n ual
Repo rt
A n
2
0
1
6
5402 S. 122nd East Avenue • Tulsa, Oklahoma 74146-2230
Educational Development
Corporation
Financial Highlights
Fiscal Years ended February 29 (28)
Financial Information
Net revenues
Earnings before income taxes
Net earnings
2016
$ 63,618,300
$ 3,545,900
$ 2,119,300
2015
$ 32,548,300
$ 1,402,500
859,200
$
Business Segments
Net Revenues
EDC Publishing
Usborne Books & More
$ 10,831,400
$ 52,786,900
$ 11,532,500
$ 21,015,800
Total
$ 63,618,300
$ 32,548,300
Earnings per share:
Basic and Diluted
$
0.52
$
0.21
Capital expenditures
Total assets
Shareholders’ equity
$ 24,911,600
$ 49,695,000
$ 13,229,500
325,000
$
$ 18,013,200
$ 12,328,300
Common Stock
Shares outstanding at year end
Cash dividends paid
Book value at year end
Market price range:
High Close
Low Close
Market price at year end
4,064,610
0.34
$
3.25
$
4,024,539
0.32
$
3.06
$
$
$
$
16.97
3.97
11.34
$
$
$
5.80
3.57
4.31
DIRECTORS
CORPORATE DATA
John A. Clerico
Co-founder and Chairman
ChartMark Investments, Inc.
Ronald T. McDaniel
Retired Vice President - Sales
Educational Development Corporation
Notice of Annual Meeting
July 19, 2016, 10:00 a.m.
Educational Development Corporation
Executive Conference Room
5402 E.122nd East Avenue
Tulsa, Oklahoma
Kara Gae Neal
Director, School of Urban Education
Form 10-K filed with the Securities and
The University of Tulsa
Exchange Commission is available upon
Form 10-K
Educational Development Corporation’s
request. Write to:
Randall W. White, President
Educational Development Corporation
5402 E.122nd East Avenue
Tulsa, Oklahoma, 74146
Chief Executive Officer – EDC
American Stock Transfer and Trust Company
Betsy Richert
Media Specialist
Tulsa Public Schools
Randall W. White
Chairman, President and
OFFICERS
Randall W. White
Chairman, President and
Chief Executive Officer
Marilyn Pinney
Transfer Agent
New York, New York
Auditors
HoganTaylor LLP
Tulsa, Oklahoma
Corporate Offices
5402 E.122nd East Avenue
Phone (918) 622-4522
Fax (918) 665-7919
www.edcpub.com
Controller and Corporate Secretary
Tulsa, Oklahoma, 74146-2230
Craig M. White
Vice President - Information Systems
Letter From The President
Dear Shareholders,
Fiscal Year 2016 has been a record-breaking one for EDC in many respects
with net revenues increasing by 95%. This incredible growth necessitated that
we find larger warehouse and office space ideally in one location. A thorough
local search resulted in the purchase of the 401,000 sq. ft. Hilti complex in
Tulsa in December of 2015. With Hilti leasing a portion of the building
back from us for the next 15 years, the transaction was a win-win both
operationally and financially. The purchase increased our warehouse space by
100%, which is already jam-packed with inventory. Sales are so strong in fact
that we are using our old premises for additional storage.
In order to accommodate the increase in orders, we have made
significant upgrades in our new warehouse to utilize the latest technology
such as adding two new pick lines, a new, more efficient distribution system
and updated software. We have also added new administrative positions to assist
with the increased workload.
Several factors have attributed to our exponential growth. The decision to
discontinue sales to Amazon in 2012 bolstered the confidence of our dedicated
direct sales force to the extent that they are recruiting and promoting in record
numbers. During June of 2015 we had 7,000 active sales consultants and currently
we have over 21,000. If current trends continue, we will have nearly 50,000 by
year end. Heather Cobb, Vice President of Usborne Books & More and her staff
have created amazing incentives that have inspired new and seasoned Consultants
to meet higher sales goals. Branding has made our incredible products even more
appealing and recognizable to customers. Operational improvements and lower
shipping rates have increased both our efficiency and our profit margin.
The Publishing Division, which sells to retail outlets, experienced a 6%
decline in net revenues compared to a national industry-wide decline of 3%. This
decline was primarily due to delayed shipments caused by the heavy influx of
orders from the Direct Sales Division.
Above all, we offer award-winning products with an important role to play in
shaping the future. Early literacy is the foundation stone for learning, and even
in our digital culture there is no substitute for reading a book with a child. Today’s
readers are tomorrow’s leaders, and everyone who sells, buys or invests with us is
making an investment in the future.
EDC is a company you can be proud to work for
and one you can be proud to own.
Cordially yours,
Randall W. White
Chairman of the Board, President
and Chief Executive Officer
London, UKCEO: Peter UsborneSan Diego, CAPublisher: Kira LynnTulsa, OKCEO: Randall WhiteTulsa, OKVP: Heather CobbTulsa, OKVP: Jeanie CroneSells to:IndividualsSchoolsLibrariesSells to:Retail StoresDISTRIBUTESOWNS About EDC Educational Development Corporation (EDC) 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, which publishes 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 over 21,000 direct sales consultants nationally.EDC History1965 EDC founded to develop supplemental curriculum material for schools 1978 EDC acquires the rights to publish Usborne books in North America1983 Randall White joins company as Controller 1986 Randall White named company CEO1989 EDC launches the Direct Sales Division, focusing exclusively on Usborne books1997 Direct Sales Division holds first annual convention in Tulsa 2008 EDC acquires Kane Miller, renames the Direct Sales Division “Usborne Books & More” (UBAM)2010 Jeanie Crone named Vice President of the Publishing Division2011 EDC hires Heather Cobb as UBAM National Sales Manager2012 EDC President & CEO Randall White makes the decision to stop selling through Amazon2014 EDC promotes Heather Cobb to Vice President of UBAM2015 EDC purchases Hilti complex in TulsaUsborne Books Usborne Publishing was created in 1973 and is now the leading UK independent publishing company. Founder Peter Usborne pioneered a new generation of vividly illustrated books created with the assumption that children are intelligent and deserve compelling books that are visually and intellectually stimulating. This vision has been extended to incorporate over 2,000 titles for children of every age, from infants to teenagers, in a variety of topics and formats. Usborne books are currently published globally in over 100 languages. Kane Miller Books For over 25 years, Kane Miller has been publishing award-winning children’s books from around the world. Kane Miller books transport the reader to places that are simultaneously different and familiar. Kane Miller titles foster global awareness, good citizenship, appreciation for diversity, kindness and perseverance. Like Usborne, Kane Miller offers books in a variety of formats for every age from babies to adults.London, UKCEO: Peter UsborneSan Diego, CAPublisher: Kira LynnTulsa, OKCEO: Randall WhiteTulsa, OKVP: Heather CobbTulsa, OKVP: Jeanie CroneSells to:IndividualsSchoolsLibrariesSells to:Retail StoresDISTRIBUTESOWNSIndustry Awards2015Usborne Publishing named UK Private Business of the Year2014Usborne Publishing named Independent Publisher of the Year and Children’s Publisher of the Year by the UK’s Independent Publisher’s Guild (IPG) Usborne Books & More (UBAM) Division Usborne Books & More is EDC’s Direct Sales Division, representing 83% of EDC net revenues for FY2016. This has been a record-breaking year, with net revenues up over 150% from FY2015, totaling $52,786,900. FY2016 Key Performance Indicators:• New Consultants: 11,800 151%• New Team Leaders: 713 287.5%• Incentive Trip Earners: 322 175%• Leadership Training Attendance: 450 80%• Convention Registration: 1,248 86%EDC Publishing (Retail) Division Our Publishing Division, also known as the Retail Division, sells to large national chains and independent retailers nationwide. FY2016 Key Performance Indicators:• The retail business has traditionally been very lucrative for EDC Publishing, especially in the Toy and Gift sectors, which has been enjoying growth of 5% per year.• Net revenues for FY2016 were $10,831,400, a decrease of 6% from FY2015. Net revenues in the Publishing Division decreased in FY2016 due to a shift in business between the two divisions of the corporation. • The Publishing Division’s remaining wholesale business has been discontinued in order to allow the UBAM Division’s Educational Consultants to pursue school and library business without direct competition from wholesalers. • The Publishing Division will henceforward operate solely as a supplier to retail businesses and will no longer supply wholesale accounts. Focus will be placed on continuing to grow this sector in the future, both by increasing business in current accounts, as well as prospecting new customers. • Successful marketing efforts will continue, including print advertising and presence at prominent national trade shows such as Toy Fair, New York NOW, San Francisco Gift Show, Los Angeles Gift Show, Atlanta Gift Show, Las Vegas Gift Show, ASTRA and the Museum Store Association Show.News from Our Two Sales DivisionsUBAM: 83% Retail: 17% Stock Prices & Dividends PaidCash Dividend PaidFiscal YearStock PricesHighLow 2016 2015 2014 2013 2012 2011STOCK PRICES AND DIVIDENDS PAID $ 16.97 $ 5.80 $ 3.95 $ 5.00 $ 6.90 $ 7.00 $ 3.97 $ 3.57 $ 2.49 $ 3.79 $ 3.80 $ 5.15 $ 0.34 $ 0.32 $ 0.32 $ 0.44 $ 0.48 $ 0.54OperationsEDC has installed new software, two new pick lines and over half a mile of conveyor to support the order fulfillment process. UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
(cid:2) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
(cid:3)(cid:3)(cid:3)(cid:3)
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended February 29, 2016
OR
For the transition period from to .
Commission file number: 000-04957
EDUCATIONAL DEVELOPMENT CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
5402 South 122nd East Avenue, Tulsa, Oklahoma
(Address of principal executive offices)
73-0750007
(I.R.S. Employer
Identification No.)
74146
(Zip Code)
Registrant’s telephone number, including area code (918) 622-4522
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.20 par value
(Title of class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes (cid:3) No (cid:2)
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes (cid:3) No (cid:2)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes (cid:2) No (cid:3)
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during
the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes (cid:2) No (cid:3)
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not
contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. (cid:3)
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See definitions of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of
the Exchange Act. (Check one):
Large accelerated filer (cid:3)
Non-accelerated filer (cid:3)
(Do not check if a smaller reporting company)
Accelerated filer (cid:3)
Smaller reporting company (cid:2)
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)
Yes (cid:3) No (cid:2)
The aggregate market value of the outstanding shares of common stock held by non-affiliates of the registrant at the price at which the
common stock was last sold on August 31, 2015, on the NASDAQ Stock Market, LLC was $24,498,500.
As of May 26, 2016, 4,069,669 shares of common stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for fiscal year 2016 relating to our Annual Meeting of Shareholders to be held on July 19, 2016 are
incorporated by reference into Part III of this Report on Form 10-K.
FORWARD-LOOKING STATEMENTS
TABLE OF CONTENTS
Business
PART I
Item 1.
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2.
Item 3.
Item 4.
Properties
Legal Proceedings
Mine Safety Disclosures
Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
PART II
Item 5.
Item 6.
Item 7.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Item 8.
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
PART III
Item 10. Directors and Executive Officers of the Registrant
Item 11.
Item 12.
Item 13.
Item 14.
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions
Principal Accountant’s Fees and Services
PART IV
Item 15.
Exhibits and Financial Statement Schedules
4
4
5
5
5
5
5
6
6
6
14
15
15
15
15
16
16
16
16
16
17
FORWARD-LOOKING STATEMENTS
PART I
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. 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.
Item 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, in the State of Delaware. 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 & More” or “UBAM”) - This division distributes books nationwide through
independent consultants, who hold book showings in individual homes, through social media, book fairs, direct sales and
internet sales. The UBAM consultants also distribute these titles to school and public libraries.
Publishing Division (“EDC 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
2016
2015
83%
17%
100%
65%
35%
100%
UBAM
Publishing
Total net revenues
(c) Narrative Description of Business
Products
As the sole United States trade publisher of the Usborne line of books, we offer over 2,000 different titles. Many are
interactive in nature, including our Touchy-Feely board 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.
4
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 19,600 consultants in 50 states at February 29, 2016.
EDC Publishing markets through commissioned trade representatives who call on book, toy, and specialty stores along with
other retail outlets. We also do in-house marketing by telephone to these customers and potential customers. This division markets to
approximately 5,000 book, toy and specialty stores. Significant orders, totaling 22% of the Publishing division’s net sales, have been
received from major book chains.
Key Customers
No customer represents more than 10% of our net sales.
Seasonality
Sales for both divisions are greatest during the fall due to the holiday season.
Competition
While we have the exclusive U.S. rights to sell Usborne Books, we face competition for UBAM from several other larger
direct selling companies - for sales and consultants. Our school and library market faces competition from Scholastic Books for the
book fair market.
EDC Publishing faces competition from large U.S. and international publishing companies.
Employees
As of April 1, 2016, 150 full-time employees worked at our Tulsa and San Diego facilities; almost 60% of those are in the
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 website at www.edcpub.com.
Item 1A. RISK FACTORS
We are a smaller reporting company and are not required to provide this information.
Item 1B. UNRESOLVED STAFF COMMENTS
None
Item 2. PROPERTIES
We are located at 5402 S 122nd E Ave, Tulsa, Oklahoma. This facility is owned by us and contains approximately 400,000
square feet of office and warehouse space, of which 219,000 is utilized by us and 181,000 is occupied by a third-party tenant. All
product distributions are made from this 170,000 square foot warehouse using multiple flow-rack systems, known as “the lines,” to
expedite order fulfillment, packaging, and shipment. A facility located at 10302 E. 55th Pl., Tulsa, Oklahoma is also owned by us and
contains approximately 95,000 square feet of warehouse space which is used to store our overflow inventory, along with
approximately 10,000 square feet of office space that is currently vacant. We also lease a small office in San Diego, California which
houses Kane Miller Book Publishers. We believe that our operating facilities meet both present and future capacity needs.
Item 3. LEGAL PROCEEDINGS
We are not a party to any material pending legal proceedings.
Item 4. MINE SAFETY DISCLOSURES
None
5
PART II
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
The common stock of EDC is traded on NASDAQ (symbol--EDUC). The high and low quarterly common stock quotations
for fiscal years 2016 and 2015, as reported by the NASDAQ, were as follows:
Period
1st Qtr
2nd Qtr
3rd Qtr
4th Qtr
2016
2015
High
Low
High
Low
5.00
6.05
14.27
16.97
3.97
4.58
6.30
8.98
3.92
4.95
4.88
5.80
3.57
3.71
4.04
4.12
The number of shareholders of record of EDC’s common stock at February 29, 2016 was 576.
During fiscal year 2016, we paid quarterly dividends totaling $0.35 per share as follows: $0.08 per share dividend on March
20, 2015, $0.09 per share dividend on June 19, 2015, $0.09 per share dividend on September 18, 2015, and $0.09 per share dividend
on December 18, 2015. An additional $0.09 per share dividend was declared on February 26, 2016 and was paid during fiscal year
2017 on March 18, 2016.
We had no repurchases of our common stock during the fourth quarter of fiscal year 2016 and a maximum number of shares
that may be repurchased totaling 303,152.
ISSUER PURCHASES OF EQUITY SECURITIES
Period
Total # of
Shares
Purchased
Average Price
Paid per Share
Total # of
Shares
Purchased as
Part of
Publicly
Announced
Plan (1)
December 1 - 31, 2015
January 1 - 31, 2016
February 1 - 29, 2016
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.
Item 6. SELECTED FINANCIAL DATA
We are a smaller reporting company and are not required to provide this information.
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Management’s discussion and analysis contains statements that are forward-looking and include numerous risks which you
should carefully consider. Additional risks and uncertainties may also materially and adversely affect our business. You should read
the following discussion in connection with our financial statements, including the notes to those statements, included in this
document. Our fiscal years end on February 29(28).
6
Maximum # of
Shares that
May
be
Repurchased
under the Plan
303152
303,152
303,152
303,152
-
-
-
-
Management Summary
Educational Development Corporation is the sole distributor in the United States of the Usborne line of children’s books and
is the owner of Kane Miller Book Publishers. We operate two separate divisions, EDC Publishing and Usborne Books & More
(“UBAM”), to sell these books. Our corporate headquarters, including the distribution facility for both divisions, is located in Tulsa,
Oklahoma.
These two divisions each have their own customer base. EDC Publishing markets its products on a wholesale basis to
various retail accounts. UBAM markets its products to individual consumers as well as to school and public libraries through direct-
selling consultants.
Publishing Division
EDC Publishing operates in a market that is highly competitive, with a large number of companies engaged in the selling of
books. The Publishing division’s customer base includes national book chains, regional and local bookstores, toy and gift stores,
school supply stores and museums. To reach these markets, the Publishing division utilizes a combination of commissioned sales
representatives located throughout the country and a commissioned inside sales group located in our headquarters. The Vice President
of the Publishing division manages sales to the national chain customers.
Publishing Division Net Revenues by Market Type
FY 2016
FY 2015
National chain stores
All other
Total net revenues
22%
78%
100%
26%
74%
100%
EDC Publishing uses a variety of methods to attract potential new customers and maintain current customers. Company
personnel attend many of the national trade shows held by the book selling industry each year, allowing us to make contact with
potential buyers who may be unfamiliar with our books. We actively target the national chains through joint promotional efforts and
institutional advertising in trade publications. The Publishing division also participates with certain customers in a cooperative
advertising allowance program, under which we pay back up to 2% of the net sales to that customer. Our products are then featured in
promotions, such as catalogs, offered by the vendor. We may also acquire, for a fee, an end cap position in a bookstore (our products
are placed on the end of a shelf), which in the publishing industry is considered an advantageous location in the bookstore.
EDC Publishing’s in-house telesales group targets the smaller independent book and gift store market. Our semi-annual, full-
color, 160-page catalogs, are mailed to over 5,000 customers and potential customers. We also offer two display racks to assist stores
in displaying our products.
Net Revenues
Net Revenues for Publishing Division
FY 2016
FY 2015
$
10,831,400 $
11,532,500
Publishing division’s net revenues decreased $701,100 in fiscal year 2016 from fiscal year 2015, or 6.1%. Net revenues were
up 5.0% for smaller retail stores and down 14.4% for national chain stores.
Usborne Books & More (“UBAM”) Division
UBAM is a multi-level direct selling organization that markets its products through independent sales representatives
(“consultants”) located throughout the United States. The customer base of UBAM consists of individual purchasers, as well as
school and public libraries. Revenues are generated through internet sales, home shows, book fairs and contracts with school and
public libraries. This past fiscal year continued a significant shift toward online home shows via social media outlets, such as
Facebook.
7
An important factor in the continued growth of the UBAM division is the addition of new sales consultants and the retention
of existing consultants. Current active consultants (defined as those with sales during the past six months) recruit new sales
consultants. UBAM makes it easy to recruit by providing signing kits for which new consultants can earn partial or full
reimbursement based on established sales criteria. UBAM provides an extensive handbook that is a valuable tool in explaining the
various programs to the new recruit.
New Sales Representatives
Active Sales Representatives End of Fiscal Year
FY 2016
FY 2015
18,000
19,600
6,500
7,800
Consultants During Year
The UBAM division presently has six levels of sales representatives:
·
·
·
·
·
·
Consultants
Team Leaders
Senior Team Leaders
Executive Team Leaders
Senior Executive Team Leaders
Directors
Upon signing up, each individual is considered a consultant. Consultants receive commissions from each sale they make; the
commission rate is determined by the marketing program under which the sale is made. In addition, consultants receive a monthly
sales bonus once their sales reach an established monthly goal. Consultants who recruit other consultants and meet certain established
criteria are eligible to become team leaders. Upon reaching this level, they receive monthly override payments based upon the sales of
their downline groups.
Once team leaders reach certain established criteria, they become senior team leaders and are eligible to earn promotion
bonuses on their downline groups. Once senior team leaders reach certain established criteria, they become executive team leaders,
senior executive team leaders or directors. Executive team leaders and higher may receive an additional monthly override payment
based upon the sales of their downline groups.
During fiscal year 2016, a significant shift, which began during the prior fiscal year, continued in our home party sales model
from our traditional, in-person home parties. With the increased use of social media, online venues such as Facebook, have become a
popular outlet for these events. This allows customers to ‘attend’ online from any location. While we had marked growth in both
home party net revenues, after commissions, and in internet net revenues, after commissions, this shift is most evident in the
proportion of internet and home show orders to the total net revenues, after commissions.
Net Revenues, after Commissions, for UBAM Division
Net Revenues
Less commissions
Net Revenues, after commissions
FY 2016
FY 2015
$
$
52,786,900 $
(17,710,800)
35,076,100 $
21,015,800
(6,491,500)
14,524,300
Percent of Net Revenues, after Commissions, by UBAM Marketing Program
Internet
School & Library
Home Shows
Fund Raisers
Transportation Revenues
Totals
FY 2016
FY 2015
54%
20%
12%
2%
12%
100%
23%
41%
25%
2%
9%
100%
8
Internet
School & Library
Home Shows
Fund Raisers
Number of Orders by UBAM Marketing Program
FY 2016
FY 2015
561,000
21,400
98,800
1,300
682,500
91,700
14,000
30,200
1,000
136,900
This increase in net revenues, after commissions, resulted from increases in the following:
·
·
·
·
598% in internet sales
50% in school and library sales
42% in home party sales
135% in fundraiser sales
The increase in net revenues, after commissions, is greatly attributed to a 151% increase in the number of active
consultants at the end of fiscal year 2016.
The increase in internet net revenues, after commissions, is attributed to 512% more orders placed during the period, along
with a 15% increase in average order size. Customers order via the consultants’ UBAM-hosted web sites, which have been
customized to their own preferences. Orders are processed through a shopping cart and the consultant receives sales credit and
commission on the sales. Much of the increase in internet sales resulted from the use of social media to host virtual parties, frequently
referred to as “Facebook Parties” and from the increase in the number of sales consultants.
The school and library marketing program increase is attributed to a 53% increase in the number of orders, offset by the
average order size decreased of 2% over the prior fiscal year. Much of this change is a result of the increase in the number of sales
consultants.
School and library sales are made by consultants who have received additional, specialized training which allows them to sell
to schools and libraries. The UBAM consultant is the only source that a library or school has for most of our titles. They are not
available through school supply distribution companies.
This program includes book fairs which are held with an organization as the sponsor. The consultant provides promotional
materials to acquaint parents with the books. Parents turn in their orders at a designated time. The book fair program generates free
books for the sponsoring organization. UBAM also has a Reach for the Stars fundraiser program. This is a pledge-based reading
incentive program that provides cash and books to the sponsoring organization and books for the children.
The increase in home party sales, including the discontinued category of “direct sales”, after commissions, is attributed to a
227% increase in the total number of orders, offset by a 56% decrease in average order size. Much of this change is a result of the
increase in the number of sales consultants. Consultants contact individuals (“hostesses”) to hold book shows in their homes. The
consultant assists the hostess in setting up the details for the show and makes a presentation at the show and takes orders for the
books. The hostess earns free books based upon the total sales at the show, including online orders. These online orders are reported
as internet sales, which has resulted in smaller average home show order sizes. Customer specials are available for customers when
they order a selected amount. Additionally, home shows provide an excellent opportunity for recruiting new consultants.
Our fund-raising program, Cards for a Cause, increased 135% in sales, after commissions, over the prior year. This resulted
from a 30% increase in the number of orders and a 71% increase in the average size of these orders over the prior fiscal
year. Organizations sell variety boxes of greeting-type cards and keep a portion of the proceeds to help support themselves and their
related causes.
Transportation revenues increased 270% during fiscal year 2016. Transportation revenues are based on sales order size, with
minimums per order depending on order type. This increase is partially due to the increase in the number of smaller orders for which
a standard minimum is applied, along with a full year benefit of a 20% increase in that minimum which occurred halfway through
fiscal year 2015.
9
The cost of free books provided under the various UBAM marketing programs is recorded as operating and selling expense
in the statements of earnings.
(1-2) Liquidity and Capital Resources
EDC has a history of profitability and positive cash flow. Typically, our primary source of cash is generated from our
operations. Outside of cash used in operating activities, generally our primary uses of cash are to pay down our outstanding bank
credit facility loan balance, for capital expenditures, to pay dividends, and to acquire treasury stock. During fiscal year 2016, we
utilized our bank credit facility to meet some cash requirements. At fiscal year end, our revolving bank credit facility loan balance
was $3,331,800.
During fiscal year 2016, we experienced positive cash flow from our operations of $6,650,600. Cash flow resulted from the
following:
·
·
·
·
·
·
an increase in accounts payable, accrued salaries and commissions, and other current liabilities of $6,837,000,
an increase in deferred revenue of $2,925,200
net earnings of $2,119,300,
the provision for doubtful accounts and sales returns of $1,239,600,
an increase in net income tax payable/receivable of $739,500, and
depreciation expense of $274,500.
Offset by:
·
·
·
·
·
an increase in inventories of $6,048,600,
an increase in prepaid expenses and other assets of $672,500,
an increase in accounts receivable of $676,200,
provision for inventory valuation allowance of $68,100, and
deferred income tax benefit of $19,100.
The significant increase in accounts payable, accrued salaries and commissions, and other current liabilities is primarily a
result of the current payments owed to our suppliers for our increased inventory stock required to sustain our sales increase.
The increase in deferred revenue is primarily a result of orders received for the UBAM division, but not shipped by the end
of fiscal year 2016.
Cash used in investing activities was $24,911,600 for capital expenditures. On December 1, 2015, we closed on a new
facility which has allowed us to expand to accommodate our growth over the past year.
Our capital expenditures included:
·
·
·
·
·
Purchase of new facility of $23,213,600
Warehouse rack system for new facility of $1,074,000
Additional investment in accounting and UBAM software systems of $410,400
Warehouse equipment of $95,400
Other improvements to new facility of $94,800
Cash provided by financing activities was $19,060,800, which was primarily due to $18,400,000 in long-term debt related to
the purchase of our new facility, offset by long-term debt payments of $97,200. Also, $4,881,800 in borrowings were provided under
our revolving credit agreement, offset by $2,950,000 in payments against this agreement. Additionally, $202,500 was provided from
the sale of treasury stock, offset by $1,600 paid to acquire treasury stock. Cash was also used for dividend payments of $1,374,700.
In September 2002, the Board of Directors authorized a minimum annual cash dividend of 20% of net earnings. In fiscal
years 2016 and 2015, we declared dividends equal to 67% and 149%, respectively, of net income after taxes.
10
Our Board of Directors adopted a stock repurchase plan in which we may purchase up to an additional 500,000 shares as
market conditions warrant. When management believes the stock is undervalued and when stock becomes available at an attractive
price, we can utilize free cash flow to repurchase shares. Management believes this enhances the value to the remaining shareholders
and that these repurchases will have no adverse effect on our short-term and long-term liquidity.
(3) Results of Operations
Earnings as a Percent of Net Revenues
Net revenues
Cost of sales
Gross margin
Operating expenses:
Operating and selling
Sales commissions
General and administrative
Total operating expenses
Other income, net
Earnings before income taxes
Income taxes
Net earnings
FY 2016
FY 2015
100.0%
32.2%
67.8%
30.5%
28.4%
3.7%
62.6%
0.4%
5.6%
2.3%
3.3%
100.0%
39.2%
60.8%
29.2%
21.0%
6.3%
56.5%
0.0%
4.3%
1.7%
2.6%
Fiscal Year 2016 Compared with Fiscal Year 2015
The following presents an overview of our results of operations for years ended February 29, 2016 and February 28,
2015. We had earnings before income taxes of $3,545,900 for fiscal year 2016 compared with $1,402,500 for fiscal year 2015.
Gross sales
Less discounts & allowances
Transportation revenue
Net revenues
Revenues
FY 2016
FY 2015
$ Change
$
$
80,319,400 $
(22,061,500)
5,360,400
63,618,300 $
48,345,400 $
(17,273,100)
1,476,000
32,548,300 $
31,974,000
(4,788,400)
3,884,400
31,070,000
UBAM’s gross sales increased 138.0% or $33,274,800 during fiscal year 2016 to $57,385,300 when compared with fiscal
year 2015. This increase is attributable to a 151% increase in the number of independent sales consultants, with resulting increases in
all types of sales, including internet, school and library/book fair, home parties, and fund raisers. The overall number of orders was up
398% due to increases in internet, home show, school and library, and fund raiser orders. Average sales per order for this division
were down 48%, primarily due to a shift from larger home party orders to multiple individual online orders per internet-based party.
EDC Publishing’s gross sales decreased 5.4% or $1,300,800 during fiscal year 2016 when compared with fiscal year
2015. Sales increased by 5.0% to smaller retail stores and decreased by 14.4% to national chain stores.
UBAM’s discounts and allowances were $9,927,900 in fiscal year 2016 and $4,533,600 in fiscal year 2015. Most sales by
UBAM are at retail. As a part of UBAM’s marketing programs, discounts between 40% and 50% of retail are offered on selected
items at various times throughout the year. The discounts and allowances in the UBAM division will vary from year to year
depending upon the marketing programs in place during any given year. UBAM’s discounts and allowances were 17.3% of UBAM’s
gross sales in fiscal year 2016 and 18.8% in fiscal year 2015.
11
EDC Publishing’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 $12,133,600 in fiscal year 2016 and $12,739,500 in fiscal year 2015. To be competitive with other wholesale book distributors,
EDC Publishing 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. EDC Publishing’s discounts and allowances were 52.9% of their gross sales in fiscal year 2016 and 52.6% in
fiscal year 2015.
Transportation revenues increased $3,884,400 or 263.2% in fiscal year 2016, due primarily to the increase in UBAM gross
sales during the year and the shift in sales to more, smaller internet-based orders, which each are subject to a flat minimum shipping
charge. Also, we realized the benefit of a full year with a 20% increase in the minimum shipping charge made during fiscal year 2015.
Cost of sales
Operating and selling
Sales commissions
General and administrative
Total
Expenses
FY 2016
FY 2015
$ Change
$
$
20,494,200 $
19,419,400
18,062,800
2,328,500
60,304,900 $
12,763,900 $
9,515,400
6,842,700
2,039,900
31,161,900 $
7,730,300
9,904,000
11,220,100
288,600
29,143,000
Cost of sales increased 60.6% in fiscal year 2016 when compared with fiscal year 2015. Our cost of products is 22% to 28%
of the gross sales price, depending upon the product. The percentage change in gross sales to the percentage change in cost of sales,
depends largely on the mix of products sold. Approximately 67% of our products come from one vendor, where the cost of the
products is a fixed percentage of the retail price. Cost of sales is the inventory cost of product sold (including the cost of the product
itself and inbound freight charges), along with royalties accrued for sales of Kane Miller titles for which we have royalty payment
contracts. The costs of our distribution network are not included in our cost of sales, but rather in our operating and selling expenses.
Operating and selling expenses include purchasing and receiving, inspection, warehousing, and other costs of our distribution
network. These costs totaled $2,865,700 in fiscal year 2016 and $1,259,500 in fiscal year 2015. In addition to costs associated with
our distribution network (noted above), operating and selling costs include expenses of the Publishing and UBAM divisions, along
with the order entry and customer service functions. Operating and selling expenses as a percentage of gross sales were 24.2% for
fiscal year 2016 and 19.7% for fiscal year 2015.
Sales commissions for EDC Publishing increased $800 for the fiscal year ended 2016. Sales commissions for this division
fluctuate depending upon the amount of sales made to our “house accounts,” which are our largest customers and do not have any
commission expense associated with them, and sales made by our outside sales representatives. Publishing division sales
commissions are paid on net sales and were 3.2% for fiscal year 2016 and 3.0% for fiscal year 2015.
Sales commissions for UBAM increased $11,219,300. UBAM division sales commissions are paid based on the retail price
of non-promotional products sold and were 30.9% of UBAM gross sales for fiscal year 2016 and 26.9% for fiscal year 2015. The
fluctuation in the percentages of commission expense to gross sales is the result of the type of sale. Internet sales, home shows, book
fairs, school and library sales and fundraiser sales have different commission rates. Also, another factor contributing to the
fluctuations in the percentages is the payment of overrides and bonuses, both dependent on consultants’ monthly sales and downline
sales. The increase in sales commissions is the result of higher gross sales in the UBAM division.
General and administrative expenses include the executive department, accounting department, information services
department, general office management and building facilities management. General and administrative expenses as a percentage of
gross sales were 2.9% for fiscal year 2016 and 4.2% for fiscal year 2015.
The tax provision for fiscal year 2016 was $1,426,600. The effective rate for fiscal year 2016 was 40.2% and for fiscal year
2015 was 38.7%. Our effective tax rate is higher than the Federal statutory rate due to an IRS audit settlement for $67,800 of our 2012
tax year, state income and franchise taxes.
12
Contractual Obligations
We are a smaller reporting company and are not required to provide this information.
Critical Accounting Policies
Our discussion and analysis of our financial condition and results of operations are based upon our financial statements,
which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of
these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues
and expenses, and related disclosures of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including
those related to our valuation of inventory, allowance for uncollectible accounts receivable, allowance for sales returns, long-lived
assets and deferred income taxes. We base our estimates on historical experience and on various other assumptions that are believed
to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of
assets and liabilities that are not readily apparent from other sources.
Actual results may materially differ from these estimates under different assumptions or conditions. Historically, however,
actual results have not differed materially from those determined using required estimates. Our significant accounting policies are
described in the notes accompanying the financial statements included elsewhere in this report. However, we consider the following
accounting policies to be more significantly dependent on the use of estimates and assumptions.
Stock-Based Compensation
We account for stock-based compensation whereby share-based payment transactions with employees, such as stock options
and restricted stock, are measured at estimated fair value at date of grant and recognized as compensation expense.
Revenue Recognition
Sales are recognized and recorded when products are shipped. Products are shipped FOB shipping point. UBAM’s sales are
paid at the time the product is ordered. These sales accounted for 83% and 65% of net revenues in fiscal years 2016 and 2015,
respectively.
Estimated allowances for sales returns are recorded as sales are recognized and recorded. Management uses a moving
average calculation to estimate the allowance for sales returns. We are not responsible for product damaged in transit. Damaged
returns are primarily from the retail stores. The damages occur in the stores, not in shipping to the stores. It is industry practice to
accept returns from wholesale customers. Transportation revenue represents the amount billed to the customer for shipping the
product and is recorded when the product is shipped. Management has estimated and included a reserve for sales returns of $100,000
for the years ended February 29, 2016 and February 28, 2015.
Allowance for Doubtful Accounts
We maintain an allowance for estimated losses resulting from the inability of our customers to make required payments. An
estimate of uncollectible amounts is made by management based upon historical bad debts, current customer receivable balances, age
of customer receivable balances, customers’ financial conditions and current economic trends. Management has estimated an
allowance for doubtful accounts of $401,900 and $234,500 as of February 29, 2016 and February 28, 2015, respectively.
Inventory
Management continually estimates and calculates the amount of noncurrent inventory. The inventory arises due to
occasional purchases of book inventory in quantities in excess of what will be sold within the normal operating cycle due to minimum
order requirements of our primary supplier. Noncurrent inventory was estimated by management using the current year turnover ratio
by title. All inventory in excess of 2 ½ years of anticipated sales was classified as noncurrent inventory. Noncurrent inventory
balances prior to valuation allowances were $469,000 and $718,900 at February 29, 2016 and February 28, 2015, respectively.
Inventories are presented net of a valuation allowance. Management has estimated and included a valuation allowance for
both current and noncurrent inventory. This allowance is based on management’s identification of slow moving inventory on
hand. Management has estimated a valuation allowance for both current and noncurrent inventory of $325,000 and $393,100 as of
February 29, 2016 and 2015, respectively.
13
Our product line contains approximately 2,000 titles, each with different rates of sale, depending upon the nature and
popularity of the title. Almost all of our product line is saleable as the books are not topical in nature and remain current in content
today as well as in the future. Most of our products are printed in Europe, China, Singapore, India, Malaysia and Dubai resulting in a
three to four-month lead-time to have a title reprinted and delivered to us.
Our principal supplier, based in England, generally requires a minimum reorder of 6,500 or more of a title in order to get a
solo print run. Smaller orders would require a shared print run with the supplier’s other customers, which can result in more lengthy
delays to receive the ordered title. Anticipating customer preferences and purchasing habits requires historical analysis of similar
titles in the same series. We then place the initial order or re-order based upon this analysis.
These factors and historical analysis have led Management to determine that 2 ½ years represents a reasonable estimate of the
normal operating cycle for our products.
New Accounting Pronouncements
The Financial Accounting Standards Board (“FASB”) periodically issues new accounting standards in a continuing effort to
improve standards of financial accounting and reporting. We have reviewed the recently issued pronouncements and concluded that
the following recently issued accounting standards apply to us.
In May 2014, FASB issued ASU No. 2014-09, and amended with ASU No. 2015-14 “Revenue from Contracts with
Customers,” which provides a single revenue recognition model which is intended to improve comparability over a range of
industries, companies and geographical boundaries and will also result in enhanced disclosures. The changes are effective for fiscal
years, and interim periods within those years, beginning after December 15, 2017, which means the first quarter of our fiscal year
2019. We are currently reviewing the ASU and assessing the potential impact on our financial statements.
In August 2015, FASB issued ASU No. 2015-15 “Interest—Imputation of Interest,” which modifies the presentation and
subsequent measurement of debt issuance costs associated with line-of-credit arrangements. These changes allow an entity to defer
and present debt issuance costs as an asset and subsequently amortize the deferred debt issuance costs ratably over the term of the
line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. The
changes are effective for financial statements issued for annual periods beginning after December 15, 2015, and interim periods within
those annual periods, which means the first quarter of our fiscal year 2017.We are currently reviewing the ASU and assessing the
potential impact on our financial statements.
In November 2015, FASB issued ASU No. 2015-17, which is intended to improve how deferred taxes are classified on
organizations’ balance sheets by eliminating the current requirement for organizations to present deferred tax liabilities and assets as
current and noncurrent in a classified balance sheet. Instead, organizations will now be required to classify all deferred tax assets and
liabilities as noncurrent. The changes are effective for financial statements issued for annual periods beginning after December 15,
2016, and interim periods within those annual periods, which means the first quarter of our fiscal year 2018. We anticipate this ASU
having minimal impact on our financial statements.
In February 2016, FASB issued ASU No. 2016-02, “Leases,” which is intended to establish a comprehensive new lease
accounting model. The new standard clarifies the definition of a lease, requires a dual approach to lease classification similar to
current lease classifications, and causes lessees to recognize leases on the balance sheet as a lease liability with a corresponding right-
of-use asset. The new standard is effective for interim and annual periods beginning after December 15, 2018, which means the first
quarter of our fiscal year 2020. The new standard requires a modified retrospective transition for capital or operating leases existing at
or entered into after the beginning of the earliest comparative period presented in the financial statements. We are currently reviewing
the ASU and evaluating the potential impact on our financial statements.
In March 2016, FASB issued ASU No. 2016-09, “Compensation - Stock Compensation: Improvements to Employee Share-
Based Payment Accounting,” which is intended to simplify several aspects of the accounting for share-based payment transactions,
including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of
cash flows. The new standard is effective for interim and annual periods beginning after December 15, 2016, which means the first
quarter of our fiscal year 2018. We are currently reviewing the ASU and evaluating the potential impact on our financial statements.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company and are not required to provide this information.
14
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item 8 begins at page 23.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None
Item 9A. CONTROLS AND PROCEDURES
An evaluation was performed of the effectiveness of the design and operation of our disclosure controls and procedures
pursuant to Exchange Act Rule 13a-15(e) and 15d-15(e) as of February 29, 2016. This evaluation was conducted under the
supervision and with the participation of our management, including our Chief Executive Officer and our Controller/Corporate
Secretary (Principal Financial and Accounting Officer).
Based on that evaluation, these officers concluded that our disclosure controls and procedures were effective to ensure that
information required to be disclosed in reports that we file or submit under the Securities Exchange Act of 1934 is accumulated and
communicated to them, as appropriate, to allow timely decisions regarding required disclosure and is recorded, processed,
summarized and reported in accordance within the time periods specified in Securities and Exchange Commission rules and forms. It
should be noted that the design of any system of controls is based in part upon certain assumptions about the likelihood of future
events.
During the fourth fiscal quarter of the fiscal year covered by this report on Form 10-K, there have been no changes in our
internal control over financial reporting that have materially affected or are reasonably likely to materially affect, our internal control
over financial reporting.
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such
term is defined in Rule 13a-15(f) of the Securities Exchange Act of 1934 (the “Exchange Act”). Under the supervision and with the
participation of our management, including our President and our Controller, we evaluated the effectiveness of our internal control
over financial reporting based on the framework in INTERNAL CONTROL-INTEGRATED FRAMEWORK issued by the
Committee of Sponsoring Organizations of the Treadway Commission in 1992. All internal control systems, no matter how well
designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance
with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate. Based on our evaluation under that framework and applicable SEC rules, our management
concluded that our internal control over financial reporting was effective as of February 29, 2016. The original framework was
updated with the issuance of the 2013 Internal Control – Integrated Framework by the Committee of Sponsoring Organizations of the
Treadway Commission. Our management has not yet implemented the 2013 Framework, but does not deem it impacting our effective
assessment conclusion.
This annual report does not include an attestation report of our registered public accounting firm regarding internal control
over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to rules
of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.
Item 9B. OTHER INFORMATION
None
15
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) Identification of Directors
PART III
The information required by this Item 10 is furnished by incorporation by reference to the information under the caption
“Election of Directors” in our definitive Proxy Statement to be filed in connection with the Annual Meeting of Shareholders to be held
on July 19, 2016.
(b) Identification of Executive Officers
Information regarding our executive officers required by Item 401 of Regulation S-K is presented in Item 1 hereof under the
subcaption “Executive Officers” as permitted by General Instruction G (3) to Form 10-K and Instruction 3 to Item 401(b) of
Regulation S-K.
(c) Compliance with Section 16 (a) of the Exchange Act
The information required by this Item 10 is furnished by incorporation by reference to the information under the caption
“Section 16 (a) Beneficial Ownership Reporting Compliance” in our definitive Proxy Statement to be filed in connection with the
Annual Meeting of Shareholders to be held on July 19, 2016.
Item 11. EXECUTIVE COMPENSATION
The information required by this Item 11 is furnished by incorporation by reference to the information under the caption
“Executive Compensation” in our definitive Proxy Statement to be filed in connection with the Annual Meeting of Shareholders to be
held on July 19, 2016.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
The information required by this Item 12 is furnished by incorporation by reference to the information under the captions
“Security Ownership of Certain Beneficial Owners and Management” and “Compensation Plans” in our definitive Proxy Statement to
be filed in connection with the Annual Meeting of Shareholders to be held on July 19, 2016.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None
Item 14. PRINCIPAL ACCOUNTANT’S FEES AND SERVICES
The information required by this Item 14 is furnished by incorporation by reference to the information under the caption
“Independent Registered Public Accountants” in our definitive Proxy Statement to be filed in connection with the Annual Meeting of
Shareholders to be held on July 19, 2016.
16
PART IV
Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following documents are filed as part of this report:
1.
Financial Statements
Report of Independent Registered Public Accounting Firm
Balance Sheets as of February 29, 2016 and February 28, 2015
Statements of Earnings for the Years ended February 29, 2016 and February 28, 2015
Statements of Shareholders’ Equity for the Years ended February 29, 2016 and February 28, 2015
Statements of Cash Flows for the Years ended February 29, 2016 and February 28, 2015
Notes to Financial Statements
Schedules have been omitted as such information is either not required or is included in the financial statements.
2. Exhibits
Page
21
22
23
24
25
26-35
3.1
3.2
3.3
3.4
3.5
3.6
4.1
10.1
Restated Certificate of Incorporation dated April 26, 1968 and Certificate of Amendment thereto dated
June 21, 1968 are incorporated herein by reference to Exhibit 1 to Registration Statement on Form 10-K
(File No. 0-4957).
Certificate of Amendment of Restated Certificate of Incorporation dated August 27, 1977 is incorporated
herein by reference to Exhibit 20.1 to Form 10-K for fiscal year ended February 28, 1981 (File No. 0-
4957).
By-Laws, as amended, are incorporated herein by reference to Exhibit 20.2. to Form 10-K for fiscal year
ended February 28, 1981 (File No. 0-4957).
Certificate of Amendment of Restated Certificate of Incorporation dated November 17, 1986 is
incorporated herein by reference to exhibit 3.3 to Form 10-K for fiscal year ended February 28, 1987 (File
No. 0-4957).
Certificate of Amendment of Restated Certificate of Incorporation dated March 22, 1996 is incorporated
herein by reference to Exhibit 3.4 to Form 10-K for fiscal year ended February 28, 1997 (File No. 0-4957).
Certificate of Amendment of Restated Certificate of Incorporation dated July 15, 2002 is incorporated
herein by reference to Exhibit 10.30 to Form 10-K dated February 28, 2003 (File No. 0-4957).
Specimens of Common Stock Certificates are incorporated herein by reference to Exhibits 3.1 and 3.2 to
Registration Statement on Form 10-K (File No. 0-4957) filed June 29, 1970.
Usborne Agreement-Contractual agreement by and between the Company and Usborne Publishing Limited
dated November 25, 1988 is incorporated herein by reference to Exhibit 10.12 to Form 10-K dated
February 28, 1989 (File No. 0-4957).
17
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.14
10.15
10.16
10.17
Party Plan-Contractual agreement by and between the Company and Usborne Publishing Limited dated
March 14, 1989 is incorporated herein by reference to Exhibit 10.13 to Form 10-K dated February 28,
1989 (File No. 0-4957).
Amendment dated January 1, 1992 to Usborne Agreement - Contractual agreement by and between the
Company and Usborne Publishing Limited is incorporated herein by reference to Exhibit 10.13 to Form
10-K dated February 29, 1992 (File No. 0-4957).
Educational Development Corporation 1992 Incentive Stock Option Plan is incorporated herein by
reference to Exhibit 4(c) to Registration Statement on Form S-8 (File No. 33-60188).
Restated Loan Agreement dated June 30, 1999 between the Company and State Bank & Trust, N.A.,
Tulsa, OK, is incorporated herein by reference to Exhibit 10.24 to Form 10-K dated February 29, 2000
(File No. 0-4957).
Educational Development Corporation 2002 Incentive Stock Option Plan is incorporated herein by
reference to Exhibit A to definitive proxy statement on Schedule 14A dated May 23, 2002 (File No. 0-
4957).
Amendment dated November 12, 2002 to Usborne Agreement – Contractual agreement by and between us
and Usborne Publishing Limited is incorporated herein by reference to Exhibit 10.24 to Form 10-K dated
February 28, 2003 (File No. 0-4957).
Employment Agreement between Randall W. White and the Company dated February 28, 2004.
Eleventh Amendment dated June 30, 2009 to Restated Loan Agreement between the Company and Arvest
Bank, Tulsa, OK.
Twelfth Amendment dated June 30, 2010 to Restated Loan Agreement between the Company and Arvest
Bank, Tulsa, OK.
Thirteenth Amendment dated June 30, 2011 to Restated Loan Agreement between the Company and
Arvest Bank, Tulsa, OK.
Fourteenth Amendment dated June 30, 2012 to Restated Loan Agreement between the Company and
Arvest Bank, Tulsa, OK.
Fifteenth Amendment dated June 30, 2013 to Restated Loan Agreement between the Company and Arvest
Bank, Tulsa, OK.
Sixteenth Amendment dated June 30, 2014 to Restated Loan Agreement between the Company and Arvest
Bank, Tulsa, OK.
Seventeenth Amendment dated September 19, 2014 to Restated Loan Agreement between the Company
and Arvest Bank, Tulsa, OK.
Eighteenth Amendment dated June 30, 2015 to Restated Loan Agreement between the Company and
Arvest Bank, Tulsa, OK.
Nineteenth Amendment dated July 7, 2015 to Restated Loan Agreement between the Company and Arvest
Bank, Tulsa, OK.
10.18
Loan Agreement dated December 1, 2015 by and between the Company and MidFirst Bank, Tulsa, OK.
18
10.19
10.20
10.21
*23.1
*31.1
*31.2
*32.1
Purchase and Sale Agreement dated October 1, 2015 by and between the Company and Hilti, Inc., Tulsa,
OK.
Lease Agreement dated December 1, 2015 by and between the Company and Hilti, Inc., Tulsa, OK.
First Amendment Loan Agreement dated March 10, 2016 by and between the Company and MidFirst
Bank, Tulsa, OK.
Consent of Independent Registered Public Accounting Firm.
Certification of the Chief Executive Officer of Educational Development Corporation pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
Certification of the Controller and Corporate Secretary (Principal Financial and Accounting Officer) of
Educational Development Corporation pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
*Filed Herewith
19
SIGNATURES
Pursuant to the requirements of Section 13 or 15(b) of the Securities Exchange Act of 1934, the Company has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.
EDUCATIONAL DEVELOPMENT CORPORATION
Date: May 26, 2016 By: /s/ Marilyn Pinney
Marilyn Pinney
Controller and Corporate Secretary
(Principal Financial and Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the date indicated.
Date:
May 26, 2016
May 26, 2016
May 26, 2016
/s/ Randall W. White
Randall W. White
Chairman of the Board
President, Treasurer and
Director
/s/ John A. Clerico
John A. Clerico, Director
/s/ Ronald McDaniel
Ronald McDaniel, Director
May 26, 2016
/s/ Kara Gae Neal
Kara Gae Neal, Director
May 26, 2016
/s/ Betsy Rickert
Betsy Rickert, Director
May 26, 2016
/s/ Marilyn Pinney
Marilyn Pinney
Controller and Corporate Secretary
(Principal Financial and Accounting Officer)
20
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders
Educational Development Corporation
We have audited the accompanying balance sheets of Educational Development Corporation as of February 29, 2016 and February 28,
2015, and the related statements of earnings, shareholders’ equity and cash flows for the years then ended. These financial statements
are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Educational
Development Corporation as of February 29, 2016 and February 28, 2015, and the results of its operations and its cash flows for the
years then ended, in conformity with U.S. generally accepted accounting principles.
/s/ HOGANTAYLOR LLP
Tulsa, Oklahoma
May 26, 2016
21
EDUCATIONAL DEVELOPMENT CORPORATION
BALANCE SHEETS
AS OF FEBRUARY 29(28),
ASSETS
2016
2015
CURRENT ASSETS:
Cash and cash equivalents
Accounts receivable, less allowance for doubtful accounts and
sales returns $501,900 (2016) and $334,500 (2015)
Inventories—Net
Prepaid expenses and other assets
Deferred income taxes
Total current assets
INVENTORIES—Net
PROPERTY, PLANT AND EQUIPMENT—Net
OTHER ASSETS
DEFERRED INCOME TAXES
TOTAL ASSETS
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable
Line of credit
Deferred revenues
Current maturities of long-term debt
Accrued salaries and commissions
Income taxes payable
Dividends payable
Other current liabilities
Total current liabilities
LONG-TERM DEBT—Net of current maturities
Total liabilities
COMMITMENTS (Note 7)
SHAREHOLDERS’ EQUITY:
Common stock, $0.20 par value; Authorized 8,000,000 shares;
Issued 6,041,040 shares; Outstanding 4,064,610 (2016) and
4,024,539 (2015) shares
Capital in excess of par value
Retained earnings
Less treasury stock, at cost
Total shareholders’ equity
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
See notes to financial statements.
22
$
1,183,700 $
383,900
2,513,300
17,479,500
1,028,100
298,200
22,502,800
3,076,700
11,181,000
374,200
249,800
15,265,600
169,000
350,800
26,710,300
2,073,200
262,000
50,900
243,400
80,200
$
49,695,000 $
18,013,200
$
7,801,300 $
3,331,800
2,925,200
615,400
1,202,500
803,100
366,300
1,732,500
18,778,100
2,237,700
1,400,000
-
-
618,100
63,600
322,000
1,043,500
5,684,900
17,687,400
36,465,500
-
5,684,900
1,208,200
8,548,000
14,557,500
24,313,700
(11,084,200)
13,229,500
49,695,000 $
1,208,200
8,548,000
13,857,200
23,613,400
(11,285,100)
12,328,300
18,013,200
$
EDUCATIONAL DEVELOPMENT CORPORATION
STATEMENTS OF EARNINGS
FOR THE YEARS ENDED FEBRUARY 29(28),
GROSS SALES
Less discounts and allowances
Transportation revenue
NET REVENUES
COST OF SALES
Gross margin
OPERATING EXPENSES:
Operating and selling
Sales commissions
General and administrative
Total operating expenses
INTEREST EXPENSE
OTHER INCOME
EARNINGS BEFORE INCOME TAXES
INCOME TAXES
NET EARNINGS
BASIC AND DILUTED EARNINGS
PER SHARE:
Basic
Diluted
WEIGHTED AVERAGE NUMBER OF COMMON AND EQUIVALENT SHARES
OUTSTANDING:
Basic
Diluted
Dividends per share
See notes to financial statements.
23
2016
2015
$
80,319,400 $
(22,061,500)
5,360,400
63,618,300
20,494,200
43,124,100
48,345,400
(17,273,100)
1,476,000
32,548,300
12,763,900
19,784,400
19,419,400
18,062,800
2,328,500
39,810,700
9,515,400
6,842,700
2,039,900
18,398,000
244,900
54,000
(477,400)
(70,100)
3,545,900
1,402,500
1,426,600
2,119,300 $
543,300
859,200
0.52 $
0.52 $
0.21
0.21
$
$
$
4,049,154
4,003,702
4,051,678
4,003,702
$
0.35 $
0.32
EDUCATIONAL DEVELOPMENT CORPORATION
STATEMENTS OF SHAREHOLDERS’
EQUITY
FOR THE YEARS ENDED FEBRUARY 29(28),
Common Stock
(par value $0.20 per share)
Number of
Shares
Issued
Amount
Capital in
Excess of Retained
Par Value Earnings
Treasury Stock
Number of
Shares
Amount
Shareholders’
Equity
BALANCE—March
1, 2014
Purchases of
treasury stock
Sales of treasury
stock
Dividends declared
($0.08/share)
Dividends paid
($0.24/share)
Net earnings
BALANCE—
6,041,040 $ 1,208,200 $ 8,548,000 $ 14,280,500 2,063,097 $ (11,454,300) $ 12,582,400
-
-
-
-
-
-
-
-
-
-
-
-
-
1,339
(5,200)
(5,200)
-
(47,935 )
174,400
174,400
-
(322,000)
-
-
(960,500)
859,200
-
-
-
-
(322,000)
-
-
(960,500)
859,200
February 28, 2015 6,041,040 $ 1,208,200 $ 8,548,000 $ 13,857,200 2,016,501 $ (11,285,100) $ 12,328,300
Purchases of
treasury stock
Sales of treasury
stock
Dividends declared
($0.09/share)
Dividends paid
($0.26/share)
Net earnings
BALANCE—
-
-
-
-
-
-
-
-
-
-
-
-
-
163
(1,600)
(1,600)
-
(40,234 )
202,500
202,500
-
(366,300)
- (1,052,700)
- 2,119,300
-
-
-
-
(366,300)
-
-
(1,052,700)
2,119,300
February 29, 2016 6,041,040 $ 1,208,200 $ 8,548,000 $ 14,557,500 1,976,430 $ (11,084,200) $ 13,229,500
See notes to financial statements.
24
EDUCATIONAL DEVELOPMENT CORPORATION
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED FEBRUARY 29(28),
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Depreciation
Deferred income taxes
Provision for doubtful accounts and sales returns
Provision for inventory valuation allowance
Changes in assets and liabilities:
Accounts receivable
Inventories, net
Prepaid expenses and other assets
Accounts payable, accrued salaries and commissions,
and other current liabilities
Deferred revenue
Income tax payable
Total adjustments
Net cash provided by (used in) operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments—long-term debt
Proceeds from long-term debt
Cash received from sale of treasury stock
Cash paid to acquire treasury stock
Borrowings under line of credit
Payments under line of credit
Dividends paid
Net cash provided by financing activities
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS—BEGINNING OF YEAR
CASH AND CASH EQUIVALENTS—END OF YEAR
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest
Cash paid for income taxes
See notes to financial statements.
25
2016
2015
$
2,119,300 $
859,200
274,500
(19,100)
1,239,600
(68,100)
129,400
700
1,281,000
-
(676,200)
(6,048,600)
(672,500)
(1,356,900)
(1,192,200)
(88,000)
6,837,000
2,925,200
739,500
4,531,300
6,650,600
182,500
-
(77,300)
(1,120,800)
(261,600)
(24,911,600)
(24,911,600)
(325,000)
(325,000)
(97,200)
18,400,000
202,500
(1,600)
4,881,800
(2,950,000)
(1,374,700)
19,060,800
799,800
383,900
1,183,700 $
-
-
174,400
(5,200)
4,550,000
(3,150,000)
(1,278,700)
290,500
(296,100)
680,000
383,900
179,800 $
706,400 $
54,000
619,900
$
$
$
EDUCATIONAL DEVELOPMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED FEBRUARY 29, 2016 AND FEBRUARY 28, 2015
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business—Educational Development Corporation (“we”, “our”, “us”, or “the Company”) distributes books and
publications through our EDC Publishing and Usborne Books & More (“UBAM”) divisions to book, toy and gift stores, libraries and
home educators located throughout the United States (“U.S.”). We are the sole U.S. distributor of books and related items, which are
published by an England-based publishing company, Usborne, our primary supplier. We are also in the direct publishing market
through our ownership of Kane Miller Book Publishers.
Estimates—Our financial statements were prepared in conformity with accounting principles generally accepted in the United
States of America, which requires management to make estimates and assumptions that affect the amounts and disclosures in the
financial statements. Actual results could differ from these estimates.
Business Concentration—A significant portion of our inventory purchases are concentrated with Usborne. Purchases from
them were approximately $20.0 million and $12.2 million for the years ended February 29, 2016 and February 28, 2015,
respectively. Total inventory purchases for those same periods were approximately $29.8 million and $15.3 million, respectively.
Cash and Cash Equivalents—Cash and cash equivalents are maintained at financial institutions and, at times, balances may
exceed federally insured limits. We have never experienced any losses related to these balances. Insurance coverage on our cash
balances was limited to $250,000 and our cash balances exceed federally insured limits. The majority of payments due from banks for
third party credit card transactions process within two business days. These amounts due are classified as cash and cash
equivalents. Cash and cash equivalents also include demand and time deposits, money market funds and other marketable securities
with maturities of three months or less when acquired.
Accounts Receivable— Accounts receivable are uncollateralized customer obligations due under normal trade terms generally
requiring payment within thirty days from the invoice date. Extended, seasonal dating is frequently available for orders of minimum
quantities or amounts. Trade accounts are stated at the amount management expects to collect from outstanding
balances. Delinquency fees are not assessed. Payments of accounts receivable are allocated to the specific invoices identified on the
customers’ remittance advice. Accounts receivable are carried at original invoice amount less an estimated reserve made for returns
and discounts based on quarterly review of historical rates of returns and expected discounts to be taken. The carrying amount of
accounts receivable is reduced, if needed, by a valuation allowance that reflects management’s best estimate of the amounts that will
not be collected.
Management periodically reviews accounts receivable balances and, based on an assessment of historical bad debts, current
customer receivable balances, age of customer receivable balances, customers’ financial conditions and current economic trends,
estimates the portion of the balance that will not be collected. Management provides for probable uncollectible amounts through a
charge to earnings and a credit to a valuation account based on its assessment of the current status of the individual
accounts. Balances which remain outstanding after management has used reasonable collection efforts are written off through a
charge to the valuation allowance and a credit to trade accounts receivable. Recoveries of trade receivables previously written off are
recorded as income when received.
Inventories—Inventories are stated at the lower of cost or market. Cost is determined using the first-in-first-out method. We
present a portion of our inventory as a noncurrent asset. Occasionally we purchase book inventory in quantities in excess of what will
be sold within the normal operating cycle due to minimum order requirements of our primary supplier. These excess quantities are
included in noncurrent inventory. We estimate noncurrent inventory using the current year turnover ratio by title. All inventory in
excess of 2½ years of anticipated sales is classified as noncurrent inventory.
Inventories are presented net of a valuation allowance. Management has estimated and included an allowance for slow
moving inventory for both current and noncurrent inventory. This allowance is based on management’s analysis of inventory on hand
at February 29, 2016 and February 28, 2015.
26
Property, Plant and Equipment—Property, plant and equipment are stated at cost and depreciated on a straight-line basis over
the estimated useful lives, as follows:
Building
Building improvements
Machinery, equipment
Furniture and fixtures
30 years
10 – 15 years
3 – 15 years
3 years
Capitalized projects that are not placed in service are recorded as in progress and are not depreciated until the related assets
are placed in service.
Income Taxes—We account for income taxes using the liability method. Under this method, deferred tax assets and liabilities
are determined based on the difference between the financial statement and the tax basis of assets and liabilities using the current tax
laws and rates. A valuation allowance is established when necessary to reduce deferred tax assets to the amounts that are “more likely
than not” to be realized.
Revenue Recognition—Sales are recognized and recorded when products are shipped. Products are shipped FOB shipping
point. The UBAM division’s sales are paid at the time the product is ordered. These sales accounted for 83% of net revenues in fiscal
year 2016 and 65% in fiscal year 2015. Sales which have been paid but not shipped are classified as deferred revenue on the balance
sheet.
Allowances for estimated sales returns are recorded as sales are recognized and recorded. Management uses a moving
average calculation to estimate the allowance for sales returns. We are not responsible for product damaged in transit. Damaged
returns are primarily from the retail stores related to damages which occur in the stores, not in shipping to the stores. It is industry
practice to accept returns from wholesale customers. Management has estimated and included a reserve for sales returns of $100,000
as of February 29, 2016 and February 28, 2015.
Transportation revenue represents the amount billed to the customer for shipping the product and is recorded when the
product is shipped.
Advertising Costs—Advertising costs are expensed as incurred. Advertising expenses, included in selling and operating
expenses in the statements of earnings, were $531,500 and $367,300 for the years ended February 29, 2016 and February 28, 2015,
respectively.
Shipping and Handling Costs—We classify shipping and handling costs as operating and selling expenses in the statements of
earnings. Shipping and handling costs were $8,655,600 and $3,719,300 for the years ended February 29, 2016 and February 28, 2015,
respectively.
Interest Expense—Interest related to our outstanding debt is recognized as incurred. Interest expense, classified separately in
the statements of earnings, were $244,900 and $54,000 for the years ended February 29, 2016 and February 28, 2015, respectively.
Earnings per Share—Basic earnings per share (“EPS”) is computed by dividing net earnings by the weighted average number
of common shares outstanding during the period. Diluted EPS is based on the combined weighted average number of common shares
outstanding and dilutive potential common shares issuable which include, where appropriate, the assumed exercise of options. In
computing Diluted EPS, we have utilized the treasury stock method.
27
The computation of weighted average common and common equivalent shares used in the calculation of basic and diluted
earnings per share (“EPS”) is shown below.
Earnings Per Share:
Net earnings applicable to common shareholders
Shares:
Weighted average shares outstanding–basic
Assumed exercise of options
Weighted average shares outstanding–diluted
Diluted Earnings Per Share
Basic
Diluted
Stock options not considered above because they were antidilutive
Year Ended February 29(28),
2016
2015
$
2,119,300 $
859,200
4,049,154
2,524
4,003,702
-
4,051,678
4,003,702
$
$
0.52 $
0.52 $
-
0.21
0.21
10,000
Long-Lived Asset Impairment— We review the value of long-lived assets for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be recoverable based on estimated future cash flows. No
impairment was noted as a result of such review during the years ended February 29, 2016 and February 28, 2015.
Stock-Based Compensation—Share-based payment transactions with employees, such as stock options and restricted stock, are
measured at estimated fair value at date of grant and recognized as compensation expense over the requisite service period, net of
estimated forfeitures.
New Accounting Pronouncements— The Financial Accounting Standards Board (“FASB”) periodically issues new accounting
standards in a continuing effort to improve standards of financial accounting and reporting. We have reviewed the recently issued
pronouncements and concluded that the following recently issued accounting standards apply to us.
In May 2014, FASB issued ASU No. 2014-09, and amended with ASU No. 2015-14 “Revenue from Contracts with
Customers,” which provides a single revenue recognition model which is intended to improve comparability over a range of
industries, companies and geographical boundaries and will also result in enhanced disclosures. The changes are effective for fiscal
years, and interim periods within those years, beginning after December 15, 2017, which means the first quarter of our fiscal year
2019. We are currently reviewing the ASU and assessing the potential impact on our financial statements.
In August 2015, FASB issued ASU No. 2015-15 “Interest—Imputation of Interest,” which modifies the presentation and
subsequent measurement of debt issuance costs associated with line-of-credit arrangements. These changes allow an entity to defer
and present debt issuance costs as an asset and subsequently amortize the deferred debt issuance costs ratably over the term of the
line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. The
changes are effective for financial statements issued for annual periods beginning after December 15, 2015, and interim periods within
those annual periods, which means the first quarter of our fiscal year 2017. We are currently reviewing the ASU and assessing the
potential impact on our financial statements.
In November 2015, FASB issued ASU No. 2015-17, which is intended to improve how deferred taxes are classified on
organizations’ balance sheets by eliminating the current requirement for organizations to present deferred tax liabilities and assets as
current and noncurrent in a classified balance sheet. Instead, organizations will now be required to classify all deferred tax assets and
liabilities as noncurrent. The changes are effective for financial statements issued for annual periods beginning after December 15,
2016, and interim periods within those annual periods, which means the first quarter of our fiscal year 2018. We anticipate this ASU
having minimal impact on our financial statements.
28
In February 2016, FASB issued ASU No. 2016-02, “Leases,” which is intended to establish a comprehensive new lease
accounting model. The new standard clarifies the definition of a lease, requires a dual approach to lease classification similar to
current lease classifications, and causes lessees to recognize leases on the balance sheet as a lease liability with a corresponding right-
of-use asset. The new standard is effective for interim and annual periods beginning after December 15, 2018, which means the first
quarter of our fiscal year 2020. The new standard requires a modified retrospective transition for capital or operating leases existing at
or entered into after the beginning of the earliest comparative period presented in the financial statements. We are currently reviewing
the ASU and evaluating the potential impact on our financial statements.
In March 2016, FASB issued ASU No. 2016-09, “Compensation - Stock Compensation: Improvements to Employee Share-
Based Payment Accounting,” which is intended to simplify several aspects of the accounting for share-based payment transactions,
including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of
cash flows. The new standard is effective for interim and annual periods beginning after December 15, 2016, which means the first
quarter of our fiscal year 2018.We are currently reviewing the ASU and evaluating the potential impact on our financial statements.
2. INVENTORIES
Inventories consist of the following:
Current:
Book inventory
Inventory valuation allowance
Inventories net–current
Noncurrent:
Book inventory
Inventory valuation allowance
Inventories net–noncurrent
3.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
Land
Building
Building improvements
Machinery and equipment
Furniture and fixtures
System installations in progress
Less accumulated depreciation
February 29(28),
2016
2015
17,504,500 $
(25,000)
17,479,500 $
11,206,000
(25,000)
11,181,000
469,000 $
(300,000)
169,000 $
718,900
(368,100)
350,800
February 29(28),
2016
4,107,200 $
20,321,800
2,735,800
2,190,300
85,700
610,000
30,050,800
(3,340,500)
26,710,300 $
2015
250,000
2,124,700
781,600
1,706,400
75,700
200,800
5,139,200
(3,066,000)
2,073,200
$
$
$
$
$
$
On December 1, 2015, we completed the purchase of a new facility to provide larger office and warehouse capacity which
will accommodate the future growth of our operations. The land, building and equipment associated with the facility were purchased
for $23,213,000, which includes $327,000 of transaction costs. Refer to Note 7 and Note 8 for additional information.
29
4. OTHER CURRENT LIABILITIES
Other current liabilities consist of the following:
Accrued royalties
Accrued UBAM trip incentives
Interest payable
Sales tax payable
Other
5. INCOME TAXES
February 29(28),
2016
2015
$
$
578,200 $
705,200
65,000
145,700
238,400
1,732,500 $
368,200
323,700
-
181,000
170,600
1,043,500
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax purposes. The tax effects of significant items
comprising our net deferred tax assets and liabilities as of February 29(28) are as follows:
Current:
Deferred tax assets:
Allowance for doubtful accounts
Inventory overhead capitalization
Inventory valuation allowance
Allowance for sales returns
Accruals
Deferred tax assets-current
Noncurrent:
Deferred tax assets:
Inventory valuation allowance
Capital loss carryforward
Subtotal deferred tax assets
Less valuation allowance
Total net deferred tax assets
Deferred tax liabilities:
Property, plant and equipment
Deferred tax liabilities
$
$
2016
2015
40,000 $
131,000
9,500
38,000
79,700
41,100
86,900
9,500
38,000
74,300
298,200
249,800
114,000 $
163,600
277,600
(163,600)
114,000
143,300
163,600
306,900
(163,600)
143,300
(63,100)
(63,100)
(63,100)
(63,100)
Net deferred tax asset-noncurrent
$
50,900 $
80,200
Management has assessed the evidence to estimate whether sufficient future capital gains will be generated to utilize the
existing capital loss carryforward. As no current expectation of capital gains exists, Management has determined that a valuation
allowance is necessary to reduce the carrying value of deferred tax assets as it is “more likely than not” that such assets are
unrealizable.
30
The amount of the deferred tax asset considered realizable, however, could be adjusted if future capital gains are generated
during the carryforward period which ends February 28, 2019. Management has determined that no valuation allowance is necessary
to reduce the carrying value of other deferred tax assets as it is “more likely than not” that such assets are realizable.
The amount of the deferred tax liability related to property, plant and equipment could be adjusted if a scheduled future cost
segregation analysis, expected to be completed by the end of the second fiscal quarter 2017, results in changes which affect this
liability.
The components of income tax expense are as follows:
Current:
Federal
State
Deferred:
Federal
State
Total income tax expense
February 29(28),
2016
2015
$
$
1,210,900 $
234,800
1,445,700
(16,100)
(3,000)
(19,100)
1,426,600 $
439,200
103,400
542,600
600
100
700
543,300
The following reconciles our expected income tax expense utilizing statutory tax rates to the actual tax expense:
Tax expense at federal statutory rate
Federal income tax audit expense for 2012
State income tax–net of federal tax benefit
Other
Total income tax expense
February 29(28),
2016
1,205,600 $
67,900
158,200
(5,100)
1,426,600 $
2015
476,800
-
73,300
(6,800)
543,300
$
$
We file our tax returns in the U.S. and certain state jurisdictions. We are no longer subject to income tax examinations by tax
authorities for fiscal years before 2013.
Based upon a review of our income tax filing positions, we believe that our positions would be sustained upon an audit and
do not anticipate any adjustments that would result in a material change to our financial position. Therefore, no reserves for uncertain
income tax positions have been recorded. We classify interest and penalties associated with income taxes as a component of income
tax expense on the statement of earnings.
6.
EMPLOYEE BENEFIT PLAN
We have a profit sharing plan that incorporates the provisions of Section 401(k) of the Internal Revenue Code. The 401(k)
plan covers substantially all employees meeting specific age and length of service requirements. Matching contributions are
discretionary and amounted to $51,400 and $44,900 in the fiscal years ended February 29, 2016 and February 28, 2015,
respectively. The 401(k) plan includes an option for employees to invest in our stock, which is purchased from our treasury stock
shares. Shares purchased for the 401(k) plan from Treasury stock amounted to 40,121 net shares and 47,935 net shares in the fiscal
years ended February 29, 2016 and February 28, 2015, respectively.
7. COMMITMENTS
In connection with the purchase of the facility, disclosed in Note 3, we entered into a 15-year lease with the seller, a non-
related third party, who will lease 181,300 square feet, or 45.3% of the facility. The lease is being accounted for as an operating lease.
31
The cost of the leased space upon acquisition was estimated as $10,159,000, which was also the carrying cost as of February
29, 2016. The accumulated depreciation associated with the leased assets as of February 29, 2016, was $88,000. Both the leased assets
and accumulated depreciation are included in property, plant and equipment-net classification in the balance sheet.
The lessee will pay $105,800 per month, with a 2.0% annual increase adjustment on the anniversary of the lease. The lease
terms allow for one five-year extension, which is not a bargain renewal option, at the expiration of the 15-year term. Revenue
associated with the lease is being recorded on a straight-line basis and is reported in Other Income on the statement of earnings.
The following table reflects future minimum rental income payments under the non-cancellable portion of this lease as of
February 29, 2016:
Year ending February 28(29),
2017
2018
2019
2020
2021
Thereafter
Total
$
$
1,275,400
1,301,000
1,327,000
1,353,500
1,380,600
14,992,400
21,629,900
At February 29, 2016, we had outstanding purchase commitments for inventory totaling approximately $18,143,200, which is
due during fiscal year 2017. Of these commitments, $14,370,300 were with Usborne, $3,550,000 with various Kane Miller publishers
and the remaining $223,000 with other suppliers.
Rent expense for the year ended February 29, 2016 was $26,100. As of February 29, 2016, we did not have any lease
commitments in excess of one year.
8. DEBT
Debt consists of the following:
Line of credit
Long-term debt
Less current maturities
Total
February 29(28),
2016
2015
$
$
$
3,331,800 $
1,400,000
18,302,800 $
(615,400)
17,687,400 $
-
-
-
In connection with our purchase of the new facility, disclosed in Note 3, and effective December 1, 2015, we signed a Loan
Agreement with MidFirst Bank (the Bank) including a Term Loan comprised of Tranche A of $13.4 million and Tranche B of $5.0
million both with the maturity date of December 1, 2025. The Loan Agreement also provides a $4.0 million revolving loan (“line of
credit”) through December 1, 2016. Available credit under the line of credit agreement was $668,200 as of February 29,
2016. Tranche A has a fixed interest rate of 4.23% and interest is payable monthly. For Tranche B and the line of credit, interest is
payable monthly at the lesser of the maximum interest rate permitted under the Governing law, or the bank adjusted LIBOR Index
plus 2.75% (3.18% at February 29, 2016). Subsequent to year end, we executed the First amendment to the loan agreement in March
2016, which increased the line of credit to $6.0 million.
32
The Loan Agreement also contains a provision for our use of the Bank’s letters of credit. The Bank agrees to issue, or obtain
issuance of commercial or stand-by letters of credit provided that no letters of credit will have an expiry date later than December 1,
2016, and that the sum of the line of credit plus the letters of credit would not exceed the borrowing base in effect at the time. The
Loan Agreement contains provisions that require us to maintain specified financial ratios, restrict transactions with related parties,
prohibit mergers or consolidation, disallow additional debt, and limit the amount of compensation, salaries, investments, capital
expenditures and leasing transactions. For the year ended February 29, 2016, we had no letters of credit outstanding.
Effective November 18, 2015, we paid off and terminated our previous Credit and Security Agreement with Arvest Bank
which provided a $4.0 million line of credit. We had $1.4 million in borrowings outstanding on the line of credit at February 28,
2015.
The following table reflects aggregate future maturities of long-term debt during the next five fiscal years and thereafter as
follows:
Year ending February 28(29),
2017
2018
2019
2020
2021
Thereafter
$
$
615,400
641,800
667,300
693,800
719,700
14,964,800
18,302,800
9.
CAPITAL STOCK, STOCK OPTIONS AND WARRANTS
The Board of Directors adopted the 2002 Incentive Stock Option Plan (the “2002 Plan”) in June of 2002. The 2002 Plan also
authorized us to grant up to 1,000,000 stock options.
Options granted under the 2002 Plan vest at date of grant and are exercisable up to ten years from the date of grant. The
exercise price on options granted is equal to the market price at the date of grant. Options outstanding at February 29, 2016 expire in
December 2019.
A summary of the status of our 2002 Plan as of February 29, 2016 and February 28, 2015, and changes during the years then
ended is presented below:
Outstanding at
Beginning of Year
Exercised
Expired
February 29(28),
2016
Weighted
Average
Exercise
2015
Weighted
Average
Exercise
Shares
Price
Shares
Price
10,000 $
-
-
5.25
-
-
11,000 $
-
(1,000)
5.68
-
(10.00)
Outstanding at End of Year
10,000
5.25
10,000
5.25
33
At February 29, 2016, all options outstanding are exercisable with an aggregate intrinsic value of $60,900 and weighted-
average remaining contractual terms of options outstanding of 3.8 years.
10. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a summary of the quarterly results of operations for the years ended February 29, 2016 and February 28,
2015.
2016
First quarter
Second quarter
Third quarter
Fourth quarter
Total year
2015
First quarter
Second quarter
Third quarter
Fourth quarter
Total year
Net
Revenues
Basic
Earnings
Gross Margin Net Earnings Per Share
Diluted
Earnings
Per Share
$
$
$
$
9,637,800 $
12,606,800
24,424,200
16,949,500
63,618,300 $
6,064,000 $
8,029,400
17,038,000
11,992,700
43,124,100 $
324,600 $
644,400
1,258,500
(108,200)
2,119,300 $
7,178,300 $
6,808,200
10,936,500
7,625,300
32,548,300 $
4,334,800 $
3,795,100
6,821,700
4,832,800
19,784,400 $
239,700 $
(3,900)
526,400
97,000
859,200 $
0.08 $
0.16
0.31
(0.03)
0.52 $
0.06 $
(0.00)
0.13
0.02
0.21 $
0.08
0.16
0.31
(0.03)
0.52
0.06
(0.00)
0.13
0.02
0.21
11. BUSINESS SEGMENTS
We have two reportable segments: EDC Publishing and Usborne Books & More (“UBAM”) which are business units that
offer different methods of distribution to different types of customers. They are managed separately based on the fundamental
differences in their operations.
·
·
EDC Publishing markets its products to retail accounts, which include book, toy and gift stores, school supply stores and
museums, through commissioned sales representatives, trade and specialty wholesalers and an internal telesales group.
UBAM markets its product line through a nationwide network of independent sales consultants using a combination of home
shows, internet shows, and book fairs. The UBAM division also distributes to school and public libraries.
The accounting policies of the segments are the same as those described in the summary of significant accounting
policies. We evaluate segment performance based on earnings (loss) before income taxes of the segments, which is defined as
segment net sales reduced by direct cost of sales and direct expenses. Corporate expenses, depreciation, interest expense, other
income and income taxes are not allocated to the segments, but are listed in the “other” column. Corporate expenses include the
executive department, accounting department, information services department, general office management and building facilities
management. Our assets and liabilities are not allocated on a segment basis.
34
Information by industry segment for the years ended February 29, 2016 and February 28, 2015 is set forth below:
NET REVENUES
Publishing
UBAM
Other
Total
Publishing
UBAM
Other
Total
2016
10,831,400 $
52,786,900
-
63,618,300 $
2015
11,532,500
21,015,800
-
32,548,300
$
$
EARNINGS (LOSS) BEFORE INCOME TAXES
2016
3,305,300 $
7,336,200
(7,095,600)
3,545,900 $
2015
3,452,800
2,456,300
(4,506,600)
1,402,500
$
$
12.
STOCK REPURCHASE PLAN
In April 2008, the Board of Directors authorized us to purchase up to an additional 500,000 shares of our common stock
under the plan initiated in 1998. This plan has no expiration date. During fiscal year 2016, we purchased 163 shares of common stock
at an average price of $9.82 per share totaling approximately $1,600. The maximum number of shares that may be repurchased in the
future is 303,152.
13. FAIR VALUE MEASUREMENTS
The valuation hierarchy included in U.S. GAAP considers the transparency of inputs used to value assets and liabilities as of
the measurement date. The less transparent or observable the inputs used to value assets and liabilities, the lower the classification of
the assets and liabilities in the valuation hierarchy. A financial instrument’s classification within the valuation hierarchy is based on
the lowest level of input that is significant to its fair value measurement. The three levels of the valuation hierarchy and the
classification of our financial assets and liabilities within the hierarchy are as follows:
Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability
to access at the measurement date.
Level 2 - Observable inputs other than quoted prices included within Level 1 for the asset or liability, either directly or
indirectly. If an asset or liability has a specified term, a Level 2 input must be observable for substantially the full term of the asset or
liability.
Level 3 - Unobservable inputs for the asset or liability.
We do not report any assets or liabilities at fair value in the financial statements. However, the estimated fair value of our
line of credit is estimated by management to approximate the carrying value of $3,331,800 and $1,400,000 at February 29, 2016 and
February 28, 2015, respectively, the estimated fair value of our term note payable is estimated by management to approximate
$18,078,300 at February 29, 2016 and $0 February 28, 2015, respectively. Management’s estimates are based on the obligations’
characteristics, including floating interest rate, maturity, and collateral. Such valuation inputs are considered a Level 2 measurement
in the fair value valuation hierarchy.
14. SUBSEQUENT EVENT
On March 18, 2016, we paid the previously declared $0.09 dividend per share to shareholders of record as of March 11,
2016.
35
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in Registration Statements No. 33-60188 and 333-100659 of Educational Development
Corporation on Form S-8 of our report dated May 26, 2016, appearing in this Annual Report on Form 10-K of Educational
Development Corporation for the year ended February 29, 2016.
/s/ HoganTaylor LLP
Tulsa, Oklahoma
May 26, 2016
Exhibit 31.1
I, Randall W. White, certify that:
CERTIFICATION
1.
2.
3.
4.
a.
b.
c.
d.
5.
a.
b.
I have reviewed this Annual Report on Form 10-K of Educational Development Corporation;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined
in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the period in which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles;
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on
such evaluation; and
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons
performing the equivalent functions):
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information;
and
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: May 26, 2016
/s/ Randall W. White
Chairman of the Board, President
and Chief Executive Officer
Exhibit 31.2
I, Marilyn Pinney, certify that:
CERTIFICATION
1.
2.
3.
4.
a.
b.
c.
d.
5.
a.
b.
I have reviewed this Annual Report on Form 10-K of Educational Development Corporation;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined
in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the period in which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles;
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on
such evaluation; and
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons
performing the equivalent functions):
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information;
and
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: May 26, 2016
/s/ Marilyn Pinney
Controller and Corporate Secretary
(Principal Financial and Accounting Officer)
Exhibit 32.1
Certification Pursuant to 18 U.S.C. Section 1350,
as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
In connection with the Annual Report of Educational Development Corporation (the “Company”) on Form 10-K for the
period ending February 29, 2016, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the
undersigned certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13 (a) or 15 (d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
Date: May 26, 2016
By /s/ Randall W. White
Randall W. White
President and Chief Executive Officer
Date: May 26, 2016
By /s/ Marilyn Pinney
Marilyn Pinney
Controller and Corporate Secretary
(Principal Financial and Accounting Officer)
Financial Highlights
Fiscal Years ended February 29 (28)
Financial Information
Net revenues
2016
$ 63,618,300
Earnings before income taxes
$ 3,545,900
Net earnings
$ 2,119,300
2015
$ 32,548,300
$ 1,402,500
$
859,200
Total
$ 63,618,300
$ 32,548,300
Business Segments
Net Revenues
EDC Publishing
Usborne Books & More
Earnings per share:
Basic and Diluted
Capital expenditures
Total assets
Shareholders’ equity
Common Stock
Cash dividends paid
Book value at year end
Market price range:
High Close
Low Close
Market price at year end
$ 10,831,400
$ 52,786,900
$ 11,532,500
$ 21,015,800
$
0.52
$
0.21
$ 24,911,600
$ 49,695,000
$ 13,229,500
$
325,000
$ 18,013,200
$ 12,328,300
$
$
$
$
$
0.34
3.25
16.97
3.97
11.34
$
$
$
$
$
0.32
3.06
5.80
3.57
4.31
Shares outstanding at year end
4,064,610
4,024,539
DIRECTORS
CORPORATE DATA
John A. Clerico
Co-founder and Chairman
ChartMark Investments, Inc.
Ronald T. McDaniel
Retired Vice President - Sales
Educational Development Corporation
Kara Gae Neal
Director, School of Urban Education
The University of Tulsa
Betsy Richert
Media Specialist
Tulsa Public Schools
Randall W. White
Chairman, President and
Chief Executive Officer – EDC
OFFICERS
Randall W. White
Chairman, President and
Chief Executive Officer
Marilyn Pinney
Controller and Corporate Secretary
Craig M. White
Vice President - Information Systems
Notice of Annual Meeting
July 19, 2016, 10:00 a.m.
Educational Development Corporation
Executive Conference Room
5402 E.122nd East Avenue
Tulsa, Oklahoma
Form 10-K
Educational Development Corporation’s
Form 10-K filed with the Securities and
Exchange Commission is available upon
request. Write to:
Randall W. White, President
Educational Development Corporation
5402 E.122nd East Avenue
Tulsa, Oklahoma, 74146
Transfer Agent
American Stock Transfer and Trust Company
New York, New York
Auditors
HoganTaylor LLP
Tulsa, Oklahoma
Corporate Offices
5402 E.122nd East Avenue
Tulsa, Oklahoma, 74146-2230
Phone (918) 622-4522
Fax (918) 665-7919
www.edcpub.com
n ual
Repo rt
A n
2
0
1
6
5402 S. 122nd East Avenue • Tulsa, Oklahoma 74146-2230
Educational Development
Corporation