Educational Development Corp. has a market cap of $21.7 million; its shares were traded at around $5.5999 with a P/E ratio of 11.5 and P/S ratio of 0.8. The dividend yield of Educational Development Corp. stocks is 8.5%. Educational Development Corp. had an annual average earning growth of 4% over the past 10 years.EDUC is in the portfolios of Jim Simons of Renaissance Technologies LLC.
Highlight of Business Operations:Cost of sales increased 0.9% for the three months ended May 31, 2010 when compared with the three months ended May 31, 2009. Cost of sales as a percentage of gross sales was 26.4% for the three months ended May 31, 2010 and for the three months ended May 31, 2009 was 26.3%. Cost of sales is the inventory cost of the product sold, which includes the cost of the product itself and inbound freight charges. Purchasing and receiving costs, inspection costs, warehousing costs, and other costs of our distribution network are included in operating and selling expenses, not in cost of sales. These costs totaled $293,500 in the quarter ended May 31, 2010 and $286,500 in the quarter ended May 31, 2009.
For the three months ended May 31, 2010, we experienced a positive cash flow from operating activities of $560,700. Cash flow from operating activities resulted from net income after taxes of $188,200, a decrease in inventory of $1,022,700 and a change in taxes receivable/payable of $113,600, offset by a decrease in current liabilities of $936,100 and an increase in prepaid expenses of $7,700.
For the three months ended May 31, 2010, cash used in financing activities was $574,700 from dividend payments of $466,400 and the purchase of $165,200 of treasury stock, offset by the sale of $56,900 in treasury stock.
Effective June 30, 2010 we signed a Twelfth Amendment to the Credit and Security Agreement with Arvest Bank which provided a reduced $2,500,000 line of credit through June 30, 2011. Interest is payable monthly at the greater of (a) prime-floating rate minus 0.75% or (b) 5.00%. At May 31, 2010, the rate in effect was 5.00%. Borrowings are collateralized by substantially all the assets of the Company. At May 31, 2010 the Company had no debt outstanding under this agreement. Available credit under the revolving credit agreement was $2,500,000 at May 31, 2010.
Management continually estimates and calculates the amount of non-current inventory. Non-current inventory arises due to occasionally purchasing 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. Non-current 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, before valuation allowance, were $946,000 at May 31, 2010 and $989,000 at February 28, 2010.
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 managements identification of slow moving inventory on hand. Management has estimated a valuation allowance for both current and noncurrent inventory of $351,500 and $355,000 as of May 31, 2010 and February 28, 2010, respectively.
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