ProQuest Company Reports 11 Percent Earnings Growth for the Third Quarter of 2004
Also Announces Board Approval of up to $40 Million Share Repurchase
ANN ARBOR, Mich., Oct. 21 -- ProQuest Company , a leading electronic publisher of information solutions for the education and automotive markets, today reported a modest increase in revenue accompanied by strong growth in earnings for the third fiscal quarter ended October 2, 2004.
"Our earnings performance was in line with our expected 10 to 13 percent growth. Revenue from our published products continues to show healthy growth. However, declines in revenue from general reference databases and non- recurring revenue products continue to pressure overall revenue growth," said Alan Aldworth, ProQuest Company's chairman and chief executive officer. "The strategic initiatives that will drive ProQuest Company's long-term growth are: investing in our electronic publishing business, making acquisitions that strengthen and extend our product lines and market reach, and continuing to make productivity improvements. We continue to make progress on each of these initiatives," added Aldworth.
Third Quarter Financial Results
As previously disclosed, ProQuest Company sold its powersports dealer management system business during the second quarter of 2004. In accordance with generally accepted accounting principles (GAAP), income statement amounts for 2004 and 2003 have been adjusted to classify the results of this business as a discontinued operation.
* Revenue from continuing operations increased to $113.1 million, from $112.3 million in the prior year's third quarter.
* EBIT from continuing operations (earnings from continuing operations before interest and income taxes) increased 7 percent to $22.5 million, from $21.0 million in the third quarter of 2003.
* EBITDA from continuing operations (earnings from continuing operations before interest, income taxes, depreciation and amortization) increased 14 percent over the third quarter of 2003 to $41.7 million, from $36.7 million in the third quarter of 2003.
* Earnings from continuing operations increased 11 percent to $12.2 million or $0.42 per fully diluted share, versus earnings from continuing operations of $11.0 million or $0.38 per fully diluted share in the third quarter of fiscal 2003.
* Operating cash flow of $24.6 million was generated in the third quarter, versus $34.0 million generated in the prior year's third quarter.
* Expenditures for property, plant, equipment, product masters and software were $13.6 million, versus $19.2 million in the prior year's third quarter.
* Free cash flow (operating cash flow less expenditures for property, plant, equipment, product masters and software, and plus proceeds from fixed asset dispositions) of $11.9 million was generated in the third quarter compared to $14.8 million generated in the third quarter of fiscal 2003.
"Overall we had mixed results for the quarter. Earnings growth was strong, however, revenue growth during the quarter was less than anticipated," said Kevin Gregory, senior vice president and chief financial officer of ProQuest Company. "At Information and Learning, third quarter revenue growth remained consistent with the growth seen in the first two quarters. The strong revenue growth from published products and the normal uptick in sales at the start of the new school year was not enough to offset the continued declines in our general reference products. While recurring revenue is strong at Business Solutions, we experienced declines in non-recurring hardware and contract development revenue," Gregory added.
"Similar to the first quarter, our third quarter ended several days later in 2004 than in the prior year. This resulted in disbursements totaling approximately $8 million being made in the third quarter of 2004 that were made in the fourth quarter in 2003. We expect this quarter-over-quarter decrease in free cash flow to be reversed in the fourth quarter," Gregory said.
Consolidated First Nine Months 2004 Financial Results
* Revenue from continuing operations increased 2 percent to $336.1 million compared to $330.6 million in the first nine months of 2003.
* EBIT from continuing operations (earnings from continuing operations before interest and income taxes) increased 4 percent over the first nine months of 2003 to $67.0 million, versus $64.2 million for the first nine months of 2003.
* EBITDA (earnings from continuing operations before interest, income taxes, depreciation and amortization) increased 9 percent to $118.3 million compared to $109.0 million for the first nine months of 2003.
* Earnings from continuing operations increased 9 percent to $35.9 million or $1.25 per fully diluted share, versus earnings from continuing operations of $32.9 million or $1.16 per fully diluted share in the first nine months of fiscal 2003.
* Operating cash flow of $43.2 million was generated in the first nine months of 2004, compared to $45.3 million (excluding the 2003 tax court refund of $13.1 million) generated in the prior year's first nine months.
* Expenditures for property, plant, equipment, product masters and software were $52.6 million, compared to $53.6 million in the prior year's first nine months.
* Free cash flow (operating cash flow less expenditures for property, plant, equipment, product masters and software, and plus proceeds from fixed asset dispositions) was a use of $8.5 million, compared to a use of $8.3 million (excluding the 2003 tax court refund of $13.1 million) in the prior year.
"After three quarters, earnings and cash flow are in line with our expectations. We expect full year revenue growth will be in line with, or slightly better than, year-to-date growth rates, which is below our original guidance of 5 to 7 percent growth," said Gregory. "We expect earnings growth to remain in the 10 to 13 percent range, and free cash flow generation equal to 75 to 90 percent of net earnings," Gregory added.
Share Repurchase Authorized
The company also announced that its board of directors has approved a stock repurchase plan which authorizes the company to repurchase up to $40 million in ProQuest Company shares.
"Management and the Board believe that ProQuest will continue to generate significant free cash flow, and at current prices a repurchase of ProQuest shares will generate a very good return," said Kevin Gregory. "This does not represent a change in our acquisition strategy, and we will continue to seek acquisitions that create long-term, profitable growth for ProQuest Company," Gregory added.
Basis of Presentation
The financial results in this press release are presented in accordance with GAAP, except for references to earnings from continuing operations before interest and income taxes (EBIT), which excludes interest, income taxes and discontinued operations; earnings from continuing operations before interest, income taxes, depreciation and amortization (EBITDA), which excludes interest, income taxes, depreciation and amortization and discontinued operations; and free cash flow. Reconciliations of non-GAAP amounts to the company's GAAP results are attached, and can also be found on the ProQuest Company website at http://www.proquestcompany.com/ .
EBIT and free cash flow are key metrics used by ProQuest Company to assess the performance of its business segments. The company defines free cash flow as operating cash flow from continuing operations less expenditures for property, plant, equipment, product masters and software, and plus proceeds from fixed asset dispositions. Free cash flow 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 and comply with the terms of its debt agreements. 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.
Conference Call
To participate in a conference call and question and answer session regarding the third 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 Thursday, October 21, 2004. For your convenience, the call will be taped and archived until October 29, 2004 and can be accessed by calling 706-645-9291, and entering ID#9915321. This conference call may also be accessed over the Internet at http://www.proquestcompany.com/ or http://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 http://www.proquestcompany.com/ website.
About ProQuest Company
ProQuest Company is based in Ann Arbor, Mich., and is a leading publisher of information solutions for the education, automotive and power equipment markets. We provide products and services to our customers through two business segments: Information and Learning and Business Solutions. Through our Information and Learning segment, which primarily serves the education market, we collect, organize and publish 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. Its products transform complex technical data, like parts catalogs and service manuals, into easily accessed electronic information. For the world's automotive manufacturers and their dealer networks, ProQuest also secures business-to-business information and retail performance management services. ProQuest Company was recently named one of the nation's 200 best small companies by Forbes magazine, and one of the 100 fastest growing technology companies in the United States by Business 2.0 magazine.
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 CONTINUING OPERATIONS
(In Millions, Except Per Share Data)
Third Quarter Ended
October 2, % of September 27, % of
2004 Sales 2003 (1) Sales
Net sales $113.1 100% $112.3 100%
Cost of sales (57.3) (51%) (55.5) (49%)
Gross profit 55.8 49% 56.8 51%
R&D expense (4.0) (3%) (4.3) (4%)
SG&A expense (27.2) (24%) (27.8) (25%)
Corporate expense (3.0) (3%) (3.7) (3%)
Other income (2) 0.9 1% - -
Earnings from continuing operations
before interest and income taxes 22.5 20% 21.0 19%
Net interest expense:
Interest income 0.3 - 0.7 -
Interest expense (4.6) (4%) (4.7) (4%)
Net interest expense (4.3) (4%) (4.0) (4%)
Earnings from continuing operations
before income taxes 18.2 16% 17.0 15%
Income tax expense (6.0) (5%) (6.0) (5%)
Net earnings from continuing
operations $12.2 11% $11.0 10%
Shares (Basic) 28.588 28.315
Shares (Diluted) 28.815 28.625
EPS (Basic) 0.43 0.38
EPS (Diluted) 0.42 0.38
(1) Amounts have been adjusted to exclude earnings from discontinued operations as displayed below:
Third Quarter Ended
September 27, 2003
Diluted
EPS
Reported earnings $11.8 $0.41
Earnings from discontinued operations, net (0.8) (0.03)
Net earnings from continuing operations $11.0 $0.38
(2) This amount relates to a benefit from a reduction in storage units as a result of our efficiency initiatives. Proceeds from units disposed of were $0.9 million.
PROQUEST COMPANY AND SUBSIDIARIES
RESULTS OF CONTINUING OPERATIONS
(In Millions, Except Per Share Data)
Year to Date
October 2, % of September 27, % of
2004 (1) Sales 2003 (1) Sales
Net sales $336.1 100% $330.6 100%
Cost of sales (168.6) (50%) (166.0) (50%)
Gross profit 167.5 50% 164.6 50%
R&D expense (12.5) (4%) (13.1) (4%)
SG&A expense (78.7) (23%) (76.9) (23%)
Corporate expense (10.2) (3%) (10.4) (3%)
Other income (2) 0.9 - - -
Earnings from continuing
operations before
interest and income taxes 67.0 20% 64.2 20%
Net interest expense:
Interest income 1.2 - 1.1 -
Interest expense (13.6) (4%) (14.1) (4%)
Net interest expense (12.4) (4%) (13.0) (4%)
Earnings from continuing
operations before income taxes 54.6 16% 51.2 16%
Income tax expense (18.7) (5%) (18.3) (6%)
Net earnings from continuing
operations (1) $35.9 11% $32.9 10%
Shares (Basic) 28.494 28.128
Shares (Diluted) 28.806 28.306
EPS (Basic) 1.26 1.17
EPS (Diluted) (1) 1.25 1.16
(1) Amounts have been adjusted to exclude earnings from discontinued operations and a gain on sale of discontinued operations, as displayed below:
Year to Date
October 2, 2004 September 27, 2003
Diluted Diluted
EPS EPS
Reported earnings $52.1 $1.81 $35.3 1.25
Earnings from discontinued
operations, net (0.9) (0.03) (2.4) (0.09)
Gain on sale of discontinued
operations, net (15.3) (0.53) - -
Net earnings from continuing
operations $35.9 $1.25 $32.9 $1.16
(2) This amount relates to a benefit from a reduction in storage units as a result of our efficiency initiatives. Proceeds from units disposed of were $0.9 million.
PROQUEST COMPANY AND SUBSIDIARIES
RESULTS OF CONTINUING OPERATIONS
(In Millions)
Third Quarter Ended
October 2, % of September 27, % of Inc/(Dec)
2004 Sales 2003 Sales $ %
Net sales
ProQuest Information
and Learning:
Published
Products $27.8 40% $24.4 35% $3.4 14%
General Reference
Products 16.0 22% 18.3 27% (2.3) (13%)
Traditional
Products 21.7 30% 21.0 30% 0.7 3%
Classroom Products 5.8 8% 5.4 8% 0.4 7%
Total ProQuest
Information and
Learning $71.3 100% $69.1 100% $2.2 3%
ProQuest Business
Solutions:
Automotive Group $39.4 94% $40.5 94% $(1.1) (3%)
Power Equipment -
Electronic 2.1 5% 1.8 4% 0.3 17%
Other 0.3 1% 0.3 1% - -
ProQuest Business
Solutions 41.8 100% 42.6 99% (0.8) (2%)
Exited Film
Products - - 0.6 1% (0.6) (100%)
Total ProQuest
Business Solutions $41.8 100% $43.2 100% $(1.4) (3%)
Total Net Sales $113.1 100% $112.3 100% $0.8 1%
EBIT (1), (3)
ProQuest Information
and Learning $12.1 11% $11.4 10% $0.7 6%
ProQuest Business
Solutions 13.4 12% 13.3 12% 0.1 1%
Corporate / Other (3.0) (3%) (3.7) (3%) 0.7 (19%)
Total EBIT $22.5 20% $21.0 19% $1.5 7%
EBITDA (2), (3)
ProQuest Information
and Learning $30.0 27% $25.8 23% $4.2 16%
ProQuest Business
Solutions 14.7 13% 14.6 13% 0.1 -
Corporate / Other (3.0) (3%) (3.7) (3%) 0.7 (19%)
Total EBITDA $41.7 37% $36.7 33% $5.0 14%
Other Data
Capital expenditures
& software spending $13.6 12% $19.2 17% $(5.6)
Long-term debt $194.6 $234.1 $(39.5)
(1) EBIT is defined as earnings from continuing 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 CONTINUING OPERATIONS
(In Millions)
Year to Date
October 2, % of September 27, % of Inc/(Dec)
2004 Sales 2003 Sales $ %
Net sales
ProQuest Information
and Learning:
Published
Products $83.5 40% $67.3 33% $16.2 24%
General Reference
Products 48.6 23% 54.9 27% (6.3) (11%)
Traditional
Products 67.4 32% 71.5 35% (4.1) (6%)
Classroom Products 10.4 5% 10.1 5% 0.3 3%
Total ProQuest
Information and
Learning $209.9 100% $203.8 100% $6.1 3%
ProQuest Business Solutions:
Automotive
Group $119.2 94% $118.2 93% $1.0 1%
Power Equipment -
Electronic 6.1 5% 5.9 5% 0.2 3%
Other 0.9 1% 0.9 1% - -
ProQuest Business
Solutions 126.2 100% 125.0 99% 1.2 1%
Exited Film
Products - - 1.8 1% (1.8) (100%)
Total ProQuest
Business Solutions $126.2 100% $126.8 100% $(0.6) (0%)
Total Net Sales $336.1 100% $330.6 100% $5.5 2%
EBIT (1), (3)
ProQuest Information
and Learning $39.8 12% $37.6 11% $2.2 6%
ProQuest Business
Solutions 37.4 11% 37.0 11% 0.4 1%
Corporate / Other (10.2) (3%) (10.4) (3%) 0.2 (2%)
Total EBIT $67.0 20% $64.2 19% $2.8 4%
EBITDA (2), (3)
ProQuest Information
and Learning $86.1 25% $78.5 24% $7.6 10%
ProQuest Business
Solutions 42.3 13% 40.7 12% 1.6 4%
Corporate / Other (10.1) (3%) (10.2) (3%) 0.1 (1%)
Total EBITDA $118.3 35% $109.0 33% $9.3 9%
Other Data
Capital expenditures
& software spending $52.6 16% $53.6 16% $(1.0)
(1) EBIT is defined as earnings from continuing 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
CONDENSED BALANCE SHEETS
(In Thousands)
ASSETS
October 2, January 3, September 27,
2004 2004 2003
Cash and cash equivalents $970 $4,023 $3,855
Accounts receivable, net 113,476 94,242 127,055
Inventory, net 4,995 4,939 5,551
Other current assets:
Prepaid royalties 25,728 15,188 14,071
Other 30,115 24,558 25,408
Total other current assets 55,843 39,746 39,479
Total current assets 175,284 142,950 175,940
Net property, plant, equipment and
product masters 192,661 180,745 179,662
Long-term receivables 5,599 5,106 4,509
Goodwill 308,214 303,693 300,905
Identifiable intangibles, net 16,377 9,435 7,627
Purchased and developed software, net 46,323 55,005 54,658
Other assets 22,485 27,102 27,020
Total assets $766,943 $724,036 $750,321
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes payable $- $300 $-
Accounts payable 38,811 49,156 48,664
Accrued expenses 39,543 39,428 39,202
Current portion of monetized future
billings 25,219 25,583 24,950
Deferred income 114,392 121,890 123,978
Total current liabilities 217,965 236,357 236,794
Long-term debt, less current
maturities 194,600 191,000 234,050
Monetized future billings, less
current portion 42,194 46,835 47,848
Other liabilities 68,460 62,444 58,517
Total long-term liabilities 305,254 300,279 340,415
Total shareholders' equity 243,724 187,400 173,112
Total liabilities and shareholders'
equity $766,943 $724,036 $750,321
NOTE: Certain reclassifications to the 2003 balance sheets have been made to conform to the 2004 presentation.
PROQUEST COMPANY AND SUBSIDIARIES
CASH FLOW SCHEDULE
(In Thousands)
Third Quarter Ended Year to Date
October 2, September 27, October 2, September 27,
2004 2003 2004 2003
Operating activities:
Earnings from operations $12,189 $11,746 $52,084 $35,269
Adjustments to reconcile
net earnings to net cash
provided by operating
activities:
Gain on sale of
discontinued operations,
net - - (15,338) -
Other income (1) (900) - (900) -
Depreciation and
amortization 19,216 15,875 51,833 45,284
Deferred income taxes 6,209 5,561 17,110 16,915
Changes in operating assets
and liabilities, net of
acquisitions:
Accounts receivable,
net (30,019) (46,323) (18,712) (30,486)
Inventory, net (126) 257 (614) (173)
Other current assets (6,199) (2,893) (14,886) (4,871)
Long-term receivables 169 266 (462) 126
Other assets (241) 160 (229) 660
Accounts payable (2,535) 11,905 (10,275) 4,119
Accrued expenses (2,055) 7,138 (9,281) (7,670)
Deferred income 28,673 31,582 (10,737) (8,828)
Other long-term
liabilities 120 (957) 3,042 (3,192)
Other, net 58 (289) 562 (1,864)
Net cash provided by
operating activities
before tax court refund 24,559 34,028 43,197 45,289
Tax court refund - - - 13,090
Net cash provided by
operating activities 24,559 34,028 43,197 58,379
Investing activities:
Expenditures for property,
plant, equipment, product
masters and software (13,571) (19,254) (52,628) (53,558)
Proceeds from fixed
assets disposition (1) 900 - 900 -
Acquisitions, net of cash
acquired (11,940) (26,824) (23,402) (50,628)
Net proceeds from equity
securities (295) (194) (3,506) (928)
Expenditures associated
with sale of discontinued
operations (74) (342) (2,924) (2,050)
Proceeds from disposition of
discontinued operations - - 35,900 -
Net cash used in investing
activities (24,980) (46,614) (45,660) (107,164)
Financing activities:
Net increase (decrease)
in short-term debt 144 8 (305) (79)
Proceeds from long-term
debt 76,970 160,150 310,670 445,550
Repayment of long-term
debt (75,050) (144,100) (307,070) (398,500)
Monetized future billings (1,217) (1,527) (5,005) (5,011)
Repurchases of common
stock (1,720) - (1,720) (1,328)
Proceeds from exercise
of stock options, net 418 1,198 3,085 9,576
Net cash (used in)
provided by financing
activities (455) 15,729 (345) 50,208
Effect of exchange rate
changes on cash (227) (16) (245) 650
(Decrease) increase in
cash and cash equivalents (1,103) 3,127 (3,053) 2,073
Cash and cash equivalents,
beginning of period 2,073 728 4,023 1,782
Cash and cash equivalents,
end of period $970 $3,855 $970 $3,855
NOTE: Certain reclassifications to the 2003 cash flow statements have been made to conform to the 2004 presentation.
(1) This amount relates to a benefit from a reduction in storage units as a result of our efficiency initiatives.
PROQUEST COMPANY AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP MEASURES
(In Millions)
Reconciliations of non-GAAP measures to GAAP measures:
EBITDA & EBIT
Third Quarter Ended October 2, 2004
PQIL PQBS Corp./Other Total
EBITDA $30.0 $14.7 $(3.0) $41.7
Less: Depreciation & amortization (17.9) (1.3) - (19.2)
EBIT $12.1 $13.4 $(3.0) $22.5
Less:
Net interest expense (4.3)
Income tax expense (6.0)
Earnings from discontinued
operations, net -
Net earnings $12.2
Third Quarter Ended September 27, 2003
PQIL PQBS Corp./Other Total
EBITDA $25.8 $14.6 $(3.7) $36.7
Less: Depreciation & amortization (14.4) (1.3) - (15.7)
EBIT $11.4 $13.3 $(3.7) $21.0
Less:
Net interest expense (4.0)
Income tax expense (6.0)
Earnings from discontinued
operations, net 0.8
Net earnings $11.8
Year to Date Ended October 2, 2004
PQIL PQBS Corp./Other Total
EBITDA $86.1 $42.3 $(10.1) $118.3
Less: Depreciation & amortization (46.3) (4.9) (0.1) (51.3)
EBIT $39.8 $37.4 $(10.2) $67.0
Less:
Net interest expense (12.4)
Income tax expense (18.7)
Earnings from discontinued
operations, net 0.9
Gain on sale of discontinued
operations, net 15.3
Net earnings $52.1
Year to Date Ended September 27, 2003
PQIL PQBS Corp./Other Total
EBITDA $78.5 $40.7 $(10.2) $109.0
Less: Depreciation & amortization (40.9) (3.7) (0.2) (44.8)
EBIT $37.6 $37.0 $(10.4) $64.2
Less:
Net interest expense (13.0)
Income tax expense (18.3)
Earnings from discontinued
operations, net 2.4
Gain on sale of discontinued
operations, net -
Net earnings $35.3
FREE CASH FLOW
Third Quarter Ended Year to Date
October 2, September 27, October 2, September 27,
2004 2003 2004 2003
Net cash provided by
operating activities $24.6 $34.0 $43.2 $58.4
Expenditures for property,
plant, equipment, product
masters and software (13.6) (19.2) (52.6) (53.6)
Proceeds from fixed assets
disposition 0.9 - 0.9 -
Free cash flow $11.9 $14.8 $(8.5) $4.8
Less: Tax court refund - - - (13.1)
Free cash flow, net of
tax court refund $11.9 $14.8 $(8.5) $(8.3)
Company News On-Call: http://www.prnewswire.com/comp/108291.html