Neebo, Inc. Reports Fiscal 2013 Second Quarter Financial Results

LINCOLN, Neb.--(BUSINESS WIRE)--Neebo, Inc. (the “Company”) today announced financial results for the fiscal second quarter ended September 30, 2012. Neebo, Inc. is a holding company and the beneficial owner of Nebraska Book Company, Inc., an industry leader in solutions for the college bookstore marketplace.

“Our simple, yet effective approach focuses on best in class guest service, expanding textbook rental programs, growing our site Neebo.com and strengthening our balance sheet through disciplined working capital management, all of which contributed to significant improvements in gross profit and SG&A expenses during the past quarter.”

Fiscal 2013 Financial Highlights (six months ended September 30, 2012)

• Debt reduced by $56.8 million, from $218.3 million at June 30, 2012 to $161.5 million at September 30, 2012. The Company made a $25.0 million voluntary prepayment on its senior secured term loan, permanently reducing the outstanding principal amount under this facility. In addition, the Company has repaid the full $31.8 million balance on its Bridge loan.
• Adjusted EBITDA** of $31.8 million for the six months ended September 30, 2012, an increase of $5.9 million over prior year period.
• Gross profit of 40.7% for the six months ended September 30, 2012, up from 39.2% in prior year period.

“I am proud to say that our team has continued to execute on our key strategies for continued growth and profitability,” said Steve Clemente, President and Chief Executive Officer. “Our simple, yet effective approach focuses on best in class guest service, expanding textbook rental programs, growing our site Neebo.com and strengthening our balance sheet through disciplined working capital management, all of which contributed to significant improvements in gross profit and SG&A expenses during the past quarter.”

“We fully intend to remain focused on paying down debt with free cash flow and net working capital improvements as we demonstrate our commitment to disciplined capital management,” explains Alexi Wellman, Chief Financial Officer.

The following table presents selected financial data for continuing operations as of and for the six months ended September 30, 2012 and 2011 ($ in 000’s).

	Six months ended
	September 30, 2012			September 30, 2011			Percent Change
Total assets	$	377,389		$	547,144		*
Long-term debt		161,472			452,073		*
Revenues, net of returns		264,065			283,601		-6.9	%
Adjusted EBITDA**		31,837			25,931		22.8	%
Adjusted EBITDA Margin		12.1	%		9.1	%
Net cash flows provided by (used in) operating activities		4,835			(45,615	)	-110.6	%
Net cash flows used in investing activities		(4,769	)		(5,377	)	*
Net cash provided by (used in) financing activities		(72,817	)		117,131		*
Net income (loss) from operations	$	268,518		$	(115,370	)	-332.7	%

* Not Meaningful

** Adjusted EBITDA is a non-GAAP financial measure. See additional disclosure below.

Item Impacting the Six Months Ended September 30, 2012 Comparability

• The Company recorded the impact of fresh start accounting as of June 30, 2012. As a result of fresh start accounting, Adjusted EBITDA was positively impacted by approximately $3.0 million related to the recording of overhead capitalization.

Conference Call

Management will hold a conference call on November 29, 2012 at 11:00AM Eastern Time (10:00AM Central Time) to review the Company’s fiscal second quarter financial results. To participate in the call, please dial [phone] or [phone] (International). Interested parties are asked to dial in ten minutes prior to the start time of the call.

A digitized replay of the call will be available from November 29, 2012 through December 6, 2012. To access the replay, call [phone] or [phone] (International) and use the access code 271935.

The unaudited condensed consolidated financial statements as of and for the three and six months ended September 30, 2012 and 2011 are located on the Company’s website at: http://www.nebook.com/financial/company_filings.asp.

About the Company

Neebo, Inc. is the beneficial owner of the Nebraska Book Company, Inc. Nebraska Book Company, Inc. began in 1915 with a single college store near the University of Nebraska campus and now operates nearly 250 stores serving colleges and universities with more than two million students. Nebraska Book Company, Inc. serves more than 2,500 bookstores, selling six million textbooks annually and installing more than 1,600 technology platforms and e-commerce sites. Additional information about Nebraska Book Company, Inc. can be found at the Company's website: www.nebook.com.

Notice Regarding Forward-Looking Statements

This press release contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they do not fully materialize or prove incorrect, could cause the Company’s business and results of operations to differ materially from those expressed or implied by such forward-looking statements. Such forward-looking statements include statements that discuss management’s beliefs and assumptions and can be identified by the use of words such as “will,” “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “intends,” “potential,” “continue,” or the negative of such terms, or other comparable terminology. These forward-looking statements speak only as of the date on which the statements were made. The Company undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent required by applicable law. Additional information regarding forward-looking statements as well as risks and uncertainties is contained in Management’s Discussion and Analysis.

Selected Financial Data

The information contained herein is more fully detailed and explained in the Company’s Unaudited Condensed Consolidated Financial Statements and Management Discussion & Analysis, which is available at: http://www.nebook.com/financial/company_filings.asp.

Consolidated Statement of Operations ($ in 000’s)

	Three months ended						Six months ended
							Successor			Predecessor
							three months			three months
	Successor			Predecessor			ended			ended			Predecessor
	September 30, 2012			September 30, 2011			September 30, 2012			June 30, 2012			September 30, 2011
Revenues, net of returns	$	195,911		$	217,744		$	195,911		$	68,153		$	283,601
Costs of sales		113,468			133,453			113,468			43,027			172,547
Gross profit		82,443			84,291			82,443			25,127			111,054
Operating expenses:
Selling, general, and administrative		47,901			48,656			47,901			31,318			85,123
Depreciation		1,758			1,743			1,758			1,642			3,618
Amortization		2,224			1,979			2,224			2,067			3,972
		51,884			52,378			51,884			35,027			92,712
Income (loss) from operations		30,559			31,912			30,559			(9,900	)		18,342
Operating expenses:
Interest expense		10,077			9,417			10,077			8,337			22,182
Interest income		(17	)		-			(17	)		-			(14	)
Goodwill impairment		-			122,639			-			-			122,639
		10,060			132,056			10,060			8,337			144,806
Income (loss) before reorganization items and income taxes		20,499			(100,143	)		20,499			(18,237	)		(126,464	)
Reorganization items		(679	)		8,749			(679	)		(274,817	)		15,266
Income (loss) from continuing operations before income taxes		21,178			(108,892	)		21,178			256,580			(141,731	)
Income tax expense (benefit)		7,785			(16,396	)		7,785			-			(26,353	)
Income (loss) from continuing operations		13,393			(92,496	)		13,393			256,580			(115,378	)
Income (loss) from discontinuing operations, net of tax		(514	)		823			(514	)		(941	)		8
Net income (loss)	$	12,879		$	(91,674	)	$	12,879		$	255,639		$	(115,370	)

Net Revenues by Segment ($ in 000’s)

	Three months ended										Six months ended
											Successor			Predecessor
											three months			three months
	Successor					Predecessor					ended			ended			Predecessor
	September 30, 2012			Percent of total		September 30, 2011			Percent of total		September 30, 2012			June 30, 2012			September 30, 2011			Percent of total
College Stores	$	141,760		72.4	%	$	167,497		76.9	%	$	141,760		$	43,762		$	209,919		74.0	%
Textbooks		58,145		29.7	%		55,463		25.5	%		58,145			25,885			81,426		28.7	%
Complementary Services		7,628		3.9	%		8,612		4.0	%		7,628			5,319			15,585		5.5	%
Intersegment		(11,621	)	-5.9	%		(13,829	)	-6.4	%		(11,621	)		(6,813	)		(23,330	)	-8.2	%
Total net revenues	$	195,911		100.0	%	$	217,744		100.0	%	$	195,911		$	68,153		$	283,601		100.0	%

Gross Profit by Segment ($ in 000’s)

	Three months ended									Six months ended
										Successor			Predecessor
										three months			three months
	Successor			Percent		Predecessor		Percent		ended			ended			Predecessor			Percent
	September 30, 2012			of net revenues		September 30, 2011		of net revenues		September 30, 2012			June 30, 2012			September 30, 2011			of net revenues
College Stores	$	45,590		32.2	%	$	54,998	32.8	%	$	45,590		$	15,364		$	71,414		34.0	%
Textbooks		33,928		58.3	%		24,821	44.8	%		33,928			9,055			34,560		42.4	%
Complementary Services		3,820		50.1	%		3,684	42.8	%		3,820			2,805			7,058		45.3	%
Intersegment		(894	)	7.7	%		787	-5.7	%		(894	)		(2,098	)		(1,978	)	8.5	%
Total gross profit	$	82,443		42.1	%	$	84,291	38.7	%	$	82,443		$	25,127		$	111,054		39.2	%

EBITDA and Adjusted EBITDA ($ in 000’s)

	Three months ended						Six months ended
							Successor			Predecessor
							three months			three months
	Successor			Predecessor			ended			ended			Predecessor
	September 30, 2012			September 30, 2011			September 30, 2012			June 30, 2012			September 30, 2011
EBITDA
Net income (loss)	$	12,879		$	(91,674	)	$	12,879		$	255,639		$	(115,370	)
Interest expense, net		10,060			9,417			10,060			8,337			22,167
Provision (benefit) for income taxes		7,785			(16,396	)		7,785			-			(26,353	)
Depreciation		1,758			1,743			1,758			1,642			3,618
Amortization		2,224			1,979			2,224			2,067			3,972
EBITDA		34,706			(94,930	)		34,706			267,685			(111,966	)
Adjusted EBITDA
EBITDA		34,706			(94,930	)		34,706			267,685			(111,966	)
Goodwill impairment		-			122,639			-			-			122,639
Reorganization of professional fees		(679	)		8,749			(679	)		13,382			15,266
Gain on settlement of liabilities subject to compromise		-			-			-			(288,199	)		-
Discontinued operations		514		$	(822.73	)		514			941			(8	)
Severance and voluntary costs		72			-			72			184			-
Site closures, settlements and other costs		-			-			-			533			-
Other miscellaneous one-time costs		1,309			-			1,309			1,389			-
Adjusted EBITDA	$	35,922		$	35,635		$	35,922		$	(4,085	)	$	25,931

The following table provides Adjusted EBITDA on a segment basis ($ in 000’s).

	Three months ended						Six months ended
							Successor			Predecessor
							three months			three months
	Successor			Predecessor			ended			ended			Predecessor
	September 30, 2012			September 30, 2011			September 30, 2012			June 30, 2012			September 30, 2011
College Stores	$	11,276		$	17,660		$	11,276		$	(3,319	)	$	12,582
Textbooks		27,211			18,927			27,211			4,083			23,780
Complementary Services		708			667			708			(49	)		1,273
Corporate Administration		(3,274	)		(1,619	)		(3,274	)		(4,801	)		(11,703	)
Total Adjusted EBITDA	$	35,922		$	35,635		$	35,922		$	(4,085	)	$	25,931

Non-GAAP Financial Information

The common definition of EBITDA is “Earnings before Interest Expense, Taxes, Depreciation and Amortization.” In evaluating financial performance, the Company uses Adjusted EBITDA to evaluate, assess and benchmark its operational results. The Company’s definition of Adjusted EBITDA is EBITDA plus adjustments to exclude the effects of mainly nonrecurring items of revenue or gain and expense or loss.

Adjusted EBITDA is not a measure of financial performance under generally accepted accounting principles (“GAAP”). Adjusted EBITDA should not be considered in isolation or as a substitute for net income (loss) in accordance with GAAP. Adjusted EBITDA excludes components that are significant in understanding and assessing our results of operations and cash flows. In addition, the Company’s measure of Adjusted EBITDA, as presented in this press release, may not be comparable to similarly titled measures used by other companies.

However, Adjusted EBITDA is presented as management believes the measure is relevant and useful information widely used by analysts, investors and other interested parties in our industry. The Company understands certain investors use it to measure the Company’s operating performance and its historical ability to meet financial obligations. Accordingly, management is disclosing this information to permit a more comprehensive analysis of the Company’s operating performance, to provide an additional measure of performance and to provide additional information with respect to its ability to meet future debt service, capital expenditure and working capital requirements. Adjusted EBITDA financial information is comparable to net income (loss). Management’s Discussion & Analysis contains a reconciliation of Adjusted EBITDA to the Company’s GAAP disclosure of net income (loss).