The Aristotle (MM) (NASDAQ:ARTLP)
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The Aristotle Corporation (NASDAQ: ARTL; ARTLP) announced today its
results of operations for the quarter and calendar year ended December
31, 2006.
Results for Quarter and Calendar
Year ended December 31, 2006
For the calendar year ended December 31, 2006, net sales increased 7.5%
to $203.0 million from $188.8 million for the calendar year ended
December 31, 2005, and earnings before income taxes increased 13.3% to
$30.8 million from $27.2 million. For the quarter ended December 31,
2006, net sales increased 8.6% to $41.5 million from $38.2 million for
the quarter ended December 31, 2005, and earnings before income taxes
declined 3.0% to $3.9 million from $4.1 million. Earnings before income
taxes for the quarter and calendar year ended December 31, 2006 were
unfavorably impacted by approximately $1.0 million of pension expense
principally incurred as a result of a partial settlement of benefit
obligations in 2006.
Net earnings applicable to common stockholders for the calendar year
ended December 31, 2006 were $15.2 million, or $.87 per diluted common
share (including $5.5 million, or $.31 per diluted common share, related
to the reversal of the valuation allowance that had previously been
recorded for Federal net operating tax loss carryforwards (“NOLs”)),
compared to $9.2 million, or $.53 per diluted common share (including
$1.2 million, or $.07 per diluted common share, related to the
utilization of NOLs), for the calendar year ended December 31, 2005. Net
earnings applicable to common stockholders for the quarter ended
December 31, 2006 were $4.5 million, or $.26 per diluted common share
(including $4.7 million, or $.27 per diluted common share, related to
the utilization of NOLs), versus $1.5 million, or $.09 per diluted
common share (including $1.2 million, or $.07 per diluted common share,
related to the utilization of NOLs), for the quarter ended December 31,
2005. In the quarter ended December 31, 2006, the Company entered into
certain transactions which resulted in taxable income and the
utilization of NOLs.
The reported net earnings are shown after deduction for Federal, state
and foreign income tax provisions. Approximately $6.3 million and $1.0
million in deferred income tax expense in the quarters ended December
31, 2006 and 2005, respectively, relate to the non-cash charge for
utilization of NOLs. For the calendar years ended December 31, 2006 and
2005, respectively, $14.2 million and $8.0 million of the reported
deferred income tax expense relate to current year NOL utilization. The
NOL utilization for the reported quarters and calendar year 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.
Although certain NOLs expired at December 31, 2006, deferred tax assets
reported at that date include approximately $1.3 million related to NOLs
which the Company will utilize in 2007.
Steven B. Lapin, Aristotle’s President and
Chief Operating Officer, stated, “The Company
is proud to report that net revenues surpassed the $200 million mark for
calendar year 2006, a record total since the Aristotle/Nasco merger in
June 2002. While acquisitions of complementary business units have aided
this achievement, Aristotle continues to increase revenues through its
fundamental educational and commercial lines. Net revenues for calendar
year 2006 reflect 7.5% organic growth from 2005, as the Company did not
add new business units from the prior period.”
Dean Johnson, Aristotle’s Chief Financial
Officer, added, “For calendar year 2005, the
Company’s EBITDA margin, as a financial
performance measurement, reflected an impressive 15.8% of net revenues.
Therefore, Aristotle is delighted to report that its calendar year 2006
EBITDA margin reached an exceptional 16.1% of net revenues. Management
believes that the combination of revenue and EBITDA margin growth is a
clear measure of the Company’s success in
providing unsurpassed products and services to its customers through
business practices designed to yield value for all shareholders.”
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 850
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 other deferred tax positions; 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, 2006. 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
Twelve Months Ended
December 31,
December 31,
2006
2005
2006
2005
Net sales
$
41,490
38,210
202,978
188,769
Cost of sales
25,739
23,374
125,906
117,219
Gross profit
15,751
14,836
77,072
71,550
Selling and administrative expense
11,951
10,772
46,392
43,620
Earnings from operations
3,800
4,064
30,680
27,930
Other (expense) income:
Interest expense
(287)
(347)
(1,648)
(1,369)
Interest income
24
11
44
34
Other, net
402
334
1,737
593
139
(2)
133
(742)
Earnings before income taxes
3,939
4,062
30,813
27,188
Income tax expense (benefit):
Current
1,450
161
4,420
2,447
Deferred
(4,158)
219
2,592
6,884
(2,708)
380
7,012
9,331
Net earnings
6,647
3,682
23,801
17,857
Preferred dividends
2,159
2,159
8,635
8,635
Net earnings applicable to common stockholders
$
4,488
1,523
15,166
9,222
Earnings per common share:
Basic
$
.26
.09
.88
.54
Diluted
$
.26
.09
.87
.53
Weighted average common shares outstanding:
Basic
17,268,758
17,207,115
17,263,675
17,167,769
Diluted
17,518,302
17,437,124
17,508,631
17,393,966
RECONCILIATION OF GAAP NET EARNINGS TO EBITDA
(in thousands)
(unaudited)
Three Months Ended
Twelve Months Ended
December 31,
December 31,
2006
2005
2006
2005
Net earnings
$
6,647
3,682
23,801
17,857
Add:
Income tax expense (benefit)
(2,708)
380
7,012
9,331
Interest expense
287
347
1,648
1,369
Other (income) expense
(426)
(345)
(1,781)
(627)
Depreciation and amortization
499
458
1,905
1,820
EBITDA
$
4,299
4,522
32,585
29,750
THE ARISTOTLE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
Assets
December 31, 2006
December 31, 2005
Current assets:
Cash and cash equivalents
$
5,814
1,803
Investments
14,586
12,856
Accounts receivable, net
15,458
14,530
Inventories, net
37,487
35,579
Prepaid expenses and other
8,123
8,026
Deferred income taxes
4,051
11,279
Total current assets
85,519
84,073
Property, plant and equipment, net
25,426
22,361
Goodwill
13,860
13,799
Deferred income taxes
8,188
2,712
Other assets
328
408
Total assets
$
133,321
123,353
Liabilities and Stockholders' Equity
Current liabilities:
Current installments of long-term debt
$
287
606
Trade accounts payable
9,440
9,013
Accrued expenses
6,729
5,736
Income taxes
1,478
185
Accrued dividends payable
2,159
2,159
Total current liabilities
20,093
17,699
Long-term debt, less current installments
11,985
24,350
Long-term pension obligations
4,469
858
Other long-term accruals
2,383
-
Total liabilities
38,930
42,907
Stockholders' equity:
Preferred stock, Series I
6,601
6,601
Preferred stock, Series J
65,760
65,760
Common stock
172
172
Additional paid-in capital
3,106
3,119
Retained earnings
20,057
4,891
Accumulated other comprehensive loss
(1,305)
(97)
Total stockholders' equity
94,391
80,446
Total liabilities and stockholders' equity
$
133,321
123,353