Part I
FORWARD STATEMENTS
This report contains statements that are forward-looking. You should read the following discussion in connection with our financial statements, including the notes to those statements, included in this document. These forward-looking statements are not historical facts but are expectations or projections based on certain assumptions and analyses made by our senior management in light of their experience and perception of historical trends, current conditions, expected future developments and other factors. Actual events and results may be materially different from anticipated results described in such statements. As used in this Annual Report on Form 10-K, the terms “EDC,” “we,” “our” or “us” mean Educational Development Corporation, a Delaware corporation, unless the context indicates otherwise.
Our ability to achieve such results is subject to certain risks and uncertainties which are not currently known to us. We caution you not to place undue reliance on these forward-looking statements, which speak only as of the date that they are made. We do not undertake any obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date of this report.
1. BUSINESS
(a) General Development of Business
Educational Development Corporation (“EDC”) is the exclusive United States trade publisher of the line of educational children’s books produced in the United Kingdom by Usborne Publishing Limited (“Usborne”). We were incorporated on August 23, 1965. Our fiscal years end on February 29 (28).
We also own Kane/Miller Book Publishers; award-winning publishers of International children’s books.
Our company motto is “The future of our world depends on the education of our children. EDC delivers educational excellence one book at a time. We provide economic opportunity while fostering strong family values. We touch the lives of children for a lifetime.”
(b) Financial Information about Industry Segments
While selling children’s books is our only line of business, we sell them through two divisions:
·
Home Business Division (“Usborne Books and More” or “UBAM”) - This division distributes books nationwide through independent consultants who hold book showings in individual homes, and through book fairs, direct sales and Internet sales. The UBAM Consultants also distribute these titles to school and public libraries.
Publishing Division (“Publishing”) – This division markets books to bookstores (including major national chains), toy stores, specialty stores, museums and other retail outlets throughout the country.
Percent Net Revenues by Division
2012
2011
Publishing
UBAM
Total revenues
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Products
As the sole United States trade publisher of the Usborne line of books, we offer over 1,500 different titles. Many are interactive in nature, including our Touchy-Feely board books, jigsaw puzzle books, activity and flashcards, adventure and search books, art books, sticker books and foreign language books. The majority of the titles published by Kane/Miller Book Publishers originally were published in other countries in their native languages.
We have a broad line of ‘internet-linked’ books which allow readers to expand their educational experience by referring them to relevant non-Usborne websites. Our books include science and math titles, as well as chapter books and novels. We continually introduce new titles across all lines of our products.
UBAM markets the books through commissioned consultants using a combination of direct sales, home parties, book fairs and the Internet. The division had approximately 6,100 consultants in 50 states at February 29, 2012.
Publishing markets through commissioned trade representatives who call on book, toy, specialty stores and other retail outlets, as well as through in-house marketing by telephone to the trade. This division markets to approximately 5,000 book, toy and specialty stores. Significant orders totaling 40% of the Publishing Division’s sales have been received from major book chains.
Seasonality
Sales for both divisions are greatest during the fall due to the holiday season.
Competition
We face competition on two fronts for our UBAM Division from several other larger direct selling companies - for sales and consultants. However, no other direct selling company exclusively sells children’s books. Our school and library market faces competition from Scholastic Books for the book fair market.
Publishing faces strong competition from large U.S. and international companies. Historically, this division's sales are approximately 1.0% of industry sales of juvenile paperbacks.
Employees
As of April 1, 2012, 69 full-time and 2 part-time employees worked at our Tulsa and San Diego facilities; about half of those are in the assembly/distribution warehouse. We believe our relations with our employees are good.
Company Reports
Our annual and quarterly reports (Forms 10-K and 10-Q), current Form 8-K reports and amendments to those reports filed with the SEC are available for download from the Investor Relations portion of our Internet website at www.edcpub.com.
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1A. RISK FACTORS
We are a smaller reporting company and are not required to provide this information.
1B. UNRESOLVED STAFF COMMENTS
None
2. PROPERTIES
We are located at 10302 E. 55th Pl., Tulsa, Oklahoma. These facilities are owned by us and contain approximately 105,000 square feet of office and warehouse space. All product distributions are made from this warehouse. We believe that our operating facility meets both present and future capacity needs.
We lease 11,400 square feet of additional warehouse space two blocks from our main facilities. This space is located at 5432 S. 103rd E. Ave., Tulsa, Oklahoma, and is used to store longer-term inventory requirements.
We also lease a small office in San Diego, California which houses Kane/Miller Book Publishers.
3. LEGAL PROCEEDINGS
We are not a party to any material pending legal proceedings.
4. MINE SAFETY DISCLOSURES
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5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
The common stock of EDC is traded on the NASDAQ Stock Market, LLC (symbol--EDUC). The high and low quarterly common stock quotations for fiscal years 2012 and 2011, as reported by the National Association of Securities Dealers, Inc., were as follows:
2012
2011
Period
High
Low
1st Qtr
2nd Qtr
3rd Qtr
4th Qtr
The number of shareholders of record of EDC's common stock at March 9, 2012 was 672.
During fiscal year 2012, we paid quarterly dividends totaling $0.48 per share as follows: $0.12 per share dividend on March 18, 2011, $0.12 per share dividend on June 17, 2011, $0.12 per share dividend on September 16, 2011, and $0.12 per share dividend on December 16, 2011. An additional $0.12 per share dividend was declared on February 29, 2012 and was paid during fiscal year 2013 to shareholders of record on March 9, 2012. Per share dividends paid during fiscal year 2011 totaled $0.51.
The following table shows repurchases of our common stock which we made during the fourth quarter of fiscal year 2012.
Period
Total # of Shares
Purchased
Average Price
Paid per Share
Purchased as
Part of Publicly Announced Plan (1)
Maximum # of Shares that May
be Repurchased under the Plan
December 1 - 31, 2011
January 1 - 31, 2012
February 1 - 29, 2012
Total
(1)
In April 2008 the Board of Directors authorized us to purchase up to 500,000 additional shares of our common stock under a plan initiated in 1998. This plan has no expiration date.
6. SELECTED FINANCIAL DATA