ProQuest Company Reports 25 Percent Revenue Growth for the Second Quarter of 2005
ANN ARBOR, Mich., July 28 -- ProQuest Company , a leading publisher of information and education solutions, reported strong increases in revenue from continuing operations for the thirteen and twenty-six week periods ended July 2, 2005. Revenue from continuing operations was $140.4 million for the second quarter and $261.5 million for the first half of 2005. Earnings from continuing operations were $12.3 million or $0.41 per fully diluted share for the second quarter. For the first half of 2005, earnings from continuing operations were $20.1 million or $0.67 per fully diluted share.
"In its first full quarter with ProQuest Company, Voyager Learning grew in every aspect. Voyager Learning added more than 250 new school districts and renewal rates were strong. We also increased our penetration in existing districts and introduced new products," said Alan Aldworth, ProQuest Company's chairman and chief executive officer.
"Overall at ProQuest Company, the products that drive our growth -- K-12 classroom solutions, digital published products, digital news products and automotive information solutions -- generated double-digit revenue growth. Based on the results in the first half of the year, we remain confident in our full-year guidance," added Aldworth.
Second Quarter Financial Results
* Revenue from continuing operations increased 25 percent to $140.4 million from $112.2 million in the prior year's second quarter.
* EBIT from continuing operations (earnings from continuing operations before interest and income taxes) increased 16 percent to $27.4 million from $23.7 million in the second quarter of 2004.
* EBITDA from continuing operations (earnings from continuing operations before interest, income taxes, depreciation and amortization) increased 18 percent to $46.7 million from $39.7 million in the second quarter of 2004.
* Earnings from continuing operations were $12.3 million or $0.41 per fully diluted share, a decrease of 5 percent. This compares to $12.9 million or $0.45 per fully diluted share in the second quarter of fiscal 2004.
* Operating cash flow was $18.4 million compared to $19.2 million in the prior year's second quarter.
* Expenditures for property, plant, equipment, product masters, curriculum development costs and software were $23.5 million versus $18.3 million in the prior year's second 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 $5.1 million compared to $0.9 million generated in the second quarter of fiscal 2004.
"ProQuest Company's second quarter growth was driven by $23 million in revenue from Voyager Learning and 17 percent growth in published products," said Kevin Gregory, senior vice president and chief financial officer of ProQuest Company.
"Strong earnings performance at Information and Learning was partially offset by lower earnings at Business Solutions. We made investments during the quarter for deployment of new automotive parts and service products and performance management projects. We are also investing in the new Syncata solutions acquired in the first quarter and as a result, there has been a short-term adverse impact on Business Solutions' profit margins. We expect revenue and earnings growth to benefit from these projects in the second half of the year and beyond," added Gregory.
Consolidated First Half Financial Results
* Revenue from continuing operations increased 17 percent to $261.5 million from $223.0 million in the first half of 2004.
* EBIT from continuing operations (earnings from continuing operations before interest and income taxes) increased 4 percent to $46.2 million from $44.5 million in the first half of 2004.
* EBITDA from continuing operations (earnings from continuing operations before interest, income taxes, depreciation and amortization) increased 10 percent to $83.9 million from $76.6 million in the first half of 2004.
* Earnings from continuing operations were $20.1 million or $0.67 per fully diluted share, a decrease of 16 percent. This compares to $23.8 million or $0.82 per fully diluted share in the first half of fiscal 2004.
Excluding the dilutive impact of Voyager Learning (of $4.4 million or $0.16 per share) 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 were $24.5 million, or $0.83 per fully diluted share.
* Operating cash flow was $18.3 million compared to operating cash flow of $18.6 million generated in the prior year's first half.
* Expenditures for property, plant, equipment, product masters, curriculum development costs and software were $47.7 million versus $39.0 million in the prior year's first half.
* 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 $29.4 million compared to a use of $20.4 million in the first half of fiscal 2004.
"During the first six months of this year, we accelerated capital spending to meet market demand for published products at Information and Learning. We expect capital expenditures for the second half of the year to be in the range of $10.0 to $12.0 million per quarter. Capital expenditures for the full year should be 11 to 12 percent of sales," said Gregory.
Outlook for 2005 ProQuest reiterated its guidance for fiscal 2005. * Revenue of $590.0 million to $610.0 million, and * Earnings per fully diluted share of $2.20 to $2.40.
"As we've noted, ProQuest Company's revenue and earnings are strongest in the second half of the year. We believe that second half revenue and earnings at Information and Learning will be driven by sales of our digital published products and continued growth at Voyager Learning," added Gregory.
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, capital expenditures, and 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 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 Thursday, July 28, 2005. For your convenience, the call will be taped and archived until August 10, 2005 and can be accessed by calling 706-645-9291, and entering ID#7005189. 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 Learning, 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 Learning 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. We undertake no obligation to update any of these forward-looking statements.
PROQUEST COMPANY AND SUBSIDIARIES
RESULTS OF OPERATIONS
(In Millions, Except Per Share Data)
Second Quarter Ended
July 2, % of July 3, % of
2005 Sales 2004 (1) Sales
Net sales $140.4 100% $112.2 100%
Cost of sales (70.3) (50%) (55.1) (49%)
Gross profit 70.1 50% 57.1 51%
R&D expense (3.7) (3%) (4.1) (4%)
SG&A expense (35.5) (25%) (26.3) (23%)
Corporate expense (3.5) (2%) (3.0) (3%)
Earnings from operations before
interest and income taxes 27.4 20% 23.7 21%
Net interest expense:
Interest income 0.4 0% 0.6 1%
Interest expense (8.7) (6%) (4.5) (4%)
Net interest expense (8.3) (6%) (3.9) (3%)
Earnings from continuing operations
before income taxes 19.1 14% 19.8 18%
Income tax expense (6.8) (5%) (6.9) (7%)
Net earnings from continuing
operations (1) $12.3 9% $12.9 11%
Shares (Basic) 29.738 28.487
Shares (Diluted) 30.245 28.782
EPS (Basic) 0.42 0.45
EPS (Diluted) 0.41 0.45
(1) Amounts have been adjusted to exclude earnings from discontinued operations and a gain on sale of discontinued operations, as displayed below:
Second Quarter Ended
July 3, 2004
Diluted
EPS
Reported earnings $28.4 $0.99
Earnings from discontinued operations, net (0.2) (0.01)
Gain on sale of discontinued operations, net (15.3) (0.53)
Net earnings from continuing operations $12.9 $0.45
PROQUEST COMPANY AND SUBSIDIARIES
RESULTS OF OPERATIONS
(In Millions, Except Per Share Data)
Year to Date
July 2, % of July 3, % of
2005 Sales 2004 (1) Sales
Net sales $261.5 100% $223.0 100%
Cost of sales (127.5) (49%) (109.1) (49%)
Gross profit 134.0 51% 113.9 51%
R&D expense (8.5) (3%) (8.5) (4%)
SG&A expense (71.5) (27%) (53.7) (24%)
Corporate expense (7.8) (3%) (7.2) (3%)
Earnings from operations before
interest and income taxes 46.2 18% 44.5 20%
Net interest expense:
Interest income 0.8 0% 0.9 0%
Interest expense (15.9) (6%) (8.9) (4%)
Net interest expense (15.1) (6%) (8.0) (4%)
Earnings from continuing operations
before income taxes 31.1 12% 36.5 16%
Income tax expense (11.0) (4%) (12.7) (5%)
Net earnings from continuing
operations (1) $20.1 8% $23.8 11%
Shares (Basic) 29.528 28.447
Shares (Diluted) 30.013 28.797
EPS (Basic) 0.68 0.83
EPS (Diluted) 0.67 0.82
(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
July 3, 2004
Diluted
EPS
Reported earnings $39.9 $1.39
Earnings from discontinued operations, net (0.8) (0.04)
Gain on sale of discontinued operations, net (15.3) (0.53)
Net earnings from continuing operations $23.8 $0.82
PROQUEST COMPANY AND SUBSIDIARIES
RESULTS OF OPERATIONS
(In Millions)
Second Quarter Ended
July 5, % of July 3, % of Inc/(Dec)
2005 Sales 2004 Sales $ %
Net Sales
ProQuest Information and Learning:
Published Products $35.4 37% $30.3 43% $5.1 17%
General Reference Products 16.1 17% 16.2 23% (0.1) (1%)
Traditional Products 19.2 20% 21.7 31% (2.5) (12%)
Classroom Products 1.4 2% 1.9 3% (0.5) (26%)
Voyager 23.0 24% - 0% 23.0 NM
Total ProQuest Information and
Learning $95.1 100% $70.1 100% $25.0 36%
ProQuest Business Solutions:
Automotive Group $43.0 95% $39.8 95% $3.2 8%
Power Equipment - Electronic 1.9 4% 2.0 4% (0.1) (5%)
Other 0.4 1% 0.3 1% 0.1 33%
Total ProQuest Business Solutions $45.3 100% $42.1 100% $3.2 8%
Total Net Sales $140.4 100% $112.2 100% $28.2 25%
EBIT (1), (3)
ProQuest Information and Learning $19.1 14% $13.7 12% $5.4 39%
ProQuest Business Solutions 11.8 8% 13.0 12% (1.2) (9%)
Corporate / Other (3.5) (2%) (3.0) (3%) (0.5) (17%)
Total EBIT $27.4 20% $23.7 21% $3.7 16%
EBITDA (2), (3)
ProQuest Information and Learning $37.0 26% $27.9 25% 9.1 33%
ProQuest Business Solutions 13.1 9% 14.7 13% (1.6) (11%)
Corporate / Other (3.4) (2%) (2.9) (3%) (0.5) (17%)
Total EBITDA $46.7 33% $39.7 35% $7.0 18%
Other Data
Capital expenditures &
software spending $23.5 17% $18.3 16% $5.2
Debt $551.2 $192.7
(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 OPERATIONS
(In Millions)
Year to Date
July 5, % of July 3, % of Inc/(Dec)
2005 Sales 2004 Sales $ %
Net Sales
ProQuest Information and Learning:
Published Products $65.6 38% $55.7 40% $9.9 18%
General Reference Products 31.5 18% 32.6 24% (1.1) (3%)
Traditional Products 41.5 24% 45.8 33% (4.3) (9%)
Classroom Products 4.3 3% 4.5 3% (0.2) (4%)
Voyager 29.0 17% - 0% 29.0 NM
Total ProQuest Information and
Learning $171.9 100% $138.6 100% $33.3 24%
ProQuest Business Solutions:
Automotive Group $85.0 95% $79.8 95% $5.2 7%
Power Equipment - Electronic 3.9 4% 4.0 4% (0.1) (3%)
Other 0.7 1% 0.6 1% 0.1 17%
Total ProQuest Business Solutions $89.6 100% $84.4 100% $5.2 6%
Total Net Sales $261.5 100% $223.0 100% $38.5 17%
EBIT (1), (3)
ProQuest Information and Learning $30.6 12% $27.7 12% $2.9 10%
ProQuest Business Solutions 23.4 9% 24.0 11% (0.6) (3%)
Corporate / Other (7.8) (3%) (7.2) (3%) (0.6) (8%)
Total EBIT $46.2 18% $44.5 20% $1.7 4%
EBITDA (2), (3)
ProQuest Information and Learning $65.5 25% $56.1 25% 9.4 17%
ProQuest Business Solutions 26.0 10% 27.6 12% (1.6) (6%)
Corporate / Other (7.6) (3%) (7.1) (3%) (0.5) (7%)
Total EBITDA $83.9 32% $76.6 34% $7.3 10%
Other Data
Capital expenditures &
software spending $47.7 18% $39.0 17% $8.7
(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
July 2, January 1, July 3,
2005 2005 2004
Cash and cash equivalents $9,692 $4,313 $2,074
Accounts receivable, net 85,559 95,279 82,261
Inventory, net 14,267 5,312 4,867
Other current assets:
Prepaid royalties 24,093 17,793 20,753
Other 38,946 32,340 35,211
Total other current assets 63,039 50,133 55,964
Total current assets 172,557 155,037 145,166
Net property, plant, equipment and
product masters 219,406 199,997 191,347
Long-term receivables 9,450 8,084 5,735
Goodwill 598,986 311,279 297,457
Identifiable intangibles, net 22,587 15,379 13,567
Curriculum, net 95,231 - -
Purchased and developed software, net 39,710 41,699 48,702
Other assets 22,867 21,454 19,274
Total assets $1,180,794 $752,929 $721,248
LIABILITIES AND SHAREHOLDERS' EQUITY
Current maturities of long-term debt $168 $5,000 $ -
Accounts payable 48,710 49,364 41,157
Accrued expenses 35,557 35,303 37,202
Current portion of monetized future
billings 20,635 24,331 25,198
Deferred income 59,733 100,480 82,961
Total current liabilities 164,803 214,478 186,518
Long-term debt, less current maturities 551,008 150,000 192,680
Monetized future billings, less
current portion 26,542 36,197 43,432
Other liabilities 121,627 82,533 68,550
Total long-term liabilities 699,177 268,730 304,662
Total shareholders' equity 316,814 269,721 230,068
Total liabilities and
shareholders' equity $1,180,794 $752,929 $721,248
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)
Second Quarter Ended Year to Date
July 2, July 3, July 2, July 3,
2005 2004 2005 2004
Operating activities:
Net earnings $12,327 $28,411 $20,085 $39,895
Adjustments to reconcile net
earnings to net cash provided
by operating activities:
Gain on sale of discontinued
operations - (15,338) - (15,338)
Depreciation and amortization 19,263 16,252 37,624 32,617
Deferred income taxes 5,362 6,063 5,135 10,901
Changes in operating assets and
liabilities, net of acquisitions:
Accounts receivable, net (10,256) (4,043) 22,283 11,307
Inventory, net (832) (419) (1,239) (488)
Other current assets (4,460) (928) (10,457) (8,687)
Long-term receivables (982) (1,728) (1,375) (631)
Other assets 1,210 (84) 1,570 12
Accounts payable 9,482 2,649 (3,061) (7,740)
Accrued expenses 8,085 7,787 (5,694) (7,226)
Deferred income (19,033) (23,655) (43,577) (39,410)
Other long-term liabilities (1,031) 4,168 (2,458) 2,922
Other, net (746) 79 (524) 504
Net cash provided by operating
activities 18,389 19,214 18,312 18,638
Investing activities:
Expenditures for property, plant,
equipment, product masters,
curriculum development costs and
software (23,499) (18,313) (47,734) (39,057)
Acquisitions, net of
cash acquired (11,050) (10,216) (351,755) (11,462)
Purchases of equity investments
available for sale (478) (5,836) (2,605) (7,289)
Proceeds from disposals of equity
investments available for sale 187 3,371 1,561 4,079
Expenditures associated with sales
of discontinued operations (47) (483) (74) (2,850)
Proceeds from sale of discontinued
operations - 35,900 - 35,900
Net cash (used in) provided by
investing activities (34,887) 4,423 (400,607) (20,679)
Financing activities:
Net decrease in short-term debt (4,966) (146) (4,951) (449)
Proceeds from long-term debt 262,600 89,050 892,600 233,700
Repayment of long-term debt (223,904) (110,620) (491,904) (232,020)
Checks issued in excess of funds
on deposit (1,208) - - -
Principal payment under capital
lease obligation (39) - (66) -
Cash paid for settlement of
treasury locks - - (490) -
Debt issuance costs - - (2,013) -
Monetized future billings (6,569) (1,655) (13,352) (3,788)
Proceeds from exercise of stock
options 397 1,198 8,242 2,667
Net cash provided by (used in)
financing activities 26,311 (22,173) 388,066 110
Effect of exchange rate changes
on cash (121) (32) (392) (18)
Increase (decrease) in cash and
cash equivalents 9,692 1,432 5,379 (1,949)
Cash and cash equivalents,
beginning of period - 642 4,313 4,023
Cash and cash equivalents,
end of period $9,692 $2,074 $9,692 $2,074
PROQUEST COMPANY AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP MEASURES
(In Millions)
Reconciliations of non-GAAP measures to GAAP measures:
EBITDA & EBIT
Second Quarter Ended July 2, 2005
PQIL PQBS Corp./Other Total
EBITDA $37.0 $13.1 $(3.4) $46.7
Less: Depreciation & amortization (17.9) (1.3) (0.1) (19.3)
EBIT $19.1 $11.8 $(3.5) $27.4
Less: Net interest expense (8.3)
Income tax expense (6.8)
Earnings from discontinued
operations, net -
Gain on sale of discontinued
operations, net -
Net earnings $12.3
EBITDA & EBIT
Second Quarter Ended July 3, 2004
PQIL PQBS Corp./Other Total
EBITDA $27.9 $14.7 $(2.9) $39.7
Less: Depreciation & amortization (14.2) (1.7) (0.1) (16.0)
EBIT $13.7 $13.0 $(3.0) $23.7
Less: Net interest expense (3.9)
Income tax expense (6.9)
Earnings from discontinued
operations, net 0.2
Gain on sale of discontinued
operations, net 15.3
Net earnings $28.4
Year to Date Ended July 2, 2005
PQIL PQBS Corp./Other Total
EBITDA $65.5 $26.0 $(7.6) $83.9
Less: Depreciation & amortization (34.9) (2.6) (0.2) (37.7)
EBIT $30.6 $23.4 $(7.8) $46.2
Less: Net interest expense (15.1)
Income tax expense (11.0)
Earnings from discontinued
operations, net -
Gain on sale of discontinued
operations, net -
Net earnings $20.1
Year to Date Ended July 3, 2004
PQIL PQBS Corp./Other Total
EBITDA $56.1 $27.6 $(7.1) $76.6
Less: Depreciation & amortization (28.4) (3.6) (0.1) (32.1)
EBIT $27.7 $24.0 $(7.2) $44.5
Less: Net interest expense (8.0)
Income tax expense (12.7)
Earnings from discontinued
operations, net 0.8
Gain on sale of discontinued
operations, net 15.3
Net earnings $39.9
Free cash flow
Second Quarter Ended Year to Date
July 2, July 3, July 2, July 3,
2005 2004 2005 2004
Net cash provided by operating
activities $18.4 $19.2 $18.3 $18.6
Expenditures for property, plant,
equipment, product masters,
curriculum development
costs and software (23.5) (18.3) (47.7) (39.0)
Free cash flow $(5.1) $0.9 $(29.4) $(20.4)
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