ProQuest Company Completes Divestiture of Periodical Microfilm and Coursepack Operations
Also Issues Adjusted Guidance for Fiscal Year 2005
ANN ARBOR, Mich., Nov. 3 -- ProQuest Company , a publisher of information and education solutions, has sold its periodical microfilm and coursepack operations to National Archive Publishing Company ("NAPC"). ProQuest Company has retained all rights to newspaper and scholarly collections. The company has also retained digital rights to all periodical content.
"Scholarly archival content is important to ProQuest Company's business. However, as usage of this content has shifted to the electronic format, sales of periodicals microfilm have decreased. We believe this was not a sustainable long-term business for ProQuest Company. This divestiture allowed us to capture the market value of the periodicals microfilm business today, while eliminating the risk of accelerating revenue and profit decline," said Alan Aldworth, president and chief executive officer of ProQuest Company.
"With respect to the coursepack business, the market did not develop as we originally anticipated. We started this business as a way to leverage our electronic content to create electronic coursepacks. The market shift to using electronic content in coursepacks has been slower than we expected. Rather than facilitating a change to electronic format and creating additional sales of ProQuest content, XanEdu remained in a highly competitive print business where we had little strategic advantage," added Aldworth.
"Selling these businesses allows us to improve our growth rates, and dedicate additional resources and management focus to our growth platforms -- K-12 curriculum products, unique published products for higher education, and information solutions for the automotive market," noted Aldworth.
In the transaction, ProQuest Company also sold its microfilm production and digitization service operations to NAPC. ProQuest will utilize NAPC as a service provider for future microfilm production and digitization.
"We have undertaken several initiatives to reduce our fixed cost base and create a more flexible variable cost model. This is another step in that process," said Aldworth. "This transaction allows us to react to market changes faster and should result in reduced costs in the future," Aldworth added.
The sale was completed after a competitive process was conducted over the past several months. Financial and strategic buyers expressed interest, with NAPC submitting the highest bid. The businesses were sold for $30 million, less an adjustment for working capital.
This transaction will be treated as part of continuing operations for accounting purposes. Attached to this press release are pro forma income statements and balance sheets for the full year 2004 and the first, second and third quarters of 2005 that exclude the results of the divested businesses.
Outlook for Full Year 2005
ProQuest Company is issuing the following revised guidance for fiscal year 2005.
ProQuest Company guidance for full year 2005 revenue was originally $590 to $610 million. The company is now adjusting this guidance for the following items:
-- Reductions in revenue of approximately $19 million related to the
previously disclosed impacts on Voyager Learning of Hurricanes Katrina
and Rita and the purchasing delays in New York City ; and,
-- A reduction in revenue of approximately $10 million attributable to
the divestiture of the periodical microfilm and coursepack businesses.
Based on the above factors, ProQuest now expects its full year 2005 revenue to be within a range of $561 to $568 million.
ProQuest Company guidance for full year 2005 earnings per fully diluted share was originally $2.20 to $2.40. The company is now adjusting this guidance for the following items:
-- A reduction in earnings per fully diluted share of approximately $0.28
related to the previously disclosed impacts on Voyager Learning of
Hurricanes Katrina and Rita and purchasing delays in New York City;
-- A reduction in earnings per share of approximately $0.10 related to
acquisition dilution and contract costs at Business Solutions; and,
-- A reduction in earnings per fully diluted share of approximately $0.08
related to the divestiture of the periodical film and coursepack
businesses.
Based on the above factors, ProQuest now expects its full year 2005 earnings per fully diluted share to be within a range of $1.74 to $1.83.
About ProQuest Company
ProQuest Company is based in Ann Arbor, Michigan, and is a leading publisher of information and education solutions. 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
PRO FORMA RESULTS OF OPERATIONS - Year to Date Q3 2005
(In Millions, Except Per Share Data)
Actual Pro Forma (1)
Inc./Dec. Inc./Dec.
Q3 2005 YTD vs. 2004 Q3 2005 YTD vs. 2004
Net sales $420.9 25% $392.8 29%
EBIT (2) $81.5 23% $74.0 29%
EBITDA (3) $144.2 23% $134.1 27%
Earnings from continuing
operations $38.3 8% $34.0 13%
Diluted EPS $1.27 3% $1.13 9%
(1) Represents results as though the divestiture had occurred as of
January 1, 2004.
(2) EBIT is defined as earnings from continuing operations before
interest and income taxes.
(3) EBITDA is defined as EBIT plus depreciation and amortization.
PROQUEST COMPANY AND SUBSIDIARIES
PRO FORMA RESULTS OF OPERATIONS - Fiscal Year 2004
(In Millions, Except Per Share Data)
Represents results as though the divestiture had occurred
at January 1, 2004.
Full
Year
Q1 Q2 Q3 Q4 2004
Net sales $99.4 $103.9 $100.3 $117.1 $420.7
Cost of sales (47.6) (50.8) (49.4) (57.7) (205.5)
Gross profit 51.8 53.1 50.9 59.4 215.2
R&D expense (3.9) (3.7) (3.7) (3.8) (15.1)
SG&A expense (25.7) (24.6) (26.6) (22.4) (99.3)
Corporate expense (4.2) (3.0) (3.0) (5.6) (15.8)
Earnings from continuing operations
before interest and income taxes 18.0 21.8 17.6 27.6 85.0
Net interest expense:
Interest income 0.3 0.6 0.3 0.3 1.5
Interest expense (4.2) (4.3) (4.5) (4.2) (17.2)
Net interest expense (3.9) (3.7) (4.2) (3.9) (15.7)
Earnings from continuing operations
before income taxes 14.1 18.1 13.4 23.7 69.3
Income tax expense (4.9) (6.3) (4.4) (7.9) (23.5)
Net earnings from continuing
operations $9.2 $11.8 $9.0 $15.8 $45.8
Shares (Basic) 28.406 28.487 28.588 28.574 28.514
Shares (Diluted) 28.799 28.782 28.815 28.868 28.844
EPS (Basic) 0.32 0.41 0.31 0.55 1.61
EPS (Diluted) 0.32 0.41 0.31 0.55 1.59
PROQUEST COMPANY AND SUBSIDIARIES
PRO FORMA RESULTS OF OPERATIONS - Fiscal Year 2004
(In Millions)
Represents results as though the divestiture had occurred
at January 1, 2004.
Full
Year
Q1 Q2 Q3 Q4 2004
Net Sales
ProQuest Information and Learning:
Published Products $25.4 $30.3 $27.8 $36.6 $120.1
General Reference Products 16.4 16.2 16.0 16.5 65.1
Traditional Products 15.3 15.3 14.7 18.0 63.3
Total ProQuest Information and
Learning $57.1 $61.8 $58.5 $71.1 $248.5
ProQuest Business Solutions:
Automotive Group $40.0 $39.8 $39.4 $43.5 $162.7
Power Equipment - Electronic 2.0 2.0 2.1 2.1 8.2
Other 0.3 0.3 0.3 0.4 1.3
Total ProQuest Business Solutions $42.3 $42.1 $41.8 $46.0 $172.2
Total Net Sales $99.4 $103.9 $100.3 $117.1 $420.7
EBIT (1)
ProQuest Information and Learning $11.2 $11.8 $7.2 $16.8 $47.0
ProQuest Business Solutions 11.0 13.0 13.4 16.4 53.8
Corporate / Other (4.2) (3.0) (3.0) (5.6) (15.8)
Total EBIT $18.0 $21.8 $17.6 $27.6 $85.0
EBITDA (2)
ProQuest Information and Learning $24.5 $25.1 $24.0 $33.7 $107.3
ProQuest Business Solutions 12.8 14.7 14.7 18.1 60.3
Corporate / Other (4.1) (2.9) (3.0) (5.5) (15.5)
Total EBITDA $33.2 $36.9 $35.7 $46.3 $152.1
(1) EBIT is defined as earnings from continuing operations before interest
and income taxes.
(2) EBITDA is defined as EBIT plus depreciation and amortization.
PROQUEST COMPANY AND SUBSIDIARIES
PRO FORMA RESULTS OF OPERATIONS - Fiscal Year 2005
(In Millions, Except Per Share Data)
Represents results as though the divestiture had occurred
at January 1, 2004.
Q1 Q2 Q3 YTD Q3
Net sales $109.8 $134.6 $148.4 $392.8
Cost of sales (51.6) (65.8) (72.3) (189.7)
Gross profit 58.2 68.8 76.1 203.1
R&D expense (4.6) (3.4) (6.0) (14.0)
SG&A expense (34.7) (34.2) (35.6) (104.5)
Corporate expense (4.3) (3.5) (2.8) (10.6)
Earnings from continuing operations
before interest and income taxes 14.6 27.7 31.7 74.0
Net interest expense:
Interest income 0.4 0.4 0.4 1.2
Interest expense (6.9) (8.3) (8.7) (23.9)
Net interest expense (6.5) (7.9) (8.3) (22.7)
Earnings from continuing operations
before income taxes 8.1 19.8 23.4 51.3
Income tax expense (2.9) (7.0) (7.4) (17.3)
Net earnings from continuing
operations $5.2 $12.8 $16.0 $34.0
Shares (Basic) 29.377 29.738 29.752 29.602
Shares (Diluted) 29.778 30.245 30.233 30.036
EPS (Basic) 0.18 0.43 0.54 1.15
EPS (Diluted) 0.18 0.42 0.53 1.13
PROQUEST COMPANY AND SUBSIDIARIES
PRO FORMA RESULTS OF OPERATIONS - Fiscal Year 2005
(In Millions)
Represents results as though the divestiture had occurred
at January 1, 2004.
Q1 Q2 Q3 YTD Q3
Net Sales
ProQuest Information and Learning:
Published Products $30.2 $35.4 $31.9 $97.5
General Reference Products 15.4 16.1 16.3 47.8
Traditional Products 13.9 14.8 14.1 42.8
Voyager 6.0 23.0 40.1 69.1
Total ProQuest Information and
Learning $65.5 $89.3 $102.4 $257.2
ProQuest Business Solutions:
Automotive Group $42.0 $43.0 $43.3 $128.3
Power Equipment - Electronic 2.0 1.9 2.3 6.2
Other 0.3 0.4 0.4 1.1
Total ProQuest Business Solutions $44.3 $45.3 $46.0 $135.6
Total Net Sales $109.8 $134.6 $148.4 $392.8
EBIT (1)
ProQuest Information and Learning $7.3 $19.4 $23.7 $50.4
ProQuest Business Solutions 11.6 11.8 10.7 34.1
Corporate / Other (4.3) (3.5) (2.7) (10.5)
Total EBIT $14.6 $27.7 $31.7 $74.0
EBITDA (2)
ProQuest Information and Learning $23.5 $36.5 $46.3 $106.3
ProQuest Business Solutions 12.9 13.1 12.1 38.1
Corporate / Other (4.2) (3.4) (2.7) (10.3)
Total EBITDA $32.2 $46.2 $55.7 $134.1
(1) EBIT is defined as earnings from continuing operations before
interest and income taxes.
(2) EBITDA is defined as EBIT plus depreciation and amortization.
PROQUEST COMPANY AND SUBSIDIARIES
PRO FORMA CONDENSED BALANCE SHEET
(In Thousands)
Represents balances excluding divested assets and liabilities.
ASSETS
October 1,
2005
Cash and cash equivalents $24,917
Accounts receivable, net 128,644
Inventory, net 15,034
Other current assets:
Prepaid royalties 26,459
Other 43,141
Total other current assets 69,600
Total current assets 238,195
Net property, plant, equipment and product masters 182,382
Long-term receivables 10,065
Goodwill 597,302
Identifiable intangibles, net 20,926
Curriculum, net 94,357
Purchased and developed software, net 36,579
Assets held for sale 47,314
Other assets 20,214
Total assets $1,247,334
LIABILITIES AND SHAREHOLDERS' EQUITY
Current maturities of long-term debt $164
Accounts payable 48,488
Accrued expenses 53,818
Current portion of monetized future billings 18,816
Deferred income 72,258
Total current liabilities 193,544
Long-term debt, less current maturities 575,264
Monetized future billings, less current portion 22,323
Liabilities held for sale 17,801
Other liabilities 103,092
Total long-term liabilities 718,480
Total shareholders' equity 335,310
Total liabilities and shareholders' equity $1,247,334
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