Neebo, Inc. Reports Fiscal Second Quarter Financial Results

College Stores Adjusted EBITDA Increased by 33%; Significant Free Cash Flow Further Reduced Term Loan by $20 Million, Decreasing the Balance from $86 Million to $12 Million in Last 12 Months

Business Wire

LINCOLN, Neb.--(BUSINESS WIRE)--

Neebo, Inc. (the “Company”; NEEB+) today announced financial results for the fiscal second quarter ended Sept. 30, 2013. Neebo, Inc. is a holding company and the beneficial owner of Nebraska Book Company, Inc., an industry leader in solutions for the college store marketplace.

Delivering Value to Students

As the cost of education continues to soar, students and parents are seeking ways to save money, and the Company continues to implement strategies to help meet that need. One of the key ways to deliver value is Neebo’s Rent Every Book Textbook and Save program, and in the second quarter, Neebo further expanded its industry-leading rental unit penetration to 33%, as compared to industry rental unit penetration of 22%.

“Course material affordability is very important to students, and our Rent Every Textbook and Save program delivers the value they are looking for,” said Steve Clemente, President and Chief Executive Officer of Neebo, Inc. “Our College Stores results exceeded expectations this quarter in large part due to the strong increase in our rental program.”

Investment in Business Intelligence Paying Off

Over the last year, Neebo has invested extensively in building and developing its Business Intelligence team, which specializes in analyzing customer, company and market-driven data to assist in our guest offering, as well as the overall strategic direction of the Company.

“The strategies implemented over the past 12 months in College Stores are paying off,” said Jon Otterberg, Chief Financial Officer and Chief Strategy Officer of Neebo, Inc. “Our Business Intelligence team continues to identify ways to enhance our value proposition to our guests and deliver it in the most cost-effective and efficient mode possible to drive long-term growth. The execution of these strategies has generated substantial free cash flow, which has allowed us to both further reduce our outstanding debt and invest in our on-campus store growth and e-commerce strategies.”

Fiscal 2014 Financial Highlights

  • $20.0 million voluntary prepayment applied to term loan; 86% of term loan paid down in last 12 months, reducing the balance from $86 million to $12 million
  • Increased free cash flow by $19.2 million during the first six months of fiscal 2014 as compared to the prior period; Company defines free cash flow as cash from operations less investing activities
  • College Stores segment (fiscal 2014 second quarter):
    • $13.2 million decline in revenue, compared to prior year period, primarily due to lower same store sales
    • 33% increase period over period in Adjusted EBITDA** to $11.6 million, primarily driven by gross margin improvement and SG&A reductions
    • 34% gross margin, a 2% increase over prior year period
    • Further increased rental penetration to 33% of all textbook transactions during fall 2013 back-to-school period, 11% above industry penetration

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

      Three months ended  
 
September 30, September 30, Percent
2013 2012 Change
 
Total assets $ 317,917 $ 370,535 (14.2 )%
Long-term debt 124,167 161,472 (23.1 )%
 
Revenues, net of returns 167,035 186,555 (10.5 )%
Adjusted EBITDA** 26,838 29,285 (8.4 )%
Adjusted EBITDA Margin 16.1 % 15.7 %
 
Six months ended
 
September 30, September 30, Percent
2013 2012 Change
Net cash flows provided by operating activities 16,304 588 *
Net cash flows used in investing activities (1,234 ) (4,767 ) *
Net cash used in financing activities (30,121 ) (72,817 ) *
 

* Not meaningful

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

 

Conference Call

Management will hold a conference call on Monday, Nov. 18, 2013, at noon CST to report the Company’s fiscal year 2014 second quarter financial results.

To participate in the conference call, interested parties should call 800-288-8961 or 612-332-0725 (international) and dial in 10 minutes prior to the start time of the call. The participant access code is 308523.

A replay of the conference call will be available from Nov. 18, 2013, at 2:00 p.m. CST through Dec. 2, 2013, at 11:59 p.m. To access the replay, callers should dial 800-475-6701 or 320-365-3844 (international) and use access code 308523.

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

About the Company

Neebo, Inc. is the beneficial owner of Nebraska Book Company, Inc., which began in 1915 with a single college store near the University of Nebraska campus and now operates more than 210 stores, serving more than 2 million students at colleges and universities nationwide. Nebraska Book Company, Inc. rents and sells 8.2 million textbooks annually and supports more than 1,600 technology platforms and e-commerce sites at more than 2,500 stores. Additional information about Nebraska Book Company, Inc. can be found at the Company’s website: http://www.nebook.com.

+Neebo, Inc. common stock is not listed, traded or quoted on any U.S. stock exchange or the OTC markets; however, trades in Neebo, Inc. common stock are reported on the OTC Grey Market under the symbol NEEB.

Notice Regarding Forward-Looking Statements

This press release contains forward-looking statements that from time to time involve risks and uncertainties, as well as assumptions that, if they do not fully materialize or prove incorrect, could cause the Company’s business and results of operations to differ materially from those expressed or implied by such forward-looking statements. Such forward-looking statements include statements that discuss management’s beliefs and assumptions and can be identified by the use of words such as “will,” “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “intends,” “potential,” “continue” or the negative of such terms, or other comparable terminology. These forward-looking statements, which include the anticipated impact of improved free cash flow on the Company’s growth strategy and ability to execute initiatives, factors that continue to improve the Company’s working capital position, and the impact of terms and stronger cash management around receivables on the Company’s ability to execute new strategies, speak only as of the date of this press release. The Company undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent required by applicable law. Additional information regarding forward-looking statements, as well as risks and uncertainties that may affect results and could cause results to differ materially from those expressed in such forward-looking statements, is contained in the Management’s Discussion and Analysis that was posted on the Company’s website today.

Selected Financial Data

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

Consolidated Statement of Operations ($ in 000’s)

           
Three months ended Six months ended
 
Successor Successor Predecessor Non-GAAP
six months three months three months Six months
Successor Successor ended ended ended ended
September 30, September 30, September 30, September 30, June 30, September 30,
2013 2012 2013 2012 2012 2012
Revenues, net of returns $ 167,035 $ 186,555 $ 226,310 $ 186,555 $ 63,226 $ 249,781
Costs of sales   99,872     107,152     136,562     107,152     39,728     146,880  
Gross profit   67,163     79,403     89,748     79,403     23,498     102,901  
 
Operating expenses:
Selling, general, and administrative 40,562 45,477 70,214 45,477 29,089 74,566
Depreciation 1,575 1,651 3,466 1,651 1,504 3,155
Amortization   2,198     2,208     4,318     2,208     2,033     4,241  
  44,335     49,336     77,998     49,336     32,626     81,962  
Income (loss) from operations   22,828     30,067     11,750     30,067     (9,128 )   20,939  
 
Other (income) expenses:
Interest expense 11,774 10,175 27,864 10,175 8,323 18,498
Interest income   (4 )   (115 )   (5 )   (115 )   13     (102 )
  11,770     10,060     27,859     10,060     8,336     18,396  

Income (loss) before reorganization items and income taxes

11,058 20,007 (16,109 ) 20,007 (17,464 ) 2,543
Reorganization items   -     (679 )   -     (679 )   (275,466 )   (276,145 )

Income (loss) from continuing operations before income taxes

11,058 20,686 (16,109 ) 20,686 258,002 278,688
Income tax expense (benefit)   4,488     7,785     (6,341 )   7,785     -     7,785  
Income (loss) from continuing operations 6,570 12,901 (9,768 ) 12,901 258,002 270,903

Income (loss) from discontinued operations, net of tax

  104     (23 )   (501 )   (23 )   (1,715 )   (1,738 )
 
Net income (loss) $ 6,674   $ 12,878   $ (10,269 ) $ 12,878   $ 256,287   $ 269,165  
 

Net Revenues by Segment ($ in 000’s)

       
Three months ended Six months ended
   
Successor Successor Predecessor Non-GAAP
six months three months three months Six months
Successor Successor ended ended ended ended
September 30, September 30, September 30, September 30, June 30, September 30,
2013 2012 2013 2012 2012 2012
College Stores $ 119,441 $ 132,633 $ 156,468 $ 132,633 $ 39,170 $ 171,803
Textbooks 53,100 58,145 77,953 58,145 25,885 84,030
Complementary Services 5,418 7,398 10,834 7,398 4,984 12,382
Intercompany eliminations   (10,924 )   (11,621 )   (18,945 )   (11,621 )   (6,813 )   (18,434 )
Total net revenues $ 167,035   $ 186,555   $ 226,310   $ 186,555   $ 63,226   $ 249,781  
 

Gross Profit by Segment ($ in 000’s)

           
Three months ended Six months ended
 
Successor Successor Predecessor Non-GAAP
six months three months three months Six months
Successor Successor ended ended ended ended
September 30, September 30, September 30, September 30, June 30, September 30,
2013 2012 2013 2012 2012 2012
College Stores $ 40,817 $ 42,778 $ 53,433 $ 42,778 $ 14,029 $ 56,807
Textbooks 22,898 33,928 32,791 33,928 9,055 42,983
Complementary Services 2,457 3,591 5,053 3,591 2,512 6,103
Intercompany eliminations   991   (894 )   (1,529 )   (894 )   (2,098 )   (2,992 )
Total gross profit $ 67,163 $ 79,403   $ 89,748   $ 79,403   $ 23,498   $ 102,901  
 

EBITDA and Adjusted EBITDA ($ in 000’s)

           
Three months ended Six months ended
 
Successor Successor Predecessor Non-GAAP
six months three months three months Six months
Successor Successor ended ended ended ended
September 30, September 30, September 30, September 30, June 30, September 30,
2013 2012 2013 2012 2012 2012

EBITDA

Net income (loss) $ 6,674 $ 12,878 $ (10,269 ) $ 12,878 $ 256,287 $ 269,165
Interest expense, net 11,770 10,060 27,859 10,060 8,336 18,396
Provision (benefit) for income taxes 4,488 7,785 (6,341 ) 7,785 - 7,785
Depreciation 1,575 1,651 3,466 1,651 1,504 3,155
Amortization   2,198     2,208     4,318     2,208     2,033     4,241  
EBITDA   26,705     34,582     19,033     34,582     268,160     302,742  
 

Adjusted EBITDA

EBITDA 26,705 34,582 19,033 34,582 268,160 302,742
Reorganization professional fees - (679 ) - (679 ) 13,382 12,703

Gain on settlement of liabilities subject to compromise

- - - - (288,848 ) (288,848 )
Fresh start adjustments - (6,907 ) - (6,907 ) - (6,907 )
Discontinued operations (104 ) 23 501 23 1,715 1,738
Severance and voluntary costs 234 88 364 88 230 318
Site closures, settlements and other costs - - - - 533 533
Share-based compensation 53 - 124 - 8 8
Elimination of interdivisional profits - 918 - 918 593 1,511
Other miscellaneous one-time costs   (50 )   1,259     788     1,259     1,663     2,922  
Adjusted EBITDA $ 26,838   $ 29,284   $ 20,810   $ 29,284   $ (2,564 ) $ 26,720  
 

Adjusted EBITDA by Segment ($ in 000’s)

           
Three months ended Six months ended
 
Successor Successor Predecessor Non-GAAP
six months three months three months Six months
Successor Successor ended ended ended ended
September 30, September 30, September 30, September 30, June 30, September 30,
2013 2012 2013 2012 2012 2012
College Stores $ 11,554 $ 8,650 $ 7,538 $ 8,650 $ (2,615 ) $ 6,035
Textbooks 17,640 22,643 22,965 22,643 4,294 26,937
Complementary Services (42 ) 723 (226 ) 723 (102 ) 621
Corporate Administration   (2,314 )   (2,732 )   (9,467 )   (2,732 )   (4,141 )   (6,873 )
Total adjusted EBITDA $ 26,838   $ 29,284   $ 20,810   $ 29,284   $ (2,564 ) $ 26,720  
 

Non-GAAP Financial Information

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

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

However, EBITDA and Adjusted EBITDA are presented, as management believes the measures are relevant and useful information widely used by analysts, investors and other interested parties in our industry. The Company understands certain investors use them to measure the Company’s operating performance. Accordingly, management is disclosing this information to permit a more comprehensive analysis of the Company’s operating performance. EBITDA and Adjusted EBITDA financial information are reconciled to net income (loss).

Contact:
Neebo, Inc.
Media Relations:
Jen Suggitt, 515-371-5885
jsuggitt@neebo.com

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