SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
(Amendment No. 2)
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): June 4, 1999
Nebraska Book Company, Inc.
(Exact name of registrant as specified in its charter)
Kansas 333-48221 47-0549819
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
4700 South 19th Street
Lincoln, NE 68501-0529
(Address of Principal executive offices)
(402) 421-7300
(Registrant's telephone number, including area code)
1
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Effective June 4, 1999, Nebraska Book Company, Inc. (the "Company")
acquired all of the outstanding common stock of Triro, Inc., an independent
college bookstore operation owned by Dennis and Larry Rother with 17 retail
bookstores located in Texas, New Mexico, and Arizona. The purchase price was
approximately $15.1 million, which consisted of $13.2 million paid to the
former shareholders and $1.9 million for the average annual debt level. The
actual amount of debt assumed and retired at closing was approximately $3.2
million, which exceeded the average outstanding debt level of $1.9 million
due to the seasonal incurrence of debt to fund the buyback of used textbooks
at the end of the Spring semester. Offsetting the higher debt balances at
Closing was a compensating increase in net asset balances (consisting
primarily of inventory). The purchase price was determined based upon arms
length negotiations between the Company and Triro, Inc. The Company will
account for this acquisition under the purchase method of accounting.
The acquisition of Triro, Inc. was funded in part through a $10.3
million capital contribution to the Company from its parent, NBC Acquisition
Corp. NBC Acquisition Corp. raised the $10.3 million in capital through the
sale of 197,001 shares of its Class A Common Stock to certain shareholders,
including HWH Capital Partners, L.P. and members of senior management. The
remaining funding was provided through available cash funds and borrowings
under the Company's revolving credit facility.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Businesses Acquired (Pages 3-14)
Audited Financial Statements of Triro, Inc.:
Independent Auditors' Report
Balance Sheets as of March 31, 1999 and 1998
Statements of Income for the years ended
March 31, 1999 and 1998
Statements of Stockholders' Equity for the years ended
March 31, 1999 and 1998
Statements of Cash Flows for the years
ended March 31, 1999 and 1998
Notes to Financial Statements
(b) Pro Forma Financial Information (Pages 15-20)
Unaudited Pro Forma Combined Balance Sheet as of March 31, 1999
Notes to Unaudited Pro Forma Combined Balance Sheet
Unaudited Pro Forma Combined Statement of Operations for
the year ended March 31, 1999
Notes to Unaudited Pro Forma Combined Statement of Operations
(c) Exhibits
2.1 Agreement for Purchase and Sale of Stock, dated as of
May 26, 1999 between and among Nebraska Book
Company, Inc. , Dennis Rother, and Larry Rother*
- -------------------------------------------------------------------------------
* - Previously Filed
2
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INDEPENDENT AUDITORS' REPORT
Triro, Inc.
College Station, Texas
We have audited the accompanying balance sheets of Triro, Inc. (the Company) as
of March 31, 1999 and 1998, and the related statements of income, stockholders'
equity and cash flows for the years then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Triro, Inc. at March 31, 1999 and 1998, and
the results of its operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
San Antonio, Texas
May 21, 1999
(June 4, 1999 as to Note 8)
3
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TRIRO, INC.
BALANCE SHEETS
MARCH 31, 1999 AND 1998
- --------------------------------------------------------------------------------
ASSETS 1999 1998
CURRENT ASSETS:
Cash and cash equivalents $ 996,136 $ 1,175,340
Accounts receivable:
Trade 149,495 116,540
Other 2,766 57,588
Inventories 3,183,562 2,651,272
Income tax receivable 28,206 -
Prepaid expenses 149,976 142,910
Refunded lease acquisition cost - 91,342
Deferred tax asset 16,236 17,307
---------- ---------
Total current assets 4,526,377 4,252,299
---------- ---------
PROPERTY AND EQUIPMENT:
Land 27,525 27,525
Buildings 282,247 268,387
Furniture, fixtures and equipment 1,105,348 726,135
Leasehold improvements 1,098,193 656,562
Vehicles 278,012 250,208
Capital lease equipment 624,289 624,289
Construction in progress - 68,854
---------- ----------
Total 3,415,614 2,621,960
Less accumulated depreciation and amortization (1,387,608) (1,159,597)
---------- ----------
Total property and equipment, net 2,028,006 1,462,363
---------- ---------
OTHER ASSETS:
Lease acquisition cost, net of accumulated
amortization of $24,876 and $16,347 in 1999
and 1998, respectively 105,190 113,719
Cash value of officers' life insurance, net 126,513 123,084
Deposits 22,798 35,516
Deferred tax asset 18,641 18,949
---------- ----------
Total other assets 273,142 291,268
---------- ----------
TOTAL $ 6,827,525 $ 6,005,930
=========== ===========
See notes to financial statements.
4
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LIABILITIES AND STOCKHOLDERS' EQUITY 1999 1998
CURRENT LIABILITIES:
Accounts payable $ 892,018 $ 762,763
Accrued liabilities 535,032 489,940
Income tax payable - 189,657
Current portion of long-term notes payable 232,704 148,785
Current portion of capital lease obligations 131,517 122,043
---------- ----------
Total current liabilities 1,791,271 1,713,188
---------- ----------
LONG-TERM NOTES PAYABLE 647,937 354,566
LONG-TERM CAPITAL LEASE OBLIGATIONS 191,176 322,693
COMMITMENTS AND CONTINGENCIES (Note 5)
STOCKHOLDERS' EQUITY:
Common stock, $1 par value, 10,000 shares authorized,
6,000 shares issued and 5,332 shares outstanding 6,000 6,000
Paid-in capital 30,205 30,205
Retained earnings 4,362,234 3,780,576
---------- ----------
Total 4,398,439 3,816,781
Less treasury stock, 668 shares, at cost (201,298) (201,298)
---------- ---------
Total stockholders' equity 4,197,141 3,615,483
---------- ---------
TOTAL $ 6,827,525 $ 6,005,930
=========== ===========
5
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TRIRO, INC.
STATEMENTS OF INCOME
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
- -------------------------------------------------------------------------------
1999 1998
NET SALES $23,701,332 $18,250,188
COST OF GOODS SOLD 15,824,148 11,870,884
---------- ----------
GROSS PROFIT 7,877,184 6,379,304
---------- ----------
EXPENSES:
Operating 5,164,761 3,807,385
General and administrative 1,710,398 1,632,085
---------- ---------
Total 6,875,159 5,439,470
--------- ---------
INCOME FROM OPERATIONS 1,002,025 939,834
--------- ---------
OTHER INCOME (EXPENSE):
Interest expense, net (117,751) (56,999)
Other income 25,389 30,415
---------- ----------
Total (92,362) (26,584)
---------- ----------
NET INCOME BEFORE PROVISION FOR
INCOME TAXES 909,663 913,250
-------- -------
PROVISION FOR INCOME TAXES:
Current 321,294 336,382
Deferred 1,379 (15,987)
---------- ----------
Total 322,673 320,395
---------- ----------
NET INCOME $ 586,990 $ 592,855
=========== ===========
See notes to financial statements.
6
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<TABLE>
<CAPTION>
TRIRO, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
- ---------------------------------------------------------------------------------------------
Common Paid-in Retained Treasury
Stock Capital Earnings Stock Total
<S> <C> <C> <C> <C> <C>
BALANCE, April 1, 1997 $6,000 $30,205 $3,193,053 $(201,298) $3,027,960
Dividends paid - - (5,332) - (5,332)
Net income - - 592,855 - 592,855
------ ------- ---------- -------- ----------
BALANCE, March 31, 1998 6,000 30,205 3,780,576 (201,298) 3,615,483
Dividends paid - - (5,332) - (5,332)
Net income - - 586,990 - 586,990
------- ------- -------- -------- ----------
BALANCE, March 31, 1999 $6,000 $30,205 $4,362,234 $(201,298) $4,197,141
======= ======== =========== ========== ==========
</TABLE>
See notes to financial statements.
7
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TRIRO, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
- --------------------------------------------------------------------------------
1999 1998
CASH FLOWS FROM OPERATIONS:
Net income $ 586,990 $ 592,855
Adjustments to reconcile net income to
net cash provided by operations:
Depreciation and amortization 380,141 294,480
Gain on disposal of equipment (10,398) (5,066)
Change in assets and liabilities
relating to operations:
Accounts receivable 21,867 (42,546)
Inventories (532,290) (351,304)
Income tax receivable (28,206) 31,225
Prepaid expenses (7,066) (18,872)
Other assets 9,289 (20,178)
Deferred taxes 1,379 (15,987)
Accounts payable 129,255 50,261
Accrued liabilities 45,092 40,834
Income tax payable (189,657) 189,657
---------- ----------
Net cash provided by operations 406,396 745,359
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Refund of lease acquisition cost 91,342 -
Payment to acquire lease - (91,342)
Purchase of property and equipment (882,814) (303,299)
Proceeds from disposal of equipment 38,288 9,800
---------- ----------
Net cash used in investing activities (753,184) (384,841)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable and line of credit 4,752,869 2,159,345
Payments on notes payable and line of credit (4,457,910) (2,253,687)
Principal payments on capital lease obligations (122,043) (78,261)
Dividends paid (5,332) (5,332)
---------- ----------
Net cash provided by (used in) financing activities 167,584 (177,935)
---------- ----------
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (179,204) 182,583
CASH AND CASH EQUIVALENTS, beginning of year 1,175,340 992,757
---------- ----------
CASH AND CASH EQUIVALENTS, end of year $ 996,136 $ 1,175,340
========== ===========
(Continued)
8
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TRIRO, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
- --------------------------------------------------------------------------------
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
During fiscal 1999, the Company incurred notes payable of $82,331 to purchase
vehicles.
During fiscal 1998, the Company incurred notes payable of $19,105 to purchase a
vehicle and entered into capital lease obligations for computer equipment of
$234,078.
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for interest and income taxes was as follows:
1999 1998
Interest $ 161,353 $ 102,569
Income taxes 539,157 112,500
See notes to financial statements. (Concluded)
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TRIRO, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
- --------------------------------------------------------------------------------
1. NATURE OF OPERATIONS
Triro, Inc. (the Company) was incorporated December 8, 1977 under the laws
of the State of Texas. The Company operates bookstores in Austin, College
Station, Houston, San Marcos, Stephenville, and Waco, Texas; Tucson and
Tempe, Arizona; and Albuquerque, New Mexico. The majority of the Company's
revenues are from sales of college textbooks and apparel.
The primary shareholders of the Company are also the primary shareholders
and partners of Southgate Center, TIG Investment Group, Inc. and Rothco
Investors Ltd., and own a 50% interest in College Park Center, Inc., all of
which lease property to the Company.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash Equivalents - The Company considers all highly liquid investments with
an original maturity of less than three months to be cash equivalents.
Inventories - Inventories are valued at the lower of average cost or
market, using the retail inventory method.
Property and Equipment - Property and equipment is stated at cost.
Depreciation and amortization is computed using the straight-line method
over the following estimated useful lives:
Estimated Range of
Useful Lives (Years)
Building 10 to 30
Furniture, fixtures and equipment 5 to 7
Leasehold improvements Lesser of 10 years
or lease life
Vehicles 5
Capital lease equipment 5
Income Taxes - Deferred tax assets and liabilities are recognized for
future tax consequences attributable to differences between financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled.
The effect on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that includes the enactment date.
Revenue Recognition - Revenue from sales of the Company's products is
recognized at the time of sale.
Advertising Costs- Advertising costs are expensed as incurred and were
$246,000 and $181,000 for the years ended March 31, 1999 and 1998,
respectively.
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
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3. LEASE ACQUISITION COST
During fiscal 1997, the Company acquired from a competitor a bookstore in
Austin, Texas and was assigned the rights to a store lease which was valued
at $130,066. This cost is being amortized over the term of the lease.
During fiscal 1998, the Company paid $91,342 to acquire a lease for a
potential bookstore site. In April 1998, the original holder of the lease
exercised its option to reacquire the lease in exchange for the return of
the purchase price plus a premium of $21,158.
<TABLE>
<CAPTION>
4. LONG-TERM NOTES PAYABLE AND LINE OF CREDIT
Long-term notes payable consist of the following at March 31:
1999 1998
<S> <C> <C>
Note payable to Bank of America, payable in monthly
installments of $10,350 including interest at 8.75% with
balance due July 13, 2003, collateralized by substantially
all assets of the Company $442,974 $ -
Note payable to Bank of America, payable in monthly installments
of $4,861 including interest at 7.75% with balance due March 5,
2000, collateralized by substantially all assets of the Company 53,473 116,667
Note payable to individual, payable in monthly installments of
$1,720 including interest at 10% with balance due August 1, 2000,
collateralized by certain property 95,495 106,007
Notes payable to Larry and Dennis Rother (primary shareholders of
the Company), interest payable semiannually at 11% with principal
balance due June 20, 2000 100,000 100,000
Note payable to Howard Rother, former shareholder and brother of
Larry and Dennis Rother, payable in monthly installments of
$1,902 including interest at 10%, collateralized by 668 shares
of treasury stock and certain portions of individual
shareholders' stock 67,179 82,449
Notes payable to Bank of America, payable in monthly installments
totaling $2,971 including interest at rates of 7.5% to 9% with
maturity dates from October 1999 to February 2001,
collateralized by certain vehicles 26,730 65,372
Note payable to financing company, payable in monthly installments
of $6,482 including interest at rates of 8.25% and 8.5% with
maturity dates from June 1999 to December 2000 29,482 -
Note payable to financing company, payable in monthly installments
of $2,061 including interest at rates of 1.9% to 8.25%
with maturity dates from July 2001 to November 2002 65,308 -
Note payable to financing company, payable in monthly installments
of $6,594 including interest at rates of 7.5% to 8.75% with
maturity dates from July 1998 to December 1998 - 32,856
-------- -------
Total 880,641 503,351
Less current portion 232,704 148,785
-------- -------
Total long-term notes payable $647,937 $354,566
========= ========
</TABLE>
11
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Scheduled principal payments on the notes are:
Year ending
March 31,
2000 $ 232,704
2001 327,872
2002 139,541
2003 132,155
2004 48,369
---------
Total $ 880,641
=========
The Company also has a line of credit arrangement with Bank of America
(BofA) under which there is a maximum line of credit available of
$2,500,000. The line is secured by personal guarantees of the shareholders
with interest on outstanding advances payable monthly at prime plus 0.25%
(8.0% at March 31, 1999). The agreement expires on July 30, 1999. No
borrowings were outstanding under the line of credit arrangement at March
31, 1999 or 1998.
A BofA note agreement contains restrictive covenants including the
maintenance of debt-to-equity and current ratios, and limitations on the
payment of officers' salaries and other distributions and limits total
outstanding advances to the lesser of 50% of inventory or the total
commitment of $2,500,000. The Company was in compliance with all covenants
as of March 31, 1999 and 1998.
Substantially all of the Company's assets are pledged as collateral to BofA
for the notes payable and line of credit arrangement described above.
5. LEASE COMMITMENTS
Operating Leases - The Company leases store and warehouse facilities and
certain office equipment under non-cancelable operating leases with initial
terms ranging from one to forty years with options to renew. Several of
these leases contain provisions relating to additional payments based on a
percentage of sales if certain minimum sales are obtained (contingent
rentals). Contingent rent expense under these leases was $173,569 and
$131,541 in fiscal 1999 and 1998, respectively.
Total rent expense under operating leases was $1,077,362 and $836,780 for
the years ended March 31, 1999 and 1998, with $404,500 and $361,470 paid to
related parties, respectively. At March 31, 1999 and 1998, the Company had
prepaid rent of $26,332 and $19,809, respectively, to a related party.
The Company subleases space in certain stores and recognized sublease
income of $83,866 and $79,338 during fiscal 1999 and 1998, respectively.
The total of minimum rentals to be received in the future under
noncancelable subleases as of March 31, 1999 is $327,332.
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The future minimum lease commitments under all non-cancelable operating
lease agreements as of March 31, 1999 are:
Year ending Related
March 31, Parties Others Total
2000 $ 315,984 $ 667,070 $ 983,054
2001 254,544 620,615 875,159
2002 242,384 501,004 743,388
2003 210,062 418,096 628,158
2004 198,864 194,391 393,255
Thereafter 427,904 2,122,080 2,549,984
---------- ---------- ----------
Total minimum lease payments $1,649,742 $4,523,256 $6,172,998
========== ========== ==========
Capital Leases - The Company leases certain computer equipment under
capital leases. At March 31, 1999, equipment in the amount of $298,995, net
of accumulated amortization of $325,294, was included in property and
equipment. Future minimum lease payments under these leases at March 31,
1999 are:
Year ending
March 31,
2000 $150,629
2001 82,641
2002 75,511
2003 52,560
2004 59
--------
361,400
Less imputed interest (38,707)
--------
Total $322,693
========
6. INCOME TAXES
The Company's effective tax rate differs from the federal statutory rate of
34% primarily due to meals and entertainment exclusions, non-deductible
payments made for officers' life insurance and the effect of state income
taxes.
13
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Deferred income taxes and benefits are provided for differences between
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Temporary differences resulting in net deferred
tax assets are as follows at March 31:
1999 1998
Current Deferred Tax Asset:
Inventory valuation $16,236 $17,307
======= =======
Noncurrent Deferred Tax Asset:
Depreciable assets $18,641 $18,949
======= =======
7. PROFIT SHARING PLAN
The Company maintains a non-contributory profit sharing plan covering all
eligible employees. Employees are eligible to participate when they have
completed one year of service with a minimum of 1,000 hours, and are at
least 21 years old. Effective April 1, 1997, the Plan was amended to allow
employee contributions. Matching contributions made by the Company are
determined by the Board of Directors annually. For fiscal year 1999 the
Company elected to match 50% of each participant's contribution up to 6% of
a participant's eligible salary. The Company's contributions to the Plan
were $85,458 and $78,563 for fiscal 1999 and 1998, respectively.
8. SUBSEQUENT EVENT
Effective June 4, 1999, the shareholders of the Company sold all the
outstanding stock of the Company to Nebraska Book Company, Inc.
* * * * * * *
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UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The unaudited pro forma combined balance sheet and statement of
operations of the Company have been prepared to give effect to the
acquisition of all of the outstanding shares of common stock of Triro, Inc.
and a $10.3 million capital contribution from NBC to assist in financing
such acquisition. At closing, the Company paid the former shareholders of
Triro, Inc. $13.2 million and retired Triro, Inc.'s long-term indebtedness
(excluding capital lease obligations).
The unaudited pro forma combined balance sheet and statement of
operations have been derived from, and should be read in conjunction with,
the historical financial statements and related notes of the Company and
Triro, Inc. The unaudited pro forma combined balance sheet assumes that the
acquisition of Triro, Inc. and capital contribution from NBC occurred as of
March 31, 1999. The unaudited pro forma combined statement of operations
assumes that all such transactions occurred on April 1, 1998.
The unaudited pro forma combined statement of operations is not
necessarily indicative of what the actual results of operations would have
been had the transactions occurred on April 1, 1998, nor do they purport to
indicate the results of future operations.
15
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<TABLE>
<CAPTION>
NEBRASKA BOOK COMPANY, INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
MARCH 31, 1999
- ------------------------------------------------------------------------------------------------------------------
Nebraska
Book Pro Forma
Company, Inc. Triro, Inc. Adjustments Pro Forma
-------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 4,059,660 $ 996,136 $ - (I) $ 5,055,796
Receivables 20,838,546 152,261 (4,855)(A) 20,985,952
Inventories 49,878,561 3,183,562 - 53,062,123
Recoverable income tax 4,902 28,206 - 33,108
Deferred income tax benefit 1,468,156 16,236 - 1,484,392
Prepaid expenses and other assets 376,748 149,976 - 526,724
------------ ----------- ----------- ------------
Total current assets 76,626,573 4,526,377 (4,855) 81,148,095
PROPERTY AND EQUIPMENT 31,212,534 3,415,614 (1,439,208)(B) 33,188,940
Less accumulated depreciation (8,024,049) (1,387,608) 1,387,608 (B) (8,024,049)
------------ ----------- ----------- ------------
23,188,485 2,028,006 (51,600) 25,164,891
GOODWILL AND OTHER INTANGIBLES, net of amortization 35,562,090 - 9,087,624 (C) 44,649,714
OTHER ASSETS 4,313,208 273,142 (126,513)(D) 4,459,837
------------ ----------- ----------- ------------
$139,690,356 $ 6,827,525 $ 8,904,656 $155,422,537
============ =========== =========== ============
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 9,200,870 $ 984,542 $ 60,997 (E) $ 10,246,409
Accrued employee compensation and benefits 3,825,893 406,999 8,613 (E) 4,241,505
Accrued interest 1,426,509 355 - 1,426,864
Accrued expenses 681,725 35,154 - 716,879
Deferred revenue 376,556 - - 376,556
Current maturities of long-term debt 5,644,838 232,704 (2,798,129)(F) 3,079,413
Current maturities of capital lease obligations - 131,517 - 131,517
Revolving credit facility - - 3,576,725 (G) 3,576,725
------------ ----------- ----------- ------------
Total current liabilities 21,156,391 1,791,271 848,206 23,795,868
LONG-TERM DEBT, net of current maturities 163,612,489 647,937 1,917,488 (F) 166,177,914
CAPITAL LEASE OBLIGATIONS, net of current maturities - 191,176 - 191,176
OTHER LONG-TERM LIABILITIES 191,074 - - 191,074
DUE TO PARENT 2,277,266 - - 2,277,266
STOCKHOLDER'S EQUITY (DEFICIT):
Common stock, authorized 50,000
shares of $1.00 par value;
issued and outstanding 100 shares 100 6,000 (6,000)(H) 100
Additional paid-in capital 30,904,931 30,205 10,305,898 (H) 41,241,034
Retained earnings (deficit) (78,451,895) 4,362,234 (4,362,234)(H) (78,451,895)
------------ ----------- ----------- ------------
(47,546,864) 4,398,439 5,937,664 (37,210,761)
Less: Treasury stock - (201,298) 201,298 (H) -
------------ ----------- ----------- -------------
Total stockholder's equity (deficit) (47,546,864) 4,197,141 6,138,962 (37,210,761)
------------ ----------- ----------- ------------
$ 139,690,356 $ 6,827,525 $ 8,904,656 $155,422,537
============= =========== =========== ============
See notes to unaudited pro forma combined balance sheet.
</TABLE>
16
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET
(A) Adjustment to eliminate the business activities occurring between the
Company's wholesale operations and Triro, Inc.'s college bookstores.
(B) Adjustment to record the basis in Triro Inc.'s property and equipment
net of accumulated depreciation and adjust for automobiles sold to the
former shareholders of Triro, Inc.
Property and Equipment:
Triro, Inc. accumulated depreciation $ (1,368,070)
Historical cost of shareholder automobiles
(net carrying value of $51,600) (71,138)
------------
$ (1,439,208)
============
Accumulated Depreciation:
Net remaining accumulated depreciation against
property and equipment $ 1,368,070
Accumulated depreciation on shareholder
automobiles 19,538
------------
$ 1,387,608
============
(C) Adjustment to the net assets of Triro, Inc. to reflect fair values under
purchase accounting.
Purchase price of Triro, Inc. $13,200,000
Triro, Inc. net assets at March 31, 1999 $ 4,197,141
Additional liabilities incurred as a
result of acquisition (74,465)
Difference between net carrying value
and sales price of automobiles sold to
former Triro, Inc. shareholders (10,300) 4,112,376
--------- ---------
Exess of purchase price over net
assets acquired $ 9,087,624
===========
(D) Adjustment to reflect transfer of interest in split dollar life
insurance policies to former Triro, Inc. shareholders.
(E) Adjustment to eliminate the business activities occurring between the
Company's wholesale operations and Triro, Inc.'s college bookstores and
record additional liabilities incurred as a result of the acquisition.
Elimination of intercompany payables $ (4,855)
Additional payables incurred as a
result of acquisition 65,852
---------
$ 60,997
=========
Additional accrued expenses incurred as
a result of acquisition $ 8,613
=========
(F) Adjustment to reflect retirement of Triro, Inc. indebtedness and
reclassify current maturities of long-term debt attributable to the
excess cash flow requirement under the Company's Senior Credit Facility.
The excess cash flow payment requirement at March 31, 1999 would have
been eliminated when including the impact of the acquisition in the
original calculation.
Retire current maturities of
Triro, Inc. debt $ (232,704)
Reclassify excess cash
flow payment as long-term (2,565,425)
-----------
$(2,798,129)
===========
Retire Triro, Inc. debt, excluding
current maturities $ (647,937)
Reclassify excess cash flow
payment as long-term 2,565,425
-----------
$ 1,917,488
===========
17
<PAGE>
(G) Adjustment to record additional borrowings under the revolving
credit facility which, in conjunction with the capital contribution
from NBC, were utilized to fund the acquisition. Such borrowings are
comprised of the following components:
Cash requirements:
Purchase price of Triro, Inc. $ 13,200,000
Payoff of long-term indebtedness 880,641
Cash proceeds:
Proceeds from transfer of split dollar
life insurance policies to
former Triro, Inc. shareholders (126,513)
Proceeds from sale of automobiles
to former Triro, Inc. shareholders (41,300)
------------
Net cash requirements 13,912,828
Proceeds from NBC capital contribution (10,336,103)
------------
Additional borrowings under revolving
credit facility $ 3,576,725
============
(H) Adjustment to eliminate Triro, Inc. equity and record $10,336,103
capital contribution from NBC.
(I) Although the net impact on cash and cash equivalents at the balance
sheet date was zero, the following inflows and outflows of cash
occurred as a result of the acquisition:
Cash Inflows:
Cash received from capital contribution $10,336,103
Cash received from additional borrowings
under revolving credit facility 3,576,725
Cash received from transfer of split
dollar life insurance policies 126,513
Cash received from sale of automobiles 41,300
Cash Outflows:
Cash paid to former shareholders of
Triro, Inc. (13,200,000)
Cash paid to retire long-term indebtness (880,641)
-----------
$ -
===========
18
<PAGE>
<TABLE>
<CAPTION>
NEBRASKA BOOK COMPANY, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED MARCH 31, 1999
- --------------------------------------------------------------------------------------------------------------------------
Nebraska
Book Pro Forma
Company, Inc. Triro, Inc. Adjustments Pro Forma
-------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUES, net of returns $217,516,312 $23,701,332 $ (97,357)(A) $241,120,287
COSTS OF SALES 137,709,320 15,824,148 (97,357)(A) 153,436,111
------------ ----------- ----------- ------------
Gross profit 79,806,992 7,877,184 - 87,684,176
OPERATING EXPENSES:
Selling, general and administrative 51,546,776 6,495,018 (703,809)(B) 57,337,985
Depreciation 2,392,701 371,612 (14,228)(C) 2,750,085
Amortization 6,148,971 8,529 3,029,208 (D) 9,186,708
------------ ----------- ----------- ------------
60,088,448 6,875,159 2,311,171 69,274,778
------------ ----------- ----------- ------------
INCOME FROM OPERATIONS 19,718,544 1,002,025 (2,311,171) 18,409,398
OTHER EXPENSES (INCOME):
Interest expense 17,508,601 160,723 73,862 (E) 17,743,186
Interest income (351,231) (42,972) 64,381 (F) (329,822)
Other income (1,099,766) (25,389) - (1,125,155)
------------ ----------- ----------- ------------
16,057,604 92,362 138,243 16,288,209
------------ ----------- ----------- ------------
INCOME BEFORE INCOME TAXES 3,660,940 909,663 (2,449,414) 2,121,189
INCOME TAX EXPENSE 2,603,657 322,673 220,321 (G) 3,146,651
------------ ----------- ----------- ------------
NET INCOME (LOSS) $ 1,057,283 $ 586,990 $(2,669,735) $ (1,025,462)
============ =========== =========== ============
See notes to unaudited pro forma combined statement of operations.
</TABLE>
19
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
(A) Adjustment to eliminate the business activities occurring between the
Company's wholesale operations and Triro, Inc.'s college bookstores.
(B) Adjustment to record a senior management bonus accrual and reflect
saving the salary and benefit costs of the former Triro, Inc.
shareholders who were no longer employed following the acquisition.
Triro, Inc.'s EBITDA contribution would have been sufficient to trigger
bonuses under the NBC senior management bonus plan, which is based upon
EBITDA levels at year-end.
Senior management bonus accrual $ 178,090
Salaries/benefits paid to former
Triro, Inc. shareholders (881,899)
-----------
$(703,809)
===========
(C) Adjustment to remove depreciation on the automobiles sold to the former
shareholders of Triro, Inc.
(D) Adjustment to record amortization on the excess of purchase price over
net assets acquired utilizing a three-year amortization period.
(E) Adjustment to record incremental interest costs associated with the
retirement of Triro, Inc. indebtedness and utilization of the Company's
revolving credit facility to finance a portion of the acquisition.
Incremental interest expense under the revolving credit facility was
calculated utilizing a 9.6% interest rate (average interest rate under
the revolving credit facility for the year ended March 31, 1999) and
assuming that the Company utilized the revolving credit facility
approximately 60% of the year.
Triro, Inc. capital lease obligation
interest expense $ 28,566
Triro, Inc. total interest expense (160,723)
---------
Reduction resulting from debt retirement (132,157)
Additional revolving credit facility
interest expense 206,019
--------
$ 73,862
========
(F) Adjustment to reduce interest income as a result of cash utilized to
repay the additional revolving credit facility indebtedness resulting
from financing the acquisition. The reduction in interest income was
calculated utilizing a 4.5% interest rate (average interest rate earned
on the Company's short-term investment account for the year ended March
31, 1999) and assuming that the Company was out of the revolving credit
facility approximately 40% of the year.
(G) Adjustment to reflect the effect of pro forma adjustments, excluding
amortization, on taxable income at the Company's statutory tax rate of
38%. Amortization of the excess of purchase price over net assets
acquired is excluded as such amortization is not deductible for tax
purposes.
20
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized in the City of Lincoln, Nebraska, on
December 27, 1999.
NEBRASKA BOOK COMPANY, INC.
/s/ Mark W. Oppegard
-----------------------------------------------
Mark W. Oppegard
President, Chief Executive Officer and Director
/s/ Alan G. Siemek
-----------------------------------------------
Alan G. Siemek
Treasurer, Chief Financial Officer and Assistant Secretary
21
