SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: (Date of earliest event reported) March 31, 2006.
THE AMERICAN EDUCATION CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Nevada 0-11078 73-1621446
- ---------------------------- ------------ -------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
7506 N. Broadway Extension, Suite 505
Oklahoma City, Oklahoma 73116
---------------------------------------------------
(Address of principal executive offices) (Zip Code)
(405) 840-6031
----------------------------------------------------
(Registrant's telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any
of the following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities
Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12(b) under the Exchange
Act (17 CFR 240.14a-12(b))
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Information to be Included in the Report
Item 8.01 Other events.
On November 14, 2005, The American Education Corporation issued the press
release attached hereto as Exhibit 99.1 titled "THE AMERICAN EDUCATION
CORPORATION ANNOUNCES EARNINGS FOR THE FOURTH QUARTER AND YEAR-ENDED
DECEMBER 31, 2005."
Item 9.01 Financial Statements and Exhibits.
(c) Exhibits.
Exhibit No. Description
- ----------- -----------
99.1 Company press release titled "THE AMERICAN EDUCATION
CORPORATION ANNOUNCES EARNINGS FOR THE FOURTH QUARTER AND
YEAR-ENDED DECEMBER 31, 2005," dated March 31, 2006.
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 hereunto duly authorized.
THE AMERICAN EDUCATION CORPORATION
/s/ Jeffrey E. Butler
- ------------------------------------------
Jeffrey E. Butler, Chief Executive Officer
March 31, 2006
Exhibit 99.1
PRESS RELEASE
For further information contact:
Jeffrey E. Butler or Geralyn DeBusk
The American Education Corporation Halliburton Investor Relations
800-34APLUS or 800-222-2811 972-458-8000
E-mail: jeb@amered.com
URL: www.amered.com
For Immediate Release
THE AMERICAN EDUCATION CORPORATION ANNOUNCES
EARNINGS FOR THE FOURTH QUARTER AND YEAR-ENDED DECEMBER 31, 2005
Oklahoma City, March 31, 2006: The American Education Corporation ("AEC")
(OTC/BB: AEDU) reports a net loss after tax from consolidated operations
for the year ended December 31, 2005, of $849,927 compared to a
consolidated net loss of $343,260 for the prior fiscal year and a
resulting loss of approximately $0.05 per diluted share for the year ended
December 31, 2005, versus a loss of $0.02 per diluted share reported for
fiscal 2004. These results are inclusive of a charge of $1,215,015 for
the impairment of goodwill associated with the Company's subsidiary unit,
Dolphin, Inc. Dolphin, a contract educational software development
business unit, ceased to provide software development services to third
parties and the remaining five key employees have been assigned
development roles within the Company's product development department. In
addition, the Company's 2005 financial results were also impacted by
continued, but declining, costs associated with the UK-based Learning
Pathways business unit, which was sold in November of 2005 to
Learning.com.
Net consolidated revenues for the 2005 fiscal year decreased 4 percent to
$9,819,396 from $10,186,517 reported in 2004. This decline in
consolidated revenues is primarily attributable to the decision to
withdraw the Dolphin business unit from the contract development services
business in the second quarter of 2005, which was completed by the end of
fiscal 2005. Revenue growth for the core AEC business was also negatively
impacted, as previously announced, by regional weather events that
occurred in the third and fourth quarters of 2005 in the Gulf Coast
states. These unexpected weather events disrupted or delayed purchases by
school districts, which were directly and indirectly impacted by the
hurricanes in this important regional market for the Company. The AEC core
domestic business unit posted revenues of $9,279,664 for fiscal 2005,
representing a 0.6 percent decrease over revenues of $9,333,011 reported
in 2004.
Consolidated 2005 operating margins, inclusive of an impairment of
goodwill for Dolphin of $1,215,015, decreased 148 percent from $1,265,674
to a loss of $610,587 as compared the prior fiscal year. This decline in
operating margins is a result of higher 2005 operating expenses incurred
for legal, accounting, consulting, salary costs and impairment charges
associated with various restructuring activities. During 2005, total
consolidated operating expenses, inclusive of the continuing residual, but
declining 2005 effects of Dolphin's operating expense and the goodwill
write off, increased by 24 percent to $9,292,455 from the $7,522,597
reported for the prior year. Core AEC software publishing gross margins
remained at approximately 97 percent of net revenues.
EBITDA decreased on a consolidated basis, with EBITDA for fiscal 2005 at
$1,919,558 versus the $1,963,039 reported for the prior fiscal year, or a
decline of 2 percent. The decline in EBITDA is also attributable to the
continued residual operating costs experienced by the Company's Learning
Pathways UK and Dolphin, Inc. subsidiaries in 2005. LPL was sold to
Learning.com in November of 2005. Going forward, these costs,
approximating $750,000 in fiscal 2005, will decline with respect to their
impact on fiscal 2006's financial performance.
Consolidated net revenues for the fourth quarter ended December 31, 2005,
decreased 21 percent to $1,831,982 compared with $2,313,044 reported in
2004. Operating losses for continuing operations for the fourth quarter
reflect a loss of $363,386 versus a loss of $23,081 reported for the same
quarter of 2004.
The AEC core business unit revenues declined 14 percent in the closing
quarter of 2005 and this decline is believed to be an ongoing result of
weather-related issues impacting the Company's important markets.
The American Education Corporation
Earnings Release for the Fourth Quarter and Year Ended 2005
March 31, 2006
Page 2
The Company's financial position at December 31, 2005 reflects the
following changes: Total assets decreased 5 percent from $8,277,572 at
December 31, 2004 to $7,834,377 at December 31, 2005; while working
capital increased from $1,097,949 at December 31, 2004 to $1,605,268 at
December 31, 2005. Current assets increased by 21 percent, while current
liabilities increased by 7 percent. The Company's bank indebtedness was
eliminated in 2005 versus the $371,862 reported at December 31, 2004.
Shareholders' equity decreased 16 percent from $5,392,714 to $4,542,787
primarily as a result of the effect of the impairment of the goodwill of
the Dolphin subsidiary.
Commenting on the Company's 2005 results, Jeffrey E. Butler, Chief
Executive Officer of the Company, stated, "AEC management has indicated in
prior 2005 press releases that the Company's Dolphin subsidiary operations
were of concern and under close scrutiny with respect to alternatives.
Dolphin's 2005 withdrawal from the contract business, downsizing and the
refocus of a sharply reduced staff on mission critical AEC development
tasks has been completed. The classification of the Company's investment
in its Learning Pathway's UK as impaired at the end of fiscal 2004 and the
sale of this business unit to Learning.com in November of 2005 largely
completes the process of a material company restructuring. AEC is now
focused on its core business and domestic opportunities.
"In summary, unexpected events disrupted the Company's revenue stream in
the latter half of the year and the Company also experienced a range of
unavoidable cost commitments that it could not defer during this same
period. Many of these costs were related to unusually high legal and
accounting expenses associated with restructuring efforts, including the
plan to privatize the business. External events and a number of internal,
essential, non-deferrable programs, which were committed to earlier in the
year converged to adversely impact what was initially believed to be a
good year for the Company. On the positive side, the Company is now fully
focused on its domestic markets without the distractions of subsidiary
operations.
"The Company is proceeding with its plans to privatize the business.
Shareholders may expect additional filings relating to this program in by
mid-April," he concluded.
The Company's Java-based technology, the A+nyWhere Learning System
Versions 3.0 and 4.0 of educational software products, provides for an
integrated offering of grade levels 1-12 software for Reading,
Mathematics, Language Arts, Science, Writing, History, Government,
Economics and Geography. In addition, the Company provides assessment
testing and instructional content for the General Educational Development
(GED) test. All company products are designed to provide for LAN, WAN and
Internet delivery options and support Windows, UNIX and Macintosh
platforms. The Company has developed a computer adaptive, companion
academic skill assessment testing tool to provide educators with the
resources to more effectively use the Company's curriculum content aligned
to important state and national academic standards. Spanish-language
versions are available for Mathematics and Language Arts for grade levels
1-8. The Company's curriculum content is aligned to the other third party
digital resources such as the GoKnow's, Internet accessible science
curriculum and reference materials, which may be accessed directly from
A+LS lessons. The A+LS comprehensive family of educational software is
now in use in over 12,000 schools, centers of adult literacy, colleges and
universities, and correctional institutions in the U.S., UK and other
international locations. A+dvancer, the Company's diagnostic,
prescriptive test and online, postsecondary developmental curriculum
offering, is aligned to ACCUPLACER On-Line, the leading college admissions
test for students requiring developmental support to enroll in full credit
secondary coursework in mathematics, reading, algebra and writing.
Note: Certain matters discussed above concerning the future performance
of the Company are forward-looking statements intended to qualify for the
safe harbors from liabilities established by the Private Securities
Litigation Reform Act of 1995. These forward-looking statements can be
identified as such by words such as "if," "may," "believes,"
"anticipates," "plans," "expects" or words of similar import. The future
performance of the Company is subject to a number of factors including,
but not limited to, general economic conditions, competitive activity and
funding available to schools.
THE AMERICAN EDUCATION CORPORATION
----------------------------------
7506 BROADWAY EXTENSION
-----------------------
OKLAHOMA CITY, OK 73116
-----------------------
1-800-34APLUS
-------------
www.amered.com
--------------
-Tables Follow-
Pre06-01
The American Education Corporation
Earnings Release for the Fourth Quarter and Year-Ended 2005
March 31, 2006
Page 3
Statement of Income
Three Months Three Months
Ended Ended
December 31, 2005 December 31, 2004 %
(unaudited) (unaudited) Change
------------------ ------------------ ------
Sales $ 1,831,982 $ 2,313,044 (21%)
Operating income (loss)
from continuing
operations (363,386) (23,081) (1474%)
Income (loss) from
continuing operations
before income taxes (371,207) (34,100) (989%)
Income (loss) from
continuing operations (402,647) (33,128) (1115%)
Loss from discontinued
operations (44,617) (527,505) 92%
Net Income (loss) (447,264) (560,633) 20%
Earnings per share - diluted
Weighted average shares
outstanding 17,143,279 15,801,795
Continuing operations $ (.02) $ (.01) (100%)
Discontinued operations (.01) (.03) 67%
----------- -----------
Total $ (.03) $ (.04) 25%
=========== ===========
Twelve Months Twelve Months
Ended Ended
December 31, 2005 December 31, 2004 %
(audited) (audited) Change
------------------ ------------------ ------
Sales $ 9,819,396 $10,186,517 (4%)
Operating income (loss)
from continuing
operations (610,587) 1,265,674 (148%)
Income (loss) from
continuing operations
before income taxes (660,520) 1,204,616 (155%)
Income (loss) from
continuing operations (620,496) 710,943 (187%)
Loss from discontinued
operations (229,431) (1,054,203) 78%
Net Income (loss) (849,927) (343,260) (148%)
Earnings per share - diluted
Weighted average shares
outstanding 17,143,279 15,801,795 (180%)
Continuing operations $ (.04) $ .05 86%
Discontinued operations (.01) (.07)
----------- ----------- -----
Total $ (.05) $ (.02) (150%)
=========== =========== =====
The American Education Corporation
Earnings Release for the Fourth Quarter and Year-Ended 2005
March 31, 2006
Page 4
Balance Sheet Data
December 31, December 31,
2005 2004 %
(audited) (audited) Change
------------------ ----------------- ------
Current Assets $3,744,383 $3,102,531 21%
Total Assets 7,834,377 8,277,572 (5%)
Current Liabilities 2,139,115 2,004,582 7%
Stockholders' Equity 4,542,787 5,392,714 (16%)
Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)
Disclosure of Calculations for the Fiscal Year-Ended December 31, 2005
Three Months Ended Year Ended
December 31 December 31
----------------------- -----------------------
2005 2004 2005 2004
----------------------- -----------------------
(unaudited) (unaudited) (audited) (audited)
Net income (loss) $(447,264) $ (560,633) $ (849,927) $ (343,260)
Add back non-EBITDA
items included in
net income (loss):
Depreciation and
amortization 451,957 887,159 1,679,160 2,143,034
Interest expense 7,821 11,019 49,933 61,058
Impairment of goodwill -- 625,431 1,215,015 625,431
Income tax (benefit)
provision 1,696 (1,017,869) (174,623) (523,224)
--------- ----------- ---------- ----------
EBITDA $ 14,210 $ (54,893) $1,919,558 $1,963,039
EBITDA represents earnings (loss) from continuing operations before interest
income, interest expense, income taxes, depreciation, amortization, other
income and impairment of goodwill. The Company believes that EBITDA
provides meaningful additional information concerning a company's operating
results and its ability to service its long-term debt and other fixed
obligations and to fund its continued growth. Many financial analysts
consider EBITDA may be a meaningful indicator of future profitability.
EBITDA should not be construed as an alternative to net income (loss) as
determined in accordance with GAAP, as an alternative to cash flows from
operating activities as determined in accordance with GAAP or as a measure
of liquidity. Because EBITDA is not calculated in the same manner by all
companies, it may not be comparable to other similarly titled measures of
other companies. See the consolidated statement of cash flows in the
consolidated financial statements filed in the Company's Form 10-KSB.