[WRC media LOGO]
WRC Media, Inc.
512 Seventh Avenue
23rd Floor
New York, NY 10018
CONTACT: Richard Nota
WRC Media Inc.
212-768-2268
For Immediate Release
WRC MEDIA INC., A LEADING SUPPLEMENTARY EDUCATION PUBLISHER,
REPORTS THIRD QUARTER RESULTS
October 26, 2001 - WRC Media announced results for the third quarter ended
September 30, 2001.
WRC Media's consolidated revenue for the third quarter increased $3.3 million or
5.8% to $60.2 million from $56.9 million for the same period in 2000 with
consolidated core revenue up 6.7% during the period.
Martin E. Kenney, Chief Executive Officer, commented, "The tragic events of
September 11th have affected us all. While WRC Media was fortunate to return to
relative normalcy in our day-to-day operations, our thoughts are with all of
those who have not been able to do so." Kenney continued, "Our results for the
third quarter are particularly impressive in light of the overall economic
environment. I am particularly pleased with the performance of WRC Media's
Assessment, Curriculum and Educational Technology Group in the third quarter
ended September 30, 2001. At American Guidance Service, Inc. (AGS(R)),
assessment and curriculum revenue was up 7.6% and EBITDA was up significantly -
more than $1.1 million or 13.8% for the third quarter compared to the same
period in 2000. At CompassLearning(TM), new software sales - the key indicator
of overall CompassLearning(TM) performance - were up approximately 7% for the
third quarter versus the prior year's quarter, and up 18% for the nine months
ended September 30, 2001 compared to the same period in 2000." Kenney continued,
"We remain
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cautiously optimistic regarding our prospects for the remainder of 2001 despite
the events of September 11th, which have resulted in canceled school board
meetings, additional pressure on library spending and re-directed advertising
spending from our corporate sponsored periodicals to WTC relief contributions.
We hope this phenomenon is short-term and that most of the business affected was
not necessarily lost but deferred. Numerous school board meetings in late
September were cancelled, which resulted in lower Compass software sales than
originally expected. However, Our CompassLearning(TM) pipeline remains strong,
up significantly over 2000, and we have made significant investments in revenue
opportunities at all of our units which should continue to pay off in the months
ahead."
Net revenue for the third quarter of 2001 - excluding non-core business lines of
hardware and Funk & Wagnalls Yearbooks (see footnote 1 below), increased $3.7
million, or 6.7%, to $59.1 million from $55.4 million for the same period in
2000.
($000) Variance to
Q3 Q3 Q3 2000
------- ------- ------------------
Net Revenue 2001 2000 $ %
--------------------------------- --------- ----------- -------- ---------
Weekly Reader 13,664 13,587 77 0.6%
AGS 19,312 17,954 1,358 7.6%
World Almanac 12,700 11,942 758 6.3%
Compass 14,218 13,438 780 5.8%
Child U 343 - 343 N/A
------- ------- ------- --------
WRC Media -Consolidated 60,237 56,921 3,316 5.8%
------- ------- ------- --------
Non-core revenue:
Compass Hardware sales 481 834 (353) (42.3%)
World Almanac's Funk & Wagnall's
Yearbook sales (1) 660 708 (48) (6.8%)
------- ------- ------- --------
WRC Media -Core business 59,096 55,379 3,717 6.7%
======= ======= ======= ========
1 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.
At AGS(R), sales increased $1.4 million, or 7.6%, to $19.3 million for the third
quarter of 2001 from $17.9 million for the same period in 2000, primarily due to
higher sales of curriculum products related to a new Florida textbook adoption
and sales attributable to the recently completed Lindy acquisition. At Weekly
Reader, sales of $13.7 million for the third quarter of 2001 were $0.1 million
or 0.6% greater than the same period in 2000. This was primarily
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attributable to a $0.7 million or 18.0% increase in higher corporate sponsored
periodical revenue from Weekly Reader's subsidiary Lifetime Learning Systems
combined with $0.5 million or 6.7% increase in elementary and secondary
periodical revenue offset by a $1.1 million or 49.1% decrease in Skills book
revenue compared to the same period a year ago. The drop in Skills book revenue
is attributable to 2001 not representing a presidential election year, which was
the case in the prior year. Skills book revenue significantly increases in
presidential election years. At World Almanac Education Group, third quarter
sales increased by $0.8 million, or 6.3%, to $12.7 million from $11.9 million
for the same period in 2000, primarily as a result of continued strength of
World Almanac's Facts On File News Services (FOFN) division and improvement in
sales at it's Gareth Stevens division. At FOFN, the third quarter of 2001
revenue of $1.9 million was $0.3 million or 20.0% greater than the third quarter
of 2000 driven by significant growth at the division's FACTS.com Internet news
service. For the third quarter of 2001, revenue from World Almanac's FACTS.com
website - the web authority of fully integrated, highly respected research and
reference materials - grew an impressive 50.5% compared to the same period in
2000. In addition, sales of children's library books at World Almanac's Gareth
Stevens division which showed signs of softness in the first half of 2001 grew
to $3.7 million in the third quarter of 2001 which represented a $0.6 million or
21.5% increase compared to the same period a year ago.
At CompassLearning(TM), total revenue increased $0.8 million, or 5.8%, to $14.2
million for the third quarter of 2001 from $13.4 million for the same period in
2000. Core revenue for the third quarter of 2001, excluding the planned
attrition of hardware sales, increased $1.1 million, or 9.0%, to $13.7 million
from $12.6 million for the same period in 2000. New software sales for the third
quarter of 2001 increased by $0.5 million or 7.1% to $7.4 million from $6.9
million for the same period in 2000 and revenue from technical support services
increased $0.5 million or 17.2% in third quarter compared to the same period a
year ago. As previously stated, new software sales at CompassLearning(TM) were
negatively impacted in the quarter due to the cancellation of numerous school
board meetings in September. We hope to recoup these revenues in the latter part
of this year.
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CompassLearning Variance to 2000
Net Revenue for the three months ------- ------- ------------------
ended September 30,2001 2001 2000 $ %
--------------------------------- --------- ----------- -------- ---------
($000)
Software 7,427 6,938 489 7.0%
Professional Development 2,595 2,497 98 3.9%
Technical Support 3,715 3,169 546 17.2%
Hardware 481 834 (353) (42.3%)
------- ------- ------- --------
Compass -Consolidated 14,218 13,438 780 5.8%
------- ------- ------- --------
Non-core revenue:
Compass Hardware business 481 834 (353) (42.3%)
------- ------- ------- --------
Compass -Core business 13,737 12,604 1,133 9.0%
======= ======= ======= ========
WRC Media Inc.'s consolidated EBITDA (excluding unrestricted subsidiaries - see
footnote 1) of $16.1 million for the third quarter was constant compared to the
same period a year ago.
------------------------------------------------------------------------------
Net revenue for the nine months ended September 30, 2001 - excluding
de-emphasized non-core business lines, increased $7.5 million, or 5.0%, to
$156.6 million from $149.1 million for the same period in 2000. Operating income
before amortization expense rose to $33.0 million versus $30.9 million in 2000,
a 6.7% increase.
Each of the WRC Media operating units posted year-to-date core revenue gains
compared to prior year. See charts below:
($000) Variance to
Prior Year
Net Revenue for the nine months -------------------
ended September 30,2001 2001 2000 $ %
--------------------------------- --------- ----------- -------- ---------
Weekly Reader 28,561 28,109 452 1.6%
AGS 45,307 43,578 1,729 4.0%
World Almanac 38,099 36,773 1,326 3.6%
Compass 48,747 49,092 (345) (0.7%)
Child U 417 - 417 N/A
------- ------- ------- --------
WRC Media - Consolidated 161,131 157,552 3,579 2.3%
------- ------- ------- --------
Non-core revenue:
Compass Hardware business 2,058 5,739 (3,681) (64.1%)
World Almanac's Funk & Wagnall's
Encyclopedia business 2,473 2,726 (253) (9.3%)
------- ------- ------- --------
WRC Media -Core business 156,600 149,087 7,513 5.0%
======= ======= ======= ========
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CompassLearning(TM)- Update:
---------------------------
($000) Variance to 2000
Net Revenue for the nine months --------- ----------- -------------------
ended September 30 2001 2000 $ %
--------------------------------- --------- ----------- -------- ---------
($000)
Software 28,133 23,773 4,360 18.3%
Professional Development 7,429 7,945 (516) (6.5%)
Technical Support 11,127 11,635 (508) (4.4%)
Hardware 2,058 5,739 (3,681) (64.1%)
------- ------- ------- --------
Compass - Consolidated 48,747 49,092 (345) -0.7%
------- ------- ------- --------
Non-core revenue:
Hardware (a) 2,058 5,739 (3,681) (64.1%)
------- ------- ------- --------
Compass - Core business 46,689 43,353 3,336 7.7%
======= ======= ======= ========
(a) CompassLearning(TM)'s hardware business revenues are generally derived
from reselling hardware to customers who request that
CompassLearning(TM) provide a package of software and hardware. In
prior years, CompassLearning(TM) offered hardware to customers as a
wholesaler of private label and other products. However, because of the
less profitable nature of the business compared to
CompassLearning(TM)'s other businesses and to reduce the need for
inventory and the risk of technological change rendering inventory
obsolete, CompassLearning(TM) began discontinuing its wholesale
hardware business in the mid 1990's. Currently, CompassLearning(TM) has
arrangements with Apple, IBM, Compaq, Gateway, and Dell computers in
order to accommodate requests by customers for complete hardware and
software solutions.
The biggest gain in core revenue took place at WRC's CompassLearning(TM) unit.
CompassLearning(TM) core revenues were $3.3 million or 7.7% greater than the
same period in the prior year primarily as a result of $4.4 million or 18.3%
increase in new software revenue.
WRC Media consolidated EBITDA (before unrestricted subsidiaries- see footnote 1)
for the nine months ending September 30, 2001 of $36.3 million was significantly
ahead of prior year by $2.8 million or 8.2%. The improved profitability compared
to prior year was primarily driven by increased sales of CompassLearning(TM)'s
software and ongoing rationalization of the business.
Net loss decreased by $6.9 million, or 13.3%, to $45.2 million compared to $52.1
million last year, primarily as a result of a $5.4 million decrease in non-cash
depreciation and amortization expenses for intangible assets, and $2.1 million
increase in operating income before amortization expense.
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As of September 30, 2001, WRC Media Inc.'s cash balance was $9.3 million (which
included $4.4 million of cash restricted to fund WRC Media's unrestricted
subsidiary and its investment in ThinkBox Inc.) and consolidated debt was $288.1
million. During the three months ended September 30, 2001, WRC Media Inc. made
scheduled principal payments of $1.1 million on its senior credit facilities and
as of September 30, 2001, the Company had $7.0 million outstanding under its
revolving credit facility. Capital expenditures (including prepublication costs)
for the nine months ended September 30, 2001 were $8.4 million.
--------------------------------------------------------------------------------
Footnote 1: Given the projected near-term financial performance of ChildU(TM)
and ThinkBox(TM), WRC Media designated ChildU(TM)and
ThinkBox(TM). "Unrestricted Subsidiaries" under its Credit
Agreement so as to: (i) exclude them from all the negative
covenants in the Credit Agreement, including the financial
covenants, and from agreed upon affirmative covenants,
representations and warranties and events of default; and (ii)
Permit additional investments in ChildU(TM)and ThinkBox(TM) by
WRC Media and its subsidiaries in excess of the acquisition
funding requirements to fund operations, if necessary. As a
result of the above-mentioned designation, ChildU(TM)and
ThinkBox(TM)financial performance will not be reflected in any
covenant calculations. Accordingly, Consolidated EBITDA
(before unrestricted subsidiaries) is defined as WRC Media
consolidated EBITDA excluding the EBITDA loss contributed by
its unrestricted subsidiaries - ChildU(TM)and its investment
in ThinkBox(TM).
* * * * * * *
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. has two principal operating units:
The Assessment, Curriculum and Electronic Group is comprised of American
Guidance Service, Inc. (AGS(R)), CompassLearning, Inc. and ChildU, Inc.
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
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.
ChildU(TM) is a leading developer and provider of Internet-delivered
curriculum and management tools. The Learning Odyssey(TM), the primary
product line, provides highly engaging and standards-based student
activities that make extending the school to the home an anytime,
anyplace learning reality.
The Reference and Periodicals Group is comprised of World Almanac Education
Group, Weekly Reader Corporation and Lifetime Learning Systems.
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 books 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.
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Lifetime Learning Systems(R) 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.
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 September 30, 2001 and 2000
($ in thousands)
Actual Increase/(Decrease)
9/30/2001 9/30/2000 $ %
------------- ------------- ------------- -----------
Revenues
Weekly Reader 13,664 $13,587 $77 0.6%
American Guidance Service 19,312 17,954 1,358 7.6%
World Almanac Education 12,700 11,942 758 6.3%
Compass Learning 14,218 13,438 780 5.8%
ChildU 343 - 343 -
------------- ------------- ------------- -----------
Total Revenue 60,237 $56,921 $3,316 5.8%
Costs and Expenses:
Operating costs and expenses 44,753 40,931 3,822 9.3%
Depreciation 813 736 77 10.4%
------------- ------------- ------------- -----------
Operating Income before amortization expense 14,671 $15,254 $(583) (3.8%)
Amortization of goodwill and other intangibles 17,178 28,014 (10,836) (38.7%)
------------- ------------- ------------- -----------
Operating Loss after amortization expense (2,507) $(12,760) $10,253 80.4%
Interest expense 8,179 9,054 (875) (9.7%)
Other,(income)/expense,net 508 (16) 524 3271.9%
Income taxes 223 (552) 775 140.4%
------------- ------------- ------------- -----------
Net Loss (11,417) $(21,246) $9,829 46.3%
============= ============= ============= ===========
EBITDA
Net Loss (11,417) $(21,246) $9,829 46.3%
Depreciation and amortization of intangibles 17,991 28,750 (10,759) (37.4%)
Amortization of deferred financing costs 157 286 (129) (45.1%)
Income taxes 223 (552) 775 140.4%
Interest expense 8,086 8,837 (751) (8.5%)
Non-cash,non-recurring charges - 6 (6) (100.0%)
------------- ------------- ------------- -----------
EBITDA 15,040 $16,081 $(1,041) (6.5%)
Add:ChildU EBITDA loss 799 - 799 -
Add:Thinkbox EBITDA loss 282 - 282 -
------------- ------------- ------------- -----------
EBITDA excluding ChildU and Thinkbox 16,121 $16,081 $40 0.3%
============= ============= ============= ===========
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WRC Media Inc.
For the three months ended September 30, 2001 and 2000
($ in thousands)
Actual Increase/(Decrease)
9/30/2001 9/30/2000 $ %
------------- ------------- ------------- -----------
Revenues
Weekly Reader 28,561 $28,109 $452 1.6%
American Guidance Service 45,307 43,578 1,729 4.0%
World Almanac Education 38,099 36,773 1,326 3.6%
Compass Learning 48,747 49,092 (345) (0.7%)
ChildU (see footnote 1) 417 - 417 -
------------- ------------- ------------- -----------
Total Revenue 161,131 $157,552 $3,579 2.3%
Costs and Expenses:
Operating costs and expenses 125,698 124,595 1,103 0.9%
Depreciation 2,419 2,030 389 19.1%
------------- ------------- ------------- -----------
Operating Income before amortization expense 33,014 $30,927 $2,087 6.7%
Amortization of goodwill and other intangibles 51,261 56,695 (5,434) (9.6%)
------------- ------------- ------------- -----------
Operating Loss after amortization expense (18,247) $(25,768) $7,521 29.2%
Interest expense 25,332 26,205 (873) (3.3%)
Other,(income)/expense,net 1,113 (30) 1,143 3808.3%
Income taxes 503 199 304 152.8%
------------- ------------- ------------- -----------
Net Loss (45,195) $(52,142) $6,947 13.3%
EBITDA
Net Loss (45,195) $(52,142) $6,947 13.3%
Depreciation and amortization of intangibles 53,680 58,725 (5,045) (8.6%)
Amortization of deferred financing costs 760 744 16 2.2%
Income taxes 503 199 304 152.8%
Interest expense 24,770 25,616 (846) (3.3%)
Non-cash,non-recurring charges - 431 (431) (100.0%)
------------- ------------- ------------- -----------
EBITDA 34,518 $33,573 $945 2.8%
Add:ChildU EBITDA loss 1,412 - 1,412 -
Add:Thinkbox EBITDA loss 411 - 411 -
------------- ------------- ------------- -----------
EBITDA excluding ChildU and Thinkbox 36,341 $33,573 $2,768 8.2%
============= ============= ============= ===========
Footnote 1: ChildU revenues represent activity for the period from inception
(May 9,2001) through September 30, 2001.
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