-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ry5VF9B3zeexXksfmQ+nLGaZZ1BODvVFSdp6b/zJcv/1mMzkG5dBWiXSVP3fykn/ bifvS7SS74IERqmSKc9TFw== 0000930661-96-000789.txt : 19960715 0000930661-96-000789.hdr.sgml : 19960715 ACCESSION NUMBER: 0000930661-96-000789 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960531 FILED AS OF DATE: 19960712 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: EDUCATIONAL DEVELOPMENT CORP CENTRAL INDEX KEY: 0000031667 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-MISCELLANEOUS NONDURABLE GOODS [5190] IRS NUMBER: 730750007 STATE OF INCORPORATION: DE FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-04957 FILM NUMBER: 96593994 BUSINESS ADDRESS: STREET 1: 10302 E 55TH PL #B CITY: TULSA STATE: OK ZIP: 74146 BUSINESS PHONE: 9186224522 MAIL ADDRESS: STREET 1: PO BOX 470663 CITY: TULSA STATE: OK ZIP: 741460663 FORMER COMPANY: FORMER CONFORMED NAME: TUTOR TAPES INTERNATIONAL CORP DATE OF NAME CHANGE: 19701030 FORMER COMPANY: FORMER CONFORMED NAME: INTERNATIONAL TEACHING TAPES INC DATE OF NAME CHANGE: 19701030 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended May 31, 1996. [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ________. Commission file number: 0-4957 EDUCATIONAL DEVELOPMENT CORPORATION (Exact name of registrant as specified in its charter) Delaware 73-0750007 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 10302 East 55th Place #B, Tulsa Oklahoma 74146-6515 (Address of principal executive offices) Issuer's telephone number: (918) 622-4522 Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No _______ -------- As of May 31, 1996 there were 5,221,631 shares of Educational Development Corporation Common Stock, $0.20 par value outstanding. 1 EDUCATIONAL DEVELOPMENT CORPORATION - -------------------------------------------------- PART I. FINANCIAL INFORMATION - ------------------------------ ITEM 1 BALANCE SHEETS
May 31, 1996 February 29, 1996 (unaudited) ----------------- ------------ ASSETS CURRENT ASSETS: Cash and Cash Equivalents $ 204,600 $ 216,000 Accounts Receivable - (less allowances for doubtful accounts and returns: 5/31/96 - $241,900 2/29/96 - $228,000) 2,365,800 2,591,400 Inventories (Note 3) 10,092,000 11,776,100 Income Taxes Receivable 171,500 352,300 Deferred Income Taxes (Note 1) 172,400 168,300 Prepaid Expenses 392,900 333,400 ----------- ----------- Total Current Assets 13,399,200 15,437,500 Property, plant and equipment at cost (less accumulated depreciation: 05/31/96 - $249,900 2/29/96 - $341,100) 794,500 815,400 Other Assets 9,700 5,100 ----------- ----------- Total Assets $14,203,400 $16,258,000 =========== ===========
2 EDUCATIONAL DEVELOPMENT CORPORATION - -------------------------------------------------- BALANCE SHEETS (continued)
May 31, 1996 February 29, 1996 ------------------ (unaudited) -------------- LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Current maturities of long-term obligations (Note 2) $ 5,510,000 $ 5,820,000 Accounts payable 990,100 3,215,700 Accrued salaries, bonuses and commissions 321,700 270,900 Other current liabilities 273,900 219,500 ----------- ----------- Total Current Liabilities 7,095,700 9,526,100 SHAREHOLDERS' EQUITY (Notes 4 and 5): Common Stock, par value of $0.20 per share (authorized 6,000,000 shares; issued 5,424,240 and 5,398,240 shares; outstanding 5,221,631 and 5,191,498 shares) 1,084,900 1,079,700 Capital in excess of par value 4,403,200 4,391,300 Retained earnings 2,091,400 1,788,300 ----------- ----------- 7,579,500 7,259,300 LESS TREASURY SHARES AT COST ( 471,800 ) ( 527,400 ) ----------- ----------- TOTAL SHAREHOLDERS' EQUITY 7,107,700 6,731,900 ----------- ----------- TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $14,203,400 $16,258,000 =========== ===========
3 EDUCATIONAL DEVELOPMENT CORPORATION - -------------------------------------------------- STATEMENTS OF EARNINGS (UNAUDITED)
Three Months Ended May 31 --------------------------- 1996 1995 ------------ ------------- Gross Sales $ 8,138,500 $ 6,304,200 Less Discounts & Allowances ( 2,453,400) ( 2,319,100) ----------- ------------ Net Sales 5,685,100 3,985,100 Cost of Sales 2,288,900 1,685,800 ----------- ------------ Gross Margin 3,396,200 2,299,300 Operating & Selling Exp. 1,146,200 652,400 Sales Commissions 1,344,800 673,500 General & Admin. Exp. 286,900 190,000 Interest Expense 124,300 46,600 ----------- ------------ Operating Income 494,000 736,800 Other Income, Net 800 100 ----------- ------------ Earnings From Continuing Operations Before Income Taxes 494,800 736,900 Income Taxes ( 191,700) ( 302,000) ----------- ------------ Earnings From Continuing Operations 303,100 434,900 Loss From Discontinued Operations, Net of Tax -- ( 4,200) ----------- ------------ Net Earnings $ 303,100 $ 430,700 =========== ============ EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE Primary and Fully Diluted: Earnings From Continuing Operations $ .06 $ .08 Discontinued Operations -- -- ----------- ------------ Net Earnings $ .06 $ .08 =========== ============ WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING: Primary and fully diluted 5,373,763 5,308,342 ========== ==========
4 EDUCATIONAL DEVELOPMENT CORPORATION - -------------------------------------------------- STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED) Common Stock (par value $.20 per share) Treasury Stock -------------------------- --------------
Number of Capital in Number Shares Excess of Retained of Shareholders' Issued Amount Par Value Earnings Shares Amount Equity --------- ---------- ---------- ----------- --------------- ----------- -------------- Balance, March 1, 1996 5,398,240 $1,079,700 $4,391,300 $1,788,300 206,742 $( 527,400 ) $6,731,900 Exercise of options at $.25/share 20,000 4,000 1,000 --- --- --- 5,000 Exercise of options at $1.50/share 6,000 1,200 7,800 --- --- --- 9,000 Issuance of treasury stock --- --- 3,100 --- ( 450 ) 1,100 4,200 Purchase of treasury stock --- --- --- --- 4,000 ( 47,300 ) ( 47,300 ) Sales of treasury stock --- --- --- --- ( 7,683 ) 101,800 101,800 Net earnings --- --- --- 303,100 --- --- 303,100 --------- ---------- ---------- ----------- -------------- ---------- ---------- Balance, May 31, 1996 5,424,240 $1,084,900 $4,403,200 $2,091,400 202,609 $( 471,800 ) $7,107,700 ========= ========== ========== =========== ============== ========== ==========
5 EDUCATIONAL DEVELOPMENT CORPORATION - --------------------------------------------------
STATEMENTS OF CASH FLOWS (UNAUDITED) Three Months Ended May 31 ---------------------------- 1996 1995 ------------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings $ 303,100 $ 430,700 Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: Depreciation and amortization 56,100 17,800 Deferred income taxes ( 4,100) 10,000 Provision for doubtful accounts and sales returns 243,200 298,400 Changes in assets and liabilities: Accounts and income taxes receivable 163,200 ( 1,082,100) Inventories 1,684,100 ( 182,700) Prepaid expenses and other assets ( 64,100) 85,800 Accounts payable and accrued expenses ( 2,120,400) ( 1,196,300) Income taxes payable -- 184,400 ------------ ------------ Total adjustments ( 42,000) ( 1,864,700) ------------ ------------ Net cash provided by (used in) operating activities 261,100 ( 1,434,000) ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment ( 35,200) ( 148,600) ------------ ------------ Net cash used in investing activities ( 35,200) ( 148,600) ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings under revolving credit agreement 2,390,000 2,700,000 Payments under revolving credit agreement ( 2,700,000) (1,300,000) Principal payments on capital lease obligations -- ( 4,300) Cash received from exercise of stock options 14,000 -- Cash received from sale of treasury stock 106,000 -- Cash paid to acquire treasury stock ( 47,300) -- ------------ ------------ Net cash (used in) provided by financing activities ( 237,300) 1,395,700 ------------ ------------ Net Decrease in Cash and Cash Equivalents ( 11,400) ( 186,900) Cash and Cash Equivalents, Beginning of Period 216,000 328,900 ------------ ------------ Cash and Cash Equivalents, End of Period $ 204,600 $ 142,000 ============ ============ Supplemental Disclosure of Cash Flow Information: Cash paid for interest $ 118,500 $ 29,300 ============ ============ Cash paid for income taxes $ 15,000 $ 105,000 ============ ============
6 EDUCATIONAL DEVELOPMENT CORPORATION - -------------------------------------------------- NOTES TO FINANCIAL STATEMENTS Note 1 - Deferred income taxes reflect the net tax effects of temporary ------ differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and operating loss and tax credit carryforwards. The tax effects of significant items comprising the Company's net tax deferred asset as of May 31, 1996 and February 29, 1996 are as follows:
May 31, 1996 February 29, 1996 ------------ ----------------- Deferred tax assets: Allowance for doubtful accounts and sales returns $ 55,000 50,300 Inventories 117,400 118,000 -------- -------- Net deferred tax asset $172,400 $168,300 ======== ========
Management has determined that no valuation allowance is necessary to reduce the value of deferred tax assets as it is more likely than not that such assets are realizable. The components of income tax expense are as follows:
THREE MONTHS ENDED May 31, 1996 May 31, 1995 ------------- ------------ Income tax expense: Current $195,800 $289,400 Deferred ( 4,100) 10,000 -------- -------- $191,700 $299,400 ======== ========
7 EDUCATIONAL DEVELOPMENT CORPORATION ------------------------------------------------ Note 2 - Effective September 25, 1995 the Company signed a Restated Credit and ------ Security Agreement with State Bank which provided a $6,000,000 line of credit and replaced the existing loan agreement. The line of credit matured June 30, 1996. The note bore interest at prime plus 1/2%, payable monthly (8.75% at May 31, 1996) and was collateralized by substantially all of the assets of the Company. The Company utilized this line of credit primarily to fund routine operations. Payments were made from current cash flows. At May 31, 1996 the Company had available $490,000 under this credit agreement. Effective June 10, 1996 the Company signed a Restated Credit and Security Agreement with State Bank which provides a $9,000,000 line of credit. The line of credit is evidenced by a promissory note in the amount of $9,000,000 payable June 30, 1997. The note bears interest at the Wall Street Journal prime floating rate. The note is collateralized by substantially all of the assets of the Company. The Company utilizes this line of credit primarily to fund routine operations. Note 3 - Inventories consist of the following: ------
05/31/96 02/29/96 ----------- ----------- Book Inventory $10,393,100 $12,077,200 Reserve for Obsolescence ( 301,100) ( 301,100) ----------- ----------- $10,092,000 $11,776,100 =========== ===========
Note 4 - The results of operations for the three months ended May 31, 1996 and ------ 1995 are not necessarily indicative of the results to be expected at year end due to seasonality of the product sales. Note 5 - The information shown with respect to the three months ended May 31, ------ 1996 and 1995, which is unaudited, includes all adjustments which in the opinion of Management are considered to be necessary for a fair presentation of earnings for such periods. There were no adjustments, other than normal recurring accruals, entering into the determination of the results shown except as noted in this report. Reclassifications were made to 1995 balances to conform with 1996 presentation. Note 6 - These statements should be read in conjunction with the Notes to ------ Financial Statements contained in the Company's Annual Report to Shareholders for the Fiscal Year ended February 29, 1996, which are incorporated herein by reference, and with Management's Discussion and Analysis or Plan of Operations appearing on page 9 of this report. 8 EDUCATIONAL DEVELOPMENT CORPORATION ------------------------------------------------ ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS FOR THE --------------------------------------------------------------------------- THREE MONTHS ENDED MAY 31, 1996 ------------------------------- Certain statements contained in this Management Discussion and Analysis are not based on historical facts, but are forward-looking statements that are based upon numerous assumptions about future conditions that may ultimately prove to be inaccurate. Actual events and results may materially differ from anticipated results described in such statements. The Company's ability to achieve such results is subject to certain risks and uncertainties. Such risks and uncertainties include but are not limited to, product prices, continued availability of capital and financing, and other factors affecting the Company's business that may be beyond its control. FINANCIAL CONDITION ------------------- The financial condition of the Company remains strong. Working capital increased 7% at May 31, 1996 over year-end February 29, 1996. Inventory decreased 14% as the Company streamlined its purchasing procedures. Payables decreased 69% at May 31,1996 over year-end February 29, 1996 as the Company paid for inventory received in the prior quarter. The Company increased its credit line to $9,000,000 effective June 10, 1996. Management continues to focus on increasing market share in its Library Service and Publishing Division and to increase revenue from the Home Business Division through increasing its sales consultants network. Management's analysis indicates that the increased exposure of its products through the Home Business Division contributes to increased marketability in the Publishing Division. Because the Company has a relatively small share of the children's book market, Management believes there is potential to continue to increase market share in the Publishing and Library Service Division in the future. Additionally, based upon the feedback Management receives from Home Business Division sales consultants, the products being offered through this Division are well received by the public and becoming more widely known and accepted. Accordingly, Management expects this Division to continue to experience growth. RESULTS OF OPERATIONS --------------------- Revenues - Net sales from the Publishing Division were $2,011,800 for the -------- three months ended May 31, 1996, a decrease of 1.2% over net sales of $2,036,100 for the three months ended May 31, 1995. Sales in the publishing industry nationwide were down from the previous year. Management expects the Publishing Division's sales to improve during the next quarter. Net sales from the Home Business Division were $3,353,900 for the three months ended May 31, 1996, an increase of 104% over the net sales of $1,645,800 for the three months ended May 31, 1995. This increase in net sales is the result of an increase in the number of active consultants, which can be attributed to new incentive programs which motivate and assist consultants in sales and recruiting. This Division offers the entire Usborne line of approximately 900 titles. Management believes this Division has excellent potential for continued growth. Net sales from the Library Services Division were $319,300 for the three months ended May 31, 1996, compared to $303,200 for the same three month period a year ago, an increase of 5%. Management is optimistic that the library market will continue to afford opportunity for growth. 9 EDUCATIONAL DEVELOPMENT CORPORATION - -------------------------------------------------- Operating Expenses - The Company's cost of sales increased to $2,288,900 for - ------------------ the three months ended May 31, 1996 compared with $1,685,800 for the same period last year, an increase of 36%. Cost of sales as a percentage of gross sales was 28.1% for the three months ended May 31, 1996 compared with 26.7% for the same period a year ago. Operating and selling expenses were $1,146,200 for the three months ended May 31, 1996 compared to $652,400 for the same period last year, an increase of 76%. Operating and selling expenses as a percentage of gross sales were 14% for the three months ended May 31, 1996 compared to 10% for the same period a year ago. Contributing to the increase in operating and selling expenses were sales incentives which increased 186% in the Home Business Division as a result of the increase in sales. Sales commissions were $1,344,800 for the three months ended May 31, 1996 compared to $673,500 for the same period last year, an increase of 100%. Sales commissions as a percentage of gross sales were 16.5% for the three months ended May 31, 1996 compared to 10.7% for the same period last year. Sales commissions as a percentage of gross sales is determined by the product mix being sold, as the commission rates vary with the product being sold. The increase in sales by the Home Business Division, which has a higher commission percentage, resulted in higher commission costs. General and administrative expenses increased to $286,900 for three months ended May 31, 1996 compared to $190,000 for the same period last year, an increase of 51%. General and administrative expenses as a percentage of gross sales were 3.5% for the three months ended May 31, 1996 and 3% for the same period last year. The Company leased additional office and warehouse space, increasing rents 42%. Interest expense was $124,300 for the three months ended May 31, 1996 compared to $46,600 for the same period a year ago. This increase was attributable to increased borrowing levels throughout the current period when compared with the same period a year ago. The increased borrowing levels occurred as the Company paid its principal supplier for inventory acquired in an earlier period. Discontinued Operations - Effective February 29, 1996, the Company - ----------------------- discontinued its School Division. The Company anticipates that the liquidation of the division will be completed during fiscal 1997 through the disposition of remaining assets of the division. The remaining assets of the division were written off at February 29, 1996. Accordingly, the operating results of the School Division are segregated and reported as discontinued operations in the accompanying statements of earnings for the first quarter ended May 31, 1995. The condensed statements of operations relating to the discontinued School Division operations for the period ended May 31, 1995 is presented below.
Gross sales $ 22,900 Less discount and allowances ( 4,400 ) -------- Net sales 18,500 Cost of sales 4,000 -------- Gross margin 14,500 Operating expenses 21,300 -------- Loss before income taxes ( 6,800 ) Income tax benefit 2,600 -------- Loss from operations ($ 4,200 ) =======
10 EDUCATIONAL DEVELOPMENT CORPORATION ------------------------------------------------ PART II OTHER INFORMATION Item 6 - Exhibits and Reports on Form 8-K A. Exhibits 1. None B. Reports on Form 8-K 1. There were no reports filed on Form 8-K during the three months covered by this report. 11 EDUCATIONAL DEVELOPMENT CORPORATION ------------------------------------------------ SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. EDUCATIONAL DEVELOPMENT CORPORATION (Registrant) By /s/ Randall W. White ------------------------------- Randall W. White President Date: July 12, 1996 -------------------- 12 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS FINANCIAL INFORMATION EXTRACTED FROM ______________ AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS 12-MOS FEB-29-1996 FEB-29-1996 MAR-01-1996 MAR-01-1996 MAY-31-1996 FEB-29-1996 204,600 215,963 0 0 2,607,700 2,819,384 241,900 228,000 10,092,000 11,776,138 13,399,200 15,437,504 1,044,400 1,156,414 249,900 341,052 14,203,400 16,257,968 7,095,700 9,526,080 0 0 0 0 0 0 1,084,900 1,079,648 6,022,800 5,652,240 14,203,400 16,257,968 5,685,100 19,253,467 5,685,100 19,253,467 2,288,900 8,083,221 4,779,100 15,116,797 271,900 860,786 15,000 60,000 124,300 297,849 494,800 2,918,035 191,700 1,112,700 303,100 1,805,335 0 (326,621) 0 0 0 0 303,100 1,478,714 .06 .28 .06 .28
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