Exhibit 99.1
FOR IMMEDIATE RELEASE
Pauline O’Keeffe
pokeeffe@excelligencelearning.com
781-329-2269
EXCELLIGENCE LEARNING RELEASES 2003 FIRST QUARTER RESULTS
Net Revenues Increase 11.8% Compared to 2002 First Quarter
Monterey, Calif.—May 7, 2003—Excelligence Learning Corporation (NASDAQSC: LRNS), a developer, manufacturer, and retailer of educational products to child care programs, preschools, elementary schools and consumers today announced consolidated revenue of $17.4 million for the first quarter of 2003, an increase of 11.8% over consolidated revenue of $15.6 million for the first quarter of 2002. On a GAAP basis, the net loss was $1.2 million, or $(0.14) per common share, for the first quarter of 2003 compared to a net loss of $2.9 million, or $(0.35) per common share, for the same period in 2002. Due to the seasonal nature of its business, the Company typically reports losses during the first quarter of its fiscal year.
EBITDA (loss), which the Company believes is a meaningful supplemental measurement of its operating performance, was $1.6 million for the first quarter of 2003, compared to an EBITDA (loss) of $2.4 million for the first quarter of 2002. EBITDA is calculated by adding back to operating income (loss): depreciation and amortization. A reconciliation of GAAP operating income (loss) to EBITDA (loss) is included in the attached schedules.
The Company is comprised of two business segments, Early Childhood and Elementary School. For the Early Childhood segment, 2003 first quarter net revenue was $15.5 million, a 13.1% increase over the $13.7 million generated in the first quarter of 2002. This improvement is primarily attributable to new product offerings, new customer solicitation and improved sales and marketing strategies. The Early Childhood segment recorded an EBITDA (loss) for the quarter of $271,000 compared to an EBITDA (loss) of $1.3 million in the first quarter of 2002.
For the Elementary School segment, net revenue was at $1.9 million for the first quarters of 2003 and 2002. EBITDA (loss) for the Elementary School segment for the first quarter of 2003 was $1.3 million, compared to an EBITDA (loss) of $1.1 million in the first quarter of 2002.
According to Chief Executive Officer Ron Elliott, “Taking into consideration the state of the economy, we have reason to be pleased with our results for the first quarter of 2003 and are on track to meet our revenue and earnings targets for the year. We will continue our cost-control measures in an effort to keep the Company’s expenses in line with anticipated revenues. As a value-focused company, we will pass these savings on to our price-conscious customers, offering competitive prices and quality merchandise—a sound, basic strategy in times like these.”
Business Outlook
The following forward-looking statements reflect Excelligence Learning Corporation’s expectations as of May 7, 2003 and are subject to risks and uncertainties that could significantly affect anticipated results. Those risks and uncertainties include, but are not limited to, (1) changes in general economic and business conditions and in the educational products industry in particular, (2) the impact of competition, including the development of competing proprietary products by the Company’s competitors, (3) the level of demand for the Company’s products, (4) fluctuations in the value of the U.S. dollar and (5) the Company’s ability to diversify its product offerings or expand in new and existing markets. Additional information concerning potential risk factors affecting the Company’s performance are described from time to time in the Company’s reports filed with the Securities and Exchange Commission, including its annual report on Form 10-K for the fiscal year ended December 31, 2002 and quarterly reports on Form 10-Q. Actual results may differ materially from those expressed in these forward-looking statements. The Company intends to continue its practice of not publicly updating forward-looking statements, except to the extent the Company is required to do so in connection with its ongoing requirements under federal securities laws to disclose material information.
Second Quarter 2003 Expectations:
Net revenues are expected to be between $23 and $26 million.
EBITDA is expected to be between $-0- and $1 million.
Operating income (loss) is expected to be between $(500,000) and $500,000.
Full Year 2003 Expectations:
Net revenues are expected to be between $100 and $115 million.
EBITDA is expected to be between $5 and $9 million.
Operating income is expected to be between $3 and $7 million.
EBITDA is calculated by adding back to operating income (loss): depreciation and amortization. EBITDA information should not be considered as an alternative to any measure of performance as promulgated under generally accepted accounting principles (such as operating income or income before extraordinary items) nor should it be considered as an indicator of the Company’s overall financial performance. The Company’s calculations of EBITDA may be different from the calculations used by other companies and therefore comparability may be limited.
About Excelligence Learning Corporation
Excelligence Learning Corporation is a developer, manufacturer and retailer of educational products to child care programs, preschools, elementary schools and consumers. The Company serves early childhood professionals, educators, and parents by providing quality educational products and programs for children from infancy to 12 years of age. With proprietary product offerings and a multi-channel distribution strategy, the Company helps to further children’s education and to reinforce the connection between learning at school and at home. The Company is composed of two business segments, Early Childhood and Elementary School. Through its Early Childhood segment, the Company develops, markets and sells educational products through multiple distribution channels to early childhood professionals and parents. Through its Elementary School segment, the Company sells school supplies and other products specifically targeted for use by children in kindergarten through sixth grade to elementary schools, teachers and other education organizations. These products are then resold as a fundraising device for the benefit of a particular school. Excelligence Learning Corporation’s headquarters is in Monterey, California and its website is www.excelligencelearning.com.
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 PROVIDES A “SAFE HARBOR” FOR FORWARD-LOOKING STATEMENTS. CERTAIN INFORMATION INCLUDED IN THIS PRESS RELEASE (AS WELL AS INFORMATION INCLUDED IN ORAL STATEMENTS OR OTHER WRITTEN STATEMENTS MADE OR TO BE MADE BY EXCELLIGENCE, ITS DIRECTORS AND/OR ITS EXECUTIVE OFFICERS) CONTAINS STATEMENTS THAT ARE FORWARD-LOOKING, INCLUDING SECOND QUARTER AND FULL YEAR 2003 EXPECTATIONS, FINANCIAL PROJECTIONS, SUCH AS PROJECTIONS OF REVENUE, STATEMENTS OF MANAGEMENT’S PLANS, OBJECTIVES OR EXPECTATIONS, INFORMATION REGARDING NEW PRODUCTS OR SERVICES, STATEMENTS OF BELIEF AND OTHER MATTERS RELATING TO EXPECTATIONS AND STRATEGIES REGARDING THE FUTURE. ALTHOUGH EXCELLIGENCE BELIEVES THE CURRENT EXPECTATIONS REFLECTED IN SUCH FORWARD-LOOKING STATEMENTS ARE BASED ON REASONABLE ASSUMPTIONS, SUCH FORWARD-LOOKING INFORMATION INVOLVES IMPORTANT RISKS AND UNCERTAINTIES THAT COULD SIGNIFICANTLY AFFECT ANTICIPATED RESULTS AND THERE CAN BE NO ASSURANCE THAT ITS EXPECTATIONS WILL BE ACHIEVED. ACCORDINGLY, ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE EXPRESSED IN ANY FORWARD-LOOKING STATEMENTS MADE BY EXCELLIGENCE. CERTAIN FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM EXCELLIGENCE’S EXPECTATIONS ARE SET FORTH AS RISK FACTORS IN THE COMPANY’S SECURITIES AND EXCHANGE COMMISSION REPORTS AND FILINGS, INCLUDING THE COMPANY’S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002 AND QUARTERLY REPORTS ON FORM 10-Q. SUCH FILINGS MAY BE VIEWED FREE OF CHARGE ATWWW.SEC.GOV.
###
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited—in thousands except shares and per share data)
Three Months Ended March 31, | ||||||||
2003 | 2002 | |||||||
Revenues | $ | 17,418 |
| $ | 15,574 |
| ||
Cost of goods sold |
| 11,290 |
|
| 9,953 |
| ||
Gross profit |
| 6,128 |
|
| 5,621 |
| ||
Operating expenses: | ||||||||
Selling, general and administrative |
| 8,027 |
|
| 8,371 |
| ||
Amortization of other intangible assets |
| 75 |
|
| 72 |
| ||
Operating loss |
| (1,974 | ) |
| (2,822 | ) | ||
Net interest and other expense |
| 27 |
|
| 90 |
| ||
Net loss before income taxes |
| (2,001 | ) |
| (2,912 | ) | ||
Income tax benefit |
| 853 |
|
| — |
| ||
Net loss | $ | (1,148 | ) | $ | (2,912 | ) | ||
Net Loss Per Share Calculation: | ||||||||
Net loss per share—basic and diluted | $ | (0.14 | ) | $ | (0.35 | ) | ||
Weighted average shares used in computing net loss per share—basic and diluted |
| 8,471,463 |
|
| 8,364,260 |
|
Segment Information and Reconciliation of Operating Loss to EBITDA loss (unaudited—in thousands):
Early Childhood | Elementary School | Consolidated | ||||||||||||||||||||||
Three Months Ended March 31, | ||||||||||||||||||||||||
2003 | 2002 | 2003 | 2002 | 2003 | 2002 | |||||||||||||||||||
Net Revenues | $ | 15,501 |
| $ | 13,722 |
| $ | 1,917 |
| $ | 1,852 |
| $ | 17,418 |
| $ | 15,574 |
| ||||||
Operating loss | $ | (565 | ) | $ | (1,629 | ) | $ | (1,409 | ) | $ | (1,193 | ) | $ | (1,974 | ) | $ | (2,822 | ) | ||||||
Depreciation and amortization |
| 294 |
|
| 285 |
|
| 127 |
|
| 94 |
|
| 421 |
|
| 379 |
| ||||||
EBITDA | $ | (271 | ) | $ | (1,344 | ) | $ | (1,282 | ) | $ | (1,099 | ) | $ | (1,553 | ) | $ | (2,443 | ) | ||||||
Note 1: Excelligence Learning Corporation's supplemental profit measure is EBITDA, which is calculated by adding back to operating income (loss): depreciation and amortization.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands except par value and share amounts)
(Unaudited)
March 31, 2003 | December 31, 2002 * | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 3,613 |
| $ | 2,713 |
| ||
Accounts receivable, net |
| 5,375 |
|
| 5,018 |
| ||
Inventories |
| 21,242 |
|
| 13,938 |
| ||
Prepaid expenses and other current assets |
| 2,443 |
|
| 2,701 |
| ||
Deferred income taxes |
| 1,672 |
|
| 1,672 |
| ||
Total current assets |
| 34,345 |
|
| 26,042 |
| ||
Property and equipment, net |
| 4,283 |
|
| 4,305 |
| ||
Deferred income taxes |
| 2,851 |
|
| 1,998 |
| ||
Other assets |
| 1,028 |
|
| 1,046 |
| ||
Goodwill |
| 5,834 |
|
| 4,701 |
| ||
Other intangible assets, net |
| 1,102 |
|
| 1,084 |
| ||
Total assets | $ | 49,443 |
| $ | 39,176 |
| ||
LIABILITIES, REDEEMABLE SECURITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Short-term debt | $ | 4,395 |
| $ | — |
| ||
Accounts payable |
| 10,050 |
|
| 3,524 |
| ||
Accrued expenses |
| 4,275 |
|
| 4,297 |
| ||
Income tax liabilities |
| 213 |
|
| 216 |
| ||
Other liabilities |
| 492 |
|
| 529 |
| ||
Total current liabilities |
| 19,425 |
|
| 8,566 |
| ||
Redeemable common shares |
| 400 |
|
| — |
| ||
Common stock, $0.01 par value; 15,000,000 shares authorized; 8,523,345 and 8,401,914 issued and outstanding at March 31, 2003 and December 31, 2002, respectively |
| 84 |
|
| 84 |
| ||
Additional paid-in capital |
| 62,219 |
|
| 62,206 |
| ||
Deferred stock compensation |
| (1,339 | ) |
| (1,482 | ) | ||
Accumulated deficit |
| (31,346 | ) |
| (30,198 | ) | ||
Total stockholders’ equity |
| 29,618 |
|
| 30,610 |
| ||
Total liabilities and stockholders’ equity | $ | 49,443 |
| $ | 39,176 |
| ||
* | Derived from audited consolidated financial statements filed in the Company’s 2002 Annual Report on Form 10-K. |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited—in thousands)
Three Months Ended March 31, | ||||||||
2003 | 2002 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (1,148 | ) | $ | (2,912 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities | ||||||||
Depreciation and amortization |
| 421 |
|
| 379 |
| ||
Provision for losses on accounts receivable |
| 25 |
|
| (10 | ) | ||
Equity-based compensation |
| 143 |
|
| 143 |
| ||
Deferred income taxes |
| (853 | ) |
| — |
| ||
Changes in operating assets and liabilities, net of assets and liabilities assumed in acquisitions: | ||||||||
Accounts receivable |
| (382 | ) |
| 505 |
| ||
Inventories |
| (7,304 | ) |
| (4,306 | ) | ||
Prepaid expenses and other current assets |
| 258 |
|
| 109 |
| ||
Other assets |
| 18 |
|
| (12 | ) | ||
Accounts payable |
| 6,526 |
|
| 4,105 |
| ||
Accrued expenses |
| (22 | ) |
| (839 | ) | ||
Income tax related liabilities |
| (3 | ) |
| — |
| ||
Other current liabilities |
| (37 | ) |
| 140 |
| ||
Net cash used in operating activities |
| (2,358 | ) |
| (2,698 | ) | ||
Cash flows from investing activities: | ||||||||
Purchase of property and equipment |
| (323 | ) |
| (195 | ) | ||
Acquisition of Marketing Logistics, Inc. |
| (827 | ) |
| — |
| ||
Net cash used in investing activities |
| (1,150 | ) |
| (195 | ) | ||
Cash flows from financing activities: | ||||||||
Bank overdraft |
| — |
|
| 450 |
| ||
Borrowings on line of credit |
| 12,852 |
|
| 19,517 |
| ||
Principal payments on line of credit |
| (8,457 | ) |
| (18,683 | ) | ||
Principal payments on notes payable |
| — |
|
| (14 | ) | ||
Issuance of equity—net of fees |
| 13 |
|
| — |
| ||
Net cash provided by financing activities: |
| 4,408 |
|
| 1,270 |
| ||
Net increase (decrease) in cash and cash equivalents |
| 900 |
|
| (1,623 | ) | ||
Cash and cash equivalents at beginning of period |
| 2,713 |
|
| 1,623 |
| ||
Cash and cash equivalents at end of period | $ | 3,613 |
| $ | — |
| ||
Supplemental disclosures of cash flow information: | ||||||||
Issuance of redeemable common shares in acquisition | $ | 400 |
| $ | — |
| ||
Cash payments during the period: | ||||||||
Cash paid for interest | $ | 2 |
| $ | 72 |
| ||
Cash paid for taxes | $ | 3 |
| $ | 506 |
| ||