Educational Development Corporation Announces Second Quarter Financial Results for Quarter Ended August 31, 2016
October 14 2016 - 7:45PM
Educational Development Corporation (“EDC”) (NASDAQ:EDUC)
(http://www.edcpub.com) today reported historic record net revenues
for the second quarter ended August 31st, 2016 (unaudited).
Randall White, CEO of Educational Development
Corporation, announced that the Company achieved record net
revenues of $25.9 million for the quarter ended August 31st, 2016,
compared to $12.6 million for the same quarter last year.
The sales increase was primarily generated by the
home business division, Usborne Books & More (UBAM) with an
increase of 163% over the same quarter last year. UBAM continues to
attract new sales associates, which now total just under 26,000,
compared to 10,000 at the end of August 2015. This division
has now posted 39 consecutive months of net revenue gains over the
same month the previous year.
On February 15, 2016, the Company moved to its new
facility which is a 40-acre property with a 401,000 sq. ft. office
and warehouse building complex. The former owners have leased
back 181,000 sq. ft. of office space on a 15-year lease, which
substantially covers the term loan payments related to the new
facility. The acquisition expands the Company-used office and
warehouse spaces from 103,000 sq. ft. to 323,000 sq. ft.
During this same period, the Company installed over
$4.2 million in software and distribution systems, with more
technology and equipment to be in place in the ensuing
months. This technology and equipment includes a new
warehouse management system to improve controls over inventory
movement and a state-of-the-art order fulfillment system for
greater efficiency. Also included is a new operating system for
UBAM featuring a replicated e-commerce website for each sales
Consultant, as well as back office functionality for both
Consultants and corporate. The Company has also installed a
software package for financial and accounting functions. These new
software packages significantly upgrade software that had been
operating in excess of 25 years and became obsolete due to the
extraordinary growth.
"There are a number of challenges we have faced as
we adjusted to our rapid growth, while simultaneously preparing to
meet sustained high demand in the months ahead," said White.
"With our new facility and additional equipment, we have now
tripled the number of daily shipments we can process, compared to
our previous facility. Long-term cost savings are expected as the
new technology and equipment we have implemented will reduce our
cost of labor."
Additional cost savings are also being seen as the
dramatic increase in sales volumes of a number of the Company's
best-selling series have provided a higher margin due to the
related volume-pricing breaks from its suppliers.
Newly-negotiated extended terms from its suppliers also positively
impact the Company's ability to build up inventory on hand in
anticipation for the fall selling season. The Company's
inventory levels were $29.6 million on August 31, 2016, compared to
$13.7 million on August 31, 2015. While a minimal amount of the
cost savings have been realized, the majority will be recognized in
future periods. The Company has negotiated a new contract to
provide ocean transport of inventory with expected cost savings
near $1.5 million annually. The Company just recently completed a
review of the entire warehouse-fulfillment operation by a world
renowned logistics company to evaluate management, metrics and
measurement. Significant cost savings and efficiencies were
recommended, some of which have been implemented with the balance
forecasted to be in place during the remainder of the
year.
The Company has experienced explosive growth during
the past 18 months which resulted in expansion of facilities and
replacement of operating systems and procedures. In spite of our
best efforts, the inordinate demand for our products resulted in a
reduction in our service level to our Sales Consultants and their
customers as well as our retail distribution outlets. To restore
our normal level of service, the Company utilized all available
avenues to secure a workforce to process our order commitments.
This resulted in inefficiencies including overtime pay, but
resulted in reducing the order fulfillment time from 4-6 weeks to
7-10 days and is improving daily. In another effort to reduce
costs, the Company implemented a warehouse work schedule
Monday-Thursday 10-hour shifts and Friday-Sunday 12-hour shifts,
which eliminated overtime and increased capacity by 69%.
It has been a hectic six months, but also very
exciting to experience this phenomenal growth in sales of our
products. While the results for this quarter are disappointing, the
Company expects to post significant improvement in the upcoming
quarters with the cost savings that are currently in place and
others that affect future quarters. Also, the sales growth
continued as the Company posted net revenue in September of $10.2
million, the largest monthly net revenue in our history which
compares to $6.1 million last September.
The Company recorded net revenues in Fiscal Year
2015 of $32.5 million, and $63.6 million in Fiscal Year 2016.
The Company is on pace to record net revenues of $120-140 million
for Fiscal Year ending February 28, 2017. The Company has
previously reported expected earnings per share in the range of
$1.00-1.10 per share, and with the improved supplier terms and
efficiency, this remains the Company's expectation.
This information may contain forward looking
statements.
EDUCATIONAL DEVELOPMENT CORPORATION |
CONDENSED STATEMENTS OF EARNINGS |
|
Three Months Ended August 31, |
Six Months Ended August 31, |
|
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
|
|
|
|
|
NET
REVENUES |
$ |
25,893,000 |
|
$ |
12,606,800 |
|
$ |
48,677,200 |
|
$ |
22,244,600 |
|
EARNINGS
BEFORE INCOME TAXES |
|
520,700 |
|
|
1,039,000 |
|
|
1,525,300 |
|
|
1,570,700 |
|
INCOME
TAXES |
|
202,200 |
|
|
394,600 |
|
|
586,600 |
|
|
601,700 |
|
NET
EARNINGS |
$ |
318,500 |
|
$ |
644,400 |
|
$ |
938,700 |
|
$ |
969,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC AND
DILUTED EARNINGS |
|
|
|
|
PER SHARE: |
|
|
|
|
Basic |
$ |
0.08 |
|
$ |
0.16 |
|
$ |
0.23 |
|
$ |
0.24 |
|
Diluted |
$ |
0.08 |
|
$ |
0.16 |
|
$ |
0.23 |
|
$ |
0.24 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED
AVERAGE NUMBER OF |
|
|
|
|
COMMON AND EQUIVALENT
SHARES |
|
|
|
|
OUTSTANDING: |
|
|
|
|
Basic |
|
4,074,469 |
|
|
4,045,219 |
|
|
4,071,574 |
|
|
4,039,055 |
|
Diluted |
|
4,080,039 |
|
|
4,045,219 |
|
|
4,077,318 |
|
|
4,039,055 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
About Educational Development
CorporationEDC is a publishing company specializing in
books for children. EDC is the sole American distributor of the
UK-based Usborne Books and owns Kane Miller Books, specializing in
children’s literature from around the world. EDC’s current catalog
contains over 1,800 titles, with new additions semi-annually. Both
Usborne and Kane Miller products are sold via 5,000 retail outlets
and by just under 26,000 direct sales consultants nationally.
Contact:
Educational Development Corporation
Randall White, (918) 622-4522
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