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News and Information Article
NASHUA, N.H., Aug. 25 /-FirstCall/ -- SkillSoft PLC (Nasdaq:
SKIL), a leading provider of content resources and complementary
technologies for integrated enterprise learning, today announced financial
results for its second fiscal quarter ended July 31, 2006.
Fiscal 2007 Second Quarter Results
The Company reported total revenues of $55.7 million for the second
quarter ended July 31, 2006 of the fiscal year ending January 31, 2007
(fiscal 2007), which represented a 4% increase over the $53.6 million
reported in the second quarter ended July 31, 2005 of the fiscal year ended
January 31, 2006 (fiscal 2006). Substantially all of the Companys revenues
in fiscal 2007 are from its Multi-Modal Learning segment, including $54.2
million for the second quarter of fiscal 2007, a 9% increase over the $49.7
million of Multi-Modal Learning revenue reported in the second quarter of
fiscal 2006. Remaining revenues came from the Companys Retail
Certification segment as a result of the amortization of the deferred
revenue retained by the Company following the sale of certain assets
related to SmartCertify in the fiscal 2006 first quarter. Gross margin was
88% for both the fiscal 2007 and fiscal 2006 second quarters.
The Companys net income was $4.8 million, or $0.05 per basic and
diluted share, for the fiscal 2007 second quarter. The fiscal 2007 second
quarter net income includes restatement expenses of approximately $0.1
million for costs incurred for the ongoing SEC investigation. Significant
non-cash charges included in the fiscal 2007 second quarter results were
$6.3 million, consisting of; $2.1 million for amortization of intangible
assets, stock-based compensation expense of $1.5 million and the non-cash
provision for income tax of $2.7 million. SkillSoft reported net income of
$22.9 million, or $0.22 per basic and diluted share, for the second quarter
of fiscal 2006. The fiscal 2006 second quarter net income included a
benefit of $19.5 million which resulted from the final settlement with the
Companys insurance carriers regarding the 2002 securities class action
lawsuit and related legal fees. Also included in the fiscal 2006 second
quarter results are restatement expenses for the ongoing SEC investigation
of approximately $0.8 million. Significant non-cash charges included in the
fiscal 2006 second quarter results were $5.7 million, consisting of; $2.5
million for amortization of intangible assets and deferred compensation
expense and the non-cash provision for income tax of $3.2 million.
The Companys effective tax rate increased from 33.0% in the fiscal
2007 first quarter to 39.2% in the fiscal 2007 second quarter resulting in
an effective tax rate of 36.5% for the six months ended July 31, 2006. This
increase is primarily due to the increase in the fiscal 2007 financial
targets discussed below.
"We are pleased by our performance in the first half of fiscal 2007.
Our Multi-Modal Learning revenue (which excludes our Retail Certification
segment) for the first half of fiscal 2007 has grown 10% compared to the
first half of fiscal 2006. This revenue was mostly attributable to our core
business, with encouraging contributions from our new product releases and
our emerging telesales distribution strategy. This first half performance
gives us the confidence to set our revenue expectations higher for the full
fiscal year," said Chuck Moran, President and Chief Executive Officer. "We
are also hopeful that our new customer sales team will contribute to our
bookings in the second half of this fiscal year. This wouldnt have a
significant revenue impact for fiscal 2007 due to the subscription nature
of our revenue, but would contribute to our revenue growth in the future,"
commented Moran.
The fiscal 2007 second quarter gross margin of 88% is the same as in
the fiscal 2006 second quarter. Research and development expense, which
included $0.3 million of stock-based compensation expense, decreased to
$9.9 million in the fiscal 2007 second quarter from $10.2 million in the
fiscal 2006 second quarter. Sales and marketing expenses increased to $23.1
million in the fiscal 2007 second quarter from $20.9 million in the fiscal
2006 second quarter. This increase was primarily due to an increase of $0.4
million of stock-based compensation expense, $0.5 million of additional
investment in Books 24x7 sales and marketing, $0.7 million of additional
investment in SkillSoft marketing programs, $0.3 million of direct sales
force headcount additions targeted at new customers and $0.3 million of
additional commissions. General and administrative expenses increased to
$6.8 million in the fiscal 2007 second quarter compared to $6.7 million in
the fiscal 2006 second quarter. This increase was primarily due to $0.6
million of stock- based compensation expense, which was offset by lower
legal and accounting expenses. Restatement charges related to the ongoing
SEC investigation were $0.1 million in the fiscal 2007 second quarter as
compared to $0.8 million in the fiscal 2006 second quarter.
SkillSoft had approximately $105.3 million in cash, cash equivalents,
short-term investments, restricted cash and long-term investments as of
July 31, 2006 compared to $78.6 million as of January 31, 2006. This
increase primarily reflects cash provided by operations of $26.3 million
and cash provided by stock option exercises and employee stock purchase
plan activity of $3.0 million in the six months ended July 31, 2006. These
increases were partially offset by purchases of property and equipment of
$2.9 million. The cash balance as of July 31, 2006 includes funds reserved
for the final payment of the 2002 securities class action settlement of
$15.3 million, which is expected to be paid in the second half of fiscal
2007.
In order to adequately assess the Companys collection efforts, taking
into account the seasonality of the Companys business, the Company
believes that it is most useful to compare current period days sales
outstanding (DSOs) to the prior year period. Given the quarterly
seasonality of bookings, the deferral from revenue of subscription billings
may increase or decrease the DSOs on sequential quarterly comparisons.
SkillSoft DSOs were in the targeted range for the fiscal 2007 second
quarter. On a net basis, which considers only receivable balances for which
revenue has been recorded, DSOs were 7 days in the fiscal 2007 second
quarter as compared to 10 days in the year ago period and 11 days in the
first quarter of fiscal 2007. On a gross basis, which considers all items
billed as receivables, DSOs were 79 days in the fiscal 2007 second quarter
as compared to 84 days in the year ago quarter and 78 days in the first
quarter of fiscal 2007.
FISCAL 2007 OUTLOOK
As a result of the Companys financial performance in the first half of
fiscal 2007, the Company is raising its full year fiscal 2007 revenue and
earnings targets. The Company is now targeting a revenue range of $218.0
million to $222.0 million and a net income range of $18.0 million to $21.0
million, or $0.17 to $0.20 per basic and diluted share, for fiscal 2007 as
a whole, compared to the previously targeted revenue range of $213.7
million to $218.0 million and a targeted net income range of $16.0 million
to $20.0 million, or $0.16 to $0.20 per basic and diluted share.
For the third quarter of fiscal 2007 ending October 31, 2006, the
Company currently anticipates revenue to be in the range of $54.0 to $56.0
million. The Company currently anticipates net income for the fiscal 2007
third quarter to be between $4.0 and $5.0 million, or $0.04 to $0.05 per
basic and diluted share.
The Company currently anticipates that it will have 104 million to 105
million diluted shares outstanding for earnings per share (EPS) calculation
purposes in fiscal 2007 as compared to the previously targeted range of 102
to 104 million diluted shares outstanding.
The Companys projected net income in fiscal 2007 (including the third
quarter of fiscal 2007) does not reflect any foreign exchange gains or
losses. The fiscal 2007 earnings outlook also does not take into account
the potential negative impact of the resolution of litigation matters,
potential restructuring charges, or the potential impact of any future
acquisitions or divestitures, including potential non-recurring acquisition
related expenses and the amortization of any purchased intangibles and
deferred compensation charges resulting from an acquisition transaction.
The outlook also does not take into account the effect of a public offering
or other financing arrangements that could impact outstanding shares and
thereby the Companys EPS outlook.
SkillSoft is presenting projected net income (for both fiscal 2007 and
the third quarter of fiscal 2007) without the impact of those items because
it is currently unable to estimate the amount of those items and it
believes that presenting net income without taking them into account
presents investors with meaningful information about the Companys
projected operating performance for fiscal 2007.
Conference Call
In conjunction with the release, management will conduct a conference
call on Friday, August 25, 2006 at 8:30 a.m. ET to discuss the Companys
fiscal 2007 second quarter operating results and fiscal 2007 outlook. Chuck
Moran, President and Chief Executive Officer, and Tom McDonald, Chief
Financial Officer, will host the call.
To participate in the conference call, local and international callers
can dial (973) 935-8510. The live conference call will be available via the
Internet by accessing the SkillSoft Web site at http://www.skillsoft.com.
Please go to the Web site at least fifteen minutes prior to the call to
register, download and install any necessary audio software.
A replay will be available from 12:01 p.m. EDT on August 25, 2006 until
11:59 p.m. EDT on September 1, 2006. The replay number is (973) 341-3080,
passcode: 7763193. A webcast replay will also be available on SkillSofts
Web site at http://www.skillsoft.com.
About SkillSoft
SkillSoft is a leading provider of comprehensive e-learning content and
technology products for business and IT professionals within global
enterprises. SkillSofts multi-modal learning solutions support and enhance
the speed and effectiveness of both formal and informal learning processes
and integrate SkillSofts in-depth content resources, learning management
system, virtual classroom technology and support services.
Content offerings include SkillSofts business, IT, desktop and
compliance courseware collections and BusinessPro(TM), ITPro(TM),
OfficeEssentials(TM), FinancePro(TM), EngineeringPro(TM),
GovEssentials(TM), ExecSummaries(TM) and ExecBlueprints(TM) collections
from Books24x7(R). SkillSofts complementary technologies include
SkillPort(R), the companys learning management system with its powerful
Search-and-Learn(TM) technology and premium add-on modules, and
SkillSoft(R) Dialogue(TM) virtual classroom, a tool that allows customers
to create and deliver effective blended learning programs using custom
content and off-the-shelf learning resources. For more information, visit
http://www.skillsoft.com.
SkillSoft, the SkillSoft logo, Ahead of the Learning Curve, SkillPort,
Search-and-Learn, SkillChoice, Books24x7, Referenceware, ITPro,
BusinessPro, OfficeEssentials, GovEssentials, EngineeringPro, FinancePro,
ExecSummaries, ExecBlueprints, Express Guide and Dialogue are trademarks or
registered trademarks of SkillSoft PLC in the United States and certain
other countries. All other trademarks are the property of their respective
owners.
SkillSoft courseware content described herein is for information
purposes only and is subject to change without notice. SkillSoft has no
obligation or commitment to develop or deliver any future release, upgrade,
feature, enhancement or function described in this press release except as
specifically set forth in a written agreement.
This release includes information that constitutes forward-looking
statements made pursuant to the safe harbor provision of the Private
Securities Litigation Reform Act of 1995. Any such forward-looking
statements involve risk and uncertainties that could cause actual results
to differ materially from those indicated by such forward-looking
statements. Factors that could cause or contribute to such differences
include competitive pressures, changes in customer demands or industry
standards, adverse economic conditions, loss of key personnel, litigation
and other risk factors disclosed under the heading "Risk Factors" in
SkillSofts Quarterly Report on Form 10-Q for the quarterly period ended
April 30, 2006 as filed with the Securities and Exchange Commission. The
forward-looking statements provided by the Company in this press release
represent the Companys views as of August 25, 2006. The Company
anticipates that subsequent events and developments may cause the Companys
views to change. However, while the Company may elect to update these
forward-looking statements at some point in the future, the Company
specifically disclaims any obligation to do so. These forward-looking
statements should not be relied upon as representing the Companys views as
of any date subsequent to the date of this release.
SkillSoft PLC and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
Three Months Ended Six Months Ended
July 31, July 31,
2006 2005 2006 2005
Revenues $55,734 $53,604 $110,387 $106,931
Cost of revenues 6,665 6,318 13,116 12,152
Gross profit 49,069 47,286 97,271 94,779
Operating expenses:
Research and
development 9,901 10,237 19,866 20,154
Selling and
marketing 23,136 20,883 46,392 45,094
General and
administrative 6,824 6,743 14,105 13,027
Legal settlements - (19,500) - (19,500)
Amortization of
intangible
assets and FAS
86 assets 2,143 2,307 4,291 4,553
Restructuring 22 (116) 22 587
Restatement:
SEC investigation 69 834 321 1,084
Professional
fees --
restatement
of SmartForce
historical
financial
statements - - - -
Total operating
expenses 42,095 21,388 84,997 64,999
Other income /
(expense), net (41) 495 (31) 385
Interest income 1,069 347 1,874 703
Interest expense (70) (37) (136) (98)
Loss on sale of
component, net - - - (681)
Income before
provision for
income taxes 7,932 26,703 13,981 30,089
Provision for /
(benefit from)
income taxes --
cash 415 542 657 676
Provision for /
(benefit from)
income taxes --
non-cash 2,692 3,217 4,446 4,002
Net income $4,825 $22,944 $8,878 $25,411
Net income, per
share, basic $0.05 $0.22 $0.09 $0.24
Basic weighted
average common
shares
outstanding 101,524,912 103,796,060 101,285,185 104,362,838
Net income, per
share, diluted $0.05 $0.22 $0.09 $0.24
Diluted weighted
average common
shares
outstanding 104,050,160 104,222,841 103,460,319 104,895,595
Pro Forma:
Legal settlements
-- insurance
proceeds - (19,500) - (19,500)
Pro forma net
income $4,825 $3,444 $8,878 $5,911
Pro forma net
income, per share,
basic $0.05 $0.03 $0.09 $0.06
Basic weighted
average common
shares
outstanding 101,524,912 103,796,060 101,285,185 104,362,838
Pro forma net
income, per share,
diluted $0.05 $0.03 $0.09 $0.06
Diluted weighted
average common
shares
outstanding 104,050,160 104,222,841 103,460,319 104,895,595
* The Company is providing pro forma financial measures as the Company
believes that these figures are helpful in allowing individuals to more
accurately assess the Companys operations and provide individuals with
additional information to more readily compare the Companys results
over multiple periods.
(1) The following summarizes the departmental allocation of the
stock-based compensation
Cost of revenues
(includes $11,
$0, $17 and $0
of FAS123R
compensation
expense,
respectively) $11 $- $17 $-
Research and
development
(includes $261,
$0, $575 and $0
of FAS123R
compensation
expense,
respectively) 284 47 667 95
Selling and
marketing
(includes $504,
$0, $1,110 and
$0 of FAS123R
compensation
expense,
respectively) 608 165 1,377 346
General and
administrative
(includes $629,
$0, $1,237 and
$0 of FAS123R
compensation
expense,
respectively) 630 8 1,253 16
$1,533 $220 $3,314 $457
SkillSoft PLC
Condensed Consolidated Balance Sheets
(Unaudited)
July 31, 2006 January 31, 2006
ASSETS
CURRENT ASSETS:
Cash, cash equivalents and
short-term investments $97,056 $73,339
Restricted cash 4,723 5,039
Accounts receivable, net 47,883 85,681
Prepaid expenses and other
current assets 16,622 22,006
Total current assets 166,284 186,065
Property and equipment, net 10,078 10,231
Goodwill 88,912 93,929
Acquired intangible assets, net 4,420 8,711
Long-term investments 3,517 230
Deferred tax assets 694 694
Other assets 44 42
Total assets $273,949 $299,902
LIABILITIES AND STOCKHOLDERS EQUITY
CURRENT LIABILITIES:
Accounts payable $2,703 $3,819
Accrued expenses 41,808 53,795
Deferred revenue 109,572 136,699
Total current liabilities 154,083 194,313
Total long-term liabilities 2,837 3,317
Total stockholders equity 117,029 102,272
Total liabilities and stockholders
equity $273,949 $299,902
SkillSoft PLC
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended
July 31,
2006 2005
Cash flows from operating activities:
Net income $8,878 $25,411
Adjustments to reconcile net income to net
cash used in operating activities --
Stock-based compensation 3,314 457
Depreciation and amortization 3,032 2,596
Amortization of acquired intangibles and
FAS 86 assets 4,291 4,553
Provision for bad debts (363) (623)
Loss on disposition - 681
Provision for income taxes -- non-cash 4,446 4,002
Changes in current assets and liabilities,
net of acquisitions
Accounts receivable 38,802 38,117
Prepaid expenses and other current
assets 5,867 3,755
Accounts payable (1,150) (2,685)
Accrued expenses (including long-term):
Accrued merger (115) (2,997)
Accrued restructuring (278) (6,353)
Accrued other (12,249) (8,097)
Deferred revenue (28,156) (27,990)
Net cash provided by / (used in)
operating activities 26,319 30,827
Cash flows from investing activities:
Purchases of property and equipment (2,855) (3,628)
Purchases of FAS 86 assets - (1,247)
Purchases of investments (53,484) (11,948)
Maturity of investments 22,245 14,425
Sale of investments - 248
Release/(designation) of restricted cash 316 (4,840)
Net cash (used in) / provided by
investing activities (33,778) (6,990)
Cash flows from financing activities:
Exercise of stock options 1,301 457
Proceeds from employee stock purchase plan 1,703 1,336
Payments to acquire treasury stock - (20,244)
Net cash (used in) / provided by
financing activities 3,004 (18,451)
Effect of exchange rate changes
on cash and cash equivalents 490 (1,015)
Net increase in cash and cash equivalents (3,965) 4,371
Cash and cash equivalents, beginning of
period 51,937 34,906
Cash and cash equivalents, end of
period $47,972 $39,277
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