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Cambium Learning Group Announces 2012 Earnings

                Cambium Learning Group Announces 2012 Earnings

Fourth Quarter Revenue Improves; Technology Growth Continues

PR Newswire

DALLAS, March 7, 2013

DALLAS, March 7, 2013 /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 unaudited
financial results.

(Logo: http://photos.prnewswire.com/prnh/20100129/CLGROUPLOGO)

              Three Months Ended                Twelve Months Ended
(In millions) December    December    $ Change  December   December   $ Change
              31, 2012    31, 2011              31, 2012   31, 2011
GAAP net      $   34.3  $   31.5  $  2.8   $  148.6  $  172.3  $(23.7)
revenues
Change in
deferred      1.9         (0.2)       2.1       8.3        5.7        2.6
revenue
GAAP net loss (88.8)      (46.6)      (42.2)    (133.8)    (49.4)     (84.4)
EBITDA        (78.1)      (33.7)      (44.4)    (83.9)     4.0        (87.9)
Adjusted      4.5         5.5         (1.0)     21.4       43.4       (22.0)
EBITDA
Goodwill      (52.2)      (37.6)      (14.6)    (66.9)     (37.6)     (29.3)
impairment
Impairment of
long-lived    (30.4)      -           (30.4)    (33.7)     -          (33.7)
assets

The Company experienced order volume and revenue growth in the fourth quarter
of 2012 versus the fourth quarter of 2011. This increase was the first
quarterly increase since the second quarter of 2011. While the fourth quarter
showed year-over-year improvements, constraints on federal and state funding
to the Company's school district customers continued to pose challenges to
performance in fiscal year 2012. The Company experienced order volume
declines in the first three quarters of 2012 before seeing improvement in the
fourth quarter. The declines in the first three quarters were attributed, in
large part, to the expiration of the American Recovery and Reinvestment Act
("ARRA") funding in September 2011 without a comparable replacement for this
federal funding in 2012. The growth of order volumes and revenue in the fourth
quarter of 2012 was due to continued improvement in the Company's services
offerings and online products. The growth in these areas in the fourth
quarter was sufficient to overcome continued weakness in the Company's legacy
print-based products, whereby these growth areas were not sufficient to offset
declines in the prior three quarters. The Learning A-Z and ExploreLearning
product lines in the Cambium Learning Technologies ("CLT") segment and service
offerings led by the school turnaround product line have been the most
consistent growth areas of the Company. These pockets of growth are promising,
and the Company believes that it will continue to see growth in services and
technology offerings.

"While performance is still not at the level we expect, we do see positive
developments and will continue to focus on developing digital capabilities in
our blended learning model with an emphasis on student directed learning. Our
products and services mitigate big problems for the country's educators," said
Ron Klausner, chief executive officer of Cambium Learning Group, Inc.

  oFor the full year 2012, company-wide order volumes were down 10% compared
    to 2011. Order volume changes by business unit were as follows:

       oVoyager Learning decreased 17%
       oCLT increased 5%
       oSopris Learning decreased 19%

  oGAAP net revenues for 2012 declined by 14% to $148.6 million compared with
    $172.3 million in 2011 caused primarily by the decline in order volume and
    to a lesser degree by an increase in deferred revenue. 
  oGAAP net revenues by business unit for 2012 and the percentage change from
    2011 were as follows: 

       oVoyager Learning: $75.0 million, down 22%
       oCLT: $51.7 million, up 4%.
       oSopris Learning: $21.9 million, down 19%

  oOn an adjusted basis, EBITDA was $21.4 million in 2012, down $22.0 million
    from $43.4 million in 2011. The decline in adjusted EBITDA is primarily
    the result of a $23.7 million decline in revenues without a corresponding
    decrease in overall spending, as the Company increased spending in the
    growth areas of Learning A-Z and ExploreLearning partially offset by lower
    costs associated with lower order volumes and cost reduction efforts. 
  oThe Company has cash and cash equivalents of $51.9 million on the balance
    sheet as of December 31, 2012.
  oThe Company made significant progress in its re-engineering and
    restructuring effort that began in late 2011. This effort is intended to
    realign the Company's resources and skill sets with emerging digital
    trends, align its organizational and cost structure to 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.
  oDuring 2012, the Company recorded non-cash goodwill impairment charges of
    $66.9 million, with Voyager Learning goodwill written down by $52.2
    million and goodwill related to the Kurzweil Educational Systems and
    IntelliTools product lines in the CLT segment written down by $14.7
    million. The goodwill impairment was the result of a decline in order
    volumes and a reduction in the Company's estimates of future cash flows
    primarily impacted by expected continued funding pressure. These same
    triggering factors resulted in non-cash impairment charges of $27.8
    million related to Voyager Learning's intangible assets including acquired
    curriculum and technology intangibles, acquired publishing rights and
    other acquired intangible assets.

In late 2012, the management teams and infrastructures for the Voyager
Learning and Sopris Learning operations were merged into a combined business
unit named Voyager Sopris Learning ("VSL"). The Company will present financial
information going forward for the combined VSL entity. Therefore, the
Company's financial statements, including those to be issued in the Company's
Form 10-K for the fiscal year 2012, will present segment results for VSL and
CLT. The Company's historical segment reporting results will be combined for
comparative purposes to reflect the current organizational structure.

In January 2013, the Michigan Court of Appeals ruled in the Company's favor on
state income tax matters that will result in the Company receiving refunds of
approximately $12.1 million. As the Michigan Court of Appeals did not appeal
the decision to the Michigan Supreme Court, the matter is resolved and a
refund is expected to be received in the second quarter of 2013.
Approximately $5.7 million of the Michigan refund will in turn be paid to the
holders of contingent value rights received as purchase price consideration in
the 2009 merger between the Company and Voyager Learning Company, and
approximately $6.4 million will be retained by the Company.

Fourth Quarter 2012 Business Highlights

  oClassroom Suite by IntelliTools^® was selected as a 2012 District
    Administration Readers' Choice Top 100 Product. Classroom Suite was chosen
    as a Top 100 Product as judged by the editors of District Administration,
    who considered more than 1000 nominations to select those solutions that
    truly make a difference in people's lives. The annual District
    Administration Readers' Choice Top 100 Products award recognizes leaders
    in the education industry, and provides superintendents and other senior
    school district leaders with the unique opportunity to learn what products
    their colleagues around the country are using, and how these products
    contribute to the success of their districts.
  oThree of the Company's innovative online programs received Awards of
    Excellence from Tech & Learning magazine. The Cambium Learning Group
    winners include ExploreLearning's Reflex™, and Voyager Learning's
    VocabJourney® and Voyager Online Algebra.Honoring groundbreaking
    software, hardware, network, and Web products, the prestigious 30-year-old
    program also recognizes products that significantly enhance proven
    education tools.
  oThe Company announced in December that students have now solved over one
    billion addition, subtraction, multiplication and division facts using
    ExploreLearning's Reflex product. Reflex is a research-based program that
    uses the allure of challenging and exciting games to get students engaged
    and working at peak performance in developing instant recall of math
    facts. Reflex launched in April 2011, just 20 months ago, but is already
    being used by hundreds of thousands of students in all 50 states.
  oThe United States Department of Education produced a summary report on the
    Federal Striving Readers Program. The program and related grants focused
    on improving reading skills for middle and high school students. In April
    of the first implementation year, the program was cancelled due to funding
    but the Department of Education allowed the states to finish the school
    year and external evaluators to complete the analysis. Louisiana, who
    used the Company's Voyager Journeys product, had the best results of eight
    states with statistically significant and educationally meaningful impact
    for overall reading and reading comprehension in these randomized control
    trials.
  oIn November 2012, the National Alliance of Black School Educators (NABSE)
    honored Cambium Learning Group Chief Executive Officer Ron Klausner with
    the President's Award at the organization's 40^th annual conference in
    Nashville, Tennessee. NABSE is the nation's premiere nonprofit
    organization devoted to furthering the academic success for the nation's
    children— particularly children of African descent. The 2012 NABSE Awards
    recognize those leaders who have made significant and lasting national and
    international contributions to the education of African American learners,
    as well as exemplified the vision and mission of NABSE.

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, March
7, 2013. The call will be recorded and archived until Friday, April 5, 2013,
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 two business units: Voyager Sopris
Learning provides educators with results-based products, services and learning
solutions that improve school and student performancein literacy and math;
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:
Brad Almond
Cambium Learning Group, Inc.
investorrelations@cambiumlearning.com

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
Consolidated Statements of Operations
(In thousands, except per share data)
                                        For the Years Ended December 31,
                                        2012          2011         2010
                                        (unaudited)
Net revenues:
Product revenues                        $ 129,747     $151,846     $160,778
Service revenues                        18,812        20,412       20,482
Total net revenues                      148,559       172,258      181,260
Cost of revenues:
Cost of product revenues                32,628        34,002       41,583
Cost of service revenues                18,335        19,163       18,308
Amortization expense                    24,716        27,799       28,511
Total cost of revenues                  75,679        80,964       88,402
Research and development expense        10,907        9,933        10,558
Sales and marketing expense             46,367        45,747       45,987
General and administrative expense      21,427        23,456       23,857
Shipping and handling costs             2,834         2,259        3,570
Depreciation and amortization expense   6,182         7,224        9,154
Goodwill impairment                    66,893        37,618       -
Embezzlement and related expense        516           (3,096)      (353)
(recoveries)
Impairment of long-lived assets         33,707        -            -
Total costs and expenses                264,512       204,105      181,175
Income (loss) before interest, other
income (expense)
and income taxes                        (115,953)     (31,847)     85
Net interest income (expense):
Interest income                         433           738          19
Interest expense                        (19,116)      (19,169)     (17,311)
Net interest income (expense)           (18,683)      (18,431)     (17,292)
Other income (expense), net             1,125         848          674
Loss before income taxes                (133,511)     (49,430)     (16,533)
Income tax benefit (expense)            (272)         (11)         583
Net loss                                $(133,783)    $(49,441)    $(15,950)
Net loss per common share:
Basic net loss per common share         $   (2.71)  $  (1.07)  $  (0.36)
Diluted net loss per common share       $   (2.71)  $  (1.07)  $  (0.36)
Average number of common shares and
equivalents outstanding:
Basic                                   49,395        46,142       44,322
Diluted                                 49,395        46,142       44,322

Cambium Learning Group, Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands, except per share data)
                                                       As of December 31,
                                                       2012         2011
ASSETS                                                 (unaudited)
Current assets:
Cash and cash equivalents                              $ 51,904    $ 63,191
Accounts receivable, net                               17,813       13,485
Inventory                                              16,620       21,561
Tax receivables                                        12,234       -
Restricted assets, current                             4,387        1,393
Assets held for sale                                   380          2,727
Other current assets                                   5,892        7,564
Total current assets                                   109,230      109,921
Property, equipment and software at cost               35,535       42,878
Accumulated depreciation and amortization              (14,514)     (12,968)
Property, equipment and software, net                  21,021       29,910
Goodwill                                               47,404       114,297
Acquired curriculum and technology intangibles, net    9,320        26,996
Acquired publishing rights, net                        7,602        26,861
Other intangible assets, net                           7,836        18,111
Pre-publication costs, net                             11,660       10,034
Restricted assets, less current portion                6,754        11,082
Other assets                                           9,632        22,468
Total assets                                           $ 230,459    $369,680
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Capital lease obligations, current                     $   1,290  $   826
Accounts payable                                       3,007        3,024
Contingent value rights, current                      7,599        -
Accrued expenses                                       20,530       21,203
Deferred revenue, current                              45,974       38,984
Total current liabilities                              78,400       64,037
Long-term liabilities:
Long-term debt                                         174,328      174,165
Capital lease obligations, less current portion        3,014        12,294
Deferred revenue, less current portion                 5,631        4,304
Contingent value rights, less current portion         -            6,684
Other liabilities                                      15,131       18,126
Total long-term liabilities                            198,104      215,573
Stockholders' equity (deficit):
Preferred stock ($.001 par value, 15,000 shares
authorized,
zero shares issued and outstanding at December 31,     -            -
2012 and 2011)
Common stock ($.001 par value, 150,000 shares
authorized,
51,207 and 51,162 shares issued, and 47,097 and
49,518 shares
outstanding at December 31, 2012 and 2011,             51           51
respectively)
Capital surplus                                        282,450      281,240
Accumulated deficit                                    (318,442)    (184,659)
Treasury stock at cost (4,110 and 1,644 shares at
December 31, 2012
and December 31, 2011, respectively)                   (7,528)      (4,931)
Other comprehensive income (loss):
Pension and postretirement plans                       (2,576)      (1,632)
Net unrealized gain on securities                      -            1
Accumulated other comprehensive income (loss)          (2,576)      (1,631)
Total stockholders' equity (deficit)                   (46,045)     90,070
Total liabilities and stockholders' equity (deficit)   $ 230,459    $ 369,680

Reconciliation Between Net Revenues and Adjusted Net Revenues and Between Net
Loss
and Adjusted EBITDA for the Years Ended December 31, 2012 and 2011
(In thousands)
(Unaudited)
                                                      2012         2011
Total net revenues                                    $ 148,559   $ 172,258
Non-operational or non-cash costs included in
   net revenues but excluded from adjusted net
   revenues:
   Adjustments related to purchase accounting         324          1,039
Adjusted net revenues                                 $ 148,883   $ 173,297
Net loss                                              $ (133,783)  $ (49,441)
Reconciling items between net loss and EBITDA:
   Depreciation and amortization                      30,898       35,023
   Net interest expense                               18,683       18,431
   Income tax                                        272          11
Income (loss) from operations before interest
expense,
   income taxes, and depreciation and
   amortization (EBITDA)                              (83,930)     4,024
Non-operational or non-cash costs included in
   EBITDA but excluded from Adjusted EBITDA:
   Other income                                       (1,125)      (848)
   Re-engineering and restructuring costs             8,370        1,189
   Merger and acquisition activities                  829          1,088
   Stock-based compensation expense                   874          1,288
   Embezzlement and related expenses (recoveries)     516          (3,096)
   Adjustments related to purchase accounting         257          872
   Goodwill impairment                                66,893       37,618
   Intangible asset impairments                       27,763       -
   Adjustments to CVR liability                       915          1,308
Adjusted EBITDA                                       $  21,362   $ 43,443

Reconciliation Between Net Revenues and Adjusted Net Revenues and Between Net
Loss
and Adjusted EBITDA for the Three Months Ended December 31, 2012 and 2011
(In thousands)
(Unaudited)
                                                       2012         2011
Total net revenues                                     $ 34,317    $ 31,466
Non-operational or non-cash costs included in
   net revenues but excluded from adjusted net
   revenues:
   Adjustments related to purchase accounting          11           150
Adjusted net revenues                                  $ 34,328    $ 31,616
Net loss                                               $ (88,807)   $ (46,555)
Reconciling items between net loss and EBITDA:
   Depreciation and amortization                       6,072        9,257
   Net interest expense                                4,651        4,194
   Income tax                                         14           (559)
Loss from operations before interest expense,
   income taxes, and depreciation and
   amortization (EBITDA)                               (78,070)     (33,663)
Non-operational or non-cash costs included in
   EBITDA but excluded from Adjusted EBITDA:
   Other income                                        (889)        (483)
   Re-engineering and restructuring costs              2,130        1,189
   Merger and acquisition activities                   145          229
   Stock-based compensation expense                    356          335
   Embezzlement and related expenses (recoveries)      64           (644)
   Adjustments related to purchase accounting          10           116
   Goodwill impairment                                 52,193       37,618
   Intangible asset impairments                        27,763       -
   Adjustments to CVR liability                        754          788
Adjusted EBITDA                                        $  4,456    $  5,485



SOURCE Cambium Learning Group, Inc.

Website: http://www.cambiumlearning.com
 
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