EXHIBIT 99.1 - Press release
For Immediate Release Contacts
April 12, 2007 Brian T. Beckwith, President & CEO
Michael L. DeMarco, Chief Financial Officer
(201) 712-0090
Peoples Educational Holdings, Inc. Fiscal Third Quarter Results
Saddle Brook, New Jersey, April 12, 2007 - Peoples Educational Holdings, Inc.
(Nasdaq: PEDH), a leading provider of supplemental educational material for the
K-12 school market, today announced financial results for its third quarter
ended February 28, 2007. Peoples reported revenue of $5.9 million, down 1% from
the same period in the prior year. Revenue from the Test Preparation, Assessment
and Instruction product group was $5.1 million for the quarter, compared to $5.2
million over the same period in the prior year. College Preparation revenue for
the quarter was $0.8 million, constant with the prior year. Net loss for the
quarter was $1.0 million or ($0.23) per share compared to a net loss of $3.7
million or ($0.83) per share for the same period a year ago.
Revenue for the nine-month period ended February 28, 2007 was $29.5 million
compared to $29.3 million for the same period in the prior year. Revenue from
the Test Preparation, Assessment and Instruction product group was $18.8 million
for the period, compared to $19.0 million over the same period in the prior
year. College Preparation revenue was $10.7 million, compared to $10.3 million
in the prior year. Net loss for the nine-month period was $307,000 or ($0.07)
per share compared to a loss of $2.5 million or ($0.58) per share for the same
period in the prior year.
Financial Highlights:
- Reduced year-to-date direct costs as a percentage of revenue from 45%
in fiscal 2006 to 43% in fiscal 2007
- Increased free cash flow (defined as cash from operations less capital
expenditures) by $3.7 million for the nine-months ended February 28,
2007 compared to the same period in the prior year. Reduced
prepublication cost expenditures, which provided $3.1 million of
increased free cash flow
- Focused Instruction revenue for the nine-month period increased 28%
over the prior year. Launched newest Focused Instruction product, Keep
on Reading-Science, into nine states
- Administrative expenses for the nine-month period decreased from $3.8
million to $3.6 million
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Business Outlook
Brian T. Beckwith, President and CEO, commented," While the K-12 instructional
materials market has been challenging over the past several months, Peoples
Education has continued to gain market share by outperforming the market.
The market appears to be improving, and we are encouraged by our March revenue,
which was up approximately 25% over March 2006.
"Our newly launched products continue to be well received. We are particularly
pleased that our flagship Measuring Up(R) program was top-ranked by the
California Department of Education in the recent $5.5 million adoption
opportunity for intervention materials for the high school exit exam."
"We expect our fiscal fourth quarter revenue to grow more than 10%
year-over-year, and we expect to be profitable for the quarter. However, in
light of our year-to-date performance, we are revising our full-year revenue and
earnings guidance to revenue of between $37 million and $40 million and primary
earnings per share of between ($0.02) and $0.04 per share. Our guidance
recognizes that the timing of the anticipated revenue from the California
adoption at this time is uncertain and could shift from the 4th quarter of
fiscal 2007 into early fiscal 2008."
"Looking ahead to fiscal 2008, our fundamental business model has been improved
through the reengineering process, and we expect to generate significant profits
in fiscal year 2008 as the K-12 instructional materials market stabilizes."
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PEOPLES EDUCATIONAL HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(UNAUDITED) (AUDITED)
February 28, 2007 May 31, 2006
----------------- ------------
ASSETS
Current Assets
Cash and Cash Equivalents $ 186,910 $ 749,792
Accounts Receivable Net of Allowances for Doubtful Accounts and
Returns 2,138,773 3,351,428
Inventory 6,881,228 4,737,427
Prepaid Expenses and Other 551,676 315,080
Income Taxes Receivable -- 660,713
Deferred Income Taxes 655,000 746,955
----------- -----------
Total Current Assets 10,413,587 10,561,395
Equipment - At Cost, Less Accumulated Depreciation
of $1,620,000 and $1,375,000, respectively 744,645 829,456
----------- -----------
Other Assets
Deferred Prepublication Costs, Net 17,540,145 16,605,686
Deferred Income Taxes 1,307,000 1,054,965
Trademarks, Net 135,465 126,006
Deposits and Other 376,554 165,017
----------- -----------
Total Other Assets 19,359,164 17,951,674
----------- -----------
Total Assets $30,517,396 $29,342,525
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current Maturities of Long Term Obligations $ 186,622 $ 2,487,086
Accounts Payable 7,830,800 7,808,965
Accrued Compensation 313,537 645,705
Short Term Bank Loan -- 1,000,000
Other Accrued Expenses 305,944 287,448
Deferred Revenue 372,324 257,439
----------- -----------
Total Current Liabilities 9,009,227 12,486,643
Long Term Obligations, Less Current Maturities 14,357,541 9,420,076
----------- -----------
Total Liabilities 23,366,768 21,906,719
----------- -----------
Commitments and Contingencies
Stockholders' Equity
Common Stock, $0.02 par value; authorized 8,500,000 shares;
Issued, 4,441,173 shares, as to both periods 88,823 88,823
Additional Paid In Capital 7,864,217 7,786,885
Retained Earnings (Accumulated Deficit) (738,554) (431,992)
Less Treasury stock, 16,232 shares and 1,650, respectively, at cost (63,858) (7,910)
----------- -----------
Total Stockholders' Equity 7,150,628 7,435,806
----------- -----------
Total Liabilities and Stockholders' Equity $30,517,396 $29,342,525
=========== ===========
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PEOPLES EDUCATIONAL HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended Nine Months Ended
February 28 February 28
------------------------- -------------------------
2007 2006 2007 2006
----------- ----------- ----------- -----------
Revenue $ 5,934,072 $ 6,012,886 $29,519,879 $29,337,093
Cost of Revenue
Direct Costs 1,994,499 2,228,046 12,560,769 13,046,793
Prepublication Cost Amortization 1,497,652 1,842,162 4,389,688 4,271,812
Product Line Restructuring Cost -- 3,930,980 -- 3,930,980
----------- ----------- ----------- -----------
Total 3,492,151 8,001,188 16,950,457 21,249,585
Gross Profit (Loss) 2,441,921 (1,988,302) 12,569,422 8,087,508
Selling, General and Administrative Expenses 3,852,712 3,602,881 12,223,834 11,589,123
----------- ----------- ----------- -----------
Income (Loss) from Operations (1,410,791) (5,591,183) 345,588 (3,501,615)
Other Expenses, Net 2,536 55,200 22,236 58,513
Interest Expense 211,652 158,245 781,259 402,764
----------- ----------- ----------- -----------
Net Loss Before Income Taxes (1,624,979) (5,804,628) (457,907) (3,962,892)
Income Tax Benefit (618,000) (2,153,415) (151,345) (1,416,415)
----------- ----------- ----------- -----------
Net Loss $(1,006,979) $(3,651,213) $ (306,562) $(2,546,477)
=========== =========== =========== ===========
Net Loss per Common Share
Basic $ (0.23) $ (0.83) $ (0.07) $ (0.58)
Diluted $ (0.23) $ (0.83) $ (0.07) $ (0.58)
Weighted-average Number of Common Shares Outstanding
Basic 4,424,941 4,418,031 4,430,575 4,386,309
Diluted 4,424,941 4,418,031 4,430,575 4,386,309
=========== =========== =========== ===========
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PEOPLES EDUCATIONAL HOLDINGS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine Months Ended
February 28,
-------------------------
2007 2006
----------- -----------
Cash Flows From Operating Activities
Net Loss $ (306,562) $(2,546,477)
Adjustments to Reconcile Net Loss to Net Cash Provided by Operating Activities
Depreciation 244,310 248,066
Amortization of Prepublication Costs and Intangible Assets 4,406,576 4,273,947
Product Line Restructuring Costs -- 3,930,980
Deferred Income Taxes (160,080) (1,308,000)
Stock-Based Compensation 77,332 26,336
Changes in Assets and Liabilities
Accounts Receivable 1,212,655 1,473,212
Inventory (2,143,801) (1,937,593)
Prepaid Expense and Other (236,596) (412,439)
Deposits and Other (211,537) (8,693)
Accounts Payable and Accrued Expenses (298,586) (1,794,598)
Deferred Revenue 114,885 210,107
Income Taxes Payable or Refundable 667,462 539,380
----------- -----------
Net Cash Provided by Operating Activities 3,366,058 2,694,228
----------- -----------
Cash Flows From Investing Activities
Purchases of Equipment (159,499) (172,007)
Expenditures for Intangibles (26,347) (35,702)
Expenditures for Prepublication Costs (5,324,147) (8,377,178)
----------- -----------
Net Cash Used in Investing Activities (5,509,993) (8,584,887)
----------- -----------
Cash Flows From Financing Activities
Net Borrowings Under Line of Credit (2,164,089) 3,245,643
Net Proceeds from the Sale of Common Stock -- 2,877,095
Purchase of Treasury Stock (55,948) (5,984)
Proceeds from the Exercise of Stock Options -- 65,250
Principal Payments on Short Term Bank Loan (1,000,000) --
Net Borrowings on Long Term Debt 4,801,090 (272,802)
----------- -----------
Net Cash Provided by Financing Activities 1,581,053 5,909,202
----------- -----------
Net Increase (Decrease) in Cash and Cash Equivalents (562,882) 18,543
Cash and Cash Equivalents
Beginning of Period 749,792 963,227
----------- -----------
End of Period $ 186,910 $ 981,770
=========== ===========
Supplemental Cash Flow Information
Cash Payments for:
Interest $ 736,823 $ 402,764
=========== ===========
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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: Grades 2-8 state customized, print worktext and print and
web-based assessments that provide students in-depth instruction and
practice in reading, language arts, and mathematics.
College Preparation
- The Company distributes and publishes 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.
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.
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.
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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