ProQuest Company First Quarter Revenue Up 9 Percent
ANN ARBOR, Mich., April 28 -- ProQuest Company , a leading publisher of information solutions for the education and automotive markets, reported a 9 percent increase in revenue from continuing operations for the first quarter of 2005. Earnings from continuing operations for the quarter were $7.8 million and earnings per share were $0.26.
"An important initiative in the first quarter was the acquisition and integration of Voyager Expanded Learning. The acquisition was closed on January 31, and the integration has gone well," said Alan Aldworth, ProQuest Company's chairman and chief executive officer. "Strong performance from Information and Learning, including Voyager, and Business Solutions resulted in a good start to the year. With this solid beginning to 2005, we are reiterating our full year guidance," said Aldworth.
First Quarter Financial Results
* Revenue from continuing operations increased 9 percent to $121.1 million from $110.8 million in the prior year's first quarter.
* EBIT from continuing operations (earnings from continuing operations before interest and income taxes) decreased 10 percent to $18.8 million from $20.8 million in the first quarter of 2004. Excluding the dilutive impact of Voyager Learning -- which includes the effect of the timing of the transaction and its associated additional costs for amortization of intangibles -- EBIT was $22.4 million, an increase of 8 percent over the previous year's first quarter.
* EBITDA from continuing operations (earnings from continuing operations before interest, income taxes, depreciation and amortization) increased 1 percent to $37.2 million from $36.9 million in the first quarter of 2004. Excluding the dilutive impact of Voyager Learning -- which includes the effect of the timing of the transaction -- EBITDA was $38.8 million, an increase of 5 percent over the first quarter of 2004.
* Earnings from continuing operations decreased 28 percent to $7.8 million or $0.26 per fully diluted share versus $10.9 million or $0.38 per fully diluted share in the first quarter of fiscal 2004. Excluding the dilutive impact of Voyager Learning -- which includes the effect of the timing of the transaction and its associated additional costs for interest and amortization of intangibles -- earnings from continuing operations grew to $11.9 million, an increase of 9 percent over the first quarter of 2004.
* Operating cash flow was a use of $0.1 million compared to a use of $0.6 million in the prior year's first quarter.
* Expenditures for property, plant, equipment, product masters, curriculum development costs and software were $24.2 million versus $20.7 million in the prior year's first quarter.
* Free cash flow (operating cash flow from continuing operations less expenditures for property, plant, equipment, product masters, curriculum development costs and software plus proceeds from asset dispositions) was a
use of $24.3 million compared to a use of $21.3 million in the first quarter of fiscal 2004.
"Voyager contributed $6.0 million in revenue for their first two full months as part of ProQuest," said Kevin Gregory, senior vice president and chief financial officer of ProQuest Company. "As expected, the acquisition had a dilutive impact on first quarter earnings of approximately fifteen cents as a result of additional costs for interest and amortization of intangibles. Also, consistent with the K-12 curriculum industry, Voyager's first quarter has historically generated the lowest revenue," Gregory continued. "Voyager's performance in the first quarter reaffirms our expectation that this acquisition will be accretive for the full year," Gregory noted.
Outlook for 2005 ProQuest expects the following results for the second quarter of 2005: * Revenue growth of 20 to 25 percent, and * Earnings per share of $0.35 to $0.45.
"Voyager's revenue and earnings follow a seasonal pattern. Revenue and earnings are greatest in the third and fourth quarters. We expect Voyager's second quarter revenue and earnings to be greater than in the first quarter. However, with the additional interest and amortization costs associated with the acquisition, Voyager Learning will have a dilutive impact on the second quarter," said Gregory.
ProQuest also reiterated its guidance for fiscal 2005. * Revenue of $590 to $610 million, and * Earnings per share of $2.20 to $2.40. 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 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, curriculum development costs 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.
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 GAAP, income statement amounts for 2004 have been adjusted to classify the results of this business as a discontinued operation.
Conference Call
To participate in a conference call and question and answer session regarding the first 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, April 28, 2005. For your convenience, the call will be taped and archived until May 6, 2005 and can be accessed by calling 706-645-9291, and entering ID#5075847. 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, but are not limited to: increased debt level due to the acquisition of Voyager, changes in customer demands or industry standards, adverse economic conditions, loss of key personnel, litigation, decreased library and educational funding/budgets, the ability to successfully integrate the Voyager acquisition, the ability to successfully close and integrate other acquisitions, demand for ProQuest's products and services, success of ongoing product development, maintaining acceptable margins, ability to control costs, the impact of federal, state and local regulatory requirements on ProQuest's business, including K-12 and higher education, and automotive, the impact of competition and the uncertainty of economic conditions in general, the ability to successfully attract and retain customers, sell additional products to existing customers, and win new business due to changes in technology, the ability to maintain a broad customer base to avoid dependence on any one single customer, K-12 enrollment and demographic trends, the level of educational funding, the level of education technology investments, the company's ability to obtain OEM data access agreements, the company's ability to obtain financing, global economic conditions, 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)
First Quarter Ended
April 2, % of April 3, % of
2005 Sales 2004 (1) Sales
Net sales $121.1 100% $110.8 100%
Cost of sales (55.6) (46%) (54.0) (49%)
Gross profit 65.5 54% 56.8 51%
R&D expense (4.8) (4%) (4.4) (4%)
SG&A expense (37.6) (31%) (27.4) (25%)
Corporate expense (4.3) (3%) (4.2) (3%)
Earnings from operations before
interest and income taxes 18.8 16% 20.8 19%
Net interest expense:
Interest income 0.4 0% 0.3 0%
Interest expense (7.2) (6%) (4.4) (4%)
Net interest expense (6.8) (6%) (4.1) (4%)
Earnings from continuing operations
before income taxes 12.0 10% 16.7 15%
Income tax expense (4.2) (4%) (5.8) (5%)
Net earnings from continuing
operations (1) $7.8 6% $10.9 10%
Shares (Basic) 29.377 28.406
Shares (Diluted) 29.778 28.799
EPS (Basic) 0.26 0.38
EPS (Diluted) 0.26 0.38
(1) Amounts have been adjusted to exclude earnings from discontinued operations, as displayed below:
First Quarter Ended
April 3, 2004
Diluted
EPS
Reported earnings $11.5 $0.40
Earnings from discontinued operations, net (0.6) (0.02)
Net earnings from continuing operations $10.9 $0.38
PROQUEST COMPANY AND SUBSIDIARIES
RESULTS OF OPERATIONS
(In Millions)
First Quarter Ended
April 2, % of April 3, % of Inc/(Dec)
2005 Sales 2004 Sales $ %
Net Sales
ProQuest Information and
Learning:
Published Products $30.2 39% $25.4 37% $4.8 19%
General Reference Products 15.4 20% 16.4 24% (1.0) (6%)
Traditional Products 22.3 29% 24.1 35% (1.8) (7%)
Classroom Products 2.9 4% 2.6 4% 0.3 12%
Voyager 6.0 8% - 0% 6.0 NM
Total ProQuest Information
and Learning $76.8 100% $68.5 100% $8.3 12%
ProQuest Business Solutions:
Automotive Group $42.0 95% $40.0 94% $2.0 5%
Power Equipment -
Electronic 2.0 4% 2.0 5% - 0%
Other 0.3 1% 0.3 1% - 0%
Total ProQuest Business
Solutions $44.3 100% $42.3 100% $2.0 5%
Total Net Sales $121.1 100% $110.8 100% $10.3 9%
EBIT (1), (3)
ProQuest Information and
Learning $11.5 9% $14.0 13% $(2.5) (18%)
ProQuest Business Solutions 11.6 10% 11.0 10% 0.6 5%
Corporate / Other (4.3) (3%) (4.2) (4%) (0.1) (2%)
Total EBIT $18.8 16% $20.8 19% $(2.0) (10%)
EBITDA (2), (3)
ProQuest Information and
Learning $28.5 23% $28.2 25% 0.3 1%
ProQuest Business Solutions 12.9 11% 12.8 12% 0.1 1%
Corporate / Other (4.2) (3%) (4.1) (4%) (0.1) (2%)
Total EBITDA $37.2 31% $36.9 33% $0.3 1%
Other Data
Capital expenditures
& software spending $24.2 20% $20.7 19% $3.5 17%
Debt $517.5 $214.3 $303.2 141%
(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
April 2, January 1, April 3,
2005 2005 2004
Cash and cash equivalents $- $4,313 $642
Accounts receivable, net 80,431 95,279 79,506
Inventory, net 13,106 5,312 5,090
Other current assets:
Prepaid royalties 19,490 17,793 20,792
Other 38,591 32,340 31,314
Total other current assets 58,081 50,133 52,106
Total current assets 151,618 155,037 137,344
Net property, plant, equipment and
product masters 213,489 199,997 186,619
Long-term receivables 8,476 8,084 4,009
Goodwill 587,029 311,279 304,469
Identifiable intangibles, net 119,418 15,379 9,754
Purchased and developed software, net 40,338 41,699 53,799
Other assets 24,065 21,454 19,348
Total assets $1,144,433 $752,929 $715,342
LIABILITIES AND SHAREHOLDERS' EQUITY
Current maturities of long-term debt $5,165 $5,000 $-
Checks issued in excess of funds on
deposit 1,208 - -
Accounts payable 39,683 49,364 38,968
Accrued expenses 27,230 35,303 21,256
Current portion of monetized future
billings 22,572 24,331 25,352
Deferred income 79,397 100,480 106,383
Total current liabilities 175,255 214,478 191,959
Long-term debt, less current
maturities 512,351 150,000 214,250
Monetized future billings, less
current portion 31,173 36,197 44,933
Other liabilities 119,809 82,533 63,543
Total long-term liabilities 663,333 268,730 322,726
Total shareholders' equity 305,845 269,721 200,657
Total liabilities and shareholders'
equity $1,144,433 $752,929 $715,342
Note: Certain reclassifications to the 2004 balance sheets have been made to conform to the 2005 presentation.
PROQUEST COMPANY AND SUBSIDIARIES
CASH FLOW SCHEDULE
(In Thousands)
First Quarter Ended
April 2, April 3,
2005 2004
Operating activities:
Net earnings $7,758 $11,484
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation and amortization 18,361 16,365
Deferred income taxes (227) 4,838
Changes in operating assets and
liabilities, net of acquisitions:
Accounts receivable, net 32,539 15,350
Inventory, net (407) (69)
Other current assets (5,997) (7,759)
Long-term receivables (393) 1,097
Other assets 360 96
Accounts payable (12,543) (10,389)
Accrued expenses (13,779) (15,013)
Deferred income (24,544) (15,755)
Other long-term liabilities (1,427) (1,246)
Other, net 222 425
Net cash used in operating activities (77) (576)
Investing activities:
Expenditures for property, plant,
equipment, product masters,
curriculum costs and software (24,235) (20,744)
Acquisitions, net of cash acquired (362,240) (1,246)
Purchases of equity investments
available for sale (2,127) (1,453)
Proceeds from disposals of equity
investments available for sale 1,374 708
Costs associated with sales of
discontinued operations (27) (2,367)
Net cash used in investing activities (387,255) (25,102)
Financing activities:
Net increase (decrease) in short-term
debt 15 (303)
Proceeds from long-term debt 630,000 144,650
Repayment of long-term debt (268,000) (121,400)
Checks issued in excess of funds on
deposit 1,208 -
Principal payment under capital lease
obligation (27) -
Cash paid for settlement of treasury
locks (490) -
Debt issuance costs (2,013) -
Monetized future billings (6,783) (2,133)
Proceeds from exercise of stock
options, net 7,845 1,469
Common stock issued to finance
acquisition 21,535 -
Net cash provided by financing
activities 383,290 22,283
Effect of exchange rate changes on
cash (271) 14
Decrease in cash and cash equivalents (4,313) (3,381)
Cash and cash equivalents, beginning
of period 4,313 4,023
Cash and cash equivalents, end of
period $- $642
PROQUEST COMPANY AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP MEASURES
(In Millions)
Reconciliations of non-GAAP measures
to GAAP measures:
EBITDA & EBIT
First Quarter Ended April 2, 2005
PQIL PQBS Corp./Other Total
EBITDA $28.5 $12.9 $(4.2) $37.2
Less: Depreciation &
amortization (17.0) (1.3) (0.1) (18.4)
EBIT $11.5 $11.6 $(4.3) $18.8
Less: Net interest expense (6.8)
Income tax expense (4.2)
Net earnings $7.8
First Quarter Ended April 3, 2004
PQIL PQBS Corp./Other Total
EBITDA $28.2 $12.8 $(4.1) $36.9
Less: Depreciation &
amortization (14.2) (1.8) (0.1) (16.1)
EBIT $14.0 $11.0 $(4.2) $20.8
Less: Net interest expense (4.1)
Income tax expense (5.8)
Earnings from discontinued
operations, net 0.6
Net earnings $11.5
Free cash flow
First Quarter Ended
April 2, April 3,
2005 2004
Net cash used in operating activities $(0.1) $(0.6)
Expenditures for property, plant,
equipment, product masters, curriculum
costs and software (24.2) (20.7)
Free cash flow $(24.3) $(21.3)
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