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) August 17, 2006.
THE AMERICAN EDUCATION CORPORATION
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(Exact name of registrant as specified in its charter)
Nevada 0-11078 73-1621446
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
7506 N. Broadway Extension, Suite 505
Oklahoma City, Oklahoma 73116
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(Address of principal executive offices) (Zip Code)
(405) 840-6031
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(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 August 14, 2006, The American Education Corporation issued the press
release attached hereto as Exhibit 99.1 titled "THE AMERICAN EDUCATION
CORPORATION REPORTS RESULTS FOR THE SIX-MONTH 2006 PERIOD Company Posts
Quarterly and Six Month Profits."
Item 9.01 Financial Statements and Exhibits.
(c) Exhibits.
Exhibit No. Description
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99.1 Company press release titled "THE AMERICAN EDUCATION
CORPORATION REPORTS RESULTS FOR THE SIX-MONTH 2006
PERIOD Company Posts Quarterly and Six Month Profits,"
dated August 14, 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
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Jeffrey E. Butler, Chief Executive Officer
August 17, 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 REPORTS
RESULTS FOR THE SIX-MONTH 2006 PERIOD
COMPANY POSTS QUARTERLY AND SIX MONTH PROFITS
Oklahoma City, August 14, 2006: The American Education Corporation (AEC)
(OTC/BB: AEDU) today announced that quarterly net revenues increased by 1
percent, while the six-month revenues declined by 8 percent for the period
ended June 30, 2006. Net revenues for the 2006 quarterly period were
$3,186,623 versus $3,158,524 for the same quarter of 2005. Net income for the
2006 second quarter increased 193 percent to reflect an after tax profit of
$451,617 versus a loss of $486,441 reported for the same period of fiscal
2005. This quarterly performance resulted in earnings per share of $0.026 for
the period, based on the diluted number of shares outstanding at the close of
the quarter. The increase in profitability is primarily a result of improving
results of the core AEC business and the absence of impairment of goodwill
charges previously recognized during the year-ago quarter. These charges were
associated with the previously announced exit from the contract software
business of the Company's New Jersey-based Dolphin subsidiary in late 2005.
Net income for the 2006 six-month period reflects earnings of $319,998 versus
a loss of $420,954, or $.019 per diluted share.
Gross margins for the quarter ended June 30, 2006 were $3,066,635, or 96
percent of net revenues and represent an increase of 5 percent over the prior
year's quarterly period performance of 91 percent of net revenues. This
increase is primarily due to the elimination of the lower gross margin
Dolphin operations on the financial results. Core AEC software publishing
gross margins remained at approximately 96 percent of net revenues,
consistent with historical results. During the quarterly period, total
operating expenses declined 32 percent compared to the prior year's quarter.
This substantial decrease in operational expense largely reflects the absence
of the significant, one time non-cash charges relating to the write-down of
Dolphin goodwill recorded in the 2005. EBITDA for the quarter was $1,111,331,
representing 35 percent of net revenues. This is compared to EBITDA of
$920,856, which represented 29 percent of net revenues that was reported for
the prior year's quarter.
For the six months ended June 30, 2006 net revenues declined 8 percent, from
$5,498,131 to $5,044,823 as a result of the elimination of all subsidiary
revenues from the exit of Dolphin from the contract software business and its
merger in the Company. Gross margins for this period were $4,829,735,
representing 96 percent of net revenues and is consistent with historical
company results. Total operating expense for the six-month period decreased
17 percent, to $4,348,476 from the $5,267,911 that was reported in the prior
year's period. Net after-tax period earnings were $319,998 versus a loss of
$420,954, reflecting a diluted per share earnings of $0.019 for the 2006 six-
month period. EBITDA for the six-month period was $1,302,902 versus
$1,434,873, reported for the same period in 2005. The decrease in EBITDA is
attributable to higher period costs for legal and operating expense. Factors
that contributed to the earnings improvement are a result of events presented
in the above quarterly discussion of the write down of Dolphin goodwill.
At June 30, 2006 total assets increased 11 percent to $8,722,028 from the
December 31, 2005 amount of $7,834,377, while current assets increased by 20
percent over the December 31, 2005 year-end reported balance sheet. Working
capital increased 7 percent from $1,605,268 to $1,718,640 during this same
period. At June 30, 2006, stockholders' equity increased 7 percent from
$4,542,787 to $4,862,785.
<Page>
The American Education Corporation Announces Second Quarter and Six Month
Results
August 14, 2006
Page 2
Commenting on the results, Jeffrey E. Butler, Chief Executive Officer of the
Company, stated, "The core AEC operating unit's revenues increased 9 percent
for the June 30 ended quarter while revenues declined 1 percent for the six-
month period. Quarterly pretax income for the corporation's core business
unit increased 11 percent for the quarter to $752,696 versus the $675,864
reported in 2005. For the 2006 six-month period, pretax income for the core
business decreased 49 percent from $1,040,831 to $533,330, primarily as a
result of losses sustained in the first quarter of the 2006 year, which the
Company attributes to the lingering effects of last years hurricanes in the
Gulf Coast that impacted the quarter's revenues. Over the first six months of
the year, the Company has continued work to expand its geographical sales
coverage in an effort to improve its long-term competitive position and to
capitalize on what management believes to be opportunities resulting from its
current market segment growth. As indicated in prior announcements, the
Company also continues to invest in product development and updating of its
product line offering in a belief that these investments will also help to
achieve long-term growth.
With respect to the status of the announced plans to privatize the Company,
significant progress has been made in this area. Shareholders should expect
to receive communications related to this matter as a mailing of documents
occurred late last week," 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.
ACCUPLACER and ACCUPLACER On-Line are either trademarks or registered
trademarks owned by the College Entrance Examination Board, New York, NY.
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
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7506 BROADWAY EXTENSION
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OKLAHOMA CITY, OK 73116
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1-800-34APLUS
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www.amered.com
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Pre06-3
The American Education Corporation Announces Second Quarter and Six Month
Results
August 14, 2006
Page 3
Statement of Operations
Three Months Three Months
Ended Ended
June 30, 2006 June 30, 2005 %
(unaudited) (unaudited) Change
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Sales $ 3,186,623 $ 3,158,524 1%
Operating income (loss)
from continuing operations 691,622 (604,926) 214%
Income (loss) from
continuing operations
before income taxes 752,696 (622,965) 221%
Income (loss) from
continuing operations 451,617 (418,040) 208%
Loss from discontinued
operations - (68,401) *
Net Income (loss) 451,617 (486,441)
193%
Earnings per share - diluted
Weighted average shares
outstanding 17,138,395 16,596,726
Continuing operations $ .026 $ (.025) 204%
Discontinued operations - (.004) *
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Total $ .026 $ (.029) 190%
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Six Months Six Months
Ended Ended
June 30, 2006 June 30, 2005 %
(unaudited) (unaudited) Change
------------------ ------------------ ------
Sales $ 5,044,823 $ 5,498,131 (8%)
Operating income (loss)
from continuing
operations 481,259 (397,348) 221%
Income (loss) from
continuing operations
before income taxes 533,331 (425,917) 225%
Income (loss) from
continuing operations 319,998 (299,811) 207%
Loss from discontinued
operations - (121,143) *
Net Income (loss) 319,998 (420,954) 176%
Earnings per share - diluted
Weighted average shares
outstanding 17,138,395 16,596,726
Continuing operations $ .019 $ (.018) 206%
Discontinued operations - (.007) *
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Total $ .019 $ (.025) 176%
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* Not meaningful
The American Education Corporation Announces Second Quarter and Six Month
Results
August 14, 2006
Page 4
Balance Sheet Data
June 30, December 31,
2006 2005 %
(unaudited) (audited) Change
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Current Assets $4,507,433 $3,744,383 20%
Total Assets 8,722,028 7,834,377 11%
Current Liabilities 2,788,793 2,139,115 30%
Stockholders' Equity 4,862,785 4,542,787 7%
Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)
Disclosure of Calculations for the Three Months and Six Months Ended
June 30, 2006
Three Months Ended Six Months Ended
June 30 June 30
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2006 2005 2006 2005
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(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Net income (loss) $ 451,617 $ (486,441) $ 319,998 $ (420,954)
Add back non-EBITDA items
included in net income:
Depreciation and amortization 419,709 1,621,428 821,643 2,015,771
Interest (income) expense (61,074) 18,039 (52,072) 28,569
Income tax provision 301,079 (232,170) 213,333 (188,513)
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EBITDA $1,111,331 $ 920,856 $1,302,902 $1,434,873
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
statement of cash flows in the financial statements filed in the Company's
Form 10-QSB.