[PLATO LEARNING LOGO]
For Immediate Release
Contact: | John Murray, President & CEO Greg Melsen, CFO Steve Schuster, VP & Treasurer 952.832.1000 |
PLATO Learning, Inc. Reports
Second Quarter Fiscal Year 2003 Results
MINNEAPOLIS, MN — June 3, 2003— PLATO Learning, Inc. (NASDAQ: TUTR), a leading provider of computer-based and e-learning solutions, today announced revenues for its second quarter ended April 30, 2003 totaling $17.5 million, a $255,000, or 1.5% increase versus the $17.2 million reported for the comparable period of fiscal 2002 and slightly above the company’s earlier guidance. The net loss for the second quarter of 2003 was $1.8 million, or $0.11 per diluted share as compared to net income of $297,000 or $0.02 per diluted share for the same period of 2002.
Revenues for the six months ended April 30, 2003 totaled $30.9 million, a $335,000, or 1% decrease over the comparable period of fiscal year 2002. The net loss for the first half of fiscal year 2003 was $5.2 million or $0.31 per diluted share compared to a loss of $1.1 million, or $0.06 per diluted share for the same period of fiscal year 2002. As previously announced, the strategic NetSchools acquisition was expected to have a dilutive effect on the operating results for the three and six months ended April 30, 2003. This dilutive effect was $0.05 and $0.11 for the three and six months ended April 30, 2003, respectively.
John Murray, President and Chief Executive Officer, said, “We entered this fiscal year knowing our first six months and second quarter would be difficult because of the tough educational funding environment. We have accomplished our goals during these periods and are pleased to have exceeded both our internal plan and the revenue attained in last year’s second quarter.”
Mr. Murray added, “We also knew our profitability would suffer as compared to last year because of the investment required to bring our Accountability Solutions and Early Reading products to market and the cost needed to pursue larger district deals. While these costs have increased our selling expenses in advance of revenue generation, we have stabilized our product development, customer support and general and administrative expenses during the last three quarters.”
Mr. Murray continued, “The K-12 funding environment continues to be a concern, especially because of the severity of state budget deficits. However, most states are working to preserve K-12 funding levels and are providing increased visibility on how they plan to address their educational funding issues. There has also been improvement in the amounts of federal funds committed to education and better understanding by educators regarding how to access these funds. Our acquisition and product development strategy is enabling us to access funds previously not available to us and our expanded programmatic solutions meet the most critical needs of school districts and administrators. We are excited about our strategic direction and competitive advantages and remain cautiously optimistic about the prospects for the remainder of fiscal 2003.”
PLATO Learning Inc.
10801 Nesbitt Avenue South, Bloomington, Minnesota 55437
www.plato.com
Mr. Murray highlighted additional key financial information:
• | Subscription based orders in Q2 2003 totaled $2.0 million as compared to $1.5 million in the second quarter of last fiscal year. | ||
• | Deferred revenue was $19.5 million at April 30, 2003 versus $11.0 million at April 30, 2002 and $18.8 million at October 31, 2002. | ||
• | Non-current installment receivables were $2.0 million at April 30, 2003 versus $2.8 million at April 30, 2002. |
The Company’s balance sheet remains strong:
• | Cash was $24.2 million at April 30, 2003, with no bank borrowings outstanding. | ||
• | Stockholders’ equity was $106.3 million at April 30, 2003. |
Quarterly Conference Call
A conference call to discuss this announcement is scheduled for today at 3:45 PM (CST). The dial-in number for this call is 1-877-775-1746. Please call about ten minutes prior and inform the operator you are participating in PLATO Learning, Inc.’s call. Should you be unable to attend the live conference call, a recording will be available to you from 6:00 p.m. on June 3, 2003 through midnight June 10, 2003. To access the recording call: 1-800-642-1687. At the prompt, enter pass code number 833217.
About PLATO Learning
PLATO Learning, Inc. is a leading provider of computer-based and e-learning instruction for kindergarten through adult learners, offering curricula in reading, writing, math, science, social studies, and life and job skills. The company also offers innovative online assessment and accountability solutions and standards-based professional development services. With over 4,000 hours of objective-based, problem-solving courseware, plus assessment, alignment and curriculum management tools, we create standards-based curricula that facilitate learning and school improvement.
With trailing 12-month revenues of about $74 million, PLATO Learning, Inc. is a publicly held company traded as TUTR on the NASDAQ-NMS. PLATO® Learning educational software is marketed to K-12 schools and colleges. The Company also sells to job training programs, correctional institutions, military education programs, corporations and individuals. The Company’s products are delivered via networks, CD-ROM, the Internet and private intranets.
PLATO Learning is headquartered at 10801 Nesbitt Avenue South, Bloomington, Minnesota 55437, (952) 832-1000 or (800) 869-2000. The Company has domestic offices throughout the United States and international offices in the United Kingdom and Canada. International distributors are located in Puerto Rico, Singapore, South Africa and the United Arab Emirates. The Company’s Web address is http://www.plato.com.
This announcement includes forward-looking statements. PLATO Learning has based these forward-looking statements on its current expectations and projections about future events. Although PLATO Learning believes that its assumptions made in connection with the forward-looking statements are reasonable, no assurances can be given that its assumptions and expectations will prove to have been correct. These forward-looking statements are subject to various risks, uncertainties and assumptions. PLATO Learning undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Any forward looking statements made are subject to the risks and uncertainties as those described in the Company’s Annual Report on Form 10-K for the year ended October 31, 2002. Actual results may differ materially from anticipated results.
® PLATO is a registered trademark of PLATO Learning, Inc.
PLATO Learning Inc.
10801 Nesbitt Avenue South, Bloomington, Minnesota 55437
www.plato.com
Plato Learning, Inc. and Subsidiaries
Consolidated Statements of Operations
(Unaudited, in thousands, except per share amounts)
Three Months Ended | Six Months Ended | ||||||||||||||||||
April 30, | April 30, | ||||||||||||||||||
2003 | 2002 | 2003 | 2002 | ||||||||||||||||
Revenues: | |||||||||||||||||||
License fees | $ | 11,519 | $ | 13,416 | $ | 20,588 | $ | 24,000 | |||||||||||
Services | 4,296 | 2,836 | 7,679 | 5,187 | |||||||||||||||
Other | 1,652 | 960 | 2,657 | 2,072 | |||||||||||||||
Total revenues | 17,467 | 17,212 | 30,924 | 31,259 | |||||||||||||||
Cost of revenues: | |||||||||||||||||||
License fees | 866 | 947 | 1,407 | 1,783 | |||||||||||||||
Services | 979 | 306 | 1,375 | 577 | |||||||||||||||
Other | 1,311 | 815 | 2,302 | 1,763 | |||||||||||||||
Total cost of revenues | 3,156 | 2,068 | 5,084 | 4,123 | |||||||||||||||
Gross profit | 14,311 | 15,144 | 25,840 | 27,136 | |||||||||||||||
Operating expenses: | |||||||||||||||||||
Sales and marketing | 11,198 | 9,799 | 21,644 | 18,894 | |||||||||||||||
General and administrative | 2,804 | 2,161 | 5,804 | 4,582 | |||||||||||||||
Product development and customer support | 3,200 | 2,577 | 6,334 | 5,358 | |||||||||||||||
Amortization of intangibles | 419 | 168 | 820 | 362 | |||||||||||||||
Restructuring charge | — | — | 380 | — | |||||||||||||||
Total operating expenses | 17,621 | 14,705 | 34,982 | 29,196 | |||||||||||||||
Operating earnings (loss) | (3,310 | ) | 439 | (9,142 | ) | (2,060 | ) | ||||||||||||
Interest income | 92 | 189 | 212 | 557 | |||||||||||||||
Interest expense | (30 | ) | (31 | ) | (54 | ) | (73 | ) | |||||||||||
Other expense, net | (8 | ) | (25 | ) | (29 | ) | (109 | ) | |||||||||||
Earnings (loss) before income taxes | (3,256 | ) | 572 | (9,013 | ) | (1,685 | ) | ||||||||||||
Income tax expense (benefit) | (1,435 | ) | 275 | (3,785 | ) | (625 | ) | ||||||||||||
Net earnings (loss) | $ | (1,821 | ) | $ | 297 | $ | (5,228 | ) | $ | (1,060 | ) | ||||||||
Earnings (loss) per share: | |||||||||||||||||||
Basic and diluted | $ | (0.11 | ) | $ | 0.02 | $ | (0.31 | ) | $ | (0.06 | ) | ||||||||
Weighted average common shares outstanding: | |||||||||||||||||||
Basic | 16,534 | 16,448 | 16,657 | 16,430 | |||||||||||||||
Diluted | 16,534 | 17,140 | 16,657 | 16,430 | |||||||||||||||
Plato Learning, Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands, except per share amounts)
April 30, | October 31, | |||||||||||
2003 | 2002 | |||||||||||
(Unaudited) | (See Note) | |||||||||||
Assets | ||||||||||||
Current assets: | ||||||||||||
Cash and cash equivalents | $ | 24,202 | $ | 30,390 | ||||||||
Accounts receivable, net | 26,631 | 33,034 | ||||||||||
Prepaid expenses and other current assets | 4,519 | 4,870 | ||||||||||
Deferred income taxes | 3,338 | 3,338 | ||||||||||
Total current assets | 58,690 | 71,632 | ||||||||||
Equipment and leasehold improvements, net of accumulated depreciation and amortization of $6,514 and $5,437, respectively | 4,881 | 5,210 | ||||||||||
Product development costs, net of accumulated amortization of $8,712 and $6,083, respectively | 14,096 | 13,545 | ||||||||||
Deferred income taxes | 3,796 | 11 | ||||||||||
Goodwill | 39,201 | 38,331 | ||||||||||
Identified intangible assets, net | 14,404 | 15,374 | ||||||||||
Other assets | 2,395 | 1,552 | ||||||||||
Total assets | $ | 137,463 | $ | 145,655 | ||||||||
Liabilities and Stockholders’ Equity | ||||||||||||
Current liabilities: | ||||||||||||
Accounts payable | $ | 1,891 | $ | 888 | ||||||||
Accrued employee salaries and benefits | 6,347 | 6,979 | ||||||||||
Accrued liabilities | 2,991 | 4,786 | ||||||||||
Deferred revenue | 15,438 | 14,891 | ||||||||||
Total current liabilities | 26,667 | 27,544 | ||||||||||
Deferred revenue | 4,081 | 3,946 | ||||||||||
Other liabilities | 452 | 582 | ||||||||||
Total liabilities | 31,200 | 32,072 | ||||||||||
Stockholders’ equity: | ||||||||||||
Common stock, $.01 par value, 50,000 shares authorized; 18,086 shares issued and 16,362 shares outstanding at April 30, 2003; 18,078 shares issued and 16,812 shares outstanding at October 31, 2002 | 164 | 168 | ||||||||||
Paid in capital | 129,837 | 129,802 | ||||||||||
Treasury stock at cost, 1,724 and 1,266 shares, respectively | (18,401 | ) | (16,244 | ) | ||||||||
Retained earnings (accumulated deficit) | (4,583 | ) | 645 | |||||||||
Accumulated other comprehensive loss | (754 | ) | (788 | ) | ||||||||
Total stockholders’ equity | 106,263 | 113,583 | ||||||||||
Total liabilities and stockholders’ equity | $ | 137,463 | $ | 145,655 | ||||||||
Note: The balance sheet at October 31, 2002 has been derived from our audited financial statements at that date.
Plato Learning, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited, in thousands)
Six Months Ended | ||||||||||||
April 30, | ||||||||||||
2003 | 2002 | |||||||||||
Operating activities: | ||||||||||||
Net loss | $ | (5,228 | ) | $ | (1,060 | ) | ||||||
Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||||||
Deferred income taxes | (3,785 | ) | (625 | ) | ||||||||
Amortization of capitalized product development costs | 2,624 | 1,940 | ||||||||||
Amortization of identified intangible assets | 970 | 512 | ||||||||||
Depreciation of equipment and leasehold improvements | 1,106 | 650 | ||||||||||
Provision for doubtful accounts | 1,052 | 901 | ||||||||||
Stock-based compensation | — | 36 | ||||||||||
Loss on disposal of equipment | 59 | 88 | ||||||||||
Changes in assets and liabilities, net of effects of acquisitions: | ||||||||||||
Accounts receivable | 4,579 | 2,035 | ||||||||||
Prepaid expenses and other current and noncurrent assets | 280 | (772 | ) | |||||||||
Accounts payable | 1,003 | (730 | ) | |||||||||
Accrued liabilities, accrued employee salaries and benefits and other liabilities | (2,403 | ) | (1,526 | ) | ||||||||
Deferred revenue | (195 | ) | 666 | |||||||||
Total adjustments | 5,290 | 3,175 | ||||||||||
Net cash provided by operating activities | 62 | 2,115 | ||||||||||
Investing Activities: | ||||||||||||
Capitalization of product development costs | (3,168 | ) | (3,262 | ) | ||||||||
Capital expenditures | (828 | ) | (2,013 | ) | ||||||||
Net cash used in investing activities | (3,996 | ) | (5,275 | ) | ||||||||
Financing Activities: | ||||||||||||
Repurchase of common stock | (2,161 | ) | (72 | ) | ||||||||
Net proceeds from issuance of common stock | 35 | 962 | ||||||||||
Repayments of capital lease obligations | (147 | ) | (124 | ) | ||||||||
Net cash provided by (used in) financing activities | (2,273 | ) | 766 | |||||||||
Effect of foreign currency on cash | 19 | (52 | ) | |||||||||
Net decrease in cash and cash equivalents | (6,188 | ) | (2,446 | ) | ||||||||
Cash and cash equivalents at beginning of period | 30,390 | 61,568 | ||||||||||
Cash and cash equivalents at end of period | $ | 24,202 | $ | 59,122 | ||||||||