Thursday, March 08, 2007

Proquest Guidance

Clearly as a result of the garage style sell off, Proquest are undergoing a significant restructuring and this morning they released an update. The story so far:

The company had a lot of debt, began selling off assets, were hit with accounting irregularities, became embroiled in a subsequent SEC investigation, before they closed the sale to CIG the company announced that the Chairman (Aldworth) was leaving and some pundits said they sold the wrong business. This is were we pick up the story.
  • The company is moving all operations to Dallas where the Education division is located which should be completed by the end of 2007. Most staff functions will be eliminated in Ann Arbor with the exception of staff for transition and (presumably) accounting staff needed to deal with legacy issues (like SEC reporting and the investigation)
  • Corporate functions transferred to the education unit are expected to be $4-5mm per year.
  • They have two buildings with long term leases in Ann Arbor which will soon be surplus to their needs. It is assumed that they will attempt to buy-out the remain lease term but that will be discussed in a subsequent update.
  • The company had a significant capital gain on the sale of the business solutions segment to Snap-On tools resulting in capital gain taxes of $60-65mm.
  • The company had a significant capital loss on the sale of the information and learning segment to CIG and they will carry-back this loss against the gain in 2005 and they think that $40-45mm will come back as a refund in 2008.
  • There is some class action suit stuff going on related to the accounting issues.
  • Proquest Education includes Voyager Expanded Learning (acquired 1/31/05), Explore Learning (acquired 2/25/05) and LearningPage (acquired in 2004). Partial year 2005 revenues for the segment are expected to be $91million, EBIT of $7.4mm and EBITDA of $27.7mm.
  • Education segment results for 2006 are projected to be Revenues of $117.3mm, EBIT of $12.0mm and EBITDA of $34.5mm.
  • Guidance for 2007: Education segment revenues of $116-124mm, EBIT of $10-13mm and EBITDA of $32-35mm.
  • 2007 Corporate expenses are expected to be between $30-32mm excluding taxes and interest. They note interest income of $4-5mm but don't project taxes and interest expense.
  • There is no note about any subsequent debt repayments, write-downs, or other mitigating factors (like rent buy-outs) that could influence the 2007 results.
  • The company still has a lot of financial reporting to do and risks being delisted if they miss an April 2, 2007 due date.

That's the update so far. Stay tuned for more.

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