Nebraska Book Company, Inc. History

Company Perspectives:

We are not comfortable just being the leader.

Key Dates:

1915:

The company is founded by E.H. Long.

1937:

Johnny Johnsen acquires the business.

1948:

A branch store operation is launched.

1973:

Lincoln Grain acquires the company.

1995:

Olympus Partners acquires the company.

1998:

Haas Wheat acquires the company.

2004:

Weston Presidio acquires the company.

Company History:

With its headquarters in Lincoln, Nebraska, Nebraska Book Company, Inc. is involved in the college bookstore industry. Its college bookstore division operates more than 110 on-campus and off-campus bookstores, where in addition to books, other merchandise, such as apparel bearing a school's name and mascot, is sold. Nebraska Book's textbook division sells new textbooks to more than 2,500 college bookstores, and the division also buys and sells used textbooks. Finally, Nebraska Book's complementary services division offers several services and solutions for college bookstores, including Prism software for inventory control; CampusHub, an e-commerce solution that allows local college bookstores to sell over the Internet; specialty books used by students in distance learning and nontraditional courses; Connect2One, an alliance of independent college bookstores; marketing services geared toward independent bookstores; college store design, to help college bookstores better utilize space in an esthetic manner; and NBC graphics, which produces silk-screen and embroidered apparels for colleges as well as high schools, service clubs, and other groups. Nebraska Book is a private company majority owned by investment firm Weston Presidio.

Founding the Company in 1915

The origins of Nebraska Book date back to 1915 with the opening of a small college bookstore in Lincoln, Nebraska, home of the University of Nebraska. The owner was a young man named E.H. "Red" Long, who had learned the business by working in his brother's bookstore located in Columbus, Ohio, while attending The Ohio State University. Long's venture had an inauspicious start. After the first year, the store was hit by lightning and burned to the ground. Long replaced the structure with one made of brick only to have one of the sides collapse. Long made the best out of the situation by moving back the wall to increase the size of the building, which not only housed books and supplies but also the Silver Moon Luncheonette.

Long owned the bookstore until 1937, when he sold it to a former employee, Johnny Johnsen, who would transform Long's single bookstore into the Nebraska Book Company. Johnsen had worked part time for Long while attending college, then managed the textbook department for a year. At that point, Long suggested that Johnsen find employment with a textbook jobber that could afford to pay him the money he was worth. Heeding his mentor's advice, Johnsen took a position with the College Book Company of Ohio and furthered his education in the field. Three years later he returned to Lincoln and bought Long's business. Long, who would launch another store devoted to high school textbooks, along with his family would live above the Nebraska Bookstore building until his death in 1959.

Johnsen took over a store that was only 50 feet by 90 feet in size. One of his first moves was to open a wholesale department that dealt in used college textbooks. Then in 1939 he brought back the supply business that Long had sold seven years earlier. But just as the business was starting to grow, World War II intervened and Johnsen lost his most important employees. Nevertheless, Nebraska Book managed to survive, only one of three college textbook jobbers that would still be in business by the end of the decade. Because of the war, the production of new textbooks was curtailed, which led to a rising market for used textbooks, an area that Nebraska Book was quick to exploit. It was during the postwar years that the company really began to grow. Many returning servicemen used the G.I. Bill to attend college and Nebraska Book developed a strong business in providing books and supplies to them. Also during the final years of the 1940s the used textbook market experienced rapid growth, and in response the wholesale department began to expand beyond the area surrounding Lincoln, eventually covering the entire country. Nebraska Book would either purchase books directly from students, with buyers paying a two-day visit to a campus, or take over a bookstore's overstock or excess merchandise. Nebraska Book's most experienced buyers then gathered for a ten-day meeting to set the prices for used textbooks, which would be published in an annual buying guide. In 1964 Nebraska Book acquired California-based College Book Company, which became the West Coast extension of its used textbook business and gave Nebraska Book a national reach. The wholesale division outgrew its space in the Nebraska Book building, and in 1967 moved into a new 110,000-square-foot warehouse in Lincoln.

Launching Branch Store Operations in 1948

In 1948 a branch store operation, supervised by the wholesale department, was launched when Nebraska Wesleyan decided to lease its bookstore operations to Nebraska Book. Soon the company added other textbook stores at Nebraska colleges, including Doan, Hastings, and Dana Colleges. The addition of these bookstores increased Nebraska Book's buying power, which further fueled the growth of the company. Over the next few years, stores were added at Washburn University, Baker University, Union College, Concordia College, Norfolk Jr. College, and McCook Jr. College. In 1965 three stores were opened and the branch store operation became a separate division. A year later, three new stores were added, bringing the total number of textbook stores to 12. Before the decade closed, Nebraska Book added two more stores.

In 1973 Nebraska Book was sold to George Lincoln, owner of Lincoln Grain, Inc., who had no experience in the textbook business. He was raised on a farm in Missouri and moved to Lincoln in 1959 to manage two grain elevators, which he would buy and merge in 1961 to form Lincoln Grain. While he built up this business he decided to take on Nebraska Book, which by this point owned or leased 42 bookstores. Lincoln closed all but the ten most profitable stores. In the 1980s the company began to build up the chain again, adding a dozen units to bring the number back up to 22. In 1987 Elders Grain, an Australian company, acquired Lincoln Grain, and George Lincoln devoted all of his time to the management of Nebraska Book, which was owned through another company he controlled, Lincoln Industries, Inc.

The bookstore business changed significantly during the time George Lincoln owned Nebraska Book, mostly due to technology, which replaced pencil and clipboard in filling orders. In the mid-1980s the College Book Company's Cypress, California, warehouse operation of College Book Company was restructured so that it mirrored the Lincoln operation, featuring the same inventory and systems so that customers around the country could expect to receive the same product and service from both facilities. To upgrade the business, Nebraska Book first automated the billing process. The next revolutionary step took place in the 1990s with the advent of online inventory sales, which led to a remodeling of the warehouse and shipping process automation. As a result of implementing these new technologies, Nebraska Book greatly reduced the amount of time it took to fill a customer's order, while achieving greater accuracy.

In 1985 Nebraska Book offered its first computer software product, PC Text, to help college bookstores automate their operations. Out of this effort emerged the company's current PRISM and WinPRism support software programs geared toward the specific management needs of a college bookstore, including the integration of inventory control with point-of-sale systems. Nebraska Book became involved in all aspects of college bookstore management systems, from design and development to installation, training, and support.

On the bookstore side of the business, Nebraska Book became increasingly involved in retail, focusing on "spirit" apparel featuring the local college's colors and logo as a way to make money between the peak periods of book buying that preceded the start of classes each semester and to prevent the store from becoming little more than a warehouse. Local managers were given a great deal of latitude in the planning of the store to suit the community. In universities with major football and basketball programs, for example, a store might devote more retail space to school apparel and souvenirs. In the early 1990s Nebraska Book began a push to expand its bookstore holdings, with the goal of opening five new stores each year for the next five years.

The expansion program would be continued by a new owner in 1995. In January of that year, Lincoln Industries announced that Nebraska Book was on the block. In August 1995 Olympus Partners, a private equity fund, bought the business for approximately $100 million. Based in Stamford, Connecticut, Olympus was founded in 1989 by Robert S. Morris, a former executive with General Electric Investment Corporation, where he managed General Electric Pension Trust's $1.6 billion private equity portfolio. Olympus took on a limited number of investments each year, ranging from $10 million venture capital deals to buyouts in the $150 million range.

Olympus owned Nebraska Book for little more than two years, during which time the company opened or acquired 17 new college bookstores, expanding its network of retail stores to 54. Cash flow during this period increased from $17 million to $29 million. The company also acquired Collegiate Stores Corporation (CSC), a buying service serving more than 500 independent college bookstores. In addition to textbook purchasing, CSC's programs included a supply program, providing some 3,000 school, office, computer, and art supplies that accounted for three-quarters of the inventory most college bookstores carried. CSC also offered reference materials, shopping bags, an apparel and giftware program, candy and nuts, credit card processing, security programs, store catalog production capability, and freight discounts. CSC would later be renamed Connect2One.

Acquired by Haas Wheat in 1998

Shortly after the CSC acquisition, in February 1998, Olympus sold Nebraska Book to Haas Wheat & Partners Inc. for $245 million, thereby realizing a sizable return on its initial invest- ment. Haas Wheat was a Dallas, Texas-based private equity firm founded by Robert B. Haas and Douglas D. Wheat in 1992. The new owners expressed a commitment to invest the funds necessary to expand Nebraska Book even further. In June 1999 Nebraska Book completed a major deal by acquiring TRIRO Inc., a College Station, Texas-based company that owned 18 bookstores in Texas, New Mexico, and Arizona. Nebraska Book also broadened its business by becoming involved in e-commerce, establishing CampusHub to help independent college bookstores to sell books and merchandise online 24 hours a day.

In August 2002 Weston Presidio, a San Francisco-based investment partnership, acquired a 33 percent stake in Nebraska Book. Weston Presidio was founded in 1991 by Michael Cronin and Michael Lazarus. The firm's investments exceeded $2.2 billion, covering a range of opportunities, from venture capital for high-growth start-ups to buyouts of mature companies. Nebraska Book fell into the latter category, attracting the interest of Weston Presidio because it was the clear leader in its field. Moreover, with the number of college students increasing, Nebraska Book was well positioned to enjoy continued growth. The cost of textbooks also was rising, with the average price now exceeding $100. A primary reason for this increase was caused by publishers who now brought out new editions of a textbook more frequently. Some 20 years earlier, a textbook was updated every seven years, but now in some cases new editions were separated by as little as 18 months. Nebraska Book's used book buyers found their jobs more challenging but because of the high cost of new books, more students were interested in buying used books, which played to the company's strength.

In 2003 Nebraska Book posted sales of $370.5 million, a 9.3 percent improvement over the prior year, with all three operating divisions enjoying sales increases, while net income soared by 45.5 percent to $23 million. A year later, revenues approached the $400 million mark, as the company added three more bookstores. In March 2004 Weston Presidio bought out Haas Wheat's position and assumed majority control of Nebraska Book, with management owning an 11 percent stake in the business. Weston Presidio's managing partner, Michael Cronin, expressed his satisfaction with the acquisition and support for management's long-term vision for the business.

Principal Subsidiaries: College Book Company; Connect2One; The CampusHub.com; Speciality Books, Inc.; NBC Textbooks.

Principal Competitors: Barnes & Noble College Bookstores, Inc.; Follett Corporation; Varsity Group Inc.

Further Reading:

• "California Group Acquires Stake in Lincoln, Neb.-Based Textbook Supplier," Omaha World-Herald, August 6, 2002.
• "The College Store: A Textbook Case," Retail Store Image, July 1, 1995, p. 54.
• Dunn, Robert, "Haas Wheat Buys Nebraska from Olympus," Buyouts, March 23, 1998.
• "Looking Back," Nebraska Branch Stores Central Newsletter, April, 1968, p. 2.

Source: International Directory of Company Histories, Vol. 65. St. James Press, 2004.

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