RLRN Renaissance Learning, Inc. (MM)

Renaissance Learning(R) Announces Third Quarter Financial Results WISCONSIN RAPIDS, Wis., Oct. 20 /PRNewswire-FirstCall/ -- Renaissance Learning(R), Inc., (NASDAQ:RLRN), a leading provider of learning information systems and school improvement programs for pre-K-12 schools, today announced financial results for the three and nine month periods ended September 30, 2004. Revenues for the third quarter of 2004 were $25.5 million, a decrease of 18.4% from third quarter 2003 revenues of $31.3 million. Net income for the quarter was $3.9 million, or $0.12 per share, compared to net income of $8.3 million, or $0.27 per share for the third quarter of 2003, which included a one-time tax benefit of $0.04 per share related to income tax credits for research activities. (Logo: http://www.newscom.com/cgi-bin/prnh/20001108/RENAISSANCELOGO ) Revenues for the nine-month period ended September 30, 2004 were $88.3 million, down 11.0% from the 2003 revenues of $99.2 million. Net income for the nine-month period was $17.5 million, or $0.56 per share, compared to net income of $24.9 million, or $0.80 per share for 2003. "Third quarter results were very close to our projections announced three weeks ago," stated John R. Hickey, President and Chief Executive Office of Renaissance Learning, Inc. "Order rates were essentially flat but revenue declined for the third quarter mainly due to the $3.3 million increase in deferred revenue. Our original expectations for stronger order rates have been impacted by customers delaying orders as they take the time to assess the benefits of Renaissance Place and by the fact that district solutions take longer to sell. Despite these delays, we are pleased with the interest that Renaissance Place has generated and are optimistic about the marketplace's acceptance of this revolutionary product. When combined with the exciting district opportunities in our pipeline and new product offerings like English in a Flash, we remain optimistic about the company's long-term growth prospects." Renaissance Learning added about 500 new customer schools in the U.S. and Canada during the quarter, bringing total North American schools using Company products to over 67,000. Of these, about 63,000 use the Company's reading products and about 25,000 use math. The company also added almost 1,000 new Renaissance Place customers in the quarter, bringing the total customer schools using Renaissance Place to over 3,100. The Company will hold a conference call at 4:00 p.m. CDT today to discuss its financial results, quarterly highlights and business outlook. The teleconference may be accessed in listen-only mode by dialing 888-868-9083 at 4:00 p.m. CDT. Please call a few minutes before the scheduled start time to ensure a proper connection. A digital recording of the conference call will be made available on October 20, 2004 at 8:00 p.m. through October 27, 2004 at 11:59 p.m. The replay dial-in is 877-519-4471. The conference ID number to access the replay is 5224832. Renaissance Learning(R), Inc., is a leading provider of research-based learning information systems software, school improvement programs, teacher training and consulting. Adopted by over 67,000 schools, Renaissance information technology products give students and teachers continuous constructive feedback that helps motivate students, dramatically accelerate learning, improve test scores, and help students master all standards, while reducing teacher paperwork. Renaissance Learning has six U.S. locations and subsidiaries in Australia, Canada, India, and the United Kingdom. This press release contains forward-looking statements made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995, including statements regarding future financial and operating results, the introduction and acceptance of new products and services, and new marketing approaches. Any such forward-looking statements may involve risk and uncertainties that could cause actual results to differ materially from any future results encompassed within the forward-looking statements. Factors that could cause or contribute to such differences include those matters disclosed in the Company's Annual Report on Form 10-K, quarterly reports on Form 10-Q and the Company's other Securities and Exchange Commission filings which factors are incorporated herein by reference. RENAISSANCE LEARNING(R), INC. CONSOLIDATED STATEMENTS OF INCOME (dollar amounts in thousands, except per share amounts) (unaudited) Three Months Nine Months ended September 30, ended September 30, 2004 2003 2004 2003 Net sales: Products $20,315 $25,640 $71,714 $81,528 Services 5,227 5,675 16,542 17,629 Total net sales 25,542 31,315 88,256 99,157 Cost of sales: Products 1,564 2,581 5,151 8,605 Services 2,191 2,510 8,129 7,911 Total cost of sales 3,755 5,091 13,280 16,516 Gross profit 21,787 26,224 74,976 82,641 Operating expenses: Product development 4,391 4,262 12,842 12,926 Selling and marketing 8,486 7,866 25,503 22,718 General and administrative 3,292 3,172 10,055 10,577 Total operating expenses 16,169 15,300 48,400 46,221 Operating income 5,618 10,924 26,576 36,420 Other income (expense), net 522 541 1,195 1,985 Income before taxes 6,140 11,465 27,771 38,405 Income taxes 2,272 3,187 10,275 13,492 Net income $3,868 $8,278 $17,496 $24,913 Earnings per share: Basic $0.12 $0.27 $0.56 $0.80 Diluted $0.12 $0.27 $0.56 $0.80 Weighted average shares outstanding: Basic 31,126,343 30,826,913 31,055,595 31,163,711 Diluted 31,276,621 31,066,216 31,236,305 31,335,294 RENAISSANCE LEARNING(R), INC. CONSOLIDATED BALANCE SHEETS (dollar amounts in thousands) September 30, December 31, 2004 2003 (unaudited) ASSETS: Current assets: Cash and cash equivalents $23,271 $62,524 Investment securities 28,786 42,825 Accounts receivable, net 12,725 13,182 Inventories 2,710 2,354 Prepaid expenses 712 1,352 Deferred tax asset 4,054 3,743 Other current assets 578 889 Total current assets 72,836 126,869 Investment Securities 17,142 6.485 Property, plant and equipment, net 19,442 20,536 Deferred tax asset 1,742 1,795 Other assets 3,580 3,746 Total assets $114,742 $159,431 LIABILITIES AND SHAREHOLDERS' EQUITY: Current liabilities: Accounts payable $3,335 $3,144 Deferred revenue 16,105 10,705 Payroll and employee benefits 2,373 3,153 Income taxes payable 910 2,295 Other current liabilities 4,279 4,869 Total current liabilities 27,002 24,166 Deferred revenue 685 800 Deferred compensation 1,184 958 Total liabilities 28,871 25,924 Minority interest 167 177 Total shareholders' equity 85,704 133,330 Total liabilities and shareholders' equity $114,742 $159,431 http://www.newscom.com/cgi-bin/prnh/20001108/RENAISSANCELOGO http://photoarchive.ap.org/ DATASOURCE: Renaissance Learning, Inc. CONTACT: Susan Sutherland of Renaissance Learning, Inc., Toll free ofc., +1-877-988-8048, Fax +1-715-424-3414, Web site: http://www.renlearn.com/

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