Peoples Educational Holdings, Inc. (NASDAQ: PEDH), a leading
provider of supplemental educational material for the K-12 school
market, today announced its financial results for the three months
ending August 31, 2011.
Brian Beckwith, President and CEO, commented on the results.
"Our overall revenue for the quarter was down 8% from the prior
year. Our Testing, Assessment and Instruction product group revenue
decreased on a year-over-year basis, primarily because of a decline
in revenue generated out of Texas. Texas is currently transitioning
to new standards and tests. Although this change has had a
short-term impact on our revenue, it creates future opportunities
as educators are in need of products supporting these new standards
and tests. We are in the process of releasing new and revised
product in Texas and expect revenue to rebound over the next three
quarters. Revenue from our Literacy product group, the smallest of
our three product groups, was significantly off compared to the
prior year due to a decline in federal funding (primarily ARRA) and
increased competition. College Preparation revenue was relatively
flat compared to prior year. Net Income for the period was $871,000
compared to $1.1 million in the prior year as we continue to
contain costs, and Non-GAAP net income increased $250,000 for the
quarter to $1.2 million. We continue to be encouraged by the
favorable market response to our common core products, and are
excited about the recent release of our new digital products
Measuring Up Insight™ and Measuring Up My Quest™. These products
present timely Internet-delivered solutions that meet the needs of
the students and teachers by providing engaging state-customized
and common core content for assessment, practice, and
instruction."
Financial Results for the Three Months Ended
August 31, 2011
- Total revenue for the quarter ending August 31, 2011 was $12.1
million, compared to $13.1 million during the same period in the
prior year. Test Preparation, Assessment, and Instruction product
group revenue was $4.5 million, compared to $5.1 million in the
prior year. College Preparation revenue was $7.1 million, compared
to $7.2 million in the prior year. Literacy revenue was $403,000,
compared to $850,000 in the prior year.
- Selling and marketing expenses for the quarter declined from
$2.2 million and 17.0% of revenue in the prior year, to $1.9
million and 15.8% of revenue. The decrease is due to lower
commission expense as a result of lower revenue, a decline in
sample expense, and the timing of various promotional
campaigns.
- General and administrative expenses were $1.1 million, a
decline of 7.7% from the prior year.
- Net income for the quarter was $871,000 ($0.20 per basic
share), compared to $1.1 million ($0.24 per basic share) in the
prior year.
- Non-GAAP net income, which excludes nonrecurring costs and
adjusts for the difference between prepublication expenditures and
amortization, increased $250,000 for the quarter to $1.2 million
(see Exhibit 1).
- Free cash flow (cash provided by operating activities reduced
by expenditures for prepublication costs, equipment, and
intangibles; see Exhibit 2) for the quarter was $1.1 million,
compared to $2.9 million in the prior year.
Business Outlook
Looking ahead to fiscal year ending May 31, 2012, Mr. Beckwith
comments, "We expect to resume revenue growth across all product
groups for the balance of the year while focusing on continued
improvements in profitability. We are projecting full year revenue
to be between $30 million and $32 million, net income to be at a
breakeven level, Non-GAAP net income to be between $400,000 and
$600,000, and free cash flow to be between $1.4 to $1.6
million."
Use of Non-GAAP Financial Measures
Some of the measures in this press release are Non-GAAP
financial measures within the meaning of SEC Regulation G. We
believe that presenting Non-GAAP net income and Non-GAAP earnings
per share and Free Cash Flow are useful to investors because they
describe our operating performance and help gauge our ability to
generate cash flow. We use these Non-GAAP measures as important
indicators of our past performance and to plan and forecast
performance in future periods. The Non-GAAP financial information
presented may not be comparable to similarly titled financial
measures used by other companies, and investors should not consider
Non-GAAP financial measures in isolation from, or in substitution
for, financial information presented in compliance with GAAP.
Conference Call
We have scheduled a conference call today, October 6, 2011, at
11:00 A.M. Eastern Time. The call will be hosted by Brian Beckwith,
President and Chief Executive Officer, and Michael DeMarco,
Executive Vice President and Chief Financial Officer. A slide
presentation highlighting points discussed in our conference call
will also be available prior to the conference call through the
investor relations section of our web site at
www.peopleseducation.com.
Live Conference Call
Thursday, October 6, 2011 at 11:00am Eastern Time
US: 800-638-4930
International: +1-617-614-3944
Participant Passcode: 34921295
Live Audio Webcast:
http://phx.corporate-ir.net/playerlink.zhtml?c=184416&s=wm&e=4191662
Webcast Replay (available approximately two hours after
conference call ends through October 6, 2012)
http://phx.corporate-ir.net/playerlink.zhtml?c=184416&s=wm&e=4191662
Dial-in Audio Replay (available approximately two hours after
conference call ends through October 13, 2011)
Dial In: 888-286-8010
International: +1-617-801-6888
Passcode: 28002124
About Peoples Educational Holdings,
Inc.
Peoples Educational Holdings, Inc., is a publisher and marketer
of print and digital educational materials for the K-12 school
market. The Company focuses its efforts in three market areas:
Test Preparation, Assessment, and
Instruction
- Test Preparation and Assessment: We create and sell
state-customized, print and digital, test preparation and
assessment materials that help teachers prepare students for
success in school and for required state proficiency tests for
grades 1-12.
- Instruction: We produce and sell proprietary state-customized
print worktexts and print and web-based delivered assessments for
grades 1-8. These products provide students with in-depth
instruction and practice in reading, language arts, and
mathematics. In addition, our backlist remedial and multicultural
products are included in this group.
Literacy
- We distribute supplemental literacy materials for grades K-8.
These materials include an extensive selection of leveled reading
materials, high interest engaging resources for striving readers,
series that integrate reading, science and social studies, and
selections and strategies for students who are in the process of
learning English.
College Preparation
- We distribute and publish instructional materials that meet the
required academic standards for high school honors, college
preparation, and Advanced Placement courses. We are the exclusive
high school distributor for two major college publishers. We also
publish our own proprietary college preparation supplements and
ancillary materials.
Forward-Looking Statements
This press release contains forward-looking statements (as
defined in section 21E of the Securities Exchange Act of 1934)
regarding the Company and its markets. These forward-looking
statements involve a number of risks and uncertainties, including
(1) changes in demand from customers, (2) changes in product or
customer mix or revenues and in the level of operating expenses,
(3) rapidly changing technologies and the Company's ability to
respond thereto, (4) the impact of competitive products and
pricing, (5) federal, state and local levels of educational
spending, (6) the Company's ability to retain qualified personnel,
(7) the Company's ability to retain its distribution agreements in
the College Preparation and Literacy markets, (8) the sufficiency
of the Company's copyright protection, and (9) the Company's
ability to continue to rely on the services of a third-party
warehouse, and other factors as discussed in the Company's filings
with the SEC. The actual results that the Company achieves may
differ materially from any forward-looking statements due to such
risks and uncertainties. The Company undertakes no obligation to
revise any forward-looking statements in order to reflect events or
circumstances that may arise after the date of this press release.
Readers are urged to carefully review and consider the various
disclosures made by the Company in this press release and the
reports the Company files with the Securities and Exchange
Commission that attempt to advise interested parties of the risks
and factors that may affect the Company's business and results of
operations.
PEOPLES EDUCATIONAL HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS (AUDITED)
(In Thousands-Except Share
Data) UNAUDITED UNAUDITED
August 31, August 31,
2011 May 31, 2011 2010
------------- ------------- -------------
ASSETS
Current Assets
Cash and Cash Equivalents $ 30 $ 18 $ 209
Accounts Receivable, Net of
Allowances for Doubtful
Accounts and Returns 4,022 2,745 5,728
Inventory, Net 3,059 3,196 3,565
Prepaid Expenses and Other 326 322 309
Prepaid Marketing Expenses 573 505 788
Deferred Income Taxes 654 1,136 692
------------- ------------- -------------
Total Current Assets 8,664 7,922 11,291
Equipment - At Cost, Less
Accumulated Depreciation of
$2,517, $2,515 and $2,486,
respectively 324 314 236
------------- ------------- -------------
Other Assets
Deferred Prepublication Costs,
Net 11,757 12,269 13,064
Deferred Income Taxes 472 501 -
Trademarks, Net 255 255 224
Prepaid Expenses and Other 97 108 149
------------- ------------- -------------
Total Other Assets 12,581 13,133 13,437
------------- ------------- -------------
Total Assets $ 21,569 $ 21,369 $ 24,964
============= ============= =============
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current Liabilities
Current Maturities of Long Term
Obligations $ 2,000 $ 2,000 $ 2,000
Accounts Payable 4,695 4,340 8,857
Accrued Compensation 409 394 346
Other Accrued Expenses 496 520 585
Deferred Revenue 448 438 441
------------- ------------- -------------
Total Current Liabilities 8,048 7,692 12,229
Long Term Obligations, Less
Current Maturities 7,165 8,234 5,845
------------- ------------- -------------
Total Liabilities 15,213 15,926 18,074
------------- ------------- -------------
Commitments and Contingencies
Stockholders' Equity
Preferred Stock, authorized
1,500,000 shares; none issued - - -
Common Stock, $0.02 par value;
authorized 8,500,000 shares;
issued, 4,481,434 as of August
31, 2011, May 31, 2011 and
August 31, 2010 90 90 90
Additional Paid In Capital 8,347 8,305 8,154
Accumulated Deficit (2,017) (2,888) (1,290)
Treasury Stock, 16,232 shares,
at cost (64) (64) (64)
------------- ------------- -------------
Total Stockholders' Equity 6,356 5,443 6,890
------------- ------------- -------------
Total Liabilities and
Stockholders' Equity $ 21,569 $ 21,369 $ 24,964
============= ============= =============
PEOPLES EDUCATIONAL HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands- Except Share Data)
Three Months Ended
August 31,
2011 2010
(Unaudited) (Unaudited)
------------ ------------
Revenue, Net $ 12,051 $ 13,148
Cost of Revenue
Direct Costs 6,223 6,666
Prepublication Cost Amortization 1,367 1,294
------------ ------------
Total 7,590 7,960
------------ ------------
Gross Profit 4,461 5,188
Selling, General and Administrative Expenses 2,995 3,409
------------ ------------
Income from Operations 1,466 1,779
Other Expenses, Net 13 8
Interest Expense 70 101
------------ ------------
Total 83 109
Income Before Income Taxes 1,383 1,670
Income Tax Expense 512 618
------------ ------------
Net Income $ 871 $ 1,052
============ ============
Net Income per Common Share
Basic $ 0.20 $ 0.24
Diluted $ 0.19 $ 0.24
Weighted-average Number of Common Shares
Outstanding
Basic 4,465 4,464
Diluted 4,471 4,464
PEOPLES EDUCATIONAL HOLDINGS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (AUDITED)
(In Thousands)
Three Months Ended
August 31,
2011 2010
----------- -----------
Cash Flows From Operating Activities
Net Income $ 871 $ 1,052
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities
Depreciation 35 42
Amortization of Prepublication Costs and
Trademarks 1,371 1,301
Stock-Based Compensation 41 30
Market Value Adjustment of Interest Rate Swap (5) 23
Deferred Income Taxes 512 618
Changes in Assets and Liabilities
Accounts Receivable (1,277) (2,738)
Inventory 137 26
Prepaid Expenses and Other 7 (27)
Prepaid Marketing Expenses (68) (146)
Accounts Payable and Accrued Expenses 346 4,204
Deferred Revenue 10 37
----------- -----------
Net Cash Provided By Operating Activities 1,980 4,422
----------- -----------
Cash Flows From Investing Activities
Purchases of Equipment (46) (29)
Expenditures for Intangibles (3) (42)
Expenditures for Prepublication Costs (855) (1,494)
----------- -----------
Net Cash Used In Investing Activities (904) (1,565)
----------- -----------
Cash Flows From Financing Activities
Net Payments Under Line of Credit (564) (2,262)
Exercise of Stock Options - 4
Principal Payments On Long Term Debt (500) (500)
----------- -----------
Net Cash Used In Financing Activities (1,064) (2,758)
----------- -----------
Net Increase in Cash and Cash Equivalents 12 99
Cash and Cash Equivalents
Beginning of Period 18 110
----------- -----------
End of Period $ 30 $ 209
=========== ===========
Supplemental Cash Flow Information
Cash Payments for:
Interest $ 74 $ 66
=========== ===========
Exhibit 1
Reconciliation of Net Income to Non-GAAP Adjusted Net Income
(In Thousands - Except Share Data)
Three Months Ended
8/31/2011 8/31/2010
----------- -----------
Net Income $ 871 $ 1,052
Amortization of Prepublications Costs 1,367 1,294
Cash Expenditures for Prepublication Costs (855) (1,494)
Market Value Adjustment of Interest Rate Swap (5) 23
Adjusted Income Tax Expense (Benefit) (188) 65
----------- -----------
Non-GAAP Net Income $ 1,190 $ 940
=========== ===========
Basic Weighted Shares Outstanding 4,465 4,464
Non-GAAP Earnings Per Share $ 0.27 $ 0.21
Exhibit 2
Reconciliation of Net Cash Provided by Operating Activities to Free Cash
Flow
(In Thousands)
Three Months Ended
8/31/2011 8/31/2010
----------- -----------
Net Cash Provided by Operating Activities $ 1,980 $ 4,422
Cash Expenditures for Equipment and Intangibles (49) (71)
Cash Expenditures for Prepublication Costs (855) (1,494)
----------- -----------
Free Cash Flow $ 1,076 $ 2,857
=========== ===========
Contact: Peoples Education, Inc. Saddle Brook, NJ 07663
Press Contact: Victoria Kiely Phone: 201-712-0090 ext. 215 Email
Contact
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