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File Number 333-164271
• | We will exchange all original notes that are validly tendered and not validly withdrawn prior to the expiration of the exchange offer. |
• | You may withdraw tenders of original notes at any time prior to the expiration of the exchange offer. |
• | The exchange offer expires at 5:00 p.m., New York City time, on March 15, 2010, unless extended. We do not currently intend to extend the expiration date. |
• | The exchange of original notes for exchange notes pursuant to the exchange offer will not constitute a taxable exchange for U.S. federal income tax purposes. |
• | We will not receive any proceeds from the exchange offer. |
• | The exchange notes are being offered in order to satisfy certain of our obligations under the registration rights agreement entered into in connection with the placement of the original notes. |
• | The terms of the exchange notes to be issued in the exchange offer are substantially identical to the original notes, except that the exchange notes will be freely transferable, except in the limited circumstances described below. |
• | The exchange notes will be our senior secured obligations and rank equally in right of payment to any of our existing and future senior indebtedness and senior in right of payment to any of our existing and future subordinated indebtedness. |
• | The exchange notes will be fully and unconditionally guaranteed, on a senior secured basis, by each of our existing and future subsidiaries that guarantee our senior secured asset-based revolving credit facility until such guarantees are released and secured by second-priority liens and security interests, subject to permitted liens, on the collateral. |
• | There is no established trading market for the exchange notes, and we do not intend to apply for listing of the exchange notes on any securities exchange or automated quotation system. |
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• | increased competition; | |
• | ability to acquire college bookstores and integrate them; | |
• | inability to purchase a sufficient supply of used textbooks; | |
• | loss or retirement of key members of management; |
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• | changes in pricing of new or used textbooks; | |
• | ability to achieve our expected cost savings; | |
• | seasonality of our wholesale and bookstore operations; | |
• | limits on cash flow available for our operations resulting from our level of indebtedness; | |
• | increases in our cost of borrowing or inability or unavailability of additional debt or equity capital; | |
• | changes in general economic conditions or in the markets in which we compete or may, from time to time, compete; and | |
• | ability to refinance our indebtedness prior to its maturity dates. |
• | the exclusion of charges or liabilities that require, or will require, cash settlement or would have required cash settlement, absent an ability to settle in another manner, from a non-GAAP liquidity measure; and | |
• | the adjustment of a non-GAAP financial measure to eliminate or smooth items identified as non-recurring, infrequent or unusual, when the nature of the charge or gain is such that it has occurred in the past two years or is reasonably likely to recur within the next two years. |
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• | EBITDA and Adjusted EBITDA do not reflect our ability to refinance our indebtedness prior to its maturity dates; | |
• | EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital needs; | |
• | EBITDA and Adjusted EBITDA do not reflect our interest expense or the cash requirements necessary to service interest or principal payments, on our debt; | |
• | EBITDA and Adjusted EBITDA do not reflect our income tax expense or the cash requirements to pay our taxes; | |
• | EBITDA and Adjusted EBITDA do not reflect historical cash expenditures or future requirements for capital expenditures or contractual commitments; | |
• | although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect any cash requirements for such replacements; and | |
• | other companies in our industry may calculate EBITDA and Adjusted EBITDA differently so they may not be comparable. |
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• | repaid in full the $186.5 million outstanding under our term loan facilities under our existing senior secured credit facilities; and | |
• | replaced our existing revolving credit facility with a senior secured asset-based revolving credit facility, which we refer to in this prospectus as the ABL Facility, by amending and restating our existing senior credit agreement (we now refer to our senior credit agreement as the ABL Credit Agreement). |
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• | the exchange notes have been registered under the Securities Act and will not bear any legend restricting their transfer; | |
• | the exchange notes bear a different CUSIP number than the original notes; and | |
• | the holders of the exchange notes will not be entitled to certain rights under the registration rights agreement. |
The exchange offer | We are offering to exchange up to $200,000,000 in aggregate principal amount of original notes for up to $200,000,000 aggregate principal amount of exchange notes. We will issue $2,000 of principal amount of exchange notes and integral multiples of $1,000 in excess thereof in exchange for each $2,000 of principal amount of original notes and integral multiples of $1,000 in excess thereof surrendered under the exchange offer. | |
Resale | Based upon interpretations by the staff of the SEC set forth in no-action letters issued to unrelated third parties, we believe that the exchange notes may be offered for resale, resold or otherwise transferred by you without compliance with the registration and prospectus delivery requirements of the Securities Act, unless you: | |
• are an “affiliate” of ours within the meaning of Rule 405 under the Securities Act; | ||
• are a broker-dealer who purchased the original notes directly from us for resale under Rule 144A or any other available exemption under the Securities Act | ||
• acquired the exchange notes other than in the ordinary course of your business; or | ||
• have an arrangement with any person to engage in the distribution of exchange notes. |
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However, we have not submitted a no-action letter and there can be no assurance that the SEC will make a similar determination with respect to the exchange offer. Furthermore, in order to participate in the exchange offer, you must make the representations set forth in the letter of transmittal that we are sending you with this prospectus. |
Expiration Date | The exchange offer will expire at 5:00 p.m., New York City time, on March 15, 2010, or on a later date and time if we decide to extend the exchange offer. We refer to the date on which the exchange offer will expire as the expiration date. We do not currently intend to extend the expiration date. A tender of the original notes in the exchange offer may be withdrawn at any time before the expiration date. Any original notes not accepted for exchange for any reason will be returned without expense to the tendering holder promptly after the expiration date or termination of the exchange offer. |
Material conditions to exchange offer | The exchange offer is subject to customary conditions, which we may waive. See “The exchange offer—Material conditions to the exchange offer.” |
Procedures for tendering original notes | The exchange offer will expire at 5:00 p.m., New York City time, on March 15, 2010. If you wish to accept the exchange offer, you must complete, sign and date the letter of transmittal, or a copy of the letter of transmittal, in accordance with the instructions contained in this prospectus and in the letter of transmittal, and mail or otherwise deliver the letter of transmittal, or the copy, together with the original notes and any other required documentation, to the exchange agent at the address set forth in this prospectus and in the letter of transmittal. |
We will accept for exchange any and all original notes that are properly tendered in the exchange offer prior to the expiration date. The exchange notes issued in the exchange offer will be delivered promptly following the expiration date. See “The exchange offer—Material conditions to the exchange offer.” | ||
Special procedures for beneficial owners | If you are the beneficial owner of original notes registered in the name of a broker, dealer, commercial bank, trust company or other nominee and wish to tender in the exchange offer, you should contact the |
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person in whose name your notes are registered and promptly instruct the person to tender on your behalf. | ||
Guaranteed delivery procedures | If you wish to tender your original notes and your original notes are not immediately available or you cannot deliver your original notes, the letter of transmittal or any other documents required by the letter of transmittal or to comply with the applicable procedures under DTC’s Automated Tender Offer Program before the expiration date, you must tender your original notes according to the guaranteed delivery procedures set forth in this prospectus under “The exchange offer—Guaranteed delivery procedures.” | |
Effect on holders of outstanding original notes | Once we complete the exchange of all validly tendered original notes pursuant to the terms of the exchange offer, we will have fulfilled a covenant contained in the registration rights agreement, and, accordingly, there will be no additional interest paid on the original notes under the circumstances described in the registration rights agreement. If you are a holder of the original notes and you do not tender your original notes in the exchange offer, you will continue to hold the original notes and you will be entitled to all the rights and limitations applicable to the original notes in the indenture, except for any rights under the registration rights agreement that by their terms terminate upon the completion of the exchange offer. | |
We expect that the exchange of the exchange notes for the original notes will have a material adverse effect on the trading market for the original notes. | ||
Consequence of failure to exchange | All untendered original notes will continue to be subject to the restrictions on transfer provided for in the original notes and in the indenture. In general, the original notes may not be offered or sold, unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. Other than in connection with the exchange offer, we do not currently anticipate that we will register the original notes under the Securities Act. | |
Certain U.S. federal income tax considerations | The exchange of original notes for exchange notes pursuant to the exchange offer will not constitute a taxable exchange for United States federal income tax purposes. See “Certain U.S. federal income tax |
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considerations” for a summary of certain United States federal income tax consequences relating to the acquisition, ownership and disposition of the original notes and exchange notes. | ||
Use of proceeds | We will not receive any cash proceeds from the issuance of exchange notes in connection with the exchange offer. | |
Exchange agent | Wilmington Trust FSB, the trustee under the indenture (“Trustee”), is the exchange agent for the exchange offer. The address and telephone number for the exchange agent are provided in the section captioned “The exchange offer—Exchange agent.” |
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Issuer | Nebraska Book Company, Inc. | |
Securities offered | $200,000,000 aggregate principal amount of 10% senior secured notes due 2011. | |
Maturity date | December 1, 2011. | |
Interest rate | The notes will bear interest at a rate of 10% per annum. | |
Interest payment dates | June 1 and December 1, commencing December 1, 2009. | |
Guarantees | The exchange notes will be unconditionally guaranteed on a senior secured basis, jointly and severally, by all of our existing and future subsidiaries that guarantee, and will in the future guarantee, indebtedness under our ABL Facility and all of our subsidiaries that guarantee other indebtedness of ours and other subsidiary guarantors. Under certain circumstances, subsidiaries may be released from these guarantees without the consent of the holders of the notes. See “Description of notes—Subsidiary guarantees.” | |
Collateral | The senior secured notes and related guarantees will have the benefit of a second-priority lien on substantially all our and our subsidiary guarantors’ tangible and intangible assets that secure all of our obligations under our new senior secured revolving credit facility on a first-priority basis (the “Collateral”). The senior secured notes and related guarantees will not be secured by the assets of non-guarantor subsidiaries. For a more detailed discussion, see “Description of notes—Collateral.” | |
Intercreditor Agreement | The Collateral securing the exchange notes and the subsidiary guarantees will also serve as collateral to secure our obligations and the subsidiary guarantors under the ABL Credit Agreement on a first-priority basis. On October 2, 2009, we entered into an Intercreditor Agreement with the subsidiary guarantors, the Trustee, on behalf of itself and the holders, and JPMorgan Chase Bank, N.A., as administrative agent under the ABL Credit Agreement, to define the rights of lenders and certain other parties (the “ABL Credit Agreement Secured Parties”) under the ABL Credit Agreement and related agreements and the holders with respect to the Collateral. If any other indebtedness ranks equally in right of |
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payment to the exchange notes (“Pari Passu Lien Indebtedness”) and is permitted by the terms of the Indenture to be secured by the Collateral, the representatives of the holders of such other Pari Passu Lien Indebtedness or indebtedness will also become party to the Intercreditor Agreement and, in the case of such Pari Passu Lien Indebtedness, will designate the Trustee (or any successor) as collateral agent on their behalf. The Intercreditor Agreement provides, among other things, that (1) liens on the Collateral securing the exchange notes will be junior to the liens in favor of the administrative agent securing the ABL Credit Agreement obligations, and consequently, the ABL Credit Agreement Secured Parties will be entitled to receive the proceeds from the disposition of any Collateral prior to the holders, (2) during any insolvency proceedings, the administrative agent and the collateral agent will coordinate their efforts to give effect to the relative priority of their security interests in the Collateral and (3) certain procedures for enforcing the second-priority liens on the Collateral shall be followed. If indebtedness is incurred pursuant to the ABL Credit Agreement and such indebtedness is secured on a first-priority basis by any Collateral held or released by the administrative agent and the exchange notes and the subsidiary guarantees are secured on a second-priority basis by any such asset that qualifies as Collateral, then the collateral agent and the representative of the holders of such indebtedness will become party to an intercreditor agreement with terms substantially similar to the Intercreditor Agreement. | ||
Ranking | The exchange notes will: | |
• be our senior secured obligations; | ||
• be secured by second-priority liens and security interests, subject to permitted liens, in the Collateral; | ||
• rank equally in right of payment to any of our existing and future senior indebtedness and senior in right of payment to any of our existing and future subordinated indebtedness; | ||
• be effectively senior to all of our existing and future unsecured indebtedness to the extent of the value of the Collateral (after giving effect to any senior lien on the Collateral); | ||
• be effectively subordinated to our obligations under our ABL Facility, to the extent of the value of the Collateral that secures such obligations on a first-priority basis; and |
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• be structurally subordinated to obligations of our subsidiaries that are not subsidiary guarantors. | ||
As of September 30, 2009, on an as adjusted basis after giving effect to the Refinancing: | ||
• we would have had approximately $378.9 million of total outstanding indebtedness (including capital lease obligations but excluding intercompany liabilities and guarantees under the ABL Facility and the indentures governing these notes and our senior subordinated notes), of which $175.0 million would have been subordinated to the notes; and | ||
• we would have had $3.9 million of outstanding senior secured pari passu indebtedness, under capitalized leases and mortgages, which would have ranked equally with the exchange notes, although effectively senior to the notes to the extent of the value of the Collateral securing such obligations. | ||
Optional redemption | At any time prior to December 1, 2011, we may redeem up to 35% of the original principal amount of the exchange notes with the proceeds of one or more equity offerings of our common shares at a redemption price of 110% of the principal amount of the exchange notes, together with accrued and unpaid interest, if any, to the date of redemption. | |
At any time prior to December 1, 2011, we may also redeem some or all of the exchange notes at a price equal to 100% of the principal amount of the notes plus accrued and unpaid interest plus a “make-whole” premium. | ||
Change of control | The occurrence of a change of control will be a triggering event requiring us to offer to purchase from you all or a portion of your exchange notes at a price equal to 101% of their principal amount, together with accrued and unpaid interest, if any, to the date of purchase. | |
Certain covenants | We will issue the exchange notes under an indenture with Wilmington Trust FSB, as trustee. The indenture will, among other things, limit our ability and the ability of our restricted subsidiaries to: | |
• incur, assume or guarantee additional indebtedness; | ||
• issue redeemable stock and preferred stock; | ||
• pay dividends or distributions or redeem or repurchase capital stock; | ||
• prepay, redeem or repurchase debt that is junior in right of payment to the notes; |
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• make loans, investments and capital expenditures; | ||
• incur liens; | ||
• engage in sale/leaseback transactions; | ||
• restrict dividends, loans or asset transfers from our subsidiaries; | ||
• sell or otherwise dispose of assets, including capital stock of subsidiaries; | ||
• consolidate or merge with or into, or sell substantially all of our assets to, another person; | ||
• enter into transactions with affiliates; and | ||
• enter into new lines of business. | ||
These covenants will be subject to a number of important exceptions and qualifications described under the heading “Description of notes—Certain covenants.” | ||
No public market | The exchange notes are new securities and there is currently no established trading market for the exchange notes. The exchange notes generally will be freely transferable but will also be new securities for which there will not initially be a market. We do not intend to apply for the exchange notes to be listed on any securities exchange or an automated dealer quotation system. Accordingly, there can be no assurance as to the development or liquidity of any market for exchange notes. The initial purchasers have advised us that they currently intend to make a market in the exchange notes. However, they are not obligated to do so, and any market making with respect to the exchange notes may be discontinued without notice. | |
Form and denomination | The notes will be issued in minimum denominations of $2,000 and integral multiples of $1,000 in excess thereof. The exchange notes will be book-entry only and registered in the name of a nominee of DTC. Investors may elect to hold interests in the notes through Clearstream Banking, S.A., or Euroclear Bank S.A./N.V., as operator of the Euroclear system if they are participants in those systems or indirectly through organizations that are participants in those systems. | |
Risk factors | Investment in the notes involves certain risks. You should carefully consider the information under “Risk factors” and all other information included in this prospectus before investing in the notes. |
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Six months | ||||||||||||||||||||
Fiscal year ended | ended | |||||||||||||||||||
March 31, | September 30, | |||||||||||||||||||
(Dollars in thousands) | 2007 | 2008 | 2009 | 2008 | 2009 | |||||||||||||||
Statement of operations data: | ||||||||||||||||||||
Revenues | $ | 544,428 | $ | 581,248 | $ | 610,716 | $ | 352,136 | $ | 345,480 | ||||||||||
Costs of sales (exclusive of depreciation shown below) | 332,444 | 354,140 | 371,369 | 219,262 | 213,771 | |||||||||||||||
Gross profit | 211,984 | 227,108 | 239,347 | 132,874 | 131,709 | |||||||||||||||
Operating expenses: | ||||||||||||||||||||
Selling, general and administrative(1) | 143,096 | 157,193 | 168,315 | 87,257 | 83,203 | |||||||||||||||
Closure of California Warehouse | 774 | (36 | ) | — | — | — | ||||||||||||||
Depreciation | 5,916 | 7,209 | 7,603 | 3,690 | 4,093 | |||||||||||||||
Amortization | 9,613 | 10,443 | 11,384 | 5,693 | 5,636 | |||||||||||||||
Goodwill impairment(2) | — | — | 106,972 | — | — | |||||||||||||||
Income (loss) from operations | 52,585 | 52,299 | (54,927 | ) | 36,234 | 38,777 | ||||||||||||||
Other expenses (income): | ||||||||||||||||||||
Interest expense | 33,135 | 33,559 | 32,878 | 15,975 | 19,382 | |||||||||||||||
Interest income | (1,643 | ) | (1,332 | ) | (427 | ) | (180 | ) | (43 | ) | ||||||||||
Loss on derivative instrument | 225 | 198 | 102 | 102 | — | |||||||||||||||
Income (loss) before income tax | 20,868 | 19,874 | (87,480 | ) | 20,337 | 19,438 | ||||||||||||||
Income tax expense (benefit) | 8,256 | 7,418 | 7,449 | 8,135 | 7,620 | |||||||||||||||
Net income (loss) | $ | 12,612 | $ | 12,456 | $ | (94,929 | ) | $ | 12,202 | $ | 11,818 | |||||||||
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Six months | ||||||||||||||||||||
Fiscal year ended | ended | |||||||||||||||||||
March 31, | September 30, | |||||||||||||||||||
(Dollars in thousands) | 2007 | 2008 | 2009 | 2008 | 2009 | |||||||||||||||
Balance sheet data (at end of period): | ||||||||||||||||||||
Working capital(3) | $ | 130,389 | $ | 137,100 | $ | 151,520 | $ | 147,071 | $ | 166,575 | ||||||||||
Total assets | 695,489 | 702,087 | 608,067 | 809,230 | 709,505 | |||||||||||||||
Total debt, including current maturities | 375,587 | 375,204 | 372,411 | 373,822 | 365,359 | |||||||||||||||
Total liabilities | 510,815 | 506,248 | 504,830 | 604,652 | 598,665 | |||||||||||||||
Stockholder’s equity | 184,674 | 195,839 | 103,237 | 204,578 | 110,840 | |||||||||||||||
Other Data: | ||||||||||||||||||||
EBITDA(4) | $ | 68,114 | $ | 69,951 | $ | (35,940 | ) | $ | 45,617 | $ | 48,506 | |||||||||
Adjusted EBITDA(4)(5) | 68,114 | 69,951 | 71,032 | 45,617 | 48,506 | |||||||||||||||
Ratio of Earnings to Fixed Charges(6) | 1.5 | x | 1.5 | x | — | 1.9 | x | 1.8 | x | |||||||||||
Net cash flows from operating activities | 27,432 | 20,864 | 31,666 | 76,224 | 77,271 | |||||||||||||||
Net cash flows from investing activities | (32,809 | ) | (22,179 | ) | (14,898 | ) | (9,788 | ) | (5,074 | ) | ||||||||||
Net cash flows from financing activities | 4,976 | (2,341 | ) | (2,055 | ) | (4,261 | ) | (10,151 | ) | |||||||||||
Depreciation and amortization | 15,529 | 17,652 | 18,987 | 9,383 | 9,730 | |||||||||||||||
Capital expenditures | 6,543 | 7,261 | 7,979 | 4,130 | 2,597 | |||||||||||||||
Business acquisition expenditures(7) | 25,874 | 14,682 | 6,321 | 5,416 | 2,291 | |||||||||||||||
Number of bookstores open at end of the period | 244 | 260 | 277 | 273 | 277 | |||||||||||||||
As of | ||||||
September 30, | ||||||
(Dollars in thousands) | 2009 | |||||
As adjusted for the Refinancing(8): | ||||||
Total senior secured debt(9) | $ | 203,912 | ||||
Ratio of senior secured debt to Adjusted EBITDA | $ | 378,912 | ||||
Ratio of total debt to Adjusted EBITDA | 5.1x | |||||
(1) | Includes share-based compensation of $997; $1,041; $1,289; $485 and $480 for the fiscal years ended March 31, 2007, 2008 and 2009, and the six months ended September 30, 2008 and 2009, respectively. | |
(2) | Due to the economic downturn and changes in some variables associated with the judgments, assumptions and estimates made by us in assessing the appropriate valuation of our goodwill, including lower market multiples, we determined in the first step of the goodwill impairment test that the carrying value of certain reporting units 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 $106,972, which reduced our goodwill carrying value to $215,436 as of March 31, 2009. Fair value was determined using the market approach and was deemed to be the most indicative of our fair value and is consistent in principle with the methodology used for goodwill evaluation in prior years. The fair value based upon the market approach is also analyzed for reasonableness by comparing it to the fair value based upon the income approach (discounted cash flow approach). See Note F to our consolidated financial statements appearing elsewhere in this prospectus. | |
(3) | Working capital is defined as current assets minus current liabilities. |
(4) | EBITDA is defined as earnings before interest, taxes, depreciation, and amortization. Adjusted EBITDA is EBITDA adjusted for goodwill impairment. There was no goodwill impairment in fiscal years 2008 and 2007 and the six months ended September 30, 2009 and 2008; therefore, Adjusted EBITDA equals EBITDA for those periods. 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 in Note 4, Long-Term Debt, to the condensed consolidated financial statements and Note H, Long-Term Debt, to the consolidated financial statements appearing elsewhere in this prospectus 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. |
Adjusted EBITDA is defined in the 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. |
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Adjusted EBITDA is similarly defined in the indentures to the Senior Subordinated Notes and the Senior Secured Notes except that charges incurred in connection with the restricted stock plan are not added back to consolidated net income. Adjusted EBITDA is utilized when calculating the pro forma fixed charge coverage ratio under the ABL Credit Agreement and the pro forma consolidated coverage ratio under the indentures to the Senior Subordinated Notes and the Senior Secured Notes. See Note 4, Long-Term Debt, to the condensed consolidated financial statements and Note H, Long-Term Debt, to the consolidated financial statements appearing elsewhere in this prospectus for disclosure of certain of our financial covenants. |
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 is it a measure of our profitability because it does not include costs and expenses identified below. We believe EBITDA and Adjusted EBITDA when viewed with both our GAAP results and the reconciliations to operating cash flows and net income provides a more complete understanding of our business than could otherwise be obtained absent this disclosure. Items excluded from EBITDA and Adjusted EBITDA, such as interest, taxes, depreciation, amortization, and goodwill impairment, are significant components in understanding and assessing our financial performance. EBITDA and Adjusted EBITDA measures presented may not be comparable to similarly titled measures presented by other registrants. |
The following table reconciles net income to EBITDA and EBITDA to Adjusted EBITDA for the periods indicated: |
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Fiscal year ended | ended | |||||||||||||||||||||||
March 31, | September 30, | |||||||||||||||||||||||
(Dollars in thousands) | 2007 | 2008 | 2009 | 2008 | 2009 | |||||||||||||||||||
Net income (loss) | $ | 12,612 | $ | 12,456 | $ | (94,929 | ) | $ | 12,202 | $ | 11,818 | |||||||||||||
Interest (income) expense, net | 31,717 | 32,425 | 32,553 | 15,897 | 19,338 | |||||||||||||||||||
Income tax expense (benefit) | 8,256 | 7,418 | 7,449 | 8,135 | 7,620 | |||||||||||||||||||
Depreciation and amortization | 15,529 | 17,652 | 18,987 | 9,383 | 9,730 | |||||||||||||||||||
EBITDA | 68,114 | 69,951 | (35,940 | ) | 45,617 | 48,506 | ||||||||||||||||||
Goodwill impairment | — | — | 106,972 | — | — | |||||||||||||||||||
Adjusted EBITDA | $ | 68,114 | $ | 69,951 | $ | 71,032 | $ | 45,617 | $ | 48,506 | ||||||||||||||
The following table reconciles Adjusted EBITDA with net cash flows from operating activities: |
Six months | ||||||||||||||||||||||||
Fiscal year ended | ended | |||||||||||||||||||||||
March 31, | September 30, | |||||||||||||||||||||||
(Dollars in thousands) | 2007 | 2008 | 2009 | 2008 | 2009 | |||||||||||||||||||
Adjusted EBITDA | $ | 68,114 | $ | 69,951 | $ | 71,032 | $ | 45,617 | $ | 48,506 | ||||||||||||||
Adjustments to reconcile Adjusted EBITDA to net cash flows from operating activities: | ||||||||||||||||||||||||
Share-based compensation | 997 | 1,041 | 1,289 | 485 | 480 | |||||||||||||||||||
Interest income | 1,643 | 1,332 | 427 | 180 | 43 | |||||||||||||||||||
Provision for losses on receivables | 834 | 468 | 1,367 | 14 | 134 | |||||||||||||||||||
Cash paid for interest | (31,388 | ) | (31,755 | ) | (30,654 | ) | (14,967 | ) | (17,360 | ) | ||||||||||||||
Cash paid for income taxes | (6,551 | ) | (13,031 | ) | (9,930 | ) | (1,932 | ) | 1,304 | |||||||||||||||
(Gain) Loss on disposal of assets | (1 | ) | 285 | 125 | 62 | 118 | ||||||||||||||||||
Change in due (to) from Parent | (84 | ) | (237 | ) | (3,160 | ) | (1,351 | ) | (1,338 | ) | ||||||||||||||
Changes in operating assets and liabilities, net of effect of acquisitions(a) | (6,132 | ) | (7,190 | ) | 1,170 | 48,116 | 45,384 | |||||||||||||||||
Net Cash Flows from Operating Activities | $ | 27,432 | $ | 20,864 | $ | 31,666 | $ | 76,224 | $ | 77,271 | ||||||||||||||
(a) | 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. |
(5) | Includes share-based compensation of $997; $1,041; $1,289; $485 and $480 for the fiscal years ended March 31, 2007, 2008 and 2009, and the six months ended September 30, 2008 and 2009, respectively. Excludes any add-back of non-recurring costs of $1,114 attributable to a voluntary early retirement plan and severance expenses and $230 and $115 for certain legal charges for |
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the fiscal year ended March 31, 2009 and for the six months ended September 30, 2009, respectively. For the fiscal years ended March 31, 2007 and 2008, and the six months ended September 30, 2008, there were no such non-recurring costs. | ||
(6) | Ratio of earnings to fixed charges was calculated by dividing earnings by fixed charges. “Earnings” have been calculated by adding fixed charges (excluding capitalized interest, of which there was none) to earnings from continuing operations before income taxes and dividends received, of which there were none, from equity affiliates, and then deducting undistributed earnings, of which there were none, of affiliates, and “fixed charges” consisting of interest expense, estimated interest portion of rental expense and capitalized interest. Earnings were insufficient to cover fixed charges by approximately $43,505 for the fiscal year ended March 31, 2009. For the fiscal year ended March 31, 2009, we recorded a write-off of goodwill, which caused the insufficiency for this period. See Note F to our consolidated financial statements appearing elsewhere in this prospectus. | |
(7) | Business acquisition expenditures represent amounts invested by us to purchase established businesses. | |
(8) | The adjusted data is calculated using historical financial data as adjusted to give effect to the Refinancing, as if it occurred on September 30, 2009. See “Capitalization.” | |
(9) | Senior secured debt consists of the notes offered hereby plus the amount of loans outstanding under the ABL Facility, capital leases and mortgages. See “Capitalization.” | |
(10) | Total debt consists of the notes offered hereby plus the amount of loans outstanding under the ABL Facility, our senior subordinated notes, capital leases and mortgages. See “Capitalization.” |
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• | certificates for the original notes or a book-entry confirmation of a book-entry transfer of the original notes into the exchange agent’s account at DTC, as a depository, including an agent’s message, as defined in this prospectus, if the tendering holder does not deliver a letter of transmittal; | |
• | a completed and signed letter of transmittal, or facsimile copy, with any required signature guarantees, or, in the case of a book-entry transfer, an agent’s message in place of the letter of transmittal; and | |
• | any other documents required by the letter of transmittal. |
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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; | |
• | 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; | |
• | 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; | |
• | limit our ability to make strategic acquisitions, invest in new products or capital assets or take advantage of business opportunities; | |
• | limit our ability to obtain additional financing, particularly in the current economic environment; and | |
• | render us more vulnerable to general adverse economic, regulatory and industry conditions. |
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• | our debt holders could declare all outstanding principal and interest to be due and payable; | |
• | the lenders under our ABL Facility could terminate their commitments to lend us money and foreclose against the assets securing their borrowings; and | |
• | we could be forced into bankruptcy or liquidation, which could result in you losing your investment in the exchange notes. |
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• | incur or assume additional debt or provide guarantees in respect of obligations of other persons; | |
• | issue redeemable stock and preferred stock; | |
• | pay dividends or distributions or redeem or repurchase capital stock; | |
• | prepay, redeem or repurchase debt; | |
• | make loans, investments and capital expenditures; | |
• | incur liens; | |
• | engage in sale/leaseback transactions; | |
• | restrict dividends, loans or asset transfers from our subsidiaries; | |
• | sell or otherwise dispose of assets, including capital stock of subsidiaries; | |
• | consolidate or merge with or into, or sell substantially all of our assets to, another person; | |
• | enter into transactions with affiliates; and | |
• | enter into new lines of business. |
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• | the original issue price for the exchange notes; and | |
• | that portion of the OID that does not constitute “unmatured interest” for purposes of the United States Bankruptcy Code. |
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• | a sale, transfer or other disposal in a transaction not prohibited under the indenture and the Collateral documents; | |
• | with respect to Collateral held by a subsidiary guarantor, upon the release of such guarantor from its guarantee in accordance with the indenture; | |
• | with respect to Collateral that is capital stock, upon the dissolution of the issuer of such capital stock in accordance with the indenture; and | |
• | upon any release, sale or disposition (other than in connection with a cancellation or termination of the ABL Facility) of Collateral pursuant to the terms of the ABL Facility, subject to certain exceptions, resulting in the release of the lien on such Collateral securing the ABL Facility. |
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• | we or any of our guarantors were insolvent or rendered insolvent by reason of the incurrence of the indebtedness; | |
• | payment of the consideration left us or any of our guarantors with an unreasonably small amount of capital to carry on the business; or | |
• | we or any of our guarantors intended to, or believed that we or it would, incur debts beyond our or its ability to pay as they mature. |
• | the sum of its debts, including contingent liabilities, was greater than the fair saleable value of all its assets; | |
• | the present fair saleable value of its assets was less than the amount that would be required to pay its probable liability on its existing debts and liabilities, including contingent liabilities, as they become absolute and mature; or | |
• | it could not pay its debts as they become due. |
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• | the commencement or continuation of any action or proceeding against the debtor that was or could have been commenced before the commencement of the bankruptcy case to recover a claim against the debtor that arose before the commencement of the bankruptcy case; | |
• | any act to obtain possession of, or control over, property of the bankruptcy estate or the debtor; | |
• | any act to create, perfect or enforce any lien against property of the bankruptcy estate; and | |
• | any act to collect or recover a claim against the debtor that arose before the commencement of the bankruptcy case. |
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• | the number of holders of exchange notes; | |
• | our operating performance and financial condition; |
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• | the market for similar securities; | |
• | the interest of securities dealers in making a market in the exchange notes; and | |
• | prevailing interest rates. |
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September 30, 2009 | ||||||||
(Dollars in thousands) | Actual | As adjusted | ||||||
Cash and cash equivalents(1) | $ | 106,085 | $ | 106,085 | ||||
Debt: | ||||||||
Existing senior secured credit facilities(2): | ||||||||
Term loans | 186,447 | — | ||||||
Revolving credit facility | — | — | ||||||
ABL Facility(3) | — | — | ||||||
Senior secured notes due 2011(4) | — | 200,000 | ||||||
Other secured debt(5) | 3,912 | 3,912 | ||||||
Total secured debt | 190,359 | 203,912 | ||||||
Senior subordinated notes due 2012 | 175,000 | 175,000 | ||||||
Total debt | 365,359 | 378,912 | ||||||
Total stockholder’s equity | 110,840 | 110,840 | ||||||
Total capitalization | $ | 476,199 | $ | 489,752 | ||||
(1) | The as adjusted amount does not reflect any increase or decrease to cash and cash equivalents. We received $199,000 in proceeds from the offering of the original notes and after paying the $186,447 of outstanding term loans, used remaining net proceeds to pay $9,835 in fees and expenses incurred in connection with the Refinancing. Any additional fees and expenses incurred in connection with the Refinancing will be paid out of remaining net proceeds and any excess will be added to cash and cash equivalents. | |
(2) | As of September 30, 2009, we had $186,447 of outstanding term loans under our existing senior secured credit facilities, which bore an interest rate of 9.25% per annum at March 31, 2009. For a more complete description of our existing senior secured credit facilities, see “Management’s discussion and analysis of financial condition and results of operations—Liquidity and capital resources.” | |
(3) | On October 2, 2009, we entered into the $75,000 ABL Facility. The commitments under the ABL Facility expire on the earlier of (i) the third anniversary of the closing of the ABL Facility and (ii) the date that is 91 days prior to the then earliest scheduled final maturity date of any of the notes, our existing senior subordinated notes, or the senior discount notes of our parent company, NBC, or any refinancing thereof. At the closing of the Refinancing, we did not draw under the ABL Facility. We estimate that our borrowing capacity under the ABL Facility, as of September 30, 2009, would have been up to an additional $73,971, after giving effect to the $1,029 of outstanding letters of credit (which reduce the amount we may borrow under the ABL Facility on adollar-for-dollar basis). Because the borrowing capacity under the ABL Facility depends, in part, on inventory, accounts receivable and other assets that fluctuate from time to time, such amounts may not reflect future borrowing capacity. As of December 16, 2009, we had up to $75,000 of total revolving credit commitments under such ABL Facility (less outstanding letters of credit and subject to a borrowing base). The calculated borrowing base as of December 16, 2009 was $71,152, of which $23,000 was outstanding under revolving lines of credit, $1,029 was outstanding under a letter of credit and $47,123 was unused. | |
(4) | Represents the principal amount of the original notes. The original notes were issued at a price of 99.5% resulting in approximately $199,000 in gross proceeds. The $1,000 discount will accrete over the life of the notes and be amortized into interest expense. | |
(5) | Represents $3,649 in capital leases and $263 in mortgages. |
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Six months ended | ||||||||||||||||||||||||
Year ended March 31, | September 30, | |||||||||||||||||||||||
2005 | 2006 | 2007 | 2008 | 2009 | 2009 | |||||||||||||||||||
Ratio of earnings and fixed charges | 1.7 | x | 1.6 | x | 1.5 | x | 1.5 | x | — | 1.8 | x | |||||||||||||
Coverage deficiency | — | — | — | — | $ | (43,505 | ) | — | ||||||||||||||||
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Six months | ||||||||||||||||||||||||||||
Fiscal year ended | ended | |||||||||||||||||||||||||||
March 31, | September 30, | |||||||||||||||||||||||||||
(Dollars in thousands) | 2005 | 2006 | 2007 | 2008 | 2009 | 2008 | 2009 | |||||||||||||||||||||
Statement of operations data: | ||||||||||||||||||||||||||||
Revenues | $ | 402,154 | $ | 420,108 | $ | 544,428 | $ | 581,248 | $ | 610,716 | $ | 352,136 | $ | 345,480 | ||||||||||||||
Cost of sales (exclusive of depreciation shown below) | 240,638 | 250,914 | 332,444 | 354,140 | 371,369 | 219,262 | 213,771 | |||||||||||||||||||||
Gross profit | 161,516 | 169,194 | 211,984 | 227,108 | 239,347 | 132,874 | 131,709 | |||||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||||
Selling, general, and administrative expenses(1) | 100,513 | 107,991 | 143,096 | 157,193 | 168,315 | 87,257 | 83,203 | |||||||||||||||||||||
Closure of California Warehouse | — | — | 774 | (36 | ) | — | — | — | ||||||||||||||||||||
Depreciation | 4,908 | 4,913 | 5,916 | 7,209 | 7,603 | 3,690 | 4,093 | |||||||||||||||||||||
Amortization | 8,258 | 8,762 | 9,613 | 10,443 | 11,384 | 5,693 | 5,636 | |||||||||||||||||||||
Goodwill impairment(2) | — | — | — | — | 106,972 | — | — | |||||||||||||||||||||
Income (loss) from operations | 47,837 | 47,528 | 52,585 | 52,299 | (54,927 | ) | 36,234 | 38,777 | ||||||||||||||||||||
Other expenses (income): | ||||||||||||||||||||||||||||
Interest expense | 25,854 | 29,395 | 33,135 | 33,559 | 32,878 | 15,975 | 19,382 | |||||||||||||||||||||
Interest income | (639 | ) | (1,275 | ) | (1,643 | ) | (1,332 | ) | (427 | ) | (180 | ) | (43 | ) | ||||||||||||||
(Gain) loss on derivative instrument | — | (525 | ) | 225 | 198 | 102 | 102 | — | ||||||||||||||||||||
Income (loss) before income taxes | 22,622 | 19,933 | 20,868 | 19,874 | (87,480 | ) | 20,337 | 19,438 | ||||||||||||||||||||
Income tax expense (benefit) | 9,162 | 7,691 | 8,256 | 7,418 | 7,449 | 8,135 | 7,620 | |||||||||||||||||||||
Net income (loss) | $ | 13,460 | $ | 12,242 | $ | 12,612 | $ | 12,456 | $ | (94,929 | ) | $ | 12,202 | $ | 11,818 | |||||||||||||
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Six months | ||||||||||||||||||||||||||||
Fiscal year ended | ended | |||||||||||||||||||||||||||
March 31, | September 30, | |||||||||||||||||||||||||||
(Dollars in thousands) | 2005 | 2006 | 2007 | 2008 | 2009 | 2008 | 2009 | |||||||||||||||||||||
Balance sheet data (at end of period): | ||||||||||||||||||||||||||||
Cash and cash equivalents | $ | 31,224 | $ | 33,383 | $ | 32,983 | $ | 29,326 | $ | 44,038 | $ | 91,501 | $ | 106,085 | ||||||||||||||
Working capital | 104,008 | 111,066 | 130,389 | 137,100 | 151,520 | 147,071 | 166,575 | |||||||||||||||||||||
Total assets | 627,239 | 645,346 | 695,489 | 702,087 | 608,067 | 809,230 | 709,505 | |||||||||||||||||||||
Total debt, including current maturities | 356,402 | 354,309 | 375,587 | 375,204 | 372,411 | 373,822 | 365,359 | |||||||||||||||||||||
(1) | Includes share-based compensation of $997; $1,041; $1,289; $485 and $480 for the fiscal years ended March 31, 2007, 2008 and 2009, and the six months ended September 30, 2008 and 2009, respectively. | |
(2) | See Note F to our consolidated financial statements appearing elsewhere in this prospectus. |
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condition and results of operations
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Quarter ended | |||||||||||||||
September 30, | Change | ||||||||||||||
2009 | 2008 | Amount | Percentage | ||||||||||||
Bookstore Division | $ | 224,760,736 | $ | 225,518,527 | $ | (757,791 | ) | (0.3)% | |||||||
Textbook Division | 59,034,333 | 62,054,071 | (3,019,738 | ) | (4.9)% | ||||||||||
Complementary Services Division | 9,447,684 | 9,315,656 | 132,028 | 1.4% | |||||||||||
Intercompany Eliminations | (16,526,651 | ) | (15,956,040 | ) | (570,611 | ) | 3.6% | ||||||||
$ | 276,716,102 | $ | 280,932,214 | $ | (4,216,112 | ) | (1.5)% | ||||||||
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Quarter ended | |||||||||||||||
September 30, | Change | ||||||||||||||
2009 | 2008 | Amount | Percentage | ||||||||||||
Bookstore Division | $ | 34,108,196 | $ | 32,199,480 | $ | 1,908,716 | 5.9% | ||||||||
Textbook Division | 20,711,713 | 20,839,508 | (127,795 | ) | (0.6)% | ||||||||||
Complementary Services Division | 718,220 | 414,111 | 304,109 | 73.4% | |||||||||||
Corporate Administration | (1,796,926 | ) | (1,402,800 | ) | (394,126 | ) | (28.1)% | ||||||||
$ | 53,741,203 | $ | 52,050,299 | $ | 1,690,904 | 3.2% | |||||||||
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Quarter ended | ||||||||
September 30, | ||||||||
2009 | 2008 | |||||||
EBITDA | $ | 53,741,203 | $ | 52,050,299 | ||||
Adjustments to reconcile EBITDA to net cash flows from operating activities: | ||||||||
Share-based compensation | 236,092 | 233,138 | ||||||
Interest income | 26,897 | 179,720 | ||||||
Provision for losses (recoveries) on receivables | 55,847 | (15,380 | ) | |||||
Cash paid for interest | (12,550,820 | ) | (12,194,186 | ) | ||||
Cash received (paid) for income taxes | 1,833,852 | (431,398 | ) | |||||
Loss on disposal of assets | 73,753 | 36,035 | ||||||
Change in due to parent | 65,000 | 53,000 | ||||||
Changes in operating assets and liabilities, net of effect of acquisitions(1) | 69,315,625 | 86,028,004 | ||||||
Net Cash Flows from Operating Activities | $ | 112,797,449 | $ | 125,939,232 | ||||
Net Cash Flows from Investing Activities | $ | (2,929,694 | ) | $ | (4,691,577 | ) | ||
Net Cash Flows from Financing Activities | $ | (15,839,819 | ) | $ | (42,139,734 | ) | ||
(1) | 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. |
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Six months ended September 30, | Change | ||||||||||||||
2009 | 2008 | Amount | Percentage | ||||||||||||
Bookstore Division | $ | 270,214,737 | $ | 271,989,690 | $ | (1,774,953 | ) | (0.7)% | |||||||
Textbook Division | 84,518,323 | 89,083,251 | (4,564,928 | ) | (5.1)% | ||||||||||
Complementary Services Division | 17,421,223 | 17,751,649 | (330,426 | ) | (1.9)% | ||||||||||
Intercompany Eliminations | (26,674,308 | ) | (26,688,350 | ) | 14,042 | (0.1)% | |||||||||
$ | 345,479,975 | $ | 352,136,240 | $ | (6,656,265 | ) | (1.9)% | ||||||||
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September 30, | Change | ||||||||||||||
2009 | 2008 | Amount | Percentage | ||||||||||||
Bookstore Division | $ | 28,608,052 | $ | 25,767,928 | $ | 2,840,124 | 11.0% | ||||||||
Textbook Division | 25,871,073 | 25,823,747 | 47,326 | 0.2% | |||||||||||
Complementary Services Division | 1,112,945 | 724,280 | 388,665 | 53.7% | |||||||||||
Intercompany Eliminations | (7,085,792 | ) | (6,699,079 | ) | (386,713 | ) | (5.8)% | ||||||||
$ | 48,506,278 | $ | 45,616,876 | $ | 2,889,402 | 6.3% | |||||||||
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Six months ended September 30, | ||||||||
2009 | 2008 | |||||||
EBITDA | $ | 48,506,278 | $ | 45,616,876 | ||||
Adjustments to reconcile EBITDA to net cash flows from operating activities: | ||||||||
Share-based compensation | 479,741 | 485,432 | ||||||
Interest income | 43,697 | 179,720 | ||||||
Provision for losses on receivables | 133,629 | 14,150 | ||||||
Cash paid for interest | (17,359,745 | ) | (14,966,649 | ) | ||||
Cash received (paid) for income taxes | 1,304,327 | (1,931,833 | ) | |||||
Loss on disposal of assets | 118,143 | 61,833 | ||||||
Change in due to parent | (1,338,000 | ) | (1,351,000 | ) | ||||
Changes in operating assets and liabilities, net of effect of acquisitions(1) | 45,383,157 | 48,115,592 | ||||||
Net Cash Flows from Operating Activities | $ | 77,271,227 | $ | 76,224,121 | ||||
Net Cash Flows from Investing Activities | $ | (5,074,342 | ) | $ | (9,788,238 | ) | ||
Net Cash Flows from Financing Activities | $ | (10,150,840 | ) | $ | (4,261,499 | ) | ||
(1) | 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. |
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Fiscal year ended March 31, | Change | ||||||||||||||
2009 | 2008 | Amount | Percentage | ||||||||||||
Bookstore Division | $ | 472,038,009 | $ | 454,374,873 | $ | 17,663,136 | 3.9% | ||||||||
Textbook Division | 147,287,779 | 139,685,035 | 7,602,744 | 5.4% | |||||||||||
Complementary Services Division | 34,233,883 | 34,372,223 | (138,340 | ) | (0.4)% | ||||||||||
Intercompany Eliminations | (42,843,490 | ) | (47,184,345 | ) | 4,340,855 | (9.2)% | |||||||||
$ | 610,716,181 | $ | 581,247,786 | $ | 29,468,395 | 5.1% | |||||||||
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Fiscal year ended March 31, | Change | ||||||||||||||
2009 | 2008 | Amount | Percentage | ||||||||||||
Bookstore Division | $ | 44,029,528 | $ | 45,941,624 | $ | (1,912,096 | ) | (4.2)% | |||||||
Textbook Division | 39,009,073 | 33,731,382 | 5,277,691 | 15.6% | |||||||||||
Complementary Services Division | 1,320,700 | 1,558,414 | (237,714 | ) | (15.3)% | ||||||||||
Corporate Administration | (13,326,971 | ) | (11,280,477 | ) | (2,046,494 | ) | (18.1)% | ||||||||
$ | 71,032,330 | $ | 69,950,943 | $ | 1,081,387 | 1.5% | |||||||||
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Fiscal year ended | ||||||||
March 31, | ||||||||
2009 | 2008 | |||||||
Adjusted EBITDA(1) | $ | 71,032,330 | $ | 69,950,943 | ||||
Adjustments to reconcile Adjusted EBITDA to net cash flows from operating activities: | ||||||||
Share-based compensation | 1,288,543 | 1,040,599 | ||||||
Interest income | 426,536 | 1,332,497 | ||||||
Provision for losses on receivables | 1,366,979 | 468,007 | ||||||
Cash paid for interest | (30,653,694 | ) | (31,755,319 | ) | ||||
Cash paid for income taxes | (9,930,165 | ) | (13,030,853 | ) | ||||
Loss on disposal of assets | 124,871 | 284,891 | ||||||
Change in due to parent | (3,160,038 | ) | (236,872 | ) | ||||
Changes in operating assets and liabilities, net of effect of acquisitions(2) | 1,170,551 | (7,190,132 | ) | |||||
Net cash flows from operating activities | $ | 31,665,913 | $ | 20,863,761 | ||||
Net cash flows from investing activities | $ | (14,898,403 | ) | $ | (22,179,160 | ) | ||
Net cash flows from financing activities | $ | (2,055,498 | ) | $ | (2,341,021 | ) | ||
(1) | March 31, 2009 Adjusted EBITDA includes an adjustment for goodwill impairment. There was no goodwill impairment in fiscal year 2008; therefore, Adjusted EBITDA equals EBITDA for fiscal year 2008. | |
(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. |
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Fiscal year ended March 31, | Change | ||||||||||||||
2008 | 2007 | Amount | Percentage | ||||||||||||
Bookstore Division | $ | 454,374,873 | $ | 418,476,613 | $ | 35,898,260 | 8.6% | ||||||||
Textbook Division | 139,685,035 | 135,798,392 | 3,886,643 | 2.9% | |||||||||||
Complementary Services Division | 34,372,223 | 32,215,306 | 2,156,917 | 6.7% | |||||||||||
Intercompany Eliminations | (47,184,345 | ) | (42,062,347 | ) | (5,121,998 | ) | 12.2% | ||||||||
$ | 581,247,786 | $ | 544,427,964 | $ | 36,819,822 | 6.8% | |||||||||
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Fiscal year ended March 31, | Change | ||||||||||||||
2008 | 2007 | Amount | Percentage | ||||||||||||
Bookstore Division | $ | 45,941,624 | $ | 44,511,202 | $ | 1,430,422 | 3.2% | ||||||||
Textbook Division | 33,731,382 | 32,210,010 | 1,521,372 | 4.7% | |||||||||||
Complementary Services Division | 1,558,414 | 2,716,144 | (1,157,730 | ) | (42.6)% | ||||||||||
Corporate Administration | (11,280,477 | ) | (11,323,483 | ) | 43,006 | 0.4% | |||||||||
$ | 69,950,943 | $ | 68,113,873 | $ | 1,837,070 | 2.7% | |||||||||
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Fiscal year ended | ||||||||
March 31, | ||||||||
2008 | 2007 | |||||||
EBITDA | $ | 69,950,943 | $ | 68,113,873 | ||||
Adjustments to reconcile EBITDA to net cash flows from operating activities: | ||||||||
Share-based compensation | 1,040,599 | 996,957 | ||||||
Interest income | 1,332,497 | 1,643,598 | ||||||
Provision for losses on receivables | 468,007 | 834,442 | ||||||
Cash paid for interest | (31,755,319 | ) | (31,388,513 | ) | ||||
Cash paid for income taxes | (13,030,853 | ) | (6,551,344 | ) | ||||
(Gain) loss on disposal of assets | 284,891 | (575 | ) | |||||
Tax expense due to parent | (236,872 | ) | (83,597 | ) | ||||
Changes in operating assets and liabilities, net of effect of acquisitions(1) | (7,190,132 | ) | (6,132,260 | ) | ||||
Net cash flows from operating activities | $ | 20,863,761 | $ | 27,432,581 | ||||
Net cash flows from investing activities | $ | (22,179,160 | ) | $ | (32,808,754 | ) | ||
Net cash flows from financing activities | $ | (2,341,021 | ) | $ | 4,976,327 | |||
(1) | 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. |
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Payments due by period | ||||||||||||||||||||
Less than | After | |||||||||||||||||||
Contractual obligations | Total | 1 year | 2-3 years | 4-5 years | 5 years | |||||||||||||||
Long-term debt(1) | $ | 368,363,179 | $ | 6,917,451 | $ | 361,322,726 | $ | 123,002 | $ | — | ||||||||||
Interest on long-term debt(2) | 73,678,595 | 32,660,697 | 41,005,407 | 12,491 | — | |||||||||||||||
Capital lease obligations | 4,047,350 | 748,692 | 1,507,043 | 740,429 | 1,051,186 | |||||||||||||||
Interest on capital lease obligations | 1,139,623 | 310,778 | 432,131 | 238,465 | 158,249 | |||||||||||||||
Operating leases | 84,472,000 | 19,471,000 | 28,611,000 | 16,609,000 | 19,781,000 | |||||||||||||||
Uncertain tax position liabilities | — | — | — | — | — | |||||||||||||||
Unconditional purchase obligations | — | — | — | — | — | |||||||||||||||
Total | $ | 531,700,747 | $ | 60,108,618 | $ | 432,878,307 | $ | 17,723,387 | $ | 20,990,435 | ||||||||||
Amount of commitment expiration per period | ||||||||||||||||||||
Other commercial | Total amounts | Less than | Over | |||||||||||||||||
commitments | committed | 1 year | 2-3 years | 4-5 years | 5 years | |||||||||||||||
Unused line of credit(3) | $ | 65,000,000 | $ | — | $ | 65,000,000 | $ | — | $ | — | ||||||||||
(1) | Assuming the Refinancing had occurred as of September 30, 2009, maturities of the long-term debt would have been $51,568 for less than 1 year, $375,121,268 for 2-3 years, $90,205 for 4-5 years and $0 after 5 years, and interest obligations would have adjusted accordingly. | |
(2) | Interest on the variable rate debt is estimated based upon implied forward rates in the yield curve at March 31, 2009. | |
(3) | Interest is not estimated on the line of credit due to uncertainty surrounding the timing and extent of usage of the line of credit. |
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September 30, | March 31, | |||||||
2009 | 2009 | |||||||
Carrying Values: | ||||||||
Instruments entered into for purposes other than trading: | ||||||||
Cash equivalents (treasury notes) | $ | 94,981,222 | $ | 4,999,319 | ||||
Fixed rate debt | $ | 178,911,987 | $ | 179,334,183 | ||||
Variable rate debt | 186,447,085 | 193,076,346 | ||||||
Fair Values: | ||||||||
Instruments entered into for purposes other than trading: | ||||||||
Cash equivalents (treasury notes) | $ | 94,981,222 | $ | 4,999,319 | ||||
Fixed rate debt | $ | 154,589,000 | $ | 90,367,000 | ||||
Variable rate debt | 186,447,085 | 160,253,000 | ||||||
Overall Weighted-Average Interest Rates: | ||||||||
Cash equivalents (treasury notes) | 0.10% | 0.07% | ||||||
Fixed rate debt | 8.63% | 8.63% | ||||||
Variable rate debt | 9.25% | 9.25% | ||||||
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(i) | institutional—bookstores that are primarily owned and operated by institutions of higher learning; | |
(ii) | contract-managed—bookstores owned by institutions of higher learning and managed by outside, private companies, typically found on-campus; and | |
(iii) | independent stores—privately owned and operated bookstores, generally located off campus. |
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Bookstores | ||||||||||||||||
open at | Bookstores | Bookstores | Bookstores at | |||||||||||||
beginning of | added during | closed during | end of | |||||||||||||
Fiscal year | fiscal year | fiscal year | fiscal year(1) | fiscal year | ||||||||||||
2005 | 113 | 11 | 0 | 124 | ||||||||||||
2006 | 124 | 17 | 2 | 139 | ||||||||||||
2007 | 139 | 120 | 15 | 244 | ||||||||||||
2008 | 244 | 23 | 7 | 260 | ||||||||||||
2009 | 260 | 24 | 7 | 277 | ||||||||||||
2010 (2) | 277 | 12 | 12 | 277 | ||||||||||||
(1) | In fiscal year 2006, two bookstores were closed and the leases were not renewed. In fiscal year 2007, fifteen bookstores were closed, primarily as a result of either the lease expiring, the contract-managed relationship not being renewed, or an agreement being reached with the landlord terminating the lease. In fiscal year 2008, the recurrence of disappointing operating results at two off-campus bookstore locations led to their closure while five contract-managed agreements involving on-campus bookstores were not renewed. In fiscal year 2009, seven bookstores were closed as a result of the lease expiring, the contract-managed relationship not being renewed, disappointing operating results, or an agreement being reached with the landlord terminating the lease. In fiscal year 2010, all of the bookstores were closed primarily as a result of the contract-managed relationship not being renewed. | |
(2) | As of September 30, 2009. |
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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 700 and 600 stores, respectively); | |
• | other college bookstores located at colleges and universities that we serve; | |
• | a number of entities that rent or sell textbooks, selle-books, other digital content and other merchandise directly to students throughe-commerce bypassing the traditional college bookstore; | |
• | student-to-student transactions that take place on campus and over the internet; and | |
• | course packs and electronic media as a source of textbook information, such as online 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. |
• | college bookstores who normally repurchase books 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; | |
• | other wholesalers who purchase used textbooks from students and then resell them to other college bookstores; and | |
• | a number of individuals and companies that buy textbooks directly from students throughe-commerce, or in person, bypassing the traditional college bookstores who are the Textbook Division’s suppliers and customers. |
• | MBS in the sale and installation of college bookstore information technology; | |
• | MBS in the distance education textbook distribution market; | |
• | college bookstores that provide their owne-commerce solution in competition with CampusHub; | |
• | the Independent College Bookstore Association (“ICBA”) in the centralized buying service business (participation by college bookstores in C2O’s or ICBA’s centralized buying service is voluntary, and college bookstores may, and some do, belong to both buying associations); and | |
• | a variety of smaller organizations and individuals involved in these businesses and others such as marketing services and consulting services. |
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Name | Age | Position | ||||
Mark L. Bono | 50 | Director | ||||
R. Sean Honey | 39 | Director | ||||
Mark W. Oppegard | 60 | Chief Executive Officer and Director | ||||
Barry S. Major | 53 | Chief Operating Officer, President and Director | ||||
Alan G. Siemek | 49 | Chief Financial Officer, Senior Vice President of Finance and Administration, Treasurer and Assistant Secretary | ||||
Robert A. Rupe | 62 | Senior Vice President—Bookstore Division | ||||
Michael J. Kelly | 52 | Senior Vice President—Textbook Division | ||||
Larry R. Rempe | 61 | Senior Vice President—Complementary Services | ||||
Nathan D. Rempe | 31 | Chief Technology Officer | ||||
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Change in | ||||||||||||||||||||||||||||||||
nonqualified | ||||||||||||||||||||||||||||||||
deferred | ||||||||||||||||||||||||||||||||
Fiscal | Stock | Option | compensation | All other | ||||||||||||||||||||||||||||
Name and principal position | Year | Salary | Bonus | awards(1) | awards(2) | earnings | compensation(3) | Total | ||||||||||||||||||||||||
Mark W. Oppegard | 2009 | $ | 266,500 | $ | 100,000 | $ | 415,042 | $ | — | $ | 206 | $ | 11,752 | $ | 793,500 | |||||||||||||||||
Chief Executive Officer | 2008 | 295,006 | 76,000 | 323,370 | — | 5,439 | 11,502 | 711,317 | ||||||||||||||||||||||||
and Director | 2007 | 295,006 | 195,000 | 332,319 | — | 4,374 | 11,516 | 838,215 | ||||||||||||||||||||||||
Alan G. Siemek | 2009 | 214,857 | 80,000 | 415,042 | — | — | 11,752 | 721,651 | ||||||||||||||||||||||||
Chief Financial Officer, | 2008 | 209,690 | 25,000 | 323,370 | — | — | 11,502 | 569,562 | ||||||||||||||||||||||||
Senior Vice President of Finance and Administration, Treasurer, and Assistant Secretary | 2007 | 202,766 | 144,000 | 332,319 | — | — | 11,180 | 690,265 | ||||||||||||||||||||||||
Barry S. Major | 2009 | 287,694 | 106,000 | 415,042 | — | — | 11,752 | 820,488 | ||||||||||||||||||||||||
Chief Operating Officer, | 2008 | 279,691 | 73,000 | 323,370 | — | — | 11,502 | 687,563 | ||||||||||||||||||||||||
President, and Director | 2007 | 272,770 | 189,000 | 332,319 | — | — | 11,180 | 805,269 | ||||||||||||||||||||||||
Robert A. Rupe | 2009 | 230,928 | 50,000 | — | — | — | 11,752 | 292,680 | ||||||||||||||||||||||||
Senior Vice President | 2008 | 222,926 | 40,000 | — | 12,429 | — | 11,502 | 286,857 | ||||||||||||||||||||||||
Bookstore Division | 2007 | 188,307 | 130,000 | — | — | — | 11,431 | 329,738 | ||||||||||||||||||||||||
Michael J. Kelly | 2009 | 204,083 | 65,000 | — | — | — | 11,752 | 280,835 | ||||||||||||||||||||||||
Senior Vice President | 2008 | 199,771 | 50,000 | — | 10,035 | — | 11,502 | 271,308 | ||||||||||||||||||||||||
Textbook Division | 2007 | 194,846 | 80,000 | — | — | — | 9,922 | 284,768 | ||||||||||||||||||||||||
(1) | Represents share-based compensation recognized in connection with the 1,400 shares of nonvested stock issued to each of Messrs. Oppegard, Siemek, and Major on March 31, 2006. Share-based compensation is being recognized from the date of issuance of the nonvested stock through September 30, 2010. See Note O of the notes to our consolidated financial statements appearing elsewhere in this prospectus. | |
(2) | The assumptions underlying share-based compensation recognized in connection with the options granted in fiscal year 2008 are outlined in Note O of the notes to our consolidated financial statements appearing elsewhere in this prospectus. There were no stock options granted in fiscal years 2009 and 2007. As further discussed in Note B of the notes to our consolidated financial statements appearing elsewhere in this prospectus, options granted prior to April 1, 2006 are accounted for under the provisions of FASB ASC Topic 718,Compensation-Stock Compensation(formerly SFAS No. 123R) utilizing the intrinsic value method. Under this method, share-based compensation is recorded on the date of grant only if the current market price of the underlying stock exceeds the exercise price. No share-based compensation was recognized in conjunction with such grants. | |
(3) | All other compensation consists of the following components: (a) matching contributions to the NBC Retirement Plan; and (b) life insurance premiums paid by us on the Executive’s behalf. See Note M of the notes to our consolidated financial statements appearing elsewhere in this prospectus. |
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• | 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 Executive’s 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. |
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Option awards | Stock awards | |||||||||||||||||||||||||||||||
Equity | ||||||||||||||||||||||||||||||||
Equity | incentive | |||||||||||||||||||||||||||||||
incentive | plan awards: | |||||||||||||||||||||||||||||||
plan awards: | market or | |||||||||||||||||||||||||||||||
Market | number of | payout value | ||||||||||||||||||||||||||||||
Number | Number | Number | value of | unearned | of unearned | |||||||||||||||||||||||||||
of Securities | of securities | of shares | shares or | shares, units | shares, units | |||||||||||||||||||||||||||
underlying | underlying | or units of | units of | or other | or other | |||||||||||||||||||||||||||
unexercised | unexercised | Option | Option | stock that | stock that | rights that | rights that | |||||||||||||||||||||||||
options— | options— | exercise | expiration | have not | have not | have not | have not | |||||||||||||||||||||||||
Name | exercisable(1) | unexercisable(1) | price | date | vested(2) | vested(3) | vested(2) | vested(4) | ||||||||||||||||||||||||
Mark W. Oppegard | 5,950 | — | $ | 52.47 | 3/4/2014 | |||||||||||||||||||||||||||
Chief Executive Officer | 2,675 | — | 106.00 | 3/4/2014 | ||||||||||||||||||||||||||||
and Director | 2,200 | — | 146.00 | 3/4/2014 | ||||||||||||||||||||||||||||
1,963 | — | 160.00 | 11/9/2014 | |||||||||||||||||||||||||||||
933 | $ | 1,070,731 | 467 | $ | 535,366 | |||||||||||||||||||||||||||
Alan G. Siemek | 4,728 | — | $ | 52.47 | 3/4/2014 | |||||||||||||||||||||||||||
Chief Financial Officer, | 1,375 | — | 106.00 | 3/4/2014 | ||||||||||||||||||||||||||||
Senior Vice President of | 1,375 | — | 146.00 | 3/4/2014 | ||||||||||||||||||||||||||||
Finance and Administration, | 1,885 | — | 160.00 | 11/9/2014 | ||||||||||||||||||||||||||||
Treasurer, and Assistant Secretary | 933 | $ | 1,070,731 | 467 | $ | 535,366 | ||||||||||||||||||||||||||
Barry S. Major | 4,780 | — | $ | 52.47 | 3/4/2014 | |||||||||||||||||||||||||||
Chief Operating Officer, | 2,500 | — | 106.00 | 3/4/2014 | ||||||||||||||||||||||||||||
President, and Director | 2,050 | — | 146.00 | 3/4/2014 | ||||||||||||||||||||||||||||
1,963 | — | 160.00 | 11/9/2014 | |||||||||||||||||||||||||||||
933 | $ | 1,070,731 | 467 | $ | 535,366 | |||||||||||||||||||||||||||
Robert A. Rupe | 1,375 | — | $ | 52.47 | 3/4/2014 | |||||||||||||||||||||||||||
Senior Vice President | 1,250 | — | 106.00 | 3/4/2014 | ||||||||||||||||||||||||||||
Bookstore Division | 1,175 | — | 146.00 | 3/4/2014 | ||||||||||||||||||||||||||||
1,700 | — | 160.00 | 11/9/2014 | |||||||||||||||||||||||||||||
2,400 | — | 160.00 | 8/29/2015 | |||||||||||||||||||||||||||||
1,180 | — | 160.00 | 3/30/2016 | |||||||||||||||||||||||||||||
434 | 433 | 205.00 | 10/12/2017 | |||||||||||||||||||||||||||||
Michael J. Kelly | 2,111 | — | $ | 52.47 | 3/4/2014 | |||||||||||||||||||||||||||
Senior Vice President | 1,375 | — | 106.00 | 3/4/2014 | ||||||||||||||||||||||||||||
Textbook Division | 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 | |||||||||||||||||||||||||||||
350 | 350 | 205.00 | 10/12/2017 | |||||||||||||||||||||||||||||
(1) | Separate grants of stock options occurred on 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 our 2004 Stock Option Plan. Options granted in fiscal year 2004 under our 2004 Stock Option Plan were fully vested and exercisable at prices consistent with the options which were cancelled. | |
(2) | Except in certain circumstances, the shares of nonvested stock do not vest until September 30, 2010. | |
(3) | Represents the recognized portion of share-based compensation associated with the 1,400 shares of nonvested stock issued to each of Messrs. Oppegard, Siemek, and Major on March 31, 2006. Due to the existence of the “put” rights, share-based compensation is being remeasured at the end of each reporting period and recognized from the date of issuance of the nonvested stock through September 30, 2010, which is described in further detail in Note O of the notes to our consolidated financial statements appearing elsewhere in this prospectus. | |
(4) | Represents the unrecognized portion of share-based compensation associated with the 1,400 shares of nonvested stock issued to each of Messrs. Oppegard, Siemek, and Major on March 31, 2006. Due to the existence of the “put” rights, share-based compensation is being remeasured at the end of each reporting period and recognized from the date of issuance of the nonvested stock through September 30, 2010, which is described in further detail in Note O of the notes to our consolidated financial statements appearing elsewhere in this prospectus. |
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Aggregate | Aggregate | |||||||||||||||||||
Executive | Registrant | Aggregate | withdrawals/ | balance | ||||||||||||||||
contributions | contributions | earnings in | distributions | as of | ||||||||||||||||
in fiscal year | in fiscal year | fiscal year | in fiscal | March 31, | ||||||||||||||||
Name | 2009 | 2009 | 2009(2) | year 2009 | 2009(2) | |||||||||||||||
Mark W. Oppegard | $ | — | $ | — | $ | 13,842 | $ | — | $ | 284,311 | ||||||||||
Chief Executive Officer and Director | ||||||||||||||||||||
Alan G. Siemek | — | — | — | — | — | |||||||||||||||
Chief Financial Officer, Senior | ||||||||||||||||||||
Vice President of Finance and | ||||||||||||||||||||
Administration, Treasurer, and | ||||||||||||||||||||
Assistant Secretary | ||||||||||||||||||||
Barry S. Major | — | — | — | — | — | |||||||||||||||
Chief Operating Officer, | ||||||||||||||||||||
President, and Director | ||||||||||||||||||||
Robert A. Rupe | — | — | — | — | — | |||||||||||||||
Senior Vice President— | ||||||||||||||||||||
Bookstore Division | ||||||||||||||||||||
Michael J. Kelly | — | — | — | — | — | |||||||||||||||
Senior Vice President— | ||||||||||||||||||||
Textbook Division | ||||||||||||||||||||
(1) | See Note N of the notes to our consolidated financial statements appearing elsewhere in this prospectus for a brief description of the deferred compensation plan. | |
(2) | Included herein are above-market earnings of $206 in fiscal year 2009, $5,439 in fiscal year 2008 and $4,374 in fiscal year 2007 which are included in the Summary Compensation Table above. |
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Total | ||||||||||||||||||||||||||||
(3) | (5) | (5) | (5) | potential | ||||||||||||||||||||||||
(2) | Prorated | (4) | Health | Life | Disability | payment | ||||||||||||||||||||||
Base | incentive | Restricted | insurance | insurance | insurance | upon | ||||||||||||||||||||||
Name | salary | bonus | stock | benefits | benefits | benefits | termination | |||||||||||||||||||||
Mark W. Oppegard Chief Executive Officer and Director | ||||||||||||||||||||||||||||
Termination of employment upon expiration of term | $ | 199,992 | $ | — | $ | 1,070,731 | $ | 8,182 | $ | 252 | $ | 285 | $ | 1,279,442 | ||||||||||||||
Termination of employment without cause | 199,992 | — | 1,070,731 | 8,182 | 252 | 285 | 1,279,442 | |||||||||||||||||||||
Termination of employment upon death or disability | 99,996 | — | 1,070,731 | — | — | — | 1,170,727 | |||||||||||||||||||||
Alan G. Siemek | ||||||||||||||||||||||||||||
Chief Financial | ||||||||||||||||||||||||||||
Officer, Senior Vice President of | ||||||||||||||||||||||||||||
Finance and Administration, | ||||||||||||||||||||||||||||
Treasurer, and Assistant Secretary | ||||||||||||||||||||||||||||
Termination of employment upon expiration of term | 213,990 | — | 1,070,731 | 8,182 | 252 | 285 | 1,293,440 | |||||||||||||||||||||
Termination of employment without cause | 213,990 | — | 1,070,731 | 8,182 | 252 | 285 | 1,293,440 | |||||||||||||||||||||
Termination of employment upon death or disability | 106,995 | — | 1,070,731 | — | — | — | 1,177,726 | |||||||||||||||||||||
Barry S. Major | ||||||||||||||||||||||||||||
Chief Operating Officer, President, and Director | ||||||||||||||||||||||||||||
Termination of employment upon expiration of term | 284,003 | — | 1,070,731 | 11,583 | 252 | 285 | 1,366,854 | |||||||||||||||||||||
Termination of employment without cause | 284,003 | — | 1,070,731 | 11,583 | 252 | 285 | 1,366,854 | |||||||||||||||||||||
Termination of employment upon death or disability | 142,002 | — | 1,070,731 | — | — | — | 1,212,733 | |||||||||||||||||||||
Robert A. Rupe | ||||||||||||||||||||||||||||
Senior Vice President—Bookstore Division | ||||||||||||||||||||||||||||
Termination of employment upon expiration of term | 230,006 | — | — | — | 252 | 285 | 230,543 | |||||||||||||||||||||
Termination of employment without cause | 230,006 | — | — | — | 252 | 285 | 230,543 | |||||||||||||||||||||
Termination of employment upon death or disability | 115,003 | — | — | — | — | — | 115,003 | |||||||||||||||||||||
Michael J. Kelly | ||||||||||||||||||||||||||||
Senior Vice President—Textbook Division | ||||||||||||||||||||||||||||
Termination of employment upon expiration of term | 203,008 | — | — | 6,660 | 252 | 285 | 210,205 | |||||||||||||||||||||
Termination of employment without cause | 203,008 | — | — | 6,660 | 252 | 285 | 210,205 | |||||||||||||||||||||
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. | |
(2) | Base salary in place at time of termination. | |
(3) | It is assumed that the incentive bonus earned for fiscal year 2009 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) | In accordance with the Stock Repurchase Agreement, if Messrs. Oppegard, Siemek, or Major are terminated by us without cause or by reason of their death or disability during the period from March 31, 2006 to September 30, 2010, a number of the shares of nonvested stock will become vested on the date of termination equal to the 1,400 shares which were issued times the number of days from March 31, 2006 to the date of termination divided by the number of days from March 31, 2006 to September 30, 2010. This value represents the cumulative balance of share-based compensation recognized at March 31, 2009 in Other Long-Term Liabilities—see Note O of the notes to our consolidated financial statements appearing elsewhere in this prospectus. For purposes of this table, it is assumed that Messrs. Oppegard, Siemek, and Major would “put” the vested shares in accordance with the Stock Repurchase Agreement upon termination. | |
(5) | Represents premiums paid by us on the Executive’s behalf. |
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• | each person known to own beneficially more than 5% of the common stock; | |
• | each of our directors; | |
• | each of the senior executive officers named in the summary compensation table above; and | |
• | all of our senior executive officers and directors as a group. |
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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) | 532,436 | 96.1% | ||||||
Ownership of senior executive officers named in the Summary Compensation Table: | ||||||||
Mark W. Oppegard | 18,188 | 3.2% | ||||||
Alan G. Siemek | 10,763 | 1.9% | ||||||
Barry S. Major(4) | 14,440 | 2.6% | ||||||
Robert A. Rupe | 9,730 | 1.7% | ||||||
Michael J. Kelly | 10,366 | 1.8% | ||||||
Ownership of directors and all senior executive officers as a group | 603,911 | 98.4% | ||||||
(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 NBC 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. Rupe—9,730 shares; Mr. Kelly—10,366 shares; and 59,528 shares for all directors and senior executive officers as a group. | |
(2) | Consists of 532,436 shares (36,455 shares of common stock in NBC plus 495,981 shares of common stock in NBC Holdings Corp.) held by Weston Presidio Funds, including 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 sole general partner of the Weston Presidio Funds is a limited liability company, of which Messrs. Bono and Honey are members. Each of them disclaims beneficial ownership of such shares, 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. The Weston Presidio Funds, in addition to their common stock holdings, also beneficially own in the aggregate all 10,000 shares of the outstanding, non-voting, non-convertible preferred stock of NBC Holdings Corp. | |
(3) | The percentages are calculated based upon 554,094 shares of NBC common stock outstanding as of December 31, 2009 and shares underlying nonqualified stock options exercisable within sixty days as detailed in footnote (1). | |
(4) | Beneficial ownership includes 1,747 shares of NBC 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 NBC. In January, 1999, NBC issued 4,765 shares of its 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, 2009 totaled approximately $91,000. |
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• | any exchange notes will be acquired in the ordinary course of its business; | |
• | the holder has no arrangement with any person to participate in the distribution of the exchange notes; | |
• | the holder is not an “affiliate,” as defined in Rule 405 of the Securities Act, of ours or if it is an affiliate, that it will comply with applicable registration and prospectus delivery requirements of the Securities Act; and | |
• | if the holder is a broker-dealer, that it will receive exchange notes for its own account in exchange for the original notes that were acquired as a result of market-making activities or other trading activities and that it will be required to acknowledge that it will deliver a prospectus in connection with any resale of the exchange notes. See “Plan of distribution.” |
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• | the holder is not an “affiliate” of ours within the meaning of Rule 405 under the Securities Act; | |
• | the exchange notes are acquired in the ordinary course of the holder’s business; and | |
• | the holder does not intend to participate in the distribution of the exchange notes. |
• | cannot rely on the position of the staff of the SEC enunciated inExxon Capital Holdings Corporationor similar interpretive letters; and | |
• | must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction. |
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• | to delay accepting for exchange any original notes for the reasons set forth under “Material conditions to the exchange offer” on the following page; | |
• | to extend the exchange offer or to terminate the exchange offer and to refuse to accept original notes not previously accepted if any of the conditions set forth below under “Material conditions to the exchange offer” have not been satisfied, by giving oral or written notice of such delay, extension or termination to the exchange agent; or | |
• | under the terms of the registration rights agreement, to amend the terms of the exchange offer in any manner. |
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• | the exchange notes to be received will not be transferable by the holder, without restriction under the Securities Act, the Exchange Act and without material restrictions under the blue sky or securities laws of substantially all of the states of the United States; | |
• | the exchange offer, or the making of any exchange by a holder of original notes, would violate applicable law or any applicable interpretation of the staff of the SEC; or | |
• | any action or proceeding has been instituted or threatened in any court or by or before any governmental agency with respect to the exchange offer that, in our judgment, would reasonably be expected to impair our ability to proceed with the exchange offer. |
• | the representations described under “Purpose and effect of the exchange offer,” “Procedures for tendering” and “Plan of distribution”; and | |
• | other representations as may be reasonably necessary under applicable SEC rules, regulations or interpretations to make available to it an appropriate form for registration of the exchange notes under the Securities Act. |
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• | complete, sign and date the accompanying letter of transmittal, or a facsimile of the letter of transmittal; have the signature on the letter of transmittal guaranteed if the letter of transmittal so requires; and mail or deliver the letter of transmittal or facsimile to the exchange agent prior to the expiration date; or | |
• | comply with DTC’s Automated Tender Offer Program procedures described below. |
• | the exchange agent must receive the original notes along with the accompanying letter of transmittal; | |
• | the exchange agent must receive, prior to the expiration date, a timely confirmation of book-entry transfer of the original notes into the exchange agent’s account at DTC according to the procedures for book-entry transfer described below or a properly transmitted agent’s message; or | |
• | the holder must comply with the guaranteed delivery procedures described below. |
• | make appropriate arrangements to register ownership of the original notes in such owner’s name; or | |
• | obtain a properly completed bond power from the registered holder of original notes. |
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• | by a registered holder who has not completed the box entitled “Special Issuance Instructions” or “Special Delivery Instructions” on the accompanying letter of transmittal; or | |
• | for the account of an eligible institution. |
• | DTC has received an express acknowledgment from a participant in its Automated Tender Offer Program that is tendering original notes that are the subject of the book-entry confirmation; | |
• | the participant has received and agrees to be bound by the terms of the accompanying letter of transmittal, or, in the case of an agent’s message relating to guaranteed delivery, that the participant has received and agrees to be bound by the applicable notice of guaranteed delivery; and | |
• | the agreement may be enforced against that participant. |
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• | original notes or a timely book-entry confirmation of the original notes into the exchange agent’s account at DTC; and | |
• | a properly completed and duly executed letter of transmittal and all other required documents or a properly transmitted agent’s message. |
• | any exchange notes that the holder receives will be acquired in the ordinary course of its business; | |
• | the holder has no arrangement or understanding with any person or entity to participate in the distribution of the exchange notes; | |
• | if the holder is not a broker-dealer, that is not engaged in and does not intend to engage in the distribution of the exchange notes; | |
• | if the holder is a broker-dealer that will receive exchange notes for its own account in exchange for original notes that were acquired as a result of market-making activities, that it will deliver a prospectus, as required by law, in connection with any resale of any exchange notes; and | |
• | the holder is not an “affiliate,” as defined in Rule 405 of the Securities Act, of ours or, if the holder is an affiliate, it will comply with any applicable registration and prospectus delivery requirements of the Securities Act. |
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• | the tender is made through an eligible institution; and | |
• | prior to the expiration date, the exchange agent receives from the eligible institution either a properly completed and duly executed notice of guaranteed delivery, by facsimile transmission, mail or hand delivery, or a properly transmitted agent’s message and notice of guaranteed delivery: |
• | setting forth the name and address of the holder, the registered number(s) of the original notes and the principal amount of original notes tendered; | |
• | stating that the tender is being made thereby; | |
• | guaranteeing that, within three NYSE Euronext trading days after the expiration date, the accompanying letter of transmittal, or facsimile of the letter of transmittal, together with the original notes or a book-entry confirmation, and any other documents required by the accompanying letter of transmittal will be deposited by the eligible institution with the exchange agent; and | |
• | the exchange agent receives the properly completed and executed letter of transmittal, or facsimile of the executed letter of transmittal, as well as all tendered original notes in proper form for transfer or a book-entry confirmation, and all other documents required by the accompanying letter of transmittal, within three NYSE Euronext trading days after the expiration date. |
• | the exchange agent must receive a written notice of withdrawal, which notice may be by telegram, telex, facsimile transmission or letter of withdrawal at one of the addresses set forth below under “Exchange agent”; or | |
• | holders must comply with the appropriate procedures of DTC’s Automated Tender Offer Program system. |
• | specify the name of the person who tendered the original notes to be withdrawn; |
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• | identify the original notes to be withdrawn, including the principal amount of the original notes; and | |
• | where certificates for the original notes have been transmitted, specify the name in which the original notes were registered, if different from that of the withdrawing holder. |
• | the serial numbers of the particular certificates to be withdrawn; and | |
• | a signed notice of withdrawal with signatures guaranteed by an eligible institution unless the holder is an eligible institution. |
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• | SEC registration fees; | |
• | fees and expenses of the exchange agent and trustee; | |
• | accounting and legal fees and printing costs; and | |
• | related fees and expenses. |
• | certificates representing the original notes for principal amounts not tendered or accepted for exchange are to be delivered to, or are to be issued in the name of, any person other than the registered holder of the original notes tendered; | |
• | tendered original notes are registered in the name of any person other than the person signing the letter of transmittal; | |
• | a transfer tax is imposed for any reason other than the exchange of the original notes under the exchange offer. |
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• | as set forth in the legend printed on the original notes as a consequence of the issuance of the original notes under the exemption from, or in transactions not subject to, the registration requirements of the Securities Act and applicable state securities laws; and | |
• | otherwise as set forth in the offering memorandum distributed in connection with the private offering of the original notes. |
• | cannot rely on the applicable interpretations of the SEC; and | |
• | must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction. |
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Year | Percentage | |||
2009 | 102.156% | |||
2010 and thereafter | 100.000% | |||
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• | be senior secured obligations of the Company; | |
• | be secured by second-priority Liens and security interests, subject to Permitted Liens, in substantially all of the tangible and intangible assets of the Company and the Subsidiary Guarantors, now owned or hereafter acquired by the Company and any Subsidiary Guarantor, that secure borrowings by the Company under the Credit Agreement on a first-priority basis (with the exception of pledges of stock of Subsidiary Guarantors to the extent that they would result in the filing with the SEC of separate financial statements of such Subsidiary Guarantors (the “Collateral”)); | |
• | rank equally in right of payment to all existing and future senior Indebtedness of the Company and senior in right of payment to any existing and future subordinated Indebtedness of the Company; | |
• | be effectively senior to all of the Company’s existing and future unsecured Indebtedness to the extent of the value of the Collateral (after giving effect to any senior Lien on the Collateral); |
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• | be effectively subordinated to the Company’s obligations under the Credit Agreement, to the extent of the value of the Collateral that secures such obligations on a first-priority basis; | |
• | be structurally subordinated to obligations of subsidiaries of the Company that are not Subsidiary Guarantors, including Indebtedness of Foreign Subsidiaries; | |
• | be initially limited to an aggregate principal amount of $200.0 million, subject to our ability to issue Additional Notes under the Indenture; | |
• | mature on December 1, 2011; | |
• | be issued in denominations of $2,000 and integral multiples of $1,000 in excess thereof; and | |
• | be unconditionally guaranteed on a senior secured basis by each of the Company’s current and future Restricted Subsidiaries that guarantee, and will in the future guarantee, Indebtedness under the Credit Agreement; provided, that, upon the release of a Guarantee by a Subsidiary Guarantor under the Credit Agreement, such Subsidiary Guarantor will be deemed released from all of its obligations under the Indenture and its Subsidiary Guarantee will terminate; provided, further, that in the event that any such Restricted Subsidiary thereafter guarantees any Indebtedness of the Company under the Credit Agreement (or if any released Guarantee under the Credit Agreement is reinstated or renewed), then such Restricted Subsidiary will guarantee the Notes on the terms and conditions set forth in the Indenture. See “Subsidiary guarantees” |
• | be senior secured obligations of the Subsidiary Guarantors; | |
• | be secured by second-priority Liens and security interests, subject to Permitted Liens, in the Collateral of the Subsidiary Guarantors; | |
• | rank equally in right of payment with all existing and future senior Indebtedness of the Subsidiary Guarantors and senior in right of payment to any existing and future subordinated Indebtedness of the Subsidiary Guarantors; | |
• | be effectively senior to all of the Subsidiary Guarantors’ existing and future unsecured Indebtedness to the extent of the value of the Collateral (after giving effect to senior Liens on the Collateral); and | |
• | be effectively subordinated to the Subsidiary Guarantors’ obligations under the Credit Agreement, to the extent of the value of the Collateral that secures such obligations on a first-priority basis. |
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• | accrue at the rate of 10% per annum; | |
• | accrue from the date of original issuance or, if interest has already been paid, from the most recent interest payment date; | |
• | be payable in cash semi-annually in arrears on June 1 and December 1, commencing on December 1, 2009; | |
• | be payable to the holders of record on the May 15 and November 15 immediately preceding the related interest payment dates; and | |
• | be computed on the basis of a360-day year comprised of twelve30-day months. |
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(1) | at least 65% of the original principal amount of the Notes remains outstanding after each such redemption; and | |
(2) | the redemption occurs within 90 days after the closing of such Equity Offering. |
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• | the Company and the Subsidiary Guarantors had $365.4 million of total outstanding Indebtedness, including capital lease obligations but excluding intercompany liabilities and Guarantees under the Credit Agreement and the Indenture, of which any future borrowings under the Credit Agreement will rank, effectively senior to the Notes to the extent the Collateral secures such obligations on a first-priority basis, and $175.0 million would have been subordinated to the Notes; and | |
• | the Company and the Subsidiary Guarantors had $3.9 million of outstanding senior secured pari passu Indebtedness, including capital lease obligations and mortgages, which would have ranked equally with the Notes, although effectively senior to the Notes to the extent of the value of the Collateral securing such obligations. |
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(1) | the sale or other disposition is in compliance with the Indenture, including the covenants “Limitation on sales of assets and subsidiary stock” and “Limitation on sale of capital stock of restricted subsidiaries;” and | |
(2) | all the obligations of such Subsidiary Guarantor under the Credit Agreement and related documentation and any other agreements relating to any other Indebtedness of the Company or its Restricted Subsidiaries terminate upon consummation of such transaction, if such Subsidiary Guarantor would not then otherwise be required to guarantee the Notes pursuant to the Indenture. |
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• | any Capital Stock and other securities of a Subsidiary to the extent that the pledge of such Capital Stock and other securities results in the Company being required to file separate financial statements of such Subsidiary with the SEC, but only to the extent necessary not to be subject to such requirement, as described in more detail below; and | |
• | any Capital Stock of any Foreign Subsidiaries directly owned by the Company or any Subsidiary Guarantor in excess of 65% of the Voting Stock of such Foreign Subsidiaries. |
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(1) | the Company shall deliver to the Collateral Agent, as mortgagee or beneficiary, as applicable, fully executed counterparts of Mortgages, each dated as of the Issue Date or, if later, the date such property is pledged to secure the Obligations, in accordance with the requirements of the Indentureand/or the Collateral Documents, duly executed by the Company or the applicable Subsidiary Guarantor, together with evidence of the completion (or satisfactory arrangements for the completion) of all recordings and filings of such Mortgage (and payment of any taxes or fees in connection therewith) as may be necessary to create a valid, perfected at least second-priority Lien (subject to Permitted Liens) against the properties purported to be covered thereby; |
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(2) | the Collateral Agent shall have received mortgagee’s title insurance policies in favor of the Collateral Agent, as mortgagee for the ratable benefit of itself and the Trustee, the holders of the Notes and holders of any Pari Passu Notes, in the form necessary, with respect to the property purported to be covered by such Mortgage, to insure that the interests created by the Mortgage constitute valid and at least second-priority Liens on such property free and clear of all Liens, defects and encumbrances (other than Permitted Liens), each such title insurance policy to be in an amount reasonably satisfactory to the Collateral Agent and such policies shall also include such endorsements and affirmative coverages as shall be reasonably requested by the Collateral Agent and shall be accompanied by evidence of the payment in full of all premiums thereon; and | |
(3) | the Issuer shall cause each Subsidiary Guarantor to, deliver to the Collateral Agent, with respect to each of the covered Premises, such filings, surveys (or any updates or affidavits that the title company may reasonably require as necessary to issue the title insurance policies), local counsel opinions, landlord agreements and fixture filings, along with such other documents, instruments, certificates and agreements, as the Collateral Agent and its counsel shall reasonably require to create, evidence or perfect a valid and at least second-priority Lien on the property subject to each such Mortgage (subject to Permitted Liens). |
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(1) | in whole, upon payment in full of the principal of, together with accrued and unpaid interest and premium, if any, on the Notes; | |
(2) | in whole, upon satisfaction and discharge of the Indenture; | |
(3) | in whole, upon a legal defeasance as set forth under the caption “Defeasance”; | |
(4) | in part, as to any property constituting Collateral (A) that is sold or otherwise disposed of by the Company or any of the Subsidiary Guarantors in a transaction permitted by “Certain covenants—Limitation on sales of assets and subsidiary stock” and by the Collateral Documents (to the extent of the interest sold or disposed of) or otherwise permitted by the Indenture and the Collateral Documents; (B) that is cash or Net Available Cash withdrawn from the Collateral Account for any one or more purposes permitted by subsection (a) of “Certain covenants—Limitation on sales of assets and subsidiary stock” or for any other expenditures not prohibited by the Indenture; (C) upon any release, sale or disposition (other than in connection with a cancellation or termination of the Credit Agreement without a replacement thereof) of such Collateral pursuant to the terms of the Credit Agreement resulting in the release of the Lien on such Collateral securing the Credit Agreement; or (D) otherwise in accordance with, and as expressly provided for under, the Indenture or the Intercreditor Agreement; |
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(5) | in whole as to all Collateral that is owned by a Subsidiary Guarantor that is released from its Subsidiary Guarantee in accordance with the Indenture; and | |
(6) | with the consent of holders of seventy-five percent (75%) in aggregate principal amount of the Notes (including, without limitation, consents obtained in connection with a tender offer or exchange offer for, or purchase of Notes); |
(1) | that a Change of Control has occurred and that such holder has the right to require the Company to purchase such holder’s Notes at a purchase price in cash equal to 101% of the principal amount of such Notes plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date) (the “Change of Control Payment”); | |
(2) | the repurchase date (which shall be no earlier than 30 days nor later than 60 days from the date such notice is mailed) (the “Change of Control Payment Date”); and | |
(3) | the procedures determined by the Company, consistent with the Indenture, that a holder must follow in order to have its Notes repurchased. |
(1) | accept for payment all Notes or portions of Notes (equal to $2,000 of principal amount or integral multiples of $1,000 thereof) properly tendered pursuant to the Change of Control Offer; |
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(2) | deposit with the paying agent an amount equal to the Change of Control Payment in respect of all Notes or portions of Notes so tendered; and | |
(3) | deliver or cause to be delivered to the Trustee the Notes so accepted together with an Officers’ Certificate stating the aggregate principal amount of Notes or portions of Notes being purchased by the Company. |
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(1) | the Consolidated Coverage Ratio for the Company and its Restricted Subsidiaries is at least 2.00 to 1.00; and | |
(2) | no Default or Event of Default will have occurred or be continuing or would occur as a consequence of Incurring the Indebtedness or transactions relating to such Incurrence. |
(1) | Indebtedness of the Company Incurred pursuant to the Credit Agreement and Guarantees of Restricted Subsidiaries in respect of the Indebtedness Incurred pursuant to a Credit Agreement; provided, however, that the aggregate principal amount of all Indebtedness Incurred by the Company pursuant to this clause (1) does not exceed $85.0 million at any time outstanding, less the aggregate principal amount of all Net Cash Proceeds from Asset Dispositions applied to permanently reduce the commitments with respect to such Indebtedness pursuant to this covenant described under the caption “Limitation on sale of assets and subsidiary stock;” |
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(2) | Guarantees by the Subsidiary Guarantors of Indebtedness Incurred in accordance with the provisions of the Indenture; provided that in the event such Indebtedness that is being Guaranteed is a Subordinated Obligation or a Guarantor Subordinated Obligation, then the related Guarantee shall be subordinated in right of payment to the Subsidiary Guarantee; | |
(3) | Indebtedness of the Company owing to and held by any Restricted Subsidiary or Indebtedness of a Restricted Subsidiary owing to and held by the Company or any other Restricted Subsidiary; provided, however, |
(a) | if the Company is the obligor on such Indebtedness, such Indebtedness is expressly subordinated to the prior payment in full in cash of all obligations with respect to the Notes; |
(b) | if a Subsidiary Guarantor is the obligor on such Indebtedness and the Company or a Subsidiary Guarantor is not the obligee, such Indebtedness is subordinated in right of payment to the Subsidiary Guarantees of such Subsidiary Guarantor; and |
(c) | (i) any subsequent issuance or transfer of Capital Stock or any other event that results in any such Indebtedness being beneficially held by a Person other than the Company or a Restricted Subsidiary of the Company; and |
(ii) | any sale or other transfer of any such Indebtedness to a Person other than the Company or a Restricted Subsidiary of the Company; |
shall be deemed, in each case, to constitute an Incurrence of such Indebtedness by the Company or such Subsidiary, as the case may be. | ||
(4) | Indebtedness represented by (a) the Notes issued on the Issue Date, the Subsidiary Guarantees and the Exchange Notes and exchange guarantees issued in a registered exchange offer pursuant to the Registration Rights Agreement, (b) any Indebtedness (other than the Indebtedness described in clauses (1), (2), (3), (6), (8), (9) and (10) hereof) outstanding on the Issue Date and (c) any Refinancing Indebtedness Incurred in respect of any Indebtedness described in this clause (4) or clause (5) or Incurred pursuant to the first paragraph of this covenant; | |
(5) | Indebtedness of a Restricted Subsidiary Incurred and outstanding on the date on which such Restricted Subsidiary was acquired by the Company (other than Indebtedness Incurred (a) to provide all or any portion of the funds utilized to consummate the transaction or series of related transactions pursuant to which such Restricted Subsidiary became a Restricted Subsidiary or was otherwise acquired by the Company or (b) otherwise in connection with, or in contemplation of, such acquisition); provided, however, that at the time such Restricted Subsidiary is acquired by the Company, the Company would have been able to Incur $1.00 of additional Indebtedness pursuant to the first paragraph of this covenant after giving effect to the Incurrence of such Indebtedness pursuant to this clause (5); | |
(6) | Indebtedness under Interest Rate Agreements; provided, that in the case of such Interest Rate Agreements are entered into for bona fide hedging purposes of the Company or its Restricted Subsidiaries (as determined in good faith by the Board of Directors or senior management of the Company) and substantially correspond in terms of notional amount, duration, currencies and interest rates, as applicable, to |
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Indebtedness of the Company or its Restricted Subsidiaries Incurred without violation of the Indenture; |
(7) | the Incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness represented by Capitalized Lease Obligations, mortgage financings or purchase money obligations with respect to assets other than Capital Stock or other Investments, in each case Incurred for the purpose of financing all or any part of the purchase price or cost of construction or improvements of property used in the business of the Company or such Restricted Subsidiary, in an aggregate principal amount not to exceed $10.0 million at any time outstanding; | |
(8) | Indebtedness Incurred in respect of workers’ compensation claims, self-insurance obligations, performance, surety and similar bonds and completion guarantees provided by the Company or a Restricted Subsidiary in the ordinary course of business; | |
(9) | Indebtedness arising from agreements of the Company or a Restricted Subsidiary providing for indemnification, adjustment of purchase price or similar obligations, in each case, Incurred or assumed in connection with the disposition of any business, assets or Capital Stock of a Restricted Subsidiary, provided that the maximum aggregate liability in respect of all such Indebtedness shall at no time exceed the gross proceeds actually received by the Company and its Restricted Subsidiaries in connection with such disposition; |
(10) | Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument (except in the case of daylight overdrafts) drawn against insufficient funds in the ordinary course of business, provided, however, that such Indebtedness is extinguished within five Business Days of Incurrence; and | |
(11) | in addition to the items referred to in clauses (1) through (10) above, Indebtedness of the Company and its Restricted Subsidiaries in an aggregate outstanding principal amount which, when taken together with the principal amount of all other Indebtedness Incurred pursuant to this clause (11) and then outstanding, will not exceed $20.0 million at any time outstanding (which may be Indebtedness Incurred under or in respect of the Credit Agreement). |
(1) | in the event that Indebtedness meets the criteria of more than one of the types of Indebtedness described in the first and second paragraphs of this covenant, the Company, in its sole discretion, will classify such item of Indebtedness on the date of |
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Incurrence and only be required to include the amount and type of such Indebtedness in one of such clauses; |
(2) | all Indebtedness outstanding on the date of the Indenture under the Credit Agreement shall be deemed initially Incurred on the Issue Date under clause (1) of the second paragraph of this covenant and not the first paragraph or clause (4) of the second paragraph of this covenant; | |
(3) | Guarantees of, or obligations in respect of letters of credit relating to, Indebtedness that is otherwise included in the determination of a particular amount of Indebtedness shall not be included; | |
(4) | if obligations in respect of letters of credit are Incurred pursuant to a Credit Agreement and are being treated as Incurred pursuant to clause (1) of the second paragraph above and the letters of credit relate to other Indebtedness, then such other Indebtedness shall not be included; | |
(5) | the principal amount of any Disqualified Stock of the Company or a Restricted Subsidiary, or Preferred Stock of a Restricted Subsidiary that is not a Subsidiary Guarantor, will be equal to the greater of the maximum mandatory redemption or repurchase price (not including, in either case, any redemption or repurchase premium) or the liquidation preference thereof; | |
(6) | Indebtedness permitted by this covenant need not be permitted solely by reference to one provision permitting such Indebtedness but may be permitted in part by one such provision and in part by one or more other provisions of this covenant permitting such Indebtedness; and | |
(7) | the amount of Indebtedness issued at a price that is less than the principal amount thereof will be equal to the amount of the liability in respect thereof determined in accordance with GAAP. |
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(1) | declare or pay any dividend or make any distribution (whether made in cash, securities or other property) on or in respect of its Capital Stock (including any payment in connection with any merger or consolidation involving the Company or any of its Restricted Subsidiaries) except: |
(a) | dividends or distributions payable in Capital Stock of the Company (other than Disqualified Stock) or in options, warrants or other rights to purchase such Capital Stock of the Company; and |
(b) | dividends or distributions payable to the Company or a Restricted Subsidiary (and if such Restricted Subsidiary is not a Wholly-Owned Subsidiary, to its other holders of common Capital Stock on a pro rata basis); |
(2) | purchase, redeem, retire or otherwise acquire for value any Capital Stock of the Company or any direct or indirect parent of the Company held by Persons other than the Company or a Restricted Subsidiary (other than in exchange for Capital Stock of the Company (other than Disqualified Stock)); | |
(3) | purchase, repurchase, redeem, defease or otherwise acquire or retire for value, prior to scheduled maturity, scheduled repayment or scheduled sinking fund payment, any Junior Lien Collateral Indebtedness, Senior Unsecured Pari Passu Indebtedness, Subordinated Obligations or Guarantor Subordinated Obligations (other than the purchase, repurchase, redemption, defeasance or other acquisition or retirement of Junior Lien Collateral Indebtedness, Senior Unsecured Pari Passu Indebtedness, Subordinated Obligations or Guarantor Subordinated Obligations purchased in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of purchase, repurchase, redemption, defeasance or other acquisition or retirement); or | |
(4) | make any Restricted Investment in any Person; |
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(a) | a Default shall have occurred and be continuing (or would result therefrom); or |
(b) | the Company is not able to Incur an additional $1.00 of Indebtedness pursuant to the first paragraph under the “Limitation on indebtedness” covenant after giving effect, on apro formabasis, to such Restricted Payment; or |
(c) | the aggregate amount of such Restricted Payment and all other Restricted Payments declared or made subsequent to March 4, 2004 would exceed the sum of: |
(i) | 50% of Consolidated Net Income for the period (treated as one accounting period) from the first day of the quarter in which March 4, 2004 occurs to the end of the most recent fiscal quarter ending prior to the date of such Restricted Payment for which financial statements are in existence (or, in case such Consolidated Net Income is a deficit, minus 100% of such deficit); | |
(ii) | 100% of the aggregate Net Cash Proceeds received by the Company from the issue or sale of its Capital Stock (other than Disqualified Stock) or other capital contributions subsequent to March 4, 2004 (other than Net Cash Proceeds received from an issuance or sale of such Capital Stock to a Subsidiary of the Company or to an employee stock ownership plan, option plan or similar trust to the extent such sale to an employee stock ownership plan or similar trust is financed by loans from or Guaranteed by the Company or any Restricted Subsidiary unless such loans have been repaid with cash on or prior to the date of determination); | |
(iii) | the amount by which Indebtedness of the Company or its Restricted Subsidiaries is reduced on the Company’s balance sheet upon the conversion or exchange (other than by a Subsidiary of the Company) subsequent to March 4, 2004 of any Indebtedness of the Company or its Restricted Subsidiaries convertible or exchangeable for Capital Stock (other than Disqualified Stock) of the Company (less the amount of any cash, or the fair market value of any other property, distributed by the Company upon such conversion or exchange); and | |
(iv) | the amount equal to the net reduction in Restricted Investments made by the Company or any of its Restricted Subsidiaries in any Person resulting from: |
(A) | repurchases or redemptions of such Restricted Investments by such Person, proceeds realized upon the sale of such Restricted Investment to an unaffiliated purchaser, repayments of loans or advances or other transfers of assets (including by way of dividend or distribution) by such Person to the Company or any Restricted Subsidiary, or |
(B) | the redesignation of Unrestricted Subsidiaries as Restricted Subsidiaries (valued in each case as provided in the definition of “Investment”) not to exceed, in the case of any Unrestricted Subsidiary, the amount of Investments previously made by the Company or any Restricted Subsidiary in such Unrestricted Subsidiary, |
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(1) | any purchase, repurchase, redemption, defeasance or other acquisition or retirement of Capital Stock, Disqualified Stock, Junior Lien Collateral Indebtedness, Senior Unsecured Pari Passu Indebtedness, Subordinated Obligations of the Company or Guarantor Subordinated Obligations of any Subsidiary Guarantor made by exchange for, or out of the proceeds of the substantially concurrent sale of, Capital Stock of the Company (other than Disqualified Stock and other than Capital Stock issued or sold to a Subsidiary or an employee stock ownership plan or similar trust to the extent such sale to an employee stock ownership plan or similar trust is financed by loans from or Guaranteed by the Company or any Restricted Subsidiary unless such loans have been repaid with cash on or prior to the date of determination); provided, however, that (a) such purchase, repurchase, redemption, defeasance, acquisition or retirement will be excluded in subsequent calculations of the amount of Restricted Payments and (b) the Net Cash Proceeds from such sale of Capital Stock will be excluded from clause (c)(ii) of the preceding paragraph; | |
(2) | (A) any purchase, repurchase, redemption, defeasance or other acquisition or retirement of Junior Lien Collateral Indebtedness, Senior Unsecured Pari Passu Indebtedness, Subordinated Obligations of the Company or Guarantor Subordinated Obligations of any Subsidiary Guarantor made by exchange for, or out of the proceeds of the substantially concurrent sale of, Subordinated Obligations of the Company or (B) any purchase, repurchase, redemption, defeasance or other acquisition or retirement of Guarantor Subordinated Obligations made by exchange for or out of the proceeds of the substantially concurrent sale of Guarantor Subordinated Obligations or (C) any purchase, repurchase, redemption, defeasance or other acquisition or retirement of Junior Lien Collateral Indebtedness of the Company made by exchange for, or out of the proceeds of the substantially concurrent sale of Junior Lien Collateral Indebtedness of the Company or Senior Unsecured Pari Passu Indebtedness of the Company or (D) any purchase, repurchase, redemption, defeasance or other acquisition or retirement of Junior Lien Collateral Indebtedness of a Subsidiary Guarantor made by exchange for or out of the proceeds of the substantially concurrent sale of Junior Lien Collateral Indebtedness or Senior Unsecured Pari Passu Indebtedness of the Company or such Subsidiary Guarantor or Guarantor Subordinated Obligations of such Subsidiary Guarantor or (E) any purchase, repurchase, redemption, defeasance or other acquisition or retirement of Senior Unsecured Pari Passu Indebtedness of the Company made by exchange for, or out of the proceeds of the substantially concurrent sale of Senior Unsecured Pari Passu Indebtedness of the Company or (F) any purchase, defeasance or redemption of Senior Unsecured Pari Passu Indebtedness of a Subsidiary Guarantor made by exchange for, or out of the proceeds of the substantially concurrent sale of Senior Unsecured Pari Passu Indebtedness of the Company or such Subsidiary Guarantor or Guarantor Subordinated Obligations of such Subsidiary Guarantor that, in each case, is permitted to be Incurred pursuant to the covenant described under “Limitation on indebtedness” and that in each case constitutes Refinancing Indebtedness; provided, however, that such purchase, repurchase, |
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redemption, defeasance, acquisition or retirement will be excluded in subsequent calculations of the amount of Restricted Payments; |
(3) | any purchase, repurchase, redemption, defeasance or other acquisition or retirement of Disqualified Stock of the Company or a Restricted Subsidiary made by exchange for or out of the proceeds of the substantially concurrent sale of Disqualified Stock of the Company or such Restricted Subsidiary, as the case may be, that, in each case, is permitted to be Incurred pursuant to the covenant described under “Limitation on indebtedness” and that in each case constitutes Refinancing Indebtedness; provided, however, that such purchase, repurchase, redemption, defeasance, acquisition or retirement will be excluded in subsequent calculations of the amount of Restricted Payments; | |
(4) | so long as no Default or Event of Default has occurred and is continuing, any purchase or redemption of Junior Lien Collateral Indebtedness, Senior Unsecured Pari Passu Indebtedness, Subordinated Obligations or Guarantor Subordinated Obligations of a Subsidiary Guarantor from Net Available Cash to the extent permitted under “Limitation on sales of assets and subsidiary stock” below; provided, however, that such purchase or redemption will be excluded in subsequent calculations of the amount of Restricted Payments; | |
(5) | dividends paid within 60 days after the date of declaration if at such date of declaration such dividend would have complied with this provision; provided, however, that such dividends will be included in subsequent calculations of the amount of Restricted Payments; | |
(6) | so long as no Default or Event of Default has occurred and is continuing, dividends to Holdings or New Holdings for the purpose of, and in the amounts equal to, amounts required to permit Holdings or New Holdings: |
(a) | to redeem or repurchase Capital Stock of Holdings or New Holdings held by any existing or former employees or management of the Company or any Subsidiary of the Company or their assigns, estates or heirs, in each case in connection with the repurchase provisions under employee stock option or stock purchase agreements or other agreements to compensate management employees; provided that such redemptions or repurchases pursuant to this clause will not exceed $4.0 million in the aggregate for all such redemptions and repurchases;provided, however, that the amount of any such repurchase or redemption will be included in subsequent calculations of the amount of Restricted Payments; and |
(b) | to make loans or advances to employees or directors of the Company or any Subsidiary of the Company the proceeds of which are used to purchase Capital Stock of Holdings or New Holdings, in an aggregate amount not in excess of $1.5 million at any one time outstanding;provided, however, that the amount of such loans and advances will be included in subsequent calculations of the amount of Restricted Payments; |
(7) | so long as no Default or Event of Default has occurred and is continuing, the declaration and payment of dividends to holders of any class or series of Disqualified Stock of the Company issued in accordance with the terms of the Indenture to the extent such dividends are included in the definition of “Consolidated Interest |
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Expense”;provided that the payment of such dividends will be excluded from the calculation of Restricted Payments; |
(8) | repurchases of Capital Stock deemed to occur upon the exercise of stock options, warrants or other convertible securities if such Capital Stock represents a portion of the exercise price thereof;provided, however, that such repurchases will be excluded from subsequent calculations of the amount of Restricted Payments; | |
(9) | so long as (a) no Default or Event of Default shall have occurred and be continuing and (b) immediately before and immediately after giving effect thereto, the Company would have been permitted to Incur at least $1.00 of additional Indebtedness pursuant to the first paragraph under the “Limitation on indebtedness” covenant, payments of cash dividends to Holdings in an amount sufficient to enable Holdings to make payments of cash interest required to be made in respect of the Holdings Senior Discount Notes in accordance the terms thereof in effect on the date of the Indenture,providedHoldings is otherwise unable to pay such interest and such dividends are applied directly to the payment of such interest; andprovided, further, that such payments will be excluded from the calculation of the amount of Restricted Payments; |
(10) | cash dividends or loans to Holdings or New Holdings in amounts equal to: |
(a) | the amounts required for Holdings or New Holdings to pay any Federal, state or local income taxes to the extent that such income taxes are directly attributable to the income of the Company and its Restricted Subsidiaries; |
(b) | the amounts required for Holdings and New Holdings to pay franchise taxes and other fees required to maintain their legal existence; |
(c) | an amount not to exceed $500,000 in any fiscal year to permit Holdings and New Holdings to pay their corporate overhead expenses Incurred in the ordinary course of business, and to pay salaries or other compensation of employees who perform services for the Company and one or more of Holdings or New Holdings; |
(d) | so long as no Default or Event of Default shall have occurred and be continuing, an amount not to exceed $100,000 in the aggregate, to enable Holdings or New Holdings to make payments to holders of its Capital Stock in lieu of issuance of fractional shares of its Capital Stock; and |
(e) | the amounts payable by Holdings or New Holdings in connection with the Transactions, if any; |
(11) | the purchase, repurchase, redemption, defeasance or other acquisition or retirement for value of any Junior Lien Collateral Indebtedness, Senior Unsecured Pari Passu Indebtedness, Subordinated Obligation or Guarantor Subordinated Obligation (i) at a purchase price not greater than 101% of the principal amount of such Junior Lien Collateral Indebtedness, Senior Unsecured Pari Passu Indebtedness, Subordinated Obligation in the event of a Change of Control in accordance with provisions similar to the “Change of control” covenant or (ii) at a purchase price not greater than |
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100% of the principal amount thereof in accordance with provisions similar to the “Limitation on sales of assets and subsidiary stock” covenant; provided that, prior to or simultaneously with such purchase, repurchase, redemption, defeasance or other acquisition or retirement, the Company has made the Change of Control Offer or Asset Disposition Offer, as applicable, as provided in such covenant with respect to the Notes and has completed the repurchase or redemption of all Notes validly tendered for payment in connection with such Change of Control Offer or Asset Disposition Offer; and |
(12) | other Restricted Payments in an amount not to exceed $10.0 million; provided that the amount of such Restricted Payments will be included in the calculation of the amount of Restricted Payments. |
(1) | pay dividends or make any other distributions on its Capital Stock or pay any Indebtedness or other obligations owed to the Company or any Restricted Subsidiary (it being understood that the priority of any Preferred Stock in receiving dividends or liquidating distributions prior to dividends or liquidating distributions being paid on |
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Common Stock shall not be deemed a restriction on the ability to make distributions on Capital Stock); |
(2) | make any loans or advances to the Company or any Restricted Subsidiary (it being understood that the subordination of loans or advances made to the Company or any Restricted Subsidiary to other Indebtedness Incurred by the Company or any Restricted Subsidiary shall not be deemed a restriction on the ability to make loans or advances); or | |
(3) | transfer any of its property or assets to the Company or any Restricted Subsidiary. |
(i) | any encumbrance or restriction pursuant to an agreement in effect at or entered into on the date of the Indenture, including, without limitation, the Indenture, the indenture for the 85/8% Notes, the Subsidiary Guarantees, the Collateral Documents, the Intercreditor Agreement and the Credit Agreement (and related documentation); |
(ii) | any encumbrance or restriction with respect to a Restricted Subsidiary pursuant to an agreement relating to any Capital Stock or Indebtedness Incurred by a Restricted Subsidiary on or before the date on which such Restricted Subsidiary was acquired by the Company (other than Capital Stock or Indebtedness Incurred as consideration in, or to provide all or any portion of the funds utilized to consummate, the transaction or series of related transactions pursuant to which such Restricted Subsidiary became a Restricted Subsidiary or was acquired by the Company or in contemplation of the transaction) and outstanding on such date, provided that any such encumbrance or restriction shall not extend to any assets or property of the Company or any other Restricted Subsidiary other than the assets and property so acquired; |
(iii) | any encumbrance or restriction with respect to a Restricted Subsidiary pursuant to an agreement effecting a refunding, replacement or refinancing of Indebtedness Incurred pursuant to an agreement referred to in clause (i) or (ii) of this paragraph or this clause (iii) or contained in any amendment to an agreement referred to in clause (i) or (ii) of this paragraph or this clause (iii); provided, however, that the encumbrances and restrictions with respect to such Restricted Subsidiary contained in any such agreement are no less favorable in any material respect to the holders of the Notes than the encumbrances and restrictions contained in such agreements referred to in clauses (i) or (ii) of this paragraph on the Issue Date or the date such Restricted Subsidiary became a Restricted Subsidiary, whichever is applicable; |
(iv) | in the case of clause (3) of the first paragraph of this covenant, any encumbrance or restriction: |
(a) | that restricts in a customary manner the subletting, assignment or transfer of any property or asset that is subject to a lease, license or similar contract, or the assignment or transfer of any such lease, license or other contract; |
(b) | contained in mortgages, pledges or other security agreements permitted under the Indenture securing Indebtedness of the Company or a Restricted Subsidiary to the extent such encumbrances or restrictions restrict the transfer of the property subject to such mortgages, pledges or other security agreements; or |
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(c) | pursuant to customary provisions restricting dispositions of real property interests set forth in any reciprocal easement agreements of the Company or any Restricted Subsidiary; |
(v) | (a) purchase money obligations for property acquired in the ordinary course of business and (b) Capitalized Lease Obligations permitted under the Indenture, in each case, that impose encumbrances or restrictions of the nature described in clause (3) of the first paragraph of this covenant on the property so acquired; |
(vi) | any restriction with respect to a Restricted Subsidiary (or any of its property or assets) imposed pursuant to an agreement entered into for the direct or indirect sale or disposition of all or substantially all the Capital Stock or assets of such Restricted Subsidiary (or the property or assets that are subject to such restriction) pending the closing of such sale or disposition; |
(vii) | net worth provisions in leases and other agreements entered into by the Company or any Restricted Subsidiary in the ordinary course of business; and |
(viii) | encumbrances or restrictions arising or existing by reason of applicable law or any applicable rule, regulation or order. |
(a) | The Company will not, and will not permit any of its Restricted Subsidiaries to, make any Asset Dispositionunless: |
(1) | in the case of any Asset Disposition involving shares or assets having a value equal to or in excess of $1.0 million, the Company or such Restricted Subsidiary, as the case may be, receives consideration at least equal to the fair market value (such fair market value to be determined on the date of contractually agreeing to such Asset Disposition), as determined in good faith by the Board of Directors (including the value of all non-cash consideration), of the shares and assets subject to such Asset Disposition; | |
(2) | in the case of any Asset Disposition involving shares or assets having a value equal to or in excess of $1.0 million, at least 75% of the consideration from such Asset Disposition received by the Company or such Restricted Subsidiary, as the case may be, is in the form of cash or Cash Equivalents; and | |
(3) | an amount equal to 100% of the Net Available Cash from such Asset Disposition is applied by the Company or such Restricted Subsidiary, as the case may be: |
(a) | to prepay, repay or purchase secured Indebtedness of the Company (other than any Disqualified Stock or Subordinated Obligations) or secured Indebtedness of a Restricted Subsidiary (other than any Disqualified Stock or Guarantor Subordinated Obligations of a Restricted Subsidiary that is a Subsidiary Guarantor) (in each case other than Indebtedness owed to the Company or an Affiliate of the Company) within 360 days from the later of the date of such Asset Disposition or the receipt of such Net Available Cash;provided,however, that, in connection with any prepayment, repayment or purchase of Indebtedness pursuant to this clause (a), the Company or such Restricted Subsidiary will retire such Indebtedness and will cause the related commitment, |
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if any, to be permanently reduced in an amount equal to the principal amount so prepaid, repaid or purchased; or |
(b) | to invest in Additional Assets within 360 days from the later of the date of such Asset Disposition or the receipt of such Net Available Cash; |
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(1) | the assumption by the transferee of Indebtedness (other than Subordinated Obligations or Disqualified Stock) of the Company or Indebtedness of a Restricted Subsidiary (other than Guarantor Subordinated Indebtedness, Guarantor Subordinated Obligations or Disqualified Stock of any Wholly-Owned Subsidiary that is a Subsidiary Guarantor) and the release of the Company or such Restricted Subsidiary from all liability on such Indebtedness in connection with such Asset Disposition (in which case the Company will, without further action, be deemed to have applied such deemed cash to Indebtedness in accordance with clause (a) above); and | |
(2) | securities, notes or other obligations received by the Company or any Restricted Subsidiary from the transferee that are promptly converted by the Company or such Restricted Subsidiary into cash. |
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(1) | the terms of such Affiliate Transaction are no less favorable to the Company or such Restricted Subsidiary, as the case may be, than those that could be obtained in a comparable transaction at the time of such transaction in arm’s-length dealings with a Person who is not such an Affiliate; | |
(2) | in the event such Affiliate Transaction involves an aggregate consideration in excess of $1.0 million, the terms of such transaction have been approved by a majority of the members of the Board of Directors of the Company and by a majority of the members of such Board of Directors having no personal stake in such transaction, if any (and such majority or majorities, as the case may be, determines that such Affiliate Transaction satisfies the criteria in clause (1) above); and | |
(3) | in the event such Affiliate Transaction involves an aggregate consideration in excess of $5.0 million, the Company has received a written opinion from an independent investment banking, accounting or appraisal firm of nationally recognized standing that such Affiliate Transaction is not materially less favorable than those that might reasonably have been obtained in a comparable transaction at such time on an arm’s-length basis from a Person that is not an Affiliate. |
(1) | any Restricted Payment (other than a Restricted Investment) permitted to be made pursuant to the covenant described under “Limitation on restricted payments;” | |
(2) | any issuance of securities, or other payments, awards or grants in cash, securities or otherwise pursuant to, or the funding of, employment agreements and other compensation arrangements, options to purchase Capital Stock of the Company, restricted stock plans, long-term incentive plans, stock appreciation rights plans, participation plans or similar employee benefits plansand/or indemnity provided on behalf of officers and employees approved by the Board of Directors; | |
(3) | loans or advances to employees, officers or directors in the ordinary course of business of the Company or any of its Restricted Subsidiaries but in any event not to exceed $1.5 million in the aggregate outstanding at any one time with respect to all loans or advances made since the Issue Date; | |
(4) | any transaction between the Company and a Restricted Subsidiary or between Restricted Subsidiaries and Guarantees issued by the Company or a Restricted Subsidiary for the benefit of the Company or a Restricted Subsidiary, as the case may be, in accordance with “Certain covenants—Limitations on indebtedness;” | |
(5) | the payment of reasonable and customary fees paid to, and indemnity provided on behalf of, directors of the Company or any Restricted Subsidiary; | |
(6) | the fees payable by the Company in connection with the Transactions; |
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(7) | the performance of obligations of the Company or any of its Restricted Subsidiaries under the terms of any agreement to which the Company or any of its Restricted Subsidiaries is a party as of or on the Issue Date and identified on a schedule to the Indenture on the Issue Date, as these agreements may be amended, modified, supplemented, extended or renewed from time to time; provided, however, that any future amendment, modification, supplement, extension or renewal entered into after the Issue Date will be permitted to the extent that its terms are not more disadvantageous to the holders of the Notes than the terms of the agreements in effect on the Issue Date; | |
(8) | the issuance of Capital Stock (other than Disqualified Stock) of the Company to any Affiliate; and | |
(9) | entrance into and performance of any employment agreement entered into by the Company or any of its Restricted Subsidiaries in the ordinary course of business or approved by the Board of Directors in good faith. |
(1) | to the Company or a Wholly-Owned Subsidiary; or | |
(2) | in compliance with the covenant described under “Limitation on sales of assets and subsidiary stock” and immediately after giving effect to such issuance or sale, such Restricted Subsidiary would continue to be a Restricted Subsidiary. |
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(1) | the resulting, surviving or transferee Person (the “Successor Company”) will be a corporation or limited liability company organized or formed, as the case may be, and existing under the laws of the United States of America, any State of the United States or the District of Columbia and the Successor Company (if not the Company) will expressly assume, by supplemental indenture or other documentation or instruments, executed and delivered to the Trustee, in form satisfactory to the Trustee, all the obligations of the Company under the Notes, the Indenture, the Collateral Documents (as applicable) and the Intercreditor Agreement and will cause such amendments, supplements or other instruments to be executed, filed and recorded in such jurisdictions as may be required by applicable law to preserve and protect the Lien on the Collateral owned by or transferred to the Successor Company, together with such financing statements or comparable documents as may be required to perfect any security interests in such Collateral which may be perfected by the filing of a financing statement or a similar document under the Uniform Commercial Code or other similar statute or regulation of the relevant states or jurisdictions; | |
(2) | immediately after giving effect to such transaction (and treating any Indebtedness that becomes an obligation of the Successor Company or any Subsidiary of the Successor Company as a result of such transaction as having been Incurred by the Successor Company or such Subsidiary at the time of such transaction), no Default or Event of Default shall have occurred and be continuing; | |
(3) | immediately after giving effect to such transaction, the Successor Company would be able to Incur at least an additional $1.00 of Indebtedness pursuant to the first paragraph of the “Limitation on indebtedness” covenant; | |
(4) | unless the Company is the Successor Company, each Subsidiary Guarantor (unless it is the other party to the transactions above, in which case clause (1) shall apply) shall have by supplemental indenture confirmed that its Subsidiary Guarantee shall apply to such Person’s obligations in respect of the Indenture and the Notes and its obligations under the Registration Rights Agreement, Collateral Documents and the Intercreditor Agreement shall continue to be in effect and shall cause such amendments, supplements or other instruments to be executed, filed, and recorded in such jurisdictions as may be required by applicable law to preserve and protect the Lien on the Collateral owned by such Subsidiary Guarantor, together with such financing statements or comparable documents as may be required to perfect any security interests in such Collateral which may be perfected by the filing of a |
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financing statement or a similar document under the Uniform Commercial Code or other similar statute or regulation of the relevant states or jurisdictions; and |
(5) | the Company shall have delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such supplemental indenture (if any) comply with the Indenture. |
(1) | if such entity remains a Subsidiary Guarantor, (a) the resulting, surviving or transferee Person (the “Successor Guarantor”) will be a corporation, partnership, trust or limited liability company organized and existing under the laws of the United States of America, any State of the United States or the District of Columbia; (b) the Successor Guarantor, if other than such Subsidiary Guarantor, expressly assumes in writing by supplemental indenture (and other applicable documents), executed and delivered to the Trustee, in form satisfactory to the Trustee, all the obligations of such Subsidiary Guarantor under the Subsidiary Guarantee, the Indenture, the Collateral Documents (as applicable) and the Intercreditor Agreement and shall cause such amendments, |
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supplements or other instruments to be executed, filed, and recorded in such jurisdictions as may be required by applicable law to preserve and protect the Lien on the Collateral owned by or transferred to the Successor Guarantor, together with such financing statements or comparable documents as may be required to perfect any security interests in such Collateral which may be perfected by the filing of a financing statement or a similar document under the Uniform Commercial Code or other similar statute or regulation of the relevant states or jurisdictions; (c) immediately after giving effect to such transaction (and treating any Indebtedness that becomes an obligation of the Successor Guarantor or any Restricted Subsidiary as a result of such transaction as having been Incurred by the Successor Guarantor or such Restricted Subsidiary at the time of such transaction), no Default of Event of Default shall have occurred and be continuing; and (d) the Company will have delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such supplemental indenture (if any) comply with the Indenture; and |
(2) | the transaction is made in compliance with the covenant described under “Limitation on sales of assets and subsidiary stock.” |
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(1) | default in any payment of interest or additional interest (as required by the Registration Rights Agreement) on any Note when due, continued for 30 days, whether or not such payment is prohibited by the provisions described under “Ranking;” | |
(2) | default in the payment of principal of or premium, if any, on any Note when due at its Stated Maturity, upon optional redemption, upon required repurchase, upon declaration or otherwise, whether or not such payment is prohibited by the provisions described under “Ranking;” | |
(3) | failure by the Company or any Subsidiary Guarantor to comply with its obligations under “Certain covenants—Merger and consolidation;” | |
(4) | failure by the Company to comply for 30 days after notice with any of its obligations under the covenants described under “Change of control” above or under the covenants described under “Certain covenants” above (in each case, other than a failure to purchase Notes that will constitute an Event of Default under clause (2) above and other than a failure to comply with “Certain covenants—Merger and consolidation” which is covered by clause (3) above); | |
(5) | failure by the Company or any Subsidiary Guarantor to comply for 60 days after notice as provided below with its other agreements contained in the Indenture, the Collateral Documents or the Intercreditor Agreement; | |
(6) | default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Restricted Subsidiaries (or the payment of which is guaranteed by the Company or any of its Restricted Subsidiaries), other than Indebtedness owed to the Company or a Restricted Subsidiary, whether such Indebtedness or guarantee now exists, or is created after the Issue Date, which default: |
(a) | is caused by a failure to pay principal of, or interest or premium, if any, on such Indebtedness within the grace period provided in such Indebtedness (“payment default”); or |
(b) | results in the acceleration of such Indebtedness prior to its maturity (the “cross acceleration provision”); |
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(7) | certain events of bankruptcy, insolvency or reorganization of the Company or a Significant Subsidiary or group of Restricted Subsidiaries that, taken together (as of the latest audited consolidated financial statements for the Company and its Restricted Subsidiaries), would constitute a Significant Subsidiary (the “bankruptcy provisions”); | |
(8) | failure by the Company or any Significant Subsidiary or group of Restricted Subsidiaries that, taken together (as of the latest audited consolidated financial statements for the Company and its Restricted Subsidiaries), would constitute a Significant Subsidiary, to pay final, non-appealable judgments aggregating in excess of $15.0 million (net of any amounts that a reputable and creditworthy insurance company has acknowledged liability for in writing), which judgments are not paid, discharged or stayed for a period of 60 days (the “judgment default provision”); | |
(9) | any Subsidiary Guarantee, Collateral Document or obligation under the Intercreditor Agreement of a Subsidiary Guarantor ceases to be in full force and effect (except as contemplated by the terms of the Indenture and the Subsidiary Guarantees) or is declared null and void in a judicial proceeding or any Subsidiary Guarantor denies or disaffirms its obligations under the Indenture, its Subsidiary Guarantee, any Collateral Document or the Intercreditor Agreement and the Company fails to cause such Subsidiary Guarantor to rescind such denials or disaffirmations within 30 days; or |
(10) | with respect to any Collateral having a fair market value in excess of $5.0 million, individually or in the aggregate, (A) the failure of the security interest with respect to such Collateral under the Collateral Documents, at any time, to be in full force and effect for any reason other than in accordance with their terms and the terms of the Indenture or the Intercreditor Agreement and other than the satisfaction in full of all obligations under the Indenture and discharge of the Indenture if such Default continues for 60 days or (B) the assertion by the Company or any Subsidiary Guarantor, in any pleading in any court of competent jurisdiction, that any such security interest is invalid or unenforceable. |
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(1) | such holder has previously given the Trustee notice that an Event of Default is continuing; | |
(2) | holders of at least 25% in principal amount of the outstanding Notes have requested the Trustee to pursue the remedy; | |
(3) | such holders have offered the Trustee reasonable security or indemnity against any loss, liability or expense; | |
(4) | the Trustee has not complied with such request within 60 days after the receipt of the request and the offer of security or indemnity; and | |
(5) | the holders of a majority in principal amount of the outstanding Notes have not given the Trustee a direction that, in the opinion of the Trustee, is inconsistent with such request within such60-day period. |
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(1) | reduce the principal amount of Notes whose holders must consent to an amendment; |
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(2) | reduce the stated rate of or extend the stated time for payment of interest on any Note; | |
(3) | reduce the principal of or extend the Stated Maturity of any Note; | |
(4) | reduce the premium payable upon the redemption of any Note or change the time at which any Note may be redeemed as described above under “Optional redemption,” whether through an amendment or waiver of provisions in the covenants, definitions or otherwise; | |
(5) | make any Note payable in money other than that stated in the Note; | |
(6) | impair the right of any holder to receive payment of, principal of, premium, if any, and interest on such holder’s Notes on or after the due dates therefor or to institute suit for the enforcement of any payment on or with respect to such holder’s Notes; | |
(7) | make any change in the amendment provisions which require each holder’s consent or in the waiver provisions; | |
(8) | modify the Subsidiary Guarantees in any manner adverse to the holders of the Notes; and | |
(9) | release any Subsidiary Guarantor from any of its obligations under its Subsidiary Guarantee or the Indenture, except in compliance with the terms thereof. |
(1) | cure any ambiguity, omission, defect or inconsistency; | |
(2) | provide for the assumption by a successor corporation of the obligations of the Company or any Subsidiary Guarantor under the Indenture, the Notes, the Subsidiary Guarantees, the Collateral Documents and the Intercreditor Agreement; | |
(3) | provide for uncertificated Notes in addition to or in place of certificated Notes (provided that the uncertificated Notes are issued in registered form for purposes of Section 163(f) of the Code, or in a manner such that the uncertificated Notes are described in Section 163(f)(2)(B) of the Code); | |
(4) | add Guarantees with respect to the Notes or release a Subsidiary Guarantor upon its designation as an Unrestricted Subsidiary;provided, howeverthat the designation is in accordance with the applicable provisions of the Indenture; | |
(5) | add additional assets as Collateral to secure the Notes and Subsidiary Guarantees; |
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(6) | release Liens in favor of the Collateral Agent in the Collateral as provided under “Collateral—Release” or in accordance with the terms of the Indenture, Collateral Documents or the Intercreditor Agreement; | |
(7) | add to the covenants of the Company for the benefit of the holders or surrender any right or power conferred upon the Company; | |
(8) | make any change that does not adversely affect the rights of any holder; | |
(9) | comply with any requirement of the SEC in connection with the qualification of the Indenture under the Trust Indenture Act; |
(10) | provide for the issuance of Exchange Notes that shall have terms substantially identical in all respects to the Notes (except that the transfer restrictions contained in the Notes shall be modified or eliminated as appropriate) and which shall be treated, together with any outstanding Notes, as a single class of securities; | |
(11) | provide for the appointment of a successor trustee; provided that the successor trustee is otherwise qualified and eligible to act as such under the terms of the Indenture; or | |
(12) | conform the text of the Indenture, the Notes or the Subsidiary Guarantees to any provision of this “Description of notes” to the extent that such provision in this “Description of notes” is intended to be a verbatim recitation of a provision of the Indenture, the Notes or the Subsidiary Guarantees. |
(1) | (A) to add other parties (or any authorized agent thereof or trustee therefor) holding Pari Passu Lien Indebtedness that are Incurred in compliance with the Credit Agreement, the Indenture and the Collateral Documents and (B) to establish that the Liens on any Collateral securing such Pari Passu Lien Indebtedness shall be pari passu under the Intercreditor Agreement with the Liens on such Collateral securing the Obligations under the Indenture and the Notes and junior and subordinated to the Liens on such Collateral securing any obligations under the Credit Agreement, all on the terms provided for in the Intercreditor Agreement as in effect immediately prior to such amendment; | |
(2) | (A) to add other parties (or any authorized agent thereof or trustee therefor) holding Indebtedness that is incurred in compliance with the Credit Agreement and the Indenture and the Collateral Documents and (B) to establish that the Liens on any Collateral securing such Indebtedness shall be pari passu under the Intercreditor Agreement with the Liens on such Collateral securing the obligations under the Credit Agreement and senior to the Liens on such Collateral securing any obligations under the Indenture and the Notes, all on the terms provided for in the Intercreditor Agreement in effect immediately prior to such amendment; |
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(3) | to effectuate the release of assets included in the Collateral from the Liens securing the Notes (x) if all other Liens on those assets securing the Obligations (including all commitments thereunder) under the Credit Agreement and other Indebtedness of the Company and its Restricted Subsidiaries are released (other than in connection with a cancellation or termination of the Credit Agreement without a replacement thereof) or (y) if those assets are owned by a Subsidiary that is a Subsidiary Guarantor and that Subsidiary Guarantor is released from its Guarantee in accordance with the terms of the Indenture; | |
(4) | to establish that the Liens on any Collateral securing any Indebtedness replacing the Credit Agreement permitted to be incurred under clause (1) of the second paragraph of the covenant described under “Certain covenants—Limitation on indebtedness” shall be senior to the Liens on such Collateral securing any obligations under the Indenture, the Notes and the Subsidiary Guarantees, which obligations shall continue to be secured on a second-priority basis on the Collateral; and | |
(5) | upon any cancellation or termination of the Credit Agreement without a replacement thereof, to establish that the Collateral shall become first priority Collateral. |
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(1) | any property or assets (other than Indebtedness and Capital Stock) to be used by the Company or a Restricted Subsidiary in a Related Business; | |
(2) | the Capital Stock of a Person that becomes a Restricted Subsidiary as a result of the acquisition of such Capital Stock by the Company or a Restricted Subsidiary; or | |
(3) | Capital Stock constituting a minority interest in any Person that at such time is a Restricted Subsidiary; |
(1) | 1.0% of the principal amount of such Note; and | |
(2) | the excess, if any, of (a) the present value as of such date of redemption of (i) the redemption price of such Note on December 1, 2011, (such redemption price being described under “Optional redemption”) plus (ii) all required interest payments due on such Note through December 1, 2011 (excluding accrued but unpaid interest to the date of redemption), computed using a discount rate equal to the Treasury Rate as of such date of redemption plus 50 basis points, over (b) the then-outstanding principal of such Note. |
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(1) | a disposition by a Restricted Subsidiary to the Company or by the Company or a Restricted Subsidiary to a Restricted Subsidiary; provided that in the case of a sale by a Restricted Subsidiary to another Restricted Subsidiary, the Company directly or indirectly owns an equal or greater percentage of the Common Stock of the transferee than of the transfer or;provided, further,that in the case of a transfer of Collateral, the transferee shall cause such amendments, supplements or other instruments to be executed, filed and recorded in such jurisdictions as may be required by applicable law to preserve and protect the Lien on the Collateral pledged by or transferred to the transferee, together with such financing statements or comparable documents as may be required to perfect any security interests in such Collateral which may be perfected by the filing of a financing statement or a similar document under the Uniform Commercial Code or other similar statute or regulation of the relevant states or jurisdictions; | |
(2) | the sale of Cash Equivalents in the ordinary course of business; | |
(3) | a disposition of inventory in the ordinary course of business; | |
(4) | a disposition of obsolete or worn out equipment or equipment that is no longer useful in the conduct of the business of the Company and its Restricted Subsidiaries and that is disposed of in each case in the ordinary course of business; | |
(5) | transactions permitted under “Certain covenants—Merger and consolidation;” | |
(6) | an issuance of Capital Stock by a Restricted Subsidiary to the Company or to a Wholly-Owned Subsidiary; | |
(7) | for purposes of “Certain covenants—Limitation on sales of assets and subsidiary stock” only, the making of a Permitted Investment or a disposition subject to “Certain covenants—Limitation on restricted payments;” | |
(8) | dispositions in connection with Permitted Liens; | |
(9) | dispositions of receivables in connection with the compromise, settlement or collection thereof in the ordinary course of business or in bankruptcy or similar proceedings and exclusive of factoring or similar arrangements; |
(10) | the licensing or sublicensing of intellectual property or other general intangibles and licenses, leases or subleases of other property, in each case in the ordinary course of business; and | |
(11) | disposition of assets acquired in foreclosures. |
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(1) | securities issued or directly and fully guaranteed or insured by the United States Government or any agency or instrumentality of the United States (provided that the full faith and credit of the United States is pledged in support thereof), having maturities of not more than one year from the date of acquisition; | |
(2) | marketable general obligations issued by any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof maturing within one year from the date of acquisition of the United States (provided that the full faith and credit of the United States is pledged in support thereof) and, at the time of acquisition, having a credit rating of “A” or better from either Standard & Poor’s Ratings Group, Inc. or Moody’s Investors Service, Inc.; | |
(3) | certificates of deposit, time deposits, eurodollar time deposits, overnight bank deposits or bankers’ acceptances having maturities of not more than one year from the date of acquisition thereof issued by any commercial bank the long-term debt of which is rated at the time of acquisition thereof at least “A” or the equivalent thereof by Standard & Poor’s Ratings Group, Inc., or “A” or the equivalent thereof by |
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Moody’s Investors Service, Inc., and having combined capital and surplus in excess of $500.0 million; |
(4) | repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (1), (2) and (3) entered into with any bank meeting the qualifications specified in clause (3) above; | |
(5) | commercial paper rated at the time of acquisition thereof at least“A-2” or the equivalent thereof by Standard & Poor’s Ratings Group, Inc. or“P-2” or the equivalent thereof by Moody’s Investors Service, Inc., or carrying an equivalent rating by a nationally recognized rating agency, if both of the two named rating agencies cease publishing ratings of investments, and in any case maturing within one year after the date of acquisition thereof; and | |
(6) | interests in any investment company or money market fund which invests 95% or more of its assets in instruments of the type specified in clauses (1) through (5) above. |
(1) | (1) (A) any “person” or “group” of related persons (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), other than one or more Permitted Holders, is or becomes the beneficial owner (as defined inRules 13d-3 and13d-5 under the Exchange Act, except that such person or group shall be deemed to have “beneficial ownership” of all shares that any such person or group has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 35% of the total voting power of the Voting Stock of the Company or Holdings (or its successor by merger, consolidation or purchase of all or substantially all of its assets) (for the purposes of this clause, such person or group shall be deemed to beneficially own any Voting Stock of the Company or Holdings held by a parent entity, if such person or group “beneficially owns” (as defined above), directly or indirectly, more than 35% of the voting power of the Voting Stock of such parent entity); and (B) the Permitted Holders “beneficially own” (as defined inRules 13d-3 and13d-5 of the Exchange Act), directly or indirectly, in the aggregate a lesser percentage of the total voting power of the Voting Stock of the Company or Holdings, as the case may be, (or its successor by merger, consolidation or purchase of all or substantially all of its assets) than such other person or group and do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the board of directors of the Company or such successor (for the purposes of this clause, such other person or group shall be deemed to beneficially own any Voting Stock of a specified entity held by a parent entity, if such other person or group “beneficially owns” directly or indirectly, more than 35% of the voting power of the Voting Stock of such parent entity and the Permitted Holders “beneficially own” directly or indirectly, in the aggregate a lesser percentage of the voting power of the Voting Stock of such parent entity and do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the board of directors of such parent entity); or | |
(2) | the first day on which a majority of the members of the Board of Directors of the Company or Holdings are not Continuing Directors; or |
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(3) | the sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the assets of the Company and its Restricted Subsidiaries taken as a whole to any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) other than a Permitted Holder; or | |
(4) | the adoption by the stockholders of the Company of a plan or proposal for the liquidation or dissolution of the Company. |
(1) | if the Company or any Restricted Subsidiary: |
(a) | has Incurred any Indebtedness since the beginning of such period that remains outstanding on such date of determination or if the transaction giving rise to the need to calculate the Consolidated Coverage Ratio is an Incurrence of Indebtedness, Consolidated EBITDA and Consolidated Interest Expense for such period will be calculated after giving effect on a pro forma basis to such Indebtedness as if such Indebtedness had been Incurred on the first day of such period (except that in making such computation, the amount of Indebtedness |
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under any revolving credit facility outstanding on the date of such calculation will be deemed to be (i) the average daily balance of such Indebtedness during such four fiscal quarters or such shorter period for which such facility was outstanding or (ii) if such facility was created after the end of such four fiscal quarters, the average daily balance of such Indebtedness during the period from the date of creation of such facility to the date of such calculation) and the discharge of any other Indebtedness repaid, repurchased, defeased or otherwise discharged with the proceeds of such new Indebtedness as if such discharge had occurred on the first day of such period; or |
(b) | has repaid, repurchased, defeased or otherwise discharged any Indebtedness since the beginning of the period that is no longer outstanding on such date of determination or if the transaction giving rise to the need to calculate the Consolidated Coverage Ratio involves a discharge of Indebtedness (in each case other than Indebtedness Incurred under any revolving credit facility unless such Indebtedness has been permanently repaid and the related commitment terminated), Consolidated EBITDA and Consolidated Interest Expense for such period will be calculated after giving effect on a pro forma basis to such discharge of such Indebtedness, including with the proceeds of such new Indebtedness, as if such discharge had occurred on the first day of such period; |
(2) | if since the beginning of such period the Company or any Restricted Subsidiary will have made any Asset Disposition or disposed of any company, division, operating unit, segment, business, group of related assets or line of business or if the transaction giving rise to the need to calculate the Consolidated Coverage Ratio is such an Asset Disposition or disposition: |
(a) | the Consolidated EBITDA for such period will be reduced by an amount equal to the Consolidated EBITDA (if positive) directly attributable to the assets that are the subject of such Asset Disposition or disposition for such period or increased by an amount equal to the Consolidated EBITDA (if negative) directly attributable thereto for such period; and |
(b) | Consolidated Interest Expense for such period will be reduced by an amount equal to the Consolidated Interest Expense directly attributable to any Indebtedness of the Company or any Restricted Subsidiary repaid, repurchased, defeased or otherwise discharged with respect to the Company and its continuing Restricted Subsidiaries in connection with such Asset Disposition or disposition for such period (or, if the Capital Stock of any Restricted Subsidiary is sold, the Consolidated Interest Expense for such period directly attributable to the Indebtedness of such Restricted Subsidiary to the extent the Company and its continuing Restricted Subsidiaries are no longer liable for such Indebtedness after such sale); |
(3) | if since the beginning of such period the Company or any Restricted Subsidiary (by merger or otherwise) will have made an Investment in any Restricted Subsidiary (or any Person that becomes a Restricted Subsidiary or is merged with or into the Company) or an acquisition of assets, including any acquisition of assets occurring in connection with a transaction causing a calculation to be made hereunder, which constitutes all or substantially all of a company, division, operating unit, segment, business or line of business, Consolidated EBITDA and Consolidated Interest Expense |
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for such period will be calculated after giving pro forma effect thereto (including the Incurrence of any Indebtedness) as if such Investment or acquisition occurred on the first day of such period; and |
(4) | if since the beginning of such period any Person (that subsequently became a Restricted Subsidiary or was merged with or into the Company or any Restricted Subsidiary since the beginning of such period) will have Incurred any Indebtedness or discharged any Indebtedness, made any Asset Disposition or any Investment or acquisition of assets that would have required an adjustment pursuant to clause (2) or (3) above if made by the Company or a Restricted Subsidiary during such period, Consolidated EBITDA and Consolidated Interest Expense for such period will be calculated after giving pro forma effect thereto as if such transaction occurred on the first day of such period. |
(1) | Consolidated Interest Expense; | |
(2) | Consolidated Income Taxes; | |
(3) | consolidated depreciation expense; |
(4) | consolidated amortization expense or impairment charges recorded in connection with the application of FASB ASC Topic 350,Intangibles-Goodwill and Other(formerly SFAS No. 142) and |
(5) | other non-cash charges reducing Consolidated Net Income (excluding any such non-cash charge to the extent it represents an accrual of or reserve for cash charges in any future period or amortization of a prepaid cash expense that was paid in a prior period not included in the calculation). |
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(1) | interest expense attributable to Capitalized Lease Obligations and the interest portion of rent expense associated with Attributable Indebtedness in respect of the relevant lease giving rise thereto, determined as if such lease were a capitalized lease in accordance with GAAP and the interest component of any deferred payment obligations; | |
(2) | amortization of debt discount and debt issuance cost (other than such discounts and costs incurred in connection with the Transactions) (provided that any amortization of bond premium will be credited to reduce Consolidated Interest Expense unless, pursuant to GAAP, such amortization of bond premium has otherwise reduced Consolidated Interest Expense); | |
(3) | non-cash interest expense; | |
(4) | commissions, discounts and other fees and charges owed with respect to letters of credit and bankers’ acceptance financing; | |
(5) | interest actually paid by the Company or any such Restricted Subsidiary under any Guarantee of Indebtedness or other obligation of any other Person; | |
(6) | costs associated with Hedging Obligations (including amortization of fees) provided, however, that if Hedging Obligations result in net benefits rather than costs, such benefits shall be credited to reduce Consolidated Interest Expense unless, pursuant to GAAP, such net benefits are otherwise reflected in Consolidated Net Income; | |
(7) | the consolidated interest expense of such Person and its Restricted Subsidiaries that was capitalized during such period; | |
(8) | the product of (a) all dividends paid or payable, in cash, Cash Equivalents or Indebtedness or accrued during such period on any series of Disqualified Stock of such Person or on Preferred Stock of its Restricted Subsidiaries payable to a party other than the Company or a Wholly-Owned Subsidiary, times (b) a fraction, the numerator of which is one and the denominator of which is one minus the then current combined federal, state, provincial and local statutory tax rate of such Person, expressed as a decimal, in each case, on a consolidated basis and in accordance with GAAP; and |
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(9) | the cash contributions to any employee stock ownership plan or similar trust to the extent such contributions are used by such plan or trust to pay interest or fees to any Person (other than the Company) in connection with Indebtedness Incurred by such plan or trust. |
(1) | any net income (loss) of any Person if such Person is not a Restricted Subsidiary, except that: |
(a) | subject to the limitations contained in clauses (3), (4) and (5) below, the Company’s equity in the net income of any such Person for such period will be included in such Consolidated Net Income up to the aggregate amount of cash actually distributed by such Person during such period to the Company or a Restricted Subsidiary as a dividend or other distribution (subject, in the case of a dividend or other distribution to a Restricted Subsidiary, to the limitations contained in clause (2) below); and |
(b) | the Company’s equity in a net loss of any such Person (other than an Unrestricted Subsidiary) for such period will be included in determining such Consolidated Net Income to the extent such loss has been funded with cash from the Company or a Restricted Subsidiary; |
(2) | any net income (but not loss) of any Restricted Subsidiary if such Subsidiary is subject to restrictions, directly or indirectly, on the payment of dividends or the making of distributions by such Restricted Subsidiary, directly or indirectly, to the Company, except that: |
(a) | subject to the limitations contained in clauses (3), (4) and (5) below, the Company’s equity in the net income of any such Restricted Subsidiary for such period will be included in such Consolidated Net Income up to the aggregate amount of cash that could have been distributed by such Restricted Subsidiary during such period to the Company or another Restricted Subsidiary as a |
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dividend (subject, in the case of a dividend to another Restricted Subsidiary, to the limitation contained in this clause); and |
(b) | the Company’s equity in a net loss of any such Restricted Subsidiary for such period will be included in determining such Consolidated Net Income; |
(3) | any gain (loss) realized upon the sale or other disposition of any property, plant or equipment of the Company or its consolidated Restricted Subsidiaries (including pursuant to any Sale/Leaseback Transaction) which is not sold or otherwise disposed of in the ordinary course of business and any gain (loss) realized upon the sale or other disposition of any Capital Stock of any Person; | |
(4) | any extraordinary gain or loss; and | |
(5) | the cumulative effect of a change in accounting principles. |
(1) | matures or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise; |
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(2) | is convertible into or exchangeable for Indebtedness or Disqualified Stock (excluding Capital Stock which is convertible or exchangeable solely at the option of the Company or a Restricted Subsidiary); or | |
(3) | is redeemable at the option of the holder of the Capital Stock in whole or in part, |
(1) | to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness of such other Person (whether arising by virtue of partnership arrangements, or by agreement to keep-well, to purchase assets, goods, securities or |
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services, to take or pay, or to maintain financial statement conditions or otherwise); or |
(2) | entered into for purposes of assuring in any other manner the obligee of such Indebtedness of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided, however, that the term “Guarantee” will not include endorsements for collection or deposit in the ordinary course of business. The term “Guarantee” used as a verb has a corresponding meaning. |
(1) | the principal of and premium (if any) in respect of indebtedness of such Person for borrowed money; | |
(2) | the principal of and premium (if any) in respect of obligations of such Person evidenced by bonds, debentures, notes or other similar instruments; | |
(3) | the principal component of all obligations of such Person in respect of letters of credit, bankers’ acceptances or other similar instruments (including reimbursement obligations with respect thereto except to the extent such reimbursement obligation relates to a trade payable and such obligation is satisfied within 30 days of Incurrence); | |
(4) | the principal component of all obligations of such Person to pay the deferred and unpaid purchase price of property (except trade payables), which purchase price is due more than six months after the date of placing such property in service or taking delivery and title thereto; | |
(5) | Capitalized Lease Obligations and all Attributable Indebtedness of such Person; |
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(6) | the principal component or liquidation preference of all obligations of such Person with respect to the redemption, repayment or other repurchase of any Disqualified Stock or, with respect to any Subsidiary that is not a Subsidiary Guarantor, any Preferred Stock (but excluding, in each case, any accrued dividends); | |
(7) | the principal component of all Indebtedness of other Persons secured by a Lien on any asset of such Person, whether or not such Indebtedness is assumed by such Person; provided, however, that the amount of such Indebtedness will be the lesser of (a) the fair market value of such asset at such date of determination and (b) the amount of such Indebtedness of such other Persons; | |
(8) | the principal component of Indebtedness of other Persons to the extent Guaranteed by such Person; and | |
(9) | to the extent not otherwise included in this definition, net obligations of such Person under Interest Rate Agreements (the amount of any such obligations to be equal at any time to the termination value of such agreement or arrangement giving rise to such obligation that would be payable by such Person at such time). |
(1) | such Indebtedness is the obligation of a partnership or joint venture that is not a Restricted Subsidiary (a “Joint Venture”); | |
(2) | such Person or a Restricted Subsidiary of such Person is a general partner of the Joint Venture (a “General Partner”); and | |
(3) | there is recourse, by contract or operation of law, with respect to the payment of such Indebtedness to property or assets of such Person or a Restricted Subsidiary of such Person; and then such Indebtedness shall be included in an amount not to exceed: |
(a) | the lesser of (i) the net assets of the General Partner and (ii) the amount of such obligations to the extent that there is recourse, by contract or operation of law, to the property or assets of such Person or a Restricted Subsidiary of such Person; or |
(b) | if less than the amount determined pursuant to clause (a) immediately above, the actual amount of such Indebtedness that is recourse to such Person or a Restricted Subsidiary of such Person, if the Indebtedness is evidenced by a writing and is for a determinable amount and the related interest expense shall be included in Consolidated Interest Expense to the extent actually paid by the Company or its Restricted Subsidiaries. |
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(1) | Hedging Obligations entered into in the ordinary course of business and in compliance with the Indenture; | |
(2) | endorsements of negotiable instruments and documents in the ordinary course of business; and | |
(3) | an acquisition of assets, Capital Stock or other securities by the Company or a Subsidiary for consideration to the extent such consideration consists of Common Stock or Preferred Stock (other than Disqualified Stock) of the Company. |
(1) | “Investment” will include the portion (proportionate to the Company’s equity interest in a Restricted Subsidiary to be designated as an Unrestricted Subsidiary) of the fair market value of the net assets of such Restricted Subsidiary at the time that such Restricted Subsidiary is designated an Unrestricted Subsidiary; provided, however, that upon a redesignation of such Subsidiary as a Restricted Subsidiary, the Company will be deemed to continue to have a permanent “Investment” in an Unrestricted Subsidiary in an amount (if positive) equal to (a) the Company’s “Investment” in such Subsidiary at the time of such redesignation less (b) the portion (proportionate to the Company’s equity interest in such Subsidiary) of the fair market value of the net assets (as conclusively determined by the Board of Directors of the Company in good faith) of such Subsidiary at the time that such Subsidiary is so re-designated a Restricted Subsidiary; and | |
(2) | any property transferred to or from an Unrestricted Subsidiary will be valued at its fair market value at the time of such transfer, in each case as determined in good faith by the Board of Directors of the Company. |
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(1) | all brokerage, legal, accounting, investment banking, title and recording tax expenses, commissions and other fees and expenses Incurred, and all Federal, state, provincial, foreign and local taxes required to be paid or accrued as a liability under GAAP (after taking into account any tax credits or deductions and any tax sharing agreements available as a direct result of such Asset Disposition), as a consequence of such Asset Disposition; | |
(2) | all payments made on any Indebtedness that is secured by any assets subject to such Asset Disposition, in accordance with the terms of any Lien upon such assets, or that must by its terms, or in order to obtain a necessary consent to such Asset Disposition, or by applicable law be repaid out of the proceeds from such Asset Disposition; | |
(3) | all distributions and other payments required to be made to minority interest holders in Subsidiaries or joint ventures as a result of such Asset Disposition; and | |
(4) | the deduction of appropriate amounts to be provided by the seller as a reserve, in accordance with GAAP, against any liabilities associated with the assets disposed of in such Asset Disposition and retained by the Company or any Restricted Subsidiary after such Asset Disposition (including, but not limited to, those in respect of indemnification obligations). |
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(1) | a Restricted Subsidiary or a Person which will, upon the making of such Investment, become a Restricted Subsidiary; provided, however, that the primary business of such Restricted Subsidiary is a Related Business; | |
(2) | another Person if as a result of such Investment such other Person is merged or consolidated with or into, or transfers or conveys all or substantially all its assets to, the Company or a Restricted Subsidiary; provided, however, that such Person’s primary business is a Related Business; | |
(3) | cash and Cash Equivalents; | |
(4) | receivables owing to the Company or any Restricted Subsidiary created or acquired in the ordinary course of business and payable or dischargeable in accordance with |
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customary trade terms; provided, however, that such trade terms may include such concessionary trade terms as the Company or any such Restricted Subsidiary deems reasonable under the circumstances; |
(5) | payroll, travel and similar advances to cover matters that are expected at the time of such advances ultimately to be treated as expenses for accounting purposes and that are made in the ordinary course of business; | |
(6) | loans or advances to employees (other than executive officers) made in the ordinary course of business consistent with past practices of the Company or such Restricted Subsidiary; | |
(7) | Capital Stock, obligations or securities received in settlement of debts created in the ordinary course of business and owing to the Company or any Restricted Subsidiary or in satisfaction of judgments or pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of a debtor; | |
(8) | Investments made as a result of the receipt of non-cash consideration from an asset Disposition that was made pursuant to and in compliance with “Certain covenants—Limitation on sales of assets and subsidiary stock;” | |
(9) | Investments in existence on the Issue Date; |
(10) | Interest Rate Agreements and related Hedging Obligations, which transactions or obligations are Incurred in compliance with “Certain covenants—Limitation on indebtedness;” | |
(11) | Investments by the Company or any of its Restricted Subsidiaries, together with all other Investments pursuant to this clause (11), in an aggregate amount at the time of such Investment not to exceed $5.0 million outstanding at any one time (with the fair market value of such Investment being measured at the time made and without giving effect to subsequent changes in value); and | |
(12) | Guarantees issued in accordance with “Certain covenants—Limitations on indebtedness”. |
(1) | Liens securing Indebtedness and related obligations Incurred pursuant to clause (1) of the second paragraph under “Certain covenants—Limitation on indebtedness”;providedthat any such Liens of the Company or any Restricted Subsidiary secure the Notes and the Subsidiary Guarantees on at least a second-priority basis (other than Excluded Collateral); | |
(2) | pledges or deposits by such Person under workmen’s compensation laws, unemployment insurance laws or similar legislation, or good faith deposits in connection with bids, tenders, contracts (other than for the payment of Indebtedness) or leases to which such Person is a party, or deposits to secure public or statutory obligations of such Person or deposits of cash or United States government bonds to secure surety or appeal bonds to which such Person is a party, or deposits as security for contested taxes or import or customs duties or for the payment of rent, in each case Incurred in the ordinary course of business; |
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(3) | Liens imposed by law, including carriers’, warehousemen’s and mechanics’ Liens, in each case for sums not yet due or being contested in good faith by appropriate proceedings if a reserve or other appropriate provisions, if any, as shall be required by GAAP shall have been made in respect thereof; | |
(4) | Liens for taxes, assessments or other governmental charges not yet subject to penalties for non-payment or that are being contested in good faith by appropriate proceedings provided appropriate reserves required pursuant to GAAP have been made in respect thereof; | |
(5) | Liens in favor of issuers of surety or performance bonds or letters of credit or bankers’ acceptances issued pursuant to the request of and for the account of such Person in the ordinary course of its business; provided, however, that such letters of credit do not constitute Indebtedness; | |
(6) | encumbrances, ground leases, easements or reservations of, or rights of others for, licenses, rights of way, sewers, electric lines, telegraph and telephone lines and other similar purposes, or zoning, building codes or other restrictions (including, without limitation, minor defects or irregularities in title and similar encumbrances) as to the use of real properties or liens incidental to the conduct of the business of such Person or to the ownership of its properties that do not in the aggregate materially adversely affect the value of said properties or materially impair their use in the operation of the business of such Person; | |
(7) | Liens securing Hedging Obligations so long as the related Indebtedness is, and is permitted to be under the Indenture, secured by a Lien on the same property securing such Hedging Obligation; | |
(8) | leases, licenses, subleases and sublicenses of assets (including, without limitation, real property and intellectual property rights) which do not materially interfere with the ordinary conduct of the business of the Company or any of its Restricted Subsidiaries; | |
(9) | judgment Liens not giving rise to an Event of Default so long as such Lien is adequately bonded and any appropriate legal proceedings that may have been duly initiated for the review of such judgment have not been finally terminated or the period within which such proceedings may be initiated has not expired; |
(10) | Liens for the purpose of securing the payment of all or a part of the purchase price of, or Capitalized Lease Obligations, purchase money obligations or other payments Incurred to finance the acquisition, improvement or construction of, assets or property acquired or constructed in the ordinary course of business; provided that: |
(a) | the aggregate principal amount of Indebtedness secured by such Liens is otherwise permitted to be Incurred under the Indenture and does not exceed the cost of the assets or property so acquired or constructed; and |
(b) | such Liens are created within 180 days of construction or acquisition of such assets or property and do not encumber any other assets or property of the Company or any Restricted Subsidiary other than such assets or property and assets affixed or appurtenant thereto; |
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(11) | Liens arising solely by virtue of any statutory or common law provisions relating to banker’s Liens, rights of set-off or similar rights and remedies as to deposit accounts or other funds maintained with a depositary institution;providedthat: |
(a) | such deposit account is not a dedicated cash collateral account and is not subject to restrictions against access by the Company in excess of those set forth by regulations promulgated by the Federal Reserve Board; and |
(b) | such deposit account is not intended by the Company or any Restricted Subsidiary to provide collateral to the depository institution; |
(12) | Liens arising from Uniform Commercial Code financing statement filings regarding operating leases entered into by the Company and its Restricted Subsidiaries in the ordinary course of business; | |
(13) | Liens existing on the Issue Date; | |
(14) | Liens on property or shares of stock of a Person at the time such Person becomes a Restricted Subsidiary; provided, however, that such Liens are not created, Incurred or assumed in connection with, or in contemplation of, such other Person becoming a Restricted Subsidiary; provided further, however, that any such Lien may not extend to any other property owned by the Company or any Restricted Subsidiary; | |
(15) | Liens on property at the time the Company or a Restricted Subsidiary acquired the property, including any acquisition by means of a merger or consolidation with or into the Company or any Restricted Subsidiary; provided, however, that such Liens are not created, Incurred or assumed in connection with, or in contemplation of, such acquisition; provided further, however, that such Liens may not extend to any other property owned by the Company or any Restricted Subsidiary; | |
(16) | Liens securing Indebtedness or other obligations of a Restricted Subsidiary owing to the Company or a Restricted Subsidiary; | |
(17) | Liens securing the Notes and Subsidiary Guarantees and any obligations owing to the Trustee or the Collateral Agent under the Indenture, the Collateral Documents or the Intercreditor Agreement; | |
(18) | Liens securing Refinancing Indebtedness Incurred to refinance Indebtedness that was previously so secured, provided that any such Lien is limited to all or part of the same property or assets (plus improvements, accessions, proceeds or dividends or distributions in respect thereof) that secured (or, under the written arrangements under which the original Lien arose, could secure) the Indebtedness being refinanced or is in respect of property that is the security for a Permitted Lien hereunder; and | |
(19) | Liens securing Indebtedness incurred after the Issue Date and any Refinancing Indebtedness relating thereto (excluding any Liens securing any other Indebtedness Incurred after the Issue Date permitted under other clauses hereof) in an aggregate principal amount at any one time outstanding not to exceed $10.0 million;providedthat (1) any such Liens shall rank equal to or junior in priority to the Liens on the Collateral securing the Notes and (2) the holder of such Lien either (x) is subject to an intercreditor agreement consistent with the Intercreditor Agreement or (y) is or agrees to become bound by the terms of the Intercreditor Agreement on the same basis as the holders of the Notes;provided, furtherthat any such Liens may rank |
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equal to the Liens on the Collateral securing the Notes only so long as Liens securing Indebtedness outstanding under clause (1) of the second paragraph under “Certain covenants—Limitation on indebtedness” does not exceed $75.0 million in the aggregate. |
(1) | (a) if the Stated Maturity of the Indebtedness being refinanced is earlier than the Stated Maturity of the Notes, the Refinancing Indebtedness has a Stated Maturity no earlier than the Stated Maturity of the Indebtedness being refinanced or (b) if the Stated Maturity of the Indebtedness being refinanced is later than the Stated Maturity of the Notes, the Refinancing Indebtedness has a Stated Maturity later than the Stated Maturity of the Notes; | |
(2) | the Refinancing Indebtedness has an Average Life at the time such Refinancing Indebtedness is Incurred that is equal to or greater than the Average Life of the Indebtedness being refinanced; | |
(3) | such Refinancing Indebtedness is Incurred in an aggregate principal amount (or if issued with original issue discount, an aggregate issue price) that is equal to or less than the sum of the aggregate principal amount (or if issued with original issue discount, the aggregate accreted value) then outstanding of the Indebtedness being refinanced (plus, without duplication, any additional Indebtedness Incurred to pay interest or premiums required by the instruments governing such existing Indebtedness and fees Incurred in connection therewith); and | |
(4) | if the Indebtedness being refinanced is subordinated in right of payment to the Notes or the Subsidiary Guarantee, such Refinancing Indebtedness is subordinated in right of payment to the Notes or the Subsidiary Guarantee on terms at least as favorable to the holders as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded. |
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(1) | with respect to the Company, any Indebtedness that rankspari passuin right of payment to the Notes but is unsecured with a Stated Maturity date subsequent to the Stated Maturity of the Notes; and | |
(2) | with respect to any Subsidiary Guarantor, any Indebtedness that rankspari passuin right of payment to such Subsidiary Guarantor’s Subsidiary Guarantee but is unsecured with a Stated Maturity date subsequent to the Stated Maturity of the Notes. |
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(1) | any Subsidiary of the Company that at the time of determination shall be designated an Unrestricted Subsidiary by the Board of Directors of the Company in the manner provided below; and | |
(2) | any Subsidiary of an Unrestricted Subsidiary. |
(1) | such Subsidiary or any of its Subsidiaries does not own any Capital Stock or Indebtedness of or have any Investment in, or own or hold any Lien on any property of, any other Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so designated or otherwise an Unrestricted Subsidiary; | |
(2) | such designation and the Investment of the Company in such Subsidiary complies with “Certain covenants—Limitation on restricted payments;” | |
(3) | such Subsidiary, either alone or in the aggregate with all other Unrestricted Subsidiaries, does not operate, directly or indirectly, all or substantially all of the business of the Company and its Subsidiaries; | |
(4) | such Subsidiary is a Person with respect to which neither the Company nor any of its Restricted Subsidiaries has any direct or indirect obligation: |
(a) | to subscribe for additional Capital Stock of such Person; or |
(b) | to maintain or preserve such Person’s financial condition or to cause such Person to achieve any specified levels of operating results; and |
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(5) | on the date such Subsidiary is designated an Unrestricted Subsidiary, such Subsidiary is not a party to any agreement, contract, arrangement or understanding with the Company or any Restricted Subsidiary with terms substantially less favorable to the Company than those that might have been obtained from Persons who are not Affiliates of the Company. |
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• | non-United States persons or entities, except to the extent specifically set forth below; | |
• | regulated investment companies, real estate investment trusts, and real estate mortgage investment conduits; | |
• | holders subject to the alternative minimum tax; | |
• | banks, insurance companies, or other financial institutions; | |
• | tax-exempt organizations and retirement plans, individual retirement accounts and tax-deferred accounts; | |
• | dealers in securities, currencies or commodities; | |
• | traders in securities that elect to use amark-to-market method of accounting for their securities holdings; | |
• | U.S. Holders (as defined below) whose “functional currency” is not the U.S. dollar; | |
• | persons subject to taxation as U.S. expatriates; | |
• | persons that will hold the notes as a position in a hedging transaction, wash sale, constructive sale, straddle, conversion transaction or other risk reduction transaction or synthetic security; | |
• | governments or agencies or instrumentalities thereof; or | |
• | S corporations, partnerships or other pass-through entities, including entities and arrangements classified as partnerships for U.S. federal income tax purposes and beneficial owners of, or investors in, such entities. |
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• | an individual who is a citizen or resident of the United States, as determined for U.S. federal income tax purposes; | |
• | a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) that is created or organized in or under the laws of the United States or any State thereof or the District of Columbia; | |
• | an estate the income of which is subject to U.S. federal income taxation regardless of its source; or | |
• | a trust that (i) is subject to the primary supervision of a court within the United States and that has one or more United States persons with authority to control all substantial decisions of the trust or (ii) has a valid election in effect under applicable Treasury Regulations to be treated as a United States person. |
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• | theNon-U.S. Holder does not actually or constructively own 10% or more of the total combined voting power of all classes of our voting stock within the meaning of the Code and applicable Treasury Regulations; | |
• | theNon-U.S. Holder is not a controlled foreign corporation that is related to us as determined for purposes of Section 864(d) of the Code; | |
• | theNon-U.S. Holder is not a bank whose receipt of interest on a note is in respect of an extension of credit made pursuant to a loan agreement entered into in the ordinary course of its trade or business; | |
• | the interest is not considered contingent interest within the meaning of Section 871(h)(4)(A) of the Code; and | |
• | either (i) theNon-U.S. Holder provides its name and address and certifies, under penalties of perjury, that it is not a United States person (which certification may be made on an IRSForm W-8BEN), or (ii) a securities clearing organization, bank, or other financial institution that holds customers’ securities in the ordinary course of its business holds the note on behalf of theNon-U.S. Holder and certifies, under penalties of perjury, that it has received an IRSForm W-8BEN for theNon-U.S. Holder and otherwise complies with applicable requirements. If the notes are held by or through certain foreign intermediaries or certain foreign partnerships, such foreign intermediaries or partnerships also must satisfy the certification requirements of applicable Treasury Regulations. |
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• | that gain is effectively connected with theNon-U.S. Holder’s conduct of a trade or business in the United States (and, if an applicable income tax treaty so requires, is attributable to a permanent establishment or fixed base maintained by theNon-U.S. Holder in the United States); or | |
• | theNon-U.S. Holder is an individual who is present in the United States for 183 days or more in the taxable year of that disposition, and certain other conditions are met. |
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• | a United States person; | |
• | a foreign person that derives 50% or more of its gross income for certain specified periods from the conduct of a trade or business in the United States; | |
• | a controlled foreign corporation for U.S. federal income tax purposes; or | |
• | a foreign partnership (i) more than 50% of the capital or profits interest of which is owned by United States persons or (ii) that is engaged in a U.S. trade or business, |
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• | upon deposit of each global note with DTC’s custodian, DTC will credit portions of the principal amount of the global note to the accounts of the DTC participants designated by the initial purchasers; and | |
• | ownership of beneficial interests in each global note will be shown on, and transfer of ownership of those interests will be effected only through, records maintained by DTC (with respect to interests of DTC participants) and the records of DTC participants (with respect to other owners of beneficial interests in the global note). |
• | a limited purpose trust company organized under the laws of the State of New York; | |
• | a “banking organization” within the meaning of the New York Banking Law; | |
• | a member of the Federal Reserve System; |
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• | a “clearing corporation” within the meaning of the New York Uniform Commercial Code; and | |
• | a “clearing agency” registered under Section 17A of the Exchange Act. |
• | will not be entitled to have notes represented by the global note registered in their names; | |
• | will not receive or be entitled to receive physical, certificated notes; and | |
• | will not be considered the owners or holders of the notes under the indenture for any purpose, including with respect to the giving of any direction, instruction or approval to the Trustee under the indenture. |
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• | DTC notifies us at any time that it is unwilling or unable to continue as depositary for the global notes and a successor depositary is not appointed within 90 days; | |
• | DTC ceases to be registered as a clearing agency under the Exchange Act and a successor depositary is not appointed within 90 days; | |
• | we, at our option, notify the Trustee that we elect to cause the issuance of certificated notes; or | |
• | certain other events provided in the indenture should occur. |
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198
Nebraska Book Company, Inc. Audited Consolidated Financial Statements | ||
F-2 | ||
F-3 | ||
F-4 | ||
F-5 | ||
F-6 | ||
F-7 | ||
Nebraska Book Company, Inc. Unaudited Interim Condensed Consolidated Financial Statements | ||
F-46 | ||
F-47 | ||
F-48 | ||
F-49 | ||
F-50 |
F-1
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F-2
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consolidated balance sheets
March 31, | ||||||||
2009 | 2008 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 44,038,468 | $ | 29,326,456 | ||||
Receivables, net | 61,301,636 | 57,396,508 | ||||||
Inventories | 93,115,663 | 99,011,087 | ||||||
Recoverable income taxes | 2,869,583 | — | ||||||
Deferred income taxes | 6,581,802 | 6,058,093 | ||||||
Prepaid expenses and other assets | 3,950,874 | 2,539,077 | ||||||
Total current assets | 211,858,026 | 194,331,221 | ||||||
Property and equipment, net of depreciation & amortization | 45,638,522 | 45,066,180 | ||||||
Goodwill | 215,436,126 | 320,367,273 | ||||||
Customer relationships, net of amortization | 85,644,340 | 91,385,860 | ||||||
Tradename | 31,320,000 | 31,320,000 | ||||||
Other identifiable intangibles, net of amortization | 9,172,622 | 12,103,357 | ||||||
Debt issue costs, net of amortization | 6,875,122 | 5,119,263 | ||||||
Other assets | 2,121,949 | 2,394,267 | ||||||
$ | 608,066,707 | $ | 702,087,421 | |||||
Liabilities and stockholder’s equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 26,865,614 | $ | 28,631,029 | ||||
Accrued employee compensation and benefits | 13,780,209 | 12,100,640 | ||||||
Accrued interest | 678,516 | 1,778,937 | ||||||
Accrued incentives | 6,110,700 | 7,108,857 | ||||||
Accrued expenses | 4,277,105 | 3,172,122 | ||||||
Income taxes payable | — | 847,370 | ||||||
Deferred revenue | 959,274 | 862,994 | ||||||
Current maturities of long-term debt | 6,917,451 | 2,070,657 | ||||||
Current maturities of capital lease obligations | 748,692 | 658,415 | ||||||
Total current liabilities | 60,337,561 | 57,231,021 | ||||||
Long-term debt, net of current maturities | 361,445,728 | 368,363,176 | ||||||
Capital lease obligations, net of current maturities | 3,298,658 | 4,111,758 | ||||||
Other long-term liabilities | 5,304,166 | 4,467,504 | ||||||
Deferred income taxes | 54,313,459 | 55,104,415 | ||||||
Due to parent | 20,130,189 | 16,970,151 | ||||||
Commitments (Note H) | ||||||||
Stockholder’s equity: | ||||||||
Common stock, voting, authorized 50,000 shares of $1.00 par value; issued and outstanding 100 shares | 100 | 100 | ||||||
Additional paid-in capital | 148,135,923 | 138,087,705 | ||||||
Retained earnings (accumulated deficit) | (44,899,077 | ) | 58,499,591 | |||||
Accumulated other comprehensive loss | — | (748,000 | ) | |||||
Total stockholder’s equity | 103,236,946 | 195,839,396 | ||||||
$ | 608,066,707 | $ | 702,087,421 | |||||
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consolidated statements of operations
Year ended March 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Revenues, net of returns | $ | 610,716,181 | $ | 581,247,786 | $ | 544,427,964 | ||||||
Costs of sales (exclusive of depreciation shown below) | 371,369,240 | 354,139,474 | 332,443,991 | |||||||||
Gross profit | 239,346,941 | 227,108,312 | 211,983,973 | |||||||||
Operating expenses: | ||||||||||||
Selling, general and administrative | 168,314,611 | 157,193,426 | 143,095,625 | |||||||||
Closure of California Warehouse | — | (36,057 | ) | 774,475 | ||||||||
Depreciation | 7,602,631 | 7,208,504 | 5,915,758 | |||||||||
Amortization | 11,384,020 | 10,443,335 | 9,613,598 | |||||||||
Goodwill impairment | 106,972,000 | — | — | |||||||||
294,273,262 | 174,809,208 | 159,399,456 | ||||||||||
Income (loss) from operations | (54,926,321 | ) | 52,299,104 | 52,584,517 | ||||||||
Other expenses (income): | ||||||||||||
Interest expense | 32,878,225 | 33,559,239 | 33,135,537 | |||||||||
Interest income | (426,536 | ) | (1,332,497 | ) | (1,643,598 | ) | ||||||
Loss on derivative financial instrument | 102,000 | 198,000 | 225,000 | |||||||||
32,553,689 | 32,424,742 | 31,716,939 | ||||||||||
Income (loss) before income taxes | (87,480,010 | ) | 19,874,362 | 20,867,578 | ||||||||
Income tax expense | 7,448,658 | 7,418,339 | 8,256,092 | |||||||||
Net income (loss) | $ | (94,928,668 | ) | $ | 12,456,023 | $ | 12,611,486 | |||||
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consolidated statements of stockholder’s equity
Retained | Accumulated | |||||||||||||||||||||||
Additional | earnings | other | ||||||||||||||||||||||
Common | paid-in | (accumulated | comprehensive | Comprehensive | ||||||||||||||||||||
stock | capital | deficit) | income (loss) | Total | income (loss) | |||||||||||||||||||
Balance, April 1, 2006 | $ | 100 | $ | 138,022,098 | $ | 33,432,082 | $ | 1,414,000 | $ | 172,868,280 | ||||||||||||||
Contributed capital | — | (4,869 | ) | — | — | (4,869 | ) | $ | — | |||||||||||||||
Net income | — | — | 12,611,486 | — | 12,611,486 | 12,611,486 | ||||||||||||||||||
Other comprehensive loss, net of taxes: | ||||||||||||||||||||||||
Unrealized loss on interest rate swap agreement, net of taxes of $506,000 | — | — | — | (801,000 | ) | (801,000 | ) | (801,000 | ) | |||||||||||||||
Balance, March 31, 2007 | $ | 100 | $ | 138,017,229 | $ | 46,043,568 | $ | 613,000 | $ | 184,673,897 | $ | 11,810,486 | ||||||||||||
Contributed capital | — | (13 | ) | — | — | (13 | ) | $ | — | |||||||||||||||
Net income | — | — | 12,456,023 | — | 12,456,023 | 12,456,023 | ||||||||||||||||||
Share-based compensation attributable to NBC Holdings Corp. stock options | — | 70,489 | — | — | 70,489 | — | ||||||||||||||||||
Other comprehensive loss, net of taxes: | ||||||||||||||||||||||||
Unrealized loss on interest rate swap agreement, net of taxes of $861,000 | — | — | — | (1,361,000 | ) | (1,361,000 | ) | (1,361,000 | ) | |||||||||||||||
Balance, March 31, 2008 | $ | 100 | $ | 138,087,705 | $ | 58,499,591 | $ | (748,000 | ) | $ | 195,839,396 | $ | 11,095,023 | |||||||||||
Contributed capital | — | 10,004,802 | — | — | 10,004,802 | — | ||||||||||||||||||
Net loss | — | — | (94,928,668 | ) | — | (94,928,668 | ) | (94,928,668 | ) | |||||||||||||||
Share-based compensation attributable to NBC Holdings Corp. stock options | — | 43,416 | — | — | 43,416 | — | ||||||||||||||||||
Dividends declared | — | — | (8,470,000 | ) | — | (8,470,000 | ) | — | ||||||||||||||||
Other comprehensive income, 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 | $ | 100 | $ | 148,135,923 | $ | (44,899,077 | ) | $ | — | $ | 103,236,946 | $ | (94,180,668 | ) | ||||||||||
F-5
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Year ended March 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Cash flows from operating activities: | ||||||||||||
Net income (loss) | $ | (94,928,668 | ) | $ | 12,456,023 | $ | 12,611,486 | |||||
Adjustments to reconcile net income (loss) to net cash flows from operating activities: | ||||||||||||
Share-based compensation | 1,288,543 | 1,040,599 | 996,957 | |||||||||
Provision for losses on receivables | 1,366,979 | 468,007 | 834,442 | |||||||||
Depreciation | 7,602,631 | 7,208,504 | 5,915,758 | |||||||||
Amortization | 13,589,972 | 12,298,118 | 11,336,553 | |||||||||
Goodwill impairment | 106,972,000 | — | — | |||||||||
Loss on derivative financial instrument | 102,000 | 198,000 | 225,000 | |||||||||
(Gain) Loss on disposal of assets | 124,871 | 284,891 | (575 | ) | ||||||||
Deferred income taxes | (1,947,665 | ) | (3,443,682 | ) | (2,148,119 | ) | ||||||
Changes in operating assets and liabilities, net of effect of acquisitions: | ||||||||||||
Receivables | (5,271,324 | ) | (2,920,327 | ) | (9,924,934 | ) | ||||||
Inventories | 8,101,584 | (1,425,783 | ) | (3,566,490 | ) | |||||||
Recoverable income taxes | (2,846,510 | ) | — | 1,438,819 | ||||||||
Prepaid expenses and other assets | (1,400,805 | ) | (545,433 | ) | (219,494 | ) | ||||||
Other assets | 275,316 | 490,219 | (714,295 | ) | ||||||||
Accounts payable | (2,132,402 | ) | (1,098,060 | ) | 5,123,589 | |||||||
Accrued employee compensation and benefits | 1,679,569 | (2,112,361 | ) | 2,617,465 | ||||||||
Accrued interest | 18,579 | (50,863 | ) | 24,069 | ||||||||
Accrued incentives | (998,157 | ) | 125,595 | (576,234 | ) | |||||||
Accrued expenses | 1,104,983 | 837,883 | 1,226,030 | |||||||||
Income taxes payable | (847,370 | ) | (2,405,704 | ) | 2,330,451 | |||||||
Deferred revenue | 96,280 | (35,672 | ) | 184,243 | ||||||||
Other long-term liabilities | (284,493 | ) | (506,193 | ) | (282,140 | ) | ||||||
Net cash flows from operating activities | 31,665,913 | 20,863,761 | 27,432,581 | |||||||||
Cash flows from investing activities: | ||||||||||||
Purchases of property and equipment | (7,979,371 | ) | (7,260,909 | ) | (6,543,074 | ) | ||||||
Acquisitions, net of cash acquired | (6,320,772 | ) | (14,681,655 | ) | (25,873,662 | ) | ||||||
Proceeds from sale of property and equipment | 35,503 | 36,385 | 313,505 | |||||||||
Software development costs | (633,763 | ) | (272,981 | ) | (705,523 | ) | ||||||
Net cash flows from investing activities | (14,898,403 | ) | (22,179,160 | ) | (32,808,754 | ) | ||||||
Cash flows from financing activities: | ||||||||||||
Proceeds from issuance of long-term debt | — | — | 24,000,000 | |||||||||
Payment of financing costs | (3,961,811 | ) | — | (964,774 | ) | |||||||
Principal payments on long-term debt | (2,070,654 | ) | (1,957,852 | ) | (3,821,172 | ) | ||||||
Principal payments on capital lease obligations | (722,823 | ) | (624,910 | ) | (390,205 | ) | ||||||
Net decrease in revolving credit facility | — | — | (13,931,119 | ) | ||||||||
Dividends paid to parent | (8,470,000 | ) | — | — | ||||||||
Capital contributions | 10,009,752 | 4,869 | — | |||||||||
Due to parent | 3,160,038 | 236,872 | 83,597 | |||||||||
Net cash flows from financing activities | (2,055,498 | ) | (2,341,021 | ) | 4,976,327 | |||||||
Net increase (decrease) in cash and cash equivalents | 14,712,012 | (3,656,420 | ) | (399,846 | ) | |||||||
Cash and cash equivalents, beginning of period | 29,326,456 | 32,982,876 | 33,382,722 | |||||||||
Cash and cash equivalents, end of period | $ | 44,038,468 | $ | 29,326,456 | $ | 32,982,876 | ||||||
Supplemental disclosures of cash flows information: | ||||||||||||
Cash paid during the period for: | ||||||||||||
Interest | $ | 30,653,694 | $ | 31,755,319 | $ | 31,388,513 | ||||||
Income taxes | 9,930,165 | 13,030,853 | 6,551,344 | |||||||||
Noncash investing and financing activities: | ||||||||||||
Property acquired through capital leases | $ | — | $ | 2,200,000 | $ | 1,079,000 | ||||||
Accumulated other comprehensive income (loss): | ||||||||||||
Unrealized gain (loss) on interest rate swap agreement, net of income taxes | 748,000 | (1,361,000 | ) | (801,000 | ) | |||||||
Deferred taxes resulting from unrealized gain (loss) on interest rate swap agreement | 473,000 | (861,000 | ) | (506,000 | ) | |||||||
Other intangible agreement to be paid over three years | — | 1,585,407 | — | |||||||||
Unpaid consideration associated with bookstore acquisitions | 155,000 | 700,000 | — | |||||||||
F-6
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notes to consolidated financial statements
A. | Nature of operations |
B. | Summary of significant accounting policies |
F-7
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F-8
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F-9
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F-10
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F-11
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F-12
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F-13
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F-14
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C. | Receivables |
March 31, | ||||||||
2009 | 2008 | |||||||
Trade receivables, less allowance for doubtful accounts of $1,283,360 and $1,033,360 at March 31, 2009 and 2008, respectively | $ | 29,097,291 | $ | 24,992,495 | ||||
Receivables from book publishers for returns | 25,233,975 | 25,096,497 | ||||||
Advances for book buy-backs | 2,795,286 | 3,773,634 | ||||||
Other | 4,175,084 | 3,533,882 | ||||||
$ | 61,301,636 | $ | 57,396,508 | |||||
D. | Inventories |
March 31, | ||||||||
2009 | 2008 | |||||||
Bookstore Division | $ | 59,785,703 | $ | 65,769,314 | ||||
Textbook Division | 30,571,333 | 30,575,106 | ||||||
Complementary Services Division | 2,758,627 | 2,666,667 | ||||||
$ | 93,115,663 | $ | 99,011,087 | |||||
F-15
Table of Contents
E. | Property and equipment |
March 31, | ||||||||
2009 | 2008 | |||||||
Land | $ | 3,565,382 | $ | 3,565,382 | ||||
Buildings and improvements | 25,675,055 | 25,028,868 | ||||||
Leasehold improvements | 14,598,193 | 10,376,770 | ||||||
Furniture and fixtures | 15,976,841 | 13,750,380 | ||||||
Information systems | 14,650,613 | 12,831,900 | ||||||
Automobiles and trucks | 220,008 | 234,620 | ||||||
Machinery | 378,966 | 374,074 | ||||||
Projects in process | 178,309 | 1,282,801 | ||||||
75,243,367 | 67,444,795 | |||||||
Less: Accumulated depreciation & amortization | (29,604,845 | ) | (22,378,615 | ) | ||||
$ | 45,638,522 | $ | 45,066,180 | |||||
F. | Goodwill and other identifiable intangibles |
F-16
Table of Contents
Bookstore | Corporate | |||||||||||
Division | Administration | Total | ||||||||||
Balance, April 1, 2007 | $ | 42,544,489 | $ | 269,061,875 | $ | 311,606,364 | ||||||
Additions to goodwill: | ||||||||||||
Bookstore acquisitions | 8,760,909 | — | 8,760,909 | |||||||||
Balance, March 31, 2008 | 51,305,398 | 269,061,875 | 320,367,273 | |||||||||
Additions to goodwill: | ||||||||||||
Bookstore acquisitions | 2,040,853 | — | 2,040,853 | |||||||||
Impairment | — | (106,972,000 | ) | (106,972,000 | ) | |||||||
Balance, March 31, 2009 | $ | 53,346,251 | $ | 162,089,875 | $ | 215,436,126 | ||||||
F-17
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F-18
Table of Contents
March 31, 2009 | ||||||||||||
Gross | Net | |||||||||||
carrying | Accumulated | carrying | ||||||||||
amount | amortization | amount | ||||||||||
Customer relationships | $ | 114,830,000 | $ | (29,185,660 | ) | $ | 85,644,340 | |||||
Developed technology | 13,086,017 | (10,069,126 | ) | 3,016,891 | ||||||||
Covenants not to compete | 6,614,699 | (4,069,131 | ) | 2,545,568 | ||||||||
Contract-managed acquisition costs | 4,816,378 | (1,954,878 | ) | 2,861,500 | ||||||||
Other | 1,585,407 | (836,744 | ) | 748,663 | ||||||||
$ | 140,932,501 | $ | (46,115,539 | ) | $ | 94,816,962 | ||||||
March 31, 2008 | ||||||||||||
Gross | Net | |||||||||||
carrying | Accumulated | carrying | ||||||||||
amount | amortization | amount | ||||||||||
Customer relationships | $ | 114,830,000 | $ | (23,444,140 | ) | $ | 91,385,860 | |||||
Developed technology | 12,452,254 | (7,950,631 | ) | 4,501,623 | ||||||||
Covenants not to compete | 7,451,032 | (3,546,939 | ) | 3,904,093 | ||||||||
Contract-managed acquisition costs | 3,652,771 | (1,232,261 | ) | 2,420,510 | ||||||||
Other | 1,585,407 | (308,276 | ) | 1,277,131 | ||||||||
$ | 139,971,464 | $ | (36,482,247 | ) | $ | 103,489,217 | ||||||
Amortization | ||||
expense | ||||
Fiscal year ended March 31, 2009 | $ | 11,384,020 | ||
Fiscal year ended March 31, 2008 | 10,443,335 | |||
Fiscal year ended March 31, 2007 | 9,613,598 | |||
Estimated amortization expense for the fiscal years ending March 31: | ||||
2010 | $ | 10,709,758 | ||
2011 | 7,593,725 | |||
2012 | 6,565,886 | |||
2013 | 6,251,048 | |||
2014 | 5,990,047 | |||
F-19
Table of Contents
G. | Accrued expenses |
March 31, | ||||||||
2009 | 2008 | |||||||
Accrued rent | $ | 3,725,616 | $ | 2,626,901 | ||||
Accrued property taxes | 551,489 | 545,221 | ||||||
$ | 4,277,105 | $ | 3,172,122 | |||||
H. | Long-term debt |
March 31, | ||||||||
2009 | 2008 | |||||||
Term Loan due March 4, 2011, principal and interest payments due quarterly, interest accrues at a floating rate based on Eurodollar rate plus an applicable margin percent (9.25% and 5.13%, as reset on March 31, 2009 and March 30, 2008, respectively) | $ | 193,076,346 | $ | 195,103,081 | ||||
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 | ||||||
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% | 286,833 | 330,752 | ||||||
368,363,179 | 370,433,833 | |||||||
Less current maturities of long-term debt | (6,917,451 | ) | (2,070,657 | ) | ||||
$ | 361,445,728 | $ | 368,363,176 | |||||
F-20
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F-21
Table of Contents
Fiscal year | ||||
2010 | $ | 6,917,451 | ||
2011 | 186,262,178 | |||
2012 | 175,060,548 | |||
2013 | 67,387 | |||
2014 | 55,615 | |||
I. | Leases and other commitments |
F-22
Table of Contents
Capital | Operating | |||||||
Fiscal year | leases | leases | ||||||
2010 | $ | 1,059,469 | $ | 19,471,000 | ||||
2011 | 1,174,565 | 15,583,000 | ||||||
2012 | 764,607 | 13,028,000 | ||||||
2013 | 529,922 | 9,931,000 | ||||||
2014 | 448,973 | 6,678,000 | ||||||
Thereafter | 1,209,437 | 19,781,000 | ||||||
Total minimum lease payments | 5,186,973 | $ | 84,472,000 | |||||
Less amount representing interest at 9.2% | (1,139,623 | ) | ||||||
Present value of minimum lease payments | 4,047,350 | |||||||
Less obligations due within one year | (748,692 | ) | ||||||
Long-term obligations | $ | 3,298,658 | ||||||
J. | Derivative financial instruments |
F-23
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March 31, | ||||
2008 | ||||
Total indebtedness outstanding | $ | 375,204,006 | ||
Term Loan subject to Eurodollar interest rate fluctuations | 195,103,081 | |||
Notional amount under swap agreement | 130,000,000 | |||
Fixed interest rate indebtedness | 180,100,925 | |||
Variable interest rate, including applicable margin: | ||||
Term Loan | 5.13% | |||
(1) | Formal documentation of the hedging relationship and the Company’s risk management objective and strategy for undertaking the hedge were in place. |
(2) | The interest rate swap agreement was expected to be highly effective in offsetting the change in the value of the hedged portion of the interest payments attributable to the Term Loan. |
F-24
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Fiscal year ended March 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Balance sheet components: | ||||||||||||
Other assets (accrued interest)—fair value of swap agreement | $ | — | $ | (1,119,000 | ) | $ | 1,301,000 | |||||
Deferred income taxes | — | 433,473 | (503,975 | ) | ||||||||
$ | — | $ | (685,527 | ) | $ | 797,025 | ||||||
Portion of agreement subsequent to September 30, 2005 hedge designation: | ||||||||||||
Increase (decrease) in fair value of swap agreement | $ | 1,221,000 | $ | (2,222,000 | ) | $ | (1,307,000 | ) | ||||
Portion of agreement prior to September 30, 2005 hedge designation: | ||||||||||||
Decrease in fair value of swap agreement | (102,000 | ) | (198,000 | ) | (225,000 | ) | ||||||
K. | Fair value measurements |
F-25
Table of Contents
Fair value measurements at reporting date using: | ||||||||||||||||
Quoted prices | ||||||||||||||||
in active | Significant | |||||||||||||||
markets for | other | Significant | ||||||||||||||
identical | observable | unobservable | ||||||||||||||
March 31, | assets | inputs | inputs | |||||||||||||
Description | 2009 | (Level 1) | (Level 2) | (Level 3) | ||||||||||||
Cash equivalents (Treasury Note) | $ | 4,999,319 | $ | — | $ | 4,999,319 | $ | — | ||||||||
Fixed rate debt | 90,367,000 | — | 90,367,000 | — | ||||||||||||
Variable rate debt (excluding Revolving Credit Facility) | 160,253,000 | — | 160,253,000 | — | ||||||||||||
L. | Income taxes |
Fiscal year ended | ||||||||||||
March 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Current: | ||||||||||||
Federal | $ | 8,043,362 | $ | 9,375,591 | $ | 8,964,579 | ||||||
State | 1,352,961 | 1,486,430 | 1,439,632 | |||||||||
Deferred | (1,947,665 | ) | (3,443,682 | ) | (2,148,119 | ) | ||||||
$ | 7,448,658 | $ | 7,418,339 | $ | 8,256,092 | |||||||
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Fiscal year ended | ||||||||||||
March 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Statutory rate | 35.0 | % | 35.0 | % | 35.0 | % | ||||||
Goodwill impairment | (46.7 | ) | — | — | ||||||||
State income tax effect | 4.2 | 1.0 | 3.8 | |||||||||
Meals and entertainment | 0.8 | 1.0 | 0.8 | |||||||||
Other | (1.8 | ) | 0.3 | — | ||||||||
(8.5 | )% | 37.3 | % | 39.6 | % | |||||||
March 31, | ||||||||
2009 | 2008 | |||||||
Deferred income tax assets (liabilities), current: | ||||||||
Vacation accruals | $ | 983,822 | $ | 1,022,517 | ||||
Inventories | 802,365 | 642,910 | ||||||
Allowance for doubtful accounts | 494,055 | 400,298 | ||||||
Product returns | 1,142,856 | 1,104,107 | ||||||
Incentive programs | 2,336,180 | 2,730,654 | ||||||
Interest rate swap agreement | — | 433,473 | ||||||
Other | 822,524 | (275,866 | ) | |||||
6,581,802 | 6,058,093 | |||||||
Deferred income tax assets (liabilities), noncurrent: | ||||||||
Deferred compensation agreements | 138,953 | 133,014 | ||||||
Goodwill amortization | (8,612,071 | ) | (6,793,181 | ) | ||||
Covenants not to compete | 1,424,543 | 1,180,890 | ||||||
Identifiable intangibles | (46,109,986 | ) | (49,160,579 | ) | ||||
Property and equipment | (1,233,192 | ) | (1,130,263 | ) | ||||
Other | 78,294 | 665,704 | ||||||
(54,313,459 | ) | (55,104,415 | ) | |||||
$ | (47,731,657 | ) | $ | (49,046,322 | ) | |||
F-27
Table of Contents
M. | Retirement plans |
N. | Deferred compensation |
O. | Share-based compensation |
F-28
Table of Contents
Stock options granted October 12, 2007: | ||||
General information: | ||||
Grant date calculated fair value per option | $ | 38.23 | ||
Shares at March 31, 2009: | ||||
Vested | 2,384 | |||
Nonvested | 2,383 | |||
4,767 | ||||
Unrecognized share-based compensation at March 31, 2009 | $ | 68,333 | ||
Period over which unrecognized share-based compensation will be realized (in years) at March 31, 2009 | 1.5 | |||
F-29
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Fiscal year ended | ||||
March 31, | ||||
2009 | ||||
Consolidated statement of operations: | ||||
Share-based compensation | $ | 43,416 | ||
Deferred tax benefit | 16,547 | |||
Other required disclosures: | ||||
Total calculated fair value of shares vested during the period | $ | 44,154 | ||
Fiscal year ended | ||||||||
March 31, 2009 | ||||||||
Weighted- | ||||||||
average | ||||||||
exercise | ||||||||
Number | price | |||||||
2004 Stock option plan: | ||||||||
Outstanding—beginning of year | 80,441 | $ | 117.39 | |||||
Granted | — | — | ||||||
Exercised or converted | — | — | ||||||
Forfeited | (238 | ) | 188.36 | |||||
Expired | — | — | ||||||
Outstanding—end of year | 80,203 | $ | 117.18 | |||||
Exercisable—end of year | 77,820 | $ | 114.49 | |||||
2004 stock option plan | ||||||||||||||||
Outstanding | Exercisable | |||||||||||||||
Weighted- | Weighted- | |||||||||||||||
average | average | |||||||||||||||
remaining | remaining | |||||||||||||||
contractual | contractual | |||||||||||||||
Number | term (yrs)~ | Number | term (yrs) | |||||||||||||
March 31, 2009: | ||||||||||||||||
Exercise price of $52.47 | 26,628 | 4.9 | 26,628 | 4.9 | ||||||||||||
Exercise price of $106 | 11,760 | 4.9 | 11,760 | 4.9 | ||||||||||||
Exercise price of $146 | 10,750 | 4.9 | 10,750 | 4.9 | ||||||||||||
Exercise price of $160 | 26,298 | 6.1 | 26,298 | 6.1 | ||||||||||||
Exercise price of $205 | 4,767 | 8.5 | 2,384 | 8.5 | ||||||||||||
80,203 | 5.5 | 77,820 | 5.4 | |||||||||||||
F-30
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F-31
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F-32
Table of Contents
Fiscal year ended | ||||||||||||
March 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Minimum | Minimum | Minimum | ||||||||||
Nonvested Stock: | Compensation | Compensation | Compensation | |||||||||
Valuation methodology | ||||||||||||
Share-based compensation: | ||||||||||||
Recognized: | ||||||||||||
Value of nonvested shares | $ | 666,667 | $ | 666,666 | $ | 666,667 | ||||||
Reimbursement for taxes | 578,460 | 303,444 | 330,290 | |||||||||
Total | $ | 1,245,127 | $ | 970,110 | $ | 996,957 | ||||||
Unrecognized: | ||||||||||||
Value of nonvested shares | $ | 1,000,000 | $ | 1,666,667 | $ | 2,333,333 | ||||||
Reimbursement for taxes | 606,097 | 839,618 | 1,180,357 | |||||||||
Total | $ | 1,606,097 | $ | 2,506,285 | $ | 3,513,690 | ||||||
Deferred tax benefit | $ | 476,298 | $ | 375,797 | $ | 125,880 | ||||||
Period over which unrecognized share-based compensation will be realized (in years) | 1.5 | 2.5 | 3.5 | |||||||||
P. | Segment information |
F-33
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Complementary | ||||||||||||||||
Bookstore | Textbook | Services | ||||||||||||||
Division | Division | Division | Total | |||||||||||||
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 | ||||||||||||
Adjusted 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 | ||||||||||||
Fiscal year ended March 31, 2008: | ||||||||||||||||
External customer revenues | $ | 452,992,078 | $ | 99,584,957 | $ | 28,670,751 | $ | 581,247,786 | ||||||||
Intersegment revenues | 1,382,795 | 40,100,078 | 5,701,472 | 47,184,345 | ||||||||||||
Depreciation and amortization expense | 7,908,134 | 6,096,196 | 2,614,015 | 16,618,345 | ||||||||||||
Earnings before interest, taxes, depreciation, and amortization (EBITDA) | 45,941,624 | 33,731,382 | 1,558,414 | 81,231,420 | ||||||||||||
Total assets | 186,707,038 | 137,629,109 | 21,639,502 | 345,975,649 | ||||||||||||
Fiscal year ended March 31, 2007: | ||||||||||||||||
External customer revenues | $ | 417,112,526 | $ | 100,486,178 | $ | 26,829,260 | $ | 544,427,964 | ||||||||
Intersegment revenues | 1,364,087 | 35,312,214 | 5,386,046 | 42,062,347 | ||||||||||||
Depreciation and amortization expense | 6,395,788 | 6,077,021 | 2,570,654 | 15,043,463 | ||||||||||||
Earnings before interest, taxes, depreciation, and amortization (EBITDA) | 44,511,202 | 32,210,010 | 2,716,144 | 79,437,356 | ||||||||||||
Total assets | 164,948,074 | 145,870,214 | 24,616,067 | 335,434,355 | ||||||||||||
F-34
Table of Contents
Fiscal year ended March 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Revenues: | ||||||||||||
Total for reportable segments | $ | 653,559,671 | $ | 628,432,131 | $ | 586,490,311 | ||||||
Elimination of intersegment revenues | (42,843,490 | ) | (47,184,345 | ) | (42,062,347 | ) | ||||||
Consolidated total | $ | 610,716,181 | $ | 581,247,786 | $ | 544,427,964 | ||||||
Depreciation and Amortization Expense: | ||||||||||||
Total for reportable segments | $ | 17,740,057 | $ | 16,618,345 | $ | 15,043,463 | ||||||
Corporate Administration | 1,246,594 | 1,033,494 | 485,893 | |||||||||
Consolidated total | $ | 18,986,651 | $ | 17,651,839 | $ | 15,529,356 | ||||||
Goodwill impairment | $ | 106,972,000 | $ | — | $ | — | ||||||
Income (Loss) Before Income Taxes: | ||||||||||||
Total Adjusted EBITDA for reportable segments(1) | $ | 84,359,301 | $ | 81,231,420 | $ | 79,437,356 | ||||||
Corporate Administration Adjusted EBITDA loss (including interdivision profit elimination)(1) | (13,326,971 | ) | (11,280,477 | ) | (11,323,483 | ) | ||||||
71,032,330 | 69,950,943 | 68,113,873 | ||||||||||
Depreciation and amortization | (18,986,651 | ) | (17,651,839 | ) | (15,529,356 | ) | ||||||
Goodwill impairment | (106,972,000 | ) | — | — | ||||||||
Consolidated income (loss) from operations | (54,926,321 | ) | 52,299,104 | 52,584,517 | ||||||||
Interest and other expenses, net | (32,553,689 | ) | (32,424,742 | ) | (31,716,939 | ) | ||||||
Consolidated income (loss) before income taxes | $ | (87,480,010 | ) | $ | 19,874,362 | $ | 20,867,578 | |||||
Total Assets: | ||||||||||||
Total for reportable segments | $ | 328,855,627 | $ | 345,975,649 | $ | 335,434,355 | ||||||
Assets not allocated to segments: | ||||||||||||
Cash and cash equivalents | 36,090,627 | 12,110,876 | 20,180,524 | |||||||||
Receivables, net | 19,857,099 | 19,490,619 | 13,985,140 | |||||||||
Recoverable income taxes | 2,869,583 | — | — | |||||||||
Deferred income taxes | 2,350,802 | 1,901,092 | 1,290,113 | |||||||||
Prepaid expenses and other assets | 3,485,273 | 2,259,681 | 1,791,710 | |||||||||
Property and equipment, net | 12,258,135 | 12,017,331 | 12,453,302 | |||||||||
Goodwill | 162,089,875 | 269,061,875 | 269,061,875 | |||||||||
Identifiable intangibles, net | 32,722,900 | 33,347,263 | 31,968,596 | |||||||||
Debt issue costs, net | 6,875,122 | 5,119,263 | 6,939,046 | |||||||||
Other assets | 611,664 | 803,772 | 2,382,931 | |||||||||
Consolidated total | $ | 608,066,707 | $ | 702,087,421 | $ | 695,487,592 | ||||||
F-35
Table of Contents
Q. | Related party transactions |
R. | Closure of California warehouse |
Fiscal year | ||||
ended | ||||
March 31, | ||||
2007(1) | ||||
Costs of Closure: | ||||
One-time termination benefits | $ | 473,000 | ||
Costs to terminate contracts | 189,000 | |||
Costs of consolidation/relocation | 112,475 | |||
$ | 774,475 | |||
F-36
Table of Contents
Balance, | Balance, | |||||||||||||||||||
April 1, | Costs incurred and | Costs | March 31, | |||||||||||||||||
2006 | charged to expense | paid/settled | Adjustments(2) | 2007(1) | ||||||||||||||||
Liability Reconciliation: | ||||||||||||||||||||
One-time termination benefits | $ | — | $ | 473,000 | $ | (232,840 | ) | $ | — | $ | 240,160 | |||||||||
Costs to terminate contracts | — | 372,000 | (189,000 | ) | (183,000 | ) | — | |||||||||||||
Costs of consolidation/relocation | — | 112,475 | (112,475 | ) | — | — | ||||||||||||||
$ | — | $ | 957,475 | $ | (534,315 | ) | $ | (183,000 | ) | $ | 240,160 | |||||||||
S. | Condensed consolidating financial information |
F-37
Table of Contents
condensed consolidating balance sheet
March 31, 2009
Nebraska | ||||||||||||||||
Book | Subsidiary | Consolidated | ||||||||||||||
Company, Inc. | guarantors | Eliminations | totals | |||||||||||||
Assets | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash and cash equivalents | $ | 40,811,478 | $ | 3,226,990 | $ | — | $ | 44,038,468 | ||||||||
Receivables, net | 52,201,871 | 58,276,880 | (49,177,115 | ) | 61,301,636 | |||||||||||
Inventories | 47,625,966 | 45,489,697 | — | 93,115,663 | ||||||||||||
Recoverable income taxes | 2,869,583 | — | — | 2,869,583 | ||||||||||||
Deferred income taxes | 2,350,802 | 4,231,000 | — | 6,581,802 | ||||||||||||
Prepaid expenses and other assets | 3,648,635 | 302,239 | — | 3,950,874 | ||||||||||||
Total current assets | 149,508,335 | 111,526,806 | (49,177,115 | ) | 211,858,026 | |||||||||||
Property and equipment, net | 40,057,891 | 5,580,631 | — | 45,638,522 | ||||||||||||
Goodwill | 199,900,017 | 15,536,109 | — | 215,436,126 | ||||||||||||
Customer relationships, net | 4,625,181 | 81,019,159 | — | 85,644,340 | ||||||||||||
Tradename | 31,320,000 | — | — | 31,320,000 | ||||||||||||
Other identifiable intangibles, net | 7,071,442 | 2,101,180 | — | 9,172,622 | ||||||||||||
Investment in subsidiaries | 151,290,937 | — | (151,290,937 | ) | — | |||||||||||
Other assets | 8,388,921 | 608,150 | — | 8,997,071 | ||||||||||||
$ | 592,162,724 | $ | 216,372,035 | $ | (200,468,052 | ) | $ | 608,066,707 | ||||||||
Liabilities and stockholder’s equity | ||||||||||||||||
Current liabilities: | ||||||||||||||||
Accounts payable | $ | 54,110,551 | $ | 21,932,178 | $ | (49,177,115 | ) | $ | 26,865,614 | |||||||
Accrued employee compensation and benefits | 9,705,781 | 4,074,428 | — | 13,780,209 | ||||||||||||
Accrued interest | 678,516 | — | — | 678,516 | ||||||||||||
Accrued incentives | 42,593 | 6,068,107 | — | 6,110,700 | ||||||||||||
Accrued expenses | 3,804,787 | 472,318 | — | 4,277,105 | ||||||||||||
Income taxes payable | (2,187,068 | ) | 2,187,068 | — | — | |||||||||||
Deferred revenue | 959,274 | — | — | 959,274 | ||||||||||||
Current maturities of long-term debt | 6,917,451 | — | — | 6,917,451 | ||||||||||||
Current maturities of capital lease obligations | 748,692 | — | — | 748,692 | ||||||||||||
Total current liabilities | 74,780,577 | 34,734,099 | (49,177,115 | ) | 60,337,561 | |||||||||||
Long-term debt, net of current maturities | 361,445,728 | — | — | 361,445,728 | ||||||||||||
Capital lease obligations, net of current maturities | 3,298,658 | — | — | 3,298,658 | ||||||||||||
Other long-term liabilities | 5,234,166 | 70,000 | — | 5,304,166 | ||||||||||||
Deferred income taxes | 24,036,460 | 30,276,999 | — | 54,313,459 | ||||||||||||
Due to parent commitments | 20,130,189 | — | — | 20,130,189 | ||||||||||||
Stockholder’s equity | 103,236,946 | 151,290,937 | (151,290,937 | ) | 103,236,946 | |||||||||||
$ | 592,162,724 | $ | 216,372,035 | $ | (200,468,052 | ) | $ | 608,066,707 | ||||||||
F-38
Table of Contents
condensed consolidating balance sheet
March 31, 2008
Nebraska | ||||||||||||||||
Book | Subsidiary | Consolidated | ||||||||||||||
Company, Inc. | guarantors | Eliminations | totals | |||||||||||||
Assets | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash and cash equivalents | $ | 23,588,130 | $ | 5,738,326 | $ | — | $ | 29,326,456 | ||||||||
Receivables, net | 50,231,144 | 35,404,082 | (28,238,718 | ) | 57,396,508 | |||||||||||
Inventories | 54,029,013 | 44,982,074 | — | 99,011,087 | ||||||||||||
Deferred income taxes | 1,901,092 | 4,157,001 | — | 6,058,093 | ||||||||||||
Prepaid expenses and other assets | 2,259,681 | 279,396 | — | 2,539,077 | ||||||||||||
Total current assets | 132,009,060 | 90,560,879 | (28,238,718 | ) | 194,331,221 | |||||||||||
Property and equipment, net | 39,757,056 | 5,309,124 | — | 45,066,180 | ||||||||||||
Goodwill | 304,831,164 | 15,536,109 | — | 320,367,273 | ||||||||||||
Customer relationships, net | 4,935,249 | 86,450,611 | — | 91,385,860 | ||||||||||||
Tradename | 31,320,000 | — | — | 31,320,000 | ||||||||||||
Other identifiable intangibles, net | 10,331,727 | 1,771,630 | — | 12,103,357 | ||||||||||||
Investment in subsidiaries | 131,583,301 | — | (131,583,301 | ) | — | |||||||||||
Other assets | 6,750,356 | 763,174 | — | 7,513,530 | ||||||||||||
$ | 661,517,913 | $ | 200,391,527 | $ | (159,822,019 | ) | $ | 702,087,421 | ||||||||
Liabilities and stockholder’s equity | ||||||||||||||||
Current liabilities: | �� | |||||||||||||||
Accounts payable | $ | 32,282,516 | $ | 24,587,231 | $ | (28,238,718 | ) | $ | 28,631,029 | |||||||
Accrued employee compensation and benefits | 8,963,654 | 3,136,986 | — | 12,100,640 | ||||||||||||
Accrued interest | 1,778,937 | — | — | 1,778,937 | ||||||||||||
Accrued incentives | 59,736 | 7,049,121 | — | 7,108,857 | ||||||||||||
Accrued expenses | 2,843,900 | 328,222 | — | 3,172,122 | ||||||||||||
Income taxes payable | (121,296 | ) | 968,666 | — | 847,370 | |||||||||||
Deferred revenue | 862,994 | — | — | 862,994 | ||||||||||||
Current maturities of long-term debt | 2,070,657 | — | — | 2,070,657 | ||||||||||||
Current maturities of capital lease obligations | 658,415 | — | — | 658,415 | ||||||||||||
Total current liabilities | 49,399,513 | 36,070,226 | (28,238,718 | ) | 57,231,021 | |||||||||||
Long-term debt, net of current maturities | 368,363,176 | — | — | 368,363,176 | ||||||||||||
Capital lease obligations, net of current maturities | 4,111,758 | — | — | 4,111,758 | ||||||||||||
Other long-term liabilities | 4,387,504 | 80,000 | — | 4,467,504 | ||||||||||||
Deferred income taxes | 22,446,415 | 32,658,000 | — | 55,104,415 | ||||||||||||
Due to parent commitments | 16,970,151 | — | — | 16,970,151 | ||||||||||||
Stockholder’s equity | 195,839,396 | 131,583,301 | (131,583,301 | ) | 195,839,396 | |||||||||||
$ | 661,517,913 | $ | 200,391,527 | $ | (159,822,019 | ) | $ | 702,087,421 | ||||||||
F-39
Table of Contents
condensed consolidating statement of operations
for the fiscal year ended March 31, 2009
Nebraska | ||||||||||||||||
Book | Subsidiary | Consolidated | ||||||||||||||
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 | (19,707,636 | ) | — | 19,707,636 | — | |||||||||||
208,851,447 | 63,799,019 | 21,622,796 | 294,273,262 | |||||||||||||
Income (loss) from operations | (66,425,299 | ) | 31,206,614 | (19,707,636 | ) | (54,926,321 | ) | |||||||||
Other expenses (income): | ||||||||||||||||
Interest expense | 32,878,225 | — | — | 32,878,225 | ||||||||||||
Interest income | (385,514 | ) | (41,022 | ) | — | (426,536 | ) | |||||||||
Loss on derivative financial instrument | 102,000 | — | — | 102,000 | ||||||||||||
32,594,711 | (41,022 | ) | — | 32,553,689 | ||||||||||||
Income (loss) before income taxes | (99,020,010 | ) | 31,247,636 | (19,707,636 | ) | (87,480,010 | ) | |||||||||
Income tax expense (benefit) | (4,091,342 | ) | 11,540,000 | — | 7,448,658 | |||||||||||
Net income (loss) | $ | (94,928,668 | ) | $ | 19,707,636 | $ | (19,707,636 | ) | $ | (94,928,668 | ) | |||||
F-40
Table of Contents
condensed consolidating statement of operations
for the fiscal year ended March 31, 2008
Nebraska | ||||||||||||||||
Book | Subsidiary | Consolidated | ||||||||||||||
Company, Inc. | guarantors | Eliminations | totals | |||||||||||||
Revenues, net of returns | $ | 381,697,820 | $ | 240,155,652 | $ | (40,605,686 | ) | $ | 581,247,786 | |||||||
Costs of sales (exclusive of depreciation shown below) | 240,688,980 | 156,028,070 | (42,577,576 | ) | 354,139,474 | |||||||||||
Gross profit | 141,008,840 | 84,127,582 | 1,971,890 | 227,108,312 | ||||||||||||
Operating expenses (income): | ||||||||||||||||
Selling, general and administrative | 108,050,482 | 47,171,054 | 1,971,890 | 157,193,426 | ||||||||||||
Closure of California Warehouse | — | (36,057 | ) | — | (36,057 | ) | ||||||||||
Depreciation | 5,676,303 | 1,532,201 | — | 7,208,504 | ||||||||||||
Amortization | 4,511,635 | 5,931,700 | — | 10,443,335 | ||||||||||||
Intercompany administrative fee | (4,838,800 | ) | 4,838,800 | — | — | |||||||||||
Equity in earnings of subsidiary | (15,608,834 | ) | — | 15,608,834 | — | |||||||||||
97,790,786 | 59,437,698 | 17,580,724 | 174,809,208 | |||||||||||||
Income from operations | 43,218,054 | 24,689,884 | (15,608,834 | ) | 52,299,104 | |||||||||||
Other expenses (income): | ||||||||||||||||
Interest expense | 33,559,239 | — | — | 33,559,239 | ||||||||||||
Interest income | (1,287,547 | ) | (44,950 | ) | — | (1,332,497 | ) | |||||||||
Loss on derivative financial instrument | 198,000 | — | — | 198,000 | ||||||||||||
32,469,692 | (44,950 | ) | — | 32,424,742 | ||||||||||||
Income before income taxes | 10,748,362 | 24,734,834 | (15,608,834 | ) | 19,874,362 | |||||||||||
Income tax expense (benefit) | (1,707,661 | ) | 9,126,000 | — | 7,418,339 | |||||||||||
Net income | $ | 12,456,023 | $ | 15,608,834 | $ | (15,608,834 | ) | $ | 12,456,023 | |||||||
F-41
Table of Contents
condensed consolidating statement of operations
for the fiscal year ended March 31, 2007
Nebraska | ||||||||||||||||
Book | Subsidiary | Consolidated | ||||||||||||||
Company, Inc. | guarantors | Eliminations | totals | |||||||||||||
Revenues, net of returns | $ | 344,250,733 | $ | 235,668,504 | $ | (35,491,273 | ) | $ | 544,427,964 | |||||||
Cost of sales (exclusive of depreciation shown below) | 215,799,510 | 154,760,028 | (38,115,547 | ) | 332,443,991 | |||||||||||
Gross profit | 128,451,223 | 80,908,476 | 2,624,274 | 211,983,973 | ||||||||||||
Operating expenses (income): | ||||||||||||||||
Selling, general and administrative | 96,426,536 | 44,044,815 | 2,624,274 | 143,095,625 | ||||||||||||
Closure of California Warehouse | — | 774,475 | — | 774,475 | ||||||||||||
Depreciation | 4,553,736 | 1,362,022 | — | 5,915,758 | ||||||||||||
Amortization | 3,778,990 | 5,834,608 | — | 9,613,598 | ||||||||||||
Intercompany administrative fee | (3,933,600 | ) | 3,933,600 | — | — | |||||||||||
Equity in earnings of subsidiary | (17,075,676 | ) | — | 17,075,676 | — | |||||||||||
83,749,986 | 55,949,520 | 19,699,950 | 159,399,456 | |||||||||||||
Income from operations | 44,701,237 | 24,958,956 | (17,075,676 | ) | 52,584,517 | |||||||||||
Other expenses (income): | ||||||||||||||||
Interest expense | 33,113,297 | 22,240 | — | 33,135,537 | ||||||||||||
Interest income | (1,593,838 | ) | (49,760 | ) | — | (1,643,598 | ) | |||||||||
Gain on derivative financial instrument | 225,000 | — | — | 225,000 | ||||||||||||
31,744,459 | (27,520 | ) | — | 31,716,939 | ||||||||||||
Income before income taxes | 12,956,778 | 24,986,476 | (17,075,676 | ) | 20,867,578 | |||||||||||
Income tax expense | 345,292 | 7,910,800 | — | 8,256,092 | ||||||||||||
Net income | $ | 12,611,486 | $ | 17,075,676 | $ | (17,075,676 | ) | $ | 12,611,486 | |||||||
F-42
Table of Contents
condensed consolidating statement of cash flows
for the fiscal year ended March 31, 2009
Nebraska | ||||||||||||||||
Book | Subsidiary | Consolidated | ||||||||||||||
Company, Inc. | guarantors | Eliminations | totals | |||||||||||||
Cash flows from operating activities | $ | 29,207,254 | $ | 2,458,659 | $ | — | $ | 31,665,913 | ||||||||
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: | ||||||||||||||||
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 | ) | ||||||||||
Dividends paid to parent | (8,470,000 | ) | — | — | (8,470,000 | ) | ||||||||||
Capital contributions | 10,009,752 | — | — | 10,009,752 | ||||||||||||
Change in due to parent | 3,160,038 | — | — | 3,160,038 | ||||||||||||
Net cash flows from financing activities | (2,055,498 | ) | — | — | (2,055,498 | ) | ||||||||||
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 | ||||||||
F-43
Table of Contents
condensed consolidating statement of cash flows
for the fiscal year ended March 31, 2008
Nebraska | ||||||||||||||||
Book | Subsidiary | Consolidated | ||||||||||||||
Company, Inc. | guarantors | Eliminations | totals | |||||||||||||
Cash flows from operating activities | $ | 18,407,954 | $ | 2,455,807 | $ | — | $ | 20,863,761 | ||||||||
Cash flows from investing activities: | ||||||||||||||||
Purchases of property and equipment | (6,607,380 | ) | (690,551 | ) | 37,022 | (7,260,909 | ) | |||||||||
Acquisitions, net of cash acquired | (14,246,655 | ) | (435,000 | ) | — | (14,681,655 | ) | |||||||||
Proceeds from sale of property and equipment | 21,985 | 51,422 | (37,022 | ) | 36,385 | |||||||||||
Software development costs | (272,981 | ) | — | — | (272,981 | ) | ||||||||||
Net cash flows from investing activities | (21,105,031 | ) | (1,074,129 | ) | — | (22,179,160 | ) | |||||||||
Cash flows from financing activities: | ||||||||||||||||
Payment of financing costs | (1,957,852 | ) | — | — | (1,957,852 | ) | ||||||||||
Principal payments on long-term debt | (624,910 | ) | — | — | (624,910 | ) | ||||||||||
Capital contributions | 4,869 | — | — | 4,869 | ||||||||||||
Change in due to parent | 236,872 | — | — | 236,872 | ||||||||||||
Net cash flows from financing activities | (2,341,021 | ) | — | — | (2,341,021 | ) | ||||||||||
Net increase (decrease) in cash and cash equivalents | (5,038,098 | ) | 1,381,678 | — | (3,656,420 | ) | ||||||||||
Cash and cash equivalents, beginning of period | 28,626,228 | 4,356,648 | — | 32,982,876 | ||||||||||||
Cash and cash equivalents, end of period | $ | 23,588,130 | $ | 5,738,326 | $ | — | $ | 29,326,456 | ||||||||
F-44
Table of Contents
condensed consolidating statement of cash flows
for the fiscal year ended March 31, 2007
Nebraska | ||||||||||||||||
Book | Subsidiary | Consolidated | ||||||||||||||
Company, Inc. | guarantors | Eliminations | totals | |||||||||||||
Cash flows from operating activities | $ | 27,351,399 | $ | 81,182 | $ | — | $ | 27,432,581 | ||||||||
Cash flows from investing activities: | ||||||||||||||||
Purchases of property and equipment | (4,770,795 | ) | (1,772,279 | ) | — | (6,543,074 | ) | |||||||||
Acquisitions, net of cash acquired | (25,200,030 | ) | (673,632 | ) | — | (25,873,662 | ) | |||||||||
Proceeds from sale of property and equipment | 107,100 | 206,405 | — | 313,505 | ||||||||||||
Software development costs | (705,523 | ) | — | — | (705,523 | ) | ||||||||||
Cash acquired in acquisition of subsidiary guarantor | (3,087,617 | ) | 3,087,617 | — | — | |||||||||||
Net cash flows from investing activities | (33,656,865 | ) | 848,111 | — | (32,808,754 | ) | ||||||||||
Cash flows from financing activities: | ||||||||||||||||
Proceeds from issuance of long-term debt | 24,000,000 | — | — | 24,000,000 | ||||||||||||
Payment of financing costs | (964,774 | ) | — | — | (964,774 | ) | ||||||||||
Principal payments on long-term debt | (3,411,172 | ) | (410,000 | ) | — | (3,821,172 | ) | |||||||||
Principal payments on capital lease obligations | (390,205 | ) | — | — | (390,205 | ) | ||||||||||
Intercompany financing activity | (14,341,119 | ) | 14,341,119 | — | — | |||||||||||
Net decrease in revolving credit facility | — | (13,931,119 | ) | — | (13,931,119 | ) | ||||||||||
Change in due to parent | 83,597 | — | — | 83,597 | ||||||||||||
Net cash flows from financing activities | 4,976,327 | — | — | 4,976,327 | ||||||||||||
Net increase (decrease) in cash and cash equivalents | (1,329,139 | ) | 929,293 | — | (399,846 | ) | ||||||||||
Cash and cash equivalents, beginning of period | 29,955,367 | 3,427,355 | — | 33,382,722 | ||||||||||||
Cash and cash equivalents, end of period | $ | 28,626,228 | $ | 4,356,648 | $ | — | $ | 32,982,876 | ||||||||
F-45
Table of Contents
condensed consolidated balance sheets
September 30, | March 31, | September 30, | ||||||||||
(unaudited) | 2009 | 2009 | 2008 | |||||||||
Assets | ||||||||||||
Current assets: | ||||||||||||
Cash and cash equivalents | $ | 106,084,513 | $ | 44,038,468 | $ | 91,500,840 | ||||||
Receivables, net | 85,032,944 | 61,301,636 | 78,239,728 | |||||||||
Inventories | 117,971,555 | 93,115,663 | 122,470,499 | |||||||||
Recoverable income taxes | — | 2,869,583 | — | |||||||||
Deferred income taxes | 8,602,801 | 6,581,802 | 8,268,093 | |||||||||
Prepaid expenses and other assets | 3,076,539 | 3,950,874 | 3,280,284 | |||||||||
Total current assets | 320,768,352 | 211,858,026 | 303,759,444 | |||||||||
Property and equipment, net of depreciation & amortization | 43,932,230 | 45,638,522 | 45,563,335 | |||||||||
Goodwill | 215,571,126 | 215,436,126 | 322,409,155 | |||||||||
Customer relationships, net of amortization | 82,773,580 | 85,644,340 | 88,515,100 | |||||||||
Tradename | 31,320,000 | 31,320,000 | 31,320,000 | |||||||||
Other identifiable intangibles, net of amortization | 6,874,747 | 9,172,622 | 11,081,838 | |||||||||
Debt issue costs, net of amortization | 5,086,222 | 6,875,122 | 4,194,563 | |||||||||
Other assets | 3,178,826 | 2,121,949 | 2,386,067 | |||||||||
$ | 709,505,083 | $ | 608,066,707 | $ | 809,229,502 | |||||||
Liabilities and stockholder’s equity | ||||||||||||
Current liabilities: | ||||||||||||
Accounts payable | $ | 118,676,798 | $ | 26,865,614 | $ | 118,354,609 | ||||||
Accrued employee compensation and benefits | 9,526,518 | 13,780,209 | 10,948,485 | |||||||||
Accrued interest | 709,588 | 678,516 | 743,224 | |||||||||
Accrued incentives | 6,676,762 | 6,110,700 | 6,927,107 | |||||||||
Accrued expenses | 5,593,464 | 4,277,105 | 4,572,207 | |||||||||
Income taxes payable | 8,383,744 | — | 9,723,464 | |||||||||
Deferred revenue | 3,783,843 | 959,274 | 2,641,204 | |||||||||
Current maturities of long-term debt | 51,568 | 6,917,451 | 2,073,070 | |||||||||
Current maturities of capital lease obligations | 791,246 | 748,692 | 705,565 | |||||||||
Total current liabilities | 154,193,531 | 60,337,561 | 156,688,935 | |||||||||
Long-term debt, net of current maturities | 361,658,564 | 361,445,728 | 367,326,024 | |||||||||
Capital lease obligations, net of current maturities | 2,857,694 | 3,298,658 | 3,716,979 | |||||||||
Other long-term liabilities | 5,819,820 | 5,304,166 | 4,698,322 | |||||||||
Deferred income taxes | 52,667,458 | 54,313,459 | 53,900,415 | |||||||||
Due to parent | 21,468,189 | 20,130,189 | 18,321,151 | |||||||||
Commitments (Note 4) | ||||||||||||
Stockholder’s equity: | ||||||||||||
Common stock, voting, authorized 50,000 shares of $1.00 par value; issued and outstanding 100 shares | 100 | 100 | 100 | |||||||||
Additional paid-in capital | 148,155,662 | 148,135,923 | 138,110,740 | |||||||||
Retained earnings (deficit) | (37,315,935 | ) | (44,899,077 | ) | 66,466,836 | |||||||
Total stockholder’s equity | 110,839,827 | 103,236,946 | 204,577,676 | |||||||||
$ | 709,505,083 | $ | 608,066,707 | $ | 809,229,502 | |||||||
F-46
Table of Contents
condensed consolidated statements of operations
Quarter ended September 30, | Six months ended September 30, | |||||||||||||||
(unaudited) | 2009 | 2008 | 2009 | 2008 | ||||||||||||
Revenues, net of returns | $ | 276,716,102 | $ | 280,932,214 | $ | 345,479,975 | $ | 352,136,240 | ||||||||
Costs of sales (exclusive of depreciation shown below) | 173,427,401 | 177,340,396 | 213,771,085 | 219,262,419 | ||||||||||||
Gross profit | 103,288,701 | 103,591,818 | 131,708,890 | 132,873,821 | ||||||||||||
Operating expenses: | ||||||||||||||||
Selling, general and administrative | 49,547,498 | 51,541,519 | 83,202,612 | 87,256,945 | ||||||||||||
Depreciation | 2,039,810 | 1,844,967 | 4,093,454 | 3,689,999 | ||||||||||||
Amortization | 2,799,197 | 2,865,326 | 5,636,279 | 5,692,716 | ||||||||||||
54,386,505 | 56,251,812 | 92,932,345 | 96,639,660 | |||||||||||||
Income from operations | 48,902,196 | 47,340,006 | 38,776,545 | 36,234,161 | ||||||||||||
Other expenses: | ||||||||||||||||
Interest expense | 9,665,973 | 7,979,165 | 19,382,100 | 15,974,636 | ||||||||||||
Interest income | (26,897 | ) | (179,720 | ) | (43,697 | ) | (179,720 | ) | ||||||||
Loss on derivative financial instrument | — | 50,000 | — | 102,000 | ||||||||||||
9,639,076 | 7,849,445 | 19,338,403 | 15,896,916 | |||||||||||||
Income before income taxes | 39,263,120 | 39,490,561 | 19,438,142 | 20,337,245 | ||||||||||||
Income tax expense | 15,391,000 | 15,796,000 | 7,620,000 | 8,135,000 | ||||||||||||
Net income | $ | 23,872,120 | $ | 23,694,561 | $ | 11,818,142 | $ | 12,202,245 | ||||||||
F-47
Table of Contents
condensed consolidated statements of stockholder’s equity
Accumulated | ||||||||||||||||||||||||
Additional | Retained | other | ||||||||||||||||||||||
Common | paid-in | earnings | comprehensive | Comprehensive | ||||||||||||||||||||
(unaudited) | stock | capital | (deficit) | income (loss) | Total | income | ||||||||||||||||||
Balance, April 1, 2008 | $ | 100 | $ | 138,087,705 | $ | 58,499,591 | $ | (748,000 | ) | $ | 195,839,396 | |||||||||||||
Contributed capital | — | 2,401 | — | — | 2,401 | $ | — | |||||||||||||||||
Share-based compensation attributable to NBC Holdings Corp. stock options | — | 20,634 | — | — | 20,634 | — | ||||||||||||||||||
Net income | — | — | 12,202,245 | — | 12,202,245 | 12,202,245 | ||||||||||||||||||
Dividends declared | — | — | (4,235,000 | ) | — | (4,235,000 | ) | — | ||||||||||||||||
Other comprehensive income, net of taxes: | ||||||||||||||||||||||||
Unrealized gain on interest rate swap agreement, net of taxes of $473,000 | — | — | — | 748,000 | 748,000 | 748,000 | ||||||||||||||||||
Balance, September 30, 2008 | $ | 100 | $ | 138,110,740 | $ | 66,466,836 | $ | — | $ | 204,577,676 | $ | 12,950,245 | ||||||||||||
Balance, April 1, 2009 | $ | 100 | $ | 148,135,923 | $ | (44,899,077 | ) | $ | — | $ | 103,236,946 | |||||||||||||
Contributed capital | — | (2,401 | ) | — | — | (2,401 | ) | $ | — | |||||||||||||||
Share-based compensation attributable to NBC Holdings Corp. stock options | — | 22,140 | — | — | 22,140 | — | ||||||||||||||||||
Net income | — | — | 11,818,142 | — | 11,818,142 | 11,818,142 | ||||||||||||||||||
Dividends declared | — | — | (4,235,000 | ) | — | (4,235,000 | ) | — | ||||||||||||||||
Balance, September 30, 2009 | $ | 100 | $ | 148,155,662 | $ | (37,315,935 | ) | $ | — | $ | 110,839,827 | $ | 11,818,142 | |||||||||||
F-48
Table of Contents
condensed consolidated statements of cash flows
Six months ended September 30, | ||||||||
(unaudited) | 2009 | 2008 | ||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 11,818,142 | $ | 12,202,245 | ||||
Adjustments to reconcile net income to net cash flows from operating activities: | ||||||||
Share-based compensation | 479,741 | 485,432 | ||||||
Provision for losses on receivables | 133,629 | 14,150 | ||||||
Depreciation | 4,093,454 | 3,689,999 | ||||||
Amortization | 7,627,562 | 6,617,416 | ||||||
Loss on derivative financial instrument | — | 102,000 | ||||||
Loss on disposal of assets | 118,143 | 61,833 | ||||||
Deferred income taxes | (3,667,000 | ) | (4,047,000 | ) | ||||
Changes in operating assets and liabilities, net of effect of acquisitions: | ||||||||
Receivables | (23,867,338 | ) | (20,854,105 | ) | ||||
Inventories | (23,577,275 | ) | (21,300,886 | ) | ||||
Recoverable income taxes | 2,869,583 | — | ||||||
Prepaid expenses and other assets | 1,024,335 | (727,215 | ) | |||||
Other assets | (522,785 | ) | 8,199 | |||||
Accounts payable | 92,042,552 | 89,316,739 | ||||||
Accrued employee compensation and benefits | (4,253,691 | ) | (1,152,155 | ) | ||||
Accrued interest | 31,072 | 83,287 | ||||||
Accrued incentives | 566,062 | (181,750 | ) | |||||
Accrued expenses | 1,316,359 | 1,400,085 | ||||||
Income taxes payable | 8,383,744 | 8,899,167 | ||||||
Deferred revenue | 2,824,569 | 1,778,210 | ||||||
Other long-term liabilities | (169,631 | ) | (171,530 | ) | ||||
Net cash flows from operating activities | 77,271,227 | 76,224,121 | ||||||
Cash flows from investing activities: | ||||||||
Purchases of property and equipment | (2,597,252 | ) | (4,129,766 | ) | ||||
Acquisitions, net of cash acquired | (2,291,018 | ) | (5,415,645 | ) | ||||
Proceeds from sale of property and equipment | 75,664 | 21,609 | ||||||
Software development costs | (261,736 | ) | (264,436 | ) | ||||
Net cash flows from investing activities | (5,074,342 | ) | (9,788,238 | ) | ||||
Cash flows from financing activities: | ||||||||
Payment of financing costs | (202,383 | ) | — | |||||
Principal payments on long-term debt | (6,653,047 | ) | (1,034,739 | ) | ||||
Principal payments on capital lease obligations | (398,410 | ) | (347,629 | ) | ||||
Dividends paid to parent | (4,235,000 | ) | (4,235,000 | ) | ||||
Capital contributions | — | 4,869 | ||||||
Change in due to parent | 1,338,000 | 1,351,000 | ||||||
Net cash flows from financing activities | (10,150,840 | ) | (4,261,499 | ) | ||||
Net increase in cash and cash equivalents | 62,046,045 | 62,174,384 | ||||||
Cash and cash equivalents, beginning of period | 44,038,468 | 29,326,456 | ||||||
Cash and cash equivalents, end of period | $ | 106,084,513 | $ | 91,500,840 | ||||
Supplemental disclosures of cash flows information: | ||||||||
Cash (received) paid during the period for: | ||||||||
Interest | $ | 17,359,745 | $ | 14,966,649 | ||||
Income taxes | (1,304,327 | ) | 1,931,833 | |||||
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 | 450,000 | 410,000 | ||||||
F-49
Table of Contents
notes to condensed consolidated financial statements
(unaudited)
September 30, | March 31, | September 30, | ||||||||||
2009 | 2009 | 2008 | ||||||||||
Bookstore Division | $ | 97,467,481 | $ | 59,785,703 | $ | 102,078,587 | ||||||
Textbook Division | 16,905,358 | 30,571,333 | 17,695,352 | |||||||||
Complementary Services Division | 3,598,716 | 2,758,627 | 2,696,560 | |||||||||
$ | 117,971,555 | $ | 93,115,663 | $ | 122,470,499 | |||||||
F-50
Table of Contents
Bookstore | Corporate | |||||||||||
Division | Administration | Total | ||||||||||
Balance, April 1, 2008 | $ | 51,305,398 | $ | 269,061,875 | $ | 320,367,273 | ||||||
Additions to goodwill: | ||||||||||||
Bookstore acquisitions | 2,041,882 | — | 2,041,882 | |||||||||
Balance, September 30, 2008 | $ | 53,347,280 | $ | 269,061,875 | $ | 322,409,155 | ||||||
Balance, April 1, 2009 | $ | 53,346,251 | $ | 162,089,875 | $ | 215,436,126 | ||||||
Additions to goodwill: | ||||||||||||
Bookstore acquisitions | 135,000 | — | 135,000 | |||||||||
Balance, September 30, 2009 | $ | 53,481,251 | $ | 162,089,875 | $ | 215,571,126 | ||||||
F-51
Table of Contents
September 30, 2009 | ||||||||||||
Gross | Net | |||||||||||
carrying | Accumulated | carrying | ||||||||||
amount | amortization | amount | ||||||||||
Customer relationships | $ | 114,830,000 | $ | (32,056,420 | ) | $ | 82,773,580 | |||||
Developed technology | 13,243,373 | (11,069,405 | ) | 2,173,968 | ||||||||
Covenants not to compete | 6,613,699 | (4,857,178 | ) | 1,756,521 | ||||||||
Contract-managed acquisition costs | 4,305,740 | (1,845,911 | ) | 2,459,829 | ||||||||
Other | 1,585,407 | (1,100,978 | ) | 484,429 | ||||||||
$ | 140,578,219 | $ | (50,929,892 | ) | $ | 89,648,327 | ||||||
March 31, 2009 | ||||||||||||
Gross | Net | |||||||||||
carrying | Accumulated | carrying | ||||||||||
amount | amortization | amount | ||||||||||
Customer relationships | $ | 114,830,000 | $ | (29,185,660 | ) | $ | 85,644,340 | |||||
Developed technology | 13,086,017 | (10,069,126 | ) | 3,016,891 | ||||||||
Covenants not to compete | 6,614,699 | (4,069,131 | ) | 2,545,568 | ||||||||
Contract-managed acquisition costs | 4,816,378 | (1,954,878 | ) | 2,861,500 | ||||||||
Other | 1,585,407 | (836,744 | ) | 748,663 | ||||||||
$ | 140,932,501 | $ | (46,115,539 | ) | $ | 94,816,962 | ||||||
F-52
Table of Contents
September 30, 2008 | ||||||||||||
Gross | Net | |||||||||||
carrying | Accumulated | carrying | ||||||||||
amount | amortization | amount | ||||||||||
Customer relationships | $ | 114,830,000 | $ | (26,314,900 | ) | $ | 88,515,100 | |||||
Developed technology | 12,716,690 | (8,994,977 | ) | 3,721,713 | ||||||||
Covenants not to compete | 7,469,032 | (3,989,422 | ) | 3,479,610 | ||||||||
Contract-managed acquisition costs | 4,320,045 | (1,452,427 | ) | 2,867,618 | ||||||||
Other | 1,585,407 | (572,510 | ) | 1,012,897 | ||||||||
$ | 140,921,174 | $ | (41,324,236 | ) | $ | 99,596,938 | ||||||
Amortization | ||||
expense | ||||
Quarter ended September 30, 2009 | $ | 2,799,197 | ||
Quarter ended September 30, 2008 | 2,865,326 | |||
Six months ended September 30, 2009 | 5,636,279 | |||
Six months ended September 30, 2008 | 5,692,716 | |||
Estimated amortization expense for the fiscal years ending March 31: | ||||
2010 | $ | 10,793,504 | ||
2011 | 7,712,045 | |||
2012 | 6,641,081 | |||
2013 | 6,294,741 | |||
2014 | 6,022,393 | |||
F-53
Table of Contents
F-54
Table of Contents
F-55
Table of Contents
September 30, | ||||
2008 | ||||
Total indebtedness outstanding | $ | 373,821,638 | ||
Term Loan subject to Eurodollar interest rate fluctuations | 194,089,714 | |||
Fixed interest rate indebtedness | 179,731,924 | |||
Variable interest rate, including applicable margin: | ||||
Term Loan | 6.38% | |||
(1) | Formal documentation of the hedging relationship and the Company’s risk management objective and strategy for undertaking the hedge were in place. |
(2) | The interest rate swap agreement was expected to be highly effective in offsetting the change in the value of the hedged portion of the interest payments attributable to the Term Loan. |
F-56
Table of Contents
Portion of agreement subsequent to September 30, 2005 hedge designation: | ||||
Increase in fair value of swap agreement: | ||||
Quarter ended September 30, 2008 | $ | 612,000 | ||
Six months ended September 30, 2008 | 1,221,000 | |||
Year ended March 31, 2009 | 1,221,000 | |||
Portion of agreement prior to September 30, 2005 hedge designation: | ||||
Decrease in fair value of swap agreement: | ||||
Quarter ended September 30, 2008 | $ | (50,000 | ) | |
Six months ended September 30, 2008 | (102,000 | ) | ||
Year ended March 31, 2009 | (102,000 | ) | ||
F-57
Table of Contents
Fair value measurements at reporting date using: | ||||||||||||||||
Quoted prices | ||||||||||||||||
in active | Significant | |||||||||||||||
markets for | other | Significant | ||||||||||||||
identical | observable | unobservable | ||||||||||||||
September 30, | assets | inputs | inputs | |||||||||||||
Description | 2009 | (Level 1) | (Level 2) | (Level 3) | ||||||||||||
Cash equivalents (treasury notes) | $ | 94,981,222 | $ | — | $ | 94,981,222 | $ | — | ||||||||
September 30, | March 31, | |||||||
2009 | 2009 | |||||||
Carrying Values: | ||||||||
Fixed rate debt | $ | 178,911,987 | $ | 179,334,183 | ||||
Variable rate debt | 186,447,085 | 193,076,346 | ||||||
Fair Values: | ||||||||
Fixed rate debt | $ | 154,589,000 | $ | 90,367,000 | ||||
Variable rate debt | 186,447,085 | 160,253,000 | ||||||
F-58
Table of Contents
F-59
Table of Contents
Complementary | ||||||||||||||||
Bookstore | Textbook | Services | ||||||||||||||
Division | Division | Division | Total | |||||||||||||
Quarter ended September 30, 2009: | ||||||||||||||||
External customer revenues | $ | 224,345,824 | $ | 44,615,434 | $ | 7,754,844 | $ | 276,716,102 | ||||||||
Intersegment revenues | 414,912 | 14,418,899 | 1,692,840 | 16,526,651 | ||||||||||||
Depreciation and amortization expense | 2,281,091 | 1,520,206 | 683,847 | 4,485,144 | ||||||||||||
Earnings before interest, taxes, depreciation and amortization (EBITDA) | 34,108,196 | 20,711,713 | 718,220 | 55,538,129 | ||||||||||||
Quarter ended September 30, 2008: | ||||||||||||||||
External customer revenues | $ | 225,090,388 | $ | 48,207,538 | $ | 7,634,288 | $ | 280,932,214 | ||||||||
Intersegment revenues | 428,139 | 13,846,533 | 1,681,368 | 15,956,040 | ||||||||||||
Depreciation and amortization expense | 2,191,110 | 1,523,804 | 659,150 | 4,374,064 | ||||||||||||
Earnings before interest, taxes,depreciation and amortization (EBITDA) | 32,199,480 | 20,839,508 | 414,111 | 53,453,099 | ||||||||||||
Six months ended September 30, 2009: | ||||||||||||||||
External customer revenues | $ | 269,457,313 | $ | 61,780,298 | $ | 14,242,364 | $ | 345,479,975 | ||||||||
Intersegment revenues | 757,424 | 22,738,025 | 3,178,859 | 26,674,308 | ||||||||||||
Depreciation and amortization expense | 4,630,129 | 3,040,789 | 1,360,277 | 9,031,195 | ||||||||||||
Earnings before interest, taxes, depreciation and amortization (EBITDA) | 28,608,052 | 25,871,073 | 1,112,945 | 55,592,070 | ||||||||||||
Six months ended September 30, 2008: | ||||||||||||||||
External customer revenues | $ | 271,190,081 | $ | 66,714,805 | $ | 14,231,354 | $ | 352,136,240 | ||||||||
Intersegment revenues | 799,609 | 22,368,446 | 3,520,295 | 26,688,350 | ||||||||||||
Depreciation and amortization expense | 4,327,295 | 3,041,210 | 1,311,124 | 8,679,629 | ||||||||||||
Earnings before interest, taxes, depreciation and amortization (EBITDA) | 25,767,928 | 25,823,747 | 724,280 | 52,315,955 | ||||||||||||
F-60
Table of Contents
Quarter ended September 30, | Six months ended September 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Revenues: | ||||||||||||||||
Total for reportable segments | $ | 293,242,753 | $ | 296,888,254 | $ | 372,154,283 | $ | 378,824,590 | ||||||||
Elimination of intersegment revenues | (16,526,651 | ) | (15,956,040 | ) | (26,674,308 | ) | (26,688,350 | ) | ||||||||
Consolidated total | $ | 276,716,102 | $ | 280,932,214 | $ | 345,479,975 | $ | 352,136,240 | ||||||||
Depreciation and amortization expense: | ||||||||||||||||
Total for reportable segments | $ | 4,485,144 | $ | 4,374,064 | $ | 9,031,195 | $ | 8,679,629 | ||||||||
Corporate Administration | 353,863 | 336,229 | 698,538 | 703,086 | ||||||||||||
Consolidated total | $ | 4,839,007 | $ | 4,710,293 | $ | 9,729,733 | $ | 9,382,715 | ||||||||
Income before income taxes: | ||||||||||||||||
Total EBITDA for reportable segments | $ | 55,538,129 | $ | 53,453,099 | $ | 55,592,070 | $ | 52,315,955 | ||||||||
Corporate Administration EBITDA loss (including interdivision profit elimination) | (1,796,926 | ) | (1,402,800 | ) | (7,085,792 | ) | (6,699,079 | ) | ||||||||
53,741,203 | 52,050,299 | 48,506,278 | 45,616,876 | |||||||||||||
Depreciation and amortization | (4,839,007 | ) | (4,710,293 | ) | (9,729,733 | ) | (9,382,715 | ) | ||||||||
Consolidated income from operations | 48,902,196 | 47,340,006 | 38,776,545 | 36,234,161 | ||||||||||||
Interest and other expenses, net | (9,639,076 | ) | (7,849,445 | ) | (19,338,403 | ) | (15,896,916 | ) | ||||||||
Consolidated income before income taxes | $ | 39,263,120 | $ | 39,490,561 | $ | 19,438,142 | $ | 20,337,245 | ||||||||
F-61
Table of Contents
F-62
Table of Contents
condensed consolidating balance sheet September 30, 2009
Nebraska | ||||||||||||||||
Book | Subsidiary | Consolidated | ||||||||||||||
Company, Inc. | guarantors | Eliminations | totals | |||||||||||||
Assets | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash and cash equivalents | $ | 101,833,613 | $ | 4,250,900 | $ | — | $ | 106,084,513 | ||||||||
Intercompany receivables | 9,178,815 | 48,007,630 | (57,186,445 | ) | — | |||||||||||
Receivables, net | 39,261,307 | 45,771,637 | — | 85,032,944 | ||||||||||||
Inventories | 75,544,146 | 42,427,409 | — | 117,971,555 | ||||||||||||
Deferred income taxes | 2,215,801 | 6,387,000 | — | 8,602,801 | ||||||||||||
Prepaid expenses and other assets | 2,544,029 | 532,510 | — | 3,076,539 | ||||||||||||
Total current assets | 230,577,711 | 147,377,086 | (57,186,445 | ) | 320,768,352 | |||||||||||
Property and equipment, net | 38,307,327 | 5,624,903 | — | 43,932,230 | ||||||||||||
Goodwill | 199,900,018 | 15,671,108 | — | 215,571,126 | ||||||||||||
Customer relationships, net | 4,470,147 | 78,303,433 | — | 82,773,580 | ||||||||||||
Tradename | 31,320,000 | — | — | 31,320,000 | ||||||||||||
Other identifiable intangibles, net | 5,014,175 | 1,860,572 | — | 6,874,747 | ||||||||||||
Investments in subsidiaries | 167,421,384 | — | (167,421,384 | ) | — | |||||||||||
Other assets | 6,692,055 | 1,572,993 | — | 8,265,048 | ||||||||||||
$ | 683,702,817 | $ | 250,410,095 | $ | (224,607,829 | ) | $ | 709,505,083 | ||||||||
Liabilities and stockholder’s equity | ||||||||||||||||
Current liabilities: | ||||||||||||||||
Accounts payable | $ | 88,964,161 | $ | 29,712,637 | $ | — | $ | 118,676,798 | ||||||||
Intercompany payables | 48,007,630 | 9,178,815 | (57,186,445 | ) | — | |||||||||||
Accrued employee compensation and benefits | 7,218,895 | 2,307,623 | — | 9,526,518 | ||||||||||||
Accrued interest | 709,588 | — | — | 709,588 | ||||||||||||
Accrued incentives | 11,437 | 6,665,325 | — | 6,676,762 | ||||||||||||
Accrued expenses | 4,052,647 | 1,540,817 | — | 5,593,464 | ||||||||||||
Income taxes payable | 4,414,547 | 3,969,197 | — | 8,383,744 | ||||||||||||
Deferred revenue | 3,777,545 | 6,298 | — | 3,783,843 | ||||||||||||
Current maturities of long-term debt | 51,568 | — | — | 51,568 | ||||||||||||
Current maturities of capital lease obligations | 791,246 | — | — | 791,246 | ||||||||||||
Total current liabilities | 157,999,264 | 53,380,712 | (57,186,445 | ) | 154,193,531 | |||||||||||
Long-term debt, net of current maturities | 361,658,564 | — | — | 361,658,564 | ||||||||||||
Capital lease obligations, net of current maturities | 2,857,694 | — | — | 2,857,694 | ||||||||||||
Other long-term liabilities | 5,459,820 | 360,000 | — | 5,819,820 | ||||||||||||
Deferred income taxes | 23,419,459 | 29,247,999 | — | 52,667,458 | ||||||||||||
Due to parent | 21,468,189 | — | — | 21,468,189 | ||||||||||||
Commitments | ||||||||||||||||
Stockholder’s equity | 110,839,827 | 167,421,384 | (167,421,384 | ) | 110,839,827 | |||||||||||
$ | 683,702,817 | $ | 250,410,095 | $ | (224,607,829 | ) | $ | 709,505,083 | ||||||||
F-63
Table of Contents
condensed consolidating balance sheet
March 31, 2009
Nebraska | ||||||||||||||||
Book | Subsidiary | Consolidated | ||||||||||||||
Company, Inc. | guarantors | Eliminations | totals | |||||||||||||
Assets | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash and cash equivalents | $ | 40,811,478 | $ | 3,226,990 | $ | — | $ | 44,038,468 | ||||||||
Intercompany receivables | 17,795,278 | 31,381,837 | (49,177,115 | ) | — | |||||||||||
Receivables, net | 34,406,593 | 26,895,043 | — | 61,301,636 | ||||||||||||
Inventories | 47,625,966 | 45,489,697 | — | 93,115,663 | ||||||||||||
Recoverable income taxes | 2,869,583 | — | — | 2,869,583 | ||||||||||||
Deferred income taxes | 2,350,802 | 4,231,000 | — | 6,581,802 | ||||||||||||
Prepaid expenses and other assets | 3,648,635 | 302,239 | — | 3,950,874 | ||||||||||||
Total current assets | 149,508,335 | 111,526,806 | (49,177,115 | ) | 211,858,026 | |||||||||||
Property and equipment, net | 40,057,891 | 5,580,631 | — | 45,638,522 | ||||||||||||
Goodwill | 199,900,017 | 15,536,109 | — | 215,436,126 | ||||||||||||
Customer relationships, net | 4,625,181 | 81,019,159 | — | 85,644,340 | ||||||||||||
Tradename | 31,320,000 | — | — | 31,320,000 | ||||||||||||
Other identifiable intangibles, net | 7,071,442 | 2,101,180 | — | 9,172,622 | ||||||||||||
Investment in subsidiaries | 151,290,937 | — | (151,290,937 | ) | — | |||||||||||
Other assets | 8,388,921 | 608,150 | — | 8,997,071 | ||||||||||||
$ | 592,162,724 | $ | 216,372,035 | $ | (200,468,052 | ) | $ | 608,066,707 | ||||||||
Liabilities and stockholder’s equity | ||||||||||||||||
Current liabilities: | ||||||||||||||||
Accounts payable | $ | 22,728,714 | $ | 4,136,900 | $ | — | $ | 26,865,614 | ||||||||
Intercompany payables | 31,381,837 | 17,795,278 | (49,177,115 | ) | — | |||||||||||
Accrued employee compensation and benefits | 9,705,781 | 4,074,428 | — | 13,780,209 | ||||||||||||
Accrued interest | 678,516 | — | — | 678,516 | ||||||||||||
Accrued incentives | 42,593 | 6,068,107 | — | 6,110,700 | ||||||||||||
Accrued expenses | 3,804,787 | 472,318 | — | 4,277,105 | ||||||||||||
Income taxes payable | (2,187,068 | ) | 2,187,068 | — | — | |||||||||||
Deferred revenue | 959,274 | — | — | 959,274 | ||||||||||||
Current maturities of long-term debt | 6,917,451 | — | — | 6,917,451 | ||||||||||||
Current maturities of capital lease obligations | 748,692 | — | — | 748,692 | ||||||||||||
Total current liabilities | 74,780,577 | 34,734,099 | (49,177,115 | ) | 60,337,561 | |||||||||||
Long-term debt, net of current maturities | 361,445,728 | — | — | 361,445,728 | ||||||||||||
Capital lease obligations, net of current maturities | 3,298,658 | — | — | 3,298,658 | ||||||||||||
Other long-term liabilities | 5,234,166 | 70,000 | — | 5,304,166 | ||||||||||||
Deferred income taxes | 24,036,460 | 30,276,999 | — | 54,313,459 | ||||||||||||
Due to parent commitments | 20,130,189 | — | — | 20,130,189 | ||||||||||||
Stockholder’s equity | 103,236,946 | 151,290,937 | (151,290,937 | ) | 103,236,946 | |||||||||||
$ | 592,162,724 | $ | 216,372,035 | $ | (200,468,052 | ) | $ | 608,066,707 | ||||||||
F-64
Table of Contents
condensed consolidating balance sheet
September 30, 2008
Nebraska | ||||||||||||||||
Book | Subsidiary | Consolidated | ||||||||||||||
Company, Inc. | guarantors | Eliminations | totals | |||||||||||||
Assets | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash and cash equivalents | $ | 86,794,499 | $ | 4,706,341 | $ | — | $ | 91,500,840 | ||||||||
Intercompany receivables | 6,544,714 | 23,016,028 | (29,560,742 | ) | — | |||||||||||
Receivables, net | 34,765,412 | 43,474,316 | — | 78,239,728 | ||||||||||||
Inventories | 81,224,102 | 41,246,397 | — | 122,470,499 | ||||||||||||
Deferred income taxes | 1,919,092 | 6,349,001 | — | 8,268,093 | ||||||||||||
Prepaid expenses and other assets | 2,880,709 | 399,575 | — | 3,280,284 | ||||||||||||
Total current assets | 214,128,528 | 119,191,658 | (29,560,742 | ) | 303,759,444 | |||||||||||
Property and equipment, net | 40,089,834 | 5,473,501 | — | 45,563,335 | ||||||||||||
Goodwill | 306,873,046 | 15,536,109 | — | 322,409,155 | ||||||||||||
Customer relationships, net | 4,780,215 | 83,734,885 | — | 88,515,100 | ||||||||||||
Tradename | 31,320,000 | — | — | 31,320,000 | ||||||||||||
Other identifiable intangibles, net | 8,716,040 | 2,365,798 | — | 11,081,838 | ||||||||||||
Investment in subsidiaries | 145,249,367 | — | (145,249,367 | ) | — | |||||||||||
Other assets | 5,901,302 | 679,328 | — | 6,580,630 | ||||||||||||
$ | 757,058,332 | $ | 226,981,279 | $ | (174,810,109 | ) | $ | 809,229,502 | ||||||||
Liabilities and stockholder’s equity | ||||||||||||||||
Current liabilities: | ||||||||||||||||
Accounts payable | $ | 87,170,134 | $ | 31,184,475 | $ | — | $ | 118,354,609 | ||||||||
Intercompany payables | 23,016,028 | 6,544,714 | (29,560,742 | ) | — | |||||||||||
Accrued employee compensation and benefits | 7,911,964 | 3,036,521 | — | 10,948,485 | ||||||||||||
Accrued interest | 743,224 | — | — | 743,224 | ||||||||||||
Accrued incentives | 10,473 | 6,916,634 | — | 6,927,107 | ||||||||||||
Accrued expenses | 3,590,350 | 981,857 | — | 4,572,207 | ||||||||||||
Income taxes payable | 8,157,796 | 1,565,668 | — | 9,723,464 | ||||||||||||
Deferred revenue | 2,639,161 | 2,043 | — | 2,641,204 | ||||||||||||
Current maturities of long-term debt | 2,073,070 | — | — | 2,073,070 | ||||||||||||
Current maturities of capital lease obligations | 705,565 | — | — | 705,565 | ||||||||||||
Total current liabilities | 136,017,765 | 50,231,912 | (29,560,742 | ) | 156,688,935 | |||||||||||
Long-term debt, net of current maturities | 367,326,024 | — | — | 367,326,024 | ||||||||||||
Capital lease obligations, net of current maturities | 3,716,979 | — | — | 3,716,979 | ||||||||||||
Other long-term liabilities | 4,628,322 | 70,000 | — | 4,698,322 | ||||||||||||
Deferred income taxes | 22,470,415 | 31,430,000 | — | 53,900,415 | ||||||||||||
Due to parent | 18,321,151 | — | — | 18,321,151 | ||||||||||||
Commitments | ||||||||||||||||
Stockholder’s equity | 204,577,676 | 145,249,367 | (145,249,367 | ) | 204,577,676 | |||||||||||
$ | 757,058,332 | $ | 226,981,279 | $ | (174,810,109 | ) | $ | 809,229,502 | ||||||||
F-65
Table of Contents
condensed consolidating statement of operations
for the three months ended September 30, 2009
Nebraska | ||||||||||||||||
Book | Subsidiary | Consolidated | ||||||||||||||
Company, Inc. | guarantors | Eliminations | totals | |||||||||||||
Revenues, net of returns | $ | 176,731,313 | $ | 114,634,253 | $ | (14,649,464 | ) | $ | 276,716,102 | |||||||
Costs of sales (exclusive of depreciation shown below) | 115,805,460 | 72,548,253 | (14,926,312 | ) | 173,427,401 | |||||||||||
Gross profit | 60,925,853 | 42,086,000 | 276,848 | 103,288,701 | ||||||||||||
Operating expenses (income): | ||||||||||||||||
Selling, general and administrative | 35,270,303 | 14,000,347 | 276,848 | 49,547,498 | ||||||||||||
Depreciation | 1,597,725 | 442,085 | — | 2,039,810 | ||||||||||||
Amortization | 1,260,269 | 1,538,928 | — | 2,799,197 | ||||||||||||
Intercompany administrative fee | (1,353,000 | ) | 1,353,000 | — | — | |||||||||||
Equity in earnings of subsidiaries | (15,577,884 | ) | — | 15,577,884 | — | |||||||||||
21,197,413 | 17,334,360 | 15,854,732 | 54,386,505 | |||||||||||||
Income from operations | 39,728,440 | 24,751,640 | (15,577,884 | ) | 48,902,196 | |||||||||||
Other expenses: | ||||||||||||||||
Interest expense | 9,665,109 | 864 | — | 9,665,973 | ||||||||||||
Interest income | (9,789 | ) | (17,108 | ) | — | (26,897 | ) | |||||||||
9,655,320 | (16,244 | ) | — | 9,639,076 | ||||||||||||
Income before income taxes | 30,073,120 | 24,767,884 | (15,577,884 | ) | 39,263,120 | |||||||||||
Income tax expense | 6,201,000 | 9,190,000 | — | 15,391,000 | ||||||||||||
Net income | $ | 23,872,120 | $ | 15,577,884 | $ | (15,577,884 | ) | $ | 23,872,120 | |||||||
F-66
Table of Contents
condensed consolidating statement of operations
for the three months ended September 30, 2008
Nebraska | ||||||||||||||||
Book | Subsidiary | Consolidated | ||||||||||||||
Company, Inc. | guarantors | Eliminations | totals | |||||||||||||
Revenues, net of returns | $ | 182,140,054 | $ | 112,768,173 | $ | (13,976,013 | ) | $ | 280,932,214 | |||||||
Costs of sales (exclusive of depreciation shown below) | 119,641,571 | 72,054,787 | (14,355,962 | ) | 177,340,396 | |||||||||||
Gross profit | 62,498,483 | 40,713,386 | 379,949 | 103,591,818 | ||||||||||||
Operating expenses (income): | ||||||||||||||||
Selling, general and administrative | 35,666,827 | 15,494,743 | 379,949 | 51,541,519 | ||||||||||||
Depreciation | 1,464,701 | 380,266 | — | 1,844,967 | ||||||||||||
Amortization | 1,300,039 | 1,565,287 | — | 2,865,326 | ||||||||||||
Intercompany administrative fee | (1,230,900 | ) | 1,230,900 | — | — | |||||||||||
Equity in earnings of subsidiaries | (13,945,782 | ) | — | 13,945,782 | — | |||||||||||
23,254,885 | 18,671,196 | 14,325,731 | 56,251,812 | |||||||||||||
Income from operations | 39,243,598 | 22,042,190 | (13,945,782 | ) | 47,340,006 | |||||||||||
Other expenses: | ||||||||||||||||
Interest expense | 7,979,165 | — | — | 7,979,165 | ||||||||||||
Interest income | (158,128 | ) | (21,592 | ) | — | (179,720 | ) | |||||||||
Loss on derivative financial instrument | 50,000 | — | — | 50,000 | ||||||||||||
7,871,037 | (21,592 | ) | — | 7,849,445 | ||||||||||||
Income before income taxes | 31,372,561 | 22,063,782 | (13,945,782 | ) | 39,490,561 | |||||||||||
Income tax expense | 7,678,000 | 8,118,000 | — | 15,796,000 | ||||||||||||
Net income | $ | 23,694,561 | $ | 13,945,782 | $ | (13,945,782 | ) | $ | 23,694,561 | |||||||
F-67
Table of Contents
condensed consolidating statement of operations
for the six months ended September 30, 2009
Nebraska | ||||||||||||||||
Book | Subsidiary | Consolidated | ||||||||||||||
Company, Inc. | guarantors | Eliminations | totals | |||||||||||||
Revenues, net of returns | $ | 215,303,463 | $ | 153,341,051 | $ | (23,164,539 | ) | $ | 345,479,975 | |||||||
Costs of sales (exclusive of depreciation shown below) | 140,138,337 | 97,317,772 | (23,685,024 | ) | 213,771,085 | |||||||||||
Gross profit | 75,165,126 | 56,023,279 | 520,485 | 131,708,890 | ||||||||||||
Operating expenses (income): | ||||||||||||||||
Selling, general and administrative | 58,877,539 | 23,804,588 | 520,485 | 83,202,612 | ||||||||||||
Depreciation | 3,224,033 | 869,421 | — | 4,093,454 | ||||||||||||
Amortization | 2,524,036 | 3,112,243 | — | 5,636,279 | ||||||||||||
Intercompany administrative fee | (2,706,000 | ) | 2,706,000 | — | — | |||||||||||
Equity in earnings of subsidiaries | (16,130,446 | ) | — | 16,130,446 | — | |||||||||||
45,789,162 | 30,492,252 | 16,650,931 | 92,932,345 | |||||||||||||
Income from operations | 29,375,964 | 25,531,027 | (16,130,446 | ) | 38,776,545 | |||||||||||
Other expenses: | ||||||||||||||||
Interest expense | 19,381,236 | 864 | — | 19,382,100 | ||||||||||||
Interest income | (17,414 | ) | (26,283 | ) | — | (43,697 | ) | |||||||||
19,363,822 | (25,419 | ) | — | 19,338,403 | ||||||||||||
Income before income taxes | 10,012,142 | 25,556,446 | (16,130,446 | ) | 19,438,142 | |||||||||||
Income tax expense (benefit) | (1,806,000 | ) | 9,426,000 | — | 7,620,000 | |||||||||||
Net income | $ | 11,818,142 | $ | 16,130,446 | $ | (16,130,446 | ) | $ | 11,818,142 | |||||||
F-68
Table of Contents
condensed consolidating statement of operations
for the six months ended September 30, 2008
Nebraska | ||||||||||||||||
Book | Subsidiary | Consolidated | ||||||||||||||
Company, Inc. | guarantors | Eliminations | totals | |||||||||||||
Revenues, net of returns | $ | 223,429,993 | $ | 151,459,395 | $ | (22,753,148 | ) | $ | 352,136,240 | |||||||
Costs of sales (exclusive of depreciation shown below) | 145,723,587 | 96,975,372 | (23,436,540 | ) | 219,262,419 | |||||||||||
Gross profit | 77,706,406 | 54,484,023 | 683,392 | 132,873,821 | ||||||||||||
Operating expenses (income): | ||||||||||||||||
Selling, general and administrative | 59,866,947 | 26,706,606 | 683,392 | 87,256,945 | ||||||||||||
Depreciation | 2,944,415 | 745,584 | — | 3,689,999 | ||||||||||||
Amortization | 2,636,157 | 3,056,559 | — | 5,692,716 | ||||||||||||
Intercompany administrative fee | (2,461,800 | ) | 2,461,800 | — | — | |||||||||||
Equity in earnings of subsidiaries | (13,666,066 | ) | — | 13,666,066 | — | |||||||||||
49,319,653 | 32,970,549 | 14,349,458 | 96,639,660 | |||||||||||||
Income from operations | 28,386,753 | 21,513,474 | (13,666,066 | ) | 36,234,161 | |||||||||||
Other expenses: | ||||||||||||||||
Interest expense | 15,974,636 | — | — | 15,974,636 | ||||||||||||
Interest income | (158,128 | ) | (21,592 | ) | — | (179,720 | ) | |||||||||
Loss on derivative financial instrument | 102,000 | — | — | 102,000 | ||||||||||||
15,918,508 | (21,592 | ) | — | 15,896,916 | ||||||||||||
Income before income taxes | 12,468,245 | 21,535,066 | (13,666,066 | ) | 20,337,245 | |||||||||||
Income tax expense | 266,000 | 7,869,000 | — | 8,135,000 | ||||||||||||
Net income | $ | 12,202,245 | $ | 13,666,066 | $ | (13,666,066 | ) | $ | 12,202,245 | |||||||
F-69
Table of Contents
condensed consolidating statement of cash flows
for the six months ended September 30, 2009
Nebraska | ||||||||||||||||
Book | Subsidiary | Consolidated | ||||||||||||||
Company, Inc. | guarantors | Eliminations | totals | |||||||||||||
Cash flows from operating activities | $ | 73,481,078 | $ | 3,790,149 | $ | — | $ | 77,271,227 | ||||||||
Cash flows from investing activities: | ||||||||||||||||
Purchases of property and equipment | (1,790,814 | ) | (861,140 | ) | 54,702 | (2,597,252 | ) | |||||||||
Acquisitions, net of cash acquired | (292,316 | ) | (1,998,702 | ) | — | (2,291,018 | ) | |||||||||
Proceeds from sale of property and equipment | 36,763 | 93,603 | (54,702 | ) | 75,664 | |||||||||||
Software development costs | (261,736 | ) | — | — | (261,736 | ) | ||||||||||
Net cash flows from investing activities | (2,308,103 | ) | (2,766,239 | ) | — | (5,074,342 | ) | |||||||||
Cash flows from financing activities: | ||||||||||||||||
Payment of financing costs | (202,383 | ) | — | — | (202,383 | ) | ||||||||||
Principal payments on long-term debt | (6,653,047 | ) | — | — | (6,653,047 | ) | ||||||||||
Principal payments on capital lease obligations | (398,410 | ) | — | — | (398,410 | ) | ||||||||||
Dividends paid to parent | (4,235,000 | ) | (4,235,000 | ) | ||||||||||||
Change in due to parent | 1,338,000 | — | — | 1,338,000 | ||||||||||||
Net cash flows from financing activities | (10,150,840 | ) | — | — | (10,150,840 | ) | ||||||||||
Net increase in cash and cash equivalents | 61,022,135 | 1,023,910 | — | 62,046,045 | ||||||||||||
Cash and cash equivalents, beginning of period | 40,811,478 | 3,226,990 | — | 44,038,468 | ||||||||||||
Cash and cash equivalents, end of period | $ | 101,833,613 | $ | 4,250,900 | $ | — | $ | 106,084,513 | ||||||||
F-70
Table of Contents
condensed consolidating statement of cash flows
for the six months ended September 30, 2008
Nebraska | ||||||||||||||||
Book | Subsidiary | Consolidated | ||||||||||||||
Company, Inc. | guarantors | Eliminations | totals | |||||||||||||
Cash flows from operating activities | $ | 73,739,599 | $ | 2,484,522 | $ | — | $ | 76,224,121 | ||||||||
Cash flows from investing activities: | ||||||||||||||||
Purchases of property and equipment | (3,277,884 | ) | (883,402 | ) | 31,520 | (4,129,766 | ) | |||||||||
Acquisitions, net of cash acquired | (2,745,146 | ) | (2,670,499 | ) | — | (5,415,645 | ) | |||||||||
Proceeds from sale of property and equipment | 15,735 | 37,394 | (31,520 | ) | 21,609 | |||||||||||
Software development costs | (264,436 | ) | — | — | (264,436 | ) | ||||||||||
Net cash flows from investing activities | (6,271,731 | ) | (3,516,507 | ) | — | (9,788,238 | ) | |||||||||
Cash flows from financing activities: | ||||||||||||||||
Principal payments on long-term debt | (1,034,739 | ) | — | — | (1,034,739 | ) | ||||||||||
Principal payments on capital lease obligations | (347,629 | ) | — | — | (347,629 | ) | ||||||||||
Dividends paid to parent | (4,235,000 | ) | — | — | (4,235,000 | ) | ||||||||||
Capital contributions | 4,869 | — | — | 4,869 | ||||||||||||
Change in due to parent | 1,351,000 | 1,351,000 | ||||||||||||||
Net cash flows from financing activities | (4,261,499 | ) | — | — | (4,261,499 | ) | ||||||||||
Net increase (decrease) in cash and cash equivalents | 63,206,369 | (1,031,985 | ) | — | 62,174,384 | |||||||||||
Cash and cash equivalents, beginning of period | 23,588,130 | 5,738,326 | — | 29,326,456 | ||||||||||||
Cash and cash equivalents, end of period | $ | 86,794,499 | $ | 4,706,341 | $ | — | $ | 91,500,840 | ||||||||
F-71
Table of Contents
10% Senior Secured Notes due 2011, for
$200,000,000 principal amount of
10% Senior Secured Notes due 2011,
which have been registered under the
Securities Act of 1933, as amended