ALSM Alphasmart (MM)

AlphaSmart Announces Financial Results for First Quarter of 2005 LOS GATOS, Calif., April 14 /PRNewswire-FirstCall/ -- AlphaSmart, Inc. (NASDAQ:ALSM) today announced its financial results for the first quarter ended March 31, 2005. AlphaSmart's first quarter 2005 net revenue was $7.0 million, compared with $8.8 million for the first quarter of 2004. Net loss under generally accepted accounting principles (GAAP) was $1.2 million, or a loss of $0.08 per share on a fully diluted basis, compared with net income of $63,000, or $0.00 per share on a fully diluted basis, for the first quarter of 2004. Weighted average shares outstanding on a fully diluted basis for the first quarter were 14.9 million, compared with 13.8 million for the same quarter a year earlier. On January 25, 2005, AlphaSmart announced a definitive agreement to merge with Renaissance Learning, Inc., a leading provider of learning information systems and school improvement programs for pre-K-12 schools, in a tax-free reorganization valued at approximately $57 million. The two companies filed a Form S-4, including a proxy statement/prospectus and other relevant materials in connection with the proposed merger transaction, with the Securities and Exchange Commission (SEC) on February 25, 2005 and are awaiting SEC approval. The transaction is expected to close in the second quarter of 2005, subject to approval by AlphaSmart stockholders and other customary closing conditions described in the definitive merger agreement. AlphaSmart's net loss under GAAP for the first quarter of 2005 included the effect of $990,000 in costs related to the proposed merger and $417,000 in costs related to litigation and settlement of a lawsuit with Wolf Electronix, Inc. In the aggregate, these one-time costs totaled $1.4 million. AlphaSmart's net income under GAAP for the first quarter of 2004 included the effect of $588,000 in interest and a premium paid on the redemption of mandatorily redeemable preferred stock. AlphaSmart plans to conduct a management teleconference on its first quarter results at 2:00 p.m. PDT / 5:00 p.m. EDT today. This call will be webcast live and archived for all investors on the AlphaSmart website at http://www.alphasmart.com/ir/ . In addition, a phone replay of the call will be available at 719-457-0820, access code 4868811, through April 21, 2005. AlphaSmart intends to discuss financial and other statistical information on today's teleconference. This information will also be available on the company's website at http://www.alphasmart.com/ir/ in the webcast described above. AlphaSmart, Inc. AlphaSmart, Inc. is a provider of affordable, portable personal learning solutions for the K-12 classroom. Its portable computer-companion products are used by students to enhance writing, keyboarding and comprehension, and have been adopted by more than 8,500 school districts in the United States and other countries. Based in Los Gatos, California, the company was founded in 1992 by former Apple Computer engineers. Forward-Looking Statements Safe Harbor This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements related to AlphaSmart's definitive agreement to merge with Renaissance Learning, Inc. and the expected closing of that merger. Any such forward-looking statements may involve risks and uncertainties that could cause actual results or events to differ materially from any future results or events encompassed within the forward-looking statements. Factors that could cause or contribute to such differences include failure to satisfy the closing conditions of the merger agreement, and unexpected delays in closing the merger. AlphaSmart expressly disclaims a duty to provide updates to forward-looking statements, whether as a result of new information, future events or other occurrences. Additional Information and Where to Find It Renaissance Learning filed a registration statement on Form S-4, which included a proxy statement/prospectus and other relevant materials in connection with the proposed merger transaction involving AlphaSmart and Renaissance Learning, with the Securities and Exchange Commission (SEC) on February 25, 2005, as amended on April 13, 2005 (File No. 333-122993). INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THIS FILING BECAUSE IT CONTAINS IMPORTANT INFORMATION REGARDING THE PROPOSED MERGER TRANSACTION. Investors and security holders may obtain free copies of these documents and other documents filed with the SEC at the SEC's website at http://www.sec.gov/. In addition, investors and security holders may obtain free copies of the documents filed with the SEC by AlphaSmart at AlphaSmart's website at http://www.alphasmart.com/ or by contacting AlphaSmart investor relations at or via telephone at 408-355-1029. Investors and security holders may obtain free copies of the documents filed with the SEC by Renaissance Learning by directing such requests to Renaissance Learning, Inc., Attention: Corporate Secretary, 2911 Peach Street, P.O. Box 8036, Wisconsin Rapids, Wisconsin 54995 or via telephone at 715-424-3636. Renaissance Learning, AlphaSmart and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from the stockholders of AlphaSmart in connection with the merger transaction. Information regarding directors and executive officers of AlphaSmart and Renaissance Learning and their respective interests in the proposed transaction will be available in the proxy statement/prospectus of AlphaSmart and Renaissance Learning described above and other relevant materials to be filed with the SEC. NOTE: AlphaSmart is a registered trademark of AlphaSmart, Inc. in the United States and other countries. All other trademarks are the property of their respective owners. ALPHASMART, INC. UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET (In thousands) March 31, December 31, 2005 2004 ASSETS Current assets: Cash and cash equivalents $2,884 $4,070 Accounts receivable, net 3,645 4,052 Inventory 3,601 4,087 Deferred tax assets 498 498 Other current assets 4,599 3,225 Total current assets 15,227 15,932 Property and equipment, net 480 572 Deferred tax assets, net of current portion 285 285 Other assets 2,581 2,193 Total assets $18,573 $18,982 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $504 $750 Accrued liabilities 3,339 2,171 Income taxes payable 348 642 Capital lease obligations, current portion 87 92 Total current liabilities 4,278 3,655 Capital lease obligations, net of current portion 7 24 Other long-term liabilities 18 18 Total liabilities 4,303 3,697 Stockholders' equity 14,270 15,285 Total liabilities and stockholders' equity $18,573 $18,982 ALPHASMART, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (In thousands, except per share amounts) Three Months Ended March 31, March 31, 2005 2004 Net revenue $6,989 $8,786 Cost of revenue 3,653 4,281 Gross margin 3,336 4,505 Operating expenses: Research and development 505 614 Sales and marketing 1,807 1,846 General and administrative 2,332 977 Total operating expenses 4,644 3,437 Income (loss) from operations (1,308) 1,068 Other expenses (20) (623) Profit (loss) before provision for income taxes (1,328) 445 Benefit from (provision for) income taxes 166 (382) Net income (loss) $(1,162) $63 Net income (loss) per share: Basic $(0.08) $0.01 Diluted $(0.08) $0.00 Shares used in computing per share amounts: Basic 14,870 11,630 Diluted 14,870 13,840 DATASOURCE: AlphaSmart, Inc. CONTACT: Gary Lewis, Corporate Controller of AlphaSmart, Inc., or +1-408-355-1029, or Web site: http://www.alphasmart.com/

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