The Aristotle Corporation Announces 2008 Second Quarter and Six Month Results

STAMFORD, Conn.--(BUSINESS WIRE)--The Aristotle Corporation (NASDAQ: ARTL; ARTLP) announced today its results of operations for the second quarter and six months ended June 30, 2008.

For the second quarter ended June 30, 2008, net earnings applicable to common stockholders were $4.5 million, or $.25 per diluted common share, versus $3.9 million, or $.23 per diluted common share, in the second quarter of 2007. Net earnings applicable to common stockholders for the first six months of 2008 were $7.3 million, or $.41 per diluted common share, compared to $6.3 million, or $.36 per diluted common share, for the comparable six months of 2007.

Second quarter net sales in 2008 increased 1.1% to $56.8 million from $56.2 million in the second quarter of 2007. Earnings from operations improved by 9.2% in the second quarter of 2008 to $10.5 million (including a $.7 million insurance recovery), equating to 18.6% of net sales. In the same quarter of 2007, earnings from operations totaled $9.7 million, or 17.2% of net sales.

For the six months ended June 30, 2008, net sales increased 2.7% to $107.2 million from $104.4 million for the six months ended June 30, 2007. Earnings from operations increased 9.6% to $18.6 million (including the insurance recovery) in the first six months of 2008, or 17.4% of net sales. In comparison, earnings from operations for the first six months of 2007 were $17.0 million, or 16.3% of net sales.

Steven B. Lapin, Aristotle’s President and Chief Operating Officer, stated, “Your Company is pleased to report net sales increases for the 2008 second quarter and year-to-date versus the comparable 2007 periods despite this year’s general economic slowdown throughout the U.S., and that, as a result of management’s diligent attention to cost controls, the growth in operating income has continued to exceed the growth in net sales.”

Dean T. Johnson, Aristotle’s Chief Financial Officer, added, “Gross margins for the three and six month periods ended June 30, 2008 were 39.3% and 39.4%, respectively, compared to 38.4% and 38.8% in the same periods of 2007. The improvement in 2008 is primarily due to management’s purchasing strategies implemented in the fourth quarter of 2007 and first quarter of 2008 which have been designed to maximize returns on inventory investments and to limit effects of petroleum-related cost increases.”

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 18.0 million shares outstanding of Aristotle common stock (NASDAQ: ARTL) and 1.1 million shares outstanding of Series I preferred stock (NASDAQ: ARTLP); there are also 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 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, 2007. 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,
			2008		2007		2008		2007
Net sales		$	56,794		56,202		107,226		104,426
Cost of sales			34,457		34,631		64,993		63,892
Gross profit			22,337		21,571		42,233		40,534
Selling and administrative expense			11,791		11,917		23,617		23,544
Earnings from operations			10,546		9,654		18,616		16,990
Other (expense) income:
Interest expense			(285)		(363)		(573)		(689)
Other, net			358		412		590		763
			73		49		17		74
Earnings before income taxes			10,619		9,703		18,633		17,064
Income tax expense (benefit):
Current			4,006		2,383		6,334		3,906
Deferred			(14)		1,220		673		2,539
			3,992		3,603		7,007		6,445
Net earnings			6,627		6,100		11,626		10,619
Preferred dividends			2,156		2,157		4,312		4,316
Net earnings applicable to common stockholders		$	4,471		3,943		7,314		6,303
Earnings per common share:
Basic		$	.25		.23		.41		.36
Diluted		$	.25		.23		.41		.36
Weighted average common shares outstanding:
Basic			17,962,706		17,454,704		17,961,873		17,361,153
Diluted			17,971,444		17,487,936		17,972,490		17,392,101

THE ARISTOTLE CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands)
Assets			June 30, 2008		December 31, 2007		June 30, 2007
			(unaudited)				(unaudited)
Current assets:
Cash and cash equivalents		$	6,444		5,604		7,423
Marketable securities			3,195		3,335		1,910
Investments			21,656		18,150		15,423
Accounts receivable, net			20,902		15,631		21,934
Inventories, net			48,215		42,297		45,618
Prepaid expenses and other			5,034		9,611		5,080
Deferred income taxes			1,879		2,484		2,680
Total current assets			107,325		97,112		100,068
Property, plant and equipment, net			28,603		27,476		26,839
Goodwill			14,358		14,476		14,185
Deferred income taxes			5,646		5,646		8,188
Investments			4,318		4,279		-
Other assets			604		446		332
Total assets		$	160,854		149,435		149,612
Liabilities and Stockholders' Equity
Current liabilities:
Current installments of long-term debt		$	303		305		294
Trade accounts payable			11,762		10,500		12,040
Accrued expenses			7,191		6,765		6,743
Income Taxes			240		-		922
Accrued dividends payable			2,156		2,156		2,157
Total current liabilities			21,652		19,726		22,156
Long term debt, less current installments			11,506		8,655		15,317
Long term pension obligations			2,617		2,944		4,303
Other long term accruals			2,449		2,429		2,410
Stockholders' equity:
Preferred stock, Series I			6,489		6,489		6,549
Preferred stock, Series J			65,760		65,760		65,760
Common stock			180		179		179
Additional paid-in capital			7,683		7,580		6,606
Retained earnings			42,278		34,964		26,360
Accumulated other comprehensive earnings (loss)			240		709		(28)
Total stockholders' equity			122,630		115,681		105,426
Total liabilities and stockholders' equity		$	160,854		149,435		149,612