Peoples Educational (PEDH) 8-K Peoples Educational Holdings, Inc. Reports Second Quarter and Year-to-Date Fiscal 2008 Results

EXHIBIT 99.1 — Press release

For Release After Market Close
January 11, 2008

Peoples Educational Holdings, Inc. Reports Second Quarter and Year-to-Date Fiscal 2008 Results

Saddle Brook, New Jersey, January 11, 2008 — Peoples Educational Holdings, Inc. (NASDAQ: PEDH), a leading provider of supplemental educational material for the K-12 school market, today announced its second quarter and year-to-date financial results for the period ended November 30, 2007.

Second quarter revenue was $8.5 million, up 3% from the same period in the prior year. Revenue from the Test Preparation, Assessment and Instruction product group was $6.5 million for the quarter, flat with the prior year. College Preparation revenue for the quarter was $2.0 million, up 12% from the prior year. Net loss for the quarter was $422,000 or $0.09 per share compared to a net loss of $336,000 or $0.08 per share in the prior year. Non-GAAP net loss, which excludes non-recurring costs and adjusts for the difference between prepublication expenditures and amortization, was $107,000 or $0.02 per share compared to a net loss of $667,000 or $0.15 per share for the same period in the prior year.

Revenue for the six-month period ended November 30, 2007, was $25.4 million, an increase of 8% as compared to the same period in the prior year. Revenue from the Test Preparation, Assessment and Instruction product group was $13.8 million for the period, compared to $13.7 million in the prior year. College Preparation revenue was $11.5 million for the period, an increase of 16% over the prior year. Net income for the six-month period was $741,000 or $0.17 per basic share and $0.16 per diluted share compared to net income of $700,000 or $0.16 per basic share and $0.15 per diluted share in the prior year. Non-GAAP net income was $1.1 million or $0.25 per basic and diluted share compared to a net income of $153,000 or $0.03 per basic and diluted share for the six-month period in the prior year.

Financial Highlights for the Six-Month Period Ending November 30, 2007

• Free cash flow (defined as cash from operations, less capital expenditures) improved $2.3 million on a year-over-year basis from $1.4 million in the prior year to $3.8 million.

• Operating income increased 7% on a year-over-year basis to $1.9 million.

• Focused Instruction revenue for the six-month period increased 18% on a year-over-year basis due to increased market penetration and the release of new product. In addition, the Company launched its new Focused Instruction product, Turbo Math, and its new Test Preparation product, Measuring Up Express.

• Electronic revenue for the six-month period increased 77% over the same period in the prior year.

• Direct Cost efficiencies realized in the prior year are being maintained. Direct costs for the six-month period increased from 57.1% of revenue to 59.7%, however the increase is a function of revenue mix. Product costs, as a percentage of revenue within our Testing, Assessment and Instruction, and College Preparation product groups are consistent with the prior year.

• Administrative expenses for the period decreased 6% on a year-over year basis to $2.3 million.

Business Outlook

Brian T. Beckwith, President and CEO commented, “While the supplemental education market has continued to be soft, we have continued our growth as revenue is up 8% for the six-months ended November 30, 2007.”

“Our first half revenue, while strong compared to the overall market, was below our projections. As a result, we are lowering our revenue guidance for the year to be between $41 and $43 million, from $43 to $45 million. We project net income to be between breakeven and $300,000. Non-GAAP net income is

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expected to be between $1.1 and $1.5 million, a significant improvement over our prior year’s loss of $600,000. Free cash flow is expected to be between $2.3 and $2.8 million, compared to a prior year negative free cash flow of $4.3 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. Peoples Educational Holdings, Inc. believes presenting non-GAAP net income and non-GAAP earnings per share and free cash flow are useful to investors because it describes the operating performance of the Company and helps investors gauge the Company’s ability to generate cash flow excluding non-recurring charges and fluctuations between new product development amortization and new product development expenditures. Company management uses these non-GAAP measures as important indicators of the Company’s past performance and to plan and forecast performance in future periods. The non-GAAP financial information Peoples Educational Holdings presents 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.

About Peoples Educational Holdings, Inc.

Peoples Educational Holdings, Inc. is a publisher and marketer of print and electronic educational materials for the K-12 school market. The Company focuses its efforts in two market areas:

Test Preparation, Assessment, and Instruction

Test Preparation and Assessment: The Company creates and sells state customized, print and electronic, test preparation and assessment materials that help teachers prepare students for success in school and for required state proficiency tests, grades 2-12.

Instruction: The Company produces and sells proprietary state customized print worktexts and print and web-based delivered assessments, for Grades 2-8. These products provide students with in-depth instruction and practice in reading, language arts, and mathematics. In addition, the Company’s backlist remedial and multicultural products are included in this group.

College Preparation

The Company distributes instructional materials that meet the academic standards high schools require for honors, college preparation, and Advanced Placement courses. The Company is the exclusive high school distributor for two major college publishers, and also creates proprietary supplemental materials for this market.

The Company’s proprietary products are supplemental in nature. They are predominately soft-cover, high gross profit margin titles that can be sold efficiently through the Company’s direct sales force, as well as through catalogs, direct mail, telemarketing, and independent commission sales representatives. Distributed products are both basal and supplemental in nature.

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Forward-Looking Statements

This press release contains forward-looking statements regarding the Company and its markets as defined in section 21E of the Securities Exchange Act of 1934. These forward-looking statements involve a number of risks and uncertainties, including (1) demand from major customers, (2) effects of competition, (3) changes in product or customer mix or revenues and in the level of operating expenses, (4) rapidly changing technologies and the Company’s ability to respond thereto, (5) the impact of competitive products and pricing, (6) local and state levels of educational spending, (7) ability to retain qualified personnel, (8) ability to retain its distribution agreements in the College Preparation market, (9) the sufficiency of the Company’s copyright protection, and (10) 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 report. 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.

Contacts:

Peoples Education, Inc., Saddle Brook, NJ
Investor Contact: Michael L. DeMarco
Press Contact: Michael L. DeMarco
Phone: 201-712-0090
investorrelations@peoplesed.com

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PEOPLES EDUCATIONAL HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS — UNAUDITED
(In Thousands-Except Share Data)

	UNAUDITED						UNAUDITED
	November 30, 2007			May 31, 2007			November 30, 2006
ASSETS
Current Assets
Cash	$	172		$	98		$	755
Accounts Receivable Net of Allowances for Doubtful Accounts and Returns		2,726			3,961			3,192
Inventory		4,887			5,270			5,671
Prepaid Expenses and Other		443			334			127
Prepaid Marketing Expenses		635			638			356
Deferred Income Taxes		1,119			871			655
Total Current Assets		9,982			11,172			10,756
Equipment — At Cost, Less Accumulated Depreciation of $1,843, $1,692 and $1,538, respectively		634			697			820
Other Assets
Deferred Prepublication Costs, Net		16,555			17,180			17,518
Deferred Income Taxes		534			1,155			689
Trademarks, Net		170			141			136
Prepaid Expenses and Other		324			370			95
Prepaid Marketing Expenses		765			1,036			1,264
Total Other Assets		18,348			19,882			19,702
Total Assets	$	28,964		$	31,751		$	31,278
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Current Maturities of Long Term Obligations	$	570		$	649		$	1,047
Accounts Payable		6,406			6,304			10,366
Accrued Compensation		178			547			575
Other Accrued Expenses		401			327			226
Deferred Revenue		656			327			352
Total Current Liabilities		8,211			8,154			12,566
Long Term Obligations, Less Current Maturities		12,715			16,405			10,587
Total Liabilities		20,926			24,559			23,153
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: 4,470,734 for November 2007 and 4,441,173 for May 2007 & November 2006		89			89			89
Additional Paid In Capital		7,980			7,875			7,832
Retained Earnings (Accumulated Deficit)		33			(708	)		268
Less Treasury stock, 16,232 shares for all periods, at cost		(64	)		(64	)		(64	)
Total Stockholders’ Equity		8,038			7,192			8,125
Total Liabilities and Stockholders’ Equity	$	28,964		$	31,751		$	31,278

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CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

	Three Months Ended						Six Months Ended
	November 30						November 30
(In Thousands, Except Per Share Data)	2007			2006			2007		2006
Revenue, Net	$	8,502		$	8,239			25,369		23,586
Cost of Revenue
Direct Costs		3,036			2,809			11,739		10,566
Prepublication Cost Amortization		1,692			1,449			3,395		2,892
Total		4,728			4,258			15,134		13,458
Gross Profit		3,774			3,981			10,235		10,128
Selling, General and Administrative Expenses		4,226			4,204			8,355		8,371
Income (Loss) from Operations		(452	)		(223	)		1,880		1,757
Other Expenses (Income), Net		12			26			24		20
Interest Expense		354			311			742		570
Net Income (Loss) Before Income Taxes		(818	)		(560	)		1,114		1,167
Income Tax Expense (Benefit)		(396	)		(224	)		373		467
Net Income (Loss)	$	(422	)	$	(336	)		741		700
Net Income (Loss) per Common Share
Basic	$	(0.09	)	$	(0.08	)	$	0.17	$	0.16
Diluted	$	(0.09	)	$	(0.08	)	$	0.16	$	0.15
Weighted-average Number of Common Shares Outstanding
Basic		4,443			4,428			4,434		4,433
Diluted		4,443			4,428			4,491		4,612

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PEOPLES EDUCATIONAL HOLDINGS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In Thousands)

	Six Months Ended
	November 30
	2007			2006
Cash Flows From Operating Activities
Net Income	$	741		$	700
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities
Depreciation		151			163
Amortization of Prepublication Costs and Intangible Assets		3,412			2,906
Stock-Based Compensation		17			45
Market Value Adjustment of Interest Rate Swap		136			76
Deferred Income Taxes		373			458
Changes in Assets and Liabilities
Accounts Receivable		1,235			160
Inventory		383			(2,198	)
Prepaid Expenses and Other		(63	)		(96	)
Prepaid Marketing Expenses		274			—
Accounts Payable and Accrued Expenses		(329	)		2,418
Deferred Revenue		329			95
Income Taxes Payable or Refundable		—			665
Net Cash Provided By Operating Activities		6,659			5,392
Cash Flows From Investing Activities
Purchases of Equipment and Leasehold Improvements		(88	)		(153	)
Expenditures for Intangibles		(46	)		(24	)
Expenditures for Prepublication Costs		(2,770	)		(3,804	)
Net Cash Used In Investing Activities		(2,904	)		(3,981	)
Cash Flows From Financing Activities
Net (Payments) Borrowings Under Line of Credit		(3,669	)		207
Purchases of Treasury Stock		—			(56	)
Proceeds From the Exercise of Stock Options		88			—
Proceeds Payments On Short Term Bank Loan		—			(1,000	)
Principal Payemnt On Long Term Debt		(100	)		(557	)
Net Cash Used In Financing Activities		(3,681	)		(1,406	)
Net Increase in Cash		74			5
Cash
Beginning of Period		98			750
End of Period	$	172		$	755
Supplemental Cash Flow Information
Cash Payments for:
Interest	$	633		$	493
Income Taxes	$	—		$	—

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Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow

(In Thousands — Except per Share Data)

	Three Months Ended						Six Months Ended
	11/30/2007			11/30/2006			11/30/2007			11/30/2006
Net Cash Provided By Operating Activities	$	1,692		$	2,600		$	6,659		$	5,392
Cash Expenditures for Fixed Assets and Intangibles		(71	)		(82	)		(134	)		(177	)
Cash Expenditures for Prepublication Costs		(1,167	)		(2,000	)		(2,770	)		(3,804	)
Free Cash Flow	$	454		$	518		$	3,755		$	1,411

Reconciliation of Net Income (Loss) to non-GAAP Adjusted Net Income (Loss)

(In Thousands — Except per Share Data)

	Three Months Ended						Six Months Ended
	11/30/2007			11/30/2006			11/30/2007			11/30/2006
Net Income (Loss)	$	(422	)	$	(336	)	$	741		$	700
Amortization of Prepublications Costs		1,692			1,449			3,395			2,892
Cash Expenditures for Prepublication Costs		(1,167	)		(2,000	)		(2,770	)		(3,804	)
Adjusted Benefit (Expense) for Income Taxes		(210	)		220			(250	)		365
Non-GAAP Net Income (Loss)	$	(107	)	$	(667	)	$	1,116		$	153
Basic Weighted Shares Outstanding		4,443			4,428			4,434			4,433
Diluted Weighted Shares Outstanding		4,443			4,428			4,491			4,612
Non-GAAP Earnings (Loss) Per Basic Share	$	(0.02	)	$	(0.15	)	$	0.25		$	0.03
Non-GAAP Earnings (Loss) Per Diluted Share	$	(0.02	)	$	(0.15	)	$	0.25		$	0.03

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