Whitney Information Network, Inc. Reports First Quarter 2006 and Restated First Quarter 2005 Results.CAPE CORAL Cape Coral, city (1990 pop. 74,991), Lee co., SW coastal Fla., located on an estuary of the Caloosahatchee River; inc. 1970. It is mostly a residential city that has grown rapidly along with the southern Florida area. , Fla. -- Whitney Information Network, Inc. (OTCBB OTCBB See OTC Bulletin Board (OTCBB). : RUSSE), an international leader in the postsecondary education industry focused on educating individual investors in real estate and financial markets, reported revenue for the three months ended March 31, 2006 of $45.3 million, 17.9% over the restated prior year amount of $38.4 million and a net loss of $3.5 million vs. a restated net earnings of $0.8 million in the comparable 2005 period. For the first quarter ended March 31, 2006, the Company generated Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become of $8.7 million compared with Adjusted EBITDA of $9.2 million in the comparable 2005 period. Q1 2006 Highlights --Paid student attendance increased 18.7% over the same period in 2005 --Cash received from course and product sales totaled $57.3 million, a 20.7% increase vs. Q1 2005 --Cash flows provided by operations amounted to $8.7 million, vs. $6.7 million, a 30.2% increase over the same period in 2005 --Cash, cash equivalents and restricted cash totaled $43.7 million at March 31, 2006 vs. $13.3 million at March 31, 2005
Summary Financial Highlights
Q1
--
2006 2005
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(unaudited, in thousands) (restated)
Revenue $45,325 $ 38,434
(Loss) earnings from operations $(3,987) $ 414
(Loss) earnings before income taxes $(3,465) $ 749
Net (loss) earnings $(3,465) $ 811
Diluted (loss) earnings per share $ (0.32) $ 0.09
Cash provided by operations $ 8,732 $ 6,708
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Non-GAAP Operating Metrics:
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Cash received from course and product sales $57,347 $ 47,509
Adjusted EBITDA $ 8,675 $ 9,207
Restatement Restatement A revision in a company's earlier financial statements. Notes: The need for restating financial figures can result from fraud, misrepresentation, or a simple clerical error. and reclassifications Overview On May 15, 2006, the Company determined and announced that it would restate re·state tr.v. re·stat·ed, re·stat·ing, re·states To state again or in a new form. See Synonyms at repeat. re·state certain historical financial results. The Consolidated Statements of Operations and Comprehensive Earnings (Loss) and Cash Flows for the quarter ended March 31, 2005 and the Consolidated Balance Sheet consolidated balance sheet A balance sheet in which assets and liabilities of a parent company and its controlled subsidiaries are combined, thereby presenting balance sheet items for the parent and its subsidiaries as if they were a single firm. as of December December: see month. 31, 2005 included in this report have been restated from previous filings. The financial restatements for the quarter ended March 31, 2005 reflect: --a modification associated with a change in revenue recognition policy and restatement of revenue from expired ex·pire v. ex·pired, ex·pir·ing, ex·pires v.intr. 1. To come to an end; terminate: My membership in the club has expired. 2. courses; --reclassifications in financial statement categories and the timing of accruals Accruals Accounts on a balance sheet that represent liabilities and non-cash-based assets used in accrual-based accounting. These accounts include, among many others, accounts payable, accounts receivable, goodwill, future tax liability and future interest expense. necessary for comparability to the current period's presentation; and --a revision to the revenue recognition policy with respect to deferral deferral - Waiting for quiet on the Ethernet. of revenue from the Company's teleconferencing product and service offering and subscription services. Please refer to our Form 10-Q Form 10-Q See 10-Q. , filed today with the Securities and Exchange Commission, for more details on the effects of these restatements and the Company's revised revenue recognition policy. The Company is in the process of amending its Annual Reports on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the years ended 2003 through 2005 to reflect certain policy revisions and the effect of such revisions on its historical Consolidated Financial Statements Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge . We may find it necessary to restate periods prior to 2003. Revised revenue recognition policy The following summarizes our revised revenue recognition policy: The student is permitted to attend courses (in all available learning formats) throughout the life of the student contract. We allow students to attend courses subsequent to expiration EXPIRATION. Cessation; end. As, the expiration of, a lease, of a contract, or statute. 2. In general, the expiration of a contract puts an end to all the engagements of the parties, except to those which arise from the non- fulfillment of obligations created upon request. The tuition For tuition fees in the United Kingdom, see . Tuition means instruction, teaching or a fee charged for educational instruction especially at a formal institution of learning or by a private tutor usually in the form of one-to-one tuition. is generally nonrefundable Nonrefundable Not permitted, under the terms of an indenture, to be refundable. . A student may receive a refund TO REFUND. To pay back by the party who has received it, to the party who has paid it, money which ought not to have been paid. 2. On a deficiency of assets, executors and administrators cum testamento annexo, are entitled to have refunded to them legacies within three days of the purchase by exercising a right of rescission Right of rescission The right to void a contract without any penalty within three days as provided in the Consumer Credit Protection Act of 1968. . In such cases, the corresponding amount of deferred revenue is relieved with no impact on the Consolidated Statement of Operations See Income statement. . We recognize revenue based on:
-- when the course is attended by the student; or
-- the likelihood of the attendance by the student is remote
(course breakage), which is based on the historical:
- percentage of students who never attended a course and
those students who never attended a course subsequent to
expiration; and
- highest number of days in which 95% of those students who
attended our courses subsequent to expiration.
We determine our course breakage rate based upon estimates developed from historical student attendance patterns. Based on our historical information, we can determine the likelihood of an expired course remaining unattended. Moreover, we determined that we do not have a legal obligation to remit To transmit or send. To relinquish or surrender, such as in the case of a fine, punishment, or sentence. An individual, for example, might remit money to pay bills. TO REMIT. To annul a fine or forfeiture. 2. the value of expired courses to relevant taxing jurisdictions. To apply course breakage, we calculate verifiable and objective supporting data as of each balance sheet date. To the extent EduTrades, Inc., a wholly owned subsidiary Wholly Owned Subsidiary A subsidiary whose parent company owns 100% of its common stock. Notes: In other words, the parent company owns the company outright and there are no minority owners. , and our United Kingdom business do not have three full years of data (subsequent to course expiration), we recognize revenue based on course attendance. Only at such time that we have developed verifiable and objective data over a three year period subsequent to course expiration will we apply course breakage based on the methodology described above. With respect to EduTrades, Inc. and United Kingdom, the Company expects to have sufficient data to apply course breakage by the end of 2006. Accordingly, we anticipate reflecting course breakage as contemplated above for the quarter ending December 31, 2006, for the courses sold during the fourth quarter of 2003 through the fourth quarter of 2006 which remain expired and unattended. We expect to recognize a significant amount of deferred revenue in the fourth quarter of 2006 from the initial application of the course breakage to our EduTrades, Inc. and United Kingdom businesses. As a result of applying this policy, during the three months ended March 31, 2006 and 2005, we recognized $1.9 million and $3.6 million, respectively, in revenue related to course breakage. Reclassifications We reviewed the financial statement classifications of expenses by both period and line item, and restated the 2003 through 2005 Consolidated Financial Statements, including the three months ended March 31, 2005. This was necessary for comparability with the current period's presentation. These changes and reclassifications will have no cumulative effect on reported earnings, cash flows or adjusted earnings before interest, taxes, depreciation and amortization Earnings before interest, taxes, depreciation and amortization (EBITDA) is a non-GAAP metric that can be used to evaluate a company's profitability.
Teleconferencing and subscription based services Upon review of our revenue recognition policies for all service and product offerings, we concluded the previous revenue recognition policy with respect to our teleconferencing and subscription based offerings needed to be modified in order to comply with the Financial Accounting Standard Board's Emerging Issues Task Force Issue No. 00-21, Revenue Arrangements with Multiple Deliverables. These restatements have no cumulative effect on our Consolidated Statement of Cash Flows. While these restatements will have no cumulative effect on our Consolidated Statement of Cash Flows, we expect that reported net earnings will change significantly in any given period. In response to the issues described above, we: --completed a review of our revenue recognition practices and have implemented changes as necessary to account for revenue recognition in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with the revised policies as of January January: see month. 1, 2006 and restated prior periods as if the policy was always applied; --have taken action to assure material expense accruals are recorded in the appropriate period; and --are restating our previously issued Consolidated Financial Statements to reflect the new revenue recognition policies and accrual accrual, n continually recurring short-term liabilities. Examples are accrued wages, taxes, and interest. practices. Reconciliation of Non-GAAP Measurements to GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). Results In addition to the results provided in accordance with generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting in the United States of America UNITED STATES OF AMERICA. The name of this country. The United States, now thirty-one in number, are Alabama, Arkansas, Connecticut, Delaware, Florida, Georgia, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Mississippi, Missouri, New Hampshire, (U.S. GAAP) throughout this document, the Company employs operating metrics metrics Managed care A popular term for standards by which the quality of a product, service, or outcome of a particular form of Pt management is evaluated. See TQM. that are not in accordance with generally accepted accounting principles (non-GAAP measures) that we believe provides additional information in analyzing our business and facilitates comparison to past and present operations. Non-GAAP measurements are not intended to replace the presentation of our financial results in accordance with U.S. GAAP. Adjusted EBITDA As used in the following operating data and our reconciliation, EBITDA means net (loss) earnings before income taxes plus interest expense, depreciation and amortization expense, as well as the stock portion of the gift to the estate of the former President, interest and nonoperating income nonoperating income Income derived from a source other than a firm's regular activities. For example, a firm may record as nonoperating income the profit gained from the sale of an asset other than inventory. , stock based compensation, minority interest and equity earnings in related parties, and the gain from the sale of assets. We refer to "Adjusted EBITDA" to mean EBITDA adjusted for the net change in deferred revenue less deferred course expenses. Adjusted EBITDA is not a financial performance measurement under U.S. GAAP. We use Adjusted EBITDA as a key measure in evaluating our operations and decision-making decision-making, n the process of coming to a conclusion or making a judgment. decision-making, evidence-based, n a type of informal decision-making that combines clinical expertise, patient concerns, and evidence gathered from . We feel it is a useful measure in determining our performance since it takes into account the change in deferred revenue and deferred course expenses in combination with our operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. . We reference Adjusted EBITDA frequently since it provides supplemental information that facilitates internal comparisons to historical operating performance of prior periods and external comparisons to competitors' historical operating performance in our industry. We plan and forecast our business using Adjusted EBITDA, with comparisons of actual to planned and forecasted Adjusted EBITDA. In addition, we provide Adjusted EBITDA because we believe investors and security analysts find Adjusted EBITDA to be a useful measure for evaluating our performance. The vast majority of our costs to acquire a student have been expended ex·pend tr.v. ex·pend·ed, ex·pend·ing, ex·pends 1. To lay out; spend: expending tax revenues on government operations. See Synonyms at spend. 2. up to the point of registration, such as media, travel, facilities and instructor fees for the introductory workshops. These costs are expensed when incurred. However, the tuition paid at registration is deferred until the course is attended by the student, when the student has received the course content in an electronic format or when the student's attendance is deemed remote, at which time the revenue is deemed earned. Thus, reporting under U.S. GAAP creates significant timing differences with respect to revenue and expenses, both in the form of cash flows and in the form of our Consolidated Statement of Operations. As a result of these factors, our operating cash flows Operating cash flow Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. can vary significantly from our results of operations for the same period. For this reason we believe Adjusted EBITDA is an important non-GAAP financial measure. Adjusted EBITDA should not be considered as an alternative to net earnings, cash flows provided by operations, investing or financing activities or other financial statement data presented in the Consolidated Financial Statements as indicators of financial performance or liquidity. Items excluded from Adjusted EBITDA are significant components in understanding our financial performance. Because Adjusted EBITDA is not a measurement determined in accordance with U.S. GAAP and is susceptible to varying calculations, Adjusted EBITDA as presented may not be comparable to other similarly titled measures of performance from other companies.
(unaudited, in thousands) Q1
--
2006 2005
(restated)
Net (loss) earnings $(3,465) $ 811
Interest income, net (326) (30)
Other income (166) (270)
Stock gift 937
Stock compensation 252
Depreciation and amortization 450 480
Minority interest and equity earnings (30) (84)
(Gain) loss on sale of assets (13)
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EBITDA (2,348) 894
Net change in deferred revenue 12,022 9,075
Net change in deferred course costs (999) (762)
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Adjusted EBITDA $ 8,675 $ 9,207
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Adjusted EBITDA as a percentage of cash received
from courses and products 15.1% 19.4%
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Cash received from course or product sales We believe cash received from course or product sales before changes in deferred revenue is an important measure of cash receipts and overall business volume. Cash received from course sales as presented may not be comparable to other similar titled measures of performance from other companies. The following reconciles cash received from course or product sales to revenue for financial reporting purposes for the respective periods.
(unaudited, in thousands) Q1
--
2006 2005
(restated)
Cash received from course or product sales $ 57,347 $47,509
Less: Net change in deferred revenue (12,022) (9,075)
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Revenue for financial reporting purposes $ 45,325 $38,434
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Information in this press release contains certain forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements deal with our current plans, intentions, beliefs, expectations, and statements of future economic performance. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "could," "expects," "plans," "intends," "anticipates," "believes," "estimates," or "predicts" or the negative of such terms. These forward-looking statements include, without limitation, statements about our market opportunity, our strategies, competition, expected activities and expenditures as we pursue our business plan, and the adequacy of our available cash resources. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Forward-looking statements involve known and unknown risks and uncertainties which may cause our actual results in future periods to differ materially from what is currently anticipated. No forward-looking statement is a guarantee of future performance, and you should not place undue reliance on any forward-looking statement. We undertake no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future. Industry data and other statistical information used are based on independent publications, government publications, reports by market research firms or other published independent sources. Some data are based on our good faith estimates, derived from our review of internal surveys and the independent sources just listed. Although we believe these sources to be reliable, we have not independently verified ver·i·fy tr.v. ver·i·fied, ver·i·fy·ing, ver·i·fies 1. To prove the truth of by presentation of evidence or testimony; substantiate. 2. the information. |
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