UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the quarterly period ended December 31, 2011

OR

For the transition period from                  to                 

Commission file number: 333-48225

NBC ACQUISITION CORP.

(Exact name of registrant as specified in its charter)

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

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  ¨    No  ¨ (NOTE: NBC Acquisition Corp. 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, NBC Acquisition Corp. 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).    x  Yes    ¨   No

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.

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

Total number of shares of common stock outstanding as of February 14, 2012: 554,094 shares

Total Number of Pages: 48

Exhibit Index: Page 48

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

NBC ACQUISITION CORP.

(DEBTOR IN POSSESSION AS OF JUNE 27, 2011)

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

See notes to condensed consolidated financial statements (unaudited).

2

NBC ACQUISITION CORP.

(DEBTOR IN POSSESSION AS OF JUNE 27, 2011)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

See notes to condensed consolidated financial statements (unaudited).

3

NBC ACQUISITION CORP.

(DEBTOR IN POSSESSION AS OF JUNE 27, 2011)

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) AND COMPREHENSIVE LOSS (UNAUDITED)

See notes to condensed consolidated financial statements (unaudited).

4

NBC ACQUISITION CORP.

(DEBTOR IN POSSESSION AS OF JUNE 27, 2011)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

See notes to condensed consolidated financial statements (unaudited).

5

NBC ACQUISITION CORP.

(DEBTOR IN POSSESSION AS OF JUNE 27, 2011)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the fiscal year ended March 31, 2011 included in the Company’s Annual Report on Form 10-K. A description of our significant accounting policies is included in our 2011 Annual Report on Form 10-K. References in this Quarterly Report on Form 10-Q to the terms “we,” “our,” “ours,” and “us” refer collectively to the Company and its subsidiaries, including NBC, except where otherwise indicated and except where the context requires otherwise. We do not conduct significant activities apart from our investment in NBC. Operational matters discussed in this report, including the acquisition of college bookstores and other related businesses, refer to operations of NBC.

On June 27, 2011 (the “Petition Date”), we and NBC and all of its subsidiaries filed voluntary petitions for reorganization relief under chapter 11 of the United States Bankruptcy Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the District of Delaware (the “Court”). The reorganization cases are being jointly administered as Case No. 11-12005 under the caption “in re Nebraska Book Company, Inc., et al.” (hereinafter referred to as the “Chapter 11 Proceedings”). We continue to operate our business as “debtors-in-possession” under the jurisdiction of the Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Court.

Our financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“GAAP”), consistently applied and on a going concern basis, which contemplates the continuity of operations, realization of assets and satisfaction of liabilities in the normal course of business. As a result of the Chapter 11 Proceedings, such realization of assets and satisfaction of liabilities, without substantial adjustments to amounts and or changes of ownership, is highly uncertain. Given this uncertainty, there is substantial doubt about our ability to continue as a going concern. Our financial statements do not include any adjustments related to assets or liabilities that may be necessary should we not be able to continue as a going concern.

Financial reporting applicable to companies in bankruptcy generally does not change the manner in which financial statements are prepared. However, it does require that the financial statements for periods subsequent to the filing of the chapter 11 petition distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business, among other disclosures. Accordingly, revenues, expenses, realized gains and losses and provisions for losses that can be directly associated with the reorganization of the business and that occurred subsequent to the Petition Date have been reported separately as “Reorganization items” in our condensed consolidated statement of operations. We have reflected the necessary changes in this Quarterly Report on Form 10-Q for the quarter ended December 31, 2011.

Substantially all of our pre-petition debt is in default and is classified as liabilities subject to compromise at December 31, 2011, including $200.0 million principal amount 10% senior secured notes (the “Pre-Petition Senior Secured Notes”), $175.0 million principal amount 8.625% senior subordinated notes (the “Pre-Petition Senior Subordinated Notes”) and $77.0 million principal amount 11% senior discount notes (the “Pre-Petition Senior Discount Notes”).

Revenue Recognition

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 over the rental period. During the quarter ended December 31, 2011, we recognized $14.6 million of revenue that was deferred at September 30, 2011.

6

Implications of Chapter 11 Proceedings

The Chapter 11 Proceedings were initiated in response to our inability to fully refinance our existing debt and vendors’ unwillingness to extend credit to us under normal terms due to refinancing uncertainties. Under section 362 of the Bankruptcy Code, the filing of a bankruptcy petition automatically stays most actions against a debtor, including most actions to collect pre-petition indebtedness or to exercise control over our property. Absent an order of the Court, substantially all pre-petition liabilities are subject to settlement under a plan of reorganization. While operating as debtors-in-possession under the Bankruptcy Code and subject to approval of the Court or otherwise as permitted in the ordinary course of business, we may sell or dispose of assets and liquidate or settle liabilities for amounts other than those reflected in the condensed consolidated financial statements. Further, a confirmed plan of reorganization or other arrangement could materially change the amounts and classifications in the historical condensed consolidated financial statements.

Subsequent to the Petition Date, we received approval from the Court to pay or otherwise honor certain pre-petition obligations generally designed to stabilize our operations including employee obligations, tax matters, and from limited available funds, pre-petition claims of certain critical vendors, certain customer programs, and certain other pre-petition claims. Additionally, we have been paying and intend to continue to pay undisputed post-petition claims in the ordinary course of business.

Plan of Reorganization

On July 17, 2011, we filed a joint plan of reorganization and related disclosure statement with the Court. On August 22, 2011, we filed with the Court a first amended disclosure statement, which contained a first amended proposed plan of reorganization (the “Amended Plan”).

The Amended Plan calls for the issuance of (i) new senior secured notes, (ii) new senior unsecured notes, (iii) new common equity interests in us in an amount equal to 78% of the Company to the holders of the Pre-Petition Senior Subordinated Notes, and (iv) new common equity interests in us in an amount equal to 22% of the Company to holders of the Pre-Petition Senior Discount Notes. The Amended Plan allows for the issuance of pro rata share of new warrants to holders of our existing equity securities to purchase up to three percent or five percent of new common equity interests in us exercisable at certain strike prices as outlined in the Amended Plan. The ultimate recovery to creditors and/or our shareholders, if any, will not be determined until confirmation and consummation of a plan of reorganization.

On the Petition Date, we, our parent company NBC Holdings, Corp., and the subsidiaries of NBC entered into a Restructuring and Support Agreement, as amended, with (a) holders of more than 95% in principal amount of the Pre-Petition Senior Subordinated Notes and (b) holders of more than 75% in principal amount of the Pre-Petition Senior Discount Notes (the “Support Agreement”), pursuant to which the participating holders have agreed, among other things, to support the restructuring to be effected pursuant to the Chapter 11 Proceedings. We continue to have ongoing discussions and negotiations with the noteholders supporting our Amended Plan and other stakeholders. In addition, we are continuing to address objections received to the Amended Plan. Discussions with these parties will likely continue until a plan of reorganization is approved by the Bankruptcy Court. Such discussions and negotiations may lead to substantial revisions and amendments to the terms of the Amended Plan and resubmission of such plan to the Bankruptcy Court.

Because a Court confirmed plan of reorganization will determine the rights and satisfaction of claims of various creditors and security holders, the ultimate settlement of such claims is subject to various uncertainties. Accordingly, no assurance can be provided as to what values, if any, will be ascribed in the Chapter 11 Proceedings to these or any other constituencies with respect to what types or amounts of distributions, if any, will be received. If certain requirements of the Bankruptcy Code are met, a plan of reorganization can be confirmed without acceptance by all constituents and without the receipt or retention of any property on account of all interests under the plan. Under any plan of reorganization, our presently outstanding equity securities could have no value and could be canceled and we urge that caution be exercised with respect to existing and future investments in any of our securities.

7

Chapter 11 Financing

We are currently funding post-petition operations with a $200.0 million Superpriority Debtor-In-Possession Credit Agreement (the “DIP Credit Agreement”), consisting of a $125.0 million debtor-in-possession term loan facility (the “DIP Term Loan Facility”) issued at a discount of $1.2 million and a $75.0 million debtor-in-possession revolving facility (the “DIP Revolving Facility”). For additional details related to the DIP Credit Agreement see Note 6.

Financial Statement Classification

Financial reporting applicable to companies in bankruptcy generally does not change the manner in which financial statements are prepared. However, it does require that the financial statements for periods subsequent to the filing of the chapter 11 petition distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business, among other disclosures. Accordingly, revenues, expenses, realized gains and losses and provisions for losses that can be directly associated with the reorganization of the business have been reported separately as “Reorganization items” in our condensed consolidated statement of operations. Reorganization items included in the condensed consolidated financial statements are as follows:

Professional fees included in Reorganization items for the quarter and nine months ended December 31, 2011 primarily relate to costs incurred after the Petition Date for advisor fees related to the Chapter 11 Proceedings. Costs incurred for advisor fees prior to the Petition Date were $4.7 million for the nine months ended December 31, 2011 and are included in selling, general and administrative expenses.

Pre-petition liabilities subject to compromise under a plan of reorganization have been reported separately from both pre-petition liabilities that are not subject to compromise and from liabilities arising subsequent to the Petition Date. Liabilities expected to be affected by a plan of reorganization are reported at amounts expected to be allowed, even if they may be settled for lesser amounts. Liabilities subject to compromise as of December 31, 2011 are set forth below and represent our estimate of pre-petition claims to be resolved in connection with the Chapter 11 Proceedings. Such claims remain subject to future adjustments, which may result from (i) negotiations; (ii) actions of the Court; (iii) disputed claims; (iv) rejection of executor contracts and unexpired leases; (v) the determination as to the value of any collateral securing claims; (vi) proofs of claim; or (vii) other events.

Liabilities subject to compromise include the following:

8

Substantially all of our pre-petition debt is in default and is classified as liabilities subject to compromise at December 31, 2011, including the Pre-Petition Senior Secured Notes, Pre-Petition Senior Subordinated Notes and Pre-Petition Senior Discount Notes. Effective June 27, 2011, we ceased recording interest expense on the Pre-Petition Senior Subordinated Notes and Pre-Petition Senior Discount Notes as such amounts of contractual interest are not being paid during the Chapter 11 Proceedings and have been determined not to be probable of being an allowed claim. Interest on the Pre-Petition Senior Secured Notes and DIP Term Loan Facility is being paid monthly during the Chapter 11 Proceedings. Interest expense on a contractual basis would have been $6.0 million higher, or $14.6 million, for the quarter ended December 31, 2011 and $12.2 million higher, or $43.1 million, for the nine months ended December 31, 2011 if we had continued to accrue interest on the Pre-Petition Senior Subordinated Notes and Pre-Petition Senior Discount Notes.

Going Concern

Our audited consolidated financial statements for the year ended March 31, 2011 and our unaudited condensed consolidated financial statements have been prepared assuming that we will continue as a going concern. However, our ability to: (i) comply with terms of the DIP Credit Agreement; (ii) comply with various orders entered by the Court in connection with the Chapter 11 Proceedings; (iii) maintain adequate cash on hand; (iv) generate sufficient cash from operations; (v) achieve confirmation of a plan of reorganization under the Bankruptcy Code; (vi) obtain financing to facilitate an exit from bankruptcy; and (vii) achieve profitability following such confirmation is uncertain and could have a material impact on our financial statements.

9

Goodwill assigned to corporate administration represents the goodwill that arose when Weston Presidio gained a controlling interest in us on March 4, 2004 (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 Bookstore Division and Textbook Division 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:

The following table presents the gross carrying amount and accumulated impairment charge of goodwill:

10

We test for impairment annually at March 31 or more frequently if impairment indicators exist. Goodwill impairment testing is a two-step process. The first step involves comparing the fair value of our 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 and debt (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.

We revised our financial projections for future periods for the Bookstore Division primarily as a result of underperformance in our off-campus bookstores during the fall 2011 back-to-school period. Underperformance in our off-campus bookstores was primarily due to increasing competition from alternative sources of textbooks, including renting of textbooks from both online and local campus competitors. These revisions indicated a potential impairment of goodwill and, as such, the estimated fair value of our reporting units were assessed to determine if their carrying values exceeded their estimated fair values at September 30, 2011.

We determined in the first step of the goodwill impairment test conducted at September 30, 2011, that the carrying value of the Bookstore Division exceeded its estimated fair value, indicating that goodwill may be impaired. Having determined that goodwill may be impaired, we performed the second step of the goodwill impairment test for the Bookstore Division reporting unit. As a result, we recorded an impairment charge of $121.8 million for the quarter ended September 30, 2011, which resulted in all goodwill assigned to the Bookstore Division being written off. The fair value of the Textbook Division exceeded its carrying value by approximately 15.0% at September 30, 2011. The impairment charge for the Bookstore Division reduced its goodwill carrying value to zero and reduced our total goodwill carrying value to $7.6 million, which relates entirely to the Textbook Division.

Fair value at September 30, 2011 was determined using a combination of the market approach, based primarily on a multiple of revenue and earnings before interest, taxes, depreciation, amortization, impairment and reorganization costs (“Adjusted EBITDA”), and the income approach, based on a discounted cash flow model. The market approach requires that we estimate a certain valuation multiple of revenue and Adjusted EBITDA for each reporting unit derived from comparable companies to estimate the fair value of the reporting unit. The discounted cash flow model discounts projected cash flows for each reporting unit to present value and includes critical assumptions such as long-term growth rates, projected revenues and earnings and cash flow forecasts for the reporting units, as well as an appropriate discount rate. The multiples applied to our trailing-twelve-month (“TTM”) and next-twelve-month (“NTM”) revenues were 0.2x for both TTM and NTM and to Adjusted EBITDA were 5.0x and 5.2x, respectively for the Bookstore Division reporting unit. The multiples applied to our TTM and NTM revenues for the Textbook Division reporting unit were 1.0x and 0.9x and to Adjusted EBITDA were 5.4x and 4.8x, respectively. Discount rates were determined separately for each reporting unit by estimating the weighted-average cost of capital using the capital asset pricing model. The discounted cash flow model assumed a discount rate of 10.5% and 11.1% for the Bookstore and Textbook Division reporting units, respectively, based on the weighted-average cost of capital derived from public companies considered to be reasonably comparable to ours. The discounted cash flow model also assumed a terminal growth rate of 2.5% and 1.0% for the Bookstore and Textbook Division reporting units, respectively.

In the second step of the goodwill impairment test conducted at September 30, 2011, we estimated fair value for our property and equipment in the Bookstore Division based primarily on appraisals. We performed a recoverability test and an impairment test for the finite lived intangibles covenants not to compete and contract-managed relationships in the Bookstore Division and determined, based on the results of an undiscounted cash flow analysis, that impairment adjustments were necessary. We recorded impairment charges of $0.1 million and $0.2 million for impairment of covenants not to compete and contract-managed relationships, respectively, in the Bookstore Division for the quarter ended September 30, 2011, which are included in the accompanying condensed consolidated statement of operations for the nine months ended December 31, 2011. Carrying value was assumed to approximate fair value for all other assets and liabilities due to their short-term nature.

11

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

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

Estimated amortization expense for the fiscal years ending March 31:

12

Identifiable intangibles not subject to amortization consist solely of the tradename asset arising out of the March 4, 2004 Transaction which is recorded at $31,320,000 and relates to our Textbook and Complementary Services Divisions. The tradename was determined to have an indefinite life based on our current intentions. The impairment for intangible assets not subject to amortization involves a comparison of the estimated fair value of the intangible asset with its carrying value. If the carrying value of the intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to the excess. The impairment evaluation for tradename is conducted at March 31 each year or, more frequently, if events or changes in circumstances, such as operating losses or a change in projections, indicate that an asset might be impaired. We completed our test at September 30, 2011 and March 31, 2011 and determined there was no impairment. The royalty rate and pre-tax discount rate used in this analysis for September 30, 2011 were 3.5% and 13.8%, respectively.

Pre-Petition Debt

Due to the Chapter 11 Proceedings, as discussed in Note 2 “Voluntary Reorganization under Chapter 11 of the United States Bankruptcy Code”, substantially all of our pre-petition debt is in default and has been reclassified to “Liabilities subject to compromise” on the condensed consolidated balance sheet at December 31, 2011, including the $200.0 million Pre-Petition Senior Secured Notes, $175.0 million Pre-Petition Senior Subordinated Notes, $77.0 million Pre-Petition Senior Discount Notes and $1.8 million of other indebtedness. As of the Petition Date, we ceased accruing interest on the Pre-Petition Senior Subordinated Notes and Pre-Petition Senior Discount Notes.

Current Capital Structure

As of December 31, 2011, we had $125.0 million of debtor-in-possession financing with unamortized discount of $0.6 million classified as short-term debt, $0.2 million of other long-term debt and pre-petition debt in liabilities subject to compromise totaled $453.8 million.

Subsequent to the Petition Date, we, NBC and our parent NBC Holdings, Inc. (“NBC Holdings”) entered into the DIP Credit Agreement which, among other things, provides up to $200.0 million of financing to us as debtors-in-possession under the Bankruptcy Code. Under the terms of the DIP Credit Agreement, we have a $125.0 million DIP Term Loan Facility, issued at a $1.2 million discount, and a $75.0 million DIP Revolving Facility (less outstanding letters of credit and subject to a borrowing base). The DIP Credit Agreement is guaranteed by us, NBC Holdings and each of the subsidiaries of NBC. Borrowings under the DIP Credit Agreement are to be used to finance working capital purposes, the payment of fees and expenses incurred in connection with entering into the DIP Credit Agreement, the Chapter 11 Proceedings and the contemplated transactions, and the repayment of loans outstanding under our prior asset-based lending credit agreement entered into prior to the Petition Date (the “Pre-Petition ABL Credit Agreement”). The calculated borrowing base of the DIP Revolving Facility as of December 31, 2011 was $75.0 million, of which $4.1 million was outstanding under letters of credit and $70.9 million was unused.

Borrowings under the DIP Credit Agreement are secured by a perfected first priority security interest on substantially all of our property and assets.

The DIP Credit Agreement matures and expires on the earliest to occur of (a) one year from the initial closing date, (b) five business days after the Petition Date (or such later date as the administrative agent may agree in its sole discretion) if entry of the interim order has not occurred by such date, (c) thirty-five days (or such later date as the administrative agent may agree in its sole discretion) after the Petition Date if entry of the final order has not occurred by such date, (d) the effective date of the plan of reorganization and (e) the acceleration of the loans under the DIP Credit Agreement and, in connection, the termination of the unused term loan or revolving credit facility commitments in accordance with the terms.

The DIP Term Loan Facility and DIP Revolving Facility bear interest at the Eurodollar rate or the base rate plus an applicable margin. 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%. Effective December 28, 2011, the DIP Credit Agreement was amended to change the applicable margin with respect to term loans to 6.5% in the case of base rate loans and to 7.5% in the case of Eurodollar loans. In addition, the applicable margin with respect to revolving credit loans was amended to 4.0% in the case of base rate loans and to 5.0% in the case of Eurodollar loans. In the case of the term loans only, the base rate shall not be less than 2.25% and the Eurodollar rate shall not be less than 1.25%. Upon the occurrence and during the continuation of an event of default, (i) all outstanding loans and reimbursement obligations (whether or not overdue) bear interest at the applicable rate plus 2.0%, (ii) the letter of credit

13

commission payable pursuant to the DIP Credit Agreement will be increased by 2.0% and (iii) if all or a portion of any interest payable or any commitment fee or other amount payable is not paid when due, it will bear interest at the rate applicable to base rate loans plus 2.0%. The fee we pay on the amount committed to the revolving facility was also amended to 0.75%. The modifications to the DIP Credit Agreement resulted in the payment of $1.1 million in costs associated with such modifications, which were expensed as reorganization costs.

The DIP Credit Agreement contains, among other things, conditions precedent, covenants, representations and warranties and events of default customary for facilities of this type. Such covenants include the requirement to provide certain financial reports and other information, use the proceeds of certain sales or other dispositions of collateral to prepay outstanding loans, and maintain certain financial covenants (including a minimum liquidity and cumulative consolidated EBITDA test). As a result of not meeting the November 2011 cumulative consolidated EBITDA test, the DIP Credit Agreement was amended, effective December 28, 2011, to waive the November 30, 2011 cumulative consolidated EBITDA test, to increase the minimum liquidity and to change the cumulative consolidated EBITDA test going forward. In addition, the covenants of the DIP Credit Agreement include certain restrictions on the incurrence of indebtedness, guarantees, liens, acquisitions and other investments, mergers, consolidations, liquidations and dissolutions, dividends and other repayments in respect of capital stock, capital expenditures, transactions with affiliates, hedging and other derivatives arrangements, negative pledge clauses, payment of expenses and disbursements other than those reflected in an agreed upon budget, and subsidiary distributions, subject to certain exceptions.

With respect to covenant compliance calculations, EBITDA, as defined in the DIP Credit Agreement (hereinafter, referred to as “Credit Facility EBITDA”), includes additional adjustments to EBITDA. Credit Facility EBITDA is defined in the DIP Credit Agreement as: (1) consolidated net income, as defined therein, which allows for an adjustment to recognize rentals consistent with prior practice and does not include any effect for any deferral of revenue of rental income; 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; (g) any costs, fees, expenses or disbursements of attorneys, consultants or advisors incurred in connection with the events leading up to and the ongoing administration of the Chapter 11 Proceedings, a plan of reorganization and any other restructuring and any upfront, arrangement or other fees paid in connection with the DIP Credit Agreement; and (h) charges, premiums and expenses associated with the discharge of pre-petition debt, 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. Credit Facility EBITDA is utilized when calculating the minimum cumulative consolidated EBITDA under the DIP Credit Agreement, which beginning July 1, 2011, requires Credit Facility EBITDA to be at least equal to certain amounts set forth in the DIP Credit Agreement. At December 31, 2011 our liquidity (the sum of cash and cash equivalents plus Revolving Credit Availability, as defined in the DIP Credit Agreement) calculated under the DIP Credit Agreement was $124.2 million and Credit Facility EBITDA was $33.8 million.

Interest on the Pre-Petition Senior Secured Notes and DIP Term Loan Facility is being paid monthly during the Chapter 11 Proceedings.

At December 31, 2011, we were in compliance with all of our debt covenants under the DIP Credit Agreement.

At December 31, 2011, we had 10,000 shares of Series A Redeemable Preferred Stock (“Preferred Stock”). Each share of the Preferred Stock had a par value of $1,000 and accrued dividends annually at 15.0% of the liquidation preference, which was equal to $1,000 per share, as adjusted. The Preferred Stock was redeemable at the option of the holders of a majority of the Preferred Stock, on the occurrence of a change of control, as defined in our First Amended and Restated Certificate of Incorporation, at a redemption price per share equal to the liquidation preference plus accrued and unpaid dividends; provided that any redemption was subject to the restrictions limiting or prohibiting any redemptions contained in the Pre-Petition ABL Credit Agreement. Effective June 27, 2011, we ceased accruing dividends on the Preferred Stock as such amounts were determined not to be probable of being an allowed claim. As of December 31, 2011, unpaid accumulated dividends were $4.1 million and are included in the redemption value of the Preferred Stock. Accumulated dividends on a contractual basis would have been $5.1 million as of December 31, 2011 if we continued to accrue dividends on the Preferred Stock.

14

Due to the nature of the redemption feature, we classified the Preferred Stock as temporary equity and measured the Preferred Stock at redemption value. As of December 31, 2011, there have been no changes in circumstance that would require the redemption of the Preferred Stock or permit the payment of cumulative preferred dividends.

For the quarter and nine months ended December 31, 2011, our effective tax rate would have been 28.4% and 32.4%, excluding the impact of the portion of the goodwill impairment charge that is attributed to non-deductible tax goodwill and as such treated as a permanent difference for income tax purposes. The effective tax rate for the nine months ended December 31, 2010 differs from the statutory federal tax rate primarily due to certain states taxing on a gross receipts methodology, increased interest expense which is not deductible in some states for state taxes, and the relatively low pre-tax income.

As of December 31, 2011 we have not provided for any effects of the bankruptcy reorganization efforts in our analysis of the realization of deferred tax assets. Any impacts on deferred tax assets as a result of our reorganization will be reflected in the consolidated financial statements at the time of emergence from bankruptcy.

A three-level hierarchal disclosure framework that prioritizes and ranks the level of market 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: Level 1- inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets; 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 Level 3 – inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The Fair Value Measurements and Disclosures Topic of the FASB ASC also applies to disclosures of fair value for all financial instruments disclosed under the Financial Instruments Topic of the FASB ASC. The Financial Instruments Topic requires disclosures about fair value for all financial instruments, whether recognized or not recognized in the statement of financial position. For financial instruments recognized at fair value on a recurring basis in the statement of financial position, the three-level hierarchal disclosure requirements also apply.

Our short-term and 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. The fair value of our short-term debt approximates carrying value due to its short-term nature. We are unable to estimate the fair value of our long-term debt that is subject to compromise at December 31, 2011 due to the uncertainties associated with the Chapter 11 Proceedings. Other fixed rate debt estimated fair values are determined utilizing the “income approach”, calculating a present value of future payments based upon prevailing interest rates for similar obligations.

15

Estimated fair values for our short-term variable rate debt (the DIP Term Loan Facility) and fixed rate long-term debt not subject to compromise at December 31, 2011, March 31, 2011 and December 31, 2010 are summarized in the following table: