1
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 quarterly period ended November 30, 2000.May 31, 2001.
[ ] 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, Tulsa Oklahoma 74146-6515
(Address of principal executive offices)
Registrant's telephone number: (918) 622-4522
Indicate by check mark whether the registrant (1) has filed all reports
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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 November 30, 2000May 31, 2001 there were 3,908,2003,908,000 shares of Educational
Development Corporation Common Stock, $0.20 par value outstanding.
2
EDUCATIONAL DEVELOPMENT CORPORATION
PART I. FINANCIAL INFORMATION
ITEM 1
BALANCE SHEETS
November 30, 2000May 31, 2001 February 29, 2000
----------------- -----------------28,
(unaudited) 2001
------------ ------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 132,800138,600 $ 214,300268,300
Accounts receivable - (less
allowances for doubtful accounts
and sales returns: 11/30/005/31/01 - $259,300$180,600
2/29/0028/01 - $209,500) 2,382,200 2,020,400$224,300) 2,258,300 1,478,400
Inventories - Net 8,038,500 8,364,1007,946,800 9,211,900
Prepaid expenses and other assets 229,700 220,400270,500 247,100
Income tax receivable -- 72,600
Deferred income taxes 180,300 137,70075,000 97,800
------------ ------------
Total current assets 10,963,500 10,956,90010,689,200 11,376,100
INVENTORIES 1,193,800 1,280,000- Net 945,000 1,005,000
PROPERTY AND EQUIPMENT
at cost (less accumulated depreciation:
11/30/0005/31/01 - $1,418,200;$1,394,900; 2/29/0028/01 - $1,330,500) 56,100 85,300$1,390,100) 110,900 84,200
DEFERRED INCOME TAXES 21,900 17,80029,100 6,300
------------ ------------
$ 12,235,30011,774,200 $ 12,340,00012,471,600
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Note payable to bank $ 790,000627,000 $ 1,278,0001,084,000
Accounts payable 1,590,200 1,681,6001,000,900 1,703,100
Accrued salaries and commissions 415,100 258,100301,500 325,700
Income taxes 90,500 46,900tax payable 136,400 --
Dividends payable 78,200 --
Other current liabilities 202,600 103,000109,700 118,700
------------ ------------
Total current liabilities 3,088,400 3,367,6002,253,700 3,231,500
DEFERRED INCOME TAXES 24,300 24,300
COMMITMENTS
SHAREHOLDERS' EQUITY:
Common Stock, $.20 par value (Authorized
6,000,000 shares; Issued 5,429,240
shares; Outstanding 3,908,2003,908,000 and
4,167,3893,911,400 shares) 1,085,800 1,085,800
Capital in excess of par value 4,413,500 4,410,1004,413,600 4,413,600
Retained earnings 8,191,000 7,259,1008,561,900 8,270,600
------------ ------------
13,690,300 12,755,00014,061,300 13,770,000
Less treasury shares, at cost (4,543,400) (3,782,600)(4,565,100) (4,554,200)
------------ ------------
9,146,900 8,972,4009,496,200 9,215,800
------------ ------------
$ 12,235,30011,774,200 $ 12,340,00012,471,600
============ ============
See notes to financial statements.
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EDUCATIONAL DEVELOPMENT CORPORATION
STATEMENTS OF EARNINGS (UNAUDITED)
Three Months Ended November 30, Nine Months Ended November 30,May 31
-------------------------------
2001 2000 1999 2000 1999
------------ ------------
------------ ------------
GROSS SALES $ 7,704,3007,283,800 $ 7,530,600 $ 21,743,000 $ 21,038,0006,742,000
Less discounts & allowances (2,458,700) (2,517,800) (7,832,400) (7,700,600)
------------ ------------(2,483,200) (2,491,600)
------------ ------------
Net sales 5,245,600 5,012,800 13,910,600 13,337,4004,800,600 4,250,400
COST OF SALES 2,065,300 1,983,400 5,813,000 5,515,000
------------ ------------1,972,800 1,797,400
------------ ------------
Gross margin 3,180,300 3,029,400 8,097,600 7,822,400
------------ ------------2,827,800 2,453,000
------------ ------------
OPERATING EXPENSES:
Operating & selling 870,200 791,900 2,388,300 2,332,700832,600 760,300
Sales commissions 1,329,500 1,149,900 2,894,800 2,630,3001,033,000 805,600
General & administrative 341,900 409,900 1,111,200 1,198,500354,200 420,200
Interest 27,700 7,200 93,900 37,90016,000 34,000
------------ ------------
------------ ------------
2,569,300 2,358,900 6,488,200 6,199,400
------------ ------------2,235,800 2,020,100
------------ ------------
OTHER INCOME 8,400 10,200 29,200 35,700
------------ ------------6,600 14,600
------------ ------------
EARNINGS BEFORE INCOME TAXES 619,400 680,700 1,638,600 1,658,700598,600 447,500
INCOME TAXES 237,500 260,900 627,900 635,000
------------ ------------229,100 171,400
------------ ------------
NET EARNINGS $ 381,900369,500 $ 419,800 $ 1,010,700 $ 1,023,700
============ ============276,100
============ ============
BASIC AND DILUTED EARNINGS
PER SHARE:
BasicSHARE $ 0.10.09 $ 0.10 $ 0.25 $ 0.23
============ ============ ============ ============
Diluted $ 0.10 $ 0.10 $ 0.25 $ 0.23
============ ============.07
============ ============
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING:
Basic 3,914,806 4,318,334 3,974,920 4,410,938
============ ============3,914,707 4,069,128
============ ============
Diluted 4,039,210 4,430,490 4,056,382 4,473,607
============ ============4,006,222 4,121,164
============ ============
DIVIDENDS DECLARED PER
COMMON SHARE $ --.02 $ -- $ 0.02 $ 0.02
============ ============.02
============ ============
See notes to financial statements.
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EDUCATIONAL DEVELOPMENT CORPORATION
STATEMENT 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, MAR. 1, 20002001 5,429,240 $ 1,085,800 $ 4,410,1004,413,600 $ 7,259,100 1,261,851 $(3,782,600)8,270,600 1,517,840 $(4,554,200) $ 8,972,400
Issuance of treasury stock -- -- -- -- (583) 1,700 1,7009,215,800
Purchases of treasury
stock -- -- -- -- 272,352 (800,100) (800,100)10,400 (31,900) (31,900)
Sales of treasury stock -- -- 3,400 -- (12,580) 37,600 41,000-- (7,000) 21,000 21,000
Dividends paid ($0.02 / share)declared -- -- -- (78,800)(78,200) -- -- (78,800)(78,200)
Net earnings -- -- -- 1,010,700369,500 -- -- 1,010,700369,500
----------- ----------- ----------- ----------- ----------- ----------- -----------
BALANCE, NOV. 30, 2000MAY 31, 2001 5,429,240 $ 1,085,800 $ 4,413,5004,413,600 $ 8,191,000 1,521,040 $(4,543,400)8,561,900 1,521,240 $(4,565,100) $ 9,146,9009,496,200
=========== =========== =========== =========== =========== =========== ===========
See notes to financial statements.
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EDUCATIONAL DEVELOPMENT CORPORATION
STATEMENTS OF CASH FLOWS (UNAUDITED)
NineThree Months Ended November 30,
------------------------------May 31
----------------------------
2001 2000
1999
------------ ----------------------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES $ 1,302,900379,300 $ 2,446,400280,900
CASH FLOWS FROM INVESTING ACTIVITIES -ACTIVITIES:
Purchases of property and equipment (58,500) (33,900)
------------ ------------(41,100) (600)
----------- -----------
Net cash used in investing activities (58,500) (33,900)
------------ ------------(41,100) (600)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under revolving credit agreement 5,801,000 5,238,0001,399,000 1,865,000
Payments under revolving credit agreement (6,289,000) (5,816,000)(1,856,000) (1,609,000)
Cash received from salesales of treasury stock 41,000 435,10021,000 --
Cash paid to acquire treasury stock (800,100) (2,157,900)
Dividends paid (78,800) (86,300)
------------ ------------(31,900) (561,500)
----------- -----------
Net cash used in financing activities (1,325,900) (2,387,100)
------------ ------------(467,900) (305,500)
----------- -----------
Net Increase (Decrease)Decrease in Cash and Cash Equivalents (81,500) 25,400(129,700) (25,200)
Cash and Cash Equivalents, Beginning of Period 268,300 214,300
210,900
------------ ----------------------- -----------
Cash and Cash Equivalents, End of Period $ 132,800138,600 $ 236,300
============ ============189,100
=========== ===========
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest $ 92,40017,600 $ 38,500
============ ============27,900
=========== ===========
Cash paid for income taxes $ 631,00020,000 $ 537,000
============ ============45,000
=========== ===========
Supplemental Disclosure of Non Cash Operating Activities:
Dividends declared $ 78,200 $ 79,000
=========== ===========
See notes to financial statements.
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EDUCATIONAL DEVELOPMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
Note 1 - The information shown with respect to the three months ended May 31,
2001 and nine months
ended November 30, 2000, and 1999, 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. The results of operations for the three months ended May 31,
2001 and nine months ended November 30, 2000, and 1999, respectively, are not necessarily indicative of the results to be
expected at year end due to seasonality of the product sales.
These financial statements and notes are prepared pursuant to the rules and
regulations of the Securities and Exchange Commission for interim reporting and
should be read in conjunction with the Financial Statements and accompanying
notes contained in the Company's Annual Report to Shareholders for the Fiscal
Year ended February 29, 2000.
SEC Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial
Statements," ("SAB 101") was issued December 1999. This staff bulletin
summarizes certain of the staff's views in applying generally accepted
accounting principles to revenue recognition in financial statements. SAB 101 is
effective no later than the fourth fiscal quarter of the fiscal years beginning
after December 15, 1999. Management does not expect implementation of SAB 101
will have a significant effect on its financial statements.28, 2001.
Note 2 - Effective June 30, 2000 the Company signed a First Amendment to the
Credit and Security Agreement with State Bank which provides a $3,500,000 line
of credit. This line of credit is evidenced by a promissory note in the amount
of $3,500,000 payable June 30, 2001. This note bears interest at the Wall Street
Journal prime floating rate minus 0.25% payable monthly (9.25%(6.75% at November 30,
2000)May 31, 2001).
The note is collateralized by substantially all the assets of the Company.
Available credit under the revolving credit agreement was $2,710,000$2,873,000 at NovemberMay 31,
2001.
Effective June 30, 2000.2001 the Company signed a Second Amendment to the Credit and
Security Agreement with State Bank which provides a $3,500,000 line of credit.
This line of credit is evidenced by a promissory note in the amount of
$3,500,000 payable June 30, 2002. This note bears interest at the Wall Street
Journal prime floating rate minus 0.25% payable monthly. The note is
collateralized by substantially all the assets of the Company.
Note 3 - Inventories consist of the following:
November 30, 2000May 31, 2001 February 29, 2000
-----------------28, 2001
------------ -----------------
Current:
Book Inventory $ 8,162,2007,993,200 $ 8,487,8009,258,300
Reserve for Obsolescence (123,700) (123,700)
------------ ------------(46,400) (46,400)
----------- -----------
Inventories net - current $ 8,038,5007,946,800 $ 8,364,100
============ ============9,211,900
=========== ===========
Non-current:
Book Inventory $ 1,051,600 $ 1,051,600
Reserve for Obsolescence (106,600) (46,600)
----------- -----------
Inventories - non-current $ 1,193,800945,000 $ 1,280,000
============ ============1,005,000
=========== ===========
The Company occasionally purchases book inventory in quantities
in excess of what will be sold within the normal operating cycle
due to minimum order requirements of the Company's primary
supplier. These amounts are included in non-current inventory.
Note 4 - Basic earnings per share ("EPS") is computed by dividing net earnings
by the weighted average number of common shares outstanding during the period.
Diluted earnings per shareEPS is based on the combined weighted average number of common shares
outstanding increased, when appropriate, for the number ofand dilutive potential common shares issuable uponwhich include, where
appropriate, the assumed exercise of stock options, computed usingoptions. In computing diluted EPS the
Company has utilized the treasury stock method.
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EDUCATIONAL DEVELOPMENT CORPORATION
The computation of weighted average common and common equivalent shares used in
the calculation of basic and diluted earnings per share ("EPS") is shown below.
Three Months Ended November 30, Nine Months Ended November 30,May 31,
-----------------------------
2001 2000 1999 2000 1999
------------ ------------
------------ ------------
Net Earnings $ 381,900369,500 $ 419,800 $ 1,010,700 $ 1,023,700
============ ============276,100
============ ============
Basic EPS:
Weighted Average Shares Outstanding 3,914,806 4,318,334 3,974,920 4,410,938
============ ============3,914,707 4,069,128
============ ============
Basic EPS $ 0.10.09 $ 0.10 $ 0.25 $ 0.23
============ ============.07
============ ============
Diluted EPS:
Weighted Average Shares Outstanding 3,914,806 4,318,334 3,974,920 4,410,9383,914,707 4,069,128
Assumed Exercise of Options 124,404 112,156 81,462 62,669
------------ ------------91,515 52,036
------------ ------------
Shares Applicable to Diluted Earnings 4,039,210 4,430,490 4,056,382 4,473,607
============ ============4,006,222 4,121,164
============ ============
Diluted EPS $ 0.10.09 $ 0.10 $ 0.25 $ 0.23
============ ============.07
============ ============
Since March 1, 1998, when the Company began its stock repurchase program,
1,523,2711,550,571 shares of the Company's common stock at a total cost of $4,593,500$4,681,400
have been acquired. The Board of Directors has authorized purchasing up to
2,000,000 shares as market conditions warrant.
During the second quarter ended August 31, 2000 the Board of Directors granted
options to purchase 120,000 shares of common stock at $2.1875 per share.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
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 at November 30, 2000May
31, 2001 was $7,875,100$8,435,500 compared with $7,589,300$8,144,600 at yearthe end February
29, 2000. Accounts receivable increased 18.5% during the first nine months of fiscal year 2001.
The Company's "fall special", offered last quarter, extendedAccounts receivable increased 43.2% during the payment terms until the fourthfirst quarter of fiscal year
2001. Inventories
declined 4.2%2002. Several sizable orders were received during the first nine monthsquarter of fiscal
year 2002 with payment due during the currentsecond quarter, resulting in the increase
in accounts receivable. Inventory levels declined 12.3% during the first quarter
of fiscal year.year 2002. The level of inventory will fluctuate throughout the year, depending upon sales
and the timing of shipments from the Company's principal supplier. The Company
continuously monitors inventory to assure it has adequate supplies on hand to
meet sales requirements. The noteAccounts payable to the bank declined 38.2%decreased 41.2% during the first
nine monthsquarter of fiscal year 2001, due to improved cash flow in the Home
Business Division during the months of October and November. Accounts payable
declined 5.4% from February 29, 2000 levels.2002. A major component of accounts payable is the amount
due to the Company's principal supplier. Increases and decreases in inventory
levels as well as the timing of the purchases and the payment terms offered by
various suppliers affect the levels of accounts payable. The note payable to the
bank decreased 42.2% during the first quarter of fiscal year 2002. Increased
sales in the Home Business Division, which are primarily cash sales, contributed
to the decrease in the note payable to the bank.
Pre-tax margins were 11.8% and 11.8%12.5% for the three months and nine monthsfirst quarter ended November 30, 2000, respectively, and 13.6% and 12.4%May 31, 2001 compared
with 10.5% for the same comparable
periods last year.
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EDUCATIONAL DEVELOPMENT CORPORATIONfirst quarter ended May 31, 2000. Increased sales and lower
sales discounts during the current quarter contributed to the improved pre-tax
margins.
RESULTS OF OPERATIONS
Revenues - Net sales from the Home Business Division were $7,904,900increased 28.7% to
$2,803,500 for the nine months ended November 30, 2000,first quarter of fiscal year 2002 when compared with
$2,178,700 for the same quarter last year. The Company attributes this to an
increase of 10.9% over netin new sales of
$7,127,700 for the nine months ended November 30, 1999. Net sales for the three
months ended November 30, 2000 and 1999 were $3,652,000 and $3,081,600
respectively, an increase of 18.5%. The Company believes this increase resulted
from the addition of new consultants and the retention of existing sales
consultants. The Company continues to offer new and exciting incentive programs,
travel contests and regional seminars to help stimulate sales and recruiting.
The Company'sCompany continues to offer its leadership skills seminar wasprogram for the
supervisors. This training program is designed to help supervisors build their
business. First offered during the first quarter of fiscal year 2001, this
seminar has proved to be very popular with the supervisors and a large number of
them have attended. Management is encouraged by the third consecutive quarter of
sales increasesresults in fiscal year 2001the Home Business Division
and is hopeful thatbelieves it will continue.
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EDUCATIONAL DEVELOPMENT CORPORATION
Net sales forfrom the Publishing Division were $1,593,600 and $6,005,700$1,997,100 for the three months
and nine months ended November 30, 2000, decreasesMay 31, 2001, a decrease of 17.5% and
3.3% over3.6% when compared with net sales of
$2,071,700 for the same two periodsthree month period a year ago. The Company competes in the juvenile paperback
market ais highly competitive market withcompetitive. Industry sales over $660last year were $753 million
annually. The Publishing Division's annual sales are approximately 1.2%1% of
this
market.industry sales. Competitive factors include product quality, price and
deliverability. National chains are increasingly dominatingcontinue to dominate the bookstore market. The
Company has taken a very aggressive approach towards increasing sales in this
market resultingsegment by the use of cooperative advertising, joint promotional efforts
and institutional advertising in fewer independent bookstores, an important market to the Company.
Each year the Company participates in several national trade shows as well as
regional trade shows throughout the country in order to promote its products.publications. Management believes that
the CompanyPublishing Division can maintain its 1% market share in the highly
competitive juvenile paperback market.
Cost of Salesshare.
Operating Expenses - The Company's cost of sales was $1,972,800 for the ninethree
months ended November
30, 2000 was $5,813,000,May 31, 2001, an increase of 5.4%9.8% over $5,515,000the cost of sales of
$1,797,400 for the ninesame three months ended November 30, 1999.May 31, 2000. Cost of sales expressed
as a percentage of gross sales was 26.7% and 26.2%27.1% for the nine months ended November 30, 2000 and 1999,
respectively. Cost of sales for the thirdfirst quarter of fiscal year
2001 was
$2,065,300 compared with $1,983,400, an increase2002 and 26.7% for the first quarter of 4.1%. Expressedfiscal year 2001. Cost of sales as a
percentage of gross sales, these costs were 26.8% and 26.3%, respectively, for
the third quarters of fiscal years 2001 and 2000. Cost of sales will fluctuate depending upon the product mix sold.
Operating Expenses - Operating and selling expenses were $832,600 for the ninequarter ended May 31, 2001
and $760,300 for the quarter ended May 31, 2000, an increase of 9.5%. These
expenses expressed as a percentage of gross sales were 11.4% and 11.3%
respectively, for the quarters ended May 31, 2001 and 2000. Increases in travel
costs in both the Publishing Division and the Home Business Division contributed
to the increase in operating and selling expenses. Increased credit card fees in
the Home Business Division, the result of increased sales, also contributed to
the increase in selling and operating expenses.
Sales commissions increased 28.2% to $1,033,000 during the first three months
ended November 30, 2000 increased 2.4% to $2,388,300 versus $2,332,700May 31, 2001 when compared with $805,600 for the same
nine month period a year ago.three months ended May
31, 2000. These costs expressed as a percentage of gross sales were 11.0% and 11.1%14.2% for
the ninethree months ended November 30, 2000May 31, 2001 and 1999, respectively. Operating and selling expenses12.0% for the quarterthree months ended November 30, 2000May 31,
2000. Sales commissions as a percentage of gross sales is determined by the
product mix sold and the division which makes the sale. Commission expense in
the Publishing Division declined 2.8% during the three months ended May 31,
2001, the results of lower sales in that division. Commission expense in the
Home Business Division increased 9.9% to $870,200 when compared with these expenses
of $791,90029.5% for the quarterthree months ended November 30, 1999. OperatingMay 31, 2001,
the result of increased sales in that division.
General and selling
expensesadministrative costs were $354,200 for the third quartersfirst quarter of fiscal
year 2002 and $420,200 for the first quarter of fiscal year 2001, a decrease of
15.7%. General and 2000, whenadministrative costs expressed as a percentage of gross sales
were 11.3%4.9% for the first quarter of the current fiscal year and 10.5% respectively. Increases6.2% for the same
quarter a year ago. A decrease in travel costs associated with the supervisor training seminars held by the Home
Business Divisiondepreciation expense contributed to the
increasesdecrease in operatinggeneral and selling
expenses.
Sales commissionsadministrative expenses for the ninefirst quarter of fiscal
year 2002.
Interest expense was $16,000 for the three months ended November 30, 2000 increased 10.1% to
$2,894,800May 31, 2001 versus
$2,630,300$34,000 for the same nine month periodthree months ended May 31, 2000, a year ago. Sales
commissions for the third quarters ended November 30, 2000 and 1999,
respectively, were $1,329,500 and $1,149,900 an increasedecrease of 15.6%52.9%. Sales
commissions expressed asAs a
percentage of gross sales, were 17.3%interest expense was 0.2% and 13.3%0.5% for the three
and nine months ended November 30, 2000, respectively and 15.3% and
12.5% for the three and nine months ended November 30, 1999, respectively. Sales
commissions will fluctuate depending upon the product being sold and the
Division making the sale. The Home Business Division and the Publishing Division
have separate and distinct commission programs and rates. Sales commissions
increased in bothmonth periods for the Home Business Division and declined for both
periods in the Publishing Division.
General and administrative expenses declined 7.3% to $1,111,200 for the nine
months ended November 30, 2000 versus $1,198,500 for the nine months ended
November 30, 1999. These expenses expressed as a percentage of gross sales were
5.1% and 5.7% for the periods ended November 30, 2000 and 1999, respectively.
General and administrative expenses for the third quarter of fiscal year 2001
decreased 16.6% to $341,900 versus $409,900 for the third quarter last year.
These expenses expressed as a percentage of gross sales are 4.4% for the third
quarter of fiscal yearending May 31, 2001 and 5.4% for the third quarter of fiscal year 2000.
The decline in general2000 respectively. Lower borrowings and
administrative expenses was duelower interest rates contributed to the decrease in depreciation expense as most of the fixed assets became fully depreciated during
the second quarter of fiscal year 2001.
Interest expense increased 147.8% to $93,900 for the nine months ended November
30, 2000 versus $37,900 for the same nine month period a year ago. For the three
months ended November 30, 2000 interest expense increased 284.7% to $27,700
compared with $7,200 for the three months ended November 30, 1999. The average
amount borrowed during the nine months ended November 30, 2000 was $1,347,473
compared with $647,200 for the nine months ended November 30, 1999. The average
amount borrowed during the third quarter of fiscal year 2001 was $1,162,956
versus $385,651 for the third quarter of fiscal year 2000. The interest rates
charged the Company on its borrowings ranged from 7.75% to 9.25% during the nine
months ended November 30, 2000 and 7.75% to 8.25% for the nine months ended
November 30, 1999. The rates for the third quarters of fiscal years 2001 and
2000, respectively, were 9.25% and 8.0% to 8.25%.
8
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EDUCATIONAL DEVELOPMENT CORPORATIONexpense.
BUSINESS SEGMENTS
The Company has two reportable segments: Publishing and Usborne Books at Home
("UBAH"). These reportable segments are business units that offer different
methods of distribution to different types of customers. They are managed
separately based on the fundamental differences in their operations. The
Publishing Division markets its products to retail accounts, which include book,
school supply, toy and gift stores and museums, through commissioned sales
representatives, trade and specialty wholesalers and an internal telesales
group. The UBAH Division markets its product line through a network of
independent sales consultants through a combination of direct sales, home shows
and book fairs.
The accounting policies of the segments are the same as those of the Company.
The Company evaluates segment performance based on operating profits of the
segments which is defined as segment net sales reduced by direct cost of sales
and direct expenses. Corporate expenses, including interest and depreciation,
and income taxes are not allocated to the segments. The Company's assets are not
allocated on a segment basis.
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EDUCATIONAL DEVELOPMENT CORPORATION
Information by industry segment for the three months ended May 31, 2001 and nine months ended
November 30, 2000 and 1999
is set forth below:
Publishing UBAH Other Total
------------ ------------ ------------ ------------
NINETHREE MONTHS ENDED NOVEMBER 30,MAY 31, 2001
Net sales from external customers $ 1,997,100 $ 2,803,500 $ -- $ 4,800,600
Earnings before income taxes 751,900 605,200 (758,500) 598,600
THREE MONTHS ENDED MAY 31, 2000
Net sales from external customers $ 6,005,7002,071,700 $ 7,904,9002,178,700 $ -- $ 13,910,6004,250,400
Earnings before income taxes $ 2,173,100 $ 1,790,600 $ (2,325,100) $ 1,638,600
THREE MONTHS ENDED NOVEMBER 30, 2000
Net sales from external customers $ 1,593,600 $ 3,652,000 $ -- $ 5,245,600
Earnings before income taxes $ 556,600 $ 810,600 $ (747,800) $ 619,400
NINE MONTHS ENDED NOVEMBER 30, 1999
Net sales from external customers $ 6,209,700 $ 7,127,700 $ -- $ 13,337,400
Earnings before income taxes $ 2,244,900 $ 1,827,600 $ (2,413,800) $ 1,658,700
THREE MONTHS ENDED NOVEMBER 30, 1999
Net sales from external customers $ 1,931,200 $ 3,081,600 $ -- $ 5,012,800
Earnings before income taxes $ 732,600 $ 767,900 $ (819,800) $ 680,700783,200 478,400 (814,100) 447,500
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company does not have any material market risk.
PART II OTHER INFORMATION
Item 5. OTHER INFORMATION
The Company's major competitor, Dorling Kindersley Family Library
(DKFL), ceased operations August 31, 2000. Dorling Kindersley, a publisher of
children's books, competed in the same markets as the Company. Their Family
Library Division was in direct competition with the Company's direct selling
division, Usborne Books at Home. While the DKFL sales consultants have many
options open to them, UBAH is the only direct selling company which sells
children's books. The Company issued a letter to all of the former DKFL
consultants and supervisors offering them the opportunity to join the UBAH sales
force. Through December 11, 2000 approximately 1,000 former DKFL consultants
have joined UBAH. The Company expects the closing of DKFL and the addition of
former DKFL consultants to have a positive effect on the Company's sales.
The co-branding advertising agreement, which the Company entered into
with Chick-fil-A, a national fast food chain, has concluded. Beginning in late
August and early September, Chick-fil-A began distributing over 1,000,000
Usborne books with their children's meal package. There is information on the
back of each book explaining the UBAH opportunity and providing a telephone
number to call for additional information. The Company did not incur any
significant expenses for this promotion. The Company believes that this added
exposure will strengthen the Usborne brand name, resulting in a positive impact
on sales.None
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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: January 5,July 6, 2001
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