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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

OR

Commission file number 1-3246

ProQuest Company

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code: (734) 761-4700

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by checkmark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).   x

The number of shares of the Registrant’s Common Stock, $.001 par value, outstanding as of May 10, 2005 was 29,850,530.

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ProQuest Company and Subsidiaries

Consolidated Statements of Operations

For the Thirteen Week Periods Ended April 2, 2005, and April 3, 2004

(In thousands, except per share data)

(Unaudited)

The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements.

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ProQuest Company and Subsidiaries

Consolidated Balance Sheets

As of April 2, 2005, January 1, 2005, and April 3, 2004

(In thousands)

The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements.

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ProQuest Company and Subsidiaries

Consolidated Statements of Cash Flows

For the Thirteen Week Periods Ended April 2, 2005, and April 3, 2004

(In thousands)

(Unaudited)

The accompanying Notes to the Consolidated Financial Statements are an integral part of these statements.

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ProQuest Company and Subsidiaries

Notes to the Consolidated Financial Statements

(Dollars and shares in thousands, except per share amounts)

(Unaudited)

Note 1 – Basis of Presentation

The Consolidated Financial Statements include the accounts of ProQuest Company and its subsidiaries, including ProQuest Information & Learning (“PQIL”) and ProQuest Business Solutions (“PQBS”), and are unaudited.

As permitted under the Securities and Exchange Commission (“SEC”) requirements for interim reporting, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted. Certain reclassifications to the 2004 Consolidated Financial Statements have been made to conform to the 2005 presentation. We believe that these financial statements include all necessary and recurring adjustments for the fair presentation of the interim period results. These financial statements should be read in conjunction with the Consolidated Financial Statements and related notes included in our annual report on Form 10-K for the fiscal year ended January 1, 2005.

In June 2004, we sold our Dealer Management System (“DMS”) business. For periods prior to June 2004, the operating results of this business have been segregated from our continuing operations in our Consolidated Statements of Operations.

Note 2 – Significant Accounting Policies

Accounts Receivable. Accounts receivable are stated net of the allowance for doubtful accounts which was $2,039, $1,452, and $1,703 at April 2, 2005, January 1, 2005, and April 3, 2004, respectively.

Inventory. Inventory costs include material, labor, and overhead. Inventories are stated at the lower of cost (determined using the first-in, first-out (“FIFO”) method) or market, net of reserves.

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The components of inventory are shown in the table below as of the dates indicated:

Property, Plant, Equipment, and Product Masters. Property, plant, equipment, and product masters are recorded at cost. The straight-line method of depreciation is primarily used, except for PQIL product masters (which represent the cost to create electronic and microform master document copies which are subsequently used in the production process to fulfill customers’ information requirements), which are depreciated on the double declining balance method. The carrying value of the product masters is $184,388 (net of $169,082 of accumulated depreciation), $171,368 (net of $161,321 of accumulated depreciation), and $161,950 (net of $154,462 of accumulated depreciation) at April 2, 2005, January 1, 2005, and April 3, 2004, respectively.

As of April 2, 2005, fixtures and equipment held under capital leases totaled $516. There were no capital leases as of January 1, 2005 or April 3, 2004.

Curriculum. Curriculum includes the acquired curriculum in the amount of $97,000 resulting from the acquisition of Voyager in the first quarter of 2005, as well as additional ongoing curriculum development costs. The curriculum that was acquired with Voyager is being amortized over 10 years on a straight-line basis. New curriculum development costs for programs that have an estimated life of more than one year are capitalized and amortized over the expected lives of the programs, typically 3 years. Curriculum development costs on programs with a one year shelf life are expensed as incurred. The carrying value of curriculum is $96,266 (net of $1,616 of accumulated amortization) at April 2, 2005.

Stock Option Plan. As permitted by Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock Based Compensation”, we account for our stock option plan using the intrinsic method prescribed in Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees” and related interpretations. Accordingly, compensation expense is recorded on the date of grant only if the current market price of the underlying stock exceeds the exercise price of the stock option. Pro forma net earnings and earnings per share disclosures for employee stock option grants based on the fair value-based method (defined in SFAS No. 123), whereby

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the fair value of stock-based awards at the date of grant would be subsequently expensed over the related vesting periods, are indicated below:

The fair value of each option granted is estimated on the date of grant using the Black-Scholes option-pricing model or a binomial model. The assumptions for the Black-Scholes option-pricing model are as follows:

On February 4, 2004, the Compensation Committee of our Board of Directors granted 1,961.5 nonqualified stock options with an exercise price of $30.97 to six members of our senior executive team. These stock options are intended to serve as a long-term incentive consistent with the Board’s desire that management deliver long-term sustainable stockholder value.

Based on the complexity of this plan, we have utilized a binomial model to estimate the fair value of the options, utilizing the following assumptions:

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We also issued 108 shares of restricted stock to certain employees and non-employees. These shares are valued at the market price at their respective award dates, recorded in “Unearned compensation on restricted stock” on our Consolidated Balance Sheets, and recognized as expense over the vesting period, typically 3 years. The amount of compensation cost related to these equity awards that was recognized into income was $169 and $0 for the thirteen weeks ended April 2, 2005 and April 3, 2004, respectively.

Derivative Financial Instruments and Hedging Activities. All derivative instruments are recognized as assets or liabilities in the balance sheet at fair value.

Net Earnings per Common Share. Basic net earnings per common share is computed by dividing net earnings by the weighted average number of common shares outstanding during the period. Diluted net earnings per common share is computed by dividing net earnings by the weighted average number of common shares outstanding during the period, and reflects the potential dilution that could occur if all of our outstanding stock options that are in-the-money were exercised and the restricted stock was fully vested, using the treasury stock method. Under the treasury stock method, the proceeds that would be received from the exercise of all in-the-money options are assumed to be used to repurchase shares. A reconciliation of the weighted average number of common shares and equivalents outstanding in the calculation of basic and diluted net earnings per common share is shown in the table below for the periods indicated:

Options to purchase 495 shares and 867 shares were outstanding at April 2, 2005 and April 3, 2004, respectively, but were not included in the computation of diluted net earnings per share because the options’ exercise prices were greater than the average market price of the common shares and, therefore, would be antidilutive.

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Note 3 – Discontinued Operations

In June 2004, we sold our DMS business, which was a component of PQBS. The DMS business was a software business, which did not fit with our core electronic publishing strategy.

Results for discontinued operations are shown in the table below for the periods indicated:

We will continue to provide parts and service products for powersports, recreational vehicles, and marine dealers. In addition, we entered into an exclusive distributor agreement with the DMS buyer. Approximately $5,100 has been recorded as deferred revenue related to this agreement, and will be recognized as revenue over the sixty-month contract. During the first quarter of 2005, $255 was recognized as revenue related to this contract.

Note 4 – Comprehensive Income

Comprehensive income or loss includes net earnings, net unrealized (loss)/gain on derivative instruments related to interest rate hedging, foreign currency translation adjustments, minimum pension liability, and net unrealized gain on available-for-sale securities.

Comprehensive income is shown in the table below for the periods indicated:

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The net unrealized (loss)/gain on derivative instruments, foreign currency translation adjustments, minimum pension liability, and net unrealized gain on securities does not impact our current income tax expense.

Note 5 – Segment Reporting

Information concerning our reportable business segments is shown in the tables below for the periods indicated:

Note 6 – Investments in Affiliates

On December 4, 2000, we entered into a Limited Liability Company Agreement with DaimlerChrysler Corporation, Ford Motor Company, and General Motors Corporation to form OEConnection (“OEC”).

For reporting purposes, OEC’s balance sheet and statement of operations are not consolidated with our results. Beginning January 1, 2003 until December 31, 2007, we earn a royalty on OEC’s net revenues, which is recorded in “Net sales” in our Consolidated Statement of Operations. The royalty recognized was $331 and $302 for the thirteen weeks ended April 2, 2005 and April 3, 2004, respectively.

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Note 7 – Goodwill, Software, Curriculum, and Other Intangible

Assets

We follow SFAS No. 142, “Goodwill and Other Intangible Assets”. SFAS No. 142 requires that goodwill no longer be amortized to earnings, but instead be reviewed for impairment on an annual basis. We perform this annual analysis during the second fiscal quarter, based on the goodwill balance as of the end of the first fiscal quarter.

The following table summarizes the changes in the carrying amount of goodwill by segment for the periods indicated:

We follow the guidance in Statement of Position (“SOP”) 98-1 “Accounting for the Costs of Computer Software Developed or Obtained for Internal Use” for capitalizing software projects. We follow SFAS No. 86 “Accounting for Costs of Computer Software to be Sold, Leased or Otherwise Marketed” for software projects related to external use. Included in depreciation and amortization expense was $3,543 and $4,042 of software amortization expense for the thirteen weeks ended April 2, 2005 and April 3, 2004, respectively. Software amortization expense was $16,919 for the fiscal year ended January 1, 2005.

Curriculum includes the acquired curriculum in the amount of $97,000 resulting from the acquisition of Voyager in the first quarter of 2005, as well additional ongoing curriculum development costs. Included in depreciation and amortization expense was $1,616 of curriculum amortization expense for the thirteen weeks ended April 2, 2005.

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The following table summarizes our “Identifiable intangible” assets and related accumulated amortization at the dates indicated:

We recorded $1,423 and $559 of intangible amortization expense during the thirteen weeks ended April 2, 2005 and April 3, 2004, respectively. Intangible amortization expense was $3,639 for the fiscal year ended January 1, 2005. Based on the current amount of intangible assets subject to amortization, the estimated amortization expense for each of the succeeding five years is as follows: