VSTY reports its year end results. If you back out the effects of the tax benefits, the fully diluted EPS for 2005 was $.11 vs. $.11 for 2004. Not a particularly good year.
Varsity Group Inc. Reports Record Fiscal Year and Sets Annual Shareholder Meeting Date
Thursday April 13, 4:16 pm ET
WASHINGTON, DC--(MARKET WIRE)--Apr 13, 2006 -- Varsity Group Inc. (NasdaqNM:VSTY - News) today announced financial results for its fiscal year ended December 31, 2005 highlighted by revenue of $50.1 million for its fiscal year 2005, representing a 33% increase over the $37.7 million of revenues reported for its fiscal year 2004 and a compounded annual revenue growth rate of approximately 42% over the last four years. Income before taxes was approximately $2.6 million for the fiscal year ended December 31, 2005, compared to approximately $3.1 million reported in 2004.
Net income was approximately $12.1 million, or $0.64 per diluted share, compared to net income of $6.9 million, or $0.39 per diluted share, for the prior year. Included in net income for fiscal 2005 and 2004 were income tax benefits of $9.5 million and $3.8 million, respectively. The income tax benefits for fiscal 2005 and 2004 were the product of reductions in the deferred tax asset valuation allowance of $10.0 million and $5.0 million in 2005 and 2004, respectively, offset by income tax provisions of $0.5 million and $1.2 million related to pre-tax income recorded in fiscal 2005 and 2004, respectively.
"As we mentioned last week, reaching the $50 million revenue mark is a significant accomplishment for our Company," commented Varsity Group Inc. CEO and President, Mark Thimmig. "We have created an important platform for the continued growth of our business and the introduction of new products and services to school, parent and student customers nationwide."
A conference call is scheduled at 4:30 P.M. EST today to discuss results. The participant dial-in number for the conference call is 800.434.1335 for domestic calls and +1.404.920.6442 for international calls. The participant code is 355550#. This conference call will be recorded and available for replay from the Investors section of our website located at varsitygroup.com.
Separately, the Company announced that its annual shareholder meeting will be held on June 15, 2006, at 10:00 a.m. local time at the Company's headquarters building at 1300 19th Street, N.W., Suite 800, Washington D.C.
ABOUT VARSITY GROUP INC.
Varsity Group (www.varsitygroup.com) provides private K-12 schools, colleges and distance learning organizations outsourcing solutions for managing their textbook, e-learning development and delivery, uniforms, branded clothing, school supplies and other related needs. Founded in 1997 as VarsityBooks.com, the company pioneered selling new college textbooks over the Internet. Building on its textbook expertise, Varsity Group now offers educational institutions a variety of solutions that enable schools to focus on their core mission, educating our future leaders.
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Statements in this press release regarding Varsity Group's business that are not historical facts are "Forward-looking statements" that involve risks and uncertainties. For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2004.
VARSITY GROUP INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per share data)
Twelve Months Ended
December 31,
2005 2004
-------- --------
Net sales:
Textbooks $ 40,663 $ 34,437
Uniforms 5,768 --
Shipping 3,638 3,245
-------- --------
Total net sales 50,069 37,682
-------- --------
Operating expenses:
Cost of textbooks 28,187 23,349
Cost of uniforms 2,645 --
Cost of shipping 2,868 2,529
Sales and marketing 9,275 5,803
General and administrative 4,855 3,200
Amortization of acquired intangibles 91 -
Non-cash compensation -- 40
-------- --------
Total operating expenses 47,921 34,921
-------- --------
Income from operations 2,148 2,761
Other income, net 467 312
-------- --------
Income before income taxes 2,615 3,073
Income tax benefit (1) 9,514 3,808
-------- --------
Net income $ 12,129 $ 6,881
======== ========
Net income per share:
Basic $ 0.72 $ 0.41
======== ========
Diluted $ 0.64 $ 0.39
======== ========
Weighted average shares:
Basic 16,947 16,715
======== ========
Diluted 18,831 17,726
======== ========
(1) The Company accounts for income taxes in accordance with Statement
of Financial Accounting Standards No. 109, ("SFAS 109") "Accounting
for Income Taxes." Under SFAS No. 109, deferred tax assets and
liabilities are determined based on differences between the financial
reporting and tax basis of assets and liabilities and are measured
using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse. A deferred tax benefit is recorded
during interim periods when we have an expectation of earnings for the
annual period. A valuation allowance is established when necessary to
reduce deferred tax assets to the amount expected to be realized. In
determining the need for a valuation allowance, management reviews both
positive and negative evidence pursuant to the requirements of SFAS No.
109, including current and historical results of operations, the annual
limitation on utilization of net operating loss carry forwards pursuant
to Internal Revenue Code section 382, future income projections and the
overall prospects of our business. Accordingly, the Company released
$10.0 million and $5.0 million of its deferred tax asset valuation
allowance in fiscal 2005 and fiscal 2004, respectively, which resulted
in an income tax benefit for both periods.
VARSITY GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands)
December 31, December 31,
2005 2004
-------- --------
Assets
Current Assets:
Cash and cash equivalents $ 2,733 $ 4,865
Short-term investments 3,336 7,000
Accounts receivable, net 2,188 1,251
Inventory 4,476 2,463
Deferred income taxes 367 141
Other 5,211 1,248
-------- --------
Total current assets 18,311 16,968
Property, plant and equipment,
net of depreciation 495 252
Software developed for internal use,
net of amortization 1,188 708
Intangible assets, net of amortization 719 --
Goodwill 2,427 --
Deferred income taxes 15,157 5,760
Long term investments 6,406 6,993
Other assets 101 31
-------- --------
Total assets 44,804 30,712
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 1,874 $ 696
Other accrued expenses and other current
liabilities 1,513 1,569
Taxes payable 336 459
-------- --------
Total current liabilities 3,723 2,724
Long-term liabilities:
Other non current liabilities 30 --
-------- --------
Total liabilities 3,753 2,724
-------- --------
Commitments and contingencies
Stockholders' equity
Preferred stock: $.0001 par value, 20,000
shares authorized; 0 shares issued and
outstanding at December 31, 2005 and 2004,
respectively -- --
Common stock, $.0001 par value, 60,000
shares authorized, 18,353 and 17,969 shares
issued and 17,138 and 16,754 shares
outstanding at December 31, 2005 and 2004,
respectively 2 2
Additional paid-in capital 89,307 88,273
Unrealized loss on securities (107) (7)
Accumulated deficit (46,418) (58,547)
Treasury stock, $.001 par value, 1,215
shares at September 30, 2005 and December
31, 2004, respectively (1,733) (1,733)
-------- --------
Total stockholders' equity 41,051 27,988
-------- --------
Total liabilities and stockholders'
equity $ 44,804 $ 30,712
======== ========
Contact:
Contact:
Jack Benson
202-667-3400
--------------------------------------------------------------------------------
Source: Varsity Group Inc.
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