[LOGO] WRC Media, Inc.
512 Seventh Avenue
23rd 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,
REPORTS FIRST QUARTER RESULTS FOR 2002
New York, NY, May 10, 2002 - WRC Media reports first quarter results-
consolidated first quarter EBITDA up 7.5%.
WRC Media's consolidated EBITDA (excluding unrestricted subsidiaries - see
footnote 1) for the first quarter ended March 31, 2002 was $8.1 million, $0.6
million or 7.5% greater than the same period last year on revenue of $46.8
million, which was $2.7 million or 5.5% lower than in 2001. Martin E. Kenney,
Chief Executive Officer, commented, "Our profitability measured in terms of
EBITDA (excluding unrestricted subsidiaries- see footnote 1) was up 7.5% and
operating income was up significantly for the three months ended March 31, 2002
- - $2.4 million of income versus a loss of $9.9 million for the first quarter of
last year. While WRC should benefit significantly from numerous provisions in
the recently passed "No Child Left Behind Act" - most of this funding will not
be available until the latter half of 2002, with some purchasing decisions
spilling over to 2003. All of our sales and marketing efforts are geared to
immediately seize the opportunities presented under the new guidelines of the
Elementary and Secondary Education Act as well as the provisions of the "No
Child Left Behind Act" especially our divisions which emphasize reading, test
prep and assessment. Our strong, trusted brands - names such as Weekly Reader's
publications and the World Almanac, which have been built over the last 100+
years, and have universal name recognition and strong customer loyalty, should
continue to outperform the competition. We continue to make prudent investments
in our core businesses - investing heavily in new textbooks and test development
at AGS; launching new World Almanac and Weekly Reader library imprints;
increasing research and implementing a product redesign as part of the 100th
anniversary of Weekly Reader; and new comprehensive software releases at
CompassLearning. While our current market outlook is for continued pressure on
top-line revenue in the second quarter, our outlook for the second half
indicates solid growth in both revenues and EBITDA in all of our core
businesses."
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The improved EBITDA performance was driven by WRC's ongoing restructuring, which
began in early 2001, with the reorganization of its original four operating
units into two operating groups: 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 Education
Group and Weekly Reader operating units). This reorganization was the next
logical step in furthering WRC's strategy for continued market leadership, fully
integrating its substantial asset base, and fully leveraging operating
infrastructure to allow for future growth. The 2002 phase of this restructuring
has resulted in the further elimination of approximately $6 million in fixed
annual operating costs. Kenney added, "I am confident our organizational
structure is not only leaner, but also more market focused, positioning us to
immediately capitalize on growth opportunities in the marketplace as the new
federal funds are released in the second half of 2002."
On January 1, 2002 the Company adopted SFAS No. 142 "Goodwill and Other
Intangible Assets." Upon adoption, the Company ceased the amortization of
goodwill and other indefinite lived intangible assets, which consist primarily
of trademarks. As required by the statement, the Company is in the process of
reviewing goodwill for impairment as of January 1, 2002. The effect of the
results of operations for the comparative period ended March 31, 2001 had the
Company adopted this accounting change on January 1, 2001 would have resulted in
reducing the Company's amortization expense and net loss by approximately
$2,685. The Company is in the process of performing the transitional goodwill
impairment test, which it expects to complete during the second quarter of 2002,
and will record any resulting impairment charge, if necessary, as a cumulative
effect of an accounting change as of January 1, 2002.
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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 AGS(R) and
CompassLearning, 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), a leader in research-based technology learning
solutions, delivers innovative, state-of-the-art educational management
and assessment tools and curriculum aligned to local, state, and
national standards. Based in San Diego, California with offices in
Weston, Florida and Phoenix, Arizona, CompassLearning's solutions
provide over 7,000 hours of curriculum and instruction solutions to
more than 20,000 schools and 10 million students nationwide.
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(R), 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(TM),
published for middle and high school students.
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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Additional links:
www.wrcmedia.com
www.agsnet.com
www.compasslearning.com
www.weeklyreader.com
www.worldalmanac.com
www.worldalmanacforkids.com
www.childu.com
www.garethstevens.com
www.thinkbox.com
www.lls-online.com
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WRC Media Inc.
For the three months ended March 31, 2002 and 2001
($ in thousands)
Actual Increase/(Decrease)
-------------------- -------------------
3/31/02 3/31/01 $ %
-------- -------- -------- -------
Net Revenue $ 46,787 $ 49,491 $ (2,704) (5.5%)
Costs and Expenses:
Operating costs and expenses 38,760 41,726 (2,966) (7.1%)
Depreciation 782 782 -- 0.0%
-------- -------- -------- -------
Operating Income before amortization expense 7,245 6,983 262 3.8%
Amortization of goodwill and other intangibles 4,827 16,853 (12,026) (71.4%)
Operating Income/(Loss) 2,418 (9,870) 12,288 124.5%
Interest expense 7,331 8,645 (1,314) (15.2%)
Other, net (income)/expense 478 204 274 134.3%
Income taxes 139 234 (95) (40.6%)
-------- -------- -------- -------
Net Loss $ (5,530) $(18,953) $(13,423) (70.8%)
======== ======== ======== =======
EBITDA
Net Loss $ (5,530) $(18,953) $(13,423) (70.8%)
Depreciation and amortization of intangibles 5,609 17,635 (12,026) (68.2%)
Income taxes 139 234 (95) (40.6%)
Interest expense 7,331 8,645 (1,314) (15.2%)
-------- -------- -------- -------
EBITDA 7,549 7,561 (12) (0.2%)
Add: ChildU EBITDA loss 329 -- 329 --
Add: Thinkbox EBITDA loss 253 -- 253 --
-------- -------- -------- -------
EBITDA (excluding unrestricted subsidiaries) $ 8,131 $ 7,561 $ 570 7.5%
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