ProQuest Reports 17 Percent Increase in EBIT And 23 Percent EPS Growth for 2002
ANN ARBOR, Mich., Feb. 13 -- ProQuest Company , a leading provider of information solutions and content to the library, education, automotive and powersports markets, today reported growth in revenue and earnings for the fourth quarter and year ended December 28, 2002. All 2001 results in this news release include continuing operations that have been adjusted to assist the reader in comparing the impact of the adoption of Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets ("SFAS No. 142"), which took effect on December 30, 2001, the first day of the company's 2002 fiscal year. The attached financial statements include a reconciliation of reported and pro forma results, and should be read in conjunction with this press release.
"In 2002, we strengthened our balance sheet, lowered expenses, and increased our financial flexibility. We grew revenue, increased content holdings, and signed and renewed long-term contracts with major automotive manufacturers," said Alan Aldworth, president and chief executive officer of ProQuest Company. "This growth is evidence of the strength of our business model, even in this difficult economic climate. We expect this growth to continue in 2003," added Aldworth.
Full Year 2002
For the year ended December 28, 2002, revenues were $428.3 million compared with $401.6 million one year ago -- an increase of 7 percent. Earnings before interest, income taxes, depreciation and amortization (EBITDA) for the year were $137.2 million, an increase of 13 percent over EBITDA of $121.7 million in 2001. Earnings before interest and income taxes (EBIT) were $89.6 million for the year, an increase of 17 percent over pro forma EBIT of $76.8 million in 2001. Pro forma net earnings for the year increased 37 percent to $43.9 million, or $1.65 per fully diluted share compared with pro forma net earnings of $32.1 million or $1.34 per fully diluted share one year ago. Pro forma net earnings and pro forma fully diluted earnings per share (EPS) for the full year exclude a one-time tax benefit of $3.6 million, or $0.13 per share; a loss of $5.1 million, or $0.19 per share, related to the settlement of interest rate swaps; and a gain on sales of discontinued operations of $0.6 million, or $0.02 per share. At fiscal year end, debt, net of cash was $185.3 million, a 27 percent reduction from $253.1 million at the end of fiscal 2001.
Fourth Quarter
Revenues increased 4 percent to $110.2 million, compared with $106.4 million for the fourth quarter of 2001. EBITDA was $36.4 million in the fourth quarter, up 3 percent from the prior year. EBIT was $23.9 million in the fourth quarter of 2002 as compared with pro forma EBIT from continuing operations of $24.2 million a year ago, a decline of 1 percent resulting from lower backfile microfilm sales and corporate reseller sales. Pro forma net earnings totaled $14.4 million for the fourth quarter of 2002, an increase of 31 percent compared with pro forma net earnings of $11.0 million from continuing operations in the same period a year ago. EPS increased 13 percent to $0.51, compared with $0.45 for the same period last year. Pro forma net earnings and EPS in the fourth quarter exclude a one-time tax benefit of $3.6 million, or $0.13 per share, and a gain on sales of discontinued operations of $0.6 million, or $0.02 per share.
Fourth quarter cash flow from continuing operations was $43.4 million. Capital expenditures were $16.1 million, and free cash flow from continuing operations was $27.3 million.
"ProQuest generated substantial cash flow in the fourth quarter as a result of collections of third quarter billings," said Kevin Gregory, ProQuest's senior vice president and chief financial officer. "The fourth quarter of 2002 is a clear indication of the cash flow that ProQuest is able to generate," added Gregory.
Information and Learning
From the Information and Learning division, 2002 revenues increased 6 percent to $249.4 million, compared with $236.0 million a year ago, and full year EBIT of $49.0 million was up 7 percent compared with pro forma EBIT of $46.0 million for 2001. For the fourth quarter, revenues were $62.5 million, compared with $63.2 million for the same quarter last year. EBIT for the fourth quarter was $11.2 million compared with pro forma EBIT of $14.6 million for the fourth quarter of 2001.
Information and Learning showed sales growth in its classroom and proprietary electronic products in the fourth quarter. XanEdu's sales more than doubled in 2002 and its customer base is growing rapidly. Sales of proprietary electronic products, which include ProQuest Historical Newspapers, increased 20 percent in 2002. However, fourth quarter results for Information and Learning were also impacted by lower-than-expected sales of non- subscription microfilm backfile products and a decline in corporate reseller business.
"Information and Learning's electronic products had solid growth for the year despite tight library budgets. The fact that XanEdu has a presence in nearly l,000 universities and Historical Newspapers has more than 1,000 subscribers is validation of these new products and our electronic publishing strategy," said Aldworth.
Business Solutions
At Business Solutions, full year revenues increased 8 percent to $178.9 million, compared with $165.6 million in 2001. EBIT for 2002 increased 23 percent to $52.1 million, compared with pro forma EBIT of $42.4 million for fiscal 2001. Business Solutions' fourth quarter revenues increased 10 percent to $47.7 million, compared with $43.2 million during the same period last year. EBIT for the fourth quarter increased 25 percent to $15.0 million, as compared with fourth quarter 2001 pro forma EBIT of $12.0 million.
Year in Review
ProQuest took several important strategic steps to continue its growth during fiscal 2002. At Business Solutions, long-term agreements were initiated or renewed with DaimlerChrysler, Mazda, Isuzu and Deere & Co. The installation of the company's NXC product for General Motors Europe was completed and is available to General Motors' 3,000 European dealers. Also, nearly 1,000 new dealers switched to the ProQuest EPC solution.
ProQuest Information and Learning completed the digitization of the Wall Street Journal and The New York Times and signed more than 1,000 ProQuest Historical Newspapers subscribers. Information and Learning also broadened its content holdings with new and renewed licensing agreements with major publishers. For example, ProQuest announced agreements with well-respected publishers such as Tribune Company, Kluwer Academic Publishers, John Wiley & Sons, Inc., and the MIT Sloan Management Review.
ProQuest made many significant positive changes to its financial structure in 2002. These improvements decreased the company's interest expense and increased its financial flexibility. The company completed a successful secondary stock offering in the second quarter with net proceeds of $123.3 million used to pay down legacy floating-rate debt. In the third quarter, the balance sheet was strengthened further and annual interest expense was reduced when the company refinanced the remaining legacy debt. ProQuest completed a private placement of $150 million of fixed-rate senior notes with a coupon rate of 5.45 percent. The company also obtained a new $175 million credit facility at an investment-grade interest rate. ProQuest's resulting effective interest rate on borrowings has declined by more than 250 basis points, resulting in a reduction of interest expense of $5 million annually.
"ProQuest's goals for 2003 are to generate strong revenue growth, maintain high profit margins and significantly increase free cash flow. We will do this by delivering innovative products in the education, library, automotive, and powersports markets. Our goals for 2003 are reasonable and attainable under the current economic and budgetary conditions," added Gregory.
2003 Outlook and Guidance
The company projects total revenue growth for fiscal 2003 of 11 percent to 13 percent, EBIT growth of 11 percent to 14 percent and earnings per share of $1.80 to $1.85. Our guidance assumes no improvement in the state of the economy and continued tightening of budgets for libraries. Net interest expense is estimated to be $19 to $20 million, and we expect an effective tax rate of 36 percent. The company also expects to generate free cash flow of $25 to $30 million. Capital spending is projected to be $50 to $55 million, compared with $58.6 million in 2002.
At Information and Learning, XanEdu is expected to double again to approximately $20 million in revenue for the year. Proprietary electronic database products are expected to increase 8 percent to 10 percent to over $80 million. Also, early in fiscal 2003, Information and Learning completed the acquisition of bigchalk, which expands its presence in the K-12 library and classroom markets. bigchalk is expected to contribute more than $20 million in incremental revenue and be accretive to our earnings for the full year. Sales of traditional microfilm and general reference database products are expected to remain steady. The company also recently announced the appointment of Alfred De Seta, a veteran of the educational publishing industry, as president, ProQuest Education.
For Business Solutions, the company projects growth of approximately 7 percent in the Global Automotive business and 10 percent in the Powersports electronic business. These gains will be slightly offset by a decline in the small legacy microfilm publishing business.
"ProQuest continues to create innovative new products, which have resulted in subscription renewal rates of approximately 90 percent with highly visible core revenues. In summary, we greatly improved our financial strength, and expect to significantly increase operating and free cash flow for 2003. Our business model is strong and our outlook is excellent. ProQuest is well positioned for growth," said Aldworth.
Conference Call
To participate in a conference call and question and answer session regarding fourth quarter and full year results with ProQuest's senior management, call 888-688-0384 (International 706-679-7706), using the password ProQuest Company, at 5:00 p.m. (ET) on Thursday, February 13, 2003. For your convenience, the call will be taped and archived until February 28, 2003 and can be accessed by calling 706-645-9291, and entering ID#7468321. This conference call may also be accessed over the Internet at www.proquestcompany.com or www.streetevents.com . To listen to the live call, please go to the web site at least fifteen minutes early to register, download, and install any necessary audio software. For those who cannot listen to the live broadcast, a replay will be available shortly after the call at the StreetEvents website.
About ProQuest Company
ProQuest Company is based in Ann Arbor, Mich., and is a leading provider of value-added information and content to the library, education, automotive and powersports industries. We provide products and services to our customers through two business segments: Information & Learning and Business Solutions. Through our Information & Learning segment, which primarily serves the library and education markets, we aggregate and publish value-added content from a wide range of sources including newspapers, periodicals and books. Our Business Solutions segment is primarily engaged in the delivery in electronic form of comprehensive parts information to the automotive market. It also provides dealers in the powersports (motorcycle, marine, and RV) markets with management systems that enable them to manage their inventory, customer service and other aspects of their businesses.
Forward-Looking Statements
Some of the statements contained herein constitute forward-looking statements. These statements relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our or our markets' actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. These risks and other factors you should specifically consider include, among other things, the company's ability to successfully integrate acquisitions and reduce costs, global economic conditions, product demand, financial market performance, and other risks listed under "Risk Factors" in our regular filings with the Securities and Exchange Commission. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential," "continue," "projects," "intends" or the negative of such terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially.
PROQUEST COMPANY
RESULTS OF OPERATIONS
(Dollars in Millions, Except Per Share Data)
Year to Date
Pro Forma (1)(3) Pro Forma (2) Actual
Dec. % of Dec. % of Dec. % of
2002 Sales 2001 Sales 2001 Sales
Net sales $428.3 100% $401.6 100% $401.6 100%
Cost of sales (202.8) (47%) (187.0) (47%) (187.0) (47%)
Gross profit 225.5 53% 214.6 53% 214.6 53%
R&D expense (21.5) (5%) (21.4) (5%) (21.4) (5%)
SG&A expense (2) (102.9) (24%) (104.8) (26%) (112.9) (28%)
Corporate expense (11.5) (3%) (11.6) (3%) (11.6) (3%)
89.6 21% 76.8 19% 68.7 17%
Net interest expense:
Interest income 4.8 1% 1.2 1% 1.2 1%
Interest expense (1) (25.8) (6%) (26.2) (7%) (26.2) (7%)
Net interest expense (21.0) (5%) (25.0) (6%) (25.0) (6%)
Earnings before taxes (1)(2) 68.6 16% 51.8 13% 43.7 11%
Income tax expense (3) (24.7) (6%) (19.7) (5%) (16.6) (4%)
Pro Forma net earnings (4) $43.9 10% $32.1 8% $27.1 7%
Shares (Basic) 26.190 23.805 23.805
Shares (Diluted) 26.588 24.077 24.077
EPS (Basic) (4) 1.68 1.35 1.14
EPS (Diluted) (4) 1.65 1.34 1.13
(1) Amounts in 2002 have been adjusted to exclude one-time tax benefit,
settlement of related interest rate swaps, the write-off of remaining
fees on previous revolving credit facility in third quarter of 2002
and the gain on sales of discontinued operations in the fourth
quarter of 2002.
(2) Amounts in 2001 have been adjusted to remove goodwill amortization
to assist in comparing the impact of the adoption of SFAS 142.
(3) Amount in 2002 reflects an effective tax rate for the year of 36%
and excludes one-time tax benefit of $3.6.
(4) Excludes one-time tax benefit, settlement of related interest rate
swaps, loss on sale of assets, equity in loss of affiliate, income
from discontinued operations, and gain on sales of discontinued
operations, as displayed below:
Year to Date
Pro Forma (2) Actual
2002 2001 2001
Diluted Diluted Diluted
EPS EPS EPS
Pro Forma net earnings from
above $43.9 $1.65 $32.1 $1.34 $27.1 $1.13
One-time tax benefit 3.6 0.13 - - - -
Settlement of interest rate
swaps (5.1) (0.19) - - - -
Loss on sale of assets - - (1.4) (0.06) (1.4) (0.06)
Equity in loss of affiliate - - (13.4) (0.56) (13.4) (0.56)
Income from discontinued
operations - - 3.0 0.13 3.0 0.13
Gain on sales of
discontinued operations 0.6 0.02 2.5 0.10 2.5 0.10
Net earnings $43.0 $1.61 $22.8 $0.95 $17.8 $0.74
PROQUEST COMPANY
RESULTS OF OPERATIONS
(Dollars in Millions, Except Per Share Data)
Fourth Quarter
Pro Forma (2) Pro Forma (1) Actual
Dec. % of Dec. % of Dec. % of
2002 Sales 2001 Sales 2001 Sales
Net sales $110.2 100% $106.4 100% $106.4 100%
Cost of sales (51.3) (47%) (49.7) (47%) (49.7) (47%)
Gross profit 58.9 53% 56.7 53% 56.7 53%
R&D expense (6.6) (6%) (5.4) (5%) (5.4) (5%)
SG&A expense (1) (26.1) (23%) (24.7) (23%) (26.7) (25%)
Corporate expense (2.3) (2%) (2.4) (2%) (2.4) (2%)
23.9 22% 24.2 23% 22.2 21%
Net interest expense:
Interest income 2.7 2% 1.0 1% 1.0 1%
Interest expense (5.6) (5%) (7.4) (7%) (7.4) (7%)
Net interest expense (2.9) (3%) (6.4) (6%) (6.4) (6%)
Earnings before taxes (1) 21.0 19% 17.8 17% 15.8 15%
Income tax expense (2) (6.6) (6%) (6.8) (7%) (6.0) (6%)
Net earnings (3) $14.4 13% $11.0 10% $9.8 9%
Shares (Basic) 28.015 24.001 24.001
Shares (Diluted) 28.139 24.425 24.425
EPS (Basic) (3) 0.51 0.46 0.41
EPS (Diluted) (3) 0.51 0.45 0.40
(1) Amounts in 2001 have been adjusted to remove goodwill amortization
to assist in comparing the impact of the adoption of SFAS 142.
(2) Amount in 2002 reflects an effective tax rate for the year of 36%
and excludes one-time tax benefit of $3.6.
(3) Excludes one-time tax benefit, loss on sale of assets, income from
discontinued operations, and gain / (loss) on sales of discontinued
operations, as displayed below:
Fourth Quarter
Pro Forma (1) Actual
2002 2001 2001
Diluted Diluted Diluted
EPS EPS EPS
Pro Forma net earnings from above $14.4 $0.51 $11.0 $0.45 $9.8 $0.40
One-time tax benefit 3.6 0.13 - - - -
Loss on sale of assets - - (1.4) (0.06) (1.4) (0.06)
Income from discontinued
operations - - 0.1 - 0.1 -
Gain / (loss) on sales of
discontinued operations 0.6 0.02 (5.9) (0.24) (5.9) (0.24)
Net earnings $18.6 $0.66 $3.8 $0.15 $2.6 $0.10
PROQUEST COMPANY
RESULTS OF OPERATIONS
(Dollars in Millions)
Year-to-Date
ProForma % Inc./ Actual
2002 2001 (1) (Dec.) 2001
Net Sales
Information and Learning $249.4 $236.0 6% $236.0
Business Solutions 178.9 165.6 8% 165.6
Total Net Sales $428.3 $401.6 7% $401.6
EBIT (2)
Information and Learning $49.0 $46.0 7% $40.3
Business Solutions 52.1 42.4 23% 40.0
Corp. / Other (11.5) (11.6) (1%) (11.6)
Total EBIT $89.6 $76.8 17% $68.7
EBITDA (3)
Information and Learning $91.6 $86.0 7% $86.0
Business Solutions 56.9 46.8 22% 46.8
Corp. / Other (11.3) (11.1) 2% (11.1)
Total EBITDA $137.2 $121.7 13% $121.7
Other Data
Capital Expenditures $58.6 11% $52.9
Debt, net of cash $185.3 (27%) $253.1
(1) Amounts have been adjusted to remove goodwill amortization to
assist in comparing the impact of the adoption of SFAS 142.
(2) EBIT is defined as earnings from operations before interest and
income taxes, net of nonrecurring items. Nonrecurring items include
loss on sale of assets, equity in loss of affiliate, income from
discontinued operations, and gain on sales of discontinued
operations.
(3) EBITDA is defined as EBIT plus depreciation and amortization.
PROQUEST COMPANY
RESULTS OF OPERATIONS
(Dollars in Millions)
Fourth Quarter
ProForma % Inc./ Actual
2002 2001 (1) (Dec.) 2001
Net Sales
Information and Learning $62.5 $63.2 (1%) $63.2
Business Solutions 47.7 43.2 10% 43.2
Total Net Sales $110.2 $106.4 4% $106.4
EBIT (2)
Information and Learning $11.2 $14.6 (23%) $13.2
Business Solutions 15.0 12.0 25% 11.4
Corp. / Other (2.3) (2.4) (4%) (2.4)
Total EBIT $23.9 $24.2 (1%) $22.2
EBITDA (3)
Information and Learning $22.4 $24.4 (8%) $24.4
Business Solutions 16.2 13.1 24% 13.1
Corp. / Other (2.2) (2.3) (4%) (2.3)
Total EBITDA $36.4 $35.2 3% $35.2
Other Data
Capital Expenditures $16.1 3% $15.6
(1) Amounts have been adjusted to remove goodwill amortization to
assist in comparing the impact of the adoption of SFAS 142.
(2) EBIT is defined as earnings from operations before interest and
income taxes, net of nonrecurring items. Nonrecurring items include
equity in loss of affiliate, income from discontinued operations, and
loss on sale of discontinued operations.
(3) EBITDA is defined as EBIT plus depreciation and amortization.
PROQUEST COMPANY AND SUBSIDIARIES
CONDENSED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
ASSETS
December 28, December 29,
2002 2001
Cash and cash equivalents $1,782 $495
Accounts receivable 103,517 89,726
Inventory 4,909 4,441
Other current assets 25,806 33,283
Total current assets 136,014 127,945
Net property, plant, equipment and
product masters 173,230 154,029
Long-term receivables 4,635 23,200
Goodwill 247,354 231,533
Other assets 100,633 89,226
Total Assets $661,866 $625,933
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes payable $62 $564
Current maturities of long-term debt - 292
Accounts payable 38,055 40,469
Accrued expenses 28,090 85,740
Short-term deferred income 26,738 28,948
Deferred income 109,865 111,915
Total current liabilities 202,810 267,928
Long-term debt 187,000 252,782
Long-term deferred income 51,071 59,933
Other liabilities 91,228 90,362
Total long-term liabilities 329,299 403,077
Total shareholders' equity (deficit) 129,757 (45,072)
Total liabilities and shareholders'
equity $661,866 $625,933
Note: Certain reclassifications to the 2001 consolidated financial
statements have been made to conform to the 2002 presentation.
PROQUEST COMPANY AND SUBSIDIARIES
CONDENSED CASH FLOW SCHEDULE
(DOLLARS IN THOUSANDS)
Year Ended Fourth Quarter
December December December December
28, 29, 28, 29,
2002 2001 2002 2001
Operating activities:
Net Earnings (Pro Forma Adjusted
Earnings - 2001 (1)) $42,380 $32,144 17,990 11,095
Adjustments to reconcile net
earnings to net cash
provided by operating activities:
Depreciation and amortization (2) 47,648 45,407 12,591 10,868
Deferred income taxes 7,299 5,419 1,759 2,340
Interest expense due to swap
settlement 7,414 - - -
Changes in operating assets and
liabilities:
Accounts receivable, net (4,732) (11,882) 19,497 16,067
Inventory (389) 556 (741) 595
Other current assets (4,713) (10,075) 5,442 2,966
Long-term receivables (3,185) - (1,905) 517
Other assets 818 6,832 (1,809) (2,482)
Software and content licenses (24,188) (25,039) (2,244) (5,380)
Accounts payable (3,873) 735 (2,366) 4,737
Accrued expenses (9,466) (14,958) (8,866) (10,729)
Deferred income (7,747) (4,615) 4,831 (7,680)
Deferred income - monetized
contracts (11,072) 233 (1,125) 5,033
Other long-term liabilities (1,322) (2,080) 337 (6,930)
Other, net 503 5,784 42 2,840
Net cash provided by continuing
operations 35,375 28,461 43,433 23,857
Changes in working capital items
related to discontinued operations (16,770) - (1,159) -
Net cash provided by operations 18,605 28,461 42,274 23,857
Investing activities:
Expenditures for property, plant,
equipment and product masters (58,646) (52,924) (16,114) (15,598)
Acquisitions, net of cash acquired (8,393) (27,803) (3,642) (9,998)
Proceeds from asset sales - 100 - 100
Proceeds from sales of discontinued
operations - 286,928 - -
Net cash (used in) provided by
investing activities (67,039) 206,301 (19,756) (25,496)
Financing activities:
Net decrease in short-term debt (830) (14,344) (3) (418)
Cash paid for settlement of interest
rate swap contracts (9,765) - - -
Repayment of long-term debt (66,074) (249,213) (22,499) (121,500)
Proceeds from sales of common stock,
net 128,418 11,169 540 4,362
Net cash provided by (used in)
financing activities 51,749 (252,388) (21,962) (117,556)
Net cash used in discontinued
operations - 12,923 - 5,108
Effect of exchange rate changes on
cash (2,028) (428) 116 5
Increase (decrease) in cash and cash
equivalents 1,287 (5,131) 672 (114,082)
Cash and cash equivalents, beginning
of period 495 5,626 1,110 114,577
Cash and cash equivalents, end of
period $1,782 $495 $1,782 $495
(1) In 2001, amounts have been adjusted for the equity in loss of
affiliate, loss on sale of assets and to remove goodwill amortization
to assist in comparing the impact of the adoption of SFAS 142.
(2) In 2001, amounts have been adjusted to remove goodwill amortization to
assist in comparing the impact of the adoption of SFAS 142.
Note: Certain reclassifications to the 2001 consolidated financial
statements have been made to conform to the 2002 presentation.
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