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Cambium Learning Group Announces 2013 Earnings

2013 Top Line Growth Driven by Technology Segments; All Segments Contribute to Year over Year Earnings Improvements

DALLAS, March 6, 2014 /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 year ended December 31, 2013.


Cambium Learning Group, Inc. Corporate Logo.


Three Months Ended December 31,

Year Ended December 31,

($ in millions)

2013

2012

$ Change

% Change

2013

2012

$ Change

% Change

GAAP net revenues

$33.3

$34.3

$(1.0)

(2.9)%

$150.5

$148.6

$1.9

1.3%

Increase in deferred revenue

1.7

1.9

(0.2)

(10.5)%

9.3

8.3

1.0

12.0%

GAAP net income (loss)

(5.7)

(88.8)

83.1

93.6%

(14.3)

(133.8)

119.5

89.3%

EBITDA

5.0

(78.1)

83.1

106.4%

27.1

(83.9)

111.0

132.3%

Adjusted EBITDA

6.4

4.5

1.9

42.2%

31.2

21.4

9.8

45.8%

Goodwill impairment

(52.2)

52.2

100.0%

(66.9)

66.9

100.0%

Impairment of
long-lived assets

(2.2)

(30.4)

28.2

92.8%

(2.2)

(33.7)

31.5

93.5%

Financial Highlights for the Year Ended December 31, 2013

During 2013, company-wide order volumes were down less than 1% compared with the same period of 2012, and order volume changes by segment were as follows:  

    • Voyager Sopris Learning™ decreased 12%
    • Learning A–Z increased 28%
    • ExploreLearning increased 27%
    • Kurzweil/IntelliTools decreased 13%

Learning A–Z and ExploreLearning continued their trend of double-digit growth rates. Offsetting this growth, Voyager Sopris Learning and Kurzweil/IntelliTools continued to show order volume declination as reductions in legacy products are currently outpacing gains from newer online and technology-enabled solutions. 

Other highlights include:

  • Overall, GAAP net revenues in 2013 increased by 1% to $150.5 million compared with $148.6 million in 2012.  GAAP net revenues by segment for 2013, and the percentage change from 2012, were as follows: 
    • Voyager Sopris Learning: $90.3 million, decreased 7%
    • Learning A–Z: $33.5 million, increased 28%
    • ExploreLearning: $16.3 million, increased 14%
    • Kurzweil/IntelliTools: $10.4 million, decreased 7%
  • Results of operations for 2013 were also impacted by the following:
    • Impairment charges of $1.2 million related to the Class.com product line, which will be discontinued in 2014
    • Impairment charges of $1.0 million for in-process product development projects that will not be completed
  • On an adjusted basis, EBITDA was $31.2 million in 2013, up $9.8 million from $21.4 million in 2012. The increase in adjusted EBITDA was primarily the result of increased revenues in Learning A–Z, that flowed through to earnings and lower costs in the Voyager Sopris Learning and Kurzweil/IntelliTools segments, attributable both to savings from the re-engineering and restructuring initiatives completed in 2012 and ongoing efforts to right-size costs in slower-growing areas of the company.
  • The Company has cash and cash equivalents of $68.0 million on the balance sheet as of December 31, 2013. Cash provided by operations during 2013 was $45.8 million, cash used in investing activities was $23.8 million, and cash used in financing activities was $5.9 million.

Financial Highlights for the Quarter Ended December 31, 2013

For the quarter ended December 31, 2013, company-wide order volumes declined 3% compared with the same period of 2012, and order volume changes by segment were as follows:

    • Voyager Sopris Learning decreased 21%
    • Learning A–Z increased 31%
    •  ExploreLearning increased 16%
    • Kurzweil/IntelliTools decreased 8%

On an adjusted basis, EBITDA for the quarter ended December 31, 2013 was $6.4 million, up $1.9 million from the quarter ended December 31, 2012. Net revenues were down $1.0 million for the quarter ended December 31, 2013, versus 2012, commensurate with the overall decline in fourth quarter order volumes. 

"Our financial performance in 2013 was in line with management's expectations, and we were pleased to have such continued strong growth in the Learning A–Z and ExploreLearning segments, slowed rates of decline in the Voyager Sopris Learning and Kurzweil/IntelliTools segments, and good results from our cost savings initiatives," said John Campbell, chief executive officer of Cambium Learning Group, Inc.  "Our company ultimately defines success by how well we help teachers improve student reading, writing, math, and science performance, so we strive to build the best solutions possible. I am pleased with our progress in 2013 toward meeting both our financial goals and our company mission."

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 toward 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® Group is a leading educational solutions and services company that is committed to helping all students reach their full potential by providing evidence-based solutions and expert professional services to empower educators and raise the achievement levels of all students. The company is composed of four business units: Voyager Sopris Learning (www.voyagersopris.com), Learning A-Z (www.learninga-z.com), ExploreLearning (www.explorelearning.com), and Kurzweil (www.kurzweiledu.com) and IntelliTools (www.intellitools.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. Cambium Learning Group, Inc. (ABCD), is based in Dallas, Texas. For more information, please visit www.cambiumlearning.com

Media and Investor Contact:
Philip Davis
Cambium Learning Group, Inc.
[email protected]

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




For the Years Ended December 31,

(In thousands, except per share data)


2013


2012

Net revenues:







Product revenues


$

127,799


$

130,160

Service revenues



22,721



18,399

Total net revenues



150,520



148,559








Cost of revenues:







Cost of product revenues



29,167



33,284

Cost of service revenues



17,521



17,679

Amortization expense



17,519



24,716

Total cost of revenues



64,207



75,679








Research and development expense



9,810



10,907

Sales and marketing expense



42,233



46,367

General and administrative expense



21,341



21,427

Shipping and handling costs



1,722



2,834

Depreciation and amortization expense



4,895



6,182

Goodwill impairment



-



66,893

Embezzlement-related expense



118



516

Impairment of long-lived assets



2,227



33,707

Total costs and expenses



146,553



264,512








Income (loss) before interest, other income (expense)







and income taxes



3,967



(115,953)








Net interest income (expense):







Interest income



191



433

Interest expense



(19,010)



(19,116)

Net interest income (expense)



(18,819)



(18,683)








Other income (expense), net



764



1,125

Loss before income taxes



(14,088)



(133,511)








Income tax expense



(165)



(272)

Net loss


$

(14,253)


$

(133,783)

Net loss per common share:







Basic net loss per common share


$

(0.30)


$

(2.71)

Diluted net loss per common share


$

(0.30)


$

(2.71)

Average number of common shares and equivalents outstanding:







Basic



47,040



49,395

Diluted



47,040



49,395


Cambium Learning Group, Inc. and Subsidiaries

Consolidated Balance Sheets




As of December 31,

(In thousands, except per share data)


2013


2012

ASSETS







Current assets:







Cash and cash equivalents


$

67,993


$

51,904

Accounts receivable, net



15,767



17,813

Inventory



9,221



16,620

Tax receivables



-



12,234

Restricted assets, current



1,343



4,387

Assets held for sale



-



380

Other current assets



6,873



5,892

Total current assets



101,197



109,230








Property, equipment and software at cost



43,224



35,535

Accumulated depreciation and amortization



(22,909)



(14,514)

Property, equipment and software, net



20,315



21,021








Goodwill



47,842



47,404

Acquired curriculum and technology intangibles, net



8,719



9,320

Acquired publishing rights, net



4,705



7,602

Other intangible assets, net



6,251



7,836

Pre-publication costs, net



13,401



11,660

Restricted assets, less current portion



5,492



6,754

Other assets



8,288



9,632

Total assets


$

216,210


$

230,459


Cambium Learning Group, Inc. and Subsidiaries

Consolidated Balance Sheets




As of December 31,

(In thousands, except per share data)


2013


2012

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)







Current liabilities:







Capital lease obligations, current


$

995


$

1,290

Accounts payable



1,301



3,007

Contingent value rights, current



-



7,599

Accrued expenses



25,279



20,530

Deferred revenue, current



53,532



45,974

Total current liabilities



81,107



78,400








Long-term liabilities:







Long-term debt



174,491



174,328

Capital lease obligations, less current portion



2,019



3,014

Deferred revenue, less current portion



7,829



5,631

Other liabilities



13,954



15,131

Total long-term liabilities



198,293



198,104








Stockholders' equity (deficit):







Preferred stock ($.001 par value, 15,000 shares authorized,







zero shares issued and outstanding at December 31, 2013 and 2012)



-



-

Common stock ($.001 par value, 150,000 shares authorized,







51,208 and 51,208 shares issued, and  45,042 and 47,098 shares







outstanding at December 31, 2013 and 2012, respectively)



51



51

Capital surplus



283,673



282,450

Accumulated deficit



(332,695)



(318,442)

Treasury stock at cost (6,166 and 4,110 shares at December 31,







2013 and December 31, 2012, respectively)



(12,147)



(7,528)

Other comprehensive loss:







Pension and postretirement plans



(2,072)



(2,576)

Accumulated other comprehensive loss



(2,072)



(2,576)

Total stockholders' equity (deficit)



(63,190)



(46,045)

Total liabilities and stockholders' equity (deficit)


$

216,210


$

230,459

 

 


Reconciliation Between Net Revenues and Adjusted Net Revenues and Between Net Loss and Adjusted EBITDA for the Years Ended December 31, 2013 and 2012

(Unaudited)


($ in thousands)


2013


2012

Total net revenues


$

150,520


$

148,559

Non-operational or non-cash costs included in net revenues but excluded







from adjusted net revenues:







Adjustments related to purchase accounting



75



324

Adjusted net revenues


$

150,595


$

148,883















Net loss


$

(14,253)


$

(133,783)

Reconciling items between net loss and EBITDA:







Depreciation and amortization



22,414



30,898

Net interest expense



18,819



18,683

Income tax expense



165



272

Income (loss)from operations before interest, income taxes, and







depreciation and amortization (EBITDA)



27,145



(83,930)








Non-operational or non-cash costs included in EBITDA but excluded from Adjusted EBITDA:













Other income, net



(764)



(1,125)

Re-engineering and restructuring costs



-



8,370

Merger and acquisition activities



732



829

Stock-based compensation and expense



1,080



874

Embezzlement-related expense



118



516

Adjustments related to purchase accounting



95



257

Goodwill impairment



-



66,893

Impairment of long-lived assets



1,189



27,763

Adjustments to CVR liability



74



915

Management transition



1,501



-

Adjusted EBITDA


$

31,170


$

21,362

 

Reconciliation Between Net Revenues and Adjusted Net Revenues and Between Net Loss and Adjusted EBITDA for the Three Months Ended December 31, 2013 and 2012

(Unaudited)


($ in thousands)


2013


2012

Total net revenues


$ 33,348


$  34,317

Non-operational or non-cash costs included in





net revenues but excluded from adjusted net revenues:





Adjustments related to purchase accounting


-


11

Adjusted net revenues


$ 33,348


$  34,328











Net loss


$ (5,734)


$(88,807)

Reconciling items between net loss and EBITDA:





Depreciation and amortization


6,071


6,072

Net interest expense


4,791


4,651

Income tax expense


(132)


14

Income (loss)from operations before interest,





income taxes, and depreciation and





amortization (EBITDA)


4,996


(78,070)






Non-operational or non-cash costs included in





EBITDA but excluded from Adjusted EBITDA:





Other income, net


(119)


(889)

Re-engineering and restructuring costs


-


2,130

Merger and acquisition activities


247


145

Stock-based compensation and expense


105


356

Embezzlement-related expense


-


64

Adjustments related to purchase accounting


-


10

Goodwill impairment


-


52,193

Impairment of long-lived assets


1,189


27,763

Adjustments to CVR liability


-


754

Adjusted EBITDA


$   6,418


$    4,456

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SOURCE Cambium Learning Group

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