AlphaSmart Announces Year-End 2004 Results

AlphaSmart Announces Year-End 2004 Results 


LOS GATOS, Calif., Feb. 8  /PRNewswire-FirstCall/ -- AlphaSmart, Inc.
(NASDAQ:ALSM) today announced its unaudited financial results for the fourth
quarter and fiscal year ended December 31, 2004.  Final results were consistent
with the preliminary expectations disclosed by the company on January 25, 2005.

AlphaSmart's fourth quarter 2004 net revenue was $6.8 million, compared with
$8.3 million for the fourth quarter of 2003.  Net loss under generally accepted
accounting principles (GAAP) was $220,000, or a loss of $0.01 per share on a
fully diluted basis, compared with net income of $413,000, or $0.04 per share
on a fully diluted basis, for the fourth quarter of 2003.

The fourth quarter 2004 net loss under GAAP included the effects of charges of
$160,000 for restructuring costs, $100,000 for legal costs related to
litigation, and $115,000 due to a change in forecasted volume related to
product royalties under AlphaSmart's license agreement with PalmSource, Inc.
for the Palm OS operating system.  In the aggregate, these charges accounted
for $0.02 per share on a fully diluted basis.

As a result of AlphaSmart's initial public offering in February 2004, the
number of weighted average shares outstanding on a fully diluted basis
increased by 35% to 14.8 million shares for the fourth quarter of 2004 from
11.0 million shares for the same quarter a year earlier.

For the fiscal year ended December 31, 2004, AlphaSmart's net revenue was $35.5
million, compared with $38.9 million for 2003.  Net income under GAAP was $2.2
million, or $0.15 per share on a fully diluted basis, compared with $3.4
million, or $0.31 per share on a fully diluted basis, for 2003.  Net income for
2004 included the effects of $375,000 in aggregate charges for the fourth
quarter and $588,000 in interest and a premium paid on the redemption of
mandatorily redeemable preferred stock in the first quarter, which together
accounted for $0.06 per share on a fully diluted basis.

On January 25, 2005, AlphaSmart announced a definitive agreement to merge with
Renaissance Learning, Inc. (NASDAQ:RLRN), 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 transaction
is expected to be completed in the second quarter of 2005, subject to approval
by AlphaSmart stockholders, government regulatory review, and other customary
closing conditions described in the definitive merger agreement.

AlphaSmart plans to conduct a management teleconference on its year-end results
at 2:00 p.m. PST / 5:00 p.m. EST 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 [phone], access code 2815545, through February 15, 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 8,000 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 financial
results for the fourth quarter and fiscal year ended December 31, 2004 and 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 the possibility that final results for the fourth quarter
and fiscal year ended December 31, 2004 could vary, perhaps materially,
following completion of the audit of our financial statements by our
independent registered public accounting firm, 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

AlphaSmart and Renaissance Learning intend to file a registration statement on
Form S-4, which will include a proxy statement/prospectus and other relevant
materials in connection with the proposed merger transaction involving
AlphaSmart and Renaissance Learning.  INVESTORS AND SECURITY HOLDERS ARE URGED
TO READ THIS FILING WHEN IT BECOMES AVAILABLE BECAUSE IT WILL CONTAIN 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 when they become available 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 [phone]. 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 [phone].

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.
                  CONDENSED CONSOLIDATED BALANCE SHEETS
                              (in thousands)

                                                        Dec. 31,   Dec. 31,
                                                         2004       2003
                                                      (unaudited)
  ASSETS
  Current assets:
    Cash and cash equivalents                            $4,070    $2,285
    Accounts receivable, net                              4,052     4,405
    Inventory                                             4,087     2,818
    Deferred tax assets                                     498       572
    Other current assets                                  3,225       898
      Total current assets                               15,932    10,978

  Property and equipment, net                               572       709
  Deferred tax assets, net of current portion               285       361
  Other assets                                            2,193     1,644

  Total assets                                          $18,982   $13,692

  LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK
   AND STOCKHOLDERS' EQUITY (DEFICIT)
  Current liabilities:
    Accounts payable                                       $750    $1,892
    Accrued liabilities                                   2,171     3,957
    Income taxes payable                                    642       625
    Borrowings under loan facility, current portion          --     2,680
    Capital lease obligations, current portion               92        76
      Total current liabilities                           3,655     9,230

  Borrowings against line of credit                          --       873
  Borrowings under loan facility, net of current portion     --     1,340
  Capital lease obligations, net of current portion          24       106
  Other long-term liabilities                                18        60
  Mandatorily redeemable preferred stock                     --     9,747
  Total liabilities                                       3,697    21,356

  Redeemable convertible preferred stock                     --    13,468

  Stockholders' equity (deficit)                         15,285  (21,132)
  Total liabilities, redeemable convertible preferred
   stock and stockholders' equity (deficit)             $18,982   $13,692


                             ALPHASMART, INC.
             CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                 (in thousands, except per share amounts)

                                    Three Months Ended  Twelve Months Ended
                                    Dec. 31,  Dec. 31,   Dec. 31,  Dec. 31,
                                      2004      2003       2004      2003
                                        (unaudited)    (unaudited)

  Net revenue                       $6,805    $8,264    $35,461  $38,864
  Cost of revenue                    3,777     3,935     17,149   18,803
  Gross margin                       3,028     4,329     18,312   20,061

  Operating expenses:
    Research and development           567       768      2,410    3,177
    Sales and marketing              1,750     1,557      7,084    5,971
    General and administrative       1,269     1,067      4,613    4,163
      Total operating expenses       3,586     3,392     14,107   13,311
  Operating profit (loss)            (558)       937      4,205    6,750
  Other income (expense), net           48     (248)      (580)   (1,043)

  Profit (loss) before income taxes  (510)       689      3,625    5,707
  Provision for (benefit from)
   income taxes                      (290)       276      1,413     2,283
  Net income (loss)                 $(220)      $413     $2,212   $3,424

  Net income (loss) per share:
    Basic                          $(0.01)     $0.07      $0.16    $0.62
    Diluted                        $(0.01)     $0.04      $0.15    $0.31

  Shares used in computing per
   share amounts:
    Basic                           14,800     5,597     13,803    5,550
    Diluted                         14,800    10,964     14,727   10,955


DATASOURCE: AlphaSmart, Inc.



CONTACT:  Investors, James M. Walker, Vice President, Chief Financial

Officer and Chief Operating Officer of AlphaSmart, Inc., [phone], or





Web site:  http://www.alphasmart.com/ 

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