The Aristotle Corporation (NASDAQ: ARTL; ARTLP) announced today its
results of operations for the second quarter and six months ended
June 30, 2006. For the three months ended June 30, 2006, net sales
increased 6.6% to $53.5 million from $50.2 million in the second
quarter of 2005, and earnings before income taxes increased 14.6%
to $9.0 million from $7.8 million. For the six months ended June
30, 2006, net sales increased 8.4% to $99.6 million from $91.9
million for the six months ended June 30, 2005, and earnings before
income taxes increased 18.5% to $15.4 million from $13.0 million.
Net earnings applicable to common stockholders in the second
quarter of 2006 were $3.3 million, or $.19 per diluted common
share, versus $2.6 million, or $.15 per diluted common share, in
the second quarter of 2005. Net earnings applicable to common
stockholders for the six months of 2006 were $5.1 million, or $.29
per diluted common share, compared to $3.7 million, or $.21 per
diluted common share, for the comparable six months of 2005. The
reported net earnings are shown after deduction for Federal, state
and foreign income tax provisions. Approximately $2.6 million and
$2.2 million in deferred income tax expense in the 2006 and 2005
second quarters, respectively, relate to the non-cash charge for
utilization of Federal net operating tax loss carryforwards
("NOL's"). For the first six months of 2006 and 2005, respectively,
$4.5 million and $3.8 million of the reported deferred income tax
expense relate to current year NOL utilization. The NOL utilization
for the reported quarters and year-to-date periods substantially
eliminated Aristotle's current Federal income tax liability and
allowed Aristotle to retain for other business purposes the cash
that would have been used for tax payments. Except for Federal
alternative minimum tax obligations arising from limitations on the
utilization of the NOL's, Aristotle anticipates that the
utilization of available NOL's will offset its Federal taxable
income through 2006. At June 30, 2006, the Condensed Consolidated
Balance Sheet contains a net deferred tax asset of $9.8 million, of
which $5.4 million relates to the NOL's. Steven B. Lapin,
Aristotle's President and Chief Operating Officer, stated, "I am
pleased to report second quarter operating results which
demonstrate the Company's continued ability to enhance its earnings
at rates greater than its revenue. With 6.6% organic growth in
revenue for the quarter ended June 30, 2006, Aristotle has produced
EBITDA growth of 11.0%, facilitated by the comprehensive efforts at
each of its business units to control operating costs; selling and
administrative expenses increased less than 2% from the 2005 to the
2006 second quarters." Mr. Lapin added, "Through the first six
months of 2006, Aristotle has generated $.29 per diluted common
share, increasing nearly 40% compared to $.21 per diluted common
share earned in the same period of 2005. All of us at the Company
are focused on carrying this earnings momentum into the peak
shipping season now upon us in the third quarter." In commenting on
Aristotle's financial condition at June 30, 2006, Dean T. Johnson,
Aristotle's Chief Financial Officer, stated, "As the Company's
earning performance improved over the past 12 months, Aristotle's
balance sheet has gained strength as well. While short term cash
investments increased $7.8 million in the past 12 months, the
outstanding balance on Aristotle's primary line of credit has
declined $6.0 million to $18.5 million at June 30, 2006. The credit
facility continues to offer the Company as much as $26.5 million of
additional capital for working capital and acquisitions." Mr.
Johnson added, "We are pleased to report that the Company has begun
construction of the new 60,000 square foot facility on its existing
land in Fort Atkinson, WI to house Nasco's plastics operations.
Completion of the building is expected by the end of 2006 at a cash
cost of approximately $3.7 million." Mr. Lapin also stated, "The
Special Committee of Aristotle's Board of Directors, together with
its legal and financial advisors, is proceeding to evaluate the
proposal made by Geneve Corporation, the Company's majority
stockholder, to acquire the outstanding shares of Common Stock and
Series I Preferred Stock not already owned by Geneve on terms
previously reported. It is anticipated that further information as
to the status of that process will be available to stockholders
before month-end." In providing EBITDA information, Aristotle
offers a non-GAAP financial measure to complement its condensed
consolidated financial statements presented in accordance with
GAAP. This non-GAAP financial measure is intended to supplement the
reader's overall understanding of the Company's current financial
performance. However, this non-GAAP financial measure is not
intended to supercede or replace Aristotle's GAAP results. A
reconciliation of the non-GAAP results to the GAAP results is
provided in the "Reconciliation of GAAP Net Earnings to EBITDA"
schedule below. EBITDA is defined as earnings before income taxes,
interest expense, other income and expense, depreciation and
amortization. About Aristotle The Aristotle Corporation, founded in
1986, and headquartered in Stamford, CT, is a leading manufacturer
and global distributor of educational, health, medical technology
and agricultural products. A selection of over 80,000 items is
offered, primarily through more than 45 separate catalogs carrying
the brand of Nasco (founded in 1941), as well as those bearing the
brands of Life/Form(R), Whirl-Pak(R), Simulaids, Triarco, Spectrum
Educational Supplies, Hubbard Scientific, Scott Resources, Haan
Crafts, To-Sew, CPR Prompt(R), Ginsberg Scientific and Summit
Learning. Products include educational materials and supplies for
substantially all K-12 curricula, molded plastics, biological
materials, medical simulators, health care products and items for
the agricultural, senior care and food industries. Aristotle has
approximately 800 full-time employees at its operations in Fort
Atkinson, WI, Modesto, CA, Fort Collins, CO, Plymouth, MN,
Saugerties, NY, Chippewa Falls, WI, Otterbein, IN and Newmarket,
Ontario, Canada. There are approximately 17.3 million shares
outstanding of Aristotle common stock (NASDAQ: ARTL) and
approximately 1.1 million shares outstanding of 11%, cumulative,
convertible, voting, Series I preferred stock (NASDAQ: ARTLP);
there are also approximately 11.0 million privately-held shares
outstanding of 12%, cumulative, non-convertible, non-voting shares
of Series J preferred stock. Aristotle has about 4,000 stockholders
of record. Further information about Aristotle can be obtained on
its website, at www.aristotlecorp.net. Safe Harbor under the
Private Securities Litigation Reform Act of 1995 To the extent that
any of the statements contained in this release are
forward-looking, such statements are based on current expectations
that involve a number of uncertainties and risks that could cause
actual results to differ materially from those projected or
suggested in such forward-looking statements. Aristotle 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: (i)
the ability of Aristotle to obtain financing and additional capital
to fund its business strategy on acceptable terms, if at all; (ii)
the ability of Aristotle on a timely basis to find, prudently
negotiate and consummate additional acquisitions; (iii) the ability
of Aristotle to manage any to-be acquired businesses; (iv) there is
not an active trading market for the Company's securities and the
stock prices thereof are highly volatile, due in part to the
relatively small percentage of the Company's securities which is
not held by the Company's majority stockholder and members of the
Company's Board of Directors and management; (v) the ability of
Aristotle to retain and utilize its Federal net operating tax loss
carryforward position; (vi) there can be no assurance that the
transaction proposed by Geneve Corporation will be approved or
completed; and (vii) other factors identified in Item 1A, Risk
Factors, contained in the Company's Annual Report on Form 10-K for
the year ended December 31, 2005. As a result, Aristotle's future
development efforts involve a high degree of risk. For further
information, please see Aristotle's filings with the Securities and
Exchange Commission, including its Forms 10-K, 10-Q and 8-K. -0- *T
THE ARISTOTLE CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
----------------------------------------------- (In thousands,
except share and per share data)
----------------------------------------------- (Unaudited) Three
Months Ended Six Months Ended June 30, June 30,
------------------------ ----------------------- 2006 2005 2006
2005 ------------ ----------- ----------- ----------- Net sales $
53,481 50,185 99,645 91,933 Cost of sales 33,086 30,938 61,651
56,623 ------------ ----------- ----------- ----------- Gross
profit 20,395 19,247 37,994 35,310 Selling and administrative
expense 11,359 11,155 22,441 21,788 ----------- -----------
----------- ----------- Earnings from operations 9,036 8,092 15,553
13,522 Other (expense) income: Interest expense (501) (362) (948)
(653) Interest income 1 12 2 12 Other, net 424 73 828 143
------------ ----------- ----------- ----------- (76) (277) (118)
(498) ------------ ----------- ----------- ----------- Earnings
before income taxes 8,960 7,815 15,435 13,024 Income tax expense:
Current 1,033 757 1,755 1,222 Deferred 2,427 2,263 4,219 3,819
------------ ----------- ----------- ----------- 3,460 3,020 5,974
5,041 ------------ ----------- ----------- ----------- Net earnings
5,500 4,795 9,461 7,983 Preferred dividends 2,159 2,158 4,318 4,316
------------ ----------- ----------- ----------- Net earnings
applicable to common stockholders $ 3,341 2,637 5,143 3,667
============ =========== =========== =========== Earnings per
common share: Basic $ .19 .15 .30 .21 Diluted $ .19 .15 .29 .21
Weighted average common shares outstanding: Basic 17,266,513
17,154,032 17,257,955 17,149,538 Diluted 17,516,190 17,394,146
17,503,199 17,399,309 RECONCILIATION OF GAAP NET EARNINGS TO EBITDA
(in thousands) (unaudited) Three Months Ended Six Months Ended June
30, June 30, ------------------- ----------------- 2006 2005 2006
2005 ----------- ------- --------- ------- Net earnings $ 5,500
4,795 9,461 7,983 Add: Income tax expense 3,460 3,020 5,974 5,041
Interest expense 501 362 948 653 Other (income) expense (425) (85)
(830) (155) Depreciation and amortization 460 461 895 890
----------- ------- --------- ------- EBITDA $ 9,496 8,553 16,448
14,412 =========== ======= ========= ======= THE ARISTOTLE
CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands) June 30, December 31, June 30, 2006 2005 2005
------------ ------------ ----------- (unaudited) (unaudited)
Assets Current assets: Cash and cash equivalents 3,671 1,803 2,169
Investments $ 13,669 12,856 5,919 Accounts receivable, net 20,898
14,530 19,857 Inventories, net 42,108 35,579 39,281 Prepaid
expenses and other 4,896 8,026 4,231 Deferred income taxes 7,088
11,279 9,825 ------------ ------------ ----------- Total current
assets 92,330 84,073 81,282 Property, plant and equipment, net
23,215 22,361 18,343 Goodwill 14,033 13,799 13,634 Deferred income
taxes 2,712 2,712 6,793 Other assets 351 408 439 ------------
------------ ----------- Total assets $ 132,641 123,353 120,491
============ ============ =========== Liabilities and Stockholders'
Equity Current liabilities: Current installments of long- term debt
$ 599 606 115 Trade accounts payable 12,362 9,013 11,015 Accrued
expenses 7,004 6,779 5,860 Accrued dividends payable 2,159 2,159
2,158 ------------ ------------ ----------- Total current
liabilities 22,124 18,557 19,148 Long-term debt, less current
installments 24,322 24,350 26,855 Stockholders' equity: Preferred
stock, Series I 6,601 6,601 6,580 Preferred stock, Series J 65,760
65,760 65,760 Common stock 173 172 172 Additional paid-in capital
3,299 3,119 2,655 Retained earnings (accumulated deficit) 10,034
4,891 (664) Accumulated other comprehensive earnings (loss) 328
(97) (15) ------------ ------------ ----------- Total stockholders'
equity 86,195 80,446 74,488 ------------ ------------ -----------
Total liabilities and stockholders' equity $ 132,641 123,353
120,491 ============ ============ =========== *T
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