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 and six
months ended November 30, 2011.
Brian Beckwith, President and CEO, commented on the results,
"Revenue for the six months ended November 30, 2011 continues to
reflect challenges in the supplemental education material market as
schools continue to react to budgetary shortfalls and have been
delaying or reducing orders, and in some instances not purchasing
new materials for the classrooms. These circumstances continue to
have an adverse impact on our revenue. Net revenue for the six
month period ended November 30, 2011 was $16.6 million, a decline
of $2.7 million and 13.9% from the same period in the prior year.
Although all three of our product groups experienced revenue
declines, the Test Preparation, Assessment and Instruction product
group accounted for $1.8 million of the decline. This is primarily
a result of a decline in revenue generated out of Texas. Texas is
currently transitioning to new standards and tests; therefore,
schools and districts have reduced their expenditures. 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. In addition, we have
recently released materials for the Texas End-of-Course (EOC) exit
exams. This is the first year these EOC tests will count, and there
is a significant amount of anxiety with educators regarding
students' preparation for these tests. Initial market feedback on
our EOC products has been favorable, and we are optimistic about
the revenue potential for these products for the balance of fiscal
2012 and beyond."
Financial and Operating Results for the Six
Months Ended November 30, 2011
- Total revenue was $16.6 million, compared to $19.3 million
during the same period in the prior year. Test Preparation,
Assessment and Instruction product group revenue was $7.3 million,
compared to $9.1 million in the prior year. College Preparation
revenue was $8.7 million, compared to $9.0 million in the prior
year. Literacy revenue was $601,000, compared to $1.2 million in
the prior year.
- Selling and marketing expenses declined from $4.6 million and
23.6% of revenue in the prior year, to $3.7 million and 22.5% of
revenue in the current year.
- General and administrative expenses were $2.1 million, a
decline of 6.1% from the prior year.
- Entered into a new multi-year distribution agreement with one
of our existing college publishers.
- End-of-Course materials in Texas for Algebra, Biology, English
and Geometry were released.
- Net income for the six months was $2,000, compared to $471,000
in the prior year. However, Non-GAAP net income, which excludes
nonrecurring costs and adjusts for the difference between
prepublication expenditures and amortization, increased $480,000 to
$595,000 (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 six months was $1.4 million,
compared to $2.2 million in the prior year.
Business Outlook
"Looking ahead to the full year, despite the softness in revenue
for the second quarter, we are reaffirming our previously issued
guidance. We anticipate revenue to be between $30 million and $32
million, net income to be at a break-even level, Non-GAAP net
income to be between $400,000 and $600,000, and free cash flow to
be between $1.4 and $1.6 million," commented Mr. Beckwith.
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, January 12, 2012, 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, January 12, 2012 at 11:00 A.M. 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 January 12, 2013)
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 19, 2012)
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
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands-Except Share Data) UNAUDITED UNAUDITED
November May 31, November
30, 2011 2011 30, 2010
---------- ---------- ----------
ASSETS
Current Assets
Cash and Cash Equivalents $ 24 $ 18 $ 34
Accounts Receivable, Net of Allowances
for Doubtful Accounts and Returns 1,613 2,745 2,190
Inventory, Net 3,143 3,196 3,673
Prepaid Expenses and Other 299 322 320
Prepaid Marketing Expenses 521 505 625
Deferred Income Taxes 476 1,136 632
---------- ---------- ----------
Total Current Assets 6,076 7,922 7,474
Equipment - At Cost, Less Accumulated
Depreciation of $2,532, $2,515 and
$2,528, respectively 313 314 206
---------- ---------- ----------
Other Assets
Deferred Prepublication Costs, Net 11,319 12,269 13,445
Deferred Income Taxes 1,160 501 402
Trademarks, Net 265 255 226
Prepaid Expenses and Other 81 108 131
---------- ---------- ----------
Total Other Assets 12,825 13,133 14,204
---------- ---------- ----------
Total Assets $ 19,214 $ 21,369 $ 21,884
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current Maturities of Long Term
Obligations $ 2,000 $ 2,000 $ 2,000
Accounts Payable 3,627 4,340 6,097
Accrued Compensation 259 394 199
Other Accrued Expenses 456 520 438
Deferred Revenue 498 438 534
---------- ---------- ----------
Total Current Liabilities 6,840 7,692 9,268
Long Term Obligations, Less Current
Maturities 6,844 8,234 6,315
---------- ---------- ----------
Total Liabilities 13,684 15,926 15,583
---------- ---------- ----------
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
shares for all periods reported 90 90 90
Additional Paid In Capital 8,390 8,305 8,146
Accumulated Deficit (2,886) (2,888) (1,871)
Treasury Stock, 16,232 shares, at cost (64) (64) (64)
---------- ---------- ----------
Total Stockholders' Equity 5,530 5,443 6,301
---------- ---------- ----------
Total Liabilities and Stockholders'
Equity $ 19,214 $ 21,369 $ 21,884
========== ========== ==========
PEOPLES EDUCATIONAL HOLDINGS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In Thousands- Except Per Share Data)
Three Months Ended Six Months Ended
November 30, November 30,
2011 2010 2011 2010
--------- --------- --------- ---------
Revenue, Net $ 4,568 $ 6,156 $ 16,619 $ 19,304
Cost of Revenue
Direct Costs 1,769 2,399 7,992 9,065
Prepublication Cost Amortization 1,258 1,239 2,625 2,533
--------- --------- --------- ---------
Total 3,027 3,638 10,617 11,598
--------- --------- --------- ---------
Gross Profit 1,541 2,518 6,002 7,706
Selling, General and
Administrative Expenses 2,832 3,374 5,827 6,783
--------- --------- --------- ---------
Income (Loss) from Operations (1,291) (856) 175 923
Other Expenses, Net 9 9 23 17
Interest Expense 79 58 149 159
--------- --------- --------- ---------
Total 88 67 172 176
Income (Loss) Before Income Taxes (1,379) (923) 3 747
Income Tax Expense (Benefit) (510) (342) 1 276
--------- --------- --------- ---------
Net Income (Loss) $ (869) $ (581) $ 2 $ 471
========= ========= ========= =========
Net Income (Loss) per Common Share
Basic $ (0.19) $ (0.13) $ 0.00 $ 0.11
Diluted $ (0.19) $ (0.13) $ 0.00 $ 0.11
Weighted-average Number of Common
Shares Outstanding
Basic 4,465 4,465 4,465 4,464
Diluted 4,465 4,465 4,475 4,465
PEOPLES EDUCATIONAL HOLDINGS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In Thousands)
Six Months Ended
November 30,
2011 2010
---------- ----------
Cash Flows From Operating Activities
Net Income $ 2 $ 471
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities
Depreciation 71 84
Amortization of Prepublication Costs and
Trademarks 2,635 2,544
Stock-Based Compensation 85 22
Market Value Adjustment of Interest Rate Swap (8) 16
Deferred Income Taxes 1 276
Changes in Assets and Liabilities
Accounts Receivable 1,132 800
Inventory 53 (82)
Prepaid Expenses and Other 50 (20)
Prepaid Marketing Expenses (16) 17
Accounts Payable and Accrued Expenses (912) 1,150
Deferred Revenue 60 130
---------- ----------
Net Cash Provided By Operating Activities 3,153 5,408
---------- ----------
Cash Flows From Investing Activities
Purchases of Equipment (71) (41)
Expenditures for Intangibles (19) (48)
Expenditures for Prepublication Costs (1,675) (3,114)
---------- ----------
Net Cash Used In Investing Activities (1,765) (3,203)
---------- ----------
Cash Flows From Financing Activities
Net Payments Under Line of Credit (382) (1,285)
Exercise of Stock Options - 4
Principal Payments On Long Term Debt (1,000) (1,000)
---------- ----------
Net Cash Used In Financing Activities (1,382) (2,281)
---------- ----------
Net Increase (Decrease) in Cash and Cash
Equivalents 6 (76)
Cash and Cash Equivalents
Beginning of Period 18 110
---------- ----------
End of Period $ 24 $ 34
========== ==========
Supplemental Cash Flow Information
Cash Payments for:
Interest $ 157 $ 135
========== ==========
Exhibit 1
---------------------------------------------------------------------------
Reconciliation of Net Income (Loss) to Non-GAAP Adjusted Net Income (Loss)
---------------------------------------------------------------------------
(In Thousands - Except Per Share Data)
Three Months Ended Six Months Ended
11/30/2011 11/30/2010 11/30/2011 11/30/2010
---------- ---------- ---------- ----------
Net Income (Loss) $ (869) $ (581) $ 2 $ 471
Amortization of
Prepublications Costs 1,258 1,239 2,625 2,533
Cash Expenditures for
Prepublication Costs (820) (1,620) (1,675) (3,114)
Market Value Adjustment of
Interest Rate Swap (3) (7) (8) 16
Adjusted Income Tax Expense
(Benefit) (161) 144 (349) 209
---------- ---------- ---------- ----------
Non-GAAP Net Income (Loss) $ (595) $ (825) $ 595 $ 115
========== ========== ========== ==========
Basic Weighted Shares
Outstanding 4,465 4,465 4,465 4,464
Non-GAAP Earnings Per Share $ (0.13) $ (0.18) $ 0.13 $ 0.03
Exhibit 2
---------------------------------------------------------------------------
Reconciliation of Net Cash Provided by Operating Activities to Free Cash
Flow
---------------------------------------------------------------------------
(In Thousands)
Three Months Ended Six Months Ended
11/30/2011 11/30/2010 11/30/2011 11/30/2010
---------- ---------- ---------- ----------
Net Cash Provided by
Operating Activities $ 1,173 $ 986 $ 3,153 $ 5,408
Cash Expenditures for
Equipment and Intangibles (41) (18) (90) (89)
Cash Expenditures for
Prepublication Costs (820) (1,620) (1,675) (3,114)
---------- ---------- ---------- ----------
Free Cash Flow $ 312 $ (652) $ 1,388 $ 2,205
========== ========== ========== ==========
Contact: Peoples Education, Inc. Saddle Brook, NJ 07663
Press Contact: Victoria Kiely Phone: 201-712-0090 ext. 215 Email
Contact
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