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| 8-K - FORM 8-K - PEOPLES EDUCATIONAL HOLDINGS | v245223_8k.htm |
EXHIBIT 99.1 – Press release
For Release Before Market Opens
January 12, 2012
Peoples Educational Holdings, Inc. Reports Fiscal Second Quarter Results
Saddle Brook, New Jersey, January 12, 2012 – 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
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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.
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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.
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General and administrative expenses were $2.1 million, a decline of 6.1% from the prior year.
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Entered into a new multi-year distribution agreement with one of our existing college publishers.
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End-of-Course materials in Texas for Algebra, Biology, English and Geometry were released.
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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).
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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 six months was $1.4 million, compared to $2.2 million in the prior year.
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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 11:00am 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: 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)
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Dial In:
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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
CONDENSED CONSOLIDATED BALANCE SHEETS
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(In Thousands-Except Share Data)
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UNAUDITED
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UNAUDITED
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November 30, 2011
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May 31, 2011
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November 30, 2010
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ASSETS
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Current Assets
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Cash and Cash Equivalents
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$ | 24 | $ | 18 | $ | 34 | ||||||
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Accounts Receivable, Net of Allowances for
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Doubtful Accounts and Returns
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1,613 | 2,745 | 2,190 | |||||||||
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Inventory, Net
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3,143 | 3,196 | 3,673 | |||||||||
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Prepaid Expenses and Other
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299 | 322 | 320 | |||||||||
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Prepaid Marketing Expenses
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521 | 505 | 625 | |||||||||
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Deferred Income Taxes
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476 | 1,136 | 632 | |||||||||
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Total Current Assets
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6,076 | 7,922 | 7,474 | |||||||||
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Equipment - At Cost, Less Accumulated Depreciation of $2,532, $2,515 and $2,528, respectively
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313 | 314 | 206 | |||||||||
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Other Assets
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Deferred Prepublication Costs, Net
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11,319 | 12,269 | 13,445 | |||||||||
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Deferred Income Taxes
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1,160 | 501 | 402 | |||||||||
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Trademarks, Net
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265 | 255 | 226 | |||||||||
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Prepaid Expenses and Other
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81 | 108 | 131 | |||||||||
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Total Other Assets
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12,825 | 13,133 | 14,204 | |||||||||
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Total Assets
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$ | 19,214 | $ | 21,369 | $ | 21,884 | ||||||
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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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3,627 | 4,340 | 6,097 | |||||||||
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Accrued Compensation
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259 | 394 | 199 | |||||||||
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Other Accrued Expenses
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456 | 520 | 438 | |||||||||
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Deferred Revenue
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498 | 438 | 534 | |||||||||
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Total Current Liabilities
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6,840 | 7,692 | 9,268 | |||||||||
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Long Term Obligations, Less Current Maturities
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6,844 | 8,234 | 6,315 | |||||||||
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Total Liabilities
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13,684 | 15,926 | 15,583 | |||||||||
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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, $0.02 par value; authorized 8,500,000 shares; issued, 4,481,434 shares for all periods reported
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90 | 90 | 90 | |||||||||
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Additional Paid In Capital
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8,390 | 8,305 | 8,146 | |||||||||
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Accumulated Deficit
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(2,886 | ) | (2,888 | ) | (1,871 | ) | ||||||
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Treasury Stock, 16,232 shares, at cost
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(64 | ) | (64 | ) | (64 | ) | ||||||
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Total Stockholders' Equity
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5,530 | 5,443 | 6,301 | |||||||||
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Total Liabilities and Stockholders' Equity
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$ | 19,214 | $ | 21,369 | $ | 21,884 | ||||||
PEOPLES EDUCATIONAL HOLDINGS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In Thousands- Except Per Share Data)
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Three Months Ended
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Six Months Ended
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November 30,
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November 30,
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2011
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2010
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2011
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2010
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Revenue, Net
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$ | 4,568 | $ | 6,156 | $ | 16,619 | $ | 19,304 | ||||||||
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Cost of Revenue
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Direct Costs
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1,769 | 2,399 | 7,992 | 9,065 | ||||||||||||
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Prepublication Cost Amortization
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1,258 | 1,239 | 2,625 | 2,533 | ||||||||||||
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Total
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3,027 | 3,638 | 10,617 | 11,598 | ||||||||||||
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Gross Profit
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1,541 | 2,518 | 6,002 | 7,706 | ||||||||||||
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Selling, General and Administrative Expenses
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2,832 | 3,374 | 5,827 | 6,783 | ||||||||||||
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Income (Loss) from Operations
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(1,291 | ) | (856 | ) | 175 | 923 | ||||||||||
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Other Expenses, Net
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9 | 9 | 23 | 17 | ||||||||||||
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Interest Expense
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79 | 58 | 149 | 159 | ||||||||||||
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Total
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88 | 67 | 172 | 176 | ||||||||||||
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Income (Loss) Before Income Taxes
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(1,379 | ) | (923 | ) | 3 | 747 | ||||||||||
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Income Tax Expense (Benefit)
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(510 | ) | (342 | ) | 1 | 276 | ||||||||||
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Net Income (Loss)
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$ | (869 | ) | $ | (581 | ) | $ | 2 | $ | 471 | ||||||
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Net Income (Loss) per Common Share
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Basic
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$ | (0.19 | ) | $ | (0.13 | ) | $ | 0.00 | $ | 0.11 | ||||||
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Diluted
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$ | (0.19 | ) | $ | (0.13 | ) | $ | 0.00 | $ | 0.11 | ||||||
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Weighted-average Number of Common Shares Outstanding
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Basic
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4,465 | 4,465 | 4,465 | 4,464 | ||||||||||||
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Diluted
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4,465 | 4,465 | 4,475 | 4,465 | ||||||||||||
PEOPLES EDUCATIONAL HOLDINGS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In Thousands)
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Six Months Ended
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November 30,
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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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$ | 2 | $ | 471 | ||||
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Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities
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Depreciation
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71 | 84 | ||||||
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Amortization of Prepublication Costs and Trademarks
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2,635 | 2,544 | ||||||
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Stock-Based Compensation
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85 | 22 | ||||||
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Market Value Adjustment of Interest Rate Swap
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(8 | ) | 16 | |||||
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Deferred Income Taxes
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1 | 276 | ||||||
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Changes in Assets and Liabilities
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Accounts Receivable
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1,132 | 800 | ||||||
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Inventory
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53 | (82 | ) | |||||
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Prepaid Expenses and Other
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50 | (20 | ) | |||||
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Prepaid Marketing Expenses
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(16 | ) | 17 | |||||
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Accounts Payable and Accrued Expenses
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(912 | ) | 1,150 | |||||
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Deferred Revenue
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60 | 130 | ||||||
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Net Cash Provided By Operating Activities
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3,153 | 5,408 | ||||||
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Cash Flows From Investing Activities
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Purchases of Equipment
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(71 | ) | (41 | ) | ||||
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Expenditures for Intangibles
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(19 | ) | (48 | ) | ||||
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Expenditures for Prepublication Costs
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(1,675 | ) | (3,114 | ) | ||||
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Net Cash Used In Investing Activities
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(1,765 | ) | (3,203 | ) | ||||
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Cash Flows From Financing Activities
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Net Payments Under Line of Credit
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(382 | ) | (1,285 | ) | ||||
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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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(1,000 | ) | (1,000 | ) | ||||
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Net Cash Used In Financing Activities
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(1,382 | ) | (2,281 | ) | ||||
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Net Increase (Decrease) in Cash and Cash Equivalents
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6 | (76 | ) | |||||
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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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$ | 24 | $ | 34 | ||||
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Supplemental Cash Flow Information
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Cash Payments for:
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Interest
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$ | 157 | $ | 135 | ||||
Exhibit 1
Reconciliation of Net Income (Loss) to Non-GAAP Adjusted Net Income (Loss)
(In Thousands - Except Per Share Data)
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Three Months Ended
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Six Months Ended
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11/30/2011
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11/30/2010
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11/30/2011
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11/30/2010
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Net Income (Loss)
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$ | (869 | ) | $ | (581 | ) | $ | 2 | $ | 471 | ||||||
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Amortization of Prepublications Costs
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1,258 | 1,239 | 2,625 | 2,533 | ||||||||||||
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Cash Expenditures for Prepublication Costs
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(820 | ) | (1,620 | ) | (1,675 | ) | (3,114 | ) | ||||||||
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Market Value Adjustment of Interest Rate Swap
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(3 | ) | (7 | ) | (8 | ) | 16 | |||||||||
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Adjusted Income Tax Expense (Benefit)
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(161 | ) | 144 | (349 | ) | 209 | ||||||||||
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Non-GAAP Net Income (Loss)
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$ | (595 | ) | $ | (825 | ) | $ | 595 | $ | 115 | ||||||
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Basic Weighted Shares Outstanding
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4,465 | 4,465 | 4,465 | 4,464 | ||||||||||||
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Non-GAAP Earnings Per Share
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$ | (0.13 | ) | $ | (0.18 | ) | $ | 0.13 | $ | 0.03 | ||||||
Exhibit 2
Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow
(In Thousands)
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Three Months Ended
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Six Months Ended
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11/30/2011
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11/30/2010
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11/30/2011
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11/30/2010
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Net Cash Provided by Operating Activities
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$ | 1,173 | $ | 986 | $ | 3,153 | $ | 5,408 | ||||||||
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Cash Expenditures for Equipment and Intangibles
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(41 | ) | (18 | ) | (90 | ) | (89 | ) | ||||||||
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Cash Expenditures for Prepublication Costs
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(820 | ) | (1,620 | ) | (1,675 | ) | (3,114 | ) | ||||||||
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Free Cash Flow
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$ | 312 | $ | (652 | ) | $ | 1,388 | $ | 2,205 | |||||||