Educational Development Corp. Reports Operating Results (10-Q)

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Jan 14, 2011
Educational Development Corp. (EDUC, Financial) filed Quarterly Report for the period ended 2010-11-30.

Educational Dev has a market cap of $26 million; its shares were traded at around $6.67 with a P/E ratio of 15.9 and P/S ratio of 0.9. The dividend yield of Educational Dev stocks is 9%. Educational Dev had an annual average earning growth of 4% over the past 10 years.

Highlight of Business Operations:

The Publishing Division s discounts and allowances are a much larger percentage of gross sales than discounts and allowances in the UBAM Division due to the different customer markets that each division targets. The Publishing Division s discounts and allowances were $2,978,900 and $2,924,000 for the quarterly periods ended November 30, 2010 and 2009, respectively. The Publishing Division sells to retail book chains, regional and local bookstores, toy and gift stores, school supply stores and museums. To be competitive with other wholesale book distributors, the Publishing Division sells at discounts between 48% and 55% of the retail price, based upon the quantity of books ordered and the dollar amount of the order. The Publishing Division s discounts and allowances were 51.4% of Publishing s gross sales for the quarterly period ended November 30, 2010 and 51.6% for the quarterly period ended November 30, 2009.

Cost of sales decreased 1.6% for the three months ended November 30, 2010 when compared with the three months ended November 30, 2009. Cost of sales as a percentage of gross sales was 26.3% and 26.4%, respectively, for each of the three month periods ended November 30, 2010 and November 30, 2009. Cost of sales is the inventory cost of the product sold, which includes the cost of the product itself and inbound freight charges. Purchasing and receiving costs, inspection costs, warehousing costs, and other costs of our distribution network are included in operating and selling expenses, not in cost of sales. These costs totaled $310,200 in the quarter ended November 30, 2010 and $306,000 in the quarter ended November 30, 2009.

Cost of sales decreased 1.5% for the nine months ended November 30, 2010 when compared with the nine months ended November 30, 2009. Cost of sales as a percentage of gross sales was 26.2% for the nine months ended November 30, 2010 and 2009. Cost of sales is the inventory cost of the product sold, which includes the cost of the product itself and inbound freight charges. Purchasing and receiving costs, inspection costs, warehousing costs, and other costs of our distribution network are included in operating and selling expenses, not in cost of sales. These costs totaled $881,000 in the nine months ended November 30, 2010 and $867,200 in the nine months ended November 30, 2009.

For the nine months ended November 30, 2010, we experienced a positive cash flow from operating activities of $3,982,100. Cash flow from operating activities resulted from a decrease in inventory of $1,819,300, an increase in current liabilities of $1,184,200, net income after taxes of $1,155,300 and a decrease in net taxes receivable/payable of $305,200, offset by a small increase in prepaid expenses of $39,100.

For the nine months ended November 30, 2010, cash used in financing activities was $1,406,200 from dividend payments of $1,398,100 and the purchase of $189,600 of treasury stock, offset by the sale of $177,100 of treasury stock.

Effective June 30, 2010 we signed a Twelfth Amendment to the Credit and Security Agreement with Arvest Bank which provided a reduced $2,500,000 line of credit through June 30, 2011. Interest is payable monthly at the greater of (a) prime-floating rate minus 0.75% or (b) 5.00%. At November 30, 2010, the rate in effect was 5.00%. Borrowings are collateralized by substantially all the assets of the Company. At November 30, 2010 the Company had no debt outstanding under this agreement. Available credit under the revolving credit agreement was $2,500,000 at November 30, 2010.

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