EX-99 2 ex99-1.htm EX. 99.1: PRESS RELEASE

Exhibit 99.1

For Immediate Release

News Release

Contacts:

Bill Smith or Dean Johnson

The Aristotle Corporation

Phone: (203) 358-8000 or (920) 563-2446

Fax: (203) 358-0179 or (920) 563-0234

wsmith@ihc-geneve.com

int@enasco.com

 

The Aristotle Corporation Announces Calendar 2006 Results

 

Stamford, CT, April 2, 2007 - 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

Investments

$

 

5,814

14,586

 

1,803

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