ARTLP The Aristotle (MM)

The Aristotle Corporation (NASDAQ: ARTL; ARTLP) announced today the following: Results for Quarter and Calendar Year ended December 31, 2007 For the calendar year ended December 31, 2007, net sales increased 4.2% to $211.6 million from $203.0 million for the calendar year ended December 31, 2006, and earnings before income taxes increased 14.0% to $35.1 million from $30.8 million. For the quarter ended December 31, 2007, net sales increased 5.1% to $43.6 million from $41.5 million for the quarter ended December 31, 2006, and earnings before income taxes increased 43.0% to $5.6 million from $3.9 million. Earnings before income taxes for the quarter and calendar year ended December 31, 2006 were unfavorably impacted by approximately $1.0 million of pension expense principally incurred as a result of a partial settlement of benefit obligations in 2006. Net earnings applicable to common stockholders for the calendar year ended December 31, 2007 were $14.9 million, or $.84 per diluted common share, compared to $15.2 million, or $.87 per diluted common share (including $5.5 million, or $.31 per diluted common share, related to additional deferred tax benefits recorded through reductions of the deferred tax asset valuation allowance from greater than expected utilization of Federal net operating tax loss carryforwards (�NOLs�)), for the calendar year ended December 31, 2006. Net earnings applicable to common stockholders for the quarter ended December 31, 2007 were $3.1 million, or $.17 per diluted common share compared to $4.5 million, or $.26 per diluted common share (including $4.7 million, or $.27 per diluted common share, related to additional deferred tax benefits recorded through reductions of the deferred tax asset valuation allowance from greater than expected utilization of NOLs), for the quarter ended December 31, 2006. The reported net earnings are shown after deduction for Federal, state and foreign income tax provisions. Approximately $6.3 million in deferred income tax expense in the quarter ended December 31, 2006 relates to the non-cash charge for utilization of NOLs. For the calendar years ended December 31, 2007 and 2006, respectively, $1.3 million and $14.2 million of the reported deferred income tax expense relate to current year NOL utilization. The NOL utilization for the reported quarters and calendar year periods reduced 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. The effective tax rate for 2007 was 32.9% versus 22.8% for 2006. Steven B. Lapin, Aristotle�s President and Chief Operating Officer, stated, �I am pleased to report earnings per share of $.17 and $.84, for the quarter and year ended December 31, 2007, respectively. Given the positive impact in 2006 resulting from the Company�s NOLs, Aristotle�s earnings performance significantly improved in 2007. Additionally, Aristotle�s gross margins improved by 70 basis points from 2006 to 2007, an important achievement driven by strategic purchasing plans and revenue growth of the Company�s higher-margin proprietary product lines. At the same time, management limited increases in selling and administrative expenses to 2.7% and 3.4% for the 2007 fourth quarter and calendar year, respectively, excluding the additional $1.0 million pension expense recognized in 2006. The Company does not anticipate the need for significant capital expenditures going forward and has sufficient capacity to maintain current operations and support a sustained level of future growth.� Mr. Lapin added, �Revenues for recent quarters in 2007 reflect moderate growth despite the heavy challenges faced by state budgetary constraints. The Company remains optimistic for 2008 but will, of course, continue to monitor the impact of U.S. economic conditions on its business to ensure that Aristotle maintains appropriate levels of expenditures and maximizes value for all stockholders.� Dean Johnson, Aristotle�s Chief Financial Officer, stated, �Portions of the Company�s 2007 cash flow from operations have been used to reduce the outstanding balance on the $45.0 million credit facility to $3.0 million at December 31, 2007. Additional cash flows have permitted the Company to make investments in marketable securities and other investments; at December 31, 2007, Aristotle had cash, marketable securities and liquid and other investments of $31.4 million. The Company�s available credit facility allows management to explore potential acquisitions and strategic investments to advance its long term profitability.� Mr. Lapin further reported, �I am delighted to note that important promotions were recently made at the senior management level. W. Phil Niemeyer, who has been with the Nasco group for more than the past 35 years, has been designated an Executive Vice President of Aristotle and appointed as a new member of the Company�s Board of Directors; Phil will also remain as President of the Nasco division. And, Dean T. Johnson, who has been a Nasco employee for the past 14 years, has been named a Senior Vice President of Aristotle, while retaining his positions of Chief Financial Officer of the Company and the Nasco division.� Long-Term Credit Facility Aristotle has entered into an amendment to its existing long-term credit agreement with the Company�s primary lender, JP Morgan Chase Bank. The amendment principally provides for an extension of the agreement (due to expire on October 15, 2008) to January 31, 2013, with favorable pricing, reporting and covenant terms. Semi-Annual Preferred Dividends Aristotle has declared semi-annual cash dividends of $.33 and $.36 per share, respectively, on its outstanding shares of Series I Preferred Stock and Series J Preferred Stock. The dividends are payable on March 31, 2008 to holders of record on March 20, 2008. Dividends are payable on Aristotle�s Preferred Stock on March 31 and September 30, if and when declared by the Company�s Board of Directors. 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 900 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 Series I preferred stock (NASDAQ: ARTLP); there are also approximately 11.0 million privately-held shares outstanding 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 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 Year Ended December 31, December 31, 2007 � 2006 2007 � 2006 � Net sales $ 43,600 41,490 211,550 202,978 Cost of sales 26,681 � 25,739 � 129,590 � 125,906 � Gross profit 16,919 15,751 81,960 77,072 � Selling and administrative expense 11,252 � 11,951 � 46,929 � 46,392 � Earnings from operations 5,667 3,800 35,031 30,680 � Other (expense) income: Interest expense (321 ) (287 ) (1,403 ) (1,648 ) Other, net 287 � 426 � 1,503 � 1,781 � (34 ) 139 � 100 � 133 � Earnings before income taxes 5,633 3,939 35,131 30,813 � Income tax expense (benefit): Current (1,155 ) 1,450 7,441 4,420 Deferred 1,534 � (4,158 ) 4,157 � 2,592 � 379 � (2,708 ) 11,598 � 7,012 � Net earnings 5,254 6,647 23,533 23,801 � Preferred dividends 2,156 � 2,159 � 8,626 � 8,635 � Net earnings applicable to common stockholders $ 3,098 � 4,488 � 14,907 � 15,166 � � Earnings per common share: Basic $ .17 .26 .84 .88 Diluted $ .17 .26 .84 .87 � Weighted average common shares outstanding: Basic 17,945,991 17,268,758 17,651,361 17,263,675 Diluted 17,966,233 17,518,302 17,669,161 17,508,631 THE ARISTOTLE CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) (unaudited) � Assets December 31,2007 December 31,2006 � Current assets: Cash and cash equivalents $ 5,604 5,814 Marketable securities � 3,335 - Investments 18,150 14,586 Accounts receivable, net 15,631 15,458 Inventories, net 42,297 37,487 Prepaid expenses and other 9,071 8,123 Income taxes receivable 540 - Deferred income taxes 2,484 4,051 � Total current assets 97,112 85,519 � Property, plant and equipment, net 27,476 25,426 � Goodwill 14,476 13,860 Deferred income taxes 5,646 8,188 Investments 4,279 - Other assets 446 328 � Total assets $ 149,435 133,321 � � Liabilities and Stockholders' Equity Current liabilities: Current installments of long-term debt $ 305 287 Trade accounts payable 10,500 9,440 Accrued expenses 6,765 6,729 Income taxes payable - 1,478 Accrued dividends payable 2,156 2,159 � Total current liabilities 19,726 20,093 � Long-term debt, less current installments 8,655 11,985 Long-term pension obligations 2,944 4,469 Other long-term accruals 2,429 2,383 � Total liabilities 33,754 38,930 � Stockholders' equity: Preferred stock, Series I 6,489 6,601 Preferred stock, Series J 65,760 65,760 Common stock 179 172 Additional paid-in capital 7,580 3,106 Retained earnings 34,964 20,057 Accumulated other comprehensive income (loss) 709 (1,305 ) Total stockholders' equity 115,681 94,391 � Total liabilities and stockholders' equity $ 149,435 133,321 �