<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter ended May 31, 1995.
[ ] TRANSITION REPORT UNDER 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: 0-4957
EDUCATIONAL DEVELOPMENT CORPORATION
(Exact name of small business issuer 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 #B, Tulsa Oklahoma 74146-6515
(Address of principal executive offices)
Issuer's telephone number: (918) 622-4522
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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
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As of May 31, 1995 there were 2,258,247 shares of Educational Development
Corporation Common Stock, $0.20 par value outstanding.
<PAGE>
EDUCATIONAL DEVELOPMENT CORPORATION
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PART I. FINANCIAL INFORMATION
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ITEM 1
BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
May 31, 1995 February 28, 1995
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<S> <C> <C>
ASSETS
Cash and Cash Equivalents $ 142,000 $ 328,900
Accounts Receivable - (less
allowances for doubtful accounts
and returns: 5/31/95 - $218,000
2/28/95 - $206,000) 2,527,600 1,743,900
Inventories (Note 3) 6,771,500 6,588,800
Deferred Income Taxes (Note 1) 247,000 257,000
Prepaid Expenses 132,100 169,300
----------- ----------
Total Current Assets 9,820,200 9,087,900
Property, plant and equipment
at cost (less accumulated
depreciation: 05/31/95 - $365,300
2/28/95 - $347,500) 495,000 364,200
Inventories (Note 3) 80,900 80,900
Other Assets (Note 4) 83,800 132,400
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Total Assets $10,479,900 $9,665,400
=========== ==========
</TABLE>
2
<PAGE>
EDUCATIONAL DEVELOPMENT CORPORATION
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BALANCE SHEETS (UNAUDITED and continued)
<TABLE>
<CAPTION>
May 31, 1995 February 28, 1995
-------------- ------------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term
obligations (Note 2) $ 403,400 $ 7,700
Accounts payable 1,790,900 3,004,300
Accrued salaries, bonuses and
commissions 151,400 171,700
Accrued test scoring 17,400 18,200
Income taxes 252,100 67,700
Other current liabilities 161,400 123,200
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Total Current Liabilities 2,776,600 3,392,800
LONG-TERM OBLIGATIONS 2,000,000 1,000,000
SHAREHOLDERS' EQUITY
(Notes 5 and 6):
Common Stock, par value of
$0.20 per share (authorized
3,000,000 shares; issued
2,344,120 shares) 468,800 468,800
Capital in excess of par value 4,569,100 4,569,100
Retained earnings 740,400 309,700
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5,778,300 5,347,600
LESS TREASURY SHARES AT COST
(85,873 shares) (75,000) (75,000)
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TOTAL SHAREHOLDERS' EQUITY 5,703,300 5,272,600
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TOTAL LIABILITIES & SHAREHOLDERS'
EQUITY $10,479,900 $9,665,400
=========== ==========
</TABLE>
3
<PAGE>
EDUCATIONAL DEVELOPMENT CORPORATION
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STATEMENTS OF EARNINGS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended May 31
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1995 1994
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<S> <C> <C>
Gross Sales $ 6,377,600 $ 4,528,500
Less Discounts & Allowances (2,374,000) (1,828,100)
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Net Sales 4,003,600 2,700,400
Cost of Sales 1,689,800 1,240,500
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Gross Margin 2,313,800 1,459,900
Operating & Selling Exp. 672,200 481,800
Sales Commissions 675,000 325,600
General & Admin. Exp. 190,000 152,000
Interest Expense 46,600 3,700
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Operating Income 730,000 496,800
Other Income (Net) 100 200
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Earnings Before Provision for
Income Taxes $ 730,100 $ 497,000
Provision for Income Taxes (Note 1) (299,400) (185,400)
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Net Earnings 430,700 311,600
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EARNINGS PER COMMON AND
COMMON EQUIVALENT SHARE
Primary and Fully Diluted $ .16 $ .12
=========== ===========
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING:
Primary and fully diluted 2,654,171 2,567,972
=========== ===========
</TABLE>
4
<PAGE>
EDUCATIONAL DEVELOPMENT CORPORATION
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STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)
<TABLE>
<CAPTION>
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
------------- ----------- ---------- --------- ------ ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, MARCH 1, 1995 2,344,120 $468,800 $4,569,100 $309,700 85,873 $( 75,000) $5,272,600
Net earnings --- --- --- 430,700 --- --- 430,700
------------- ----------- ---------- -------- ------ --------- ----------
BALANCE, MAY 31, 1995 2,344,120 $468,800 $4,569,100 $740,400 85,873 $( 75,000) $5,703,300
============= =========== ========== ======== ====== ========= ==========
</TABLE>
5
<PAGE>
EDUCATIONAL DEVELOPMENT CORPORATION
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STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended May 31
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1995 1994
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 430,700 $ 311,600
Adjustments to reconcile net
earnings to net cash provided
by (used in) operating activities:
Depreciation and amortization 17,800 20,000
Deferred income taxes 10,000 (1,800)
Provision for doubtful accounts
and sales returns 298,400 195,200
Changes in assets and liabilities:
Accounts receivable (1,082,100) (354,100)
Inventories (182,700) 10,900
Prepaid expenses 37,200 35,700
Other assets 48,600 10,400
Accounts payable and accrued expenses (1,196,300) (106,200)
Income taxes payable 184,400 71,400
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Total adjustments (1,864,700) (118,500)
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Net cash provided by (used in)
operating activities (1,434,000) 193,100
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (148,600) (17,600)
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Net cash used in investing activities (148,600) (17,600)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under revolving credit
agreement 2,700,000 550,000
Payments under revolving credit
agreement (1,300,000) (550,000)
Principal payments on capital lease
obligations (4,300) (9,700)
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Net cash (used in) provided by
financing activities 1,395,700 (9,700)
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Net Increase (Decrease) in Cash and Cash
Equivalents (186,900) 165,800
Cash and Cash Equivalents, Beginning of
Period 328,900 78,600
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Cash and Cash Equivalents, End of Period $ 142,000 $ 244,400
============ ==========
Supplemental Disclosure of Cash Flow
Information:
Cash paid for interest $ 29,300 $ 3,900
============ ==========
Cash paid for income taxes $ 105,000 $ 110,000
============ ==========
</TABLE>
6
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EDUCATIONAL DEVELOPMENT CORPORATION
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NOTES TO FINANCIAL STATEMENTS
Note 1 - Deferred income taxes reflect the net tax effects of temporary
- ------
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes, and operating
loss and tax credit carryforwards. The tax effects of significant items
comprising the Company's net tax deferred asset as of May 31, 1995 and March 1,
1995 are as follows:
<TABLE>
<CAPTION>
May 31, 1995 March 1, 1995
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<S> <C> <C>
Deferred tax assets:
Expenses deducted on the cash
basis for income tax purposes $ 6,800 $ 25,000
Allowance for doubtful accounts
and sales returns 85,000 80,000
Inventories 117,400 118,000
Amortization of assets not currently
deductible 51,400 48,000
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260,600 271,000
Deferred tax liability -
Property and equipment 13,600 14,000
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Net deferred tax asset $247,000 $257,000
======== ========
</TABLE>
Management has determined that no valuation allowance is necessary to reduce the
value of deferred tax assets as it is more likely than not that such assets are
realizable.
The components of income tax expense are as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
May 31, 1995 May 31, 1994
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<S> <C> <C>
Income tax expense:
Current $289,400 $187,200
Deferred 10,000 (1,800)
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$299,400 $185,400
======== ========
</TABLE>
7
<PAGE>
EDUCATIONAL DEVELOPMENT CORPORATION
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Note 2 - Effective June 30, 1994 the Company signed a Fourth Amendment to Credit
- ------
and Security Agreement with State Bank which provides a $1,300,000 line of
credit. The line of credit is evidenced by a promissory note in the amount of
$1,300,000 payable June 30, 1995. The note bears interest at prime plus 1-1/2%,
payable monthly. The note is collateralized by substantially all of the assets
of the Company. During the first quarter of fiscal year 1996 this revolving
credit agreement was amended, increasing the line to $3,000,000. $1,000,000 of
the amended revolving credit agreement expires October 25, 1995 and the
remaining $2,000,000 expires June 30, 1996. The Company utilizes this line of
credit primarily to fund routine operations. Payments are made from current cash
flows. At May 31, 1995 the Company had available $600,000 under this credit
agreement.
Note 3 - Inventories consist of the following:
- ------
<TABLE>
<CAPTION>
05/31/95 02/28/95
---------- ----------
<S> <C> <C>
Publishing Inventory $6,800,700 $6,616,800
School Inventory 352,800 354,000
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7,153,500 6,970,800
Reserve for Obsolescence (301,100) (301,100)
---------- ----------
6,852,400 6,669,700
Less Noncurrent School Inventory (80,900) (80,900)
---------- ----------
$6,771,500 $6,588,800
========== ==========
</TABLE>
Note 4 - Other assets consist of the following:
- -------------------------------------------------
Prepublication Costs $ 40,900 $ 49,900
Advances to Employees 1,600 40,900
Other 41,300 41,600
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$ 83,800 $ 132,400
========== ==========
Note 5 - The results of operations for the three months ended May 31, 1995 and
- ------
1994 are not necessarily indicative of the results to be expected at year end
due to seasonality of the product sales.
Note 6 - The information shown with respect to the three months ended May 31,
- ------
1995 and 1994, 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. Reclassifications were made to 1994 balances to conform with
1995 presentation.
Note 7 - These statements should be read in conjunction with the Notes to
- ------
Financial Statements contained in the Company's Annual Report to Shareholders
for the Fiscal Year ended February 28, 1995, which are incorporated herein by
reference, and with Management's Discussion and Analysis or Plan of Operations
appearing on page 9 of this report.
8
<PAGE>
EDUCATIONAL DEVELOPMENT CORPORATION
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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS FOR THE
- ----------------------------------------------------------------------------
THREE MONTHS ENDED MAY 31, 1995
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FINANCIAL CONDITION
- -------------------
The financial condition of the Company continues to strengthen. Working capital
increased 24% at May 31, 1995 over year-end February 28, 1995. An increase in
the level of receivables, offset by a decrease in payables, was the principal
contributor to the increase in working capital. Net sales increased 48% for the
three months ended May 31, 1995 over the three months ended May 31,1994.
Management continues to focus on increasing market share in its Library Service
and Publishing Division and to increase revenue from the Home Business Division
through increasing its sales consultants network. Management's analysis
indicates that the increased exposure of its products through the Home Business
Division contributes to increased sales in the Publishing Division. Because the
Company has a relatively small share of the children's book market, Management
believes there is potential to continue to increase market share in the
Publishing and Library Service Division in the future. Additionally, based upon
the feedback Management receives from Home Business Division sales consultants,
the products being offered through this Division are well received by the public
and becoming more widely known and accepted. Accordingly, Management expects
this Division to continue to experience growth.
RESULTS OF OPERATIONS
- ---------------------
Revenues - Net sales from the Publishing Division were $2,036,100 for the three
- --------
months ended May 31, 1995, an increase of 27% over net sales of $1,601,800 for
the three months ended May 31, 1994. This increase can be attributed to
increased volume as the Division continued to increase it's market penetration.
Management expects sales to continue to increase in the Publishing Division.
Net sales from the School Division increased 6% to $18,500 for the three months
ended May 31, 1995 compared to $17,400 for the same three month period last
year. With reductions in funding available to schools, cutbacks in spending
occur. Often supplementary materials, which are the Division's primary
products, are the first to be cut. Management believes its product line to be
competitive in the school market, but the uncertainty of funding to schools is
of concern. Management is evaluating its long-term options in the School
Division.
Net sales from the Home Business Division were $1,645,800 for the three months
ended May 31, 1995, an increase of 121% over the net sales of $743,800 for the
three months ended May 31, 1994. This increase in net sales is the result of an
increase in the number of active consultants, which can be attributed to new
incentive programs which motivate and assist consultants in sales and
recruiting. This Division offers the entire Usborne line of approximately 800
titles. Management believes this Division has excellent potential for continued
growth.
Net sales from the Library Services Division were $303,200 for the three months
ended May 31, 1995, compared to $337,400 for the same three month period a year
ago, an decrease of 10%. Management is optimistic that this Division has
excellent potential and that it expects sales to improve.
9
<PAGE>
EDUCATIONAL DEVELOPMENT CORPORATION
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Operating Expenses - The Company's cost of sales increased to $1,689,800 for the
- ------------------
three months ended May 31, 1995 compared with $1,240,500 for the same period
last year, an increase of 36%. Cost of sales as a percentage of gross sales was
26.5% for the three months ended May 31, 1995 compared with 27% for the same
period a year ago.
Operating and selling expenses were $672,200 for the three months ended May 31,
1995 compared to $481,800 for the same period last year, an increases of 39%.
Operating and selling expenses as a percentage of gross sales were 10% for the
three months ended May 31, 1995 compared to 11% for the same period a year ago.
Sales commissions were $675,000 for the three months ended May 31, 1995 compared
to $325,600 for the same period last year, an increase of 107%. Sales
commissions as a percentage of gross sales were 11% for the three months ended
May 31, 1995 compared to 7% for the same period last year. Sales commissions as
a percentage of gross sales is determined by the product mix being sold, as the
commission rates vary with the product being sold.
General and administrative expenses increased to $190,000 for three months ended
May 31, 1995 compared to $152,000 for the same period last year, an increase of
25%. General and administrative expenses as a percentage of gross sales were 3%
for the three months ended May 31, 1995 and 3% for the same period last year.
Interest expense was $46,600 for the three months ended May 31, 1995 compared to
$3,700 for the same period a year ago. This increase was attributable to
increased borrowing levels throughout the current period when compared with the
same period a year ago. The increased borrowing levels occurred as the Company
paid its principal supplier for inventory acquired in an earlier period.
The Company's other income decreased to $100 for the three months ended May 31,
1995 compared with $200 for the same period last year.
10
<PAGE>
EDUCATIONAL DEVELOPMENT CORPORATION
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PART II OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
A. The following exhibits are filed as part of this Quarterly Report on
Form 10-QSB:
27 - Financial Data Schedule
B. Reports on Form 8-K
1. There were no reports filed on Form 8-K during the three
months covered by this report.
11
<PAGE>
EDUCATIONAL DEVELOPMENT CORPORATION
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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: July 14, 1995
--------------------
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
10QSB AND THE 10KSB and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 12-MOS
<FISCAL-YEAR-END> FEB-28-1995 FEB-28-1995
<PERIOD-START> MAR-01-1995 MAR-01-1994
<PERIOD-END> MAY-31-1995 FEB-28-1995
<CASH> 142,000 328,925
<SECURITIES> 0 0
<RECEIVABLES> 2,745,600 1,949,894
<ALLOWANCES> 218,000 206,000
<INVENTORY> 6,771,500 6,588,744
<CURRENT-ASSETS> 9,820,200 9,087,866
<PP&E> 860,300 711,701
<DEPRECIATION> 365,300 347,489
<TOTAL-ASSETS> 10,479,900 9,665,378
<CURRENT-LIABILITIES> 2,776,600 3,392,774
<BONDS> 0 0
<COMMON> 468,800 468,824
0 0
0 0
<OTHER-SE> 5,234,500 4,803,780
<TOTAL-LIABILITY-AND-EQUITY> 10,479,900 9,665,378
<SALES> 4,003,600 12,479,907
<TOTAL-REVENUES> 4,003,600 12,479,907
<CGS> 1,689,800 5,629,254
<TOTAL-COSTS> 3,037,000 9,873,818
<OTHER-EXPENSES> 174,900 706,351
<LOSS-PROVISION> 15,000 58,000
<INTEREST-EXPENSE> 46,600 9,952
<INCOME-PRETAX> 730,100 1,831,786
<INCOME-TAX> 299,400 660,000
<INCOME-CONTINUING> 430,700 1,171,786
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 430,700 1,171,786
<EPS-PRIMARY> .16 .45
<EPS-DILUTED> .16 .45
</TABLE>
