UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)


þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended March 31, ~~2009~~2010


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission File Number 333-48221

Nebraska Book Company, Inc.

(Exact name of registrant as specified in our charter)

Kansas (State or other jurisdiction of incorporation or organization) 47-0549819 (I.R.S. Employer Identification No.)


Kansas		47-0549819
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

4700 South 19^th Street
Lincoln, NE 68501-0529
(Address of principal executive offices)

(402) 421-7300
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes þ No o

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes o No þo (NOTE: Nebraska Book Company, Inc. is a voluntary filer and is not subject to the filing requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934. Although not subject to these filing requirements, Nebraska Book Company, Inc. has filed all reports required under Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months.)

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). o Yes ~~o No~~ o No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o Accelerated filer o Non-accelerated filer þ Smaller reporting company o (do not check if a smaller reporting company) ~~Smaller reporting company o~~

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

Market value of the registrant’s voting stock held by non-affiliates of the registrant — Not applicable as registrant’s stock is not publicly traded.

There were 100 shares of common stock outstanding as of June 25, ~~2009~~2010.

DOCUMENTS INCORPORATED BY REFERENCE: None

Total Number of Pages: ~~111~~ 105

Exhibit Index: Page ~~104~~ 101

TABLE OF CONTENTS

PART I:
Item 1 Business			3
Item 1A Risk Factors			13
Item 2 Properties			1718
Item 3 Legal Proceedings			1718
Item 4 Submission of Matters to a Vote of Security Holders			17
Item 4 (Reserved and Removed)			18
PART II:
Item 5 Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities			18
Item 6 Selected Financial Data			1819
Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations			2122
Item 7A Quantitative and Qualitative Disclosures about Market Risk			3839
Item 8 Financial Statements and Supplementary Data			4041
Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure			7980
Item 9A Controls and Procedures			7980
Item 9B Other Information			7980
PART III:
Item 10 Directors, Executive Officers, and Corporate Governance			80
Item 10 Directors, Executive Officers and Corporate Governance			81
Item 11 Executive Compensation			8283
Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters			9092
Item 13 Certain Relationships and Related Transactions, and Director Independence			9193
Item 14 Principal Accountant Fees and Services			9293
PART IV:
Item 15 Exhibits and Financial Statement Schedules			93
Item 15 Exhibits and Financial Statement Schedule			94
Signatures			~~102~~99
Supplemental Information to be Furnished			~~102~~99
Financial Statement Schedule II — Valuation and Qualifying Accounts			~~103~~100
Exhibit Index			~~104~~101
Exhibit 4.7
Exhibit 10.19
Exhibit 10.18
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2

PART I.

ITEM 1. BUSINESS.

References in this Annual Report on Form 10-K to the “Company” refer to Nebraska Book Company, Inc., to “NBC” refer to our parent company, NBC Acquisition Corp., and to “we,” “our,” “ours,” and “us” refer collectively to the Company and its subsidiaries, except where otherwise indicated and except where the context requires otherwise.

The Company is athe sole wholly-owned subsidiary of NBC. NBC does not conduct significant ~~activities~~ activities apart from its investment in the Company. Effective July 1, 2002, our distance learning ~~division~~ division was separately incorporated under the laws of the State of Delaware as Specialty Books, Inc., a wholly-owned subsidiary of ~~ours~~the Company (“Specialty Books”). Effective January 1, 2005, our ~~textbook~~ textbook division was separately ~~incorporated~~formed under the laws of the State of Delaware as NBC Textbooks LLC, a wholly-owned subsidiary of ~~ours~~the Company (“Textbook Division”). On May 1, 2006, wethe Company added another wholly-owned subsidiary through the acquisition of all of the outstanding stock of ~~College~~ ~~Bookstores~~College Book Stores of America, Inc. (“CBA”), an entity separately ~~incorporated~~formed under the laws of the ~~State~~ State of Illinois. On April 24, 2007, wethe Company established Net Textstore LLC, a wholly-owned subsidiary of ours which was separately ~~incorporated~~formed under the laws of the State of Delaware. Effective ~~January~~ January 26, 2009, wethe Company established Campus Authentic LLC, a wholly-owned subsidiary of ours which was separately incorporated under the laws of the State of Delaware.

On March 4, 2004, Weston Presidio (Weston Presidio Capital III, L.P., Weston Presidio Capital IV, L.P., WPC Entrepreneur Fund, L.P., and WPC Entrepreneur Fund II, L.P.) gained a controlling interest in NBC, and hence in us, through (i) the formation of two new corporations, NBC Holdings Corp. and New NBC Acquisition Corp.; (ii) a $28.2 million equity investment by Weston Presidio in NBC Holdings Corp., funds for which were ultimately paid to NBC in the form of a capital contribution; (iii) Weston Presidio’s purchase of 36,455 shares of NBC’s common stock directly from its holders; (iv) the cancellation of 870,285 shares of NBC’s common stock upon payment by NBC of merger consideration of $180.4 million to the shareholders of record for such shares; (v) the exchange of 397,711 shares of NBC’s common stock for 512,799 shares of New NBC Acquisition Corp. capital stock in the merger of the two entities with NBC as the surviving entity; and (vi) the exchange of 512,799 shares of NBC’s common stock by Weston Presidio and current and former members of management for a like number of shares of NBC Holdings Corp. capital stock. Payment of the $180.4 million of merger consideration was funded through proceeds from the $28.2 million capital contribution, available cash, and proceeds from $405.0 million in new debt financing, of which $261.0 million was used by NBC and ~~the~~us ~~Company~~ to retire certain debt instruments outstanding at March 4, 2004 or to place funds in escrow for untendered debt instruments called for redemption on March 4, 2004 and redeemed on April 3, 2004. We declared and paid dividends to NBC of $184.3 million to help finance this transaction. Throughout this Annual Report, we generally refer to all of the steps comprising this transaction as the “March 4, 2004 Transaction.”

On April 27, 2004, we filed a Registration Statement on Form S-4 with the Securities and Exchange Commission (the “SEC”) for purposes of registering debt securities to be issued in exchange for the Senior Subordinated Notes arising out of the March 4, 2004 Transaction. The ~~Securities and~~SEC ~~Exchange Commission~~ declared such Registration Statement effective on May 7, 2004. All notes were tendered in the offer to exchange ~~that~~which was completed on June 8, 2004.

On January 8, 2010 we filed a Registration Statement on Form S-4 with the SEC for purposes of registering debt securities to be issued in exchange for the Senior Secured Notes arising out of the Refinancing. The SEC declared the Registration Statement effective on February 8, 2010. All notes were tendered in the offer to exchange that expired on March 15, 2010.

General

AsWe sell or rent a variety of ~~March 31~~new and used textbooks and sell general merchandise, ~~2009~~such as apparel, wegeneral ~~operated~~books, ~~277~~sundries and gift items, through our nationwide chain of bookstores on or adjacent to college campuses. ~~through which~~We wealso ~~sell~~engage ain ~~variety~~these activities on the internet through hundreds of ~~new~~websites ~~and~~operated ~~used~~by ~~textbooks~~us ~~and~~as ~~general~~well ~~merchandise~~as numerous third-party websites. InWe ~~addition,~~believe we are also one of of the largest wholesale distributors of used college textbooks in North America, offering over ~~111~~105,000 textbook titles and selling ~~approximately~~over 6.73 million books annually, primarily to ~~campuses~~bookstores serving campuses located in the United States. We are also a provider of distance education materials to students in nontraditional courses, which include correspondence and corporate education courses. Furthermore, we provide the college bookstore industry with a variety of services including proprietary information and e-commerce systems, ~~buying~~in-store promotions, buying programs, and consulting services. With origins dating to 1915 as a single bookstore operation, we have built a consistent reputation for excellence in ~~order~~ order fulfillment, shipping performance and customer service.

We entered the wholesale used textbook market following World War II, when the supply of new textbooks could not meet the demand created by the return of ex-GI students. InWe ~~1964, we~~ became a national, rather than a regional, wholesaler of used textbooks as a result of our purchase of The ~~College~~ College Book Company of California. During the 1970’s, we continued our focus on the wholesale business. However, realizing the synergies that exist between wholesale operations and college ~~bookstore~~ bookstore operations, in the 1980’s, we expanded our efforts in the college bookstore market to ~~primarily~~ primarily operate bookstores on or near larger campuses, typically where the institution-owned ~~college~~ college bookstore was contract-managed by a competitor or where we did not have a significant ~~wholesale~~ wholesale presence. In the last several fiscal years, we have revised our college bookstore strategy to expand our efforts in the contract-management of institutional bookstores. Today, we service the college bookstore industry through our Bookstore, Textbook, and Complementary Services Divisions.

Bookstore Division. College bookstores are a primary outlet for sales and rental of new and ~~used~~ used textbooks to students. InWe ~~addition,~~also we sell a variety of other merchandise including apparel, ~~general~~ general books, sundries, and gift items. In addition to in-store sales, we sell textbooks and other merchandise on the internet through our own bookstores’ websites as well as numerous third-party websites. As of March 31, ~~2009~~2010, we operated ~~277~~280 college bookstores on or adjacent to college campuses. Of these ~~277~~280 bookstores, ~~147~~146 were leased from the educational institution that they served (also referred to as contract-managed) and ~~130~~134 were owned or leased ~~off~~ off-campus bookstores. On May 1, 2006, we acquired 101 college bookstore locations, 98 of which were contract-managed, through the acquisition of all of the outstanding stock of CBA. CBA began ~~providing~~ providing contract-management services to small to medium-sized colleges and universities nationwide in 1984.

Our college bookstores are located at college campuses of all sizes, including some of the nation’s largest campuses, such as: Miami-Dade College; Arizona State University; Ohio State University; University of Florida; Michigan State University; Texas A&M University; University of Central Florida; Pennsylvania State University; University of Michigan; Florida State University; and University of Arizona. In addition to generating profits, our Bookstore Division provides an exclusive source of used textbooks for sale across our wholesale distribution network.

Textbook Division. We believe we are one of the largest wholesale distributors of used college ~~textbooks~~ textbooks in North America. Our Textbook Division consists primarily of selling used textbooks to ~~college~~ college bookstores and on the internet through third-party websites, buying them back from students or college bookstores at the end of each school semester and then reselling them to college bookstores and on the internet. We purchase used textbooks from and resell them to ~~college~~ college bookstores at college campuses of all sizes, including many of the nation’s largest campuses, such as: University of Virginia; Oregon State University; University of Texas; University of Illinois; University of Washington; University of Southern California; and Long Beach State University. Historically, ~~Textbook~~because the demand for used textbooks has consistently outpaced the supply, Textbook Division sales have been determined primarily by the amount of used textbooks that we could purchase. ~~This occurs because the demand for used textbooks has consistently outpaced supply.~~ Our strong relationships with the management of college bookstores nationwide have provided important access to valuable market information regarding the campus-by-campus supply and demand of textbooks, as well as an ability to procure large quantities of a wide variety of textbooks. We provide an internally-developed Buyer’s Guide to our Textbook Division customers. This guide lists details such as author, new copy retail price, and our repurchase price for approximately ~~over~~ 52,000 textbook titles.

Complementary Services Division. With our acquisition of Specialty Books in May 1997, we entered the distance education market, which consists of providing education materials to students in private high schools, nontraditional college and other courses (such as correspondence courses, continuing and corporate education courses and courses offered through electronic media such as the internet).

Other services offered to college bookstores include the sale of computer hardware and software, such as our turnkey bookstore management software that incorporates point of sale, inventory control and accounting modules, and related maintenance contracts. We have installed our proprietary total store management system at over 940 college bookstore locations, and we have an installed base of over 220 college bookstore locations for our textbook management control systems. In total, including our own bookstores, almost 1,200 college bookstore locations use our bookstore management software products.

~~Complementary~~On ~~Services~~July 1, ~~Division.~~2003, ~~With~~we ~~our~~acquired ~~acquisition~~all of ~~Specialty~~the ~~Books~~outstanding inshares ~~May 1997,~~of ~~we entered~~common ~~the~~stock ~~distance~~of TheCampusHub.com, ~~education~~Inc. ~~market~~(“CampusHub”), ~~which~~an ~~consists~~entity ofaffiliated ~~providing~~with ~~education~~us ~~materials~~through tocommon ~~students~~ownership. inCampusHub ~~private~~is ~~high~~no ~~schools,~~longer ~~nontraditional~~separately ~~college~~incorporated and ~~other~~is ~~courses~~instead ~~(such~~accounted for as ~~correspondence~~a ~~courses,~~division within ~~continuing~~our ~~and~~Complementary ~~corporate~~Services ~~education~~Division. ~~courses~~CampusHub ~~and~~provides ~~courses~~college ~~offered~~bookstores ~~through~~with ~~electronic~~a ~~media~~way ~~such~~to assell in-store inventory and virtual brand name merchandise over the internet utilizing technology ~~Internet)~~originally developed by us. This technology is utilized at approximately 640 bookstores.

~~Other~~We ~~services~~also ~~offered~~provide tocentralized ~~college bookstores include the sale of computer hardware and software~~buying, ~~such~~consulting ~~as our turnkey bookstore management software,~~ and ~~related maintenance contracts. We have installed our proprietary total~~ store ~~management~~design ~~system~~services atto ~~approximately~~assist ~~930~~ college ~~bookstore~~ ~~locations, and we have an installed base of over 300 college bookstore locations for our textbook management control systems. In total, including our own~~ bookstores, ~~over~~with ~~1,200~~their ~~college bookstore locations use our software products~~operations.

On July 1, 2003, we acquired all of the outstanding shares of common stock of TheCampusHub.com, Inc. (“CampusHub”), an entity affiliated with us through common ownership. CampusHub is no longer separately incorporated and is instead accounted for as a division within our Complementary Services Division segment. CampusHub provides college bookstores with a way to sell in-store inventory and virtual brand name merchandise over the Internet utilizing technology originally developed by us. This technology is utilized at approximately 640 bookstores.

In January 1998, we acquired Connect 2 One (formerly Collegiate Stores Corporation), a centralized buying service for approximately 790 college bookstores across the United States. Through the enhanced purchasing power of such a large group of bookstores, participating bookstores are able to purchase certain general merchandise at lower prices than those that would be paid by the stores individually. Bookstores participating in Connect 2 One’s (“C2O”) programs also provide us with another potential source of used textbooks.

We also provide consulting and store design services to assist college bookstores in store presentation and layout.

Industry Segment Financial Information

Revenue, operating profit or loss, and identifiable assets attributable to each of our reportable segments are disclosed in the notes to the consolidated financial statements presented in Item 8, Financial Statements and Supplementary Data of ~~our~~this Annual Report on Form 10-K. We make our periodic and current reports available, free of charge, through www.nebook.com as soon as reasonably practicable after such material is electronically filed with the ~~Securities and Exchange Commission~~SEC. Information contained on our ~~web~~website ~~site~~ is not a part of this Annual Report on Form 10-K.

Business Strategy

Our objective is to strengthen our position as a leading provider of products and services to the college bookstore market, thereby increasing revenue and cash flow. In order to accomplish our goal, we intend to pursue the following strategies:

Capitalize on college bookstore opportunities. We intend to increase revenues for our Bookstore Division by acquiring, opening or contract-managing additional bookstores at selected ~~college~~ college campuses and by offering additional textbook rental programs, specialty products and services at our existing bookstores. ~~In addition~~We intend to ~~ongoing~~pursue ~~efforts~~revenue growth and expand the buyback of used textbook inventory through the increased use of technology to ~~drive~~enhance inour internet activity using third-~~store~~party ~~revenue~~and ~~growth~~our own bookstores’ websites. Over time, we also intend to ~~continue~~increase ~~to pursue~~both ~~revenue~~in-store ~~growth~~and ~~over~~internet ~~the~~transactions ~~Internet~~through ~~involving~~the ~~our~~introduction ~~bookstores~~and ~~own~~use ~~websites~~of asa ~~well~~national asbrand ~~third-party~~in ~~websites~~appropriate markets.

~~Enhance~~Re-establish growth in the Textbook Division. We expect the Textbook Division to continue to be a primary contributor of revenues and cash flows, primarily as a result of an expected increase in in college enrollments, ~~and~~ continued utilization of used textbooks;, asand ~~well as~~ through the expansion of our own Bookstore Division, which should provide an additional supply of used textbooks. Additionally, to increase our supply of used textbooks, our commission structure ~~rewards~~is ~~customers~~designed to reward customers who make a long-term commitment to supplying us with a large portion of their textbooks, and we continue to change and enhance our marketing campaign to increase student awareness of the benefits of buying and selling used textbooks. Finally, we expect to continue to utilize technology to enhance our ability to acquire and sell used textbooks in this division.

Increased market penetration through technology solutions. We intend to continue generating ~~incremental~~ incremental revenue through the sale of our turnkey bookstore management software that incorporates point of sale, inventory control and accounting modules. The installation of ~~such~~ our software, along with e-commerce technology offered through CampusHub, a division within the Complementary Services Division, also increases the channels through which we can access the college and university market.

Expansion of other services programs. We intend to continue to develop and provide other services that enhance the college bookstore business, such as distance education distribution, our centralized buying group, store design consulting and other technology-related programs.

Expansion of other services programs. We intend to continue to develop and provide other services that enhance the college bookstore business, such as distance education distribution, our centralized buying group, store design consulting and other technology-related programs.

Industry Overview

Based on recent industry trade data from the National Association of College Stores, ~~the~~we believe the college bookstore industry remains strong, with approximately 4,500 college ~~stores generating~~bookstores generating annual sales of approximately $910.82 billion in the 2008-09 academic year to college students and other consumers in the United States. Sales of textbooks and other education materials used for classroom instruction comprise approximately sixty-five percent of that amount. We expect this market will continue to grow as a result of continuing increases in enrollment at U.S. colleges as estimated by the U.S. Department of Education. The United States Department of Education projects that total enrollment in the United States colleges will increase from 18.2 million in 2008 to 19.0 million in 2012.

College bookstore market. College ~~stores~~bookstores generally fall into three categories: ~~(i)~~ institutional — stores that are primarily owned and operated by institutions of higher learning; (ii) contract-managed — stores owned by institutions of higher learning and managed by outside, private companies, typically found on-campus; and (iii) independent stores — privately owned and operated stores, generally located off campus.

(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 bookstores — privately owned and operated stores, generally located off campus.

Wholesale textbook market. We believe that used textbooks will continue to be attractive to both students and college bookstores. Used textbooks provide students with a lower-cost alternative to new textbooks and bookstores typically achieve higher margins through the sale of used rather than new textbooks.

The pricing pattern of textbook publishing accounts for a large part of the growth of the used ~~book~~textbook market. Because of copyright restrictions, each new textbook is produced by only one publisher, which is free to set the new copy retail price and discount terms to bookstores. Based ~~Publishers~~on our experience, publishers generally offer new textbooks at prices that enable college bookstores to achieve a gross margin of 23.0% to 25.0% on new textbooks. Historically, the high retail costs of new textbooks and the higher margins achieved by bookstores on the sale of used ~~textbooks~~ ~~(approximately~~textbooks ~~33.0%)~~ have encouraged the growth of the market for used textbooks.

The used textbook cycle begins with new textbook publishers, who purposely plan obsolescence into the publication of new textbooks. Generally, new editions of textbooks are produced every two to four years. In the first year of a new edition, there are few used copies of a new edition available. In the second and third years, used textbooks become increasingly available. Simultaneously, publishers begin to plan an updated edition. In years four and beyond, at the end of the average life cycle of a particular edition, as publishers cut back on original production, used textbooks generally represent a majority (in unit terms) of the particular edition in use. While the length of the cycle varies by title (and sometimes is indefinite, as certain titles are never updated), the basic supply/demand progression remains fairly consistent.

College bookstores begin to place orders with used textbook wholesalers once professors determine which ~~books~~textbooks will be required for their upcoming courses, usually by the end of May ~~for~~ for the fall semester and the end of November for the spring semester. Bookstore operators must ~~first~~ first determine their allocation between new and used copies for a particular title but, in most cases, they will order an ample supply of used ~~books~~textbooks because: (i) used ~~book~~textbook demand from students is typically strong and consistent; (ii) many operators only have access to a limited supply from wholesalers and believe that not having used ~~book~~textbook alternatives could create ~~considerable~~ considerable frustration among students and with the college administration; (iii) bookstore operators earn higher margins on used ~~books~~textbooks than on new ~~books~~textbooks; and (iv) both new and used textbooks ~~books~~ are sold with return privileges, eliminating any overstock risk (excluding freight charges) to the college bookstore.

New textbook ordering usually begins in June (for the fall semester), at which time the store operator augments its expected used ~~book~~textbook supply by ordering new ~~books~~textbooks. By this time, ~~publishers~~ publishers typically will have just implemented their annual price increases. These regular price ~~increases~~ increases allow us and our competitors to buy used textbooks based on old list prices (in May) and to almost simultaneously sell them based on new higher prices, thereby creating an immediate margin increase.

While price is an important factor in the store operator’s purchasing decision, available supply, as well as service, usually determine with which used textbook wholesaler a college bookstore will develop a strong relationship. Used textbook wholesalers that are able to significantly service a college bookstore account typically receive preferential treatment from store operators, both in selling and in buying used textbooks. Pure exclusive supply arrangements in our market are rare; however, in the past nine to ten fiscal years, we have been marketing certain supply programs to the industry. These programs reward customers who make a long-term commitment to supplying us with a large portion of their books through enhanced commissions, express returns and book-buy promotion ideas and marketing materials. At the end of fiscal year ~~2009~~2010, over ~~530~~480 bookstores were participating in these programs. Since we are usually able to sell a substantial majority of the used textbooks we are able to purchase, our ability to obtain sufficient supply is a critical factor in our success.

Products and Services

Bookstore Division. As of March 31, ~~2009~~2010, we operated ~~277~~280 college bookstores on or adjacent to college campuses. These bookstores sell and rent a wide variety of used and new textbooks, and sell general books and assorted ~~general~~ merchandise, including apparel, sundries and gift items. Over the past ~~three~~ three fiscal years, external customer revenues (revenues excluding intercompany revenues) of our bookstores from activities other than used and new textbook sales and rentals have been between 16.6% and 17.4% of total revenues. We have been, and intend to continue, selectively expanding our ~~product~~ product offerings at our bookstores in order to increase ~~sales~~revenues and profitability. We have also installed, and are continually improving, software that provides e-commerce capabilities in all of our own bookstores, thereby allowing our bookstores to further expand product offerings and compete ~~with~~ with other online textbook and general merchandise sellers. All of our bookstores sell through ~~their~~ their own customized websites and many stores also sell textbooks and general merchandise through third-party websites that are popular among college students such as Amazon.com and Half.com.

Textbook Division. Our Textbook Division is engaged in the procurement and redistribution of used textbooks on college campuses primarily across the United States and through third-party websites. The portion of the used textbook business that our division operates in is limited to certain stores, certain textbooks and certain ~~books~~third-party websites. In general, the portion of the college bookstore market that our Textbook Division cannot access includes those contract-managed stores that are not operated by us that sell their used textbooks to affiliated companies, ~~and~~ institutional and independent ~~stores~~bookstores, to the extent that such used textbooks are repurchased from students and are retained by the bookstore for resale without involving a wholesaler and third-party websites that we do not buy and sell used textbooks through.

We publish the Buyer’s Guide, which lists ~~over~~approximately 52,000 textbooks according to author, title, new copy retail price, and our repurchase price. The Buyer’s Guide is an important part of ~~our~~ our inventory control and ~~book~~textbook procurement system. We update and reprint the Buyer’s Guide nine ~~times~~ times each year and make it available in both print and various electronic formats, including on ~~our~~ our proprietary software applications. A staff of dedicated professionals gathers information from ~~all~~ all over the country in order to make the Buyer’s Guide into what we believe to be the most comprehensive and up-to-date pricing and buying aid for college bookstores. We also maintain a database of ~~over~~approximately ~~175~~174,000 titles in order to better serve our customers.

Complementary Services Division. Through Specialty Books, we have access to the market for distance education products and services. Currently, we provide students at approximately 4030 colleges and private high schools with textbooks and materials for use in distance education and other education courses, and we are a provider of textbooks to nontraditional programs and students such as correspondence or corporate education students. We believe the fragmented distance education market represents an opportunity for us to leverage our fulfillment and distribution expertise in a ~~rapidly~~ growing sector of the industry. Beyond textbooks, we offer services and specialty ~~course~~ course materials to the distance education marketplace. Students are provided a web portal allowing them a secure and easy-to-use method for obtaining their course materials. Over the past three fiscal years, external customer revenues of Specialty Books have been between 4450.42% and 5154.59% of total Complementary Services Division revenues.

Other services offered to college bookstores include services related to our turnkey bookstore management software that incorporates point of sale, ~~the~~inventory control and accounting modules, the sale of other software and hardware, and the related maintenance contracts. These services generate revenue and assist us in gaining access to new sources of used textbooks. We have installed our proprietary total store management system at ~~approximately~~over ~~930~~ 940 college bookstore locations, and we have an installed base of over ~~300~~220 college bookstore locations for our textbook management control systems. In total, including our own bookstores, ~~over~~almost 1,200 college bookstore locations use our bookstore management software products. In addition, we have developed software for e-commerce capabilities. These software products allow college bookstores to launch their own e-commerce site and effectively compete against other online textbook and general merchandise sellers by offering textbooks and both traditional and non-traditional store merchandise online. Presently, there are approximately 640 stores, including our own stores, licensing our e-commerce technology via CampusHub. We also offer a digital delivery solution which allows a college bookstore to offer students the option of purchasing E-books via download in addition to new and used textbooks. On April 14, 2008, we announced an agreement with CourseSmart, a comprehensive supplier of digital ~~course~~ course materials, which establishes us as CourseSmart’s preferred supplier of Ee-books to the ~~college~~ college bookstore community.

Through C2O, we are able to offer a variety of products and services to participating college bookstores. C2O negotiates apparel, supplies, gifts, and general merchandise discounts and develops and executes marketing programs for its membership. C2O has evolved into a buying group with substantial purchasing clout by aggregating the purchasing power of approximately ~~790~~770 participating stores. Other C2O marketing services include a freight savings program, a credit card processing program, a shopping bag program, and retail display allowances for magazine displays. Additionally, the C2O staff of experienced professionals consults with the management and buyers of member bookstores. Consulting services offered include strategic planning, store review, merchandise assortment planning, buyer training, and help with other operational aspects of the business. While consulting has historically represented a relatively small component of C2O’s business, it is nonetheless strategically important to the ongoing success of this aspect of our business.

We also provide consulting and store design services ~~designed~~ to assist college bookstores in ~~store~~ store presentation and layout.

Business Description

Bookstore Division. An important aspect of our business strategy is a program designed to reach new customers through the opening or acquisition of bookstores adjacent to college campuses or the contract-management of stores on campus. In addition to generating sales or rentals of new and used textbooks and sales of general merchandise, these outlets enhance our Textbook Division by increasing the inventory of used books purchased from the campus.

A desirable campus for a company-operated, off-campus college bookstore is one on which our Textbook Division does not currently buy or sell used textbooks either because a competitor contract-manages the college’s bookstore or the college bookstore does not have a strong relationship with us. We generally will not open a location on a campus where we already have a strong relationship with the college bookstore because some college bookstores may view having a competing location as a conflict of interest. A desirable campus for contract-management is one where the current contract-management service is being provided by a competitor of ours and the contract is expiring.

We tailor each of our own bookstores to fit the needs and lifestyles of the campus on which it is located. Individual bookstore managers are given significant planning and managing responsibilities, including, hiring employees, controlling cash and inventory, and purchasing and merchandising product. We have staff specialists, or contracts with external specialists, to assist individual bookstore managers in such areas as store planning, merchandise purchasing and layout, inventory control and media buying.

As of March 31, 2009 we operated 277 college bookstores nationwide, having expanded from 113 bookstores at the beginning of fiscal year 2005. During fiscal year 2009, we completed the acquisition of 3 bookstore locations, initiated the contract-management of 19 bookstore locations, and established the start-up of 2 bookstore locations.

~~The~~As ~~table~~of ~~below~~March 31, ~~highlights~~2010 ~~certain~~we ~~information~~operated ~~regarding~~280 ~~our~~college bookstores ~~added~~nationwide, ~~and~~having ~~closed~~expanded from 124 ~~through~~bookstores ~~March 31~~at the beginning of fiscal year 2006. During fiscal year 2010, ~~2009~~we initiated the contract-management of 14 bookstore locations and established the start-up of 6 bookstore locations.

					Bookstores
	Bookstores Open		Bookstores		Lost/Closed		Bookstores at
	at Beginning of		Added During		During Fiscal		End of Fiscal
Fiscal Year	Fiscal Year		Fiscal Year		Year (1)		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

The table below highlights certain information regarding our bookstores added and closed through March 31, 2010.

(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.


					Bookstores
	Bookstores Open		Bookstores		Lost/Closed		Bookstores at
	at Beginning of		Added During		During Fiscal		End of Fiscal
Fiscal Year	Fiscal Year		Fiscal Year		Year		Year

2006		124		17		2		139
2007		139		120		15		244
2008		244		23		7		260
2009		260		24		7		277
2010		277		20		17		280

We plan to continue increasing the number of bookstores in operation ~~through opening new bookstores or contract-managing additional bookstores~~. The private bookstore expansion plan will focus on campuses where we do not already have a strong relationship with the on-campus bookstore. In determining whether or not to purchase an existing bookstore or open a new bookstore, we look at several criteria: (i) a large enough market to justify our efforts (typically this means a campus of at least 5,000 students); (ii) the competitive environment (how many bookstores ~~stores~~ currently serve the campus); (iii) a site in close proximity to campus with adequate parking and accessibility; (iv) the potential of the bookstore to have a broad product mix (larger bookstores are more attractive than smaller bookstores because a full line of general merchandise can be offered in addition to textbooks); (v) the availability of top-quality management; and (vi) certain other factors, including leasehold improvement opportunities and personnel costs. We also plan to pursue opportunities to contract-manage additional institutional stores. In determining to pursue opportunities to contract-manage a campus bookstore, we look at: (i) the size of the market; (ii) the competitive status of the market; (iii) the availability of top quality management; and (iv) certain other factors, including personnel costs. As mentioned previously, on May 1, 2006, we acquired 101 college bookstore locations, 98 of which were contract-managed, through the acquisition of all of the outstanding stock of CBA.

Wholesale Procurement and Distribution. Historically, because the demand for used textbooks has consistently exceeded supply, our sales have been primarily determined by the amount of used textbooks that we can purchase. As a result, our success has depended primarily on our inventory procurement, and we continue to focus our efforts on obtaining inventory. In order to ensure our ability to both obtain and redistribute inventory, our Textbook Division strategy has emphasized establishing and maintaining strong customer and supplier relationships with college bookstores (primarily, independent and institutional college bookstores) through our employee account representatives. These 27 account representatives (as of March 31, 2010) are responsible for procuring used textbooks from students, marketing our services on campus, purchasing overstock textbooks from bookstores and securing leads for sale of our systems products. We have been able to maintain a competitive edge by providing superior service, made possible primarily through the development and maintenance of ready access to inventory, information and supply. Other components of the Textbook Division strategy and its implementation include: (i) selectively paying a marginal premium relative to competitors to entice students to sell back more textbooks to us; (ii) gaining access to competitive campuses (where the campus bookstore is contract-managed by a competitor) by opening or acquiring off-campus, company-owned college bookstores; (iii) using technology to gain efficiencies and to improve customer service; (iv) maintaining a knowledgeable and experienced sales force that is customer-service oriented; (v) providing working capital flexibility for bookstores making substantial purchases; (vi) establishing long-term supply arrangements by rewarding customers who make a long-term commitment to supplying us with a large portion of their books; and (vii) purchasing and selling textbooks over the internet through third-party websites.

The two major used textbook purchasing seasons are at the end of each academic semester, May and December. Although we make textbook purchases during other periods, the inventory purchased in May, before publishers announce their price increases in June and July, allows us to purchase inventory based on the lower retail prices of the previous year. The combination of this purchasing cycle and the fact that we are able to sell our inventory in relation to retail prices for the following year permits us to realize additional gross profit. We advance cash to our representatives during these two periods, and the representatives in turn buy textbooks directly from students, generally through the on-campus bookstore.

~~Wholesale~~After ~~Procurement~~we ~~and~~purchase ~~Distribution. Historically, because~~ the ~~demand for used~~ textbooks ~~has consistently exceeded supply~~, ~~our sales have been primarily determined by the amount of used textbooks that~~ we ~~can~~arrange ~~purchase.~~for Weshipment ~~believe that, on average, we are able~~ to ~~fulfill approximately 20% to 25% of~~ our ~~demand.~~warehouse Asin aNebraska ~~result, our success has depended primarily on our inventory~~via ~~procurement,~~common ~~and we continue to focus our efforts on obtaining inventory~~carrier. InAt ~~order~~the ~~to ensure our ability to both obtain and redistribute inventory~~warehouse, ~~our~~we ~~Textbook~~refurbish ~~Division~~damaged ~~strategy~~textbooks ~~has emphasized establishing~~ and ~~maintaining~~categorize ~~strong customer~~ and ~~supplier~~shelve ~~relationships with college bookstores~~all ~~(primarily,~~other ~~independent and institutional college bookstores) through our employee account representatives. These 29 account representatives (as of March 31, 2009) are responsible for procuring used~~ textbooks ~~from~~in ~~students,~~a ~~marketing~~timely ~~our services on campus~~manner, ~~purchasing overstock textbooks from bookstores~~ and ~~securing~~enter ~~leads~~them ~~for~~into ~~sale of~~ our ~~systems~~online ~~products. We have been able to maintain a competitive edge by providing superior service, made possible primarily through the development and maintenance of ready access to~~ inventory, ~~information and supply~~system. ~~Other components~~ of the Textbook Division strategy and its implementation include: (i) selectively paying a marginal premium relative to competitors to entice students to sell back more books to us; (ii) gaining access to competitive campuses (where the campus bookstore is contract-managed by a competitor) by opening off-campus, company-owned college bookstores; (iii) using technology to gain efficiencies and to improve customer service; (iv) maintaining a knowledgeable and experienced sales force that is customer-service oriented; (v) providing working capital flexibility for bookstores making substantial purchases; and (vi) establishing long-term supply arrangements by rewarding customers who make a long-term commitment to supplying us with a large portion of their books.

~~The~~Customers ~~two~~place ~~major~~orders ~~used~~by ~~textbook~~phone, ~~purchasing~~mail, ~~seasons~~fax ~~are~~or atother ~~the~~electronic ~~end~~method. ofUpon ~~each~~receiving ~~academic semester~~an order, ~~May and December. Although~~ we ~~make~~remove ~~book~~the ~~purchases~~textbooks ~~during~~from ~~other~~available ~~periods,~~inventory ~~the~~and ~~inventory~~hold ~~purchased~~them infor ~~May,~~future shipping. ~~before~~Customers ~~publishers~~may ~~announce~~generally ~~their~~return ~~price~~textbooks ~~increases~~within in60 days ~~June~~after ~~and~~the ~~July,~~start ~~allows~~of usclasses to(90 days ~~purchase inventory~~for ~~based~~certain oncustomers ~~the~~participating ~~lower~~in ~~retail prices of~~ the ~~previous~~exclusive ~~year~~supply program). ~~The~~External ~~combination~~customer ofreturns ~~this purchasing cycle~~over ~~and~~ the ~~fact~~past ~~that~~three wefiscal ~~are~~years ~~able~~have toaveraged ~~sell~~approximately ~~our~~23.7% ~~inventory~~of insales ~~relation~~and togenerally ~~retail prices for the following~~are ~~year~~attributable ~~permits us~~ to ~~realize~~course ~~additional~~cancellations ~~gross~~or ~~profit~~overstocking. WeThe ~~advance~~majority ~~cash~~of toreturns ~~our~~are ~~representatives~~textbooks ~~during~~that ~~these~~we ~~two~~are ~~periods,~~able ~~and~~to ~~the~~resell ~~representatives~~for ~~in turn buy books directly from students, generally through~~ the ~~on-campus~~next ~~bookstore~~semester.

After we purchase the books, we arrange for shipment to our warehouse in Nebraska via common carrier. At the warehouse, we refurbish damaged books and categorize and shelve all other books in a timely manner, and enter them into our on-line inventory system.

Customers place orders by phone, mail, fax or other electronic method. Upon receiving an order, we remove the books from available inventory and hold them for future shipping. Customers may generally return books within 60 days after the start of classes (90 days for certain customers participating in the exclusive supply program). External customer returns over the past three fiscal years have averaged approximately 23.3% of sales and generally are attributable to course cancellations or overstocking. The majority of returns are textbooks that we are able to resell for the next semester.

Information Technology. We believe that we can enhance efficiency, profitability and competitiveness through investments in technology. Because our solutions create a competitive advantage, establish efficiencies and ensure cost-effectiveness of both our operations and the operations of our bookstore customers and suppliers, some of our proprietary software applications are currently in patent pending status with the United States Patent and Trademark Office. Additionally, we have registered trademarks for many of our software product names where brand recognition may be an important factor.

The center of our technology infrastructure revolves around PRISM and WinPRISM, our proprietary college store management, textbook management, point of sale, and inventory control systems. With more than a combined 25 years of availability in the marketplace, these proven software applications are maintained and continuously enhanced by a dedicated team of development and support professionals. Our technology operations process order entry, control inventory, generate purchase orders and customer invoices, generate various sales reports, and process and retrieve textbook information. In addition, we have developed integrated e-commerce software and service solutions allowing college bookstores to launch their own e-commerce site and effectively compete against other online textbook and general merchandise sellers by offering both print and digital textbooks and both traditional and non-traditional store merchandise online. We also develop, license or obtain certain rights related to other software designed to strengthen our e-commerce capabilities, including the capability for our bookstores to efficiently sell inventory through third-party websites that are popular among college students such as Amazon.com and Half.com.

In addition to using our technology for our own benefit through management and inventory control, we license the use of certain technology to bookstores. The use of our software by bookstore customers and suppliers helps solidify the business relationship, resulting in increased sales and access to additional inventory.

We conduct training courses for all systems users online and at our headquarters in Lincoln, Nebraska. Classes are small and provide hands on training for the various systems. Printed reference manuals and training materials accompany each system. The customer support call center is staffed with approximately 60 experienced personnel. Support is offered via ~~web site~~website, e-mail, and toll-free phone numbers. While support hours vary per product and time of year, after-hours pager support is available for mission-critical systems.

10Beginning late in fiscal year 2008, we embarked on a project to replace our internally-developed general ledger system with a general ledger/business planning and consolidation solution from SAP. During fiscal year 2009, the new solution was put into place and utilized for internal management reporting and the fiscal year 2010 budgeting process. The new solution was fully integrated in fiscal year 2010, and, among other things, provides us with greater flexibility in recording and analyzing our operating results and streamlining our budgeting process and is utilized for external financial reporting purposes.

Beginning late in fiscal year 2008, we embarked on a project to replace our internally-developed general ledger system with a general ledger/business planning and consolidation solution from SAP. During fiscal year 2009, the new solution was put into place and utilized for internal management reporting and the fiscal year 2010 budgeting process. The new solution will, among other things, provide us with greater flexibility in recording and analyzing our operating results and streamlining our budgeting process and will be utilized for external financial reporting purposes beginning the first quarter of fiscal year 2010.

Customers

We sell our Textbook and certain Complementary Services Division products and services to college bookstores throughout North America, ~~though~~ primarily throughout the United States. Our Textbook Division purchases from and resells used textbooks to college bookstores at college campuses of all sizes, including many of the nation’s largest campuses, such as: University of Virginia; Oregon State University; University of Texas; University of Illinois; University of Washington; University of Southern California; and Long Beach State University. Our 25 largest Textbook Division customers accounted for approximately 2.97% of our fiscal year ~~2009~~2010 consolidated revenues. No single Textbook Division customer accounted for more than 1.0% of our fiscal year ~~2009~~2010 consolidated revenues.

~~Our distance education program is, among other things, a primary supplier of textbooks and~~10 educational material to students enrolled in on-line courses offered through approximately 40 colleges and private high schools. For the fiscal years ended March 31, 2009, 2008, and 2007, one institution accounted for approximately 69%, 63% and 45%, respectively, of distance education program external customer revenues.

NoTable single customer accounted for more than 10.0% of our consolidated revenues in fiscal year 2009, 2008, or 2007. Contents

Our distance education program is, among other things, a primary supplier of textbooks and educational material to students enrolled in online courses offered through approximately 30 colleges and private high schools. For the fiscal years ended March 31, 2010, 2009 and 2008, one institution accounted for approximately 68%, 69% and 63%, respectively, of distance education program external customer revenues.

No single customer accounted for more than 10.0% of our consolidated revenues in fiscal year 2010, 2009 or 2008.

Competition

We compete with a variety of other companies and also individuals, all of whom seek to provide products and/or services to the college marketplace. Our main corporate competitors, who provide products and services to colleges and universities, college bookstores and directly to students, are Follett Higher Education Group (“Follett”) and MBS Textbook Exchange/Barnes & Noble College ~~Booksellers~~ Booksellers (“MBS”). MBS Textbook Exchange and Barnes & Noble College Booksellers are ~~sister companies~~affiliated ~~controlled~~companies bywith ~~the~~certain ~~same~~common ~~shareholder~~ownership.

Our Bookstore Division competes with:

• 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, sell e-books, other digital content and other merchandise directly to students through e-commerce bypassing the traditional college bookstore,;

• student -to -student transactions that take place on campus and over the ~~Internet,~~internet; and

• course packs and electronic media as a source of textbook information, such as on-line resources, Ee-~~Books~~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.

Our Textbook Division competes in the used textbook market, which includes the purchase and resale of used textbooks. We compete with:

• college bookstores who normally repurchase ~~books~~textbooks from students to be reused on that campus the following semester or term,;

• student -to -student transactions that take place on campus and over the ~~Internet~~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 through e-commerce, or in person, bypassing the traditional college bookstores who are the Textbook Division’s suppliers and customers.

Our Textbook Division competes in the wholesale business with Follett and MBS, and certain smaller regional companies including Budgetext, Texas Book Company, Tichenor College Textbook Company, and South Eastern Book Company. We believe that our market share of the independent and non-contract-managed institutional stores is comparable to that of Follett and MBS individually. Many of Follett’s and some of MBS’s college bookstores are located on smaller campuses. The size of the campus and their presence there have precluded us from entering these markets, which in turn affects both our ability to buy books and our ability to add new accounts.

Our Complementary Services Division competes with:

• MBS in the sale and installation of college bookstore information technology,;

• MBS in the distance education textbook distribution market,;

• college bookstores that provide their own e-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.

Governmental Regulation

We are subject to various federal, state and local health and safety laws and regulations. Generally, these laws establish standards for vehicle and employee safety. These laws include the Occupational Safety and Health Act. Future developments, such as stricter employee health and safety laws and regulations thereunder, could affect our operations. We do not currently anticipate that the cost of our compliance with, or of any foreseeable liabilities under, employee health and safety laws and regulations will have a material adverse affect on our business or financial condition.

Insurance

We maintain general liability, property, worker’s compensation and other insurance in amounts and on terms that we believe are customary for companies similarly situated. In addition, we maintain excess insurance where we reasonably believe it is cost effective.

Employees

As of March 31, ~~2009~~2010 we had a total of approximately 32,~~500~~600 employees, of which approximately 1,~~400~~300 were full-time, approximately ~~500~~800 were part-time and approximately ~~1,600~~500 were temporary. We have no unionized employees and believe that our relationship with our employees is satisfactory.

In view of the seasonal nature of our Textbook Division, we use seasonal labor to improve operating efficiency. We employ a small number of “flex-pool” workers who are cross-trained in a variety of warehouse functions. Temporary employees augment the flex-pool to meet periodic labor demands.

Geographic Financial Information

Revenues from external customers and long-lived assets, all of which are attributable to domestic operations, are disclosed in the notes to the consolidated financial statements presented in Item 8, Financial Statements and Supplementary Data of ~~our~~this Annual Report on Form 10-K.

ITEM 1A. RISK FACTORS.

This Annual Report on Form 10-K contains forward-looking statements within the meaning of the Securities Litigation Reform Act of 1995 that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including, but not limited to, those set forth in the following cautionary statements and elsewhere in this Annual Report on Form 10-K.

~~Further~~Our ~~deterioration~~highly inleveraged ~~the~~capital ~~economy and credit markets~~structure, aas ~~decline~~well inas ~~consumer~~the ~~spending or other~~ conditions ~~may adversely affect our future results~~ of ~~operations.~~the Asfinancial ~~widely reported~~markets, ~~the~~ ~~global~~could ~~credit~~affect ~~markets~~our ~~and~~ability ~~financial~~to ~~services~~extend ~~industry~~or ~~have~~refinance ~~been~~debt ~~experiencing~~in aadvance ~~period~~ of ~~upheaval characterized~~its ~~by the bankruptcy~~maturity, ~~failure,~~which ~~collapse~~would negatively orimpact ~~sale~~our ~~of various financial institutions, diminished~~ liquidity and ~~credit~~financial ~~availability,~~condition. ~~declines~~Current inglobal ~~consumer~~financial ~~confidence,~~conditions ~~declines in economic~~have ~~growth,~~been ~~increases~~characterized inby ~~unemployment~~increased ~~rates,~~market ~~uncertainty about economic stability and intervention from the United States federal government~~volatility. ~~There~~The ~~can~~global ~~be no assurance that there will not be further deterioration in~~ credit ~~and financial~~ markets ~~and~~have ~~confidence in economic conditions. While~~been ~~the~~experiencing ~~ultimate~~significant ~~outcome~~price ~~of these events cannot be predicted~~volatility, itdislocations ~~may decrease student enrollment in colleges~~ and ~~universities~~liquidity ~~due~~disruptions tothat have caused the ~~lack~~interest ofrate ~~financial~~cost ~~aid and other sources~~ of ~~funding~~debt ~~for education.~~financings ~~Spending by students on textbooks and other general merchandise may also decrease due~~ to ~~the~~increase ~~economic downturn~~considerably.

WeThese ~~face~~circumstances competition in our markets, which could adversely impact our revenue levels, profit margins and ability to acquire an adequate supply of used textbooks. Our industry is highly competitive. A large number of actual or potential competitors exist, some of which are larger than us and have ~~substantially~~materially ~~greater resources than us. Revenue levels and profit margins could be adversely~~ impacted ifliquidity ~~we experience increased competition~~ in the financial markets, inmaking ~~which we currently~~terms ~~operate~~for orcertain infinancings ~~markets~~less inattractive, ~~which~~and ~~we will operate~~ in ~~the~~some ~~future.~~cases ~~Over the years, an increasing number of institution-owned college stores~~ have ~~decided~~resulted toin ~~outsource or “contract-manage”~~ the ~~operation~~unavailability of ~~their bookstores~~financing. ~~The~~Continued ~~leading~~uncertainty ~~managers~~in ofthe ~~these~~credit ~~stores~~markets ~~include~~may ~~two~~negatively ofimpact our ~~principal~~ability ~~competitors in the wholesale textbook distribution business. Contract-managed stores primarily purchase their used textbook requirements from and sell their available supply of used textbooks~~ to ~~their affiliated~~extend ~~operations.~~or Arefinance ~~significant~~our ~~increase~~existing indebt ~~the~~on ~~number~~reasonable ofterms ~~contract-managed~~or ~~stores operated by our competitors, particularly~~ at ~~large college campuses~~all, ~~could~~which ~~adversely~~may negatively affect our ~~ability to acquire~~ ~~an adequate supply of used textbooks~~business.

WeOur ~~are~~three ~~also~~tranches ~~experiencing~~of ~~growing~~debt ~~competition~~(the ~~from~~Senior ~~alternative~~Secured ~~media~~Notes, ~~and~~the ~~alternative~~ABL ~~sources~~Facility ~~of textbooks~~and ~~for~~the ~~students~~Senior Subordinated ~~(such~~Notes) aseach ~~websites~~may ~~designed~~mature towithin ~~sell~~a ~~textbooks,~~period ~~e-books~~of ~~and~~six ~~digital~~months ~~content, and~~of each other. ~~merchandise~~The ~~directly~~ABL toFacility may ~~students;~~mature on~~-line~~ ~~resources;~~the ~~publishers~~earlier ~~selling~~of ~~direct~~October 2, ~~to students;~~2012 ~~print-on-demand~~and ~~textbooks;~~the ~~and~~date ~~CD-ROMs)~~that ~~and~~is ~~from~~91 days prior to the ~~use~~earliest maturity of ~~course~~the ~~packs~~Senior Secured Notes (which ~~are~~mature on December 1, 2011), the Senior Subordinated ~~collections~~Notes of(which ~~copyrighted~~mature ~~materials~~on ~~and~~March 15, ~~professors~~2012), NBC’s ~~original~~Senior ~~content~~Discount Notes (which ~~are~~mature ~~produced~~on ~~by college~~March 15, ~~bookstores~~2013), ~~and~~or ~~sold~~any torefinancing ~~students),~~thereof. ~~all~~As ofa ~~which~~consequence, ~~have~~we ~~the~~may ~~potential~~be required to ~~reduce~~refinance orthe ~~replace~~other tranches ~~the~~of ~~need~~debt ~~for textbooks~~in ~~sold~~our ~~through~~capital ~~college~~structure ~~bookstores.~~as Awell ~~substantial~~as ~~increase~~NBC’s inSenior ~~the~~Discount ~~availability~~Notes, orin ~~the~~order to ~~acceptance~~refinance ofthe ~~these~~ABL ~~alternatives~~Facility. asDue ato ~~source~~our ofhighly ~~textbooks~~leveraged ~~and~~capital ~~textbook~~structure, ~~information~~in ~~could significantly~~the ~~reduce~~absence ~~college~~of ~~students’~~a significant ~~use~~improvement ofin ~~college~~our ~~bookstores~~credit profile and/or the ~~use~~financial ofmarkets, ~~traditional textbooks~~we ~~and~~may ~~thus~~not ~~adversely~~be ~~impact~~able to refinance our ~~revenue~~indebtedness, ~~levels~~or ~~and~~NBC ~~profit~~may ~~margins~~not be able to refinance its indebtedness, at all or on terms acceptable to us.

We ~~are~~face ~~experiencing growing~~ competition ~~from~~in ~~technology-enabled~~our ~~student~~markets, towhich ~~student transactions~~could ~~that~~adversely ~~take~~impact ~~place~~our ~~over~~revenue ~~the~~levels, ~~Internet.~~profit margins ~~These~~and ~~transactions,~~ability ~~whereby~~to aacquire ~~student~~an ~~enters~~adequate ~~into a~~supply ~~transaction~~of ~~directly~~used ~~with~~textbooks. ~~another~~Our ~~student~~industry ~~for~~is ~~the~~highly competitive. ~~sale~~A ~~and~~large ~~purchase~~number of aactual ~~textbook,~~and ~~provide competition~~potential bycompetitors ~~reducing~~exist, ~~the~~some ~~supply~~ of ~~textbooks~~which ~~available~~are tolarger than us ~~for purchase~~ and byhave ~~reducing~~substantially ~~the sale~~greater ofresources ~~textbooks~~than ~~through college bookstores~~us. ~~While~~Revenue ~~these~~levels ~~transactions~~and ~~have~~profit ~~occurred~~margins ~~for many~~could ~~years,~~be ~~prior~~adversely toimpacted ~~the~~if ~~Internet~~we ~~these~~experience ~~transactions~~increased ~~were~~competition ~~limited~~in bythe ~~geography,~~markets ain ~~lack~~which ofwe ~~information~~currently ~~related~~operate toor ~~pricing~~in ~~and~~markets ~~demand,~~in ~~and~~which ~~other~~we ~~factors.~~will Aoperate ~~significant increase~~ in the ~~number of these transactions could adversely impact our revenue levels and profit margins~~future.

We are experiencing growing competition from alternative media and alternative sources of textbooks for students (such as websites designed to rent or sell textbooks and sell e-books, other digital content and other merchandise directly to students; on-line resources; publishers selling or renting directly to students; print-on-demand textbooks; and CD-ROMs) and from the use of course packs (which are collections of copyrighted materials and professors’ original content which are produced by college bookstores and sold to students), all of which have the potential to reduce or replace the need for textbooks sold through college bookstores. A substantial increase in the availability or the acceptance of these alternatives as a source of textbooks and textbook information could significantly reduce college students’ use of college bookstores and/or the use of traditional textbooks and thus adversely impact our revenue levels and profit margins.

We are also experiencing growing competition from technology-enabled student-to-student transactions that take place over the internet. These transactions, whereby a student enters into a transaction directly with another student for the sale and purchase of a textbook, provide competition by reducing the supply of textbooks available to us for purchase and by reducing the sale of textbooks through college bookstores. While these transactions have occurred for many years, prior to the internet these transactions were limited by geography, a lack of information related to pricing and demand, and other factors. A significant increase in the number of these transactions could adversely impact our revenue levels and profit margins.

Over the years, an increasing number of institution-owned college bookstores have decided to outsource or “contract-manage” the operation of their bookstores. The leading managers of these bookstores include two of our principal competitors in the wholesale textbook distribution business. Contract-managed bookstores primarily purchase their used textbook requirements from and sell their available supply of used textbooks to their affiliated operations. A significant increase in the number of contract-managed bookstores operated by our competitors, particularly at large college campuses, could adversely affect our ability to acquire an adequate supply of used textbooks.

We believe all of these competitive factors have contributed to a decline in textbooks sold in the Textbook Division.

WeFurther ~~have~~deterioration in the economy and credit markets, a ~~substantial~~decline ~~level~~in consumer spending or other conditions may adversely affect our future results of ~~indebtedness~~operations. WeAs widely reported, the global credit markets and financial services industry have ~~$372.4 million~~been experiencing a period of ~~outstanding~~upheaval ~~indebtedness~~characterized atby ~~March 31~~the bankruptcy, ~~2009~~failure, collapse or sale of various financial institutions, diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates, uncertainty about economic stability and intervention from the United States federal government. ~~NBC~~There ~~has~~can ~~additional~~be ~~outstanding~~no ~~indebtedness~~assurance ofthat ~~$77~~there will not be further deterioration in credit and financial markets and confidence in economic conditions or that any recovery, if and when achieved, will be sustained.~~0 million~~ asWhile the ultimate outcome of these events ~~March 31~~cannot be predicted, ~~2009~~it ~~under~~may ~~the~~decrease ~~Senior~~student ~~Discount~~enrollment ~~Notes.~~in ~~The~~colleges ~~degree~~and universities due to ~~which~~the lack weof ~~are~~financial ~~leveraged~~aid ~~could~~and ~~have~~other sources of funding for education. Spending by students on ~~important~~textbooks ~~consequences,~~and ~~including~~other general merchandise may also decrease due to the ~~following:~~economic downturn.

•We are the sole operating subsidiary of our parent company and will need to continue to distribute funds to our parent to permit satisfaction of its obligations. Our parent company, NBC, is a holding company and as such conducts substantially all of its operations through us and our subsidiaries. Consequently, NBC does not have any income from its own operations and does not expect to generate income from its own operations in the future. As a result, NBC’s ability to meet ~~obtain~~its ~~additional~~debt ~~financing~~service ~~for~~obligations, ~~working~~including ~~capital~~its obligations under its $77.0 million (face value) 11% Senior Discount Notes, ~~capital~~substantially ~~expenditures~~depends upon our and our subsidiaries’ cash flow and distribution of funds by us as dividends, ~~acquisitions~~loans, advances or ~~general~~other ~~corporate~~payments. ~~purposes~~Our ~~may~~ability to distribute funds to NBC will be ~~impaired;~~limited under certain circumstances under the terms of our indentures and our other indebtedness. If in the future NBC were unable to satisfy its obligations under the Senior Discount Notes, which could result from the application of these restrictions on our ability to distribute funds to NBC, it could result in an event of default under the Senior Discount Notes. An event of default under the Senior Discount Notes could result in cross-defaults under our indebtedness, including the ABL Facility.

•We may be unable to obtain a ~~substantial~~sufficient ~~portion~~supply of used textbooks, which could adversely impact our ~~cash~~revenue ~~flow~~levels ~~from~~and ~~operations~~profit ~~must~~margins. beOur ~~dedicated~~ability to ~~the~~purchase ~~payment~~a sufficient number of ~~interest~~used textbooks largely determines our used textbook sales for future periods. Successfully acquiring books typically requires a visible presence on ~~outstanding~~college ~~indebtedness~~campuses at the end of each semester, ~~thereby~~which requires ~~reducing~~hiring ~~the~~a ~~funds~~significant ~~available~~number of temporary personnel, and having access to ussufficient ~~for~~funds under a revolving credit facility or other ~~purposes~~financing alternatives to purchase the books. Textbook acquisition also depends upon college students’ willingness to sell their used textbooks at the end of each semester. The unavailability of sufficient personnel or credit, ~~such~~or asa ~~capital~~shift ~~expenditures~~in student preferences, could impair our ability to acquire sufficient used textbooks to meet our sales objectives, thereby adversely impacting our revenue levels and ~~acquisitions;~~profit margins.

•We ~~all~~may not be able to successfully acquire or contract-manage additional bookstores or integrate those additional stores, which could adversely impact our ability to grow revenues and profit margins. Part of our business strategy is to expand sales for our college bookstore operations by either acquiring privately-owned bookstores or being awarded additional contracts to manage institutional bookstores. We may not be able to identify additional private bookstores for acquisition or we may not be successful in competing for contracts to manage additional institutional bookstores. Due to the ~~indebtedness~~seasonal ~~outstanding~~nature ~~under~~of business in our bookstores, the operations ~~Senior~~of ~~Credit~~the ~~Facility~~acquired or newly contract-managed bookstores may be affected by the time of the fiscal year when a bookstore is ~~secured~~acquired or contract-managed by ~~substantially~~us. ~~all~~The process may require financial resources that would otherwise be available for our existing operations. Our integration of these future bookstores may not be successful; or, the anticipated strategic benefits of these future bookstores may not be realized or may not be realized within time frames contemplated by our management. ~~assets~~Acquisitions and additional contract-managed bookstores may involve a number of special risks, including, but not limited to, adverse short-term effects on our reported results of operations, diversion of management’s attention, standardization of accounting systems, dependence on retaining, hiring and ~~will~~training ~~mature~~key ~~prior~~personnel, unanticipated problems or legal liabilities, and actions of our competitors and customers. If we are unable to ~~the~~successfully ~~Senior~~integrate ~~Subordinated~~our ~~Notes~~future bookstores for these or other reasons, anticipated revenues and ~~the~~profit ~~Senior~~margins ~~Discount~~from ~~Notes;~~these new bookstores could be adversely impacted.

• we believe we are substantially more leveraged than certain of our competitors, which might place us at a competitive disadvantage;

• we may be hindered in our ability to adjust rapidly to changing market conditions;

• we may be more vulnerable in the event of a downturn in general economic conditions or in our industry or business; and

• our indebtedness may make it more difficult for us to satisfy our financial obligations.

The indentures governing the Senior Subordinated Notes and NBC’s Senior Discount Notes, as well as the Senior Credit Facility, impose significant operating and financial restrictions, which could prevent us from incurring additional indebtedness and taking certain other actions and could result in all amounts outstanding being declared due and payable if we are not in compliance with such restrictions. The indentures governing the Senior Subordinated Notes and NBC’s Senior Discount Notes restrict our ability to do the following: incur additional indebtedness; pay dividends or make other restricted payments; consummate certain asset sales; create liens on assets; enter into transactions with affiliates; make investments, loans or advances; consolidate or merge with or into any other entity; convey, transfer or lease all or substantially all of our assets; or change the business we conduct.

The Senior Credit Facility prohibits us from prepaying other indebtedness. In addition, we are required to comply with and maintain specified financial ratios and tests, including a minimum interest coverage ratio, a maximum leverage ratio and a minimum fixed charge coverage ratio. Our ability to meet these financial ratios and tests can be affected by our operating results and events beyond our control. A breach of any of these covenants could result in a default under the Senior Credit Facility or the indentures. Upon an event of default under the Senior Credit Facility, the lenders could elect to declare all amounts and accrued interest outstanding under the Senior Credit Facility due and payable and could terminate their commitments to make further extensions of credit under the Senior Credit Facility and the holders of the Senior Subordinated Notes and NBC’s Senior Discount Notes could elect to declare all amounts under such notes immediately due and payable. If we were unable to repay our indebtedness under the Senior Credit Facility, the lenders could proceed against the collateral securing the indebtedness. If the indebtedness under the Senior Credit Facility were accelerated, our assets may not be sufficient to repay in full such indebtedness and other indebtedness, including the Senior Subordinated Notes and NBC’s Senior Discount Notes. Substantially all of our assets are pledged as security under the Senior Credit Facility.

~~Recent~~We ~~disruptions~~may innot ~~the~~be ~~financial~~able ~~markets~~to ~~could~~successfully ~~affect~~renew our ~~ability~~contract-managed tobookstores ~~extend~~on orprofitable ~~refinance debt as it matures~~terms, which could ~~negatively~~adversely impact our ~~liquidity~~profit ~~and financial condition~~margins. ~~The global~~As ~~credit~~we ~~markets~~expand ~~have~~our ~~been~~operations ~~experiencing~~in contract-management ~~significant~~of ~~price~~institutional ~~volatility~~bookstores, ~~dislocations~~we ~~and liquidity~~will ~~disruptions~~increasingly ~~which~~be ~~have~~competing ~~caused~~for the ~~interest~~renewal of ~~rate~~our ~~cost~~contracts offor ~~debt~~those ~~financings~~stores toas ~~increase considerably.~~the ~~These~~current ~~circumstances~~contracts ~~have~~expire. ~~materially~~Our ~~impacted~~contracts ~~liquidity~~are intypically ~~the~~for 3 ~~financial~~to ~~markets~~5 years, ~~making~~ ~~terms~~with ~~for~~various ~~certain~~renewal ~~financings~~and ~~less~~cancellation ~~attractive,~~clauses. ~~and~~We inmay ~~some~~not ~~cases~~be ~~have~~successful ~~resulted~~ in ~~the~~renewing ~~unavailability~~our ofcurrent ~~financing.~~contracts ~~Continued~~or ~~uncertainty~~those inrenewals ~~the~~may ~~credit~~not ~~markets~~be ~~may~~on ~~negatively~~terms ~~impact~~that ~~our ability~~provide tous ~~extend~~the opportunity to improve or ~~refinance~~maintain ~~our~~the ~~existing~~profitability ~~debt~~of atmanaging ~~all,~~the orbookstore. If we are unable to successfully renew our contracts on ~~reasonable~~profitable terms, ~~which~~our ~~may negatively~~profit ~~affect~~margins ~~our~~could ~~business~~be adversely impacted.

AsPublishers ofmay ~~March 31,~~not ~~2009,~~continue ~~under~~to ~~our~~increase ~~Senior~~prices ~~Credit~~of ~~Facility~~textbooks weannually, ~~have~~which acould ~~revolving credit facility~~adversely ~~with~~impact ~~maximum~~our ~~borrowings~~revenue oflevels ~~$65 million~~and ~~that~~profit ~~matures~~margins. onWe ~~May 31,~~generally ~~2010~~buy ~~and~~used ~~term~~textbooks ~~loans~~based ~~with~~on ~~maturities~~publishers’ inprevailing ~~excess~~prices offor ~~$45 million~~new ~~per~~textbooks ~~quarter~~just ~~beginning~~prior ~~June 30,~~to ~~2010.~~the Ifimplementation weby ~~are~~publishers ~~unable~~of totheir ~~extend our line~~annual ofprice ~~credit,~~increases or(which ~~enter~~historically ~~into~~have abeen ~~new~~4% ~~credit facility, prior~~ to ~~its~~5%) ~~maturity~~and ~~date~~resell orthese ~~extend~~textbooks ~~(or refinance)~~shortly ~~the~~thereafter ~~term~~based ~~loans~~upon ~~prior~~the tonew ~~June 30,~~higher ~~2010~~prices, ~~our~~thereby ~~liquidity~~creating ~~and~~an ~~financial~~immediate ~~condition~~margin ~~would~~increase. ~~be adversely~~Our ~~impacted.~~ability Ifto ~~the~~increase ~~indebtedness~~our ~~under~~used ~~the~~textbook ~~Senior~~prices ~~Credit~~each ~~Facility~~fiscal isyear ~~not~~depends ~~extended~~on orannual ~~refinanced,~~price ~~the~~increases on ~~assets~~new oftextbooks ~~NBC~~implemented ~~may~~by ~~not~~publishers. beThe ~~sufficient~~failure of publishers to ~~repay~~continue inannual ~~full~~price increases ~~such~~on ~~indebtedness~~new ~~and~~textbooks ~~other~~could ~~indebtedness, including~~adversely ~~the~~impact ~~Senior~~our ~~Subordinated~~revenue ~~Notes~~levels and ~~Senior~~profit ~~Discount Notes~~margins. In ~~addition~~recent periods, ~~even~~annual ifincreases wein ~~are able~~prices tohave ~~extend~~allowed orus ~~refinance~~to ~~the~~partially ~~indebtedness~~offset ~~under~~a ~~the~~decline ~~Senior~~in ~~Credit~~unit ~~Facility~~sales, ~~the terms of the new~~ ~~financing~~however ~~may~~there ~~not~~is beno asguaranty ~~favorable~~that tothis uswill ~~as the terms of the existing financing~~continue.

WePublisher ~~may~~practices ~~not~~regarding benew ~~able~~editions toand ~~successfully~~materials ~~contract-manage~~packaged ~~additional~~with ~~bookstores~~new ortextbooks ~~integrate those~~could ~~additional stores~~change, ~~which~~thereby ~~could~~reducing ~~adversely~~the ~~impact~~supply ~~our ability to grow revenues and profit margins. Part~~ of ~~our~~used ~~business~~textbooks ~~strategy~~available is to ~~expand~~us ~~sales~~and ~~for~~adversely ~~our~~impacting ~~college bookstore operations by being~~our ~~awarded~~revenue ~~additional~~levels ~~contracts~~and toprofit ~~manage~~margins. ~~institutional~~Publishers ~~bookstores.~~have Wehistorically ~~may~~produced ~~not~~new beeditions ~~successful~~of intextbooks ~~competing~~every ~~for~~two ~~contracts~~ to ~~manage~~four ~~additional institutional stores~~years. ~~Due~~Changes toin the ~~seasonal~~business ~~nature~~models of ~~business~~ inpublishers ~~our~~to ~~bookstores,~~accelerate ~~operations may be affected by~~ the ~~time of the fiscal year when a~~new ~~bookstore~~edition iscycle ~~contract-managed~~or byto ~~us.~~significantly ~~The~~increase ~~process may require financial resources that would otherwise be available for our existing operations. Our integration of these future bookstores may not be successful; or,~~ the ~~anticipated~~number ~~strategic benefits~~ of ~~these~~textbooks ~~future~~with ~~bookstores~~other ~~may~~materials ~~not~~packaged ~~be realized~~ or ~~may not be realized within time frames contemplated by our management. Additional~~ ~~contract-managed~~bundled ~~stores~~with ~~may~~them ~~involve~~(which amakes ~~number~~it ofmore ~~special~~difficult ~~risks, including, but not limited~~ to~~, adverse~~ ~~short-term~~repurchase ~~effects~~and onresell ~~our~~the ~~reported~~entire ~~results~~package of materials) ~~operations,~~could ~~diversion~~reduce ofthe ~~management’s attention,~~supply ~~standardization~~ of ~~accounting~~used ~~systems,~~textbooks ~~dependence~~available onto ~~retaining~~us, ~~hiring~~thereby ~~and~~adversely ~~training key~~impacting ~~personnel, unanticipated problems or legal liabilities, and actions of~~ our ~~competitors~~revenue ~~and customers.~~levels ~~If we are unable to successfully integrate our future contract-managed stores for these or other reasons, anticipated revenues~~ and profit margins ~~from these new bookstores could be adversely impacted~~.

WeThe ~~may~~loss ~~not~~or beretirement ~~able~~of tokey ~~successfully~~members ~~renew~~of ~~our~~management ~~contract-managed~~may ~~bookstores at profitable terms~~occur, which could ~~adversely~~negatively ~~impact~~ affect our ~~profit~~ability ~~margins.~~to Asexecute ~~we expand~~ our ~~operations~~current ~~in contract-management~~strategy ofand/or ~~institutional~~our ~~bookstores,~~ability weto ~~will~~effectively ~~increasingly~~react beto ~~competing for the renewal~~changing ofindustry ~~our~~dynamics, ~~contracts~~thereby ~~for~~adversely ~~those~~impacting ~~stores~~our asrevenue ~~the~~levels ~~current~~and ~~contracts~~profit ~~expire~~margins. ~~Contracts~~Our ~~in the industry are~~future ~~typically~~success ~~for~~depends 3 to ~~5 years,~~a ~~with~~significant ~~various~~extent ~~renewal~~on the efforts and ~~cancellation~~abilities ~~clauses.~~of Weour ~~may~~senior ~~not~~management beteam. ~~successful~~The inloss ~~renewing~~of ~~our~~the ~~current~~services ~~contracts~~of orany ~~those~~one ~~renewals~~of ~~may~~these ~~not~~individuals becould onnegatively ~~terms~~affect ~~that~~our ~~provide~~ability usto ~~the~~execute ~~opportunity~~our tocurrent ~~improve~~strategy and/or ~~maintain~~our ~~the~~ability ~~profitability~~to ofeffectively ~~managing~~react ~~the~~to ~~store.~~changing Ifindustry ~~we are unable~~dynamics, tothereby ~~successfully~~adversely ~~renew~~impacting our ~~contracts~~revenue onlevels ~~profitable~~and ~~terms, our~~ profit margins ~~could be adversely impacted~~.

WeOur ~~may~~wholesale beand ~~unable~~bookstore tooperations ~~obtain~~are seasonal in nature — a ~~sufficient~~significant ~~supply~~reduction ofin sales ~~used~~during ~~textbooks,~~our ~~which~~peak selling periods could adversely impact our ~~revenue~~ability ~~levels~~to repay the ABL Facility, thereby increasing interest expense and ~~profit~~adversely ~~margins.~~impacting ~~Our~~revenue levels by restricting our ability to ~~purchase~~buy aan ~~sufficient~~adequate ~~number~~supply of used textbooks. ~~largely~~Our ~~determines~~wholesale and bookstore operations experience two distinct selling periods and our ~~used~~wholesale ~~textbook~~operations ~~sales~~experience ~~for~~two ~~future~~distinct buying periods. ~~Successfully~~The ~~acquiring~~peak selling periods for the wholesale operations occur prior to the beginning of each ~~books~~school ~~typically~~semester ~~requires~~in aJuly/August ~~visible~~and ~~presence~~November/December. onThe ~~college~~buying ~~campuses~~periods for the wholesale operations occur at the end of each school semester, ~~which~~in May and December. The primary selling ~~requires~~periods ~~hiring~~for athe ~~significant~~bookstore ~~number~~operations ofare ~~temporary~~in ~~personnel,~~August/September and ~~having~~January. ~~access~~In tofiscal ~~sufficient~~year ~~funds~~2010, 46% ~~under~~of our ~~Revolving~~annual ~~Credit~~revenues ~~Facility~~occurred orin ~~other~~the ~~financing~~second ~~alternatives~~fiscal toquarter ~~purchase~~(July-September), while 32% of our annual revenues occurred in the ~~books~~fourth fiscal quarter (January-March). ~~Textbook~~Accordingly, our working ~~acquisition~~capital ~~also~~requirements ~~depends~~fluctuate ~~upon~~throughout ~~college~~the ~~students’~~fiscal ~~willingness~~year, toincreasing ~~sell~~substantially ~~their~~in ~~used~~May ~~textbooks~~and December atas a result of the ~~end~~buying periods. We fund our working capital requirements primarily ofthrough ~~each~~the ~~semester~~ABL Facility. ~~The~~We ~~unavailability~~repay ofthe ~~sufficient~~ABL ~~personnel~~Facility orwith ~~credit,~~cash orprovided afrom ~~shift~~operations. A significant reduction in ~~student preferences,~~sales during our peak selling periods could ~~impair~~adversely impact our ability to ~~acquire~~repay ~~sufficient~~the ~~used~~ABL ~~textbooks~~Facility, toincrease ~~meet~~the ~~our~~average ~~sales~~balance outstanding under the ABL Facility (thereby ~~objectives~~resulting in increased interest expense), and restrict our ability to buy an adequate supply of used textbooks (thereby adversely impacting our revenue levels ~~and profit margins~~).

~~Publishers~~We ~~may~~are ~~not~~controlled ~~continue~~by toone ~~increase~~principal ~~prices~~equity ~~of textbooks annually~~holder, which ~~could~~has ~~adversely impact~~the ~~our~~power ~~revenue~~to ~~levels~~take unilateral action and ~~profit~~could ~~margins.~~have Wean ~~generally~~interest ~~buy~~in ~~used~~pursuing ~~textbooks~~acquisitions, ~~based~~divestitures onand ~~publishers’~~other transactions, ~~prevailing~~even ~~prices~~though ~~for~~such ~~new~~transactions ~~textbooks~~might ~~just~~involve ~~prior~~risks to ~~the~~other ~~implementation~~affected byparties. ~~publishers~~Weston Presidio beneficially owns approximately 81.4% of ~~their~~NBC’s ~~annual price~~issued ~~increases~~and outstanding common stock (~~which~~taking ~~historically~~into account ~~have~~for ~~been~~such 4%percentage tocalculation ~~5%)~~options outstanding and ~~resell~~options ~~these~~available, ~~textbooks~~if ~~shortly~~any, for ~~thereafter~~future ~~based~~grant ~~upon~~under the ~~new~~2004 ~~higher~~Stock ~~prices,~~Option ~~thereby~~Plan). ~~creating~~As ana ~~immediate~~result, ~~margin~~Weston ~~increase.~~Presidio ~~Our ability~~is able to ~~increase~~control all matters, including the election of a majority of our ~~used~~board ~~textbook~~of ~~prices~~directors, ~~each~~the ~~fiscal~~approval ~~year~~of amendments ~~depends~~to onNBC’s ~~annual~~and ~~price~~our ~~increases~~certificate onof incorporation and the approval of fundamental corporate ~~new~~transactions ~~textbooks~~such ~~implemented~~as bymergers ~~publishers~~and asset sales. The ~~failure~~interests of ~~publishers~~Weston toPresidio ~~continue~~may ~~annual~~not ~~price~~in all cases ~~increases~~be onaligned ~~new~~with ~~textbooks~~the ~~could~~interests ~~adversely~~of ~~impact~~other ~~our~~affected ~~revenue~~parties. ~~levels~~In addition, Weston Presidio may have an interest in pursuing acquisitions, divestitures and ~~profit~~other ~~margins~~transactions, including selling us, that, in its judgment, could affect its equity investment, even though such transactions might involve risks to other affected parties.

~~Publisher~~Our ~~practices~~substantial ~~regarding~~indebtedness ~~new editions and materials packaged with new textbooks~~ could ~~change,~~ ~~thereby~~limit ~~reducing~~cash ~~the~~flow ~~supply of used textbooks~~ available tofor usour operations and could adversely ~~impacting~~affect our ~~revenue~~ ~~levels~~ability ~~and~~to ~~profit~~service ~~margins.~~debt ~~Publishers~~or ~~have~~obtain ~~historically~~additional ~~produced~~financing, ~~new~~if ~~editions of textbooks every two to four years~~necessary. ~~Changes~~As ~~in the business models~~ of ~~publishers to accelerate the new~~ ~~edition~~March 31, ~~cycle~~2010, orwe tohad ~~significantly~~total ~~increase~~outstanding ~~the~~debt ~~number~~ of ~~textbooks~~approximately ~~with~~$377.6 million. ~~other~~Our ~~materials~~level ~~packaged or bundled with it (which makes it more difficult to repurchase and resell the entire package~~ of ~~materials)~~indebtedness could ~~reduce~~have ~~the~~important ~~supply~~consequences. ofFor ~~used textbooks available to us~~example, ~~thereby~~it ~~adversely impacting~~could: ~~our revenue levels and profit margins.~~

~~The~~• ~~loss~~make orit ~~retirement~~more ofdifficult ~~key members of management may occur, which could negatively affect our ability~~ to ~~execute~~pay our ~~current~~debts ~~strategy~~as ~~and/or~~they ~~our~~become ~~ability to effectively react to changing industry dynamics~~due, ~~thereby~~especially ~~adversely~~during ~~impacting~~general ~~our~~negative ~~revenue~~economic ~~levels~~ and ~~profit~~market ~~margins.~~industry ~~Our~~conditions ~~future success~~because ~~depends~~if ~~to a significant extent on the efforts and abilities of~~ our ~~senior~~revenues ~~management~~decrease ~~team. The~~due ~~loss~~to ofgeneral ~~the~~economic ~~services~~or ofindustry ~~any~~conditions, ~~one~~we ofmay ~~these~~not ~~individuals~~have ~~could~~sufficient ~~negatively~~cash ~~affect~~flow ~~our~~from ~~ability~~operations to ~~execute~~ ~~our~~make ~~current strategy and/or~~ our ~~ability~~scheduled todebt ~~effectively react to changing industry dynamics, thereby adversely impacting our revenue levels and profit margins.~~ payments;

~~Our~~• ~~wholesale~~limit ~~and~~our ~~bookstore~~flexibility ~~operations are seasonal~~ in ~~nature~~planning —for, aor ~~significant~~reacting ~~reduction in sales during our peak selling periods could adversely impact our ability~~ to ~~repay the Revolving Credit Facility~~, ~~thereby~~changes ~~increasing~~in ~~interest expense and adversely impacting revenue levels by restricting~~ our ~~ability~~business ~~to buy an adequate supply of used textbooks. Our wholesale~~ and ~~bookstore operations experience two distinct selling periods and our wholesale operations experience two distinct buying periods. The peak selling periods for~~ the ~~wholesale~~industry ~~operations occur prior to the beginning of each school semester~~ in ~~July/August~~which ~~and~~we ~~November/December.~~operate ~~The buying periods for the wholesale operations occur at the end of each school semester in May~~ and ~~December. The primary selling periods for the bookstore operations are in August/September and January. In fiscal year 2009~~, ~~46% of our annual revenues occurred in the second fiscal quarter (July-September)~~consequently, ~~while~~places ~~31% of~~us ~~our~~at annual revenues occurred in the fourth fiscal quarter (January-March). Accordingly, our working capital requirements fluctuate throughout the fiscal year, increasing substantially in May and December as a ~~result~~competitive ofdisadvantage ~~the~~to ~~buying periods. We fund~~ our ~~working~~competitors ~~capital requirements primarily through the Revolving Credit Facility, which historically has been repaid~~ with ~~cash~~less provided from operations. A significant reduction in sales during our peak selling periods could adversely impact our ability to repay the Revolving Credit Facility, increase the average balance outstanding under the Revolving Credit Facility (thereby resulting in increased interest expense), and restrict our ability to buy an adequate supply of used textbooks (thereby adversely impacting our revenue levels). debt;

We• ~~are~~require ~~controlled~~us ~~by one principal equity holder, who has the power~~ to ~~take~~dedicate unilateral action and could have an interest in pursuing acquisitions, divestitures and other transactions, even though such transactions might involve risks to other affected parties. Weston Presidio beneficially owns approximately 83.4% of NBC’s issued and outstanding common stock (taking into account for such percentage calculation options outstanding and options available, if any, for future grant under the 2004 Stock Option Plan). As a ~~result,~~substantial ~~Weston~~portion ~~Presidio is able to control all matters, including the election~~ of ~~a majority of~~ our ~~board~~cash offlow ~~directors,~~from ~~the~~operations ~~approval of amendments~~ to ~~NBC’s~~service ~~and~~ our ~~certificates~~debt, ofthereby ~~incorporation~~reducing ~~and~~ the ~~approval~~availability of ~~fundamental~~our ~~corporate transactions~~cash ~~such~~flow asto ~~mergers~~fund ~~and~~working ~~asset~~capital, ~~sales.~~capital ~~The interests of Weston Presidio may not in all cases be aligned with the interests of other affected parties. In addition~~expenditures, ~~Weston Presidio may have an interest in pursuing~~ acquisitions, ~~divestitures~~ and other ~~transactions,~~general ~~including~~corporate ~~selling us, that, in its judgment, could affect its equity investment, even though such transactions might involve risks to other affected parties.~~ purposes;

A• ~~portion~~limit of our ~~goodwill~~ability ~~recently became impaired and we may be required~~ to ~~write~~make ~~down additional~~strategic ~~amounts of goodwill or identifiable intangibles and record impairment charges if future circumstances indicate that goodwill or identifiable intangibles are impaired. We monitor relevant circumstances~~acquisitions, ~~including~~invest ~~industry trends, general economic conditions, and the potential impact that such circumstances might have on the valuation of our goodwill and identifiable intangibles. It is possible that changes~~ in ~~such~~new ~~circumstances,~~products or incapital ~~the~~assets numerous variables associated with the judgments, assumptions and estimates made by us in assessing the appropriate valuation of our goodwill and identifiable intangibles, could in the future require us to further write down a portion of our goodwill or ~~write~~take ~~down~~advantage ~~a portion~~ of ~~our~~business identifiable intangibles and record related non-cash impairment charges. We evaluate the impairment of the carrying value of our goodwill and identifiable intangibles in accordance with applicable accounting standards, including Statements of Financial Accounting Standards (“SFAS”) No. 142, Goodwill and Other Intangible Assets and No. 144, Impairment of Long-Lived Assets. In accordance with such standards, we evaluate impairment on goodwill and certain identifiable intangibles annually and evaluate impairment on all intangibles whenever events or changes in circumstances indicate that the carrying amounts of such assets may not be recoverable. Our evaluation of impairment is based on a combination of our projection of estimated future cash flows and other valuation methodologies. We recorded impairment charges of $107.0 million to reduce the carrying value of goodwill to its estimated fair value at March 31, 2009. 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.

Restrictive covenants may adversely affect our operations. The ABL Credit Agreement and the indentures governing the Senior Secured Notes, the Senior Subordinated Notes, and NBC’s Senior Discount Notes contain various covenants that limit our ability to, among other things:

•

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.

In addition, the restrictive covenants in the ABL Credit Agreement require us to maintain specified financial ratios and satisfy other financial condition tests. Our ability to meet those financial ratios and tests can be affected by events beyond our control, and we cannot assure you that we will meet them. A breach of any of these covenants could result in a default under the ABL Facility. Moreover, the occurrence of a default under the ABL Facility could result in an event of default under our other indebtedness including the Senior Subordinated Notes and the Senior Secured Notes and NBC’s Senior Discount Notes. Upon the occurrence of an event of default under the ABL Facility, the lenders could elect to declare all amounts outstanding under the ABL Facility to be immediately due and payable and terminate all commitments to extend further credit. If we were unable to repay those amounts, the lenders under the ABL Facility could proceed against the collateral granted to them to secure that indebtedness. We have pledged substantially all of our assets as collateral under the ABL Facility. If the lenders under the ABL Facility accelerate the repayment of borrowings, we cannot assure you that we will have sufficient assets to repay the ABL Facility and our other indebtedness or borrow sufficient funds to refinance such indebtedness. Even if we are able to obtain new financing, it may not be on commercially reasonable terms, or terms that are acceptable to us.

The amount of borrowings permitted under the ABL Facility may fluctuate significantly, and the maturity of the ABL Facility may be accelerated under certain circumstances, which may adversely affect our liquidity, financial position and results of operations. The amount of borrowings permitted at any time under the ABL Facility is limited to a monthly (or more frequently under certain circumstances) borrowing base valuation of our inventory, accounts receivable and certain cash balances. As a result, access to credit under the ABL Facility is potentially subject to significant fluctuations depending on the value of the eligible assets that comprise the borrowing base as of any measurement date, as well as certain discretionary rights of the agent in respect of the calculation of such borrowing base value. In addition, in the event that we fail to comply with the covenants and restrictions of the ABL Facility, we may be in default, at which time payment of the obligations and unpaid interest may be accelerated and become immediately due and payable under the ABL Facility, which may adversely affect our liquidity, financial position and results of operations.

A portion of our goodwill recently became impaired and we may be required to write down additional amounts of goodwill or identifiable intangibles and record impairment charges if future circumstances indicate that goodwill or identifiable intangibles are impaired. We monitor relevant circumstances, including industry trends, general economic conditions, and the potential impact that such circumstances might have on the valuation of our goodwill and identifiable intangibles. It is possible that changes in such circumstances, or in the numerous variables associated with the judgments, assumptions and estimates made by us in assessing the appropriate valuation of our goodwill and identifiable intangibles, could in the future require us to further write down a portion of our goodwill or write down a portion of our identifiable intangibles and record related non-cash impairment charges. We evaluate the impairment of the carrying value of our goodwill and identifiable intangibles in accordance with applicable accounting standards, including the Intangibles — Goodwill and Other and Property, Plant and Equipment Topics of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“Codification”). In accordance with such standards, we evaluate impairment on goodwill and certain identifiable intangibles annually and evaluate impairment on all intangibles whenever events or changes in circumstances indicate that the carrying amounts of such assets may not be recoverable. Our evaluation of impairment is based on a combination of our projection of estimated future cash flows and other valuation methodologies. We recorded impairment charges of $107.0 million to reduce the carrying value of goodwill to its estimated fair value at March 31, 2009. We completed our annual test for impairment during the fourth quarter for the year ended March 31, 2010 and no impairment was indicated. The goodwill impairment charge is described in greater detail in Note F of the notes to our consolidated financial statements.

Our operations are subject to various laws, rules and regulations relating to protection of the environment and of human health and safety. Our operations are subject to federal, state and local laws relating to the protection of the environment and of human health and safety. As an owner and operator of real property, we can be found jointly and severally liable under such laws for costs associated with investigating, removing and remediating any hazardous or toxic substances that may exist on, in or about our real property. This liability can be imposed without regard to whether the owner or operator had knowledge of, or was actually responsible for causing, the conditions being addressed. Some of our properties may have been impacted by the migration of hazardous substances released at neighboring third-party locations. In addition, it is possible that we may face claims alleging harmful exposure to, or property damage resulting from, the release of hazardous or toxic substances at or from our locations or otherwise related to our business. Environmental conditions relating to any former, current or future locations could adversely impact our business and results of operations.

Increases in the price of raw materials used by our suppliers or the reduced availability of raw materials to our suppliers could increase their cost of goods, which could be passed on to us through higher prices in new textbooks, clothing and general merchandise, which may decrease our profitability. The principal raw materials used by our suppliers are paper, various fabrics and plastics. The prices we pay our suppliers for new textbooks, clothing and general merchandise are dependent in part on the market price for raw materials used to produce them. The price and availability of such raw materials may fluctuate substantially, depending on a variety of factors, including demand, crop yields, weather, supply conditions, transportation costs, energy prices, work stoppages, government regulation, economic climates and other unpredictable factors. Any and all of these factors may be exacerbated by global climate change. Fluctuations in the price and availability of raw materials to our suppliers have not materially affected our profitability in recent years. However, increases in raw material costs, together with other factors, might cause an increase in the cost of goods for our suppliers which may be passed onto us through higher prices.

ITEM 2. PROPERTIES.

At March 31, ~~2009~~2010, our Bookstore Division locations consisted of the following: (i) 6 owned off-campus bookstore locations, (ii) ~~124~~128 leased off-campus bookstore locations, and (iii) ~~147~~146 leased on-campus (contract-managed) bookstore locations serving university and post-graduate educational institutions throughout the United States. These institutions serve more than 2.1 million students. We own our two Textbook Division warehouses (totaling 253,000 square feet) in Lincoln, Nebraska (one of which is also the location of our headquarters). Our distance education program resides in a leased facility with 49,500 square feet in Athens, Ohio. The lease, as amended, expires on May 31, 2011 and has one one-year option to renew.

ITEM 3. LEGAL PROCEEDINGS.

From time to time, we are subject to legal proceedings and other claims arising in the ordinary course of our business. We believe that currently we are not a party to any litigation the outcome of which would have a material adverse affect on our financial condition or results of operations. We maintain insurance coverage against claims in an amount which we believe to be adequate.

ITEM 4. ~~SUBMISSION~~RESERVED OFAND ~~MATTERS TO A VOTE OF SECURITY HOLDERS~~REMOVED.

No items were submitted to a vote by our security holders during the fourth quarter of fiscal year 2009.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

There were no equity securities issued by us during fiscal year ~~2009~~2010. There is no established public trading market for our common stock and all of our common stock is owned by NBC. As discussed in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations and Item 8, Financial Statements and Supplementary Data, the payment of dividends is subject to various restrictions under our debt instruments. For fiscal year 2010 and 2009, cash ~~dividends~~ dividends of $8.5 million were paid to NBC to provide funding for interest due and payable on NBC’s $77.0 million 11% senior discount notes. No dividends were declared on our common stock during ~~fiscal~~ ~~years~~fiscal ~~2008~~year ~~and 2007~~2008.

Additional information regarding equity compensation plans can be found in Item 12, Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

ITEM 6. SELECTED FINANCIAL DATA.

The table on the following page sets forth our selected historical consolidated financial and other data. The selected historical consolidated financial data was derived from our audited consolidated financial statements.

~~The~~ITEM ~~following~~6. ~~table~~SELECTED ~~should~~FINANCIAL be read in conjunction with Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations and our consolidated financial statements and the related notes thereto included in Item 8, Financial Statements and Supplementary DataDATA.

	Fiscal Years Ended
	March 31,			March 31,			March 31,			March 31,			March 31,
	2009			2008			2007			2006			2005
	(dollars in thousands)
Statement of Operations Data:
Revenues	$	610,716		$	581,248		$	544,428		$	420,108		$	402,154
Costs of sales (exclusive of depreciation shown below)		371,369			354,140			332,444			250,914			240,638
Gross profit		239,347			227,108			211,984			169,194			161,516
Operating expenses:
Selling, general and administrative (1)		168,315			157,193			143,096			107,991			100,513
Closure of California Warehouse		—			(36	)		774			—			—
Depreciation		7,603			7,209			5,916			4,913			4,908
Amortization		11,384			10,443			9,613			8,762			8,258
Goodwill impairment		106,972			—			—			—			—
Income (Loss) from operations		(54,927	)		52,299			52,585			47,528			47,837
Other expenses (income):
Interest expense		32,878			33,559			33,135			29,395			25,854
Interest income		(427	)		(1,332	)		(1,643	)		(1,275	)		(639	)
(Gain) Loss on derivative instrument		102			198			225			(525	)		—
Income (Loss) before income taxes		(87,480	)		19,874			20,868			19,933			22,622
Income tax expense		7,449			7,418			8,256			7,691			9,162
Net income (loss)	$	(94,929	)	$	12,456		$	12,612		$	12,242		$	13,460
Other Data:
Adjusted EBITDA (2)	$	71,032		$	69,951		$	68,114		$	61,203		$	61,003
Net cash flows from operating activities		31,666			20,864			27,432			22,498			16,944
Net cash flows from investing activities		(14,898	)		(22,179	)		(32,809	)		(18,122	)		(748	)
Net cash flows from financing activities		(2,055	)		(2,341	)		4,976			(2,218	)		18,248
Capital expenditures		7,979			7,261			6,543			7,312			7,666
Business acquisition expenditures (3)		6,321			14,682			25,874			10,849			20,160
Number of bookstores open at end of the period		277			260			244			139			124
Balance Sheet Data (At End of Period):
Cash and cash equivalents	$	44,038		$	29,326		$	32,983		$	33,383		$	31,224
Working capital		151,520			137,100			130,389			111,066			104,008
Total assets		608,067			702,087			695,489			645,346			627,239
Total debt, including current maturities		372,411			375,204			375,587			354,309			356,402

The following table sets forth our selected historical consolidated financial and other data and should be read in conjunction with Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations and our consolidated financial statements and the related notes thereto included in Item 8, Financial Statements and Supplementary Data. The selected historical consolidated financial data was derived from our audited consolidated financial statements.

(1)	Includes share-based compensation of $1,289; $1,041 and $997 for the fiscal years ended March 31, 2009, 2008 and 2007, respectively.
	Fiscal Years Ended
(2)	Adjusted EBITDA is defined as earnings before interest, taxes, depreciation, amortization, and goodwill impairment. There was no goodwill impairment in fiscal years 2008, 2007, 2006 and 2005; therefore, Adjusted EBITDA equals EBITDA for those years. As we are highly-leveraged and as our equity is not publicly-traded, management believes that non-GAAP financial measures, EBITDA and Adjusted EBITDA, are useful in measuring our liquidity and provide additional information for determining our ability to meet debt service requirements. The Senior Subordinated Notes and Senior Credit Facility also use EBITDA, as defined in those agreements, for certain financial covenants. EBITDA and Adjusted EBITDA do not represent and should not be considered as an alternative to net cash flows from operating activities as determined by accounting principles generally accepted in the United States of America (“GAAP”), and EBITDA and Adjusted EBITDA do not necessarily indicate whether cash flows will be sufficient for cash requirements. 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.
	March 31,			March 31,			March 31,			March 31,			March 31,
	2010			2009			2008			2007			2006
	(dollars in thousands)
Statement of Operations Data:
Revenues	$	605,494		$	610,716		$	581,248		$	544,428		$	420,108
Costs of sales (exclusive of depreciation shown below)		370,196			371,369			354,140			332,444			250,914
Gross profit		235,298			239,347			227,108			211,984			169,194
Operating expenses:
Selling, general and administrative (1)		161,858			168,315			157,193			143,096			107,991
Closure of California Warehouse		—			—			(36	)		774			—
Depreciation		8,517			7,603			7,209			5,916			4,913
Amortization		10,853			11,384			10,443			9,613			8,762
Goodwill impairment (2)		—			106,972			—			—			—
Income (Loss) from operations		54,070			(54,927	)		52,299			52,585			47,528
Other expenses (income):
Interest expense		40,680			32,878			33,559			33,135			29,395
Interest income		(180	)		(427	)		(1,332	)		(1,643	)		(1,275	)
Loss on early extinguishment of debt (3)		3,066			—			—			—			—
(Gain) Loss on derivative instrument (4)		—			102			198			225			(525	)
Income (Loss) before income taxes		10,504			(87,480	)		19,874			20,868			19,933
Income tax expense		3,142			7,449			7,418			8,256			7,691
Net income (loss)	$	7,362		$	(94,929	)	$	12,456		$	12,612		$	12,242
Other Data:
Adjusted EBITDA (5)	$	73,440		$	71,032		$	69,951		$	68,114		$	61,203
Net cash flows from operating activities		36,237			31,666			20,864			27,432			22,498
Net cash flows from investing activities		(8,766	)		(14,898	)		(22,179	)		(32,809	)		(18,122	)
Net cash flows from financing activities		(10,537	)		(2,055	)		(2,341	)		4,976			(2,218	)
Capital expenditures		5,411			7,979			7,261			6,543			7,312
Business acquisition expenditures (6)		2,848			6,321			14,682			25,874			10,849
Number of bookstores open at end of the period (7)		280			277			260			244			139
Balance Sheet Data (At End of Period):
Cash and cash equivalents	$	60,973		$	44,038		$	29,326		$	32,983		$	33,383
Working capital (8)		168,561			151,520			137,100			130,389			111,066
Total assets		615,505			608,067			702,087			695,489			645,346
Total debt, including current maturities		377,624			372,411			375,204			375,587			354,309


(1)		Includes share-based compensation of $1,107, $1,289, $1,041 and $997 for the fiscal years ended March 31, 2010, 2009, 2008 and 2007, 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 our goodwill impairment test conducted at March 31, 2009 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 in fiscal year 2009, which reduced our goodwill carrying value to $215,436 as of March 31, 2009. See Note F to our consolidated financial statements in Item 8, Financial Statements and Supplementary Data.

The following presentation reconciles Adjusted EBITDA with net cash flows from operating activities as presented in the Consolidated Statements of Cash Flows included in Item 8, Financial Statements and Supplementary Data:


(3)		The loss on early extinguishment of debt for the fiscal year ended March 31, 2010 relates to the write-off of debt issue costs as a result of the termination of the Term Loan and Revolving Credit Facility. See Note H to our consolidated financial statements in Item 8, Financial Statements and Supplementary Data.

(4)		Our interest rate swap agreement expired on September 30, 2008.

(5)		EBITDA is defined as earnings before interest, taxes, depreciation, and amortization. Adjusted EBITDA is EBITDA adjusted for goodwill impairment and for loss on early extinguishment of debt. There was no goodwill impairment or loss on early extinguishment of debt in fiscal years 2008, 2007 and 2006; therefore, Adjusted EBITDA equals EBITDA for those years. 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 below, 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. 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 H to the consolidated financial statements 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 are they a measure of our profitability because they do 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 provide a more complete understanding of our business than otherwise could be obtained absent this disclosure. Items excluded from EBITDA and Adjusted EBITDA, such as interest, taxes, depreciation, amortization, goodwill impairment, and loss on early extinguishment of debt, 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 companies.

	Fiscal Years Ended
	March 31,			March 31,			March 31,			March 31,			March 31,
	2009			2008			2007			2006			2005
	(dollars in thousands)
Adjusted EBITDA (2)	$	71,032		$	69,951		$	68,114		$	61,203		$	61,003
Adjustments to reconcile Adjusted EBITDA to net cash flows from operating activities:
Share-based compensation		1,288			1,041			997			—			—
Interest income		427			1,332			1,643			1,275			639
Provision for losses on receivables		1,367			468			834			231			316
Cash paid for interest		(30,654	)		(31,755	)		(31,388	)		(27,875	)		(25,796	)
Cash paid for income taxes		(9,930	)		(13,031	)		(6,551	)		(9,589	)		(4,946	)
(Gain) Loss on disposal of assets		125			285			(1	)		90			68
Due (to) from Parent		(3,160	)		(237	)		(84	)		(75	)		262
Changes in operating assets and liabilities, net of effect of acquisitions (4)		1,171			(7,190	)		(6,132	)		(2,762	)		(14,602	)
Net Cash Flows from Operating Activities	$	31,666		$	20,864		$	27,432		$	22,498		$	16,944

(3)		Business acquisition expenditures represent established businesses purchased by us.
(4)		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.

The following presentation reconciles net income (loss), which we believe to be the closest GAAP performance measure, to EBITDA and Adjusted EBITDA and reconciles EBITDA and Adjusted EBITDA to net cash flows from operating activities, which we believe to be the closest GAAP liquidity measure, as presented in the Consolidated Statements of Cash Flows included in Item 8, Financial Statements and Supplementary Data:


	Fiscal Years Ended
	March 31,			March 31,			March 31,			March 31,			March 31,
	2010			2009			2008			2007			2006
	(dollars in thousands)
Net income (loss)		7,362			(94,929	)		12,456			12,612			12,242

Interest expense, net		40,499			32,553			32,425			31,717			27,595
Income tax expense		3,142			7,449			7,418			8,256			7,691
Depreciation and amortization		19,371			18,987			17,652			15,529			13,675


EBITDA		70,374			(35,940	)		69,951			68,114			61,203

Goodwill impairment		—			106,972			—			—			—
Loss on early extinguishment of debt		3,066			—			—			—			—


Adjusted EBITDA (5)	$	73,440		$	71,032		$	69,951		$	68,114		$	61,203

Share-based compensation		1,107			1,288			1,041			997			—
Interest income		180			427			1,332			1,643			1,275
Provision for losses on receivables		1,399			1,367			468			834			231
Cash paid for interest		(29,102	)		(30,654	)		(31,755	)		(31,388	)		(27,875	)
Cash paid for income taxes		(3,155	)		(9,930	)		(13,031	)		(6,551	)		(9,589	)
(Gain) Loss on disposal of assets		235			125			285			(1	)		90
Due to Parent		(3,064	)		(3,160	)		(237	)		(84	)		(75	)

Changes in operating assets and liabilities, net of effect of acquisitions (9)		(4,803	)		1,171			(7,190	)		(6,132	)		(2,762	)

Net Cash Flows from Operating Activities	$	36,237		$	31,666		$	20,864		$	27,432		$	22,498


(6)		Business acquisition expenditures represent established businesses purchased by us.

(7)		On May 1, 2006, we acquired 101 college bookstore locations through the acquisition of all of the outstanding stock of CBA.

(8)		Working capital is defined as current assets minus current liabilities.

(9)		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.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussions should be read in conjunction with our consolidated financial statements and the related notes thereto included in Item 8, Financial Statements and Supplementary Data, and other information in this Annual Report on Form 10-K.

Executive Summary

Overview

Acquisitions. Our Bookstore Division continues to grow its number of bookstore locations~~. We~~ ~~acquired~~through 3acquisitions ~~bookstore~~and start-up locations. ~~and~~We initiated the contract-management of 1914 bookstore locations in 19 11 separate transactions and established the start-up of 26 bookstore locations during the fiscal year ended March 31, ~~2009~~2010. We believe there are attractive opportunities for us to continue to expand our chain of bookstores across the country.

Revenue Results. Consolidated revenues for the fiscal year ended March 31, ~~2009~~2010 ~~increased~~decreased $~~29.~~5.2 million, or 50.19%, from the fiscal year ended March 31, ~~2008~~2009. This ~~increase~~decrease iswas primarily ~~attributable~~ due to ~~growth~~a decrease in ~~the~~revenues ~~Bookstore Division, including acquisition activity and start-up growth since April 1, 2007. Revenues increased~~ in the Textbook Division ~~by 5.4%~~ as a result of ~~price~~ ~~increases that were partially offset by~~ a decrease in units sold. Revenues ~~decreased slightly~~increased in the ~~Complementary~~Bookstore ~~Services~~ Division primarily asdue ato ~~result~~acquisition ofactivity ~~decreased~~and ~~revenues from~~start-up ~~our~~growth ~~systems~~since ~~and~~April 1, ~~consulting~~2008. ~~businesses~~Revenues ~~which~~increased ~~was mostly offset by an increase~~ in ~~revenues~~the ~~from~~Complementary ~~our e-commerce~~Services ~~and~~Division ~~distance~~primarily ~~education businesses. Finally,~~ as a result of aincreased ~~shift in Textbook Division~~ revenues from our ~~own~~distance ~~bookstores~~education toand ~~independent~~e-commerce ~~bookstores~~businesses ~~(external~~which ~~customers), intercompany~~were ~~revenues~~partially ~~and~~offset ~~the~~by ~~corresponding~~a ~~intercompany~~decrease ~~eliminations~~in ~~for~~revenues ~~the fiscal year ended March 31, 2009 decreased~~ from ~~the~~our ~~fiscal~~consulting ~~year ended March 31, 2008~~business.

Adjusted EBITDA Results. Consolidated Adjusted EBITDA for the fiscal year ended March 31, ~~2009~~2010 increased $12.14 million, or 3.4%, from the fiscal year ended March 31, ~~2008~~2009. The Adjusted ~~EBITDA~~ EBITDA increase is attributable to an increase in our ~~Textbook~~Bookstore ~~Division~~and Complementary Services Divisions Adjusted EBITDA. and a lower Adjusted EBITDA loss in the Corporate Administration Division, which were offset by a decrease in the Adjusted EBITDA of the Textbook Division. Adjusted EBITDA in the Bookstore Division was ~~down~~up due primarily to lower ~~same~~selling, ~~store~~general ~~sales~~and administrative ~~combined~~expenses ~~with~~primarily ~~higher~~as a result of cost cutting measures implemented during the last ~~selling,~~quarter ~~general~~of fiscal 2009. Complementary Services Division Adjusted EBITDA was up primarily due to improved results from our distance education and ~~administrative~~e-commerce ~~expenses~~services businesses. Corporate Administration Adjusted EBITDA loss was down due to prior year costs related to an early retirement program and severance, which were not incurred again in ~~the~~fiscal ~~Complementary~~2010. ~~Services~~Adjusted EBITDA in the Textbook Division was down due primarily to lower ~~results~~revenues, ~~from~~which ~~our~~was ~~distance~~partially ~~education~~offset ~~business.~~by ~~Adjusted~~lower ~~EBITDA~~selling, isgeneral ~~considered~~and administrative expenses primarily as a result of cost cutting measures implemented during the last quarter of fiscal 2009. EBITDA and Adjusted EBITDA are considered non-GAAP ~~financial~~measures ~~measure~~ by the SEC, and therefore you should refer to the more detailed explanation of those ~~that~~measures ~~measure~~ that is provided ~~later in this section~~below.

~~Goodwill~~EBITDA ~~Impairment.~~is Indefined ~~fiscal~~as ~~year~~earnings ~~2009~~before interest, wetaxes, ~~recognized~~depreciation, and amortization. Adjusted EBITDA is EBITDA adjusted for goodwill impairment ~~charges~~and offor ~~$107.0~~loss on early extinguishment of ~~million~~debt. ~~due~~There towas ~~the~~no ~~economic~~goodwill ~~downturn~~impairment ~~and~~or ~~changes~~loss inon ~~some~~early ~~variables~~extinguishment ~~associated~~of ~~with~~debt for the ~~judgments~~fiscal year ended March 31, 2008; therefore, Adjusted EBITDA equals EBITDA for that period. As we are ~~assumptions~~highly-leveraged and ~~estimates~~as ~~made~~our byequity usis innot ~~assessing~~publicly-traded, ~~the~~management ~~valuation~~believes ofthat the ~~Company’s~~non-GAAP measures, ~~goodwill~~EBITDA and Adjusted EBITDA, are useful in evaluating our results and provide additional ~~including~~information ~~lower~~for ~~market~~determining ~~multiples~~our ability to meet debt service requirements. ~~Goodwill~~That belief is ~~disclosed~~driven by the consistent use of the measures in the ~~notes~~computations used to establish the ~~consolidated~~value ~~financial~~of our equity ~~statements~~over ~~presented~~the inpast ~~Item~~15 8years and the fact that our debt covenants also use those measures, ~~Financial~~as ~~Statements~~further described below, to measure and ~~Supplementary~~monitor ~~Data~~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 ~~Annual~~overall ~~Report~~performance, to assist onin ~~Form~~resource 10allocation decision-Kmaking, to develop our budget goals, to determine incentive compensation goals and payments, and to manage other expenditures among other uses.

~~Challenges~~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 ~~Expectations~~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. 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 H to the consolidated financial statements for disclosure of certain of our financial covenants.

We expect that we will continue to face challenges and opportunities similar to those which we have faced in the recent past and, in addition, new and different challenges and opportunities given the credit crisis and economic turmoil. We have experienced, and continue to experience, increasing competition for the supply of used textbooks from other textbook wholesalers and from student to student transactions, increasing competition from alternative media and alternative sources of textbooks for students, competition for contract-management opportunities and other challenges. We also believe that we will continue to face challenges and opportunities related to opening or contract-managing bookstores. Finally, we are uncertain what impact the recent downturn in general economic conditions and the ongoing disruption in the financial markets might have on our business, including our efforts to extend or refinance indebtedness under our Senior Credit Facility. Despite these challenges, we expect that we will continue to grow revenue and EBITDA on a consolidated basis in fiscal year 2010. We also expect that our capital expenditures will remain modest for a company of our size.

Fiscal Year Ended March 31, 2009 Compared With Fiscal Year Ended March 31, 2008.

Revenues. Revenues for the fiscal years ended March 31, 2009 and 2008 and the corresponding change in revenues were as follows:

	Fiscal Year Ended						Change
	March 31, 2009			March 31, 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	%

For the fiscal year ended March 31, 2009, Bookstore Division revenues increased $17.7 million, or 3.9%, from the fiscal year ended March 31, 2008. The increase in Bookstore Division revenues was primarily attributable to the addition of 47 bookstore locations through acquisitions or start-ups since April 1, 2007. The new bookstores provided an additional $34.1 million of revenue for the fiscal year ended March 31, 2009. Same-store sales for the fiscal year ended March 31, 2009 decreased $9.0 million, or 2.1%, from the fiscal year ended March 31, 2008, primarily due to decreased new textbook and clothing and insignia wear revenues which offset a small increase in revenues from used textbooks. The Company defines same-store sales for the fiscal year ended March 31, 2009 as sales from any store, even if expanded or relocated, that has been operated by the Company since the start of fiscal year 2008. Finally, revenues declined $7.5 million as a result of certain lost contract-managed stores and store closings since April 1, 2007.

For the fiscal year ended March 31, 2009, Textbook Division revenues increased $7.6 million, or 5.4%, from the fiscal year ended March 31, 2008, due primarily to an approximate 6.7% increase in the average price per book sold, which was offset in part by an approximate 1.7% decrease in units sold. Complementary Services Division revenues decreased slightly from the year ended March 31, 2008, as decreases in the systems and consulting businesses were mostly offset by an increase in revenue from our e-commerce and distance education businesses. Primarily as a result of a shift in Textbook Division revenues from our own bookstores to independent bookstores (external customers), intercompany revenues and the corresponding intercompany eliminations for the fiscal year ended March 31, 2009 decreased $4.3 million from the fiscal year ended March 31, 2008.

Gross profit. Gross profit for the fiscal year ended March 31, 2009 increased $12.2 million, or 5.4%, to $239.3 million from $227.1 million for the fiscal year ended March 31, 2008. The increase in gross profit was primarily attributable to the increase in revenues, as the consolidated gross margin percentage increased only slightly to 39.2% for the fiscal year ended March 31, 2009 from 39.1% for the fiscal year ended March 31, 2008. The increase in consolidated gross margin percentage is primarily attributable to improved margins in the Textbook Division offset by slightly lower gross margins in the Bookstore Division.

Selling, general and administrative expenses. Selling, general and administrative expenses for the fiscal year ended March 31, 2009 increased $11.1 million, or 7.1%, to $168.3 million from $157.2 million for the fiscal year ended March 31, 2008. Selling, general and administrative expenses as a percentage of revenues were 27.6% and 27.0% for the fiscal years ended March 31, 2009 and 2008, respectively. The increase in selling, general and administrative expenses includes a $4.9 million increase in personnel costs and a $3.6 million increase in rent which is primarily attributable to our continued growth in the Bookstore Division. The increase in personnel costs was partially due to approximately $1.1 million in personnel costs resulting from a voluntary early retirement plan and severance expenses in fiscal year 2009. Commission and shipping expenses also increased $0.9 million and $0.7 million, respectively, primarily due to increased Bookstore Division sales on the Internet involving third-party websites. Also included in the increase was $0.2 million in legal expenses related to the Senior Credit Facility amendment in February 2009.

~~Earnings~~There ~~(loss) before~~are ~~interest,~~material ~~taxes,~~limitations ~~depreciation,~~associated ~~amortization,~~with the use of EBITDA and ~~goodwill~~Adjusted ~~impairment~~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 GAAP. ~~Adjusted~~Furthermore, EBITDA and Adjusted EBITDA do not necessarily indicate whether cash flows will be sufficient for cash requirements because the ~~fiscal~~measures ~~years~~do ~~ended~~not ~~March 31~~include reductions for cash payments for our obligation to service our debt, ~~2009~~fund our working capital, make capital expenditures and ~~2008~~make acquisitions or pay our income taxes and dividends; nor are they a measure of our profitability because they do 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 provide a more complete ~~corresponding~~understanding ~~change~~of inour business than otherwise could be obtained absent this disclosure. Items excluded from EBITDA and Adjusted EBITDA, ~~were~~such as ~~follows:~~interest, taxes, depreciation, amortization, goodwill impairment, and loss on early extinguishment of debt, 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 companies.

	Fiscal Year Ended						Change
	March 31, 2009			March 31, 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	%

Challenges and Expectations

~~Bookstore~~We ~~Division~~expect ~~Adjusted~~that ~~EBITDA~~we ~~decreased~~will ~~$1.9 million,~~continue orto ~~4.2%,~~face aschallenges ~~increased~~and ~~revenues~~opportunities ~~were~~similar to those which we ~~offset~~have byfaced ain ~~slightly~~the ~~lower~~recent ~~gross~~past ~~profit~~and, ~~percentage~~in addition, new and ~~slightly~~different ~~higher~~challenges ~~selling,~~and opportunities given the general instability in the credit markets and ~~administrative~~ ~~expenses~~economy. asOur athree ~~percentage~~tranches of ~~revenues.~~debt ~~The~~(the Senior ~~$5.3 million~~Secured Notes, orthe ~~15.6%,~~ABL ~~increase~~Facility inand the Senior Subordinated Notes) each may mature within a ~~Textbook~~period ~~Division~~of ~~Adjusted~~six ~~EBITDA~~months ~~was~~of ~~primarily~~each ~~due~~other. Due to ~~the~~our ~~previously~~highly ~~mentioned~~leveraged ~~increase~~capital instructure, continued ~~revenues~~uncertainty ~~and~~in ~~gross~~the ~~profits,~~credit asmarkets ~~well~~and/or asour ~~control~~future results of ~~selling,~~operations ~~general~~may ~~and~~negatively ~~administrative~~impact ~~expenses.~~our ~~Complementary~~ability ~~Services~~to ~~Division~~extend ~~Adjusted~~or ~~EBITDA~~refinance ~~decreased~~our ~~$0.2 million~~existing debt on reasonable terms, or 15at all.3% We have experienced, ~~primarily~~and ~~due~~we believe we will continue to experience, increasing competition for the supply ~~lower~~of ~~results~~used intextbooks ~~our~~from ~~systems~~other companies, including other textbook wholesalers and ~~distance~~from student-to-student ~~education~~transactions, ~~businesses~~increasing ~~which~~competition ~~was~~from ~~partially~~alternative ~~offset~~media byand alternative ~~improved~~sources ~~results~~of intextbooks ~~our~~for ~~e-commerce~~students, ~~business.~~competition ~~Corporate~~for ~~Administration’s~~contract-management ~~Adjusted~~opportunities ~~EBITDA~~and ~~loss~~other ~~increased $2~~challenges.~~0 million~~ ~~primarily~~We ~~due~~also believe that we will continue to $1face challenges and opportunities related to acquisitions.~~1 million~~ inFinally, ~~current~~we ~~year~~are ~~costs~~uncertain ~~associated~~what ~~with~~impact the ~~voluntary~~ ~~early~~current ~~retirement~~economy ~~plan~~might ~~and~~have ~~severance~~on our business. Despite these challenges, ~~and~~we ~~legal~~expect ~~expenses~~that ~~related~~we will continue to ~~the~~grow ~~February 2009~~EBITDA on a ~~refinancing~~consolidated basis in fiscal year 2011. We also expect that our capital expenditures will remain modest for a company of our size.

~~Adjusted~~Fiscal ~~EBITDA~~Year isEnded ~~defined as earnings before interest~~March 31, ~~taxes,~~2010 ~~depreciation,~~Compared ~~amortization,~~With ~~and goodwill impairment.~~ Fiscal ~~year~~Year ~~2008~~Ended ~~does not include an adjustment to EBITDA for goodwill impairment. As we are highly-leveraged and as our equity is not publicly-traded~~March 31, management believes that non-GAAP financial measures, EBITDA and Adjusted EBITDA, are useful in measuring our liquidity and provides additional information for determining our ability to meet debt service requirements2009. ~~The Senior Subordinated Notes and Senior Credit Facility also use EBITDA, as defined~~ in those agreements, for certain financial covenants. EBITDA and Adjusted EBITDA do not represent and should not be considered as an alternative to net cash flows from operating activities as determined by GAAP, and EBITDA and Adjusted EBITDA do not necessarily indicate whether cash flows will be sufficient for cash requirements. 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 companies.

Revenues. Revenues for the fiscal years ended March 31, 2010 and 2009 and the corresponding change in revenues were as follows:


	Fiscal Years Ended						Change
	March 31, 2010			March 31, 2009			Amount			Percentage
Bookstore Division	$	472,492,275		$	472,038,009		$	454,266			0.1	%
Textbook Division		140,592,220			147,287,779			(6,695,559	)		(4.5	)%
Complementary Services Division		35,470,836			34,233,883			1,236,953			3.6	%
Intercompany Eliminations		(43,061,718	)		(42,843,490	)		(218,228	)		0.5	%

	$	605,493,613		$	610,716,181		$	(5,222,568	)		(0.9	)%

For the fiscal year ended March 31, 2010, Bookstore Division revenues increased $0.5 million, or 0.1%, from the fiscal year ended March 31, 2009. The increase in Bookstore Division revenues was primarily attributable to the addition of 44 bookstore locations through acquisitions or start-ups since April 1, 2008. The new bookstores provided an additional $21.6 million of revenue for the fiscal year ended March 31, 2010. Same-store sales for the fiscal year ended March 31, 2009 decreased $11.5 million, or 2.6%, from the fiscal year ended March 31, 2009, primarily due to decreased new and used textbook revenues and to a smaller decrease in clothing and insignia wear revenues. The same-store sale decrease in new and used textbooks is partly attributable to the rental program implemented in the fourth quarter of fiscal 2010 in our off-campus stores. If the books rented would have been sold instead, we estimate that same-store sales would have been approximately $4.4 million higher, lowering the same-store sales decrease to 1.6% for the current fiscal year. We define same-store sales for the fiscal year ended March 31, 2010 as sales from any store, even if expanded or relocated, that has been operated by us since the start of fiscal year 2009. Finally, revenues declined $9.6 million as a result of certain lost contract-managed stores and store closings since April 1, 2008.

~~The~~For ~~following~~the ~~presentation~~fiscal ~~reconciles~~year ~~Adjusted~~ended ~~EBITDA~~March 31, ~~with~~2010, ~~net~~Textbook ~~cash~~Division ~~flows~~revenues decreased $6.7 million, or 4.5%, from ~~operating~~the fiscal year ended March 31, 2009, due primarily to an approximate 4.8% decrease ~~activities~~in ~~and~~units ~~also~~sold, ~~sets~~which ~~forth~~was ~~net~~slightly ~~cash~~offset ~~flows~~by an approximate 0.2% increase in the average price per book sold. Complementary Services Division revenues increased $1.2 million, or 3.6%, from ~~investing~~the ~~and~~year ended ~~financing~~March 31, ~~activities~~2009, as ~~presented~~ increases in the ~~Consolidated~~distance ~~Statements~~education ofand ~~Cash~~e-commerce ~~Flows~~services ~~included~~businesses were mostly offset by a decrease in ~~Item~~revenues from our consulting business. Intercompany eliminations for the fiscal year ended March 831, ~~Financial~~2010 ~~Statements~~decreased ~~and~~$0.2 million from the fiscal year ~~Supplementary~~ended ~~Data:~~March 31, 2009.

	Fiscal Year Ended
	March 31, 2009			March 31, 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
Tax expense 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	)

Gross profit. Gross profit for the fiscal year ended March 31, 2010 decreased $4.0 million, or 1.7%, to $235.3 million from $239.3 million for the fiscal year ended March 31, 2009. The decrease in gross profit was primarily attributable to the decrease in revenues in the Textbook Division. The consolidated gross margin percentage decreased slightly to 38.9% for the fiscal year ended March 31, 2010 from 39.2% for the fiscal year ended March 31, 2009 primarily due to a decrease in gross margin percentage in the Textbook Division.

(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 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.

Selling, general and administrative expenses. Selling, general and administrative expenses for the fiscal year ended March 31, 2010 decreased $6.4 million, or 3.8%, to $161.9 million from $168.3 million for the fiscal year ended March 31, 2009. Selling, general and administrative expenses as a percentage of revenues were 26.7% and 27.6% for the fiscal years ended March 31, 2010 and 2009, respectively. The decrease in selling, general and administrative expenses includes a $10.3 million decrease in personnel costs and a $1.6 million decrease in advertising and travel expenses, which were primarily due to cost cutting measures implemented during the last quarter of fiscal 2009. These decreases were partially offset by a $4.2 million increase in commission expense, primarily due to an increase in sales on the internet involving third-party websites and a $1.8 million increase in rent, primarily due to an increase in the number of bookstores in the Bookstore Division.

~~Depreciation~~Earnings ~~expense.~~before ~~Depreciation~~interest, ~~expense~~taxes, ~~for~~depreciation, ~~the~~amortization, ~~fiscal~~goodwill ~~year ended March 31~~impairment, ~~2009~~and ~~increased~~loss on ~~$0.4 million,~~early orextinguishment ~~5.5%,~~of todebt $7(Adjusted EBITDA).~~6 million~~ ~~from~~Adjusted ~~$7.2 million~~EBITDA for the fiscal ~~year~~years ended March 31, ~~2008, due~~2010 ~~primarily~~and to2009 ~~growth~~and in the ~~Bookstore~~corresponding ~~Division~~change ~~(including~~in ~~new~~Adjusted ~~stores~~EBITDA ~~added~~were ~~since~~as ~~April 1, 2007~~follows: ~~and store remodeling projects).~~

Amortization expense. Amortization expense for the fiscal year ended March 31, 2009 increased $1.0 million, or 9.0%, to $11.4 million from $10.4 million for the fiscal year ended March 31, 2008, due in part to a $0.4 million increase in amortization of covenant not to compete agreements arising from bookstore acquisitions, $0.3 million increase in amortization of contract-managed acquisition costs primarily associated with contract-managed bookstore acquisitions/renewals occurring since April 1, 2007 and $0.2 million of amortization of certain contractual rights associated with a September 1, 2007 agreement with a third-party software company.


	Fiscal Years Ended						Change
	March 31, 2010			March 31, 2009			Amount			Percentage
Bookstore Division	$	45,685,171		$	44,029,528		$	1,655,643			3.8	%
Textbook Division		37,050,519			39,009,073			(1,958,554	)		(5.0	)%
Complementary Services Division		2,301,001			1,320,700			980,301			74.2	%
Corporate Administration		(11,597,268	)		(13,326,971	)		1,729,703			13.0	%

	$	73,439,423		$	71,032,330		$	2,407,093			3.4	%

~~Goodwill~~Bookstore ~~impairment.~~Division ~~During~~Adjusted ~~the~~EBITDA ~~fourth~~increased ~~quarter~~$1.7 million, ofor ~~2009~~3.8%, ~~the~~primarily ~~Company~~due ~~recognized~~to ~~a non-cash~~lower ~~charge~~selling, ofgeneral and administrative expenses. The $~~107~~2.0 million, ~~related~~or 5.0%, decrease in Textbook Division Adjusted EBITDA was primarily due to the ~~impairment~~previously ofmentioned ~~goodwill.~~decrease ~~The~~in ~~impairment~~revenues and gross profit, which ~~was determined~~were ~~during~~partially ~~our~~offset ~~2009~~by ~~annual~~a ~~impairment~~decrease ~~testing~~in selling, general and administrative expenses primarily as a result of ~~goodwill,~~cost iscutting ~~due~~measures toimplemented during the ~~economic~~last ~~downturn~~quarter of ~~and~~fiscal ~~changes~~2009. inComplementary ~~some~~Services ~~variables~~Division ~~associated~~Adjusted ~~with~~EBITDA ~~the~~increased ~~judgments,~~$1.0 million ~~assumptions~~primarily due to improved results in our e-commerce and ~~estimates~~distance ~~made~~education bybusinesses uswhich was partially offset inby ~~assessing~~lower ~~the~~results ~~valuation~~in ofour ~~the~~consulting ~~Company~~business. Corporate Administration’s ~~goodwill,~~Adjusted ~~including~~EBITDA ~~lower~~loss decreased ~~market multiples~~$1.7 million ~~No impairment~~primarily ~~charge~~due ~~was~~to ~~recorded~~expenses ~~for~~incurred in the prior year ~~ended~~that ~~March 31~~were not incurred again in fiscal 2010, ~~2008~~including $1.1 million of costs associated with a voluntary early retirement program and severance.

~~Interest~~For ~~expense,~~an ~~net.~~explanation ~~Interest~~of ~~expense,~~why ~~net~~EBITDA ~~for~~and ~~the~~Adjusted ~~fiscal~~EBITDA ~~year~~are ~~ended~~useful ~~March 31,~~measures ~~2009~~in evaluating our ~~increased~~operating ~~$0.2 million,~~results orand ~~0.4%,~~provide additional information for determining our ability to ~~$32.6~~meet debt ~~million~~service ~~from~~requirements, ~~$32~~see “Adjusted EBITDA Results” earlier in this Item.~~4 million~~ ~~for~~The ~~the~~following presentation ~~fiscal~~reconciles ~~year~~net ~~ended~~income ~~March 31~~(loss), ~~2008,~~which ~~due~~we ~~primarily~~believe to abe ~~$0.9~~the closest GAAP performance ~~million~~measure, ~~decline~~to inEBITDA ~~interest~~and ~~income~~Adjusted asEBITDA aand ~~result~~reconciles ofEBITDA ~~lower~~and ~~interest~~Adjusted ~~rates~~EBITDA onto ~~invested~~net ~~funds~~cash flows from operating activities, which ~~was offset~~we bybelieve ato ~~$0.7 million~~be ~~decrease~~the inclosest ~~Term~~GAAP ~~Loan~~liquidity ~~interest~~measure, ~~expense~~and also sets forth net cash flows from investing and financing activities as apresented ~~result~~in the Consolidated Statements of ~~lower~~Cash ~~variable interest~~Flows ~~rates.~~included in Item 8, Financial Statements and Supplementary Data:

Income taxes. Income tax expense for the fiscal year ended March 31, 2009 was comparable to fiscal year ended March 31, 2008 at $7.4 million. Our effective tax rate for the fiscal years ended March 31, 2009 and 2008 was (8.5)% and 37.3%, respectively. Our effective tax rate for fiscal year 2009 differs from the statutory tax rate primarily as a result of a pre-tax earnings charge for non-deductible goodwill impairment. Excluding the impact of the goodwill impairment charge, which was all attributed to non-deductible goodwill and as such is treated as a permanent difference for income tax purposes, our effective tax rate would have been 38.2% for the fiscal year ended March 31, 2009 as compared to 37.3% for the fiscal year ended March 31, 2008. The lower effective tax rate in fiscal year 2008 is due primarily to the recognition of certain state income tax benefits in connection with a state tax incentive program.


	Fiscal Years Ended
	March 31, 2010			March 31, 2009
Net income (loss)		7,362,198			(94,928,668	)

Interest expense, net		40,499,120			32,553,689
Income tax expense		3,142,094			7,448,658
Depreciation and amortization		19,370,252			18,986,651


EBITDA		70,373,664			(35,939,670	)

Goodwill impairment		—			106,972,000
Loss on early extinguishment of debt		3,065,759			—


Adjusted EBITDA (1)	$	73,439,423		$	71,032,330

Share-based compensation		1,106,882			1,288,543
Interest income		180,709			426,536
Provision for losses on receivables		1,399,466			1,366,979
Cash paid for interest		(29,102,221	)		(30,653,694	)
Cash paid for income taxes		(3,155,473	)		(9,930,165	)
Loss on disposal of assets		235,803			124,871
Tax expense due to parent		(3,064,522	)		(3,160,038	)
Changes in operating assets and liabilities, net of effect of acquisitions (2)		(4,803,359	)		1,170,551

Net Cash Flows from Operating Activities	$	36,236,708		$	31,665,913

Net Cash Flows from Investing Activities	$	(8,765,940	)	$	(14,898,403	)


Net Cash Flows from Financing Activities	$	(10,536,611	)	$	(2,055,498	)


(1)		March 31, 2010 Adjusted EBITDA includes an adjustment for loss on early extinguishment of debt and March 31, 2009 Adjusted EBITDA includes an adjustment for goodwill impairment.

(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.

Depreciation expense. Depreciation expense for the fiscal year ended March 31, 2010 increased $0.9 million, or 12.0%, to $8.5 million from $7.6 million for the fiscal year ended March 31, 2009, due primarily to new bookstores added since April 1, 2008 and bookstore remodeling projects.

Amortization expense. Amortization expense for the fiscal year ended March 31, 2010 decreased $0.5 million, or 4.7%, to $10.9 million from $11.4 million for the fiscal year ended March 31, 2009, primarily due to a $0.5 million decrease in amortization of covenant not to compete agreements arising from bookstore acquisitions.

Goodwill impairment. During the fourth quarter of 2009, we recognized a non-cash charge of $107.0 million related to the impairment of goodwill. The impairment, which was determined during our 2009 annual impairment testing of goodwill conducted at March 31, was due to the economic downturn and changes in some variables associated with the judgments, assumptions and estimates made by us in assessing the valuation of our goodwill, including lower market multiples. No impairment charge was recorded for the year ended March 31, 2010.

~~Fiscal~~Interest ~~Year~~expense, net. Interest expense, net for the fiscal year ended March 31, ~~2008~~2010 increased ~~Compared~~$7.9 million, ~~With~~or ~~Fiscal~~24.4%, ~~Year~~to ~~ended~~$40.5 million from $32.6 million for the fiscal year ended March 31, ~~2007~~2009, due primarily to a $5.7 million increase in interest on the Term Loan and Senior Secured Notes mainly due to higher interest rates and a $2.6 million increase in amortization of additional prepaid loan costs related to the issuance of the Senior Secured Notes and entering into the ABL Credit Agreement. These increases were partially offset by a $0.6 million decline in interest on the Revolving Credit Facility due to lower outstanding indebtedness.

~~Revenues~~Loss on early extinguishment of debt. ~~Revenues~~The ~~for~~loss on extinguishment of debt of $3.1 million for the fiscal ~~years~~year ended March 31, ~~2008~~2010 ~~and~~relates ~~2007~~to ~~and~~ the ~~corresponding change~~write-off inof ~~revenues~~debt ~~were~~issue costs as ~~follows:~~a result of the termination of the Term Loan and Revolving Credit Facility.

	Fiscal Year Ended						Change
	March 31, 2008			March 31, 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	%

Income taxes. Income tax expense for the fiscal year ended March 31, 2010 decreased $4.3 million to $3.1 million from $7.4 million for the fiscal year ended March 31, 2009. Our effective tax rate for the fiscal years ended March 31, 2010 and 2009 was 29.9% and (8.5)%, respectively. Our effective tax rate for fiscal year 2010 differs from the statutory tax rate primarily due to the adjustment of the deferred tax rate and the change in NOL carryforward benefit. The effective tax rate would have been 41.4% without the effect of the adjustment to the deferred tax rate and change in NOL carryforward benefit. Our effective tax rate for fiscal year 2009 differs from the statutory tax rate primarily as a result of a pre-tax earnings charge for non-deductible goodwill impairment. Excluding the impact of the goodwill impairment charge, which was all attributed to non-deductible goodwill and as such is treated as a permanent difference for income tax purposes, our effective tax rate would have been 38.2% for the fiscal year ended March 31, 2009.

~~The~~Fiscal ~~increase~~Year in Bookstore Division revenues was primarily attributable to the addition of 143 bookstore locations through acquisitions or start-ups since April 1, 2006 and improved same store sales. The new bookstores (which include the impact of bookstores acquired on or after April 1, 2006 and subsequently closed) provided an additional $24.8 million of revenue for the fiscal year ended March 31, ~~2008.~~2009 ~~Same-store~~Compared ~~sales~~With ~~for~~Fiscal ~~the~~Year ~~fiscal year~~ ended March 31, 2008 ~~increased $12~~.1 million, or 4.0%, from the fiscal year ended March 31, 2007, primarily due to increased used textbook and clothing and insignia wear revenues. The Company defines same-store sales for the fiscal year ended March 31, 2008 as sales from any store, even if expanded or relocated, that has been operated by the Company since the start of fiscal year 2007. Finally, revenues declined $1.0 million as a result of certain store closings (excluding the impact of bookstores acquired on or after April 1, 2006 which were subsequently closed) since April 1, 2006.

~~For the fiscal year ended March 31, 2008, Textbook Division revenues increased 2~~Revenues.9% ~~from~~Revenues for the fiscal ~~year~~years ended March 31, ~~2007~~2009 ~~due primarily to an approximate 5.2% increase in the average price per book sold~~ and ~~lower~~2008 returns that was partially offset by an approximate 3.6% decrease in units sold. Complementary Services Division revenues increased primarily due to strong results in the distance education business. As a result of our growth in the Bookstore Division, intercompany revenues and the corresponding ~~intercompany eliminations for the fiscal year ended March 31, 2008~~ ~~increased~~change ~~$4.8 million and $0.3 million~~ in ~~the~~revenues ~~Textbook~~were ~~and~~as ~~Complementary Services Divisions,~~follows: ~~respectively, from the fiscal year ended March 31, 2007.~~

Gross profit. Gross profit for the fiscal year ended March 31, 2008 increased $15.1 million, or 7.1%, to $227.1 million from $212.0 million for the fiscal year ended March 31, 2007. The increase in gross profit was primarily attributable to the increase in revenues, as the consolidated gross margin percentage increased slightly to 39.1% for the fiscal year ended March 31, 2008 from 38.9% for the fiscal year ended March 31, 2007. The increase in consolidated gross margin percentage is primarily attributable to an increase in revenues coming from higher margin used textbooks in the Bookstore Division and to overall improvement in gross margin from the bookstores acquired in the CBA transaction.


	Fiscal Years Ended						Change
	March 31, 2009			March 31, 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	%

~~Selling,~~For ~~general~~the ~~and~~fiscal ~~administrative~~year ~~expenses.~~ended ~~Selling~~March 31, ~~general~~2009, ~~and~~Bookstore ~~administrative~~Division ~~expenses~~revenues ~~for~~increased $17.7 million, or 3.9%, from the fiscal year ended March 31, 2008. ~~increased~~The ~~$14.1 million,~~increase orin ~~9.9%,~~Bookstore Division revenues was primarily attributable to ~~$157.2 million~~the ~~from~~addition of 47 bookstore locations through acquisitions or start-ups since April 1, 2007. The new bookstores provided an additional $~~143~~34.1 million of revenue for the fiscal year ended March 31, ~~2007~~2009. ~~Selling,~~Same-store ~~general~~sales ~~and~~for ~~administrative expenses~~the asfiscal ayear ~~percentage~~ended ofMarch 31, 2009 ~~revenues~~decreased ~~were 27~~$9.0% million, ~~and~~or 262.31%, ~~for~~from the fiscal ~~years~~year ended March 31, 2008 ~~and 2007~~, ~~respectively.~~primarily ~~The~~due ~~increase~~to decreased innew ~~selling,~~textbook ~~general~~and clothing and ~~administrative~~insignia ~~expenses,~~wear revenues which ~~includes~~ offset a ~~$4.3 million~~small increase in revenues ~~commission~~from ~~expense,~~used ~~a $3~~textbooks.~~1 million~~ ~~increase~~We indefine ~~rent,~~same-store asales ~~$2.5 million~~for ~~increase~~the infiscal ~~shipping~~year ~~expense~~ended ~~and~~March 31, a2009 as ~~$2.0 million~~sales ~~increase~~from inany ~~personnel~~store, ~~costs~~even if expanded or relocated, isthat ~~primarily attributable~~has tobeen ~~our~~operated ~~continued~~by ~~growth~~us insince the start ~~Bookstore~~of ~~Division.~~fiscal ~~The~~year ~~increased~~2008. ~~commission~~Finally, ~~and shipping~~revenues ~~expenses~~declined ~~were~~$7.5 million ~~primarily~~as ~~due~~a toresult ~~increased~~of ~~Bookstore~~certain ~~Division~~lost contract-managed ~~sales~~bookstores onand ~~the~~store ~~Internet involving~~closings ~~third-party~~since ~~websites~~April 1, 2007.

~~Closure~~For ofthe ~~California~~fiscal ~~warehouse~~year ~~expenses.~~ended ~~Closure~~March 31, of2009, ~~California~~Textbook ~~warehouse~~Division ~~expenses~~revenues ~~are~~increased $7.6 million, ~~attributable~~or to5.4%, ~~costs~~from ~~associated~~the ~~with~~fiscal ~~the~~year ~~October~~ended March 2731, ~~2006~~2008 ~~closure~~due ofprimarily ~~our~~to ~~California~~an ~~warehouse~~approximate 6.7% increase in ~~facility~~the average price per book sold, ~~including~~which ~~one-time~~was ~~termination~~offset ~~benefits~~in part by an approximate 1.7% decrease in units sold. Complementary Services Division revenues decreased slightly from the year ended March 31, 2008, ~~costs~~as todecreases ~~terminate~~in ~~contracts~~the systems and ~~costs~~consulting ofbusinesses were mostly offset by an increase in ~~consolidation/relocation.~~revenue ~~Payments~~from ofour ~~one~~e-~~time~~commerce ~~termination~~services ~~benefits~~and ~~extended~~distance ~~through~~education ~~April~~businesses. Primarily as a result of ~~2008~~a ~~and~~shift ~~were~~in ~~slightly~~Textbook ~~lower~~Division ~~than~~revenues from our own bookstores to independent bookstores (external customers), intercompany revenues and the ~~remaining~~corresponding ~~accrual~~intercompany eliminations for ~~such~~the ~~benefits~~fiscal year atended March 31, ~~2007,~~2009 ~~resulting in~~decreased an$4.3 million ~~adjustment~~from to the ~~accrual during~~ fiscal year ended March 31, 2008.

Gross profit. Gross profit for the fiscal year ended March 31, 2009 increased $12.2 million, or 5.4%, to $239.3 million from $227.1 million for the fiscal year ended March 31, 2008. The increase in gross profit was primarily attributable to the increase in revenues, as the consolidated gross margin percentage increased only slightly to 39.2% for the fiscal year ended March 31, 2009 from 39.1% for the fiscal year ended March 31, 2008. The increase in consolidated gross margin percentage was primarily attributable to improved margins in the Textbook Division offset by slightly lower gross margins in the Bookstore Division.

~~Earnings~~Selling, ~~(loss)~~general and administrative expenses. Selling, general and administrative expenses for the fiscal year ended March ~~before~~31, ~~interest~~2009 increased $11.1 million, ~~taxes~~or 7.1%, ~~depreciation~~to $168.3 million from $157.2 million for the fiscal year ended March 31, 2008. Selling, general and ~~amortization~~administrative expenses ~~(EBITDA)~~as a percentage of revenues were 27.6% ~~EBITDA~~and 27.0% for the fiscal years ended March 31, 2009 and 2008, respectively. The increase in selling, general and ~~2007~~administrative expenses includes a $4.9 million increase in personnel costs and a $3.6 million increase in rent which was primarily attributable to our continued growth in the ~~corresponding~~Bookstore ~~change~~Division. The increase in ~~EBITDA~~personnel ~~were~~costs was aspartially due to approximately $1.1 million in personnel costs resulting from a voluntary early ~~follows:~~retirement plan and severance expenses in fiscal year 2009. Commission and shipping expenses also increased $0.9 million and $0.7 million, respectively, primarily due to increased Bookstore Division sales on the internet involving third-party websites. Also included in the increase in selling, general and administrative expenses was $0.2 million in legal expenses related to our Senior Credit Facility amendment in February, 2009.

	Fiscal Year Ended						Change
	March 31, 2008			March 31, 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	%

Earnings before interest, taxes, depreciation, amortization, and goodwill impairment (Adjusted EBITDA). Adjusted EBITDA for the fiscal years ended March 31, 2009 and 2008 and the corresponding change in Adjusted EBITDA were as follows:

The increase in Bookstore Division EBITDA was primarily due to the previously mentioned increase in revenues and gross profit offset partially by increased selling, general and administrative expenses. The increase in Textbook Division EBITDA was primarily due to the previously mentioned increase in revenues, as well as solid control of expenses and $0.8 million of expenses incurred in the fiscal year ended March 31, 2007 associated with the closure of our California warehouse. The decrease in Complementary Services Division EBITDA was primarily due to lower results in our systems businesses. Corporate Administration’s EBITDA loss was flat in comparison to the prior fiscal year.


	Fiscal Years Ended						Change
	March 31, 2009			March 31, 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	%

~~EBITDA~~Bookstore isDivision ~~defined~~Adjusted asEBITDA ~~earnings~~decreased ~~before interest~~$1.9 million, ~~taxes,~~or ~~depreciation~~4.2%, ~~and~~as ~~amortization.~~increased Asrevenues wewere ~~are~~offset ~~highly-leveraged~~by ~~and~~a asslightly ~~our~~lower ~~equity~~gross isprofit ~~not~~percentage ~~publicly-traded,~~and ~~management~~slightly ~~believes~~higher ~~that~~selling, ageneral ~~non-GAAP~~and ~~financial~~administrative ~~measure,~~expenses ~~EBITDA,~~as isa ~~useful~~percentage inof ~~measuring~~revenues. ~~our~~The ~~liquidity~~$5.3 million, ~~and~~or ~~provides~~15.6%, ~~additional~~increase ~~information~~in ~~for~~Textbook ~~determining~~Division ~~our~~Adjusted ~~ability~~EBITDA towas ~~meet~~primarily ~~debt~~due ~~service~~to ~~requirements.~~the ~~The~~previously ~~Senior~~mentioned ~~Subordinated~~increase ~~Notes~~in revenues and ~~Senior~~ ~~Credit~~gross ~~Facility also use EBITDA~~profits, as ~~defined~~well inas ~~those~~control ~~agreements~~of selling, ~~for~~general ~~certain~~and ~~financial covenants~~administrative expenses. Complementary ~~EBITDA~~Services ~~does~~Division ~~not~~Adjusted ~~represent~~EBITDA ~~and~~decreased ~~should~~$0.2 million, ~~not~~or be15.3%, ~~considered~~primarily asdue ~~an alternative~~ to ~~net cash~~ ~~flows~~lower ~~from~~results ~~operating~~in ~~activities~~our assystems ~~determined~~and bydistance ~~GAAP,~~education ~~and~~businesses ~~EBITDA~~which ~~does~~was ~~not~~partially ~~necessarily~~offset ~~indicate~~by ~~whether~~improved ~~cash~~results ~~flows~~in ~~will~~our bee-commerce ~~sufficient for cash requirements~~business. ~~Items~~Corporate ~~excluded~~Administration’s ~~from~~Adjusted EBITDA, ~~such as~~loss ~~interest,~~increased ~~taxes,~~$2.0 million ~~depreciation~~primarily ~~and~~due ~~amortization,~~to ~~are~~$1.1 million ~~significant components~~ in ~~understanding~~current ~~and assessing~~year ~~our~~costs ~~financial~~associated ~~performance.~~with ~~EBITDA~~the voluntary ~~measures~~early ~~presented~~retirement ~~may~~plan ~~not~~and beseverance, ~~comparable~~and tolegal ~~similarly titled~~expenses ~~measures~~related ~~presented~~to bythe ~~other~~February, ~~companies~~2009 refinancing.

For an explanation of why EBITDA and Adjusted EBITDA are useful measures in evaluating our operating results and provide additional information for determining our ability to meet debt service requirements, see “Adjusted EBITDA Results” earlier in this Item. The following presentation reconciles net income (loss), which we believe to be the closest GAAP performance measure, to EBITDA ~~with~~and Adjusted EBITDA and reconciles EBITDA and Adjusted EBITDA to net cash flows from operating activities, which we believe to be the closest GAAP liquidity measure, and also sets forth net cash flows from investing and financing activities as presented in the ~~Consolidated~~ Consolidated Statements of Cash Flows included in Item 8, Financial Statements and Supplementary Data:

	Fiscal Year Ended
	Fiscal Years Ended
	March 31, 2008			March 31, 2007
	March 31, 2009			March 31, 2008
EBITDA	$	69,950,943		$	68,113,873
Net income (loss)		(94,928,668	)		12,456,023
Adjustments to reconcile EBITDA to net cash flows from operating activities:
Interest expense, net		32,553,689			32,424,742
Share-based compensation		1,040,599			996,957
Income tax expense		7,448,658			7,418,339
Interest income		1,332,497			1,643,598
Depreciation and amortization		18,986,651			17,651,839
Provision for losses on receivables		468,007			834,442
EBITDA		(35,939,670	)		69,950,943
Cash paid for interest		(31,755,319	)		(31,388,513	)
Goodwill impairment		106,972,000			—
Cash paid for income taxes		(13,030,853	)		(6,551,344	)
Adjusted EBITDA	$	71,032,330		$	69,950,943
(Gain) Loss on disposal of assets		284,891			(575	)
Share-based compensation		1,288,543			1,040,599
Tax expense due to parent		(236,872	)		(83,597	)
Interest income		426,536			1,332,497
Changes in operating assets and liabilities, net of effect of acquisitions (1)		(7,190,132	)		(6,132,260	)
Provision for losses on receivables		1,366,979			468,007
Net Cash Flows from Operating Activities	$	20,863,761		$	27,432,581
Cash paid for interest		(30,653,694	)		(31,755,319	)
Net Cash Flows from Investing Activities	$	(22,179,160	)	$	(32,808,754	)
Cash paid for income taxes		(9,930,165	)		(13,030,853	)
Net Cash Flows from Financing Activities	$	(2,341,021	)	$	4,976,327
Loss on disposal of assets		124,871			284,891
Tax expense due to parent		(3,160,038	)		(236,872	)
Changes in operating assets and liabilities, net of effect of acquisitions (1)		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)		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.

Depreciation expense. Depreciation expense for the fiscal year ended March 31, ~~2008~~2009 increased $10.34 million, or 215.95%, to $7.26 million from $57.92 million for the fiscal year ended March 31, ~~2007~~2008, due primarily to growth in the Bookstore Division (including new ~~stores~~bookstores added since April 1, ~~2006,~~ a2007 ~~new capital lease,~~ and ~~store~~bookstore remodeling projects).

Amortization expense. Amortization expense for the fiscal year ended March 31, ~~2008~~2009 increased $01.80 million, or 89.60%, to $1011.4 million from $910.64 million for the fiscal year ended March 31, ~~2007,~~ 2008, due in part to a $0.4 million increase in amortization of covenant not to compete agreements arising from bookstore acquisitions, a $0.3 million increase in amortization of contract-managed acquisition costs primarily associated with contract-managed bookstore acquisitions/renewals occurring since April 1, ~~2006~~ 2007 and $0.32 million of amortization of certain contractual rights associated with a September 1, 2007 agreement with a third-party software company.

~~Interest~~Goodwill ~~expense, net~~impairment. ~~Interest~~During ~~expense,~~the ~~net~~fourth ~~for~~quarter ~~the~~of ~~fiscal~~2009, ~~year~~we ~~ended~~recognized ~~March 31,~~a ~~2008 increased~~non-cash charge of $0107.70 million, orrelated 2to the impairment of goodwill.2% The impairment, towhich ~~$32.4 million~~was ~~from~~determined ~~$31.7 million~~during our ~~for~~2009 annual impairment testing of goodwill, was due to the ~~fiscal~~economic ~~year~~downturn ~~ended~~and changes in ~~March 31,~~some ~~2007~~variables associated with the judgments, ~~due~~assumptions ~~primarily~~and toestimates amade ~~$0.3 million~~by ~~decline~~us in ~~interest~~assessing ~~income~~the valuation of our goodwill, including lower market multiples. No impairment charge was recorded for the year ended March 31, 2008.

Income taxes. Income tax expense for the fiscal year ended March 31, 2008 decreased $0.9 million to $7.4 million from $8.3 million for the fiscal year ended March 31, 2007. Our effective tax rate for the fiscal years ended March 31, 2008 and 2007 was 37.3% and 39.6%, respectively. Our effective tax rate for fiscal year 2008 differs from the statutory tax rate primarily as a result of state income taxes. The lower effective tax rate in fiscal year 2008 is due primarily to the recognition of certain state income tax benefits in connection with a state tax incentive program.

Interest expense, net. Interest expense, net for the fiscal year ended March 31, 2009 increased $0.2 million, or 0.4%, to $32.6 million from $32.4 million for the fiscal year ended March 31, 2008, due primarily to a $0.9 million decline in interest income as a result of lower interest rates on invested funds, which was offset by a $0.7 million decrease in Term Loan interest expense as a result of lower variable interest rates.

Income taxes. Income tax expense for the fiscal year ended March 31, 2009 was comparable to fiscal year ended March 31, 2008 at $7.4 million. Our effective tax rate for the fiscal years ended March 31, 2009 and 2008 was (8.5)% and 37.3%, respectively. Our effective tax rate for fiscal year 2009 differs from the statutory tax rate primarily as a result of a pre-tax earnings charge for non-deductible goodwill impairment. Excluding the impact of the goodwill impairment charge, which was all attributed to non-deductible goodwill and as such is treated as a permanent difference for income tax purposes, our effective tax rate would have been 38.2% for the fiscal year ended March 31, 2009 as compared to 37.3% for the fiscal year ended March 31, 2008. The lower effective tax rate in fiscal year 2008 is due primarily to the recognition of certain state income tax benefits in connection with a state tax incentive program.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, we evaluate our estimates and judgments, including those related to returns, bad debts, inventory valuation and obsolescence, goodwill and intangible assets, rebate programs, income taxes, and contingencies and litigation. We base our estimates and judgments on historical experience and on various other factors that ~~management~~ management believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe the following critical accounting policies, among others, affect our more significant judgments and estimates used in the preparation of our consolidated ~~financial~~ financial statements:

Revenue Recognition. We recognize revenue from Textbook Division sales at the time of shipment. We have established a program which, under certain conditions, enables our customers to return textbooks. We record reductions to revenue and costs of sales for the estimated impact of textbooks with return privileges which have yet to be returned to the Textbook Division. External customer returns over the past three fiscal years have ranged from approximately 22.9% to 24.8% of sales. Additional reductions to revenue and costs of sales may be required if the actual rate of ~~returns~~ returns exceeds the estimated rate of returns. ~~The~~Consistent with prior years, the estimated rate of returns is determined utilizing actual historical return experience. The accrual rate for customer returns at March 31, 2010 was approximately 24.5% of sales.

Bad Debts. We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. InConsistent with prior years, in determining the adequacy of the allowance, we analyze the aging of the receivable, the customer’s financial position, historical collection experience, and other economic and industry factors. IfNet charge-offs over the past three fiscal years have been between $0.5 million and $1.4 million, or 0.1% to 0.3%, of revenues. We have maintained an allowance for doubtful accounts between $1.0 million and $1.2 million, or 0.2% to 0.3%, of revenues over the past three fiscal years. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

Inventory Valuation and Obsolescence. ~~Our~~Inventories, ~~Bookstore~~including ~~Division~~rental ~~values~~inventory, ~~new~~are ~~textbook~~stated ~~and non-textbook inventories~~ at the lower of cost or market ~~using the retail inventory method~~. ~~Under the~~The ~~retail~~cost ~~inventory~~of ~~method,~~used ~~the~~textbook ~~valuation of~~ inventories atis ~~cost~~determined ~~and~~using the ~~resulting gross margins~~ ~~are~~weighted-average ~~calculated~~method. byOur ~~applying~~Bookstore aDivision ~~calculated~~uses ~~cost-to-retail ratio to~~ the retail ~~value of inventories. The retail~~ inventory method isto andetermine ~~averaging~~cost for ~~method~~new ~~that~~textbooks ~~has~~and ~~been~~non-textbook ~~widely~~inventories. ~~used~~The incost ~~the~~of ~~retail~~other ~~industry due~~inventories tois ~~its~~determined ~~practicality.~~on ~~Inherent~~ a first-in, ~~the~~first-out ~~retail~~cost ~~inventory~~ method. ~~calculation~~Consistent ~~are~~with ~~certain significant~~prior ~~management~~years, ~~judgments~~we ~~and~~account ~~estimates~~for ~~which impact the ending~~ inventory obsolescence ~~valuation~~based atupon ~~cost as~~assumptions ~~well~~about asfuture ~~the~~demand ~~resulting~~and ~~gross~~market ~~margins~~conditions. ~~Changes~~At inMarch 31, ~~the fact patterns underlying such management~~2010, ~~judgments~~used ~~and~~textbook ~~estimates could ultimately result in adjusted~~ inventory ~~costs.~~was ~~Used~~subject ~~textbook inventories~~to ~~are~~an ~~valued~~obsolescence ~~using~~reserve ~~a combination~~ of ~~weighted-average~~$2.3 million. ~~cost~~For ~~and~~the ~~market values. Other~~prior ~~inventories~~three ~~are~~fiscal ~~determined~~years, on the ~~first-in, first-out cost method. We account for inventory~~ obsolescence ~~based~~reserve ~~upon~~was ~~assumptions~~between ~~about~~$2.3 million ~~future demand~~ and ~~market conditions~~$2.4 million. If actual ~~future~~ future demand or market conditions are less favorable than those projected by us, inventory write-downs may be required. In determining inventory adjustments, we consider amounts of inventory on hand, projected demand, new editions, and industry factors.

Goodwill and Intangible Assets. The March 4, 2004 Transaction and our acquisitions of college bookstores result in the application of purchase accounting as of the transaction date. In certain circumstances, our management performs valuations where appropriate to determine the fair value of assets acquired and liabilities assumed. The goodwill in such transactions is determined by calculating the difference between the purchase price and the fair value of net assets acquired. We evaluate the impairment of the carrying value of our goodwill and identifiable intangibles in accordance with applicable accounting standards, including Statements of Financial Accounting Standards (“SFAS”) No. 142, Goodwill and Other Intangible Assets; and No. 144, Impairment of Long-Lived Assets. In accordance with such standards, we evaluate impairment on goodwill and certain identifiable intangibles annually and evaluate impairment on all intangibles whenever events or changes in circumstances indicate that the carrying amounts of such assets may not be recoverable. We are required to make certain assumptions and estimates regarding the fair value of intangible assets when assessing such assets for impairment. 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, the Company determined in the first step of its goodwill impairment test that the carrying values of certain reporting units exceeded their fair values, indicating that goodwill may be impaired. Having determined that goodwill may be impaired, the Company performed the second step of the goodwill impairment test which involves calculating the implied fair value of goodwill by allocating the fair value of the reporting unit to all of its assets and liabilities other than goodwill (including both recognized and unrecognized intangible assets) and comparing the residual amount to the carrying value of goodwill. As a result, the Company recorded an impairment charge of $107.0 million in fiscal year 2009. Fair value is determined using the market approach and is deemed to be the most indicative of the Company’s fair value. The fair value based upon the market approach is also analyzed for reasonableness compared to the fair value based upon the income approach (discounted cash flow approach). We are also required to make certain assumptions and estimates when assigning an initial value to covenants not to compete arising from bookstore acquisitions. Changes in the fact patterns underlying such assumptions and estimates could ultimately result in the recognition of impairment losses on intangible assets.

~~Accrued~~Goodwill ~~Incentives.~~and ~~Our~~Intangible ~~Textbook~~Assets. ~~Division~~The ~~offers~~March 4, ~~certain~~2004 ~~incentive~~Transaction ~~programs~~and toour ~~its~~acquisitions ~~customers~~of college ~~that~~bookstores ~~allow~~result in the ~~participating~~application ~~customers~~of the ~~opportunity~~acquisition tomethod ~~earn~~of ~~rebates~~accounting ~~for~~as ~~used~~of ~~textbooks~~the ~~sold to~~acquisition ~~the~~date. ~~Textbook~~In ~~Division.~~certain ~~The~~circumstances, ~~rebates~~our ~~can~~management beperforms ~~redeemed~~valuations inwhere aappropriate ~~number~~to ofdetermine the ~~ways,~~fair ~~including~~value toof ~~pay~~assets ~~for freight~~acquired ~~charges~~and onliabilities ~~textbooks~~assumed. ~~sold~~The togoodwill ~~the~~in ~~customer~~such ortransactions tois determined ~~pay~~by ~~for~~calculating ~~certain~~the ofdifference between the ~~products~~consideration ortransferred ~~services we~~and ~~offer~~the ~~through~~fair ~~our~~value of ~~Complementary~~net ~~Services~~assets ~~Division~~acquired. ~~The~~We ~~customer~~evaluate ~~can~~the ~~also~~impairment ~~use~~of the ~~rebates~~carrying tovalue ~~pay~~of our goodwill and ~~for~~identifiable ~~the~~intangibles ~~cost~~in ofaccordance ~~textbooks~~with ~~sold~~applicable byaccounting standards, including the Intangibles ~~Textbook~~— ~~Division~~Goodwill toand ~~the~~Other ~~customer;~~and ~~however~~the Property, aPlant ~~portion~~and Equipment Topics of the FASB ASC. In ~~rebates~~accordance ~~earned~~with bysuch ~~the~~standards, ~~customer~~we ~~are~~evaluate ~~forfeited~~impairment ifon ~~the~~goodwill ~~customer~~and ~~chooses~~certain toidentifiable intangibles ~~use~~annually ~~rebates~~at inMarch 31 ~~this~~and ~~manner. If~~evaluate ~~the~~impairment ~~customer~~on ~~fails~~all tointangibles ~~comply~~whenever ~~with~~events ~~the~~or changes ~~terms~~in ofcircumstances indicate that the ~~program,~~carrying ~~rebates~~amounts ~~earned~~of ~~during~~such ~~the~~assets ~~year~~may ~~are forfeited.~~not ~~Significant~~be ~~judgment~~recoverable. We isare required into ~~estimating~~make certain assumptions and estimates regarding the ~~expected~~fair ~~level~~value of ~~forfeitures on~~intangible ~~rebates~~assets ~~earned~~when assessing such assets for impairment. ~~Although~~We weevaluate ~~believe~~goodwill ~~that~~at the reporting unit level and have identified our ~~estimates~~reportable ofsegments, ~~anticipated~~the ~~forfeitures~~Textbook Division, ~~which~~Bookstore ~~are~~Division ~~based~~and ~~upon~~Complementary ~~historical~~Services ~~experience~~Division, ~~are~~as ~~reasonable,~~our ~~actual~~reporting ~~results~~units. ~~could~~Our ~~differ~~reporting ~~from~~units ~~these~~are ~~estimates~~determined based ~~resulting~~on inthe anway ~~ultimate~~management ~~redemption~~organizes ofthe ~~rebates~~segments ~~which~~for ~~differs~~making ~~from~~operating ~~that~~decisions ~~which~~and isassessing performance. ~~reflected~~Management ~~in accrued~~has ~~incentives~~organized inour ~~the~~reporting ~~consolidated~~segments ~~financial~~based ~~statements~~upon differences in products and services provided.

~~Income~~In ~~Taxes.~~the Wefirst ~~account~~step ~~for~~of ~~income~~our ~~taxes~~goodwill byimpairment ~~recording~~test, ~~taxes~~fair ~~payable~~value oris ~~refundable~~determined ~~for~~using ~~the~~a market ~~current~~approach ~~fiscal~~based ~~year~~primarily ~~and~~on ~~deferred~~an ~~tax~~EBITDA ~~assets~~multiple, and ~~liabilities~~is ~~for~~deemed ~~future~~to ~~tax~~be ~~consequences~~the most indicative of ~~events~~the ~~that~~Company’s ~~have~~fair ~~been~~value. ~~recognized~~The inEBITDA ~~our~~multiple ~~consolidated~~approach ~~financial~~requires ~~statements~~that orwe ~~the~~estimate ~~consolidated~~a ~~income~~certain ~~tax~~valuation ~~returns.~~multiple ~~Significant~~of ~~judgment~~EBITDA isderived ~~required~~from incomparable ~~determining~~companies ~~the~~and ~~provision~~apply ~~for~~that ~~income~~multiple ~~taxes~~to ~~and~~our latest twelve ~~related~~month ~~accruals,~~pro ~~deferred~~forma ~~tax~~EBITDA. ~~assets,~~We ~~and~~reviewed ~~deferred~~comparable ~~tax~~company ~~liabilities.~~information Into determine the ~~ordinary~~EBITDA multiple ~~course~~and ~~of business,~~concluded ~~there~~that ~~are~~6.76x ~~transactions~~was ~~and~~an ~~calculations~~appropriate ~~where~~EBITDA ~~the~~multiple ~~ultimate~~at ~~tax~~March 31, ~~outcome~~2010 isand ~~uncertain~~7.0x was ~~Additionally~~appropriate at March 31, ~~the~~2009. ~~consolidated~~This ~~income~~total ~~tax~~company ~~returns~~fair ~~are~~value ~~subject~~is allocated to ~~audit~~the byreporting ~~various~~units based ~~tax~~upon ~~authorities~~their percentage of EBITDA. The fair value was also calculated using the income ~~Although~~approach (discounted cash flow approach) and we ~~believe~~concluded that ~~our~~it ~~estimates~~was ~~are~~supportive ~~reasonable,~~of ~~actual~~the ~~results~~fair ~~could~~value based ~~differ~~upon ~~from~~the ~~these estimates~~EBITDA ~~resulting~~multiple inapproach. aIf ~~final~~we ~~tax~~fail ~~outcome~~the ~~that~~first ~~may~~step beof ~~different~~the ~~from~~goodwill ~~that~~impairment test, ~~which~~we isare ~~reflected~~required, in the second step, to estimate the fair value of reporting unit assets and liabilities, including intangible assets, to derive the ~~consolidated~~fair ~~financial~~value ~~statements~~of the reporting unit’s goodwill.

~~Derivative~~Due ~~Financial~~to ~~Instruments.~~the Weeconomic ~~use~~downturn ~~derivative~~and ~~financial~~changes ~~instruments~~in comparable company market multiples, ~~from~~we ~~time~~determined in tothe ~~time~~first step of our goodwill impairment test conducted at March 31, 2009 that the carrying tovalues ~~manage~~of the ~~risk~~Textbook and Bookstore Divisions exceeded their fair values, indicating that ~~changes~~goodwill may inbe ~~interest~~impaired. ~~rates~~Having ~~will~~determined ~~affect~~that goodwill may be impaired, we performed the ~~amount~~second step of the ~~our~~goodwill ~~future~~impairment ~~interest payments~~test onwhich ~~our~~involves ~~variable~~calculating ~~rate~~the ~~debt.~~implied Iffair ~~written~~value ~~documentation~~of ~~designating~~goodwill by allocating the ~~derivative~~fair ~~financial~~value of the reporting unit to all of its assets and liabilities other than ~~instrument~~goodwill as(including both recognized and unrecognized intangible assets) and comparing the residual amount to the carrying value of goodwill. As a ~~hedge~~result, iswe ~~not~~recorded an impairment charge of $107.0 million in ~~place~~fiscal atyear ~~inception~~2009. The carrying value of ~~the~~goodwill ~~instrument~~in orexcess ifof the ~~critical~~implied ~~terms~~fair ofvalue was $67.0 million and $40.0 million for the ~~derivative~~Textbook ~~financial~~and ~~instrument~~Bookstore doDivisions, ~~not~~respectively. ~~match~~At March 31, 2010, the ~~critical~~date ~~terms~~ of the ~~variable~~most ~~rate~~recent ~~debt~~step ~~being~~one test, after adjusting the carrying values for ~~hedged~~goodwill impairment, wethe ~~would~~fair bevalue ~~required~~of tothe ~~recognize~~Textbook ~~changes~~Division inexceeded the ~~fair~~carrying value of $210.7 million by 4.8% and the ~~portion~~Bookstore Division fair value exceeded the carrying value of $244.5 million by 4.7%. We continue to monitor events and circumstances which may affect the fair values of both ~~derivative~~reporting ~~financial~~units, ~~instrument~~including ~~not~~current ~~qualifying~~market ~~for~~conditions, ~~hedge~~and ~~accounting~~we ~~immediately~~believe inthat ~~earnings~~both reporting units are still at risk of failing step one of the impairment test.

We are also required to make certain assumptions and estimates when assigning an initial value to covenants not to compete arising from bookstore acquisitions. Changes in the fact patterns underlying such assumptions and estimates could ultimately result in the recognition of impairment losses on intangible assets.

We monitor relevant circumstances, including industry trends, general economic conditions, and the potential impact that such circumstances might have on the valuation of our goodwill and identifiable intangibles. It is possible that changes in such circumstances, or in the numerous variables associated with the judgments, assumptions and estimates made by us in assessing the appropriate valuation of our goodwill and identifiable intangibles, including a further deterioration in the economy or debt markets or a significant delay in the expected recovery, could in the future require us to further write down a portion of our goodwill or write down a portion of our identifiable intangibles and record related non-cash impairment charges. If we were to have used a multiple of 6.44x or below at March 31, 2010, the first step of the goodwill impairment test would have indicated that goodwill may be impaired and we would have performed the second step of the goodwill impairment test to determine the goodwill impairment, if any.

Accrued Incentives. Our Textbook Division offers certain incentive programs to its customers that allow the participating customers the opportunity to earn rebates for used textbooks sold to the Textbook Division. The rebates can be redeemed in a number of ways, including to pay for freight charges on textbooks sold to the customer or to pay for certain products or services we offer through our Complementary Services Division. The customer can also use the rebates to pay for the cost of textbooks sold by the Textbook Division to the customer; however, a portion of the rebates earned by the customer are forfeited if the customer chooses to use rebates in this manner. If the customer fails to comply with the terms of the program, rebates earned

during the year are forfeited. Significant judgment is required in estimating the expected level of forfeitures on rebates earned. Although we believe that our estimates of anticipated forfeitures, which have consistently been based upon historical experience, are reasonable, actual results could differ from these estimates resulting in an ultimate redemption of rebates which differs from that which is reflected in accrued incentives in the consolidated financial statements. For the past three fiscal years, actual forfeitures have ranged between 9.4% and 16.6% of rebates earned within those years. After adjusting for estimated forfeitures, rebates earned are accrued at a rate of approximately 13.5% of the dollar value of eligible textbooks purchased by the Textbook Division. Accrued incentives at March 31, 2010 were $6.3 million, including estimated forfeitures, however, if we accrued for rebates earned and unused as of March 31, 2010, assuming no forfeitures, our accrued incentives would have been $7.0 million.

Income Taxes. We account for income taxes by recording taxes payable or refundable for the current fiscal year and deferred tax assets and liabilities for future tax consequences of events that have been recognized in our consolidated financial statements or the consolidated income tax returns. Significant judgment is required in determining the provision for income taxes and related accruals, deferred tax assets, and deferred tax liabilities. In the ordinary course of business, there are transactions and calculations where the ultimate tax outcome is uncertain. Additionally, the consolidated income tax returns are subject to audit by various tax authorities. Although we believe that our estimates are reasonable, actual results could differ from these estimates resulting in a final tax outcome that may be different from that which is reflected in the consolidated financial statements.

Changes in Accounting Standards. In June 2009, the FASB Codification became the single source of authoritative GAAP. The Codification did not create any additional GAAP standards but incorporated existing accounting and reporting standards into a new topical structure with a new referencing system to identify authoritative accounting standards, replacing the prior references to Statement of Financial Accounting Standards, Emerging Issues Task Force, FASB Staff Position, etc. Authoritative standards included in the Codification are designated by their topical reference, and new standards are designated as Accounting Standards Updates with a year and assigned sequence number. References to prior standards have been updated in this annual report for the fiscal year ended March 31, 2010 to reflect the new referencing system.

LIQUIDITY AND CAPITAL RESOURCES

Financing Activities

~~Effective~~On ~~February~~October 32, 2009, ~~the~~in ~~Senior~~conjunction ~~Credit~~with ~~Facility~~the ~~was~~completion ~~amended~~of ~~to,~~our ~~among~~offering ~~other~~of ~~things,~~the ~~(i)~~Senior Secured ~~extend~~Notes ~~the~~and ~~maturity~~payment ~~date~~in full of the ~~Revolving~~Term ~~Credit~~Loan, ~~Facility~~we toentered ~~May 31,~~into ~~2010,~~the ~~(ii) decrease~~ABL ~~the~~Credit Agreement which provides ~~maximum~~for ~~borrowing~~the ~~capacity~~ABL ~~under~~Facility and replaced the Revolving Credit Facility, ~~from~~effectively ~~$85.0 million~~terminating tothe ~~$65.0 million,~~Senior ~~(iii) amend~~Credit ~~certain~~Facility. ~~definitions~~The ~~and~~ABL ~~financial~~Facility ~~covenants~~is ~~under~~secured ~~the~~by ~~Senior~~a ~~Credit~~first ~~Facility,~~priority ~~including~~interest in substantially all of ~~limiting~~our ~~future~~and ~~acquisitions~~our tosubsidiaries’ ~~contract-managed~~property ~~stores~~and assets, ~~and~~which ~~(iv) increase~~also secure the ~~interest~~Senior ~~rate~~Secured Notes on ~~the~~a ~~Term~~second ~~Loan~~priority ~~and~~basis. ~~Revolving~~The ~~Credit~~ABL Facility. ~~The~~is ~~applicable~~scheduled ~~margin~~to mature on the ~~Revolving~~earlier ~~Credit~~of ~~Facility~~October 2, 2012 and ~~Term~~the ~~Loan~~date ~~will~~that ~~increase~~is 91 days prior to ~~6.0%~~the onearliest ~~Eurodollar~~maturity ~~borrowings~~of ~~and~~the ~~5.0%~~Senior onSecured ~~Base~~Notes ~~rate~~(due December 1, ~~borrowings~~2011), the Senior Subordinated Notes (due March 15, 2012), NBC’s Senior Discount Notes (due March 15, 2013), or any refinancing thereof. ~~The~~Borrowings under the ABL Facility are subject to the Eurodollar interest rate, ~~will~~ not to be less than 31.255%, plus ~~the~~an applicable margin ranging from 4.25% ~~The~~to ~~interest~~4.75%, ~~rate on~~or ~~Base~~the base interest rate ~~borrowings~~plus ~~will~~an beapplicable ~~the~~margin ~~greater~~ranging offrom a)3.25% ~~Prime~~to ~~rate~~3.75%. In addition, b)the ~~Federal~~applicable ~~Funds~~margin ~~rate~~will ~~plus~~increase 01.5% orduring c) the ~~one-month~~time ~~Eurodollar~~periods ~~loan~~from ~~rate~~April 15 ~~plus~~to ~~1.0%,~~June 29 ~~not~~and tofrom beDecember ~~less~~1 ~~than~~to ~~4.25%~~January 29 ~~plus~~of ~~the~~each ~~applicable margin~~year. ~~The~~ ~~Commitment~~There ~~Fee~~also ~~rate~~is ~~will~~a ~~increase~~commitment tofee ranging from 0.75%. ~~The~~to ~~modifications~~1.0% tofor the ~~Senior~~daily ~~Credit~~average ~~Facility resulted~~unused inamount. ~~the~~Costs ~~payment~~ of $410.02 million ~~in costs~~ associated with ~~such~~the issuance ~~modifications,~~of ~~which~~the Senior Secured Notes and entering into the ABL Credit Agreement were capitalized as debt issue costs to be amortized to interest expense over the remaining life of the ~~debt~~ debt instruments. Debt issue costs of $3.1 million were written off as a result of the termination of the Term Loan and Revolving Credit Facility.

InEffective ~~conjunction~~February 3, ~~with~~2009, the Senior Credit Facility, ~~amendment~~which onhas ~~February 3~~been terminated as described earlier, ~~2009~~was amended to, ~~NBC~~among ~~entered~~other ~~into~~things, (i) extend the maturity date of the Revolving Credit aFacility ~~Stock~~to ~~Subscription~~May 31, ~~Agreement~~2010, ~~with~~(ii) decrease ~~NBC~~the ~~Holdings~~maximum ~~Corp~~borrowing capacity under the Revolving Credit Facility from $85.0 million to $65.0 million, (~~“Holdings”~~iii) amend certain definitions and financial covenants under the Senior Credit Facility, ~~pursuant~~including tolimiting ~~which~~future ~~Holdings~~acquisitions to ~~purchased~~contract-managed 10stores,~~000~~ ~~shares~~and of(iv) increase athe ~~newly~~interest ~~created~~rate ~~series~~on ofthe ~~NBC~~Term ~~preferred~~Loan ~~stock,~~and ~~par~~Revolving ~~value~~Credit Facility. $The applicable margin on the Revolving Credit Facility and Term Loan increased to 6.0% on Eurodollar borrowings and 5.010% ~~per share,~~on ~~for~~Base ~~$1,000~~rate ~~per~~borrowings. ~~share,~~The ~~for~~Eurodollar aninterest ~~aggregate~~rate ~~purchase~~was ~~price~~not ofto be ~~$10~~less than 3.~~0 million~~25% plus the applicable margin. AsThe ainterest ~~result~~rate on Base rate borrowings was the greater of a) Prime rate, b) Federal Funds rate plus 0.5% or c) the one-month Eurodollar loan rate ~~Stock~~plus ~~Subscription~~1.0%, ~~Agreement~~not to be less than 4.25%, plus the ~~Company~~applicable ~~received~~margin. aThe commitment fee rate increased to 0.75%. The modifications to the Senior Credit Facility resulted in the payment of $104.0 million ~~capital~~in ~~contribution~~costs ~~from~~associated ~~NBC~~with such modifications, which were capitalized as debt issue costs to be amortized to interest expense over the remaining life of the debt instruments.

Effective March 30, 2007, certain amendments were made to the Senior Credit Facility to, among other things, increase the Revolving Credit Facility from $65.0 million to $85.0 million and modify the definition of EBITDA to exclude certain one-time charges recorded in fiscal year 2007 for purposes of the debt covenant calculations. The additional availability of borrowings under the Revolving Credit Facility allowed us to continue to pursue opportunities to expand our chain of bookstores across the country. The modifications of the Senior Credit Facility resulted in the payment of $0.2 million in costs associated with such modifications, which were capitalized as debt issue costs to be amortized to interest expense over the remaining life of the Revolving Credit Facility.

Effective April 26, 2006, certain amendments were made to the Senior Credit Facility to allow for the acquisition of CBA, including adding an incremental $24.0 million of borrowings under the Term Loan, increasing amounts available under the Revolving Credit Facility from $50.0 million to $65.0 million, and amending certain restrictions and financial covenants. The additional Term Loan borrowings were used to help finance the purchase of all of CBA’s outstanding stock, repay CBA’s outstanding long-term bank indebtedness, and provide funding for the payment of transaction costs and other liabilities associated with the acquisition. CBA’s long-term bank indebtedness, revolving credit facility balance, and the corresponding accrued interest repaid on May 1, 2006 totaled $14.4 million. The modifications to the Senior Credit Facility resulted in the payment of $0.8 million in costs associated with such modifications, which were capitalized as debt issue costs to be amortized to interest expense over the remaining life of the debt instruments.

Our primary liquidity requirements are for debt service under the Senior Credit Facility, the Senior Subordinated Notes and other outstanding indebtedness, for working capital, for income tax payments, for capital expenditures and for certain acquisitions. We have historically funded these requirements primarily through internally generated cash flows and funds borrowed under our Revolving Credit Facility. At March 31, 2009, our total indebtedness was $372.4 million, consisting of a $193.1 million Term Loan, $175.0 million of Senior Subordinated Notes, and $4.3 million of other indebtedness, including capital lease obligations. To provide additional financing to fund the March 4, 2004 Transaction, NBC issued Senior Discount Notes, the balance of which at March 31, 2009 was $77.0 million (face value).

~~Principal~~In ~~and~~conjunction ~~interest~~with ~~payments under~~ the Senior Credit Facility, ~~the~~amendment ~~Senior~~on ~~Subordinated Notes~~February 3, ~~and~~2009, NBC’s ~~Senior~~entered ~~Discount~~into a ~~Notes~~Stock ~~represent~~Subscription ~~significant~~Agreement ~~liquidity~~with ~~requirements~~NBC ~~for~~Holdings usCorp. ~~Under the terms of the Senior Credit Facility’s Term Loan~~(“Holdings”), wepursuant ~~are scheduled~~ to ~~make~~which ~~principal payments~~Holdings ~~totaling~~purchased ~~approximately~~10,000 ~~$6.9 million~~shares inof ~~fiscal~~a ~~year~~newly ~~2010~~created ~~and~~series ~~$186.2 million~~of inNBC ~~fiscal~~preferred ~~year 2011~~stock, ~~including~~ ~~significant~~par ~~quarterly~~value ~~principal payments beginning June 30, 2010~~$0.01 ~~These scheduled~~per ~~principal~~share, ~~payments~~for ~~are subject to change upon the annual payment and application of excess cash flows (as defined by the Senior Credit Facility)~~$1,000 ifper ~~any~~share, ~~towards~~for ~~the Term Loan principal balances. The fiscal year 2010 principal payment includes~~ an ~~excess~~aggregate ~~cash~~purchase ~~flow~~price ~~payment~~ of $610.0 million. ~~due September,~~As ~~2009~~a ~~for~~result ~~fiscal~~of ~~year~~the Stock ~~ended~~Subscription ~~March 31~~Agreement, ~~2009.~~the ~~There~~Company ~~was~~received noa ~~excess~~$10.0 million ~~cash~~capital ~~flow~~contribution ~~obligation~~from ~~for the fiscal year ended March 31, 2008~~NBC.

~~Loans~~Our primary liquidity requirements are for debt service under the ~~Senior~~ABL Credit Agreement, which replaced the Revolving Credit Facility, ~~bear~~the ~~interest~~Senior atSecured ~~floating~~Notes, ~~rates~~which ~~based~~were ~~upon~~issued ~~the~~on October 2, ~~borrowing~~2009 ~~option~~in ~~selected~~conjunction bywith ~~us.~~the Onpayment ~~July 15~~in full of the Term Loan, ~~2005~~the Senior Subordinated Notes and other outstanding indebtedness, wedividends ~~entered~~to ~~into~~NBC anto pay interest ~~rate~~on ~~swap~~its ~~agreement~~Senior Discount Notes, for toworking ~~essentially~~capital, ~~convert~~for aincome ~~portion~~tax ofpayments, ~~the~~for ~~variable~~capital ~~rate~~expenditures ~~Term~~and ~~Loan~~for ~~into~~certain ~~debt~~acquisitions. We ~~with~~have ahistorically ~~fixed~~funded ~~rate~~these ~~of 6.844%~~requirements ~~(4.344%~~primarily ~~plus~~through aninternally ~~applicable~~generated ~~margin~~cash asflows and ~~defined~~funds byborrowed ~~the~~under ~~Senior~~our ~~Credit~~revolving ~~Facility)~~credit facility. ~~This~~At ~~agreement~~March 31, 2010, our total indebtedness was ~~effective~~$377.6 million, asconsisting of ~~September~~a $75.0 ~~30,~~million ~~2005~~ABL ~~and~~Facility ~~expired~~which ~~September 30,~~was ~~2008.~~unused ~~The~~at ~~Senior~~March 31, ~~Subordinated~~2010, ~~Notes~~$200 million ~~require~~of ~~semi-annual~~Senior ~~interest~~Secured ~~payments~~Notes atwith aunamortized ~~fixed~~discount ~~rate~~ of $0.8 million, $175.~~625%~~0 million ~~and~~of Senior ~~mature~~Subordinated onNotes, ~~March~~and $3.4 15million of other indebtedness, ~~2012. The~~including ~~Senior~~capital ~~Discount~~lease obligations. ~~Notes~~To ~~require~~provide ~~semi-annual~~additional ~~cash~~financing ~~interest~~to ~~payments~~fund ~~commencing~~the ~~September~~March 154, ~~2008 at~~2004 aTransaction, ~~fixed~~NBC ~~rate~~issued Senior ofDiscount ~~11.0%~~Notes, ~~and~~the ~~mature~~balance onof which at March 1531, ~~2013~~2009 was $77.0 million (face value).

Principal and interest payments under the ABL Facility, the Senior Secured Notes, the Senior Subordinated Notes, and NBC’s Senior Discount Notes represent significant liquidity requirements for us. An excess cash flow payment of $6.0 million for fiscal year ended March 31, 2009 under the Senior Credit Facility was paid in September 2009.

Loans under the Senior Credit Facility were subject to interest at floating rates based upon the borrowing option selected by us. On July 15, 2005, we entered into an interest rate swap agreement to essentially convert a portion of the variable rate Term Loan into debt with a fixed rate of 6.844% (4.344% plus an applicable margin as defined by the Senior Credit Facility). This agreement was effective as of September 30, 2005 and expired September 30, 2008.

The Senior Secured Notes require semi-annual interest payments at a fixed rate of 10.0% and mature on December 1, 2011. The Senior Subordinated Notes require semi-annual interest payments at a fixed rate of 8.625% and mature on March 15, 2012. NBC’s Senior Discount Notes require semi-annual cash interest payments commencing September 15, 2008 at a fixed rate of 11.0% and mature on March 15, 2013.

In July 2007, a bookstore location was relocated, the new property lease for which has been classified as a capital lease. This lease expires in fiscal year 2018 and contains two five-year options to renew. The capital lease obligation and corresponding property recorded at inception of the lease totaled $2.2 million. In November 2006, two bookstore locations were acquired, the property leases for which have been classified as capital leases. These leases expire in fiscal year 2012 and contain multiple options to renew every five years. The capital lease obligations and corresponding property recorded at inception of the leases totaled $1.1 million.

Investing Cash Flows

Our capital expenditures were $85.04 million, $78.30 million and $67.53 million for the fiscal years ended March 31, ~~2009~~2010, ~~2008~~2009 and ~~2007~~2008, respectively. Capital expenditures consist primarily of leasehold improvements and furnishings for new bookstores, bookstore renovations, computer upgrades and miscellaneous warehouse improvements. ~~Our~~The ~~ability~~ABL ~~to make capital expenditures is subject to certain restrictions under the Senior~~ Credit ~~Facility,~~Agreement ~~including~~does annot ~~annual~~have a limitation on ~~capital~~ capital expenditures ~~made~~other inthan ~~the~~as ~~ordinary course of business. As~~ part of the ~~February 3,~~fixed ~~2009~~charge ~~amendment~~coverage ~~to the Senior Credit Facility, the annual capital expenditure limit was changed to $13~~ratio.~~0 million~~ ~~for fiscal year 2009.~~ We expect capital expenditures to be between $56.0 million and $67.0 million for fiscal year ~~2010~~2011.

Business acquisition and contract-management renewal expenditures were $62.38 million, $146.73 million and $2514.97 million for the fiscal years ended March 31, ~~2009~~2010, ~~2008~~2009 and ~~2007~~2008, respectively. During the fiscal year ended March 31, ~~2009~~2010, 2214 bookstore locations were acquired in 1911 separate transactions (19all of which were contract-managed locations). During the fiscal year ended March 31, ~~2008~~ 2009, 2022 bookstore locations were acquired in 1419 separate transactions (1019 of which were contract-managed locations). During the fiscal year ended March 31, ~~2007~~2008, we acquired ~~118 bookstore~~20 bookstore locations in 1714 separate transactions (~~110~~10 of which were contract-managed locations)~~, including the acquisition of CBA’s 101 bookstore locations for $18~~.~~8 million~~ ~~(net of cash acquired) on May 1, 2006.~~ Our ability to make acquisition expenditures is subject to certain restrictions under the ~~Senior~~ABL Credit ~~Facility, as amended~~Agreement.

During the fiscal years ended March 31, ~~2009,~~2010 ~~2008~~ and ~~2007,~~2009 we capitalized $0.6 million, ~~$0.3~~and during ~~million~~the ~~and~~fiscal year ended March 31, 2008, we capitalized $0.73 million, ~~respectively,~~ in software development costs associated with new software products and enhancements to existing software products.

Effective September 1, 2007, we entered into an agreement whereby we agreed to pay $1.7 million over a period of thirty-six months to a software company in return for certain rights related to that company’s products that are designed to enhance web-based sales. This other identifiable intangible is being amortized on a straight-line basis over the thirty-six month base term of the agreement. The asset and corresponding liability were recorded based upon the present value of the future payments assuming an imputed interest rate of 6.7%, resulting in a discount of $0.1 million which will be recorded as interest expense over the base term of the agreement utilizing the effective interest method of accounting.

InEffective ~~addition~~September 1, to2007, ~~the~~we ~~previously~~entered ~~mentioned~~into ~~business~~an ~~acquisition~~agreement ~~and~~whereby ~~contract-management~~we ~~renewal~~agreed to pay $1.7 ~~expenditures,~~million ~~the~~over ~~contract~~a period of thirty-~~managed~~six ~~acquisition~~months ~~costs~~to ~~during~~a ~~the~~software ~~fiscal~~company ~~year~~in ~~ended~~return ~~March 31,~~for ~~2009~~certain rights ~~included~~related ~~$0.2 million~~to ofthat ~~unpaid~~company’s ~~consideration~~products that are designed to enhance web-based sales. ~~The~~This ~~purchase~~other ~~price~~identifiable ofintangible ~~one~~is ofbeing ~~the~~amortized ~~bookstores~~on ~~during~~a straight-line basis over the ~~fiscal~~thirty-six ~~year~~month ~~ended~~base ~~March 31,~~term ~~2008~~of ~~included~~the $0agreement.~~7 million~~ ofThe ~~contingent~~asset ~~consideration,~~and ~~which~~corresponding isliability were ~~paid~~recorded tobased upon the ~~previous~~present ~~owner~~value onof athe ~~monthly~~future ~~basis~~payments ~~and~~assuming isan ~~calculated~~imputed asinterest arate ~~percentage~~ of ~~revenues~~ ~~generated~~6.7%, byresulting ~~the~~in ~~acquired~~a ~~bookstore~~discount ~~each~~of ~~month~~$0.1 million ~~Such~~which ~~payments~~will ~~totaled~~be ~~$123,972~~recorded ~~and~~as ~~$41,219~~interest ~~for~~expense over the ~~fiscal~~base ~~years~~term ~~ended~~of ~~March 31,~~the ~~2009~~agreement ~~and~~utilizing ~~2008,~~the ~~respectively~~effective interest method of accounting.

In addition to the previously mentioned business acquisition and contract-management renewal expenditures, the contract-managed acquisition costs during the fiscal year ended March 31, 2010 included $0.6 million of unpaid consideration. The purchase price of one of the bookstores during the fiscal year ended March 31, 2008 included $0.7 million of contingent consideration, which is paid to the previous owner on a monthly basis and is calculated as a percentage of revenues generated by the acquired bookstore each month. Such payments totaled $133,474, $123,972 and $41,219 for the fiscal years ended March 31, 2010, 2009 and 2008, respectively.

Operating Cash Flows

Our principal sources of cash to fund our future operating liquidity needs will be cash from operating activities and borrowings under the ~~Revolving~~ABL ~~Credit~~ Facility. Usage of the ~~Revolving Credit~~ABL Facility to meet our liquidity needs fluctuates throughout the fiscal year due to our distinct buying and selling periods, increasing substantially at the end of each college semester (May and December). For the fiscal year ended March 31, ~~2009~~2010, weighted-average borrowings under ~~the~~ ~~Revolving~~our ~~Credit~~revolving ~~Facility~~credit facilities approximated $164.90 million, with actual borrowings ranging from a low of no borrowings to a high of $4928.56 million. Net cash flows from operating activities for the fiscal year ended March 31, ~~2009~~ 2010 were $3136.72 million, up $104.85 million from $2031.97 million for the fiscal year ended March 31, ~~2008~~2009. The increase in net cash flows from operating activities is due primarily to a $96.5 million decrease in accounts receivable primarily due to a decrease in ~~payments~~Bookstore Division receivables from publishers for ~~inventories~~returns and a decrease of $36.18 million in income taxes paid during the fiscal year ended March 31, ~~2009~~2010. The increase in net cash flows was partially offset by an $11.0 million increase in payments for inventories partially due to increased rental inventories in the Bookstore Division at March 31, 2010. Net cash flows from operating activities for the fiscal year ended March 31, ~~2008~~2009 were $2031.97 million, aan ~~decrease~~increase of $610.58 million from $2720.49 million for the fiscal year ended March 31, ~~2007~~2008. The ~~decrease~~increase in net cash flows from operations was due primarily to a $69.5 million ~~increase~~decrease in ~~income~~payments ~~taxes~~for ~~paid~~inventories ~~during~~and ~~the~~a ~~fiscal ended~~decrease ~~March 31,~~of ~~2008~~$3.1 million ~~Fluctuations~~ in ~~certain~~income ~~balances, including receivables and accounts~~taxes ~~payable,~~paid ~~were~~during ~~due in part to~~ the ~~impact~~fiscal ofended ~~CBA (acquired on May~~March 131, ~~2006)~~2009.

As of March 31, ~~2009~~2010, we had $4461.0 million in cash ~~and cash equivalents~~ available to help fund working capital requirements. At certain times of the year, we also invest in cash equivalents. Any investments in cash equivalents are subject to restrictions under the ~~Senior~~ABL Credit ~~Facility~~Agreement. The ~~Senior~~ABL Credit Agreement ~~Facility~~ allows investments in (1) certain short-term securities issued by, or unconditionally guaranteed by, the federal government, (2) certain short-term deposits in banks that have combined capital and surplus of not less than $500 million, (3) certain short-term commercial paper of issuers rated at least A-1 by Standard & Poor’s or P-1 by Moody’s, (4) certain money market funds which invest exclusively in assets otherwise allowable under the ~~Senior~~ABL Credit ~~Facility~~Agreement and (5) certain other similar short-term investments. ~~All~~ ~~cash equivalents have matured subsequent to March 31, 2009 with no gain or loss recognized.~~ Although we invest in compliance with the restrictions under our ~~Senior~~credit ~~Credit~~agreement ~~Facility~~ and generally seek to minimize the risk associated with investments by investing in investment grade, highly liquid securities, we cannot give assurances that the cash equivalents inthat ~~our~~are ~~investment portfolio,~~ in ~~which~~or wewill ~~may~~be ~~invest~~selected to be in ~~the~~our ~~future,~~investment ~~will~~portfolio will not lose a portion of their value or become impaired in the future.

Covenant Restrictions

Access to our principal sources of cash is subject to various restrictions and compliance with specified financial ratios and tests, including minimum interest coverage ratios, maximum leverage ratios, and minimum fixed charge coverage ratios. The availability of additional borrowings under the Revolving Credit Facility is subject to the calculation of a borrowing base, which is a function of eligible accounts receivable and inventory, up to the maximum borrowing limit. The Senior Credit Facility restricts our ability to make investments, acquisitions, loans or advances and pay dividends, except that, among other things, we may pay dividends to NBC (i) in an amount not to exceed the amount of interest required to be paid on the Senior Discount Notes and (ii) to pay corporate overhead expenses not to exceed $250,000 per fiscal year and any taxes owed by NBC. The indenture governing the Senior Subordinated Notes restricts the ability of the Company and its Restricted Subsidiaries (as defined in the indenture) to pay dividends or make other Restricted Payments (as defined in the indenture) to their respective stockholders, subject to certain exceptions, unless certain conditions are met, including that (i) no default under the indenture shall have occurred and be continuing, (ii) the Company shall be permitted by the indenture to incur additional indebtedness and (iii) the amount of the dividend or payment may not exceed a certain amount based on, among other things, the Company’s consolidated net income. The indenture governing the Senior Discount Notes contains similar restrictions on NBC’s ability and the ability of certain of its subsidiaries to pay dividends or make certain other payments to its respective stockholders. Such restrictions are not expected to affect our ability to meet our cash obligations for the next twelve months.

~~Sources~~Covenant ~~of and Needs for Capital~~Restrictions

AsWe have a substantial level of ~~March 31,~~indebtedness. ~~2009~~Our debt agreements impose significant financial restrictions, wewhich could ~~borrow~~prevent upus tofrom ~~$47.4 million~~incurring ~~under~~additional ~~the~~indebtedness ~~Revolving~~and ~~Credit~~taking ~~Facility.~~certain ~~The~~other ~~Revolving~~actions ~~Credit~~and ~~Facility~~could ~~was~~result ~~unused~~in atall ~~March 31,~~amounts ~~2009.~~outstanding ~~Amounts~~being ~~available~~declared ~~under~~due ~~the~~and ~~Revolving~~payable if we are ~~Credit~~not ~~Facility~~in ~~may~~compliance bewith ~~used~~such ~~for~~restrictions. ~~working~~Access ~~capital~~to ~~and~~borrowings ~~general~~under ~~corporate~~the ~~purposes~~ABL ~~(including~~Facility upis tosubject ~~$10.0 million~~to ~~for~~the ~~letters~~calculation of ~~credit)~~a borrowing base, ~~subject~~which tois ~~certain~~a ~~limitations~~function ~~under~~of ~~the~~eligible ~~Senior~~accounts ~~Credit~~receivable and ~~Facility~~inventory, ~~including~~up anto ~~annual~~the ~~limitation~~maximum onborrowing ~~capital~~limit ~~expenditures~~(less ~~made~~outstanding inletters of credit). The ABL Credit Agreement restricts our ability and the ~~ordinary~~ability ~~course~~of certain of ~~business.~~ ~~The~~our ~~Senior~~subsidiaries ~~Credit~~to ~~Facility~~make ~~was~~investments, acquisitions, ~~amended~~loans ~~effective~~or ~~February 3~~advances and pay dividends, ~~2009~~except tothat, among other things, we may pay dividends to NBC (i) ~~extend~~in ~~the~~an ~~maturity~~amount ~~date~~not ofto exceed the ~~Revolving~~amount ~~Credit~~of ~~Facility~~interest required to ~~May 31,~~be ~~2010,~~paid on the Senior Discount Notes and (ii) to pay corporate overhead expenses not to exceed $250,000 per fiscal ~~decrease~~year ~~the~~and ~~maximum~~any ~~borrowing~~taxes ~~capacity~~owed by NBC. In addition, under our ABL Facility, if availability, as defined in the ~~Revolving~~ABL Credit ~~Facility~~Agreement, tois less than the greater of 20% of the total revolving credit commitments and $6515.0 million, ~~(iii)~~we will be required to maintain a fixed charge coverage ratio of at ~~amend~~least ~~certain~~1.10x ~~definitions~~measured ~~and~~for ~~financial~~the ~~covenants~~last twelve-month period on a pro forma basis in order to maintain access to funds under the ~~Senior~~ABL ~~Credit~~ Facility. At March 31, ~~including limiting~~2010, ~~future~~we ~~acquisitions~~had up to ~~contract-managed~~$75.0 million ~~stores,~~of ~~and~~total revolving credit commitments under the ABL Facility (ivless outstanding letters of credit and subject to a borrowing base) ~~increase~~. ~~the~~The ~~interest~~calculated ~~rate~~borrowing onbase ~~the~~as of March 31, 2010 was $44.7 million, of ~~Term~~which ~~Loan~~$1.0 million was outstanding under a letter of credit and ~~Revolving~~$43.7 million ~~Credit~~was ~~Facility~~unused. At March 31, 2010, our pro forma fixed charge coverage ratio was 1.5x.

~~Except~~The ~~for~~indenture ~~upcoming~~governing ~~maturities~~the Senior Secured Notes restricts our ability and the ability of certain ~~indebtedness~~of asour ~~described~~subsidiaries ~~below~~to pay dividends or make certain other payments, subject to certain exceptions, unless certain conditions are met, including (i) no default under the indenture has occurred, (ii) we ~~believe~~and ~~that~~certain ~~funds~~of our subsidiaries maintain a consolidated coverage ratio of 2.0 to ~~generated~~1.0 on a pro forma basis and (iii) the amount of the dividend or payment may not exceed 50% of aggregate income from ~~operations~~January 1, ~~existing~~2004 to the end of the most recent fiscal quarter plus cash, proceeds ~~and~~received ~~borrowings~~from the issuance of stock less the aggregate of payments made under this restriction. The indentures governing the ~~Revolving~~Senior ~~Credit~~Subordinated ~~Facility~~Notes ~~will~~and NBC’s Senior Discount beNotes ~~sufficient~~contain tosimilar ~~finance~~restrictions on our ~~current~~ability ~~operations,~~and ~~any~~the ~~required~~ability ~~excess~~of ~~cash~~certain ~~flow~~of our subsidiaries and the ability of NBC to pay dividends or make certain other payments. In addition, ~~cash~~if there is no availability under the restricted payment calculation mentioned above, but we maintain the 2.0 to 1.0 consolidated coverage ratio on a pro forma basis, we may make dividends to NBC to meet the interest ~~requirements~~payments on the Senior Discount Notes. If we do not maintain the 2.0 to 1.0 ratio on a pro forma basis, ~~income~~we ~~tax~~may still make payments, ~~planned~~including ~~capital~~dividends, ~~expenditures~~up to $15.0 million in the aggregate. At March 31, 2010, our pro forma consolidated coverage ratio calculated under the indenture to the Senior Subordinated Notes was 1.85 to 1.0 and ~~internal~~the ~~growth~~ratio calculated under the indenture to the Senior Secured Notes was 2.0 to 1.0. The pro forma consolidated coverage ratio calculated under the indenture to the Senior Subordinated Notes differs from the ratio calculated under the indenture to the Senior Secured Notes because the indenture to the Senior Subordinated Notes excludes debt issue cost amortization for all debt instruments outstanding at the March 4, 2004 Transaction date from the ~~next~~calculation ~~twelve~~and ~~months~~the indenture to the Senior Secured Notes excludes only debt issue cost amortization for the Senior Secured Notes and the ABL Facility from the same calculation. ~~Future~~At ~~acquisitions~~March 31, if2010, ~~any~~the amount distributable under the most restrictive indenture was $10.8 million after applying the $4.2 million dividend we paid to NBC for the March 15, ~~may~~2010 interest ~~require~~on ~~additional~~NBC’s ~~debt~~Senior ~~financing~~Discount orNotes. Such restrictions are not expected to affect our ability ~~capital~~to ~~contributions~~meet our cash obligations for the next twelve months.

~~The~~As ~~Revolving~~of ~~Credit Facility matures on May~~March 31, 2010 ~~and the Term Loans have maturities in excess of $45 million per quarter beginning June 30~~, ~~2010. If~~ we ~~are~~were unable to extend our Revolving Credit Facility, or enter into a new credit facility, prior to its maturity date or extend (or refinance) the Term Loans prior to June 30, 2010, our liquidity and financial condition will be adversely impacted. If this indebtedness is not extended or refinanced, the assets of NBC may not be sufficient to repay in ~~full~~compliance ~~such~~with ~~indebtedness~~all and other indebtedness, including the Senior Subordinated Notes and Senior Discount Notes. In addition, even if we are able to extend or refinance the indebtedness under the Senior Credit Facility, the terms of ~~the~~our ~~new~~debt ~~financing may not be as favorable to us as the terms of the existing financing~~covenants.

Our debt covenants use EBITDA and Adjusted EBITDA in the ratio calculations mentioned above. For a discussion of EBITDA and Adjusted EBITDA, see “Adjusted EBITDA Results” earlier in this Item and for a presentation reconciling EBITDA and Adjusted EBITDA to net cash flows from operating activities, which we believe to be the closest GAAP liquidity measure, see “Fiscal Year Ended March 31, 2010 Compared With Fiscal Year Ended March 31, 2009” and “Fiscal Year Ended March 31, 2009 Compared With Fiscal Year Ended March 31, 2008” earlier in this Item.

Sources of and Needs for Capital

As of March 31, 2010, we had up to $75.0 million of total revolving credit commitments under the ABL Facility (less outstanding letters of credit and subject to a borrowing base). The calculated borrowing base as of March 31, 2010 was $44.7 million, of which $1.0 million was outstanding under a letter of credit and $43.7 million was unused. Amounts drawn under the ABL Facility may be used for working capital and general corporate purposes (including up to $10.0 million for letters of credit), subject to certain limitations.

On October 2, 2009, in conjunction with the completion of our offering of the Senior Secured Notes and payment in full of the Term Loan, we entered into the ABL Credit Agreement which provides for the ABL Facility and replaced the Revolving Credit Facility (collectively the “Refinancing”). Although our overall indebtedness did not materially increase upon consummation of the Refinancing, our liquidity requirements have increased, primarily due to increased interest payment obligations. After giving effect to the Refinancing, our three principal tranches of debt (the Senior Secured Notes, the ABL Facility and the Senior Subordinated Notes) each will mature within a period of six months of each other. The ABL Facility will mature on the earlier of October 2, 2012 and the date that is 91 days prior to the earliest maturity of the $200.0 million Senior Secured Notes (which mature on December 1, 2011), the $175.0 million Senior Subordinated Notes (which mature on March 15, 2012), NBC’s $77.0 million Senior Discount Notes (which mature on March 15, 2013), or any refinancing thereof. As a consequence, we may be required to refinance the other tranches of debt in our and NBC’s capital structure in order to refinance the ABL Facility. Due to our highly leveraged capital structure, in the absence of a significant improvement in our credit profile and/or the financial markets, we may not be able to refinance our indebtedness, or NBC may not be able to refinance its indebtedness, on terms acceptable to us.

Our ability to satisfy our debt obligations and to pay principal and interest on our debt, fund working capital and make anticipated capital expenditures will depend on our future performance, which is subject to general economic conditions and other factors, some of which are beyond our control. We believe that funds generated from operations, existing cash, and borrowings under the ABL Facility will be sufficient to finance our current operations, cash interest requirements, income tax payments, planned capital expenditures, and internal growth for the foreseeable future. Future acquisitions, if any, may require additional debt or equity financing. As noted previously, we also cannot give assurance that we will generate sufficient cash flow from operations or that future borrowings will be available under the ABL Facility in an amount sufficient to enable us to service our debt or to fund our liquidity needs.

Off-Balance Sheet Arrangements

As of March 31, ~~2009~~2010, we had no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

The following tables present aggregated information as of March 31, ~~2009~~2010 regarding our contractual obligations and commercial commitments:

			Payments Due by Period
Contractual			Less Than		2-3		4-5		After 5
			Less Than		2-3		4-5		After 5
Obligations	Total		1 Year		Years		Years		Years
Contractual Obligations	Total		1 Year		Years		Years		Years
Long-term debt	$	368,363,179	$	6,917,451	$	361,322,726	$	123,002	$	—
Long-term debt (1)	$	375,237,954	$	54,403	$	375,127,935	$	55,616	$	—
Interest on long-term debt (1)		73,678,595		32,660,697		41,005,407		12,491		—
Interest on long-term debt		70,239,747		35,116,701		35,120,521		2,525		—
Capital lease obligations		43,~~047~~226,~~350~~790		~~748~~846,~~692~~053		1982,~~507,043~~976		~~740~~620,~~429~~311		1777,~~051,186~~450
Interest on capital lease obligations		1804,~~139,623~~053		~~310~~231,~~778~~847		~~432~~311,~~131~~557		~~238~~179,~~465~~425		~~158~~81,~~249~~224
Operating leases		8480,~~472~~384,000		19,~~471~~630,000		2829,~~611~~807,000		1615,~~609~~875,000		1915,~~781~~072,000
Uncertain tax position liabilities		—		—		—		—		—
Unconditional purchase obligations		—		—		—		—		—
Total	$	529,892,544	$	55,879,004	$	441,349,989	$	16,732,877	$	15,930,674
Total	$	531,700,747	$	60,108,618	$	432,878,307	$	17,723,387	$	20,990,435

Total

Amount of Commitment Expiration Per Period

Other Commercial

Amounts

Less Than

2-3

4-5

Over 5

Amounts

Less Than

2-3

4-5

Over 5

Commitments

Committed

1 Year

Years

Other Commercial Commitments

Committed

1 Year

Years

Unused line of credit (2)

6575,000,000

—

6575,000,000

—

(1)		~~Interest~~Does onnot include the ~~variable~~effect ~~rate~~of ~~debt~~$0.8 ismillion ~~estimated~~of ~~based~~unamortized ~~upon~~discount ~~implied~~for ~~forward rates in~~ the ~~yield~~Senior ~~curve~~Secured ~~at March 31, 2009~~Notes.
(2)		Interest is not estimated on the line of credit due to uncertainty surrounding the timing and extent of usage of the line of credit.

We have recorded other long-term liabilities of $2.3 million, which consist primarily of certain lease related liabilities of $1.2 million to appropriately recognize rent expense over the rental term, deferred payments related to acquisitions of $0.7 million and deferred compensation of $0.4 million, which are excluded from the preceding table primarily because we cannot reasonably estimate the timing of the long-term payments.

Transactions with Related and Certain Other Parties

In accordance with ~~the~~our ~~Company’s~~ debt covenants, ~~the~~we ~~Company~~ declared and paid $8.5 million in dividends to NBC during the fiscal ~~year~~years ended March 31, 2010 and 2009 to provide funding for interest due ~~and~~ and payable on NBC’s $77.0 million 11% senior discount notes. There were no dividends declared or ~~paid~~ paid to NBC in fiscal ~~years~~year 2008 ~~or 2007~~.

In conjunction with the Senior Credit Facility amendment on February 3, 2009, NBC entered into a Stock Subscription Agreement with ~~NBC~~ Holdings ~~Corp. (“Holdings”)~~, pursuant to which Holdings purchased 10,000 shares of a newly created series of NBC preferred stock, par value $0.01 per share, for $1,000 per share, for an aggregate purchase price of $10.0 million. As a result of the Stock Subscription Agreement, the Company received a $10.0 million capital contribution from NBC.

Impact of Inflation

Our results of operations and financial condition are presented based upon historical costs. While it is difficult to accurately measure the impact of inflation due to the imprecise nature of the estimates required, we believe that the effects of inflation, if any, on our results of operations and financial condition have not been material. However, there can be no assurance that during a period of significant inflation, our results of operations will not be adversely affected.

Accounting Standards Not Yet Adopted

In ~~May~~January ~~2009~~2010, the ~~Financial~~FASB issued Accounting Standards ~~Board~~Update (2010-06, “~~FASB”)~~Improving ~~issued~~Disclosures about ~~SFAS~~Fair ~~No. 165,~~Value ~~Subsequent Events~~Measurements” (“~~SFAS~~Update ~~No. 165~~2010-06”). ~~SFAS~~Update ~~No. 165~~2010-06 ~~establishes~~provides ~~general~~amendments to current standards ofto ~~accounting~~require new disclosures for transfers of assets and liabilities between Levels 1 and 2 ~~disclosure~~and offor ~~events~~activity ~~that~~in ~~occur~~Level ~~after~~3 fair value measurements. Furthermore, the ~~balance~~update ~~sheet~~provides ~~date~~amendments to ~~but~~clarify ~~before~~that ~~financial~~a ~~statements~~reporting ~~are~~entity should provide fair value measurement disclosures for each class ~~issued~~of orassets ~~are~~and ~~available~~liabilities and should provide disclosures about the valuation techniques and inputs used to bemeasure ~~issued~~fair value for both recurring and nonrecurring fair value measurements for those measurements that fall in either Level 2 or Level 3. ~~This~~Update ~~Statement~~2010-06 becomes effective for us in fiscal year ~~2010 and~~2011. isManagement ~~not~~has ~~expected~~determined tothat the update will not have a material impact on ~~our~~ the consolidated financial statements.

In ~~March~~October ~~2008~~2009, the FASB issued ~~SFAS~~Accounting ~~No. 161,~~Standards ~~Disclosures~~Update ~~about~~2009-13, ~~Derivative~~“Revenue ~~Instruments and~~Recognition ~~Hedging Activities~~ (anTopic ~~amendment~~605) of— ~~FASB~~Multiple ~~Statement~~Deliverable ~~No. 133)~~Arrangements” (“~~SFAS~~Update ~~No. 161~~2009-13”). ~~SFAS~~Update ~~No. 161 requires~~2009-13 ~~entities~~addresses tothe accounting ~~provide~~for ~~enhanced~~multiple-deliverable ~~disclosures~~arrangements ~~about~~to ~~how~~enable ~~and~~vendors ~~why~~to anaccount ~~entity~~for ~~uses~~products ~~derivative~~or ~~instruments,~~services ~~how~~(deliverables) separately ~~derivative~~rather ~~instruments~~than ~~and~~as ~~related~~a ~~hedged~~combined ~~items~~unit. ~~are~~The ~~accounted~~update ~~for~~addresses ~~under~~how ~~FASB~~to ~~Statement~~separate ~~No. 133,~~deliverables and how ~~derivative~~to ~~instruments~~measure and ~~related~~allocate ~~hedged~~arrangement ~~items~~considerations ~~affect~~to anone ~~entity’s~~or more ~~financial~~units ~~position,~~of ~~financial performance, and cash flows~~account. ~~This~~Update ~~Statement~~2009-13 becomes effective prospectively for ~~us in~~revenue ~~fiscal~~arrangements ~~year~~entered into ~~2010.~~or ~~Our~~materially ~~latest~~modified ~~interest~~in ~~rate~~fiscal ~~swap~~years ~~agreement~~beginning ~~expired~~ on ~~September~~or after June 3015, ~~2008; however~~2010, ~~our~~with ~~current~~earlier application ~~disclosure~~permitted. ~~format~~An ~~will~~entity ~~need~~may elect to beadopt ~~expanded~~the ~~(particularly~~standard ason ita ~~relates~~retrospective tobasis. ~~the~~We ~~specific~~expect ~~components~~to ofapply ~~gains~~this ~~and~~standard ~~losses~~ on ~~derivative~~a ~~instruments)~~prospective ifbasis webeginning ~~use~~April 1, ~~derivative~~2011. ~~instruments~~Management has indetermined that the ~~future~~update will not have a material impact on the consolidated financial statements.

In ~~December~~October ~~2007~~2009, the FASB issued ~~SFAS~~Accounting ~~No. 141~~Standards ~~(revised~~Update ~~2007)~~2009-14, ~~Business Combinations (~~“~~SFAS No. 141~~Software (~~revised~~Topic ~~2007~~985)”) ~~and~~— Certain ~~SFAS~~Revenue ~~No. 160,~~Arrangements ~~Noncontrolling~~That ~~Interests~~Include inSoftware ~~Consolidated~~Elements” ~~Financial Statements~~ (“~~SFAS~~Update ~~No. 160~~2009-14”). ~~SFAS~~Update ~~No. 141~~2009-14 clarifies ~~(revised~~what ~~2007)~~guidance ~~establishes~~should ~~principles~~be ~~and~~used ~~requirements for~~in ~~how~~allocating ~~an acquirer recognizes~~ and ~~measures~~measuring ~~the~~revenue ~~identifiable~~for ~~assets~~vendors ~~acquired,~~that ~~the~~sell ~~liabilities~~or ~~assumed,~~lease ~~and~~tangible ~~any~~products ~~noncontrolling~~in ~~interest~~an inarrangement ~~the~~that ~~acquiree;~~contains ~~recognizes~~software ~~and~~that ~~measures~~is ~~the~~more ~~goodwill acquired~~than inincidental to the ~~business~~tangible ~~combination~~product oras a ~~gain~~whole. ~~from~~The aamendments ~~bargain~~in ~~purchase;~~this ~~and~~update ~~determines~~do ~~what information~~not toaffect ~~disclose~~software ~~to enable users of the financial statements to evaluate the nature and~~revenue ~~financial~~arrangements ~~effects~~that ofdo ~~the~~not ~~business~~include ~~combination.~~tangible Inproducts ~~addition,~~nor ~~SFAS~~do ~~No. 141~~they ~~(revised~~affect ~~2007)~~software ~~requires~~revenue arrangements that ~~direct~~include ~~costs~~services ~~associated~~if ~~with~~the ansoftware ~~acquisition~~is beessential ~~expensed~~to asthe ~~incurred.~~functionality ~~SFAS~~of Nothose services. ~~141~~ ~~(revised~~Update ~~2007)~~2009-14 ~~has~~becomes ~~been~~effective ~~subsequently~~prospectively ~~amended~~for byrevenue ~~FASB~~arrangements ~~Staff~~entered ~~Position~~into ~~No. 141(R)-1~~or tomaterially modified ~~amend~~in ~~the~~fiscal ~~initial recognition~~years ~~and~~beginning ~~measurement,~~on ~~subsequent~~or ~~measurement~~after ~~and~~June 15, ~~accounting~~2010, ~~and~~with ~~disclosure~~earlier ofapplication ~~assets and~~permitted. ~~liabilities~~An ~~arising~~entity ~~from~~may ~~contingencies~~elect into aadopt ~~business~~the ~~combination.~~standard ~~SFAS~~on ~~No. 160~~a ~~establishes accounting~~retrospective ~~and~~basis. ~~reporting~~We ~~standards~~expect ~~for~~to ~~the~~apply ~~noncontrolling interest (minority interest) in a~~this ~~subsidiary~~standard ~~and~~on ~~for the deconsolidation of~~ a ~~subsidiary.~~prospective ~~Included~~basis inbeginning ~~SFAS~~April 1, No2011. ~~160~~ isManagement ~~the requirement~~has determined that ~~noncontrolling interests be reported in~~ the ~~equity section of the balance sheet.~~update ~~These~~will ~~Statements become effective for us in fiscal year 2010 and are~~ not ~~expected to~~ have a material impact on ~~our~~the consolidated financial statements.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS No. 157”), which we adopted on April 1, 2008 except for the provisions that become effective in fiscal year 2010 as described below. This Statement defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The Statement has been subsequently amended by FASB Staff Position No.’s 157-1 and 157-2 to exclude lease classification or measurement (except in certain instances) from the scope of SFAS No. 157 and to defer the effective date of SFAS No. 157 for most nonfinancial assets and nonfinancial liabilities. This Statement, as it pertains to most nonfinancial assets and nonfinancial liabilities, becomes effective for us in fiscal year 2010. We do not believe that the adoption of the remaining provisions of SFAS No. 157 will have a material impact on our consolidated financial statements.

“Safe Harbor” Statement Under the Private Securities Litigation Reform Act of 1995

This Annual Report on Form 10-K contains or incorporates by reference certain statements that are not historical facts, including, most importantly, information concerning possible or assumed future results of our operations and statements preceded by, followed by or that include the words “may,” “believes,” “expects,” “anticipates,” or the negation thereof, or similar expressions, which constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Reform Act”). All statements which address operating performance, events or developments that are expected or anticipated to occur in the future, including statements relating to volume and revenue growth, earnings per share or EBITDA and Adjusted EBITDA growth, our ability to extend, refinance or repay our indebtedness, or statements expressing general optimism or pessimism about future results of operations, are forward-looking statements within the meaning of the Reform Act. Such forward-looking statements involve risks, uncertainties and other factors which may cause our actual performance or achievements to be materially different from any future results, performances or achievements expressed or implied by such forward-looking statements. For those statements, we claim the protection of the safe harbor for forward-looking statements contained in the Reform Act. Several important factors could affect our future results and could cause those results to differ materially from those expressed in the forward-looking statements contained herein. Such factors include, but are not limited to, the following: further deterioration in the economy and credit markets or a decline in consumer spending; increased competition from other companies that target our markets; increased competition from alternative media and alternative sources of textbooks for students, including digital or other educational content sold directly to students; increased competition for the purchase and sale of used textbooks from student to student transactions; the risks of operating with a substantial level of indebtedness including possible increases in our costs of borrowing or our inability to extend or refinance debt as it matures; our inability to successfully contract-manage additional bookstores or to integrate those additional stores; our inability to cost-effectively maintain or increase the number of contract-managed stores; our inability to purchase a sufficient supply of used textbooks; changes in pricing of new and/or used textbooks; changes in publisher practices regarding new editions and materials packaged with new textbooks; the loss or retirement of key members of management; the impact of seasonality of the wholesale and bookstore operations; the impact of being controlled by one principal equity holder; further goodwill impairment or impairment of identifiable intangibles resulting in a non-cash write down of goodwill or identifiable intangibles; changes in general economic conditions and/or in the markets in which we compete or may, from time to time, compete; and other risks detailed in our Securities and Exchange Commission filings, in particular in this Annual Report on Form 10-K, all of which are difficult or impossible to predict accurately and many of which are beyond our control. We will not undertake and specifically decline any obligation to publicly release the result of any revisions which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

~~ITEM~~“Safe ~~7A.~~Harbor” ~~QUANTITATIVE~~Statement ~~AND~~Under ~~QUALITATIVE~~the ~~DISCLOSURES~~Private ~~ABOUT~~Securities ~~MARKET~~Litigation ~~RISK.~~Reform Act of 1995

~~Our~~This ~~primary~~Annual ~~market~~Report ~~risk~~on ~~exposure~~Form is10-K contains or incorporates by reference certain statements that are not historical facts, ~~and~~including, ismost ~~expected~~importantly, information concerning possible or assumed future results of our operations, such as, but not limited to, ~~continue~~statements relating to beEBITDA or Adjusted EBITDA growth, ~~fluctuation~~the expected revenue of new bookstores we are operating, expanding sales on the internet, continued growth of the market for new and used textbooks, the increase of student enrollment in colleges, expected growth or changes in certain segments, volume or revenue growth, ~~variable~~our ~~interest~~ability ~~rates.~~to Ofextend, refinance or repay our indebtedness, expressions of general optimism or pessimism about the ~~$372~~future, and statements preceded by, followed by or that include the words “may,” “believes,” “expects,” “feels,” “anticipates,” or the negation thereof, or similar expressions, which constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Reform Act”).~~4 million~~ These forward-looking statements, for which we claim the protection of the safe harbor contained in ~~total~~the ~~indebtedness~~Reform ~~outstanding~~Act, atinvolve ~~March 31~~risks, ~~2009~~uncertainties and other factors which may cause the actual performance or our achievements to be materially different from any future results, ~~approximately~~performances ~~$193~~or achievements expressed or implied by such forward-looking statements.~~1 million~~ isSeveral ~~subject~~important factors could affect our future results and could cause those results to ~~fluctuations~~differ materially from those expressed in the ~~Eurodollar~~forward-looking statements ~~interest~~contained ~~rate~~herein. AsThese factors include, but are not limited to, the following: (1) the ~~provided~~risks of operating with a substantial level of indebtedness including possible increases in our costs ~~Senior~~of ~~Credit Facility~~borrowing, ~~exposure~~our inability to pay interest ~~rate~~as ~~fluctuations~~it iscomes ~~managed~~due, ~~by maintaining~~repay ~~fixed~~debt, ~~interest~~extend ~~rate~~or refinance debt as it matures, and obtain additional financing, and the possibility that the maturity of our credit facility may be accelerated and that cash flow will be diverted away from operations; (~~primarily~~2) increased competition from other companies that target our markets; (3) increased competition from alternative media and alternative sources of textbooks for students, including digital or other educational content sold or rented directly to students and increased competition for the ~~Senior~~purchase and ~~Subordinated~~sale ~~Notes~~of used textbooks from student-to-student transactions; (4) further deterioration in the economy and credit markets, ~~historically~~a decline in consumer spending, and/or changes in general economic ~~entering~~conditions ~~into~~in ~~interest~~the ~~rate~~markets ~~swap~~in ~~agreements~~which ~~that~~we ~~qualified~~compete asor ~~cash~~may ~~flow~~compete; ~~hedging~~(5) our ~~instruments~~inability to successfully ~~convert~~start-up, ~~certain~~acquire ~~variable~~or ~~rate~~contract-manage ~~debt~~additional ~~into~~bookstores ~~fixed~~or ~~rate~~to ~~debt.~~integrate Onthose ~~July~~additional bookstores and/or to cost-effectively maintain our current contract-managed bookstores; (6) ~~15,~~our inability ~~2005,~~to wepurchase ~~entered~~a ~~into~~sufficient ansupply of used textbooks; (7) changes in pricing of new and/or ~~interest~~used ~~rate~~textbooks ~~swap~~or ~~agreement~~in publisher practices regarding new editions and materials packaged with new textbooks; (8) the loss or retirement of key members of management; (9) the impact of seasonality of the wholesale and bookstore operations; (10) further goodwill impairment or impairment of identifiable intangibles resulting in a non-cash write down of goodwill or identifiable intangibles; and other risks detailed in our SEC filings, ~~which~~in ~~became~~particular ~~effective~~in this Annual Report on Form ~~September 30~~10-K, ~~2005~~all of which are difficult or impossible to predict accurately and ~~expired~~many onof ~~September~~which are ~~30,~~beyond ~~2008~~our control. We will not undertake and specifically decline any obligation to publicly release the result of any revisions which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

The following table presents quantitative information about our market risk sensitive instruments (the weighted-average variable rates are based on implied forward rates in the yield curve at March 31, 2009):

	Fixed Rate Debt					Variable Rate Debt
			Weighted-					Weighted-
			Average					Average
	Principal		Interest			Principal		Interest
	Cash Flows		Rate			Cash Flows (1)		Rate
Fiscal Year Ended March 31:
2010	$	797,572		8.64	%	$	6,868,571		9.25	%
2011		972,328		8.64	%		186,207,775		9.25	%
2012		175,649,666		8.63	%		—		—
2013		461,245		8.63	%		—		—
2014		402,187		8.46	%		—		—
Thereafter		1,051,185		8.29	%		—		—
Total	$	179,334,183		8.63	%	$	193,076,346		9.25	%
Fair Value	$	90,367,000		—		$	160,253,000		—

(1) Principal cash flows represent scheduled principal payments and are adjusted for anticipated excess cash flow payments and certain optional prepayments, if any, to be applied toward principal balances.

~~Certain~~ITEM quantitative market risk disclosures have changed since March 31, 2008 as a result of market fluctuations, movement in interest rates, the February, 2009 amendment to the Senior Credit Facility, and principal payments7A. ~~The~~QUANTITATIVE ~~following~~AND ~~table~~QUALITATIVE ~~presents~~DISCLOSURES ~~summarized~~ABOUT ~~market~~MARKET ~~risk information~~RISK. ~~(the weighted-average variable rates are based on implied forward rates in the yield curve as of the date presented):~~

	March 31,			March 31,
	2009			2008
Carrying Values:
Fixed rate debt	$	179,334,183		$	180,100,925
Variable rate debt		193,076,346			195,103,081
Interest rate swap — “in-the-money” (“out-of-the-money”)		—			(1,119,000	)
Fair Values:
Fixed rate debt	$	90,367,000		$	161,984,000
Variable rate debt		160,253,000			179,495,000
Interest rate swap — “in-the-money” (“out-of-the-money”)		—			(1,119,000	)
Overall Weighted-Average Interest Rates:
Fixed rate debt		8.63	%		8.64	%
Variable rate debt		9.25	%		5.38	%
Interest rate swap receive rate		—			2.63	%
Interest rate swap pay rate		—			4.34	%

Our primary market risk exposure is, and is expected to continue to be, fluctuation in interest rates. Our exposure to market risk for changes in interest rates relates to our short-term investments and borrowings under the ABL Facility. All of our long-term debt that would have exposed us to market risk due to fluctuations in variable interest rates has been paid in full. Exposure to interest rate fluctuations for our long-term debt is managed by maintaining fixed interest rate debt (primarily the Senior Subordinated Notes and the Senior Secured Notes). Because we pay fixed interest coupons on our notes, market fluctuations do not impact our debt interest payments. However, the fair value of our notes fluctuates as a result of changes in market interest rates, changes in our credit worthiness, and changes in the overall credit market.

The following table presents quantitative information about our market risk sensitive instruments, which include the Senior Subordinated Notes, the Senior Secured Notes, capital lease obligations, and other long-term debt:


	Fixed Rate Debt
			Weighted-
			Average
	Principal		Interest
	Cash Flows (1)		Rate
Fiscal Year Ended March 31:
2011	$	900,456		9.36	%
2012		375,649,664		9.35	%
2013		461,247		8.63	%
2014		402,190		8.46	%
2015		273,739		8.29	%
Thereafter		777,450		8.29	%

Total	$	378,464,746		9.35	%


Fair Value	$	372,317,000		—


(1)		Principal cash flows represent scheduled principal payments and are adjusted for certain optional prepayments, if any, to be applied toward principal balances.

Certain quantitative market risk disclosures have changed since March 31, 2009 as a result of the payment in full of the Term Loan and our issuance of the Senior Secured Notes, market fluctuations, movement in interest rates, and principal payments. The following table presents summarized market risk information (the weighted-average variable rates are based on implied forward rates in the yield curve as of the date presented):


	March 31,			March 31,
	2010			2009

Carrying Values:

Instruments entered into for purposes other than trading:	$	—		$	4,999,319
Cash equivalents (treasury notes)

Fixed rate debt		377,624,262			179,334,183
Variable rate debt		—			193,076,346

Fair Values:

Instruments entered into for purposes other than trading:
Cash equivalents (treasury notes)	$	—		$	4,999,319

Fixed rate debt		372,317,000			90,367,000
Variable rate debt		—			160,253,000

Overall Weighted-Average Interest Rates:

Cash equivalents (treasury notes)		—			0.07	%

Fixed rate debt		9.35	%		8.63	%
Variable rate debt		—			9.25	%

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Index to Consolidated Financial Statements of Nebraska Book Company, Inc.

Report of Independent Registered Public Accounting Firm			4142
Consolidated Balance Sheets as of March 31, 2009 and March 31, 2008			42
Consolidated Balance Sheets as of March 31, 2010 and March 31, 2009			43
Consolidated Statements of Operations for the Years Ended March 31, 2009, 2008 and 2007			43
Consolidated Statements of Operations for the Years Ended March 31, 2010, 2009 and 2008			44
Consolidated Statements of Stockholder’s Equity for the Years Ended March 31, 2009, 2008 and 2007			44
Consolidated Statements of Stockholder’s Equity for the Years Ended March 31, 2010, 2009 and 2008			45
Consolidated Statements of Cash Flows for the Years Ended March 31, 2009, 2008 and 2007			45
Consolidated Statements of Cash Flows for the Years Ended March 31, 2010, 2009 and 2008			46
Notes to Consolidated Financial Statements			4647

4041

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholder of
Nebraska Book Company, Inc.
Lincoln, Nebraska

We have audited the accompanying consolidated balance sheets of Nebraska Book Company, Inc. (a wholly-owned subsidiary of NBC Acquisition Corp.) and subsidiaries as of March 31, ~~2009~~2010 and ~~2008~~2009, and the related consolidated statements of operations, stockholder’s equity, and cash flows for each of the three years in the period ended March 31, ~~2009~~2010. Our audits also included the financial statement ~~schedules~~schedule listed in the Index at Item 15. These financial statements and financial statement ~~schedules~~schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on the financial statements and financial statement ~~schedules~~schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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 consolidated financial statements present fairly, in all material respects, the financial position of Nebraska Book Company, Inc. and subsidiaries as of March 31, ~~2009~~2010 and ~~2008~~2009, and the results of their operations and their cash flows for each of the three years in the period ended March 31, ~~2009~~2010 in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement ~~schedules~~schedule, when considered in relation to the basic consolidated financial statements taken as a whole, ~~present~~presents fairly in all material respects the information set forth therein.

/s/ Deloitte & Touche LLP

~~Lincoln~~Omaha, Nebraska June 25, ~~2009~~2010

4142

NEBRASKA BOOK COMPANY, INC.

CONSOLIDATED BALANCE SHEETS

	March 31,			March 31,
	2009			2008
	2010			2009
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	4460,~~038~~972,~~468~~625		$	2944,~~326~~038,~~456~~468
Receivables, net		6157,~~301~~987,~~636~~794			5761,~~396~~301,~~508~~636
Inventories		9397,~~115~~497,~~663~~689			9993,~~011~~115,~~087~~663
Recoverable income taxes		2,~~869~~435,~~583~~287			—2,869,583
Deferred income taxes		6,~~581~~247,~~802~~559			6,~~058~~581,~~093~~802
Prepaid expenses and other assets		34,~~950~~070,~~874~~281			23,~~539~~950,~~077~~874
Total current assets		229,211,~~858,026~~235			~~194~~211,~~331~~858,~~221~~026
PROPERTY AND EQUIPMENT, net of depreciation & amortization		4542,~~638~~155,~~522~~424			45,~~066~~638,~~180~~522
GOODWILL		215,~~436~~571,126			~~320~~215,~~367~~436,~~273~~126
CUSTOMER RELATIONSHIPS, net of amortization		8579,~~644~~902,~~340~~820			9185,~~385~~644,~~860~~340
TRADENAME		31,320,000			31,320,000
OTHER IDENTIFIABLE INTANGIBLES, net of amortization		95,~~172~~295,~~622~~324			129,~~103~~172,~~357~~622
DEBT ISSUE COSTS, net of amortization		69,~~875~~198,~~122~~683			56,~~119~~875,~~263~~122
OTHER ASSETS		2,~~121~~850,~~949~~632			2,~~394~~121,~~267~~949
	$	~~608~~615,~~066~~505,~~707~~244		$	~~702~~608,~~087~~066,~~421~~707
LIABILITIES AND STOCKHOLDER’S EQUITY
CURRENT LIABILITIES:
Accounts payable	$	26,~~865~~387,~~614~~040		$	2826,~~631~~865,~~029~~614
Accrued employee compensation and benefits		139,~~780~~401,~~209~~468			1213,~~100~~780,~~640~~209
Accrued interest		~~678~~7,~~516~~295,709			1678,~~778,937~~516
Accrued incentives		6,~~110~~313,~~700~~933			76,~~108~~110,~~857~~700
Accrued expenses		49,~~277~~051,~~105~~651			34,~~172~~277,~~122~~105
Income taxes payable		—			847,370
Deferred revenue		1,299,960			959,274
Deferred revenue		959,274			862,994
Current maturities of long-term debt		54,403			6,917,451
Current maturities of long-term debt		6,917,451			2,070,657
Current maturities of capital lease obligations		846,053			748,692
Current maturities of capital lease obligations		748,692			658,415
Total current liabilities		60,650,217			60,337,561
Total current liabilities		60,337,561			57,231,021
LONG-TERM DEBT, net of current maturities		374,343,069			361,445,728
LONG-TERM DEBT, net of current maturities		361,445,728			368,363,176
CAPITAL LEASE OBLIGATIONS, net of current maturities		2,380,737			3,298,658
CAPITAL LEASE OBLIGATIONS, net of current maturities		3,298,658			4,111,758
OTHER LONG-TERM LIABILITIES		2,278,963			5,304,166
OTHER LONG-TERM LIABILITIES		5,304,166			4,467,504
DEFERRED INCOME TAXES		50,467,019			54,313,459
DEFERRED INCOME TAXES		54,313,459			55,104,415
DUE TO PARENT		23,194,711			20,130,189
DUE TO PARENT		20,130,189			16,970,151
COMMITMENTS (Note I)
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~~197,~~923~~307			~~138~~148,~~087~~135,~~705~~923
Retained earnings (accumulated deficit)		(44,899,077	)		58,499,591
Accumulated Deficit		(46,006,879	)		(44,899,077	)
Accumulated other comprehensive loss		—			(748,000	)
Total stockholder’s equity		102,190,528			103,236,946
Total stockholder’s equity		103,236,946			195,839,396
	$	615,505,244		$	608,066,707
	$	608,066,707		$	702,087,421

42See notes to consolidated financial statements.

NEBRASKA BOOK COMPANY, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

	Year Ended			Year Ended			Year Ended
	March 31,			March 31,			March 31,
	2009			2008			2007
	2010			2009			2008
REVENUES, net of returns	$	~~610~~605,~~716~~493,~~181~~613		$	~~581~~610,~~247~~716,~~786~~181		$	~~544~~581,~~427~~247,~~964~~786
COSTS OF SALES (exclusive of depreciation shown below)		~~371~~370,~~369~~195,~~240~~916			~~354~~371,~~139~~369,~~474~~240			~~332~~354,~~443~~139,~~991~~474
Gross profit		~~239~~235,~~346~~297,~~941~~697			~~227~~239,~~108~~346,~~312~~941			~~211~~227,~~983~~108,~~973~~312
OPERATING EXPENSES:
Selling, general and administrative		~~168~~161,~~314~~858,~~611~~274			~~157~~168,~~193~~314,~~426~~611			~~143~~157,~~095~~193,~~625~~426
Closure of California Warehouse		—			~~(36,057~~—	)		~~774~~(36,~~475~~057	)
Depreciation		78,~~602~~517,~~631~~004			7,~~208~~602,~~504~~631			57,~~915~~208,~~758~~504
Amortization		1110,~~384~~853,~~020~~248			1011,~~443~~384,~~335~~020			910,~~613~~443,~~598~~335
Goodwill impairment		~~106,972,000~~—			—106,972,000			—
		294,273,262			174,809,208			159,399,456
		181,228,526			294,273,262			174,809,208
INCOME (LOSS) FROM OPERATIONS		(54,~~926~~069,~~321~~171	)		52(54,~~299~~926,~~104~~321	)		52,~~584~~299,~~517~~104
OTHER EXPENSES (INCOME):
Interest expense		3240,~~878~~679,~~225~~829			3332,~~559~~878,~~239~~225			33,~~135~~559,~~537~~239
Interest income		(~~426~~180,~~536~~709	)		(1426,~~332,497~~536	)		(1,~~643~~332,~~598~~497	)
Loss on derivative financial instrument		102,000			198,000			225,000
Loss on early extinguishment of debt		3,065,759			—			—
		32,553,689			32,424,742			31,716,939
Loss on derivative financial instrument		—			102,000			198,000
INCOME (LOSS) BEFORE INCOME TAXES		(87,480,010	)		19,874,362			20,867,578
		43,564,879			32,553,689			32,424,742
INCOME TAX EXPENSE		7,448,658			7,418,339			8,256,092
INCOME (LOSS) BEFORE INCOME TAXES		10,504,292			(87,480,010	)		19,874,362
NET INCOME (LOSS)	$	(94,928,668	)	$	12,456,023		$	12,611,486
INCOME TAX EXPENSE		3,142,094			7,448,658			7,418,339
NET INCOME (LOSS)	$	7,362,198		$	(94,928,668	)	$	12,456,023

See notes to consolidated financial statements.

4344

NEBRASKA BOOK COMPANY, INC.

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
BALANCE, April 1, 2007	$	100	$	138,017,229		$	46,043,568		$	613,000		$	184,673,897
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:
Other comprehensive loss, 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	)
Contributed capital		—		(40	)		—			—			(40	)	$	—
Net income		—		—			7,362,198			—			7,362,198			7,362,198
Share-based compensation attributable to NBC Holdings Corp. stock options		—		61,424			—			—			61,424			—
Dividends declared		—		—			(8,470,000	)		—			(8,470,000	)		—
BALANCE, March 31, 2010	$	100	$	148,197,307		$	(46,006,879	)	$	—		$	102,190,528		$	7,362,198

See notes to consolidated financial statements.

4445

NEBRASKA BOOK COMPANY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Year Ended			Year Ended			Year Ended
	March 31,			March 31,			March 31,
	2009			2008			2007
	2010			2009			2008
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	~~(94~~7,~~928~~362,~~668~~198	)	$	12(94,~~456~~928,~~023~~668	)	$	12,~~611~~456,~~486~~023
Adjustments to reconcile net income (loss) to net cash flows from operating activities:
Share-based compensation		1,~~288~~106,~~543~~882			1,~~040~~288,~~599~~543			~~996~~1,~~957~~040,599
Provision for losses on receivables		1,~~366~~399,~~979~~466			~~468~~1,~~007~~366,979			~~834~~468,~~442~~007
Depreciation		78,~~602~~517,~~631~~004			7,~~208~~602,~~504~~631			57,~~915~~208,~~758~~504
Amortization		1315,~~589~~654,~~972~~145			1213,~~298~~589,~~118~~972			1112,~~336~~298,~~553~~118
Goodwill impairment		~~106,972,000~~—			—106,972,000			—
Loss on derivative financial instrument		102,000			198,000			225,000
Loss on early extinguishment of debt		3,065,759			—			—
(Gain) Loss on disposal of assets		124,871			284,891			(575	)
Amortization of bond discount		159,518			—			—
Deferred income taxes		(1,947,665	)		(3,443,682	)		(2,148,119	)
Loss on derivative financial instrument		—			102,000			198,000
Loss on disposal of assets		235,803			124,871			284,891
Deferred income taxes		(3,512,197	)		(1,947,665	)		(3,443,682	)
Changes in operating assets and liabilities, net of effect of acquisitions:
Receivables		(51,~~271~~252,~~324~~806	)		(25,~~920~~271,~~327~~324	)		(92,~~924~~920,~~934~~327	)
Inventories		8(2,~~101~~874,~~584~~880	)		(18,~~425~~101,~~783~~584	)		(31,~~566~~425,~~490~~783	)
Recoverable income taxes		(2434,~~846,510~~296	)		—(2,846,510	)		~~1,438,819~~—
Prepaid expenses and other assets		(130,~~400,805~~593	)		(~~545~~1,~~433~~400,805	)		(~~219~~545,~~494~~433	)
Other assets		~~275~~462,~~316~~071			~~490~~275,~~219~~316			~~(714~~490,~~295~~219	)
Accounts payable		(2376,~~132,402~~486	)		(12,~~098~~132,~~060~~402	)		5(1,~~123~~098,~~589~~060	)
Accrued employee compensation and benefits		1(4,~~679~~378,~~569~~741	)		(21,~~112~~679,~~361~~569	)		(2,~~617~~112,~~465~~361	)
Accrued interest		186,~~579~~617,193			~~(50~~18,~~863~~579	)		24(50,~~069~~863	)
Accrued incentives		~~(998~~203,~~157~~233	)		~~125~~(998,~~595~~157	)		~~(576~~125,~~234~~595	)
Accrued expenses		1516,~~104,983~~894			~~837~~1,~~883~~104,983			1837,~~226,030~~883
Income taxes payable		~~(847,370~~—	)		(2847,~~405,704~~370	)		(2,~~330~~405,~~451~~704	)
Deferred revenue		96340,~~280~~686			~~(35~~96,~~672~~280	)		~~184~~(35,~~243~~672	)
Other long-term liabilities		~~(284~~20,~~493~~465	)		(~~506~~284,~~193~~493	)		(~~282~~506,~~140~~193	)
Net cash flows from operating activities		3136,~~665~~236,~~913~~708			2031,~~863~~665,~~761~~913			2720,~~432~~863,~~581~~761
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		(75,~~979~~410,~~371~~976	)		(7,~~260~~979,~~909~~371	)		(67,~~543~~260,~~074~~909	)
Acquisitions, net of cash acquired		(62,~~320~~847,~~772~~608	)		(146,~~681~~320,~~655~~772	)		(2514,~~873~~681,~~662~~655	)
Proceeds from sale of property and equipment		35141,~~503~~167			3635,~~385~~503			~~313~~36,~~505~~385
Software development costs		(~~633~~648,~~763~~523	)		(~~272~~633,~~981~~763	)		(~~705~~272,~~523~~981	)
Net cash flows from investing activities		(148,~~898~~765,~~403~~940	)		(2214,~~179~~898,~~160~~403	)		(3222,~~808~~179,~~754~~160	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt		—199,000,000			—			~~24,000,000~~—
Payment of financing costs		(310,~~961~~190,~~811~~217	)		—(3,961,811	)		~~(964,774~~—	)
Principal payments on long-term debt		(2193,~~070~~125,~~654~~225	)		(12,~~957~~070,~~852~~654	)		(31,~~821~~957,~~172~~852	)
Principal payments on capital lease obligations		(~~722~~820,~~823~~560	)		(~~624~~722,~~910~~823	)		(~~390~~624,~~205~~910	)
Net decrease in revolving credit facility		—			—			(13,931,119	)
Borrowings under revolving credit facility		85,000,000			200,600,000			148,000,000
Dividends paid to parent		(8,470,000	)		—			—
Payments under revolving credit facility		(85,000,000	)		(200,600,000	)		(148,000,000	)
Capital contributions		10,009,752			4,869			—
Dividends paid to parent		(8,470,000	)		(8,470,000	)		—
Due to parent		3,160,038			236,872			83,597
Capital contributions		4,869			10,009,752			4,869
Net cash flows from financing activities		(2,055,498	)		(2,341,021	)		4,976,327
Due to parent		3,064,522			3,160,038			236,872
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		14,712,012			(3,656,420	)		(399,846	)
Net cash flows from financing activities		(10,536,611	)		(2,055,498	)		(2,341,021	)
CASH AND CASH EQUIVALENTS, Beginning of period		29,326,456			32,982,876			33,382,722
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		16,934,157			14,712,012			(3,656,420	)
CASH AND CASH EQUIVALENTS, End of period	$	44,038,468		$	29,326,456		$	32,982,876
CASH AND CASH EQUIVALENTS, Beginning of period		44,038,468			29,326,456			32,982,876
CASH AND CASH EQUIVALENTS, End of period	$	60,972,625		$	44,038,468		$	29,326,456
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION:
Cash paid during the period for:
Interest	$	3029,~~653~~102,~~694~~221		$	3130,~~755~~653,~~319~~694		$	31,~~388~~755,~~513~~319
Income taxes		93,~~930~~155,~~165~~473			139,~~030~~930,~~853~~165			613,~~551~~030,~~344~~853
Noncash investing and financing activities:
Property acquired through capital leases	$	—		$	~~2,200,000~~—		$	12,~~079~~200,000
Accumulated other comprehensive income (loss):
Unrealized gain (loss) on interest rate swap agreement, net of income taxes		~~748,000~~—			(1748,~~361,~~000	)		(~~801~~1,361,000	)
Deferred taxes resulting from unrealized gain (loss) on interest rate swap agreement		~~473,000~~—			~~(861~~473,000	)		(~~506~~861,000	)
Other intangible agreement to be paid over three years		—			~~1,585,407~~—			—1,585,407
Unpaid consideration associated with bookstore acquisitions		~~155~~574,~~000~~465			~~700~~155,000			—700,000

45See notes to consolidated financial statements.

NEBRASKA BOOK COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A. NATURE OF OPERATIONS

Nebraska Book Company, Inc. (the “Company,” “we,” “our,” or “us”) is a wholly-owned subsidiary of NBC Acquisition Corp. (“NBC”). Wholly-owned subsidiaries of Nebraska Book Company, Inc. include NBC Textbooks LLC and Net Textstore LLC (accounted for in the Company’s Textbook Division), Specialty Books, Inc. (accounted for in the Company’s Complementary Services Division), Campus Authentic LLC (accounted for in the Company’s Bookstore Division), and College Book Stores of America, Inc. (“CBA”) (a portion of the Company’s Bookstore Division representing a group of primarily contract-managed college bookstore locations acquired on May 1, 2006).

~~The~~We ~~Company~~participate ~~participates~~ in the college bookstore industry primarily by operating ~~its~~our own ~~college~~ college bookstores, by providing used textbooks to college bookstore operators, by providing ~~distance~~ distance education products and services, and by providing proprietary college bookstore information and e-commerce systems, consulting and other services.

On March 4, 2004, Weston Presidio formed NBC Holdings Corp. and acquired the controlling interest in NBC through a series of steps which resulted in Weston Presidio owning a substantial majority of NBC’s common stock (referred to as the “March 4, 2004 Transaction”).

B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

~~The~~Our significant accounting policies ~~of the Company~~ are as follows:

Principles of Consolidation: Effective July 1, 2002, ~~the~~our ~~Company’s~~ distance learning division ~~was~~ was separately incorporated under the laws of the State of Delaware as Specialty Books, Inc., aone of our wholly-owned ~~subsidiary of the Company~~subsidiaries. Effective January 1, 2005, ~~the~~our ~~Company’s~~ Textbook Division was separately incorporated under the laws of the State of Delaware as NBC Textbooks LLC, ~~a wholly-owned~~one ~~subsidiary~~ of ~~the~~our ~~Company~~wholly-owned subsidiaries. On May 1, 2006, ~~the~~we ~~Company~~ acquired all of the outstanding stock of CBA, an entity separately incorporated under the laws of the State of Illinois and now accounted for as aone of our wholly-owned ~~subsidiary of the Company~~subsidiaries. On April 24, 2007, ~~the~~we ~~Company~~ established Net Textstore LLC as a wholly-owned subsidiary separately incorporated under the laws of the State of Delaware. Effective January 26, 2009, we established Campus Authentic LLC, a wholly-owned subsidiary which was separately incorporated under the laws of the State of Delaware. Subsequent to the date of incorporation or acquisition, ~~the~~our ~~Company’s~~ financial statements have been presented on a consolidated basis to include all of the balances of Specialty Books, Inc., NBC Textbooks LLC, CBA, Net Textstore LLC and Campus Authentic LLC, after elimination of all intercompany balances and transactions. In connection with their incorporation, Specialty Books, Inc., NBC Textbooks LLC, CBA, Net Textstore LLC and Campus Authentic LLC have guaranteed payment and performance of obligations, liabilities, and indebtedness arising under, out of, or in connection with the Senior Subordinated Notes, Senior Secured Notes and ~~Senior~~the ~~Credit~~ABL Facility.

Revenue Recognition: ~~The~~Our ~~Company’s~~ revenue recognition policies, by reporting segment, are as follows:

Bookstore Division –— The Bookstore Division’s revenues consist primarily of the sale or rental of new and used textbooks, as well as the sale of a variety of other merchandise including apparel, general books, sundries, and gift items. Such sales occur primarily “over-the-counter” or online with revenues being recognized at the point of sale or upon shipment. We implemented a rental program for new and used textbooks in fiscal 2010 and revenues associated with that program are recognized at the time of rental.

Textbook Division –— The Textbook Division recognizes revenue from the sale of used textbooks when title passes (at the time of shipment), net of estimated product returns. The Textbook Division has established a program which, under certain conditions, enables its customers to return the used textbooks. The effect of this program is estimated utilizing actual historical return experience and revenues are adjusted accordingly.

Complementary Services Division –— Complementary Services Division revenues come from a variety of sources, including the sale of distance education materials, the sale of computer hardware and software (and licensing thereof), software maintenance contracts, membership fees, and a variety of services provided to college bookstores. Revenues from the sale of distance education materials and computer hardware/software (and licensing thereof) are recognized at the time of delivery. Software maintenance contracts and membership fees are generally invoiced to the customer annually, with the revenues being deferred and recognized on a straight-line basis over the term of the contract. Revenues from the various services provided to college bookstores are recognized once services have been rendered.

4647

Shipping and Handling Fees and Costs: Amounts billed to a customer for shipping and handling have been classified as revenues in the consolidated statements of operations and approximated $67.16 million, $56.71 million and $35.37 million for the fiscal years ended March 31, ~~2009~~2010, ~~2008~~2009 and ~~2007~~2008, respectively. Shipping and handling costs are included in operating expenses in the consolidated statements of operations and approximated $1011.40 million, $910.94 million and $79.49 million for the fiscal years ended March 31, ~~2009~~2010, ~~2008~~2009 and ~~2007~~2008, respectively.

Sales Tax Collections: ~~Sales~~We account for sales tax collected from customers and remitted to the ~~applicable~~ applicable taxing authorities ~~is accounted for by the Company~~ on a net basis, with no impact on revenues and any differences between amount collected and amount remitted being recorded in selling, general and ~~administrative~~ administrative expenses.

Advertising: Advertising costs are expensed as incurred and approximated $76.03 million, $7.30 million and $7.3 million for the fiscal years ended March 31, ~~2009~~2010, ~~2008~~2009 and ~~2007~~2008, respectively.

Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and 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 the estimates.

Cash and Cash Equivalents: Cash and cash equivalents consist of cash on hand and in regular checking accounts and an overnight sweep account at the bank as well as short-term investments in treasury notes with maturities of three months or less when purchased.

~~Inventories~~Accounts Receivable and Allowance for Doubtful Accounts: ~~Inventories~~We ~~are~~maintain ~~stated~~allowances atfor doubtful accounts for estimated losses resulting from the ~~lower~~inability of ~~cost~~our orcustomers ~~market.~~to ~~Used~~make ~~textbook inventories~~required ~~are~~payments. ~~valued~~In ~~using~~determining athe ~~combination~~adequacy of the ~~weighted-average~~allowance, ~~cost~~we ~~and~~analyze ~~market~~the ~~values.~~aging ~~The~~of ~~Company~~the receivable, the customer’s ~~Bookstore~~ ~~Division~~financial ~~values~~position, ~~new~~historical ~~textbook~~collection experience, and ~~non-textbook~~other ~~inventories~~economic ~~using~~and industry factors. If the ~~retail~~financial ~~inventory method.~~condition ~~Other~~of ~~inventories~~our ~~are~~customers ~~determined~~were onto ~~the~~deteriorate, ~~first-~~resulting in an impairment of their ability to make payments, ~~first~~additional allowances may be required. Credits due from publishers for returns are re-~~out~~classed ~~cost~~from ~~method~~accounts payable to accounts receivable.

~~Property and Equipment~~Inventories: ~~Property~~Inventories ~~and equipment~~ are stated at the lower of cost or market. ~~Depreciation~~The cost of used textbook inventories is determined using the ~~straight~~weighted-~~line~~average method. ~~The~~Our ~~majority~~Bookstore ofDivision ~~property~~uses ~~and~~the retail ~~equipment~~inventory ~~have~~method ~~useful~~to ~~lives~~determine ofcost ~~one~~for ~~to seven~~new ~~years,~~textbooks ~~with~~and ~~the~~non-textbook ~~exception~~inventories. The cost of ~~buildings~~other ~~which~~inventories ~~are~~is ~~depreciated~~determined ~~over~~on ~~39 years~~a ~~and~~first-in, ~~leasehold improvements~~first-out ~~which~~cost ~~are~~method. ~~depreciated~~We ~~over~~account ~~the~~for ~~remaining~~inventory obsolescence ~~life~~based ofupon ~~the~~assumptions ~~corresponding~~about ~~lease,~~future ordemand ~~the useful~~and ~~life,~~market ~~if shorter~~conditions. ~~The~~If ~~Company~~actual ~~does~~future demand ~~not~~or ~~consider~~market ~~renewal~~conditions ~~options~~are ~~for~~less ~~the~~favorable ~~determination~~than ofthose projected by us, inventory write-downs ~~the~~may ~~amortization~~be ~~period~~required. ~~for~~In ~~leasehold~~determining ~~improvements~~inventory ~~unless~~adjustments, ~~renewal~~we isconsider ~~considered~~amounts ~~reasonably~~of ~~assured~~inventory on hand, atprojected ~~the~~demand, ~~inception~~new ofeditions ~~the~~and ~~lease~~other industry factors.

~~Goodwill:~~Property ~~Goodwill~~and ~~arose~~Equipment: asProperty ~~a result of the March 4, 2004 Transaction~~ and ~~the~~equipment ~~acquisition~~are ~~of bookstore~~stated ~~operations~~at ~~subsequent thereto~~cost. ~~Goodwill~~Depreciation is ~~not amortized but rather tested at least~~determined ~~annually~~using ~~for~~the ~~impairment~~straight-line method. The ~~test~~majority ~~for impairment~~ of ~~goodwill~~property ~~is a two-step process that identifies potential impairment~~ and ~~then~~equipment ~~measures~~have ~~the~~useful ~~amount~~lives of ~~such~~one ~~impairment~~ to ~~be recorded in the~~ ~~consolidated~~seven ~~financial~~years, ~~statements. Due to the economic downturn and changes in some variables associated~~ with the ~~judgments,~~exception ~~assumptions and estimates made by us in assessing the appropriate valuation~~ of ~~our~~buildings ~~goodwill,~~which ~~including~~are ~~lower~~depreciated ~~market~~over ~~multiples,~~39 years ~~the~~and ~~Company determined in the first~~leasehold ~~step~~improvements of its goodwill impairment test that the carrying values of certain reporting units exceeded their fair values, indicating that goodwill may be impaired. Having determined that goodwill may be impaired, the Company performed the second step of the goodwill impairment test which ~~involves calculating~~are ~~the~~depreciated ~~implied~~over ~~fair value of goodwill by allocating~~ the ~~fair~~remaining ~~value~~life of the ~~reporting~~corresponding ~~unit to~~lease, ~~all~~or ~~of its assets and liabilities other than goodwill (including both recognized and unrecognized intangible assets) and comparing~~ the ~~residual amount to the carrying value of~~ ~~goodwill.~~useful ~~As a result~~life, ~~the~~if ~~Company recorded an impairment charge of $107~~shorter.~~0 million,~~ ~~which~~We ~~reduced our~~do ~~goodwill~~not ~~carrying~~consider ~~value~~renewal tooptions ~~$215.4 million~~for ~~as of March 31, 2009. Fair value was determined using~~ the ~~market~~determination ~~approach and was deemed to be the most indicative~~ of the ~~Company’s fair value and~~ isamortization ~~consistent~~period ~~in principle with the methodology used~~ for ~~goodwill~~leasehold ~~evaluation~~improvements inunless ~~prior~~renewal ~~years. The fair value based upon the market approach~~ is ~~also~~considered ~~analyzed~~reasonably ~~for~~assured ~~reasonableness by comparing it to~~at the ~~fair~~inception ~~value based upon the income approach (discounted cash flow approach). Determining the fair value~~ of ~~a reporting unit is judgmental in nature and requires~~ the ~~use of significant estimates and assumptions about future economic conditions and comparable company market multiples, among others~~lease.

47Goodwill: Goodwill arose as a result of the March 4, 2004 Transaction and the acquisition of bookstore operations subsequent thereto. The goodwill in such transactions is determined by calculating the difference between the consideration transferred and the fair value of net assets acquired. We evaluate the impairment of the carrying value of our goodwill and identifiable intangibles in accordance with applicable accounting standards, including the Intangibles — Goodwill and Other and Property, Plant and Equipment Topics of the FASB ASC. In accordance with such standards, goodwill is not amortized but rather tested at least annually at March 31 for impairment and we evaluate impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. We evaluate goodwill at the reporting unit level and have identified our reportable segments the Textbook Division, Bookstore Division and Complementary Services Division as our reporting units. Our reporting units are determined based on the way that management organizes the segments for making operating decisions and assessing performance. Management has organized our operating segments based upon differences in products and services provided.

Identifiable Intangibles – Customer Relationships: The identifiable intangible asset for customer relationships is attributable to the non-contractual long-term relationships the Company has established over the years with customers in its Textbook and Complementary Services Divisions. This identifiable intangible is amortized on a straight-line basis over an estimated useful life of 20 years.

Due to the economic downturn and in conjunction with the goodwill impairment test, the identifiable intangible asset for customer relationships was tested for impairment. In accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, an impairment loss shall be recognized if the carrying amount of an intangible asset is not recoverable and its carrying amount exceeds its fair value. We completed our test using the income approach which utilizes valuation techniques to convert future amounts of cash flows or earnings to a present amount and determined that the intangible asset for customer relationships was not impaired.

Identifiable Intangibles – Tradename: The identifiable intangible asset for tradename relates to the trademark owned on the name “Nebraska Book Company” and the corresponding logo. This identifiable intangible has an indefinite useful life; and, thus, is not amortized but rather tested at least annually for impairment. In accordance with SFAS No. 142, Goodwill and Other Intangible Assets, an impairment loss shall be recognized if the carrying amount of an intangible asset is not recoverable and its carrying amount exceeds its fair value. We completed our test using the market approach which is applied using relevant information generated by market transactions involving identical or comparable assets or liabilities and determined that the intangible asset for tradename was not impaired.

Other Identifiable Intangibles – Developed Technology: The Company’s primary activities regarding the internal development of software revolve around its proprietary college bookstore information technology (PRISM and WinPRISM) and e-commerce technology (WebPRISM), which are used by the Company’s Bookstore Division and also marketed to the general public. As this software internally developed is intended for both internal use and sale to external customers, the Company adheres to the guidance in Statement of Financial Accounting Standards (“SFAS”) No. 86, Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed as required by Statement of Position 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use.

Development costs included in the research and development of new software products and enhancements to existing software products associated with the Company’s proprietary college bookstore information technology and e-commerce technology are expensed as incurred until technological feasibility has been established. After technological feasibility is established, additional development costs are capitalized and amortized on a straight-line basis over the lesser of six years or the economic life of the related product. Recoverability of such capitalized costs is evaluated based upon estimates of future undiscounted cash flows.

Due to the economic downturn and in conjunction with the goodwill impairment test, the identifiable intangible asset for developed technology was tested for impairment. In accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, an impairment loss shall be recognized if the carrying amount of an intangible asset is not recoverable and its carrying amount exceeds its fair value. We completed our test using the cost approach which considers replacement cost based on the cost to acquire or construct a substitute asset of comparable utility from the perspective of a market participant and determined that the intangible asset for developed technology was not impaired.

Development costs also include the development of new software products and enhancements to existing software products used solely for internal purposes. Such costs are expensed until the preliminary project stage is completed and the project has been authorized by management, at which point subsequent costs are capitalized until the project is substantially complete and ready for its intended use. These costs, capitalization of which totaled $0.6 million, $0.3 million and $0.7 million for the fiscal years ended March 31, 2009, 2008 and 2007, respectively, are amortized on a straight-line basis over a period up to six years.

Amortization of the capitalized costs associated with developed technology totaled $2.1 million, $2.0 million and $1.9 million for the fiscal years ended March 31, 2009, 2008 and 2007, respectively.

Other Identifiable Intangibles – Covenants Not to Compete: The identifiable intangible asset for covenants not to compete represents the value assigned to such agreements, which are typically entered into with the owners of college bookstores acquired by the Company. This identifiable intangible is amortized on a straight-line basis over the term of the agreement, which ranges from 3 to 15 years.

~~Other~~In ~~Identifiable~~the ~~Intangibles~~first –step ~~Contract-Managed~~of ~~Acquisition~~our ~~Costs:~~goodwill ~~The~~impairment ~~identifiable~~test, fair value is determined using a market ~~intangible~~approach ~~asset~~based ~~for~~primarily ~~contract-managed~~on ~~acquisition~~an ~~costs~~earnings ~~generally~~before ~~represents~~interest, ~~payments~~taxes, ~~made~~depreciation, atand amortization (“EBITDA”) multiple, and is deemed to be the most indicative of the Company’s fair value. The ~~time~~EBITDA multiple approach requires that we estimate a certain valuation multiple of ~~contract~~EBITDA ~~signing~~derived from orcomparable ~~renewal~~companies toand ~~institutions~~apply that ~~contract~~multiple ~~with~~to ~~the~~our ~~Company~~latest twelve month pro forma EBITDA. We reviewed comparable company information to ~~manage~~determine the EBITDA multiple and concluded that 6.76x ~~on-campus~~was ~~bookstore~~an appropriate EBITDA multiple at March 31, 2010 and 7.0x was appropriate at March 31, 2009. This ~~identifiable~~total ~~intangible~~company fair value is ~~amortized~~allocated onto athe ~~straight-line~~reporting ~~basis~~units ~~over~~based upon their percentage of EBITDA. The fair value was also calculated using the income approach (discounted cash flow ~~term~~approach) and we concluded that it was supportive of the ~~agreements~~fair value based upon the EBITDA multiple approach. If we fail the first step of the goodwill impairment test, ~~which~~we ~~range~~are ~~from~~required, 1in the second step, to ~~15 years~~estimate the fair value of reporting unit assets and liabilities, including intangible assets, to derive the fair value of the reporting unit’s goodwill.

~~Other~~We ~~Identifiable~~monitor ~~Intangibles~~relevant –circumstances, ~~Other:~~including ~~The~~industry ~~other~~trends, ~~identifiable~~general ~~intangible~~economic ~~asset~~conditions, ~~relates~~and the topotential ~~an agreement~~impact ~~whereby~~that ~~NBC~~such ~~agreed~~circumstances tomight ~~pay~~have $1on the valuation of our goodwill and identifiable intangibles.~~7 million~~ ~~over~~It ais ~~period~~possible ofthat ~~36 months,~~changes ~~beginning~~in ~~September 1~~such circumstances, or in the numerous ~~2007~~variables associated with the judgments, toassumptions aand ~~software~~estimates ~~company~~made by us in ~~return~~assessing ~~for~~the appropriate ~~certain~~valuation ~~rights~~of ~~related~~our togoodwill ~~that~~and ~~company’s~~identifiable ~~products~~intangibles, ~~that~~including a further ~~are~~deterioration ~~designed~~in tothe ~~enhance~~economy ~~web-based~~or ~~sales.~~debt ~~This~~markets ~~identifiable~~or ~~intangible~~a issignificant ~~amortized~~delay onin a ~~straight-line~~ ~~basis~~recovery, ~~over~~could in the future ~~36 month~~require ~~base~~us ~~term~~to further write down a portion of ~~the~~our ~~agreement~~goodwill or write down a portion of our identifiable intangibles and record related non-cash impairment charges.

~~Debt~~Identifiable ~~Issue~~Intangibles ~~Costs~~— Customer Relationships: The ~~costs~~identifiable ~~related~~intangible toasset ~~the~~for customer ~~issuance~~relationships ofis ~~debt~~attributable ~~are~~to ~~capitalized~~the ~~and~~non-contractual ~~amortized~~long-term ~~to interest~~relationships ~~expense~~we ~~using~~have established over the ~~effective~~years ~~interest~~with ~~method~~customers ~~over~~in ~~the~~our ~~lives~~Textbook ofand ~~the~~Complementary ~~related~~Services ~~debt~~Divisions. ~~Accumulated~~This ~~amortization~~identifiable ofintangible ~~such~~is ~~costs~~amortized ason ofa ~~March 31,~~straight-line ~~2009~~basis ~~and~~over ~~2008~~an ~~was~~estimated ~~approximately~~useful ~~$8.9 million and~~life ~~$6.7~~of 20 ~~million, respectively~~years. ~~Long-term~~We ~~debt~~test isour ~~disclosed~~customer relationship intangible for impairment whenever events or changes in ~~Note~~circumstances Hindicate that the carrying amount may not be recoverable.

~~Accrued~~Due ~~Incentives.~~to ~~Our~~the ~~Textbook~~economic ~~Division~~downturn ~~offers~~and ~~certain~~in ~~incentive~~conjunction ~~programs~~with tothe ~~its~~goodwill ~~customers that~~impairment ~~allow~~test ~~the~~conducted for ~~participating~~March 31, ~~customers~~2009, the ~~opportunity~~identifiable tointangible ~~earn~~asset ~~rebates~~ for ~~used~~customer ~~textbooks~~relationships ~~sold~~was totested for ~~the~~impairment ~~Textbook~~at ~~Division~~March 31, 2009. AsIn accordance with the ~~rebates~~Property, ~~are~~Plant ~~earned~~and byEquipment Topic of the FASB ~~customer~~ASC, ~~the~~an ~~Company~~impairment ~~recognizes~~loss ~~the rebates~~will ~~based~~be onrecognized ~~historical~~if ~~rates~~the carrying amount of ~~usage~~an ~~and~~intangible ~~forfeitures~~asset is not recoverable and its carrying amount exceeds its fair value. We completed our test using the income ~~balance~~approach which utilizes valuation techniques to convert future amounts of ~~earned~~cash ~~but~~flows ~~unused~~or ~~rebates~~earnings isto ~~recorded~~a aspresent ~~accrued~~amount ~~incentives~~and determined that the intangible asset for customer relationships was not impaired.

~~Derivative~~Identifiable ~~Financial~~Intangibles ~~Instruments~~— Tradename: ~~Interest~~The ~~rate~~identifiable ~~swap~~intangible ~~agreements~~asset ~~have~~for ~~historically~~tradename ~~been used~~relates byto the ~~Company~~trademark toowned ~~reduce~~on ~~exposure~~the toname ~~fluctuations~~“Nebraska inBook Company” and the ~~interest~~corresponding ~~rates~~logo. onThis identifiable ~~its~~intangible ~~variable~~has ~~rate~~an ~~debt. Such~~indefinite ~~agreements~~useful ~~are~~life; ~~recorded~~and, inthus, ~~the~~is ~~consolidated~~not ~~balance~~amortized ~~sheet~~but rather tested at ~~fair~~least ~~value~~annually for impairment. ~~Changes~~In inaccordance with the ~~fair~~Intangibles — Goodwill and Other ~~value~~Topic of the ~~agreements~~FASB ~~are~~ASC, ~~recorded~~an inimpairment ~~earnings~~loss orshall ~~other~~be ~~comprehensive~~recognized ~~income~~if ~~(loss),~~the ~~based~~carrying onamount of an ~~whether~~intangible ~~the~~asset ~~agreements~~is ~~are~~not ~~designated~~recoverable asand ~~part~~its ofcarrying ~~the~~amount ~~hedge~~exceeds ~~transaction~~its ~~and~~fair ~~whether~~value. ~~the~~We ~~agreements~~completed ~~are~~our ~~effective~~test inat ~~offsetting~~March 31, 2010 by reviewing the ~~change~~valuation infrom March 31, 2009 and determined that the assumptions ~~value~~used ofin the ~~interest~~valuation ~~payments~~have ~~attributable~~not tosignificantly changed; therefore, we determined that the ~~Company’s~~intangible ~~variable~~asset ~~rate~~for ~~debt~~tradename was not impaired.

~~Fair~~Other ~~Value~~Identifiable ofIntangibles ~~Financial~~— ~~Instruments~~Developed Technology: ~~The~~Our ~~carrying~~primary ~~amounts~~activities ofregarding ~~financial instruments including~~the ~~cash~~internal ~~and~~development ~~cash~~of ~~equivalents,~~software ~~accounts~~revolve ~~receivable,~~around ~~and~~its ~~accounts~~proprietary ~~payable~~college ~~approximate~~bookstore ~~fair value as of~~information ~~March 31,~~technology ~~2009~~(PRISM and ~~2008,~~WinPRISM) ~~because~~and ~~of the relatively short maturity of these instruments. The fair value of long~~e-~~term~~commerce ~~debt,~~technology ~~including the current maturities~~(WebPRISM), ~~was~~which ~~approximately~~are ~~$250.6 million~~used ~~and~~by our ~~$341.5 million~~Bookstore asDivision ~~of March 31, 2009~~ and ~~2008,~~also ~~respectively,~~marketed asto ~~determined~~the bycollege ~~quoted~~bookstore ~~market~~industry ~~values~~ and ~~prevailing~~other ~~interest rates for similar debt issues~~businesses. ~~The interest rate swap agreement was~~As ~~expired~~this atinternally ~~March 31,~~developed ~~2009~~software ~~and~~is ~~was~~intended ~~recorded~~for atboth ainternal ~~loss~~use ofand ~~$1.1 million~~sale asto ~~of March 31~~external customers, ~~2008.~~we ~~The fair~~adhere ~~value~~to of the ~~interest~~guidance ~~rate~~in ~~swap~~the ~~agreement~~Software atand ~~March 31,~~Internal-Use ~~2008~~Software ~~was~~Topics ~~determined by calculating the net present value~~ of ~~estimated future payments between~~ the ~~Company and its counterparty~~FASB ASC.

~~Share-Based~~Development ~~Compensation:~~costs Onincluded ~~April 1,~~in ~~2006,~~ the ~~Company~~research ~~adopted~~and ~~SFAS~~development ~~No. 123~~of ~~(revised~~new ~~2004),~~software products and ~~Share-Based~~enhancements ~~Payment~~to ~~(“SFAS~~existing ~~No. 123R”).~~software ~~SFAS~~products ~~No. 123R~~associated ~~focuses~~with ~~primarily~~our onproprietary ~~accounting~~college ~~for~~bookstore ~~transactions~~information intechnology ~~which~~and ane-commerce ~~entity~~technology ~~obtains~~are ~~employee~~expensed ~~services~~as inincurred ~~share-based~~until ~~payment~~technological feasibility ~~transactions~~has ~~and requires~~been anestablished. ~~entity~~After ~~to,~~technological infeasibility ~~most~~is ~~cases~~established, ~~measure~~additional development ~~and~~costs ~~recognize~~are ~~the~~capitalized ~~cost~~and ofamortized ~~such services based~~ on ~~the grant~~a straight-~~date~~line ~~fair~~basis ~~value~~over of the ~~award.~~lesser ~~This~~of ~~Statement~~six years isor athe ~~revision~~economic life of ~~SFAS~~the ~~No. 123,~~related ~~Accounting for Stock-Based Compensation (“SFAS No~~product. ~~123”),~~ ~~and~~Recoverability ~~supersedes~~of ~~Accounting~~such ~~Principles~~capitalized ~~Board~~costs ~~(“APB”)~~is ~~Opinion~~evaluated ~~No. 25,~~based ~~Accounting~~upon ~~for~~estimates ~~Stock~~of ~~Issued~~future toundiscounted ~~Employees~~cash ~~(“APB~~flows. ~~Opinion~~We ~~No. 25”),~~test ~~thereby~~our developed technology ~~eliminating~~intangible ~~the~~for ~~intrinsic~~impairment ~~value~~whenever ~~method~~events ofor ~~accounting~~changes ~~for~~in ~~share-based~~circumstances ~~compensation~~indicate bythat the ~~Company~~carrying ~~for~~amount ~~transactions~~may ~~occurring~~not ~~after~~be ~~March 31, 2006~~recoverable.

~~The~~Due ~~Company~~to ~~accounts~~the ~~for~~economic ~~its~~downturn ~~share-based~~and ~~compensation~~in ~~arising~~conjunction ~~from~~with ~~transactions~~the ~~occurring prior~~goodwill toimpairment ~~April~~test conducted for March 131, ~~2006~~2009, ~~under~~ the ~~provisions~~identifiable ofintangible ~~APB~~asset ~~Opinion~~for ~~No. 25~~developed ~~and~~technology ~~related~~was ~~interpretations~~tested for ~~utilizing~~impairment ~~the~~at ~~intrinsic~~March 31, ~~value method~~2009. ~~Under~~In ~~this~~accordance ~~method~~with the Property, ~~compensation~~Plant ~~expense~~and isEquipment ~~recorded~~Topic onof the ~~date~~FASB ofASC, ~~grant~~an ~~only~~impairment ifloss ~~the~~shall ~~current~~be ~~market~~recognized ~~price~~if of the ~~underlying~~carrying ~~stock~~amount ~~exceeds~~of ~~the~~an ~~exercise~~intangible ~~price.~~asset is ~~SFAS~~not ~~No. 123~~recoverable ~~established accounting~~ and ~~disclosure~~its ~~requirements~~carrying ~~using~~amount aexceeds its fair- value~~-based~~. ~~method~~We ~~of accounting~~completed ~~for~~our ~~share-based~~test ~~employee~~using ~~compensation~~the cost ~~plans.~~approach ~~For~~which ~~purposes~~considers ofreplacement ~~measuring~~cost ~~share-~~based ~~compensation,~~ on the ~~Company~~cost isto ~~considered~~acquire aor ~~nonpublic~~construct ~~entity~~a assubstitute ~~defined in SFAS No. 123R. As allowed~~asset byof ~~SFAS~~comparable ~~No. 123,~~utility ~~the~~from ~~Company elected to continue to apply~~ the ~~intrinsic-value-based~~perspective ~~method~~ of ~~accounting~~ ~~for~~a ~~options~~market ~~granted~~participant ~~prior to April 1, 2006~~ and ~~used~~determined that the intangible ~~minimum~~asset ~~value method~~ for ~~pro forma~~developed ~~disclosure~~technology ofwas ~~the~~not ~~impact of SFAS No~~impaired. ~~123 prior to the adoption of SFAS No. 123R.~~

~~Nonvested~~Development ~~Stock:~~costs ~~Under~~also include the ~~NBC~~development ~~Holdings Corp. 2005 Restricted Stock Plan, 4,200 shares~~ of ~~NBC Holdings~~new ~~Corp.~~software ~~capital~~products ~~stock may be~~ and ~~were~~enhancements ~~issued on March 31, 2006 for $0.01 per share~~ to ~~certain~~existing ~~officers~~software ~~and~~products ~~directors~~used ofsolely ~~the~~for ~~Company~~internal purposes. ~~Certain~~Such ~~restrictions~~costs ~~limit~~are ~~the~~expensed ~~sale~~until ~~or transfer of~~the ~~these~~preliminary ~~shares~~project ~~(as~~stage ~~more~~is ~~fully~~completed ~~described~~and inthe ~~Note~~project Ohas tobeen ~~the~~authorized ~~consolidated~~by ~~financial~~management, ~~statements).~~at ~~Such~~which ~~shares~~point ~~are~~subsequent ~~subject~~costs toare ~~both~~capitalized ~~call~~until ~~rights~~the onproject ~~behalf~~is ofsubstantially ~~NBC~~complete ~~Holdings Corp.~~ and ~~put~~ready ~~rights on behalf of~~for ~~the~~its ~~officers~~intended ~~and~~use. ~~directors~~These ~~once~~costs, ~~vested~~capitalization ~~(as~~of ~~more~~which ~~fully~~totaled ~~described~~$0.6 million infor ~~Note O to~~ the ~~consolidated~~fiscal years ~~financial~~ended ~~statements). The shares vest on September~~March 3031, 2010 ~~(the~~and ~~“vesting~~2009 ~~date”)~~and $0.3 million ~~Due~~for to the ~~existence~~ offiscal ~~the~~year ~~put~~ended ~~rights, share-based compensation will be recognized from~~ March 31, ~~2006~~2008 ~~until~~are ~~the~~amortized ~~vesting~~on ~~date~~a ~~and~~straight-line ~~recorded~~basis asover ~~“other~~a ~~long-term~~period ~~liabilities”~~up into ~~the~~six ~~consolidated balance sheets~~years.

~~Income~~Amortization ~~Taxes: The Company files a consolidated federal income tax return with its parent and follows a policy~~ of ~~recording an amount equal to~~ the ~~income~~capitalized ~~tax~~costs ~~expense~~associated ~~which~~with ~~the~~developed ~~Company~~technology ~~would have~~totaled ~~incurred had it filed a separate return~~$2. ~~The Company is responsible for remitting tax~~1 ~~payments~~million ~~and collecting tax refunds~~ for the ~~consolidated~~fiscal ~~group.~~years ~~The~~ended ~~amount due to parent (i.e.~~March 31, ~~NBC)~~ ~~represents~~2010 ~~the~~and ~~cumulative~~2009 ~~reduction~~and ~~in tax payments made by the Company as a result of the tax benefit of operating losses generated by the Company’s parent~~$2.0 million ~~The Company provides~~ for ~~deferred income~~the ~~taxes~~fiscal ~~based upon temporary differences between financial statement and income tax bases of~~year ~~assets~~ended ~~and liabilities~~March 31, ~~and tax rates in effect for periods in which such temporary differences are estimated to reverse~~2008.

~~The~~Other ~~Company~~Identifiable ~~adopted~~Intangibles ~~the~~— ~~provisions~~Covenants ofNot ~~FASB Interpretation No. 48, “Accounting for Uncertainty~~ to ~~Income~~Compete: ~~Taxes”~~The ~~(FIN~~identifiable ~~48)~~intangible ~~on April 1, 2007. Under FIN 48, tax benefits are recorded only~~ asset for ~~tax positions~~covenants ~~that are more likely than~~ not to becompete ~~sustained~~represents ~~upon examination by tax authorities. The amount recognized is measured as~~ the ~~largest~~value ~~amount~~assigned ~~of benefit that is greater than 50% likely~~ to be ~~realized~~such ~~upon~~agreements, ~~ultimate~~which ~~settlement. Unrecognized tax benefits~~ are ~~tax~~typically entered ~~benefits~~into ~~claimed~~with in the ~~tax returns~~owners ~~that~~of docollege ~~not~~bookstores ~~meet~~acquired ~~these~~by ~~recognition and measurement standards~~us. ~~The~~This ~~adoption~~identifiable ofintangible ~~FIN 48 had no~~is ~~impact~~amortized on ~~the~~a ~~Company’s~~straight-line ~~consolidated~~basis ~~financial~~over ~~statements. Although~~ the ~~statute~~term of ~~limitations varies~~the ~~by state~~agreement, ~~generally~~which ~~starting~~ranges ~~with~~from ~~fiscal~~2 ~~year~~to ~~2004, tax~~ 15 years. We ~~remain~~test ~~open~~our ~~and~~covenants ~~subject~~not to ~~examination~~ bycompete ~~either~~intangible ~~the~~for ~~Internal~~impairment ~~Revenue~~whenever ~~Service~~events or achanges ~~number of states where the Company does~~in ~~business.~~circumstances ~~Interest~~indicate ~~and~~that ~~penalties associated with underpayments of income taxes are classified in~~ the ~~consolidated~~carrying ~~statements~~amount ofmay ~~operations~~not asbe ~~income tax expense~~recoverable.

~~Comprehensive~~Other ~~Income~~Identifiable ~~(Loss)~~Intangibles — Contract-Managed Acquisition Costs: ~~Comprehensive~~The ~~income~~identifiable intangible ~~(loss) includes~~asset ~~net~~for ~~income~~contract-managed ~~and~~acquisition ~~other comprehensive~~costs ~~income~~generally ~~(losses).~~represents ~~Other~~payments ~~comprehensive~~made ~~income~~at ~~(losses) consists~~the time of ~~unrealized~~contract ~~gains~~signing or renewal to institutions that contract with us to manage the on-campus ~~(losses)~~ bookstore. This identifiable intangible is amortized on ~~the~~a ~~interest~~straight-line ~~rate~~basis ~~swap~~over ~~agreement,~~the ~~net~~term of ~~taxes~~the agreements, which range from 1 to 15 years. We test our contract-managed acquisition costs intangible for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

~~Accounting~~Other ~~Standards~~Identifiable ~~Not~~Intangibles ~~Yet~~— ~~Adopted~~Other: InThe ~~May 2009,~~other ~~the~~identifiable ~~FASB~~intangible ~~issued~~asset ~~SFAS~~relates ~~No. 165,~~to ~~Subsequent~~an ~~Events~~agreement ~~(“SFAS~~whereby ~~No. 165).~~we ~~SFAS~~agreed Noto pay $1.7 ~~165~~million ~~establishes~~over ~~general~~a ~~standards~~period of ~~accounting~~36 months, ~~for~~beginning ~~and~~September 1, ~~disclosure~~2007, ofto ~~events~~a ~~that~~software ~~occur~~company ~~after~~in ~~the~~return ~~balance~~for ~~sheet~~certain ~~date~~rights ~~but~~related ~~before~~to ~~financial~~that ~~statements~~company’s ~~are issued~~products or that are ~~available~~designed to beenhance ~~issued~~web-based sales. This ~~Statement~~identifiable ~~becomes~~intangible ~~effective~~is ~~for~~amortized on a straight-line basis over the ~~Company~~36 month inbase ~~fiscal year~~term ~~2010~~of ~~and~~the isagreement. ~~not~~We ~~expected~~test toour ~~have~~other aintangible ~~material~~for impairment ~~impact~~whenever onevents or changes in circumstances indicate that the ~~Company’s~~carrying ~~consolidated~~amount ~~financial~~may not be ~~statements~~recoverable.

InDebt ~~March 2008,~~Issue ~~the~~Costs: ~~FASB~~The ~~issued~~costs ~~SFAS~~related ~~No. 161,~~to ~~Disclosures~~the ~~about~~issuance ~~Derivative Instruments and Hedging Activities (an amendment~~ of ~~FASB~~debt ~~Statement~~are ~~No. 133)~~capitalized ~~(“SFAS~~and ~~No. 161”).~~amortized ~~SFAS No. 161~~to ~~requires~~interest ~~entities~~expense tousing ~~provide~~the ~~enhanced~~effective ~~disclosures~~interest ~~about~~method ~~how~~over ~~and~~the ~~why~~lives anof ~~entity~~the ~~uses~~related ~~derivative~~debt. ~~instruments,~~Accumulated ~~how~~amortization ~~derivative~~of ~~instruments~~such ~~and~~costs ~~related~~as ~~hedged~~of ~~items are accounted for under FASB Statement No.~~March ~~133~~31, ~~and~~2010 ~~how derivative instruments~~ and ~~related~~2009 ~~hedged~~was ~~items~~approximately ~~affect an entity’s~~$6.9 million ~~financial~~and ~~position~~$8.9 million, ~~financial~~respectively ~~performance,~~ and ~~cash flows~~$3.1 million ~~This~~of ~~Statement~~such ~~becomes~~costs ~~effective~~were ~~in fiscal~~written ~~year~~off ~~2010.~~during ~~The~~the ~~Company’s~~fiscal year ~~latest~~ended ~~interest rate swap agreement expired on September~~March 3031, ~~2008; however,~~2010 ~~the~~in ~~current~~conjunction ~~disclosure~~with ~~format~~the ~~will~~termination ~~need~~of tothe beTerm ~~expanded~~Loan ~~(particularly~~and asRevolving itCredit Facility ~~relates~~under to the ~~specific~~ ~~components~~Senior ofCredit ~~gains~~Facility. ~~and~~See ~~losses~~also onlong-term ~~derivative~~debt ~~instruments)~~which ifis ~~derivative~~disclosed ~~instruments are used~~ in ~~the~~Note ~~future~~H.

InAccrued ~~December 2007, the FASB issued SFAS No~~Incentives. ~~141~~ ~~(revised~~Our ~~2007),~~Textbook ~~Business~~Division ~~Combinations~~offers ~~(“SFAS No. 141~~certain ~~(revised~~incentive ~~2007)”)~~programs ~~and~~to ~~SFAS~~its ~~No. 160, Noncontrolling Interests in Consolidated Financial~~customers ~~Statements~~that ~~(“SFAS~~allow ~~No. 160”).~~the ~~SFAS~~participating ~~No. 141~~customers ~~(revised~~the ~~2007)~~opportunity ~~establishes~~to ~~principles~~earn ~~and~~rebates ~~requirements~~ for ~~how~~used antextbooks ~~acquirer~~sold ~~recognizes and measures~~ to the ~~identifiable~~Textbook ~~assets~~Division. ~~acquired,~~As the ~~liabilities assumed,~~rebates ~~and~~are ~~any~~earned ~~noncontrolling~~by ~~interest in~~ the ~~acquiree;~~customer, ~~recognizes~~we ~~and~~recognize ~~measures~~ the ~~goodwill acquired~~rebates ~~in the business combination or a gain from a bargain purchase; and determines what~~based ~~information~~on tohistorical ~~disclose~~rates ~~to enable users~~ of ~~the~~usage ~~financial~~and ~~statements~~forfeitures toand ~~evaluate~~ the ~~nature~~balance ~~and financial effects~~ of ~~the~~earned ~~business~~but ~~combination.~~unused Inrebates ~~addition, SFAS No. 141 (revised 2007) requires~~is ~~that~~recorded ~~direct costs associated with an acquisition be expensed~~ as ~~incurred.~~accrued ~~SFAS No~~incentives. ~~141~~ ~~(revised 2007)~~Accrued ~~has~~incentives ~~been~~at ~~subsequently~~March 31, ~~amended~~2010 bywere ~~FASB Staff Position No~~$6.3 ~~141(R)-1~~million, ~~to amend the initial~~including ~~recognition~~estimated ~~and~~forfeitures, ~~measurement~~however, ~~subsequent~~if ~~measurement~~we ~~and~~accrued ~~accounting and disclosure of assets and liabilities arising from contingencies in a business combination. SFAS No. 160 establishes accounting and reporting standards~~ for ~~the~~rebates ~~noncontrolling~~earned ~~interest (minority interest) in a subsidiary~~ and ~~for~~unused ~~the~~as ~~deconsolidation~~ of ~~a subsidiary. Included in SFAS No.~~March ~~160~~31, ~~is the~~2010, ~~requirement~~assuming ~~that~~no ~~noncontrolling~~forfeitures, ~~interests~~our beaccrued ~~reported~~incentives inwould ~~the equity section of the balance sheet. These Statements become effective for the Company in fiscal year 2010 and are not expected to~~ have a ~~material~~been ~~impact on the Company’s consolidated financial statements~~$7.0 million.

Derivative Financial Instruments: Interest rate swap agreements have historically been used by us to reduce exposure to fluctuations in the interest rates on our variable rate debt. Such agreements are recorded in the consolidated balance sheet at fair value. Changes in the fair value of the agreements are recorded in earnings or other comprehensive income (loss), based on whether the agreements are designated as part of the hedge transaction and whether the agreements are effective in offsetting the change in the value of the interest payments attributable to the Company’s variable rate debt.

Fair Value of Financial Instruments: The carrying amounts of financial instruments including cash and cash equivalents, accounts receivable, and accounts payable approximate fair value as of March 31, 2010 and 2009, because of the relatively short maturity of these instruments. The fair value of long-term debt, including the current maturities, was approximately $372.3 million and $250.6 million as of March 31, 2010 and 2009, respectively, as determined by quoted market values and prevailing interest rates for similar debt issues. The interest rate swap agreement was expired at March 31, 2010 and 2009 and was recorded at a loss of $1.1 million as of March 31, 2008. The fair value of the interest rate swap agreement at March 31, 2008 was determined by calculating the net present value of estimated future payments between the Company and its counterparty.

InShare-Based ~~September~~Compensation: On April 1, 2006, ~~the~~we ~~FASB~~adopted ~~issued~~ SFAS No. ~~157,~~123 ~~Fair~~(revised ~~Value~~2004), Share-Based ~~Measurements~~Payment (“SFAS No. ~~157~~123R”) ~~which~~ ~~the~~codified ~~Company~~in ~~adopted on April 1, 2008 except for~~ the ~~provisions~~Compensation ~~which~~— ~~become~~Stock ~~effective~~Compensation ~~in fiscal~~Topic ~~year 2010 as described below. This Statement defines fair value, establishes a framework~~of ~~for~~the ~~measuring~~FASB ~~fair value, and expands disclosures about fair value measurements~~ASC. The ~~Statement~~Topic ~~has been~~focuses ~~subsequently~~primarily ~~amended~~on byaccounting ~~FASB~~for ~~Staff~~transactions ~~Position~~in ~~No.’s~~which ~~157-1~~an ~~and 157-2 to exclude lease~~entity ~~classification~~obtains oremployee ~~measurement~~services ~~(except~~ in ~~certain~~share-based ~~instances)~~payment ~~from~~transactions ~~the~~and ~~scope~~requires ofan ~~SFAS~~entity ~~No. 157 and~~ to ~~defer~~, ~~the~~in ~~effective date of SFAS No. 157 for~~ most ~~nonfinancial assets and nonfinancial liabilities.~~ ~~This Statement~~cases, asmeasure itand ~~pertains~~recognize tothe ~~most~~cost ~~nonfinancial~~of ~~assets~~such ~~and~~services ~~nonfinancial~~based ~~liabilities,~~on ~~becomes effective for~~ the ~~Company~~grant-date infair ~~fiscal~~value ~~year~~of ~~2010~~the award. ~~Management~~This ~~does~~Topic ~~not~~eliminates ~~believe that~~ the ~~adoption~~intrinsic ~~of the~~value ~~remaining~~method ~~provisions~~ of ~~SFAS~~accounting ~~No. 157~~for ~~will~~share-based ~~have~~compensation by aus ~~material~~for ~~impact~~transactions onoccurring ~~the~~after ~~Company’s~~March 31, ~~consolidated financial statements~~2006.

We account for our share-based compensation arising from transactions occurring prior to April 1, 2006 under the provisions of the Compensation — Stock Compensation Topic of the FASB ASC utilizing the intrinsic value method. Under this method, compensation expense is recorded on the date of grant only if the current market price of the underlying stock exceeds the exercise price. The Topic establishes accounting and disclosure requirements using a fair-value-based method of accounting for share-based employee compensation plans. For purposes of measuring share-based compensation, we are considered a nonpublic entity as defined in the Topic. As allowed by the Topic, we elected to continue to apply the intrinsic-value-based method of accounting for options granted prior to April 1, 2006 and used the minimum value method for pro forma disclosure of the impact of accounting standard changes.

Nonvested Stock: Under the NBC Holdings Corp. 2005 Restricted Stock Plan, 4,200 shares of NBC Holdings Corp. capital stock may be and were issued on March 31, 2006 for $0.01 per share to certain of our officers and directors. Certain restrictions limit the sale or transfer of these shares (as more fully described in Note O to the consolidated financial statements). Such shares are subject to both call rights on behalf of NBC Holdings Corp. and put rights on behalf of the officers and directors once vested (as more fully described in Note O to the consolidated financial statements). The shares vest on September 30, 2010 (the “vesting date”). Due to the existence of the put rights, share-based compensation will be recognized from March 31, 2006 until the vesting date and recorded as “other long-term liabilities” or “accrued expenses” in the consolidated balance sheets, as appropriate.

Income Taxes: We file a consolidated federal income tax return with our parent and follow a policy of recording an amount equal to the income tax expense which we would have incurred had we filed a separate return. We are responsible for remitting tax payments and collecting tax refunds for the consolidated group. The amount due to parent (i.e., NBC) represents the cumulative reduction in tax payments made by us as a result of the tax benefit of operating losses generated by our parent. We provide for deferred income taxes based upon temporary differences between financial statement and income tax bases of assets and liabilities, and tax rates in effect for periods in which such temporary differences are estimated to reverse.

We adopted the provisions of FASB Interpretation No. 48, “Accounting for Uncertainty to Income Taxes” (FIN 48) codified in the Income Taxes Topic of the FASB ASC on April 1, 2007. Tax benefits are recorded only for tax positions that are more likely than not to be sustained upon examination by tax authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50% likely to be realized upon ultimate settlement. Unrecognized tax benefits are tax benefits claimed in the tax returns that do not meet these recognition and measurement standards. The adoption of the accounting standard had no impact on our consolidated financial statements. Although the statute of limitations varies by state, generally starting with fiscal year 2006, tax years remain open and subject to examination by either the Internal Revenue Service or a number of states where we do business. Interest and penalties associated with underpayments of income taxes are classified in the consolidated statements of operations as income tax expense.

Comprehensive Income (Loss): Comprehensive income (loss) includes net income and other comprehensive income (losses). Other comprehensive income (losses) consists of unrealized gains (losses) on the interest rate swap agreement, net of taxes.

Presentation: In our accompanying 2009 and 2008 Consolidated Statements of Cash Flows we have revised our presentation of proceeds from, and principal payments of, our revolving credit facility to reflect the cash flows in connection with the borrowings and repayments under this revolver. Related amounts had previously been presented on a net basis, rather than in accordance with ASC Topic 230, Statement of Cash Flows (formerly SFAS No. 95, Statement of Cash Flows) on a gross basis. This revision had no impact on the net proceeds from, and principal repayments of, this revolver or on our net cash flows from financing activities.

Accounting Standards Not Yet Adopted: In January 2010, the FASB issued Accounting Standards Update 2010-06, “Improving Disclosures about Fair Value Measurements” (“Update 2010-06”). Update 2010-06 provides amendments to current standards to require new disclosures for transfers of assets and liabilities between Levels 1 and 2 and for activity in Level 3 fair value measurements. Furthermore, the update provides amendments to clarify that a reporting entity should provide fair value measurement disclosures for each class of assets and liabilities and should provide disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements for those measurements that fall in either Level 2 or Level 3. Update 2010-06 becomes effective for us in fiscal year 2011. Management has determined that the update will not have a material impact on the consolidated financial statements.

In October 2009, the FASB issued Accounting Standards Update 2009-13, “Multiple Deliverable Arrangements” (“Update 2009-13”). Update 2009-13 addresses the accounting for multiple-deliverable arrangements to enable vendors to account for products or services (deliverables) separately rather than as a combined unit. The update addresses how to separate deliverables and how to measure and allocate arrangement considerations to one or more units of account. Update 2009-13 becomes effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, with earlier application permitted. An entity may elect to adopt the standard on a retrospective basis. We expect to apply this standard on a prospective basis beginning April 1, 2011. Management has determined that the update will not have a material impact on the consolidated financial statements.

In October 2009, the FASB issued Accounting Standards Update 2009-14, “Certain Revenue Arrangements That Include Software Elements” (“Update 2009-14”). Update 2009-14 clarifies what guidance should be used in allocating and measuring revenue from vendors that sell or lease tangible products in an arrangement that contains software that is more than incidental to the tangible product as a whole. The amendments in this update do not affect software revenue arrangements that do not include tangible products nor do they affect software revenue arrangements that include services if the software is essential to the functionality of those services. Update 2009-14 becomes effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, with earlier application permitted. An entity may elect to adopt the standard on a retrospective basis. We expect to apply this standard on a prospective basis beginning April 1, 2011. Management has determined that the update will not have a material impact on the consolidated financial statements.

C. RECEIVABLES

Receivables are summarized as follows:

	March 31,
	2009		2008
	2010		2009
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
Trade receivables, less allowance for doubtful accounts of $1,283,360 at March 31, 2010 and 2009	$	30,944,300	$	29,097,291
Receivables from book publishers for returns		2522,~~233~~148,~~975~~190		25,~~096~~233,~~497~~975
Advances for book buy-backs		21,~~795~~675,~~286~~625		32,~~773~~795,~~634~~286
Other		43,~~175~~219,~~084~~679		34,~~533~~175,~~882~~084
	$	6157,~~301~~987,~~636~~794	$	5761,~~396~~301,~~508~~636

Trade receivables include the effect of estimated product returns. The amount of estimated product returns at March 31, ~~2009~~2010 and ~~2008~~2009 was $5.53 million and $5.35 million, respectively.

D. INVENTORIES

Inventories are summarized as follows:

	March 31,
	2009		2008
	2010		2009
Bookstore Division	$	5968,~~785~~765,~~703~~952	$	6559,~~769~~785,~~314~~703
Textbook Division		3026,~~571~~132,~~333~~007		30,~~575~~571,~~106~~333
Complementary Services Division		2,~~758~~599,~~627~~730		2,~~666~~758,~~667~~627
	$	9397,~~115~~497,~~663~~689	$	9993,~~011~~115,~~087~~663

Textbook Division inventories include the effect of estimated product returns. The amount of estimated product returns at March 31, ~~2009~~2010 and ~~2008~~2009 was $2.54 million and $2.45 million, respectively.

General and administrative costs associated with the storage and handling of inventory approximated $9.9 million and $10.4 million for ~~both~~the fiscal years ended March 31, ~~2009~~2010 and ~~2008~~2009, respectively of which $2.20 million and $2.42 million was capitalized into inventory at March 31, 2010 ~~2009~~ and ~~2008~~2009, respectively.

5152

E. PROPERTY AND EQUIPMENT

A summary of the cost of property and equipment follows:

	March 31,
	2009			2008
	2010			2009
Land	$	3,565,382		$	3,565,382
Buildings and improvements		25,~~675~~774,~~055~~209			25,~~028~~675,~~868~~055
Leasehold improvements		1416,~~598~~207,~~193~~697			1014,~~376~~598,~~770~~193
Furniture and fixtures		1517,~~976~~153,~~841~~671			1315,~~750~~976,~~380~~841
Information systems		14,~~650~~640,~~613~~695			1214,~~831~~650,~~900~~613
Automobiles and trucks		~~220~~231,~~008~~743			~~234~~220,~~620~~008
Machinery		~~378~~351,~~966~~011			~~374~~378,~~074~~966
Projects in process		~~178~~83,~~309~~703			1178,~~282,801~~309
		75,243,367			67,444,795
		78,008,111			75,243,367
Less: Accumulated depreciation & amortization		(2935,~~604~~852,~~845~~687	)		(2229,~~378~~604,~~615~~845	)
	$	4542,~~638~~155,~~522~~424		$	45,~~066~~638,~~180~~522

F. GOODWILL AND OTHER IDENTIFIABLE INTANGIBLES

As discussed in Note A, on March 4, 2004, Weston Presidio acquired the controlling interest in NBC through a series of steps which resulted in Weston Presidio owning a substantial majority of NBC’s common stock. The March 4, 2004 Transaction was accounted for as a purchase at NBC Holdings Corp. with the related purchase accounting pushed-down to NBC and ~~the~~us ~~Company~~ as of the date of the transaction. The excess of the purchase price over the historical basis of the net assets acquired was applied to adjust net assets to their fair values, as determined in part using an ~~independent~~ independent third-party appraisal. The allocation of the excess purchase price included establishing identifiable intangibles for customer relationships of $114.8 million and tradename of $31.3 million; adjusting the carrying value of developed technology at March 4, 2004 to a fair value of $11.4 million; and adjusting the carrying value of goodwill at March 4, 2004 to a fair value of $269.1 million, of which $25.3 million is deductible for income tax purposes. The weighted-average amortization period for the identifiable intangibles subject to amortization is 18 19.61 years, including 20 years for customer relationships and 54.60 years for developed technology.

For the fiscal year ended March 31, ~~2009~~2010, 2214 bookstore locations were acquired in 1911 separate transactions. The total purchase price, net of cash acquired, of such acquisitions was $52.89 million, of which $0.41 million was assigned to tax-deductible goodwill, $10.61 million was assigned to ~~non-~~tax deductible ~~goodwill, $0.2 million was assigned to tax-deductible~~ covenants not to compete with an amortization ~~periods~~period of ~~three~~two years, and $0.4 5 million was assigned to ~~non~~contract-~~tax~~managed ~~deductible covenants~~acquisition ~~not~~costs towith ~~compete~~a ~~with~~weighted-average amortization period ~~periods~~ of ~~up to three~~ 3.4 years, and ~~$1.5 million~~a ~~was assigned to contract~~weighted-~~managed~~average ~~acquisition costs with~~ amortization ~~periods~~period offor upall tointangibles ~~ten~~acquired of 3.3 years. As of March 31, ~~2009~~2010, $0.26 million of ~~contract-managed~~ acquisition costs ~~and renewal costs~~ were unpaid. Finally, during the period ended March 31, ~~2009~~2010, ~~NBC~~we paid $0.1 million of previously accrued consideration for bookstore acquisitions and contract-managed costs occurring in prior fiscal years.

~~Effective~~We ~~September 1,~~also ~~2007,~~incurred ~~the Company entered into an agreement whereby it agreed to pay~~ $10.73 million ~~over a period of thirty-six months to a software company~~ in ~~return for certain rights related to that company’s products that are designed to enhance web~~contract-~~based~~managed ~~sales.~~acquisition ~~This~~costs ~~other identifiable~~with ~~intangible is being amortized on~~ a ~~straight~~weighted-~~line basis over the thirty-six month base~~average ~~term~~amortization period of ~~the agreement~~3.2 years ~~The~~associated ~~asset~~with ~~and corresponding liability were recorded based upon~~ the ~~present value~~renewal of ~~the future payments assuming an imputed interest rate of~~ 6~~.7%,~~ ~~resulting~~contract-managed inlocations ~~a discount of~~during ~~$0.1 million which is recorded as interest expense over~~ the ~~base~~fiscal ~~term~~year ofended ~~the~~March 31, ~~agreement utilizing the effective interest method of accounting~~2010.

~~For~~Effective ~~the fiscal year ended March~~September 311, ~~2008~~2007, 20we ~~bookstore~~entered ~~locations~~into ~~were~~an ~~acquired~~agreement inwhereby 14we ~~separate transactions.~~agreed ~~The~~to ~~purchase~~pay ~~price, net of cash acquired, of such acquisitions was~~ $141.~~3 million, of~~7 ~~which $8.8~~ million ~~was~~over ~~assigned~~a toperiod ~~tax~~of thirty-~~deductible~~six ~~goodwill,~~months ~~$1.9 million was assigned~~ to ~~covenants not~~a tosoftware ~~compete~~company ~~with~~in ~~amortization~~return ~~periods~~for ofcertain ~~three~~rights related ~~years, and $0.6 million was assigned~~ to ~~contract-managed~~ ~~acquisition~~that ~~costs~~company’s ~~with~~products ~~amortization~~that ~~periods~~are ofdesigned up to ~~five~~enhance ~~years~~web-based sales. ~~Included~~This ~~in the~~other ~~total~~identifiable ~~purchase~~intangible ~~price,~~is ~~net~~being ofamortized ~~cash~~on ~~acquired,~~a ~~was~~straight-line ~~$0.7 million~~basis ofover ~~contingent~~the ~~consideration~~thirty-six ~~associated~~month base ~~with~~term ~~one~~ of the ~~bookstores~~agreement. ~~acquired,~~The ~~which~~asset ~~will~~and becorresponding ~~paid~~liability towere ~~the~~recorded ~~previous~~based ~~owner~~upon onthe ~~a monthly basis~~present ~~and~~value ~~is calculated as a percentage~~ of ~~revenues~~the ~~generated~~future bypayments ~~the~~assuming ~~acquired~~an ~~bookstore~~imputed ~~each~~interest ~~month. Payments~~rate of ~~contingent consideration totaled $41~~6.7%,~~219~~ ~~for~~resulting ~~the~~in ~~fiscal~~a ~~year~~discount ~~ended March 31, 2008.~~of ~~Finally, the Company incurred~~ $0.71 million inwhich ~~contract-managed~~is ~~acquisition~~recorded ~~costs~~as ~~with~~interest ~~amortization~~expense ~~periods~~over ofthe upbase toterm ~~ten years associated with renewals~~ of 12the ~~contract-managed~~agreement ~~locations during~~ utilizing the ~~fiscal~~effective ~~year~~interest ~~ended~~method ~~March 31,~~of ~~2008~~accounting.

52For the fiscal year ended March 31, 2009, 22 bookstore locations were acquired in 19 separate transactions. The purchase price, net of cash acquired, of such acquisitions was $5.8 million, of which $0.4 million was assigned to tax-deductible goodwill, $1.6 million was assigned to non tax-deductible goodwill, $0.2 million was assigned to tax-deductible covenants not to compete with amortization periods of three years, $0.4 million was assigned to non tax-deductible covenants not to compete with amortization periods of three years, and $0.9 million was assigned to contract-managed acquisition costs with a weighted-average amortization period of 4.5 years and a weighted-average amortization period for all intangibles acquired of 4.0 years. Included in the total purchase price, net of cash acquired, was $0.7 million of contingent consideration associated with one of the bookstores acquired, which is being paid to the previous owner on a monthly basis and is calculated as a percentage of revenues generated by the acquired bookstore each month.

~~Goodwill~~We ~~assigned~~also toincurred ~~corporate administration represents goodwill arising out of the March~~$0.5 ~~4, 2004~~million ~~Transaction,~~in ascontract-managed ~~all~~acquisition ~~goodwill~~costs ~~was assigned to corporate administration. As is the case~~ with a ~~portion~~ ~~of the Company’s assets, such goodwill is not allocated between the Company’s reportable~~weighted-average ~~segments~~amortization ~~when~~period ~~management~~of ~~makes operating decisions and assesses performance~~6.9 years ~~The~~associated ~~Company~~with ~~has identified~~ the ~~Textbook~~renewal ~~Division,~~of ~~Bookstore~~10 ~~Division~~contract-managed ~~and Complementary Services Division as its~~locations ~~reporting~~during ~~units. Such goodwill is allocated to~~ the ~~Company’s~~fiscal ~~reporting~~year ~~units~~ended ~~for purposes of testing goodwill for impairment and calculating any gain or loss on the disposal of all or~~March 31, ~~where applicable, a portion of a reporting unit~~2009.

Goodwill assigned to corporate administration represents goodwill arising out of the March 4, 2004 Transaction, as all goodwill was assigned to corporate administration. As is the case with a portion of our assets, such goodwill is not allocated between our reportable segments when management makes operating decisions and assesses performance. We have identified the Textbook Division, Bookstore Division and Complementary Services Division as our reporting units. Such goodwill is allocated to our reporting units for purposes of testing goodwill for impairment and calculating any gain or loss on the disposal of all or, where applicable, a portion of a reporting unit.

The changes in the carrying amount of goodwill, in total, by reportable segment and assigned to corporate administration, are as follows:

	Bookstore		Corporate
	Division		Administration			Total
Balance, April 1, 2007	$	42,544,489	$	269,061,875		$	311,606,364
Balance, April 1, 2008	$	51,305,398	$	269,061,875		$	320,367,273
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
Additions to goodwill:
Bookstore acquisitions		135,000		—			135,000
Balance, March 31, 2010	$	53,481,251	$	162,089,875		$	215,571,126

~~We test for impairment annually or more frequently if impairment indicators exist.~~ The ~~Company~~ ~~has~~following ~~identified~~table ~~the~~presents ~~Bookstore Division, Textbook Division and Complementary Services Division as its reporting units for~~ the ~~purposes~~gross of assessing impairment. We completed our annual test for impairment by reporting unit during the fourth quarter for the year ended March 31, 2009. Goodwill impairment testing is a two-step process. The first step involves comparing the fair value of the Company’s reporting units to their carrying amount. Ifand ~~the~~accumulated ~~fair value of the reporting unit is greater than its carrying amount, there is no~~ impairment. Ifcharge ~~the reporting unit’s carrying amount is greater than the fair value, the second step must be completed to measure the amount~~ of ~~impairment, if any. The second step involves calculating the implied fair value of~~ goodwill ~~by allocating the fair value of the reporting unit to all of its assets and liabilities~~: other than goodwill (including both recognized and unrecognized intangible assets) and comparing the residual amount to the carrying value of goodwill. If the implied fair value of goodwill is less than the carrying value of goodwill, an impairment loss is recognized equal to the difference.

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, the Company 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, the Company performed the second step of the goodwill impairment test. As a result, the Company recorded an impairment charge of $107.0 million, which reduced our goodwill carrying value to $215.4 million as of March 31, 2009. Fair value was determined using the market approach and was deemed to be the most indicative of the Company’s 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). Determining the fair value of a reporting unit is judgmental in nature and requires the use of significant estimates and assumptions about future economic conditions and comparable company market multiples, among others.


	March 31,
	2010			2009
Gross carrying amount	$	322,543,126		$	322,408,126
Accumulated impairment		(106,972,000	)		(106,972,000	)

Net carrying amount	$	215,571,126		$	215,436,126

53We test for impairment annually or more frequently if impairment indicators exist. We have identified the Bookstore Division, Textbook Division and Complementary Services Division as our reporting units for the purposes of assessing impairment. We completed our annual test for impairment by reporting unit during the fourth quarter for the year ended March 31, 2010 and no impairment was indicated. Goodwill impairment testing is a two-step process. The first step involves comparing the fair value of the Company’s reporting units to their carrying amount. If the fair value of the reporting unit is greater than the carrying amount, there is no impairment. If the reporting unit’s carrying amount is greater than the fair value, the second step must be completed to measure the amount of impairment, if any. The second step involves calculating the implied fair value of goodwill by allocating the fair value of the reporting unit to all of its assets and liabilities other than goodwill (including both recognized and unrecognized intangible assets) and comparing the residual amount to the carrying value of goodwill. If the implied fair value of goodwill is less than the carrying value of goodwill, an impairment loss is recognized equal to the difference.

Due to the economic downturn and changes in comparable company market multiples, we determined in the first step of the goodwill impairment test conducted at March 31, 2009, that the carrying value of the Textbook and Bookstore Divisions 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 $107.0 million in fiscal year 2009. The carrying value of goodwill in excess of the implied fair value was $67.0 million and $40.0 million for the Textbook and Bookstore Divisions, respectively. The impairment charge reduced our goodwill carrying value to $215.4 million as of March 31, 2009. Fair value was determined using a market approach based primarily on an EBITDA multiple, and was deemed to be the most indicative of the Company’s fair value and is consistent in principle with the methodology used for goodwill evaluation in prior years. The EBITDA multiple approach requires that we estimate a certain valuation multiple of EBITDA derived from comparable companies and apply that multiple to our latest twelve month pro forma EBITDA. We review comparable company information to determine the EBITDA multiple. This total company fair value is allocated to the reporting units based upon their percentage of EBITDA. The fair value is also calculated using the income approach (discounted cash flow approach) and we concluded at March 31, 2010 and 2009 that it was supportive of the fair value based upon the EBITDA multiple approach. Determining the fair value of a reporting unit is judgmental in nature and requires the use of significant estimates and assumptions about future economic conditions and comparable company market multiples, among others. In the second step of the goodwill impairment test, we are required to estimate the fair value of reporting unit assets and liabilities, including intangible assets, to derive the fair value of the reporting unit’s goodwill. For purposes of the second step of the goodwill impairment test conducted at March 31, 2009, we estimated the fair value of our intangible assets Tradename, Customer Relationships and Developed Technology using the relief-from-royalty market approach, excess earnings method income approach and replacement cost approach, respectively.

The following table presents the gross carrying amount and accumulated amortization of identifiable intangibles subject to amortization, in total and by asset class:


	March 31, 2010
	Gross					Net
	Carrying		Accumulated			Carrying
	Amount		Amortization			Amount
Customer relationships	$	114,830,000	$	(34,927,180	)	$	79,902,820
Developed technology		13,709,789		(12,137,672	)		1,572,117
Covenants not to compete		3,416,000		(2,268,172	)		1,147,828
Contract-managed acquisition costs		4,555,740		(2,200,557	)		2,355,183
Other		1,585,407		(1,365,211	)		220,196

	$	138,096,936	$	(52,898,792	)	$	85,198,144


	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

Information regarding aggregate amortization expense for identifiable intangibles subject to amortization is presented in the following table:

	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

Information regarding aggregate amortization expense for identifiable intangibles subject to amortization is presented in the following table:


	Amortization
	Expense

Fiscal year ended March 31, 2010	$	10,853,248
Fiscal year ended March 31, 2009		11,384,020
Fiscal year ended March 31, 2008		10,443,335

Estimated amortization expense for the fiscal years ending March 31:
2011	$	8,104,852
2012		6,880,562
2013		6,482,335
2014		6,119,918
2015		5,961,196

Identifiable intangibles not subject to amortization consist solely of the tradename asset arising out of the March 4, 2004 Transaction and total $31,320,000. The tradename was determined to have an indefinite life based on our current intentions. We periodically review the underlying factors relative to this intangible asset. If factors were to change that would indicate the need to assign a definite life to this asset, we would do so and commence amortization. We test the tradename for impairment annually on March 31. We completed our test at March 31, 2010 by reviewing the valuation from prior year and determined that the assumptions used in the valuation have not significantly changed. We completed our test at March 31, 2009 using the relief-from-royalty market approach which is applied using relevant information generated by market transactions involving identical or comparable assets or liabilities. We determined at March 31, 2010 and 2009 that the intangible asset for tradename was not impaired.

Identifiable intangibles subject to amortization consist of customer relationships, developed technology, covenants not to compete, contract-managed acquisition costs and other intangibles. These intangibles are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Due to the economic downturn and in conjunction with the goodwill impairment test conducted for March 31, 2009, the customer relationships and developed technology intangibles were tested for impairment at March 31, 2009. We completed our test using the excess earnings method income approach for customer relationships and the replacement cost approach for developed technology and determined that the intangible assets were not impaired.

G. ACCRUED EXPENSES

Accrued expenses are summarized as follows:

	March 31,
	2009		2008
	2010		2009
Accrued rent	$	34,~~725~~285,~~616~~622	$	23,~~626~~725,~~901~~616
Accrued property taxes		551,489		545,221
Accrued share-based compensation		4,257,652		—
	$	4,277,105	$	3,172,122
Accrued property taxes		508,377		551,489
	$	9,051,651	$	4,277,105

Accrued share-based compensation is the liability recognized for the shares issued under the 2005 Restricted Stock Plan, which vest September 30, 2010, and the Restricted Stock Special Bonus Agreement, which are described in further detail in Note O and was presented as a long-term liability in prior years.

H. LONG-TERM DEBT

Details regarding each of the instruments of indebtedness of the Company are provided in the following table:

	March 31,
	2009			2008
	2010			2009
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
Term Loan paid in full October 2, 2009, principal and interest payments were due quarterly, interest accrued at a floating rate based on Eurodollar rate plus an applicable margin percent (9.25%, as reset on March 31, 2009)	$	—		$	193,076,346
Senior Secured Notes, second-priority to ABL Facility, unamortized bond discount $840,482, principal due December 1, 2011, interest payments accrue at fixed rate of 10.0% and are payable semi-annually on December 1 and June 1 beginning December 1, 2009		199,159,518			—
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~~237,~~833~~954			~~330~~286,~~752~~833
		368,363,179			370,433,833
		374,397,472			368,363,179
Less current maturities of long-term debt		(654,~~917,451~~403	)		(26,~~070~~917,~~657~~451	)
Long-term debt	$	~~361~~374,~~445~~343,~~728~~069		$	~~368~~361,~~363~~445,~~176~~728

Indebtedness at March 31, ~~2009~~2010 includes an amended and restated bank-administered ~~senior~~ credit agreement ~~facility~~ (the “~~Senior~~ABL Credit ~~Facility~~Agreement”), ~~provided~~which toprovides ~~the~~for ~~Company through~~ a ~~syndicate~~$75.0 million ofasset-based revolving ~~lenders,~~credit ~~consisting~~facility ~~of a term loan~~ (the “~~Term~~ABL ~~Loan~~Facility”), ~~with~~which awas ~~remaining~~unused ~~balance~~at ofMarch 31, 2010; $~~193~~200.10 million~~, (which~~ ~~includes~~of ~~remaining~~10.0% senior ~~amounts~~secured ~~due~~notes ~~under~~(the ~~both~~“Senior ~~the~~Secured ~~original~~Notes”) ~~March 4,~~issued ~~2004~~at ~~loan~~a discount of $~~180~~1.0 million with ~~and~~unamortized ~~the~~bond ~~April 26,~~discount ~~2006 incremental loan~~ of $~~24.~~0.8 million) ~~and~~at ~~a $65.0~~March ~~million~~31, ~~revolving~~2010 ~~credit facility~~ (~~the~~effective ~~“Revolving~~rate ~~Credit~~of ~~Facility”~~10.14%); $175.0 million of 8.625% senior subordinated notes (the “Senior Subordinated Notes”), and other indebtedness. The ~~Revolving~~ABL ~~Credit~~ Facility ~~was~~is scheduled to expire on ~~March 4,~~the ~~2009~~earlier ~~prior~~of ~~to the February~~October 32, ~~2009~~2012 ~~amendment~~and ~~to extend~~ the ~~maturity~~ date ~~to May 31,~~that ~~2010, while the Term Loan~~ is ~~due March~~91 4,days ~~2011.~~prior ~~Availability~~to ~~under~~ the ~~Revolving~~earliest ~~Credit Facility~~maturity isof ~~determined by~~ the ~~calculation~~Senior ofSecured aNotes ~~borrowing~~(due ~~base~~December 1, ~~which at any time is equal to a~~ ~~percentage of eligible accounts receivable and inventory~~2011), upthe toSenior aSubordinated ~~maximum~~Notes ~~borrowing~~(due ~~limit. The calculated borrowing base at~~ March 3115, ~~2009~~2012), ~~was~~NBC’s $4777.40 million. ~~The~~of ~~Revolving~~11% ~~Credit~~senior discount ~~Facility~~notes ~~was unused~~(the at“Senior Discount Notes”, due March 3115, ~~2009~~2013), or any refinancing thereof.

On October 2, 2009, in conjunction with the completion of the offering of the Senior Secured Notes, we entered into the ABL Credit Agreement which provides for the ABL Facility mentioned previously. The ABL Facility is secured by a first priority interest in substantially all of our and our subsidiaries’ property and assets, which also secure the Senior Secured Notes on a second priority basis. Borrowings under the ABL Facility are subject to the Eurodollar interest rate, not to be less than 1.5%, plus an applicable margin ranging from 4.25% to 4.75%, or a base interest rate. The base interest rate is the greater of a) prime rate, b) federal funds rate plus 0.5%, or c) the one-month Eurodollar loan rate plus 1.0%, not to be less than 2.5%, plus an applicable margin ranging from 3.25% to 3.75%. In addition, the applicable margin will increase 1.5% during the time periods from April 15 to June 29 and from December 1 to January 29 of each year. There also is a commitment fee for the average daily unused amount of the ABL Facility ranging from 0.75% to 1.0% of such unused amount.

The Senior Secured Notes pay cash interest semi-annually and mature on December 1, 2011. The Senior Subordinated Notes pay cash interest semi-annually and mature on March 15, 2012.

Prior to entering into the ABL Credit Agreement and issuing the Senior Secured Notes on October 2, 2009, indebtedness included an amended and restated bank-administered senior credit facility amended on February 3, 2009 (the “Senior Credit Facility”) provided to us through a syndicate of lenders, which consisted of a term loan (the “Term Loan”) and a revolving credit facility (the “Revolving Credit Facility”). Borrowings on the Term Loan and Revolving Credit Facility were subject to the Eurodollar interest rate or the base interest rate. The Eurodollar interest rate was not to be less than 3.25% plus the applicable margin of 6.0%. The base interest rate was the greater of a) prime rate, b) federal funds rate plus 0.5%, or c) the one-month Eurodollar loan rate plus 1.0%, not to be less than 4.25%, plus the applicable margin of 5.0%. Accrued interest on the Term Loan and Revolving Credit Facility was due quarterly. Additionally, there was a 0.75% commitment fee for the average daily unused amount of the Revolving Credit Facility. The average borrowings under the Revolving Credit Facility and the ABL Facility were $4.0 million at an average rate of 8.8% for the fiscal year ended March 31, 2010.

Prior to the February 3, 2009 amendment, the interest rate on the Term Loan was Prime plus an applicable margin of up to 1.5% or, on Eurodollar borrowings, the Eurodollar interest rate plus an applicable margin of up to 2.5%. The Revolving Credit Facility interest rate was Prime plus an applicable margin of up to 1.75% or, on Eurodollar borrowings, the Eurodollar interest rate plus an applicable margin of up to 2.75%. Accrued interest on the Term Loan and Revolving Credit Facility is due quarterly. Additionally, there was a 0.5% commitment fee for the average daily unused amount of the Revolving Credit Facility. The average borrowings under the Revolving Credit Facility for the fiscal years ended March 31, 2009 and 2008 were $16.9 million and $15.2 million at an average rate of 5.8% and 8.8%, respectively.

55NBC has guaranteed the prompt and complete payment and performance of our obligations under the ABL Facility.

The Senior Credit Facility stipulated that excess cash flows, as defined therein, would be applied towards prepayment of the Term Loan. An excess cash flow payment of $6.0 million was paid in September of 2009 for fiscal year ended March 31, 2009.

A loss from early extinguishment of debt totaling $3.1 million was recorded for the fiscal year ended March 31, 2010 related to the write-off of unamortized loan costs as a result of the termination of the Term Loan and Revolving Credit Facility under the Senior Credit Facility.

The ABL Credit Agreement requires us to maintain certain financial ratios and contains a number of other covenants that among other things, restrict our ability and the ability of certain of our subsidiaries to incur additional indebtedness, dispose of assets, make capital expenditures, investments, acquisitions, loans or advances, and pay dividends, except that, among other things, we may pay dividends to NBC (i) in an amount not to exceed the amount of interest required to be paid on the Senior Discount Notes and (ii) to pay corporate overhead expenses not to exceed $250,000 per fiscal year and any taxes owed by NBC. In addition, under our ABL Facility, if availability, as defined in the ABL Credit Agreement, is less than the greater of 20% of the total revolving credit commitments and $15.0 million, we will be required to maintain a fixed charge coverage ratio of at least 1.10x measured for the last twelve-month period on a pro forma basis in order to maintain access to the funds under that Facility. The calculated borrowing base as of March 31, 2010 was $44.7 million, of which $1.0 million was outstanding under a letter of credit and $43.7 million was unused. At March 31, 2010, our pro forma fixed charge coverage ratio was 1.5.

The indenture governing the Senior Secured Notes restricts our ability and the ability of certain of our subsidiaries to pay dividends or make certain other payments, subject to certain exceptions, unless certain conditions are met, including (i) no default under the indenture has occurred, (ii) we and certain of our subsidiaries maintain a consolidated coverage ratio of 2.0 to 1.0 on a pro forma basis and (iii) the amount of the dividend or payment may not exceed 50% of aggregate income from January 1, 2004 to the end of the most recent fiscal quarter plus cash proceeds received from the issuance of stock less the aggregate of payments made under this restriction. The indentures governing the Senior Subordinated Notes and NBC’s Senior Discount Notes contain similar restrictions on our ability and the ability of certain of our subsidiaries and the ability of NBC and certain of its subsidiaries to pay dividends or make certain other payments. In addition, if there is no availability under the restricted payment calculation mentioned above, but we maintain the 2.0 to 1.0 consolidated coverage ratio on a pro forma basis, we may make dividends to NBC to meet the interest payments on the Senior Discount Notes. If we do not maintain the 2.0 to 1.0 ratio on a pro forma basis, we may still make payments, including dividends to NBC, up to $15.0 million in the aggregate. At March 31, 2010, our pro forma consolidated coverage ratio calculated under the indenture to the Senior Subordinated Notes was 1.85 to 1.0 and the ratio calculated under the indenture to the Senior Secured Notes was 2.0 to 1.0. The pro forma consolidated coverage ratio calculated under the indenture to the Senior Subordinated Notes differs from the ratio calculated under the indenture to the Senior Secured Notes because the indenture to the Senior Subordinated Notes excludes debt issue cost amortization for all debt instruments outstanding at the March 4, 2004 Transaction date from the calculation and the indenture to the Senior Secured Notes excludes only debt issue cost amortization for the Senior Secured Notes and the ABL Facility from the same calculation. At March 31, 2010, the amount distributable under the most restrictive indenture was $10.8 million after applying the $4.2 million dividend paid to NBC for the March 15, 2010 interest on NBC’s Senior Discount Notes. Such restrictions are not expected to affect our ability to meet our cash obligations for the next twelve months.

At March 31, 2010, we were in compliance with all of our debt covenants.

OnAt ~~February~~March ~~3, 2009, the Senior Credit Facility was amended to, among other things, (i) extend the maturity date of the Revolving Credit Facility to May~~ 31, 2010, ~~(ii) decrease~~ the ~~maximum borrowing~~aggregate ~~under~~maturities the Revolving Credit Facility from $85.0 million to $65.0 million, (iii) amend certain definitions and financial covenants, including limiting future acquisitions to contract-managed stores, and (iv) increase the interest rate on the Term Loan and Revolving Credit Facility. The applicable margin on the Revolving Credit Facility and Term Loan increased to 6.0% on Eurodollar borrowings and 5.0% on Base rate borrowings. The Eurodollar interest rate is not to be less than 3.25% plus the applicable margin. The interest rate on Base rate borrowings is the greater of ~~a) Prime rate, b) Federal Funds rate plus 0.5%, or c) the one~~long-~~month~~term ~~Eurodollar~~debt ~~loan rate plus 1.0%, not to be less than 4.25% plus the applicable margin. The commitment fee~~ for the ~~average~~ ~~daily~~next ~~unused~~five ~~amount of the Revolving Credit Facility increased to 0.75%. The modifications~~fiscal ofyears ~~the Senior Credit Facility resulted in the payment of $4.0 million in costs associated with such modifications, which~~ were ~~capitalized~~ as ~~debt issue costs to be amortized to interest expense over~~follows: ~~the remaining life of the related debt.~~

The Senior Credit Facility is collateralized by substantially all of the assets of the Company and NBC. Additionally, NBC has guaranteed the prompt and complete payment and performance of the Company’s obligations under the Senior Credit Facility. The Senior Credit Facility also stipulates that excess cash flows, as defined therein, shall be applied towards prepayment of the Term Loan. An excess cash flow payment of $6.0 million is due September of 2009 for fiscal year ended March 31, 2009. There was no excess cash flow obligation for the fiscal year ended March 31, 2008.


Fiscal Year

2011	$	54,403
2012		375,060,548
2013		67,387
2014		55,616
2015		—

The Senior Credit Facility requires the Company to maintain certain financial ratios and contains a number of other covenants that among other things, restrict the ability to incur additional indebtedness, dispose of assets, make capital expenditures, investments, acquisitions, loans or advances, and pay dividends, except that, among other things, the Company may pay dividends to NBC (i) in an amount not to exceed the amount of interest required to be paid on the Senior Discount Notes and (ii) to pay corporate overhead expenses not to exceed $250,000 per fiscal year and any taxes owed by NBC. The Company was compliant with such covenants at March 31, 2009.

The Senior Subordinated Notes pay cash interest semi-annually and mature on March 15, 2012. The indenture governing the Senior Subordinated Notes restricts the ability of the Company and certain of its subsidiaries to pay dividends or make certain other payments to its respective stockholders, subject to certain exceptions, unless certain conditions are met, including that (i) no default under the indenture shall have occurred and be continuing, (ii) the Company shall be permitted by the indenture to incur additional indebtedness and (iii) the amount of the dividend or payment may not exceed a certain amount based on, among other things, the Company’s consolidated net income. Such restrictions are not expected to affect our ability to meet our cash obligations for the next twelve months.

Effective March 30, 2007, the Senior Credit Facility was amended to, among other things, increase the Revolving Credit Facility from $65.0 million to $85.0 million and modify the definition of EBITDA to exclude certain one time charges, recorded in fiscal year 2007, for purposes of the debt covenant calculations. The additional availability of borrowings under the Revolving Credit Facility allowed for the continued pursuit of opportunities to expand the Company’s chain of bookstores across the country. The modifications of the Senior Credit Facility resulted in the payment of $0.2 million in costs associated with such modifications, which were capitalized as debt issue costs to be amortized to interest expense over the remaining life of the Revolving Credit Facility.

At March 31, 2009, the aggregate maturities of long-term debt for the next five fiscal years were as follows:

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

~~The~~We ~~Company~~have ~~has~~ 7 bookstore facility leases classified as capital leases. These leases expire at at various dates through fiscal year 2018 and contain options to renew for periods of up to ten years. Capitalized leased property included in property and equipment was $32.46 million and $43.1 4 million, net of accumulated depreciation at March 31, ~~2009~~2010 and ~~2008~~2009, respectively.

~~The~~We ~~Company~~ also ~~leases~~lease bookstore facilities and data processing equipment under noncancelable ~~operating~~ operating leases expiring at various dates through fiscal year ~~2022~~2024, many of which contain options to renew for periods of up to fifteen years. Certain of the leases are based on a percentage of sales, ranging from 0.0% to 1415.60%.

Future minimum capital lease payments and aggregate minimum lease payments under noncancelable operating leases for the fiscal years ending March 31 are as follows:

	Capital			Operating
Fiscal Year	Leases			Leases
2010	$	1,059,469		$	19,471,000
2011	$	1,077,900		$	19,630,000
2011		1,174,565			15,583,000
2012		764,606			16,990,000
2012		764,607			13,028,000
2013		529,925			12,817,000
2013		529,922			9,931,000
2014		448,973			9,200,000
2014		448,973			6,678,000
2015		350,765			6,675,000
Thereafter		1858,~~209,437~~674			1915,~~781~~072,000
Total minimum lease payments		54,~~186~~030,~~973~~843		$	8480,~~472~~384,000
Less amount representing interest at 9.2%		(1,139,623	)
Less amount representing interest at 9.0%		(804,053	)
Present value of minimum lease payments		43,~~047~~226,~~350~~790
Less obligations due within one year		(~~748~~846,~~692~~053	)
Long-term obligations	$	32,~~298~~380,~~658~~737

Total rent expense for the fiscal years ended March 31, ~~2009~~2010, ~~2008~~2009 and ~~2007~~2008 was $3335.31 million, $2933.73 million and $2629.57 million, respectively. Percentage rent expense, above the guaranteed rent minimum amount, for the fiscal years ended March 31, ~~2009~~2010, ~~2008~~2009 and ~~2007~~2008 was approximately $1011.04 million, $910.30 million and $89.43 million, respectively.

J. DERIVATIVE FINANCIAL INSTRUMENTS

~~SFAS~~The ~~No. 133,~~Derivatives ~~Accounting~~and ~~for~~Hedging ~~Derivative~~Topic ~~Instruments~~of ~~and~~the ~~Hedging~~FASB ~~Activities,~~ASC ~~as amended,~~ requires that all derivative instruments be recorded in the balance sheet at fair value. Changes in the fair value of derivatives are recorded in earnings or other comprehensive income (loss), based on whether the instrument is designated as part of a hedge transaction and, if so, the type of hedge transaction. Until ~~its~~our interest rate swap agreement expired on September 30, 2008, ~~the Company~~we utilized derivative financial instruments to manage the risk that changes in interest rates would affect the amount of its future interest payments on portions of its variable rate debt.

~~The~~Our ~~Company’s~~ primary market risk exposure ~~is,~~was ~~and is expected to continue to be,~~ fluctuation in variable interest rates. Ason ~~provided in~~ the ~~Senior~~Term ~~Credit~~Loan. Exposure ~~Facility, exposure~~ to interest rate fluctuations iswas managed by maintaining fixed interest rate debt (primarily the Senior Subordinated Notes) and, historically, entering into interest rate swap agreements that qualified as cash flow hedging instruments to convert certain variable rate debt into fixed rate debt. ~~The~~We ~~Company~~ had a three-year amortizing interest rate swap agreement whereby a portion of the variable rate Term Loan was converted into debt with a fixed rate of 6.844% (4.344% plus an applicable margin as defined by the Senior Credit Facility). This agreement expired on September 30, 2008. Notional amounts under the agreement were reduced periodically until reaching $130.0 million. ~~General information~~ ~~regarding the Company’s exposure to fluctuations in variable interest rates is presented in the following table:~~

	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	%

Effective September 30, 2005, the interest rate swap agreement qualified as a cash flow hedge instrument as the following criteria were met:

	(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.

(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 ~~Company estimated the effectiveness of the~~ interest rate swap agreement ~~utilizing~~was ~~the hypothetical~~expected ~~derivative method. Under this method, the fair value of the actual interest rate swap agreement is compared~~ to ~~the fair value of a hypothetical swap agreement that has the same critical terms as the portion of the Term Loan being hedged. To the extent that the agreement is not considered to~~ be highly effective in offsetting the change in the value of the ~~interest payments being~~ hedged, ~~the fair value relating to the ineffective~~ portion of ~~such agreement and any subsequent changes in such fair value will be immediately recognized in earnings as “gain or loss on derivative financial instruments”. To~~ the ~~extent that the agreement is considered highly effective but not completely effective in offsetting the change in the value of the~~ interest payments ~~being~~attributable ~~hedged, any changes in fair value relating~~ to the ~~ineffective~~Term ~~portion of such agreement will be immediately recognized in earnings as “interest expense”~~Loan.

~~Under~~The ~~hedge~~Company ~~accounting,~~estimated the effectiveness of the interest rate swap ~~agreements~~agreement ~~are~~utilizing ~~reflected~~the hypothetical atderivative method. Under this method, the fair value inof the actual interest rate swap ~~balance~~agreement ~~sheet~~is ~~and~~compared to the ~~related~~fair ~~gains~~value orof ~~losses~~a onhypothetical ~~these~~swap ~~agreements~~agreement ~~are~~that ~~generally~~has ~~recorded~~the insame critical ~~stockholders’~~terms ~~equity,~~as ~~net~~the portion of ~~applicable~~the ~~income~~debt ~~taxes~~being ~~(as~~hedged. ~~“accumulated~~To ~~other~~the ~~comprehensive~~extent ~~income (loss)”).~~that ~~Gains~~the oragreement ~~losses~~is ~~recorded~~not inconsidered to ~~accumulated~~be ~~other~~highly ~~comprehensive~~effective ~~income~~in ~~(loss) are reclassified~~offsetting ~~into~~the ~~earnings~~change asin anthe ~~adjustment~~value toof the interest ~~expense~~payments inbeing hedged, the ~~same~~fair ~~periods~~value inrelating ~~which~~to the ~~related~~ ~~interest~~ineffective ~~payments~~portion ~~being~~of ~~hedged~~such agreement and any subsequent changes in such fair value are immediately recognized in earnings. ~~Except~~ as ~~described~~“gain ~~below,~~or ~~the net~~loss ~~effect~~on ofderivative ~~this~~financial instruments”. ~~accounting~~To onthe extent that the ~~Company’s~~agreement ~~consolidated~~is ~~results~~considered ofhighly ~~operations~~effective ~~was~~but ~~that~~not ~~interest~~completely ~~expense~~effective onin aoffsetting ~~portion~~the ofchange in the ~~Term~~value ~~Loan~~of ~~was~~the ~~generally~~interest payments being ~~recorded~~hedged, ~~based~~any onchanges in ~~fixed~~fair ~~interest~~value ~~rates until~~relating to the ~~interest~~ineffective ~~rate~~portion ~~swap~~of such agreement ~~expired~~are onimmediately ~~September 30,~~recognized ~~2008~~in earnings as “interest expense”.

58Under hedge accounting, interest rate swap agreements are reflected at fair value in the balance sheet and the related gains or losses on these agreements are generally recorded in stockholders’ equity, net of applicable income taxes (as “accumulated other comprehensive income (loss)”). Gains or losses recorded in “accumulated other comprehensive income (loss)” are reclassified into earnings as an adjustment to interest expense in the same periods in which the related interest payments being hedged are recognized in earnings. Except as described below, the net effect of this accounting on our consolidated results of operations was that interest expense on a portion of the Term Loan was generally being recorded based on fixed interest rates until the interest rate swap agreement expired on September 30, 2008.

In accordance with our Risk Management Policy, the interest rate swap agreement was intended as a hedge against certain future interest payments under the Term Loan from the agreement’s inception on July 15, 2005. However, formal documentation designating the interest rate swap agreement as a hedge against certain future interest payments under the Term Loan was not put in place until September 30, 2005 (the effective date of the interest rate swap agreement). As a result, the interest rate swap agreement did not qualify as a cash flow hedge until September 30, 2005. Accordingly, the $0.7 million increase in the fair value of the interest rate swap agreement from inception to September 30, 2005 was recognized in earnings as a “gain on derivative financial instruments”. Changes in the fair value of this portion of the interest rate swap agreement were also recognized as a “gain (loss) on derivative financial instruments” in the consolidated statements of operations.

Subsequent to September 30, 2005, the change in fair value of a September 30, 2005 hypothetical swap was recorded, net of income taxes, in “accumulated other comprehensive income (loss)” in the consolidated balance sheets. Changes in the fair value of the interest rate swap agreement were reflected in the consolidated statements of cash flows as either “gain (loss) on derivative financial instruments” or as “noncash investing and financing activities”.

In accordance with the Company’s Risk Management Policy, the interest rate swap agreement was intended as a hedge against certain future interest payments under the Term Loan from the agreement’s inception on July 15, 2005. However, formal documentation designating the interest rate swap agreement as a hedge against certain future interest payments under the Term Loan was not put in place until September 30, 2005 (the effective date of the interest rate swap agreement). As a result, the interest rate swap agreement did not qualify as a cash flow hedge until September 30, 2005. Accordingly, the $0.7 million increase in the fair value of the interest rate swap agreement from inception to September 30, 2005 was recognized in earnings as a “gain on derivative financial instruments”. Changes in the fair value of this portion of the interest rate swap agreement are also recognized as a “gain (loss) on derivative financial instruments” in the consolidated statements of operations. Subsequent to September 30, 2005, the change in fair value of a September 30, 2005 hypothetical swap was recorded, net of income taxes, in “accumulated other comprehensive income (loss)” in the consolidated balance sheets. Changes in the fair value of the interest rate swap agreement were reflected in the consolidated statements of cash flows as either “gain (loss) on derivative financial instruments” or as “noncash investing and financing activities”.

Information regarding the fair value of the interest rate swap agreement designated as a hedging instrument is presented in the following table:

	Fiscal Years Ended
	March 31, 2009			March 31, 2008			~~March 31, 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

InThe ~~September 2006,~~Fair ~~the~~Value ~~FASB~~Measurements ~~issued~~and ~~SFAS~~Disclosures ~~No. 157,~~Topic ~~Fair~~of ~~Value~~the ~~Measurements~~FASB ~~(“SFAS~~ASC ~~No. 157”). This Statement~~ defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The ~~Statement~~standard ~~was~~excludes ~~subsequently amended by FASB Staff Position No.’s 157-1 and 157-2 to exclude~~ lease classification or measurement (except in certain instances) ~~from the scope of SFAS No~~. ~~157 and to defer the effective date of SFAS No. 157 for most~~ nonfinancial assets and nonfinancial liabilities. This Statement becomes effective for most of the Company’s nonfinancial assets and nonfinancial liabilities in fiscal year 2010. Management does not believe that the adoption of the remaining provisions of SFAS No. 157 will have a material impact on the Company’s consolidated financial statements.

OnA ~~April 1, 2008, the Company adopted the provisions of SFAS No. 157, excepting the aforementioned provisions which become effective in fiscal year 2010. SFAS No. 157 establishes a~~ three-level hierarchal disclosure framework that prioritizes and ranks the level of market ~~price~~ price observability is used in measuring assets and liabilities at fair value on a recurring basis in the statement of financial position. Market price observability is impacted by a number of factors, including the type of asset or liability and its characteristics. Assets and liabilities with readily available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.

The three levels are defined as follows: (1) Level 1-inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets; (2) Level 2-inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument; and (3) Level 3-inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The ~~Company~~Fair ~~invests~~Value inMeasurements ~~certain~~and ~~cash~~Disclosures ~~equivalents~~Topic ~~allowed~~of by the ~~Senior~~FASB ~~Credit~~ASC ~~Facility.~~also Atapplies to disclosures ~~March 31,~~of ~~2009,~~fair ~~cash~~value ~~equivalents~~for ~~included~~all ~~$5.0 million~~financial ininstruments ~~Treasury~~disclosed ~~Notes~~under ~~with~~the aFinancial ~~weighted-average interest~~Instruments ~~rate~~Topic of 0the FASB ASC.~~07%~~ ~~and~~The ~~weighted~~Financial ~~average~~Instruments ~~contractual~~Topic ~~term~~requires ofdisclosures ~~70 days.~~about ~~Due~~fair tovalue ~~the~~for ~~short-term~~all financial ~~nature~~instruments, ofwhether ~~the~~recognized ~~Treasury~~or ~~Note,~~not ~~carrying~~recognized ~~value~~in ~~(including~~the ~~accrued~~statement ~~interest)~~of isfinancial ~~considered~~position. toFor ~~approximate~~financial ~~fair~~instruments ~~value~~recognized at ~~March 31,~~fair ~~2009.~~value ~~The~~on ~~Treasury~~a ~~Note~~recurring ~~has~~basis ~~matured~~in ~~subsequent to~~ the ~~year~~statement ~~end~~of financial ~~with~~position, nothe ~~gain~~three-level orhierarchal ~~loss~~disclosure ~~recognized~~requirements also apply.

~~The~~Our long-term debt is not measured at estimated fair value on a recurring basis in the statement of financial position so it does not fall under the three-level hierarchal disclosure requirements. At March 31, 2010, the estimated fair value of the Senior Subordinated Notes (fixed rate) and ~~Term~~the ~~Loan~~Senior Secured Notes (~~variable~~fixed rate) ~~are~~was ~~valued~~determined utilizing the “market approach” ~~as defined by SFAS No. 157~~ based upon quoted prices for these instruments in markets that are not active. Other fixed rate debt (including capital lease obligations) estimated fair values are ~~valued~~ determined utilizing the “income approach” ~~as defined by SFAS No. 157~~, calculating a present value of future payments based upon prevailing interest rates for similar obligations.

~~The following table summarizes the valuation of the aforementioned financial assets and~~61 ~~liabilities measured at fair value on a recurring basis:~~

			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

The provision (benefit) for income taxes consists of:

	Fiscal Years Ended
	March 31, 2009			March 31, 2008			March 31, 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

At March 31, 2010 and 2009 we did not have any funds drawn under our revolving line of credit. Estimated fair values for our fixed rate and variable rate long-term debt at March 31, 2010 and March 31, 2009 are summarized in the following table:


	March 31,		March 31,
	2010		2009
Carrying Values:
Fixed rate debt	$	377,624,262	$	179,334,183
Variable rate debt		—		193,076,346

Fair Values:
Fixed rate debt	$	372,317,000	$	90,367,000
Variable rate debt		—		160,253,000

L. INCOME TAXES

The provision for income taxes consists of:


	Fiscal Years Ended
	March 31, 2010			March 31, 2009			March 31, 2008
Current:
Federal	$	4,542,939		$	8,043,362		$	9,375,591
State		2,111,352			1,352,961			1,486,430
Deferred		(3,512,197	)		(1,947,665	)		(3,443,682	)

	$	3,142,094		$	7,448,658		$	7,418,339

The following represents a reconciliation between the actual income tax expense and income taxes computed by applying the Federal income tax rate to income before income taxes:

	Fiscal Years Ended
	March 31, 2009			March 31, 2008			March 31, 2007
	March 31, 2010			March 31, 2009			March 31, 2008
Statutory rate		3534.03	%		35.0	%		35.0	%
Goodwill impairment		~~(46.7~~—	)		—(46.7	)		—
State income tax effect		4.2			1.0			3.8
Adjustments to state deferred tax rate		(8.0	)		—			—
Meals and entertainment		0.8			1.0			0.8
NOL carryforward benefit		(3.5	)		—			—
Other		(1.8	)		0.3			—
State income tax effect		4.9			4.2			1.0
		(8.5	%)		37.3	%		39.6	%
Meals and entertainment		1.1			0.8			1.0
Other		1.1			(1.8	)		0.3
		29.9	%		(8.5	%)		37.3	%

Excluding the impact of the ~~goodwill~~adjustment ~~impairment~~to ~~charge,~~the ~~which~~state ~~was~~deferred ~~all attributed to non-deductible~~ tax ~~goodwill~~rate and asthe ~~such~~NOL ~~treated as a permanent difference for income tax purposes,~~carryforward ~~our~~benefit, the effective tax rate would have been 3841.24%. ~~for~~For the fiscal year ended March 31, 2009 ~~as compared~~, toour ~~37.3%~~effective ~~and~~tax ~~39.6%~~rate ~~for~~would ~~the~~have ~~fiscal~~been ~~years ended March 31~~38.2%, ~~2008~~excluding ~~and~~the ~~2007,~~impact ~~respectively.~~of ~~The~~the ~~decline~~goodwill inimpairment ~~the~~charge, ~~state~~which ~~income tax effect in fiscal year 2008~~ was ~~attributable~~all attributed to ~~$0.8 million~~non-deductible ~~in state income~~ tax ~~benefits~~goodwill ~~recorded~~and inas ~~conjunction~~such ~~with~~treated ~~LB775,~~as a ~~State of Nebraska tax incentive program based~~permanent ~~upon~~difference ~~employment~~for ~~and investment growth. This program offers~~ income tax ~~credits, sales tax refunds and property tax exemptions to companies who make investments that meet minimum levels of investment and employment~~purposes.

~~The components of the deferred tax assets (liabilities) consist of the following:~~62

	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	)

The Company had no unrecognized tax benefits as of March 31, 2009 and 2008. Interest and penalties for underpayments of income taxes were $2,250 and $6,100, respectively, paid in the fiscal year ended March 31, 2009; $8,211 and $54,099, respectively, paid in the fiscal year ended March 31, 2008; and $2,615 and $6,892, respectively, paid in the fiscal year ended March 31, 2007.

The components of the deferred tax assets (liabilities) consist of the following:


	March 31,
	2010			2009
Deferred income tax assets (liabilities), current:
Vacation accruals	$	1,053,004		$	983,822
Inventories		1,176,603			802,365
NOL carryforward benefit		759,526			—
Allowance for doubtful accounts		488,432			494,055
Product returns		1,140,441			1,142,856
Incentive programs		2,391,251			2,336,180
Other		(761,698	)		822,524

		6,247,559			6,581,802


Deferred income tax assets (liabilities), noncurrent:

Deferred compensation agreements		140,707			138,953
Goodwill amortization		(10,270,824	)		(8,612,071	)
Covenants not to compete		1,608,593			1,424,543
Identifiable intangibles		(42,496,001	)		(46,109,986	)
Property and equipment		(492,925	)		(1,233,192	)
Other		1,043,431			78,294

		(50,467,019	)		(54,313,459	)

	$	(44,219,460	)	$	(47,731,657	)

At March 31, 2010, we had net operating loss (“NOL”) carryforwards for state income tax purposes of approximately $20.8 million, which will expire on various dates, if unused, beginning in 2014 through 2030. We currently believe that it is more likely than not that we will realize the benefits of our state net operating losses prior to their expiration, therefore, we have not established a valuation allowance against the deferred tax asset. We had no unrecognized tax benefits as of March 31, 2010 and 2009. Interest and penalties for underpayments of income taxes were $8,833 and $10,543, respectively, paid in the fiscal year ended March 31, 2010; $2,250 and $6,100, respectively, paid in the fiscal year ended March 31, 2009; and $8,211 and $54,099, respectively, paid in the fiscal year ended March 31, 2008.

M. RETIREMENT PLANS

~~The~~We ~~Company~~participate ~~participates~~ in and ~~sponsors~~sponsor a 401(k) compensation deferral plan. The plan covers substantially all employees. The plan provisions include employee contributions based on a percentage of compensation along with a company matching feature (100% of the employee’s contribution up to 51% of their total compensation). ~~The~~plus ~~Company~~50% of the employee’s contribution on the next 5% of their total compensation). Our contributions for the fiscal years ended March 31, ~~2009~~2010, 2009 ~~2008~~ and ~~2007~~2008 were $21.45 million, $2.14 million and $2.01 million, respectively.

When ~~the~~ ~~Company~~we acquired CBA on May 1, 2006, CBA had an Employee Stock Ownership Plan (the “Plan”). ~~The~~ We ~~Company~~ acquired all the issued and outstanding shares of CBA stock owned by the Plan. The Plan ~~was~~ was frozen and converted to a qualified profit sharing plan. There have been no contributions to the Plan since May 1, 2006, and there will be no future contributions to this Plan. The majority of Plan assets ~~are~~were ~~expected to be~~ distributed to participants during fiscal year 2010 and final distribution is expected to occur in January 2011. The Plan assets, which are not included in ~~the~~our ~~Company’s~~ consolidated financial statements, have been invested by the trustee, primarily in fixed income investments.

N. DEFERRED COMPENSATION

~~The~~We ~~Company~~have ~~has~~ a non-qualified deferred compensation plan for selected employees. This plan ~~allows~~ allows participants to voluntarily elect to defer portions of their current compensation. The amounts can be distributed upon either death or voluntary/involuntary resignation or termination. Interest is accrued at the Prime rate adjusted semi-annually on January 1 and July 1 and is compounded as of March 31. The liability for the deferred compensation is included in other long-term liabilities and totaled $0.4 million ~~and $0.3 million~~ as of March 31, ~~2009~~2010 and ~~2008, respectively~~2009.

O. SHARE-BASED COMPENSATION

In conjunction with the March 4, 2004 Transaction, NBC Holdings Corp. established the 2004 Stock Option Plan, which was amended on January 14, 2010 and August 13, 2008 to increase the number of options available for issuance under the Plan. On September 29, 2005, NBC Holdings Corp. adopted the NBC Holdings Corp. 2005 Restricted Stock Plan to provide for the sale of NBC Holdings Corp. capital stock to certain of our officers and directors ~~of the Company~~. Details regarding each of the plans are as follows:

2004 Stock Option Plan — This plan, established and amended by NBC Holdings Corp., provides for the granting of options to purchase 85100,306 shares of NBC Holdings Corp. capital stock to selected employees, officers, and employee directors of NBC and its affiliates. Additional shares may be issued upon changes in the capitalization of NBC and upon approval of a committee designated by NBC’s Board of Directors (“the Committee”). All options granted are intended to be nonqualified stock options, although the plan also provides for incentive stock options. This plan provides for the granting of options at the discretion of the Committee. Vesting schedules of options may vary and are determined at the time of grant by the Committee. Subject to certain exceptions, stock options granted under this plan are to be granted at an exercise price of not less than fair market value on the date the options are granted and expire ten years from the date of grant. At March 31, ~~2009~~2010, there were 415,~~463~~276 options available for grant under this plan. With respect to each option granted by NBC Holdings Corp., NBC and NBC Holdings Corp. have an understanding that pursuant to the 2004 Stock Option Plan, NBC has granted, and will continue to grant, an option to purchase an equivalent number of shares of its common stock at the same exercise price to NBC Holdings Corp.

No share-based compensation expense was recognized at the time of grant for the options granted to employees prior to April 1, 2007, as the exercise price was greater than or equal to the estimated fair value (including a discount for the holder’s minority interest position and illiquidity of NBC Holdings Corp.’s capital stock) of NBC Holdings Corp.’s capital stock on the date of grant.

On ~~October~~February 123, ~~2007~~2010, NBC’s Board of Directors approved the grant of 4,~~917~~238 options available for ~~grant~~issuance under the 2004 Stock Option Plan. The options, which have an exercise price of $~~205 per~~85 per share, vest 25% on each of ~~October~~February 123, ~~2007~~2010, ~~2008~~2011, ~~2009~~2012, and ~~2010~~2013. The options expire on ~~October~~ 12February 3, ~~2017~~2020. The fair value of such options was estimated on the date of grant under the ~~calculated~~ calculated value method using a closed-form option valuation model that contained the following assumption ~~assumptions~~— – expected volatility of 1327.18%, no expected dividends, an expected term of four years, and a risk-free rate of 41.39%. As the stock underlying such options is not publicly traded, the ~~expected~~ expected volatility was based upon quarterly observations of the Dow Jones Global Index for Small ~~Cap~~ Cap General Retailers over the four year period ended ~~October~~February 123, ~~2007~~2010. This index was selected as ~~one~~ one which fit the industry in which ~~the~~we ~~Company operates~~operate, and the volatility of that index was ~~calculated~~ calculated utilizing a standard deviation formula. The expected term was an estimate of the period of time that such options granted are expected to remain outstanding after considering the vesting ~~period~~ period and historical experience. The risk-free rate was based upon the ~~October~~February 123, ~~2007~~2010 estimated ~~yield~~ yield of a U.S. Treasury constant maturity series with a four year term.

AsOn aOctober 12, ~~result~~2007, NBC’s Board of ~~employee~~Directors ~~resignations~~approved the grant of 4,917 ~~313~~options available for issuance under the 2004 Stock Option Plan. The options, ~~granted~~which ~~prior~~have toan ~~April~~exercise price of $205 per share, vest 25% on each of October 112, 2007, 2008, 2009 and ~~150~~2010. The options expire on October 12, 2017. The fair value of such options was estimated on the date of grant under the calculated value method using a closed-form option valuation model that contained the following assumptions — expected volatility of 13.1%, no expected dividends, an expected term of four years, and a risk-free rate of 4.3%. As the stock underlying such options is not publicly traded,~~917~~ the expected volatility was based upon quarterly observations of the Dow Jones Global Index for Small Cap General Retailers over the four year period ended October 12, 2007. This index was selected as one which fit the industry in which we operate, and the volatility of that index was calculated utilizing a standard deviation formula. The expected term was an estimate of the period of time that such options granted are expected to remain outstanding after considering the vesting period and historical experience. The risk-free rate was based upon the October 12, 2007 ~~have~~estimated ~~been~~yield of ~~forfeited~~a U.S. Treasury constant maturity series with a four year term.

62As a result of employee resignations, 313 options granted prior to April 1, 2007 and 200 options of the 4,917 options granted October 12, 2007 have been forfeited.

Specific information regarding share-based compensation for stock options granted after March 31, 2007 is presented in the following table:

Stock Options Granted October 12, 2007:
General information:
Grant date calculated fair value per option	$	38.23
Shares at March 31, 2009:
Shares at March 31, 2010:
Vested		23,~~384~~538
Nonvested		21,~~383~~179
Total		4,~~767~~717
Unrecognized share-based compensation at March 31, 2009	$	68,333
Unrecognized share-based compensation at March 31, 2010	$	22,141
Period over which unrecognized share-based compensation will be realized (in years) at March 31, 2009		1.5
Period over which unrecognized share-based compensation will be realized (in years) at March 31, 2010		0.5
Stock Options Granted February 3, 2010:
General information:
Grant date calculated fair value per option	$	13.87
Shares at March 31, 2010:
Vested		1,060
Nonvested		3,178
Total		4,238
Unrecognized share-based compensation at March 31, 2010	$	41,630
Period over which unrecognized share-based compensation will be realized (in years) at March 31, 2010		2.8

Financial information:

	Fiscal Year Ended
	March 31,
	2009
	2010
Consolidated Statement of Operations:
Share-based compensation	$	4361,~~416~~424
Deferred tax benefit		1623,~~547~~648
Other Required Disclosures:
Total calculated fair value of shares vested during the period	$	4458,~~154~~812

A summary of the Company’s share-based compensation activity related to stock options vested or expected to vest for the 2004 Stock Option Plan is as follows:

	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

2005 Restricted Stock Plan — This plan provides for the issuance of shares of nonvested stock to individuals determined by NBC Holdings Corp.’s Board of Directors. Any shares issued under the plan are subject to restrictions on transferability and a right of NBC Holdings Corp. to re-acquire such shares at less than their then fair market value under certain conditions.

On March 31, 2006, 1,400 shares of NBC Holdings Corp. capital stock were issued for $0.01 per share to each of three officers and directors of the Company (the “Officers”) pursuant to a Restricted Stock Purchase Agreement (the “RSPA”). The Officers are party to the Stockholders Agreement, dated March 4, 2004, by and among NBC Holdings Corp. and the Stockholders of NBC Holdings Corp. named therein, the provisions of which restrict the transfer of such shares and provide for certain other rights as detailed therein. The shares granted to the Officers are also each subject to a Stock Repurchase Agreement (the “SRA”) that, among other things, provides for vesting, certain call rights on behalf of NBC Holdings Corp., and certain put rights on behalf of the applicable Officer.

The vesting provisions in each SRA provide that if the Officer is still employed by NBC Holdings Corp., the shares granted vest on September 30, 2010 (the “Vesting Date”). If the Officer is not employed by NBC Holdings Corp. on that date the shares do not vest except under certain conditions related to termination of his employment without “cause” (as defined in the SRA) or due to his death or disability. If the Officer is terminated without cause prior to the Vesting Date, the shares vest based upon a formula determined by the number of days from March 31, 2006 to the date of termination as a percentage of the number of days from March 31, 2006 to the Vesting Date. If a termination without cause before the Vesting Date follows a Change of Control (as defined in the SRA), all of the Officer’s shares become immediately vested.

The call rights provide NBC Holdings Corp. the right to reacquire each Officer’s unvested shares upon the occurrence of certain events, including events under its control, for an aggregate purchase price of $1.00. If the Officer remains employed by the Company until the Vesting Date or is terminated without cause prior to such date, NBC Holdings Corp. has the right but not the obligation to call the vested shares at fair market value (minus any dividends or distributions paid in respect of such shares) subject to certain adjustments and any restrictions or limitations in the Company’s debt covenants. The call rights expire 30 days after the Vesting Date.

The put rights enable the Officer to require NBC Holdings Corp. to repurchase all vested shares following the Vesting Date at the lesser of fair market value or effectively $1.0 million for such Officer’s 1,400 shares, subject to certain adjustments and any restrictions or limitations in the Company’s debt covenants. The put rights expire 90 days after the Vesting Date. The SRA also provides that NBC Holdings Corp. will pay a cash bonus to the Officer related to any vested shares that are repurchased in connection with the put. This bonus is intended to reimburse the Officer for any federal, state and local taxes related to the repurchase and to this cash bonus itself. The bonus will not be paid if such payment is restricted or limited by the Company’s debt covenants.

In connection with the NBC Holdings Corp. 2005 Restricted Stock Plan, the Company also entered into a Restricted Stock Special Bonus Agreement (the “SBA”) with each Officer. Each SBA provides for the payment of a cash bonus to the Officer within 30 days following the Vesting Date based upon certain criteria (the “Special Bonus”). If the Officer is still employed by the Company on that date, or has been terminated without ”cause” (as defined in the SBA) following a Change of Control (as defined in the SBA) prior to that date, the amount is calculated as effectively $1.0 million less the fair market value of his nonvested stock, subject to certain adjustments. If, prior to the Vesting Date, the Officer has been terminated without cause prior to a Change in Control, the amount of the Special Bonus is adjusted based on the number of days from March 31, 2006 to the date of termination as a percentage of the number of days from March 31, 2006 to the Vesting Date, subject to certain adjustments. In either case, the Special Bonus will not be paid if such payment is restricted or limited by the Company’s debt covenants. The SBA also provides that in the event of payment of the Special Bonus, the Company will pay an additional cash bonus to the Officer in an amount sufficient to reimburse the Officer for any federal, state and local taxes related to the Special Bonus and this additional bonus itself.

The combination of the NBC Holdings Corp. 2005 Restricted Stock Plan, the RSPA, the SRA and the SBA is intended to provide a minimum compensation benefit of $1.0 million to each of the Officers assuming that they remain employed by the Company through September 30, 2010 – all subject to certain adjustments and conditions related to the Company’s debt covenants – as described above.

Due to the put rights on behalf of the Officers, share-based compensation is re-measured at the end of each reporting period and recognized to a minimum of $3.0 million plus anticipated cash bonuses to be paid to reimburse the Officers for any federal, state and local taxes thereon from the date of issuance of the nonvested stock until September 30, 2010 and is recorded as “other long-term liabilities” in the consolidated balance sheets and as selling, general and administrative expenses in the consolidated statements of operations. No additional nonvested shares have been issued nor have any of the 4,200 nonvested shares vested or been forfeited since the original issuance on March 31, 2006.

InA ~~re-measuring~~summary ~~share-based compensation at the end~~ of ~~each~~our reporting period, the Company recognizes to the greater of (a) the minimum compensation benefits associated with the nonvested shares or (b) the estimated fair value of such shares. As of March 31, 2009, the minimum compensation benefits exceed the estimated fair value of the nonvested shares and are thus used as the basis for recording share-based compensation. ~~Fair~~activity ~~value~~related isto estimated utilizing a methodology which is consistent with the transaction-based method under the market approach described in the AICPA Audit and Accounting Practice Aid Series, Valuation of Privately-Held-Company Equity Securities (the “Practice Aid”). This methodology is consistent with the approaches that have been used in all four arms-length negotiated transactions involving NBC’s common stock ~~since~~options ~~1995, including~~vested ~~the~~or ~~last transaction on March 4, 2004 and includes the following steps: (a) the~~expected ~~determination of an estimated enterprise value using a multiple of Adjusted EBITDA; (b) the enterprise value is reduced by outstanding debt~~ to ~~derive~~vest anfor ~~equity value; and (c)~~ the ~~equity~~2004 ~~value is~~Stock ~~then~~Option ~~divided~~Plan ~~by outstanding common stock and common stock equivalents to arrive at an estimated equity value per share. As NBC Holdings Corp.’s common stock~~ is not publicly traded and the nonvested shares represent a minority interest position, the estimated equity value per share is discounted for these factors to arrive at the fair value of the nonvested shares. The factors to be considered in performing a valuation as outlined in the Practice Aid, as well as the risks outlined in this Annual Report on Form 10-K and other factors, impact the selection of the Adjusted EBITDA multiple used in the previously mentioned valuation methodology. As these factors and risks change, their impact on the valuation methodology is also considered. The Company does not believe that the results of a contemporaneous valuation by an unrelated valuation specialist would provide more reliable evidence of valuation compared to the current methodology, given its consistent application in all four arms-length negotiated transactions involving NBC’s common stock over the past fourteen years. Specific information regarding nonvested stock share-based compensation is presented in the following tablefollows:

	Fiscal Years Ended
	Fiscal Year Ended
	March 31, 2009			March 31, 2008		March 31, 2007
	March 31, 2010
	Minimum			Minimum		Minimum
				Weighted-
Nonvested Stock:	Compensation			Compensation		Compensation
				Average
Valuation methodology
				Exercise
Share-based compensation:
	Number			Price
Recognized:
2004 Stock Option Plan:
Value of nonvested shares	$	666,667		$	666,666	$	666,667
Outstanding — beginning of year		80,203		$	117.18
Reimbursement for taxes		578,460			303,444		330,290
Granted		4,238			85.00
Total	$	1,245,127		$	970,110	$	996,957
Exercised or converted		—			—
Unrecognized:
Forfeited		(50	)		205.00
Value of nonvested shares	$	1,000,000		$	1,666,667	$	2,333,333
Expired		—			—
Reimbursement for taxes		606,097			839,618		1,180,357
Outstanding — end of year		84,391		$	117.75
Total	$	1,606,097		$	2,506,285	$	3,513,690
Exercisable — end of year		80,033		$	115.40
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


	Outstanding				Exercisable
			Weighted-				Weighted-
			Average				Average
			Remaining				Remaining
			Contractual				Contractual
	Number		Term (Yrs)		Number		Term (Yrs)
March 31, 2010:
Exercise price of $52.47		26,628		3.9		26,628		3.9
Exercise price of $106		11,760		3.9		11,760		3.9
Exercise price of $146		10,750		3.9		10,750		3.9
Exercise price of $160		26,298		5.1		26,298		5.1
Exercise price of $205		4,717		7.5		3,538		7.5
Exercise price of $85		4,238		9.8		1,059		9.8

		84,391		4.8		80,033		4.5

2005 Restricted Stock Plan — This plan provides for the issuance of shares of nonvested stock to individuals determined by NBC Holdings Corp.’s Board of Directors. Any shares issued under the plan are subject to restrictions on transferability and a right of NBC Holdings Corp. to re-acquire such shares at less than their then fair market value under certain conditions.

On March 31, 2006, 1,400 shares of NBC Holdings Corp. capital stock were issued for $0.01 per share to each of our three officers and directors (the “Officers”) pursuant to a Restricted Stock Purchase Agreement (the “RSPA”). The Officers are party to the Stockholders Agreement, dated March 4, 2004, by and among NBC Holdings Corp. and the Stockholders of NBC Holdings Corp. named therein, the provisions of which restrict the transfer of such shares and provide for certain other rights as detailed therein. The shares granted to the Officers are also each subject to a Stock Repurchase Agreement (the “SRA”) that, among other things, provides for vesting, certain call rights on behalf of NBC Holdings Corp., and certain put rights on behalf of the applicable Officer. With respect to each share of capital stock issued by NBC Holdings Corp., NBC and NBC Holdings Corp. have a separate understanding that pursuant to the 2005 Restricted Stock Plan, NBC has issued, and will continue to issue, an equivalent number of shares of its common stock at the same purchase price per share to NBC Holdings Corp.

The vesting provisions in each SRA provide that if the Officer is still employed by NBC Holdings Corp., the shares granted vest on September 30, 2010 (the “Vesting Date”). If the Officer is not employed by NBC Holdings Corp. on that date the shares do not vest except under certain conditions related to termination of his employment without “cause” (as defined in the SRA) or due to his death or disability. If the Officer is terminated without cause prior to the Vesting Date, the shares vest based upon a formula determined by the number of days from March 31, 2006 to the date of termination as a percentage of the number of days from March 31, 2006 to the Vesting Date. If a termination without cause before the Vesting Date follows a change of control (as defined in the SRA), all of the Officer’s shares become immediately vested.

PThe call rights provide NBC Holdings Corp. ~~SEGMENT~~the ~~INFORMATION~~right to reacquire each Officer’s unvested shares upon the occurrence of certain events, including events under its control, for an aggregate purchase price of $1.00. If the Officer remains employed by us until the Vesting Date or is terminated without cause prior to such date, NBC Holdings Corp. has the right but not the obligation to call the vested shares at fair market value (minus any dividends or distributions paid in respect of such shares) subject to certain adjustments and any restrictions or limitations in our debt covenants. The call rights expire 30 days after the Vesting Date.

The ~~Company’s~~put ~~operating~~rights ~~segments~~enable ~~are determined based on~~ the ~~way~~Officer ~~that~~to ~~management~~require ~~organizes~~NBC ~~the segments~~Holdings ~~for~~Corp. ~~making~~to ~~operating~~repurchase ~~decisions~~all ~~and~~vested shares ~~assessing~~following ~~performance.~~the ~~Management~~Vesting ~~has~~Date ~~organized~~at the ~~Company’s~~ ~~operating~~lesser ~~segments~~of ~~based~~fair ~~upon~~market ~~differences~~value inor ~~products~~effectively ~~and services provided~~$1. ~~The Company~~0 million ~~has~~for ~~three~~such ~~operating~~Officer’s ~~segments: Bookstore Division~~1,400 ~~Textbook Division~~shares, ~~and~~subject ~~Complementary~~to ~~Services Division.~~certain ~~The~~adjustments ~~Bookstore~~ and ~~Textbook~~any ~~Divisions~~restrictions ~~qualify~~or aslimitations in ~~reportable~~our ~~operating~~debt ~~segments,~~covenants. ~~while separate~~The ~~disclosure~~put ofrights ~~the~~expire ~~Complementary~~90 days ~~Services~~after ~~Division~~the isVesting ~~provided~~Date. asThe ~~management~~SRA ~~believes~~also provides that ~~information~~ ~~about~~NBC ~~this~~Holdings ~~operating~~Corp. ~~segment~~will ispay ~~useful~~a tocash ~~the~~bonus ~~readers~~to of the ~~Company’s~~Officer ~~consolidated financial~~related ~~statements.~~to ~~The~~any ~~Bookstore~~vested ~~Division~~shares that ~~segment~~are ~~encompasses~~repurchased ~~the~~in ~~operating~~connection ~~activities~~with of the ~~Company’s~~ ~~college~~put. ~~bookstores~~This ~~located~~bonus onis orintended ~~adjacent~~ to ~~college~~reimburse ~~campuses.~~the ~~The Textbook Division~~Officer ~~segment~~for ~~consists~~any ~~primarily of selling used textbooks to college bookstores~~federal, ~~buying~~state ~~them~~and ~~back~~local ~~from students~~taxes orrelated ~~college~~to ~~bookstores at~~ the ~~end~~repurchase ~~of each college semester~~ and ~~then~~to ~~reselling~~this ~~them~~cash ~~to college~~bonus ~~bookstores~~itself. The bonus ~~Complementary~~will ~~Services~~not ~~Division~~be ~~segment~~paid ~~includes~~if ~~book-related services~~ such aspayment ~~distance~~is ~~education~~restricted ~~materials,~~or ~~computer~~limited ~~hardware~~by ~~and~~our ~~software,~~debt ~~e-commerce technology, and a centralized buying service~~covenants.

~~The~~In ~~Company~~connection ~~primarily~~with ~~accounts~~the ~~for~~NBC ~~intersegment~~Holdings ~~sales~~Corp. as2005 ifRestricted Stock Plan, we also entered into a Restricted Stock Special Bonus Agreement (the ~~sales~~“SBA”) ~~were~~with each Officer. Each SBA provides for the payment of a cash bonus to ~~third~~the ~~parties~~Officer within 30 days following the Vesting Date based upon certain criteria (atthe ~~current~~“Special ~~market prices~~Bonus”). ~~Certain~~If ~~assets~~the Officer is still employed by us on that date, ~~net~~or ~~interest~~has ~~expense~~been terminated ~~and~~without ~~taxes~~“cause,” ~~(excluding~~as ~~interest~~defined ~~and~~in the SBA, following a change of control, as defined in the ~~taxes~~SBA, ~~incurred~~prior byto that date, the ~~Company’s~~amount ~~wholly-owned~~is ~~subsidiaries~~calculated as effectively $1.0 million less the fair market value of his nonvested stock, ~~NBC~~subject ~~Textbooks~~to ~~LLC~~certain adjustments. If, ~~Net~~prior ~~Textstore~~to ~~LLC~~the Vesting Date, the ~~CBA~~Officer has been terminated without cause prior to a change in control, ~~Campus~~the ~~Authentic~~amount ~~LLC~~of ~~and~~the ~~Specialty~~Special Bonus ~~Books~~is adjusted based on the number of days from March 31, ~~Inc~~2006 to the date of termination as a percentage of the number of days from March 31, 2006 to the Vesting Date, subject to certain adjustments.) ~~are~~In either case, the Special Bonus will not ~~allocated~~be ~~between~~paid if such payment is restricted or limited by our debt covenants. The SBA also provides that in the event of payment of the Special Bonus, the Company’s will pay an additional cash bonus to the Officer in an amount sufficient to ~~segments;~~reimburse ~~instead~~the Officer for any federal, ~~such~~state ~~balances~~and ~~are~~local ~~accounted~~taxes ~~for~~related into athe ~~corporate~~Special ~~administrative~~Bonus ~~division~~and this additional bonus itself.

~~EBITDA~~The ~~and~~combination ~~Adjusted~~of ~~EBITDA~~the ~~are~~NBC ~~important~~Holdings ~~measures~~Corp. of2005 ~~segment~~Restricted ~~profit~~Stock orPlan, ~~loss~~the ~~used~~RSPA, by the ~~Chief~~SRA and ~~Executive~~the ~~Officer~~SBA ~~and~~is ~~President~~intended ~~(chief~~to ~~operating~~provide ~~decision~~a ~~makers)~~minimum inafter-tax ~~making~~compensation ~~decisions~~benefit ~~about~~of $1.0 million to each of ~~resources~~the Officers assuming that they remain employed by us through September 30, 2010 — all subject to certain beadjustments ~~allocated~~and conditions related to ~~operating~~our ~~segments~~debt ~~and~~covenants ~~assessing~~— ~~operating~~as ~~segment~~described ~~performance~~earlier.

~~The~~Due ~~following~~to ~~table~~the ~~provides~~put ~~selected~~rights ~~information~~on ~~about~~behalf ~~profit~~of ~~(excluding~~the Officers, share-based compensation is re-measured at the ~~impact~~end of ~~the~~each reporting period and recognized to a minimum of $3.0 million plus anticipated cash ~~Company’s~~bonuses ~~interdivisional~~to ~~administrative~~be ~~fee~~paid –to ~~see~~reimburse ~~Note~~the SOfficers for any federal, ~~Condensed~~state ~~Consolidating~~and ~~Financial~~local taxes thereon from ~~Information~~the date of issuance of the nonvested stock until September 30, to2010 and is recorded as “accrued expenses” in the consolidated ~~financial~~balance ~~statements)~~sheets and ~~assets~~as on“selling, ageneral ~~segment~~and ~~basis:~~administrative expenses” in the consolidated statements of operations. No additional nonvested shares have been issued nor have any of the 4,200 nonvested shares vested or been forfeited since the original issuance on March 31, 2006.

					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

~~The~~In ~~following~~re-measuring ~~table~~share-based ~~reconciles~~compensation ~~segment~~at ~~information~~the ~~presented~~end ~~above~~of each reporting period, we recognize the greater of (a) the minimum compensation benefits associated with ~~consolidated~~the nonvested shares or (b) the ~~information~~estimated fair value of such shares. As of March 31, 2010, the minimum compensation benefits exceed the estimated fair value of the nonvested shares and are thus used as ~~presented~~the basis for recording share-based compensation. Fair value is estimated utilizing a methodology which is consistent with the transaction-based method under the market approach described in the AICPA Audit and Accounting Practice Aid Series, Valuation of Privately-Held-Company Equity Securities (the “Practice Aid”). This methodology is consistent with the approaches that have been used in all four arms-length negotiated transactions involving NBC’s ~~consolidated~~common ~~financial~~stock ~~statements~~since 1995, including the last transaction on March 4, 2004 and includes the following steps: (a) the determination of an estimated enterprise value using a multiple of EBITDA; (b) the enterprise value is reduced by outstanding debt and redeemable preferred stock and accumulated dividends to derive an equity value; and (c) the equity value is then divided by outstanding common stock and common stock equivalents to arrive at an estimated equity value per share. As NBC Holdings Corp.’s common stock is not publicly traded and the nonvested shares represent a minority interest position, the estimated equity value per share is discounted for these factors to arrive at the fair value of the nonvested shares. The factors to be considered in performing a valuation as outlined in the Practice Aid, as well as the risks outlined in this Annual Report on Form 10-K and other factors, impact the selection of the EBITDA multiple used in the previously mentioned valuation methodology. As these factors and risks change, their impact on the valuation methodology is also considered. Specific information regarding nonvested stock share-based compensation is presented in the following table:

	Fiscal Years Ended
	March 31, 2009			March 31, 2008			March 31, 2007
	March 31, 2010			March 31, 2009			March 31, 2008
Revenues:
	Minimum Compensation
Total for reportable segments	$	653,559,671		$	628,432,131		$	586,490,311
Nonvested Stock:
Elimination of intersegment revenues		(42,843,490	)		(47,184,345	)		(42,062,347	)
Valuation methodology
Consolidated total	$	610,716,181		$	581,247,786		$	544,427,964
Share-based compensation:
Depreciation and Amortization Expense:
Recognized:
Total for reportable segments	$	17,740,057		$	16,618,345		$	15,043,463
Value of nonvested shares	$	666,667		$	666,667		$	666,666
Corporate Administration		1,246,594			1,033,494			485,893
Reimbursement for taxes		378,791			578,460			303,444
Consolidated total	$	18,986,651		$	17,651,839		$	15,529,356
Total	$	1,045,458		$	1,245,127		$	970,110
Goodwill impairment	$	106,972,000		$	—		$	—
Unrecognized:
Income (Loss) Before Income Taxes:
Value of nonvested shares	$	333,333		$	1,000,000		$	1,666,667
Total Adjusted EBITDA for reportable segments (1)	$	84,359,301		$	81,231,420		$	79,437,356
Reimbursement for taxes		198,825			606,097			839,618
Corporate Administration Adjusted EBITDA loss (including interdivision profit elimination) (1)		(13,326,971	)		(11,280,477	)		(11,323,483	)
Total	$	532,158		$	1,606,097		$	2,506,285
		71,032,330			69,950,943			68,113,873
Deferred tax benefit	$	375,824		$	476,298		$	375,797
Depreciation and amortization		(18,986,651	)		(17,651,839	)		(15,529,356	)
Period over which unrecognized share-based compensation will be realized (in years)		0.5			1.5			2.5
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

	March 31, 2009		March 31, 2008		March 31, 2007
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

P. SEGMENT INFORMATION

~~(1)~~Our ~~Adjusted~~operating ~~EBITDA~~segments isare ~~defined~~determined asbased ~~earnings~~on ~~before~~the ~~interest~~way that management organizes the segments for making operating decisions and assessing performance. Management has organized our operating segments based upon differences in products and services provided. We have three operating segments: Bookstore Division, ~~taxes~~Textbook Division, ~~depreciation~~and Complementary Services Division. The Bookstore and Textbook Divisions qualify as reportable operating segments, ~~amortization~~while separate disclosure of the Complementary Services Division is provided as management believes that information about this operating segment is useful to the readers of our consolidated financial statements. The Bookstore Division segment encompasses the operating activities of our college bookstores located on or adjacent to college campuses. The Textbook Division segment consists primarily of selling used textbooks to college bookstores, buying them back from students or college bookstores at the end of each college semester and ~~goodwill~~then ~~impairment~~reselling them to college bookstores. ~~There~~The ~~was~~Complementary noServices ~~goodwill~~Division ~~impairment~~segment inincludes ~~fiscal~~book-related ~~years~~services ~~2008~~such as distance education materials, computer hardware and ~~2007;~~software, ~~therefore~~e-commerce ~~Adjusted~~technology, ~~EBITDA~~consulting services, ~~equals~~and ~~EBTIDA~~a ~~for~~centralized ~~those~~buying ~~years~~service.

The Company’s revenues are attributed to countries based on the location of the customer. Substantially all revenues generated are attributable to customers located within the United States.

Q. RELATED PARTY TRANSACTIONS

In accordance with the Company’s debt covenants, the Company declared and paid $8.5 million in dividends to NBC during the fiscal year ended March 31, 2009 to provide funding for interest due and payable on NBC’s $77.0 million 11% senior discount notes. There were no dividends declared and paid by the Company to NBC during the fiscal years ended March 31, 2008 and 2007.

In conjunction with the Senior Credit Facility amendment on February 3, 2009, NBC entered into a Stock Subscription Agreement with NBC Holdings Corp. (“Holdings”), pursuant to which Holdings purchased 10,000 shares of a newly created series of NBC preferred stock, par value $0.01 per share, for $1,000 per share, for an aggregate purchase price of $10.0 million. As a result of the Stock Subscription Agreement, the Company received a $10.0 million capital contribution from NBC.

RWe primarily account for intersegment sales as if the sales were to third parties (at current market prices). ~~CLOSURE~~Certain OFassets, ~~CALIFORNIA~~net ~~WAREHOUSE~~interest expense and taxes (excluding interest and taxes incurred by the Company’s wholly-owned subsidiaries, NBC Textbooks LLC, Net Textstore LLC, CBA, Campus Authentic LLC and Specialty Books, Inc.) are not allocated betwee

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Filing Compare · NEBRASKA BOOK CO