For Immediate Release News Release



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 9, 2007



THE ARISTOTLE CORPORATION

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)



DELAWARE

0-14669

06-1165854

(STATE OR OTHER JURISDICTION

(COMMISSION FILE

(I.R.S. EMPLOYER

OF INCORPORATION)

NUMBER)

IDENTIFICATION NO.)



96 CUMMINGS POINT ROAD, STAMFORD, CONNECTICUT

 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)



06902

(ZIP CODE)



(203) 358-8000

(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 under the Exchange Act (17 CFR 240.14a-12)


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))












Page 1 of 2 Pages







Page 2 of 2 Pages


Item 2.02 Results of Operations and Financial Condition.


On August 9, 2007, The Aristotle Corporation issued a press release announcing financial results for the quarter ended June 30, 2007, a copy of which is attached as Exhibit 99.1.


Item 9.01 Financial Statements and Exhibits


(d)

Exhibits


Exhibit 99.1 - Press release of The Aristotle Corporation, dated August 9, 2007.



The information in this Form 8-K and the Exhibit attached hereto shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, unless expressly set forth by specific reference in such filing.




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 ARISTOTLE CORPORATION

 

(Registrant)

 

By:  /s/  H. William Smith

 

Name:  H. William Smith

Title:    Vice President, General Counsel

 

and Secretary

  


Date: August 9, 2007





EXHIBITS


Exhibit 99.1 Press release issued August 9, 2007.





Exhibit 99.1

For Immediate Release

News Release

Contacts:

Bill Smith or Dean Johnson

The Aristotle Corporation

Phone: (203) 358-8000 or (920) 563-2446

Fax: (203) 358-0179 or (920) 563-0234

wsmith@ihc-geneve.com

int@enasco.com


The Aristotle Corporation Announces

2007 Second Quarter and Six Month Results


Stamford, CT, August 9, 2007 - The Aristotle Corporation (NASDAQ: ARTL; ARTLP) announced today its results of operations for the second quarter and six months ended June 30, 2007.


For the second quarter ended June 30, 2007, net sales increased 5.1% to $56.2 million from $53.5 million in the second quarter of 2006, and earnings before income taxes increased 8.3% to $9.7 million from $9.0 million.  For the six months ended June 30, 2007, net sales increased 4.8% to $104.4 million from $99.6 million for the six months ended June 30, 2006, and earnings before income taxes increased 10.6% to $17.1 million from $15.4 million.


Net earnings applicable to common stockholders in the second quarter of 2007 were $3.9 million, or $.23 per diluted common share, versus $3.3 million, or $.19 per diluted common share, in the second quarter of 2006. Net earnings applicable to common stockholders for the first six months of 2007 were $6.3 million, or $.36 per diluted common share, compared to $5.1 million, or $.29 per diluted common share, for the comparable six months of 2006.


The reported net earnings are shown after deduction for Federal, state and foreign income tax provisions.  Approximately $2.6 million in deferred income tax expense in the 2006 second quarter relates to the non-cash charge for utilization of Federal net operating tax loss carryforwards (“NOLs”).  For the first six months of 2007 and 2006, respectively, $1.3 million and $4.5 million of the reported deferred income tax expense relate to NOL utilization.  The utilization of NOLs for the reported quarters and year to date periods reduced Aristotle’s current Federal tax liability.  In the first quarter of 2007, the remaining balance of NOLs available as of December 31, 2006, approximately $3.6 million, was utilized from income generated by the Company.


Steven B. Lapin, Aristotle’s President and Chief Operating Officer, stated, “In presenting these results for the second quarter of 2007, I am particularly pleased to report that earnings per share for the quarter, on a fully diluted basis, have increased more than 20% compared to the second quarter of 2006, primarily as a result of organic revenue growth of 5.1% and strengthening of gross profit margins through cost control and promotion of proprietary products.  EBITDA growth for the second quarter was 6.7% compared to the second quarter of 2006, reaching $10.1 million for the quarter ended June 30, 2007.”


Mr. Lapin noted, “The number of proprietary items in the Company’s catalogs, including those geared to the K-12 and health care training markets, continues to increase.  The unique features of these products demonstrate Aristotle’s acknowledged ability to create custom designs to meet evolving needs.  A principal focus of the Company’s business strategy is the continued enhancement of its proprietary lines so as to provide highly competitive offerings carrying stronger gross margins.”                                                    


 Dean T. Johnson, Aristotle’s Chief Financial Officer, added, “Working capital increased $6.4 million to $77.9 million at June 30, 2007, compared to $71.5 million at June 30, 2006.  Within working capital, inventory increased $3.5 million to $45.6 compared to last year.  The Company has enhanced its inventory at June 30, 2007 in preparation of the peak shipping months for the K-12 school market, and to strengthen stock levels related to the health care training market to meet expected domestic and international demand for the remainder of 2007.”  


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®, Whirl-Pak®, Simulaids, Triarco, Spectrum Educational Supplies, Hubbard Scientific, Scott Resources, Haan Crafts, To-Sew, CPR Prompt®, 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 850 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 17.9 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 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 its Federal net operating tax loss carryforward position and other deferred tax positions; and (vi) 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, 2006.  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-K/A, 10-Q and 8-K.                                         





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,

 

 

2007

 

2006

 

2007

 

2006

 

 

 

 

 

 

 

 

 

Net sales

$

56,202

 

53,481

 

104,426

 

99,645

Cost of sales

 

34,631

 

33,086

 

63,892

 

61,651

 

Gross profit

 

21,571

 

20,395

 

40,534

 

37,994

 

 

 

 

 

 

 

 

 

Selling and administrative expense

 

11,917

 

11,359

 

23,544

 

22,441

 

Earnings from operations

 

9,654

 

9,036

 

16,990

 

15,553

 

 

 

 

 

 

 

 

 

Other (expense) income:

 

 

 

 

 

 

 

 

 

Interest expense

 

(363)

 

(501)

 

(689)

 

(948)

 

Other, net

 

412

 

425

 

763

 

830

 

 

49

 

(76)

 

74

 

(118)

 

Earnings before income taxes

 

9,703

 

8,960

 

17,064

 

15,435

 

 

 

 

 

 

 

 

 

Income tax expense:

 

 

 

 

 

 

 

 

 

Current

 

2,383

 

1,033

 

3,906

 

1,755

 

Deferred

 

1,220

 

2,427

 

2,539

 

4,219

 

 

 

3,603

 

3,460

 

6,445

 

5,974

 

 

 

 

Net earnings

 

6,100

 

5,500

 

10,619

 

9,461

 

 

 

 

 

 

 

 

 

Preferred dividends

 

2,157

 

2,159

 

4,316

 

4,318

 

Net earnings applicable to common stockholders

$

3,943

 

3,341

 

6,303

 

5,143

 

 

 

 

 

 

 

 

 

Earnings per common share:

 

 

 

 

 

 

 

 

 

Basic

$

.23

 

.19

 

.36

 

.30

 

Diluted

$

.23

 

.19

 

.36

 

.29

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

17,454,704

 

17,266,513

 

17,361,153

 

17,257,955

 

Diluted

 

17,487,936

 

17,516,190

 

17,392,101

 

17,503,199






RECONCILIATION OF GAAP NET EARNINGS TO EBITDA

(in thousands)

(unaudited)


 

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

 

June 30,

 

June 30,

 

 

 

 

2007

 

2006

 

2007

 

2006

 

 

 

 

 

 

 

 

 

 

Net earnings

$

6,100

 

5,500

 

10,619

 

9,461

 

Add:

 

 

 

 

 

 

 

 

 

 

Income tax expense

 

3,603

 

3,460

 

6,445

 

5,974

 

 

Interest expense

 

363

 

501

 

689

 

948

 

 

Other (income) expense

 

(412)

 

(425)

 

(763)

 

(830)

 

 

Depreciation and amortization

 

480

 

460

 

921

 

895

 

EBITDA

$

10,134

 

9,496

 

17,911

 

16,448










THE ARISTOTLE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 (in thousands)




Assets

 

June 30,

 2007

 

December 31, 2006

 

June 30,    2006

 

 

 

(unaudited)

 

 

 

(unaudited)

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

Marketable securities

$

7,423

1,910

 

5,814

-

 

3,671

-

 

 

Investments

 

15,423

 

14,586

 

13,669

 

 

Accounts receivable, net

 

21,934

 

15,458

 

20,898

 

 

Inventories, net

 

45,618

 

37,487

 

42,108

 

 

Prepaid expenses and other

 

5,080

 

8,123

 

4,896

 

 

Deferred income taxes

 

2,680

 

4,051

 

7,088

 

 

Total current assets

 

100,068

 

85,519

 

92,330

 

 

 

 

 

 

 

 

 

Property, plant and equipment, net

 

26,839

 

25,426

 

23,215

 

 

 

 

 

 

 

 

 

Goodwill

 

14,185

 

13,860

 

14,033

 

Deferred income taxes

 

8,188

 

8,188

 

2,712

 

Other assets

 

332

 

328

 

351

 

 

Total assets

$

149,612

 

133,321

 

132,641

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Current installments of long-term debt

$

294

 

287

 

599

 

 

Trade accounts payable

 

12,040

 

9,440

 

12,362

 

 

Accrued expenses

 

6,743

 

6,729

 

5,312

 

 

Income Taxes

 

922

 

1,478

 

386

 

 

Accrued dividends payable

 

2,157

 

2,159

 

2,159

 

 

Total current liabilities

 

22,156

 

20,093

 

20,818

 

 

 

 

 

 

 

 

 

Long term debt, less current installments

 

15,317

 

11,985

 

24,322

 

Long term pension obligations

 

4,303

 

4,469

 

1,306

 

Other long term accruals

 

2,410

 

2,383

 

-

 

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

Preferred stock, Series I

 

6,549

 

6,601

 

6,601

 

 

Preferred stock, Series J

 

65,760

 

65,760

 

65,760

 

 

Common stock

 

179

 

172

 

173

 

 

Additional paid-in capital

 

6,606

 

3,106

 

3,299

 

 

Retained earnings

 

26,360

 

20,057

 

10,034

 

 

Accumulated other comprehensive earnings (loss)

 

(28)

 

(1,305)

 

328

 

 

Total stockholders' equity

 

105,426

 

94,391

 

86,195

 

 

Total liabilities and stockholders' equity

$

149,612

 

133,321

 

132,641