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 December 31, 1996
--- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-14669
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THE ARISTOTLE CORPORATION AND SUBSIDIARY
----------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 06-1165854
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
78 Olive Street, New Haven, Connecticut 06511
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 867-4090
Indicate by check mark whether the registrant (1) has filed all reports required
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 January 31, 1997, 1,097,902 shares of Common Stock were outstanding.
THE ARISTOTLE CORPORATION AND SUBSIDIARY
INDEX OF INFORMATION CONTAINED IN FORM 10-Q FOR THE
QUARTER ENDED DECEMBER 31, 1996
Page
Part I - Financial Information ----
Item 1 - Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets at December 31, 1996
and June 30, 1996 3
Condensed Consolidated Statements of Operations for the
Three and Six Months Ended December 31, 1996 and 1995 4
Condensed Consolidated Statements of Cash Flows for the Six
Months Ended December 31, 1996 and 1995 5
Notes to Condensed Consolidated Financial Statements 6
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
Part II - Other Information
Item 4 - Submission of Matters to a Vote of Security Holders 13
Item 6 - Exhibits and Reports on Form 8-K 13
Signatures 14
Exhibit Index 15
2
THE ARISTOTLE CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except for share data)
December 31, June 30,
1996 1996
---- ----
(Unaudited)
ASSETS
------
Current assets:
Cash and cash equivalents $ 637 $ 99
Marketable securities held in escrow, at market value -- 6,253
Accounts receivable, net of reserves of $202 and $242 2,887 2,834
Inventories 9,707 9,478
Other current assets 434 359
--------- ---------
Total current assets 13,665 19,023
--------- ---------
Property and equipment, net 1,586 1,684
--------- ---------
Other assets:
Marketable securities held in escrow, at market value 1,200 --
Employee notes receivable 354 354
Goodwill, net of amortization of $126 and $101 1,808 1,845
Deferred tax asset 630 630
Other noncurrent assets 256 259
--------- ---------
4,248 3,088
--------- ---------
$19,499 $23,795
--------- ---------
LIABILITIES AND STOCKHOLDER'S EQUITY
------------------------------------
Current liabilities:
Notes payable and current maturities of long-term debt $ 6,758 $ 6,055
FDIC tax refund claim payable -- 3,760
Accounts payable 1,275 1,372
Accrued expenses 568 919
Deferred tax liability 630 630
-------- --------
Total current liabilities 9,231 12,736
-------- --------
Long-term debt, less current maturities 1,805 2,097
-------- --------
Total liabilities 11,036 14,833
-------- --------
Minority interest in subsidiary's preferred stock 1,975 2,247
-------- --------
Minority interest in subsidiary's common stock 184 182
-------- --------
Commitments and contingencies
Redeemable preferred stock, $.01 par value; 3,000,000 shares authorized; 76,014 and
101,976 Series A at December 31, 1996 and June 30, 1996, respectively, 60,756 and
61,345 Series B at December 31, 1996 and June 30, 1996, respectively, 60,756 and
61,345 Series C at December 31, 1996 and June 30, 1996, respectively and 24,998
shares Series D at December 31, 1996 and June 30, 1996 issued and outstanding
3 3
-------- --------
Stockholders equity:
Common stock, $.01 par value; 3,000,000 shares authorized;
1,105,801 shares at December 31, 1996 and June 30,1996 issued and outstanding 11 11
Additional paid-in capital 159,762 159,762
Retained earnings (deficit) ( 153,440) (153,245)
Treasury stock at cost - 7,287 and 1,287 shares at December 31, 1996 and June 30, 1996,
respectively ( 30) ( 8)
Net unrealized investment gains (losses) ( 2) 10
--------- --------
Total stockholders equity 6,301 6,530
--------- --------
$ 19,499 $ 23,795
--------- --------
The accompanying notes are an integral part of
these condensed consolidated financial statements.
3
THE ARISTOTLE CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(dollars in thousands, except for share data)
Three Months Six Months
Ended December 31, Ended December 31,
1996 1995 1996 1995
---- ---- ---- ----
Net sales $ 4,941 $ 6,787 $ 10,248 $ 12,756
Cost of goods sold 3,573 5,026 7,393 9,426
------------ ------------ ----------- -----------
Gross profit 1,368 1,761 2,855 3,330
Operating expenses:
Selling 729 783 1,427 1,457
General and administrative 528 439 976 979
Product development 151 110 277 228
------------- ------------ ------------ ------------
Operating income (loss) ( 40) 429 175 666
------------- ------------ ------------ ------------
Other income (expense)
Investment and interest income 36 77 98 157
Interest expense ( 166) ( 235) ( 350) ( 454)
------------- ------------- ------------- -------------
Income (loss) before income
taxes and minority interest ( 170) 271 ( 77) 369
Income tax expense 8 6 22 6
------------- ------------- ------------- -------------
Income (loss) before minority
interest ( 178) 265 ( 99) 363
Minority interest 42 62 96 119
------------ ------------- ------------- -------------
NET INCOME (LOSS) ($ 220) $ 203 ($ 195) $ 244
------------ ------------- ------------- -------------
Net income (loss) per share ($ 0.19) $ 0.18 ($ 0.17) $ 0.22
------------ ------------- ------------- -------------
Weighted average shares outstanding 1,134,614 1,124,184 1,136,268 1,123,310
------------ ------------- ------------- -------------
The accompanying notes are an integral part of
these condensed consolidated financial statements.
4
THE ARISTOTLE CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(dollars in thousands)
Six Months
Ended December 31,
1996 1995
---- ----
Cash flows from operating activities:
Net income (loss) ($ 195) $ 244
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities: 260 262
Depreciation and amortization
Changes in assets and liabilities: ( 53) 1,270
Accounts receivable ( 229) 1,215
Inventories ( 89) 15
Other assets ( 97) ( 1,147)
Accounts payable ( 351) ( 287)
Accrued expenses - 61
Issuance of treasury stock ------------ ------------
Net cash provided by (used in) operating
activities ( 754) 1,633
------------ ------------
Cash flows from investing activities:
Purchase of property and equipment ( 132) ( 364)
Purchase of marketable securities ( 707) -
Minority interest 2 9
Repurchase of ASI preferred stock ( 260) -
Sale of marketable securities 5,760 -
Settlement of FDIC claim ( 3,760) -
------------ ------------
Net cash provided by (used in) investing
activities 903 ( 355)
------------ ------------
Cash flows from financing activities:
Net borrowings (payments) under line-of-credit 980 ( 1,240)
Principal payments under note payable ( 569) ( 125)
Purchase of treasury stock ( 22) -
Proceeds from issuance of long-term debt - 75
------------ ------------
Net cash provided by (used in) financing
activities 389 ( 1,290)
------------ ------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 538 ( 12)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 99 188
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 637 $ 176
------------ ------------
The accompanying notes are an integral part of
these condensed consolidated financial statements.
5
THE ARISTOTLE CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
---------------------
The Aristotle Corporation ("Aristotle") is a holding company for its
subsidiary, Aristotle Sub, Inc. ("ASI"). ASI is a holding company for The
Strouse, Adler Company ("Strouse"). Strouse designs, manufactures and markets
women's intimate apparel. Unless the context indicates otherwise, all references
herein to the "Company" include Aristotle, ASI and Strouse.
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with the instructions to Form 10-Q
and do not include all of the information and notes required by generally
accepted accounting principles for complete financial statements. In the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the six months ended December 31, 1996 are not necessarily
indicative of results that may be expected for the year ending June 30, 1997.
For further information, refer to the consolidated financial statements and
notes included in the Company's Annual Report on Form 10-K for the year ended
June 30, 1996.
2. Earnings per Common Share
-------------------------
Weighted average shares outstanding are primary; treasury stock has
not been included. At December 31, 1996, the weighted average shares include
33,424 shares of common stock equivalents.
3. Debt Agreement
--------------
On October 3, 1996, Strouse and Bank of Boston, Connecticut (the
"Bank") entered into a credit agreement that provides for a line-of-credit
facility and a term loan facility (the "Credit Facilities"). Borrowing under the
line-of-credit is determined by a borrowing base which is equal to the sum of
80% of eligible accounts receivable, as defined, plus 50% of eligible raw
material inventory, as defined, plus 60% of eligible finished goods inventory,
as defined, with a maximum borrowing of $8,000,000 at any one time. In addition,
the line-of-credit facility permits advances to exceed the borrowing base amount
by up to $750,000 through September 1997, and $500,000 thereafter through
September 1999 (so long as the total line-of-credit is not more than the
$8,000,000 and the overadvance is reduced to zero for 30 consecutive days per
annum). The principal amount of the term loan is $2,000,000. The credit
agreement matures in September 1999. Strouse uses the Credit Facilities for
working capital and other general corporate purposes.
The interest on the line-of-credit will vary from prime to prime plus
1.0% or Eurodollar plus 1.75% to Eurodollar plus 3.0% per annum based on the
financial performance of Strouse. The term loan bears interest at the option of
the Company at a rate per annum equal to prime plus .75%, Eurodollar plus 2.5%
or at a fixed rate of the Bank's cost of funds plus 2.25%. The term loan has a
three year term and requires principal payments to reduce the amount outstanding
based on a ten year amortization.
6
The Credit Facilities are secured by a lien on all assets of Strouse.
Aristotle and ASI have unconditionally guaranteed the Credit Facilities.
Recourse under each guaranty is limited to $2,000,000. To secure Aristotle's
guarantee of the Credit Facilities, Aristotle has pledged $500,000 (the "Account
Pledged to the Bank") which is included in marketable securities held in escrow
in the accompanying balance sheet. The credit agreement further provides that
Strouse may not pay dividends to ASI or Aristotle without the Bank's prior
written consent. Strouse must maintain certain financial ratios and satisfy
various other covenants in connection with the Credit Facilities.
As of January 31, 1997, the balance outstanding on the line-of-credit
was $6,133,000 and the balance outstanding on the term loan was $1,950,000. As
of January 31, 1997, the additional borrowing available on the overadvance was
$415,000.
7
THE ARISTOTLE CORPORATION AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Results of Operations
Three Months Ended December 31, 1996 and 1995
---------------------------------------------
The Company's net sales for the three months ended December 31, 1996
decreased 27% to $4,941,000, compared to net sales of $6,787,000 for the three
months ended December 31, 1995. The decrease was primarily generated by a
$560,000 volume decrease in shapewear products, and a $1,480,000 volume decrease
in specialty brassiere products, offset by a $194,000 impact from increased
prices.
The Company's gross profit for the three months ended December 31, 1996
decreased 22% to $1,368,000, compared to gross profit of $1,761,000 for the
three months ended December 31, 1995. Gross margin percentage increased to 27.7%
from 25.9%. The decrease in gross profit was primarily a result of the reduction
in sales. The increase in gross margin percentage was principally a result of
reduced overhead expenses and a consolidation of production to locations with
lower costs.
Selling, general and administrative expenses for the three months ended
December 31, 1996 were $1,257,000, compared to $1,222,000 for the corresponding
three months ended December 31, 1995. The $35,000, or 3%, increase was
principally a result of increases in advertising and professional fees,
partially offset by a reduction in commissions and shareholder expenses.
Product development costs for the Company for the three months ended
December 31, 1996 were $151,000, compared to $110,000 for the three months ended
December 31, 1995. Product development costs primarily included compensation of
Company personnel and were incurred by Strouse. All products are designed
internally in Strouse's New Haven and New York design centers. The $41,000, or
37%, increase in costs reflects Strouse's continued investment in the product
development process through increases in staffing in Strouse's design centers.
Investment and interest income was $36,000 and $77,000 for the three months
ended December 31, 1996 and 1995, respectively. Investment and interest income
for the three months ended December 31, 1996 was principally generated by an
investment account (the "Strouse Escrow Account") established in connection with
the acquisition of Strouse by Aristotle (the "Acquisition") and subject to an
escrow and pledge agreement with the former Strouse stockholders (the "Former
Strouse Stockholders"). Investment and interest income for the three months
ended December 31, 1995 was principally generated by the Strouse Escrow Account
and two special escrow accounts (the "FDIC Escrow Accounts"). The FDIC Escrow
Accounts contained approximately $5,760,000 in tax refunds received by the
Company that the Federal Deposit Insurance Corporation ("FDIC") claimed. The
$41,000 reduction in investment and interest income for the three months ended
December 31, 1996 was primarily a result of the payment to the FDIC of
approximately $3,760,000 from the FDIC Escrow Accounts in the first quarter of
1996 in connection with a settlement between the Company and the FDIC related to
certain disputes between the FDIC, the Company and others (the "FDIC
Settlement").
Interest expense for the three months ended December 31, 1996 decreased to
$166,000 from $235,000 in the corresponding three months ended December 31,
1995. The decrease in interest expense primarily resulted from reduced borrowing
levels under the Credit Facilities due to a reduction in inventory.
The income tax provision reflects minimum state taxes, as any federal tax
obligation is sheltered by the utilization of net operating loss carryforwards.
8
Minority interest expense of $42,000 and $62,000 for the three months ended
December 31, 1996 and 1995, respectively, was principally due to preferred
dividends paid or accrued during the corresponding period on outstanding
preferred stock of ASI (the "ASI Preferred Stock") issued to the Former Strouse
Stockholders in connection with the Acquisition. The preferred dividends
decreased as a result of the exercise of the Put Right, as defined in the
Liquidity and Capital Resources section, by three Former Strouse Stockholders,
including one executive officer and one former executive officer, in November
and December, 1996, which resulted in fewer shares of ASI Preferred Stock being
outstanding.
9
Six Months Ended December 31, 1996 and 1995
-------------------------------------------
The Company's net sales for the six months ended December 31, 1996
decreased 20% to $10,248,000, compared to net sales of $12,756,000 for the six
months ended December 31, 1995. The decrease was primarily generated by a
$620,000 volume decrease in shapewear products, and a $2,382,000 volume decrease
in specialty brassiere products, offset by a $494,000 impact from increased
prices.
The Company's gross profit for the six months ended December 31, 1996
decreased 14% to $2,855,000, compared to gross profit of $3,330,000 for the six
months ended December 31, 1995. Gross margin percentage increased to 27.9% from
26.1%. The decrease in gross profit was primarily a result of the reduction in
sales. The increase in gross margin percentage was principally a result of
reduced overhead expenses, lower production costs resulting from a reduction in
production rates charged by the Company's Dominican subcontractor and a
consolidation of Strouse's production to locations with lower costs.
Selling, general and administrative expenses for the six months ended
December 31, 1996 were $2,403,000, compared to $2,436,000 for the corresponding
six months ended December 31, 1995. The $33,000, or 1%, decrease was principally
a result of a reduction in administrative personnel, commissions and shareholder
expenses, partially offset by an increase in advertising and professional fees.
Product development costs for the Company for the six months ended December
31, 1996 were $277,000, compared to $228,000 for the six months ended December
31, 1995. Product development costs primarily included compensation of Company
personnel and were incurred by Strouse. All products are designed internally in
Strouse's New Haven and New York design centers. The $49,000, or 21%, increase
in costs reflects Strouse's continued investment in the product development
process through increases in staffing in Strouse's design centers.
Investment and interest income was $98,000 and $157,000 for the six months
ended December 31, 1996 and 1995, respectively. This income was principally
generated by the FDIC Escrow Accounts and the Strouse Escrow Account. The
$59,000 reduction in investment and interest income for the six months ended
December 31, 1996 was primarily a result of the payment to the FDIC of
approximately $3,760,000 from the FDIC Escrow Accounts in the first quarter of
1996 in connection with the FDIC Settlement.
Interest expense for the six months ended December 31, 1996 decreased to
$350,000 from $454,000 in the corresponding six months ended December 31, 1995.
The decrease in interest expense primarily resulted from reduced borrowing
levels under the Credit Facilities due to a reduction in inventory.
The income tax provision reflects minimum state taxes, as any federal tax
obligation is sheltered by the utilization of net operating loss carryforwards.
Minority interest expense of $96,000 and $119,000 for the six months ended
December 31, 1996 and 1995, respectively, was principally due to preferred
dividends paid or accrued during the corresponding period on outstanding ASI
Preferred Stock. The preferred dividends decreased for the six months ended
December 31, 1996 as a result of the exercise of the Put Right by three Former
Strouse Stockholders in November and December, 1996, which resulted in fewer
shares of ASI Preferred Stock being outstanding.
10
Liquidity and Capital Resources
The Company used $754,000 to fund operations during the six months ended
December 31, 1996. The Company generated $1,633,000 from operations for the six
months ended December 31, 1995. During these periods, the principal operating
cash requirements were attributable to increased inventory levels and a
reduction of other liabilities.
The Company generated $903,000 from investing activities for the six months
ended December 31, 1996 and utilized $355,000 for investing activities for the
six months ended December 31, 1995. In the six months ended December 31,1996,
the primary generation of cash from investing activities was the $5,760,000 sale
of marketable securities that were withdrawn from the FDIC Escrow Accounts in
connection with the FDIC Settlement, offset by the payment of $3,760,000 from
the FDIC Escrow Accounts in connection with the FDIC Settlement. The Company
also used $260,000 to fund the payment of the Put Right, as defined below,
exercised by three of the Former Strouse Stockholders, including one executive
officer and one former executive officer of the Company. In exchange for the
funding of the Put Right, the Company received 25,962 shares of ASI Series A
Preferred Stock and 25,962 shares of Aristotle Preferred Stock. During such
period, the Company also utilized $707,000 of its cash from investing activities
to purchase marketable securities to fund the Account Pledged to the Bank, which
secures Aristotle's guarantee of the Credit Facilities, and to restore the
Strouse Escrow Account. During both periods, the Company used cash from
investing activities to purchase property and equipment.
The Company generated $389,000 from financing activities for the six months
ended December 31, 1996. The Company utilized $1,290,000 for financing
activities during the six months ended December 31, 1995. Funds generated during
the six months ended December 31, 1996 were primarily a result of the Company
drawing $980,000 from its line-of-credit, offset by the $569,000 payment of its
notes payable. In addition, the Company repurchased 6,000 shares of its Common
Stock in the open market for approximately $22,000. The Company intends to pay
its directors' annual retainer with these treasury shares.
In connection with the Acquisition, ASI issued to the Former Strouse
Stockholders 245,381 shares of ASI Preferred Stock and Aristotle issued to the
Former Strouse Stockholders 270,379 shares of voting preferred stock of
Aristotle (the "Aristotle Preferred Stock"). The Former Strouse Stockholders may
require that ASI repurchase each share of ASI Preferred Stock at various dates
beginning in April 1996 for $10.00 per share, plus any accrued but unpaid
dividends (the "Put Right"). Prior to the vesting of the Put Right, the ASI
Preferred Stock is entitled to quarterly dividends of 8.9% per annum. Once the
Put Right is exercisable, the dividends cease. In order to exercise the Put
Right, a Former Strouse Stockholder must sell an equal number of shares of
Aristotle Preferred Stock to Aristotle for $.001 per share. The Put Right is
secured by the Strouse Escrow Account.
If the Former Strouse Stockholders exercise their Put Right with respect to
the ASI Preferred Stock, then Aristotle would have to pay up to $1,975,000
during the next four fiscal years to such Stockholders. It is not anticipated
that current amounts of capital will be sufficient to satisfy potential
commitments related to the Acquisition. However, there is $700,000 held in the
Strouse Escrow Account, $354,000 in employee notes receivable, $560,000 from
Strouse intercompany loans and $500,000 held in the Account Pledged to the Bank
to satisfy the requirements of the Put Rights, if exercised. Any default in the
payments due to the Former Strouse Stockholders could create a partial unwinding
of the Acquisition in which the Former Strouse Stockholders would be entitled to
receive 59% of the capital stock of Strouse, in exchange for certain
consideration previously paid to them by Aristotle in connection with the
Acquisition.
11
In order to conserve funds, in November 1996, the Company requested that
the holders of the ASI Preferred Stock postpone the Put Right with respect to
101,976 shares of ASI Series A Preferred Stock and 61,345 shares of ASI Series B
Preferred Stock from dates in April 1996 and April 1997 to October 1997. In
exchange, ASI offered to continue to pay the 8.9% dividend until October 1997 to
the holders of the ASI Preferred Stock who postpone the Put Right. In addition,
the Company offered to delay the repayment of certain loans made by Aristotle to
certain Former Strouse Stockholders (the "Acquisition Loans") in connection with
the Acquisition from April 1997 until October 1997 if such Stockholders postpone
their Put Rights.
In October 1996, pursuant to terms of an employment agreement between a
former executive officer of Strouse and the Company, upon the voluntary
termination of such officer's employment, the former executive officer was
obligated to sell to the Company for nominal consideration 589 shares of ASI
Series B Preferred Stock and 589 shares of ASI Series C Preferred Stock. As
mentioned above, in November and December of 1996, three Former Strouse
Stockholders exercised their Put Right with respect to 25,962 shares of ASI
Series A Preferred Stock and 25,962 shares of Aristotle Preferred Stock for a
cash payment of $260,000.
After repurchases of ASI Preferred Stock pursuant to the foregoing
employment agreement and exercise of Put Rights, the offer resulted in the
holders of 73,604 shares of ASI Series A Preferred Stock and 13,862 shares of
ASI Series B Preferred Stock postponing their Put Right until October 1997 with
the remaining 2,410 shares of ASI Series A Preferred Stock continuing to be
exercisable. In addition, there are 46,894 shares of ASI Series B Preferred
Stock that will be exercisable beginning April 1997. The offer also resulted in
the delay of the repayment of $131,000 principal amount of Acquisition Loans to
October 1997, with $46,000 principal amount of Acquisition Loans remaining
payable in April 1997.
In order to meet its projected capital requirements and potential
commitments to the Former Strouse Stockholders, the Company believes that it
must either raise new equity capital or obtain additional financing or both.
There can, however, be no assurance that the Company will be able to raise new
equity capital or obtain additional financing.
Certain Factors That May Affect Future Results of Operations
The Company believes that this report may contain forward-looking
statements within the meaning of the "safe-harbor" provisions of the Private
Securities Litigation Reform Act of 1995. These forward-looking statements are
based on management's current expectations and are subject to a number of
factors and uncertainties that could cause actual results to differ materially
from those described in the forward-looking statements. The Company cautions
investors that there can be no assurance that actual results or business
conditions will not differ materially from those projected or suggested in such
forward-looking statements as a result of various factors, including, but not
limited to, the following: the availability of financing and additional capital
to fund the Company's business strategy on acceptable terms, if at all, market
responses to pricing actions, continued competitive factors and pricing
pressures, changes in product mix, the timely acceptance of new products,
inventory risks due to shifts in market demand, the dependence by the Company on
key customers, and general economic conditions. As a result, the Company's
future development efforts involve a high degree of risk. For further
information, refer to the more specific risks and uncertainties discussed
throughout this report.
12
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
On November 21, 1996, Aristotle held its annual meeting of its
stockholders. The following matters were voted on at the annual meeting:
1. The election of Barry R. Banducci and Daniel J. Miglio to
Aristotle's Board of Directors for three-year terms; and
2. The approval of the Company's plan to continue to pay the annual
retainer that it pays to its non-employee Directors in Common Stock
of the Company; and
3. The ratification of the appointment of Arthur Andersen LLP,
Independent Certified Public Accountants, as Aristotle's independent
auditors for the fiscal year ending June 30, 1997.
The following chart shows the number of votes cast for or against, as
well as the number of abstentions and broker nonvotes, as to each matter voted
on at the annual meeting:
The The The The
election election approval of appointment
of of Company's Plan of Arthur
Mr. Banducci Mr. Miglio to Pay Directors Andersen LLP
- -------------------------------------------------------------------------------
For 925,617 925,347 790,983 917,863
Against 6,925 7,195 26,320 9,034
Abstain 0 0 5,545 5,645
Broker Nonvotes 0 0 109,694 N/A
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
See Exhibit Index.
(b) Reports on Form 8-K:
There were no reports on Form 8-K for the three months ended
December 31, 1996.
13
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.
THE ARISTOTLE CORPORATION
/s/ John J. Crawford
--------------------
John J. Crawford
Its President, Chief Executive Officer
and Chairman of the Board
Date: February 14, 1997
/s/ Paul McDonald
-----------------
Paul McDonald
Its Chief Financial Officer
and Secretary
(principal financial and chief
accounting officer)
Date: February 14, 1997
14
EXHIBIT INDEX
Exhibit Description
- ------- -----------
4.1 Amended and Restated Certificate of Incorporation of
Aristotle Sub, Inc., filed December 4, 1996 is filed
herewith as Exhibit 4.1.
27.1 Financial Data Schedule
15