EXHIBIT 99.1
[WRC LOGO] WRC Media Inc.
512 Seventh Avenue
22nd Floor
New York, NY 10018
CONTACT: Richard Nota
WRC Media Inc.
212-768-1150
Fax 212-768-1887
rnota@wrcmedia.com
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www.wrcmedia.com
For Immediate Release
WRC MEDIA INC., A LEADING SUPPLEMENTARY EDUCATION PUBLISHER,
REPORTS SECOND QUARTER RESULTS FOR 2003
New York, NY, August 12, 2003 - WRC Media reports second quarter results -
consolidated second quarter Operating Income down 9% but Adjusted EBITDA up
17.3% on revenue of $43.5 million.
WRC Media's (WRC or the Company) Adjusted EBITDA (see footnote 1) for the second
quarter ended June 30, 2003 was $9.5 million, $1.4 million or 17.3% greater than
the same period last year on revenue of $43.5 million, which was $0.3 million or
0.7% lower than the same period in 2002. Martin E. Kenney, Chief Executive
Officer, commented, "Our profitability measured in terms of operating income was
down 9.0% resulting primarily from $1.0 million of restructuring costs. However,
Adjusted EBITDA was up approximately 17.3% for the three months ended June 30,
2003 primarily attributable to the lower operating expenses excluding
restructuring charges. Net revenue for the second quarter of 2003 was slightly
lower by 0.7% compared to the same period in 2002 primarily driven by lower
revenue at WRC's library businesses resulting from library funding cutbacks.
These revenue declines were partially offset by higher revenue at the Company's
educational technology businesses which posted revenue growth of 7.4% for the
three months ended June 30, 2003 compared to the same period in 2002."
Mr. Kenney continued, "The persistently sluggish U.S. economy has affected
nearly every market and segment of the education industry. K-12 schools across
the country have been plagued by state and local budget shortfalls, which have
in turn influenced the bottom lines of supplemental education providers that
serve education institutions. As a result of the decline of state and local
budgets, a number of markets and segments within K-12 have experienced negative
growth. Though most large school districts appear finally ready to comply with
and benefit from Federal dollars under the Federal No Child Left Behind Act
(NCLB), many still remain confused by the law and its provisions requiring
purchased solutions to have scientific research supporting claims of efficacy.
As a result, we believe WRC will ultimately benefit from NCLB as WRC has
persuasive support for its research claims and has the grant writing staff able
to work with school and district officials to procure this funding. Assessment
and accountability remain paramount themes, as do solutions that promote
improved decision-making by administrators. WRC continues to believe that the
winning solutions will link assessment and remediation as part of an integrated
solution. Professional development is also clearly a priority for schools. In
the second quarter, the Company's educational technology unit created and sold a
new professional development offering which was the driver behind the 7.4%
revenue growth that business posted."
Mr. Kenney concluded, "In summary, we believe that education funding will
improve on the federal side in the latter part of the second half of this year
as more and more schools understand and take advantage of funding available
under the NCLB. This source of funding, however, will not be sufficient to
offset cuts in state and local education funding for the remainder of 2003.
Accordingly, we expect that the current market conditions will persist into the
third quarter, negatively affecting our revenue."
Net revenue for the second quarter of 2003 decreased $0.3 million, or 0.7%, to
$43.5 million from $43.8 million for the same period in 2002. At Weekly Reader,
revenue increased $0.7 million, or 14.6%, to $5.3 million from $4.6 million for
the same period in 2002. This was attributable to higher custom publishing
shipments by Weekly Reader's subsidiary Lifetime Learning Systems.
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At World Almanac Education Group, second quarter revenue decreased by $1.3
million, or 10.6%, to $10.5 million from $11.8 million for the same period in
2002. This decrease was primarily due to the continuing weak environment for
school library funding.
At AGS, second quarter revenue decreased $0.7 million, or 5.1%, to $13.5 million
from $14.2 million for the same period in 2002, primarily due a $0.9 million
decrease in backlist curriculum products, partially offset by growth in core
curriculum and assessment products of $0.2 million.
CompassLearning and ChildU which together comprise the Company's educational
technology business grew revenue by 7.4% quarter-over-quarter for the period
ended June 30, 2003. At CompassLearning (standalone), revenue decreased $0.4
million, or 3.7%, to $12.3 million from $12.7 million for the same period in
2002. At ChildU, WRC's unrestricted subsidiary, revenue increased $1.4 million
or 304.4% to $1.9 million from $0.5 million for the same period in 2002 driven
by sales of its web-enabled curriculum products.
For the three-months ended June 30, 2003, operating income decreased $0.3
million, or 9.0%, to $3.3 million from $3.6 million in 2002. This decrease was
primarily due to $1.0 million of restructuring costs attributable to updating
the assumptions used in determining the fair value of the remaining lease
obligations associated with facilities vacated in 2002.
Net loss decreased by $0.6 million, or 11.3% for the three months ended June 30,
2003, to $4.7 million in 2003 from $5.3 million in 2002 primarily due to lower
other expenses, net of $0.6 million driven by lower management fees of $0.3
million, combined with lower interest expense, of $0.3 million partially offset
by slightly lower operating income.
Net revenue for the six-months ended June 30, 2003 decreased $0.1 million, or
0.1%, to $90.5 million from $90.6 million for the same period in 2002. WRC Media
Adjusted EBITDA for the six-months ending June 30, 2003 of $18.8 million
exceeded the same period in the prior year by $3.1 million or 20.0%. The higher
profitability compared to prior year is driven by significantly higher revenue
at ChildU, WRC's unrestricted subsidiary. ChildU revenue increased $2.2 million
or 298.6% to $2.9 million from $0.7 million for the same period in 2002
resulting from higher sales of its web-enabled curriculum products from greater
market acceptance as more and more schools are becoming Internet capable. ChildU
achieved an important milestone for the period ended June 30, 2003, by becoming
EBITDA positive ($0.8 million) on a trailing twelve month basis.
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Operating income increased $0.8 million, or 12.6%, to $6.8 million for the
six-months ended June 30, 2003, from operating income of $6.0 million for the
same period in 2002. This improvement in income from operations was primarily
driven by $0.6 million in higher gross profits resulting from higher margin on
sales and by $0.2 million in lower operating costs.
Net loss decreased by $83.0 million, or 90.1% for the six months ended June 30,
2003, to $9.1 million from $92.1 million in 2002 primarily due to the $80.7
million in non-cash charge recorded in the prior period resulting in the
Company's adoption of SFAS No. 142. Excluding the non-cash charge, net loss
decreased $2.3 million or 20.2% primarily due to higher gross profit of $0.6
million on flat revenue, lower operating expense of $0.2 million, lower interest
payments of $0.5 million and lower loss on investments of $1.1 million.
As of June 30, 2003, WRC Media's cash balance was $12.5 million and consolidated
debt was $294.2 million. During the six months ended June 30, 2003, WRC Media
made scheduled principal payments of $3.9 million on its senior credit
facilities and as of June 30, 2003, there were $24.0 million in outstanding
advances under the Company's revolving credit facility. Capital expenditures
(including prepublication costs) for the six months ended June 30, 2003 were
$5.2 million.
For further information about WRC Media's results of operations, financial
condition, cash flows, liquidity and other financial information, please see the
Company's quarterly report on Form 10-Q which will be publicly filed by August
14, 2003 with the Securities and Exchange Commission.
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Footnote 1: Adjusted EBITDA is defined as income (loss) before interest
expense, taxes, depreciation, amortization and other (income)
charges excluding unrealized hedge gain of ($207) for the
three-months ended June 30, 2002 and restructuring costs of $1,001
for the three-months ended June 30, 2003excluding unrealized hedge
gain of ($207) for the six-months ended June 30, 2002 and
restructuring costs and other non-recurring expenses of $1,481 for
the six-months ended June 30, 2003. 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 EBITDA identically, the presentation of
EBITDA in this report is not necessarily comparable to similarly
titled measures of other companies. 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
product line's performance based on their EBITDA results. EBITDA
may not be available for the Company's discretionary use as there
are requirements to repay debt, among other payments.
Restricted EBITDA is defined as Adjusted EBITDA excluding WRC
Media's unrestricted subsidiaries. Given the projected near-term
financial performance of ChildU and ThinkBox, WRC Media designated
ChildU and ThinkBox "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 and ThinkBox 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 and ThinkBox financial
performance will not be included in any covenant calculations or
in any measures of adjusted EBITDA. Accordingly, Restricted EBITDA
is defined as WRC Media Adjusted EBITDA excluding the $1.0 million
EBITDA income in three months ended June 30, 2003 and the $1.9
million EBITDA loss in the three-months ended June 30, 2002 and
excluding $1.1 million EBITDA income for the six months ended June
30, 2003 and $2.5 million EBITDA loss for the six months ended
June 30, 2002 contributed by its unrestricted subsidiaries -
ChildU and ThinkBox. As of June 30, 2003, there were $122.7
million senior secured term loans under the senior credit
facilities, of which Adjusted EBITDA as defined in the credit
agreement is utilized in both financial covenants. If the covenant
were to be violated, the debt would become callable which could
adversely affect the Company's financial condition and liquidity.
The current minimum ratio for the leverage ratio is no greater
than 5.75 to 1 and for the fixed chare ratio, no less than 1.05 to
1.
* * * * * * *
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 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) 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.
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 print and electronic education
materials to schools and libraries.
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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.
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.
Additional links:
www.wrcmedia.com
www.agsnet.com
www.compasslearning.com
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www.weeklyreader.com
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www.worldalmanac.com
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www.worldalmanacforkids.com
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www.facts.com
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www.wae.cc
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www.childu.com
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www.garethstevens.com
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www.thinkbox.com
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www.lls-online.com
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The Q2 investor call is scheduled for Wednesday, August 13, 2003; the following
is the dial-in information for the call:
Date: Wednesday, August 13, 2003 Time: 11:00 am (Eastern Standard Time)
Call-in: Domestic: (800) 450-0819 International: (612) 332-0345
Chairperson: Martin Kenney Call name: WRC Media Conference
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WRC Media Inc.
For the three months ended June 30, 2003 and 2002
($ in thousands)
Actual Increase/(Decrease)
------------------------- -----------------------
6/30/2003 6/30/2002 $ %
Net Revenue $43,493 $43,810 $(317) (0.7%)
Costs and Expenses:
Operating costs and expenses 33,890 34,525 (635) (1.8%)
Restructuring costs 1,001 - 1,001 N/A
Depreciation 591 809 (218) (26.9%)
Amortization of other intangibles 4,691 4,827 (136) (2.8%)
------- ------- ------- -------
Total operating costs and expenses 40,173 40,161 12 0.0%
Operating Income 3,320 3,649 (329) (9.0%)
Interest expense 7,188 7,473 (285) (3.8%)
Other, net expense 388 941 (553) (58.8%)
Income taxes 454 544 (90) (16.5%)
------- ------- ------- -------
Net Loss $(4,710) $(5,309) $ 599 11.3%
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Adjusted EBITDA / Restricted EBITDA reconciliation to Net Loss
Net Loss $(4,710) $(5,309) $ 599 11.3%
Depreciation and amortization of intangibles** 5,615 5,636 (21) (0.4%)
Income taxes 454 544 (90) (16.5%)
Interest expense 7,188 7,473 (285) (3.8%)
Un-realized gain from hedging transaction - (207) 207 100.0%
Restructuring costs 1,001 - 1,001 0.0%
------- ------- ------- -------
Adjusted EBITDA 9,548 8,137 1,411 17.3%
Add: ChildU EBITDA (income) loss (1,004) 1,018 (2,022) (198.6%)
Add: Thinkbox EBITDA loss 884 (884) (100.0%)
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Restricted EBITDA (excluding unrestricted subsidiaries) $ 8,544 $10,039 $(1,495) (14.9%)
======= ======= ======= ========
** Amount includes amortization of capitalized software costs of $333 which are
included in operating costs and expenses above.
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WRC Media Inc.
For the six months ended June 30, 2003 and 2002
($ in thousands)
Actual Increase/(Decrease)
------------------------- ------------------------
6/30/2003 6/30/2002 $ %
--------- --------- ------- ------
Net Revenue $90,470 $90,597 $ (127) (0.1%)
Costs and Expenses:
Operating costs and expenses 71,625 73,285 (1,660) (2.3%)
Restructuring costs and non-recurring expenses 1,481 - 1,481 N/A
Depreciation 1,207 1,591 (384) (24.1%)
Amortization of other intangibles 9,324 9,654 (330) (3.4%)
------- ------- -------- --------
Total operating costs and expenses 83,637 84,530 (893) (1.1%)
Operating Income 6,833 6,067 766 12.6%
Interest expense 14,270 14,804 (534) (3.6%)
Other, net (income)/expense 619 1,419 (800) (56.4%)
Income taxes 1,042 9,883 (8,841) (89.5%)
------- ------- -------- --------
Net Loss before cumulative effect of change
in accounting principle (9,098) (20,039) (10,941) (54.6%)
Cumulative effect of change in accounting principle - (72,022) (72,022) (100.0%)
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Net loss $(9,098) $(92,061) $(82,963) (90.1%)
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Adjusted EBITDA / Restricted EBITDA reconciliation to Net Loss
Net Loss $(9,098) $(92,061) $(82,963) (90.1%)
Depreciation and amortization of intangibles** 11,123 11,245 (122) (1.1%)
Income taxes 1,042 9,883 (8,841) (89.5%)
Interest expense 14,270 14,804 (534) (3.6%)
Cumulative effect of change in accouting principle - 72,022 (72,022) (100.0%)
Un-realized gain from hedging transaction - (207) 207 100.0%
Restructuring costs 1,289 - 1,289 0.0%
Non-recurring expenses 192 - 192 0.0%
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Adjusted EBITDA 18,818 15,686 3,132 20.0%
Plus / (Minus): ChildU EBITDA (income)/loss (1,142) 1,347 (2,489) (184.8%)
Plus / (Minus): Thinkbox EBITDA loss - 1,137 (1,137) (100.0%)
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Restricted EBITDA (excluding unrestricted subsidiaries) $17,676 $18,170 $ (494) (2.7%)
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** 2003 Amount includes amortization of capitalized software costs of $592 which
are included in operating costs and expenses above.
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