SOURCE: Varsity Group Inc.

May 15, 2007 16:47 ET

Varsity Group Inc. Reports First Quarter Results

WASHINGTON, DC -- (MARKET WIRE) -- May 15, 2007 -- Varsity Group Inc. (NASDAQ: VSTY) today reported financial results for the first quarter of 2007. Revenue decreased 13.8% to $1.9 million from $2.2 million for the three months ended March 31, 2007 compared to the same period in 2006. Pre-tax loss was $2.8 million, a 35.7% increase from the pre-tax loss of $2.0 million recorded for the first quarter of 2006. Net loss was $2.8 million, or $0.15 per diluted share, for the three months ending March 31, 2007, compared to net loss of $1.2 million, or $0.07 per diluted share, for the three months ending March 31, 2006. Varsity Group Chief Financial Officer and Interim President and CEO Jim Craig commented, "While the first quarter is and has historically been insignificant in terms of revenue, many of the cost reduction measures implemented at year end 2006 had significant impact in reducing our cost structure for the first quarter of 2007."

A conference call is scheduled at 5:00 P.M. EST today to discuss results. The participant dial-in number for the conference call is (800) 565-5442. The participant code is 3731427. This conference call will be recorded and available for replay from the Investors section of our website located at http://www.varsitygroup.com.

ABOUT VARSITY GROUP INC.

Varsity Group Inc. is an outsource solution provider to education institutions nationwide. Under the brands Varsity Books and Campus Outfitters, Varsity provides solutions that enable schools to focus on their core educational mission. Varsity Group's solutions include online textbook, school supply and full-service school uniform services.

"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, 2006.


                            VARSITY GROUP INC.
        CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
                  (in thousands, except per share data)



                                                        Three Months Ended
                                                             March 31,
                                                        ------------------
                                                          2007      2006
                                                        --------  --------
Net sales:
     Textbooks                                          $  1,217  $  1,468
     Uniforms                                                509       521
     Shipping                                                189       232
                                                        --------  --------
          Total net sales                                  1,915     2,221
                                                        --------  --------

Operating expenses:
     Cost of textbooks                                       805     1,114
     Cost of uniforms                                        246       224
     Cost of shipping                                        253       251
     Sales and marketing                                   1,532     1,240
     General and administrative                            1,795     1,505
     Amortization of acquired intangibles                     --        39
                                                        --------  --------
          Total operating expenses                         4,631     4,373
                                                        --------  --------

Loss from operations                                      (2,716)   (2,152)
                                                        --------  --------

Other (expense) income, net:
     Interest income                                          32       118
     Interest expense                                        (19)       --
     Other (expense) income                                  (56)        1
                                                        --------  --------
         Other (expense) income, net                         (43)      119
                                                        --------  --------

Loss before income taxes                                  (2,759)   (2,033)
Income tax (expense) benefit                                  (2)      873
                                                        --------  --------
Net loss                                                $ (2,761) $ (1,160)
                                                        ========  ========
Net loss per share:
     Basic and diluted                                  $  (0.15) $  (0.07)
                                                        ========  ========
Weighted average shares:
     Basic and diluted                                    18,424    17,146
                                                        ========  ========




                            VARSITY GROUP INC.
            CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
                    (in thousands, except par values)


                                                  March 31,   December 31,
                                                    2007          2006
                                                ------------  ------------
ASSETS
Current Assets:
     Cash and cash equivalents                  $         55  $        436
     Restricted cash                                   2,031            --
     Short-term investments                               --         2,498
     Accounts receivable, net of allowance for
      doubtful accounts of $184 at March 31,
      2007 and $203 at December 31, 2006,
      respectively                                       737         1,673
     Inventory                                         8,957         8,636
     Deferred income taxes                                --            --
     Other                                             1,364         2,532
                                                ------------  ------------
           Total current assets                       13,144        15,775

Property, plant and equipment, net of
 depreciation                                            892         1,156
Software developed for internal use, net of
 amortization                                          2,175         2,090
Intangible assets, net of amortization                     7             8
Goodwill                                                 511           511
Long-term investments                                     --         3,949
Other assets                                             161           159
                                                ------------  ------------
          Total assets                          $     16,890  $     23,648
                                                ============  ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
     Accounts payable                           $      1,822  $      2,384
     Line of credit                                    2,349            --
     Margin loan                                          --         4,205
     Other accrued expenses and other current
      liabilities                                        851         2,654
     Taxes payable                                        57            56
                                                ------------  ------------
          Total current liabilities                    5,079         9,299

Long-term liabilities:
     Other non-current liabilities                       157           157
                                                ------------  ------------
          Total liabilities                            5,236         9,456
                                                ------------  ------------

Commitments and contingencies
Stockholders' equity:
     Preferred stock:  $.0001 par value, 20,000
      shares authorized; 0 shares issued and
      outstanding at March 31, 2007 and
      December 31, 2006, respectively                     --            --
     Common stock, $.0001 par value, 60,000
      shares authorized, 19,673 and 19,575
      shares issued and 18,458 and 18,360
      shares outstanding at March 31, 2007 and
      December 31, 2006, respectively                      2             2
     Additional paid-in capital                       90,941        90,721
     Accumulated unrealized loss on securities            --            (2)
     Accumulated deficit                             (77,556)      (74,796)
     Treasury stock, $.0001 par value, 1,215
      shares at March 31, 2007 and December 31,
      2006, respectively                              (1,733)       (1,733)
                                                ------------  ------------
     Total stockholders' equity                       11,654        14,192
                                                ------------  ------------
     Total liabilities and stockholders' equity $     16,890  $     23,648
                                                ============  ============

Contact Information

  • Contact:
    Jim Craig
    Chief Financial Officer
    Email Contact
    202-349-1231