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 August 31,November 30, 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 August 31,November 30, 2001 there were 3,855,1703,844,617 shares of Educational
Development Corporation Common Stock, $0.20 par value outstanding.
2
EDUCATIONAL DEVELOPMENT CORPORATION
PART I. FINANCIAL INFORMATION
ITEM 1
BALANCE SHEETS
August 31,November 30, 2001
(unaudited) February 28, 2001
---------------(unaudited)
----------------- -----------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 409,6002,319,200 $ 268,300
Accounts receivable - (less
allowances for doubtful accounts
and sales returns: 8/31/11/30/01 - $171,200$176,500
2/28/01 - $224,300) 2,549,2002,672,500 1,478,400
Inventories - Net 7,541,3007,006,300 9,211,900
Prepaid expenses and other assets 198,000193,700 247,100
Income taxes receivable -- 72,600
Deferred income taxes 68,00082,800 97,800
--------------- ---------------
Total current assets 10,766,10012,274,500 11,376,100
INVENTORIES 892,600813,900 1,005,000
PROPERTY AND EQUIPMENT
at cost (less accumulated depreciation:
08/31/11/30/01 - $1,409,600;$1,424,200; 2/28/01 - $1,390,100) 101,200117,900 84,200
DEFERRED INCOME TAXES 24,40028,600 6,300
--------------- ---------------
$ 11,784,30013,234,900 $ 12,471,600
=============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Note payable to bank $ -- $ 1,084,000
Accounts payable 1,556,0002,266,200 1,703,100
Accrued salaries and commissions 364,400501,500 325,700
Income taxes 54,700141,700 --
Other current liabilities 155,100267,800 118,700
--------------- ---------------
Total current liabilities 2,130,2003,177,200 3,231,500
DEFERRED INCOME TAXES -- 24,300
COMMITMENTS
SHAREHOLDERS' EQUITY:
Common Stock, $.20 par value (Authorized
6,000,000 shares; Issued 5,429,240
shares; Outstanding 3,855,1703,844,617 and
3,911,400 shares) 1,085,800 1,085,800
Capital in excess of par value 4,416,1004,419,000 4,413,600
Retained earnings 8,909,8009,394,800 8,270,600
--------------- ---------------
14,411,70014,899,600 13,770,000
Less treasury shares, at cost (4,757,600)(4,841,900) (4,554,200)
--------------- ---------------
9,654,10010,057,700 9,215,800
--------------- ---------------
$ 11,784,30013,234,900 $ 12,471,600
=============== ===============
See notes to financial statements.
2
3
EDUCATIONAL DEVELOPMENT CORPORATION
STATEMENTS OF EARNINGS (UNAUDITED)
Three Months Ended August 31, SixNovember 30, Nine Months Ended August 31,November 30,
2001 2000 2001 2000
------------ ------------ ------------ -------------------------- -------------- -------------- --------------
GROSS SALES $ 7,953,0008,261,700 $ 7,296,7007,704,300 $ 15,236,80023,498,500 $ 14,038,70021,743,000
Less discounts & allowances (2,844,600) (2,882,100) (5,327,800) (5,373,700)
------------ ------------ ------------ ------------(2,253,800) (2,458,700) (7,581,600) (7,832,400)
-------------- -------------- -------------- --------------
Net sales 5,108,400 4,414,600 9,909,000 8,665,0006,007,900 5,245,600 15,916,900 13,910,600
COST OF SALES 2,108,100 1,950,300 4,080,900 3,747,700
------------ ------------ ------------ ------------2,235,200 2,065,300 6,316,100 5,813,000
-------------- -------------- -------------- --------------
Gross margin 3,000,300 2,464,300 5,828,100 4,917,300
------------ ------------ ------------ ------------3,772,700 3,180,300 9,600,800 8,097,600
-------------- -------------- -------------- --------------
OPERATING EXPENSES:
Operating & selling 877,100 757,800 1,709,700 1,518,100992,900 870,200 2,702,600 2,388,300
Sales commissions 1,104,600 759,700 2,137,600 1,565,3001,632,500 1,329,500 3,770,100 2,894,800
General & administrative 361,700 349,100 715,900 769,300366,800 341,900 1,082,700 1,111,200
Interest 4,300 32,200-- 27,700 20,300 66,200
------------ ------------ ------------ ------------
2,347,700 1,898,800 4,583,500 3,918,900
------------ ------------ ------------ ------------93,900
-------------- -------------- -------------- --------------
2,992,200 2,569,300 7,575,700 6,488,200
-------------- -------------- -------------- --------------
OTHER INCOME 12,100 6,200 18,700 20,800
------------ ------------ ------------ ------------19,600 8,400 38,300 29,200
-------------- -------------- -------------- --------------
EARNINGS BEFORE INCOME TAXES 664,700 571,700 1,263,300 1,019,200800,100 619,400 2,063,400 1,638,600
INCOME TAXES 240,900 219,000 470,000 390,400
------------ ------------ ------------ ------------315,100 237,500 785,100 627,900
-------------- -------------- -------------- --------------
NET EARNINGS $ 423,800485,000 $ 352,700381,900 $ 793,3001,278,300 $ 628,800
============ ============ ============ ============1,010,700
============== ============== ============== ==============
BASIC AND DILUTED EARNINGS
PER SHARE:
Basic $ 0.110.13 $ 0.090.10 $ 0.200.33 $ 0.16
============ ============ ============ ============0.25
============== ============== ============== ==============
Diluted $ 0.110.12 $ 0.090.10 $ 0.200.32 $ 0.16
============ ============ ============ ============0.25
============== ============== ============== ==============
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING:
Basic 3,867,091 3,940,825 3,890,899 4,004,976
============ ============ ============ ============3,851,496 3,914,806 3,877,764 3,974,920
============== ============== ============== ==============
Diluted 4,028,636 3,992,270 4,017,429 4,056,717
============ ============ ============ ============4,095,284 4,039,210 4,043,381 4,056,382
============== ============== ============== ==============
DIVIDENDS DECLARED PER
COMMON SHARE $ -- $ -- $ 0.04 $ 0.02
============ ============ ============ ========================== ============== ============== ==============
See notes to financial statements.
3
4
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, 2001 5,429,240 $ 1,085,800 $ 4,413,600 $ 8,270,600
1,517,840 $(4,554,200) $ 9,215,800
Purchases of treasury
stock -- -- -- --
66,900 (235,400) (235,400)
Sales of treasury stock -- -- 2,5005,600 --
(10,670) 32,000 34,500Exercise of options at $3.00/share -- -- (200) --
Dividends paid ($0.04 / share) -- -- -- (154,100)
Net earnings -- -- -- 1,278,300
------------- ------------- ------------- -------------
BALANCE, NOV. 30, 2001 5,429,240 $ 1,085,800 $ 4,419,000 $ 9,394,800
============= ============= ============= =============
Treasury Stock
-----------------------------
Number
of Shareholders'
Shares Amount Equity
------------- ------------- -------------
BALANCE, MAR. 1, 2001 1,517,840 $ (4,554,200) $ 9,215,800
Purchases of treasury
stock 94,500 (371,400) (371,400)
Sales of treasury stock (24,417) 73,600 79,200
Exercise of options at $3.00/share (3,300) 10,100 9,900
Dividends paid ($0.04 / share) -- -- (154,100)
Net earnings -- -- -- 793,300 -- -- 793,300
----------- ----------- ----------- ----------- ----------- ----------- -----------1,278,300
------------- ------------- -------------
BALANCE, AUG. 31,NOV. 30, 2001 5,429,2401,584,623 $ 1,085,800(4,841,900) $ 4,416,100 $ 8,909,800 1,574,070 $(4,757,600) $ 9,654,100
=========== =========== =========== =========== =========== =========== ===========10,057,700
============= ============= =============
See notes to financial statements.
4
5
EDUCATIONAL DEVELOPMENT CORPORATION
STATEMENTS OF CASH FLOWS (UNAUDITED)
SixNine Months Ended August 31November 30
--------------------------------
2001 2000
------------ -------------------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES $ 1,626,3003,648,700 $ 584,6001,302,700
CASH FLOWS FROM INVESTING ACTIVITIES -
Purchases of property and equipment (46,000) (2,200)
------------ ------------(77,400) (58,500)
-------------- --------------
Net cash used in investing activities (46,000) (2,200)
------------ ------------(77,400) (58,500)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under revolving credit agreement 2,347,000 3,876,0005,801,000
Payments under revolving credit agreement (3,431,000) (3,707,000)(6,289,000)
Cash received from exercise of stock option 9,900 --
Cash received from sale of treasury stock 34,500 5,80079,200 41,000
Cash paid to acquire treasury stock (235,400) (741,700)(371,400) (800,100)
Dividends paid (154,100) (78,800)
------------ -------------------------- --------------
Net cash used in financing activities (1,439,000) (645,700)
------------ ------------(1,520,400) (1,325,900)
-------------- --------------
Net Increase (Decrease) in Cash and Cash Equivalents 141,300 (63,300)2,050,900 (81,700)
Cash and Cash Equivalents, Beginning of Period 268,300 214,300
------------ -------------------------- --------------
Cash and Cash Equivalents, End of Period $ 409,6002,319,200 $ 151,000
============ ============132,600
============== ==============
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest $ 25,90026,400 $ 62,300
============ ============92,400
============== ==============
Cash paid for income taxes $ 355,300602,300 $ 394,800
============ ============631,000
============== ==============
See notes to financial statements.
5
6
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, 2001 and 2000, 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
and sixnine months ended August 31,November 30, 2001 and 2000, 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, 2001.
Note 2 - Effective June 30, 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. There were no
borrowings under the revolving credit agreement at August 31,November 30, 2001.
Note 3 - Inventories consist of the following:
August 31,November 30, 2001 February 28, 2001
-------------------------------- -----------------
Current:
Book Inventory $ 7,587,7007,052,700 $ 9,258,300
Reserve for Obsolescence (46,400) (46,400)
--------------- ----------------------------- --------------
Inventories net - current $ 7,541,3007,006,300 $ 9,211,900
=============== ============================= ==============
Non-current:
Book Inventory $ 1,008,200938,500 $ 1,051,600
Reserve for Obsolescence (115,600)(124,600) (46,600)
--------------- ----------------------------- --------------
Inventories - non-current $ 892,600813,900 $ 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 is computed by dividing net earnings by the
weighted average number of common shares outstanding during the period. Diluted
earnings per share is based on the combined weighted average number of common
shares outstanding increased, when appropriate, for the number of common shares
issuable upon exercise of stock options, computed using the treasury stock
method.
6
7
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,
2001 2000 2001 2000
------------ ------------ ------------ ------------------------- ------------- ------------- -------------
Net Earnings $ 423,800485,000 $ 352,700381,900 $ 793,3001,278,300 $ 628,800
============ ============ ============ ============1,010,700
============= ============= ============= =============
Basic EPS:
Weighted Average Shares Outstanding 3,867,091 3,940,825 3,890,899 4,004,976
============ ============ ============ ============3,851,496 3,914,806 3,877,764 3,974,920
============= ============= ============= =============
Basic EPS $ 0.110.13 $ 0.090.10 $ 0.200.33 $ 0.16
============ ============ ============ ============0.25
============= ============= ============= =============
Diluted EPS:
Weighted Average Shares Outstanding 3,867,091 3,940,825 3,890,899 4,004,9763,851,496 3,914,806 3,877,764 3,974,920
Assumed Exercise of Options 161,545 51,445 126,530 51,741
------------ ------------ ------------ ------------243,788 124,404 165,617 81,462
------------- ------------- ------------- -------------
Shares Applicable to Diluted Earnings 4,028,636 3,992,270 4,017,429 4,056,717
============ ============ ============ ============4,095,284 4,039,210 4,043,381 4,056,382
============= ============= ============= =============
Diluted EPS $ 0.110.12 $ 0.090.10 $ 0.200.32 $ 0.16
============ ============ ============ ============0.25
============= ============= ============= =============
Since March 1, 1998, when the Company began its stock repurchase program,
1,607,0711,634,674 shares of the Company's common stock at a total cost of $4,885,100$5,020,989
have been acquired. The Board of Directors has authorized purchasing up to
2,000,000 shares as market conditions warrant.
Note 5 - On December 12, 2001 the Company paid an earnest money deposit of
$89,500 and entered into an agreement to purchase its current leased office and
warehouse facility for cash of approximately $1,790,000. Closing is anticipated
to occur in January 2002.
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.
With the exception of the overall impact on the general economy, the tragic
events of September 11, 2001 arehave not currently expected to havehad a direct material effect on the
Company.
FINANCIAL CONDITION
The financial condition of the Company remains strong. Working capital at
August
31,November 30, 2001 was $8,635,900$9,097,300 compared with working capital of $8,144,600 at
the end of fiscal year 2001. Cash provided by increased sales in the Home
Business Division resulted in cash and cash equivalents increasing $2,050,900
over fiscal year 2001 year end balances. Accounts receivable increased 59.8%67.3%
during the first sixnine months of fiscal year 2002. The Company's "fall special",
which offered extended
payment terms, began duringin the second quarter and contributed tocontinued during the increase
in accounts receivable.third quarter,
extended the payment terms until the fourth quarter of fiscal year 2002.
Inventory levels declined 16.7%22.5% during the first sixnine months of the current 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. Accounts payable decreased 8.6% duringincreased 33.1% over accounts
payable at the first six monthsend of last fiscal year 2002.year. The 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 Company
paid off its short term bank borrowings during the second quarter using cash
generated by increased sales in the Home Business Division.
The Company paid a dividend of $0.04 per share on August 10, 2001.
Pre-tax margins were 13.0%13.3% and 12.8%13.0% for the three months and sixnine months ended
August 31,November 30, 2001, respectively compared with 13.0%and 11.8% and 11.8% for the same comparable
periods last year.
7
8
EDUCATIONAL DEVELOPMENT CORPORATION
RESULTS OF OPERATIONS
Revenues - Net sales from the Home Business Division were $5,756,600$10,231,400 for the
sixnine months ended August 31,November 30, 2001 compared with $4,252,900$7,904,900 for the sixnine months
ended August 31,November 30, 2000, an increase of 35.4%29.4%. Sales for the three months ended
August
31,November 30, 2001 were $2,953,100 versus $2,074,200increased 22.5% to $4,474,800 compared with $3,652,000 for the
same three month period last
year, an increase of 42.4%.months ended November 30, 2000. 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 and exciting 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. This training program is designed to help supervisors build their
business. Management is optimistic that the Home Business Division will continue
to grow.
Net sales for the Publishing Division were $2,155,300 and $4,152,400$5,685,500 for the nine months ended
November 30, 2001 compared with $6,005,700 for the same period a year ago, a
decline of 5.3%. Net sales for the three months ended November 30, 2001 and six months ended August 31, 2001, respectively, compared with
$2,340,4002000
were $1,533,100 and $4,412,100 for the same two periods,$1,593,600 respectively, a year ago.decrease of 3.8%. The Company
attributes this decline to a 45% decrease in purchasing by one of the Company's
major wholesale distributors who closed down two distribution centers during the
last six months.months of fiscal year 2002. This wholesaler's consolidation has been
completed and their purchases have begun to return to a more normal level. The
juvenile paperback market is highly competitive. Industry sales last year were
$753 million. The Publishing Division's annual sales are approximately 1% of
industry sales. Competitive factors include product quality, price and
deliverability. National chains continue to dominate the market. The Company has
taken a very aggressive approach towards increasing sales in this market segment
by the use of cooperative advertising, joint promotional efforts and
institutional advertising in trade publications. Management believes the Company
can maintain its 1% market share.
Cost of Sales - The Company's cost of sales for the sixnine months ended August 31,November
30, 2001 was $4,080,900,$6,316,100, an increase of 8.9%8.7% over cost of sales of $3,747,700$5,813,000
for the sixnine months ended August 31,November 30, 2000. Cost of sales expressed as a
percentage of gross sales was 26.8%26.9% for the sixnine months ended August 31,November 30, 2001
and 26.7% for the same sixnine month period a year ago. Cost of sales for the three
months ended August 31,November 30, 2001 was $2,108,100, an increase of 8.1% over cost of sales of
$1,950,300$2,235,200 compared with $2,065,300 for the
same three monthsmonth period last year. Costyear, an increase of 8.2%. When expressed as a
percentage of gross sales, cost of sales for the three months ended November 30,
2001 was 27.1% and was 26.8% for the three months ended November 30, 2000.
Operating Expenses - Operating and selling expenses increased 13.2% to
$2,702,600 for the nine months ended November 30, 2001 compared with $2,388,300
for the nine months ended November 30, 2000. These expenses expressed as a
percentage of gross sales were 26.5%11.5% and 26.7%11.0% for the periods ending August 31,
2001 and 2000 respectively.
Operating Expenses - Operating and selling expenses for the sixnine months ended
August 31, 2001 were $1,709,700 compared with $1,518,100 for the six months
ended August 31, 2000, an increase of 12.6%. Expressed as a percentage of gross
sales, these cost were 11.2% and 10.8% for the six months ended August 31,November 30, 2001 and 2000 respectively. Operating and selling expenses for the
three months ended August 31,November 30, 2001 were $877,100 versus $757,800$992,900, an increase of 14.1% over
these expenses of $870,200 for the same three months lastperiod a year an increase of 15.7%. These costsago. When expressed as a
percentage of gross sales, were 11.0%these expenses for the three months ended August 31,November
30, 2001 and 10.4% for the three
months ended August 31, 2000.2000 were 12.0% and 11.3% respectively. Increased costs for special
promotions and incentives in the Home Business Division contributed to the
increase in operating and selling expenses for both the three months and sixnine
months ended August 31,November 30, 2001.
Sales commissions for the sixnine months ended August 31,November 30, 2001 increased 36.6% to
$2,137,600 whenwere $3,770,100
compared with $1,565,300$2,894,800 for the sixsame nine month period last year, an increase
of 30.2%. Sales commissions for the third quarters ended November 30, 2001 and
2000, respectively, were $1,632,500 and $1,329,500, an increase of 22.8%. When
expressed as a percentage of gross sales, sales commissions for the three months
and nine months ended August 31,
2000.November 30, 2001 were 19.8% and 16.0% respectively and
were 17.3% and 13.3% for the three months and nine months ended November 30,
2000, 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 both periods for the Home Business Division and
declined in both periods for the Publishing Division.
General and administrative expenses were $1,082,700 for the nine months ended
November 30, 2001 versus $1,111,200 for the nine months ended November 30, 2000,
a decrease of 2.6%. These costs expressed as a percentage of gross sales were
14.0%4.6% for the six months ended August 31, 2001current nine month period and 11.2%5.1% for the six months ended August
31, 2000. Sales commissions for the three months ended August 31, 2001 and 2000
were $1,104,600 and $759,700, respectively, an increase of 45.4%. Sales
commissions expressed assame nine month period a
percentage of gross sales were 13.9% for the three
months ended August 31, 2001 and 10.4% for the three months ended August 31,
2000. Sales commissions as a percentage of gross sales is determined by the
product mix sold and the division which makes the sale. Sales commissions for
the Publishing Division were up slightly both for the three months and six
months ended August 31, 2001. Sales commissions in the Home Business Division
increased 47.1% for the three months ended August 31, 2001 and 38.0% for the six
months ended August 31, 2001, the result of increased sales in that division.
General and administrative expenses were $715,900 for the six months ended
August 31, 2001 and $769,300 for the six months ended August 31, 2000, a
decrease of 6.9%. These expenses expressed as a percentage of gross sales were
4.7% and 5.5% for the periods ended August 31, 2001 and 2000, respectively.year ago. General and administrative expenses for the three months ended
August 31,November 30, 2001 and 2000 were $361,700 and $349,100, respectively,$366,800, an increase of 3.6%. As7.3% over $341,900, for the same
three months last year. When expressed as a percentage of gross sales, these
expenses were 4.5%costs for the three months ended August 31,November 30, 2001 and 4.8% for the three months ended August 31, 2000.2000 were 4.4% and 4.4%
respectively. A decrease in depreciation expense contributed to the decrease in
general and administrative expenses for the sixnine months ended August 31,November 30, 2001.
Interest expense was $20,300 for the six months ended August 31, 2001 and
$66,200 for the six months ended August 31, 2000, a decrease of 69.3%. As a
percentage of gross sales,The Company did not incur any interest expense was 0.1% and 0.5% for the six months
ended August 31, 2001 and 2000. Interest expenseexpenses for the three months ended
August 31,November 30, 2001 as the bank loan had been paid off in the previous quarter.
Interest expense for the nine months ended November 30, 2001 decreased 86.7% to $4,300 versus $32,200 for78.4%
when compared with the three months
ended August 31, 2000. Assame nine month period a percentage of gross sales, interest expense was
0.05% for the three months ended August 31, 2001 and 0.4% for the three months
ended August 31, 2000.year ago. Reduced borrowings and
lower interest rates contributed to the decrease inlower interest expense.costs.
8
9
EDUCATIONAL DEVELOPMENT CORPORATION
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, 2001 and 2000 is set forth below:
Publishing UBAH Other Total
------------ ------------ ------------ -------------------------- -------------- -------------- --------------
SIXNINE MONTHS ENDED AUGUST 31,NOVEMBER 30, 2001
Net sales from external customers $ 4,152,4005,685,500 $ 5,756,60010,231,400 $ -- $ 9,909,00015,916,900
Earnings before income taxes $ 1,496,4002,022,700 $ 1,254,0002,312,000 $ (1,487,100)(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) $ 664,700
SIX800,100
NINE MONTHS ENDED AUGUST 31,NOVEMBER 30, 2000
Net sales from external customers $ 4,412,1006,005,700 $ 4,252,9007,904,900 $ -- $ 8,665,00013,910,600
Earnings before income taxes $ 1,616,5002,173,100 $ 980,0001,790,600 $ (1,577,300)(2,325,100) $ 1,019,2001,638,600
THREE MONTHS ENDED AUGUST 31,NOVEMBER 30, 2000
Net sales from external customers $ 2,340,4001,593,600 $ 2,074,2003,652,000 $ -- $ 4,414,6005,245,600
Earnings before income taxes $ 833,300556,600 $ 501,600810,600 $ (763,200)(747,800) $ 571,700619,400
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
None
9
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)
By /s/ Randall W. White
--------------------------------
Randall W. White
President
Date: October 4,December 20, 2001
----------------------------------------------
10