ProQuest Reports Revenue Growth of 6 Percent and Earnings Per Share Of $0.43 for the Second Quarter of 2003
ANN ARBOR, Mich., July 22 -- ProQuest Company , a leading publisher of information solutions and content for the library, classroom, automotive and powersports markets, today reported year- over-year growth in revenue, earnings and free cash flow for the second quarter ended June 28, 2003.
"We secured important new contracts in the second quarter at both our business segments. Our electronic products continue to perform well. However, we are still operating in an environment where tight library budgets are having a significant impact on sales of non-subscription microfilm backfile products," said Alan Aldworth, president and chief executive officer of ProQuest Company.
Second Quarter 2003 Highlights
* Revenues were $115.1 million, compared with $109.0 million in the second quarter of 2002.
* EBIT was $23.7 million for the quarter, compared with 2002 second quarter EBIT of $23.3 million.
* Net earnings for the quarter increased 21 percent to $12.3 million, or $0.43 per fully diluted share, compared with net earnings of $10.2 million or $0.40 per fully diluted share one year ago.
* Free cash flow, which the company defines as operating cash flow less capital expenditures and software spending, was a use of $15.9 million for the quarter, compared with a use of $17.6 million in the second quarter of 2002, an improvement of $1.7 million.
* Capital expenditures were $8.8 million, compared to $14.2 million for the second quarter of 2002, a reduction of 38 percent.
* Software spending was $3.4 million, compared to $6.6 million for the second quarter of 2002, a reduction of 48 percent.
* At June 28, 2003, debt, net of cash and cash equivalents was $217.3 million, an increase of $11.7 million over the first quarter of 2003.
ProQuest Information and Learning
Information and Learning's second quarter revenues increased 6 percent to $68.9 million, compared with $65.0 million one year ago. Second quarter EBIT of $13.4 million increased 2 percent compared with $13.1 million in the year- ago quarter. "As expected, EBIT growth was impacted by a $2.8 million increase in depreciation and amortization expense compared to the second quarter of 2002," said Kevin Gregory, senior vice president and chief financial officer of ProQuest Company. "This additional depreciation and amortization is the result of investments for new products that are entering the market," added Gregory.
Product Line Detail
Sales of classroom products in the quarter increased 93 percent over the prior year to $2.1 million. Information and Learning's electronic products also continued to perform well in the second quarter of 2003. Sales of published products grew 7 percent over the prior year, to $24.0 million for the quarter. Sales of general reference products increased by 32 percent to $18.2 million, mainly as a result of Bigchalk revenues.
"The integration of Bigchalk was completed in the second quarter as planned," said Kevin Gregory. "Bigchalk products contributed to both revenue and EBIT in the second quarter, and during the second half of this year their margin contribution should be similar to other Information and Learning electronic products," Gregory added.
Sales of traditional products were $24.7 million, an 11 percent decline compared to the second quarter of 2002. This was the result of lower sales of non-subscription microfilm as tight library budgets caused a decline in archival backfile purchases.
Information and Learning Highlights
* Introduced the next-generation interface for ProQuest database products. This new interface is easier to use and more powerful than ever.
* Gained rights to add 30 distinguished University of California Press journals to the ProQuest online information service.
* Completed the digitization of The Washington Post for ProQuest Historical Newspapers.
* As announced yesterday, acquired SIRS Publishing, Inc., the highly respected publisher of SIRS Researcher, SIRS Discoverer and SIRS Enduring Issues.
ProQuest Business Solutions
At Business Solutions, second quarter revenues increased 5 percent to $46.2 million, compared with $44.0 million in the second quarter of 2002. Second quarter 2003 EBIT was $13.8 million, an increase of 5 percent over EBIT of $13.1 million in the second quarter of 2002.
Product Line Detail
Business Solutions' second quarter results were driven by sales of automotive parts and service products, which were up 4 percent to $30.3 million, and sales of dealership performance management products, which increased 16 percent to $8.4 million. Sales of Powersports' electronic products grew 2 percent to $6.7 million.
Business Solutions Highlights
* Awarded a contract by General Motors Europe to provide Standards Monitoring for the GM brand family (Opel, Vauxhall, Saab and Daewoo) across Europe, to assist with compliance with the European Common Market's new competition regulations.
* Signed a new contract to provide electronic parts and service products to the 12,000 dealerships of Tecumseh Engine & Transmission Group.
* Selected by Ingersoll-Rand Air Solutions to provide its Internet-based parts identification system.
* Signed a letter of intent with Mitsubishi Motors Corporation to develop an automotive electronic parts catalog for their dealers worldwide.
Consolidated First Half 2003 Highlights
* Revenues were up 7 percent to $226.9 million, compared with $211.7 million in the first half of 2002.
* EBIT was $45.9 million for the first half, an increase of 5 percent over 2002 first half EBIT of $43.8 million.
* Net earnings for the first half increased 28 percent to $23.5 million, or $0.84 per fully diluted share, compared with net earnings of $18.4 million or $0.74 per fully diluted share one year ago.
* First half free cash flow was a use of $10.7 million, an improvement of $32.1 million over the first half of 2002.
2003 Outlook and Guidance
For the third quarter of 2003, the company projects revenue growth in the range of 10 to 15 percent compared to the same quarter in 2002. Earnings per share in the third quarter of 2003 are projected within a range of $0.40 to $0.50.
For the full year, ProQuest confirms its previous guidance of 11 to 13 percent revenue growth, EPS of $1.80 to $1.85, and free cash flow of $35 to $40 million. The company also continues to project capital spending of $50 to $55 million, and software spending of $11 to $13 million for 2003.
"We are continuing to see pressure on top line revenue growth as the education economy shows no sign of improvement and library budgets remain tight. However, we believe our guidance is realistic and achievable. We remain confident in our ability to produce earnings per share of $1.80 to $1.85, and free cash flow of $35 to $40 million for 2003," said Alan Aldworth.
Basis of Presentation
The financial results in this press release are presented in accordance with generally accepted accounting principles (GAAP), except for references to earnings before interest and taxes (EBIT), which excludes interest and income taxes; earnings before interest, taxes, depreciation and amortization (EBITDA), which excludes interest, income taxes, depreciation and amortization; debt, net of cash and cash equivalents (net debt); and free cash flow. Reconciliations of non-GAAP amounts to the company's GAAP results follows.
EBIT and free cash flow are key metrics used by ProQuest Company to assess the performance of its business segments. Free cash flow also provides a measure of the company's cash flows after all operational expenditures. EBITDA provides useful information about how ProQuest Company's management assesses the company's ability to fund working capital items and capital expenditures as well as service its debt. The company's ability to fund working capital items, fund capital expenditures and service debt in the future, however, may be affected by other operating or legal requirements. EBITDA is also a component of ProQuest's debt covenants under both its senior notes and revolving credit facility. Debt, net of cash and cash equivalents, provides a source of consistent measurement from period to period of the company's outstanding debt commitments, net of any cash on hand that may be utilized to pay down the debt balance.
Conference Call
To participate in a conference call and question and answer session regarding second quarter 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 Tuesday, July 22, 2003. For your convenience, the call will be taped and archived until August 1, 2003 and can be accessed by calling 706-645-9291, and entering ID#1098594. 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 publisher of value-added information and content for the library, classroom, automotive and powersports markets. 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 classroom 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 and service information to the automotive market. It also provides dealers in the powersports (motorcycle, marine, RV and outdoor power) 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," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential," "continue," "projects," "intends," "prospects," "priorities," or the negative of such terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially.
PROQUEST COMPANY AND SUBSIDIARIES
RESULTS OF OPERATIONS
(In Millions, Except Per Share Data)
Second Quarter Ended
June % of June % of
2003 Sales 2002 Sales
Net sales $115.1 100% $109.0 100%
Cost of sales (57.9) (50%) (51.6) (47%)
Gross profit 57.2 50% 57.4 53%
R&D expense (4.0) (3%) (5.5) (5%)
SG&A expense (26.0) (23%) (25.7) (24%)
Corporate expense (3.5) (3%) (2.9) (3%)
Earnings from operations before
interest and income taxes 23.7 21% 23.3 21%
Net interest expense:
Interest income 0.2 - 0.6 1%
Interest expense (4.7) (4%) (7.5) (7%)
Net interest expense (4.5) (4%) (6.9) (6%)
Earnings before income taxes 19.2 17% 16.4 15%
Income tax expense (6.9) (6%) (6.2) (6%)
Net earnings $12.3 11% $10.2 9%
Shares (Basic) 28.057 24.620
Shares (Diluted) 28.319 25.153
EPS (Basic) 0.44 0.41
EPS (Diluted) 0.43 0.40
PROQUEST COMPANY AND SUBSIDIARIES
RESULTS OF OPERATIONS
(In Millions, Except Per Share Data)
Year to Date
June % of June % of
2003 Sales 2002 Sales
Net sales $226.9 100% $211.7 100%
Cost of sales (113.9) (50%) (99.4) (47%)
Gross profit 113.0 50% 112.3 53%
R&D expense (9.0) (4%) (10.5) (5%)
SG&A expense (51.5) (23%) (52.0) (25%)
Corporate expense (6.6) (3%) (6.0) (3%)
Earnings from operations before
interest and income taxes 45.9 20% 43.8 20%
Net interest expense:
Interest income 0.4 - 1.1 1%
Interest expense (9.5) (4%) (15.2) (7%)
Net interest expense (9.1) (4%) (14.1) (6%)
Earnings before income taxes 36.8 16% 29.7 14%
Income tax expense (13.3) (6%) (11.3) (5%)
Net earnings $23.5 10% $18.4 9%
Shares (Basic) 28.034 24.375
Shares (Diluted) 28.155 24.913
EPS (Basic) 0.84 0.76
EPS (Diluted) 0.84 0.74
PROQUEST COMPANY AND SUBSIDIARIES
RESULTS OF OPERATIONS
(In Millions)
Second Quarter Ended
June June % Inc./
2003 2002 (Dec.)
Net Sales
Information and Learning $68.9 $65.0 6%
Business Solutions 46.2 44.0 5%
Total Net Sales $115.1 $109.0 6%
EBIT (1), (3)
Information and Learning $13.4 $13.1 2%
Business Solutions 13.8 13.1 5%
Corp. / Other (3.5) (2.9) (21%)
Total EBIT $23.7 $23.3 2%
EBITDA (2), (3)
Information and Learning $26.5 $23.4 13%
Business Solutions 15.2 14.4 6%
Corp. / Other (3.5) (2.9) (21%)
Total EBITDA $38.2 $34.9 9%
Other Data
Capital Expenditures $8.8 $14.2 (38%)
Software spending $3.4 $6.6 (48%)
(1) EBIT is defined as earnings from operations before interest and
income taxes.
(2) EBITDA is defined as EBIT plus depreciation and amortization.
(3) See "Reconciliation of Non-GAAP Measures."
PROQUEST COMPANY AND SUBSIDIARIES
RESULTS OF OPERATIONS
(In Millions)
Year to Date
June June % Inc./
2003 2002 (Dec.)
Net Sales
Information and Learning $134.7 $125.2 8%
Business Solutions 92.2 86.5 7%
Total Net Sales $226.9 $211.7 7%
EBIT (1), (3)
Information and Learning $26.2 $25.9 1%
Business Solutions 26.3 23.9 10%
Corp. / Other (6.6) (6.0) (10%)
Total EBIT $45.9 $43.8 5%
EBITDA (2), (3)
Information and Learning $52.7 $46.9 12%
Business Solutions 29.1 26.6 9%
Corp. / Other (6.5) (6.0) (8%)
Total EBITDA $75.3 $67.5 12%
Other Data
Capital Expenditures $25.2 $29.8 (15%)
Software spending $9.1 $11.7 (22%)
Debt, net of cash and cash
equivalents (3) $217.3 $191.2 14%
(1) EBIT is defined as earnings from operations before interest and
income taxes.
(2) EBITDA is defined as EBIT plus depreciation and amortization.
(3) See "Reconciliation of Non-GAAP Measures."
RECONCILIATION OF NON-GAAP MEASURES
(In Millions)
Reconciliations of non-GAAP measures to GAAP measures:
EBITDA & EBIT
Second Quarter Ended June 2003
Corp./
PQIL PQBS Other Total
EBITDA $26.5 $15.2 $(3.5) $38.2
Less: Depreciation & Amortization (13.1) (1.4) - (14.5)
EBIT $13.4 $13.8 $(3.5) $23.7
Less: Net Interest Expense (4.5)
Less: Income Tax Expense (6.9)
Net Earnings $12.3
Second Quarter Ended June 2002
Corp./
PQIL PQBS Other Total
EBITDA $23.4 $14.4 $(2.9) $34.9
Less: Depreciation & Amortization (10.3) (1.3) - (11.6)
EBIT $13.1 $13.1 $(2.9) $23.3
Less: Net Interest Expense (6.9)
Less: Income Tax Expense (6.2)
Net Earnings $10.2
Year to Date June 2003
Corp./
PQIL PQBS Other Total
EBITDA $52.7 $29.1 $(6.5) $75.3
Less: Depreciation & Amortization (26.5) (2.8) (0.1) (29.4)
EBIT $26.2 $26.3 $(6.6) $45.9
Less: Net Interest Expense (9.1)
Less: Income Tax Expense (13.3)
Net Earnings $23.5
Year to Date June 2002
Corp./
PQIL PQBS Other Total
EBITDA $46.9 $26.6 $(6.0) $67.5
Less: Depreciation & Amortization (21.0) (2.7) - (23.7)
EBIT $25.9 $23.9 $(6.0) $43.8
Less: Net Interest Expense (14.1)
Less: Income Tax Expense (11.3)
Net Earnings $18.4
Debt, net of cash and cash equivalents
June December June
2003 2002 2002
Long-term debt, less current
maturities $218.0 $187.0 $200.0
Current maturities of long-term debt - - 0.2
Notes payable - 0.1 -
Less: Cash and cash equivalents (0.7) (1.8) (9.0)
Net debt $217.3 $185.3 $191.2
Free cash flow
Second Quarter
Ended Year to Date
June June June June
2003 2002 2003 2002
Free cash flow $(15.9) $(17.6) $(10.7) $(42.8)
Expenditures for software 3.4 6.6 9.1 11.7
Expenditures for property, plant,
equipment
and product masters 8.8 14.2 25.2 29.8
Net cash (used in) provided by
operating activities $(3.7) $3.2 $23.6 $(1.3)
PROQUEST COMPANY AND SUBSIDIARIES
CONDENSED BALANCE SHEETS
(In Thousands)
ASSETS
June 28, December 28, June 29,
2003 2002 2002
Cash and cash equivalents $728 $1,782 $8,986
Accounts receivable, net 79,224 103,517 73,200
Inventory, net 5,367 4,909 4,407
Other current assets 34,260 25,475 38,810
Total current assets 119,579 135,683 125,403
Net property, plant, equipment and
product masters 177,904 173,230 163,385
Long-term receivables 4,775 4,635 24,997
Goodwill 267,642 247,354 240,029
Intangibles, net 7,773 692 -
Other assets 83,913 69,923 95,158
Total assets $661,586 $631,517 $648,972
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Notes payable $- $62 $-
Current maturities of long-term debt - - 218
Accounts payable 33,544 38,055 35,181
Accrued expenses 28,551 28,090 53,137
Current portion of monetized future
billings 26,071 26,738 27,982
Deferred income 87,002 109,865 78,496
Total current liabilities 175,168 202,810 195,014
Long-term debt, less current
maturities 218,000 187,000 200,015
Monetized future billings 48,254 51,071 53,702
Other liabilities 60,115 60,880 98,528
Total long-term liabilities 326,369 298,951 352,245
Total shareholders' equity 160,049 129,756 101,713
Total liabilities and shareholders'
equity $661,586 $631,517 $648,972
Note: Certain reclassifications to the June 2002 consolidated financial
statements have been made to conform to the December 2002 and June 2003
presentation.
PROQUEST COMPANY AND SUBSIDIARIES
CONDENSED CASH FLOW SCHEDULE
(In Thousands)
Year to Date Second Quarter Ended
June 28, June 29, June 28, June 29,
2003 2002 2003 2002
Operating activities:
Net earnings $23,523 $18,429 $12,287 $10,151
Adjustments to reconcile net
earnings to net cash provided
by operating activities:
Depreciation and amortization 29,409 23,649 14,515 11,532
Deferred income taxes 15,163 3,140 5,551 4,306
Changes in operating assets and
liabilities, net of acquisitions:
Accounts receivable, net 25,118 12,542 (54) 2,372
Inventory, net (430) 74 400 65
Other current assets (1,978) (5,000) 306 (408)
Long-term receivables (140) (1,797) (1,285) (795)
Other assets (234) 4,817 1,056 5,995
Accounts payable (7,786) (5,632) (2,989) (1,954)
Accrued expenses (14,808) (7,020) (8,032) 1,937
Deferred income (40,410) (37,539) (23,025) (21,228)
Other long-term liabilities (2,235) (1,933) (574) 143
Other, net (1,575) (5,045) (1,844) (8,914)
Net cash provided by (used in)
operations 23,617 (1,315) (3,688) 3,202
Investing activities:
Expenditures for property, plant,
equipment and product masters (25,194) (29,784) (8,773) (14,196)
Expenditures for software (9,110) (11,665) (3,394) (6,534)
Acquisitions, net of cash acquired (23,804) (2,617) - -
Expenditures for discontinued
operations (1,708) (12,611) (1,708) (11,165)
Net cash used in investing
activities (59,816) (56,677) (13,875) (31,895)
Financing activities:
Net decrease in short-term debt (87) (770) (34) (272)
Proceeds from long-term debt 285,400 110,750 145,450 78,150
Repayment of long-term debt (254,400) (163,591) (136,750) (163,516)
Monetized future billings (3,484) (7,854) (2,362) (3,955)
Repurchases of common stock (1,328) - (403) -
Proceeds from sales of common
stock, net - 123,295 - 123,295
Proceeds from exercise of stock
options, net 8,378 4,330 8,199 1,907
Net cash provided by financing
activities 34,479 66,160 14,100 35,609
Effect of exchange rate changes on
cash 666 323 475 426
(Decrease) Increase in cash and
cash equivalents (1,054) 8,491 (2,988) 7,342
Cash and cash equivalents,
beginning of period 1,782 495 3,716 1,644
Cash and cash equivalents, end of
period $728 $8,986 $728 $8,986
Note: Certain reclassifications to the 2002 cash flow statement have been
made to conform to the 2003 presentation.
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