Neebo, Inc. Reports Fiscal Third Quarter Financial Results

Revises Second Quarter Results

Adjusted EBITDA increased $1.8M; Reaches agreement to extend $40 million credit facility; Inventory position improved by 28 percent through expedited supply chain strategy

LINCOLN, Neb.--()--Neebo, Inc. (the “Company”; NEEB+) today announced financial results for the fiscal third quarter ended Dec. 31, 2013, and revised its second quarter results. Neebo, Inc. is a holding company and the beneficial owner of Nebraska Book Company, Inc., an industry leader in solutions for the college store marketplace.

Third Quarter Fiscal 2014 Earnings

Although it is reporting its fiscal third quarter results today, the Company is continuing to investigate certain costing issues within its inventory system. The Company is not currently able to predict the outcome of this investigation or the timing of its completion. While it is possible that this investigation could result in material changes to the Company’s third quarter and revised second quarter financial statements issued today, it is currently anticipated that the results will not have any impact on the balances currently reported for cash and cash equivalents, long-term debt or net cash flows used in operating activities, or on the Company’s liquidity. Should any material change result, the Company will issue a press release detailing the material impacts on its published financial statements and reissue the impacted financial statements.

Second Quarter Fiscal 2014 Earnings Revision

Concurrently with publishing these financial statements for the nine months ended Dec. 31, 2013, and Dec. 31, 2012, the Company is also revising its previously published financial statements for the second quarter and the six months ended Sept. 30, 2013. During second quarter fiscal 2014, a system error shortened the time period in which deferred revenue and income are recognized. This resulted in the recognition of approximately $4.2 million and $1.9 million in deferred revenue and gross margin, respectively, in the second quarter of fiscal 2014, which should have been recognized and reported in third quarter fiscal 2014 results. The correction of this issue had no impact on financial statements reported for the nine months ended Dec. 31, 2013, and Dec. 31, 2012. In conjunction with revising second quarter fiscal year 2014, the Company is withdrawing its Management’s Discussion and Analysis for the second quarter and the first six months of 2014. Investors are urged to review the Management’s Discussion and Analysis for the third quarter and the first nine months of 2014 that the Company is issuing today. Below is a table summarizing the financial impact to the second quarter P&L of certain revised line items.

 
($ in 000’s)     Three months ended September 30, 2013
        Adjusted
Revenue     EBITDA     EBITDA
As previously reported 167,035 26,705 26,838
 
Deferred rental revenue (Note 1) (4,204 ) (1,890 ) (1,890 )
Loyalty card (Note 2) 801

801

801

Obsolescence (Note 3)

- 333 (333 )
Other - 170 170
Discontinued operations (Note 4) (2,410 )     (16 )     (21 )
As revised 161,222       26,103       25,565  
Increase(Decrease) (5,813 ) (602 ) (1,273 )

Note 1) The Company corrected its methodology for calculating deferred rental revenue. The deferred rental revenue adjustment reduces the amount of revenue recognized in the fiscal quarter ended Sept. 30, 2013, with a corresponding amount recorded in the fiscal quarter ended Dec. 31, 2013. For the nine months ended Dec. 31, 2013, the statement of operations was not impacted by this correction.

Note 2) The loyalty card adjustment represents a refinement to the estimated liability based on historical usage. Due to the seasonality of the Company's business, management determined that the fiscal quarter ended Sept. 30, 2013, was the most appropriate quarter to begin reflecting the refined calculation.

Note 3) The inventory obsolescence adjustment represents a refinement to the factors used in estimating the reserve that more accurately reflects the Company's historical experience. Due to the seasonality of the Company's business, management determined that the fiscal quarter ended Sept. 30, 2013, was the most appropriate quarter to begin reflecting the refined calculation.

Note 4) Impact of closed stores moved to discontinued operations in third quarter fiscal 2014.

Company Extends Credit Facility; In Process of Negotiating ABL

The Company has agreed with its existing lender to extend its credit facility for six months to Sept. 4, 2014. The extended facility will provide $40 million in availability, subject to the terms of the facility agreement. In addition, the Company is in negotiations with interested parties to enter into a new, multi-year revolving ABL credit facility.

Expedited Supply Chain Strategy Increases Inventory Position by 28 percent

In the second quarter of fiscal 2014, the Company launched an expedited supply chain strategy, which advanced units to successfully fill demand. This resulted in accelerated availability of an additional 72,000 units, increasing the fulfillment of demand in the third quarter. As a result, the Textbook Division inventory position was improved by 28 percent.

Strategic Staffing Results in SG&A Efficiencies

The Company continues to look for ways to improve efficiencies and invest in innovative strategies. This involves allocating resources differently to achieve higher returns. In fiscal year third quarter, the Company made proactive, strategic changes in staffing within college stores and related administrative positions, which led to an SG&A reduction. In addition, the Company staffed college stores team members to more closely fit the workload week-by-week as activity fluctuated, rather than hiring staff to fill across-the-board levels.

 

Selected Financial Data for Fiscal 2014 and Fiscal 2013 Third Quarters ($ in 000’s)

 
    Three months ended    
December 31,     December 31, Percent
2013 2012 Change
 
Total assets $ 308,348 $ 360,470 (14.5 )%
Long-term debt 124,520 160,146 (22.2 )%
 
Revenues, net of returns 64,632 64,443 0.3 %
Adjusted EBITDA** (242 ) (2,040 ) (88.1 )%
Adjusted EBITDA Margin (0.4 )% (3.2 )%
 
Nine months ended
December 31, December 31, Percent
2013 2012 Change
Net cash flows used in operating activities (12,168 ) (24,603 ) (50.5 )%
Net cash flows used in investing activities (3,414 ) (6,053 ) (43.6 )%
Net cash from (used in) financing activities 1,234 (54,285 ) 102.3 %
 

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

 

Conference Call

Management will hold a conference call on Monday, March 10, 2014, at 9:00 a.m. CST to report the Company’s fiscal year 2014 third quarter financial results.

To participate in the conference call, interested parties should call 800-230-1093 or 612-332-0107 (international) and dial in 10 minutes prior to the start time of the call. The participant access code is 318534. A replay of the conference call will be available from March 10, 2014, at 11:00 a.m. CST through March 25, 2014, at 11:59 p.m. To access the replay, callers should dial 800-475-6701 or 320-365-3844 (international) and use access code 318534.

The unaudited condensed consolidated financial statements as of and for the three and nine months ended Dec. 31, 2013, and Dec. 31, 2012, as well as the revised condensed consolidated financial statements for the three and six months ended Sept. 30, 2013, are located on the Financial Filings page of the Company’s website at http://www.nebook.com/financial/company_filings.asp.

About the Company

Neebo, Inc. is the beneficial owner of Nebraska Book Company, Inc., which began in 1915 with a single college store near the University of Nebraska campus and now operates more than 206 stores, serving more than 2 million students at colleges and universities nationwide. Nebraska Book Company, Inc. sells and rents more than 8.7 million textbooks annually and supports technology platforms and e-commerce sites at more than 1,200 bookstore locations. Additional information about Nebraska Book Company, Inc. can be found at the Company’s website: http://www.nebook.com.

*Neebo, Inc. common stock is not listed, traded or quoted on any U.S. stock exchange but is quoted on the OTC Pink Market under the symbol NEEB.

Notice Regarding Forward-Looking Statements

This press release contains forward-looking statements that from time to time 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, which include anticipated borrowing availability under the extended credit facility and the potential outcome of the Company’s investigation of certain costing issues within its inventory system, speak only as of the date of this press release. 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 that may affect results and could cause results to differ materially from those expressed in such forward-looking statements, is contained in the Management’s Discussion and Analysis that was posted on the Company’s website today.

Selected Financial Data

The information contained herein is more fully detailed and explained in the Company’s Dec. 31, 2013, Unaudited Consolidated Financial Statements and Management’s Discussion and Analysis, as well as the Company’s Sept. 30, 2013, Revised Unaudited Consolidated Financial Statements, which are available at http://www.nebook.com/financial/company_filings.asp.

 

Consolidated Statement of Operations ($ in 000’s)

 
    Three months ended         Nine months ended    
       
Successor Successor Predecessor Non-GAAP
nine months six months three months nine months
Successor Successor ended ended ended ended
December 31, December 31, December 31, December 31, June 30, December 31,
2013 2012 2013 2012 2012 2012
Revenues, net of returns $ 64,632 $ 64,443 $ 284,459 $ 247,811 $ 62,235 $ 310,046
Costs of sales   37,914     36,168     169,743     141,069     39,099     180,168  
Gross profit   26,718     28,275     114,716     106,742     23,136     129,878  
 
Operating expenses:
Selling, general, and administrative 27,827 30,817 96,964 75,370 28,509 103,879
Depreciation 1,528 1,743 4,918 3,343 1,461 4,804
Amortization   2,261     2,282     6,579     4,490     2,033     6,523  
  31,616     34,842     108,461     83,203     32,003     115,206  
Income (loss) from operations   (4,898 )   (6,567 )   6,255     23,539     (8,867 )   14,672  
 
Other (income) expenses:
Interest expense 6,527 5,615 34,376 15,694 8,350 24,044
Interest income   (17 )   (3 )   (7 )   (22 )   (14 )   (36 )
  6,510     5,612     34,369     15,672     8,336     24,008  

Income (loss) before reorganization items and income taxes

(11,408 ) (12,179 ) (28,114 ) 7,867 (17,203 ) (9,336 )
Reorganization items       (629 )       (1,308 )  

(275,466

)

  (276,774 )

Income (loss) from continuing operations before income taxes

(11,408 ) (11,550 ) (28,114 ) 9,175 258,263 267,438
Income tax expense (benefit)   (4,553 )   (3,943 )   (11,123 )   3,842         3,842  
Income (loss) from continuing operations (6,855 ) (7,607 ) (16,991 ) 5,333 258,263 263,596

Income (loss) from discontinued operations, net of tax

  (1,085 )   309     (1,561 )   247     (1,976 )   (1,729 )
 
Net income (loss) $ (7,940 ) $ (7,298 ) $ (18,552 ) $ 5,580   $ 256,287   $ 261,867  
 
 

Net Revenues by Segment ($ in 000’s)

 
    Three months ended         Nine months ended    
       
Successor Successor Predecessor Non-GAAP
nine months six months three months nine months
Successor Successor ended ended ended ended
December 31, December 31, December 31, December 31, June 30, December 31,
2013 2012 2013 2012 2012 2012
College Stores $ 39,321 $ 40,497 $ 189,305 $ 169,943 $ 38,178 $ 208,121
Textbooks 27,183 30,282 105,136 88,428 25,885 114,313
Complementary Services 4,099 5,323 14,934 12,721 4,984 17,705
Intercompany eliminations   (5,971 )   (11,659 )   (24,916 )   (23,281 )   (6,813 )   (30,094 )
Total net revenues $ 64,632   $ 64,443   $ 284,459   $ 247,811   $ 62,234   $ 310,045  
 
 

Gross Profit by Segment ($ in 000’s)

 
    Three months ended         Nine months ended    
       
Successor Successor Predecessor Non-GAAP
nine months six months three months nine months
Successor Successor ended ended ended ended
December 31, December 31, December 31, December 31, June 30, December 31,
2013 2012 2013 2012 2012 2012
College Stores $ 14,528 $ 17,001 $ 66,194 $ 58,844 $ 13,666 $ 72,510
Textbooks 12,619 11,678 45,588 45,606 9,056 54,662
Complementary Services 2,288 2,538 7,341 6,129 2,512 8,641
Intercompany eliminations   (2,717 )   (2,943 )   (4,407 )   (3,837 )   (2,098 )   (5,935 )
Total gross profit $ 26,718   $ 28,274   $ 114,716   $ 106,742   $ 23,136   $ 129,878  
 
 

EBITDA and Adjusted EBITDA ($ in 000’s)

 
    Three months ended         Nine months ended    
       
Successor Successor Predecessor Non-GAAP
nine months six months three months nine months
Successor Successor ended ended ended ended
December 31, December 31, December 31, December 31, June 30, December 31,
2013 2012 2013 2012 2012 2012

EBITDA

Net income (loss) $ (7,940 ) $ (7,298 ) $ (18,552 ) $ 5,580 $ 256,287 $ 261,867
Interest expense, net 6,510 5,612 34,368 15,672 8,336 24,008
Provision (benefit) for income taxes (4,553 ) (3,943 ) (11,122 ) 3,842 - 3,842
Depreciation 1,528 1,743 4,918 3,343 1,461 4,804
Amortization   2,261     2,282     6,579     4,490     2,033     6,523  
EBITDA   (2,194 )   (1,604 )   16,191     32,927     268,117     301,044  
 

Adjusted EBITDA

EBITDA (2,194 ) (1,604 ) 16,191 32,927 268,117 301,044
Reorganization professional fees - (629 ) - (1,308 ) 13,382 12,074

Gain on settlement of liabilities subject to compromise

- - - - (288,848 ) (288,848 )
Fresh start adjustments - (2,285 ) - (9,193 ) - (9,193 )
Discontinued operations 1,085 (309 ) 1,561 (247 ) 1,977 1,730
Severance and voluntary costs 365 158 729 246 230 476
Site closures, settlements and other costs - - - 48 533 581
Share-based compensation 53 48 176 - 8 8
Other miscellaneous one-time costs   449     2,581     904     4,758     2,256     7,014  
Adjusted EBITDA $ (242 ) $ (2,040 ) $ 19,561   $ 27,231   $ (2,345 ) $ 24,886  
 
 

Adjusted EBITDA by Segment ($ in 000’s)

 
    Three months ended         Nine months ended    
       
Successor Successor Predecessor Non-GAAP
nine months six months three months nine months
Successor Successor ended ended ended ended
December 31, December 31, December 31, December 31, June 30, December 31,
2013 2012 2013 2012 2012 2012
College Stores $ (1,834 ) $ (3,254 ) $ 4,699 $ 5,384 $ (2,397 ) $ 2,987
Textbooks 8,214 8,050 31,178 30,693 4,295 34,988
Complementary Services (50 ) (486 ) (276 ) 237 (102 ) 135
Corporate Administration (3,303 ) (3,620 ) (10,939 ) (5,521 ) (1,943 ) (7,464 )
Intercompany Eliminations   (3,269 )   (2,730 )   (5,101 )   (3,562 )   (2,198 )   (5,760 )
Total adjusted EBITDA $ (242 ) $ (2,040 ) $ 19,561   $ 27,231   $ (2,345 ) $ 24,886  
 

Non-GAAP Financial Information

The common definition of EBITDA is “Earnings before Interest, Taxes, Depreciation and Amortization.” In evaluating financial performance, the Company uses Adjusted EBITDA to evaluate, assess and benchmark its operational results. Adjusted EBITDA consists of EBITDA adjusted to exclude the effects of certain specified items of revenue or gain and expense or loss. The Company’s definition of Adjusted EBITDA is EBITDA plus adjustments to exclude items that impacted EBITDA yet are not considered a part of our normal operations, such as: cost and benefits related to the Chapter 11 process and our restructuring, discontinued operations, one-time severance and voluntary costs, and site closure costs and cost related to our store divestiture plan. Inter-divisional profit impacts are also excluded with respect to each business segment in connection with computing segment Adjusted EBITDA. In addition, we also exclude certain non-cash data, including share-based compensation. EBITDA and Adjusted EBITDA are not measures of financial performance under generally accepted accounting principles (“GAAP”). They should not be considered in isolation or as a substitute for net income (loss) in accordance with GAAP. EBITDA and Adjusted EBITDA exclude 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, EBITDA and Adjusted EBITDA are presented, as management believes the measures are relevant and useful information widely used by analysts, investors and other interested parties in our industry. The Company understands certain investors use them to measure the Company’s operating performance. Accordingly, management is disclosing this information to permit a more comprehensive analysis of the Company’s operating performance. EBITDA and Adjusted EBITDA financial information are reconciled to net income (loss).

Contacts

Neebo, Inc.
Media Relations:
Cassie Grenemeier, 402-730-0500
cgrenemeier@neebo.com

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Contacts

Neebo, Inc.
Media Relations:
Cassie Grenemeier, 402-730-0500
cgrenemeier@neebo.com