The Aristotle (MM) (NASDAQ:ARTLP)
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The Aristotle Corporation (NASDAQ: ARTL; ARTLP)
announced today its results of operations for the quarter ended March
31, 2006.
First Quarter 2006 Results
For the three months ended March 31, 2006, net sales increased
10.6% to $46.2 million from $41.7 million in the first quarter of
2005. Earnings before income taxes increased 24.3% to $6.5 million
from $5.2 million in the 2005 first quarter, and net earnings
increased 24.2% to $4.0 million from $3.2 million in the 2005 first
quarter. Net earnings applicable to common stockholders in the first
quarter of 2006 were $1.8 million, or $.10 per diluted common share,
compared to net earnings applicable to common stockholders of $1.0
million, or $.06 per diluted common share, in the 2005 first quarter.
Net earnings applicable to common stockholders in both the 2006 and
2005 periods were reduced by the accretion of $2.2 million for
dividends on Aristotle's Series I and Series J preferred stocks.
The reported net earnings are shown after deduction for Federal,
state and foreign income tax expenses. Approximately $1.9 million and
$1.6 million of the income tax provision for the 2006 and 2005 first
quarters, respectively, relate to the non-cash charge for utilization
of Federal net operating tax loss carryforwards ("NOL's"). The
utilization of NOL's for the reported quarters reduces Aristotle's
current Federal tax liability, thereby conserving cash. Except for
Federal alternative minimum tax obligations arising from limitations
on the use of NOL's in future periods, Aristotle anticipates that the
utilization of available NOL's will offset its Federal taxable income
through 2006. At March 31, 2006, the Condensed Consolidated Balance
Sheet includes a net deferred tax asset of $12.2 million, of which
$8.0 million relates to the NOL's.
Steven B. Lapin, Aristotle's President and Chief Operating
Officer, stated, "The corporate-wide sales growth achieved in this
year's first quarter is exceptional for the markets that Aristotle
serves. Your Company's largest business segment, focused on K-12 level
classroom educational materials primarily distributed in the U.S. and
Canada, experienced a revenue increase of nearly 12% compared to the
same quarter last year. And, the Commercial segment achieved an
approximate 5% revenue growth this quarter."
"At the same time, selling and administrative expenses have
increased only 4.2% in the comparable periods. The combined effect of
your Company's sales growth, stable gross margins and controlled
expenses yielded an EBITDA increase of 18.7% to $7.0 million in the
first quarter of 2006 compared to $5.9 million in the first quarter of
2005."
Dean Johnson, Aristotle's Chief Financial Officer, commented,
"Like many other businesses, your Company is concerned about the
potential negative impact of high petroleum prices which, among other
things, affect plastic material costs and shipping expenses. And,
although Aristotle has performed well in this environment during
recent quarters, management is well aware that it must continue to
employ procurement practices designed to maximize inventory investment
returns, creative product development efforts to meet its customer
needs, and prudent operating expense controls in order to build upon
the success realized to date."
In providing EBITDA information, Aristotle offers a non-GAAP
financial measure to complement its condensed consolidated financial
statements presented in accordance with GAAP. This non-GAAP financial
measure is intended to supplement the reader's overall understanding
of Aristotle's current financial performance. However, this non-GAAP
financial measure is not intended to supercede or replace Aristotle's
GAAP results. A reconciliation of the non-GAAP results to the GAAP
results is provided in the "Reconciliation of GAAP Net Earnings to
EBITDA" schedule below. EBITDA is defined as net earnings before
income taxes, interest expense, other income and expense, and
depreciation and amortization.
About Aristotle
The Aristotle Corporation, founded in 1986, and headquartered in
Stamford, CT, is a leading manufacturer and global distributor of
educational, health, medical technology and agricultural products. A
selection of over 80,000 items is offered, primarily through more than
45 separate catalogs carrying the brand of Nasco (founded in 1941), as
well as those bearing the brands of Life/Form(R), Whirl-Pak(R),
Simulaids, Triarco, Spectrum Educational Supplies, Hubbard Scientific,
Scott Resources, Haan Crafts, To-Sew, CPR Prompt(R), Ginsberg
Scientific, and Summit Learning. Products include educational
materials and supplies for substantially all K-12 curricula, molded
plastics, biological materials, medical simulators, health care
products and items for the agricultural, senior care and food
industries. Aristotle has approximately 800 full-time employees at its
operations in Fort Atkinson, WI, Modesto, CA, Fort Collins, CO,
Plymouth, MN, Saugerties, NY, Chippewa Falls, WI, Otterbein, IN and
Newmarket, Ontario, Canada.
There are approximately 17.3 million shares outstanding of
Aristotle common stock (NASDAQ: ARTL) and approximately 1.1 million
shares outstanding of 11%, cumulative, convertible, voting, Series I
preferred stock (NASDAQ: ARTLP); there are also approximately 11.0
million privately-held shares outstanding of 12%, cumulative,
non-convertible, non-voting shares of Series J preferred stock.
Aristotle has about 4,000 stockholders of record.
Further information about Aristotle can be obtained on its
website, at www.aristotlecorp.net.
Safe Harbor under the Private Securities Litigation Reform Act of
1995
To the extent that any of the statements contained in this release
are forward-looking, such statements are based on current expectations
that involve a number of uncertainties and risks that could cause
actual results to differ materially from those projected or suggested
in such forward-looking statements. Aristotle cautions investors that
there can be no assurance that actual results or business conditions
will not differ materially from those projected or suggested in such
forward-looking statements as a result of various factors, including,
but not limited to, the following: (i) the ability of Aristotle to
obtain financing and additional capital to fund its business strategy
on acceptable terms, if at all; (ii) the ability of Aristotle on a
timely basis to find, prudently negotiate and consummate additional
acquisitions; (iii) the ability of Aristotle to manage any to-be
acquired businesses; (iv) there is not an active trading market for
the Company's securities, and the stock prices thereof are highly
volatile, due in part to the relatively small percentage of the
Company's securities which is not held by the Company's majority
stockholder and members of the Company's Board of Directors and
management; (v) the ability of Aristotle to retain and utilize its
Federal net operating tax loss carryforward position; and (vi) other
factors identified in Item 1A, Risk Factors, contained in the
Company's Annual Report on Form 10-K for the year ended December 31,
2005. As a result, Aristotle's future development efforts involve a
high degree of risk. For further information, please see Aristotle's
filings with the Securities and Exchange Commission, including its
Forms 10-K, 10-Q and 8-K.
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THE ARISTOTLE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
-----------------------------------------------
(In thousands, except share and per share data)
-----------------------------------------------
(Unaudited)
Three Months Ended
March 31,
-----------------------
2006 2005
----------- -----------
Net sales $ 46,164 41,748
Cost of sales 28,565 25,685
----------- -----------
Gross profit 17,599 16,063
Selling and administrative expense 11,082 10,633
----------- -----------
Earnings from operations 6,517 5,430
Other income (expense):
Interest expense (447) (291)
Other, net 405 70
----------- -----------
(42) (221)
----------- -----------
Earnings before income taxes 6,475 5,209
Income taxes:
Current 722 465
Deferred 1,792 1,556
----------- -----------
2,514 2,021
----------- -----------
Net earnings 3,961 3,188
Preferred dividends 2,159 2,158
----------- -----------
Net earnings applicable to common
stockholders $ 1,802 1,030
=========== ===========
Earnings per common share:
Basic $ .10 .06
Diluted $ .10 .06
Weighted average common shares outstanding:
Basic 17,249,302 17,144,992
Diluted 17,494,518 17,407,253
RECONCILIATION OF GAAP NET EARNINGS TO EBITDA
(in thousands)
(unaudited)
Three Months Ended
March 31,
-----------------------------
2006 2005
-------------- -------------
Net earnings $ 3,961 3,188
Add:
Income taxes 2,514 2,021
Interest expense 447 291
Other, net (405) (70)
Depreciation and amortization 435 429
-------------- -------------
EBITDA $ 6,952 5,859
============== =============
THE ARISTOTLE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
March 31, December 31, March 31,
Assets 2006 2005 2005
----------- ------------ -----------
(unaudited) (unaudited)
Current assets:
Cash and cash equivalents $ 1,999 1,803 795
Investments 13,258 12,856 4,131
Accounts receivable, net 19,381 14,530 16,866
Inventories 38,222 35,579 36,848
Prepaid expenses and other 7,013 8,026 6,032
Deferred income taxes 9,501 11,279 9,825
----------- ------------ -----------
Total current assets 89,374 84,073 74,497
Property, plant and equipment,
net 23,045 22,361 17,901
Goodwill 13,872 13,799 13,685
Deferred income taxes 2,712 2,712 9,047
Other assets 373 408 463
----------- ------------ -----------
Total assets $ 129,376 123,353 115,593
=========== ============ ===========
Liabilities and Stockholders'
Equity
Current liabilities:
Current installments of long-
term debt $ 589 606 115
Trade accounts payable 9,704 9,013 7,789
Accrued expenses 5,488 6,779 4,954
Accrued dividends payable - 2,159 -
----------- ------------ -----------
Total current liabilities 15,781 18,557 12,858
Long-term debt, less current
installments 31,268 24,350 30,910
Stockholders' equity:
Preferred stock, Series I 6,601 6,601 6,580
Preferred stock, Series J 65,760 65,760 65,760
Common stock 173 172 171
Additional paid-in capital 3,219 3,119 2,483
Retained earnings (accumulated
deficit) 6,693 4,891 (3,301)
Accumulated other comprehensive
earnings (loss) (119) (97) 132
----------- ------------ -----------
Total stockholders' equity 82,327 80,446 71,825
----------- ------------ -----------
Total liabilities and
stockholders' equity $ 129,376 123,353 115,593
=========== ============ ===========
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