WRC Media, Inc.
[LOGO] 512 Seventh Avenue
23rd Floor
New York, NY 10018
CONTACT: Richard Nota
WRC Media Inc.
212-768-2268
For Immediate Release
WRC MEDIA INC., THE LEADING SUPPLEMENTARY EDUCATION PUBLISHER,
REPORTS FIRST QUARTER RESULTS
April 23, 2001 - WRC Media announced results for the first quarter ended March
31, 2001.
WRC Media is off to a solid start in 2001. Consolidated EBITDA for the first
quarter was $7.6 million, 16.1% or $1.0 million greater than the same period in
2000.
Martin E. Kenney, Chief Executive Officer, stated, "Significantly improved
performance from CompassLearning was a key driver of our strong first quarter
results. New software revenue was up 42.7% versus the same period of 2000, an
encouraging indicator of the prospects for the educational software marketplace
for the remainder of the year. The increase in CompassLearning new software
sales, combined with the benefits resulting from the organizational initiatives
we commenced in mid-2000, contributed significantly to the 16.1% increase in
EBITDA over last year. I am optimistic that CompassLearning is now headed in the
right direction, and with our solid start, I am confident about our ability to
grow our core business in 2001." Mr. Kenney continued, "On April 3, 2001, we
reorganized WRC Media into two operating units: The Assessment, Curriculum and
Educational Technology Group (comprised of the CompassLearning and AGS operating
units) and the Reference and Periodicals Group (comprised of the World Almanac
and Weekly Reader operating units). This is the next logical step in furthering
our strategy for continued market leadership, fully integrating our substantial
asset base, and fully leveraging our operating infrastructure to allow for
future growth. I am confident our new organizational structure is more market
focused, and it will allow us to capitalize efficiently on growth opportunities
in the marketplace."
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Consolidated revenues for the first quarter of 2001 decreased $0.7 million, or
1.5%, to $49.5 million from $50.2 million for the same period in 2000. This
decrease was the result of an anticipated decrease in de-emphasized business
lines; including, planned attrition of low margin hardware sales at
CompassLearning, and Funk & Wagnalls Yearbook sales at World Almanac. World
Almanac is no longer soliciting new subscribers for its yearbooks since the
print edition of the Funk & Wagnalls Encyclopedia was discontinued. Accordingly,
Funk & Wagnalls sales of Yearbooks are naturally declining year-over-year, as it
is entirely dependent upon sales orders from existing customers via renewals.
Net revenue for the first quarter of 2001 - excluding non-core business lines of
hardware and Yearbooks, increased $1.4 million, or 3.1%, to $47.1 million from
$45.7 million for the same period in 2000.
- -------------------------------------------------------------------------------
($000) Variance to
Q1 Q1 Q1 2000
--------------------
Net Revenue 2001 2000 $ %
- ------------------------------------ ----------- --------- --------------------
Weekly Reader 10,421 10,459 (38) (0.4%)
AGS 12,119 11,940 179 1.5%
World Almanac 13,042 13,308 (266) (2.0%)
Compass 13,909 14,527 (618) (4.3%)
----------- --------- --------------------
WRC Media - Consolidated 49,491 50,234 (743) (1.5%)
----------- --------- --------------------
Less: Noncore revenues:
Compass Hardware business 848 2,690 (1,842) (68.5%)
World Almanac's Funk & Wagnall's
Yearbook business 1,536 1,846 (310) (16.8%)
----------- --------- --------------------
WRC Media - Core business 47,107 45,698 1,409 3.1%
- -------------------------------------------------------------------------------
At American Guidance Service, Inc., sales increased $0.2 million, or 1.5%, to
$12.1 million for the first quarter of 2001 from $11.9 million for the same
period in 2000, primarily due to higher sales of curriculum products. At Weekly
Reader Corporation, sales of $10.4 million were flat for the first quarter of
2001 compared to the same period in 2000. At World Almanac Education Group,
Inc., first quarter sales decreased by $0.3 million, or 2.0%, to $13.0 million
from $13.3 million for the same period in 2000, as a result of anticipated lower
sales of Funk & Wagnalls Yearbook business. Net revenue for the first quarter of
2001 excluding non-core Yearbook sales increased $0.1 million, or 0.4%, to $11.5
million from $11.4 million for the same period in 2000.
Mr. Kenney stated, "I am pleased with the first quarter results at AGS, Weekly
Reader and World Almanac. At AGS, the division was able to post a
quarter-over-quarter gain in revenues despite being up
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against a year 2000 quarter that was significantly up over 1999 ($1.2 million
and 11.5%) and despite the harsh winter in the Midwest and Northeast that
delayed purchasing decisions and shipment of product to certain customers. We
expect those sales to materialize in the second quarter of 2001.
At Weekly Reader, I am encouraged by the recent changes we have made in sales
and marketing. These changes include an increased marketing budget related to
direct mail of 14%; a research based circulation recapture plan with a goal of
increasing our market share, and the addition of talented executives to the
Weekly Reader team. We have hired a Senior Executive to manage the Weekly Reader
sales and marketing initiatives. This position was vacant for most of 2000. We
expect an increased focus in this area to positively impact our top line growth.
At World Almanac, I am encouraged by our 2001 quarter-over quarter revenue gain
in the core business. I base this primarily on the fact that the 2000 first
quarter included a spillover effect of sales of the World Almanac Millennium
edition, which was a significant nonrecurring revenue stream in 2000. For the
first quarter of 2001, World Almanac's Facts.com - the web authority of fully
integrated, highly respected research and reference materials- which is still in
its embryonic stage of development-- grew an impressive 81.6% compared to the
same period in 2000 offsetting the fall-off from World Almanac 2000. This 2001
growth follows 2000 results in which Facts.com revenues increased from $390
thousand in 1999 to $1.6 million in 2000 - or 311%. We have great confidence
that we are positioned to continue to grow both revenues and margins from this
website."
At CompassLearning, revenue decreased $0.6 million, or 4.3%, to $13.9 million
for the first quarter of 2001 from $14.5 million for the same period in 2000, as
a direct result of the planned attrition of low margin, non-core hardware sales
that was almost entirely offset by higher margin software sales. Net revenue for
the first quarter of 2001 excluding the planned attrition of hardware sales
increased $1.2 million, or 10.3%, to $13.0 million from $11.8 million for the
same period in 2000. Software sales for the first quarter of 2001 increased
significantly by $2.1 million or 42.7% to $7.0 million from $4.9 million for the
same period in 2000. Mr. Kenney stated "At CompassLearning, it is our strategy
to grow our core business; which is the high margin electronic courseware
business and the related professional development services that emanate from
that business, and continue to de-emphasize the significantly lower margin
hardware revenues, as well as the technical support service revenue streams
which have a declining service life cycle."
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CompassLearning, Inc.
- ---------------------
Analysis of revenue for the three months
ended Variance
March 31, (in 000's) 2001 2000 $ %
---------------------------------------------------
Software $ 6,972 $ 4,887 $ 2,085 42.7%
Professional Development 2,484 2,695 (211) (7.8%)
Technical Support 3,605 4,255 (650) (15.3%)
Hardware 848 2,690 (1,842) (68.5%)
---------------------------------------------------
Total revenue, Net $ 13,909 $14,527 $ (618) (4.3%)
Less: Non-core hardware revenue 848 2,690 (1,842) (217.2%)
---------------------------------------------------
Core revenues $ 13,061 $11,837 $ 1,224 10.3%
===================================================
Sales mix, in part, explains the significantly reduced operating loss (measured
in terms of EBITDA) at CompassLearning for the first quarter ended March 31,
2001 versus 2000. CompassLearning gross profit increased $1.4 million, or 20.9%,
for the first quarter of 2001 compared to the same period in 2000, primarily due
to the replacement of $500 thousand of hardware gross margin with $1.5 million
of higher software gross margin attributable to higher software sales.
CompassLearning's gross profit margin improved to 59.0% for the first quarter -
from 46.8% for the same period in 2000. CompassLearning's pre-corporate EBITDA
for the first quarter increased $2.3 million, or 97.4% to a $62 thousand loss
compared to a $2.4 million EBITDA loss for the same period last year
(CompassLearning's first quarter is historically its weakest).
WRC Media Inc.'s EBITDA increased by $1.0 million, or 16.1%, to $7.6 million for
the first quarter of 2001 from $6.5 million for the same period in 2000. This
increase is primarily attributable to $1.9 million of greater gross profit for
the first quarter of this year compared to the same period in 2000, offset by
$0.8 million of higher selling, general and administrative expenses.
CompassLearning contributed $1.4 million of the $1.9 million higher gross profit
in the quarter resulting from higher software sales. Operating income before
amortization expense increased $0.9 million, or 15.8% to $6.7 million for the
first quarter of 2001 from $5.8 million for the same period in 2000.
Net loss increased by $7.3 million, or 63.1%, to $18.9 million compared to $11.6
million last year, directly as a result of an $8.4 million increase in non-cash
depreciation and amortization expenses for intangible assets, partially offset
by the $1.4 million higher gross profit.
As of March 31, 2001, WRC Media Inc.'s cash balance was $2.9 million and
consolidated debt was $285.0 million. During the three months ended March 31,
2001, WRC Media Inc. made scheduled principal payments of $1.0 million on its
senior credit facilities and as of March 31, 2001, the Company
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had $12 million outstanding under its revolving credit facility. Capital
expenditures (including prepublication costs) for the three months ended March
31, 2001 were $1.8 million.
* * * * * * * *
WRC Media Inc. (www.wrcmedia.com), a publishing and media company, creates and
distributes innovative quality supplementary educational materials for use in
schools, libraries, and the home. According to Educational Marketer, WRC Media
was the nation's largest supplementary materials publisher for 1999. WRC Media
Inc has four principal operating subsidiaries.
CompassLearning'TM' Inc. is the leader in research-driven, standards-based
digital learning solutions that provide choices to help teachers manage student
performance, personalize learning, and connect communities of learners. With
over 7,000 hours of curriculum and instruction, more than 20,000 schools use
CompassLearning'TM' solutions.
Weekly Reader Corporation publishes Weekly Reader periodicals serving over 7
million school children. It also publishes other branded periodicals and
instructional materials, including Teen Newsweek, published for middle and high
school students.
World Almanac Education Group, Inc. publishes the World Almanac and World
Almanac for Kids, Facts On File news periodicals and Internet services, Gareth
Stevens books and the Funk & Wagnalls encyclopedia. The company distributes high
quality books to schools and libraries through its Library Services division.
American Guidance Service, Inc. is a leader in producing highly reliable and
valid behavior, ability, achievement, and speech-language assessments, and
publishes a variety of high-interest, low-reading-level textbooks for middle and
high school students.
Information in this press release contains forward-looking statements, including
statements regarding our expectations, beliefs, intentions or strategies that
involve a number of risks, uncertainties, and assumptions. Should any of the
risks or uncertainties develop into actual events, or our assumptions prove to
be inaccurate, actual outcomes and results could differ materially from what is
expressed in such forward-looking statements and these developments or
inaccuracies could materially and adversely affect our business, financial
condition and results of operations. Risks and uncertainties relating to WRC
Media's and its subsidiaries' businesses are set forth in the documents and
reports filed from time to time with the Securities and Exchange Commission.
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WRC Media Inc.
For the three months ended March 31, 2001 and 2000
($ in thousands)
Actual Increase/(Decrease)
---------------------- ---------------------
3/31/2001 3/31/2000 $ %
--------- --------- -------- ---------
Revenues
Weekly Reader $ 10,421 $ 10,459 $ (38) (0.4%)
American Guidance Service 12,119 11,940 179 1.5%
World Almanac Education 13,042 13,308 (266) (2.0%)
Compass Learning 13,909 14,527 (618) (4.3%)
-------- -------- ------- -------
Total Revenue $ 49,491 $ 50,234 $ (743) (1.5%)
Costs and Expenses:
Operating costs and expenses 41,964 43,776 $(1,812) (4.1%)
Depreciation 782 634 148 23.3%
-------- -------- ------- -------
Operating Income before amortization expense $ 6,745 $ 5,824 $ 921 15.8%
Amortization of goodwill and other intangibles 16,853 8,655 8,198 94.7%
-------- -------- ------- -------
Operating Loss after amortization expense $(10,108) $ (2,831) $(7,277) (257.0%)
Interest expense 8,611 8,354 257 3.1
Other, (income)/expense, net -- (11) 11 100.0%
Income taxes 234 450 216 48.0%
-------- -------- ------- -------
Net Loss $(18,953) $ 11,624 $ 7,329) (63.1%)
======== ======== ======= =======
EBITDA
Net Loss $(18,953) $(11,624) $(7,329) (63.1%)
Depreciation and amortization of intangibles 17,635 9,289 8,346 89.8%
Amortization of deferred financing costs 288 174 114 65.5%
Income taxes 234 450 (216) (48.0%)
Interest expense 8,358 8,226 132 1.6%
-------- -------- ------- -------
EBITDA $ 7,562 $ 6,515 $ 1,047 16.1%
======== ======== ======= =======
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