Cambium Learning Group Announces Third Quarter Earnings Company Beginning to See Improvement in Order Volume in the Fourth Quarter PR Newswire DALLAS, Nov. 8, 2012 DALLAS, Nov. 8, 2012 /PRNewswire/ --Cambium Learning Group, Inc. (NASDAQ: ABCD, the "Company"), the leading educational company focused primarily on serving the needs of at-risk and special student populations, will hold a conference call today at 5:00 p.m. Eastern Time to discuss 2012 third-quarter earnings. The call will be based on unaudited financial results through September 30, 2012. Three Months Ended Nine Months Ended (In September September $ % September September $ % millions) 30, 2012 30, 2011 Change Change 30, 2012 30, 2011 Change Change GAAP net $ $ $ -13% $ $ $(26.6) -19% revenues 46.0 52.9 (6.9) 114.2 140.8 Change in deferred 13.2 11.9 1.3 11% 6.4 5.9 0.5 8% revenue GAAP net income (2.2) 3.1 (5.3) -171% (45.0) (2.9) (42.1) 1452% (loss) EBITDA 11.1 17.0 (5.9) -35% (5.9) 37.7 (43.6) -116% Adjusted 12.5 17.6 (5.1) -29% 16.9 38.0 (21.1) -56% EBITDA (Logo: http://photos.prnewswire.com/prnh/20100129/CLGROUPLOGO) The third quarter of 2012 continues to be challenging in replicating the order volume achieved in 2011 when American Recovery and Reinvestment Act ("ARRA") funding was still in place. The Company continues to see order volume decline in each of its three operating segments for the full nine months; however, the Company saw sales growth in the Cambium Learning Technologies ("CLT") segment in the third quarter and the service offerings within the Voyager Learning segment, led by the school turnaround offering, continue to grow. Overall in Q3 we started to see some abatement in the negative trends from the first half of the year, led by our student-directed learning applications and turnaround services. Additionally, to date in the fourth quarter, order volumes have improved over prior year when compared with the same quarter-to-date time period in 2011. "While the challenging funding environment continued to weigh on order volumes in the third quarter, we are beginning to see favorable year-over-year comparative trends and expect to sustain those improvements through the remainder of the fourth quarter," said Ron Klausner, chief executive officer of Cambium Learning Group, Inc. oCompany order volume decreased 9.6% for the three months ending September 30, 2012, versus a decline in the first half of the year of 21.4%, indicating a slowing of the year-over-year declines. oThrough November 7, 2012, the Company has experienced an increase in order volume in the fourth quarter of over 10%, providing further indication that year-over-year declines in order volume are abating. oCompany order volume decreased 16% for the first nine months of 2012 versus the first nine months of 2011. Order volume changes by business unit were as follows: oVoyager Learning decreased 22% oCLT decreased 3% oSopris Learning decreased 22% oWithin the CLT unit, order volumes of the combined Learning A-Z and ExploreLearning product lines continued to grow, but this combined growth was offset by continued declines in order volumes of the Kurzweil Educational Systems^® and IntelliTools^® technology based products. oGAAP net revenues for the first nine months declined by 19% to $114.2 million compared with $140.8 million in 2011. The decline was primarily caused by the decline in order volume. GAAP net revenues by business unit for the first nine months of the year and the percentage change from the first nine months of 2011 were as follows: oVoyager Learning: $58.6 million, down 28% oCLT: $38.2 million, up 1%. oSopris Learning: $17.5 million, down 21% oOn an adjusted basis, EBITDA was $16.9 million in the first nine months of 2012, down $21.1 million from $38.0 million in the comparable period in 2011. The decline in adjusted EBITDA is primarily the result of a $26.6 million decline in revenues, and an increased 2012 investment in development, made primarily in the growing online-based products segment. However, this was partially offset by lower costs associated with lower order volumes and cost reduction efforts. oThe first nine months reported cash used in operations of $12.8 million due primarily to the nature of the Company's operations, which are highly seasonal. The first half is typically cash-flow negative due to declines in order volumes while investment in key areas has been maintained. oThe Company has cash and cash equivalents of $35.1 million on the balance sheet as of September 30, 2012, and the balance has been rising since that date and is expected to continue increasing by the end of 2012. oThe Company has progressed with and has expanded the scope of its re-engineering and restructuring effort that began in late 2011 and will continue through the end of 2012. This effort is intended to realign the Company's resources and skill sets with emerging digital trends, align our organizational and cost structure to our strategic goals, enhance the customer experience, and provide significant cost reductions in several operational areas through re-engineering and optimizing certain key processes. Savings are designed to provide financial flexibility to invest in growth areas or improve future earnings potential. Third Quarter 2012 Business Highlights oThe Company announced on September 27, 2012, that Thomas Kalinske, executive chairman of Global Education Learning, an online business teaching English to non-English speaking children in Asia, was appointed as the Company's chairman of the board. Mr. Kalinske has been a member of the Company's Board since February 2010. oThe ComputED Gazette announced that five Cambium Learning Group online programs, ExploreLearning Gizmos^®, ExploreLearning Reflex^™, VmathLive^®, Ticket to Read^® and firefly^®, ^ were named winners in its 17^th Annual 2012 Education Software Review Awards (EDDIES). The EDDIES target content-rich and innovative programs and websites that augment classroom curriculum and improve the productivity of teachers. Winning products provide teachers and parents alike with technology that fosters educational excellence and are chosen from titles submitted by publishers worldwide. oOn August 13, 2012, Voyager Learning announced an update to its VmathLive program, a web-based online math resource that creates a stimulating game environment for students in grades 2-8. Math will virtually "unfold" for students using VmathLive as they gain greater confidence in their math abilities and improve their results in a unique origami-themed program. oKurzweil 3000^® firefly by Kurzweil Educational Systems received an Honorable Mention in the 2012-13 Reader's Choice Awards sponsored by eSchoolMedia, the parent organization of eSchoolNews, eCampusNews, and eClassroomNews. The winning products were chosen after 1300 readers submitted their top choices for products that made the greatest impact on their schools. oSopris Learning released innovative educator tools to support RAVE-O®: Proven Literacy Intervention: RAVE-O Town, www.raveotown.com, and RAVE-O Online Training, www.soprislearningtrainingcenter.com. Non-GAAP Financial Measures EBITDA, Adjusted EBITDA and Adjusted Net Revenues are not prepared in accordance with GAAP and may be different from non-GAAP financial measures used by other companies. Non-GAAP financial measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. The Company believes that these non-GAAP measures provide useful information to investors because they reflect the underlying performance of the ongoing operations of the Company, and provide investors with a view of the Company's operations from management's perspective. Adjusted EBITDA and Adjusted Net Revenues remove significant purchase accounting, non-operational or certain non-cash items from earnings. The Company uses Adjusted EBITDA and Adjusted Net Revenues to monitor and evaluate the operating performance of the Company and as the basis to set and measure progress towards performance targets, which directly affect compensation for employees and executives. The Company generally uses these non-GAAP measures as measures of operating performance and not as measures of the Company's liquidity. The Company's presentation of EBITDA, Adjusted EBITDA and Adjusted Net Revenues should not be construed as an indication that future results will be unaffected by unusual, non-operational or non-cash items. Investor Conference Call The company will provide additional commentary on today's conference call. To listen to the Company's upcoming conference call, please dial (800) 860-2442 and reference "Cambium Learning" at 5:00 p.m. Eastern Time on Thursday, November 8, 2012. The call will be recorded and archived until Friday, December 7, 2012, and can be replayed by calling (877) 344-7529 and entering ID#10019972. The conference call will also be Webcast and available on the Company's Website at http://cambiumlearning.investorroom.com/events. About Cambium Learning Group, Inc. Cambium Learning® Group (NASDAQ: ABCD) is the leading educational company focused primarily on serving the needs of at-risk and special student populations. The company is comprised of three business units: Voyager Learning, provides comprehensive print and online intervention solutions, professional development, and school turnaround offerings and includes Lincoln National Academy, Class.com, and Voyager Education Services; Sopris Learning is known for supplemental solutions, including assessment, supplemental intervention, positive behavior supports and professional development; and Cambium Learning Technologies develops instructional and assistive technology and represents IntelliTools®, Kurzweil Educational Systems®, Learning A–Z, and ExploreLearning. Cambium Learning Group is committed to providing evidence-based support and expert professional services to empower educators and raise the achievement levels of all students. Learn more at www.cambiumlearning.com. Media and Investor Contact: Chris Cleveland Cambium Learning Group, Inc. 214.932.9474 firstname.lastname@example.org Forward Looking Statements Some of the statements contained herein constitute forward-looking statements. These statements relate to future events, including the future financial performance of Cambium Learning Group, Inc., and involve known and unknown risks, uncertainties and other factors that may cause the markets, actual results, levels of activity, performance or achievements of Cambium Learning Group, Inc. to be materially different from any actual future results, levels of activity, performance or achievements. These risks and other factors you should consider include, but are not limited to, the ability to successfully attract and retain a broad customer base for current and future products, changes in customer demands or industry standards, success of ongoing product development, maintaining acceptable margins, the ability to control costs, K-12 enrollment and demographic trends, the level of educational and education technology funding, the impact of federal, state and local regulatory requirements on the business of the company, the loss of key personnel, the impact of competition, the uncertainty of general economic conditions and financial market performance, and those other risks and uncertainties listed under the heading "RISK FACTORS" in Cambium Learning Group, Inc.'s Form 10-K. 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," or "priorities," or the negative of such terms, or other comparable terminology. These statements are only predictions. Actual events or results may differ materially. Cambium Learning Group, Inc. does not assume or undertake any obligation to update the information contained in this press release, and expressly disclaims any obligation to do so, whether as a result of new information, future events or otherwise. Cambium Learning Group, Inc. and Subsidiaries Condensed Consolidated Statements of Operations (In thousands, except per share data) (Unaudited) Three Months Ended Nine Months Ended September September September September 30, 30, 30, 30, 2012 2011 2012 2011 Net revenues $ 45,958 $ 52,906 $ 114,242 $ 140,792 Cost of revenues: Cost of revenues 14,274 16,318 39,837 45,104 Amortization expense 7,035 6,962 19,984 20,424 Total cost of revenues 21,309 23,280 59,821 65,528 Research and 2,622 2,199 8,606 7,093 development expense Sales and marketing 11,331 11,817 35,268 35,594 expense General and 4,837 4,795 15,643 16,136 administrative expense Shipping and handling 1,204 844 2,485 1,995 costs Depreciation and 1,592 1,858 4,842 5,342 amortization expense Goodwill impairment - - 14,700 - Embezzlement and related expense 493 (56) 452 (2,452) (recoveries) Impairment of 236 - 3,347 - long-lived assets Total costs and 43,624 44,737 145,164 129,236 expenses Income (loss) before interest, other income 2,334 8,169 (30,922) 11,556 (expense) and income taxes Net interest expense (4,628) (4,950) (14,032) (14,237) Other income, net 163 - 236 365 Income (loss) before (2,131) 3,219 (44,718) (2,316) income taxes Income tax expense (104) (155) (258) (570) Net income (loss) $ (2,235) $ 3,064 $ (44,976) $ (2,886) Net income (loss) per common share: Basic net income (loss) $ (0.05) $ 0.07 $ (0.90) $ (0.06) per common share Diluted net income $ (0.05) $ 0.07 $ (0.90) $ (0.06) (loss) per common share Average number of common shares and equivalents outstanding: Basic 49,284 46,743 49,722 44,911 Diluted 49,284 47,130 49,722 44,911 Cambium Learning Group, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (In thousands, except per share data) September 30, December 31, 2012 2011 ASSETS (unaudited) Current assets: Cash and cash equivalents $ 35,139 $ 63,191 Accounts receivable, net 32,915 13,485 Inventory 18,937 21,561 Deferred tax assets 2,800 2,829 Restricted assets, current 4,389 1,393 Assets held for sale 1,847 2,727 Other current assets 5,553 4,735 Total current assets 101,580 109,921 Property, equipment and software at cost 34,667 42,878 Accumulated depreciation and amortization (13,023) (12,968) Property, equipment and software, net 21,644 29,910 Goodwill 99,597 114,297 Acquired curriculum and technology intangibles, 19,966 26,996 net Acquired publishing rights, net 19,910 26,861 Other intangible assets, net 15,517 18,111 Pre-publication costs, net 12,009 10,034 Restricted assets, less current portion 7,063 11,082 Other assets 21,505 22,468 Total assets $ 318,791 $ 369,680 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Capital lease obligations, current $ 1,278 $ 826 Accounts payable 4,402 3,024 Contingent value rights, current 1,717 - Accrued expenses 17,335 21,203 Deferred revenue, current 45,237 38,984 Total current liabilities 69,969 64,037 Long-term liabilities: Long-term debt 174,287 174,165 Capital lease obligations, less current portion 3,243 12,294 Deferred revenue, less current portion 4,441 4,304 Contingent value rights, less current portion 5,128 6,684 Other liabilities 16,994 18,126 Total long-term liabilities 204,093 215,573 Stockholders' equity: Preferred stock ($.001 par value, 15,000 shares authorized, zero shares issued and outstanding at September 30, 2012 and - - December 31, 2011) Common stock ($.001 par value, 150,000 shares authorized, 51,208 and 51,162 shares issued, and 48,370 and 49,518 shares outstanding at September 30, 2012 and December 31, 51 51 2011, respectively) Capital surplus 282,147 281,240 Accumulated deficit (229,635) (184,659) Treasury stock at cost (2,838 and 1,644 shares at September 30, 2012 and December 31, 2011, respectively) (6,228) (4,931) Other comprehensive income (loss): Pension and postretirement plans (1,606) (1,632) Net unrealized gain on securities - 1 Accumulated other comprehensive loss (1,606) (1,631) Total stockholders' equity 44,729 90,070 Total liabilities and stockholders' equity $ 318,791 $ 369,680 Reconciliation Between Net Revenues and Adjusted Net Revenues and Between Net Income (Loss) and Adjusted EBITDA for the Three Months Ended September 30, 2012 and 2011 (In thousands) (Unaudited) Three Months Ended September 30, 2012 2011 Total net revenues $45,958 $52,906 Non-operational or non-cash costs included in net revenues but excluded from adjusted net revenues: Adjustments related to purchase 58 234 accounting Adjusted net revenues $46,016 $53,140 Net income (loss) (2,235) 3,064 Reconciling items between net income (loss) and EBITDA: Depreciation and amortization 8,627 8,820 Net interest expense 4,628 4,950 Income tax expense 104 155 Income from operations before interest, income taxes, and depreciation and amortization (EBITDA) 11,124 16,989 Non-operational or non-cash costs included in EBITDA but excluded from Adjusted EBITDA: Other income, net (163) - Re-engineering and restructuring costs 491 - Merger and acquisition activities 160 182 Stock-based compensation expense^ 313 349 Embezzlement and related expenses 493 (56) (recoveries)^ Adjustments related to purchase 49 185 accounting Adjustments to CVR liability 54 - Adjusted EBITDA $12,521 $17,649 Reconciliation Between Net Revenues and Adjusted Net Revenues and Between Net Loss and Adjusted EBITDA for the Nine Months Ended September 30, 2012 and 2011 (In thousands) (Unaudited) Nine Months Ended September 30, 2012 2011 Total net revenues $114,242 $140,792 Non-operational or non-cash costs included in net revenues but excluded from adjusted net revenues: Adjustments related to purchase accounting 313 889 Adjusted net revenues $114,555 $141,681 Net loss $(44,976) $ (2,886) Reconciling items between net loss and EBITDA: Depreciation and amortization 24,826 25,766 Net interest expense 14,032 14,237 Income tax expense 258 570 Income (loss) from operations before interest, income taxes, and depreciation and amortization (EBITDA) (5,860) 37,687 Non-operational or non-cash costs included in EBITDA but excluded from Adjusted EBITDA: Other income, net (236) (365) Re-engineering and restructuring costs 6,240 - Merger and acquisition activities 684 859 Stock-based compensation expense^ 518 953 Embezzlement and related expenses 452 (2,452) (recoveries)^ Adjustments related to purchase accounting 247 756 Adjustments to CVR liability 161 520 Goodwill impairment 14,700 - Adjusted EBITDA $ 16,906 $ 37,958 SOURCE Cambium Learning Group, Inc. Website: http://www.cambiumlearning.com
Cambium Learning Group Announces Third Quarter Earnings
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