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 fourth
quarter and year ended May 31, 2011.
"Despite the revenue decline for the fourth quarter compared to
the prior year, I am encouraged by the continuing positive trend
over our first and second quarter results. The introduction of our
Common Core Standards products, during the third quarter, resulted
in a favorable market response. With the upcoming release of our
new digital product suite and our End of Course products, we will
have an excellent blend of print and digital solutions to meet our
customers' needs," states Brian T. Beckwith, President and Chief
Executive Officer.
Fourth Quarter Financial Results
- Total revenue for the fourth quarter ending May 31, 2011 was
$6.8 million, compared to $7.4 million in the prior year. Test
Preparation, Assessment, and Instruction product group revenue was
$4.2 million, compared to $4.7 million in the prior year. College
Preparation revenue was $1.9 million, compared to $2.0 million in
the prior year. Literacy revenue was $711,000, compared to $719,000
in the prior year.
- Gross profit as a percentage of revenue for the quarter was
41.2%, compared to 41.7% in the prior year. Direct Costs as a
percentage of revenue decreased from 40.9% to 37.7% due to product
revenue mix and lower inventory reserve expense. Prepublication
cost amortization as a percentage of revenue was 21.1%, an increase
of 3.7 percentage points.
- Selling expenses for the quarter were $1.6 million, or 23.6% of
revenue, compared to $1.5 million, or 20.5% of revenue, in the
prior year. The increase is due to higher sales infrastructure
costs, offset by lower commission expense as a result of lower
revenue.
- Marketing expenses were $702,000, a year-over-year decline of
1.8%.
- General and administrative expenses were $1.0 million, a
decline of 3.0% from the prior year.
- Net loss for the quarter was $391,000 ($0.09 per share),
compared to a loss of $106,000 ($0.02 per share) in the prior
year.
- Non-GAAP net income, which excludes nonrecurring costs and
adjusts for the difference between prepublication expenditures and
amortization for the quarter was $127,000, or $0.03 per share,
compared to a loss of $679,000 or $0.15 per share in the prior
year, due to the timing of prepublication expenditures (see Exhibit
1).
Year End Financial Results
- Total revenue for the twelve months ended May 31, 2011 was
$31.3 million, compared to $34.9 million in the prior year. Test
Preparation, Assessment and Instruction revenue was $17.4 million,
compared to $20.2 million in the prior year. College Preparation
revenue was $11.6 million for the current period, compared to $12.1
million, and Literacy revenue was $2.2 million, compared to $2.6
million in the prior year.
- Gross profit as a percentage of revenue was 40.8%, compared to
41.7% in the prior year. Direct Costs as a percentage of revenue
decreased from 42.9% in the prior year to 42.0% as a result of a
$265,000 decrease in inventory reserve expense, offset by an
increase in product costs due to revenue mix. Prepublication Cost
Amortization expense for the year was $5.4 million, which is
consistent with the prior year. As a percentage of revenue, it
increased from 15.4% to 17.2%.
- Marketing and selling expenses decreased from $9.3 million
(26.8% of revenue) in the prior year to $8.9 million (28.4% of
revenue).
- General and administrative expenses for the year were $4.4
million, a year-over-year decline of $81,000 and 1.8%. Included in
the expense was $181,000 of stock-based compensation, an increase
of $121,000 from the prior year.
- Net loss for the twelve-month period was $546,000 ($0.12 per
share), compared to net income of $251,000 ($0.06 per share) in the
prior year.
- Non-GAAP net loss, for the year was $164,000, or $0.04 per
share, compared to income of $534,000 or $0.12 per share in the
prior year (see Exhibit 1). The year-over-year fluctuation is
primarily due to the fluctuation in net income (loss) between the
two periods.
- Free cash flow (cash provided by operating activities reduced
by expenditures for prepublication costs, equipment, and
intangibles, see Exhibit 2) was $265,000 for the year, compared to
$3.2 million in the prior year. The fluctuation is a result of a
$2.8 million decrease in net cash provided by operations.
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, August 15, 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
Monday, August 15, 2011 at 11:00am Eastern Time
US: 800-638-4930
International: 617-614-3944
Participant Passcode: 42014969
Live Audio Webcast:
http://phx.corporate-ir.net/playerlink.zhtml?c=184416&s=wm&e=4144069
Webcast Replay (available approximately two
hours after conference call ends through August 14, 2012)
http://phx.corporate-ir.net/playerlink.zhtml?c=184416&s=wm&e=4144069
Dial-in Audio Replay (available approximately two hours after
conference call ends through August 22, 2011)
Dial In: 888-286-8010
International: +1-617-801-6888
Passcode: 47442512
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 for three publishers, on an exclusive basis in
the United States, 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)
May 31, May 31,
2011 2010
--------- ---------
ASSETS
Current Assets
Cash and Cash Equivalents $ 18 $ 110
Accounts Receivable Net of Allowances for
Doubtful Accounts and Returns 2,745 2,990
Inventory 3,196 3,591
Prepaid Expenses and Other 322 264
Prepaid Marketing Expenses 505 642
Deferred Income Taxes 1,136 833
--------- ---------
Total Current Assets 7,922 8,430
Equipment - At Cost, Less Accumulated Depreciation of
$2,515 and $2,444, respectively 314 249
--------- ---------
Other Assets
Deferred Prepublication Costs, Net 12,269 12,864
Deferred Income Taxes 501 477
Trademarks, Net 255 189
Prepaid Expenses and Other 108 167
--------- ---------
Total Other Assets 13,133 13,697
--------- ---------
Total Assets $ 21,369 $ 22,376
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current Maturities of Long Term Obligations $ 2,000 $ 2,000
Accounts Payable 4,340 4,904
Accrued Compensation 394 153
Other Accrued Expenses 520 527
Deferred Revenue 438 404
--------- ---------
Total Current Liabilities 7,692 7,988
Long Term Obligations, Less Current Maturities 8,234 8,584
--------- ---------
Total Liabilities 15,926 16,572
--------- ---------
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 May 31, 2011 and
4,478,434 May 31, 2010 90 90
Additional Paid In Capital 8,305 8,120
Accumulated Deficit (2,888) (2,342)
Treasury Stock, 16,232 shares for both periods, at
cost (64) (64)
--------- ---------
Total Stockholders' Equity 5,443 5,804
--------- ---------
Total Liabilities and Stockholders' Equity $ 21,369 $ 22,376
========= =========
PEOPLES EDUCATIONAL HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands- Except Share Data)
Three Months Ended Twelve Months Ended
May 31, May 31,
2011 2010 2011 2010
(Unaudited) (Unaudited) (Audited) (Audited)
----------- ----------- --------- ----------
Revenue, Net $ 6,840 $ 7,411 $ 31,270 $ 34,915
Cost of Revenue
Direct Costs 2,578 3,031 13,139 14,981
Prepublication Cost
Amortization 1,446 1,292 5,364 5,384
----------- ----------- --------- ----------
Total 4,024 4,323 18,503 20,365
Gross Profit 2,816 3,088 12,767 14,550
Selling, General and
Administrative Expenses 3,317 3,270 13,263 13,819
----------- ----------- --------- ----------
Income (Loss) from
Operations (501) (182) (496) 731
Other Expenses, Net 50 13 71 37
Interest Expense 76 71 306 277
----------- ----------- --------- ----------
Total 126 84 377 314
Income (Loss) Before Income
Taxes (627) (266) (873) 417
Income Tax Expense (Benefit) (236) (160) (327) 166
----------- ----------- --------- ----------
Net Income (Loss) $ (391) $ (106) $ (546) $ 251
=========== =========== ========= ==========
Net Income (Loss) per Common
Share
Basic and Diluted $ (0.09) $ (0.02) $ (0.12) $ 0.06
Weighted-average Number of
Common Shares Outstanding
Basic 4,465 4,462 4,465 4,462
Diluted 4,465 4,462 4,465 4,465
PEOPLES EDUCATIONAL HOLDINGS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (AUDITED)
(In Thousands)
Twelve Months Ended
May 31,
2011 2010
--------- ---------
Cash Flows From Operating Activities
Net Income (Loss) $ (546) $ 251
Adjustments to Reconcile Net Income (Loss) to Net Cash
Provided by Operating Activities
Depreciation 161 223
Amortization of Prepublication Costs and
Trademarks 5,384 5,400
Stock-Based Compensation 181 60
Market Value Adjustment of Interest Rate Swap 11 (153)
Deferred Income Taxes (327) 153
Changes in Assets and Liabilities
Accounts Receivable 245 (148)
Inventory 395 628
Prepaid Expenses and Other 1 165
Prepaid Marketing Expenses 137 220
Accounts Payable and Accrued Expenses (330) 561
Deferred Revenue 34 126
Income tax refund attributable to net operating
loss carryback - 635
--------- ---------
Net Cash Provided By Operating Activities 5,346 8,121
--------- ---------
Cash Flows From Investing Activities
Purchases of Equipment (226) (85)
Expenditures for Intangibles (86) (35)
Expenditures for Prepublication Costs (4,769) (4,782)
--------- ---------
Net Cash Used In Investing Activities (5,081) (4,902)
--------- ---------
Cash Flows From Financing Activities
Net (Payments) Borrowings Under Line of Credit 1,639 (1,117)
Exercise of Stock Options 4 -
Principal Payments On Long Term Debt (2,000) (2,034)
--------- ---------
Net Cash Used In Financing Activities (357) (3,151)
--------- ---------
Net Increase (Decrease) in Cash and Cash Equivalents (92) 68
Cash and Cash Equivalents
Beginning of Year 110 42
--------- ---------
End of Year $ 18 $ 110
========= =========
Supplemental Cash Flow Information
Cash Payments for:
Interest $ 286 $ 487
========= =========
Exhibit 1
Reconciliation of Net Income (Loss) to Non-GAAP Adjusted Net Income (Loss)
(In Thousands - Except Share Data)
Three Months Ended Twelve Months Ended
5/31/2011 5/31/2010 5/31/2011 5/31/2010
--------- --------- --------- ---------
Net Income (Loss) $ (391) $ (106) $ (546) $ 251
Amortization of Prepublications
Costs 1,446 1,292 5,364 5,384
Cash Expenditures for
Prepublication Costs (620) (2,165) (4,769) (4,782)
Market Value Adjustment of
Interest Rate Swap (4) (36) 11 (153)
Adjusted Income Tax Expense
(Benefit) (304) 336 (224) (166)
--------- --------- --------- ---------
Non-GAAP Net Income (Loss) $ 127 $ (679) $ (164) $ 534
========= ========= ========= =========
Basic Weighted Shares
Outstanding 4,465 4,462 4,465 4,462
Non-GAAP Earnings (Loss) Per
Share $ 0.03 $ (0.15) $ (0.04) $ 0.12
Exhibit 2
Reconciliation of Net Cash Provided by Operating
Activities to Free Cash Flow
(In Thousands)
Twelve Months Ended
5/31/2011 5/31/2010
--------- ---------
Net Cash Provided by Operating
Activities $ 5,346 $ 8,121
Cash Expenditures for Equipment
and Intangibles (312) (120)
Cash Expenditures for
Prepublication Costs (4,769) (4,782)
--------- ---------
Free Cash Flow $ 265 $ 3,219
========= =========
Contact: Peoples Education, Inc. Saddle Brook, NJ 07663
Press Contact: Victoria Kiely Phone: 201-712-0090 ext. 215 Email
Contact
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