abcd-10q_20150930.htm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2015

OR

¨

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                 to                 .

Commission File Number: 001-34575

 

Cambium Learning Group, Inc.

(Exact name of registrant as specified in its charter)

 

 

Delaware

   

27-0587428

(State or Other Jurisdiction of
Incorporation or Organization)

   

(I.R.S. Employer
Identification No.)

   

   

   

17855 Dallas Parkway, Suite 400, Dallas, Texas

   

75287

(Address of Principal Executive Offices)

   

(Zip Code)

Registrant’s telephone number, including area code: (888) 399-1995

 

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x      No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x      No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer

   

¨

      

Accelerated filer

   

¨

 

 

 

 

 

 

 

Non-accelerated filer

   

¨  (Do not check if a smaller reporting company)

      

 

Smaller reporting company

   

x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes  ¨      No  x

The number of shares of the registrant’s common stock, $0.001 par value per share, outstanding as of November 6, 2015 was 45,610,749.

 

 

 

 

 


 

TABLE OF CONTENTS

 

 

 

 

Page

PART I

 

FINANCIAL INFORMATION

 

 

 

 

 

Item 1.

 

Financial Statements

3

 

 

 

 

 

 

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited) for the Three and Nine Months Ended September 30, 2015 and September 30, 2014

3

 

 

 

 

 

 

Condensed Consolidated Balance Sheets as of September 30, 2015 (Unaudited) and December 31, 2014

4

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows (Unaudited) for the Nine Months Ended September 30, 2015 and September 30, 2014

6

 

 

 

 

 

 

Notes to the Condensed Consolidated Financial Statements (Unaudited)

7

 

 

 

 

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

19

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

35

 

 

 

 

Item 4.

 

Controls and Procedures

35

 

 

 

 

PART II

 

OTHER INFORMATION

36

 

 

 

 

Item 1.

 

Legal Proceedings

36

 

 

 

 

Item 1A.

 

Risk Factors

36

 

 

 

 

Item 6.

 

Exhibits

37

 

 

 

 

SIGNATURE PAGE

38

 

 

EXHIBITS

39

 

 

 

2


 

Item 1. Financial Statements.

Cambium Learning Group, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

(In thousands, except per share data)

(Unaudited)

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

Net revenues

$

40,339

 

 

$

41,144

 

 

$

109,264

 

 

$

108,467

 

Cost of revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenues

 

9,120

 

 

 

11,045

 

 

 

24,283

 

 

 

29,986

 

Amortization expense

 

4,434

 

 

 

4,695

 

 

 

12,712

 

 

 

13,213

 

Total cost of revenues

 

13,554

 

 

 

15,740

 

 

 

36,995

 

 

 

43,199

 

Research and development expense

 

2,935

 

 

 

2,745

 

 

 

7,827

 

 

 

8,090

 

Sales and marketing expense

 

11,722

 

 

 

11,015

 

 

 

32,845

 

 

 

31,680

 

General and administrative expense

 

5,120

 

 

 

5,039

 

 

 

15,537

 

 

 

14,676

 

Shipping and handling costs

 

457

 

 

 

666

 

 

 

879

 

 

 

1,266

 

Depreciation and amortization expense

 

1,001

 

 

 

1,050

 

 

 

2,994

 

 

 

3,150

 

Total costs and expenses

 

34,789

 

 

 

36,255

 

 

 

97,077

 

 

 

102,061

 

Income before interest, other income (expense)

   and income taxes

 

5,550

 

 

 

4,889

 

 

 

12,187

 

 

 

6,406

 

Net interest expense

 

(3,575

)

 

 

(4,377

)

 

 

(10,875

)

 

 

(13,535

)

Loss on extinguishment of debt

 

 

 

 

 

 

 

 

 

 

(570

)

Other income, net

 

204

 

 

 

535

 

 

 

679

 

 

 

965

 

Income (loss) before income taxes

 

2,179

 

 

 

1,047

 

 

 

1,991

 

 

 

(6,734

)

Income tax expense

 

(213

)

 

 

(52

)

 

 

(517

)

 

 

(146

)

Net income (loss)

$

1,966

 

 

$

995

 

 

$

1,474

 

 

$

(6,880

)

Other comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of net pension loss

 

56

 

 

 

22

 

 

 

168

 

 

 

65

 

Comprehensive income (loss)

$

2,022

 

 

$

1,017

 

 

$

1,642

 

 

$

(6,815

)

Net income (loss) per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

0.04

 

 

$

0.02

 

 

$

0.03

 

 

$

(0.15

)

Diluted

$

0.04

 

 

$

0.02

 

 

$

0.03

 

 

$

(0.15

)

Average number of common shares and equivalents

   outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

45,562

 

 

 

45,664

 

 

 

45,513

 

 

 

45,663

 

Diluted

 

47,103

 

 

 

45,753

 

 

 

46,744

 

 

 

45,663

 

 

 

 

 

 

 

 

 

 

The accompanying Notes to the Condensed Consolidated Financial Statements are an integral part of these statements.

 

 

3


 

Cambium Learning Group, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands, except per share data)

  

 

September 30, 2015

 

 

December 31, 2014

 

 

(Unaudited)

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

$

33,513

 

 

$

34,387

 

Accounts receivable, net

 

28,876

 

 

 

14,304

 

Inventory

 

4,754

 

 

 

5,337

 

Restricted assets, current

 

1,345

 

 

 

1,345

 

Other current assets

 

10,750

 

 

 

8,168

 

Total current assets

 

79,238

 

 

 

63,541

 

Property, equipment and software at cost

 

58,332

 

 

 

51,298

 

Accumulated depreciation and amortization

 

(35,784

)

 

 

(30,442

)

Property, equipment and software, net

 

22,548

 

 

 

20,856

 

Goodwill

 

47,842

 

 

 

47,842

 

Acquired curriculum and technology intangibles, net

 

3,307

 

 

 

5,209

 

Acquired publishing rights, net

 

1,785

 

 

 

2,762

 

Other intangible assets, net

 

3,548

 

 

 

4,499

 

Pre-publication costs, net

 

16,604

 

 

 

15,070

 

Restricted assets, less current portion

 

3,296

 

 

 

4,152

 

Other assets

 

7,609

 

 

 

7,635

 

Total assets

$

185,777

 

 

$

171,566

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying Notes to the Condensed Consolidated Financial Statements are an integral part of these statements.

4


 

Cambium Learning Group, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands, except per share data)

  

 

September 30, 2015

 

 

December 31, 2014

 

 

(Unaudited)

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Capital lease obligations, current

$

1,121

 

 

$

1,076

 

Accounts payable

 

3,561

 

 

 

1,612

 

Accrued expenses

 

15,703

 

 

 

17,432

 

Deferred revenue, current

 

71,505

 

 

 

61,788

 

Total current liabilities

 

91,890

 

 

 

81,908

 

Long-term liabilities:

 

 

 

 

 

 

 

Long-term debt

 

139,820

 

 

 

139,723

 

Capital lease obligations, less current portion

 

96

 

 

 

943

 

Deferred revenue, less current portion

 

12,690

 

 

 

9,409

 

Other liabilities

 

14,020

 

 

 

14,638

 

Total long-term liabilities

 

166,626

 

 

 

164,713

 

 

Commitments and contingencies (See Note 12)

 

 

 

 

 

 

 

Stockholders' equity (deficit):

 

 

 

 

 

 

 

Preferred stock ($.001 par value, 15,000 shares authorized, zero

   shares issued and outstanding at September 30, 2015 and

   December 31, 2014)

 

 

 

 

 

Common stock ($.001 par value, 150,000 shares authorized,

   52,142 and 52,006 shares issued, and 45,611 and 45,474

   shares outstanding at September 30, 2015 and December 31, 2014,

   respectively)

 

52

 

 

 

52

 

Capital surplus

 

284,917

 

 

 

284,243

 

Accumulated deficit

 

(341,176

)

 

 

(342,650

)

Treasury stock at cost (6,532 shares at September 30, 2015

   and December 31, 2014)

 

(12,784

)

 

 

(12,784

)

Accumulated other comprehensive loss:

 

 

 

 

 

 

 

Pension and postretirement plans

 

(3,748

)

 

 

(3,916

)

Accumulated other comprehensive loss

 

(3,748

)

 

 

(3,916

)

Total stockholders' equity (deficit)

 

(72,739

)

 

 

(75,055

)

Total liabilities and stockholders' equity (deficit)

$

185,777

 

 

$

171,566

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying Notes to the Condensed Consolidated Financial Statements are an integral part of these statements.

 

 

5


 

Cambium Learning Group, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited) 

 

 

Nine Months Ended September 30,

 

 

2015

 

 

2014

 

 

 

 

 

 

 

 

 

Net income (loss)

$

1,474

 

 

$

(6,880

)

Adjustments to reconcile net income (loss)

   to net cash provided by operating activities:

 

 

 

 

 

 

 

Depreciation and amortization expense

 

15,706

 

 

 

16,363

 

Loss on extinguishment of debt

 

 

 

 

570

 

Gain on sale of IntelliTools product line

 

 

 

 

(289

)

Amortization of note discount and deferred financing

   costs

 

922

 

 

 

1,164

 

Stock-based compensation and expense

 

486

 

 

 

383

 

Other

 

5

 

 

 

96

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

Accounts receivable, net

 

(14,572

)

 

 

(12,794

)

Inventory

 

583

 

 

 

2,649

 

Other current assets

 

(2,582

)

 

 

(1,964

)

Other assets

 

(799

)

 

 

(1,734

)

Restricted assets

 

856

 

 

 

921

 

Accounts payable

 

1,949

 

 

 

2,422

 

Accrued expenses

 

(1,329

)

 

 

(5,336

)

Deferred revenue

 

12,998

 

 

 

9,300

 

Other long-term liabilities

 

(450

)

 

 

(1,511

)

Net cash provided by operating activities

 

15,247

 

 

 

3,360

 

Investing activities:

 

 

 

 

 

 

 

Cash paid for acquisitions

 

(400

)

 

 

(3,600

)

Expenditures for property, equipment, software and

   pre-publication costs

 

(15,107

)

 

 

(13,027

)

Proceeds from sale of IntelliTools product line

 

 

 

 

806

 

Net cash used in investing activities

 

(15,507

)

 

 

(15,821

)

Financing activities:

 

 

 

 

 

 

 

Principal payments under capital lease obligations

 

(802

)

 

 

(736

)

Repayment of debt

 

 

 

 

(10,145

)

Proceeds from exercise of stock options

 

188

 

 

 

53

 

Share repurchases

 

 

 

 

(301

)

Net cash used in financing activities

 

(614

)

 

 

(11,129

)

Change in cash and cash equivalents

 

(874

)

 

 

(23,590

)

Cash and cash equivalents, beginning of period

 

34,387

 

 

 

67,993

 

Cash and cash equivalents, end of period

$

33,513

 

 

$

44,403

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying Notes to the Condensed Consolidated Financial Statements are an integral part of these statements.

 

 

6


 

Cambium Learning Group, Inc. and Subsidiaries

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

 

Note 1 — Basis of Presentation

Presentation

The Condensed Consolidated Financial Statements include the accounts of Cambium Learning Group, Inc. and its subsidiaries (the “Company”) and are unaudited.  The condensed consolidated balance sheet as of December 31, 2014 has been derived from audited financial statements.  All intercompany transactions have been eliminated.

As permitted under the Securities and Exchange Commission (“SEC”) requirements for interim reporting, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) have been omitted.  The Company believes that these financial statements include all necessary and recurring adjustments for the fair presentation of the interim period results.  These financial statements should be read in conjunction with the Consolidated Financial Statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014.  Due to seasonality, the results of operations for the three and nine months ended September 30, 2015 are not necessarily indicative of the results to be expected for any future interim period or for the year ending December 31, 2015.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.  Subsequent actual results may differ from those estimates.

Nature of Operations

The Company is a leading educational solutions and services company that is committed to helping all students reach their full potential.  The Company’s brands include:  Learning A–Z, Voyager Sopris Learning, ExploreLearning, and Kurzweil Education.  Together, these brands provide breakthrough technology solutions for online learning and professional support; best-in-class intervention and supplemental instructional materials; gold-standard professional development and school-improvement services; valid and reliable assessments; and proven materials to support a positive and safe school environment.  

These brands comprise three reportable segments with separate management teams and infrastructures that offer various products and services.  See Note 14 – Segment Reporting for further information on the Company’s segment reporting structure.  

 

 

Note 2 — Accounts Receivable

Accounts receivable are stated net of allowances for doubtful accounts and estimated sales returns.  The allowance for doubtful accounts and estimated sales returns totaled $0.6 million at September 30, 2015 and $0.4 million at December 31, 2014.  The allowance for doubtful accounts is based on a review of outstanding balances and historical collection experience.  The reserve for sales returns is based on historical rates of return as well as other factors that in the Company’s judgment, could reasonably be expected to cause sales returns to differ from historical experience.

 

 

Note 3 — Stock-Based Compensation and Expense

Cambium Learning Group, Inc. 2009 Equity Incentive Plan

In 2009, the Company adopted the Cambium Learning Inc. 2009 Equity Incentive Plan (“Incentive Plan”).  Under the Incentive Plan, 5,000,000 shares of common stock were reserved for issuance of awards which may be granted in the form of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock, restricted stock units, conversion stock options, conversion stock appreciation rights, and other stock or cash awards.  The Incentive Plan is administered by the board of directors which has the authority to establish the terms and conditions of awards granted under the Incentive Plan.

7


 

Stock-Based Compensation and Expense

The following table presents our stock-based compensation expense resulting from stock options that are recorded in our condensed consolidated statements of operations and comprehensive income (loss) for the periods presented:

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

(in thousands)

2015

 

 

2014

 

 

2015

 

 

2014

 

Cost of revenues

$

11

 

 

$

10

 

 

$

29

 

 

$

28

 

Research and development expense

 

37

 

 

 

27

 

 

 

98

 

 

 

76

 

Sales and marketing expense

 

42

 

 

 

35

 

 

 

113

 

 

 

96

 

General and administrative expense

 

102

 

 

 

63

 

 

 

246

 

 

 

183

 

Total

$

192

 

 

$

135

 

 

$

486

 

 

$

383

 

2015 Grants

In the second quarter 2015, the Company granted 416,275 options under the Incentive Plan with a weighted-average exercise price of $2.97.  The options vest in equal monthly installments on the last day of the month over a four year period, with an initial vesting date of May 31, 2015. In the third quarter 2015, the Company granted 168,050 options under the Incentive Plan with a weighted average exercise price of $4.64.  The options vest in equal monthly installments on the last day of the month over a four year period, with an initial vesting date of July 31, 2015.

 

 

Note 4 — Net Income (Loss) per Common Share

Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted-average number of common shares outstanding during the period. Diluted net income (loss) per common share is computed by dividing net income (loss) by the weighted-average number of common shares outstanding during the period, including potential dilutive shares of common stock assuming the dilutive effect of outstanding stock options and restricted stock awards using the treasury stock method.  Weighted-average shares from common share equivalents in the amount of 135,930 and 258,542 for the three and nine months ended September 30, 2015, and 803,944 and 2,638,533 for the three and nine months ended September 30, 2014, respectively, were excluded from the respective dilutive shares outstanding because their effect was anti-dilutive.

The following table presents the calculation of basic and diluted net income (loss) per share:

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

(in thousands, except per share data)

2015

 

 

2014

 

 

2015

 

 

2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

$

1,966

 

 

$

995

 

 

$

1,474

 

 

$

(6,880

)

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares used in computing basic net income (loss) per share

 

45,562

 

 

 

45,664

 

 

 

45,513

 

 

 

45,663

 

Diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Add weighted-average effect of dilutive securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock options and restricted stock awards

 

1,541

 

 

 

89

 

 

 

1,231

 

 

 

 

Weighted-average common shares used in computing diluted net income (loss) per share

 

47,103

 

 

 

45,753

 

 

 

46,744

 

 

 

45,663

 

Net income (loss) per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

0.04

 

 

$

0.02

 

 

$

0.03

 

 

$

(0.15

)

Diluted

$

0.04

 

 

$

0.02

 

 

$

0.03

 

 

$

(0.15

)

Common Stock Repurchases

During the nine months ended September 30, 2014, the Company repurchased 167,961 shares of its outstanding common stock for $0.3 million.  During the nine months ended September 30, 2015, the Company did not repurchase any shares of its outstanding common stock.  

 

 

8


 

Note 5 — Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset, or paid to transfer a liability (exit price), in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.  Valuation techniques are based on observable or unobservable inputs.  Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions.  These two types of inputs have created the following fair value hierarchy:

 

·

Level 1 — Quoted prices for identical instruments in active markets.

 

·

Level 2 — Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which significant value drivers are observable.

 

·

Level 3 — Valuations derived from valuation techniques in which significant value drivers are unobservable.

Applicable guidance requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

At September 30, 2015, financial instruments include $33.5 million of cash and cash equivalents, restricted assets of $4.6 million, collateral investments of $3.6 million, and $139.8 million of senior secured notes.  At December 31, 2014, financial instruments include $34.4 million of cash and cash equivalents, restricted assets of $5.5 million, collateral investments of $3.6 million, and $139.7 million of senior secured notes.  The fair market values of cash equivalents, restricted assets, and collateral investments are equal to their carrying value, as these investments are recorded based on quoted market prices and/or other market data for the same or comparable instruments and transactions as of the end of the reporting period.   

At September 30, 2015 and December 31, 2014, the senior secured notes, with aggregate outstanding principal amount of $140.0 million, had a fair value of $140.0 million and $137.4 million, respectively, based on quoted market prices in active markets for these debt instruments when traded as assets (Level 1).

Assets and liabilities measured at fair value on a recurring basis are as follows:

 

(in thousands)

 

 

 

 

Fair Value at Reporting Date Using

 

Description

September 30, 2015

 

 

Quoted Prices

in Active

Markets for

Identical

Assets

(Level 1)

 

 

Significant

Other

Observable

Inputs

(Level 2)

 

 

Significant

Unobservable

Inputs

(Level 3)

 

Restricted Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money Market

$

4,641

 

 

$

4,641

 

 

$

 

 

$

 

Collateral Investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money Market

 

904

 

 

 

904

 

 

 

 

 

 

 

Certificates of Deposit

 

2,724

 

 

 

2,724

 

 

 

 

 

 

 

 

 

(in thousands)

 

 

 

 

Fair Value at Reporting Date Using

 

Description

December 31, 2014

 

 

Quoted Prices

in Active

Markets for

Identical

Assets

(Level 1)

 

 

Significant

Other

Observable

Inputs

(Level 2)

 

 

Significant

Unobservable

Inputs

(Level 3)

 

Restricted Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money Market

$

5,497

 

 

$

5,497

 

 

$

 

 

$

 

Collateral Investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money Market

 

904

 

 

 

904

 

 

 

 

 

 

 

Certificates of Deposit

 

2,720

 

 

 

2,720

 

 

 

 

 

 

 

 

 

(in thousands)

Total Gains (Losses) for the

Nine Months Ended September 30,

 

Description

2015

 

 

2014

 

Restricted Assets:

 

 

 

 

 

 

 

Money Market

$

 

 

$

 

Collateral Investments:

 

 

 

 

 

 

 

Money Market

 

 

 

 

 

Certificates of Deposit

 

 

 

 

 

9


 

Assets and liabilities measured at fair value on a non-recurring basis are listed below at their carrying values as of each reporting date:  

 

(in thousands)

 

 

 

 

Fair Value at Reporting Date Using

 

Description

September 30, 2015

 

 

Quoted Prices

in Active

Markets for

Identical

Assets

(Level 1)

 

 

Significant

Other

Observable

Inputs

(Level 2)

 

 

Significant

Unobservable

Inputs

(Level 3)

 

Goodwill

$

47,842

 

 

$

 

 

$

 

 

$

47,842

 

Property, equipment and software, net

 

22,548

 

 

 

 

 

 

 

 

 

22,548

 

Pre-publication costs, net

 

16,604

 

 

 

 

 

 

 

 

 

16,604

 

Acquired curriculum and technology

     intangibles, net

 

3,307

 

 

 

 

 

 

 

 

 

3,307

 

Acquired publishing rights, net

 

1,785

 

 

 

 

 

 

 

 

 

1,785

 

Other intangible assets, net

 

3,548

 

 

 

 

 

 

 

 

 

3,548

 

 

 

 

 

(in thousands)

 

 

 

 

Fair Value at Reporting Date Using

 

Description

December 31, 2014

 

 

Quoted Prices

in Active

Markets for

Identical

Assets

(Level 1)

 

 

Significant

Other

Observable

Inputs

(Level 2)

 

 

Significant

Unobservable

Inputs

(Level 3)

 

Goodwill

$

47,842

 

 

$

 

 

$

 

 

$

47,842

 

Property, equipment and software, net

 

20,856

 

 

 

 

 

 

 

 

 

20,856

 

Pre-publication costs, net

 

15,070

 

 

 

 

 

 

 

 

 

15,070

 

Acquired curriculum and technology

     intangibles, net

 

5,209

 

 

 

 

 

 

 

 

 

5,209

 

Acquired publishing rights, net

 

2,762

 

 

 

 

 

 

 

 

 

2,762

 

Other intangible assets, net

 

4,499

 

 

 

 

 

 

 

 

 

4,499

 

 

 

(in thousands)

Total Gains (Losses) for the

Nine Months Ended September 30,

 

Description

2015

 

 

2014

 

Goodwill

$

 

 

$

 

Property, equipment and software, net

 

 

 

 

 

Pre-publication costs, net

 

 

 

 

 

Acquired curriculum and technology intangibles, net

 

 

 

 

 

Acquired publishing rights, net

 

 

 

 

 

Other intangible assets, net

 

 

 

 

 

 

There were no significant remeasurements of these assets during the nine months ended September 30, 2015 or 2014.

 

Note 6 — Other Current Assets

Other current assets at September 30, 2015 and December 31, 2014 consisted of the following:

 

(in thousands)

September 30, 2015

 

 

December 31, 2014

 

Deferred costs

$

8,053

 

 

$

5,908

 

Prepaid expenses

 

2,151

 

 

 

1,714

 

Deferred taxes

 

546

 

 

 

546

 

Other current assets

$

10,750

 

 

$

8,168

 

 

 

10


 

Note 7 — Other Assets

Other assets at September 30, 2015 and December 31, 2014 consisted of the following:

 

(in thousands)

September 30, 2015

 

 

December 31, 2014

 

Deferred financing costs

$

1,574

 

 

$

2,349

 

Collateral investments

 

3,628

 

 

 

3,624

 

Deferred costs, less current portion

 

1,598

 

 

 

828

 

Other

 

809

 

 

 

834

 

Other assets

$

7,609

 

 

$

7,635

 

 

Deferred Financing Costs

Deferred financing costs relate to costs incurred with the issuance of the 9.75% senior secured notes due 2017.  See Note 13 – Long-Term Debt.

Collateral Investments

The Company maintains certificates of deposit to collateralize its outstanding letters of credit associated with the build-to-suit lease, credit collections, and workers’ compensation activity.  At September 30, 2015 and December 31, 2014, the Company had $2.7 million in certificates of deposit serving as collateral for its outstanding letters of credit.

Additionally, the Company maintains a money market fund investment to serve as collateral for a travel card program.  The balance of the money market fund investment was $0.9 million at September 30, 2015 and December 31, 2014.

 

 

Note 8 — Accrued Expenses

Accrued expenses at September 30, 2015 and December 31, 2014 consisted of the following:

 

(in thousands)

September 30, 2015

 

 

December 31, 2014

 

Salaries, bonuses and benefits

$

8,605

 

 

$

6,439

 

Accrued interest

 

1,714

 

 

 

5,119

 

Pension and post-retirement benefit plans

 

1,173

 

 

 

1,173

 

Accrued royalties

 

893

 

 

 

1,369

 

Headsprout acquisition accrual

 

 

 

 

400

 

Other

 

3,318

 

 

 

2,932

 

Accrued expenses

$

15,703

 

 

$

17,432

 

 

Accrued Interest

Accrued interest at September 30, 2015 and December 31, 2014 primarily relates to the Company’s 9.75% senior secured notes. The senior secured notes require semi-annual interest payments in arrears on each February 15th and August 15th over the life of the notes.

Pension and Post-Retirement Benefit Plans

See Note 10 – Pension Plan for additional information regarding the Company’s pension plan.

Headsprout Acquisition Accrual

In December 2013, LAZEL, Inc., a wholly owned subsidiary of the Company, completed the acquisition of certain assets of Headsprout for $4.0 million.  Of the total purchase price, $3.6 million was paid in January 2014 and the remaining $0.4 million was paid in June 2015.

 

 

11


 

Note 9 — Other Liabilities

Other liabilities at September 30, 2015 and December 31, 2014 consisted of the following:

 

(in thousands)

September 30, 2015

 

 

December 31, 2014

 

Pension and post-retirement benefit plans, long-term portion

$

10,920

 

 

$

11,440

 

Long-term income tax payable

 

1,276

 

 

 

1,237

 

Deferred rent

 

921

 

 

 

1,043

 

Long-term deferred tax liability

 

559

 

 

 

559

 

Long-term deferred compensation

 

344

 

 

 

359

 

Other liabilities

$

14,020

 

 

$

14,638

 

 

Pension and Post-Retirement Benefit Plans

See Note 10 – Pension Plan for additional information regarding the Company’s pension plan.

 

 

Note 10 — Pension Plan

The net pension costs of the Company’s defined benefit pension plan were comprised primarily of interest costs and totaled $0.2 million and $0.1 million, respectively, for the three months ended September 30, 2015 and 2014 and totaled $0.5 million and $0.4 million, respectively, for the nine months ended September 30, 2015 and 2014.  The net pension costs for the three and nine months ended September 30, 2015 included the amortization of accumulated net loss of $0.1 million and $0.2 million, respectively.  The net pension costs for the three and nine months ended September 30, 2014 included an immaterial amount of amortization of accumulated net loss.  

 

 

Note 11 — Uncertain Tax Positions

The Company recognizes the financial statement impacts of a tax return position when it is more likely than not, based on technical merits, that the position will ultimately be sustained.  For tax positions that meet this recognition threshold, the Company applies judgment, taking into account applicable tax laws, experience managing tax audits and relevant GAAP, to determine the amount of tax benefits to recognize in its financial statements.  For each position, the difference between the benefit realized on the Company’s tax return and the benefit reflected in its financial statements is recorded to Other Liabilities in the Condensed Consolidated Balance Sheets as an unrecognized tax benefit (“UTB”).  The Company updates its UTBs at each financial statement date to reflect the impacts of audit settlements and other resolution of audit issues, expiration of statutes of limitation, developments in tax law and ongoing discussions with tax authorities.  The balance of UTBs was $6.5 million at September 30, 2015 and December 31, 2014.

Included in the balance of unrecognized tax benefits at September 30, 2015 are approximately $1.3 million of tax benefits that, if recognized, would affect the effective tax rate.  The recognition of the remaining uncertain tax positions would not affect the effective tax rate, but would instead increase or would have increased available tax attributes.  However, the recognition of the tax attribute would be offset by an increase in the deferred tax asset valuation allowance resulting in no net impact in the effective tax rate.

The Company recognizes interest accrued related to its UTBs and penalties as income tax expense.  Related to the UTBs noted above, the Company recognized no penalties and immaterial interest during the three and nine months ended September 30, 2015.  At September 30, 2015, the Company has liabilities of $0.3 million for penalties (gross) and $0.2 million for interest (gross).

The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions.  All U.S. tax years prior to 2008 related to the Voyager Learning Company acquired entities have been audited by the Internal Revenue Service.  Cambium and its subsidiaries have been examined by the Internal Revenue Service through the end of 2006.  The Company has been audited by the various state tax authorities through 2007.  

 

 

12


 

Note 12 — Commitments and Contingencies

Legal Proceedings

The Company is involved in various legal proceedings incidental to its business.  Management believes that the outcome of these proceedings will not have a material adverse effect upon the Company’s consolidated operations or financial condition and the Company has recognized appropriate liabilities as necessary based on facts and circumstances known to management. The Company expenses legal costs related to legal contingencies as incurred.

Purchase Commitments

From time to time, the Company may enter into firm purchase commitments for printed materials included in inventory which the Company expects to use in the ordinary course of business.  These commitments are typically for terms less than one year and require the Company to buy minimum quantities of materials with specific delivery dates at a fixed price over the term. These open purchase commitments totaled $0.2 million as of September 30, 2015.

Letters of Credit

The Company has letters of credit outstanding at September 30, 2015 in the amount of $1.9 million to support the build-to-suit lease, credit collections, and workers’ compensation activity.  The Company maintains certificates of deposit of $2.7 million as collateral for the letters of credit as well as an additional deposit to support Automated Clearing House processing and credit card collections. The Company also maintains a $0.9 million money market fund investment as collateral for a travel card program. The certificates of deposit and money market fund investment are included in Collateral Investments in Note 7 — Other Assets.  

 

 

Note 13 — Long-Term Debt

Long-term debt at September 30, 2015 and December 31, 2014 consisted of the following: 

(in thousands)

September 30, 2015

 

 

December 31, 2014

 

9.75% senior secured notes due February 15, 2017,

   interest payable semiannually

$

140,000

 

 

$

140,000

 

Less: Unamortized discount

 

(180

)

 

 

(277

)

Long-term debt

$

139,820

 

 

$

139,723

 

 

Senior Secured Notes Due 2017

In February 2011, the Company closed an offering of $175 million aggregate principal amount of 9.75% senior secured notes due 2017 (the “Notes”).  Deferred financing costs, net of accumulated amortization, are capitalized in Other Assets in the Condensed Consolidated Balance Sheets, and are amortized over the term of the related debt using the effective interest method.  Unamortized capitalized deferred financing costs at September 30, 2015 and December 31, 2014 were $1.6 million and $2.3 million, respectively.  

Interest on the Notes accrues at a rate of 9.75% per annum from the date of original issuance and is payable semi-annually in arrears on each February 15th and August 15th to the holders of record of the Notes on the immediately preceding February 1st and August 1st.  No principal repayments are due until the maturity date of the Notes.

The Notes are secured by (i) a first priority lien on substantially all of the Company’s assets including capital stock of the guarantors (which are certain of the Company’s subsidiaries), and (ii) a second-priority lien, prior to the termination of the ABL Facility (as defined and described below), on substantially all of the inventory and accounts receivable and related assets of the ABL Credit Parties, in each case, subject to certain permitted liens.  The Notes also contain customary covenants, including limitations on the Company’s ability to incur debt, and events of default as defined by the agreement.  The Company may, at its option, redeem the Notes prior to their maturity based on the terms included in the agreement.

During the nine months ended September 30, 2014, the Company repurchased an aggregate of $10.0 million aggregate principal amount of Notes for an aggregate purchase price of approximately $10.1 million, plus accrued and unpaid interest.  During the nine months ended September 30, 2014, a Loss on Extinguishment of Debt of $0.4 million was recorded in connection with these repurchases, which was primarily due to the write-off of unamortized deferred financing costs.  During the nine months ended September 30, 2015, the Company did not repurchase any Notes.  

Terminated ABL Facility

In February 2011, the Company’s wholly owned subsidiary, Cambium Learning, Inc. (together with its wholly owned subsidiaries, the “ABL Credit Parties”), entered into a credit facility (the “ABL Facility”) pursuant to a Loan and Security Agreement (the “ABL Loan Agreement”), by and among the ABL Credit Parties, Harris N.A., individually and as Agent (the “Agent”) for any ABL Lender (as hereinafter defined) which is or becomes a party to said ABL Loan Agreement, certain other lenders party thereto

13


 

(together with Harris N.A. in its capacity as a lender, the “ABL Lenders”), Barclays Bank PLC, individually and as Collateral Agent, and BMO Capital Markets and Barclays Capital, as Joint Lead Arrangers and Joint Book Runners. The ABL Facility consisted of a four-year $40.0 million revolving credit facility, which included a $5.0 million subfacility for swing line loans and a $5.0 million subfacility for letters of credit.  

The ABL Facility was, subject to certain exceptions, secured by a first-priority lien on the ABL Credit Parties’ inventory and accounts receivable and related assets and a second-priority lien (junior to the lien securing the ABL Credit Parties’ obligations with respect to the Notes) on substantially all of the ABL Credit Parties’ other assets.

The ABL Credit Parties were required to pay, quarterly in arrears, an unused line fee equal to the product of (x) either 0.375% or 0.50% (depending upon the ABL Credit Parties’ fixed charge coverage ratio at the time) and (y) the average daily unused amount of the revolver.  The ABL Facility contained a financial covenant that generally required the ABL Credit Parties to maintain, on a consolidated basis, either (i) excess availability of at least the greater of $8.0 million and 15% of the revolver commitment or (ii) a fixed charge coverage ratio of 1.1 to 1.0.  

During the quarter ended March 31, 2014, the Company’s excess availability and fixed charge coverage ratios fell below the required thresholds, which put the Company in a Trigger Period as defined under the ABL Facility agreement.  On March 26, 2014, the Company had no borrowings outstanding under the agreement and terminated the ABL Facility.  A Loss on Extinguishment of Debt of approximately $0.2 million was recognized in connection with the termination related to the write-off of unamortized deferred financing costs.

 

 

Note 14 — Segment Reporting

The Company operates in three reportable segments with separate management teams and infrastructures that offer various products and services.

Reclassifications

Certain prior period reclassifications have been made to conform to the current period presentation.

Segment Aggregation

Prior to the first quarter of 2015, the Voyager Sopris Learning and Kurzweil Education operating segments were separately reported in the financial statements.  As permitted by GAAP, the Company elected to aggregate these two operating segments into a single reportable segment titled Voyager Sopris Learning.  The separate Voyager Sopris Learning and Kurzweil Education operating segments have similar economic characteristics as well as similar products and services, production processes, class of customers, and product and service distribution methods.  In addition, the Company believes the aggregated presentation is more useful to investors and other financial statement users because both units are in the midst of transitioning to higher concentrations of technology-enabled solutions and because of the relatively small financial contribution of Kurzweil Education to the consolidated results.

Operating Expenses and General Capital Expenditures

Certain operating expenses, such as rent, personnel and consulting fees, previously pooled and reported in Other in the segment information have been reclassified to the applicable reportable segment to which the expense directly supported.  Additionally, General Capital Expenditures, also previously reported in Other in the segment information, have been reclassified to the applicable reportable segment to which the expenditure related.  These reclassifications were made in order to provide a more complete depiction of the reportable segments as stand-alone operations.  Segment disclosures for the three and nine months ended September 30, 2014 were conformed to the 2015 presentation.

The following table reports the effect of these reclassifications on prior period disclosures:

 

Three Months Ended September 30, 2014

 

(in thousands)

Learning

A-Z

 

 

Voyager Sopris

Learning

 

 

ExploreLearning

 

 

Other

 

 

Consolidated

 

Operating expense

$

37

 

 

$

170

 

 

$

 

 

$

(207

)

 

$

 

Expenditures for property, equipment, software

   and pre-publication costs

 

304

 

 

 

55

 

 

 

13

 

 

 

(372

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2014

 

(in thousands)

Learning

A-Z

 

 

Voyager Sopris

Learning

 

 

ExploreLearning

 

 

Other

 

 

Consolidated

 

Operating expense

$

106

 

 

$

513

 

 

$

 

 

$

(619

)

 

$

 

Expenditures for property, equipment, software

   and pre-publication costs

 

931

 

 

 

263

 

 

 

271

 

 

 

(1,465

)

 

 

 

14


 

Learning A-Z Segment

Learning A-Z is a preK-6 educational resource company specializing in online delivery of leveled readers and supplementary curriculum.  Founded in 2002 to help teachers differentiate instruction and meet the unique needs of all students, Learning A-Z’s resources are currently used in more than half the districts across the United States and Canada and in over 180 countries worldwide.  Serving a wide range of student needs, including English language learners, intervention, special education, and daily instruction, Learning A-Z’s value proposition focuses on three key elements:

 

·

Saving teachers time, giving them all the resources they need, all online, all accessible at the click of a mouse

 

·

Saving teachers money, delivering thousands of resources for a fraction of the cost of print and other online providers

 

·

Supporting student achievement through differentiated instruction, ensuring the right high-quality resources for every preK-6 student

Learning A-Z operates seven subscription-based websites: Reading A-Z, Raz-Kids, Vocabulary A-Z, Headsprout®, ReadyTest A-Z, Writing A-Z and Science A-Z. These websites are stand-alone or integrated, for a comprehensive solution that provides online supplemental books, lessons, assessments and other instructional resources for individual classrooms, schools, and districts.

Voyager Sopris Learning Segment

The Voyager Sopris Learning segment is comprised of the Company’s Voyager Sopris Learning and Kurzweil Education brands.

Voyager Sopris Learning Brand

The Voyager Sopris Learning brand is committed to partnering with school districts to meet and surpass their goals for student achievement. The suite of instructional and service solutions the Voyager Sopris Learning brand provides is not only research based, but also evidence based—proven to increase student achievement and educator effectiveness. Voyager Sopris Learning’s solutions have been fully tested in the classroom, ensuring that they are easy to implement and teacher friendly. They are innovative, both in overall instructional approach and in the strategic use of technology in blended and 100% online solutions and are supported by an unparalleled commitment to build local capacity for sustained success. With a comprehensive suite of instructional resources, the Voyager Sopris Learning brand provides assessments, professional development and school improvement services, literacy and math instructional tools— both comprehensive and supplemental—and resources to build a positive school climate.

Kurzweil Education Brand

The Kurzweil Education brand delivers award-winning educational technology that solves real problems.  The brand’s literacy and learning solutions offer learners a way up and a path forward.  Using the principals of Universal Design for Learning, the Kurzweil Education brand provides technology-based solutions that enable all learners to read, understand and demonstrate their learning using technology-based tools and resources.

ExploreLearning Segment

ExploreLearning develops online solutions to improve student learning in math and science.  ExploreLearning currently offers two supplemental products: Gizmos, the world’s largest library of interactive, online simulations for math and science in grades 3-12 that help students gain a deep understanding of challenging concepts through active inquiry and exploration; and Reflex, a powerful adaptive online program that helps students in grades 2-8 develop math fact fluency through game-based instruction and practice.

Gizmos and Reflex bring research-proven, standards-aligned instructional strategies to classrooms around the world.  They support the tenets of the National Council of Teachers of Mathematics, the National Science Teachers Association and new rigorous state and national standards.  Additionally, new studies show students using Reflex are scoring higher than their peers on standardized tests.

Other

Other consists of unallocated shared services, such as accounting, legal, human resources and corporate related items, as well as depreciation and amortization expense, other income and expense, and income taxes.  The Company does not allocate any of these costs to its segments, and the chief operating decision maker evaluates performance of operating segments excluding these items.

15


 

The following tables present the net revenues, operating expenses, income (loss) from operations, and capital expenditures which are used by the Company’s chief operating decision maker to measure the segments operating performance. The Company does not track assets directly by segment and the chief operating decision maker does not use assets to measure a segment’s operating performance, and therefore this information is not presented.

 

 

Three Months Ended September 30, 2015

 

(in thousands)

Learning

A-Z

 

 

Voyager Sopris

Learning

 

 

ExploreLearning

 

 

Other

 

 

Consolidated

 

Net revenues

$

13,733

 

 

$

21,820

 

 

$

4,786

 

 

$

 

 

$

40,339

 

Cost of revenues

 

416

 

 

 

7,800

 

 

 

904

 

 

 

 

 

 

9,120

 

Amortization expense

 

 

 

 

 

 

 

 

 

 

4,434

 

 

 

4,434

 

Total cost of revenues

 

416

 

 

 

7,800

 

 

 

904

 

 

 

4,434

 

 

 

13,554

 

Other operating expenses

 

6,654

 

 

 

7,718

 

 

 

2,506

 

 

 

3,356

 

 

 

20,234

 

Depreciation and amortization expense

 

 

 

 

 

 

 

 

 

 

1,001

 

 

 

1,001

 

Total costs and expenses

 

7,070

 

 

 

15,518

 

 

 

3,410

 

 

 

8,791

 

 

 

34,789

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) before interest, other

    income (expense) and income taxes

 

6,663

 

 

 

6,302

 

 

 

1,376

 

 

 

(8,791

)

 

 

5,550

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest expense

 

 

 

 

 

 

 

 

 

 

(3,575

)

 

 

(3,575

)

Other income, net

 

 

 

 

 

 

 

 

 

 

204

 

 

 

204

 

Income tax expense

 

 

 

 

 

 

 

 

 

 

(213

)

 

 

(213

)

Segment net income (loss)

$

6,663

 

 

$

6,302

 

 

$

1,376

 

 

$

(12,375

)

 

$

1,966

 

Expenditures for property, equipment,

    software and pre-publication costs

$

2,276

 

 

$

2,195

 

 

$

683

 

 

$

121

 

 

$

5,275

 

 

 

 

 

Three Months Ended September 30, 2014

 

(in thousands)

Learning

A-Z

 

 

Voyager Sopris

Learning

 

 

ExploreLearning

 

 

Other

 

 

Consolidated

 

Net revenues

$

11,116

 

 

$

25,930

 

 

$

4,098

 

 

$

 

 

$

41,144

 

Cost of revenues

 

300

 

 

 

10,012

 

 

 

733

 

 

 

 

 

 

11,045

 

Amortization expense

 

 

 

 

 

 

 

 

 

 

4,695

 

 

 

4,695

 

Total cost of revenues

 

300

 

 

 

10,012

 

 

 

733

 

 

 

4,695

 

 

 

15,740

 

Other operating expenses

 

5,029

 

 

 

8,535

 

 

 

2,452

 

 

 

3,449

 

 

 

19,465

 

Depreciation and amortization expense

 

 

 

 

 

 

 

 

 

 

1,050

 

 

 

1,050

 

Total costs and expenses

 

5,329

 

 

 

18,547

 

 

 

3,185

 

 

 

9,194

 

 

 

36,255

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) before interest, other

    income (expense) and income taxes

 

5,787

 

 

 

7,383

 

 

 

913

 

 

 

(9,194

)

 

 

4,889

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest expense

 

 

 

 

 

 

 

 

 

 

(4,377

)

 

 

(4,377

)

Other income, net

 

 

 

 

 

 

 

 

 

 

535

 

 

 

535

 

Income tax expense

 

 

 

 

 

 

 

 

 

 

(52

)

 

 

(52

)

Segment net income (loss)

$

5,787

 

 

$

7,383

 

 

$

913

 

 

$

(13,088

)

 

$

995

 

Expenditures for property, equipment,

    software and pre-publication costs

$

1,971

 

 

$

1,961

 

 

$

481

 

 

$

254

 

 

$

4,667

 

16


 

 

 

Nine Months Ended September 30, 2015

 

(in thousands)

Learning

A-Z

 

 

Voyager Sopris

Learning

 

 

ExploreLearning

 

 

Other

 

 

Consolidated

 

Net revenues

$

39,930

 

 

$

54,831

 

 

$

14,503

 

 

$

 

 

$

109,264

 

Cost of revenues

 

1,286

 

 

 

20,751

 

 

 

2,246

 

 

 

 

 

 

24,283

 

Amortization expense

 

 

 

 

 

 

 

 

 

 

12,712

 

 

 

12,712

 

Total cost of revenues

 

1,286

 

 

 

20,751

 

 

 

2,246

 

 

 

12,712

 

 

 

36,995

 

Other operating expenses

 

17,914

 

 

 

20,982

 

 

 

7,469

 

 

 

10,723

 

 

 

57,088

 

Depreciation and amortization expense

 

 

 

 

 

 

 

 

 

 

2,994

 

 

 

2,994

 

Total costs and expenses

 

19,200

 

 

 

41,733

 

 

 

9,715

 

 

 

26,429

 

 

 

97,077

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) before interest, other

   income (expense) and income taxes

 

20,730

 

 

 

13,098

 

 

 

4,788

 

 

 

(26,429

)

 

 

12,187

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest expense

 

 

 

 

 

 

 

 

 

 

(10,875

)

 

 

(10,875

)

Other income, net

 

 

 

 

 

 

 

 

 

 

679

 

 

 

679

 

Income tax expense

 

 

 

 

 

 

 

 

 

 

(517

)

 

 

(517

)

Segment net income (loss)

$

20,730

 

 

$

13,098

 

 

$

4,788

 

 

$

(37,142

)

 

$

1,474

 

Expenditures for property, equipment,

    software and pre-publication costs

$

5,973

 

 

$

6,869

 

 

$

1,931

 

 

$

334

 

 

$

15,107

 

 

 

Nine Months Ended September 30, 2014

 

(in thousands)

Learning

A-Z

 

 

Voyager Sopris

Learning

 

 

ExploreLearning

 

 

Other

 

 

Consolidated

 

Net revenues

$

31,846

 

 

$

63,502

 

 

$

13,119

 

 

$

 

 

$

108,467

 

Cost of revenues

 

1,194

 

 

 

26,606

 

 

 

2,186

 

 

 

 

 

 

29,986

 

Amortization expense

 

 

 

 

 

 

 

 

 

 

13,213

 

 

 

13,213

 

Total cost of revenues

 

1,194

 

 

 

26,606

 

 

 

2,186

 

 

 

13,213

 

 

 

43,199

 

Other operating expenses

 

13,793

 

 

 

23,931

 

 

 

7,668

 

 

 

10,320

 

 

 

55,712

 

Depreciation and amortization expense

 

 

 

 

 

 

 

 

 

 

3,150

 

 

 

3,150

 

Total costs and expenses

 

14,987

 

 

 

50,537

 

 

 

9,854

 

 

 

26,683

 

 

 

102,061

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) before interest, other

    income (expense) and income taxes

 

16,859

 

 

 

12,965

 

 

 

3,265

 

 

 

(26,683

)

 

 

6,406

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest expense

 

 

 

 

 

 

 

 

 

 

(13,535

)

 

 

(13,535

)

Loss on extinguishment of debt

 

 

 

 

 

 

 

 

 

 

(570

)

 

 

(570

)

Other income, net

 

 

 

 

 

 

 

 

 

 

965

 

 

 

965

 

Income tax expense

 

 

 

 

 

 

 

 

 

 

(146

)

 

 

(146

)

Segment net income (loss)

$

16,859

 

 

$

12,965

 

 

$

3,265

 

 

$

(39,969

)

 

$

(6,880

)

Expenditures for property, equipment,

    software and pre-publication costs

$

5,334

 

 

$

5,693

 

 

$

1,471

 

 

$

529

 

 

$

13,027

 

 

 

Note 15 — Related Party Transactions

As previously disclosed, the Company is party to a consulting fee agreement with VSS Fund Management LLC (“VSS”) entitling VSS to the following fees: (i) a fee equal to 1% of the gross proceeds of any debt or equity financing by the Company, and (ii) a fee equal to 1% of the enterprise value of any entities acquired or disposed of by the Company. 

 

 

Note 16 — Subsequent Events

The Company previously had a build-to-suit lease for warehouse and office space in Frederick, Colorado with a term through October 31, 2016.  In 2012, in connection with its plan to outsource warehouse operations to a third party, the Company ceased use of this facility and entered into an agreement to sublease this facility through October 31, 2016.  At September 30, 2015, the related

17


 

remaining costs of the build-to-suit lease are accounted for as a liability in Capital Lease Obligations, Current and Capital Lease Obligations, Less Current Portion.    

On October 16, 2015, the Company entered into agreements to terminate its build-to-suit lease and to terminate the related sublease.  The Company paid termination fees of approximately $0.2 million related to the early lease termination.   The Company estimates that a gain of approximately $0.4 million will be recognized in the fourth quarter related to the termination.

The Company has been required to hold an outstanding letter of credit in the amount $1.0 million to secure the lease, the collateral for which is included in Other Assets as of September 30, 2015.   In connection with the lease termination, the Company has been released from the letter of credit requirement and expects to convert the collateral investment into cash in the fourth quarter.

 

18


 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

This section should be read in conjunction with the audited Consolidated Financial Statements of Cambium Learning Group, Inc. and its subsidiaries (the “Company,” “we,” “us,” or “our”) and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2014.

Cautionary Note Regarding Forward-looking Statements

This report contains forward-looking statements within the meaning of the federal securities laws that involve risks and uncertainties, and which are based on beliefs, expectations, estimates, projections, forecasts, plans, anticipations, targets, outlooks, initiatives, visions, objectives, strategies, opportunities, drivers and intents of our management.  Such statements are made in reliance upon the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.  All statements other than statements of historical fact included in this report, including statements regarding our future financial position, economic performance and results of operations, as well as our business strategy, objectives of management for future operations, and the information set forth under “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” are forward-looking statements.

Statements that are not historical facts, including statements about our beliefs and expectations, are forward-looking statements.  Forward-looking statements can be identified by, among other things, the use of forward-looking language, such as “believes,” “expects,” “estimates,” “projects,” “forecasts,” “plans,” “anticipates,” “targets,” “outlooks,” “initiatives,” “visions,” “objectives,” “strategies,” “opportunities,” “drivers,” “intends,” “scheduled to,” “seeks,” “may,” “will,” or “should,” or the negative of those terms, or other variations of those terms or comparable language, or by discussions of strategy, plans, targets, models or intentions. Forward-looking statements speak only as of the date they are made, and except for our ongoing obligations under the federal securities laws, we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events, or otherwise, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements.  Accordingly, you are cautioned that any such forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict.  Although we believe that the expectations reflected in such forward-looking statements are reasonable as of the date made, expectations may prove to have been materially different from the results expressed or implied by such forward-looking statements, as it is impossible for us to anticipate all factors that could affect our actual results.  These risks and uncertainties include, but are not limited to, those described in “Risk Factors” in Part II, Item 1A and elsewhere in this report and in our Annual Report on Form 10-K for the year ended December 31, 2014, and those described from time to time in our future reports filed with the SEC. Unless otherwise required by law, we also disclaim any obligation to update our view of any such risks or uncertainties or to announce publicly the results of any revisions to the forward-looking statements made in this report.

Overview

Cambium Learning Group, Inc., a Delaware corporation, is a leading educational solutions and services company that is committed to helping all students reach their full potential. Our award winning brands include: Learning A–Z™ (www.learninga-z.com), Voyager Sopris Learning™ (www.voyagersopris.com), ExploreLearning® (www.explorelearning.com and www.reflexmath.com) and Kurzweil Education™ (www.kurzweiledu.com). Together, these brands provide breakthrough technology solutions for online learning and professional support; best-in-class intervention and supplemental instructional materials; gold-standard professional development and school-improvement services; valid and reliable assessments; and proven materials to support a positive and safe school environment.

During 2015, our products have continued to receive awards and accolades from industry publications, including:

The 20th Annual Education Software Review Awards (“EDDIE”) presented by The ComputED Gazette

In September 2015, the Company was awarded 10 EDDIE awards from ComputED Gazette, with Learning A-Z receiving 6 awards and every Cambium Learning Group business unit winning at least one award.   We won EDDIE Awards in the following categories:

Early Learning, Reading Website: Headsprout by Learning A-Z

Multilevel, Reading Resource Website: Raz-Kids by Learning A-Z

Multilevel, Teacher Tools, Reading Resource Website: Reading A-Z by Learning A-Z

Upper Elementary, Science Website: Science A-Z by Learning A-Z

Upper Elementary, Test Skills Website: ReadyTest A-Z by Learning A-Z

19


 

Upper Elementary, Writing Website: Writing A-Z by Learning A-Z

Math Fluency Website: Reflex by ExploreLearning

Math & Science Online Simulations: Gizmos by ExploreLearning

ESL Website: LANGUAGE! Live by Voyager Sopris Learning

Literary Skills:  Kurzweil 3000 – firefly by Kurzweil Education

2015 33rd Annual Awards of Excellence by Tech & Learning Magazine

In October 2015, ExploreLearning was among the winners of Tech & Learning magazine’s 33rd Annual Awards of Excellence for Best Upgraded Product for its Reflex product.  The Tech & Learning Awards of Excellence recognize both new and upgraded education technology products. Judges evaluated more than 150 applicants using four criteria: quality and effectiveness, ease of use, creative use of technology, and suitability for use in an educational environment. Winners in the Best Upgraded Product category made significant enhancements in the past year to proven education tools. Reflex previously won in 2012 in the Best New Product category.

2015 CODiE Awards

In May 2015, Learning A-Z received a 2015 CODiE™ Award, representing the 11th CODiE the Company has received.  For nearly 30 years, the Software and Information Industry Association (SIIA) CODiE Awards have recognized software and information companies for achievement and vision.  It is the only peer-reviewed program in the content, education, and software industry.  We won a 2015 award in the following category:

Best ELL/World Language Acquisition Instructional Solution:  ReadingA-Z by Learning A-Z

The 21st Annual Best Educational Software Awards (“BESSIE”) presented by The ComputED Gazette

In April 2015, Learning A-Z, Voyager Sopris Learning, ExploreLearning, and Kurzweil Education each received BESSIE Awards.  The BESSIE Awards target innovative and content-rich programs and websites that provide parents and teachers with technology to foster educational excellence and are awarded to titles submitted by publishers worldwide.  We won BESSIE Awards in the following categories:

Early Learning:

Reading Website:  Headsprout by Learning A-Z

Upper Elementary:

Science Website:  ScienceA-Z by Learning A-Z

Test Skills Website:  ReadyTestA-Z by Learning A-Z

Math Fluency Website:  Reflex by ExploreLearning

Middle School:

ESL Website:  LANGUAGE! Live by Voyager Sopris Learning

Multi-Level:

Literary Skills:  Kurzweil 3000 – firefly by Kurzweil Education

Reading Resource Website:  Raz-Kids by Learning A-Z

Math and Science Online Simulations:  Gizmos by ExploreLearning

Teacher Tools:

Reading Resource Website:  ReadingA-Z by Learning A-Z

20


 

2015 REVERE Award presented by the PreK-12 Learning Group of the Association of American Publishers

In July 2015, Learning A-Z received a 2015 REVERE Award for the content in its Reading A-Z product that supports English language learners (ELLs).  The REVERE Awards are presented by the PreK-12 Learning Group of the Association of American Publishers to Identify and honor excellence in educational materials.

Segment Information

We have three reportable segments with separate management teams and infrastructures that offer various products and services:  Learning A-Z, Voyager Sopris Learning, and ExploreLearning.  Segment results of operations include Other, which consists of unallocated shared services, such as accounting, legal, human resources and corporate related items, as well as depreciation and amortization expense, interest income and expense, other income and expense, and income taxes.  We do not allocate any of these costs to our segments, and our chief operating decision maker evaluates performance of operating segments excluding these items.

Reclassifications

Certain prior period reclassifications have been made to conform to the current period presentation.

Segment Aggregation

Prior to the first quarter of 2015, the Voyager Sopris Learning and Kurzweil Education operating segments were separately reported in the financial statements.  As permitted by GAAP, we elected to aggregate these two operating segments into a single reportable segment titled Voyager Sopris Learning.  The separate Voyager Sopris Learning and Kurzweil Education operating segments have similar economic characteristics as well as similar products and services, production processes, class of customers, and product and service distribution methods.  In addition, we believe the aggregated presentation is more useful to investors and other financial statement users because both units are in the midst of transitioning to higher concentrations of technology-enabled subscription solutions and because of the relatively small financial contribution of Kurzweil Education to the consolidated results.

Operating Expenses and General Capital Expenditures

Certain operating expenses, such as rent, personnel and consulting fees, previously pooled and reported in Other in our segment information, have been reclassified to the applicable reportable segment to which the expense directly supported.  Additionally, General Capital Expenditures, also previously reported in Other in our segment information, have been reclassified to the applicable reportable segment to which the expenditure related.  These reclassifications were made in order to provide a more complete depiction of the reportable segments as stand-alone operations.  Segment disclosures for the three and nine months ended September 30, 2014 were conformed to the 2015 presentation.

The following tables reports the effect of these reclassifications on prior period disclosures:

 

Three Months Ended

 

(in thousands)

March 31,

 

 

June 30,

 

 

September 30,

 

 

December 31,

 

 

Fiscal 2014

 

Operating expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Learning A-Z

$

33

 

 

$

36

 

 

$

37

 

 

$

36

 

 

$

142

 

Voyager Sopris Learning

 

173

 

 

 

170

 

 

 

170

 

 

 

214

 

 

 

727

 

ExploreLearning

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

(206

)

 

 

(206

)

 

 

(207

)

 

 

(250

)

 

 

(869

)

Operating expense

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

 

Three Months Ended

 

(in thousands)

March 31,

 

 

June 30,

 

 

September 30,

 

 

December 31,

 

 

Fiscal 2014

 

Capital expenditures - general expenditures

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Learning A-Z

$

221

 

 

$

406

 

 

$

304

 

 

$

274

 

 

$

1,205

 

Voyager Sopris Learning

 

119

 

 

 

89

 

 

 

55

 

 

 

42

 

 

 

305

 

ExploreLearning

 

192

 

 

 

66

 

 

 

13

 

 

 

44

 

 

 

315

 

Other

 

(532

)

 

 

(561

)

 

 

(372

)

 

 

(360

)

 

 

(1,825

)

Capital expenditures - general expenditures

$

 

 

$

 

 

$

 

 

$

 

 

$

 

Learning A-Z Segment

Learning A-Z is a preK-6 educational resource company specializing in online delivery of leveled readers and supplementary curriculum.  Founded in 2002 to help teachers differentiate instruction and meet the unique needs of all students, Learning A-Z’s resources are currently used in more than half the districts across the United States and Canada and in over 180 countries worldwide.

21


 

Serving a wide range of student needs, including English language learners, intervention, special education, and daily instruction, Learning A-Z’s value proposition focuses on three key elements:

 

·

Saving teachers time, giving them all the resources they need, all online, all accessible at the click of a mouse

 

·

Saving teachers money, delivering thousands of resources for a fraction of the cost of print and other online providers

 

·

Supporting student achievement through differentiated instruction, ensuring the right high-quality resources for every preK-6 student

Learning A-Z operates seven subscription-based websites: Reading A-Z, Raz-Kids, Vocabulary A-Z, Headsprout®, ReadyTest A-Z, Writing A-Z and Science A-Z. These websites are stand-alone or integrated, for a comprehensive solution that provides online supplemental books, lessons, assessments and other instructional resources for individual classrooms, schools, and districts.

Voyager Sopris Learning Segment

Our Voyager Sopris Learning segment is comprised of our Voyager Sopris Learning and Kurzweil Education brands.

Voyager Sopris Learning Brand

The Voyager Sopris Learning brand is committed to partnering with school districts to meet and surpass their goals for student achievement. The suite of instructional and service solutions the Voyager Sopris Learning brand provides is not only research based, but also evidence based—proven to increase student achievement and educator effectiveness. Voyager Sopris Learning’s solutions have been fully tested in the classroom, ensuring that they are easy to implement and teacher friendly. They are innovative, both in overall instructional approach and in the strategic use of technology in blended and 100% online solutions and are supported by an unparalleled commitment to build local capacity for sustained success. With a comprehensive suite of instructional resources, the Voyager Sopris Learning brand provides assessments, professional development and school improvement services, literacy and math instructional tools— both comprehensive and supplemental—and resources to build a positive school climate.

Effective July 6, 2015, Jeffrey A. Elliott joined the Company as President of Voyager Sopris Learning to succeed George Logue, who announced in January 2015 his intent to retire from the Company and its affiliates. Mr. Elliott was formerly Chief Executive Officer of The Virtual High School and brings 20 years of experience in the education industry. Mr. Logue will serve in a transitional role through the end of 2015.

Kurzweil Education Brand

The Kurzweil Education brand delivers award-winning educational technology that solves real problems.  The brand’s literacy and learning solutions offer learners a way up and a path forward.  Using the principles of Universal Design for Learning, the Kurzweil Education brand provides technology-based solutions that enable all learners to read, understand and demonstrate their learning using technology-based tools and resources.

ExploreLearning Segment

ExploreLearning develops online solutions to improve student learning in math and science.  ExploreLearning currently offers two supplemental products: Gizmos, the world’s largest library of interactive, online simulations for math and science in grades 3-12 that help students gain a deep understanding of challenging concepts through active inquiry and exploration; and Reflex, a powerful adaptive online program that helps students in grades 2-8 develop math fact fluency through game-based instruction and practice.

Gizmos and Reflex bring research-proven, standards-aligned instructional strategies to classrooms around the world. They support the tenets of the National Council of Teachers of Mathematics, the National Science Teachers Association and new rigorous state and national standards.  Additionally, new studies show students using Reflex are scoring higher than their peers on standardized tests.

Results of Operations

Bookings

Bookings is an internal, non-GAAP metric that measures the total dollar value of customer orders in a period, regardless of the timing of the related revenue recognition.  We consider Bookings a leading indicator of revenues.  During the nine months ended September 30, 2015, consolidated Bookings increased 4.7% to $122.4 million, compared to $117.0 million during the nine months ended September 30, 2014.  Bookings by segment for the nine months ended September 30, 2015 and the percentage change from the same period of 2014 were as follows:  

 

·

Learning A-Z:  $45.9 million, increased 23.0%, with continued strong growth in its student-centric solutions, including Raz-Kids.com, Headsprout®, Writing A-Z and ReadyTest A-Z.  All are student-centric solutions, and their growth

22


 

 

demonstrates strong demand for products that put technology directly into students’ hands.  Management’s full-year expectations for strong double-digit growth at Learning A-Z remain unchanged. 

 

·

Voyager Sopris Learning:  $60.8 million, decreased 5.1%, with Bookings growth from newer technology-enabled subscription solutions such as LANGUAGE!® Live and Kurzweil’s firefly offset by the expected decline of older legacy products.  Voyager Sopris Learning also continues to experience success with its recently expanded and rereleased Step Up to Writing® program as school districts require quality programs to meet rigorous writing assessments.  Management’s full-year expectations that Bookings will decline at lower rates than in the prior year remain unchanged.

 

·

ExploreLearning:  $15.8 million, increased 0.9% - Bookings pacing can fluctuate from quarter to quarter within the ExploreLearning segment due to large deal size and renewal timing.  Full-year expectations for low double-digit growth for the segment remain unchanged.

We continue to execute our strategy to shift resources to subscription and technology-enabled products.  For the nine months ended September 30, 2015, approximately 65% of Bookings were generated by technology-enabled products versus 57% for the same period of 2014.  For purposes of this metric, technology-enabled products are defined as those products that are sold primarily as a technology-based solution or that could be used solely using a digital platform.  For the Voyager Sopris Learning segment, several products classified as technology-enabled include supplemental print materials.

 

Three Months Ended September 30, 2015 Compared to the Three Months Ended September 30, 2014

 

 

Three Months Ended

 

 

Year Over Year Change

 

 

September 30, 2015

 

 

September 30, 2014

 

 

Favorable/(Unfavorable)

 

(in thousands)

Amount

 

 

% of Net

Revenues

 

 

Amount

 

 

% of Net

Revenues

 

 

$

 

 

%

 

Net revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Learning A-Z

$

13,733

 

 

 

34.0

%

 

$

11,116

 

 

 

27.0

%

 

$

2,617

 

 

 

23.5

%

Voyager Sopris Learning

 

21,820

 

 

 

54.1

%

 

 

25,930

 

 

 

63.0

%

 

 

(4,110

)

 

 

(15.9

)%

ExploreLearning

 

4,786

 

 

 

11.9

%

 

 

4,098

 

 

 

10.0

%

 

 

688

 

 

 

16.8

%

Total net revenues

 

40,339

 

 

 

100.0

%

 

 

41,144

 

 

 

100.0

%

 

 

(805

)

 

 

(2.0

)%

Cost of revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Learning A-Z

 

416

 

 

 

1.0

%

 

 

300

 

 

 

0.7

%

 

 

(116

)

 

 

(38.7

)%

Voyager Sopris Learning

 

7,800

 

 

 

19.3

%

 

 

10,012

 

 

 

24.3

%

 

 

2,212

 

 

 

22.1

%

ExploreLearning

 

904

 

 

 

2.2

%

 

 

733

 

 

 

1.8

%

 

 

(171

)

 

 

(23.3

)%

Amortization expense

 

4,434

 

 

 

11.0

%

 

 

4,695

 

 

 

11.4

%

 

 

261

 

 

 

5.6

%

Total cost of revenues

 

13,554

 

 

 

33.6

%

 

 

15,740

 

 

 

38.3

%

 

 

2,186

 

 

 

13.9

%

Research and development expense

 

2,935

 

 

 

7.3

%

 

 

2,745

 

 

 

6.7

%

 

 

(190

)

 

 

(6.9

)%

Sales and marketing expense

 

11,722

 

 

 

29.1

%

 

 

11,015

 

 

 

26.8

%

 

 

(707

)

 

 

(6.4

)%

General and administrative expense

 

5,120

 

 

 

12.7

%

 

 

5,039

 

 

 

12.2

%

 

 

(81

)

 

 

(1.6

)%

Shipping and handling costs

 

457

 

 

 

1.1

%

 

 

666

 

 

 

1.6

%

 

 

209

 

 

 

31.4

%

Depreciation and amortization expense

 

1,001

 

 

 

2.5

%

 

 

1,050

 

 

 

2.6

%

 

 

49

 

 

 

4.7

%

Income before interest, other income

   (expense) and income taxes

 

5,550

 

 

 

13.8

%

 

 

4,889

 

 

 

11.9

%

 

 

661

 

 

 

(13.5

)%

Net interest expense

 

(3,575

)

 

 

(8.9

)%

 

 

(4,377

)

 

 

(10.6

)%

 

 

802

 

 

 

18.3

%

Other income, net

 

204

 

 

 

0.5

%

 

 

535

 

 

 

1.3

%

 

 

(331

)

 

 

(61.9

)%

Income tax expense

 

(213

)

 

 

(0.5

)%

 

 

(52

)

 

 

(0.1

)%

 

 

(161

)

 

 

(309.6

)%

Net income

$

1,966

 

 

 

4.9

%

 

$

995

 

 

 

2.4

%

 

$

971

 

 

 

(97.6

)%

Net revenues

Net revenues decreased during the three months ended September 30, 2015 by 2.0% to $40.3 million, compared to $41.1 million during the same period of 2014.  Increased net revenues in Learning A-Z and ExploreLearning were more than offset by lower net revenues in Voyager Sopris Learning.  Net revenues by segment were as follows:

 

·

Learning A-Z’s net revenues increased $2.6 million, or 23.5%, to $13.7 million in the quarter ended September 30, 2015 compared to the same period of 2014.  The year-over-year growth in net revenues is the result of Learning A-Z’s ongoing strong Bookings trend.

23


 

 

·

Voyager Sopris Learning’s net revenues decreased $4.1 million, or 15.9%, to $21.8 million during the quarter ended September 30, 2015 compared to the same period of 2014.  The decline was larger than the Bookings decline of 6.5%, due to the transition to technology-enabled products for which revenue is recognized more slowly than print products.   

 

·

ExploreLearning’s net revenues increased $0.7 million, or 16.8%, to $4.8 million during the quarter ended September 30, 2015 compared to the same period of 2014.  The increase in net revenues is a higher percentage than the increase in Bookings due to the recognition of prior period Bookings, which are recognized pro-rata over the applicable subscription periods.  

Cost of revenues

Cost of revenues includes expenses to print, purchase, handle and warehouse product, as well as order processing and royalty costs, and to provide services and support to customers.  Cost of revenues, excluding amortization, decreased $1.9 million, or 17.4%, to $9.1 million in the third quarter of 2015 compared to $11.0 million in the same period of 2014.  Cost of revenues benefitted year-over-year from the increasing contribution from higher margin technology-enabled solutions and right-sizing cost structure efforts completed by Voyager Sopris Learning in 2014.  Cost of revenues by segment were as follows:

 

·

Learning A-Z’s cost of revenues was relatively consistent year-over-year, increasing slightly to $0.4 million in the quarter ended September 30, 2015 compared to the same period of 2014.

 

·

Voyager Sopris Learning’s cost of revenues decreased $2.2 million, or 22.1%, to $7.8 million in the quarter ended September 30, 2015 compared to the same period of 2014.  The decrease in cost of revenues was commensurate with the year-over-year decline in revenue.  Additionally, cost of revenues was positively impacted by right-sizing cost structure efforts completed during fiscal 2014.

 

·

ExploreLearning’s cost of revenues increased by $0.2 million to $0.9 million in the quarter ended September 30, 2015.  

Amortization expense

Amortization expense in cost of revenues includes amortization for acquired pre-publication costs and technology, acquired publishing rights, and developed pre-publication and technology product development.  Amortization was $4.4 million in the third quarter of 2015, $0.3 million lower than 2014. The change was due to a decrease in amortization of acquired publishing rights and curriculum of $0.4 million which was partially offset by increased amortization of developed pre-publication and technology product development of $0.1 million.

Research and development expense

Research and development expense includes costs to research, evaluate and develop educational products, net of capitalization.  Research and development expense for the third quarter of 2015 increased $0.2 million to $2.9 million compared to $2.7 million for the third quarter of 2014.  Research and development activities have been largely focused on product development during the third quarter of 2015 and a significant portion of the costs for product development are recorded as capital expenditures rather than research and development expense.

Sales and marketing expense

Sales and marketing expense includes all costs to maintain our various sales channels, including the salaries and commissions paid to our sales force, and costs related to our advertising and marketing efforts.  Sales and marketing expense for the third quarter of 2015 increased $0.7 million to $11.7 million compared to $11.0 million for the third quarter of 2014.  This increase is due to planned increases in Learning A-Z partially offset by decreases in Voyager Sopris Learning.  

General and administrative expense

General and administrative expenses were slightly higher, increasing by $0.1 million in the third quarter of 2015 to $5.1 million compared to $5.0 million for the third quarter of 2014.  

Shipping and handling costs

Shipping and handling costs for the quarter ended September 30, 2015 decreased $0.2 million, to $0.5 million compared to $0.7 million for the third quarter of 2014, commensurate with the decline in Bookings related to printed material.      

Net interest expense

Net interest expense decreased by $0.8 million, or 18.3%, to $3.6 million in the third quarter of 2015 compared to the same period in 2014 due to the repurchase of $35.0 million aggregate principal amount of debt that occurred during the year ended December 31, 2014.

24


 

Other income, net

Other income, net decreased by $0.3 million to $0.2 million during the three months ended September 30, 2015 compared to $0.5 million for the same period in 2014.  The decrease was primarily due to a settlement received by the Company associated with an internet domain name in the third quarter of 2014.

Income tax expense

During the third quarter of 2015, we recorded current state income tax expense of $0.2 million and, during the third quarter of 2014, we recorded $0.1 million of state income tax expense.  We continue to maintain a valuation allowance against our deferred tax assets, which eliminates any non-current tax benefit generated.

 

Nine Months Ended September 30, 2015 Compared to the Nine Months Ended September 30, 2014

 

 

Nine Months Ended

 

 

Year Over Year Change

 

 

September 30, 2015

 

 

September 30, 2014

 

 

Favorable/(Unfavorable)

 

(in thousands)

Amount

 

 

% of Net Revenues

 

 

Amount

 

 

% of Net Revenues

 

 

$

 

 

%

 

Net revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Learning A-Z

$

39,930

 

 

 

36.5

%

 

$

31,846

 

 

 

29.4

%

 

$

8,084

 

 

 

25.4

%

Voyager Sopris Learning

 

54,831

 

 

 

50.2

%

 

 

63,502

 

 

 

58.5

%

 

 

(8,671

)

 

 

(13.7

)%

ExploreLearning

 

14,503

 

 

 

13.3

%

 

 

13,119

 

 

 

12.1

%

 

 

1,384

 

 

 

10.5

%

Total net revenues

 

109,264

 

 

 

100.0

%

 

 

108,467

 

 

 

100.0

%

 

 

797

 

 

 

0.7

%

Cost of revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Learning A-Z

 

1,286

 

 

 

1.2

%

 

 

1,194

 

 

 

1.1

%

 

 

(92

)

 

 

(7.7

)%

Voyager Sopris Learning

 

20,751

 

 

 

19.0

%

 

 

26,606

 

 

 

24.5

%

 

 

5,855

 

 

 

22.0

%

ExploreLearning

 

2,246

 

 

 

2.1

%

 

 

2,186

 

 

 

2.0

%

 

 

(60

)

 

 

(2.7

)%

Amortization expense

 

12,712

 

 

 

11.6

%

 

 

13,213

 

 

 

12.2

%

 

 

501

 

 

 

3.8

%

Total cost of revenues

 

36,995

 

 

 

33.9

%

 

 

43,199

 

 

 

39.8

%

 

 

6,204

 

 

 

14.4

%

Research and development expense

 

7,827

 

 

 

7.2

%

 

 

8,090

 

 

 

7.5

%

 

 

263

 

 

 

3.3

%

Sales and marketing expense

 

32,845

 

 

 

30.1

%

 

 

31,680

 

 

 

29.2

%

 

 

(1,165

)

 

 

(3.7

)%

General and administrative expense

 

15,537

 

 

 

14.2

%

 

 

14,676

 

 

 

13.5

%

 

 

(861

)

 

 

(5.9

)%

Shipping and handling costs

 

879

 

 

 

0.8

%

 

 

1,266

 

 

 

1.2

%

 

 

387

 

 

 

30.6

%

Depreciation and amortization expense

 

2,994

 

 

 

2.7

%

 

 

3,150

 

 

 

2.9

%

 

 

156

 

 

 

5.0

%

Income before interest, other income

   (expense) and income taxes

 

12,187

 

 

 

11.2

%

 

 

6,406

 

 

 

5.9

%

 

 

5,781

 

 

 

(90.2

)%

Net interest expense

 

(10,875

)

 

 

(10.0

)%

 

 

(13,535

)

 

 

(12.5

)%

 

 

2,660

 

 

 

19.7

%

Loss on extinguishment of debt

 

 

 

 

0.0

%

 

 

(570

)

 

 

(0.5

)%

 

 

570

 

 

 

100.0

%

Other income, net

 

679

 

 

 

0.6

%

 

 

965

 

 

 

0.9

%

 

 

(286

)

 

 

(29.6

)%

Income tax expense

 

(517

)

 

 

(0.5

)%

 

 

(146

)

 

 

(0.1

)%

 

 

(371

)

 

 

(254.1

)%

Net income (loss)

$

1,474

 

 

 

1.3

%

 

$

(6,880

)

 

 

(6.3

)%

 

$

8,354

 

 

 

(121.4

)%

Net revenues

Net revenues increased during the nine months ended September 30, 2015 by 0.7% to $109.3 million, compared to $108.5 million during the same period of 2014.  Increased net revenues in Learning A-Z and ExploreLearning were partially offset by lower net revenues in Voyager Sopris Learning.  Net revenues by segment were as follows:

 

·

Learning A-Z’s net revenues increased $8.1 million, or 25.4%, to $39.9 million in the nine months ended September 30, 2015 compared to the same period of 2014.  The year-over-year growth in net revenues is the result of Learning A-Z’s ongoing strong Bookings trend.

 

·

Voyager Sopris Learning’s net revenues decreased $8.7 million, or 13.7%, to $54.8 million during the nine months ended September 30, 2015 compared to the same period of 2014.  The decline was larger than the Bookings decline of 5.1%, due to the transition to technology-enabled products for which revenue is recognized more slowly than print products.      

 

·

ExploreLearning’s net revenues increased $1.4 million, or 10.5%, to $14.5 million during the nine months ended September 30, 2015 compared to the same period of 2014.  The increase in net revenues is a higher percentage than the increase in Bookings due to the recognition of prior period Bookings, which are recognized pro-rata over the applicable subscription periods.    

25


 

Cost of revenues

Cost of revenues includes expenses to print, purchase, handle and warehouse product, as well as order processing and royalty costs, and to provide services and support to customers.  Cost of revenues, excluding amortization, decreased $5.7 million, or 19.0%, to $24.3 million in the first nine months of 2015 compared to $30.0 million in the same period of 2014.  Cost of revenues benefitted year-over-year from the increasing contribution from higher margin technology-enabled solutions and right-sizing cost structure efforts completed by Voyager Sopris Learning in 2014.  Cost of revenues by segment were as follows:

 

·

Learning A-Z’s cost of revenues increased slightly year-over-year by $0.1 million, or 7.7%, to $1.3 million for the nine months ended September 30, 2015 compared to the same period of 2014.

 

·

Voyager Sopris Learning’s cost of revenues decreased $5.9 million, or 22.0%, to $20.8 million in the nine months ended September 30, 2015 compared to the same period of 2014.  The decrease in cost of revenues was commensurate with the year-over-year decline in revenue.  Additionally, cost of revenues was positively impacted by right-sizing cost structure efforts completed during fiscal 2014.

 

·

ExploreLearning’s cost of revenues was relatively consistent year-over-year, increasing $0.1 million, or 2.7%, to $2.2 million in the nine months ended September 30, 2015 compared to the same period of 2014.  

Amortization expense

Amortization expense in cost of revenues includes amortization for acquired pre-publication costs and technology, acquired publishing rights, and developed pre-publication and technology product development.  Amortization decreased $0.5 million to $12.7 million in the nine months ended September 30, 2015 compared to $13.2 million for same period of 2014.  The change was due to a decrease in amortization of acquired publishing rights and curriculum of $1.3 million which was partially offset by increased amortization of developed pre-publication and technology product development of $0.8 million.

Research and development expense

Research and development expense includes costs to research, evaluate and develop educational products, net of capitalization.  Research and development expense for the nine months ended September 30, 2015 decreased $0.3 million to $7.8 million compared to $8.1 million for the same period of 2014.  Research and development activities have been largely focused on product development during the nine months ended September 30, 2015 and a significant portion of the costs for product development are recorded as capital expenditures rather than research and development expense.  

Sales and marketing expense

Sales and marketing expense includes all costs to maintain our various sales channels, including the salaries and commissions paid to our sales force, and costs related to our advertising and marketing efforts.  Sales and marketing expense for the nine months ended September 30, 2015 increased $1.2 million to $32.8 million compared to $31.7 million for the same period in 2014.  This increase is due to planned increases in Learning A-Z partially offset by decreases in Voyager Sopris Learning.    

General and administrative expense

General and administrative expense increased $0.9 million in the nine months ended September 30, 2015 to $15.5 million compared to $14.7 million for the nine months ended September 30, 2014.  General and administrative expense for the nine months ended September 30, 2014 included a gain on the sale of the IntelliTools product line of $0.3 million.  In addition to the impact of this prior year item, the year over year increase includes expenditures to support Learning A-Z growth.

Shipping and handling costs

Shipping and handling costs for the nine months ended September 30, 2015 decreased $0.4 million to $0.9 million, compared to $1.3 million for the same period of 2014, commensurate with the decline in Bookings related to printed material.

Net interest expense

Net interest expense decreased by $2.7 million, or 19.7%, to $10.9 million in the first nine months of 2015 compared to the same period in 2014 primarily due to the repurchase of $35.0 million aggregate principal amount of debt that occurred during the year ended December 31, 2014.

Loss on Extinguishment of Debt

During the nine months ended September 30, 2014, we repurchased an aggregate of $10.0 million aggregate principal amount of our Notes for an aggregate purchase price of approximately $10.1 million, plus accrued and unpaid interest.  A Loss on Extinguishment of Debt of $0.4 million was recorded in connection with these repurchases, primarily related to the write-off of unamortized deferred financing costs.  Additionally, during the nine months ended September 30, 2014, a Loss on Extinguishment of

26


 

Debt of $0.2 million was recorded in connection with the termination of the ABL facility related to the write-off of unamortized deferred financing costs. 

Other income, net

Other income, net decreased by $0.3 million to $0.7 million during the nine months ended September 30, 2015 compared to $1.0 million for the same period in 2014.  The decrease was primarily due to a settlement received by the Company associated with an internet domain name in the third quarter of 2014.

Income tax expense

During the nine months ended September 30, 2015 and 2014, we recorded current state income tax expense of $0.5 million and $0.1 million, respectively.  We continue to maintain a valuation allowance against our deferred tax assets, which eliminates any non-current tax benefit generated.

Liquidity and Capital Resources

Sales seasonality affects operating cash flow, and as a result, we normally incur a net cash deficit from all of our activities through the early part of the third quarter each year.  We typically fund these seasonal deficits through the drawdown of cash. The cash balance as of September 30, 2015 was $33.5 million.  The primary sources of liquidity are our current cash balances and our annual cash flow from operations and the primary liquidity requirements relate to interest on our long-term debt, product development costs, capital investments and working capital.  We believe that based on current and anticipated levels of operating performance and cash flow from operations, we will be able to make required interest payments on our debt and fund our working capital and capital expenditure requirements for the next 12 months.  

Long-Term Debt

Senior Secured Notes Due 2017

In February 2011, the Company closed an offering of $175.0 million aggregate principal amount of 9.75% senior secured notes due 2017 (the “Notes”).  Deferred financing costs, net of accumulated amortization, are capitalized in Other Assets in the Condensed Consolidated Balance Sheets and are amortized over the term of the related debt using the effective interest method. Unamortized deferred financing costs at September 30, 2015 and December 31, 2014 were $1.6 million and $2.3 million, respectively.

Interest on the Notes accrues at a rate of 9.75% per annum from the date of original issuance and is payable semi-annually in arrears on each February 15th and August 15th to the holders of record of the Notes on the immediately preceding February 1st and August 1st. No principal repayments are due until the maturity date of the Notes.

The Notes are secured by (i) a first priority lien on substantially all of the Company’s assets, including capital stock of the guarantors (which are certain of the Company’s subsidiaries), and (ii) a second-priority lien, prior to the termination of the ABL Facility, on substantially all of the inventory and accounts receivable and related assets of the ABL Credit Parties, in each case, subject to certain permitted liens. The Notes also contain customary covenants, including limitations on the Company’s ability to incur debt, and events of default as defined by the agreement. The Company may, at its option, redeem the Notes prior to their maturity based on the terms included in the agreement.

During the year ended December 31, 2014, the Company repurchased $35.0 million aggregate principal amount of its senior secured notes due 2017 for approximately $35.0 million, plus accrued and unpaid interest.  The Company recognized a Loss on Extinguishment of Debt of approximately $0.7 million in connection with the repurchases, which was primarily due to the write-off of unamortized deferred financing costs.  During the three and nine months ended September 30, 2015, the company did not repurchase any notes.

The Notes mature on February 15, 2017.  We believe that we will be able to refinance any principal amount outstanding under the Notes at or before this date on terms acceptable to us, and we are likely to refinance the Notes either later this quarter or during the first quarter of 2016.  At this time, we are targeting a structure that includes a combination of senior revolving and term loan debt, where the term loan debt would have a lower principal amount than our current Notes and we would use a revolver facility to cover the seasonally low cash period in the first half of the year.  We believe, based on preliminary indications, that we could reduce our cost of capital under such a structure, but it is preliminary and we have no assurance that we will complete this or another refinancing transaction, which is subject to market and other risks.

Terminated ABL Facility

In February 2011, the Company’s wholly owned subsidiary, Cambium Learning, Inc. (together with its wholly owned subsidiaries, the “ABL Credit Parties”), entered into a credit facility (the “ABL Facility”) pursuant to a Loan and Security Agreement (the “ABL Loan Agreement”), by and among the ABL Credit Parties, Harris N.A., individually and as Agent (the “Agent”) for any

27


 

ABL Lender (as hereinafter defined) which is or becomes a party to said ABL Loan Agreement, certain other lenders party thereto (together with Harris N.A. in its capacity as a lender, the “ABL Lenders”), Barclays Bank PLC, individually and as Collateral Agent, and BMO Capital Markets and Barclays Capital, as Joint Lead Arrangers and Joint Book Runners. The ABL Facility consisted of a four-year $40.0 million revolving credit facility, which included a $5.0 million subfacility for swing line loans and a $5.0 million subfacility for letters of credit.

The ABL Facility was, subject to certain exceptions, secured by a first-priority lien on the ABL Credit Parties’ inventory and accounts receivable and related assets and a second-priority lien (junior to the lien securing the ABL Credit Parties’ obligations with respect to the Notes) on substantially all of the ABL Credit Parties’ other assets.

The ABL Credit Parties were required to pay, quarterly in arrears, an unused line fee equal to the product of (x) either 0.375% or 0.50% (depending upon the ABL Credit Parties’ fixed charge coverage ratio at the time) and (y) the average daily unused amount of the revolver.  The ABL Facility contained a financial covenant that generally required the ABL Credit Parties to maintain, on a consolidated basis, either (i) excess availability of at least the greater of $8.0 million and 15% of the revolver commitment or (ii) a fixed charge coverage ratio of 1.1 to 1.0.

During the quarter ended March 31, 2014, the Company’s excess availability and fixed charge coverage ratios fell below the required thresholds, which put the Company in a Trigger Period, as defined under the ABL Loan Agreement.  On March 26, 2014, the Company had no borrowings outstanding under the agreement and terminated the ABL Facility.  A Loss on Extinguishment of Debt of approximately $0.2 million was recognized in connection with the termination related to the write-off of unamortized deferred financing costs.

Cash flows

Cash from operations is seasonal, with more cash generated in the second half of the year than in the first half of the year.  Cash is historically generated during the second half of the year because the buying cycle of school districts generally starts at the beginning of each new school year in the fall.  Cash provided by (used in) our operating, investing and financing activities is summarized below:

 

 

Nine Months Ended September 30,

 

(in thousands)

2015

 

 

2014

 

Operating activities

$

15,247

 

 

$

3,360

 

Investing activities

 

(15,507

)

 

 

(15,821

)

Financing activities

 

(614

)

 

 

(11,129

)

Operating activities.  Cash provided by operating activities was $15.2 million and $3.4 million for the nine months ended September 30, 2015 and 2014, respectively.  Cash flows from operating activities were impacted favorably during 2015 by improved earnings compared to 2014.  Additional factors include:

 

·

The movement in 2014 of $2.1 million of cash to certificates of deposit to collateralize certain letters of credit, which were previously collateralized by the ABL Facility prior to its termination;

 

·

Lower cash interest payments of $3.3 million in the first nine months of 2015 versus the prior year, due to the repurchase of Notes during 2014; and

 

·

Incentive compensation payments paid in early 2015 for the 2014 plan year were approximately $1.3 million lower than amounts paid in early 2014 for the 2013 plan year.

Investing activities.  Cash used in investing activities was $15.5 million for the nine months ended September 30, 2015 compared to $15.8 million during the same period of 2014.  Capital expenditures were $2.1 million higher in the nine months ended September 30, 2015 compared to the same period in 2014.  Cash outflows in 2015 include the final Headsprout acquisition payment of $0.4 million.  Cash outflows in 2014 include the initial Headsprout acquisition payment of $3.6 million, offset by proceeds from the IntelliTools product line sale of $0.8 million.

Financing activities.  Cash used in financing activities was $0.6 million and $11.1 million for the nine months ended September 30, 2015 and 2014, respectively.  Cash outflows for the nine months ended September 30, 2014 include the repurchase of $10.1 million of our Notes and $0.3 million of common stock repurchases.  

28


 

Non-GAAP Measures

The Company uses the following non-GAAP financial measures to monitor and evaluate the operating performance of the Company and as a basis to set and measure progress towards performance targets, which directly affect compensation for employees and executives:  Bookings, EBITDA, Adjusted EBITDA, and Cash Income.

 

·

Bookings measure the total dollar value of customer orders in a period, regardless of the timing of the related revenue recognition, and is a leading indicator of revenue.

 

·

EBITDA is earnings (loss) from operations before interest, income taxes, and depreciation and amortization.

 

·

Adjusted EBITDA is EBITDA excluding non-operational and non-cash items.  Examples of items excluded from Adjusted EBITDA include stock-based compensation, merger, acquisition and disposition activities, and certain impairment charges.

 

·

Cash Income reduces Adjusted EBITDA for capital expenditures and removes the timing differences for recognition of deferred revenues and related deferred costs.  

Bookings, EBITDA, Adjusted EBITDA, and Cash Income are not prepared in accordance with GAAP and may be different from similarly named, non-GAAP financial measures used by other companies. Non-GAAP financial measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. We believe that these non-GAAP measures provide useful information to investors because they reflect the underlying performance of the ongoing operations of the Company and provide investors with a view of the Company’s operations from management’s perspective. Net income (loss) reported on a GAAP basis includes material non-operational and non-cash items while Adjusted EBITDA and Cash Income remove significant purchase accounting, non-operational or certain non-cash items from earnings.  We generally use these non-GAAP measures as measures of operating performance and not as measures of liquidity. Our presentation of Bookings, EBITDA, Adjusted EBITDA, and Cash Income should not be construed as an indication that our future results will be unaffected by unusual, non-operational or non-cash items.

Below are reconciliations of Bookings to Net Revenues and of Net Income (Loss) to Cash Income for the three and nine months ended September 30, 2015 and 2014:

Reconciliation of Bookings to Net Revenues

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

(in thousands)

2015

 

 

2014

 

 

2015

 

 

2014

 

Bookings

$

68,489

 

 

$

64,438

 

 

$

122,445

 

 

$

116,967

 

Change in deferred revenues

 

(28,299

)

 

 

(24,436

)

 

 

(12,998

)

 

 

(9,300

)

Other (a)

 

149

 

 

 

1,142

 

 

 

(183

)

 

 

800

 

Net revenues

$

40,339

 

 

$

41,144

 

 

$

109,264

 

 

$

108,467

 

 

29


 

Reconciliation of Net Income (Loss) to Cash Income

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

(in thousands)

2015

 

 

2014

 

 

2015

 

 

2014

 

Net income (loss)

$

1,966

 

 

$

995

 

 

$

1,474

 

 

$

(6,880

)

Reconciling items between net income (loss) and EBITDA:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization expense

 

5,435

 

 

 

5,745

 

 

 

15,706

 

 

 

16,363

 

Net interest expense

 

3,575

 

 

 

4,377

 

 

 

10,875

 

 

 

13,535

 

Income tax expense

 

213

 

 

 

52

 

 

 

517

 

 

 

146

 

Income from operations before interest, income

    taxes, and depreciation and amortization (EBITDA)

 

11,189

 

 

 

11,169

 

 

 

28,572

 

 

 

23,164

 

Non-operational or non-cash costs included in

    EBITDA but excluded from Adjusted EBITDA:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income, net

 

(204

)

 

 

(535

)

 

 

(679

)

 

 

(965

)

Loss on extinguishment of debt

 

 

 

 

 

 

 

 

 

 

570

 

Merger, acquisition and disposition activities (b)

 

199

 

 

 

346

 

 

 

552

 

 

 

689

 

Stock-based compensation and expense (c)

 

192

 

 

 

135

 

 

 

486

 

 

 

383

 

Adjusted EBITDA

 

11,376

 

 

 

11,115

 

 

 

28,931

 

 

 

23,841

 

Change in deferred revenues

 

28,299

 

 

 

24,436

 

 

 

12,998

 

 

 

9,300

 

Change in deferred costs

 

(3,694

)

 

 

(2,745

)

 

 

(2,915

)

 

 

(1,182

)

Capital expenditures

 

(5,275

)

 

 

(4,667

)

 

 

(15,107

)

 

 

(13,027

)

Cash income

$

30,706

 

 

$

28,139

 

 

$

23,907

 

 

$

18,932

 

 

30


 

Reconciliation of Bookings to Net Revenues by Segment – 2015

 

 

Three Months Ended September 30, 2015

 

(in thousands)

Learning A-Z

 

 

Voyager Sopris

Learning

 

 

ExploreLearning

 

 

Consolidated

 

Bookings

$

28,164

 

 

$

29,780

 

 

$

10,545

 

 

$

68,489

 

Change in deferred revenues

 

(14,430

)

 

 

(8,111

)

 

 

(5,758

)

 

 

(28,299

)

Other (a)

 

(1

)

 

 

151

 

 

 

(1

)

 

 

149

 

Net revenues

$

13,733

 

 

$

21,820

 

 

$

4,786

 

 

$

40,339

 

 

 

Nine Months Ended September 30, 2015

 

(in thousands)

Learning A-Z

 

 

Voyager Sopris

Learning

 

 

ExploreLearning

 

 

Consolidated

 

Bookings

$

45,851

 

 

$

60,774

 

 

$

15,820

 

 

$

122,445

 

Change in deferred revenues

 

(5,905

)

 

 

(5,804

)

 

 

(1,289

)

 

 

(12,998

)

Other (a)

 

(16

)

 

 

(139

)

 

 

(28

)

 

 

(183

)

Net revenues

$

39,930

 

 

$

54,831

 

 

$

14,503

 

 

$

109,264

 

 

Reconciliation of Net Income to Cash Income by Segment - 2015

 

 

Three Months Ended September 30, 2015

 

(in thousands)

Learning A-Z

 

 

Voyager Sopris

Learning

 

 

ExploreLearning

 

 

Other

 

 

Consolidated

 

Net income

$

6,663

 

 

$

6,302

 

 

$

1,376

 

 

$

(12,375

)

 

$

1,966

 

Reconciling items between net income and EBITDA:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization expense

 

 

 

 

 

 

 

 

 

 

5,435

 

 

 

5,435

 

Net interest expense

 

 

 

 

 

 

 

 

 

 

3,575

 

 

 

3,575

 

Income tax expense

 

 

 

 

 

 

 

 

 

 

213

 

 

 

213

 

Income from operations before interest, income

    taxes, and depreciation and amortization (EBITDA)

 

6,663

 

 

 

6,302

 

 

 

1,376

 

 

 

(3,152

)

 

 

11,189

 

Non-operational or non-cash costs included in

   EBITDA but excluded from

   Adjusted EBITDA:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income, net

 

 

 

 

 

 

 

 

 

 

(204

)

 

 

(204

)

Merger, acquisition and disposition activities (b)

 

 

 

 

 

 

 

 

 

 

199

 

 

 

199

 

Stock-based compensation and expense (c)

 

47

 

 

 

68

 

 

 

24

 

 

 

53

 

 

 

192

 

Adjusted EBITDA

 

6,710

 

 

 

6,370

 

 

 

1,400

 

 

 

(3,104

)

 

 

11,376

 

Change in deferred revenues

 

14,430

 

 

 

8,111

 

 

 

5,758

 

 

 

 

 

 

28,299

 

Change in deferred costs

 

(1,603

)

 

 

(1,553

)

 

 

(538

)

 

 

 

 

 

(3,694

)

Adjusted EBITDA excluding effect of deferred

    revenues and deferred costs

 

19,537

 

 

 

12,928

 

 

 

6,620

 

 

 

(3,104

)

 

 

35,981

 

Capital expenditures − pre-publication costs

 

(1,327

)

 

 

(741

)

 

 

(181

)

 

 

 

 

 

(2,249

)

Capital expenditures − software development costs

 

(565

)

 

 

(1,274

)

 

 

(390

)

 

 

 

 

 

(2,229

)

Capital expenditures − general expenditures

 

(384

)

 

 

(180

)

 

 

(112

)

 

 

(121

)

 

 

(797

)

Cash income

$

17,261

 

 

$

10,733

 

 

$

5,937

 

 

$

(3,225

)

 

$

30,706

 

 

31


 

 

Nine Months Ended September 30, 2015

 

(in thousands)

Learning A-Z

 

 

Voyager Sopris

Learning

 

 

ExploreLearning

 

 

Other

 

 

Consolidated

 

Net income

$

20,730

 

 

$

13,098

 

 

$

4,788

 

 

$

(37,142

)

 

$

1,474

 

Reconciling items between net income and EBITDA:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization expense

 

 

 

 

 

 

 

 

 

 

15,706

 

 

 

15,706

 

Net interest expense

 

 

 

 

 

 

 

 

 

 

10,875

 

 

 

10,875

 

Income tax expense

 

 

 

 

 

 

 

 

 

 

517

 

 

 

517

 

Income from operations before interest, income

    taxes, and depreciation and amortization (EBITDA)

 

20,730

 

 

 

13,098

 

 

 

4,788

 

 

 

(10,044

)

 

 

28,572

 

Non-operational or non-cash costs included in

   EBITDA but excluded from

   Adjusted EBITDA:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income, net

 

 

 

 

 

 

 

 

 

 

(679

)

 

 

(679

)

Merger, acquisition and disposition activities (b)

 

 

 

 

 

 

 

 

 

 

552

 

 

 

552

 

Stock-based compensation and expense (c)

 

125

 

 

 

158

 

 

 

61

 

 

 

142

 

 

 

486

 

Adjusted EBITDA

 

20,855

 

 

 

13,256

 

 

 

4,849

 

 

 

(10,029

)

 

 

28,931

 

Change in deferred revenues

 

5,905

 

 

 

5,804

 

 

 

1,289

 

 

 

 

 

 

12,998

 

Change in deferred costs

 

(1,075

)

 

 

(1,667

)

 

 

(173

)

 

 

 

 

 

(2,915

)

Adjusted EBITDA excluding effect of deferred

    revenues and deferred costs

 

25,685

 

 

 

17,393

 

 

 

5,965

 

 

 

(10,029

)

 

 

39,014

 

Capital expenditures − pre-publication costs

 

(3,591

)

 

 

(2,422

)

 

 

(488

)

 

 

 

 

 

(6,501

)

Capital expenditures − software development costs

 

(1,521

)

 

 

(3,945

)

 

 

(1,218

)

 

 

 

 

 

(6,684

)

Capital expenditures − general expenditures

 

(861

)

 

 

(502

)

 

 

(225

)

 

 

(334

)

 

 

(1,922

)

Cash income

$

19,712

 

 

$

10,524

 

 

$

4,034

 

 

$

(10,363

)

 

$

23,907

 

Reconciliation of Bookings to Net Revenues by Segment - 2014

 

 

Three Months Ended September 30, 2014

 

(in thousands)

Learning A-Z

 

 

Voyager Sopris

Learning

 

 

ExploreLearning

 

 

Consolidated

 

Bookings

$

22,103

 

 

$

31,865

 

 

$

10,470

 

 

$

64,438

 

Change in deferred revenues

 

(10,987

)

 

 

(7,077

)

 

 

(6,372

)

 

 

(24,436

)

Other (a)

 

 

 

 

1,142

 

 

 

 

 

 

1,142

 

Net revenues

$

11,116

 

 

$

25,930

 

 

$

4,098

 

 

$

41,144

 

 

 

 

Nine Months Ended September 30, 2014

 

(in thousands)

Learning A-Z

 

 

Voyager Sopris

Learning

 

 

ExploreLearning

 

 

Consolidated

 

Bookings

$

37,279

 

 

$

64,008

 

 

$

15,680

 

 

$

116,967

 

Change in deferred revenues

 

(5,448

)

 

 

(1,392

)

 

 

(2,460

)

 

 

(9,300

)

Other (a)

 

15

 

 

 

886

 

 

 

(101

)

 

 

800

 

Net revenues

$

31,846

 

 

$

63,502

 

 

$

13,119

 

 

$

108,467

 

 

32


 

Reconciliation of Net Income (Loss) to Cash Income by Segment - 2014

 

 

Three Months Ended September 30, 2014

 

(in thousands)

Learning A-Z

 

 

Voyager Sopris

Learning

 

 

ExploreLearning

 

 

Other

 

 

Consolidated

 

Net income (loss)

$

5,787

 

 

$

7,383

 

 

$

913

 

 

$

(13,088

)

 

$

995

 

Reconciling items between net income (loss) and EBITDA:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization expense

 

 

 

 

 

 

 

 

 

 

5,745

 

 

 

5,745

 

Net interest expense

 

 

 

 

 

 

 

 

 

 

4,377

 

 

 

4,377

 

Income tax expense

 

 

 

 

 

 

 

 

 

 

52

 

 

 

52

 

Income from operations before interest, income

    taxes, and depreciation and amortization (EBITDA)

 

5,787

 

 

 

7,383

 

 

 

913

 

 

 

(2,914

)

 

 

11,169

 

Non-operational or non-cash costs included in

   EBITDA but excluded from

   Adjusted EBITDA:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income, net

 

 

 

 

 

 

 

 

 

 

(535

)

 

 

(535

)

Merger, acquisition and disposition activities (b)

 

 

 

 

 

 

 

 

 

 

346

 

 

 

346

 

Stock-based compensation and expense (c)

 

38

 

 

 

39

 

 

 

17

 

 

 

41

 

 

 

135

 

Adjusted EBITDA

 

5,825

 

 

 

7,422

 

 

 

930

 

 

 

(3,062

)

 

 

11,115

 

Change in deferred revenues

 

10,987

 

 

 

7,077

 

 

 

6,372

 

 

 

 

 

 

24,436

 

Change in deferred costs

 

(1,022

)

 

 

(1,160

)

 

 

(563

)

 

 

 

 

 

(2,745

)

Adjusted EBITDA excluding effect of deferred revenues and

   deferred costs

 

15,790

 

 

 

13,339

 

 

 

6,739

 

 

 

(3,062

)

 

 

32,806

 

Capital expenditures − pre-publication costs

 

(1,280

)

 

 

(757

)

 

 

(143

)

 

 

 

 

 

(2,180

)

Capital expenditures − software development costs

 

(388

)

 

 

(1,150

)

 

 

(325

)

 

 

(31

)

 

 

(1,894

)

Capital expenditures − general expenditures

 

(303

)

 

 

(54

)

 

 

(13

)

 

 

(223

)

 

 

(593

)

Cash income

$

13,819

 

 

$

11,378

 

 

$

6,258

 

 

$

(3,316

)

 

$

28,139

 

 

33


 

 

Nine Months Ended September 30, 2014

 

(in thousands)

Learning A-Z

 

 

Voyager Sopris

Learning

 

 

ExploreLearning

 

 

Other

 

 

Consolidated

 

Net income (loss)

$

16,859

 

 

$

12,965

 

 

$

3,265

 

 

$

(39,969

)

 

$

(6,880

)

Reconciling items between net loss and EBITDA:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization expense

 

 

 

 

 

 

 

 

 

 

16,363

 

 

 

16,363

 

Net interest expense

 

 

 

 

 

 

 

 

 

 

13,535

 

 

 

13,535

 

Income tax expense

 

 

 

 

 

 

 

 

 

 

146

 

 

 

146

 

Income from operations before interest, income

    taxes, and depreciation and amortization (EBITDA)

 

16,859

 

 

 

12,965

 

 

 

3,265

 

 

 

(9,925

)

 

 

23,164

 

Non-operational or non-cash costs included in

   EBITDA but excluded from

   Adjusted EBITDA:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income, net

 

 

 

 

 

 

 

 

 

 

(965

)

 

 

(965

)

Loss on extinguishment of debt

 

 

 

 

 

 

 

 

 

 

570

 

 

 

570

 

Merger, acquisition and disposition activities (b)

 

 

 

 

 

 

 

 

 

 

689

 

 

 

689

 

Stock-based compensation and expense (c)

 

104

 

 

 

114

 

 

 

46

 

 

 

119

 

 

 

383

 

Adjusted EBITDA

 

16,963

 

 

 

13,079

 

 

 

3,311

 

 

 

(9,512

)

 

 

23,841

 

Change in deferred revenues

 

5,448

 

 

 

1,392

 

 

 

2,460

 

 

 

 

 

 

9,300

 

Change in deferred costs

 

(838

)

 

 

(259

)

 

 

(85

)

 

 

 

 

 

(1,182

)

Adjusted EBITDA excluding effect of deferred

    revenues and deferred costs

 

21,573

 

 

 

14,212

 

 

 

5,686

 

 

 

(9,512

)

 

 

31,959

 

Capital expenditures − pre-publication costs

 

(3,331

)

 

 

(2,264

)

 

 

(424

)

 

 

 

 

 

(6,019

)

Capital expenditures − software development costs

 

(1,073

)

 

 

(3,167

)

 

 

(776

)

 

 

(31

)

 

 

(5,047

)

Capital expenditures − general expenditures

 

(930

)

 

 

(262

)

 

 

(271

)

 

 

(498

)

 

 

(1,961

)

Cash income

$

16,239

 

 

$

8,519

 

 

$

4,215

 

 

$

(10,041

)

 

$

18,932

 

Footnotes

(a)

Other comprises timing differences between the invoicing of a transaction, which generates Bookings, and its recognition as either net revenues or deferred revenue.  The most common reasons for these timing differences include product that is shipped from our warehouse and invoiced but not recognized as revenues until physical delivery due to shipping terms, adjustments to the allowance for estimated sales returns, and revenue under contract that is earned and recognized in one period but invoiced in a subsequent period.

(b)

Costs are related to merger and acquisition activities including due diligence and other non-operational charges such as pension and severance costs for former employees.

(c)

Stock-based compensation and expense is related to our outstanding options and restricted stock awards.

Off-Balance Sheet Arrangements

The Company has no off-balance sheet arrangements as of September 30, 2015 that have or are reasonably likely to have a current or future material effect on the Company’s financial condition, changes in financial conditions, sales or expenses, results of operations, liquidity, capital expenditures or capital resources.

Contractual Obligations

This item is not required for a smaller reporting company.

Critical Accounting Policies

In the ordinary course of business, we make a number of estimates and assumptions relating to the reporting of results of operations and financial position in the preparation of our condensed consolidated financial statements in conformity with GAAP.  Actual results could differ significantly from those estimates under different assumptions and conditions.  We included in our Form 10-K for the year ended December 31, 2014 a discussion of our critical accounting policies that are particularly important to the portrayal of our financial position and results of operations and that require the use of our management’s most difficult, subjective and complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.

34


 

 We have made no material changes to any of the critical accounting policies discussed in our 2014 Form 10-K through September 30, 2015.

Recently Issued Financial Accounting Standards

In July 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2015-11, Simplifying the Measurement of Inventory (ASU 2015-11).   ASU 2015-11 requires an entity to measure inventory within the scope of the update at the lower of cost and net realizable value. Subsequent measurement is unchanged for inventory measured using LIFO or the retail inventory method. This ASU is effective for interim periods and fiscal years beginning after December 15, 2016, and early adoption is permitted. We are currently evaluating the impact of adopting this guidance.

In April 2015, the FASB issued ASU No. 2015-05, Intangibles – Goodwill and Other – Internal-Use Software:  Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement (ASU 2015-05).  ASU 2015-05 provides guidance to assist an entity in evaluating the accounting for fees paid by a customer in a cloud computing arrangement.  Specifically, this ASU provides guidance to customers related to whether a cloud computing arrangement includes a software license.  If a cloud computing arrangement includes a software license, the ASU requires a customer to account for the software license element of the arrangement in a manner consistent with the acquisition of other software licenses.  Where an arrangement does not include a software license, the ASU requires a customer to account for the arrangement as a service contract.  The amendments in this ASU apply only to internal-use software that a customer obtains access to in a hosting arrangement when specific criteria are met.  ASU 2015-05 is effective for interim and annual financial statements issued for fiscal years beginning after December 15, 2015, with early adoption permitted.  We are currently assessing the impact of the adoption of ASU 2015-05 on our consolidated financial statements and have not yet determined whether we will early adopt this ASU.

In April 2015, the FASB issued ASU No. 2015-03, Interest – Imputation of Interest:  Simplifying the Presentation of Debt Issuance Costs (ASU 2015-03).  ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a reduction of the carrying amount of the corresponding debt liability, consistent with debt discounts.  The recognition and measurement guidance for debt issuance costs are not affected by this ASU.  ASU 2015-03 is effective for interim and annual financial statements issued for fiscal years beginning after December 15, 2015, with early adoption permitted for financial statements that have not been previously issued.  The adoption of ASU 2015-03 will impact our financial statements as we currently report deferred financing costs in Other Assets in the Condensed Consolidated Balance Sheets.  At this time, we have not determined whether we will early adopt this ASU.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (ASU 2014-09), which supersedes nearly all existing revenue recognition guidance under U.S. GAAP.  The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services.  The new revenue guidance defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP.  ASU 2014-09 allows for either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures).  The original effective date was for annual periods beginning after December 15, 2016.  On July 9, 2015, the FASB elected to defer the effective date of the new revenue recognition standard by one year, for annual periods beginning after December 15, 2017.  Early adoption is permitted, but only as early as the original effective date of ASU 2014-09.  We are currently evaluating the impact of our pending adoption of ASU 2014-09 on our consolidated financial statements and have not yet determined the method by which we will adopt the standard.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

This item is not required for a smaller reporting company.

 

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Management of the Company, with the participation of the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rule 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) pursuant to Rule 13a-15 of the Exchange Act as of the end of the period covered by this report.  The Company’s disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported on a timely basis and that such information is communicated to management, including the Chief Executive Officer, Chief Financial Officer and its Board of Directors to allow timely decisions regarding required disclosure.

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Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of September 30, 2015.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

Part II. Other Information

 

Item 1. Legal Proceedings.

The Company is involved in various legal proceedings incidental to its business.  Management believes that the outcome of these proceedings will not have a material adverse effect upon the Company’s consolidated operations or financial condition and the Company has recognized appropriate liabilities as necessary based on facts and circumstances known to management.

 

Item 1A. Risk Factors.

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A.  Risk Factors,” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014, as such factors could materially affect the Company’s business, financial condition, or future results.  In the nine months ended September 30, 2015, there were no material changes to the risk factors disclosed in the Company’s 2014 Annual Report on Form 10-K.  The risks described in the Annual Report on Form 10-K are not the only risks the Company faces.  Additional risks and uncertainties not currently known to the Company, or that the Company currently deems to be immaterial, also may have a material adverse impact on the Company’s business, financial condition, or results of operations.

36


 

Item 6. Exhibits.

The following exhibits are filed as part of this report.

 

Exhibit
Number

 

Description

 

 

 

10.1

 

Amendment, effective April 30, 2015, to Logistics Services Agreement, dated February 22, 2012, between Cambium Learning, Inc. and Ozburn-Hessey Logistics, LLC (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 15, 2015 (File No. 001-34575)).

 

 

 

31.1

 

Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

 

 

31.2

 

Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

 

 

32.1*

 

Certification of Chief Executive Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

 

32.2*

 

Certification of Chief Financial Officer Pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

 

101.ins

 

XBRL Instance Document.

 

 

 

101.def

 

XBRL Taxonomy Extension Definition Linkbase Document.

 

 

 

101.sch

 

XBRL Taxonomy Extension Schema Document.

 

 

 

101.cal

 

XBRL Taxonomy Extension Calculation Linkbase Document.

 

 

 

101.lab

 

XBRL Taxonomy Extension Label Linkbase Document.

 

 

 

101.pre

 

XBRL Taxonomy Extension Presentation Linkbase Document.

 

 

 

* Furnished herewith.

 

 

 

37


 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned duly authorized officer of the registrant.

 

 

 

 

  

CAMBIUM LEARNING GROUP, INC.

 

 

 

 

 

Date: November 12, 2015

  

/s/ Barbara Benson

 

 

 

  

Barbara Benson,

 

 

 

  

Chief Financial Officer (Principal Financial Officer)

 

 

 

38


 

EXHIBIT INDEX

 

Exhibit
Number

 

Description

 

 

 

10.1

 

Amendment, effective April 30, 2015, to Logistics Services Agreement, dated February 22, 2012, between Cambium Learning, Inc. and Ozburn-Hessey Logistics, LLC (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 15, 2015 (File No. 001-34575)).

 

 

 

31.1

 

Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

 

 

31.2

 

Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

 

 

32.1*

 

Certification of Chief Executive Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

 

32.2*

 

Certification of Chief Financial Officer Pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

 

101.ins

 

XBRL Instance Document.

 

 

 

101.def

 

XBRL Taxonomy Extension Definition Linkbase Document.

 

 

 

101.sch

 

XBRL Taxonomy Extension Schema Document.

 

 

 

101.cal

 

XBRL Taxonomy Extension Calculation Linkbase Document.

 

 

 

101.lab

 

XBRL Taxonomy Extension Label Linkbase Document.

 

 

 

101.pre

 

XBRL Taxonomy Extension Presentation Linkbase Document.

* Furnished herewith.

 

39