Cambium Learning Group Announces Second Quarter Earnings Technology-Enabled Products Continue Growth Trajectory PR Newswire DALLAS, Aug. 8, 2013 DALLAS, Aug. 8, 2013 /PRNewswire/ --Cambium Learning Group, Inc. (NASDAQ: ABCD, the "Company"), a leading educational solutions and services company committed to helping all students reach their full potential by providing evidence-based solutions and expert professional services, announced today its financial results for the second quarter of 2013. (Logo: http://photos.prnewswire.com/prnh/20100129/CLGROUPLOGO) Three Months Ended Six Months Ended June June 30, $ June June $ ($ in millions) 30, 2012 Change % Change 30, 30, Change % Change 2013 2013 2012 GAAP net revenues $42.8 $40.4 $2.4 5.8% $74.2 $68.3 $5.9 8.7% Change in deferred (1.6) 0.3 (1.9) (626.2)% (9.5) (6.8) (2.8) (40.6)% revenue GAAP net income 0.4 (22.5) 22.9 101.9% (8.6) (42.7) 34.1 79.8% (loss) EBITDA 10.7 (9.7) 20.4 210.4% 11.2 (17.0) 28.2 166.0% Adjusted EBITDA 11.2 7.5 3.6 48.4% 13.4 4.4 9.0 205.7% For the first half of 2013, company-wide order volumes decreased 5% compared to the first half of 2012, and order volume changes by segment were as follows: oVoyager Sopris Learning decreased 10% oLearning A-Z increased 11% oExploreLearning increased 23% oKurzweil/IntelliTools decreased 14% The Company's Voyager Sopris Learning and Kurzweil/IntelliTools segments experienced order volume challenges in the first half of 2013, while Learning A-Z and ExploreLearning continued their double digit growth. "Learning A-Z and ExploreLearning have a compelling value proposition in today's educational market with quality content and innovative and award-winning technology. We expect continued growth from these business units," said John Campbell, chief executive officer of Cambium Learning Group, Inc. "We have been slow to execute our strategy of transitioning the Voyager Sopris Learning and Kurzweil/IntelliTools products to the innovative technology-based learning solutions demanded by today's market, which has impacted our top line growth. We believe our ongoing development efforts will result in a product portfolio that provides school districts with updated technology and solutions that address the issues teachers are facing with the new Common Core State Standards. Voyager Sopris Learning's recent release of the adolescent intervention literacy solution LANGUAGE! Live and Kurzweil/IntelliTools' firefly offering, a subscription solution which has shown strong growth year over year, are examples of the types of products that we believe will reverse the downward top-line trend," continued Mr. Campbell. Other highlights include: oGAAP net revenues for the first half of 2013 increased by 9% to $74.2 million, compared with $68.3 million in the first half of 2012. In addition to the order volume improvement in the Company's subscription businesses, deferred revenue balances decreased by $9.5 million in the first half of 2013, as the Company recognized revenue on prior-period technology and service sales that were delivered during the period. Comparatively, deferred revenue balances decreased by $6.8 million in the first half of 2012. oGAAP net revenues by segment for the first half of 2013, and the percentage change from the first half of 2012, were as follows: oVoyager Sopris Learning: $45.8 million, increased 6% oLearning A-Z: $15.7 million, increased 27% oExploreLearning: $7.8 million, increased 13% oKurzweil/IntelliTools: $4.9 million, decreased 17% oOn an adjusted basis, EBITDA was $13.4 million in the first half of 2013, up $9.0 million from $4.4 million in the first half of 2012. The increase in adjusted EBITDA was the result of the increase in net revenues and cost savings from the re-engineering and restructuring initiatives completed in 2012. oIn the second quarter of 2013, the Company received a $12.3 million tax refund from the state of Michigan. Additionally, the Company was able to move $3.0 million of cash out of an escrow fund held for the benefit of a potential tax indemnity obligation which was not triggered. Both of these cash inflows are reflected as cash provided from operating activities. Portions of the Michigan settlement and the escrow account held for the benefit of the potential tax indemnity were in turn paid out to the holders of the contingent value rights issued in the Company's 2009 merger with Voyager Learning Company. The contingent value rights payments of $7.7 million are reflected as cash used in investing activities. oThe Company has cash and cash equivalents of $46.3million on the balance sheet as of June 30, 2013. Cash provided by operations during the first half of 2013 was $11.0million, cash used in investing activities was $15.6 million, and cash used in financing activities was $0.9 million. The Company's operations are highly seasonal and the first half of the year is historically cash flow negative. 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. About Cambium Learning Group, Inc. Cambium Learning Groupis a leading educational solutions and services company that is committed to helping every student reach their full potential by providing evidence-based solutions and expert professional services to empower educators and raise the achievement levels of all students. Cambium is composed of four business units: Voyager Learning (www.voyagerlearning.com) and Sopris Learning (www.soprislearning.com), Learning A–Z® (www.learninga-z.com), ExploreLearning® (www.explorelearning.com), and Kurzweil/IntelliTools (www.kurzweiledu.com). Together, these business units provide best-in-class intervention and supplemental instructional materials; gold-standard professional development and school-improvement services;breakthrough technology solutions for online learning and professional support; valid and reliable assessments; and proven materials to support a positive and safe school environment. For more information, visit www.cambiumlearning.com. Media and Investor Contact: Barbara Benson Cambium Learning Group, Inc. 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 Six Months Ended June30, June30, June30, June30, 2013 2012 2013 2012 Net revenues $ 42,786 $ 40,429 $ 74,215 $ 68,284 Cost of revenues: Cost of revenues 12,647 14,397 24,050 25,563 Amortization expense 4,281 6,579 7,988 12,949 Total cost of revenues 16,928 20,976 32,038 38,512 Research and development 2,528 2,652 4,859 5,984 expense Sales and marketing expense 11,715 12,041 22,048 23,937 General and administrative 4,880 5,061 11,673 10,806 expense Shipping and handling costs 399 954 698 1,281 Depreciation and 1,220 1,591 2,436 3,250 amortization expense Goodwill impairment - 14,700 - 14,700 Embezzlement and related 115 44 115 (41) expense (recoveries) Impairment of long-lived - 320 - 3,111 assets Total costs and expenses 37,785 58,339 73,867 101,540 Income (loss) before interest, other income 5,001 (17,910) 348 (33,256) (expense) and income taxes Net interest expense (4,679) (4,627) (9,255) (9,404) Other income, net 211 37 430 73 Income (loss) before income 533 (22,500) (8,477) (42,587) taxes Income tax benefit (expense) (102) 23 (170) (154) Net income (loss) $ 431 $ (22,477) $ (8,647) $ (42,741) Net income (loss) per common share: Basic net income (loss) per $ 0.01 $ (0.45) $ (0.18) $ (0.86) common share Diluted net income (loss) $ 0.01 $ (0.45) $ (0.18) $ (0.86) per common share Average number of common shares and equivalents outstanding: Basic 47,357 49,941 47,377 49,944 Diluted 47,637 49,941 47,377 49,944 Cambium Learning Group, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (In thousands, except per share data) As of June30, December31, 2013 2012 ASSETS (unaudited) Current assets: Cash and cash equivalents $ 46,271 $ 51,904 Accounts receivable, net 20,900 17,813 Inventory 12,030 16,620 Tax receivables 92 12,234 Restricted assets, current 1,350 4,387 Assets held for sale 261 380 Other current assets 4,954 5,892 Total current assets 85,858 109,230 Property, equipment and software at cost 39,537 35,535 Accumulated depreciation and amortization (18,510) (14,514) Property, equipment and software, net 21,027 21,021 Goodwill 47,404 47,404 Acquired curriculum and technology intangibles, 7,446 9,320 net Acquired publishing rights, net 6,154 7,602 Other intangible assets, net 6,933 7,836 Pre-publication costs, net 13,329 11,660 Restricted assets, less current portion 6,107 6,754 Other assets 9,341 9,632 Total assets $ 203,599 $ 230,459 Cambium Learning Group, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (In thousands, except per share data) As of June30, December31, 2013 2012 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) (unaudited) Current liabilities: Capital lease obligations, current $ 1,068 $ 1,290 Accounts payable 2,354 3,007 Contingent value rights, current — 7,599 Accrued expenses 21,042 20,530 Deferred revenue, current 35,114 45,974 Total current liabilities 59,578 78,400 Long-term liabilities: Long-term debt 174,409 174,328 Capital lease obligations, less current portion 2,534 3,014 Deferred revenue, less current portion 6,962 5,631 Other liabilities 14,593 15,131 Total long-term liabilities 198,498 198,104 Stockholders' equity (deficit): Preferred stock ($.001 par value, 15,000 shares authorized, zero shares issued and outstanding — — at June30, 2013 and December31, 2012) Common stock ($.001 par value, 150,000 shares authorized, 51,208 and 51,208 shares issued, and 46,904 and 47,098 shares outstanding at June30, 51 51 2013 and December31, 2012, respectively) Capital surplus 282,849 282,450 Accumulated deficit (327,089) (318,442) Treasury stock at cost (4,304 and 4,110 shares at June30, 2013 and December31, 2012, (7,772) (7,528) respectively) Accumulated other comprehensive income (loss): Pension and postretirement plans (2,516) (2,576) Accumulated other comprehensive income (loss) (2,516) (2,576) Total stockholders' equity (deficit) (54,477) (46,045) Total liabilities and stockholders' equity $ 203,599 $ 230,459 (deficit) Reconciliation Between Net Revenues and Adjusted Net Revenues and Between Net Income (Loss) and Adjusted EBITDA for the Three Months Ended June 30, 2013 and 2012 ThreeMonthsEndedJune30, 2013 2012 (In thousands) (Unaudited) Total net revenues $ 42,786 $ 40,429 Non-operational or non-cash costs included in net revenues but excluded from adjusted net revenues: 9 123 Adjustments related to purchase accounting Adjusted net revenues $ 42,795 $ 40,552 Net income (loss) $ 431 $ (22,477) Reconciling items between net income (loss) and EBITDA: Depreciation and amortization 5,501 8,170 Net interest expense 4,679 4,627 Income tax (benefit) expense 102 (23) Income (loss) from operations before interest, income taxes, and depreciation and amortization 10,713 (9,703) (EBITDA) Non-operational or non-cash costs included in EBITDA but excluded from Adjusted EBITDA: Other income, net (211) (37) Re-engineering and restructuring costs — 2,045 Merger and acquisition activities 156 343 Stock-based compensation and expense 362 (20) Embezzlement and related expenses (recoveries) 115 44 Adjustments related to purchase accounting 9 95 Adjustments to CVR liability 19 54 Goodwill impairment — 14,700 Adjusted EBITDA $ 11,163 $ 7,521 Reconciliation Between Net Revenues and Adjusted Net Revenues and Between Net Loss and Adjusted EBITDA for the Six Months Ended June 30, 2013 and 2012 SixMonthsEndedJune30, 2013 2012 (In thousands) (Unaudited) Total net revenues $ 74,215 $ 68,284 Non-operational or non-cash costs included in net revenues but excluded from adjusted net revenues: 18 255 Adjustments related to purchase accounting Adjusted net revenues $ 74,233 $ 68,539 Net loss $ (8,647) $ (42,741) Reconciling items between net loss and EBITDA: Depreciation and amortization 10,424 16,199 Net interest expense 9,255 9,404 Income tax expense 170 154 Income (loss) from operations before interest, income taxes, and depreciation and amortization 11,202 (16,984) (EBITDA) Non-operational or non-cash costs included in EBITDA but excluded from Adjusted EBITDA: Other income, net (430) (73) Re-engineering and restructuring costs — 5,749 Management transition 1,501 — Merger and acquisition activities 314 524 Stock-based compensation and expense 591 205 Embezzlement and related expenses (recoveries) 115 (41) Adjustments related to purchase accounting 38 198 Adjustments to CVR liability 74 107 Goodwill impairment — 14,700 Adjusted EBITDA $ 13,405 $ 4,385 SOURCE Cambium Learning Group, Inc. Website: http://www.cambiumlearning.com
Cambium Learning Group Announces Second Quarter Earnings
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