Net revenue for the quarter ending August 31st, 2011, was $12.1 million, a decrease of 8% from the same period in the prior year. The decline was a result of two major factors. First, our testing assessment and instruction product group revenue decreased $587,000 on a year-over-year basis primarily because of a decline in revenue in the state of Texas.Secondly, revenue from our Literacy group was off significantly compared to prior year. I will comment more specifically on these areas in a moment. Our net income for the quarter was $0.9 million or $0.20 per basic share compared to $1.1 million or $0.24 per basic share in the prior year. Our non-GAAP net income was $1.2 million or $0.27 per share compared to $0.9 million or $0.21 per share in the prior period. As indicated, our TAI revenue decreased primarily due to the decline in Texas. Texas has implemented new standards and is in the midst of a change to new tests. While the changeover has significantly affected our revenues in Texas in the short-term, we believe that the New Star assessments coupled with the new upcoming high school end-of-course assessments required for graduation will create significant growth opportunities for us. We are currently in the process of releasing new and revised product for Texas and expect revenue to rebound over the next three quarters. Texas is the second largest state and it has historically been one of our strongest states, with strong brand recognition and a highly capable sales team. Our Literacy product group represents the smallest of our three product groups. These Literacy products are developed by other publishers. Revenue for this group was $447,000, compared to the prior year, due to a decline in a number of large opportunities, but last year we are funded primarily with ARRA funds.
We are currently pursuing additional funding opportunities; including the recently released $180 million federal Striving Readers Comprehensive Literacy Program. We are also positioning this product and packages that align well with the goal to the common core standards that are beginning to be implemented in most states.Our College Preparation product group was relatively flat, compared to prior year; and we are beginning to see pockets of growth in both print and digital versions of these products. These are primarily college level texts, e-books and class management systems that we sell into the high school space, as exclusive distributors for two college publishers. We also developed proprietary supplemental materials for this market. We are pleased to see stabilization in this market and believe that there continues to be opportunities for future growth. The overall market for K-12 instruction materials has been extremely challenging over the past few years due to the decline in state and local funding. While the state and local fiscal environments are still difficult, there are signs that state finances are beginning to stabilize. According to the National Association of State Budget Officers, 13 states and the District of Columbia have reported shortfalls in their 2011 budgets. In fiscal year 2010 by contrast, 45 states experienced shortfalls relative to their original budgets. Two key states, California and New Jersey have experienced surpluses that were unanticipated. On the downside, Texas has experienced revenue challenges that began later in the economic cycle than was the case in most states. While we don’t believe the turnaround will be fast, we are pleased to see signs of stabilization in many of our markets, and modest growth in state funding and states such as California and New Jersey. We are focused on the eventual change over in most states to the Common Core State Standards over the next few years. We released our first CCSS instructional products earlier in the calendar year and have now seen sales in 23 states. We continue to be encouraged by the favorable market response to these products. This expands our presence beyond the 10 core states that we previously were focused on. Read the rest of this transcript for free on seekingalpha.com