Exhibit 99.1
[WRC WRC MEDIA INC.
MEDIA 512 Seventh Avenue
LOGO] 22nd Floor
New York, NY 10018
CONTACT: Richard Nota
WRC Media Inc.
212-768-1150
Fax 212-768-1887
rnota@wrcmedia.com
www.wrcmedia.com
FOR IMMEDIATE RELEASE
WRC MEDIA INC., A LEADING SUPPLEMENTARY EDUCATION PUBLISHER, RELEASES ITS
PRELIMINARY AND UNAUDITED CONDENDSED CONSOLIDATED FINANCIAL RESULTS FOR 2003
NEW YORK, NY, JANUARY 28, 2004 - WRC MEDIA RELEASES PRELIMINARY AND UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL RESULTS FOR ITS FULL YEAR 2003.
WRC Media has provided below its preliminary, unaudited results for the fiscal
year ended December 31, 2003, including a reconciliation of Adjusted EBITDA and
Recurring EBITDA to Net Loss for such period. The expected fiscal year 2003
results provided are unaudited and based on preliminary information and
management's current expectations and assumptions, and WRC Media cautions that
the results are subject to change based on the outcome of our annual audit
process. Full audited results for the fiscal year ended December 31, 2003,
will be included in WRC Media's Annual Report on Form 10-K, which it expects to
file on March 30, 2004.
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WRC MEDIA INC.
PRELIMINARY CONDENSED CONSOLIDATED FINANCIAL RESULTS
($ in thousands) 12/31/2002 12/31/2003
---------- ----------
(Unaudited)
Weekly Reader $ 44,607 $ 46,002
American Guidance Service 57,876 56,652
World Almanac Education 53,211 49,691
Compass Learning/ChildU 53,460 50,462
---------- ----------
Net Revenue $ 209,154 $ 202,807
Costs and Expenses:
Operating costs and expenses 158,962 157,045
Restructuring and non-recurring expenses 8,594 992
Depreciation 3,041 2,256
Amortization of other intangibles 18,812 17,971
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Total operating costs and expenses 189,409 178,264
---------- ----------
Operating Income 19,745 24,543
Interest expense 29,844 29,051
Other, net (income)/expense 2,343 1,153
---------- ----------
Net loss before income taxes and cumulative effect of
change in accounting principle (12,442) (5,661)
Income taxes 10,980 2,151
---------- ----------
Net loss before cumulative effect of change
in accounting principle (23,422) (7,812)
Cumulative effect of change in accounting principle (72,022) -
---------- ----------
Net loss $ (95,444) $ (7,812)
========== ==========
Reconciliation of Adjusted EBITDA and Recurring EBITDA to Net Loss
- ------------------------------------------------------------------
Net Loss $ (95,444) $ (7,812)
Depreciation and amortization of intangibles** 22,209 21,701
Income taxes 10,980 2,151
Interest expense*** 29,844 29,051
Non-cash cumulative effect of accounting change 72,022 -
Restructuring and non-recurring expenses 8,594 992
---------- ----------
Adjusted EBITDA [1] 48,205 46,083
Employee separation costs - 1,532
Costs and expenses related to SEC inquiry - 368
One-time management fee offset - (300)
---------- ----------
Recurring EBITDA [2] $ 48,205 $ 47,683
========== ==========
** Amount includes amortization of capitalized software costs of $356 for 2002 and $1,474 for 2003 which are
included in operating costs and expenses above.
*** Cash interest was approximately $27.9 million and $27.8 million for the years ended December 31, 2002 and
2003, respectively.
Certain reclassifications have been made in the prior year's condensed consolidated financial results to conform
with current year's presentation.
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1. Adjusted EBITDA represents income (loss) before interest expense, taxes,
depreciation, amortization and other (income) charges excluding
restructuring costs of $8,594 for the year ended December 31, 2002 and
restructuring costs and other non-recurring expenses of $992 for the year
ended December 31, 2003. Adjusted EBITDA data is a non-GAAP measure and
is included in our discussion because we believe that this information
may be considered by investors as an additional basis on which to
evaluate WRC Media's performance. Because all companies do not
calculate Adjusted EBITDA identically, the presentation of Adjusted
EBITDA in this report is not necessarily comparable to similarly titled
measures of other companies. Adjusted EBITDA is not intended to
represent cash flow from operating activities and should not be
considered an alternative to net income or loss (as determined in
conformity with GAAP) as an indicator of the Company's operating
performance or to cash flow as a measure of liquidity. It is presented
herein as the Company evaluates and measures each business unit's
performance based on their Adjusted EBITDA results. The Company also
uses Adjusted EBITDA to evaluate management performance. Adjusted EBITDA
may not be available for the Company's discretionary use as there are
requirements to repay debt, among other payments.
2. Recurring EBITDA is defined as Adjusted EBITDA excluding certain costs
and expenses believed by WRC Media to be unusual in magnitude or type.
When WRC Media evaluates and measures the performance of its business
units, it eliminates such costs and expenses because WRC Media believes
such elimination provides a more accurate measure of the actual
performance of the business units. Recurring EBITDA for the fiscal year
ended December 31, 2003 excluded (1) a non-cash charge of $1,532 recorded
in connection with the separation costs expected to be incurred in
connection with the departure of a former officer and director, which
costs are subject to change and are expected to be paid in cash during
the first half of 2004, (2) a charge of $368 in cash costs and expenses
related to an on-going SEC inquiry incurred as of December 31, 2003, and
(3) management fees of $300 which were waived by our principal
shareholder during such period and which otherwise would have been a cash
operating cost and expense. The Company believes the 2003 employee
separation costs to be unusual in magnitude because only a few employees
of the Company have employment contracts which would provide them with
similar benefits in the event they leave employment with the Company
under certain circumstances. No separation costs of such magnitude were
incurred by the Company for any individual employee during the fiscal
year ended December 31, 2001 or 2002. The Company believes the costs and
expenses related to the SEC inquiry are unusual because this matter
represents the only SEC inquiry we have experienced. The Company
believes the waiver of management fees payable to our principal
shareholder is unusual in type because it was a one-time waiver and our
principal shareholder is under no obligation to waive any management fees
in the future. Prior to the waiver in 2003, our principal shareholder
had not waived its management fees for any previous period. No
adjustments were made to Recurring EBITDA for the fiscal year ended
December 31, 2002 because no separation costs of unusual magnitude were
incurred during such year and our principal shareholder had not waived
any of its management fees. Recurring EBITDA is a non-GAAP measure and is
not intended to represent cash flow from operating activities and should
not be considered an alternative to net income or loss (as determined in
conformity with GAAP) as an indicator of the Company's operating
performance or to cash flow as a measure of liquidity. We will not be
permitted to present Recurring EBITDA in our filings with the SEC
because, despite our view that our adjustments are for costs and expenses
that are unusual in magnitude or type, we believe it is likely that our
adjustments would not meet the SEC's standards for inclusion of such
adjustments in filings, which standards would not permit the elimination
of items identified as non-recurring, infrequent or unusual when the
nature of the charge makes it reasonably likely to recur. Investors
should make their own assessment as to the appropriateness of the
adjustments included in Recurring EBITDA.
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As of December 31, 2003, WRC Media's cash balance was approximately $1.4
million and the consolidated face value of its debt was $275.7 million. During
the year ended December 31, 2003, WRC Media made scheduled principal payments
of $8.0 million on its senior credit facilities and as of December 31, 2003,
there were $5.0 million in outstanding advances under the Company's revolving
credit facility. The Company's Series B 15% Senior Preferred Stock due 2011
represented $137.7 million of the Company's total capitalization as of
December 31, 2003. Capital expenditures (including prepublication costs) for
the year ended December 31, 2003 were $10.3 million. Additionally, the Company
incurred approximately $4.8 million in capitalized software development costs
for the year ended December 31, 2003.
As of December 31, 2003, WRC Media recorded a charge of $368 thousand for
accounting and legal fees relating to an inquiry by the Securities and
Exchange Commission. WRC Media is unable at this time to estimate the total
amount of such fees that it may incur, and the amount of the reserve may
change.
WRC Media is pursuing a new financing that will be secured by a
second-priority lien on the collateral securing our existing senior secured
credit facility. The Company currently expects the proceeds to be used to
repay a portion of our existing credit facility, provide cash for general
corporate purposes, and pay related fees and expenses. WRC Media has engaged
Credit Suisse First Boston and Banc of America Securities to lead the
transaction.
The new financing will require the approval of our lenders under our existing
credit facility. The transaction is currently expected to be completed by the
end of February 2004; however, we can give no assurances as to whether we will
be successful in achieving the new financing or, if successful, when such
transaction would be completed.
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* * * * * * *
WRC Media Inc., a leading publishing and media company, creates and distributes
innovative supplementary educational materials for the school, library, and
home markets. WRC Media's product suite includes some of the best-known brands
in education, recognized for their consistent high quality and proven
effectiveness. WRC Media Inc. operates in one industry segment, educational
publishing organized in five principal operating units:
AGS(R) is a leader in producing highly reliable and valid behavior,
ability, achievement, and speech-language assessments for all ages. The
company also publishes a variety of high-interest, low-reading- level
textbooks for middle and high school students, as well as
curriculum-based assessment software and test preparation programs.
CompassLEARNING(TM) is the leader in research-driven, standards- based
innovative-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.
World Almanac Education Group, Inc. publishes the World Almanac(R), the
World Almanac for Kids, Facts On File(R) news periodicals and Internet
services, Gareth Stevens books, and the Funk & Wagnalls(R) encyclopedia.
The company distributes high quality print and electronic education
materials to schools and libraries.
Weekly Reader Corporation publishes Weekly Reader(R) periodicals serving
over 7 million school children. It also publishes other branded
periodicals and instructional materials, including Teen Newsweek(R),
published for middle and high school students.
WRC Consumer and Sponsored Publishing include the company's custom
educational publishing company, Lifetime Learning Systems(R) (Lifetime).
Lifetime Learning Systems is the recognized leader in developing
customized educational programs. Lifetime's programs are customized for
sponsors; including corporations, nonprofit associations and government
agencies that have the need to cost effectively convey important public
relations and marketing messages to targeted audiences. The mission of
WRC Consumer and Sponsored Publishing is to continue grow WRC Media
sales. It will mine the value of our brands and grow our consumer
business through alternative outlets and alliances.
Information in this press release may contain 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. The Company disclaims
any intention or obligation to update or revise forward-looking statements,
whether as a result of new information, future events or otherwise. 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.
Additional links:
www.wrcmedia.com
www.agsnet.com
www.compasslearning.com
www.weeklyreader.com
www.worldalmanac.com
www.worldalmanacforkids.com
www.facts.com
www.wae.cc
www.childu.com
www.garethstevens.com
www.thinkbox.com
www.lls-online.com
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