Cengage Learning is present in six educational markets: academic, career, school, research, professional, and international. Operations are divided into two businesses: Domestic and International. Domestic concentrates on the US, where educational solutions are provided for the academic, career, school, and professional market. Adaptations of these domestic products are distributed in over 110 countries by Cengage’s International operations.

Key Company Developments in 2012 & 2013

Financial:

While Cengage Learning saw both revenues and earnings rise, the company is still struggling with debts amounting to 5.7 billion USD for the year ending June 30, 2012. For fiscal year 2012, the domestic segment generated approximately 86.2% of total revenues and 95.9% adjusted EBITDA.

Cengage Learning reported an operating loss of 2.77 billion USD for the three months ending March 31, 2012, compared to a loss of 12.3 million USD the previous year. Sales rose 4.8% to 353.4 million USD.

Ownership, Mergers & Acquisition, Internal Organization:

Both Ron Dunn and David Shaffer announced they would step down from their current positions in July 2012. Ron Dunn, who was CEO since 2007, became Chairman to make way for a younger chief officer. David Shaffer retired as company chairman on September 30, 2012. Julian Drinkall was appointed president and CEO of Cengage EMEA and India business, replacing Jill Jones.

Cengage had to shift a debt of approximately 5.7 billion USD with 500 million USD annual interest. Following Dunn’s departure, the company announced they would appeal to investors with a debt maturity extension program. However, in May 2013, new CEO Michael Hansen (as of September 2012) discussed restructuring options with analysts including a possible voluntary Chapter 11 bankruptcy filing, since the company may not have enough liquidity to repay. Cengage Learning had already appointed restructuring advisers to repay parts of its 5.3 billion USD gross debt load. Cengage was bought by Apax in 2007 for 7.75 billion USD, and a private equity owner “bought up more than 800 million USD of debt in the struggling publisher, potentially setting the stage for an effort to keep control of the company even if Cengage files for bankruptcy”, according to the Wall Street Journal. Analysts assume that Apax could be interested in merging Cengage with the former education unit of McGraw Hill that recently was bought by Apollo, which also holds Cengage debt.

International:

For fiscal year 2012, the international segment generated approximately 13.8% and 6.1%, respectively, of total revenues and adjusted EBITDA.

As a foreign educational publisher, Cengage has a strong position within the Chinese ELT market. Cengage Lerarning operates in Asia/Pacific, EMEA (Europe, Middle East and Africa), and Latin America, with physical locations in Asia (based in Singapore), EMEA (based in Andover, England), Australia (based in Melbourne), and Latin America (based in Mexico City).

Digital:

For fiscal year 2012, total domestic digital product sales comprised approximately 37.5% of total domestic revenue compared with 31.9% for fiscal year 2011, with digital product sales during fiscal year 2012 for key digital products in the core two- and four-year college and career markets increasing by over 52.0% compared to the prior year.

In the research market, Cengage digitized substantially all of its reference content and derives approximately 70% of revenue in the research market from digital products.

Bestselling Authors & Titles:

Leading authors include N. Gregory Mankiw, former Chairman of the President’s Council of Economic Advisers and among the most respected and well-known authors of texts in the introductory economics market, and James Stewart, the author of a best-selling calculus title now in its 7th edition.

Earlier Developments:

2011:

Revenues were lower in fiscal year 2011 (ending June 30) than 2010, with 1.88 billion USD against 2.02 billion USD. The majority of revenue is from international business, which offset declines in domestic academic and career products resulting from “changes in customer ordering patterns, price pressure within career, volume pressure from the used and textbook rental initiatives of book retailers and some specific adoption losses.”

In 2011, Cengage Learning acquired the National Geographic Society’s School Publishing, which included the company’s digital and print publishing, English language training products, Science series, and other publishing brands. Cengage sold businesses in Australia and New Zealand.

Cengage Learning International competes in high-growth markets such as Asia and Pacific, Europe, Middle East, Africa, and Latin America, with varied results in fiscal 2011: while Asia and Australia experienced growth in the academic and school market, respectively, lower sales of the English Language Training products caused decreases in Latin America, Europe, Middle East and Africa.

The sales of digital products made up 32% of domestic revenue. Beside digital platforms such as Apila and SAM, Cengage Learning transformed its reference content into the digital word, establishing Gale as a major brand. Most of the revenue in the library reference segment came from digital solutions. Gale applies the so-called “digital-first” product development model by launching digital products ahead of printed derivations. Almost three-quarters of its revenue is from recurring subscriptions.

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