The Aristotle (MM) (NASDAQ:ARTLP)
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The Aristotle Corporation (NASDAQ: ARTL; ARTLP) announced today its
results of operations for the third quarter and nine months ended
September 30, 2006.
For the three months ended September 30, 2006, net sales increased 5.5%
to $61.8 million from $58.6 million in the third quarter of 2005, and
earnings before income taxes increased 13.2% to $11.4 million from $10.1
million. For the nine months ended September 30, 2006, net sales
increased 7.3% to $161.5 million from $150.6 million for the nine months
ended September 30, 2005, and earnings before income taxes increased
16.2% to $26.9 million from $23.1 million.
Net earnings applicable to common stockholders in the third quarter of
2006 were $5.5 million, or $.32 per diluted common share, versus $4.0
million, or $.23 per diluted common share, in the third quarter of 2005.
Net earnings applicable to common stockholders for the first nine months
of 2006 were $10.7 million, or $.61 per diluted common share, compared
to $7.7 million, or $.44 per diluted common share, for the comparable
nine months of 2005. Net earnings applicable to common stockholders in
each of the three and nine month periods of 2006 were favorably impacted
by approximately $.4 million (or $.02 per diluted common share) as a net
result of (i) a decrease in the valuation allowance that was established
to reflect the estimate of Aristotle’s Federal
net operating tax loss carryforwards (“NOL’s”)
that were expected to expire unutilized at December 31, 2006 and (ii)
expenses incurred by the Company in connection with Geneve Corporation’s
merger proposal which was withdrawn on September 18, 2006.
In the quarter ended September 30, 2006, the valuation allowance was
reduced by $.7 million to $5.8 million. The change in the valuation
allowance, related to the projected utilization of NOL’s,
was due primarily to current estimates of 2006 taxable income, driven in
large part by the Company’s third quarter
results. No change in the valuation allowance had been made in the
quarter and nine months ended September 30, 2005.
The reported net earnings are shown after deduction for Federal, state
and foreign income tax provisions. Approximately $3.4 million and $3.0
million in deferred income tax expense in the 2006 and 2005 third
quarters, respectively, relate to the non-cash charge for utilization of
NOL’s. For the first nine months of 2006 and
2005, respectively, $7.9 million and $7.0 million of the reported
deferred income tax expense relate to current year NOL utilization. The
NOL utilization for the reported quarters and year-to-date periods
substantially eliminated Aristotle’s current
Federal income tax liability and allowed Aristotle to retain for other
business purposes the cash that would have been used for tax payments.
Except for Federal alternative minimum tax obligations arising from
limitations on the utilization of the NOL’s,
Aristotle anticipates that the utilization of available NOL’s
will offset its Federal taxable income through 2006. At September 30,
2006, the Condensed Consolidated Balance Sheet contains a net deferred
tax asset of $7.3 million, of which $2.9 million relates to the NOL’s.
Steven B. Lapin, Aristotle’s President and
Chief Operating Officer, stated, “Further to
the excellent reported third quarter numbers for the Company’s
peak season, which continued the favorable results of the first six
months, the 5.5% organic revenue growth produced EBITDA of $11.8
million, which reflects a 9.4% increase over EBITDA for the quarter
ended September 30, 2005. In major part, the earnings growth was
achieved through careful management of gross margins, including prudent
purchasing practices and strategic pricing structures designed to
provide unsurpassed value and service to our customers.”
Dean T. Johnson, Aristotle’s Chief Financial
Officer, added, “Excluding the effect of the
adjustment to the NOL valuation at September 30, 2006, earnings per
diluted common share for the quarter ended September 30, 2006 still
increased more than 20% compared to the third quarter of 2005.”
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 the Company’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 earnings before income taxes, interest expense,
other income and expense, 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®,
Whirl-Pak®, Simulaids, Triarco, Spectrum
Educational Supplies, Hubbard Scientific, Scott Resources, Haan Crafts,
To-Sew, CPR Prompt®, 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 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-K/A, 10-Q and 8-K.
THE ARISTOTLE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(In thousands, except share and
per share data)
(Unaudited)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2006
2005
2006
2005
Net sales
$
61,843
58,626
161,488
150,559
Cost of sales
38,516
37,222
100,167
93,845
Gross profit
23,327
21,404
61,321
56,714
Selling and administrative expense
12,000
11,060
34,441
32,848
Earnings from operations
11,327
10,344
26,880
23,866
Other (expense) income:
Interest expense
(413)
(369)
(1,361)
(1,022)
Interest income
18
11
20
23
Other, net
507
116
1,335
259
112
(242)
(6)
(740)
Earnings before income taxes
11,439
10,102
26,874
23,126
Income tax expense:
Current
1,215
1,064
2,970
2,286
Deferred
2,531
2,846
6,750
6,665
3,746
3,910
9,720
8,951
Net earnings
7,693
6,192
17,154
14,175
Preferred dividends
2,158
2,160
6,476
6,476
Net earnings applicable to common stockholders
$
5,535
4,032
10,678
7,699
Earnings per common share:
Basic
$
.32
.23
.62
.45
Diluted
$
.32
.23
.61
.44
Weighted average common shares outstanding:
Basic
17,269,846
17,164,155
17,261,961
17,154,462
Diluted
17,529,652
17,422,089
17,511,332
17,404,363
RECONCILIATION OF GAAP NET EARNINGS TO EBITDA
(in thousands)
(unaudited)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2006
2005
2006
2005
Net earnings
$
7,693
6,192
17,154
14,175
Add:
Income tax expense
3,746
3,910
9,720
8,951
Interest expense
413
369
1,361
1,022
Other (income) expense
(525)
(127)
(1,355)
(282)
Depreciation and amortization
511
472
1,406
1,362
EBITDA
$
11,838
10,816
28,286
25,228
THE ARISTOTLE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
Assets
Sept. 30, 2006
Dec. 31, 2005
Sept. 30, 2005
(unaudited)
(unaudited)
Current assets:
Cash and cash equivalents
Investments
$
3,306
14,172
1,803
12,856
3,011
6,019
Accounts receivable, net
27,261
14,530
25,013
Inventories, net
36,296
35,579
34,963
Prepaid expenses and other
4,818
8,026
5,255
Deferred income taxes
4,562
11,279
9,825
Total current assets
90,415
84,073
84,086
Property, plant and equipment, net
23,873
22,361
20,421
Goodwill
14,018
13,799
13,818
Deferred income taxes
2,712
2,712
3,969
Other assets
327
408
416
Total assets
$
131,345
123,353
122,710
Liabilities and Stockholders' Equity
Current liabilities:
Current installments of long-term debt
$
165
606
119
Trade accounts payable
10,939
9,013
9,436
Accrued expenses
6,516
6,594
4,747
Income Taxes
688
185
385
Accrued dividends payable
-
2,159
-
Total current liabilities
18,308
18,557
14,687
Long-term debt, less current installments
21,297
24,350
28,839
Stockholders' equity:
Preferred stock, Series I
6,601
6,601
6,601
Preferred stock, Series J
65,760
65,760
65,760
Common stock
173
172
172
Additional paid-in capital
3,327
3,119
2,773
Retained earnings
15,569
4,891
3,368
Accumulated other comprehensive earnings (loss)
310
(97)
510
Total stockholders' equity
91,740
80,446
79,184
Total liabilities and stockholders' equity
$
131,345
123,353
122,710
The Aristotle Corporation (NASDAQ: ARTL; ARTLP) announced today
its results of operations for the third quarter and nine months ended
September 30, 2006.
For the three months ended September 30, 2006, net sales increased
5.5% to $61.8 million from $58.6 million in the third quarter of 2005,
and earnings before income taxes increased 13.2% to $11.4 million from
$10.1 million. For the nine months ended September 30, 2006, net sales
increased 7.3% to $161.5 million from $150.6 million for the nine
months ended September 30, 2005, and earnings before income taxes
increased 16.2% to $26.9 million from $23.1 million.
Net earnings applicable to common stockholders in the third
quarter of 2006 were $5.5 million, or $.32 per diluted common share,
versus $4.0 million, or $.23 per diluted common share, in the third
quarter of 2005. Net earnings applicable to common stockholders for
the first nine months of 2006 were $10.7 million, or $.61 per diluted
common share, compared to $7.7 million, or $.44 per diluted common
share, for the comparable nine months of 2005. Net earnings applicable
to common stockholders in each of the three and nine month periods of
2006 were favorably impacted by approximately $.4 million (or $.02 per
diluted common share) as a net result of (i) a decrease in the
valuation allowance that was established to reflect the estimate of
Aristotle's Federal net operating tax loss carryforwards ("NOL's")
that were expected to expire unutilized at December 31, 2006 and (ii)
expenses incurred by the Company in connection with Geneve
Corporation's merger proposal which was withdrawn on September 18,
2006.
In the quarter ended September 30, 2006, the valuation allowance
was reduced by $.7 million to $5.8 million. The change in the
valuation allowance, related to the projected utilization of NOL's,
was due primarily to current estimates of 2006 taxable income, driven
in large part by the Company's third quarter results. No change in the
valuation allowance had been made in the quarter and nine months ended
September 30, 2005.
The reported net earnings are shown after deduction for Federal,
state and foreign income tax provisions. Approximately $3.4 million
and $3.0 million in deferred income tax expense in the 2006 and 2005
third quarters, respectively, relate to the non-cash charge for
utilization of NOL's. For the first nine months of 2006 and 2005,
respectively, $7.9 million and $7.0 million of the reported deferred
income tax expense relate to current year NOL utilization. The NOL
utilization for the reported quarters and year-to-date periods
substantially eliminated Aristotle's current Federal income tax
liability and allowed Aristotle to retain for other business purposes
the cash that would have been used for tax payments. Except for
Federal alternative minimum tax obligations arising from limitations
on the utilization of the NOL's, Aristotle anticipates that the
utilization of available NOL's will offset its Federal taxable income
through 2006. At September 30, 2006, the Condensed Consolidated
Balance Sheet contains a net deferred tax asset of $7.3 million, of
which $2.9 million relates to the NOL's.
Steven B. Lapin, Aristotle's President and Chief Operating
Officer, stated, "Further to the excellent reported third quarter
numbers for the Company's peak season, which continued the favorable
results of the first six months, the 5.5% organic revenue growth
produced EBITDA of $11.8 million, which reflects a 9.4% increase over
EBITDA for the quarter ended September 30, 2005. In major part, the
earnings growth was achieved through careful management of gross
margins, including prudent purchasing practices and strategic pricing
structures designed to provide unsurpassed value and service to our
customers."
Dean T. Johnson, Aristotle's Chief Financial Officer, added,
"Excluding the effect of the adjustment to the NOL valuation at
September 30, 2006, earnings per diluted common share for the quarter
ended September 30, 2006 still increased more than 20% compared to the
third quarter of 2005."
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 the Company'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 earnings before income
taxes, interest expense, other income and expense, 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 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-K/A, 10-Q and 8-K.
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*T
THE ARISTOTLE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
----------------------------------------------------------------------
(In thousands, except share and per share data)
----------------------------------------------------------------------
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ -----------------------
2006 2005 2006 2005
----------- ----------- ----------- -----------
Net sales $ 61,843 58,626 161,488 150,559
Cost of sales 38,516 37,222 100,167 93,845
----------- ----------- ----------- -----------
Gross profit 23,327 21,404 61,321 56,714
Selling and
administrative
expense 12,000 11,060 34,441 32,848
----------- ----------- ----------- -----------
Earnings from
operations 11,327 10,344 26,880 23,866
Other (expense)
income:
Interest expense (413) (369) (1,361) (1,022)
Interest income 18 11 20 23
Other, net 507 116 1,335 259
----------- ----------- ----------- -----------
112 (242) (6) (740)
----------- ----------- ----------- -----------
Earnings before
income taxes 11,439 10,102 26,874 23,126
Income tax expense:
Current 1,215 1,064 2,970 2,286
Deferred 2,531 2,846 6,750 6,665
----------- ----------- ----------- -----------
3,746 3,910 9,720 8,951
----------- ----------- ----------- -----------
Net earnings 7,693 6,192 17,154 14,175
Preferred dividends 2,158 2,160 6,476 6,476
----------- ----------- ----------- -----------
Net earnings
applicable to
common
stockholders $ 5,535 4,032 10,678 7,699
=========== =========== =========== ===========
Earnings per common
share:
Basic $ .32 .23 .62 .45
Diluted $ .32 .23 .61 .44
Weighted average
common shares
outstanding:
Basic 17,269,846 17,164,155 17,261,961 17,154,462
Diluted 17,529,652 17,422,089 17,511,332 17,404,363
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RECONCILIATION OF GAAP NET EARNINGS TO EBITDA
(in thousands)
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- ------------------
2006 2005 2006 2005
------------------- ------------------
Net earnings $ 7,693 6,192 17,154 14,175
Add:
Income tax expense 3,746 3,910 9,720 8,951
Interest expense 413 369 1,361 1,022
Other (income) expense (525) (127) (1,355) (282)
Depreciation and
amortization 511 472 1,406 1,362
------------------- ------------------
EBITDA $ 11,838 10,816 28,286 25,228
=================== ==================
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THE ARISTOTLE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
Sept. 30, Dec. 31, Sept. 30,
Assets 2006 2005 2005
------------ -------- -----------
(unaudited) (unaudited)
Current assets:
Cash and cash equivalents 3,306 1,803 3,011
Investments $ 14,172 12,856 6,019
Accounts receivable, net 27,261 14,530 25,013
Inventories, net 36,296 35,579 34,963
Prepaid expenses and other 4,818 8,026 5,255
Deferred income taxes 4,562 11,279 9,825
------------ -------- -----------
Total current assets 90,415 84,073 84,086
Property, plant and equipment, net 23,873 22,361 20,421
Goodwill 14,018 13,799 13,818
Deferred income taxes 2,712 2,712 3,969
Other assets 327 408 416
------------ -------- -----------
Total assets $ 131,345 123,353 122,710
============ ======== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Current installments of long-term
debt $ 165 606 119
Trade accounts payable 10,939 9,013 9,436
Accrued expenses 6,516 6,594 4,747
Income Taxes 688 185 385
Accrued dividends payable - 2,159 -
------------ -------- -----------
Total current liabilities 18,308 18,557 14,687
Long-term debt, less current
installments 21,297 24,350 28,839
Stockholders' equity:
Preferred stock, Series I 6,601 6,601 6,601
Preferred stock, Series J 65,760 65,760 65,760
Common stock 173 172 172
Additional paid-in capital 3,327 3,119 2,773
Retained earnings 15,569 4,891 3,368
Accumulated other comprehensive
earnings (loss) 310 (97) 510
------------ -------- -----------
Total stockholders' equity 91,740 80,446 79,184
------------ -------- -----------
Total liabilities and
stockholders' equity $ 131,345 123,353 122,710
============ ======== ===========
*T