PEOPLES EDUCATIONAL HOLDINGS, INC.
299 Market Street
Saddle Brook, NJ 07663
For Release at 6:30AM on 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."
• 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.
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
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
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 Education, Inc., Saddle Brook, NJ 07663
Press Contact: Victoria Kiely Phone: 201-712-0090 ext. 215 investorrelations@peoplesed.com
(In Thous ands -Except Share Data) UNA UDITED UNA UDITED
November 30, 2011 May 31, 2011 November 30, 2010
ASSETS Current As s ets
Cas h and Cas h Equivalents
Accounts Receivable, Net of Allowances for
$ 24 $
18 $ 34
Doubtful Accounts and Returns 1,613 2,745 2,190
Inventory, Net 3,143 3,196 3,673
Prepaid Expens es and Other 299 322 320
Prepaid Marketing Expens es 521 505 625
Deferred Incom e Taxes 476 1,136 632
Total Current As s ets 6,076 7,922 7,474
Equipm ent - At Cos t, Les s Accum ulated Depreciation | |||
of $2,532, $2,515 and $2,528, res pectively | 313 | 314 | 206 |
Other As s ets | |||
Deferred Prepublication Cos ts , Net | 11,319 | 12,269 | 13,445 |
Deferred Incom e Taxes | 1,160 | 501 | 402 |
Tradem arks , Net | 265 | 255 | 226 |
Prepaid Expens es and Other | 81 | 108 | 131 |
Total Other As s ets | 12,825 | 13,133 | 14,204 |
Total As s ets | $ 19,214 | $ 21,369 | $ 21,884 |
LIABILITIES AND STOC KHOLDERS' EQU ITY Current Liabilities
Current Maturities of Long Term Obligations
$ 2,000 $
2,000 $
2,000
Accounts Payable 3,627 4,340 6,097
Accrued Com pens ation 259 394 199
Other Accrued Expens es 456 520 438
Deferred Revenue 498 438 534
Total Current Liabilities 6,840 7,692 9,268
Long Term Obligations , Les s Current Maturities | 6,844 | 8,234 | 6,315 |
Total Liabilities | 13,684 | 15,926 | 15,583 |
Com m itm ents and Contingencies | |||
Stockholders ' Equity | |||
Preferred Stock, authorized 1,500,000 s hares ; none is s ued | - | - | - |
Com m on Stock, $0.02 par value; authorized 8,500,000 s hares ; | |||
is s ued, 4,481,434 s hares for all periods reported | 90 | 90 | 90 |
Additional Paid In Capital | 8,390 | 8,305 | 8,146 |
Accum ulated Deficit | (2,886) | (2,888) | (1,871) |
Treas ury Stock, 16,232 s hares , at cos t | (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 S UBS IDIARY
CONDENS ED CONS OLIDATED S TATEMENTS OF OPERATIONS (UNAUDITED)
(In T housands- Excep t Per Share Data)
T hree M onths Ended
November 30,
Six M onths Ended
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 |
Prep ublication Cost Amortiz ation | 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 Exp enses | 2,832 | 3,374 | 5,827 | 6,783 |
Income (Loss) from Op erations | (1,291) | (856) | 175 | 923 |
Other Exp enses, Net | 9 | 9 | 23 | 17 |
Interest Exp ense | 79 | 58 | 149 | 159 |
Total | 88 | 67 | 172 | 176 |
Income (Loss) Before Income T axes | (1,379) | (923) | 3 | 747 |
Income T ax Exp ense (Benefit) | (510) | (342) | 1 | 276 |
Net Income (Loss) | $ (869) | $ (581) | $ 2 | $ 471 |
Net Income (Loss) p er 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 Thous ands )
Cas h Flows From Operating Activities
Six Months Ended
Novem ber 30,
2011 2010
Net Incom e
Adjus tm ents to Reconcile Net Incom e to Net Cas h
Provided by Operating Activities
$ 2 $
471
Depreciation | 71 | 84 |
Am ortization of Prepublication Cos ts and Tradem arks | 2,635 | 2,544 |
Stock-Bas ed Com pens ation | 85 | 22 |
Market Value Adjus tm ent of Interes t Rate Swap | (8) | 16 |
Deferred Incom e Taxes | 1 | 276 |
Changes in As s ets and Liabilities | ||
Accounts Receivable | 1,132 | 800 |
Inventory | 53 | (82) |
Prepaid Expens es and Other | 50 | (20) |
Prepaid Marketing Expens es | (16) | 17 |
Accounts Payable and Accrued Expens es | (912) | 1,150 |
Deferred Revenue | 60 | 130 |
Net Cas h Provided By Operating Activities | 3,153 | 5,408 |
Cas h Flows From Inves ting Activities | ||
Purchas es of Equipm ent | (71) | (41) |
Expenditures for Intangibles | (19) | (48) |
Expenditures for Prepublication Cos ts | (1,675) | (3,114) |
Net Cas h Us ed In Inves ting Activities | (1,765) | (3,203) |
Cas h Flows From Financing Activities | ||
Net Paym ents Under Line of Credit | (382) | (1,285) |
Exercis e of Stock Options | - | 4 |
Principal Paym ents On Long Term Debt | (1,000) | (1,000) |
Net Cas h Us ed In Financing Activities (1,382) (2,281)
Net Increas e (Decreas e) in Cas h and Cas h Equivalents 6 (76) Cas h and Cas h Equivalents
Beginning of Period | 18 | 110 |
End of Period | $ 24 | $ 34 |
Supplem ental Cas h Flow Inform ation
Cas h Paym ents for: Interes t
$ 157 $
135
Exhibit 1 Reconciliation of Net Income (Loss) to Non-GAAP Adjusted Net Income (Loss)(In Thous ands - Except Per Share Data)
Three Months Ended
Six Months Ended
11/30/2011 11/30/2010 11/30/2011 11/30/2010
Net Incom e (Los s )
$ (869) $
(581) $
2 $ 471
Am ortization of Prepublications Cos ts | 1,258 | 1,239 | 2,625 | 2,533 |
Cas h Expenditures for Prepublication Cos ts | (820) | (1,620) | (1,675) | (3,114) |
Market Value Adjus tm ent of Interes t Rate Swap | (3) | (7) | (8) | 16 |
Adjus ted Incom e Tax Expens e (Benefit) | (161) | 144 | (349) | 209 |
Non-GAAP Net Incom e (Los s ) | $ (595) | $ (825) | $ 595 | $ 115 |
Bas ic Weighted Shares Outs tanding | 4,465 | 4,465 | 4,465 | 4,464 |
Non-GAAP Earnings Per Share | $ (0.13) | $ (0.18) | $ 0.13 | $ 0.03 |
(In Thous ands )
Three Mo | nths Ended | Six Mon | ths Ended | |
11/30/2011 | 11/30/2010 | 11/30/2011 | 11/30/2010 | |
Net Cas h Provided by Operating Activities | $ 1,173 | $ 986 | $ 3,153 | $ 5,408 |
Cas h Expenditures for Equipm ent and Intangible | (41) | (18) | (90) | (89) |
Cas h Expenditures for Prepublication Cos ts | (820) | (1,620) | (1,675) | (3,114) |
Free Cas h Flow | $ 312 | $ (652) | $ 1,388 | $ 2,205 |
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