Varsity Group Inc. Reports Record Third Quarter With $5.5M Pre-Tax Income and Projects Record Fiscal Year
biz.yahoo.com
Monday November 15, 9:00 am ET
WASHINGTON, DC--(MARKET WIRE)--Nov 15, 2004 -- Varsity Group Inc. (NasdaqNM:VSTY - News) today reported record financial results for the third quarter of 2004 highlighted by pre-tax income of $5.5 million, a 43% increase from the pre-tax income of $3.8 million recorded for the third quarter of 2003. Revenue increased 49% to $32.1 million from $21.5 million for the three months ended September 30, 2004 and September 30, 2003, respectively. Revenue growth was driven by the continued expansion of the Company's flagship eduPartners program, serving over 315 educational institutions in the recently completed third quarter 2004 back-to-school season, compared to 210 schools during the same period in 2003.
Net income increased to $7.3 million, or $0.41 per diluted share, for the three months ending September 30, 2004, compared to $3.8 million, or $0.22 per diluted share, for the three months ending September 30, 2003. Included in net income for 2004 is a net tax benefit of $1.9 million compared to no tax benefit recognized during the same period in 2003. The net tax benefit is a product of a reduction in the deferred tax asset valuation allowance of $4.0 million, offset by an income tax provision of $2.1 million related to earnings recorded during the three months ending September 30, 2004.
"This quarter's record results were the product of another extremely strong back-to-school selling season in 2004 and stands as a testament to the hard work of our employees and strength of our eduPartners model," commented Eric Kuhn, Chairman and Chief Executive Officer of Varsity Group Inc. "We continued the successful expansion of our eduPartners program, delivering a superior online bookstore solution to over 315 schools this summer and shipping over one million textbooks to over 125,000 families nationwide. Financially, we demonstrated our ability to continue to rapidly and profitably expand our business. Capping off an extremely exciting and rewarding quarter, we celebrated our return to the NASDAQ National Market on September 29, 2004."
"We view the market opportunity for our eduPartners program with tremendous optimism and are excited about the potential to continue to scale our business, expand the eduPartners franchise and create shareholder value. Toward that end, we will continue to explore opportunities to leverage the portfolio of assets we have developed including a rapidly growing base of school and individual customers, considerable cash reserves and a strong balance sheet."
Separately, the Company announced that on November 12, 2004, the Company purchased 83,334 previously issued and outstanding shares of Varsity Group Inc. Common Stock from its Chief Executive Officer.
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VARSITY GROUP INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
-------- -------- -------- --------
Net sales:
Product $ 29,275 $ 19,628 $ 31,967 $ 21,149
Shipping 2,797 1,837 3,029 2,055
-------- -------- -------- --------
Total net sales 32,072 21,465 34,996 23,204
-------- -------- -------- --------
Operating expenses:
Cost of product 19,599 13,274 21,431 14,337
Cost of shipping 2,108 1,147 2,294 1,279
Sales and marketing 3,744 2,488 4,994 3,251
Tax related benefit - - - (515)
Product development 98 61 158 180
General and administrative 1,153 687 2,178 1,397
Non-cash compensation 9 48 40 179
-------- -------- -------- --------
Total operating expenses 26,711 17,705 31,095 20,108
-------- -------- -------- --------
Income from operations 5,361 3,760 3,901 3,096
Other income, net 102 53 207 185
-------- -------- -------- --------
Income before income taxes 5,463 3,813 4,108 3,281
Income tax benefit (1) 1,882 - 3,406 -
-------- -------- -------- --------
Net income $ 7,345 $ 3,813 $ 7,514 $ 3,281
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Net income (loss) per share:
Basic $ 0.44 $ 0.23 $ 0.45 $ 0.20
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Diluted $ 0.41 $ 0.22 $ 0.43 $ 0.19
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Weighted average shares:
Basic 16,760 16,516 16,703 16,412
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Diluted 17,894 17,467 17,652 17,418
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