ProQuest Company Reports 13 Percent Increase in Earnings for 2004
Fourth Quarter Revenue Increased 5 Percent and Earnings Increased 23 Percent
ANN ARBOR, Mich., Feb. 24 -- ProQuest Company , a leading publisher of information solutions for the education and automotive markets, reported increases in revenue and earnings from continuing operations for the 2004 fiscal year ended January 1, 2005.
"Both of our business segments had solid fourth quarter results. We had a strong close to the year and achieved 3 percent revenue growth for 2004," said Alan Aldworth, ProQuest Company's chairman and chief executive officer. "There were many positive developments in the fourth quarter including continued growth in our published products, improved library budgets, and the acquisition of Voyager Expanded Learning. In light of these developments, we expect solid results for 2005," Aldworth added.
Fourth Quarter Financial Results
* Revenue from continuing operations increased 5 percent to $126.7 million from $120.5 million in the prior year's fourth quarter.
* EBIT from continuing operations (earnings from continuing operations before interest and income taxes) increased 17 percent to $29.2 million from $25.0 million in the fourth quarter of 2003.
* EBITDA from continuing operations (earnings from continuing operations before interest, income taxes, depreciation and amortization) increased 21 percent to $48.9 million from $40.4 million in the fourth quarter of 2003.
* Earnings from continuing operations increased 23 percent to $16.8 million or $0.58 per fully diluted share versus $13.7 million or $0.48 per fully diluted share in the fourth quarter of fiscal 2003.
* Operating cash flow was $64.6 million versus $62.7 million in the prior year's fourth quarter.
* Expenditures for property, plant, equipment, product masters and software were $14.2 million versus $17.3 million in the prior year's fourth quarter.
* Free cash flow (operating cash flow less expenditures for property, plant, equipment, product masters and software) was $50.4 million compared to $45.4 million in the fourth quarter of fiscal 2003.
"In the fourth quarter, our published products continued to experience double-digit revenue growth and renewal rates were strong," said Kevin Gregory, senior vice president and chief financial officer of ProQuest Company. "While overall microfilm revenue declined, we had another quarter of increased microfilm backfile sales. Business Solutions revenue showed renewed growth in the fourth quarter, driven primarily by our performance management products," Gregory added.
Consolidated Full Year 2004 Financial Results
* Revenue from continuing operations increased 3 percent to $462.8 million compared to $451.1 million in fiscal 2003.
* EBIT from continuing operations (earnings from continuing operations before interest and income taxes) increased 8 percent to $96.2 million versus $89.2 million for fiscal 2003.
* EBITDA (earnings from continuing operations before interest, income taxes, depreciation and amortization) increased 12 percent to $167.2 million compared to $149.4 million for fiscal 2003.
* Earnings from continuing operations increased 13 percent to $52.7 million or $1.83 per fully diluted share versus $46.7 million or $1.64 per fully diluted share in fiscal 2003.
* Operating cash flow was $107.8 million compared to $108.0 million (excluding the 2003 tax court refund of $13.1 million) for fiscal 2003.
* Expenditures for property, plant, equipment, product masters and software were $66.8 million compared to $70.8 million in fiscal 2003.
* Free cash flow (operating cash flow less expenditures for property, plant, equipment, product masters and software, plus proceeds from fixed asset dispositions) was $41.9 million compared to $37.2 million (excluding the 2003 tax court refund of $13.1 million) for the prior year.
Outlook and Guidance ProQuest expects results within the following parameters for fiscal 2005:
* Revenue of $590 million to $610 million. The significant year-over- year increase is primarily due to the recent acquisition of Voyager.
* Earnings per fully diluted share of $2.20 to $2.40. * Free cash flow of 85 to 100 percent of net earnings. Basis of Presentation
As previously disclosed, ProQuest Company sold its powersports dealer management system business during the second quarter of 2004. As a result of the sale, and 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.
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 follow, 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, 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.
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.
PROQUEST COMPANY AND SUBSIDIARIES
RESULTS OF CONTINUING OPERATIONS
(In Millions, Except Per Share Data)
Fourth Quarter Ended
January 1, % of January 3, % of
2005 (1) Sales 2004 (1) Sales
Net sales $126.7 100% $120.5 100%
Cost of sales (61.7) (49%) (56.0) (46%)
Gross profit 65.0 51% 64.5 54%
R&D expense (4.1) (3%) (5.3) (4%)
SG&A expense (26.1) (21%) (29.0) (24%)
Corporate expense (5.6) (4%) (6.0) (5%)
Other income - - 0.8 -
Earnings from continuing operations
before interest and income taxes 29.2 23% 25.0 21%
Net interest expense:
Interest income 0.3 - 0.3 -
Interest expense (4.4) (3%) (4.6) (4%)
Net interest expense (4.1) (3%) (4.3) (4%)
Earnings from continuing operations
before income taxes 25.1 20% 20.7 17%
Income tax expense (8.3) (7%) (7.0) (6%)
Net earnings from continuing
operations (1) $16.8 13% $13.7 11%
Shares (Basic) 28.574 28.372
Shares (Diluted) 28.868 28.753
EPS (Basic) 0.59 0.48
EPS (Diluted) 0.58 0.48
(1) Amounts have been adjusted to exclude earnings from discontinued operations and a loss on sale of discontinued operations, as displayed below:
Fourth Quarter Ended
January 1, 2005 January 3, 2004
Diluted Diluted
EPS EPS
Reported earnings $14.9 $0.52 $14.5 $0.51
Earnings from discontinued operations,
net - - (0.8) (0.03)
Loss on sale of discontinued
operations, net 1.9 0.06 - -
Net earnings from continuing
operations $16.8 $0.58 $13.7 $0.48
PROQUEST COMPANY AND SUBSIDIARIES
RESULTS OF CONTINUING OPERATIONS
(In Millions, Except Per Share Data)
Year to Date
January 1, % of January 3, % of
2005 (1) Sales 2004 (1) Sales
Net sales $462.8 100% $451.1 100%
Cost of sales (230.3) (50%) (222.0) (49%)
Gross profit 232.5 50% 229.1 51%
R&D expense (16.6) (3%) (18.4) (4%)
SG&A expense (104.8) (23%) (106.0) (23%)
Corporate expense (15.8) (3%) (16.3) (4%)
Other income (2) 0.9 - 0.8 -
Earnings from continuing operations
before interest and income taxes 96.2 21% 89.2 20%
Net interest expense:
Interest income 1.5 - 1.4 -
Interest expense (17.9) (4%) (18.5) (4%)
Net interest expense (16.4) (4%) (17.1) (4%)
Earnings from continuing operations
before income taxes 79.8 17% 72.1 16%
Income tax expense (27.1) (6%) (25.4) (6%)
Net earnings from continuing
operations (1) $52.7 11% $46.7 10%
Shares (Basic) 28.514 28.192
Shares (Diluted) 28.844 28.426
EPS (Basic) 1.85 1.66
EPS (Diluted) 1.83 1.64
(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
January 1, 2005 January 3, 2004
Diluted Diluted
EPS EPS
Reported earnings $67.0 $2.32 $49.8 $1.75
Earnings from discontinued operations,
net (0.8) (0.03) (3.1) (0.11)
Gain on sale of discontinued
operations, net (13.5) (0.46) - -
Net earnings from continuing
operations $52.7 $1.83 $46.7 $1.64
(2) In 2004, 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. In 2003, the amount is primarily due to a fee received by PQBS from transitioning Micro Publishing business to another supplier.
PROQUEST COMPANY AND SUBSIDIARIES
RESULTS OF CONTINUING OPERATIONS
(In Millions)
Fourth Quarter Ended
Jan. 1, % of Jan. 3, % of Inc/(Dec)
2005 Sales 2004 Sales $ %
Net sales
ProQuest Information and Learning:
Published Products $36.6 45% $28.6 38% $8.0 28%
General Reference Products 16.5 21% 18.1 24% (1.6) (9%)
Traditional Products 24.3 30% 25.7 34% (1.4) (5%)
Classroom Products 3.3 4% 3.3 4% - 0%
Total ProQuest Information and
Learning $80.7 100% $75.7 100% $5.0 7%
ProQuest Business Solutions:
Automotive Group $43.5 94% $42.5 95% $1.0 2%
Power Equipment - Electronic 2.1 5% 1.8 4% 0.3 17%
Other 0.4 1% 0.3 1% 0.1 33%
ProQuest Business Solutions 46.0 100% 44.6 100% 1.4 3%
Exited Film Products - - 0.2 - (0.2) NM
Total ProQuest Business Solutions $46.0 100% $44.8 100% $1.2 3%
Total Net Sales $126.7 100% $120.5 100% $6.2 5%
EBIT (1), (3)
ProQuest Information and Learning $18.4 14% $17.5 15% $0.9 5%
ProQuest Business Solutions 16.4 13% 13.5 11% 2.9 21%
Corporate / Other (5.6) (4%) (6.0) (5%) 0.4 7%
Total EBIT $29.2 23% $25.0 21% $4.2 17%
EBITDA (2), (3)
ProQuest Information and Learning $36.3 29% $31.3 26% $5.0 16%
ProQuest Business Solutions 18.0 14% 15.1 13% 2.9 19%
Corporate / Other (5.4) (4%) (6.0) (5%) 0.6 10%
Total EBITDA $48.9 39% $40.4 34% $8.5 21%
Other Data
Capital expenditures & software
spending $14.2 11% $17.3 14% $(3.1)
Debt $155.0 $191.3 $(36.3)
(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
Jan. 1, % of Jan. 3, % of Inc/(Dec)
2005 Sales 2004 Sales $ %
Net sales
ProQuest Information and
Learning:
Published Products $120.1 41% $95.9 34% $24.2 25%
General Reference Products 65.1 22% 73.0 26% (7.9) (11%)
Traditional Products 91.8 32% 97.2 35% (5.4) (6%)
Classroom Products 13.6 5% 13.4 5% 0.2 1%
Total ProQuest Information and
Learning $290.6 100% $279.5 100% $11.1 4%
ProQuest Business Solutions:
Automotive Group $162.7 94% $160.7 94% $2.0 1%
Power Equipment - Electronic 8.2 5% 7.7 4% 0.5 6%
Other 1.3 1% 1.1 1% 0.2 18%
ProQuest Business Solutions 172.2 100% 169.5 99% 2.7 2%
Exited Film Products - - 2.1 1% (2.1) NM
Total ProQuest Business Solutions $172.2 100% $171.6 100% $0.6 -
Total Net Sales $462.8 100% $451.1 100% $11.7 3%
EBIT (1), (3)
ProQuest Information and Learning $58.2 12% $55.1 12% $3.1 6%
ProQuest Business Solutions 53.8 12% 50.4 11% 3.4 7%
Corporate / Other (15.8) (3%) (16.3) (3%) 0.5 3%
Total EBIT $96.2 21% $89.2 20% $7.0 8%
EBITDA (2), (3)
ProQuest Information and Learning $122.4 26% $109.8 24% $12.6 11%
ProQuest Business Solutions 60.3 13% 55.8 12% 4.5 8%
Corporate / Other (15.5) (3%) (16.2) (3%) 0.7 4%
Total EBITDA $167.2 36% $149.4 33% $17.8 12%
Other Data
Capital expenditures & software
spending $66.8 14% $70.8 16% $(4.0)
(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
January 1, January 3,
2005 2004
Cash and cash equivalents $4,313 $4,023
Accounts receivable, net 95,279 94,242
Inventory, net 5,312 4,939
Other current assets:
Prepaid royalties 17,793 15,188
Other 32,340 27,847
Total other current assets 50,133 43,035
Total current assets 155,037 146,239
Net property, plant, equipment and
product masters 199,997 180,745
Long-term receivables 8,084 5,106
Goodwill 311,279 303,693
Identifiable intangibles, net 15,379 9,435
Purchased and developed software, net 41,699 55,005
Other assets 21,454 23,813
Total assets $752,929 $724,036
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes payable $- $300
Current maturities of long-term debt 5,000 -
Accounts payable 49,364 49,156
Accrued expenses 34,281 39,428
Current portion of monetized future
billings 24,331 25,583
Deferred income 100,480 121,890
Total current liabilities 213,456 236,357
Long-term debt, less current
maturities 150,000 191,000
Monetized future billings, less
current portion 36,197 46,835
Other liabilities 83,555 62,444
Total long-term liabilities 269,752 300,279
Total shareholders' equity 269,721 187,400
Total liabilities and shareholders'
equity $752,929 $724,036
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)
Fourth Quarter Ended Year to Date
Jan. 1, Jan. 3, Jan. 1, Jan. 3,
2005 2004 2005 2004
Operating activities:
Earnings from operations $14,908 $14,551 $66,992 $49,821
Adjustments to reconcile net
earnings to net cash provided
by operating activities:
(Gain)/loss on sale of discontinued
operations, net 1,854 - (13,484) -
Gain on sale of fixed assets - - (900) -
Depreciation and amortization 19,728 15,413 71,561 60,696
Deferred income taxes 4,784 5,820 21,894 22,735
Changes in operating assets and
liabilities, net of acquisitions:
Accounts receivable, net 18,538 33,934 (174) 3,448
Inventory, net (309) 340 (923) 167
Other current assets 6,114 (862) (8,772) (5,733)
Long-term receivables (2,449) (597) (2,911) (471)
Other assets (2,687) (1,283) (2,916) (623)
Accounts payable 10,898 528 623 4,647
Accrued expenses 6,718 (4,698) (2,563) (12,368)
Deferred income (14,823) (3,682) (25,560) (12,510)
Other long-term liabilities 650 3,229 3,692 37
Other, net 695 6 1,257 (1,858)
Net cash provided by operating
activities before tax court refund 64,619 62,699 107,816 107,988
Tax court refund - - - 13,090
Net cash provided by operating
activities 64,619 62,699 107,816 121,078
Investing activities:
Expenditures for property, plant,
equipment, product masters
and software (14,146) (17,261) (66,774) (70,819)
Proceeds from sale of fixed assets - - 900 -
Acquisitions, net of cash acquired (2,365) (1,126) (25,767) (51,754)
Purchases of equity investments
available for sale (216) (560) (7,893) (1,488)
Proceeds from disposals of equity
investments available for sale 90 - 4,261 -
Costs associated with sale of
discontinued operations (58) (490) (2,982) (2,540)
Proceeds from disposition of
discontinued operations - - 35,900 -
Net cash used in investing
activities (16,695) (19,437) (62,355) (126,601)
Financing activities:
Net increase in short-term debt 4,919 297 4,614 218
Proceeds from long-term debt 60,900 37,900 371,570 483,450
Repayment of long-term debt (105,500) (80,950) (412,570) (479,450)
Debit issuance costs (395) - (395) -
Monetized future billings (6,885) (380) (11,890) (5,391)
Repurchases of common stock (1,846) - (3,566) (1,328)
Proceeds from exercise of stock
options, net 3,642 500 6,727 10,076
Net cash (used in) provided by
financing activities (45,165) (42,633) (45,510) 7,575
Effect of exchange rate changes on
cash 584 (461) 339 189
Increase in cash and cash
equivalents 3,343 168 290 2,241
Cash and cash equivalents,
beginning of period 970 3,855 4,023 1,782
Cash and cash equivalents, end of
period $4,313 $4,023 $4,313 $4,023
NOTE: Certain reclassifications to the 2003 cash flow statements have been made to conform to the 2004 presentation.
PROQUEST COMPANY AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP MEASURES
(In Millions)
Reconciliations of non-GAAP measures to GAAP measures:
EBITDA & EBIT
Fourth Quarter Ended January 1, 2005
PQIL PQBS Corp./Other Total
EBITDA $36.3 $18.0 $(5.4) $48.9
Less: Depreciation & amortization (17.9) (1.6) (0.2) (19.7)
EBIT $18.4 $16.4 $(5.6) $29.2
Less:
Net interest expense (4.1)
Income tax expense (8.3)
Earnings from discontinued
operations, net -
Loss on sale of discontinued
operations, net (1.9)
Net earnings $14.9
EBITDA & EBIT
Fourth Quarter Ended January 3, 2004
PQIL PQBS Corp./Other Total
EBITDA $31.3 $15.1 $(6.0) $40.4
Less: Depreciation & amortization (13.8) (1.6) - (15.4)
EBIT $17.5 $13.5 $(6.0) $25.0
Less:
Net interest expense (4.3)
Income tax expense (7.0)
Earnings from discontinued
operations, net 0.8
Loss on sale of discontinued
operations, net -
Net earnings $14.5
Year to Date Ended January 1, 2005
PQIL PQBS Corp./Other Total
EBITDA $122.4 $60.3 $(15.5) $167.2
Less: Depreciation & amortization (64.2) (6.5) (0.3) (71.0)
EBIT $58.2 $53.8 $(15.8) $96.2
Less:
Net interest expense (16.4)
Income tax expense (27.1)
Earnings from discontinued
operations, net 0.8
Gain on sale of discontinued
operations, net 13.5
Net earnings $67.0
Year to Date Ended January 3, 2004
PQIL PQBS Corp./Other Total
EBITDA $109.8 $55.8 $(16.2) $149.4
Less: Depreciation & amortization (54.7) (5.4) (0.1) (60.2)
EBIT $55.1 $50.4 $(16.3) $89.2
Less:
Net interest expense (17.1)
Income tax expense (25.4)
Earnings from discontinued
operations, net 3.1
Gain on sale of discontinued
operations, net -
Net earnings $49.8
FREE CASH FLOW
Fourth Quarter
Ended Year to Date
Jan. 1 Jan. 3 Jan. 1 Jan. 3
2005 2004 2005 2004
Net cash provided by operating
activities $64.6 $62.7 $107.8 $121.1
Expenditures for property, plant,
equipment,
product masters and software (14.2) (17.3) (66.8) (70.8)
Proceeds from fixed assets
disposition - - 0.9 -
Free cash flow $50.4 $45.4 $41.9 $50.3
Less: Tax court refund - - - (13.1)
Free cash flow, net of tax court
refund $50.4 $45.4 $41.9 $37.2
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