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 August 31,November 30, 2002.
[ ] 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 August 31,November 30, 2002 there were 3,827,2833,834,481 shares of Educational
Development Corporation Common Stock, $0.20 par value outstanding.
EDUCATIONAL DEVELOPMENT CORPORATION
PART I. FINANCIAL INFORMATION
ITEM 1
BALANCE SHEETS
August 31,November 30, 2002
(unaudited) February 28, 2002
--------------- ----------------- -----------------
(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 471,3002,107,100 $ 906,900
Accounts receivable - (less
allowances for doubtful accounts
and sales returns: 8/31/11/30/02 - $188,000$189,700
2/28/02 - $184,100) 2,723,4002,720,600 2,040,400
Inventories - Net 8,682,0009,089,300 8,292,000
Prepaid expenses and other assets 144,700133,700 218,300
Income taxes receivable 30,100 --
Deferred income taxes 119,800130,800 120,700
------------ ----------------------------- -----------------
Total current assets 12,171,30014,181,500 11,578,300
INVENTORIES 487,400309,400 683,900
PROPERTY AND EQUIPMENT
at cost (less accumulated depreciation:
08/31/11/30/02 - $1,498,100;$1,529,400; 2/28/02 - $1,446,000) 1,974,7001,954,100 1,907,600
------------ ----------------------------- -----------------
$ 14,633,40016,445,000 $ 14,169,800
============ ============================= =================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 3,096,3003,646,600 $ 3,380,100
Accrued salaries and commissions 446,700633,600 352,800
Income taxes --213,800 63,800
Other current liabilities 258,600373,500 244,800
------------ ----------------------------- -----------------
Total current liabilities 3,801,6004,867,500 4,041,500
DEFERRED INCOME TAXES 12,30011,100 13,000
COMMITMENTS
SHAREHOLDERS' EQUITY:
Common Stock, $.20 par value (Authorized
8,000,000 shares; Issued 5,429,240
shares; Outstanding 3,827,2833,834,481 and
3,822,117 shares) 1,085,800 1,085,800
Capital in excess of par value 4,443,4004,547,900 4,417,500
Retained earnings 10,419,30011,184,200 9,647,700
------------ ------------
15,948,500----------------- -----------------
16,817,900 15,151,000
Less treasury shares, at cost (5,129,000)(5,251,500) (5,035,700)
------------ ------------
10,819,500----------------- -----------------
11,566,400 10,115,300
------------ ----------------------------- -----------------
$ 14,633,40016,445,000 $ 14,169,800
============ ============================= =================
See notes to financial statements.statements
2
EDUCATIONAL DEVELOPMENT CORPORATION
STATEMENTS OF EARNINGS (UNAUDITED)
Three Months Ended August 31, SixNovember 30, Nine Months Ended August 31,November 30,
2002 2001 2002 2001
------------ ------------ ------------ ------------
GROSS SALES $ 8,728,30010,555,600 $ 7,953,0008,261,700 $ 17,866,80028,422,400 $ 15,236,80023,498,500
Less discounts & allowances (3,126,200) (2,844,600) (6,132,400) (5,327,800)(2,728,200) (2,253,800) (8,860,600) (7,581,600)
------------ ------------ ------------ ------------
Net sales 5,602,100 5,108,400 11,734,400 9,909,0007,827,400 6,007,900 19,561,800 15,916,900
COST OF SALES 2,297,900 2,108,100 4,743,000 4,080,9002,802,200 2,235,200 7,545,200 6,316,100
------------ ------------ ------------ ------------
Gross margin 3,304,200 3,000,300 6,991,400 5,828,1005,025,200 3,772,700 12,016,600 9,600,800
------------ ------------ ------------ ------------
OPERATING EXPENSES:
Operating & selling 914,200 877,100 1,911,400 1,709,7001,139,100 992,900 3,050,500 2,702,600
Sales commissions 1,274,700 1,104,600 2,712,000 2,137,6002,253,900 1,632,500 4,965,900 3,770,100
General & administrative 400,700 361,700 775,900 715,900407,400 366,800 1,183,300 1,082,700
Interest 300 4,300-- -- 900 20,300
------------ ------------ ------------ ------------
2,589,900 2,347,700 5,400,200 4,583,5003,800,400 2,992,200 9,200,600 7,575,700
------------ ------------ ------------ ------------
OTHER INCOME 15,400 12,100 21,800 18,7008,100 19,600 29,900 38,300
------------ ------------ ------------ ------------
EARNINGS BEFORE INCOME TAXES 729,700 664,700 1,613,000 1,263,3001,232,900 800,100 2,845,900 2,063,400
INCOME TAXES 275,700 240,900 611,300 470,000468,000 315,100 1,079,300 785,100
------------ ------------ ------------ ------------
NET EARNINGS $ 454,000764,900 $ 423,800485,000 $ 1,001,7001,766,600 $ 793,3001,278,300
============ ============ ============ ============
BASIC AND DILUTED EARNINGS
PER SHARE:
Basic $ 0.120.20 $ 0.110.13 $ 0.260.46 $ 0.200.33
============ ============ ============ ============
Diluted $ 0.110.19 $ 0.110.12 $ 0.240.43 $ 0.200.32
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING:
Basic 3,834,772 3,867,091 3,836,324 3,890,8993,836,345 3,851,496 3,836,331 3,877,764
============ ============ ============ ============
Diluted 4,144,683 4,028,636 4,150,941 4,017,4294,136,271 4,095,284 4,146,051 4,043,381
============ ============ ============ ============
DIVIDENDS DECLARED PER
COMMON SHARE $ -- $ -- $ 0.06 $ 0.04
============ ============ ============ ============
See notes to financial statements.
3
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, 2002 5,429,240 $ 1,085,800 $ 4,417,500 $ 9,647,700 1,607,123 $ (5,035,700) $ 10,115,300
Purchases of treasury
stock -- -- -- -- 82,200 (549,700) (549,700)
Sales of treasury stock -- -- 1,900106,400 -- (84,164) 301,300 407,700
Exercise of options at
$5.50/share -- -- 23,700 -- (10,000) 31,300 55,000
Exercise of options at
$4.00/share -- -- 300 -- (400) 1,300 1,600
Dividends paid ($0.06/0.06 / share) -- -- -- (230,100) -- -- (230,100)
Net earnings -- -- -- 1,001,700
---------1,766,600 -- -- 1,766,600
------------ ------------ ------------ ------------ ------------ ------------ ------------
BALANCE, AUG. 31,NOV. 30, 2002 5,429,240 $ 1,085,800 $ 4,443,4004,547,900 $ 10,419,300
=========11,184,200 1,594,759 $ (5,251,500) $ 11,566,400
============ ============ ============
Treasury Stock
------------------------------
Number
of Shareholders'
Shares Amount Equity
------------ ------------ -------------
BALANCE, MAR. 1, 2002 1,607,123 $ (5,035,700) $ 10,115,300
Purchases of treasury stock 28,100 (197,700) (197,700)
Sales of treasury stock (22,866) 71,800 73,700
Exercise of options at $5.50/share (10,000) 31,300 55,000
Exercise of options at $4.00/share (400) 1,300 1,600
Dividends paid ($0.06/share) -- -- (230,100)
Net earnings -- -- 1,001,700
------------ ------------ ------------
BALANCE, AUG. 31, 2002 1,601,957 $ (5,129,000) $ 10,819,500============ ============ ============ ============
See notes to financial statements.
4
EDUCATIONAL DEVELOPMENT CORPORATION
STATEMENTS OF CASH FLOWS (UNAUDITED)
SixNine Months Ended August 31
----------------------------November 30
2002 2001
----------- ----------------------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES $ (11,900)1,652,700 $ 1,626,3003,648,700
CASH FLOWS FROM INVESTING ACTIVITIES -
Purchases of property and equipment (126,200) (46,000)
----------- -----------(137,000) (77,400)
------------ ------------
Net cash used in investing activities (126,200) (46,000)
----------- -----------(137,000) (77,400)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under revolving credit agreement 1,317,000 2,347,000
Payments under revolving credit agreement (1,317,000) (3,431,000)
Cash received from exercise of stock option 56,600 --9,900
Cash received from sale of treasury stock 73,700 34,500407,700 79,200
Cash paid to acquire treasury stock (197,700) (235,400)(549,700) (371,400)
Dividends paid (230,100) (154,100)
----------- ----------------------- ------------
Net cash used in financing activities (297,500) (1,439,000)
----------- -----------(315,500) (1,520,400)
------------ ------------
Net Increase (Decrease) in Cash and Cash Equivalents (435,600) 141,3001,200,200 2,050,900
Cash and Cash Equivalents, Beginning of Period 906,900 268,300
----------- ----------------------- ------------
Cash and Cash Equivalents, End of Period $ 471,3002,107,100 $ 409,600
=========== ===========2,319,200
============ ============
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest $ 700900 $ 25,900
=========== ===========26,400
============ ============
Cash paid for income taxes $ 705,000941,200 $ 355,300
=========== ===========602,300
============ ============
See notes to financial statements.
5
EDUCATIONAL DEVELOPMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
Note 1 - The information shown with respect to the three months and sixnine months
ended August 31,November 30, 2002 and 2001, 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. The adjustments reflected in the
financial statements represent normal recurring accruals. The results of
operations for the three months and sixnine months ended August 31,November 30, 2002 and
2001, 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 28, 2002.
Note 2 - Effective June 30, 2002 the Company signed a Third 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, 2003. 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. At August 31,November 30,
2002, the Company had no borrowings outstanding.
Note 3 - Inventories consist of the following:
August 31,November 30, 2002 February 28, 2002
-------------------------------- -----------------
Current:
Book Inventory $ 8,728,4009,135,700 $ 8,338,400
Reserve for Obsolescence (46,400) (46,400)
----------- -----------
Inventories net - current $ 8,682,0009,089,300 $ 8,292,000
=========== ===========
Non-current:
Book Inventory $ 639,000470,000 $ 817,500
Reserve for Obsolescence (151,600)(160,600) (133,600)
----------- -----------
Inventories - non-current $ 487,400309,400 $ 683,900
=========== ===========
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 -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 EPS is based on the combined weighted average number of common shares
outstanding and dilutive potential common shares issuable which include, where
appropriate, the assumed exercise of options. In computing diluted EPS the
Company has utilized the treasury stock method.
6
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 August 31, SixNovember 30, Nine Months Ended August 31,November 30,
2002 2001 2002 2001
---------- ---------- ---------- ----------
Net Earnings $ 454,000764,900 $ 423,800 $1,001,700 $ 793,300485,000 $1,766,600 $1,278,300
========== ========== ========== ==========
Basic EPS:
Weighted Average Shares Outstanding 3,834,772 3,867,091 3,836,324 3,890,8993,836,345 3,851,496 3,836,331 3,877,764
========== ========== ========== ==========
Basic EPS $ 0.120.20 $ 0.110.13 $ 0.260.46 $ 0.200.33
========== ========== ========== ==========
Diluted EPS:
Weighted Average Shares Outstanding 3,834,772 3,867,091 3,836,324 3,890,8993,836,345 3,851,496 3,836,331 3,877,764
Assumed Exercise of Options 309,911 161,545 314,617 126,530299,926 243,788 309,720 165,617
---------- ---------- ---------- ----------
Shares Applicable to Diluted Earnings 4,144,683 4,028,636 4,150,941 4,017,4294,136,271 4,095,284 4,146,051 4,043,381
========== ========== ========== ==========
Diluted EPS $ 0.110.19 $ 0.110.12 $ 0.240.43 $ 0.200.32
========== ========== ========== ==========
Since March 1, 1998, when the Company began its stock repurchase program,
1,707,8741,761,974 shares of the Company's common stock at a total cost of $5,482,100$5,834,000
have been acquired. The Board of Directors previously authorized purchasing up
to 2,000,000 shares as market conditions warrant. At their September 18, 2002
meeting, the Board of Directors authorized purchasing up to an additional
500,000 shares as market conditions warrant.
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
August
31,November 30, 2002 was $8,369,700$9,314,000 compared with $7,536,800 at the end of fiscal
year 2002. Accounts receivable increased 30.9%30.8% during the first sixnine months of
fiscal year 2003. The Company's "fall special", which offered extended payment
terms to December 15, 2002, began during the second quarter and contributed to
the increase in accounts receivable. This "fall special" offered
extended payment terms of 60 days or a December 15 due date, depending upon the
size of the order. Inventory levels rose slightly, increasing
2.3%4.9% over inventory at fiscal year end 2002. The level of inventory will
fluctuate 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. Accounts payable decreased 8.4%increased
7.9% during the first sixnine months of fiscal year 2003. 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
of inventory and the payment terms offered by various suppliers affect the
levels of accounts payable. Cash generated by increased in sales in the Home
Business Division enabled the Company to conclude the quarter ended August 31,November 30,
2002 with no short term bank debt.
The Company paid a dividenddivided of $0.06 per share on August 12,9, 2002.
Pre-tax margins were 13.0%15.8% and 13.7%14.6% for the three months and sixnine months ended
August 31,November 30, 2002, respectively, compared with 13.0%13.3% and 12.8%13.0% for the same
comparable periods last year.
7
EDUCATIONAL DEVELOPMENT CORPORATION
RESULTS OF OPERATIONS
Revenues - Net sales from the Home Business Division were $7,328,700$13,525,100 for the
sixnine months ended August 31,November 30, 2002 compared with $5,756,600$10,231,400 for the sixnine
months ended August 31,November 30, 2001, an increase of 27.3%32.2%. Net sales for the three
month period ending August 31,November 30, 2002 were $3,372,300,$6,196,400, an increase of 14.2%38.5% over
net sales of $2,953,100$4,474,800 for the same three month period last year. The Company
attributes these increases to the addition of new sales consultants and the
retention of existing sales consultants. The Company continues to offer new
incentive programs, travel contests and regional seminars to help stimulate
sales and recruiting. The Company also continues to offer its leadership skills
program for the supervisors. Management believes that the Home Business Division
will continue to grow.
Net sales infor the Publishing Division were $4,405,700$6,036,700 for the sixnine months ended
August 31,November 30, 2002 compared with net sales of $4,152,400$5,685,500 for the sixnine months
ended August 31,November 30, 2001, an increase of 6.1%6.2%. Net sales for the three months
ended August 31,November 30, 2002 were $2,229,800,$1,631,000, an increase of 3.5%6.4% over net sales of
$2,155,300$1,533,100 for the same three month period last year. The juvenile paperback
market is highly competitive. Industry sales of juvenile paperbacks approaches
$888 million annually. The Publishing Division's annual sales are approximately
0.8% of industry sales. Competitive factors include product quality, price and
deliverability. Sales to national chains continuescontinue to be of major importance to
the Publishing Division. To insure that the Company continues to successfully participateparticipates in
their growth, we continue our cooperative advertising program and other special
promotional programs. These activities have improved our relationship with the
national chains and we anticipate further positive development in this important
area. Management believes the Company can improve its market share.share in the
juvenile paperback market.
Cost of Sales - The Company's cost of sales for the sixnine months ended August 31,November
30, 2002 was $4,743,000,$7,545,200, an increase of 16.2%19.5% over cost of sales of $4,080,900$6,316,100
for the sixnine months ended August 31,November 30, 2001. Cost of sales expressed as a
percentage of gross sales was 26.5% for the sixnine months ended August 31,November 30, 2002
and 26.8%26.9% for the same sixnine month period a year ago. Cost of sales for the three
months ended August 31,November 30, 2002 was $2,297,900$2,802,200 compared with $2,108,100$2,235,200 for the
same three months ended August 31,November 30, 2001, an increase of 9.0%25.4%. Cost of sales
expressed as a percentage of gross sales were 26.3%was 26.5% and 26.5%27.1% for the three
month periods
ending August 31,months ended November 30, 2002 and 2001 respectively. Cost of sales as a
percentage of gross sales will fluctuate primarily depending upon the product mix sold.
Operating Expenses - Operating and selling expenses increased 11.8%12.9% to
$1,911,400$3,050,500 for the sixnine months ended August 31,November 30, 2002 when compared with
$1,709,700$2,702,600 for the sixnine months ended August 31,November 30, 2001. Expressed as a
percentage of gross sales, operating and selling expenses were 10.7% for the
sixnine months ended August 31,November 30, 2002 and 11.2%11.5% for the same sixnine month period
last year. Operating and selling expenses for the three months ended August 31,November
30, 2002 and 2001 were $914,200$1,139,100 and $877,100,$992,900, respectively, an increase of
4.2%14.7%. These costs expressed as a percentage of gross sales were 10.5%10.8% for the
three months ended August 31,November 30, 2002 and 11.0%12.0% for the three months ended
August 31,November 30, 2001. Increases in promotional costs and credit card fees in the
Home Business Division, plus increases in shipping costs and promotional costs
in the Publishing Division, all of which are the direct resultresults of increased
sales in these two divisions, contributed to the increase in operating expenses.
Sales commissions for the sixnine months ended August 31,November 30, 2002 were $2,712,000,$4,965,900,
an increase of 26.9%31.7% over sales commissioncommissions of $2,137,600$3,770,100 for the sixnine months
ended August 31,November 30, 2001. These expenses expressed as a percentage of gross sales
were 15.2%17.5% for the sixnine months ended August 31,November 30, 2002 and 14.0%16.0% for the sixnine
months ended August 31,November 30, 2001. Sales commissions for the three months ended
August 31,November 30, 2002 and 2001 were $1,274,700$2,253,900 and $1,104,600,$1,632,500, respectively, an
increase of 15.4%38.1%. Sales commissions expressed as a percentage of gross sales
were 14.6%21.4% for the three months ended August 31,November 30, 2002 and 13.9%19.8% for the three
months ended August 31,November 30, 2001. Sales commissions as a percentage of gross sales
is determined by the product mix sold and the division which makes the sale. The
Home Business Division and the Publishing Division have separate and distinct
commission programs and rates. Sales commissions in the Home Business Division
increased 16.1%32.5% and 27.8%38.5% for the three months and sixnine months ended August 31,November
30, 2002, the result of increased sales in that division. Although sales in the
Publishing Division increased in both the three month period and sixnine month
period ended August 31,November 30, 2002, sales commissions in the Publishing Division
decreased 7.8%1.1% for the nine months ended November 30, 2002 and 3.0%increased 4.1%
for the three months and six months ended August 31,November 30, 2002. This was the
resultThe amount of increased sales in the
Company's "house accounts", which are the Company'sPublishing Division's largest
customers, whichaffects the relationship of its commission expense to sales, as these
sales do not have noany commission expense associated with them.
8
EDUCATIONAL DEVELOPMENT CORPORATION
General and administrative expenses for the sixnine months ended August 31,November 30, 2002
were $775,900,$1,183,300, an increase of 8.4%9.3% over $715,900$1,082,700 for the same sixnine month
period last year. These expenses expressed as a percentage of gross sales were
4.3%4.2% for the sixnine months ended August 31,November 30, 2002 and 4.7%4.6% for the sixnine months
ended August 31,November 30, 2001. General and administrative expenses for the three
months ended August 31,November 30, 2002 were $400,700$407,400 versus $361,700$366,800 for the same three
months last year, an increase of 10.8%11.1%. These costs expressed as a percentage of
gross sales were 4.6%3.9% and 4.5%4.4% for the three months ended August 31,November 30, 2002 and
2001, respectively. Contributing to the increases in general and administrative
expenses were increases in payroll costs and public relation costs.
Interest expense was less than $1,000$900 for the sixnine months andended November 30, 2002 compared
with $20,300 for the same nine months a year ago. There was no interest expense
for the three months ended August 31,November 30, 2002 compared to $20,300 and $4,300, respectively, for the six months
and three months ended August 31,November 30, 2001. Minimal
borrowings and lower interest costsrates contributed to the lower interest expense.
8
EDUCATIONAL DEVELOPMENT CORPORATIONexpense in
the current fiscal year.
Cash flows from operating activities was negativepositive for the sixnine months ended
August 31,November 30, 2002. Contributing to this was a increasewere increases in accounts receivable,net earnings, payables
and accrued expenses, offset by increases in receivables, the result of the
Company's "fall special" which offered customers extended payment terms.
Also affecting cash flow wasterms, and an
increase in inventories and a decrease in
payables.inventory.
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.
Information by industry segment for the three months and sixnine months ended
August
31,November 30, 2002 and 2001 is set forth below:
Publishing UBAH Other Total
----------- ----------- ----------- -----------
SIXNINE MONTHS ENDED AUGUST 31,NOVEMBER 30, 2002
Net sales from external customers $ 4,405,700 $ 7,328,7006,036,700 $13,525,100 $ -- $11,734,400$19,561,800
Earnings before income taxes $ 1,542,7002,112,400 $ 1,608,100 $(1,537,800)3,129,000 $(2,395,500) $ 1,613,0002,845,900
THREE MONTHS ENDED AUGUST 31,NOVEMBER 30, 2002
Net sales from external customers $ 2,229,8001,631,000 $ 3,372,3006,196,400 $ -- $ 5,602,1007,827,400
Earnings before income taxes $ 752,300569,700 $ 758,8001,520,900 $ (781,400)(857,700) $ 729,700
SIX1,232,900
NINE MONTHS ENDED AUGUST 31,NOVEMBER 30, 2001
Net sales from external customers $ 4,152,400 $ 5,756,6005,685,500 $10,231,400 $ -- $ 9,909,000$15,916,900
Earnings before income taxes $ 1,496,4002,022,700 $ 1,254,000 $(1,487,100)2,312,000 $(2,271,300) $ 1,263,3002,063,400
THREE MONTHS ENDED AUGUST 31,NOVEMBER 30, 2001
Net sales from external customers $ 2,155,3001,533,100 $ 2,953,1004,474,800 $ -- $ 5,108,4006,007,900
Earnings before income taxes $ 744,500526,300 $ 648,8001,058,000 $ (728,600)(784,200) $ 664,700800,100
9
EDUCATIONAL DEVELOPMENT CORPORATION
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company does not have any material market risk.
9
EDUCATIONAL DEVELOPMENT CORPORATION
Item 4. CONTROLS AND PROCEDURES
With(a) Evaluation of Controls and Procedures - Within 90 days prior to the filing
of this report, under the supervision and with the participation of management, the
Company's chief executive officermanagement, including the Company's Chief Executive Officer
("CEO") and chief financial officer evaluatedthe Chief Financial Officer ("CFO"), an evaluation of the
effectiveness of the Company's disclosure controls and procedures on October 7, 2002.was
performed. Based on this evaluation, the chief
executive officerCEO and the chief financial officerCFO have concluded that
the Company's disclosure controls and procedures are effective to insure
that material information is recorded, processed, summarized and reported
by Management on a timely basis in connectionorder to comply with the Company's
filingdisclosure obligations under the Securities Exchange Act of its quarterly report on Form 10-Q for1934 and the
quarterly
period ended August 31, 2002.
Subsequent to October 7, 2002 through the date of this filing of Form 10-Q
for the quarterly period ended August 31, 2002, there have beenSEC rules thereunder.
(b) Changes in Internal Controls - There were no significant changes in the
Company's internal controls or in other factors that could significantly
affect these controls including any significant
deficiencies or material weaknessessubsequent to the date of internal controls that would require
corrective action.the evaluation.
PART II OTHER INFORMATION
None
10
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)
Date: October 10, 2002 By /s/ Randall W. White
---------------- ----------------------------------------------------------
Randall W. White
President
Date: January 10, 2003
-----------------------
11
EDUCATIONAL DEVELOPMENT CORPORATION
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
In connection with the Quarterly Report of Educational Development Corporation
(the "Company") on Form 10-Q for the period ending August 31,November 30, 2002, as filed
with the Securities and Exchange Commission on the date hereof (the "Report"),
I, Randall W. White, President and Chief Executive Officer of the Company,
certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the
requirements of Section 13(a)13 (a) or 15(d)15 (d) of the Securities Exchange Act of 1934;
and (2) The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
Date: OctoberJanuary 10, 20022003 By /s/ Randall W. White
---------------- ---------------------------------------------------------- --------------------------------
Randall W. White
President and Chief Executive Officer
In connection with the Quarterly Report of Educational Development Corporation
(the "Company") on Form 10-Q for the period ending August 31,November 30, 2002, as filed
with the Securities and Exchange Commission on the date hereof (the "Report"),
I, W. Curtis Fossett, Chief Financial Officer of the Company, certify pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the
requirements of Section 13(a)13 (a) or 15(d)15 (d) of the Securities Exchange Act of 1934;
and (2) The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
Date: OctoberJanuary 10, 20022003 By /s/ W. Curtis Fossett
---------------- ----------------------------------------------- ---------------------------------
W. Curtis Fossett
Chief Financial Officer
1112
EDUCATIONAL DEVELOPMENT CORPORATION
CERTIFICATION
I, Randall W. White, President and CEO of Educational Development Corporation
certify that:
1. I have reviewed this quarterly report on Form 10-Q of Educational
Development Corporation.
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: OctoberJanuary 10, 20022003 By /s/ Randall W. White
---------------- ----------------------------------------------------------- --------------------------------
Randall W. White
President and Chief Executive Officer
13
EDUCATIONAL DEVELOPMENT CORPORATION
I, W. Curtis Fossett, CFO of Educational Development Corporation certify that:
1. I have reviewed this quarterly report on Form 10-Q of Educational
Development Corporation.
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
12
EDUCATIONAL DEVELOPMENT CORPORATION
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: OctoberJanuary 10, 20022003 By /s/ W. Curtis Fossett
---------------- --------------------------------------------------- ---------------------------------
W. Curtis Fossett
Chief Financial Officer
1314