UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2008

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 its charter)

KANSAS

47-0549819

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification No.)

4700 South 19^th Street

Lincoln, Nebraska

68501-0529

(Address of principal executive offices)

(Zip Code)

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 o No x

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 x 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 x

Total number of shares of common stock outstanding as of November 14, 2008: 100 shares

Total Number of Pages: 39

Exhibit Index: Page 39

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

NEBRASKA BOOK COMPANY, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

	September 30,		March 31,			September 30,
	2008		2008			2007
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	91,500,840	$	29,326,456		$	93,563,958
Receivables, net		78,239,728		57,396,508			63,339,845
Inventories		122,470,499		99,011,087			108,198,572
Deferred income taxes		8,268,093		6,058,093			7,457,115
Prepaid expenses and other assets		3,280,284		2,539,077			2,877,380
Total current assets		303,759,444		194,331,221			275,436,870

PROPERTY AND EQUIPMENT, net of depreciation & amortization		45,563,335		45,066,180			45,573,206
GOODWILL		322,409,155		320,367,273			311,607,314
IDENTIFIABLE INTANGIBLES, net of amortization		130,916,938		134,809,217			138,086,265
DEBT ISSUE COSTS, net of amortization		4,194,563		5,119,263			6,045,790
OTHER ASSETS		2,386,067		2,394,267			3,120,329
	$	809,229,502	$	702,087,421		$	779,869,774
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable	$	118,354,609	$	28,631,029		$	94,657,070
Accrued employee compensation and benefits		10,948,485		12,100,640			9,872,169
Accrued interest		743,224		1,778,937			916,176
Accrued incentives		6,927,107		7,108,857			7,116,541
Accrued expenses		4,572,207		3,172,122			4,103,282
Income taxes payable		9,723,464		847,370			10,221,994
Deferred revenue		2,641,204		862,994			2,876,937
Current maturities of long-term debt		2,073,070		2,070,657			2,575,052
Current maturities of capital lease obligations		705,565		658,415			618,387
Total current liabilities		156,688,935		57,231,021			132,957,608

LONG-TERM DEBT, net of current maturities		367,326,024		368,363,176			369,399,091
CAPITAL LEASE OBLIGATIONS, net of current maturities		3,716,979		4,111,758			4,481,894
OTHER LONG-TERM LIABILITIES		4,698,322		4,467,504			4,250,144
DEFERRED INCOME TAXES		53,900,415		55,104,415			56,766,119
DUE TO PARENT		18,321,151		16,970,151			16,664,279
COMMITMENTS (Note 4)
STOCKHOLDER'S EQUITY:
Common stock, voting, authorized 50,000 shares of $1.00 par value; issued
and outstanding 100 shares		100		100			100
Additional paid-in capital		138,110,740		138,087,705			138,019,657
Retained earnings		66,466,836		58,499,591			57,045,882
Accumulated other comprehensive income (loss)		-		(748,000	)		285,000
Total stockholder's equity		204,577,676		195,839,396			195,350,639
	$	809,229,502	$	702,087,421		$	779,869,774

See notes to condensed consolidated financial statements.

NEBRASKA BOOK COMPANY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

	Quarter Ended September 30,						Six Months Ended September 30,
	2008			2007			2008			2007

REVENUES, net of returns	$	280,932,214		$	260,309,829		$	352,136,240		$	328,148,351

COSTS OF SALES (exclusive of depreciation shown below)		177,340,396			165,235,843			219,262,419			205,712,784

Gross profit		103,591,818			95,073,986			132,873,821			122,435,567

OPERATING EXPENSES:
Selling, general and administrative		51,541,519			46,774,066			87,256,945			79,373,067
Depreciation		1,844,967			1,701,259			3,689,999			3,402,982
Amortization		2,865,326			2,517,266			5,692,716			4,942,720
		56,251,812			50,992,591			96,639,660			87,718,769

INCOME FROM OPERATIONS		47,340,006			44,081,395			36,234,161			34,716,798

OTHER EXPENSES (INCOME):
Interest expense		7,979,165			8,513,701			15,974,636			16,888,897
Interest income		(179,720	)		(483,531	)		(179,720	)		(537,413	)
Loss on derivative financial instrument		50,000			182,000			102,000			180,000

		7,849,445			8,212,170			15,896,916			16,531,484

INCOME BEFORE INCOME TAXES		39,490,561			35,869,225			20,337,245			18,185,314

INCOME TAX EXPENSE		15,796,000			14,168,000			8,135,000			7,183,000

NET INCOME	$	23,694,561		$	21,701,225		$	12,202,245		$	11,002,314

See notes to condensed consolidated financial statements.

NEBRASKA BOOK COMPANY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
(UNAUDITED)

								Accumulated
			Additional					Other
	Common		Paid-in		Retained			Comprehensive						Comprehensive
	Stock		Capital		Earnings			Income (Loss)			Total			Income

BALANCE, April 1, 2007	$	100	$	138,017,229	$	46,043,568		$	613,000		$	184,673,897

Contributed capital		-		2,428		-			-			2,428		$	-

Net income		-		-		11,002,314			-			11,002,314			11,002,314
Other comprehensive loss, net of taxes:
Unrealized loss on interest rate swap agreement,
net of taxes of $207,000		-		-		-			(328,000	)		(328,000	)		(328,000	)
BALANCE, September 30, 2007	$	100	$	138,019,657	$	57,045,882		$	285,000		$	195,350,639		$	10,674,314

BALANCE, April 1, 2008	$	100	$	138,087,705	$	58,499,591		$	(748,000)		$	195,839,396

Contributed capital		-		2,401		-			-			2,401		$	-
Share-based compensation attributable to
NBC Holdings Corp. stock options		-		20,634		-			-			20,634			-

Net income		-		-		12,202,245			-			12,202,245			12,202,245

Dividends declared		-		-		(4,235,000	)		-			(4,235,000	)		-

Other comprehensive income, net of taxes:

Unrealized gain on interest rate swap
agreement, net of taxes of $473,000		-		-		-			748,000			748,000			748,000
BALANCE, September 30, 2008	$	100	$	138,110,740	$	66,466,836		$	-		$	204,577,676		$	12,950,245

See notes to condensed consolidated financial statements.

NEBRASKA BOOK COMPANY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

	Six Months Ended September 30,
	2008			2007
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	12,202,245		$	11,002,314
Adjustments to reconcile net income to net cash flows from operating activities:
Share-based compensation		485,432			487,458
Provision for losses (recoveries) on receivables		14,150			(21,699	)
Depreciation		3,689,999			3,402,982
Amortization		6,617,416			5,870,975
Loss on derivative financial instrument		102,000			180,000
Loss on disposal of assets		61,833			180,508
Deferred income taxes		(4,047,000	)		(3,835,000	)
Changes in operating assets and liabilities, net of effect of acquisitions:
Receivables		(20,854,105	)		(8,371,517	)
Inventories		(21,300,886	)		(12,625,200	)
Prepaid expenses and other assets		(727,215	)		(883,736	)
Other assets		8,199			433,618
Accounts payable		89,316,739			65,281,043
Accrued employee compensation and benefits		(1,152,155	)		(4,340,832	)
Accrued interest		83,287			205,376
Accrued incentives		(181,750	)		133,279
Accrued expenses		1,400,085			1,769,043
Income taxes payable		8,899,167			6,968,920
Deferred revenue		1,778,210			1,978,271
Other long-term liabilities		(171,530	)		64,818
Net cash flows from operating activities		76,224,121			67,880,621

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		(4,129,766	)		(3,869,010	)
Acquisitions, net of cash acquired		(5,415,645	)		(2,494,582	)
Proceeds from sale of property and equipment		21,609			9,389
Software development costs		(264,436	)		(168,861	)
Net cash flows from investing activities		(9,788,238	)		(6,523,064	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt		(1,034,739	)		(417,542	)
Principal payments on capital lease obligations		(347,629	)		(294,802	)
Dividends paid to parent		(4,235,000	)		-
Capital contributions		4,869			4,869
Change in due to parent		1,351,000			(69,000	)
Net cash flows from financing activities		(4,261,499	)		(776,475	)

NET INCREASE IN CASH AND CASH EQUIVALENTS		62,174,384			60,581,082
CASH AND CASH EQUIVALENTS, Beginning of period		29,326,456			32,982,876
CASH AND CASH EQUIVALENTS, End of period	$	91,500,840		$	93,563,958
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION:
Cash paid during the period for:
Interest	$	14,966,649		$	15,755,266
Income taxes		1,931,833			4,118,080
Noncash investing and financing activities:
Property acquired through capital lease	$	-		$	2,200,000
Accumulated other comprehensive income (loss):
Unrealized gain (loss) on interest rate swap agreement, net of income taxes		748,000			(328,000	)
Deferred taxes resulting from unrealized gain (loss) on interest rate swap agreement		473,000			(207,000	)
Other intangible agreement to be paid over three years		-			1,585,407
Unpaid consideration associated with bookstore acquisitions		410,000			-
See notes to condensed consolidated financial statements.

NEBRASKA BOOK COMPANY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Basis of Presentation - The condensed consolidated balance sheet of Nebraska Book Company, Inc. (the “Company”) and its wholly-owned subsidiaries (Specialty Books, Inc., NBC Textbooks LLC, College Book Stores of America (“CBA”) and Net Textstore LLC), at March 31, 2008 was derived from the Company’s audited consolidated balance sheet as of that date. The Company is a wholly-owned subsidiary of NBC Acquisition Corp. (“NBC”). All other condensed consolidated financial statements contained herein are unaudited and reflect all adjustments which are, in the opinion of management, necessary to present fairly the financial position of the Company and the results of the Company’s operations and cash flows for the periods presented. All of these adjustments are of a normal recurring nature. All intercompany balances and transactions are eliminated in consolidation. Because of the seasonal nature of the Company’s operations, results of operations of any single reporting period should not be considered as indicative of results for a full fiscal year.

These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the fiscal year ended March 31, 2008 included in the Company’s 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, except where otherwise indicated.

2.	Inventories - Inventories are summarized as follows:

	September 30,	March 31,	September 30,
	2008	2008	2007
Bookstore Division	$ 102,078,587	$ 65,769,314	$ 87,586,976
Textbook Division	17,695,352	30,575,106	17,345,633
Complementary Services Division	2,696,560	2,666,667	3,265,963
	$ 122,470,499	$ 99,011,087	$ 108,198,57

Goodwill and Other Identifiable Intangibles – During the six months ended September 30, 2008, 16 bookstore locations were acquired in 13 separate transactions. The total purchase price, net of cash acquired, of such acquisitions was $5.6 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 a non tax-deductible covenant not to compete with an amortization period of three years, and $0.8 million was assigned to contract-managed acquisition costs with amortization periods of up to seven years. As of September 30, 2008, $0.4 million of the $5.6 million purchase price remained to be paid.

The Company also incurred $0.1 million in contract-managed acquisition costs with amortization periods of up to five years associated with the renewal of six contract-managed locations during the six months ended September 30, 2008.

Finally, during the six months ended September 30, 2008, the Company paid $0.1 million of previously accrued consideration for bookstore acquisitions occurring in prior fiscal years.

Goodwill assigned to corporate administration represents the goodwill that arose when Weston Presidio gained a controlling interest in NBC 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 the Company’s assets, such goodwill is not allocated between the Company’s reportable segments when management makes operating decisions and assesses performance. Such goodwill is allocated to the Company’s 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 and by reportable segment, are as follows:

	Bookstore		Corporate
	Division		Administration		Total

Balance, April 1, 2007	$	42,544,489	$	269,061,875	$	311,606,364
Additions to goodwill:
Bookstore acquisitions		950		-		950
Balance, September 30, 2007	$	42,545,439	$	269,061,875	$	311,607,314

Balance, April 1, 2008	$	51,305,398	$	269,061,875	$	320,367,273
Additions to goodwill:
Bookstore acquisitions		2,041,882		-		2,041,882
Balance, September 30, 2008	$	53,347,280	$	269,061,875	$	322,409,155

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

	September 30, 2008
	Gross					Net
	Carrying		Accumulated			Carrying
	Amount		Amortization			Amount
Customer relationships	$	114,830,000	$	(26,314,900	)	$	88,515,100
Developed technology		12,716,690		(8,994,977	)		3,721,713
Covenants not to compete		7,469,032		(3,989,422	)		3,479,610
Contract-managed acquisition costs		4,320,045		(1,452,427	)		2,867,618
Other		1,585,407		(572,510	)		1,012,897
	$	140,921,174	$	(41,324,236	)	$	99,596,938

		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

		September 30, 2007
		Gross					Net
		Carrying		Accumulated			Carrying
		Amount		Amortization			Amount
Customer relationships	$	114,830,000	$	(20,573,380	)	$	94,256,620
Developed technology		12,348,133		(6,918,973	)		5,429,160
Covenants not to compete		5,590,333		(2,809,235	)		2,781,098
Contract-managed acquisition costs		3,614,854		(856,832	)		2,758,022
Other		1,585,407		(44,042	)		1,541,365
	$	137,968,727	$	(31,202,462	)	$	106,766,265

Effective September 1, 2007, the Company entered into an agreement whereby the Company 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 is recorded as interest expense over the base term of the agreement utilizing the effective interest method of accounting.

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

	Amortization
	Expense

Quarter ended September 30, 2008	$	2,865,326
Quarter ended September 30, 2007		2,517,266
Six months ended September 30, 2008		5,692,716
Six months ended September 30, 2007		4,942,720

Estimated amortization expense for the fiscal years ending March 31:
2009	$	11,285,000
2010		10,435,000
2011		7,455,000
2012		6,449,000
2013		6,218,000

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 the Company’s current intentions. The Company periodically reviews 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, the Company would do so and commence amortization.

Long-Term Debt - Indebtedness at September 30, 2008 includes an amended and restated bank-administered senior credit facility (the “Senior Credit Facility”) provided to the Company through a syndicate of lenders, consisting of a term loan (the “Term Loan”) with a remaining balance of $194.1 million (includes remaining amounts due under both the original March 4, 2004 loan of $180.0 million and the April 26, 2006 incremental loan of $24.0 million) and an $85.0 million revolving credit facility (the “Revolving Credit Facility”), which was unused at September 30, 2008; $175.0 million of 8.625% senior subordinated notes (the “Senior Subordinated Notes”); $0.3 million of other indebtedness; and $4.4 million of capital leases. The Revolving Credit Facility expires on March 4, 2009, while the Term Loan is due March 4, 2011. Availability under the Revolving Credit Facility is determined by the calculation of a borrowing base, which at any time is equal to a percentage of eligible accounts receivable and inventory, up to a maximum of $85.0 million. The calculated borrowing base at September 30, 2008 was $75.8 million.

The interest rate on the Term Loan is 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 is 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%. Additionally, there is a 0.5% commitment fee for the average daily unused amount of the Revolving Credit Facility.

The Senior Credit Facility stipulates that excess cash flows as defined in the credit agreement dated February 13, 1998 (the “Credit Agreement”), as most recently amended on March 30, 2007 and most recently restated on March 4, 2004, shall be applied towards prepayment of the Term Loan. There was no excess cash flow obligation for the fiscal years ended March 31, 2008 and 2007.

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

Derivative Financial Instruments - SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, 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 interest rate swap agreement expired on September 30, 2008, the Company utilized derivative financial instruments to manage the risk that changes in interest rates would affect the amount of its future interest payments on its variable rate debt.

The Company’s primary market risk exposure is, and is expected to continue to be, fluctuation in variable interest rates. As provided in the Senior Credit Facility, exposure to interest rate fluctuations is managed by maintaining fixed interest rate debt (primarily the Senior Subordinated Notes); and, historically, by entering into interest rate swap agreements that qualified as cash flow hedging instruments to convert certain variable rate debt into fixed rate debt. The 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 in the Credit Agreement). 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:

	September 30,	March 31,	September 30,
	2008	2008	2007
Total indebtedness outstanding	$ 373,821,638	$ 375,204,006	$ 377,074,424

Term Loan subject to Eurodollar interest rate fluctuations	194,089,714	195,103,081	196,623,133

Notional amount under swap agreement	-	130,000,000	130,000,000

Fixed interest rate indebtedness	179,731,924	180,100,925	180,451,291

Variable interest rate, including applicable margin:
Term Loan	6.38%	5.13%	7.65%

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.

The Company estimated the effectiveness of the interest rate swap agreement utilizing the hypothetical 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 debt instrument 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 are 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 hedged, any changes in fair value relating to the ineffective portion of such agreement are immediately recognized in earnings as “interest expense”.

Under 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 stockholder’s 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 the Company’s condensed 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 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 were also recognized as a “gain (loss) on derivative financial instruments” in the condensed 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 condensed consolidated balance sheets. Changes in the fair value of the interest rate swap agreement were reflected in the condensed consolidated statements of cash flows as either “gain (loss) on derivative financial instruments” or as “noncash investing and financial activities”.

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

	September 30,	March 31,	September 30,
	2008	2008	2007
Balance Sheet Components:
Other assets (Accrued interest) - fair value of swap agreement	$ -	$ (1,119,000)	$ 586,000
Deferred income taxes	-	433,473	(227,002)
	$ -	$ (685,527)	$ 358,998

Portion of Agreement Subsequent to September 30, 2005 Hedge Designation:
Increase (Decrease) in fair value of swap agreement:
Quarter ended September 30	$ 612,000		$ (1,096,000)
Six months ended September 30	1,221,000		(535,000)
Year ended March 31, 2008		$ (2,222,000)

Portion of Agreement Prior to September 30, 2005 Hedge Designation:
Decrease in fair value of swap agreement:
Quarter ended September 30	(50,000)		(182,000)
Six months ended September 30	(102,000)		(180,000)
Year ended March 31, 2008		(198,000)

Fair Value Measurements - In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 157, Fair Value Measurements. This Statement defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The Statement was 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 has not yet determined if the Statement will have a material impact on its consolidated financial statements as it pertains to such nonfinancial assets and nonfinancial liabilities.

On 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 observability used in measuring assets and liabilities at fair value. 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 invests in certain cash equivalents allowed by the Senior Credit Facility. At September 30, 2008, cash equivalents included $39.8 million in commercial paper with a weighted-average interest rate of 2.65% and weighted-average contractual term of 57 days. Due to the short-term nature of the commercial paper, fair market value is considered to approximate carrying value (including accrued interest of $0.1 million) at September 30, 2008. All commercial paper held at September 30, 2008 has matured subsequent to the end of the quarter with no gain or loss recognized.

The Senior Subordinated Notes (fixed rate) and Term Loan (variable rate) are valued 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) are valued 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 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
	September 30,	Assets	Inputs	Inputs
Description	2008	(Level 1)	(Level 2)	(Level 3)

Cash equivalents (commercial paper)	$ 39,918,651	$ -	$ 39,918,651	$ -

Fixed rate debt	136,152,000	-	136,152,000	-
Variable rate debt (excluding Revolving Credit Facility)	176,622,000	-	176,622,000	-

Segment Information - The Company’s operating segments are determined based on the way that management organizes the segments for making operating decisions and assessing performance. Management has organized the Company’s operating segments based upon differences in products and services provided. The Company has three operating segments: Bookstore Division, Textbook Division, and Complementary Services Division. The Bookstore and Textbook Divisions qualify as reportable operating segments, 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 the Company’s condensed consolidated financial statements. The Bookstore Division segment encompasses the operating activities of the Company’s 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 then reselling them to college bookstores. The Complementary Services Division segment includes book-related services such as distance education materials, computer hardware and software, e-commerce technology, and a centralized buying service.

The Company primarily accounts for intersegment sales as if the sales were to third parties (at current market prices). Certain assets, net interest expense and taxes (excluding interest and taxes incurred by the Company’s wholly-owned subsidiaries, NBC Textbooks LLC, Net Textstore LLC, CBA, and Specialty Books, Inc.) are not allocated between the Company’s segments; instead, such balances are accounted for in a corporate administrative division.

EBITDA is the measure of segment profit or loss utilized by the Chief Executive Officer (chief operating decision maker) in making decisions about resources to be allocated to operating segments and assessing operating segment performance.

The following table provides selected information about profit or loss (excluding the impact of the Company’s interdivisional administrative fee – see Note 11, Condensed Consolidating Financial Information, to the condensed consolidated financial statements) on a segment basis:

					Complementary
	Bookstore		Textbook		Services
	Division		Division		Division		Total
Quarter ended September 30, 2008:
External customer revenues	$	225,090,388	$	48,207,538	$	7,634,288	$	280,932,214
Intersegment revenues		428,139		13,846,533		1,681,368		15,956,040
Depreciation and amortization expense		2,191,110		1,523,804		659,150		4,374,064
Earnings before interest, taxes,
depreciation and amortization (EBITDA)		32,199,480		20,839,508		414,111		53,453,099

Quarter ended September 30, 2007:
External customer revenues	$	209,277,404	$	42,258,369	$	8,774,056	$	260,309,829
Intersegment revenues		459,378		15,696,111		1,399,093		17,554,582
Depreciation and amortization expense		1,882,078		1,521,851		652,277		4,056,206
Earnings before interest, taxes,
depreciation and amortization (EBITDA)		30,767,977		19,045,524		280,572		50,094,073

Six months ended September 30, 2008:
External customer revenues	$	271,190,081	$	66,714,805	$	14,231,354	$	352,136,240
Intersegment revenues		799,609		22,368,446		3,520,295		26,688,350
Depreciation and amortization expense		4,327,295		3,041,210		1,311,124		8,679,629
Earnings before interest, taxes,
depreciation and amortization (EBITDA)		25,767,928		25,823,747		724,280		52,315,955

Six months ended September 30, 2007:
External customer revenues	$	252,042,024	$	60,802,619	$	15,303,708	$	328,148,351
Intersegment revenues		832,088		24,583,876		2,850,743		28,266,707
Depreciation and amortization expense		3,623,530		3,042,484		1,300,689		7,966,703
Earnings before interest, taxes,
depreciation and amortization (EBITDA)		25,676,524		24,433,923		336,930		50,447,377

The following table reconciles segment information presented above with consolidated information as presented in the Company’s condensed consolidated financial statements:

	Quarter Ended September 30,						Six Months Ended September 30,
	2008			2007			2008			2007
Revenues:
Total for reportable segments	$	296,888,254		$	277,864,411		$	378,824,590		$	356,415,058
Elimination of intersegment revenues		(15,956,040	)		(17,554,582	)		(26,688,350	)		(28,266,707	)
Consolidated total	$	280,932,214		$	260,309,829		$	352,136,240		$	328,148,351

Depreciation and Amortization Expense:
Total for reportable segments	$	4,374,064		$	4,056,206		$	8,679,629		$	7,966,703
Corporate Administration		336,229			162,319			703,086			378,999
Consolidated total	$	4,710,293		$	4,218,525		$	9,382,715		$	8,345,702

Income Before Income Taxes:
Total EBITDA for reportable segments	$	53,453,099		$	50,094,073		$	52,315,955		$	50,447,377

Corporate Administration EBITDA loss
(including interdivision profit elimination)		(1,402,800	)		(1,794,153	)		(6,699,079	)		(7,384,877	)
		52,050,299			48,299,920			45,616,876			43,062,500
Depreciation and amortization		(4,710,293	)		(4,218,525	)		(9,382,715	)		(8,345,702	)
Consolidated income from operations		47,340,006			44,081,395			36,234,161			34,716,798
Interest and other expenses, net		(7,849,445	)		(8,212,170	)		(15,896,916	)		(16,531,484	)
Consolidated income before income taxes	$	39,490,561		$	35,869,225		$	20,337,245		$	18,185,314

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.

Share-Based Compensation – On August 18, 2008, NBC Holding’s Corp. (NBC’s parent) amended the 2004 Stock Option Plan (the “Plan”), increasing the number of options available for issuance under the Plan to 85,306 options from 81,306 options. There were no options granted during the six months ended September 30, 2008. On August 31, 2008, 238 options were forfeited as a result of an employee resignation.

9.	Related Party Transactions – In accordance with the Company’s debt covenants, the Company declared and paid $4.2 million in dividends to NBC during the six months ended September 30, 2008 to provide funding for interest due and payable on NBC’s Senior Discount Notes.

10.

Accounting Pronouncements Not Yet Adopted – In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities (an amendment of FASB Statement No. 133). SFAS No. 161 requires entities to provide enhanced disclosures about how and why an entity uses derivative instruments, how derivative instruments and related hedged items are accounted for under FASB Statement No. 133, and how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. This Statement becomes effective in fiscal year 2010. The Company’s present interest rate swap agreement expired on September 30, 2008; however, the current disclosure format will need to be expanded (particularly as it relates to the specific components of gains and losses on derivative instruments) if derivative instruments are used in the future.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations and SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements. SFAS No. 141 (revised 2007) establishes principles and requirements for how an acquirer recognizes and measures the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree; recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. In addition, SFAS No. 141 (revised 2007) requires that direct costs associated with an acquisition be expensed as incurred. SFAS No. 160 establishes accounting and reporting standards for the noncontrolling interest (minority interest) in a subsidiary and for the deconsolidation of a subsidiary. Included in SFAS No. 160 is the requirement that noncontrolling interests be reported in the equity section of the balance sheet. These Statements become effective for the Company in fiscal year 2010. Management has not yet determined if SFAS No. 141 (revised 2007) will have a material impact on its consolidated financial statements. SFAS No. 160 is not expected to have a material impact on the Company’s consolidated financial statements.

11.

Condensed Consolidating Financial Information - On April 24, 2007, the Company established Net Textstore LLC as a wholly-owned subsidiary separately incorporated under the laws of the State of Delaware. On May 1, 2006, the 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 a wholly-owned subsidiary of the Company. Effective January 1, 2005, the Company’s textbook division was separately formed under the laws of the State of Delaware as NBC Textbooks LLC, a wholly-owned subsidiary of the Company. Effective July 1, 2002, the Company’s distance education business was separately incorporated under the laws of the State of Delaware as Specialty Books, Inc., a wholly-owned subsidiary of the Company. In connection with their incorporation, Net Textstore LLC, CBA, NBC Textbooks LLC, and Specialty Books, Inc. have unconditionally guaranteed, on a joint and several basis, full and prompt payment and performance of the Company’s obligations, liabilities, and indebtedness arising under, out of, or in connection with the Senior Subordinated Notes. Net Textstore LLC, CBA, NBC Textbooks LLC, and Specialty Books, Inc. are also a party to the Guarantee and Collateral Agreement related to the Senior Credit Facility. Condensed consolidating balance sheets, statements of operations, and statements of cash flows are presented on the following pages which reflect financial information for the parent company (Nebraska Book Company, Inc.), subsidiary guarantors (Net Textstore LLC (from April 24, 2007), CBA, NBC Textbooks LLC, and Specialty Books, Inc.), consolidating eliminations, and consolidated totals.

NEBRASKA BOOK COMPANY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING BALANCE SHEET
SEPTEMBER 30, 2008

	Nebraska
	Book		Subsidiary					Consolidated
	Company, Inc.		Guarantors		Eliminations			Totals
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	86,794,499	$	4,706,341	$	-		$	91,500,840
Receivables, net		41,310,126		66,490,344		(29,560,742	)		78,239,728
Inventories		81,224,102		41,246,397		-			122,470,499
Deferred income taxes		1,919,092		6,349,001		-			8,268,093
Prepaid expenses and other assets		2,880,709		399,575		-			3,280,284
Total current assets		214,128,528		119,191,658		(29,560,742	)		303,759,444

PROPERTY AND EQUIPMENT, net		40,089,834		5,473,501		-			45,563,335
GOODWILL		306,873,046		15,536,109		-			322,409,155
IDENTIFIABLE INTANGIBLES, net		44,816,255		86,100,683		-			130,916,938
INVESTMENT IN SUBSIDIARIES		145,249,367		-		(145,249,367	)		-
OTHER ASSETS		5,901,302		679,328		-			6,580,630
	$	757,058,332	$	226,981,279	$	(174,810,109	)	$	809,229,502

LIABILITIES AND STOCKHOLDER'S EQUITY

CURRENT LIABILITIES:
Accounts payable	$	110,186,162	$	37,729,189	$	(29,560,742	)	$	118,354,609
Accrued employee compensation and benefits		7,911,964		3,036,521		-			10,948,485
Accrued interest		743,224		-		-			743,224
Accrued incentives		10,473		6,916,634		-			6,927,107
Accrued expenses		3,590,350		981,857		-			4,572,207
Income taxes payable		8,157,796		1,565,668		-			9,723,464
Deferred revenue		2,639,161		2,043		-			2,641,204
Current maturities of long-term debt		2,073,070		-		-			2,073,070
Current maturities of capital lease obligations		705,565		-		-			705,565
Total current liabilities		136,017,765		50,231,912		(29,560,742	)		156,688,935

LONG-TERM DEBT, net of current maturities		367,326,024		-		-			367,326,024
CAPITAL LEASE OBLIGATIONS, net of current maturities		3,716,979		-		-			3,716,979
OTHER LONG-TERM LIABILITIES		4,628,322		70,000		-			4,698,322
DEFERRED INCOME TAXES		22,470,415		31,430,000		-			53,900,415
DUE TO PARENT		18,321,151		-		-			18,321,151
COMMITMENTS
STOCKHOLDER'S EQUITY		204,577,676		145,249,367		(145,249,367	)		204,577,676
	$	757,058,332	$	226,981,279	$	(174,810,109	)	$	809,229,502

NEBRASKA BOOK COMPANY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING BALANCE SHEET
MARCH 31, 2008

	Nebraska
	Book			Subsidiary					Consolidated
	Company, Inc.			Guarantors		Eliminations			Totals
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	23,588,130		$	5,738,326	$	-		$	29,326,456
Receivables, net		50,231,144			35,404,082		(28,238,718	)		57,396,508
Inventories		54,029,013			44,982,074		-			99,011,087
Deferred income taxes		1,901,092			4,157,001		-			6,058,093
Prepaid expenses and other assets		2,259,681			279,396		-			2,539,077
Total current assets		132,009,060			90,560,879		(28,238,718	)		194,331,221

PROPERTY AND EQUIPMENT, net		39,757,056			5,309,124		-			45,066,180
GOODWILL		304,831,164			15,536,109		-			320,367,273
IDENTIFIABLE INTANGIBLES, net		46,586,976			88,222,241		-			134,809,217
INVESTMENT IN SUBSIDIARIES		131,583,301			-		(131,583,301	)		-
OTHER ASSETS		6,750,356			763,174		-			7,513,530
	$	661,517,913		$	200,391,527	$	(159,822,019)		$	702,087,421

LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable	$	32,282,516		$	24,587,231	$	(28,238,718)		$	28,631,029
Accrued employee compensation and benefits		8,963,654			3,136,986		-			12,100,640
Accrued interest		1,778,937			-		-			1,778,937
Accrued incentives		59,736			7,049,121		-			7,108,857
Accrued expenses		2,843,900			328,222		-			3,172,122
Income taxes payable		(121,296	)		968,666		-			847,370
Deferred revenue		862,994			-		-			862,994
Current maturities of long-term debt		2,070,657			-		-			2,070,657
Current maturities of capital lease obligations		658,415			-		-			658,415
Total current liabilities		49,399,513			36,070,226		(28,238,718	)		57,231,021

LONG-TERM DEBT, net of current maturities		368,363,176			-		-			368,363,176
CAPITAL LEASE OBLIGATIONS, net of current maturities		4,111,758			-		-			4,111,758
OTHER LONG-TERM LIABILITIES		4,387,504			80,000		-			4,467,504
DEFERRED INCOME TAXES		22,446,415			32,658,000		-			55,104,415
DUE TO PARENT		16,970,151			-		-			16,970,151
COMMITMENTS
STOCKHOLDER'S EQUITY		195,839,396			131,583,301		(131,583,301	)		195,839,396
	$	661,517,913		$	200,391,527	$	(159,822,019)		$	702,087,421

NEBRASKA BOOK COMPANY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING BALANCE SHEET
SEPTEMBER 30, 2007

	Nebraska
	Book		Subsidiary					Consolidated
	Company, Inc.		Guarantors		Eliminations			Totals
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	88,525,391	$	5,038,567	$	-		$	93,563,958
Receivables, net		31,760,899		43,204,134		(11,625,188	)		63,339,845
Inventories		69,040,966		39,157,606		-			108,198,572
Deferred income taxes		1,639,114		5,818,001		-			7,457,115
Prepaid expenses and other assets		2,616,699		260,681		-			2,877,380
Total current assets		193,583,069		93,478,989		(11,625,188	)		275,436,870

PROPERTY AND EQUIPMENT, net		39,689,806		5,883,400		-			45,573,206
GOODWILL		296,071,205		15,536,109		-			311,607,314
IDENTIFIABLE INTANGIBLES, net		46,973,750		91,112,515		-			138,086,265
INVESTMENT IN SUBSIDIARIES		129,189,469		-		(129,189,469	)		-
OTHER ASSETS		8,352,411		813,708		-			9,166,119
	$	713,859,710	$	206,824,721	$	(140,814,657)		$	779,869,774

LIABILITIES AND STOCKHOLDER'S EQUITY

CURRENT LIABILITIES:
Accounts payable	$	74,192,028	$	32,090,230	$	(11,625,188)		$	94,657,070
Accrued employee compensation and benefits		7,610,704		2,261,465		-			9,872,169
Accrued interest		916,176		-		-			916,176
Accrued incentives		30,931		7,085,610		-			7,116,541
Accrued expenses		3,459,757		643,525		-			4,103,282
Income taxes payable		8,874,572		1,347,422		-			10,221,994
Deferred revenue		2,876,937		-		-			2,876,937
Current maturities of long-term debt		2,575,052		-		-			2,575,052
Current maturities of capital lease obligations		618,387		-		-			618,387
Total current liabilities		101,154,544		43,428,252		(11,625,188	)		132,957,608

LONG-TERM DEBT, net of current maturities		369,399,091		-		-			369,399,091
CAPITAL LEASE OBLIGATIONS, net of current maturities		4,481,894		-		-			4,481,894
OTHER LONG-TERM LIABILITIES		4,065,144		185,000		-			4,250,144
DEFERRED INCOME TAXES		22,744,119		34,022,000		-			56,766,119
DUE TO PARENT		16,664,279		-		-			16,664,279
COMMITMENTS
STOCKHOLDER'S EQUITY		195,350,639		129,189,469		(129,189,469	)		195,350,639
	$	713,859,710	$	206,824,721	$	(140,814,657)		$	779,869,774

NEBRASKA BOOK COMPANY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE QUARTER ENDED SEPTEMBER 30, 2008

	Nebraska
	Book			Subsidiary						Consolidated
	Company, Inc.			Guarantors			Eliminations			Totals

REVENUES, net of returns	$	182,140,054		$	112,768,173		$	(13,976,013)		$	280,932,214

COSTS OF SALES (exclusive of depreciation shown below)		119,641,571			72,054,787			(14,355,962	)		177,340,396

Gross profit		62,498,483			40,713,386			379,949			103,591,818

OPERATING EXPENSES (INCOME):
Selling, general and administrative		35,666,827			15,494,743			379,949			51,541,519
Depreciation		1,464,701			380,266			-			1,844,967
Amortization		1,300,039			1,565,287			-			2,865,326
Intercompany administrative fee		(1,230,900	)		1,230,900			-			-
Equity in earnings of subsidiaries		(13,945,782	)		-			13,945,782			-

		23,254,885			18,671,196			14,325,731			56,251,812

INCOME FROM OPERATIONS		39,243,598			22,042,190			(13,945,782	)		47,340,006

OTHER EXPENSES (INCOME):
Interest expense		7,979,165			-			-			7,979,165
Interest income		(158,128	)		(21,592	)		-			(179,720	)
Loss on derivative financial instrument		50,000			-			-			50,000

		7,871,037			(21,592	)		-			7,849,445

INCOME BEFORE INCOME TAXES		31,372,561			22,063,782			(13,945,782	)		39,490,561

INCOME TAX EXPENSE		7,678,000			8,118,000			-			15,796,000

NET INCOME	$	23,694,561		$	13,945,782		$	(13,945,782)		$	23,694,561

NEBRASKA BOOK COMPANY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE QUARTER ENDED SEPTEMBER 30, 2007

	Nebraska
	Book			Subsidiary					Consolidated
	Company, Inc.			Guarantors		Eliminations			Totals

REVENUES, net of returns	$	173,506,749		$	102,723,581	$	(15,920,501)		$	260,309,829

COSTS OF SALES (exclusive of depreciation shown below)		115,469,417			65,957,250		(16,190,824	)		165,235,843

Gross profit		58,037,332			36,766,331		270,323			95,073,986

OPERATING EXPENSES (INCOME):
Selling, general and administrative		32,975,875			13,527,868		270,323			46,774,066
Depreciation		1,311,406			389,853		-			1,701,259
Amortization		1,037,487			1,479,779		-			2,517,266
Intercompany administrative fee		(1,209,600	)		1,209,600		-			-
Equity in earnings of subsidiaries		(12,688,231	)		-		12,688,231			-

		21,426,937			16,607,100		12,958,554			50,992,591

INCOME FROM OPERATIONS		36,610,395			20,159,231		(12,688,231	)		44,081,395

OTHER EXPENSES (INCOME):
Interest expense		8,513,701			-		-			8,513,701
Interest income		(483,531	)		-		-			(483,531	)
Loss on derivative financial instrument		182,000			-		-			182,000

		8,212,170			-		-			8,212,170

INCOME BEFORE INCOME TAXES		28,398,225			20,159,231		(12,688,231	)		35,869,225

INCOME TAX EXPENSE		6,697,000			7,471,000		-			14,168,000

NET INCOME	$	21,701,225		$	12,688,231	$	(12,688,231)		$	21,701,225

NEBRASKA BOOK COMPANY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2008

	Nebraska
	Book			Subsidiary						Consolidated
	Company, Inc.			Guarantors			Eliminations			Totals

REVENUES, net of returns	$	223,429,993		$	151,459,395		$	(22,753,148)		$	352,136,240

COSTS OF SALES (exclusive of depreciation shown below)		145,723,587			96,975,372			(23,436,540	)		219,262,419

Gross profit		77,706,406			54,484,023			683,392			132,873,821

OPERATING EXPENSES (INCOME):
Selling, general and administrative		59,866,947			26,706,606			683,392			87,256,945
Depreciation		2,944,415			745,584			-			3,689,999
Amortization		2,636,157			3,056,559			-			5,692,716
Intercompany administrative fee		(2,461,800	)		2,461,800			-			-
Equity in earnings of subsidiaries		(13,666,066	)		-			13,666,066			-

		49,319,653			32,970,549			14,349,458			96,639,660

INCOME FROM OPERATIONS		28,386,753			21,513,474			(13,666,066	)		36,234,161

OTHER EXPENSES (INCOME):
Interest expense		15,974,636			-			-			15,974,636
Interest income		(158,128	)		(21,592	)		-			(179,720	)
Loss on derivative financial instrument		102,000			-			-			102,000

		15,918,508			(21,592	)		-			15,896,916

INCOME BEFORE INCOME TAXES		12,468,245			21,535,066			(13,666,066	)		20,337,245

INCOME TAX EXPENSE		266,000			7,869,000			-			8,135,000

NET INCOME	$	12,202,245		$	13,666,066		$	(13,666,066)		$	12,202,245

NEBRASKA BOOK COMPANY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2007

	Nebraska
	Book			Subsidiary					Consolidated
	Company, Inc.			Guarantors		Eliminations			Totals

REVENUES, net of returns	$	211,057,431		$	142,011,126	$	(24,920,206)		$	328,148,351

COSTS OF SALES (exclusive of depreciation shown below)		140,215,916			91,362,702		(25,865,834	)		205,712,784

Gross profit		70,841,515			50,648,424		945,628			122,435,567

OPERATING EXPENSES (INCOME):
Selling, general and administrative		54,839,763			23,587,676		945,628			79,373,067
Depreciation		2,631,514			771,468		-			3,402,982
Amortization		1,983,042			2,959,678		-			4,942,720
Intercompany administrative fee		(2,419,600	)		2,419,600		-			-
Equity in earnings of subsidiaries		(13,215,002	)		-		13,215,002			-

		43,819,717			29,738,422		14,160,630			87,718,769

INCOME FROM OPERATIONS		27,021,798			20,910,002		(13,215,002	)		34,716,798

OTHER EXPENSES (INCOME):
Interest expense		16,888,897			-		-			16,888,897
Interest income		(537,413	)		-		-			(537,413	)
Loss on derivative financial instrument		180,000			-		-			180,000

		16,531,484			-		-			16,531,484

INCOME BEFORE INCOME TAXES		10,490,314			20,910,002		(13,215,002	)		18,185,314

INCOME TAX EXPENSE (BENEFIT)		(512,000	)		7,695,000		-			7,183,000

NET INCOME	$	11,002,314		$	13,215,002	$	(13,215,002)		$	11,002,314

NEBRASKA BOOK COMPANY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2008


	Nebraska
	Book			Subsidiary						Consolidated
	Company, Inc.			Guarantors			Eliminations			Totals

CASH FLOWS FROM OPERATING ACTIVITIES	$	73,739,599		$	2,484,522		$	-		$	76,224,121

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		(3,277,884	)		(883,402	)		31,520			(4,129,766	)
Acquisitions, net of cash acquired		(2,745,146	)		(2,670,499	)		-			(5,415,645	)
Proceeds from sale of property and equipment		15,735			37,394			(31,520	)		21,609
Software development costs		(264,436	)		-			-			(264,436	)
Net cash flows from investing activities		(6,271,731	)		(3,516,507	)		-			(9,788,238	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt		(1,034,739	)		-			-			(1,034,739	)
Principal payments on capital lease obligations		(347,629	)		-			-			(347,629	)
Dividends paid to parent		(4,235,000	)								(4,235,000	)
Capital contributions		4,869			-			-			4,869
Change in due to parent		1,351,000			-			-			1,351,000
Net cash flows from financing activities		(4,261,499	)		-			-			(4,261,499	)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		63,206,369			(1,031,985	)		-			62,174,384

CASH AND CASH EQUIVALENTS, Beginning of period		23,588,130			5,738,326			-			29,326,456

CASH AND CASH EQUIVALENTS, End of period	$	86,794,499		$	4,706,341		$	-		$	91,500,840

NEBRASKA BOOK COMPANY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2007


	Nebraska
	Book			Subsidiary					Consolidated
	Company, Inc.			Guarantors			Eliminations		Totals

CASH FLOWS FROM OPERATING ACTIVITIES	$	66,400,022		$	1,480,599		$	-	$	67,880,621

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		(3,388,712	)		(480,298	)		-		(3,869,010	)
Acquisitions, net of cash acquired		(2,144,582	)		(350,000	)		-		(2,494,582	)
Proceeds from sale of property and equipment		(22,229	)		31,618			-		9,389
Software development costs		(168,861	)		-			-		(168,861	)
Net cash flows from investing activities		(5,724,384	)		(798,680	)		-		(6,523,064	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt		(417,542	)		-			-		(417,542	)
Principal payments on capital lease obligations		(294,802	)		-			-		(294,802	)
Capital contributions		4,869			-			-		4,869
Change in due to parent		(69,000	)		-			-		(69,000	)
Net cash flows from financing activities		(776,475	)		-			-		(776,475	)

NET INCREASE IN CASH AND CASH EQUIVALENTS		59,899,163			681,919			-		60,581,082

CASH AND CASH EQUIVALENTS, Beginning of period		28,626,228			4,356,648			-		32,982,876

CASH AND CASH EQUIVALENTS, End of period	$	88,525,391		$	5,038,567		$	-	$	93,563,958

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Executive Summary

Overview

Acquisitions. Our Bookstore Division continues to grow its number of bookstore locations. We acquired 8 bookstore locations in 5 separate transactions during the quarter ended September 30, 2008. We believe that there continue to be attractive opportunities for us to expand our chain of bookstores across the country.

Revenue Results. Consolidated revenues for the quarter ended September 30, 2008 increased $20.6 million, or 7.9% from the quarter ended September 30, 2007. This increase is primarily attributable to growth in the Bookstore Division, due to acquisition activity, and to increased revenues in the Textbook Division. Revenues in the Complementary Services Division for the quarter ended September 30, 2008 were down slightly compared to the prior year quarter.

EBITDA Results. Consolidated EBITDA for the quarter ended September 30, 2008 increased $3.8 million, or 7.8% from the quarter ended September 30, 2007. The consolidated EBITDA increase is primarily attributable to the Textbook and Bookstore Divisions. The increase in the Textbook Division was due to increased revenues and gross profits while selling, general and administrative expenses were comparable to the prior year quarter. The increase in the Bookstore Division was primarily due to growth in the number of bookstores operated by us. EBITDA also increased slightly in the Complementary Services Division. Finally, Corporate Administration’s EBITDA loss declined as a result of a decrease in the interdivision profit elimination. EBITDA is considered a non-GAAP financial measure by the SEC, and therefore you should refer to the more detailed explanation of that measure that is provided later in this section.

Challenges and Expectations

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 general 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 acquisitions. Finally, we are uncertain what impact the recent downturn in general economic conditions and the ongoing disruption in the capital markets might have on our operations and our negotiations involving our Revolving Credit Facility, which expires on March 4, 2009. Despite these challenges, we expect that we will continue to grow revenue and EBITDA on a consolidated basis in fiscal year 2009. We also expect that our capital expenditures will remain modest for a company of our size.

Quarter Ended September 30, 2008 Compared With Quarter Ended September 30, 2007.

Revenues. Revenues for the quarters ended September 30, 2008 and 2007 and the corresponding change in revenues were as follows:

							Change
	2008			2007			Amount			Percent
Bookstore Division	$	225,518,527		$	209,736,782		$	15,781,745		7.5	%
Textbook Division		62,054,071			57,954,480			4,099,591		7.1	%
Complementary Services Division		9,315,656			10,173,149			(857,493	)	(8.4	)%
Intercompany Eliminations		(15,956,040	)		(17,554,582	)		1,598,542		(9.1	)%
	$	280,932,214		$	260,309,829		$	20,622,385		7.9	%

The increase in Bookstore Division revenues was primarily attributable to the addition of 41 bookstore locations through acquisitions or start-ups since April 1, 2007. The new bookstores (which include the impact of bookstores acquired on or after April 1, 2007 and subsequently closed, if any) provided an additional $20.2 million of revenue for the quarter ended September 30, 2008. Same-store sales for the quarter ended September 30, 2008 decreased $1.5 million, or 0.7%, from the quarter ended September 30, 2007, primarily due to decreased new textbook revenues which were partially offset by increased used textbook revenues. The Company defines same-store sales for the quarter ended September 30, 2008 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 $2.9 million as a result of certain store closings (excluding the impact of bookstores acquired on or after April 1, 2007 which were subsequently closed, if any) since July 1, 2007.

For the quarter ended September 30, 2008, Textbook Division revenues increased $4.1 million or 7.1% from the quarter ended September 30, 2007, due to an approximate 8.5% increase in the average price per book sold, offset partially by a decrease in units sold of 2.8%. Complementary Services Division revenues decreased $0.9 million from the quarter ended September 30, 2007, as decreases in the distance education and consulting businesses were partially offset by an increase in revenue from our systems business. Intercompany eliminations decreased $1.6 million, or 9.1%, primarily as a result of a shift in Textbook Division revenues from our own bookstores to independent bookstores (external customers).

Gross profit. Gross profit for the quarter ended September 30, 2008 increased $8.5 million, or 9.0%, to $103.6 million from $95.1 million for the quarter ended September 30, 2007. The increase in gross profit was primarily attributable to the increase in revenues, though the consolidated gross margin percentage also increased to 36.9% for the quarter ended September 30, 2008 from 36.5% for the quarter ended September 30, 2007. The increase in consolidated gross margin percentage is primarily attributable to higher margins in the Textbook and Complementary Services divisions and an increase in revenues coming from higher margin used textbooks in the Bookstore Division.

Selling, general and administrative expenses. Selling, general and administrative expenses for the quarter ended September 30, 2008 increased $4.7 million, or 10.2%, to $51.5 million from $46.8 million for the quarter ended September 30, 2007. Selling, general and administrative expenses as a percentage of revenues were 18.3% and 18.0% for the quarters ended September 30, 2008 and 2007, respectively. The increase in selling, general and administrative expenses, which includes a $2.6 million increase in personnel costs and a $1.4 million increase in rent, is primarily attributable to our continued growth in the Bookstore Division. Commission and shipping expenses also increased, primarily due to increased Bookstore Division sales on the Internet involving third party websites.

Earnings (loss) before interest, taxes, depreciation, and amortization (EBITDA). EBITDA for the quarters ended September 30, 2008 and 2007 and the corresponding change in EBITDA were as follows:

							Change
	2008			2007			Amount		Percentage
Bookstore Division	$	32,199,480		$	30,767,977		$	1,431,503		4.7	%
Textbook Division		20,839,508			19,045,524			1,793,984		9.4	%
Complementary Services Division		414,111			280,572			133,539		47.6	%
Corporate Administration		(1,402,800	)		(1,794,153	)		391,353		21.8	%
	$	52,050,299		$	48,299,920		$	3,750,379		7.8	%

The increase in Bookstore Division EBITDA was primarily due to growth in the number of college bookstores owned by us. The increase in Textbook Division EBITDA was primarily due to the previously mentioned increase in revenues and gross profits and steady selling, general and administrative expenses. Complementary Services Division EBITDA increased slightly primarily due to improved results from our systems business. Corporate Administration’s EBITDA loss declined primarily as a result of a decrease in the interdivision profit elimination, which can fluctuate during interim periods but is typically relatively unchanged by fiscal year-end.

EBITDA is defined as earnings before interest, taxes, depreciation, and amortization. As we are highly-leveraged and as our equity is not publicly-traded, management believes that a non-GAAP financial measure, EBITDA, is useful in measuring our liquidity and provides 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 does not represent and should not be considered as an alternative to net cash flows from operating activities as determined by GAAP, and EBITDA does not necessarily indicate whether cash flows will be sufficient for cash requirements. Items excluded from EBITDA, such as interest, taxes, depreciation and amortization, are significant components in understanding and assessing our financial performance. EBITDA measures presented may not be comparable to similarly titled measures presented by other companies.

The following presentation reconciles EBITDA with net cash flows from operating activities and also sets forth net cash flows from investing and financing activities as presented in the condensed consolidated statements of cash flows:

	Quarter Ended September 30,
	2008			2007

EBITDA	$	52,050,299		$	48,299,920

Adjustments to reconcile EBITDA to net cash flows from operating activities:
Share-based compensation		233,138			233,416
Interest income		179,720			483,531
Provision for losses (recoveries) on receivables		(15,380	)		5,141
Cash paid for interest		(12,194,186	)		(15,518,420	)
Cash paid for income taxes		(431,398	)		(363,684	)
Loss on disposal of assets		36,035			179,311
Tax expense due (to) from parent		(1,351,000	)		69,000
Changes in operating assets and liabilities, net of effect of acquisitions (1)		86,028,004			76,979,406
Net Cash Flows from Operating Activities	$	124,535,232		$	110,367,621

Net Cash Flows from Investing Activities	$	(4,691,577	)	$	(3,402,402	)

Net Cash Flows from Financing Activities	$	(40,735,734	)	$	(23,142,326	)

(1) 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 quarter ended September 30, 2008 increased $0.1 million, or 8.4%, to $1.8 million from $1.7 million for the quarter ended September 30, 2007, due primarily to growth in the Bookstore Division.

Amortization expense. Amortization expense for the quarter ended September 30, 2008 increased $0.4 million, or 13.8 %, to $2.9 million from $2.5 million for the quarter ended September 30, 2007, due in part to a $0.2 million increase in amortization of non-compete agreements and contract-managed acquisition costs primarily associated with bookstore acquisitions and contract-management renewals occurring since July 1, 2007 and $0.1 million of amortization of certain contractual rights associated with a September 1, 2007 agreement with a third-party software company.

Interest expense, net. Interest expense, net for the quarter ended September 30, 2008 decreased $0.4 million, or 4.4%, to $7.8 million from $8.2 million for the quarter ended September 30, 2007, primarily due to a $0.5 million decline in interest on the Term Loan mainly due to a decline in the variable interest rate and a $0.1 million reduction in the loss on derivative financial instrument associated with the interest rate swap agreement that expired on September 30, 2008. These decreases were partly offset by a $0.3 million decline in interest income.

Income taxes. Income tax expense for the quarter ended September 30, 2008 increased $1.6 million, or 11.5%, to $15.8 million from $14.2 million for the quarter ended September 30, 2007. Our effective tax rate for the quarters ended September 30, 2008 and 2007 was 40.0% and 39.5%, respectively. Our effective tax rate differs from the statutory tax rate primarily as a result of state income taxes.

Six Months Ended September 30, 2008 Compared With Six Months Ended September 30, 2007.

Revenues. Revenues for the six months ended September 30, 2008 and 2007 and the corresponding change in revenues were as follows:

							Change
	2008			2007			Amount		Percentage
Bookstore Division	$	271,989,690		$	252,874,112		$	19,115,578		7.6	%
Textbook Division		89,083,251			85,386,495			3,696,756		4.3	%
Complementary Services Division		17,751,649			18,154,451			(402,802)		(2.2	)%
Intercompany Eliminations		(26,688,350	)		(28,266,707	)		1,578,357		(5.6	)%
	$	352,136,240		$	328,148,351		$	23,987,889		7.3	%

The increase in Bookstore Division revenues was primarily attributable to the addition of 41 bookstore locations through acquisitions or start-ups since April 1, 2007. The new bookstores (which include the impact of bookstores acquired on or after April 1, 2007 and subsequently closed, if any) provided an additional $22.9 million of revenue for the six months ended September 30, 2008. Same-store sales for the six months ended September 30, 2008 increased 0.1%, from the six months ended September 30, 2007, primarily due to increased used textbook revenues which were mostly offset by decreased new textbook revenues. The Company defines same-store sales for the six months ended September 30, 2008 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 $4.0 million as a result of certain store closings (excluding the impact of bookstores acquired on or after April 1, 2007 which were subsequently closed, if any) since April 1, 2007.

For the six months ended September 30, 2008, Textbook Division revenues increased $3.7 million or 4.3% from the six months ended September 30, 2007, due primarily to an approximate 8.1% increase in the average price per book sold offset partially by a decrease in units sold of 4.7%. The decrease in units sold is partially attributable to a decrease in the number of units provided by the Bookstore Division. The Bookstore Division has provided fewer used textbooks to the Textbook Division from its end of semester buyback process because the Bookstore Division is keeping more books purchased at buyback to make them available for sale on third party websites. Complementary Services Division revenues decreased $0.4 million compared to the prior year six months as decreases in the distance education and consulting businesses were partially offset by an increase in revenue from our systems and supplies businesses. Intercompany eliminations decreased $1.6 million, or 5.6%, primarily as a result of a shift in Textbook Division revenues from our own bookstores to independent bookstores (external customers).

Gross profit. Gross profit for the six months ended September 30, 2008 increased $10.5 million, or 8.5%, to $132.9 million from $122.4 million for the six months ended September 30, 2007. The increase in gross profit was primarily attributable to the increase in revenues, though the consolidated gross margin percentage also increased to 37.7% for the six months ended September 30, 2008 from 37.3% for the six months ended September 30, 2007. The increase in consolidated gross margin percentage is primarily attributable to higher margins in the Textbook and Complementary Services divisions and an increase in revenues coming from higher margin used textbooks in the Bookstore Division.

Selling, general and administrative expenses. Selling, general and administrative expenses for the six months ended September 30, 2008 increased $7.9 million, or 9.9%, to $87.3 million from $79.4 million for the six months ended September 30, 2007. Selling, general and administrative expenses as a percentage of revenues were 24.8% and 24.2% for the six months ended September 30, 2008 and 2007, respectively. The increase in selling, general and administrative expenses, which includes a $3.5 million increase in personnel costs and a $1.9 million increase in rent, is primarily attributable to our continued growth in the Bookstore Division. Commission and shipping expenses also increased $0.9 million and $0.6 million respectively, primarily due to increased Bookstore Division sales on the Internet involving third party websites.

Earnings (loss) before interest, taxes, depreciation, and amortization (EBITDA). EBITDA for the six months ended September 30, 2008 and 2007 and the corresponding change in EBITDA were as follows:

			Change
	2008	2007	Amount	Percentage
Bookstore Division	$ 25,767,928	$ 25,676,524	$ 91,404	0.4 %
Textbook Division	25,823,747	24,433,923	1,389,824	5.7 %
Complementary Services Division	724,280	336,930	387,350	115.0 %
Corporate Administration	(6,699,079)	(7,384,877)	685,798	9.3 %
	$ 45,616,876	$ 43,062,500	$ 2,554,376	5.9 %

Bookstore Division EBITDA was relatively unchanged, increasing $0.1 million or 0.4%, as increased revenues and the resulting gross profit were offset by slightly higher selling, general and administrative expenses as a percentage of revenues. The increase in Textbook Division EBITDA was primarily due to the previously mentioned increase in revenues and gross profits and steady selling, general and administrative expenses. Complementary Services Division EBITDA increased primarily due to improved results from our systems business. Corporate Administration’s EBITDA loss declined primarily as a result of a decrease in the interdivision profit elimination, which can fluctuate during interim periods but is typically relatively unchanged by fiscal year-end.

	Six Months Ended September 30,
	2008			2007
EBITDA	$	45,616,876		$	43,062,500

Adjustments to reconcile EBITDA to net cash flows from operating activities:
Share-based compensation		485,432			487,458
Interest income		179,720			537,413
Provision for losses (recoveries) on receivables		14,150			(21,699	)
Cash paid for interest		(14,966,649	)		(15,755,266	)
Cash paid for income taxes		(1,931,833	)		(4,118,080	)
Loss on disposal of assets		61,833			180,508
Tax expense due (to) from parent		(1,351,000	)		69,000
Changes in operating assets and liabilities, net of
effect of acquisitions (1)		48,115,592			43,438,787
Net Cash Flows from Operating Activities	$	76,224,121		$	67,880,621
Net Cash Flows from Investing Activities	$	(9,788,238)		$	(6,523,064)
Net Cash Flows from Financing Activities	$	(4,261,499)		$	(776,475)

Depreciation expense. Depreciation expense for the six months ended September 30, 2008 increased $0.3 million, or 8.4%, to $3.7 million from $3.4 million for the six months ended September 30, 2007, due primarily to growth in the Bookstore Division (including new stores added since April 1, 2007, a new capital lease recorded in the second quarter of fiscal year 2008, and store remodeling projects).

Amortization expense. Amortization expense for the six months ended September 30, 2008 increased $0.8 million, or 15.2%, to $5.7 million from $4.9 million for the six months ended September 30, 2007, due in part to a $0.5 million increase in amortization of non-compete agreements and contract-managed acquisition costs primarily associated with bookstore acquisitions and contract-management 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.

Interest expense, net. Interest expense, net for the six months ended September 30, 2008 decreased $0.6 million, or 3.8%, to $15.9 million from $16.5 million for the six months ended September 30, 2007, primarily due to a $0.9 million decline in interest on the Term Loan mainly due to a decline in the variable interest rate and a $0.1 million reduction in the loss on derivative financial instrument associated with the interest rate swap agreement that expired on September 30, 2008. These decreases were partly offset by a $0.4 million decline in interest income.

Income taxes. Income tax expense for the six months ended September 30, 2008 increased $0.9 million, or 13.3%, to $8.1 million from $7.2 million for the six months ended September 30, 2007. Our effective tax rate for the six months ended September 30, 2008 and 2007 was 40.0% and 39.5%, respectively. Our effective tax rate differs from the statutory tax rate primarily as a result of state income taxes.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these condensed 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 condensed 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, 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 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 condensed consolidated 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. Additional reductions to revenue and costs of sales may be required if the actual rate of returns exceeds the estimated rate of returns. The estimated rate of returns is determined utilizing actual historical return experience.

Bad Debts. We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. 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. 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. Our Bookstore Division values new textbook and non-textbook inventories at the lower of cost or market using the retail inventory method. Under the retail inventory method, the valuation of inventories at cost and the resulting gross margins are calculated by applying a calculated cost-to-retail ratio to the retail value of inventories. The retail inventory method is an averaging method that has been widely used in the retail industry due to its practicality. Inherent in the retail inventory method calculation are certain significant management judgments and estimates which impact the ending inventory valuation at cost as well as the resulting gross margins. Changes in the fact patterns underlying such management judgments and estimates could ultimately result in adjusted inventory costs.

Inventory Obsolescence. We account for inventory obsolescence based upon assumptions about future demand and market conditions. If actual 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. 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 No. 86, Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed; 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 are required to make certain assumptions and estimates regarding the fair value of intangible assets when assessing such assets for impairment. 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 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 are 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 condensed consolidated financial statements.

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 condensed 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 condensed consolidated financial statements.

LIQUIDITY AND CAPITAL RESOURCES

Financing Activities

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 September 30, 2008, our total indebtedness was $373.8 million, consisting of a $194.1 million Term Loan, $175.0 million of Senior Subordinated Notes, and $4.7 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 September 30, 2008 was $77.0 million (face value).

Principal and interest payments under the Senior Credit Facility, the Senior Subordinated Notes, and NBC’s Senior Discount Notes represent significant liquidity requirements for us. Under the terms of the Senior Credit Facility’s Term Loan, we are scheduled to make principal payments totaling approximately $2.0 million in fiscal years 2009-2010 and $191.1 million in fiscal year 2011. These scheduled principal payments are subject to change upon the annual payment and application of excess cash flows (as defined in the Credit Agreement underlying the Senior Credit Facility), if any, towards the Term Loan principal balances. There was no excess cash flow obligation for the fiscal years ended March 31, 2008 and 2007.

Loans under the Senior Credit Facility bear 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 in the Credit Agreement). This agreement was effective as of September 30, 2005 and expired September 30, 2008. The Senior Subordinated Notes require semi-annual interest payments at a fixed rate of 8.625% and mature on March 15, 2012. The 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.

During the six months ended September 30, 2008, we declared and paid $4.2 million in dividends to NBC to provide funding for interest due and payable on NBC’s Senior Discount Notes.

We file a consolidated federal income tax return with our parent company, NBC, and follow a policy of recording income taxes equal to that which would have been incurred had we filed a separate return. We are responsible for remitting tax payments and collecting tax refunds for the consolidated group. The $1.3 million increase in the due to parent balance for the six months ended September 30, 2008 represents the current period tax savings resulting from operating losses generated by NBC from which we derive the benefit through reduced tax payments on the consolidated return.

We expect to complete renegotiation of the terms of the Revolving Credit Facility prior to its expiration on March 4, 2009; however, we are uncertain what impact the recent downturn in general economic conditions and the ongoing disruption in the capital markets might have on our operations and those negotiations.

In July 2007, we relocated a bookstore and its new property lease was 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.

Investing Cash Flows

Our capital expenditures were $4.1 million and $3.9 million for the six months ended September 30, 2008 and 2007, respectively. Capital expenditures consist primarily of leasehold improvements and furnishings for new bookstores, bookstore renovations, computer upgrades and miscellaneous warehouse improvements. Our ability to make capital expenditures is subject to certain restrictions under the Senior Credit Facility, including an annual limitation on capital expenditures made in the ordinary course of business. The annual limitation for fiscal year 2009 is $19.6 million. We expect capital expenditures to be between $5.0 million and $6.0 million for fiscal year 2009.

Business acquisition and contract-management renewal expenditures were $5.4 million and $2.5 million for the six months ended September 30, 2008 and 2007, respectively. During the six months ended September 30, 2008, 16 bookstore locations were acquired in 13 separate transactions (13 of which were contract-managed locations). During the six months ended September 30, 2007, 10 bookstore locations were acquired in 8 separate transactions (all of which were contract-managed locations). Our ability to make acquisition expenditures is subject to certain restrictions under the Senior Credit Facility.

During the six months ended September 30, 2008 and 2007, we capitalized $0.3 million and $0.2 million, respectively, in software development costs associated with new software products and enhancements to existing software products.

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 Credit Facility. Usage of the Revolving Credit 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). Net cash flows from operating activities for the six months ended September 30, 2008 were $76.2 million, up $8.3 million from $67.9 million for the six months ended September 30, 2007. The increase in net cash flows from operating activities is due primarily to increased accounts payable balances, which is in large part offset by increases in receivables and inventories and a decrease in amounts paid under our annual bonus plan, payouts for which occur in the first quarter following fiscal year-end and are based upon our financial performance for the fiscal year.

As of September 30, 2008, we had $91.5 million in cash and cash equivalents available to help fund working capital requirements. Our investments in cash equivalents are subject to restrictions under the Senior Credit Facility. The Senior Credit 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 Credit Facility and (5) certain other similar short-term investments. All cash equivalents at September 30, 2008 have matured subsequent to the end of the quarter with no gain or loss recognized. Although we invest in compliance with the restrictions under our Senior Credit 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 in our investment portfolio will not lose all or 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 at any time is equal to a percentage of eligible accounts receivable and inventory, up to a maximum of $85.0 million. The Senior Credit Facility restricts our ability to make 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 the ability of NBC 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. Such restrictions are not expected to affect our ability to meet our cash obligations for the remaining term of the Revolving Credit Facility.

Sources of and Needs for Capital

As of September 30, 2008, we could borrow up to $75.8 million under the Revolving Credit Facility, which was unused at September 30, 2008. Amounts available under the Revolving Credit 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 under the Senior Credit Facility, including an annual limitation on capital expenditures made in the ordinary course of business. We expect to renegotiate the terms of the Revolving Credit Facility prior to its expiration on March 4, 2009.

We believe that funds generated from operations, existing cash, and borrowings under the Revolving Credit Facility, subject to renegotiation, will be sufficient to finance our current operations, any required excess cash flow payments, cash interest requirements, income tax payments, planned capital expenditures and internal growth for the next twelve months. Future acquisitions, if any, may require additional debt or equity financing.

Off-Balance Sheet Arrangements

As of September 30, 2008, 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.

Transactions with Related and Certain Other Parties

During the six months ended September 30, 2008, we declared and paid $4.2 million in dividends to NBC to provide funding for interest due and payable on NBC’s Senior Discount Notes.

We file a consolidated federal income tax return with our parent company, NBC, and follow a policy of recording income taxes equal to that which would have been incurred had we filed a separate return. We are responsible for remitting tax payments and collecting tax refunds for the consolidated group. The due to parent balance, totaling $18.3 million and $16.7 million at September 30, 2008 and 2007, respectively, represents the cumulative tax savings resulting from operating losses generated by NBC from which we derive the benefit through reduced tax payments on the consolidated return.

Accounting Standards Not Yet Adopted

In March 2008, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 161, Disclosures about Derivative Instruments and Hedging Activities (an amendment of FASB Statement No. 133). SFAS No. 161 requires entities to provide enhanced disclosures about how and why an entity uses derivative instruments, how derivative instruments and related hedged items are accounted for under FASB Statement No. 133, and how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. This Statement becomes effective for us in fiscal year 2010. Our present interest rate swap agreement expired on September 30, 2008; however, our current disclosure format will need to be expanded (particularly as it relates to the specific components of gains and losses on derivative instruments) if we use derivative instruments in the future.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations and SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements. SFAS No. 141 (revised 2007) establishes principles and requirements for how an acquirer recognizes and measures the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree; recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. In addition, SFAS No. 141 (revised 2007) requires that direct costs associated with an acquisition be expensed as incurred. SFAS No. 160 establishes accounting and reporting standards for the noncontrolling interest (minority interest) in a subsidiary and for the deconsolidation of a subsidiary. Included in SFAS No. 160 is the requirement that noncontrolling interests be reported in the equity section of the balance sheet. These Statements become effective for us in fiscal year 2010. We have not yet determined if SFAS No. 141 (revised 2007) will have a material impact on our consolidated financial statements. SFAS No. 160 is not expected to have a material impact on our consolidated financial statements.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. 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 have not yet determined if the Statement will have a material impact on our consolidated financial statements as it pertains to such nonfinancial assets and nonfinancial liabilities.

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

This Quarterly Report on Form 10-Q 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 growth 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: 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; our inability to successfully acquire or 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; increases in our cost of borrowing or our inability to renegotiate, renew or raise debt or raise additional equity capital; 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 our 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 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Our primary market risk exposure is, and is expected to continue to be, fluctuation in variable interest rates. Of the $373.8 million in total indebtedness outstanding at September 30, 2008, approximately $194.1 million is subject to fluctuations in the Eurodollar interest rate. As provided in our Senior Credit Facility, exposure to interest rate fluctuations is managed by maintaining fixed interest rate debt (primarily the Senior Subordinated Notes); and, historically, by entering into interest rate swap agreements that qualified as cash flow hedging instruments to convert certain variable rate debt into fixed rate debt. On July 15, 2005, we entered into an interest rate swap agreement, which became effective on September 30, 2005. The interest rate swap agreement expired on September 30, 2008.

We invest in certain cash equivalents allowed by the Senior Credit Facility. At September 30, 2008, cash equivalents included $39.8 million in commercial paper with a weighted-average interest rate of 2.65% and weighted-average contractual term of 57 days. Due to the short-term nature of the commercial paper, fair market value is considered to approximate carrying value (including accrued interest of $0.1 million) at September 30, 2008. All commercial paper held at September 30, 2008 has matured subsequent to the end of the quarter with no gain or loss recognized.

Certain quantitative market risk disclosures have changed since March 31, 2008 as a result of market fluctuations, movement in interest rates, principal payments, investments and the expiration of the interest rate swap agreement. The table below 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.

	September 30,	March 31,
	2008	2008
Fair Values:
Instruments entered into for purposes other than trading:
Cash equivalents (commercial paper)	$ 39,918,651	$ -

Fixed rate debt	136,152,000	161,984,000
Variable rate debt (excluding Revolving Credit Facility)	176,622,000	179,495,000
Interest rate swap ("out-of-the-money")	-	(1,119,000)

Overall Weighted-Average Interest Rates:
Cash equivalents (commercial paper)	2.65%	-
Fixed rate debt	8.63%	8.64%
Variable rate debt (excluding Revolving Credit Facility)	6.27%	5.38%
Interest rate swap receive rate	-	2.63%
Interest rate swap pay rate	-	4.34%

ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of disclosure controls and procedures.Our management, with the participation of our chief executive officer and chief financial officer (our principal executive officer and principal financial officer), evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2008. This evaluation was performed to determine if our disclosure controls and procedures were effective, in that they are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, including ensuring that such information is accumulated and communicated to management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure. Based on this evaluation, our chief executive officer and chief financial officer concluded that, as of September 30, 2008, our disclosure controls and procedures were effective.

Changes in internal control over financial reporting. There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) which occurred during the quarter ended September 30, 2008 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1A. RISK FACTORS

There have been no material changes in our risk factors from those disclosed in Part 1, Item 1A., “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended March 31, 2008, which was filed with the Securities and Exchange Commission on June 30, 2008, except as set forth below.

If we are unable to renew or renegotiate the Revolving Credit Facility, which expires March 4, 2009, it could adversely impact our ability to fund working capital requirements and/or our ability to acquire additional bookstores. While our negotiations to extend or refinance the Revolving Credit Facility, which expires March 4, 2009, are ongoing and expected to be completed prior to March 4, 2009, the significant disruptions in the credit markets associated with the general global economic turmoil could adversely impact our ability to refinance or extend the Revolving Credit Facility on satisfactory terms. In the event that we are unable to extend or otherwise put in place a Revolving Credit Facility or other financing vehicle, our business operations could be significantly impacted. Without credit or alternative financing available, our ability to fund our working capital requirements and/or our ability to make certain acquisitions would be significantly reduced, which could have a material adverse effect on revenue and profit levels. If we were unable to extend or otherwise put in place a Revolving Credit Facility or other financing vehicle on satisfactory terms, interest expense could increase.

ITEM 5. OTHER INFORMATION.

The Company is not required to file reports with the Securities and Exchange Commission pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, but is filing this Quarterly Report on Form 10-Q on a voluntary basis.

ITEM 6. EXHIBITS

Exhibits

3.1

Certificate of Incorporation, as amended, of Nebraska Book Company, Inc., filed as Exhibit 3.1 to Nebraska Book Company, Inc. Registration Statement on Form S-4, as amended (File No. 333-48221), is incorporated herein by reference.

3.2

First Restated By-laws of Nebraska Book Company, Inc., filed as Exhibit 3.2 to Nebraska Book Company, Inc. Form 10-Q for the quarter ended September 30, 2003, is incorporated herein by reference.

10.1*

First Amendment, dated August 18, 2008, to the NBC Holdings Corp. 2004 Stock Option Plan adopted March 4, 2004.

31.1

Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1

Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2

Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* - Management contracts or compensatory plans filed herewith or incorporated by reference.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on November 14, 2008.

NEBRASKA BOOK COMPANY, INC.

/s/	Mark W. Oppegard

Mark W. Oppegard

Chief Executive Officer and

Director

/s/ Alan G. Siemek

Alan G. Siemek

Chief Financial Officer, Senior Vice President

of Finance and Administration, Treasurer and

Assistant Secretary

EXHIBIT INDEX

3.1

3.2