Attached files
| file | filename |
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| 8-K - LIVE FILING - CAMBIUM LEARNING GROUP, INC. | htm_43503.htm |
| EX-99.2 - EX-99.2 - CAMBIUM LEARNING GROUP, INC. | exhibit2.htm |
Cambium Learning Group Announces Third Quarter Earnings
DALLAS, Nov. 8, 2011 /PRNewswire/ — Cambium Learning Group, Inc. (Nasdaq: ABCD, the “Company”), a 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 2011 third quarter earnings. The call will be based on unaudited financial results through September 30, 2011.
Third Quarter Financial Summary and Other Operational Metrics
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||
(In millions) |
September 30, 2011 | September 30, 2010 | $Change | % Change | September 30, 2011 | September 30, 2010 | $Change | % Change | ||||||||||||||||||||||||
GAAP net revenues |
$ | 52.9 | $ | 56.6 | $ | (3.7 | ) | -7 | % | $ | 140.8 | $ | 132.7 | $ | 8.1 | 6 | % | |||||||||||||||
Adjusted net
revenues |
53.1 | 59.0 | (5.9 | ) | -10 | % | 141.7 | 144.8 | (3.1 | ) | -2 | % | ||||||||||||||||||||
Change in adjusted
deferred revenue |
11.7 | 7.3 | 4.4 | 61 | % | 5.0 | (3.0 | ) | 8.0 | 268 | % | |||||||||||||||||||||
Adjusted net
revenues plus
change in adjusted
deferred revenue |
64.8 | 66.3 | (1.5 | ) | -2 | % | 146.7 | 141.8 | 4.9 | 3 | % | |||||||||||||||||||||
GAAP net income
(loss) |
3.1 | 3.9 | (0.8 | ) | -22 | % | (2.9 | ) | (17.7 | ) | 14.8 | 84 | % | |||||||||||||||||||
EBITDA |
17.0 | 17.3 | (0.3 | ) | -2 | % | 37.3 | 23.8 | 13.5 | 57 | % | |||||||||||||||||||||
Adjusted EBITDA |
17.6 | 21.0 | (3.4 | ) | -16 | % | 38.0 | 41.1 | (3.1 | ) | -8 | % | ||||||||||||||||||||
Year to date the Company has maintained order volumes slightly ahead of prior year in what has proven to be a tumultuous year for education funding. In all the Company’s performance has been strong in the Cambium Learning Technologies unit, the Sopris unit and the Voyager unit’s services. In the third quarter, the Company’s order volume gains from the first half of the year were given back as the third quarter proved to be more challenging for the Voyager unit’s product sales, which have been under pressure throughout 2011 but mainly in the third quarter. As the decline in product order volume has been offset by sales of services and online technology products, whose revenues have deferred revenue recognition, revenue has been lower than prior year on an adjusted basis and deferred revenue balances have risen.
| • | Company order volume increased 1% for the first nine months of 2011 versus the same period in 2010. Year to date order volume changes by business unit were as follows: |
| o o o |
Voyager has decreased 8% Cambium Learning Technologies has increased 14% Sopris has increased 12% |
| • | The Sopris and Cambium Learning Technologies units have continued to show favorable growth throughout 2011 in the face of generally adverse education funding climates across the United States. The growth is a result of new products, E-commerce capabilities and expanded sales resources. |
| • | Year-to-date GAAP net revenues improved by 6% to $140.8 million compared with the first nine months of 2010. The improvement was primarily caused by purchase accounting adjustments to deferred revenue related to the 2009 acquisition of Voyager, which significantly reduced 2010 net revenues by $12.1 million with the corresponding reduction in 2011 being only $0.9 million. |
| • | Adjusted net revenues, which exclude the impact of purchase accounting, decreased by 10% in the third quarter 2011 versus the same period in 2010 and by 2% for the first nine months of 2011 versus 2010 as the Company experienced a slowdown in the sale of its Voyager unit product sales which was not fully offset by the revenue generated from growth in Voyager services, the Sopris unit and in the Cambium Learning Technologies unit. |
| • | Adjusted net revenues by business unit for the first nine months of 2011 and the percentage change from the first nine months of 2010 were as follows: |
| o o o |
Voyager: $81 million, down 10% Sopris: $22 million, up 11% Cambium Learning Technologies: $38 million, up 11% |
| • | Approximately 35% of the Company’s total adjusted revenue and 40% of the order volume now comes from technology enabled offerings in the various business units. |
| • | Total GAAP costs and expenses declined considerably as onetime, merger-related costs in 2010 were not repeated in 2011. Excluding onetime costs, the Company’s overall spending was essentially flat in the first nine months of 2011 versus 2010. Shared services and Voyager cost declines were offset by increased investment in the Cambium Learning Technologies and Sopris units in line with the growth in those units. |
| • | Year to date the Company has experienced an improvement in GAAP net loss and EBITDA. This was partially provided by the improved top line which has benefited from the lower impact of purchase accounting reductions in 2011 versus 2010. Significant spending improvement came from the non-recurrence of merger related costs from 2010. |
| • | On an adjusted EBITDA basis, the Company achieved $38 million in the first nine months of 2011, which was an 8% decline from the same period for 2010. The $3.1 million decline in adjusted EBITDA is primarily the result of the delayed revenue recognition of certain sales as well as maintaining a relatively flat cost structure in 2011 versus 2010. |
| • | Cash flow generation has remained strong with $26 million of cash from operations generated in the first nine months of 2011 and the Company has cash and cash equivalents of $54 million on the balance sheet. |
“I am pleased with the continued growth in our Cambium Learning Technologies and Sopris business units and the services offerings of the Voyager unit,” says Ron Klausner, Chief Executive Officer of Cambium Learning Group. “Our investments in all of these areas and the market acceptance of technology based solutions are driving consistent growth in these units. However, the Voyager unit’s product sales have experienced the greatest impact from adverse conditions in the education funding environment as a result of the continued depressed circumstance of state and local budgets.”
Business Summary Bullets
| • | Voyager launched a new version of VocabJourney®, an interactive, web-based reading component to help students boost their vocabulary and comprehension skills. Originally offered only to students in Voyager’s high school reading intervention program, Passport Reading Journeys® III, the newly enhanced version of VocabJourney, is now available to all levels of Passport Reading Journeys (grades six through nine) as well as students in LANGUAGE!®, the company’s comprehensive literacy intervention program (for grades three through 12). In addition to these versions that have been designed to work with Passport Reading Journeys and LANGUAGE!, a version of VocabJourney is available to individuals, districts and schools for use as a stand-alone vocabulary intervention. |
| • | The Company’s products were once again honored by an industry peer group. Kurzweil 3000® was recently named a winner of the ComputEd Gazette EDDIE Award in the category of High School Special Education. The EDDIE Awards target content-rich and innovative programs and websites that augment classroom curriculum and improve the productivity of teachers. |
| • | On September 22, 2011, the Company announced it signed a definitive agreement to purchase certain assets of Class.com, an industry-leading provider of online learning solutions that engage and inspire students and adult learners with innovative, media-rich courseware, for approximately $4.5 million in cash. The transaction closed on October 6, 2011. |
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 adjusted EBITDA and adjusted net revenues 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 exclude items that do not reflect the underlying performance of the combined Company by removing significant one-time or certain non-cash items. The Company uses these measures 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.
Investor Conference Call
The Company will provide additional commentary on today’s conference call. To listen to the Company’s conference call, please dial (800) 860-2442 and reference “Cambium Learning” at 5:00 p.m. Eastern Time on Tuesday, November 8, 2011. The call will be recorded and archived until Tuesday, December 13, 2011, and can be replayed by calling (877) 344-7529 and entering ID#10004479. 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 operates three core divisions: Voyager, which provides comprehensive interventions; Sopris, which is known for supplemental solutions; and Cambium Learning Technologies, which comprises IntelliTools®, Kurzweil Educational Systems®, Learning A–Z, and ExploreLearning. Cambium Learning Group is committed to providing research-based solutions that help educators raise the achievement levels of preK–12 students as well as adult learning communities. The company’s website is www.cambiumlearning.com.
Media and Investor Contact:
Chris Cleveland
Cambium Learning Group, Inc.
214.932.9474
chris.cleveland@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 | ||||||||||||||||
| Condensed Consolidated Statements of Operations | ||||||||||||||||
| (In thousands, except per share data) (Unaudited) | ||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | September 30, | September 30, | |||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
Net revenues |
$ | 52,906 | $ | 56,607 | $ | 140,792 | $ | 132,730 | ||||||||
Cost of revenues: |
||||||||||||||||
Cost of revenues |
16,318 | 18,021 | 45,104 | 44,550 | ||||||||||||
Amortization expense |
6,962 | 7,096 | 20,424 | 21,083 | ||||||||||||
Total cost of revenues |
23,280 | 25,117 | 65,528 | 65,633 | ||||||||||||
Research and development expense |
2,199 | 2,543 | 7,093 | 8,116 | ||||||||||||
Sales and marketing expense |
11,817 | 11,966 | 35,594 | 34,199 | ||||||||||||
General and administrative expense |
4,795 | 5,608 | 16,136 | 19,151 | ||||||||||||
Shipping and handling costs |
844 | 1,122 | 1,995 | 2,834 | ||||||||||||
Depreciation and amortization expense |
1,858 | 2,085 | 5,342 | 7,022 | ||||||||||||
Embezzlement and related expense
(recoveries) |
(56 | ) | 21 | (2,452 | ) | 51 | ||||||||||
Total costs and expenses |
44,737 | 48,462 | 129,236 | 137,006 | ||||||||||||
Income (loss) before interest, other
income (expense) |
||||||||||||||||
and income taxes |
8,169 | 8,145 | 11,556 | (4,276 | ) | |||||||||||
Net interest expense |
(4,950 | ) | (4,478 | ) | (14,237 | ) | (13,460 | ) | ||||||||
Other income, net |
— | 271 | 365 | 176 | ||||||||||||
Income (loss) before income taxes |
3,219 | 3,938 | (2,316 | ) | (17,560 | ) | ||||||||||
Income tax benefit (expense) |
(155 | ) | 8 | (570 | ) | (111 | ) | |||||||||
Net income (loss) |
$ | 3,064 | $ | 3,946 | $ | (2,886 | ) | $ | (17,671 | ) | ||||||
Net income (loss) per common share: |
||||||||||||||||
Basic net income (loss) per common
share |
$ | 0.07 | $ | 0.09 | $ | (0.06 | ) | $ | (0.40 | ) | ||||||
Diluted net income (loss) per
common share |
$ | 0.07 | $ | 0.09 | $ | (0.06 | ) | $ | (0.40 | ) | ||||||
Average number of common shares and
equivalents outstanding: |
||||||||||||||||
Basic |
46,743 | 44,324 | 44,911 | 44,322 | ||||||||||||
Diluted |
47,130 | 44,395 | 44,911 | 44,322 | ||||||||||||
| Cambium Learning Group, Inc. and Subsidiaries | ||||||||
| Condensed Consolidated Balance Sheets | ||||||||
| (In thousands, except per share data) | ||||||||
| September 30, | December 31, | |||||||
| 2011 | 2010 | |||||||
ASSETS |
(unaudited) | |||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 53,812 | $ | 11,831 | ||||
Accounts receivable, net |
30,972 | 31,627 | ||||||
Inventory |
20,750 | 22,015 | ||||||
Deferred tax assets |
3,703 | 3,703 | ||||||
Restricted assets, current |
1,392 | 3,064 | ||||||
Assets held for sale |
2,727 | — | ||||||
Other current assets |
4,497 | 3,937 | ||||||
Total current assets |
117,853 | 76,177 | ||||||
Property, equipment and software at cost |
40,340 | 32,944 | ||||||
Accumulated depreciation and amortization |
(11,420 | ) | (7,838 | ) | ||||
Property, equipment and software, net |
28,920 | 25,106 | ||||||
Goodwill |
151,915 | 151,915 | ||||||
Acquired curriculum and technology intangibles, net |
25,538 | 33,063 | ||||||
Acquired publishing rights, net |
29,822 | 38,707 | ||||||
Other intangible assets, net |
18,910 | 22,132 | ||||||
Pre-publication costs, net |
9,610 | 7,834 | ||||||
Restricted assets, less current portion |
11,407 | 12,641 | ||||||
Other assets |
22,177 | 15,487 | ||||||
Total assets |
$ | 416,152 | $ | 383,062 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
Current liabilities: |
||||||||
Current portion of long-term debt |
$ | - | $ | 1,280 | ||||
Current portion of capital lease obligations |
823 | 378 | ||||||
Accounts payable |
1,865 | 6,465 | ||||||
Contingent value rights, current |
— | 1,623 | ||||||
Accrued expenses |
21,129 | 22,888 | ||||||
Deferred revenue, current |
38,686 | 34,140 | ||||||
Total current liabilities |
62,503 | 66,774 | ||||||
Long-term liabilities: |
||||||||
Long-term debt, less current portion |
174,124 | 150,850 | ||||||
Capital lease obligations, less current portion |
12,378 | 12,317 | ||||||
Deferred revenue, less current portion |
4,793 | 3,416 | ||||||
Contingent value rights, less current portion |
5,896 | 5,746 | ||||||
Other liabilities |
19,238 | 19,947 | ||||||
Total long-term liabilities |
216,429 | 192,276 | ||||||
Stockholders’ equity: |
||||||||
Preferred stock ($.001 par value, 15,000 shares authorized, |
||||||||
zero shares issued and outstanding at September 30, 2011 |
||||||||
and December 31, 2010) |
— | — | ||||||
Common stock ($.001 par value, 150,000 shares authorized, |
||||||||
51,162 and 43,869 shares issued, and 49,518 and 43,869 shares |
||||||||
outstanding at September 30, 2011 and December 31, 2010,
respectively) |
51 | 44 | ||||||
Capital surplus |
280,905 | 259,887 | ||||||
Accumulated deficit |
(138,104 | ) | (135,218 | ) | ||||
Treasury stock at cost (1,644 and zero shares at |
||||||||
September 30, 2011 and December 31, 2010, respectively) |
(4,931 | ) | — | |||||
Other comprehensive income (loss): |
||||||||
Pension and postretirement plans |
(702 | ) | (702 | ) | ||||
Net unrealized gain on securities |
1 | 1 | ||||||
Accumulated other comprehensive income (loss) |
(701 | ) | (701 | ) | ||||
Total stockholders’ equity |
137,220 | 124,012 | ||||||
Total liabilities and stockholders’ equity |
$ | 416,152 | $ | 383,062 | ||||
| Reconciliation Between Net Revenues and Adjusted Net Revenues and Between Net Income | ||||||||||||
| and Adjusted EBITDA for the Three Months Ended September 30, 2011 and 2010 | ||||||||||||
| (In thousands) | ||||||||||||
| (Unaudited) | ||||||||||||
| Three Months Ended September 30, | ||||||||||||
| 2011 | 2010 | |||||||||||
| Total net revenues | $ | 52,906 | $ | 56,607 | ||||||||
| Non-recurring and non-operational costs included in | ||||||||||||
net revenues but excluded from adjusted net revenues: |
||||||||||||
Adjustments related to purchase accounting |
234 | 2,400 | ||||||||||
| Adjusted net revenues | $ | 53,140 | $ | 59,007 | ||||||||
| Net income | $ | 3,064 | $ | 3,946 | ||||||||
| Reconciling items between net income and EBITDA: | ||||||||||||
Depreciation and amortization |
8,820 | 9,181 | ||||||||||
Net interest expense |
4,950 | 4,478 | ||||||||||
Other (income) expense |
— | (271 | ) | |||||||||
Income tax |
155 | (8 | ) | |||||||||
| Income from operations before interest and other income | ||||||||||||
(expense), income taxes, and depreciation and |
||||||||||||
amortization (EBITDA) |
16,989 | 17,326 | ||||||||||
| Non-recurring, non-operational, and certain non-cash costs | ||||||||||||
included in EBITDA but excluded from Adjusted EBITDA: |
||||||||||||
Integration and merger-related costs |
— | 949 | ||||||||||
Legacy VLCY corporate |
182 | 360 | ||||||||||
Stock-based compensation expense |
349 | 245 | ||||||||||
Embezzlement and related expenses (recoveries) |
(56 | ) | 21 | |||||||||
Adjustments related to purchase accounting |
185 | 1,949 | ||||||||||
Adjustments to CVR liability |
— | 100 | ||||||||||
| Adjusted EBITDA | $ | 17,649 | $ | 20,950 | ||||||||
| Reconciliation Between Net Revenues and Adjusted Net Revenues and Between Net Loss and | ||||||||||||
| Adjusted EBITDA for the Nine Months Ended September 30, 2011 and 2010 | ||||||||||||
| (In thousands) | ||||||||||||
| (Unaudited) | ||||||||||||
| Nine Months Ended September 30, | ||||||||||||
| 2011 | 2010 | |||||||||||
| Total net revenues | $ | 140,792 | $ | 132,730 | ||||||||
| Non-recurring and non-operational costs included in | ||||||||||||
net revenues but excluded from adjusted net revenues: |
||||||||||||
Adjustments related to purchase accounting |
889 | 12,112 | ||||||||||
| Adjusted net revenues | $ | 141,681 | $ | 144,842 | ||||||||
| Net loss | $ | (2,886 | ) | $ | (17,671 | ) | ||||||
| Reconciling items between net loss and EBITDA: | ||||||||||||
Depreciation and amortization |
25,766 | 28,105 | ||||||||||
Net interest expense |
14,237 | 13,460 | ||||||||||
Other (income) expense |
(365 | ) | (176 | ) | ||||||||
Income tax |
570 | 111 | ||||||||||
| Income from operations before interest and other income | ||||||||||||
(expense), income taxes, and depreciation and |
||||||||||||
amortization (EBITDA) |
37,322 | 23,829 | ||||||||||
| Non-recurring, non-operational, and certain non-cash costs | ||||||||||||
included in EBITDA but excluded from Adjusted EBITDA: |
||||||||||||
Integration and merger-related costs |
— | 5,506 | ||||||||||
Legacy VLCY corporate |
859 | 835 | ||||||||||
Stock-based compensation expense |
953 | 778 | ||||||||||
Embezzlement and related expenses (recoveries) |
(2,452 | ) | 51 | |||||||||
Adjustments related to purchase accounting |
756 | 10,018 | ||||||||||
Adjustments to CVR liability |
520 | 100 | ||||||||||
| Adjusted EBITDA | $ | 37,958 | $ | 41,117 | ||||||||
| Cambium Learning Group, Inc. | ||||||||||||||||||||||||||||||||||||||||
| Change in Adjusted Deferred Revenue | ||||||||||||||||||||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||||||||||||||||||||
| As of: | ||||||||||||||||||||||||||||||||||||||||
| December 31, |
March 31, | June 30, | September 30, | December 31, | March 31, | June 30, | September 30, | |||||||||||||||||||||||||||||||||
| 2009 | 2010 | 2010 | 2010 | 2010 | 2011 | 2011 | 2011 | |||||||||||||||||||||||||||||||||
| Deferred revenue | $ | 24,181 | $ | 21,842 | $ | 23,643 | $ | 33,301 | $ | 37,556 | $ | 30,779 | $ | 31,581 | $ | 43,479 | ||||||||||||||||||||||||
| Purchase accounting fair | ||||||||||||||||||||||||||||||||||||||||
value adjustment |
14,374 | 9,222 | 4,662 | 2,262 | 1,437 | 1,105 | 782 | 548 | ||||||||||||||||||||||||||||||||
| Adjusted deferred revenue | 38,555 | 31,064 | 28,305 | 35,563 | 38,993 | 31,884 | 32,363 | 44,027 | ||||||||||||||||||||||||||||||||
Change in adjusted
deferred revenue |
$ | (7,491 | ) | $ | (2,759 | ) | $ | 7,258 | $ | 3,430 | $ | (7,109 | ) | $ | 479 | $ | 11,664 | |||||||||||||||||||||||