Year Ended |
|
|
|
March 31, |
|
Financial information: |
|
2011 |
|
Consolidated Statement of Operations: |
|
|
|
|
Share-based compensation |
|
$ |
77,783 |
|
Deferred tax benefit |
|
|
93,138 |
|
Other Required Disclosures: |
|
|
|
|
Total calculated fair value of shares vested during the period |
|
$ |
77,783 |
|
70
A summary of our share-based compensation activity related to stock options vested or expected
to vest for the 2004 Stock Option Plan is as follows:
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended |
|
|
|
March 31, 2011 |
|
|
|
|
|
|
|
Weighted- |
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
|
Exercise |
|
|
|
Number |
|
|
Price |
|
2004 Stock Option Plan: |
|
|
|
|
|
|
|
|
Outstanding beginning of year |
|
|
84,391 |
|
|
$ |
117.75 |
|
Granted |
|
|
5,000 |
|
|
|
85.00 |
|
Exercised or converted |
|
|
|
|
|
|
|
|
Forfeited |
|
|
(150 |
) |
|
|
85.00 |
|
Expired |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding end of year |
|
|
89,241 |
|
|
$ |
113.73 |
|
|
|
|
|
|
|
|
Exercisable end of year |
|
|
83,447 |
|
|
$ |
115.86 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2004 Stock Option Plan |
|
|
|
Outstanding |
|
|
Exercisable |
|
|
|
|
|
|
|
Weighted- |
|
|
|
|
|
|
Weighted- |
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
Average |
|
|
|
|
|
|
|
Remaining |
|
|
|
|
|
|
Remaining |
|
|
|
|
|
|
|
Contractual |
|
|
|
|
|
|
Contractual |
|
|
|
Number |
|
|
Term (Yrs) |
|
|
Number |
|
|
Term (Yrs) |
|
March 31, 2011: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise price of $52.47 |
|
|
26,628 |
|
|
|
2.9 |
|
|
|
26,628 |
|
|
|
2.9 |
|
Exercise price of $106 |
|
|
11,760 |
|
|
|
2.9 |
|
|
|
11,760 |
|
|
|
2.9 |
|
Exercise price of $146 |
|
|
10,750 |
|
|
|
2.9 |
|
|
|
10,750 |
|
|
|
2.9 |
|
Exercise price of $160 |
|
|
26,298 |
|
|
|
4.1 |
|
|
|
26,298 |
|
|
|
4.1 |
|
Exercise price of $205 |
|
|
4,717 |
|
|
|
6.5 |
|
|
|
4,717 |
|
|
|
6.5 |
|
Exercise price of $85 |
|
|
9,088 |
|
|
|
9.0 |
|
|
|
3,294 |
|
|
|
9.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
89,241 |
|
|
|
4.1 |
|
|
|
83,447 |
|
|
|
3.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 Restricted Stock Plan This plan provided for the issuance of shares of nonvested stock
to individuals determined by NBC Holdings Corp.s Board of Directors. Any shares issued under the
plan were subject to restrictions on transferability and a right of NBC Holdings Corp. to
re-acquire such shares at less than their then fair market value under certain conditions.
On March 31, 2006, 1,400 shares of NBC Holdings Corp. capital stock were issued for $0.01 per
share to each of our three officers and directors (the Officers) pursuant to a Restricted Stock
Purchase Agreement (the RSPA). The Officers were party to the Stockholders Agreement, dated
March 4, 2004, by and among NBC Holdings Corp. and the Stockholders of NBC Holdings Corp. named
therein, the provisions of which restricted the transfer of such shares and provided for certain
other rights as detailed therein. The shares granted to the Officers were also each subject to a
Stock Repurchase Agreement (the SRA) that, among other things, provided for vesting, certain call
rights on behalf of NBC Holdings Corp., and certain put rights on behalf of the applicable Officer.
With respect to each share of capital stock issued by NBC Holdings Corp., we and NBC Holdings
Corp. have an understanding that pursuant to the 2005 Restricted Stock Plan, we have issued, and
will continue to issue, an equivalent number of shares of our common stock at the same purchase
price per share to NBC Holdings Corp.
The put rights enabled the Officer to require NBC Holdings Corp. to repurchase all vested
shares following the Vesting Date at the lesser of fair market value or effectively $1.0 million
for such Officers 1,400 shares, subject to certain adjustments and any restrictions or limitations
in our debt covenants. The SRA also provided that NBC Holdings Corp. would pay a cash bonus to the
Officer related to any vested shares that were repurchased in connection with the put. This bonus
was intended to reimburse the Officer for any federal, state and local taxes related to the
repurchase and to this cash bonus itself.
71
In connection with the NBC Holdings Corp. 2005 Restricted Stock Plan, NBC also entered into a
Restricted Stock Special Bonus Agreement (the SBA) with each Officer. Each SBA provided for the
payment of a cash bonus to the Officer within 30 days following the Vesting Date based upon certain
criteria (the Special Bonus). If the Officer was still employed by us on that date, or had been
terminated without cause, as defined in the SBA, following a change of control, as defined in the
SBA, prior to that date, the amount would be calculated as effectively $1.0 million less the fair
market value of his nonvested stock, subject to certain adjustments. The SBA also provided that in
the event of payment of the Special Bonus, NBC would pay an additional cash bonus to the Officer in
an amount sufficient to reimburse the Officer for any federal, state and local taxes related to the
Special Bonus and this additional bonus itself.
The combination of the NBC Holdings Corp. 2005 Restricted Stock Plan, the RSPA, the SRA and
the SBA was intended to provide a minimum after-tax compensation benefit of $1.0 million to each of
the Officers assuming that they remained employed by NBC through September 30, 2010 all subject
to certain adjustments and conditions related to our debt covenants as described earlier. The
shares issued under the 2005 Restricted Stock Plan vested September 30, 2010, the put rights were
exercised by the Officers and total payments of $4.6 million under the 2005 Restricted Stock Plan,
the RSPA, the SRA and the SBA were paid during the fiscal year ended March 31, 2011.
Due to the put rights on behalf of the Officers, share-based compensation was re-measured at
the end of each reporting period and recognized to a minimum of $3.0 million plus anticipated cash
bonuses to be paid to reimburse the Officers for any federal, state and local taxes thereon from
the date of issuance of the nonvested stock until September 30, 2010 and was recorded as accrued
expenses in the consolidated balance sheets and as selling, general and administrative expenses
in the consolidated statements of operations. No additional nonvested shares have been issued.
72
In re-measuring share-based compensation at the end of each reporting period, we recognized
the greater of (a) the minimum compensation benefits associated with the nonvested shares or (b)
the estimated fair value of such shares. Fair value was estimated utilizing a methodology which is
consistent with the transaction-based method under the market approach described in the AICPA Audit
and Accounting Practice Aid Series, Valuation of Privately-Held-Company Equity Securities (the
Practice Aid). This methodology is consistent with the approaches that have been used in all
four arms-length negotiated transactions involving our common stock since 1995, including the last
transaction on March 4, 2004 and includes the following steps: (a) the determination of an
estimated enterprise value using a multiple of EBITDA; (b) the enterprise value is reduced by
outstanding debt and redeemable preferred stock and accumulated dividends to derive an equity
value; and (c) the equity value is then divided by outstanding common stock and common stock
equivalents to arrive at an estimated equity value per share. As NBC Holdings Corp.s common stock
is not publicly traded and the nonvested shares represent a minority interest position, the
estimated equity value per share was discounted for these factors to arrive at the fair value of
the nonvested shares. The factors to be considered in performing a valuation as outlined in the
Practice Aid, as well as the risks outlined in this Annual Report on Form 10-K and other factors,
impact the selection of the EBITDA multiple used in the previously mentioned valuation methodology.
As these factors and risks change, their impact on the valuation methodology is also considered.
Specific information regarding nonvested stock share-based compensation is presented in the
following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended |
|
|
|
March 31, 2011 |
|
|
March 31, 2010 |
|
|
March 31, 2009 |
|
|
|
Minimum Compensation |
|
Nonvested Stock: |
|
|
|
|
|
|
|
|
|
|
|
|
Valuation methodology |
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation: |
|
|
|
|
|
|
|
|
|
|
|
|
Recognized: |
|
|
|
|
|
|
|
|
|
|
|
|
Value of nonvested shares |
|
$ |
333,333 |
|
|
$ |
666,667 |
|
|
$ |
666,667 |
|
Reimbursement for taxes |
|
|
36,751 |
|
|
|
378,791 |
|
|
|
578,460 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
370,084 |
|
|
$ |
1,045,458 |
|
|
$ |
1,245,127 |
|
|
|
|
|
|
|
|
|
|
|
Unrecognized: (1) |
|
|
|
|
|
|
|
|
|
|
|
|
Value of nonvested shares |
|
$ |
|
|
|
$ |
333,333 |
|
|
$ |
1,000,000 |
|
Reimbursement for taxes |
|
|
|
|
|
|
198,825 |
|
|
|
606,097 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
532,158 |
|
|
$ |
1,606,097 |
|
|
|
|
|
|
|
|
|
|
|
Deferred tax benefit |
|
$ |
|
|
|
$ |
375,824 |
|
|
$ |
476,298 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period over which unrecognized
share-based compensation will
be realized (in years) |
|
|
|
|
|
|
0.5 |
|
|
|
1.5 |
|
R. SEGMENT INFORMATION
Our operating segments are determined based on the way that management organizes the segments
for making operating decisions and assessing performance. Management has organized our operating
segments based upon differences in products and services provided. We have three operating
segments: Bookstore Division, Textbook Division, and Complementary Services Division. The
Bookstore and Textbook Divisions qualify as reportable operating segments, while separate
disclosure of the Complementary Services Division is provided as management believes that
information about this operating segment is useful to the readers of the consolidated financial
statements. The Bookstore Division segment encompasses the operating activities of our college
bookstores located on or adjacent to college campuses. The Textbook Division segment consists
primarily of selling used textbooks to college bookstores, buying them back from students or
college bookstores at the end of each college semester and then reselling them to college
bookstores. The Complementary Services Division segment includes book-related services such as
distance education materials, computer hardware and software, e-commerce technology, consulting
services, and a centralized buying service.
We primarily account for intersegment sales as if the sales were to third parties (at current
market prices). Certain assets, net interest expense and taxes (excluding interest and taxes
incurred by NBCs wholly-owned subsidiaries, NBC Textbooks LLC, Net
Textstore LLC, CBA, Campus Authentic LLC, and Specialty Books, Inc.) are not allocated between
our segments; instead, such balances are accounted for in a corporate administrative division.
73
EBITDA and earnings before interest, taxes, depreciation, amortization, goodwill impairment,
and loss on early extinguishment of debt (Adjusted EBITDA) are important measures of segment
profit or loss used by the Chief Executive Officer and President (chief operating decision makers)
in making decisions about resources to be allocated to operating segments and assessing operating
segment performance.
The following table provides selected information about profit and assets on a segment basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Complementary |
|
|
|
|
|
|
Bookstore |
|
|
Textbook |
|
|
Services |
|
|
|
|
|
|
Division |
|
|
Division |
|
|
Division |
|
|
Total |
|
Fiscal year ended March 31, 2011: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External customer revenues |
|
$ |
468,299,457 |
|
|
$ |
102,889,379 |
|
|
$ |
27,241,331 |
|
|
$ |
598,430,167 |
|
Intersegment revenues |
|
|
236,921 |
|
|
|
32,609,239 |
|
|
|
8,156,495 |
|
|
|
41,002,655 |
|
Depreciation and amortization expense |
|
|
8,901,801 |
|
|
|
6,089,249 |
|
|
|
1,054,568 |
|
|
|
16,045,618 |
|
Earnings before interest, taxes,
depreciation, amortization, and
goodwill impairment (Adjusted
EBITDA) |
|
|
33,905,906 |
|
|
|
34,710,745 |
|
|
|
2,764,283 |
|
|
|
71,380,934 |
|
Total assets |
|
|
173,974,208 |
|
|
|
117,814,656 |
|
|
|
14,264,903 |
|
|
|
306,053,767 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal year ended March 31, 2010: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External customer revenues |
|
$ |
471,028,406 |
|
|
$ |
104,918,932 |
|
|
$ |
29,546,275 |
|
|
$ |
605,493,613 |
|
Intersegment revenues |
|
|
1,463,869 |
|
|
|
35,673,288 |
|
|
|
5,924,561 |
|
|
|
43,061,718 |
|
Depreciation and amortization expense |
|
|
9,285,089 |
|
|
|
6,075,652 |
|
|
|
2,606,650 |
|
|
|
17,967,391 |
|
Earnings before interest, taxes,
depreciation, amortization, and loss
on early extinguishment of debt
(Adjusted EBITDA) |
|
|
45,685,171 |
|
|
|
37,050,519 |
|
|
|
2,301,001 |
|
|
|
85,036,691 |
|
Total assets |
|
|
189,058,497 |
|
|
|
121,026,790 |
|
|
|
15,312,328 |
|
|
|
325,397,615 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal year ended March 31, 2009: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External customer revenues |
|
$ |
470,690,964 |
|
|
$ |
111,715,360 |
|
|
$ |
28,309,857 |
|
|
$ |
610,716,181 |
|
Intersegment revenues |
|
|
1,347,045 |
|
|
|
35,572,419 |
|
|
|
5,924,026 |
|
|
|
42,843,490 |
|
Depreciation and amortization expense |
|
|
9,009,168 |
|
|
|
6,086,334 |
|
|
|
2,644,555 |
|
|
|
17,740,057 |
|
Earnings before interest, taxes,
depreciation, amortization, and
goodwill impairment (Adjusted
EBITDA) |
|
|
44,029,528 |
|
|
|
39,009,073 |
|
|
|
1,320,700 |
|
|
|
84,359,301 |
|
Total assets |
|
|
179,192,480 |
|
|
|
131,827,129 |
|
|
|
17,836,018 |
|
|
|
328,855,627 |
|
74
The following table reconciles segment information presented above with consolidated
information as presented in the consolidated financial statements:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended |
|
|
|
March 31, 2011 |
|
|
March 31, 2010 |
|
|
March 31, 2009 |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
Total for reportable segments |
|
$ |
639,432,822 |
|
|
$ |
648,555,331 |
|
|
$ |
653,559,671 |
|
Elimination of intersegment revenues |
|
|
(41,002,655 |
) |
|
|
(43,061,718 |
) |
|
|
(42,843,490 |
) |
|
|
|
|
|
|
|
|
|
|
Consolidated total |
|
$ |
598,430,167 |
|
|
$ |
605,493,613 |
|
|
$ |
610,716,181 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and Amortization Expense: |
|
|
|
|
|
|
|
|
|
|
|
|
Total for reportable segments |
|
$ |
16,045,618 |
|
|
$ |
17,967,391 |
|
|
$ |
17,740,057 |
|
Corporate Administration |
|
|
1,159,207 |
|
|
|
1,402,861 |
|
|
|
1,246,594 |
|
|
|
|
|
|
|
|
|
|
|
Consolidated total |
|
$ |
17,204,825 |
|
|
$ |
19,370,252 |
|
|
$ |
18,986,651 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill impairment |
|
$ |
89,000,000 |
|
|
$ |
|
|
|
$ |
106,972,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) Before Income Taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
Total Adjusted EBITDA for reportable segments (1) |
|
$ |
71,380,934 |
|
|
$ |
85,036,691 |
|
|
$ |
84,359,301 |
|
Corporate Administration Adjusted EBITDA loss
(including interdivision profit elimination) (1) |
|
|
(15,955,066 |
) |
|
|
(11,597,268 |
) |
|
|
(13,326,971 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
55,425,868 |
|
|
|
73,439,423 |
|
|
|
71,032,330 |
|
Depreciation and amortization |
|
|
(17,204,825 |
) |
|
|
(19,370,252 |
) |
|
|
(18,986,651 |
) |
Goodwill impairment |
|
|
(89,000,000 |
) |
|
|
|
|
|
|
(106,972,000 |
) |
|
|
|
|
|
|
|
|
|
|
Consolidated income (loss) from operations |
|
|
(50,778,957 |
) |
|
|
54,069,171 |
|
|
|
(54,926,321 |
) |
Interest and other expenses, net |
|
|
(51,027,654 |
) |
|
|
(49,224,513 |
) |
|
|
(41,279,082 |
) |
Loss on early extinguishment of debt |
|
|
|
|
|
|
(3,065,759 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated income (loss) before income taxes |
|
$ |
(101,806,611 |
) |
|
$ |
1,778,899 |
|
|
$ |
(96,205,403 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2011 |
|
|
March 31, 2010 |
|
|
March 31, 2009 |
|
Total Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Total for reportable segments |
|
$ |
306,053,767 |
|
|
$ |
325,397,615 |
|
|
$ |
328,855,627 |
|
Assets not allocated to segments: |
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
45,012,983 |
|
|
|
49,933,615 |
|
|
|
36,090,627 |
|
Receivables, net |
|
|
23,437,942 |
|
|
|
17,839,544 |
|
|
|
19,857,099 |
|
Recoverable income taxes |
|
|
7,398,901 |
|
|
|
2,435,287 |
|
|
|
2,869,583 |
|
Deferred income taxes |
|
|
1,644,974 |
|
|
|
1,690,559 |
|
|
|
2,350,802 |
|
Prepaid expenses and other assets |
|
|
2,197,991 |
|
|
|
2,216,334 |
|
|
|
3,485,273 |
|
Property and equipment, net |
|
|
11,718,278 |
|
|
|
11,711,425 |
|
|
|
12,258,135 |
|
Goodwill (2) |
|
|
73,089,875 |
|
|
|
162,089,875 |
|
|
|
162,089,875 |
|
Identifiable intangibles, net |
|
|
31,656,404 |
|
|
|
32,035,514 |
|
|
|
32,722,900 |
|
Debt issue costs, net |
|
|
4,211,013 |
|
|
|
9,964,874 |
|
|
|
7,896,706 |
|
Other assets |
|
|
1,884,853 |
|
|
|
956,793 |
|
|
|
611,664 |
|
|
|
|
|
|
|
|
|
|
|
Consolidated total |
|
$ |
508,306,981 |
|
|
$ |
616,271,435 |
|
|
$ |
609,088,291 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Adjusted EBITDA is defined as earnings before interest, taxes, depreciation,
amortization, goodwill impairment, and loss on early extinguishment of debt. |
|
(2) |
|
We determined in the first step of our annual goodwill impairment test conducted
at March 31 that the carrying value of certain reporting units exceeded their fair
values, indicating that goodwill may be impaired for fiscal years ended 2011 and 2009.
Having determined that goodwill may be impaired, we performed the second step of the
goodwill impairment test. As a result, we recorded an impairment charge of $89.0
million and $107.0 million in fiscal years 2011 and 2009, respectively, which reduced
our goodwill carrying value to $129.4 million and $215.4 million as of March 31, 2011
and 2009, respectively. |
Our revenues are attributed to countries based on the location of the customer. Substantially
all revenues generated are attributable to customers located within the United States.
75
S. RELATED PARTY TRANSACTIONS
In accordance with NBCs debt covenants, NBC declared and paid $8.5 million in dividends to us
during the fiscal years ended March 31, 2011, 2010 and 2009 to provide funding for interest due and
payable on our $77.0 million 11% Pre-Petition Senior Discount Notes.
In conjunction with the Senior Credit Facility amendment on February 3, 2009, we entered into
a Stock Subscription Agreement with NBC Holdings Corp. (Holdings), pursuant to which Holdings
purchased 10,000 shares of a newly created series of our preferred stock, par value $0.01 per
share, for $1,000 per share, for an aggregate purchase price of $10.0 million. As a result of the
Stock Subscription Agreement, we made a $10.0 million capital contribution to NBC.
T. EARNINGS PER SHARE
Basic EPS data is computed by dividing earnings after the deduction of preferred stock
dividends by the weighted-average number of common shares outstanding during the period. Diluted
EPS data is calculated by dividing earnings after the deduction of preferred stock dividends by the
weighted-average number of common shares outstanding and potential common shares including stock
options, if any, with a dilutive effect. The information used to compute basic and dilutive EPS on
income (from continuing operations is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended |
|
|
|
March 31, 2011 |
|
|
March 31, 2010 |
|
|
March 31, 2009 |
|
Net income (loss) |
|
$ |
(98,309,733 |
) |
|
$ |
2,311,287 |
|
|
$ |
(100,494,023 |
) |
Less: preferred stock dividends |
|
|
(1,795,480 |
) |
|
|
(1,572,554 |
) |
|
|
(233,334 |
) |
|
|
|
|
|
|
|
|
|
|
Net income (loss) available to common shareholders |
|
$ |
(100,105,213 |
) |
|
$ |
738,733 |
|
|
$ |
(100,727,357 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding-basic |
|
|
554,094 |
|
|
|
554,094 |
|
|
|
554,094 |
|
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Potential shares of common stock, attributable
to stock options |
|
|
|
|
|
|
5,768 |
|
|
|
|
|
Weighted-average common shares outstanding-diluted |
|
|
554,094 |
|
|
|
559,862 |
|
|
|
554,094 |
|
Weighted average common shares outstanding-diluted includes the incremental shares that would
be issued upon the assumed exercise of stock options, if the effect is dilutive. Options to
purchase 89,241 and 80,203 shares of common stock were outstanding at March 31, 2011 and 2009, but
were not included in the computation of diluted weighted-average common shares because their effect
would have been anti-dilutive. Stock options outstanding for March 31, 2010 were 84,391.
U. SUBSEQUENT EVENT
On June 27, 2011, we filed voluntary petitions for reorganization relief under the Bankruptcy
Code in the Court. Due to the chapter 11 bankruptcy filing, substantially all of our debt is in
default and has been classified as current liabilities. See Note C and Note I for further
discussion.
76
V. CONDENSED CONSOLIDATING FINANCIAL INFORMATION
Effective January 26, 2009, we established Campus Authentic LLC, a wholly-owned subsidiary of
NBC which was separately incorporated under the laws of the State of Delaware. On April 24, 2007,
we established Net Textstore LLC as a wholly-owned subsidiary of NBC separately incorporated under
the laws of the State of Delaware. On May 1, 2006, we acquired all of the outstanding stock of CBA,
an entity separately incorporated under the laws of the State of Illinois and now accounted for as
one of NBCs wholly-owned subsidiaries. Effective January 1, 2005, our textbook division was
separately formed under the laws of the State of Delaware as NBC Textbooks LLC, one of NBCs
wholly-owned subsidiaries. Effective July 1, 2002, our distance education business was separately
incorporated under the laws of the State of Delaware as Specialty Books, Inc., one of NBCs
wholly-owned subsidiaries. In connection with their incorporation, Campus Authentic LLC, Net
Textstore LLC, CBA, NBC Textbooks LLC and Specialty Books, Inc. have unconditionally guaranteed, on
a joint and several basis, full and prompt payment and performance of NBCs obligations,
liabilities, and indebtedness arising under, out of, or in connection with the Pre-Petition Senior
Subordinated Notes and Pre-Petition Senior Secured Notes. However, we are not a guarantor of NBCs
obligations, liabilities or indebtedness arising out of, or in connection, with such notes. As of
March 31, 2011, we, NBC and NBCs wholly-owned subsidiaries were also a party to the First Lien
Amended and Restated Guarantee and Collateral Agreement related to the Pre-Petition ABL Credit
Agreement. Condensed consolidating balance sheets, statements of operations, and statements of
cash flows are presented on the following pages which reflect financial information for the parent
company (NBC Acquisition Corp), NBC and the subsidiary guarantors (Campus Authentic LLC (from
January 26, 2009), Net Textstore LLC, CBA, NBC Textbooks LLC and Specialty Books, Inc.),
consolidating eliminations, and consolidated totals.
77
NBC ACQUISITION CORP. AND SUBSIDIARY
(DEBTOR IN POSSESSION AS OF JUNE 27, 2011)
CONDENSED CONSOLIDATING BALANCE SHEET
MARCH 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NBC |
|
|
Nebraska |
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquistion |
|
|
Book |
|
|
Subsidiary |
|
|
|
|
|
|
Consolidated |
|
|
|
Corp. |
|
|
Company, Inc. |
|
|
Guarantors |
|
|
Eliminations |
|
|
Totals |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
|
|
|
$ |
49,526,530 |
|
|
$ |
6,920,850 |
|
|
$ |
|
|
|
$ |
56,447,380 |
|
Intercompany receivables |
|
|
26,103,749 |
|
|
|
15,756,276 |
|
|
|
75,596,987 |
|
|
|
(117,457,012 |
) |
|
|
|
|
Receivables, net |
|
|
42 |
|
|
|
31,909,645 |
|
|
|
23,056,618 |
|
|
|
|
|
|
|
54,966,305 |
|
Inventories |
|
|
|
|
|
|
47,874,164 |
|
|
|
42,240,033 |
|
|
|
|
|
|
|
90,114,197 |
|
Recoverable income taxes |
|
|
|
|
|
|
7,398,901 |
|
|
|
|
|
|
|
|
|
|
|
7,398,901 |
|
Deferred income taxes |
|
|
(45,585 |
) |
|
|
715,404 |
|
|
|
4,503,000 |
|
|
|
|
|
|
|
5,172,819 |
|
Prepaid expenses and other assets |
|
|
|
|
|
|
4,338,486 |
|
|
|
2,861,986 |
|
|
|
|
|
|
|
7,200,472 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
26,058,206 |
|
|
|
157,519,406 |
|
|
|
155,179,474 |
|
|
|
(117,457,012 |
) |
|
|
221,300,074 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PROPERTY AND EQUIPMENT, net |
|
|
|
|
|
|
33,971,546 |
|
|
|
5,420,104 |
|
|
|
|
|
|
|
39,391,650 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GOODWILL |
|
|
|
|
|
|
113,765,621 |
|
|
|
15,671,109 |
|
|
|
|
|
|
|
129,436,730 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CUSTOMER RELATIONSHIPS, net |
|
|
|
|
|
|
4,005,045 |
|
|
|
70,156,255 |
|
|
|
|
|
|
|
74,161,300 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TRADENAME |
|
|
|
|
|
|
31,320,000 |
|
|
|
|
|
|
|
|
|
|
|
31,320,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER IDENTIFIABLE INTANGIBLES, net |
|
|
|
|
|
|
3,533,284 |
|
|
|
2,439,765 |
|
|
|
|
|
|
|
5,973,049 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTMENT IN SUBSIDIARIES |
|
|
1,123,613 |
|
|
|
188,466,295 |
|
|
|
|
|
|
|
(189,589,908 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER ASSETS |
|
|
510,798 |
|
|
|
5,885,251 |
|
|
|
328,129 |
|
|
|
|
|
|
|
6,724,178 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
27,692,617 |
|
|
$ |
538,466,448 |
|
|
$ |
249,194,836 |
|
|
$ |
(307,046,920 |
) |
|
$ |
508,306,981 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
|
|
|
$ |
17,456,720 |
|
|
$ |
2,548,748 |
|
|
$ |
|
|
|
$ |
20,005,468 |
|
Intercompany payables |
|
|
|
|
|
|
75,596,987 |
|
|
|
15,756,276 |
|
|
|
(91,353,263 |
) |
|
|
|
|
Accrued employee compensation and benefits |
|
|
|
|
|
|
6,097,248 |
|
|
|
2,512,129 |
|
|
|
|
|
|
|
8,609,377 |
|
Accrued interest |
|
|
371,288 |
|
|
|
7,295,682 |
|
|
|
|
|
|
|
|
|
|
|
7,666,970 |
|
Accrued incentives |
|
|
|
|
|
|
16,896 |
|
|
|
5,834,040 |
|
|
|
|
|
|
|
5,850,936 |
|
Accrued expenses |
|
|
|
|
|
|
5,154,291 |
|
|
|
1,242,398 |
|
|
|
|
|
|
|
6,396,689 |
|
Income taxes payable |
|
|
|
|
|
|
(3,469,950 |
) |
|
|
3,469,950 |
|
|
|
|
|
|
|
|
|
Deferred revenue |
|
|
|
|
|
|
1,405,802 |
|
|
|
|
|
|
|
|
|
|
|
1,405,802 |
|
Current maturities of long-term debt |
|
|
77,000,000 |
|
|
|
374,697,680 |
|
|
|
|
|
|
|
|
|
|
|
451,697,680 |
|
Current maturities of capital lease obligations |
|
|
|
|
|
|
505,562 |
|
|
|
|
|
|
|
|
|
|
|
505,562 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
77,371,288 |
|
|
|
484,756,918 |
|
|
|
31,363,541 |
|
|
|
(91,353,263 |
) |
|
|
502,138,484 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LONG-TERM DEBT, net of current maturities |
|
|
|
|
|
|
123,005 |
|
|
|
|
|
|
|
|
|
|
|
123,005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CAPITAL LEASE OBLIGATIONS, net of current maturities |
|
|
|
|
|
|
1,791,621 |
|
|
|
|
|
|
|
|
|
|
|
1,791,621 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER LONG-TERM LIABILITIES |
|
|
|
|
|
|
1,367,913 |
|
|
|
200,000 |
|
|
|
|
|
|
|
1,567,913 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DEFERRED INCOME TAXES |
|
|
(10,292,472 |
) |
|
|
23,199,629 |
|
|
|
29,165,000 |
|
|
|
|
|
|
|
42,072,157 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DUE TO PARENT |
|
|
|
|
|
|
26,103,749 |
|
|
|
|
|
|
|
(26,103,749 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMMITMENTS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REDEEMABLE PREFERRED STOCK |
|
|
13,601,368 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,601,368 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS EQUITY (DEFICIT) |
|
|
(52,987,567 |
) |
|
|
1,123,613 |
|
|
|
188,466,295 |
|
|
|
(189,589,908 |
) |
|
|
(52,987,567 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
27,692,617 |
|
|
$ |
538,466,448 |
|
|
$ |
249,194,836 |
|
|
$ |
(307,046,920 |
) |
|
$ |
508,306,981 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
78
NBC ACQUISITION CORP. AND SUBSIDIARY
(DEBTOR IN POSSESSION AS OF JUNE 27, 2011)
CONDENSED CONSOLIDATING BALANCE SHEET
MARCH 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NBC |
|
|
Nebraska |
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition |
|
|
Book |
|
|
Subsidiary |
|
|
|
|
|
|
Consolidated |
|
|
|
Corp. |
|
|
Company, Inc. |
|
|
Guarantors |
|
|
Eliminations |
|
|
Totals |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
|
|
|
$ |
55,410,821 |
|
|
$ |
5,561,804 |
|
|
$ |
|
|
|
$ |
60,972,625 |
|
Intercompany receivables |
|
|
23,194,711 |
|
|
|
17,716,457 |
|
|
|
57,770,424 |
|
|
|
(98,681,592 |
) |
|
|
|
|
Receivables, net |
|
|
|
|
|
|
32,613,517 |
|
|
|
25,374,277 |
|
|
|
|
|
|
|
57,987,794 |
|
Inventories |
|
|
|
|
|
|
55,017,307 |
|
|
|
42,480,382 |
|
|
|
|
|
|
|
97,497,689 |
|
Recoverable income taxes |
|
|
|
|
|
|
2,435,287 |
|
|
|
|
|
|
|
|
|
|
|
2,435,287 |
|
Deferred income taxes |
|
|
|
|
|
|
1,690,559 |
|
|
|
4,557,000 |
|
|
|
|
|
|
|
6,247,559 |
|
Prepaid expenses and other assets |
|
|
|
|
|
|
3,494,754 |
|
|
|
575,527 |
|
|
|
|
|
|
|
4,070,281 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
23,194,711 |
|
|
|
168,378,702 |
|
|
|
136,319,414 |
|
|
|
(98,681,592 |
) |
|
|
229,211,235 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PROPERTY AND EQUIPMENT, net |
|
|
|
|
|
|
36,815,903 |
|
|
|
5,339,521 |
|
|
|
|
|
|
|
42,155,424 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GOODWILL |
|
|
|
|
|
|
199,900,018 |
|
|
|
15,671,108 |
|
|
|
|
|
|
|
215,571,126 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CUSTOMER RELATIONSHIPS, net |
|
|
|
|
|
|
4,315,113 |
|
|
|
75,587,707 |
|
|
|
|
|
|
|
79,902,820 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TRADENAME |
|
|
|
|
|
|
31,320,000 |
|
|
|
|
|
|
|
|
|
|
|
31,320,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER IDENTIFIABLE INTANGIBLES, net |
|
|
|
|
|
|
3,455,593 |
|
|
|
1,839,731 |
|
|
|
|
|
|
|
5,295,324 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTMENT IN SUBSIDIARIES |
|
|
102,190,528 |
|
|
|
171,532,241 |
|
|
|
|
|
|
|
(273,722,769 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER ASSETS |
|
|
766,191 |
|
|
|
10,892,382 |
|
|
|
1,156,933 |
|
|
|
|
|
|
|
12,815,506 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
126,151,430 |
|
|
$ |
626,609,952 |
|
|
$ |
235,914,414 |
|
|
$ |
(372,404,361 |
) |
|
$ |
616,271,435 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
|
|
|
$ |
22,622,816 |
|
|
$ |
3,764,224 |
|
|
$ |
|
|
|
$ |
26,387,040 |
|
Intercompany payables |
|
|
|
|
|
|
57,770,424 |
|
|
|
17,716,457 |
|
|
|
(75,486,881 |
) |
|
|
|
|
Accrued employee compensation and benefits |
|
|
|
|
|
|
6,921,873 |
|
|
|
2,479,595 |
|
|
|
|
|
|
|
9,401,468 |
|
Accrued interest |
|
|
371,288 |
|
|
|
7,295,709 |
|
|
|
|
|
|
|
|
|
|
|
7,666,997 |
|
Accrued incentives |
|
|
|
|
|
|
31,148 |
|
|
|
6,282,785 |
|
|
|
|
|
|
|
6,313,933 |
|
Accrued expenses |
|
|
|
|
|
|
8,195,313 |
|
|
|
856,338 |
|
|
|
|
|
|
|
9,051,651 |
|
Income taxes payable |
|
|
|
|
|
|
(3,651,775 |
) |
|
|
3,651,775 |
|
|
|
|
|
|
|
|
|
Deferred revenue |
|
|
|
|
|
|
1,299,960 |
|
|
|
|
|
|
|
|
|
|
|
1,299,960 |
|
Current maturities of long-term debt |
|
|
|
|
|
|
54,403 |
|
|
|
|
|
|
|
|
|
|
|
54,403 |
|
Current maturities of capital lease obligations |
|
|
|
|
|
|
846,053 |
|
|
|
|
|
|
|
|
|
|
|
846,053 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
371,288 |
|
|
|
101,385,924 |
|
|
|
34,751,174 |
|
|
|
(75,486,881 |
) |
|
|
61,021,505 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LONG-TERM DEBT, net of current maturities |
|
|
77,000,000 |
|
|
|
374,343,069 |
|
|
|
|
|
|
|
|
|
|
|
451,343,069 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CAPITAL LEASE OBLIGATIONS, net of current maturities |
|
|
|
|
|
|
2,380,737 |
|
|
|
|
|
|
|
|
|
|
|
2,380,737 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER LONG-TERM LIABILITIES |
|
|
|
|
|
|
1,918,963 |
|
|
|
360,000 |
|
|
|
|
|
|
|
2,278,963 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DEFERRED INCOME TAXES |
|
|
(10,065,529 |
) |
|
|
21,196,020 |
|
|
|
29,270,999 |
|
|
|
|
|
|
|
40,401,490 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DUE TO PARENT |
|
|
|
|
|
|
23,194,711 |
|
|
|
|
|
|
|
(23,194,711 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMMITMENTS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REDEEMABLE PREFERRED STOCK |
|
|
11,805,888 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,805,888 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS EQUITY |
|
|
47,039,783 |
|
|
|
102,190,528 |
|
|
|
171,532,241 |
|
|
|
(273,722,769 |
) |
|
|
47,039,783 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
126,151,430 |
|
|
$ |
626,609,952 |
|
|
$ |
235,914,414 |
|
|
$ |
(372,404,361 |
) |
|
$ |
616,271,435 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
79
NBC ACQUISITION CORP. AND SUBSIDIARY
(DEBTOR IN POSSESSION AS OF JUNE 27, 2011)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED MARCH 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NBC |
|
|
Nebraska |
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition |
|
|
Book |
|
|
Subsidiary |
|
|
|
|
|
|
Consolidated |
|
|
|
Corp. |
|
|
Company, Inc. |
|
|
Guarantors |
|
|
Eliminations |
|
|
Totals |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUES, net of returns |
|
$ |
|
|
|
$ |
354,526,859 |
|
|
$ |
272,897,127 |
|
|
$ |
(28,993,819 |
) |
|
$ |
598,430,167 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COSTS OF SALES (exclusive of depreciation shown below) |
|
|
|
|
|
|
219,787,829 |
|
|
|
176,156,445 |
|
|
|
(29,784,575 |
) |
|
|
366,159,699 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
|
|
|
|
134,739,030 |
|
|
|
96,740,682 |
|
|
|
790,756 |
|
|
|
232,270,468 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES (INCOME): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
|
|
|
|
|
122,988,058 |
|
|
|
53,065,786 |
|
|
|
790,756 |
|
|
|
176,844,600 |
|
Depreciation |
|
|
|
|
|
|
6,707,569 |
|
|
|
1,871,523 |
|
|
|
|
|
|
|
8,579,092 |
|
Amortization |
|
|
|
|
|
|
2,191,853 |
|
|
|
6,433,880 |
|
|
|
|
|
|
|
8,625,733 |
|
Goodwill impairment |
|
|
|
|
|
|
89,000,000 |
|
|
|
|
|
|
|
|
|
|
|
89,000,000 |
|
Intercompany administrative fee |
|
|
|
|
|
|
(8,685,564 |
) |
|
|
8,685,564 |
|
|
|
|
|
|
|
|
|
Equity in earnings of subsidiaries |
|
|
92,674,736 |
|
|
|
(16,934,057 |
) |
|
|
|
|
|
|
(75,740,679 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
92,674,736 |
|
|
|
195,267,859 |
|
|
|
70,056,753 |
|
|
|
(74,949,923 |
) |
|
|
283,049,425 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) FROM OPERATIONS |
|
|
(92,674,736 |
) |
|
|
(60,528,829 |
) |
|
|
26,683,929 |
|
|
|
75,740,679 |
|
|
|
(50,778,957 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER EXPENSES (INCOME): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
8,725,393 |
|
|
|
42,478,097 |
|
|
|
23 |
|
|
|
|
|
|
|
51,203,513 |
|
Interest income |
|
|
|
|
|
|
(83,708 |
) |
|
|
(92,151 |
) |
|
|
|
|
|
|
(175,859 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,725,393 |
|
|
|
42,394,389 |
|
|
|
(92,128 |
) |
|
|
|
|
|
|
51,027,654 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) BEFORE INCOME TAXES |
|
|
(101,400,129 |
) |
|
|
(102,923,218 |
) |
|
|
26,776,057 |
|
|
|
75,740,679 |
|
|
|
(101,806,611 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME TAX EXPENSE (BENEFIT) |
|
|
(3,090,396 |
) |
|
|
(10,248,482 |
) |
|
|
9,842,000 |
|
|
|
|
|
|
|
(3,496,878 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS) |
|
$ |
(98,309,733 |
) |
|
$ |
(92,674,736 |
) |
|
$ |
16,934,057 |
|
|
$ |
75,740,679 |
|
|
$ |
(98,309,733 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
80
NBC ACQUISITION CORP. AND SUBSIDIARY
(DEBTOR IN POSSESSION AS OF JUNE 27, 2011)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED MARCH 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NBC |
|
|
Nebraska |
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition |
|
|
Book |
|
|
Subsidiary |
|
|
|
|
|
|
Consolidated |
|
|
|
Corp. |
|
|
Company, Inc. |
|
|
Guarantors |
|
|
Eliminations |
|
|
Totals |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUES, net of returns |
|
$ |
|
|
|
$ |
377,306,980 |
|
|
$ |
264,870,178 |
|
|
$ |
(36,683,545 |
) |
|
$ |
605,493,613 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COSTS OF SALES (exclusive of
depreciation shown below) |
|
|
|
|
|
|
236,892,355 |
|
|
|
171,376,403 |
|
|
|
(38,072,842 |
) |
|
|
370,195,916 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
|
|
|
|
140,414,625 |
|
|
|
93,493,775 |
|
|
|
1,389,297 |
|
|
|
235,297,697 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES (INCOME): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
|
|
|
|
|
113,325,037 |
|
|
|
47,143,940 |
|
|
|
1,389,297 |
|
|
|
161,858,274 |
|
Depreciation |
|
|
|
|
|
|
6,751,707 |
|
|
|
1,765,297 |
|
|
|
|
|
|
|
8,517,004 |
|
Amortization |
|
|
|
|
|
|
4,674,439 |
|
|
|
6,178,809 |
|
|
|
|
|
|
|
10,853,248 |
|
Intercompany administrative fee |
|
|
|
|
|
|
(6,732,823 |
) |
|
|
6,732,823 |
|
|
|
|
|
|
|
|
|
Equity in earnings of subsidiaries |
|
|
(7,362,198 |
) |
|
|
(20,241,303 |
) |
|
|
|
|
|
|
27,603,501 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,362,198 |
) |
|
|
97,777,057 |
|
|
|
61,820,869 |
|
|
|
28,992,798 |
|
|
|
181,228,526 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME FROM OPERATIONS |
|
|
7,362,198 |
|
|
|
42,637,568 |
|
|
|
31,672,906 |
|
|
|
(27,603,501 |
) |
|
|
54,069,171 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER EXPENSES (INCOME): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
8,725,393 |
|
|
|
40,678,890 |
|
|
|
939 |
|
|
|
|
|
|
|
49,405,222 |
|
Interest income |
|
|
|
|
|
|
(83,373 |
) |
|
|
(97,336 |
) |
|
|
|
|
|
|
(180,709 |
) |
Loss on early extinguishment of debt |
|
|
|
|
|
|
3,065,759 |
|
|
|
|
|
|
|
|
|
|
|
3,065,759 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,725,393 |
|
|
|
43,661,276 |
|
|
|
(96,397 |
) |
|
|
|
|
|
|
52,290,272 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) BEFORE INCOME TAXES |
|
|
(1,363,195 |
) |
|
|
(1,023,708 |
) |
|
|
31,769,303 |
|
|
|
(27,603,501 |
) |
|
|
1,778,899 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME TAX EXPENSE (BENEFIT) |
|
|
(3,674,482 |
) |
|
|
(8,385,906 |
) |
|
|
11,528,000 |
|
|
|
|
|
|
|
(532,388 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME |
|
$ |
2,311,287 |
|
|
$ |
7,362,198 |
|
|
$ |
20,241,303 |
|
|
$ |
(27,603,501 |
) |
|
$ |
2,311,287 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
81
NBC ACQUISTION CORP. AND SUBSIDIARY
(DEBTOR IN POSSESSION AS OF JUNE 27, 2011)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED MARCH 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NBC |
|
|
Nebraska |
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition |
|
|
Book |
|
|
Subsidiary |
|
|
|
|
|
|
Consolidated |
|
|
|
Corp. |
|
|
Company, Inc. |
|
|
Guarantors |
|
|
Eliminations |
|
|
Totals |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUES, net of returns |
|
$ |
|
|
|
$ |
386,910,695 |
|
|
$ |
260,062,026 |
|
|
$ |
(36,256,540 |
) |
|
$ |
610,716,181 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COSTS OF SALES (exclusive of depreciation shown below) |
|
|
|
|
|
|
244,484,547 |
|
|
|
165,056,393 |
|
|
|
(38,171,700 |
) |
|
|
371,369,240 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
|
|
|
|
142,426,148 |
|
|
|
95,005,633 |
|
|
|
1,915,160 |
|
|
|
239,346,941 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES (INCOME): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
|
|
|
|
|
115,276,253 |
|
|
|
51,123,198 |
|
|
|
1,915,160 |
|
|
|
168,314,611 |
|
Depreciation |
|
|
|
|
|
|
6,054,313 |
|
|
|
1,548,318 |
|
|
|
|
|
|
|
7,602,631 |
|
Amortization |
|
|
|
|
|
|
5,180,117 |
|
|
|
6,203,903 |
|
|
|
|
|
|
|
11,384,020 |
|
Goodwill impairment |
|
|
|
|
|
|
106,972,000 |
|
|
|
|
|
|
|
|
|
|
|
106,972,000 |
|
Intercompany administrative fee |
|
|
|
|
|
|
(4,923,600 |
) |
|
|
4,923,600 |
|
|
|
|
|
|
|
|
|
Equity in earnings of subsidiaries |
|
|
94,928,668 |
|
|
|
(19,707,636 |
) |
|
|
|
|
|
|
(75,221,032 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
94,928,668 |
|
|
|
208,851,447 |
|
|
|
63,799,019 |
|
|
|
(73,305,872 |
) |
|
|
294,273,262 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) FROM OPERATIONS |
|
|
(94,928,668 |
) |
|
|
(66,425,299 |
) |
|
|
31,206,614 |
|
|
|
75,221,032 |
|
|
|
(54,926,321 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER EXPENSES (INCOME): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
8,725,393 |
|
|
|
32,878,225 |
|
|
|
|
|
|
|
|
|
|
|
41,603,618 |
|
Interest income |
|
|
|
|
|
|
(385,514 |
) |
|
|
(41,022 |
) |
|
|
|
|
|
|
(426,536 |
) |
Loss on derivative financial instrument |
|
|
|
|
|
|
102,000 |
|
|
|
|
|
|
|
|
|
|
|
102,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,725,393 |
|
|
|
32,594,711 |
|
|
|
(41,022 |
) |
|
|
|
|
|
|
41,279,082 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) BEFORE INCOME TAXES |
|
|
(103,654,061 |
) |
|
|
(99,020,010 |
) |
|
|
31,247,636 |
|
|
|
75,221,032 |
|
|
|
(96,205,403 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME TAX EXPENSE (BENEFIT) |
|
|
(3,160,038 |
) |
|
|
(4,091,342 |
) |
|
|
11,540,000 |
|
|
|
|
|
|
|
4,288,620 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS) |
|
$ |
(100,494,023 |
) |
|
$ |
(94,928,668 |
) |
|
$ |
19,707,636 |
|
|
$ |
75,221,032 |
|
|
$ |
(100,494,023 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
82
NBC ACQUISITION CORP. AND SUBSIDIARY
(DEBTOR IN POSSESSION AS OF JUNE 27, 2011)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE FISCAL YEAR ENDED MARCH 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NBC |
|
|
Nebraska |
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition |
|
|
Book |
|
|
Subsidiary |
|
|
|
|
|
|
Consolidated |
|
|
|
Corp. |
|
|
Company, Inc. |
|
|
Guarantors |
|
|
Eliminations |
|
|
Totals |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES |
|
$ |
(5,561,004 |
) |
|
$ |
11,233,876 |
|
|
$ |
7,154,228 |
|
|
$ |
|
|
|
$ |
12,827,100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment |
|
|
|
|
|
|
(3,661,112 |
) |
|
|
(2,012,336 |
) |
|
|
9,668 |
|
|
|
(5,663,780 |
) |
Acquisitions, net of cash acquired |
|
|
|
|
|
|
(5,657,765 |
) |
|
|
(3,803,543 |
) |
|
|
|
|
|
|
(9,461,308 |
) |
Proceeds from sale of property and equipment |
|
|
|
|
|
|
441,151 |
|
|
|
20,697 |
|
|
|
(9,668 |
) |
|
|
452,180 |
|
Software development costs |
|
|
|
|
|
|
(1,633,638 |
) |
|
|
|
|
|
|
|
|
|
|
(1,633,638 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows from investing activities |
|
|
|
|
|
|
(10,511,364 |
) |
|
|
(5,795,182 |
) |
|
|
|
|
|
|
(16,306,546 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of long-term debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment of financing costs |
|
|
|
|
|
|
(66,660 |
) |
|
|
|
|
|
|
|
|
|
|
(66,660 |
) |
Principal payments on long-term debt |
|
|
|
|
|
|
(54,401 |
) |
|
|
|
|
|
|
|
|
|
|
(54,401 |
) |
Principal payments on capital lease obligations |
|
|
|
|
|
|
(929,607 |
) |
|
|
|
|
|
|
|
|
|
|
(929,607 |
) |
Borrowings under revolving credit facility |
|
|
|
|
|
|
44,200,000 |
|
|
|
|
|
|
|
|
|
|
|
44,200,000 |
|
Payments under revolving credit facility |
|
|
|
|
|
|
(44,200,000 |
) |
|
|
|
|
|
|
|
|
|
|
(44,200,000 |
) |
Dividends received from subsidiary (paid to parent) |
|
|
8,470,000 |
|
|
|
(8,470,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from payment on note receivable from
stockholder |
|
|
4,869 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,869 |
|
Capital contributions |
|
|
(4,869 |
) |
|
|
4,827 |
|
|
|
|
|
|
|
42 |
|
|
|
|
|
Change in due from subsidiary |
|
|
(2,908,996 |
) |
|
|
2,909,038 |
|
|
|
|
|
|
|
(42 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows from financing activities |
|
|
5,561,004 |
|
|
|
(6,606,803 |
) |
|
|
|
|
|
|
|
|
|
|
(1,045,799 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS |
|
|
|
|
|
|
(5,884,291 |
) |
|
|
1,359,046 |
|
|
|
|
|
|
|
(4,525,245 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, Beginning of period |
|
|
|
|
|
|
55,410,821 |
|
|
|
5,561,804 |
|
|
|
|
|
|
|
60,972,625 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, End of period |
|
$ |
|
|
|
$ |
49,526,530 |
|
|
$ |
6,920,850 |
|
|
$ |
|
|
|
$ |
56,447,380 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
83
NBC ACQUISITION CORP. AND SUBSIDIARY
(DEBTOR IN POSSESSION AS OF JUNE 27, 2011)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE FISCAL YEAR ENDED MARCH 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NBC |
|
|
Nebraska |
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquistion |
|
|
Book |
|
|
Subsidiary |
|
|
|
|
|
|
Consolidated |
|
|
|
Corp. |
|
|
Company, Inc. |
|
|
Guarantors |
|
|
Eliminations |
|
|
Totals |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES |
|
$ |
(5,405,478 |
) |
|
$ |
29,900,573 |
|
|
$ |
6,336,135 |
|
|
$ |
|
|
|
$ |
30,831,230 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment |
|
|
|
|
|
|
(3,737,872 |
) |
|
|
(1,730,751 |
) |
|
|
57,647 |
|
|
|
(5,410,976 |
) |
Acquisitions, net of cash acquired |
|
|
|
|
|
|
(463,474 |
) |
|
|
(2,384,134 |
) |
|
|
|
|
|
|
(2,847,608 |
) |
Proceeds from sale of property and equipment |
|
|
|
|
|
|
85,250 |
|
|
|
113,564 |
|
|
|
(57,647 |
) |
|
|
141,167 |
|
Software development costs |
|
|
|
|
|
|
(648,523 |
) |
|
|
|
|
|
|
|
|
|
|
(648,523 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows from investing activities |
|
|
|
|
|
|
(4,764,619 |
) |
|
|
(4,001,321 |
) |
|
|
|
|
|
|
(8,765,940 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of long-term debt |
|
|
|
|
|
|
199,000,000 |
|
|
|
|
|
|
|
|
|
|
|
199,000,000 |
|
Payment of financing costs |
|
|
|
|
|
|
(10,190,217 |
) |
|
|
|
|
|
|
|
|
|
|
(10,190,217 |
) |
Principal payments on long-term debt |
|
|
|
|
|
|
(193,125,225 |
) |
|
|
|
|
|
|
|
|
|
|
(193,125,225 |
) |
Principal payments on capital lease obligations |
|
|
|
|
|
|
(820,560 |
) |
|
|
|
|
|
|
|
|
|
|
(820,560 |
) |
Borrowings under revolving credit facility |
|
|
|
|
|
|
85,000,000 |
|
|
|
|
|
|
|
|
|
|
|
85,000,000 |
|
Payments under revolving credit facility |
|
|
|
|
|
|
(85,000,000 |
) |
|
|
|
|
|
|
|
|
|
|
(85,000,000 |
) |
Dividends received from subsidiary (paid to parent) |
|
|
8,470,000 |
|
|
|
(8,470,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from payment on note receivable from stockholder |
|
|
4,869 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,869 |
|
Capital contributions |
|
|
(4,869 |
) |
|
|
4,869 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in due from subsidiary |
|
|
(3,064,522 |
) |
|
|
3,064,522 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows from financing activities |
|
|
5,405,478 |
|
|
|
(10,536,611 |
) |
|
|
|
|
|
|
|
|
|
|
(5,131,133 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE IN CASH AND CASH EQUIVALENTS |
|
|
|
|
|
|
14,599,343 |
|
|
|
2,334,814 |
|
|
|
|
|
|
|
16,934,157 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, Beginning of period |
|
|
|
|
|
|
40,811,478 |
|
|
|
3,226,990 |
|
|
|
|
|
|
|
44,038,468 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, End of period |
|
$ |
|
|
|
$ |
55,410,821 |
|
|
$ |
5,561,804 |
|
|
$ |
|
|
|
$ |
60,972,625 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
84
NBC ACQUISITION CORP. AND SUBSIDIARY
(DEBTOR IN POSSESSION AS OF JUNE 27, 2011)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE FISCAL YEAR ENDED MARCH 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NBC |
|
|
Nebraska |
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition |
|
|
Book |
|
|
Subsidiary |
|
|
|
|
|
|
Consolidated |
|
|
|
Corp. |
|
|
Company, Inc. |
|
|
Guarantors |
|
|
Eliminations |
|
|
Totals |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES |
|
$ |
(5,309,962 |
) |
|
$ |
29,207,254 |
|
|
$ |
2,458,659 |
|
|
$ |
|
|
|
$ |
26,355,951 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment |
|
|
|
|
|
|
(6,096,566 |
) |
|
|
(1,989,243 |
) |
|
|
106,438 |
|
|
|
(7,979,371 |
) |
Acquisitions, net of cash acquired |
|
|
|
|
|
|
(3,236,139 |
) |
|
|
(3,084,633 |
) |
|
|
|
|
|
|
(6,320,772 |
) |
Proceeds from sale of property and equipment |
|
|
|
|
|
|
38,060 |
|
|
|
103,881 |
|
|
|
(106,438 |
) |
|
|
35,503 |
|
Software development costs |
|
|
|
|
|
|
(633,763 |
) |
|
|
|
|
|
|
|
|
|
|
(633,763 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows from investing activities |
|
|
|
|
|
|
(9,928,408 |
) |
|
|
(4,969,995 |
) |
|
|
|
|
|
|
(14,898,403 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of preferred stock |
|
|
10,000,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000,000 |
|
Payment of financing costs |
|
|
|
|
|
|
(3,961,811 |
) |
|
|
|
|
|
|
|
|
|
|
(3,961,811 |
) |
Principal payments on long-term debt |
|
|
|
|
|
|
(2,070,654 |
) |
|
|
|
|
|
|
|
|
|
|
(2,070,654 |
) |
Principal payments on capital lease obligations |
|
|
|
|
|
|
(722,823 |
) |
|
|
|
|
|
|
|
|
|
|
(722,823 |
) |
Borrowings under revolving credit facility |
|
|
|
|
|
|
200,600,000 |
|
|
|
|
|
|
|
|
|
|
|
200,600,000 |
|
Payments under revolving credit facility |
|
|
|
|
|
|
(200,600,000 |
) |
|
|
|
|
|
|
|
|
|
|
(200,600,000 |
) |
Dividends received from subsidiary (paid to parent) |
|
|
8,470,000 |
|
|
|
(8,470,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from payment on note receivable from stockholder |
|
|
9,752 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,752 |
|
Capital contributions |
|
|
(10,009,752 |
) |
|
|
10,009,752 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in due from subsidiary |
|
|
(3,160,038 |
) |
|
|
3,160,038 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows from financing activities |
|
|
5,309,962 |
|
|
|
(2,055,498 |
) |
|
|
|
|
|
|
|
|
|
|
3,254,464 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |
|
|
|
|
|
|
17,223,348 |
|
|
|
(2,511,336 |
) |
|
|
|
|
|
|
14,712,012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, Beginning of period |
|
|
|
|
|
|
23,588,130 |
|
|
|
5,738,326 |
|
|
|
|
|
|
|
29,326,456 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, End of period |
|
$ |
|
|
|
$ |
40,811,478 |
|
|
$ |
3,226,990 |
|
|
$ |
|
|
|
$ |
44,038,468 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
85
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
ITEM 9A. CONTROLS AND PROCEDURES.
(a) Evaluation of disclosure controls and procedures. Our management, with the participation
of our chief executive officer and treasurer (our principal executive officer and principal
financial officer), evaluated the effectiveness of our disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of March 31, 2011. This
evaluation was performed to determine if our disclosure controls and procedures were effective, in
that they are designed to ensure that information required to be disclosed by us in the reports
that we file or submit under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the SECs rules and regulations, including ensuring that such
information is accumulated and communicated to management, including our chief executive officer
and treasurer, as appropriate to allow timely decisions regarding required disclosure. Based on
this evaluation, our chief executive officer and treasurer concluded that, as of March 31, 2011,
our disclosure controls and procedures were effective.
(b) Managements annual report on internal control over financial reporting:
Management is responsible for establishing and maintaining adequate internal control over
financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. The
Companys internal control system was designed to provide reasonable assurance to management
and the board of directors regarding the preparation and fair presentation of published
financial statements.
Management assessed the effectiveness of the Companys internal control over financial
reporting as of March 31, 2011. In making this assessment, it used the criteria set forth by
the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal
Control Integrated Framework. Based on its assessment management has concluded that, as
of March 31, 2011, the Companys internal control over financial reporting was effective.
(c) Attestation report of the registered public accounting firm. This annual report does not
include an attestation report of the Companys registered public accounting firm regarding internal
control over financial reporting. Managements report was not subject to attestation by the
Companys registered public accounting firm pursuant to rules of the SEC that permit the Company to
provide only managements report in this annual report.
(d) Changes in internal control over financial reporting. There were no changes in
our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under
the Exchange Act) which occurred during the quarter ended March 31, 2011 that materially affected,
or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION.
We are not required to file reports with the SEC pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934, as amended, but are filing this Annual Report on Form 10-K on a
voluntary basis.
86
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
The members of our Board of Directors and senior executive officers and their ages are as
follows:
|
|
|
|
|
|
|
Name |
|
Age |
|
|
Position |
|
|
|
|
|
|
|
Mark L. Bono
|
|
|
51 |
|
|
Director |
R. Sean Honey
|
|
|
40 |
|
|
Director |
Mark W. Oppegard
|
|
|
61 |
|
|
Chief Executive Officer, Secretary and Director |
Barry S. Major
|
|
|
54 |
|
|
President/Chief Operating Officer, NBC and Director |
Alan G. Siemek
|
|
|
51 |
|
|
Vice President and Treasurer |
Steven A. Clemente
|
|
|
41 |
|
|
Senior Vice President Bookstore Division, NBC |
Michael J. Kelly
|
|
|
53 |
|
|
Senior Vice President Textbook Division, NBC |
Larry R. Rempe
|
|
|
63 |
|
|
Senior Vice President Complementary Services, NBC |
Nathan D. Rempe
|
|
|
33 |
|
|
Chief Technology Officer, NBC |
Amanda L. Towne
|
|
|
38 |
|
|
Chief Accounting Officer, NBC |
The business experience, principal occupation and employment as well as the periods of service
of each of the directors and senior executive officers during the last five fiscal years are set
forth below.
Mark L. Bono became a Director of ours upon the consummation of the March 4, 2004 Transaction.
Mr. Bono joined Weston Presidio in 1999 and is a member of the general partners of the Weston
Funds. Prior to 1999, Mr. Bono served in various positions at Tucker Anthony, an investment
banking firm, including Managing Director and Co-Head of Mergers and Acquisitions. Mr. Bono also
serves as a Director of Trimark Sportswear Group, Summit Energy, Herbal Science and Rockwood. As a
result of these and other professional experiences, Mr. Bono possesses particular knowledge and
experience in capital structure and corporate governance practices that strengthen the Boards
collective qualification, skills and experience.
R. Sean Honey was named a Director of ours upon the consummation of the March 4, 2004
Transaction. Mr. Honey joined Weston Presidio in 1999 and is a member of the general partners of
the Weston Funds. Prior to 1999, Mr. Honey served in various positions at J.P. Morgan in both
Mergers and Acquisitions and Merchant Banking. Mr. Honey also serves as a Director of Apple
American Group, Cellu Tissue Holdings, and Purcell Systems. As a result of these and other
professional experiences, Mr. Honey possesses particular knowledge and experience in capital
structure and corporate governance practices that strengthen the Boards collective qualification,
skills and experience.
Mark W. Oppegard has served in the college bookstore industry for 41 years (all of which have
been with us). Mr. Oppegard became our Chief Executive Officer, Secretary and Director and Chief
Executive Officer of NBC on February 13, 1998 and served as our President from that date to
September, 2008. Additionally, Mr. Oppegard served as NBCs President from 1992 to September, 2008
and has served as a Director of NBC since 1995. Prior to 1998, Mr. Oppegard served as our Vice
President, Secretary, Assistant Treasurer and Director between 1995 and 1998. Prior to 1992, Mr.
Oppegard served in a series of positions at NBC, including Vice President of the Bookstore
Division. Mr. Oppegard brings to the Board extensive executive management experience, significant
knowledge of the Company, our operations, our competitors and our market, leadership skills and a
long history in strategy and strategic planning.
Barry S. Major, who has served in the college bookstore industry for 12 years (all of which
have been with us), was named President in September, 2008, upon consummation of the March 4, 2004
Transaction was named our Director and was named Chief Operating Officer of NBC in January, 1999.
Mr. Major is also a member of the board of directors of Mutual of Omaha Bank, where he also serves
on the loan committee of the board of directors and chairs the audit and compensation committees.
Mr. Major brings to the Board extensive executive management experience, knowledge of the Company,
our operations, our competitors and our market, financial acumen and private company corporate
governance experience.
Alan G. Siemek, who has served in the college bookstore industry for 12 years (all of which
have been with us), was named Senior Vice President of Finance and Administration of NBC in April,
2001. Mr. Siemek has also served as our Vice President and Treasurer and Chief Financial Officer,
Treasurer and Assistant Secretary of NBC since July, 1999.
87
Steven A. Clemente joined NBC in April, 2010 as Senior Vice President of NBCs Bookstore
Division. Prior to joining NBC, Mr. Clemente served as Group Vice President for Target Stores from
February, 2008 to April, 2010 in which he was overseeing operations in excess of $2.5 billion
annually. From January, 2006 to January, 2008, Mr. Clemente served as Director for Target Stores.
Mr. Clemente began at Target Stores in 1995 as an Executive Team Leader/Regional Buyer and worked
his way up through the organization, including District Team Leader in both Houston and Louisiana.
Michael J. Kelly, who has served in the college bookstore industry for 11 years (all of which
have been with us), was named Senior Vice President of NBCs Textbook Division in April, 2005.
Prior to April, 2005, Mr. Kelly served as NBCs Senior Vice President of Distance
Learning/Marketing Services and Other Complementary Services from August, 2001 to March, 2005 and
as NBCs Vice President of e-commerce from November, 1999 to July, 2001.
Larry R. Rempe has served in the college bookstore industry for 25 years (all of which have
been with us) and was named Senior Vice President of Complementary Services of NBC in April, 2005.
Prior to April, 2005, Mr. Rempe served as NBCs Vice President of Information Systems since 1986.
Between 1974 and 1986, Mr. Rempe served in various positions for Lincoln Industries, Inc., a
holding company that owned NBC until 1995. Mr. Larry Rempe is the father of Mr. Nathan Rempe,
NBCs Chief Technology Officer. Mr. Rempe retired effective May 1, 2011.
Nathan D. Rempe, who has served in the college bookstore industry for 6 years (all of which
have been with us), was named Senior Vice President of NBC in January, 2011 and Chief Technology
Officer of NBC in March, 2009. Prior to March, 2009, Mr. Rempe served as NBCs Vice President of
Internet Services since 2006 and Director of Internet Strategy in 2005. Prior to joining NBC, Mr.
Rempe served as Lead e-Business Developer for Commercial Federal Bank where he managed the banks
online consumer banking application. Mr. Rempe is also an Executive Faculty member at Creighton
University, teaching graduate level courses in information technology. Mr. Nathan Rempe is the son
of Mr. Larry Rempe, NBCs Senior Vice President of Complementary Services.
Amanda L. Towne, who has served in the college bookstore industry for 12 years (all of which
have been with us), was named Chief Accounting Officer of NBC in October, 2010. Ms. Towne has also
served in various positions, including Vice President of Financial Reporting and Budgeting,
Director of Corporate Accounting and Budgeting, and Accounting Manager of NBC since October, 1999.
Board of Directors
Our Board of Directors (the Board) and NBCs Board is led by Mark L. Bono. Mark W. Oppegard
serves as NBCs CEO and Director and our Director, Barry S. Major serves as NBCs President, COO,
Director and our Director and R. Sean Honey serves as our Director and NBCs Director. The Board
has determined that this is an effective leadership structure at the present time because Mr. Bono
and Mr. Honey bring experience regarding acquisitions and corporate governance practice of other
corporations while the Board gets the benefit of Mr. Oppegard and Mr. Majors intimate knowledge of
the day-to-day operations of our business and their significant experience in the industry.
Our Board generally administers its risk oversight function through the board as a whole.
NBCs Chief Executive Officer and President and Chief Operating Officer, members of the Board, and
other executives have day-to-day risk management responsibilities. In addition, management
provides a monthly report of our financial and operation performance to each member of the Board.
The Audit Committee provides additional oversight through its quarterly meetings, where it reviews
our contingencies, significant transactions and subsequent events, among other matters with
management and our independent auditors.
The Board has not established a formal process for identifying director nominees, nor does it
have a formal policy regarding consideration of diversity in identifying director nominees.
Audit Committee
Our audit committee currently consists of Mark L. Bono and R. Sean Honey. Among other
functions, our audit committee (a) makes recommendations to our board of directors regarding the
selection of independent auditors; (b) reviews the results and scope of the audit and other
services provided by our independent auditors; (c) reviews our financial statements; and (d)
reviews and evaluates our internal control functions. The Board of Directors has determined that
the audit committee does not have an audit committee financial expert as that term is defined by
the applicable rules and regulations of the SEC. However, the Board of Directors is satisfied that
the members of our audit committee have sufficient expertise and business and financial experience
necessary to effectively perform their duties as the audit committee.
88
Code of Ethics
We have adopted a written code of ethics for our principal executive officer and senior
financial officers as required by the SEC under Section 406 of the Sarbanes-Oxley Act of 2002. The
code sets forth written standards to deter wrongdoing and promote honest and ethical conduct,
accurate and timely disclosure in reports and documents, compliance with applicable governmental
laws and regulations, prompt internal reporting of violations of the code, and accountability for
adherence to the code.
ITEM 11. EXECUTIVE COMPENSATION.
The following tables and paragraphs provide information concerning compensation paid for the
last three fiscal years to NBCs Chief Executive Officer, Chief Financial Officer, and three other
most highly compensated senior executive officers (each, an Executive) earning in excess of
$100,000 in total compensation as defined in Regulation S-K, subpart 229.402(a)(3), including
compensation discussion and analysis, summary compensation table, grants of plan-based awards,
employment agreements, outstanding equity awards, nonqualified deferred compensation, potential
payments upon termination or change in control, compensation of directors, compensation committee
interlocks and insider participation, and compensation committee report.
Compensation Discussion and Analysis
Compensation Philosophy. Our compensation programs are intended to attract and retain vital
employees and to properly incent high level talent to work for and ultimately add value to the
Company for the benefit of the shareholders.
Compensation Committee and Compensation Process. We do not have a formal Compensation
Committee; however, Messrs. Bono and Honey, the two directors affiliated with Weston Presidio, the
majority equity owner of NBC Holdings Corp. (our parent company), act to approve the chief
executive officer base salary compensation, our budget, and all stock option or other equity
awards. All other decisions related to compensation are approved by our chief executive officer
and President as appropriate.
Executive Compensation Components. Components of our Executive compensation include base
salary, bonus, stock option and other equity awards, severance benefits, health insurance,
disability and life insurance, and various other insurance coverages as described in further detail
below. The following is a brief description of each principal element of compensation:
|
1) |
|
Base Salary. Base salaries are intended to compensate the Executives and all other
salaried employees for their basic services performed for us on an annual basis. In
setting base salaries, we take into account the Executives experience, the functions and
responsibilities of the job, and any other factors relevant to that particular job. Base
salaries are typically adjusted annually by our chief executive officer and President;
however, we do not limit ourselves to this schedule. The chief executive officers base
salary is approved by Messrs. Bono and Honey of the Board of Directors, the two directors
affiliated with Weston Presidio. |
|
2) |
|
Bonus Plan. We use our executive bonus plan to incent each Executive on an annual
basis. Bonuses for each Executive are initially determined by a preset percentage of the
Executives salary based upon attainment of goals related to our consolidated EBITDA and
Adjusted EBITDA compared to budget. Such goals may be revised for material unbudgeted
events. Typically the minimum percentage needed to qualify for a bonus is 93% of budgeted
EBITDA, and the maximum bonus amounts are achieved at 110% of budgeted EBITDA. Such
initial calculated amounts are then adjusted by our chief executive officer and President
based upon non-quantifiable criteria in evaluating job performance. |
|
3) |
|
Stock Option and Other Equity Awards. We use nonqualified stock options and other
equity awards to incent our Executives to remain with us and to maximize long-term value
for our shareholders. We have generally awarded stock options on an annual basis to each
Executive based upon informal performance measures. Generally, we must achieve at least
93% of the budgeted EBITDA before options are granted. Messrs. Bono and Honey, the two
directors affiliated with Weston Presidio, receive a recommendation from our chief
executive officer regarding the number of stock options to be granted to each Executive and
then adjust such recommendation as they consider appropriate. In addition, in March 2006,
upon the approval of the entire Board of Directors, our chief executive officer, chief
financial officer, and President were each issued 1,400 shares of nonvested stock for $0.01
per share. This issuance of shares was designed to incent those named Executives to remain
with us until at least September 30, 2010. Since this issuance of nonvested
stock, these named Executives have not received any further grants of stock options. These
shares vested September 30, 2010 and were subsequently paid out. See Note Q to the
consolidated financial statements in Item 8, Financial Statements and Supplementary Data. |
89
|
4) |
|
Severance Plans. Each Executive has signed a memorandum of understanding under which
they may be paid severance of up to (i) one year of base salary, (ii) pro rata bonuses and
(iii) continuation of health, life and disability benefits for up to 12 months if they are
terminated without cause (as defined in those agreements). |
|
5) |
|
Other Benefits. We maintain health, dental and vision insurance plans for the benefit
of eligible employees, including the Executives. The health and dental plans require the
employee to pay a portion of the premium and we pay the remainder. The vision plan premium
is paid in its entirety by the employee. We also maintain a 401(k) retirement plan that is
available to all eligible employees. For fiscal years ended March 31, 2011 and 2010, we
matched elective employee-participant contributions on the basis of 100% of the employees
contribution up to 1% of their total compensation plus 50% of the employees contribution
on the next 5% of their total compensation. For fiscal year ended March 31, 2009, we
matched elective employee-participant contributions on the basis of 100% of the employees
contribution up to 5% of their total compensation. Certain amounts of life, accidental
death and dismemberment, and short and long-term disability insurance coverage is also
offered to all eligible employees and premiums or costs are paid in full by us. Certain
other voluntary insurance coverages are available to eligible employees, such as
supplemental life, cancer and personal accident insurance with the entire premium paid by
the employee. The foregoing benefits are available to each Executive on the same basis as
all other eligible employees. |
We do not have a policy regarding the adjustment or recovery of compensation if the results on
which that compensation was determined are restated or otherwise adjusted.
90
Summary Compensation Table
The table presented below summarizes compensation to each Executive for the last three fiscal
years:
Summary Compensation Table
|
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|
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|
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|
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(2) |
|
|
|
|
|
|
Change in |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity |
|
|
|
|
|
|
Nonqualified |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive |
|
|
|
|
|
|
Deferred |
|
|
(5) |
|
|
|
|
|
|
Fiscal |
|
|
|
|
|
|
(1) |
|
|
Plan |
|
|
Option |
|
|
Compensation |
|
|
All Other |
|
|
|
|
Name and Principal Position |
|
Year |
|
|
Salary |
|
|
Bonus |
|
|
Compensation |
|
|
Awards (3) |
|
|
Earnings (4) |
|
|
Compensation |
|
|
Total |
|
Mark W. Oppegard Chief Executive Officer and Director, NBC |
|
|
2011 |
|
|
$ |
199,992 |
|
|
$ |
|
|
|
$ |
1,333,510 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
8,827 |
|
|
$ |
1,542,329 |
|
|
|
|
2010 |
|
|
|
200,426 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,827 |
|
|
|
209,253 |
|
|
|
|
2009 |
|
|
|
266,500 |
|
|
|
100,000 |
|
|
|
|
|
|
|
|
|
|
|
206 |
|
|
|
11,752 |
|
|
|
378,458 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alan G. Siemek Chief Financial Officer, Senior Vice President of Finance and
Administration, Treasurer, and Assistant Secretary, NBC |
|
|
2011 |
|
|
|
213,990 |
|
|
|
|
|
|
|
1,333,510 |
|
|
|
|
|
|
|
|
|
|
|
8,827 |
|
|
|
1,556,327 |
|
|
|
|
2010 |
|
|
|
214,373 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,827 |
|
|
|
223,200 |
|
|
|
|
2009 |
|
|
|
214,857 |
|
|
|
80,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,752 |
|
|
|
306,609 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Barry S. Major Chief Operating Officer, President and Director, NBC |
|
|
2011 |
|
|
|
284,003 |
|
|
|
|
|
|
|
1,333,510 |
|
|
|
|
|
|
|
|
|
|
|
8,827 |
|
|
|
1,626,340 |
|
|
|
|
2010 |
|
|
|
284,446 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,827 |
|
|
|
293,273 |
|
|
|
|
2009 |
|
|
|
287,694 |
|
|
|
106,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,752 |
|
|
|
405,446 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven A. Clemente Senior Vice President Bookstore Division, NBC (6) |
|
|
2011 |
|
|
|
248,558 |
|
|
|
100,000 |
|
|
|
|
|
|
|
85,450 |
|
|
|
|
|
|
|
67,138 |
|
|
|
501,146 |
|
|
|
|
2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael J. Kelly Senior Vice President Textbook Division, NBC |
|
|
2011 |
|
|
|
203,008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,379 |
|
|
|
210,387 |
|
|
|
|
2010 |
|
|
|
203,250 |
|
|
|
|
|
|
|
|
|
|
|
9,709 |
|
|
|
|
|
|
|
8,827 |
|
|
|
221,786 |
|
|
|
|
2009 |
|
|
|
204,083 |
|
|
|
65,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,752 |
|
|
|
280,835 |
|
|
|
|
(1) |
|
Bonus paid to Steven A. Clemente for fiscal year 2011 was paid pursuant to his
employment agreement. |
|
(2) |
|
Amounts paid related to the 2005 Restricted Stock Plan and Restricted Stock Special
Bonus Agreement. See Note Q of the notes to the consolidated financial statements in Item
8, Financial Statements and Supplementary Data. |
|
(3) |
|
The amounts shown represent the aggregate grant date fair value for awards granted in
fiscal years 2011 and 2010, computed in accordance with FASB ASC Topic 718. See Note Q of
the notes to the consolidated financial statements in Item 8, Financial Statements and
Supplementary Data. |
|
(4) |
|
The amounts shown represent above market earnings on non-qualified deferred
compensation. |
|
(5) |
|
All other compensation consists of the following components: (a) matching contributions
to the NBC Retirement Plan; (b) life insurance premiums paid by us on the Executives
behalf and (c) relocation expenses paid by us on the Executives behalf. Relocation
expenses paid on behalf of Steven A. Clemente amounted to $8,947 in relocation benefits,
$25,000 for loss on sale of residence and $22,990 as tax gross up. Directors do not
receive compensation for their services as a director. See Note O of the notes to the
consolidated financial statements in Item 8, Financial Statements and Supplementary Data. |
|
(6) |
|
Steven A. Clemente joined the company in April, 2010. |
91
Grants of Plan-Based Awards
The following table provides information concerning each grant of an award to an Executive in
the last completed fiscal year:
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards: |
|
|
Exercise |
|
|
Grant |
|
|
|
|
|
|
|
Number of |
|
|
or Base |
|
|
Date Fair |
|
|
|
|
|
|
|
Securities |
|
|
Price of |
|
|
Value of |
|
|
|
Grant |
|
|
Underlying |
|
|
Option |
|
|
Option |
|
Name |
|
Date |
|
|
Options |
|
|
Awards |
|
|
Awards |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark W. Oppegard Chief Executive Officer and Director, NBC |
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alan G. Siemek Chief Financial Officer, Senior Vice
President of Finance and Administration, Treasurer, and Assistant Secretary, NBC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Barry S. Major Chief Operating Officer, President and Director, NBC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven A. Clemente Senior Vice President Bookstore Division, NBC |
|
|
4/26/2010 |
|
|
|
5,000 |
|
|
|
85 |
|
|
|
85,450 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael J. Kelly Senior Vice President Textbook Division, NBC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The exercise price of the options granted under the 2004 Stock Option Plan approximated the
estimated fair value at the date of grant of the shares underlying such options. The estimated
fair value of the shares underlying such options was determined utilizing the methodology described
in Note Q of the notes to the consolidated financial statements in Item 8, Financial Statements and
Supplementary Data.
Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table -
Employment Agreements
We have employment agreements with each of the Executives. As amended, such agreements (the
Employment Agreements) with the previously mentioned Executives provide for (1) an annual base
salary, (2) incentive compensation based upon the attainment of financial objectives, (3) customary
fringe benefits, and (4) a minimum incentive bonus of $100,000 paid to Steven A. Clemente for
fiscal year 2011. The salaries of the Executives are approximately as follows: Mr. Oppegard,
$200,000 per annum; Mr. Siemek, $214,000 per annum; Mr. Major, $284,000 per annum; Mr. Clemente,
$275,000 per annum; and Mr. Kelly, $203,000 per annum. Each of the Employment Agreements provides
that their term will be automatically extended from year to year, unless terminated upon specified
notice by either party.
The Employment Agreements also provide that each Executive may be granted a number of options
annually under the stock option plan described in Note Q to the consolidated financial statements
presented in Item 8, Financial Statements and Supplementary Data, with the size of such grant to be
determined by the Board of Directors. Each such option shall have an exercise price not to be less
than the fair market value per share as of the date of grant and will be exercisable as to 25% of
the shares covered thereby on the date of grant and as to an additional 25% of the shares covered
thereby on each of the first three anniversaries of the date of grant, subject to the Executives
continued employment with us on such dates.
92
The Employment Agreements also provide for specified payments to the Executive upon the
expiration of such agreements, in the event of termination of employment with us without cause
(as defined in the respective agreements), and in the event of death or disability of the Executive
during the term, as outlined below:
|
|
|
Termination of Employment upon Expiration of the Term of the Employment Agreement If
we have given the Executive notice of our intention to terminate employment at the end of
the term of the Employment Agreement, the Executive is entitled to continued payment of base
salary and health, life insurance and disability insurance benefits for a period of one year
following the expiration of the term of the Employment Agreement. |
|
|
|
Termination of Employment Without Cause prior to the Expiration of the Term of the
Employment Agreement - If we have given the Executive notice of our intention to terminate
employment without cause prior to the end of the term of the Employment Agreement, the
Executive is entitled to continued payment of base salary and health, life insurance and
disability insurance benefits for a period of one year following the date of termination.
Additionally, the Executive is entitled to payment of any incentive bonus when otherwise
due, prorated through the date of termination. |
|
|
|
Termination of Employment upon Death or Disability If an Executives employment is
terminated as a result of death or disability, the Executive is entitled to continued
payment of base salary for a period of six months following the date of termination.
Additionally, the Executive is entitled to payment of any incentive bonus when otherwise
due, prorated through the date of termination. |
The Employment Agreements also contain customary confidentiality obligations and
non-competition agreements for each Executive spanning a period of three years from the date of
termination.
Finally, the Employment Agreements provide that the Executives will not sell, transfer, pledge
or otherwise dispose of any shares of our common stock, except for certain transfers to immediate
family members, in the event of disability and for estate planning purposes prior to the
consummation by us of an initial public offering of our common stock.
93
Outstanding Equity Awards
The following table provides information concerning outstanding equity awards held by each
Executive:
Outstanding Equity Awards at March 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards |
|
|
|
(1) |
|
|
(1) |
|
|
|
|
|
|
|
|
|
Number |
|
|
Number |
|
|
|
|
|
|
|
|
|
of Securities |
|
|
of Securities |
|
|
|
|
|
|
|
|
|
Underlying |
|
|
Underlying |
|
|
|
|
|
|
|
|
|
Unexercised |
|
|
Unexercised |
|
|
Option |
|
|
Option |
|
|
|
Options - |
|
|
Options - |
|
|
Exercise |
|
|
Expiration |
|
Name |
|
Exercisable |
|
|
Unexercisable |
|
|
Price |
|
|
Date |
|
Mark W. Oppegard Chief Executive Officer and Director, NBC |
|
|
5,950 |
|
|
|
|
|
|
$ |
52.47 |
|
|
|
3/4/2014 |
|
|
|
|
2,675 |
|
|
|
|
|
|
|
106.00 |
|
|
|
3/4/2014 |
|
|
|
|
2,200 |
|
|
|
|
|
|
|
146.00 |
|
|
|
3/4/2014 |
|
|
|
|
1,963 |
|
|
|
|
|
|
|
160.00 |
|
|
|
11/9/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alan G. Siemek Chief Financial Officer, Senior Vice
President of Finance and Administration,
Treasurer, and Assistant Secretary, NBC |
|
|
4,728 |
|
|
|
|
|
|
|
52.47 |
|
|
|
3/4/2014 |
|
|
|
|
1,375 |
|
|
|
|
|
|
|
106.00 |
|
|
|
3/4/2014 |
|
|
|
|
1,375 |
|
|
|
|
|
|
|
146.00 |
|
|
|
3/4/2014 |
|
|
|
|
1,885 |
|
|
|
|
|
|
|
160.00 |
|
|
|
11/9/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Barry S. Major Chief Operating Officer, President and Director, NBC |
|
|
4,780 |
|
|
|
|
|
|
|
52.47 |
|
|
|
3/4/2014 |
|
|
|
|
2,500 |
|
|
|
|
|
|
|
106.00 |
|
|
|
3/4/2014 |
|
|
|
|
2,050 |
|
|
|
|
|
|
|
146.00 |
|
|
|
3/4/2014 |
|
|
|
|
1,963 |
|
|
|
|
|
|
|
160.00 |
|
|
|
11/9/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven A. Clemente Senior Vice President Bookstore Division, NBC |
|
|
1,250 |
|
|
|
3,750 |
|
|
|
85.00 |
|
|
|
4/26/2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael J. Kelly Senior Vice President Textbook Division, NBC |
|
|
2,111 |
|
|
|
|
|
|
|
52.47 |
|
|
|
3/4/2014 |
|
|
|
|
1,375 |
|
|
|
|
|
|
|
106.00 |
|
|
|
3/4/2014 |
|
|
|
|
1,175 |
|
|
|
|
|
|
|
146.00 |
|
|
|
3/4/2014 |
|
|
|
|
1,600 |
|
|
|
|
|
|
|
160.00 |
|
|
|
11/9/2014 |
|
|
|
|
2,400 |
|
|
|
|
|
|
|
160.00 |
|
|
|
8/29/2015 |
|
|
|
|
1,180 |
|
|
|
|
|
|
|
160.00 |
|
|
|
3/30/2016 |
|
|
|
|
700 |
|
|
|
|
|
|
|
205.00 |
|
|
|
10/12/2017 |
|
|
|
|
350 |
|
|
|
350 |
|
|
|
85.00 |
|
|
|
2/3/2020 |
|
|
|
|
(1) |
|
Separate grants of stock options occurred on April 26, 2010, February 3, 2010, October
12, 2007, March 30, 2006, August 29, 2005 and November 9, 2004. Twenty-five percent of the
options granted were exercisable immediately upon granting with the remaining options
becoming exercisable in 25% increments over the subsequent three years. In connection with
the March 4, 2004 Transaction, all existing options at March 4, 2004 vested, certain of
which were cancelled in exchange for new options granted under the 2004 Stock Option Plan.
Options granted in fiscal year 2004 under the 2004 Stock Option Plan were fully vested and
exercisable at prices consistent with the options which were cancelled. |
94
Option Exercises and Stock Vested
The following table provides information concerning the vesting of our named executive
officers restricted stock during Fiscal 2011. None of our named executive officers exercised
stock options during Fiscal 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards |
|
|
Stock Awards (1) |
|
|
|
Number of |
|
|
|
|
|
|
Number of |
|
|
|
|
|
|
Shares |
|
|
Value |
|
|
Shares |
|
|
Value |
|
|
|
Acquired |
|
|
Realized |
|
|
Acquired |
|
|
Realized |
|
|
|
on Exercise |
|
|
on Exercise |
|
|
on Vesting |
|
|
on Vesting |
|
Name |
|
(#) |
|
|
($) |
|
|
(#) |
|
|
($) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark W. Oppegard
Chief Executive
Officer and
Director, NBC |
|
|
|
|
|
$ |
|
|
|
|
1,400 |
|
|
$ |
209,069 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alan G. Siemek
Chief Financial
Officer, Senior
Vice President of
Finance and
Administration,
Treasurer, and
Assistant
Secretary, NBC |
|
|
|
|
|
|
|
|
|
|
1,400 |
|
|
|
209,069 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Barry S. Major
Chief Operating
Officer, President
and Director, NBC |
|
|
|
|
|
|
|
|
|
|
1,400 |
|
|
|
209,069 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven A. Clemente
Senior Vice
President
Bookstore Division,
NBC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael J. Kelly
Senior Vice
President
Textbook Division,
NBC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Represents the restricted shares received on vesting date September 30, 2010 and the
subsequent payment received by the named executive officers directly related to the vested
restricted stock. The value realized was equal to the estimated fair market value of
$149.34 per unit on the day of vesting multiplied by the number of units that vested. |
95
Nonqualified Deferred Compensation
The following table provides information concerning nonqualified deferred compensation for
each Executive:
Nonqualified Deferred Compensation March 31, 2011 (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2) |
|
|
Aggregate |
|
|
Aggregate |
|
|
|
Executive |
|
|
Registrant |
|
|
Aggregate |
|
|
Withdrawals/ |
|
|
Balance |
|
|
|
Contributions |
|
|
Contributions |
|
|
Earnings |
|
|
Distributions |
|
|
as of |
|
|
|
in Fiscal |
|
|
in Fiscal |
|
|
in Fiscal |
|
|
in Fiscal |
|
|
March 31, |
|
Name |
|
Year 2011 |
|
|
Year 2011 |
|
|
Year 2011 |
|
|
Year 2011 |
|
|
Year 2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark W. Oppegard Chief Executive Officer and Director, NBC |
|
$ |
|
|
|
$ |
|
|
|
$ |
9,540 |
|
|
$ |
|
|
|
$ |
303,091 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alan G. Siemek Chief Financial Officer, Senior Vice President of
Finance and Administration, Treasurer, and Assistant Secretary, NBC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Barry S. Major Chief Operating Officer, President and Director, NBC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven A. Clemente Senior Vice President Bookstore Division, NBC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael J. Kelly Senior Vice President Textbook Division, NBC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
See Note P of the notes to the consolidated financial statements in Item 8, Financial
Statements and Supplementary Data for a brief description of the deferred compensation
plan. |
|
(2) |
|
There are no above market earnings included herein for fiscal years 2011 and 2010;
above market earnings in prior years were $206 in fiscal year 2009 which are included in
the Summary Compensation Table above. |
96
Potential Payments Upon Termination or Change-In-Control
As described above, the employment agreements for each Executive include provisions for
potential payment upon termination of employment. The following table quantifies the estimated
payments and benefits that would be provided to the Executive in each covered circumstance,
assuming the triggering event occurred on March 31, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Potential Payments Upon Termination or Change in Control March 31, 2011 (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
(3) |
|
|
(4) |
|
|
(4) |
|
|
(4) |
|
|
Potential |
|
|
|
(2) |
|
|
Prorated |
|
|
Health |
|
|
Life |
|
|
Disability |
|
|
Payment |
|
|
|
Base |
|
|
Incentive |
|
|
Insurance |
|
|
Insurance |
|
|
Insurance |
|
|
Upon |
|
Name |
|
Salary |
|
|
Bonus |
|
|
Benefits |
|
|
Benefits |
|
|
Benefits |
|
|
Termination |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark W. Oppegard Chief Executive
Officer and Director, NBC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination of Employment upon
Expiration of Term |
|
$ |
199,992 |
|
|
$ |
|
|
|
$ |
13,543 |
|
|
$ |
252 |
|
|
$ |
285 |
|
|
$ |
214,072 |
|
Termination of Employment Without Cause |
|
|
199,992 |
|
|
|
|
|
|
|
13,543 |
|
|
|
252 |
|
|
|
285 |
|
|
|
214,072 |
|
Termination of Employment upon Death
or Disability |
|
|
99,996 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
99,996 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alan G. Siemek Chief Financial
Officer, Senior Vice President of
Finance and Administration, Treasurer,
and Assistant Secretary, NBC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination of Employment upon
Expiration of Term |
|
|
213,990 |
|
|
|
|
|
|
|
12,868 |
|
|
|
252 |
|
|
|
285 |
|
|
|
227,395 |
|
Termination of Employment Without Cause |
|
|
213,990 |
|
|
|
|
|
|
|
12,868 |
|
|
|
252 |
|
|
|
285 |
|
|
|
227,395 |
|
Termination of Employment upon Death
or Disability |
|
|
106,995 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
106,995 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Barry S. Major Chief Operating
Officer, President and Director, NBC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination of Employment upon
Expiration of Term |
|
|
284,003 |
|
|
|
|
|
|
|
11,482 |
|
|
|
252 |
|
|
|
285 |
|
|
|
296,022 |
|
Termination of Employment Without Cause |
|
|
284,003 |
|
|
|
|
|
|
|
11,482 |
|
|
|
252 |
|
|
|
285 |
|
|
|
296,022 |
|
Termination of Employment upon Death
or Disability |
|
|
142,002 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
142,002 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven A. Clemente Senior Vice
President Bookstore Division, NBC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination of Employment upon
Expiration of Term |
|
|
275,000 |
|
|
|
|
|
|
|
12,868 |
|
|
|
252 |
|
|
|
285 |
|
|
|
288,405 |
|
Termination of Employment Without Cause |
|
|
275,000 |
|
|
|
|
|
|
|
12,868 |
|
|
|
252 |
|
|
|
285 |
|
|
|
288,405 |
|
Termination of Employment upon Death
or Disability |
|
|
137,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
137,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael J. Kelly Senior Vice President
Textbook Division, NBC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination of Employment upon
Expiration of Term |
|
|
203,008 |
|
|
|
|
|
|
|
10,291 |
|
|
|
252 |
|
|
|
285 |
|
|
|
213,836 |
|
Termination of Employment Without Cause |
|
|
203,008 |
|
|
|
|
|
|
|
10,291 |
|
|
|
252 |
|
|
|
285 |
|
|
|
213,836 |
|
Termination of Employment upon Death
or Disability |
|
|
101,504 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101,504 |
|
|
|
|
(1) |
|
The Employment Agreements are silent as to how payment amounts are ultimately
determined and how payment is to be made (i.e. monthly, lump sum, etc.). Our Board of
Directors would ultimately be responsible for approving the terms of such termination
payments. |
97
|
|
|
(2) |
|
Base salary in place at time of termination. |
|
(3) |
|
It is assumed that the incentive bonus earned for fiscal year 2011, if any, was paid in
the normal course of business. As the assumed termination does not fall within a fiscal
year, no pro rata allocation is necessary. |
|
(4) |
|
Represents premiums paid by us on the Executives behalf. |
Compensation of Directors
Our Directors receive no compensation for services but are reimbursed for out-of-pocket
expenses. These reimbursements are less than $10,000 annually to each Director.
Compensation Risk Assessment
We believe that our executive compensation policies and practices are not reasonably likely to
have a material adverse effect on the Company and that the compensation programs do not encourage
excessive risk and instead encourage behaviors that support sustainable value creation.
Compensation Committee Interlocks and Insider Participation
As previously mentioned, we do not currently have a compensation committee. Mark W. Oppegard,
Chief Executive Officer, Secretary and Director, participates with Messrs. Bono and Honey, the two
directors affiliated with Weston Presidio, in deliberations concerning stock options and other
equity awards from time to time granted to the Executives.
Compensation Committee Report
Our Board of Directors has reviewed and discussed the Compensation Discussion and Analysis
above with management and has approved the inclusion of such Compensation Discussion and Analysis
in this Annual Report on Form 10-K for the year ended March 31, 2011.
Board of Directors:
Mark L. Bono;
R. Sean Honey;
Mark W. Oppegard; and
Barry S. Major.
98
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
Security Ownership of Certain Beneficial Owners and Management Shares of our common stock
issued and outstanding totaled 554,094 on July 14, 2011. Weston Presidio owns 36,455 of the issued
and outstanding shares directly, with the remaining 517,639 issued and outstanding shares being
owned by NBC Holdings Corp, which has 513,439 shares of capital stock issued and outstanding that
are owned either by Weston Presidio or current and former members of NBC management. The
securities underlying the 2004 Stock Option Plan, of which 89,241 options are outstanding as of
July 14, 2011, are shares of NBC Holdings Corp. capital stock. The information in the following
table sets forth NBC Acquisition Corp. common stock beneficially owned by each person who owns more
than 5.0% of such shares; each director; each named executive officer in Item 11, Executive
Compensation; and all directors and named executive officers treated as a group. The shares listed
and percentages calculated thereon are based upon NBC Acquisition Corp. common stock outstanding as
of July 14, 2011 and NBC Holdings Corp. capital stock underlying nonqualified stock options that
are exercisable within sixty days, pursuant to Rule 13d-3 of the Securities Exchange Act of 1934.
To our knowledge, each of such holders of shares has sole voting and investment power as to the
shares owned unless otherwise noted. The address for each senior executive officer and director is
4700 South 19th Street, Lincoln, Nebraska 68501 unless otherwise noted.
|
|
|
|
|
|
|
|
|
|
|
Amount and |
|
|
|
|
|
|
Nature of |
|
|
|
|
|
|
Beneficial |
|
|
Percent of |
|
Title of Class/Name of Beneficial Owner |
|
Ownership (1) |
|
|
Class (3) |
|
|
|
|
|
|
|
|
|
|
Common Stock: |
|
|
|
|
|
|
|
|
Owning Greater Than 5% of Shares: |
|
|
|
|
|
|
|
|
Weston Presidio Capital IV, L.P. (2) |
|
|
365,449 |
|
|
|
66.0 |
% |
Weston Presidio Capital III, L.P. (2) |
|
|
153,623 |
|
|
|
27.7 |
% |
WPC Entrepreneur Fund, L.P. (2) |
|
|
7,579 |
|
|
|
1.4 |
% |
WPC Entrepreneur Fund II, L.P. (2) |
|
|
5,785 |
|
|
|
1.0 |
% |
|
|
|
|
|
|
|
|
|
Ownership of Directors: |
|
|
|
|
|
|
|
|
Mark L. Bono (2) |
|
|
532,436 |
|
|
|
96.1 |
% |
R. Sean Honey (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ownership of Senior Executive Officers Named in Item 11: |
|
|
|
|
|
|
|
|
Mark W. Oppegard |
|
|
16,788 |
|
|
|
3.0 |
% |
Alan G. Siemek |
|
|
9,363 |
|
|
|
1.7 |
% |
Barry S. Major (4) |
|
|
13,040 |
|
|
|
2.3 |
% |
Steven A. Clemente |
|
|
2,500 |
|
|
|
0.4 |
% |
Michael J. Kelly |
|
|
10,891 |
|
|
|
1.9 |
% |
|
|
|
|
|
|
|
|
|
Ownership of Directors and All Senior Executive Officers as a Group |
|
|
593,662 |
|
|
|
97.7 |
% |
|
|
|
(1) |
|
Beneficial ownership is determined in accordance with the rules of the SEC and includes
voting and investment power with respect to the shares of our common stock. Such shares
include NBC Holdings Corp. shares underlying nonqualified stock options exercisable within
sixty days, as follows: Mr. Oppegard 12,788 shares; Mr. Siemek 9,363 shares; Mr. Major
11,293 shares; Mr. Clemente 2,500 shares; Mr. Kelly 10,891 shares; and 53,479 shares
for all directors and senior executive officers as a group. |
|
(2) |
|
The sole general partner of Weston Presidio Capital IV, L.P., Weston Presidio Capital
III, L.P., WPC Entrepreneur Fund, L.P., and WPC Entrepreneur Fund II, L.P. (the Weston
Presidio Funds) is a limited liability company of which Messrs. Bono and Honey are
members. Messrs. Bono and Honey disclaim beneficial ownership of the shares held by the
Weston Presidio Funds, except to the extent of their respective pecuniary interests
therein. The address of the Weston Presidio Funds, and Messrs. Bono and Honey is 200
Clarendon Street, 50th Floor, Boston, Massachusetts 02116. |
|
(3) |
|
The percentages are calculated based upon shares of NBC Acquisition Corp. common stock
outstanding as of July 14, 2011 and shares underlying nonqualified stock options
exercisable within sixty days as detailed in footnote (1). |
|
(4) |
|
Beneficial ownership includes 1,747 shares of our common stock which are pledged as
security for the full and timely payment of remaining amounts due under a promissory note
Mr. Major has with us. In January, 1999, we issued 4,765
shares of our common stock to Mr. Major at a price of $52.47 per share, in exchange for
$25,000 in cash and a promissory note in the principal amount of $225,000 bearing interest at
5.25% per year. Remaining amounts due under the promissory note at March 31, 2011 totaled
approximately $91,000. |
99
Securities Authorized for Issuance under Equity Compensation Plans Through our parent, NBC
Holdings Corp., we have a share-based compensation plan established to provide for the granting of
options to purchase capital stock of NBC Holdings Corp. Details regarding this plan are presented
in the footnotes to the consolidated financial statements found in Item 8, Financial Statements and
Supplementary Data. Specific information as of March 31, 2011 regarding the plans, which were not
approved by security holders, is also presented in the following table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
Weighted- |
|
|
Number of |
|
|
|
Securities to |
|
|
Average |
|
|
Securities |
|
|
|
be Issued Upon |
|
|
Exercise |
|
|
Remaining |
|
|
|
Exercise of |
|
|
Price of |
|
|
Available for |
|
|
|
Outstanding |
|
|
Outstanding |
|
|
Future |
|
Plan |
|
Options |
|
|
Options |
|
|
Issuance |
|
2004 Stock Option Plan |
|
|
89,241 |
|
|
$ |
113.73 |
|
|
|
10,425 |
|
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
Director Independence We are a corporation with public debt (not listed on any exchange)
whose equity is privately held. Although our Board has not made a formal determination on the
matter, under current New York Stock Exchange listing standards (which we are not currently subject
to) and taking into account any applicable committee standards, we believe that Messrs. Oppegard
and Major would not be considered independent under any general listing standards or those
applicable to any particular committee due to their employment relationship with us, and Messrs.
Bono and Honey may not be considered independent under any general listing standards or those
applicable to any particular committee, due to their relationship with Weston Presidio, our largest
indirect stockholder.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
The following table shows our fees for audit and audit-related services and fees paid for tax
and all other services rendered by Deloitte & Touche LLP, the member firms of Deloitte Touche
Tohmatsu, and their respective affiliates for each of the last two years:
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended March 31, |
|
|
|
2011 |
|
|
2010 |
|
|
|
|
|
|
|
|
|
|
Audit Fees |
|
$ |
213,250 |
|
|
$ |
234,500 |
|
Audit-Related Fees |
|
|
|
|
|
|
118,600 |
|
Tax Fees |
|
|
235,920 |
|
|
|
173,162 |
|
Other Fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
449,170 |
|
|
$ |
526,262 |
|
|
|
|
|
|
|
|
Audit Fees include professional services rendered for the audit of our annual consolidated
financial statements and for the reviews of the consolidated interim financial statements included
in our Quarterly Reports on Form 10-Q.
Audit-Related Fees consist of fees for assurance and related services that are related to the
performance of the audit or review of the consolidated financial statements, including services
provided in conjunction with the Pre-Petition Senior Secured Notes offering in October, 2009 and
the SEC comment letter dated November 24, 2009.
100
Tax Fees consist of fees for professional services for tax compliance, tax advice, and tax
planning. These services include assistance regarding federal and state tax compliance, return
preparation, and tax audits.
The audit committee pre-approves all audit and non-audit services performed by our independent
registered public accounting firm.
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
|
(a) |
|
Financial Statements, Financial Statement Schedules, and Exhibits. |
|
(1) |
|
Consolidated Financial Statements of NBC Acquisition Corp. |
Index to Consolidated Financial Statements.
Report of Independent Registered Public Accounting Firm.
Consolidated Balance Sheets as of March 31, 2011 and 2010.
Consolidated Statements of Operations for the Years Ended March 31, 2011, 2010 and
2009.
Consolidated Statements of Stockholders Equity (Deficit) for the Years Ended March 31,
2011, 2010 and 2009.
Consolidated Statements of Cash Flows for the Years Ended March 31, 2011, 2010 and
2009.
Notes to Consolidated Financial Statements.
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(2) |
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Financial Statement Schedules. |
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Schedule I Condensed Financial Information of NBC Acquisition Corp. (Parent Company
Only). |
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Schedule II (Item 15(a)(2)) Valuation and Qualifying Accounts. |
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(3) |
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Exhibits. |
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2.1 |
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Agreement and Plan of Merger, dated as of February 18, 2004, by and among NBC
Holdings Corp., New NBC Acquisition Corp., NBC Acquisition Corp., certain Selling
Stockholders named therein, and HWH Capital Partners, L.P., filed as Exhibit 2.1 to NBC
Acquisition Corp. Registration Statement on Form S-4 (No. 333-114889), is incorporated
herein by reference. |
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2.2 |
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Amendment No. 1 to the Agreement and Plan of Merger, dated as of March 2, 2004,
by and among NBC Holdings Corp., New NBC Acquisition Corp., NBC Acquisition Corp.,
certain Selling Stockholders named therein, and HWH Capital Partners, L.P., filed as
Exhibit 2.2 to NBC Acquisition Corp. Registration Statement on Form S-4 (No.
333-114889), is incorporated herein by reference. |
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2.3 |
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Stock Purchase Agreement, dated as of February 18, 2004, by and among Weston
Presidio Capital III, L.P., Weston Presidio Capital IV, L.P., WPC Entrepreneur Fund
L.P., WPC Entrepreneur Fund II, MSD Ventures, L.P., HWH Capital Partners, L.P., NBC
Acquisition Corp., and NBC Holdings Corp., filed as Exhibit 2.3 to NBC Acquisition
Corp. Registration Statement on Form S-4 (No. 333-114889), is incorporated herein by
reference. |
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2.4 |
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Agreement and Plan of Merger, dated as of July 1, 2003, by and among
TheCampusHub.com, Inc., Nebraska Book Company, Inc., and NBC Acquisition Corp., filed
as Exhibit 2.1 to NBC Acquisition Corp. Form 10-Q for the quarter ended June 30, 2003,
is incorporated herein by reference. |
101
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2.5 |
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Share Purchase Agreement, dated as of April 2, 2006, by and among Nebraska
Book, CBA and the Sellers referenced therein, filed as Exhibit 2.1 to NBC Acquisition
Corp. Current Report on Form 8-K dated April 6, 2006, is incorporated herein by
reference. |
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2.6 |
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Second Amendment to Share Purchase Agreement, dated as of April 30, 2006, by
and among Nebraska Book, CBA and the Sellers referenced therein, filed as Exhibit 2.1
to NBC Acquisition Corp. Current Report on Form 8-K dated May 4, 2006, is incorporated
herein by reference. |
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3.1 |
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Amended and Restated Certificate of Incorporation of NBC Acquisition Corp.,
filed as Exhibit 3.1 to NBC Acquisition Corp. Current Report on Form 8-K dated February
3, 2009, is incorporated herein by reference. |
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3.2 |
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By-laws of NBC Acquisition Corp., filed as Exhibit 3.2 to NBC Acquisition Corp.
Registration Statement on Form S-4, as amended (File No. 333-48225), is incorporated
herein by reference. |
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3.3 |
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Amendment, dated as of August 2, 2002, to By-laws of NBC Acquisition Corp.,
filed as Exhibit 3.2 to NBC Acquisition Corp. Form 10-Q for the quarter ended December
31, 2002, is incorporated herein by reference. |
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4.1 |
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Indenture, dated March 4, 2004, by and among NBC Acquisition Corp., the
subsidiary guarantors parties thereto and BNY Midwest Trust Company as Trustee, filed
as Exhibit 4.5 to NBC Acquisition Corp. Registration Statement on Form S-4 (File No.
333-114889), is incorporated herein by reference. |
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4.2 |
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Form of 11% Senior Discount Notes Due 2013 (included in Exhibit 4.5), filed as
Exhibit 4.6 to NBC Acquisition Corp. Registration Statement on Form S-4 (File No.
333-114889), is incorporated herein by reference. |
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4.3 |
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Form of Exchange Note of NBC Acquisition Corp. 11% Senior Discount Notes Due
2013, filed as Exhibit 4.7 to NBC Acquisition Corp. Form 10-K for the fiscal year ended
March 31, 2004, is incorporated herein by reference. |
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4.4 |
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Indenture, dated March 4, 2004, by and among Nebraska Book Company, Inc., the
subsidiary guarantors parties thereto and BNY Midwest Trust Company as Trustee, filed
as Exhibit 4.12 to NBC Acquisition Corp. Registration Statement on Form S-4 (File No.
333-114889), is incorporated herein by reference. |
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4.5 |
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Form of 8 5/8% Senior Subordinated Note Due 2012 (included in Exhibit 4.13),
filed as Exhibit 4.13 to NBC Acquisition Corp. Registration Statement on Form S-4 (File
No. 333-114889), is incorporated herein by reference. |
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4.6 |
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Form of Exchange Note of Nebraska Book Company, Inc. 8 5/8% Senior Subordinated
Note Due 2012, filed as Exhibit 4.15 to NBC Acquisition Corp. Form 10-K for the fiscal
year ended March 31, 2004, is incorporated herein by reference. |
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4.7 |
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Supplemental Indenture, dated as of December 31, 2004, by and among NBC
Textbooks LLC, Nebraska Book Company, Inc., each other then existing Subsidiary
Guarantor under the Indenture, and the Trustee, filed as Exhibit 10.1 to NBC
Acquisition Corp. Current Report on Form 8-K dated January 6, 2005, is incorporated
herein by reference. |
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4.8 |
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Supplemental Indenture, dated as of May 1, 2006, by and among CBA, Nebraska
Book Company, Inc., each other then existing Subsidiary Guarantor under the Indenture,
and the Trustee, filed as Exhibit 10.2 to NBC Acquisition Corp. Current Report on Form
8-K dated May 4, 2006, is incorporated herein by reference. |
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4.9 |
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Supplemental Indenture, dated as of May 1, 2007, by and among Net Textstore
LLC, Nebraska Book Company, Inc., each other then existing Subsidiary Guarantor under
the Indenture, and the Trustee, filed as Exhibit 10.1 to NBC Acquisition Corp. Current
Report on Form 8-K dated May 7, 2007, is incorporated herein by reference. |
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4.10 |
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Supplemental Indenture, dated as of January 26, 2009, by and among Campus
Authentic LLC, Nebraska Book Company, Inc., each other then existing Subsidiary
Guarantor under the Indenture, and the Trustee, filed as Exhibit 4.14 to NBC
Acquisition Corp. Form 10-K for the fiscal year ended March 31, 2009, is incorporated
herein by reference. |
102
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4.11 |
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Indenture, dated October 2, 2009, by and among Nebraska Book Company, Inc., the
Subsidiary Guarantors and Wilmington Trust FSB, as trustee and note holder collateral
agent, filed as Exhibit 4.1 to NBC Acquisition Corp. Current Report on Form 8-K filed
October 7, 2009, is incorporated herein by reference. |
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4.12 |
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Form of 10% Senior Secured Note Due 2011 (included in Exhibit 4.1 as Exhibit A
to NBC Acquisition Corp. Current Report on Form 8-K filed October 7, 2009), is
incorporated herein by reference. |
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4.13 |
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Pledge and Security Agreement, dated October 2, 2009, among Nebraska Book
Company, Inc., the Subsidiary Guarantors and Wilmington Trust FSB, as Noteholder
Collateral Agent, filed as Exhibit 4.3 to NBC Acquisition Corp. Current Report on Form
8-K filed October 7, 2009, is incorporated herein by reference. |
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10.1 |
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Restructuring Support Agreement, dated June 26, 2011, by and among NBC Holdings
Corp., NBC Acquisition Corp., Nebraska Book Company, Inc., the Subsidiary Guarantors,
undersigned holders of Nebraska Book Company Inc.s 8.625% Senior Subordinated Notes due 2012
and the undersigned holders of our 11.0% Senior Discount Notes due 2013, filed herewith. |
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10.2 |
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Super-Priority Debtor-in-Possession Credit Agreement, dated as of June 30, 2011,
among NBC Holdings Corp., NBC Acquisition Corp., Nebraska Book Company, Inc., the
Subsidiary Guarantors, the lenders party thereto, JPMorgan Chase Bank, N.A., as
administrative agent and collateral agent, filed herewith. |
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10.3 |
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Guarantee and Collateral Agreement, dated June 30, 2011, among NBC Holdings
Corp., NBC Acquisition Corp., Nebraska Book Company, Inc., the Subsidiary Guarantors,
and JPMorgan Chase Bank, N.A., as administrative agent, filed herewith. |
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10.4 |
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Amended and Restated Credit Agreement, dated October 2, 2009, among Nebraska
Book, the Subsidiary Guarantors, the lenders party thereto, JPMorgan Chase Bank, N.A.,
as administrative agent, Wells Fargo Bank, National Association, as syndication agent,
Bank of America, N.A., as documentation agent, filed as Exhibit 10.1 to NBC Acquisition
Corp. Form 10-Q for the quarter ended September 30, 2009, is incorporated herein by
reference. |
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10.5 |
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First Amendment, dated as of March 22, 2010, to the Amended and Restated Credit
Agreement, dated October 2, 2009, among NBC Holdings Corp., NBC Acquisition Corp.,
Nebraska Book Company, Inc., the Subsidiary Guarantors, the lenders party thereto,
JPMorgan Chase Bank, N.A., as administrative agent, Wells Fargo Bank, National
Association, as syndication agent, and Bank of America, N.A., as documentation agent,
filed as Exhibit 10.1 to NBC Acquisition Corp. Current Report on Form 8-K filed March
25, 2010, is incorporated herein by reference. |
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10.6 |
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First Lien Amended and Restated Guarantee and Collateral Agreement, dated
October 2, 2009, among NBC Holdings Corp., NBC Acquisition Corp., Nebraska Book
Company, Inc., the Subsidiary Guarantors, and JPMorgan Chase Bank, N.A., as
administrative agent, filed as Exhibit 10.2 to NBC Acquisition Corp. Form 10-Q for the
quarter ended September 30, 2009, is incorporated herein by reference. |
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10.7 |
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First Amendment, dated as of March 22, 2010, to the First Lien Amended and
Restated Guarantee and Collateral Agreement, dated October 2, 2009, among NBC Holdings
Corp., NBC Acquisition Corp., Nebraska Book Company, Inc., the Subsidiary Guarantors,
and JPMorgan Chase Bank, N.A., as administrative agent, filed as Exhibit 10.1 to NBC
Acquisition Corp. Current Report on Form 8-K filed March 25, 2010, is incorporated
herein by reference. |
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10.8 |
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Intercreditor Agreement, dated October 2, 2009, by and among Nebraska Book
Company, Inc., the Subsidiary Guarantors and Wilmington Trust FSB, as trustee, filed as
Exhibit 10.3 to NBC Acquisition Corp. Current Report on Form 8-K filed October 7, 2009,
is incorporated herein by reference. |
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10.9 |
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Purchase Agreement, dated as of March 4, 2004, by and among NBC Acquisition
Corp. and J.P. Morgan Securities Inc., Citigroup Global Markets Inc. and Fleet
Securities, Inc., filed as Exhibit 10.13 to NBC Acquisition Corp. Registration
Statement on Form S-4 (File No. 333-114889), is incorporated herein by reference. |
103
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10.10 |
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Purchase Agreement, dated as of March 4, 2004, by and among Nebraska Book
Company, Inc. and J.P. Morgan Securities Inc., Citigroup Global Markets Inc. and Fleet
Securities, Inc., filed as Exhibit 10.15 to NBC Acquisition Corp. Registration
Statement on Form S-4 (File No. 333-114889), is incorporated herein by reference. |
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10.11 |
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Stockholders Agreement, dated as of July 11, 2002, by and among NBC
Acquisition Corp., HWH Capital Partners, L.P., HWH Cornhusker Partners, L.P., Weston
Presidio Capital III, L.P., Weston Presidio Capital IV, L.P., WPC Entrepreneur Fund,
L.P., WPC Entrepreneur Fund II, L.P., and the other stockholders party thereto, filed
as Exhibit 4.1 to NBC Acquisition Corp. Form 10-Q for the quarter ended June 30, 2002,
is incorporated herein by reference. |
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10.12 |
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Amended and Restated Stockholders Agreement, dated as of July 1, 2003, by and
among NBC Acquisition Corp., HWH Capital Partners, L.P., HWH Cornhusker Partners, L.P.,
Weston Presidio Capital III, L.P., Weston Presidio Capital IV, L.P., WPC Entrepreneur
Fund, L.P., WPC Entrepreneur Fund II, L.P., MSD Ventures, L.P., and the other
stockholders party thereto, filed as Exhibit 4.1 to NBC Acquisition Corp. Form 10-Q for
the quarter ended June 30, 2003, is incorporated herein by reference. |
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10.13 |
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Stock Subscription Agreement between NBC Acquisition Corp. and NBC Holdings
Corp., dated as of February 3, 2009, filed as Exhibit 10.2 to NBC Acquisition Corp.
Current Report on Form 8-K dated February 3, 2009, is incorporated herein by reference. |
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10.14 |
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Registration Rights Agreement, dated as of March 4, 2004, by and among NBC
Acquisition Corp. and J.P. Morgan Securities Inc., Citigroup Global Markets Inc. and
Fleet Securities, Inc., filed as Exhibit 10.22 to NBC Acquisition Corp. Registration
Statement on Form S-4 (File No. 333-114889), is incorporated herein by reference. |
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10.15 |
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Registration Rights Agreement, dated as of March 4, 2004, by and among
Nebraska Book Company, Inc. and J.P. Morgan Securities Inc., Citigroup Global Markets
Inc. and Fleet Securities, Inc., filed as Exhibit 10.24 to NBC Acquisition Corp.
Registration Statement on Form S-4 (File No. 333-114889), is incorporated herein by
reference. |
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10.16 |
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Registration Rights Agreement, dated as of October 2, 2009, by and among
Nebraska Book Company, Inc., the guarantors listed in Schedule 1 thereto, J.P. Morgan
Securities Inc., Banc of America Securities LLC, Wells Fargo Securities, LLC and Piper
Jaffray & Co., filed as Exhibit 10.4 to NBC Acquisition Corp. Form 10-Q for the quarter
ended December 31, 2009, is incorporated herein by reference. |
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10.17 |
* |
|
Form of Memorandum of Understanding, dated as of February 13, 1998 by and between NBC
Acquisition Corp. and each of Mark W. Oppegard, Bruce E. Nevius, Larry R. Rempe,
Kenneth F. Jirovsky, William H. Allen, Thomas A. Hoff and Ardean A. Arndt, filed as
Exhibit 10.5 to NBC Acquisition Corp. Registration Statement on Form S-4, as amended
(File No. 333-48225), is incorporated herein by reference. |
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10.18 |
* |
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Memorandum of Understanding, dated as of December 22, 1998 by and between Nebraska
Book Company, Inc. and Barry S. Major, Chief Operating Officer, filed as Exhibit 10.1
to NBC Acquisition Corp. Form 10-Q for the quarter ended December 31, 1998, is
incorporated herein by reference. |
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10.19 |
* |
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Addendum to the Memorandum of Understanding, dated as of December 22, 1998 by and
between Nebraska Book Company, Inc. and Barry S. Major, dated March 29, 2002, filed as
Exhibit 10.10 to NBC Acquisition Corp. Form 10-K for the fiscal year ended March 31,
2002, is incorporated herein by reference. |
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10.20 |
* |
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Amended and Restated Secured Promissory Note dated July 9, 2002 by and between NBC
Acquisition Corp. and Barry S. Major, filed as Exhibit 10.4 to NBC Acquisition Corp.
Form 10-Q for the quarter ended June 30, 2002, is incorporated herein by reference. |
104
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10.21* |
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First Amendment to the Amended and Restated Secured Promissory Note, dated as of
December 31, 2008, between Barry S. Major and NBC Acquisition Corp., filed as Exhibit
10.1 to NBC Acquisition Corp. Current Report on Form 8-K dated January 7, 2009, is
incorporated herein by reference. |
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10.22* |
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Memorandum of Understanding, dated as of July 1, 1999 by and between Nebraska Book
Company, Inc. and Alan Siemek, Chief Financial Officer, filed as Exhibit 10.1 to NBC
Acquisition Corp. Form 10-Q for the quarter ended September 30, 1999, is incorporated
herein by reference. |
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10.23* |
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Addendum to the Memorandum of Understanding, dated as of July 1, 1999 by and between
Nebraska Book Company, Inc. and Alan Siemek, dated March 29, 2002, filed as Exhibit
10.12 to NBC Acquisition Corp. Form 10-K for the fiscal year ended March 31, 2002, is
incorporated herein by reference. |
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10.24* |
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Memorandum of Understanding, dated as of November 1, 1999 by and between Nebraska
Book Company, Inc. and Michael J. Kelly, Vice President of e-commerce, filed as Exhibit
10.1 to NBC Acquisition Corp. Form 10-Q for the quarter ended December 31, 1999, is
incorporated herein by reference. |
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10.25* |
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Memorandum of Understanding, dated as of April 17, 2001 by and between Nebraska Book
Company, Inc. and Robert Rupe, Senior Vice President of the Bookstore Division, filed
as Exhibit 10.1 to NBC Acquisition Corp. Form 10-Q for the quarter ended June 30, 2001,
is incorporated herein by reference. |
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10.26* |
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Amendment to the Memorandums of Understanding by and between Nebraska Book Company,
Inc. and each of Mark W. Oppegard, Larry R. Rempe, Kenneth F. Jirovsky, William H.
Allen, Thomas A. Hoff, Barry S. Major, Alan Siemek, Michael J. Kelly, and Robert Rupe,
dated March 4, 2004, filed as Exhibit 10.36 to NBC Acquisition Corp. Form 10-K for the
fiscal year ended March 31, 2004, is incorporated herein by reference. |
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10.27* |
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Executive Employment Agreement dated as of March 27, 2010, by and between Nebraska
Book Company, Inc. and Steven Clemente, Senior Vice President of the Bookstore
Division, filed as Exhibit 10.24 to NBC Acquisition Corp. Form 10-K for the fiscal year ended
March 31, 2010, is incorporated herein by reference. |
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10.28* |
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NBC Holdings Corp. 2004 Stock Option Plan adopted March 4, 2004, filed as Exhibit
10.43 to NBC Acquisition Corp. Registration Statement on Form S-4 (File No.
333-114889), is incorporated herein by reference. |
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10.29* |
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First Amendment, dated August 18, 2008, to the NBC Holdings Corp. 2004 Stock Option
Plan adopted March 4, 2004, filed as Exhibit 10.1 to NBC Acquisition Corp. Form 10-Q
for the quarter ended September 30, 2008, is incorporated herein by reference. |
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10.30* |
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Second Amendment, dated January 14, 2010, to the NBC Holdings Corp. 2004 Stock Option
Plan, filed as Exhibit 10.1 to NBC Acquisition Corp. Current Report on Form 8-K filed
January 19, 2010, is incorporated herein by reference. |
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10.31* |
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NBC Holdings Corp. 2005 Restricted Stock Plan adopted September 29, 2005, filed as
Exhibit 10.1 to NBC Acquisition Corp. Form 10-Q for the quarter ended September 30,
2005, is incorporated herein by reference. |
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10.32* |
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Restricted Stock Purchase Agreement, dated as of March 31, 2006, between Holdings and
Oppegard, filed as Exhibit 10.1 to NBC Acquisition Corp. Current Report on Form 8-K
dated April 6, 2006, is incorporated herein by reference. |
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10.33* |
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Restricted Stock Purchase Agreement, dated as of March 31, 2006, between Holdings and
Major, filed as Exhibit 10.2 to NBC Acquisition Corp. Current Report on Form 8-K dated
April 6, 2006, is incorporated herein by reference. |
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10.34* |
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Restricted Stock Purchase Agreement, dated as of March 31, 2006, between Holdings and
Siemek, filed as Exhibit 10.3 to NBC Acquisition Corp. Current Report on Form 8-K dated
April 6, 2006, is incorporated herein by reference. |
105
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10.35 |
* |
|
Stock Repurchase Agreement, dated as of March 31, 2006, between Holdings and
Oppegard, filed as Exhibit 10.4 to NBC Acquisition Corp. Current Report on Form 8-K
dated April 6, 2006, is incorporated herein by reference. |
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10.36 |
* |
|
Stock Repurchase Agreement, dated as of March 31, 2006, between Holdings and Major,
filed as Exhibit 10.5 to NBC Acquisition Corp. Current Report on Form 8-K dated April
6, 2006, is incorporated herein by reference. |
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10.37 |
* |
|
Stock Repurchase Agreement, dated as of March 31, 2006, between Holdings and Siemek,
filed as Exhibit 10.6 to NBC Acquisition Corp. Current Report on Form 8-K dated April
6, 2006, is incorporated herein by reference. |
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10.38 |
* |
|
Restricted Stock Plan Special Bonus Agreement, dated as of March 31, 2006, between
Nebraska Book and Oppegard, filed as Exhibit 10.7 to NBC Acquisition Corp. Current
Report on Form 8-K dated April 6, 2006, is incorporated herein by reference. |
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10.39 |
* |
|
Restricted Stock Plan Special Bonus Agreement, dated as of March 31, 2006, between
Nebraska Book and Major, filed as Exhibit 10.8 to NBC Acquisition Corp. Current Report
on Form 8-K dated April 6, 2006, is incorporated herein by reference. |
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10.40 |
* |
|
Restricted Stock Plan Special Bonus Agreement, dated as of March 31, 2006, between
Nebraska Book and Siemek, filed as Exhibit 10.9 to NBC Acquisition Corp. Current Report
on Form 8-K dated April 6, 2006, is incorporated herein by reference. |
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10.41 |
* |
|
Form of Deferred Compensation Agreement by and among Nebraska Book Company, Inc. and
each of Mark W. Oppegard, Bruce E. Nevius, Larry R. Rempe and Thomas A. Hoff, filed as
Exhibit 10.7 to NBC Acquisition Corp. Registration Statement on Form S-4, as amended
(File No. 333-48225), is incorporated herein by reference. |
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10.42 |
* |
|
Amendment of Form of Deferred Compensation Agreement, dated December 30, 2002, by and
among Nebraska Book Company, Inc. and each of Mark W. Oppegard, Larry R. Rempe and
Thomas A. Hoff, filed as Exhibit 10.1 to NBC Acquisition Corp. Form 10-Q for the
quarter ended December 31, 2002, is incorporated herein by reference. |
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10.43 |
* |
|
NBC Acquisition Corp. 401(k) Savings Plan, filed as Exhibit 10.8 to NBC Acquisition
Corp. Registration Statement on Form S-4, as amended (File No. 333-48225), is
incorporated herein by reference. |
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12.1 |
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Statements regarding computation of ratios, filed as Exhibit 12.1 to NBC
Acquisition Corp. Registration Statement on Form S-4 (File No. 333-114889), is
incorporated herein by reference. |
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14.1 |
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Code of Business Conduct and Ethics and Code of Ethics for Our Principal
Executive Officer and Senior Financial Officers for NBC Acquisition Corp., filed as
Exhibit 14.1 to NBC Acquisition Corp. Form 10-K for the fiscal year ended March 31,
2004, is incorporated herein by reference. |
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21.1 |
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Subsidiaries of NBC Acquisition Corp., filed as Exhibit 21.1 to NBC Acquisition
Corp. Registration Statement on Form S-4 (File No. 333-114889), is incorporated herein
by reference. |
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31.1 |
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Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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31.2 |
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Certification of Principal Financial and Accounting Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002. |
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32.1 |
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Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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32.2 |
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Certification of Principal Financial and Accounting Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002. |
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99.1 |
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|
Mirror Option Agreement between NBC Acquisition Corp. and NBC Holdings Corp.,
dated September 30, 2005, filed as Exhibit 99.1 to NBC Acquisition Corp. Form 10-Q for
the quarter ended September 30, 2005, is incorporated herein by reference. |
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99.2 |
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|
Mirror Restricted Stock Agreement between NBC Acquisition Corp. and NBC
Holdings Corp., dated March 31, 2006, filed as Exhibit 99.2 to NBC Acquisition Corp.
Form 10-K for the fiscal year ended March 31, 2006, is incorporated herein by
reference. |
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* |
|
- Management contracts or compensatory plans filed herewith or incorporated by reference. |
All other schedules for which provision is made in the applicable accounting regulations of
the SEC are either not required under the related instructions, are not applicable (and therefore
have been omitted), or the required disclosures are contained in the consolidated financial
statements included herein.
106
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
|
|
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|
|
|
NBC ACQUISITION CORP.
|
|
|
/s/ Mark W. Oppegard
|
|
|
Mark W. Oppegard |
|
|
Chief Executive Officer, Secretary,
and Director July 14, 2011 |
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the capacities and on the
dates indicated.
|
|
|
|
|
|
|
/s/ Mark W. Oppegard
|
|
|
|
/s/ Mark L. Bono |
|
|
|
|
|
|
Mark L. Bono
|
|
|
Chief Executive Officer, Secretary, and Director
|
|
|
|
Director |
|
|
(principal executive officer)
|
|
|
|
July 14, 2011 |
|
|
July 14, 2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Alan G. Siemek
|
|
|
|
/s/ R. Sean Honey |
|
|
|
|
|
|
|
|
|
Alan G. Siemek
|
|
|
|
R. Sean Honey |
|
|
Vice President and Treasurer
|
|
|
|
Director |
|
|
(principal financial and accounting officer)
|
|
|
|
July 14, 2011 |
|
|
July 14, 2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Barry S. Major |
|
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|
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|
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|
|
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|
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President and Director |
|
|
|
|
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|
July 14, 2011 |
|
|
|
|
|
|
Supplemental Information to Be Furnished With Reports Filed Pursuant to Section 15(d) of the
Act by Registrants Which Have Not Registered Securities Pursuant to Section 12 of the Act:
No annual report or proxy material with respect to any annual or other meeting of security
holders for the fiscal year ended March 31, 2011 has been, or will be, sent to security holders.
107
NBC ACQUISITION CORP. (PARENT COMPANY ONLY)
(DEBTOR IN POSSESSION AS OF JUNE 27, 2011)
SCHEDULE I CONDENSED FINANCIAL INFORMATION
BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
March 31, |
|
|
|
2011 |
|
|
2010 |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER ASSETS: |
|
|
|
|
|
|
|
|
Due from subsidiary (Note A) |
|
$ |
26,103,791 |
|
|
$ |
23,194,711 |
|
Investment in subsidiary (Note A) |
|
|
1,123,613 |
|
|
|
102,190,528 |
|
Debt issue costs, net of amortization |
|
|
510,798 |
|
|
|
766,191 |
|
Deferred income taxes |
|
|
10,246,887 |
|
|
|
10,065,529 |
|
|
|
|
|
|
|
|
|
|
$ |
37,985,089 |
|
|
$ |
136,216,959 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS EQUITY (DEFICIT) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES: |
|
|
|
|
|
|
|
|
Accrued interest |
|
$ |
371,288 |
|
|
$ |
371,288 |
|
Current maturities of long-term debt |
|
|
77,000,000 |
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
77,371,288 |
|
|
|
371,288 |
|
|
|
|
|
|
|
|
|
|
LONG-TERM DEBT, net of current maturities |
|
|
|
|
|
|
77,000,000 |
|
|
|
|
|
|
|
|
|
|
COMMITMENTS (Note B) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REDEEMABLE PREFERRED STOCK |
|
|
|
|
|
|
|
|
Series A redeemable preferred stock, $.01 par value 20,000 shares
authorized, 10,000 shares issued and outstanding,
at redemption value |
|
|
13,601,368 |
|
|
|
11,805,888 |
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS EQUITY (DEFICIT): |
|
|
|
|
|
|
|
|
Common stock, voting, authorized 5,000,000 shares of $.01 par value; issued and outstanding 554,094 shares |
|
|
5,541 |
|
|
|
5,541 |
|
Additional paid-in-capital |
|
|
111,281,289 |
|
|
|
111,203,506 |
|
Note receivable from stockholder |
|
|
(92,675 |
) |
|
|
(92,755 |
) |
Accumulated deficit |
|
|
(164,181,722 |
) |
|
|
(64,076,509 |
) |
|
|
|
|
|
|
|
Total stockholders equity (deficit) |
|
|
(52,987,567 |
) |
|
|
47,039,783 |
|
|
|
|
|
|
|
|
|
|
$ |
37,985,089 |
|
|
$ |
136,216,959 |
|
|
|
|
|
|
|
|
See notes to condensed financial statements.
108
NBC ACQUISITION CORP. (PARENT COMPANY ONLY)
(DEBTOR IN POSSESSION AS OF JUNE 27, 2011)
SCHEDULE I CONDENSED FINANCIAL INFORMATION
STATEMENTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended |
|
|
Year Ended |
|
|
Year Ended |
|
|
|
March 31, |
|
|
March 31, |
|
|
March 31, |
|
|
|
2011 |
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INTEREST EXPENSE |
|
$ |
(8,725,393 |
) |
|
$ |
(8,725,393 |
) |
|
$ |
(8,725,393 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME TAX BENEFIT |
|
|
3,090,396 |
|
|
|
3,674,482 |
|
|
|
3,160,038 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EQUITY IN EARNINGS (DEFICIT) OF SUBSIDIARY |
|
|
(92,674,736 |
) |
|
|
7,362,198 |
|
|
|
(94,928,668 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS) |
|
$ |
(98,309,733 |
) |
|
$ |
2,311,287 |
|
|
$ |
(100,494,023 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EARNINGS (LOSS) PER SHARE: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
(180.66 |
) |
|
$ |
1.33 |
|
|
$ |
(181.79 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
$ |
(180.66 |
) |
|
$ |
1.32 |
|
|
$ |
(181.79 |
) |
|
|
|
|
|
|
|
|
|
|
See notes to condensed financial statements.
109
NBC ACQUISITION CORP. (PARENT COMPANY ONLY)
(DEBTOR IN POSSESSION AS OF JUNE 27, 2011)
SCHEDULE I CONDENSED FINANCIAL INFORMATION
STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended |
|
|
Year Ended |
|
|
Year Ended |
|
|
|
March 31, |
|
|
March 31, |
|
|
March 31, |
|
|
|
2011 |
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows from operating activities |
|
$ |
(5,561,004 |
) |
|
$ |
(5,405,478 |
) |
|
$ |
(5,309,962 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows from investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of preferred stock |
|
|
|
|
|
|
|
|
|
|
10,000,000 |
|
Dividends received from subsidiary |
|
|
8,470,000 |
|
|
|
8,470,000 |
|
|
|
8,470,000 |
|
Change in due from subsidiary |
|
|
(2,908,996 |
) |
|
|
(3,064,522 |
) |
|
|
(3,160,038 |
) |
Proceeds from payment on note receivable from stockholder |
|
|
4,869 |
|
|
|
4,869 |
|
|
|
9,752 |
|
Contributions to subsidiary |
|
|
(4,869 |
) |
|
|
(4,869 |
) |
|
|
(10,009,752 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash flows from financing activities |
|
|
5,561,004 |
|
|
|
5,405,478 |
|
|
|
5,309,962 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE IN CASH AND CASH EQUIVALENTS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, Beginning of year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, End of year |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the period for interest |
|
$ |
8,470,000 |
|
|
$ |
8,470,000 |
|
|
$ |
8,470,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncash investing and financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive income associated with
derivative financial instrument of subsidiary |
|
|
|
|
|
|
|
|
|
|
748,000 |
|
See notes to condensed financial statements.
110
NBC ACQUISITION CORP. (PARENT COMPANY ONLY)
(DEBTOR IN POSESSION AS OF JUNE 27, 2011)
SCHEDULE I CONDENSED FINANCIAL INFORMATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These condensed financial statements of NBC Acquisition Corp. (Parent Company Only) should be
read in conjunction with the consolidated financial statements and notes thereto within the
attached Form 10-K.
Due From Subsidiary NBC Acquisition Corp. (the Company) files a consolidated federal
income tax return with its wholly-owned subsidiary, Nebraska Book Company, Inc. (NBC) and follows
a policy of recording income taxes equal to that which would have been incurred had we filed a
separate return. NBC is responsible for remitting tax payments and collecting tax refunds for the
consolidated group. The non-current amount due from subsidiary represents the cumulative tax
savings resulting from operating losses generated by us from which NBC derives the benefit through
reduced tax payments on the consolidated return.
Investment In Subsidiary We account for our investment in NBC under the equity method of
accounting. Contributions to or from NBC are included within the investment in subsidiary.
B. COMMITMENTS
We, along with NBCs wholly-owned subsidiaries (Specialty Books, Inc., NBC Textbooks LLC,
College Book Stores of America, Inc., Net Textstore LLC and Campus Authentic LLC), have jointly and
severally, unconditionally and irrevocably, guaranteed the prompt and complete payment and
performance by NBC of NBCs obligations underlying its pre-petition credit agreement. Such
guarantee remains in full force and effect until all obligations underlying the pre-petition credit
agreement, which became effective February 13, 1998 and was most recently amended and restated on
October 2, 2009, have been satisfied. The maximum potential future amounts payable under the
guarantee at March 31, 2011 totaled $75.0 million in principal payments, plus interest, which was
based on variable rates. As this guarantee represents a parents guarantee of its subsidiarys
debt to a third party, such guarantee is not carried as a liability in the Parent Company Only
financial statements.
C. DIVIDENDS
For fiscal year 2011, 2010 and 2009, cash dividends of $8.5 million were received from NBC to
provide funding for interest due and payable on our $77.0 million 11% pre-petition senior discount
notes. See Note I to the consolidated financial statements in Item 8, Financial Statements and
Supplementary Data.
D. REDEEMABLE PREFERRED STOCK
In conjunction with the Senior Credit Facility amendment on February 3, 2009, we entered into
a Stock Subscription Agreement with NBC Holdings Corp. (Holdings), pursuant to which Holdings
purchased 10,000 shares of a newly created Series A Preferred Stock, par value $0.01 per share, for
$1,000 per share, for an aggregate purchase price of $10.0 million. See Note K to the consolidated
financial statements in Item 8, Financial Statements and Supplementary Data.
111
NBC ACQUISITION CORP.
SCHEDULE II (Item 15(a)(2)) VALUATION AND QUALIFYING ACCOUNTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charged to |
|
|
Added |
|
|
|
|
|
|
|
|
|
|
Beginning of |
|
|
Charged to |
|
|
Other |
|
|
through |
|
|
|
|
|
|
End of |
|
|
|
Fiscal Year |
|
|
Costs and |
|
|
Accounts |
|
|
Stock |
|
|
Net |
|
|
Fiscal Year |
|
|
|
Balance |
|
|
Expenses |
|
|
(Revenue) |
|
|
Acquisitions |
|
|
Charge-Offs |
|
|
Balance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FISCAL YEAR ENDED MARCH 31, 2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts |
|
$ |
1,283,360 |
|
|
$ |
2,193,739 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
(2,193,739 |
) |
|
$ |
1,283,360 |
|
Allowance for sales returns |
|
|
5,273,651 |
|
|
|
|
|
|
|
32,215,351 |
|
|
|
|
|
|
|
(32,584,000 |
) |
|
|
4,905,002 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FISCAL YEAR ENDED MARCH 31, 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts |
|
|
1,283,360 |
|
|
|
1,399,466 |
|
|
|
|
|
|
|
|
|
|
|
(1,399,466 |
) |
|
|
1,283,360 |
|
Allowance for sales returns |
|
|
5,452,166 |
|
|
|
|
|
|
|
31,799,536 |
|
|
|
|
|
|
|
(31,978,051 |
) |
|
|
5,273,651 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FISCAL YEAR ENDED MARCH 31, 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts |
|
|
1,033,360 |
|
|
|
1,366,979 |
|
|
|
|
|
|
|
|
|
|
|
(1,116,979 |
) |
|
|
1,283,360 |
|
Allowance for sales returns |
|
|
5,292,620 |
|
|
|
|
|
|
|
32,627,107 |
|
|
|
|
|
|
|
(32,467,561 |
) |
|
|
5,452,166 |
|
112
EXHIBIT INDEX
|
|
|
|
|
|
2.1 |
|
|
Agreement and Plan of Merger, dated as of February 18, 2004, by and among NBC
Holdings Corp., New NBC Acquisition Corp., NBC Acquisition Corp., certain Selling
Stockholders named therein, and HWH Capital Partners, L.P., filed as Exhibit 2.1 to NBC
Acquisition Corp. Registration Statement on Form S-4 (No. 333-114889), is incorporated
herein by reference. |
|
|
|
|
|
|
2.2 |
|
|
Amendment No. 1 to the Agreement and Plan of Merger, dated as of March 2, 2004,
by and among NBC Holdings Corp., New NBC Acquisition Corp., NBC Acquisition Corp.,
certain Selling Stockholders named therein, and HWH Capital Partners, L.P., filed as
Exhibit 2.2 to NBC Acquisition Corp. Registration Statement on Form S-4 (No.
333-114889), is incorporated herein by reference. |
|
|
|
|
|
|
2.3 |
|
|
Stock Purchase Agreement, dated as of February 18, 2004, by and among Weston
Presidio Capital III, L.P., Weston Presidio Capital IV, L.P., WPC Entrepreneur Fund
L.P., WPC Entrepreneur Fund II, MSD Ventures, L.P., HWH Capital Partners, L.P., NBC
Acquisition Corp., and NBC Holdings Corp., filed as Exhibit 2.3 to NBC Acquisition
Corp. Registration Statement on Form S-4 (No. 333-114889), is incorporated herein by
reference. |
|
|
|
|
|
|
2.4 |
|
|
Agreement and Plan of Merger, dated as of July 1, 2003, by and among
TheCampusHub.com, Inc., Nebraska Book Company, Inc., and NBC Acquisition Corp., filed
as Exhibit 2.1 to NBC Acquisition Corp. Form 10-Q for the quarter ended June 30, 2003,
is incorporated herein by reference. |
|
|
|
|
|
|
2.5 |
|
|
Share Purchase Agreement, dated as of April 2, 2006, by and among Nebraska
Book, CBA and the Sellers referenced therein, filed as Exhibit 2.1 to NBC Acquisition
Corp. Current Report on Form 8-K dated April 6, 2006, is incorporated herein by
reference. |
|
|
|
|
|
|
2.6 |
|
|
Second Amendment to Share Purchase Agreement, dated as of April 30, 2006, by
and among Nebraska Book, CBA and the Sellers referenced therein, filed as Exhibit 2.1
to NBC Acquisition Corp. Current Report on Form 8-K dated May 4, 2006, is incorporated
herein by reference. |
|
|
|
|
|
|
3.1 |
|
|
Amended and Restated Certificate of Incorporation of NBC Acquisition Corp.,
filed as Exhibit 3.1 to NBC Acquisition Corp. Current Report on Form 8-K dated February
3, 2009, is incorporated herein by reference. |
|
|
|
|
|
|
3.2 |
|
|
By-laws of NBC Acquisition Corp., filed as Exhibit 3.2 to NBC Acquisition Corp.
Registration Statement on Form S-4, as amended (File No. 333-48225), is incorporated
herein by reference. |
|
|
|
|
|
|
3.3 |
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Amendment, dated as of August 2, 2002, to By-laws of NBC Acquisition Corp.,
filed as Exhibit 3.2 to NBC Acquisition Corp. Form 10-Q for the quarter ended December
31, 2002, is incorporated herein by reference. |
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4.1 |
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Indenture, dated March 4, 2004, by and among NBC Acquisition Corp., the
subsidiary guarantors parties thereto and BNY Midwest Trust Company as Trustee, filed
as Exhibit 4.5 to NBC Acquisition Corp. Registration Statement on Form S-4 (File No.
333-114889), is incorporated herein by reference. |
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4.2 |
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Form of 11% Senior Discount Notes Due 2013 (included in Exhibit 4.5), filed as
Exhibit 4.6 to NBC Acquisition Corp. Registration Statement on Form S-4 (File No.
333-114889), is incorporated herein by reference. |
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4.3 |
|
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Form of Exchange Note of NBC Acquisition Corp. 11% Senior Discount Notes Due
2013, filed as Exhibit 4.7 to NBC Acquisition Corp. Form 10-K for the fiscal year ended
March 31, 2004, is incorporated herein by reference. |
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4.4 |
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Indenture, dated March 4, 2004, by and among Nebraska Book Company, Inc., the
subsidiary guarantors parties thereto and BNY Midwest Trust Company as Trustee, filed
as Exhibit 4.12 to NBC Acquisition Corp. Registration Statement on Form S-4 (File No.
333-114889), is incorporated herein by reference. |
113
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4.5 |
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Form of 8 5/8% Senior Subordinated Note Due 2012 (included in Exhibit 4.13),
filed as Exhibit 4.13 to NBC Acquisition Corp. Registration Statement on Form S-4 (File
No. 333-114889), is incorporated herein by reference. |
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4.6 |
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Form of Exchange Note of Nebraska Book Company, Inc. 8 5/8% Senior Subordinated
Note Due 2012, filed as Exhibit 4.15 to NBC Acquisition Corp. Form 10-K for the fiscal
year ended March 31, 2004, is incorporated herein by reference. |
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4.7 |
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Supplemental Indenture, dated as of December 31, 2004, by and among NBC
Textbooks LLC, Nebraska Book Company, Inc., each other then existing Subsidiary
Guarantor under the Indenture, and the Trustee, filed as Exhibit 10.1 to NBC
Acquisition Corp. Current Report on Form 8-K dated and filed on January 6, 2005, is
incorporated herein by reference. |
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4.8 |
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Supplemental Indenture, dated as of May 1, 2006, by and among CBA, Nebraska
Book Company, Inc., each other then existing Subsidiary Guarantor under the Indenture,
and the Trustee, filed as Exhibit 10.2 to NBC Acquisition Corp. Current Report on Form
8-K dated May 4, 2006, is incorporated herein by reference. |
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4.9 |
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Supplemental Indenture, dated as of May 1, 2007, by and among Net Textstore
LLC, Nebraska Book Company, Inc., each other then existing Subsidiary Guarantor under
the Indenture, and the Trustee, filed as Exhibit 10.1 to NBC Acquisition Corp. Current
Report on Form 8-K dated May 7, 2007, is incorporated herein by reference. |
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4.10 |
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Supplemental Indenture, dated as of January 26, 2009, by and among Campus
Authentic LLC, Nebraska Book Company, Inc., each other then existing Subsidiary
Guarantor under the Indenture, and the Trustee, filed as Exhibit 4.14 to NBC
Acquisition Corp. Form 10-K for the fiscal year ended March 31, 2009, is incorporated
herein by reference. |
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4.11 |
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Indenture, dated October 2, 2009, by and among Nebraska Book Company, Inc., the
Subsidiary Guarantors and Wilmington Trust FSB, as trustee and noteholder collateral
agent, filed as Exhibit 4.1 to NBC Acquisition Corp. Current Report on Form 8-K filed
October 7, 2009, is incorporated herein by reference. |
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4.12 |
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Form of 10% Senior Secured Note Due 2011 (included in Exhibit 4.1 as Exhibit A
to NBC Acquisition Corp Current Report on Form 8-K filed October 7, 2009), is
incorporated herein by reference. |
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4.13 |
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Pledge and Security Agreement, dated October 2, 2009, among Nebraska Book
Company, Inc., the Subsidiary Guarantors and Wilmington Trust FSB, as Noteholder
Collateral Agent, filed as Exhibit 4.3 to NBC Acquisition Corp. Current Report on Form
8-K filed October 7, 2009, is incorporated herein by reference. |
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10.1 |
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|
Restructuring Support Agreement, dated June 26, 2011, by and among NBC Holdings
Corp., NBC Acquisition Corp., Nebraska Book Company, Inc., the Subsidiary Guarantors,
undersigned holders of Nebraska Book Company Inc.s 8.625% Senior Subordinated Notes due 2012 and the undersigned holders of our 11.0%
Senior Discount Notes due 2013, filed herewith. |
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10.2 |
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Super-Priority Debtor-in-Possession Credit Agreement, dated as of June 30, 2011,
among NBC Holdings Corp., NBC Acquisition Corp., Nebraska Book Company, Inc., the
Subsidiary Guarantors, the lenders party thereto, JPMorgan Chase Bank, N.A., as
administrative agent and collateral agent, filed herewith. |
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10.3 |
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Guarantee and Collateral Agreement, dated June 30, 2011, among NBC Holdings
Corp., NBC Acquisition Corp., Nebraska Book Company, Inc., the Subsidiary Guarantors,
and JPMorgan Chase Bank, N.A., as administrative agent, filed herewith. |
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10.4 |
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Amended and Restated Credit Agreement, dated October 2, 2009, among Nebraska
Book, the Subsidiary Guarantors, the lenders party thereto, JPMorgan Chase Bank, N.A.,
as administrative agent, Wells Fargo Bank, National Association, as syndication agent,
Bank of America, N.A., as documentation agent, filed as Exhibit 10.1 to NBC Acquisition
Corp. Form 10-Q for the quarter ended September 30, 2009, is incorporated herein by
reference. |
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10.5 |
|
|
First Amendment, dated as of March 22, 2010, to the Amended and Restated Credit
Agreement, dated October 2, 2009, among NBC Holdings Corp., NBC Acquisition Corp.,
Nebraska Book Company, Inc., the Subsidiary Guarantors, the lenders party thereto,
JPMorgan Chase Bank, N.A., as administrative agent, Wells Fargo Bank, National
Association, as syndication agent, and Bank of America, N.A., as documentation agent,
filed as Exhibit 10.1 to NBC Acquisition Corp. Current Report on Form 8-K filed March
25, 2010, is incorporated herein by reference. |
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10.6 |
|
|
First Lien Amended and Restated Guarantee and Collateral Agreement, dated
October 2, 009, among NBC Holdings Corp., NBC Acquisition Corp., Nebraska Book Company,
Inc., the Subsidiary Guarantors, and JPMorgan Chase Bank, N.A., as administrative
agent, filed as Exhibit 10.2 to NBC Acquisition Corp. Form 10-Q for the quarter ended
September 30, 2009, is incorporated herein by reference. |
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10.7 |
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First Amendment, dated as of March 22, 2010 to the First Lien Amended and
Restated Guarantee and Collateral Agreement, dated October 2, 2009, among NBC Holdings
Corp., NBC Acquisition Corp., Nebraska Book Company, Inc., the Subsidiary Guarantors,
and JPMorgan Chase Bank, N.A., as administrative agent, filed as Exhibit 10.1 to NBC
Acquisition Corp. Current Report on Form 8-K filed March 25, 2010, is incorporated
herein by reference. |
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10.8 |
|
|
Intercreditor Agreement, dated October 2, 2009, by and among Nebraska Book
Company, Inc., the Subsidiary Guarantors and Wilmington Trust FSB, as trustee, filed as
Exhibit 10.3 to NBC Acquisition Corp. Current Report on Form 8-K filed October 7, 2009,
is incorporated herein by reference. |
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10.9 |
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|
Purchase Agreement, dated as of March 4, 2004, by and among NBC Acquisition
Corp. and J.P. Morgan Securities Inc., Citigroup Global Markets Inc. and Fleet
Securities, Inc., filed as Exhibit 10.13 to NBC Acquisition Corp. Registration
Statement on Form S-4 (File No. 333-114889), is incorporated herein by reference. |
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10.10 |
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Purchase Agreement, dated as of March 4, 2004, by and among Nebraska Book
Company, Inc. and J.P. Morgan Securities Inc., Citigroup Global Markets Inc. and Fleet
Securities, Inc., filed as Exhibit 10.15 to NBC Acquisition Corp. Registration
Statement on Form S-4 (File No. 333-114889), is incorporated herein by reference. |
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10.11 |
|
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Stockholders Agreement, dated as of July 11, 2002, by and among NBC
Acquisition Corp., HWH Capital Partners, L.P., HWH Cornhusker Partners, L.P., Weston
Presidio Capital III, L.P., Weston Presidio Capital IV, L.P., WPC Entrepreneur Fund,
L.P., WPC Entrepreneur Fund II, L.P., and the other stockholders party thereto, filed
as Exhibit 4.1 to NBC Acquisition Corp. Form 10-Q for the quarter ended June 30, 2002,
is incorporated herein by reference. |
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10.12 |
|
|
Amended and Restated Stockholders Agreement, dated as of July 1, 2003, by and
among NBC Acquisition Corp., HWH Capital Partners, L.P., HWH Cornhusker Partners, L.P.,
Weston Presidio Capital III, L.P., Weston Presidio Capital IV, L.P., WPC Entrepreneur
Fund, L.P., WPC Entrepreneur Fund II, L.P., MSD Ventures, L.P., and the other
stockholders party thereto, filed as Exhibit 4.1 to NBC Acquisition Corp. Form 10-Q for
the quarter ended June 30, 2003, is incorporated herein by reference. |
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10.13 |
|
|
Stock Subscription Agreement between NBC Acquisition Corp. and NBC Holdings
Corp., dated as of February 3, 2009, filed as Exhibit 10.2 to NBC Acquisition Corp.
Current Report on Form 8-K dated February 3, 2009, is incorporated herein by reference. |
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10.14 |
|
|
Registration Rights Agreement, dated as of March 4, 2004, by and among NBC
Acquisition Corp. and J.P. Morgan Securities Inc., Citigroup Global Markets Inc. and
Fleet Securities, Inc., filed as Exhibit 10.22 to NBC Acquisition Corp. Registration
Statement on Form S-4 (File No. 333-114889), is incorporated herein by reference. |
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10.15 |
|
|
Registration Rights Agreement, dated as of March 4, 2004, by and among
Nebraska Book Company, Inc. and J.P. Morgan Securities Inc., Citigroup Global Markets
Inc. and Fleet Securities, Inc., filed as Exhibit 10.24 to
NBC Acquisition Corp. Registration Statement on Form S-4 (File No. 333-114889), is
incorporated herein by reference. |
115
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10.16 |
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|
Registration Rights Agreement, dated as of October 2, 2009, by and among
Nebraska Book Company, Inc., the guarantors listed in Schedule 1 thereto, J.P. Morgan
Securities Inc., Banc of America Securities LLC, Wells Fargo Securities, LLC and Piper
Jaffray & Co., filed as Exhibit 10.4 to NBC Acquisition Corp. Form 10-Q for the quarter
ended December 31, 2009, is incorporated herein by reference. |
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10.17 |
* |
|
Form of Memorandum of Understanding, dated as of February 13, 1998 by and between NBC
Acquisition Corp. and each of Mark W. Oppegard, Bruce E. Nevius, Larry R. Rempe,
Kenneth F. Jirovsky, William H. Allen, Thomas A. Hoff and Ardean A. Arndt, filed as
Exhibit 10.5 to NBC Acquisition Corp. Registration Statement on Form S-4, as amended
(File No. 333-48225), is incorporated herein by reference. |
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10.18 |
* |
|
Memorandum of Understanding, dated as of December 22, 1998 by and between Nebraska
Book Company, Inc. and Barry S. Major, Chief Operating Officer, filed as Exhibit 10.1
to NBC Acquisition Corp. Form 10-Q for the quarter ended December 31, 1998, is
incorporated herein by reference. |
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10.19 |
* |
|
Addendum to the Memorandum of Understanding, dated as of December 22, 1998 by and
between Nebraska Book Company, Inc. and Barry S. Major, dated March 29, 2002, filed as
Exhibit 10.10 to NBC Acquisition Corp. Form 10-K for the fiscal year ended March 31,
2002, is incorporated herein by reference. |
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10.20 |
* |
|
Amended and Restated Secured Promissory Note dated July 9, 2002 by and between NBC
Acquisition Corp. and Barry S. Major, filed as Exhibit 10.4 to NBC Acquisition Corp.
Form 10-Q for the quarter ended June 30, 2002, is incorporated herein by reference. |
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10.21 |
* |
|
First Amendment to the Amended and Restated Secured Promissory Note, dated as of
December 31, 2008, between Barry S. Major and NBC Acquisition Corp., filed as Exhibit
10.1 to NBC Acquisition Corp. Current Report on Form 8-K dated January 7, 2009, is
incorporated herein by reference. |
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10.22 |
* |
|
Memorandum of Understanding, dated as of July 1, 1999 by and between Nebraska Book
Company, Inc. and Alan Siemek, Chief Financial Officer, filed as Exhibit 10.1 to NBC
Acquisition Corp. Form 10-Q for the quarter ended September 30, 1999, is incorporated
herein by reference. |
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10.23 |
* |
|
Addendum to the Memorandum of Understanding, dated as of July 1, 1999 by and between
Nebraska Book Company, Inc. and Alan Siemek, dated March 29, 2002, filed as Exhibit
10.12 to NBC Acquisition Corp. Form 10-K for the fiscal year ended March 31, 2002, is
incorporated herein by reference. |
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10.24 |
* |
|
Memorandum of Understanding, dated as of November 1, 1999 by and between Nebraska
Book Company, Inc. and Michael J. Kelly, Vice President of e-commerce, filed as Exhibit
10.1 to NBC Acquisition Corp. Form 10-Q for the quarter ended December 31, 1999, is
incorporated herein by reference. |
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10.25 |
* |
|
Memorandum of Understanding, dated as of April 17, 2001 by and between Nebraska Book
Company, Inc. and Robert Rupe, Senior Vice President of the Bookstore Division, filed
as Exhibit 10.1 to NBC Acquisition Corp. Form 10-Q for the quarter ended June 30, 2001,
is incorporated herein by reference. |
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10.26 |
* |
|
Amendment to the Memorandums of Understanding by and between Nebraska Book Company,
Inc. and each of Mark W. Oppegard, Larry R. Rempe, Kenneth F. Jirovsky, William H.
Allen, Thomas A. Hoff, Barry S. Major, Alan Siemek, Michael J. Kelly, and Robert Rupe,
dated March 4, 2004, filed as Exhibit 10.36 to NBC Acquisition Corp. Form 10-K for the
fiscal year ended March 31, 2004, is incorporated herein by reference. |
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10.27 |
* |
|
Executive Employment Agreement dated as of March 27, 2010, by and between Nebraska
Book Company, Inc. and Steven Clemente, Senior Vice President of the Bookstore
Division, filed as Exhibit 10.24 to NBC Acquisition Corp. Form 10-K for the fiscal year ended
March 31, 2010, is incorporated herein by reference. |
116
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10.28 |
* |
|
NBC Holdings Corp. 2004 Stock Option Plan adopted March 4, 2004, filed as Exhibit
10.43 to NBC Acquisition Corp. Registration Statement on Form S-4 (File No.
333-114889), is incorporated herein by reference. |
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10.29 |
* |
|
First Amendment, dated August 18, 2008, to the NBC Holdings Corp. 2004 Stock Option
Plan adopted March 4, 2004, filed as Exhibit 10.1 to NBC Acquisition Corp. Form 10-Q
for the quarter ended September 30, 2008, is incorporated herein by reference. |
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10.30 |
* |
|
Second Amendment, dated January 14, 2010, to the NBC Holdings Corp. 2004 Stock Option
Plan, filed as Exhibit 10.1 to NBC Acquisition Corp. Current Report on Form 8-K filed
January 19, 2010, is incorporated herein by reference. |
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10.31 |
* |
|
NBC Holdings Corp. 2005 Restricted Stock Plan adopted September 29, 2005, filed as
Exhibit 10.1 to NBC Acquisition Corp. Form 10-Q for the quarter ended September 30,
2005, is incorporated herein by reference. |
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10.32 |
* |
|
Restricted Stock Purchase Agreement, dated as of March 31, 2006, between Holdings and
Oppegard, filed as Exhibit 10.1 to NBC Acquisition Corp. Current Report on Form 8-K
dated April 6, 2006, is incorporated herein by reference. |
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10.33 |
* |
|
Restricted Stock Purchase Agreement, dated as of March 31, 2006, between Holdings and
Major, filed as Exhibit 10.2 to NBC Acquisition Corp. Current Report on Form 8-K dated
April 6, 2006, is incorporated herein by reference. |
|
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|
10.34 |
* |
|
Restricted Stock Purchase Agreement, dated as of March 31, 2006, between Holdings and
Siemek, filed as Exhibit 10.3 to NBC Acquisition Corp. Current Report on Form 8-K dated
April 6, 2006, is incorporated herein by reference. |
|
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|
10.35 |
* |
|
Stock Repurchase Agreement, dated as of March 31, 2006, between Holdings and
Oppegard, filed as Exhibit 10.4 to NBC Acquisition Corp. Current Report on Form 8-K
dated April 6, 2006, is incorporated herein by reference. |
|
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10.36 |
* |
|
Stock Repurchase Agreement, dated as of March 31, 2006, between Holdings and Major,
filed as Exhibit 10.5 to NBC Acquisition Corp. Current Report on Form 8-K dated April
6, 2006, is incorporated herein by reference. |
|
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10.37 |
* |
|
Stock Repurchase Agreement, dated as of March 31, 2006, between Holdings and Siemek,
filed as Exhibit 10.6 to NBC Acquisition Corp. Current Report on Form 8-K dated April
6, 2006, is incorporated herein by reference. |
|
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10.38 |
* |
|
Restricted Stock Plan Special Bonus Agreement, dated as of March 31, 2006, between
Nebraska Book and Oppegard, filed as Exhibit 10.7 to NBC Acquisition Corp. Current
Report on Form 8-K dated April 6, 2006, is incorporated herein by reference. |
|
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|
10.39 |
* |
|
Restricted Stock Plan Special Bonus Agreement, dated as of March 31, 2006, between
Nebraska Book and Major, filed as Exhibit 10.8 to NBC Acquisition Corp. Current Report
on Form 8-K dated April 6, 2006, is incorporated herein by reference. |
|
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|
10.40 |
* |
|
Restricted Stock Plan Special Bonus Agreement, dated as of March 31, 2006, between
Nebraska Book and Siemek, filed as Exhibit 10.9 to NBC Acquisition Corp. Current Report
on Form 8-K dated April 6, 2006, is incorporated herein by reference. |
|
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10.41 |
* |
|
Form of Deferred Compensation Agreement by and among Nebraska Book Company, Inc. and
each of Mark W. Oppegard, Bruce E. Nevius, Larry R. Rempe and Thomas A. Hoff, filed as
Exhibit 10.7 to NBC Acquisition Corp. Registration Statement on Form S-4, as amended
(File No. 333-48225), is incorporated herein by reference. |
117
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10.42 |
* |
|
Amendment of Form of Deferred Compensation Agreement, dated December 30, 2002, by and
among Nebraska Book Company, Inc. and each of Mark W. Oppegard, Larry R. Rempe and
Thomas A. Hoff, filed as Exhibit 10.1 to NBC Acquisition Corp. Form 10-Q for the
quarter ended December 31, 2002, is incorporated herein by reference. |
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|
10.43 |
* |
|
NBC Acquisition Corp. 401(k) Savings Plan, filed as Exhibit 10.8 to NBC Acquisition
Corp. Registration Statement on Form S-4, as amended (File No. 333-48225), is
incorporated herein by reference. |
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|
|
12.1 |
|
|
Statements regarding computation of ratios, filed as Exhibit 12.1 to NBC
Acquisition Corp. Registration Statement on Form S-4 (File No. 333-114889), is
incorporated herein by reference. |
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14.1 |
|
|
Code of Business Conduct and Ethics and Code of Ethics for Our Principal
Executive Officer and Senior Financial Officers for NBC Acquisition Corp., filed as
Exhibit 14.1 to NBC Acquisition Corp. Form 10-K for the fiscal year ended March 31,
2004, is incorporated herein by reference. |
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21.1 |
|
|
Subsidiaries of NBC Acquisition Corp., filed as Exhibit 21.1 to NBC Acquisition
Corp. Registration Statement on Form S-4 (File No. 333-114889), is incorporated herein
by reference. |
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31.1 |
|
|
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
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|
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31.2 |
|
|
Certification of Principal Financial and Accounting Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002. |
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|
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32.1 |
|
|
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
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|
|
32.2 |
|
|
Certification of Principal Financial and Accounting Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002. |
|
|
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|
|
99.1 |
|
|
Mirror Option Agreement between NBC Acquisition Corp. and NBC Holdings Corp.,
dated September 30, 2005, filed as Exhibit 99.1 to NBC Acquisition Corp. Form 10-Q for
the quarter ended September 30, 2005, is incorporated herein by reference. |
|
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|
|
99.2 |
|
|
Mirror Restricted Stock Agreement between NBC Acquisition Corp. and NBC
Holdings Corp., dated March 31, 2006, filed as Exhibit 99.2 to NBC Acquisition Corp.
Form 10-K for the fiscal year ended March 31, 2006, is incorporated herein by
reference. |
|
|
|
* |
|
- Management contracts or compensatory plans filed herewith or incorporated by reference. |
All other schedules for which provision is made in the applicable accounting regulations of
the SEC are either not required under the related instructions, are not applicable (and therefore
have been omitted), or the required disclosures are contained in the consolidated financial
statements included herein.
118