At the end of 2010, warning signs appeared at Nebraska Book Co.
That year, for the first time in its history, the 97-year-old Lincoln-based business posted a year-over-year revenue decline.
The credit crunch and banking crises ratcheted up the financial pressures on a company that — after having changed private equity ownership three times since 1995, each deal adding more debt — had little wiggle room to avoid a stumble.
But stumble it did, forcing the company to file for Chapter 11 bankruptcy last June.
“Without a doubt it was the most challenging business thing I've ever gone through,” said Barry Major, who became CEO three weeks ago after serving as chief operating officer for 13 years. “I wouldn't wish it upon anybody.”
Today, under new leadership with a leaner debt load, company officials say Nebraska Book is ready to get back on track with an aggressive approach to sustainable growth.
Before 2010, the tale of Nebraska Book was one of expansion and steady top-line growth.
The company's growth began in the 1930s, turning the used textbook wholesaler into a retail bookstore operator, book distributor, e-commerce provider and major software licensor. It was originally launched as a single bookstore in 1915 near the University of Nebraska campus in Lincoln.
When he joined the company in 1999, Major said in an interview with The World-Herald, the task was clear: Expand the company's footprint.
At the time, the company owned 50 off-campus bookstores and was undergoing a transition to new ownership after Olympus Partners, a Stamford, Conn., private equity fund, sold the company to Haas Wheat & Partners Inc. of Dallas in a $245 million deal. Olympus had purchased Nebraska Book for $100 million in 1995.
For decades, off-campus bookstores, which sold predominantly used books, were a popular choice for students hunting for deals. Often, Major said, off-campus shops sold textbooks for roughly 25 percent less than on-campus stores, which usually were owned by universities and run by third parties.
Major, however, saw an opportunity to compete in the on-campus market. In 2006, he spearheaded a deal to acquire College Book Stores of America and its 100 on-campus textbook retailers.
“If we were going to get into that part of the business, we needed to jump-start it,” Major said. “And (College Book Stores of America) was in it.”
But another shift was about to take place: the rise in online book shopping and selling.
“As the business model changed, the off-campus store really had many disadvantages,” Major said.
Students started shopping on the Internet for used books and at on-campus stores for new books not yet available online. Nebraska Book's off-campus properties became less and less profitable.
Students also favored on-campus retailers because they could use their financial aid and their campus-issued bank cards, and because the on-campus shops were usually more convenient, Major said.
But that was just the start of disruptive, industry-changing trends. Textbook rentals, a business Nebraska Book didn't participate in at all, began to erode sales even more.
Consider the following figures: A book that sold new for $100 at an on-campus store might carry a price tag of $75 at a used-book store. But when rentals came into play, students could rent the book for a semester for between $40 and $50. To keep pace, on-campus stores started offering books for the same prices as their off-campus competition.
The off-campus stores' price advantage was “erased overnight,” Major said.
The “perfect storm,” as he calls it, was upon the company. With most of its $560 million in debt coming due during an 18-month stretch in 2011 and 2012, the company tried to arrange a line of credit to avoid bankruptcy, but that plan failed.
According to court papers, the company had $508.3 million in assets and about $547.7 million in debt by March 31, 2011. On June 27, 2011, Nebraska Book filed for Chapter 11 to reorganize its finances and continue operating.
A year later, Nebraska Book emerged with a revamped financial structure, shedding $380 million in debt. Boston-based private equity firm Mast Capital Management became the largest shareholder and now holds three of the seven seats on the company's board of directors. There are more than 15 other shareholders with a stake in the firm, Major said.
The company's operations endured a change, as well. During the yearlong process, Nebraska Book swapped 23 unprofitable on-campus bookstores for an equal number that were making money, and unloaded 56 off-campus sites that were operating in the red. The holdings now tally 157 on-campus sites and 92 off-campus shops.
But the company isn't done acquiring properties.
According to Major, there are between 4,000 and 4,500 college bookstores in the United States. Of those, nearly half are operated by three companies — Follett Corp., with 960 stores; Barnes and Noble, with 640; and Nebraska Book, with 249.
Nebraska Book wants to grow its numbers, especially in on-campus shops, Major said, and a critical element to growing its footprint is the concern that tablet computers like the Apple iPad could overrun physical textbook sales in the future.
Major isn't convinced that's happening anytime soon. But when the issue does come to a head, he said, Nebraska Book will be ready.
“We are not asleep at the switch, but I believe that's years away, eight, 10, 15 years away,” he said. “The good news is that it makes colleges nervous and more likely to outsource to us.”
In 2011, in an attempt to bring better brand recognition to the company's stores, it unveiled “Neebo,” a brand that it has used in conjunction with some of the on-campus properties it runs. It also has two Neebo stores in Lincoln, selling high-end sports apparel and other merchandise.
The company also launched Neebo.com, where students can rent and buy books and shop for university apparel and other supplies for college.
“We're not just a bookstore,” said Nate Rempe, the company's chief technology officer. “And we'll come right out and say that. We are a college outfitter.”
Nebraska Book employs between 2,000 and 3,000 people around the country and between 500 and 1,000 in Lincoln, depending on the season. Over the past year it has had an infusion of new leadership. Major succeeded former CEO Mark Oppegard, who ran the company for 42 years, and hired Steve Clemente from Target as chief operating officer and Alexi Wellman from accounting firm KPMG as chief financial officer.
Under the new leadership and with its new business model in place, Major said he's excited about what's happened so far and about the inevitable changes yet to come.
This time around, Major hopes change will help the company avoid another stumble.
“I don't find change scary,” he said. “If they want to change things, I let them change it because it's going to be better for the company.”