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| 8-K - FORM 8-K - PEOPLES EDUCATIONAL HOLDINGS | v236509_8k.htm |
EXHIBIT 99.1 – Press release
For Release Before Market Opens
October 6, 2011
Peoples Educational Holdings, Inc. Reports Fiscal First Quarter Results
Saddle Brook, New Jersey, October 6, 2011 – 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
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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.
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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.
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General and administrative expenses were $1.1 million, a decline of 7.7% from the prior year.
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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.
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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).
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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.
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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
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US:
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800-638-4930
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International:
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+1-617-614-3944
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Participant Passcode:
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34921295
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Live Audio Webcast:
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http://phx.corporate-ir.net/playerlink.zhtml?c=184416&s=wm&e=4191662
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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)
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Dial
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888-286-8010
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International:
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+1-617-801-6888
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Passcode:
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28002124
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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
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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.
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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.
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Literacy
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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.
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College Preparation
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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.
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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.
Contact:
Peoples Education, Inc., Saddle Brook, NJ 07663
Press Contact: Victoria Kiely
Phone: 201-712-0090 ext. 215
investorrelations@peoplesed.com
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PEOPLES EDUCATIONAL HOLDINGS, INC. AND SUBSIDIARY
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CONSOLIDATED BALANCE SHEETS (AUDITED)
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(In Thousands-Except Share Data)
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UNAUDITED
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UNAUDITED
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August 31, 2011
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May 31, 2011
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August 31, 2010
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ASSETS
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Current Assets
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Cash and Cash Equivalents
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$ | 30 | $ | 18 | $ | 209 | ||||||
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Accounts Receivable, Net of Allowances for
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Doubtful Accounts and Returns
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4,022 | 2,745 | 5,728 | |||||||||
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Inventory, Net
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3,059 | 3,196 | 3,565 | |||||||||
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Prepaid Expenses and Other
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326 | 322 | 309 | |||||||||
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Prepaid Marketing Expenses
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573 | 505 | 788 | |||||||||
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Deferred Income Taxes
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654 | 1,136 | 692 | |||||||||
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Total Current Assets
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8,664 | 7,922 | 11,291 | |||||||||
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Equipment - At Cost, Less Accumulated Depreciation
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of $2,517, $2,515 and $2,486, respectively
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324 | 314 | 236 | |||||||||
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Other Assets
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Deferred Prepublication Costs, Net
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11,757 | 12,269 | 13,064 | |||||||||
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Deferred Income Taxes
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472 | 501 | - | |||||||||
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Trademarks, Net
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255 | 255 | 224 | |||||||||
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Prepaid Expenses and Other
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97 | 108 | 149 | |||||||||
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Total Other Assets
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12,581 | 13,133 | 13,437 | |||||||||
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Total Assets
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$ | 21,569 | $ | 21,369 | $ | 24,964 | ||||||
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LIABILITIES AND STOCKHOLDERS' EQUITY
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Current Liabilities
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Current Maturities of Long Term Obligations
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$ | 2,000 | $ | 2,000 | $ | 2,000 | ||||||
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Accounts Payable
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4,695 | 4,340 | 8,857 | |||||||||
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Accrued Compensation
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409 | 394 | 346 | |||||||||
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Other Accrued Expenses
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496 | 520 | 585 | |||||||||
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Deferred Revenue
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448 | 438 | 441 | |||||||||
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Total Current Liabilities
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8,048 | 7,692 | 12,229 | |||||||||
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Long Term Obligations, Less Current Maturities
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7,165 | 8,234 | 5,845 | |||||||||
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Total Liabilities
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15,213 | 15,926 | 18,074 | |||||||||
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Commitments and Contingencies
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Stockholders' Equity
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Preferred Stock, authorized 1,500,000 shares; none issued
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- | - | - | |||||||||
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Common Stock, $0.02 par value; authorized 8,500,000 shares;
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issued, 4,481,434 as of August 31, 2011, May 31, 2011 and August 31, 2010
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90 | 90 | 90 | |||||||||
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Additional Paid In Capital
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8,347 | 8,305 | 8,154 | |||||||||
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Accumulated Deficit
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(2,017 | ) | (2,888 | ) | (1,290 | ) | ||||||
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Treasury Stock, 16,232 shares, at cost
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(64 | ) | (64 | ) | (64 | ) | ||||||
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Total Stockholders' Equity
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6,356 | 5,443 | 6,890 | |||||||||
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Total Liabilities and Stockholders' Equity
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$ | 21,569 | $ | 21,369 | $ | 24,964 | ||||||
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PEOPLES EDUCATIONAL HOLDINGS, INC. AND SUBSIDIARY
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CONSOLIDATED STATEMENTS OF INCOME
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(In Thousands- Except Share Data)
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Three Months Ended
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August 31,
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2011
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2010
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(Unaudited)
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(Unaudited)
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Revenue, Net
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$ | 12,051 | $ | 13,148 | ||||
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Cost of Revenue
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Direct Costs
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6,223 | 6,666 | ||||||
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Prepublication Cost Amortization
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1,367 | 1,294 | ||||||
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Total
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7,590 | 7,960 | ||||||
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Gross Profit
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4,461 | 5,188 | ||||||
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Selling, General and Administrative Expenses
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2,995 | 3,409 | ||||||
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Income from Operations
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1,466 | 1,779 | ||||||
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Other Expenses, Net
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13 | 8 | ||||||
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Interest Expense
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70 | 101 | ||||||
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Total
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83 | 109 | ||||||
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Income Before Income Taxes
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1,383 | 1,670 | ||||||
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Income Tax Expense
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512 | 618 | ||||||
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Net Income
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$ | 871 | $ | 1,052 | ||||
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Net Income per Common Share
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Basic
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$ | 0.20 | $ | 0.24 | ||||
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Diluted
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$ | 0.19 | $ | 0.24 | ||||
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Weighted-average Number of Common Shares Outstanding
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Basic
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4,465 | 4,464 | ||||||
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Diluted
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4,471 | 4,464 | ||||||
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PEOPLES EDUCATIONAL HOLDINGS, INC. AND SUBSIDIARY
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (AUDITED)
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(In Thousands)
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Three Months Ended
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August 31,
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2011
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2010
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Cash Flows From Operating Activities
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Net Income
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$ | 871 | $ | 1,052 | ||||
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Adjustments to Reconcile Net Income to Net Cash
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Provided by Operating Activities
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Depreciation
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35 | 42 | ||||||
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Amortization of Prepublication Costs and Trademarks
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1,371 | 1,301 | ||||||
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Stock-Based Compensation
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41 | 30 | ||||||
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Market Value Adjustment of Interest Rate Swap
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(5 | ) | 23 | |||||
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Deferred Income Taxes
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512 | 618 | ||||||
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Changes in Assets and Liabilities
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Accounts Receivable
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(1,277 | ) | (2,738 | ) | ||||
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Inventory
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137 | 26 | ||||||
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Prepaid Expenses and Other
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7 | (27 | ) | |||||
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Prepaid Marketing Expenses
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(68 | ) | (146 | ) | ||||
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Accounts Payable and Accrued Expenses
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346 | 4,204 | ||||||
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Deferred Revenue
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10 | 37 | ||||||
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Net Cash Provided By Operating Activities
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1,980 | 4,422 | ||||||
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Cash Flows From Investing Activities
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Purchases of Equipment
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(46 | ) | (29 | ) | ||||
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Expenditures for Intangibles
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(3 | ) | (42 | ) | ||||
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Expenditures for Prepublication Costs
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(855 | ) | (1,494 | ) | ||||
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Net Cash Used In Investing Activities
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(904 | ) | (1,565 | ) | ||||
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Cash Flows From Financing Activities
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Net Payments Under Line of Credit
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(564 | ) | (2,262 | ) | ||||
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Exercise of Stock Options
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- | 4 | ||||||
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Principal Payments On Long Term Debt
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(500 | ) | (500 | ) | ||||
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Net Cash Used In Financing Activities
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(1,064 | ) | (2,758 | ) | ||||
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Net Increase in Cash and Cash Equivalents
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12 | 99 | ||||||
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Cash and Cash Equivalents
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Beginning of Period
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18 | 110 | ||||||
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End of Period
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$ | 30 | $ | 209 | ||||
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Supplemental Cash Flow Information
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Cash Payments for:
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Interest
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$ | 74 | $ | 66 | ||||
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Exhibit 1
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Reconciliation of Net Income to Non-GAAP Adjusted Net Income
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(In Thousands - Except Share Data)
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Three Months Ended
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8/31/2011
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8/31/2010
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Net Income
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$ | 871 | $ | 1,052 | ||||
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Amortization of Prepublications Costs
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1,367 | 1,294 | ||||||
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Cash Expenditures for Prepublication Costs
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(855 | ) | (1,494 | ) | ||||
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Market Value Adjustment of Interest Rate Swap
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(5 | ) | 23 | |||||
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Adjusted Income Tax Expense (Benefit)
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(188 | ) | 65 | |||||
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Non-GAAP Net Income
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$ | 1,190 | $ | 940 | ||||
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Basic Weighted Shares Outstanding
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4,465 | 4,464 | ||||||
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Non-GAAP Earnings Per Share
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$ | 0.27 | $ | 0.21 | ||||
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Exhibit 2
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Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow
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(In Thousands)
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Three Months Ended
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8/31/2011
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8/31/2010
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Net Cash Provided by Operating Activities
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$ | 1,980 | $ | 4,422 | ||||
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Cash Expenditures for Equipment and Intangibles
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(49 | ) | (71 | ) | ||||
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Cash Expenditures for Prepublication Costs
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(855 | ) | (1,494 | ) | ||||
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Free Cash Flow
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$ | 1,076 | $ | 2,857 | ||||