DALLAS, March 18 /PRNewswire-FirstCall/ -- Voyager Learning Company (OTC:
VLCY, the "Company"), a publisher of education materials and provider of
education solutions in the K-12 market, is providing results of operations for
the 2008 fiscal year. The Company filed its 2008 Annual Report on Form 10-K
on March 6, 2009.
Fiscal 2008 Financial Results
Net sales for 2008 were $98.5 million, a decrease of 10 percent from net
sales for 2007 of $109.6 million. The decrease was primarily driven by lower
order volume and higher revenue deferral rates in fiscal 2008 compared to
fiscal 2007. The Company experienced weakness in markets and products which
have heavy reliance on federal, state and local funding sources. The
Company's reading intervention program for middle school students and online
offerings continued to grow, but that growth was not enough to offset declines
in products with a heavy historical reliance on federal funding. In 2008, a
larger percentage of sales were deferred compared to 2007 as the Company
continues to include more service and technology in its products.
Gross profit decreased $10.8 million in fiscal 2008 to $62.6 million
compared to $73.4 million in fiscal 2007. The gross profit margin also
decreased to 63.5 percent in 2008 compared to 67.0 percent in fiscal 2007.
The decrease is primarily due to the deferral of a larger percentage of sales
in 2008 versus 2007, which reduced net sales, but did not have a corresponding
decrease in cost of sales. The higher deferral percentages are primarily due
to increased revenue attributed to online materials, which are recognized over
the period access is provided.
Loss from continuing operations before interest, other income (expense)
and income taxes was $83.3 million in fiscal 2008 compared to $104.4 million
in fiscal 2007. The Company had adjusted EBITDA, reflecting ongoing business
operations, of $15.8 million in 2008 compared to $28.7 million in 2007, where
adjusted EBITDA excludes depreciation and amortization expense, goodwill
impairment charges, costs to terminate leases in Ann Arbor, Michigan, and
corporate overhead costs which were predominantly for restatement related
activities in 2007 and 2008. The Company's restatement effort and related
work to become current in its filings was substantially completed in 2008.
Going forward, the Company estimates it will incur ongoing corporate overhead
and public company costs of approximately $4 million annually. This $4
million in annual, recurring costs is not included in adjusted EBITDA of $15.8
million for 2008 or $28.7 million for 2007.
Cash Position
Cash and cash equivalents totaled $67.3 million as of December 31, 2008.
In addition, the Company had, as of December 31, 2008, $11.0 million of short-
term investments in Treasury bills maturing in April 2009. During the fourth
quarter of 2008, the Company offered participants in its replacement benefit
plan and defined benefit pension plan lump sum distributions to settle those
retirement obligations. The Company paid cash out of $7.9 million in January
2009 related to these lump sum payments. Additionally, in January 2009, the
Company escrowed $4 million under the terms of the agreement in principle to
settle a consolidated shareholder securities class action lawsuit. Cash and
short term investments totaled $65 million as of February 28, 2009.
Investor Conference Call
The Company will hold a conference call at 4:00 p.m. Eastern time today
to discuss its financial results and business outlook. To listen to the
Company's upcoming conference call, please dial (888) 688-0384 and enter ID #
88616335. The conference call will be webcast and archived on the Company's
website at www.voyagercompany.com.
Non-GAAP Financial Measures
EBITDA, Adjusted EBITDA, and adjusted EBITDA including the expected run
rate for public company costs are measures that are not prepared in accordance
with generally accepted accounting principles 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. These non-GAAP
financial measures have been used in this announcement because the Company
believes they are useful to investors by providing greater transparency to
information used in the Company's internal financial and operational analysis
and because they offer greater consistency to financial information provided
in earlier press releases and conference call scripts which provided
preliminary information on the Voyager operating businesses. Investors are
encouraged to review the reconciliations attached to this announcement of the
non-GAAP financial measures used in the announcement to their most directly
comparable GAAP financial measures.
About Voyager Learning Company
Voyager Learning Company (OTC: VLCY.PK) is based in Dallas, Texas, and is
a publisher of education materials and provider of education solutions serving
the K-12 market. Through its product lines, which include Voyager Expanded
Learning, ExploreLearning and Learning A-Z, the Company is a leading provider
of K-12 curriculum products, in-school core reading programs, reading and math
intervention programs, and professional development programs for school
districts throughout the United States.
Forward-Looking Statements
Some of the statements contained herein constitute forward-looking
statements. These statements relate to future events, the results of our
pending restatement process, and our future financial performance and involve
known and unknown risks, uncertainties and other factors that may cause our or
our markets' actual results, levels of activity, performance or achievements
to be materially different from any future results, levels of activity,
performance or achievements. These risks and other factors you should
consider include, but are not limited to, the existing securities and
derivative litigation in which the Company is involved and any other current
or future litigation, the Company's ability to successfully settle the
securities class action litigation, loss of key personnel, success of ongoing
product development, maintaining acceptable margins, the ability to control
costs, changes in customer demands or industry standards, the ability to
successfully attract and retain customers, the ability to sell additional
products to existing customers and win new business from new customers, the
ability to maintain a broad customer base to avoid dependence on a few
customers, the risks and uncertainties affecting the Company, 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
Company's business, the impact on the Company's stock price and trading volume
as a result of the Company's common stock being traded over-the-counter, the
impact of competition and the risk that our competitors will seek to
capitalize on the risks and uncertainties confronting the Company including
those listed above and the uncertainty of economic conditions in general,
financial market performance, and other risks listed under "Risk Factors" in
our filings with the Securities and Exchange Commission. 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,"
"priorities," or the negative of such terms or other comparable terminology.
These statements are only predictions. Actual events or results may differ
materially. The Company undertakes no obligation to update any of these
statements.
VOYAGER LEARNING COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Fiscal Year Ended
December 31, December 29,
2008 2007
Net sales $98,531 $109,612
Cost of sales (exclusive of
depreciation and amortization shown
separately below) (35,939) (36,192)
Gross profit 62,592 73,420
Research and development expense (5,302) (4,532)
Sales and marketing expense (33,734) (29,587)
General and administrative expense (30,660) (53,280)
Depreciation and amortization expense (21,358) (23,190)
Goodwill impairment (43,141) (67,232)
Lease termination costs (11,673) -
Loss from continuing operations
before interest, other income
(expense) and income taxes (83,276) (104,401)
Net interest income (expense):
Interest income 1,485 3,682
Interest expense (510) (3,347)
Net interest income (expense) 975 335
Other income (expense), net (363) 4,408
Loss from continuing operations
before income taxes (82,664) (99,658)
Income tax benefit 1,160 12,396
Loss from continuing operations (81,504) (87,262)
Earnings from discontinued operations
(less applicable income tax expense
of $0, $1,491, and $23,776, respectively) - 5,460
Gain on sale of discontinued operations
(less applicable income tax expense of
$0, $11,160, and $66,321, respectively) - 46,572
Net earnings (loss) $(81,504) $(35,230)
Net earnings (loss) per common share:
Basic:
Loss from continuing operations $(2.73) $(2.92)
Earnings from discontinued operations - 0.18
Gain on sale of discontinued
operations - 1.56
Basic net earnings (loss) per common
share $(2.73) $(1.18)
Diluted:
Loss from continuing operations $(2.73) $(2.92)
Earnings from discontinued operations - 0.18
Gain on sale of discontinued
operations - 1.56
Diluted net earnings (loss) per
common share $(2.73) $(1.18)
Average number of common shares and
equivalents outstanding:
Basic 29,871 29,858
Diluted 29,871 29,858
VOYAGER LEARNING COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
December 31, December 29,
2008 2007
ASSETS
Current assets:
Cash and cash equivalents $67,302 $53,868
Accounts receivable, net 7,371 9,266
Income tax receivable 19,782 65,600
Inventory 15,196 16,005
Other current assets 33,826 16,489
Total current assets 143,477 161,228
Property, equipment, and software at cost:
Buildings and improvements 1,220 10,666
Machinery and equipment 4,707 5,975
Software 10,616 7,284
Total property, equipment, and
software at cost 16,543 23,925
Accumulated depreciation and
amortization (9,718) (8,584)
Net property, equipment, and software 6,825 15,341
Goodwill 99,717 142,858
Acquired curriculum intangibles, net 38,594 51,206
Other intangible assets, net 5,218 6,411
Developed curriculum, net 8,903 9,333
Other assets 1,363 16,350
Total assets $304,097 $402,727
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of capital lease
obligations $149 $789
Accounts payable 1,962 4,403
Accrued expenses 40,866 25,315
Deferred revenue 27,917 19,822
Total current liabilities 70,894 50,329
Long-term liabilities:
Capital lease obligations, less
current maturities 96 810
Other liabilities 20,348 61,258
Total long-term liabilities 20,444 62,068
Commitments and contingencies
Shareholders' equity:
Common stock ($.001 par value, 50,000
shares authorized, 30,550 shares issued
and 29,874 shares outstanding at
the end of fiscal 2008, and 30,552
shares issued and 29,883 shares outstanding
at the end of fiscal 2007) 30 30
Capital surplus 357,741 356,683
Accumulated earnings (deficit) (129,227) (47,723)
Treasury stock, at cost (676 shares
at the end of fiscal 2008 and 669 shares
at the end of fiscal 2007) (16,836) (16,742)
Other comprehensive income (loss):
Pension and postretirement plans, net
of tax benefit of $713 in each year 1,093 (2,088)
Net unrealized gain (loss) on
securities, net of tax expense of
$39 in each year (42) 170
Accumulated other comprehensive
income (loss) 1,051 (1,918)
Total shareholders' equity 212,759 290,330
Total liabilities and shareholders'
equity $304,097 $402,727
VOYAGER LEARNING COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
Fiscal Year Ended
December 31, December 29,
2008 2007
Operating activities:
Net earnings (loss) $(81,504) $(35,230)
Adjustments to reconcile net earnings
(loss) to net cash provided by (used in)
operating activities:
Goodwill and long-lived asset
impairment 43,141 67,232
Gain on sale of discontinued
operations, net of tax - (46,572)
Earnings from discontinued
operations, net of tax - (5,460)
Depreciation and amortization 21,358 23,190
Amortization and write-off of
deferred financing costs - 2,286
Stock-based compensation 878 137
Gain on sale of available for sale
securities (106) (508)
Deferred income taxes (1,176) (12,671)
Non-cash lease termination costs 673 -
Changes in operating assets and
liabilities:
Accounts receivable, net 1,895 6,067
Tax receivable 45,818 (55,742)
Inventory 809 (3,404)
Other current assets 6,866 52,009
Other assets (13) (1,205)
Accounts payable (2,441) 661
Accrued expenses (9,038) (61,113)
Deferred revenue 8,367 3,385
Other long-term liabilities (4,353) (15,217)
Other, net 50 (4)
Net cash provided by (used in)
operating activities of continuing
operations 31,224 (82,159)
Investing activities:
Expenditures for property, equipment,
curriculum development costs, and
software (7,912) (8,755)
Purchases of equity investments
available for sale (11,786) (7,777)
Proceeds from sales of equity
investments available for sale 2,172 8,843
Proceeds from (expenditures
associated with) sale of
discontinued operations, net - 186,342
Net cash provided by (used in)
investing activities of continuing
operations (17,526) 178,653
Financing activities:
Repayment of debt - (58,225)
Principal payments under capital
lease obligations (264) (840)
Debt issuance costs - (302)
Net cash used in financing activities
of continuing operations (264) (59,367)
Increase in cash and cash equivalents
of continuing operations 13,434 37,127
Net cash used in discontinued
operations:
Net cash used in operating
activities - (19,891)
Net cash used in investing
activities - (2,540)
Net cash used in financing
activities - (730)
Net cash used in discontinued
operations - (23,161)
Increase in cash and cash equivalents 13,434 13,966
Cash and cash equivalents, beginning
of year 53,868 39,902
Cash and cash equivalents, end of
year $67,302 $53,868
VOYAGER LEARNING COMPANY
RECONCILIATION OF LOSS FROM CONTINUING OPERATIONS BEFORE INTEREST,
OTHER INCOME (EXPENSE) AND INCOME TAXES TO ADJUSTED EBITDA
(in thousands)
Fiscal Year Ended
December 31, December 29,
2008 2007
Loss from continuing operations
before interest, other income
(expense) and income taxes, as reported $(83,276) $(104,401)
Add back: depreciation and
amortization expense 21,358 23,190
Loss from continuing operations
before interest, other income
(expense) and income taxes,
depreciation and amortization (EBITDA) (61,918) (81,211)
Add back non-recurring and non-
operating costs:
Goodwill impairment 43,141 67,232
Lease termination costs 11,673 -
Public company costs and costs
incurred to complete the
delinquent SEC filings and
transition the corporate office 22,947 42,728
Adjusted EBITDA $15,843 $28,749
Less: expected ongoing run rate for
public company costs (a) (4,000) (4,000)
Adjusted EBITDA including the
expected run rate for public company
costs $11,843 $24,749
(a) Estimated by the company based on expectations of recurring costs to
be incurred in 2009
