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| 8-K - FORM 8-K - PEOPLES EDUCATIONAL HOLDINGS | v231691_8k.htm |
EXHIBIT 99.1 – Press release
For Release Before Market Opens
August 15, 2011
Peoples Educational Holdings, Inc. Reports Fiscal Fourth Quarter and Year End Results
Saddle Brook, New Jersey, August 15, 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 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
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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.
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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.
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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.
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Marketing expenses were $702,000, a year-over-year decline of 1.8%.
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General and administrative expenses were $1.0 million, a decline of 3.0% from the prior year.
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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.
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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).
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Year End Financial Results
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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.
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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%.
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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).
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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.
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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.
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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.
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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.
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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
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US:
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800-638-4930
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International:
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617-614-3944
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Participant Passcode:
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42014969
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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)
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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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47442512
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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 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.
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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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May 31, 2011
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May 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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$ | 18 | $ | 110 | ||||
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Accounts Receivable Net of Allowances for
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Doubtful Accounts and Returns
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2,745 | 2,990 | ||||||
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Inventory
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3,196 | 3,591 | ||||||
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Prepaid Expenses and Other
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322 | 264 | ||||||
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Prepaid Marketing Expenses
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505 | 642 | ||||||
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Deferred Income Taxes
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1,136 | 833 | ||||||
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Total Current Assets
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7,922 | 8,430 | ||||||
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Equipment - At Cost, Less Accumulated Depreciation
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of $2,515 and $2,444, respectively
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314 | 249 | ||||||
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Other Assets
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Deferred Prepublication Costs, Net
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12,269 | 12,864 | ||||||
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Deferred Income Taxes
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501 | 477 | ||||||
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Trademarks, Net
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255 | 189 | ||||||
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Prepaid Expenses and Other
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108 | 167 | ||||||
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Total Other Assets
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13,133 | 13,697 | ||||||
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Total Assets
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$ | 21,369 | $ | 22,376 | ||||
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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 | ||||
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Accounts Payable
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4,340 | 4,904 | ||||||
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Accrued Compensation
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394 | 153 | ||||||
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Other Accrued Expenses
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520 | 527 | ||||||
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Deferred Revenue
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438 | 404 | ||||||
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Total Current Liabilities
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7,692 | 7,988 | ||||||
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Long Term Obligations, Less Current Maturities
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8,234 | 8,584 | ||||||
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Total Liabilities
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15,926 | 16,572 | ||||||
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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, $0.02 par value; authorized 8,500,000 shares;
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issued, 4,481,434 as of May 31, 2011 and 4,478,434 May 31, 2010
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90 | 90 | ||||||
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Additional Paid In Capital
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8,305 | 8,120 | ||||||
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Accumulated Deficit
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(2,888 | ) | (2,342 | ) | ||||
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Treasury Stock, 16,232 shares for both periods, at cost
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(64 | ) | (64 | ) | ||||
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Total Stockholders' Equity
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5,443 | 5,804 | ||||||
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Total Liabilities and Stockholders' Equity
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$ | 21,369 | $ | 22,376 | ||||
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PEOPLES EDUCATIONAL HOLDINGS, INC. AND SUBSIDIARY
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CONSOLIDATED STATEMENTS OF OPERATIONS
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(In Thousands- Except Share Data)
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Three Months Ended
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Twelve Months Ended
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May 31,
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May 31,
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2011
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2010
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2011
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2010
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(Unaudited)
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(Unaudited)
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(Audited)
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(Audited)
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Revenue, Net
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$ | 6,840 | $ | 7,411 | $ | 31,270 | $ | 34,915 | ||||||||
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Cost of Revenue
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Direct Costs
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2,578 | 3,031 | 13,139 | 14,981 | ||||||||||||
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Prepublication Cost Amortization
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1,446 | 1,292 | 5,364 | 5,384 | ||||||||||||
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Total
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4,024 | 4,323 | 18,503 | 20,365 | ||||||||||||
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Gross Profit
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2,816 | 3,088 | 12,767 | 14,550 | ||||||||||||
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Selling, General and Administrative Expenses
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3,317 | 3,270 | 13,263 | 13,819 | ||||||||||||
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Income (Loss) from Operations
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(501 | ) | (182 | ) | (496 | ) | 731 | |||||||||
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Other Expenses, Net
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50 | 13 | 71 | 37 | ||||||||||||
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Interest Expense
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76 | 71 | 306 | 277 | ||||||||||||
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Total
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126 | 84 | 377 | 314 | ||||||||||||
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Income (Loss) Before Income Taxes
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(627 | ) | (266 | ) | (873 | ) | 417 | |||||||||
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Income Tax Expense (Benefit)
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(236 | ) | (160 | ) | (327 | ) | 166 | |||||||||
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Net Income (Loss)
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$ | (391 | ) | $ | (106 | ) | $ | (546 | ) | $ | 251 | |||||
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Net Income (Loss) per Common Share
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Basic and Diluted
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$ | (0.09 | ) | $ | (0.02 | ) | $ | (0.12 | ) | $ | 0.06 | |||||
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Weighted-average Number of Common Shares Outstanding
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Basic
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4,465 | 4,462 | 4,465 | 4,462 | ||||||||||||
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Diluted
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4,465 | 4,462 | 4,465 | 4,465 | ||||||||||||
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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Twelve Months Ended
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May 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 (Loss)
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$ | (546 | ) | $ | 251 | |||
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Adjustments to Reconcile Net Income (Loss) to Net Cash
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Provided by Operating Activities
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Depreciation
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161 | 223 | ||||||
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Amortization of Prepublication Costs and Trademarks
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5,384 | 5,400 | ||||||
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Stock-Based Compensation
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181 | 60 | ||||||
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Market Value Adjustment of Interest Rate Swap
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11 | (153 | ) | |||||
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Deferred Income Taxes
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(327 | ) | 153 | |||||
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Changes in Assets and Liabilities
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Accounts Receivable
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245 | (148 | ) | |||||
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Inventory
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395 | 628 | ||||||
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Prepaid Expenses and Other
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1 | 165 | ||||||
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Prepaid Marketing Expenses
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137 | 220 | ||||||
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Accounts Payable and Accrued Expenses
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(330 | ) | 561 | |||||
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Deferred Revenue
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34 | 126 | ||||||
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Income tax refund attributable to net operating loss carryback
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- | 635 | ||||||
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Net Cash Provided By Operating Activities
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5,346 | 8,121 | ||||||
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Cash Flows From Investing Activities
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Purchases of Equipment
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(226 | ) | (85 | ) | ||||
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Expenditures for Intangibles
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(86 | ) | (35 | ) | ||||
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Expenditures for Prepublication Costs
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(4,769 | ) | (4,782 | ) | ||||
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Net Cash Used In Investing Activities
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(5,081 | ) | (4,902 | ) | ||||
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Cash Flows From Financing Activities
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Net (Payments) Borrowings Under Line of Credit
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1,639 | (1,117 | ) | |||||
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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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(2,000 | ) | (2,034 | ) | ||||
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Net Cash Used In Financing Activities
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(357 | ) | (3,151 | ) | ||||
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Net Increase (Decrease) in Cash and Cash Equivalents
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(92 | ) | 68 | |||||
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Cash and Cash Equivalents
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Beginning of Year
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110 | 42 | ||||||
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End of Year
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$ | 18 | $ | 110 | ||||
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Supplemental Cash Flow Information
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Cash Payments for:
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Interest
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$ | 286 | $ | 487 | ||||
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Exhibit 1
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Reconciliation of Net Income (Loss) to Non-GAAP Adjusted Net Income (Loss)
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(In Thousands - Except Share Data)
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Three Months Ended
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Twelve Months Ended
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5/31/2011
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5/31/2010
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5/31/2011
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5/31/2010
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Net Income (Loss)
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$ | (391 | ) | $ | (106 | ) | $ | (546 | ) | $ | 251 | |||||
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Amortization of Prepublications Costs
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1,446 | 1,292 | 5,364 | 5,384 | ||||||||||||
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Cash Expenditures for Prepublication Costs
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(620 | ) | (2,165 | ) | (4,769 | ) | (4,782 | ) | ||||||||
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Market Value Adjustment of Interest Rate Swap
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(4 | ) | (36 | ) | 11 | (153 | ) | |||||||||
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Adjusted Income Tax Expense (Benefit)
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(304 | ) | 336 | (224 | ) | (166 | ) | |||||||||
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Non-GAAP Net Income (Loss)
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$ | 127 | $ | (679 | ) | $ | (164 | ) | $ | 534 | ||||||
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Basic Weighted Shares Outstanding
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4,465 | 4,462 | 4,465 | 4,462 | ||||||||||||
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Non-GAAP Earnings (Loss) Per Share
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$ | 0.03 | $ | (0.15 | ) | $ | (0.04 | ) | $ | 0.12 | ||||||
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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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Twelve Months Ended
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5/31/2011
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5/31/2010
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Net Cash Provided by Operating Activities
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$ | 5,346 | $ | 8,121 | ||||
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Cash Expenditures for Equipment and Intangibles
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(312 | ) | (120 | ) | ||||
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Cash Expenditures for Prepublication Costs
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(4,769 | ) | (4,782 | ) | ||||
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Free Cash Flow
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$ | 265 | $ | 3,219 | ||||