AEDU - .40 x .43
The American Education Corporation Announces Significant Improvements in 2003 Profitability and Cash Flows from Operations
Wednesday March 31, 2:18 pm ET
OKLAHOMA CITY--(BUSINESS WIRE)--March 31, 2004--The American Education Corporation (OTCBB:AEDU - News) today announced a significant improvement in net profits from operations to $173,577 for the year ended December 31, 2003, compared to a consolidated net loss of $761,884 reported for the prior fiscal year. These results provide for earnings of approximately $0.01 per common share versus a loss of $0.05 per share reported for fiscal 2002. Net consolidated revenues increased 1% from $8,483,160 in fiscal 2002 to $8,598,868 for the 2003 fiscal year. Revenues for the core Oklahoma City-based operations increased 28% year-over-year, achieving a new fiscal year record. The Company's subsidiary operations in New Jersey and the UK negatively impacted top-line consolidated revenue growth and earnings, with a decline in total subsidiary revenues of approximately $1,500,000 and cumulative losses of $500,000 in 2003. As a result of strategic management initiatives implemented in 2003, this performance by the subsidiaries represents an improvement in results over the prior fiscal year.
The Company increased operating cash flows 284% on a consolidated basis, with EBITDA for fiscal 2003 at $2,153,306 versus $561,233 reported for the prior year. During 2003, total operating expenses declined 8% from $7,241,112 to $6,692,057 compared to the prior year. The improvement in EBITDA is in spite of the operating losses experienced by the Company's Learning Pathways and Dolphin, Inc., subsidiaries. These subsidiaries were operated under a directive to de-emphasize revenue growth and minimize the costs and cash impact on AEC's consolidated results of operations. As a result, 2003 costs were reduced by approximately $1,400,000 over the prior year's levels. Both business units have entered 2004 well positioned, with the potential to begin to contribute to overall, consolidated corporate 2004 financial performance.
The AEC core business unit posted record revenues of $7,343,583 for fiscal 2003, a 28% increase over 2002 revenues of $5,745,346. Fourth quarter AEC revenues grew 43% over the comparable 2002 period, also establishing a new, historical record for this quarterly period. Annual operating margins increased 778% from $149,701 to $1,313,836 over the prior fiscal year. Core AEC software publishing gross margins were approximately 96% of net revenues, an improvement of 1% over the prior year.
Consolidated net revenues for the fourth quarter ended December 31, 2003, increased 36% to $1,960,609 compared with $1,445,006 reported in 2002, establishing a new historical fourth quarter revenue record. Normally the fourth quarter is the seasonally lowest quarterly revenue period for both the Company and the industry sector and is often a quarter where losses are reported. Consolidated revenues and earnings for the quarter were adversely affected by difficulties experienced by the subsidiaries during the quarter as well as by a one-time adjustment for corporate taxes approximating $50,000. The AEC core business unit grew at 43%, establishing a new revenue record in the closing quarter while generating net profits of approximately $57,000. Conversely, the combined revenues for the two subsidiaries declined 11% in the fourth quarter as compared to the same quarter of 2002, offsetting strong AEC gains.
The Company's financial position strengthened based on the results of operations at December 31, 2003. Total assets increased 5% from $9,317,066 to $9,810,546 at December 31, 2003, while working capital significantly improved to $782,983 compared to a working capital deficit of $571,256 at December 31, 2002. Current assets increased by 30%, while current liabilities declined by 19%. The Company and its lender recently agreed to extend the maturity of its bank lines of credit until March and November of 2005. A portion of the Company's bank debt under its lines of credit is now classified as long-term debt. During the year ended December 31, 2003, debt due to financial institutions was reduced by $424,317, or 36%, reflecting bank indebtedness of $750,933 at December 31, 2003. Shareholders' equity decreased 2% from $5,811,508 to $5,711,287 as a result of adjustments to treasury stock.
Commenting on the Company's 2003 results, Jeffrey E. Butler, Chief Executive Officer of the Company, stated, "We are pleased that the programs we initiated early in 2003 were effective in counteracting a still difficult industry funding climate and enabled us to establish new revenue records in our core business. The Company appears to be back on its way to the industry-leading financial performance levels that were posted in 2000 with respect to operating margins and cash flow. The Company's strong fiscal 2003 results have enabled AEC to work through a difficult financial situation, including the reestablishment of its commercial banking relations to a status that is now viewed as favorable by management. Throughout 2003, the Company provided guidance that state budget difficulties have curtailed, deferred or delayed funding to the school marketplace. While this issue is still of concern, it underscores the quality of our reported results," Butler said.
"Throughout 2003, AEC has continued to invest in the critical content and technology development programs essential to the future competitiveness of the business. A number of additions and updates to the Company's comprehensive K-12 content and data management tools associated with the A+nyWhere Learning System® software product family were released during the year. In addition, the Company completed conversion of all K-12 content to the Macintosh platform late in the year, resulting in an important new product offering, which should provide for incremental growth opportunities in 2004. Many of the new reporting features now incorporated into all company products will become increasingly important to maintaining growth as schools move to conform to new assessment, testing and annual reporting requirements mandated by the federal No Child Left Behind Act of 2001 initiative. The Company also released a major new product family, A+dvancer Learning System(TM), an online diagnostic, prescriptive assessment and remedial content offering aligned to the College Board's market-leading ACCUPLACER®OnLine post-secondary admissions test. This new product family, launched in the last half of the year, is receiving good initial acceptance and should make significant contributions to both growth and earnings in 2004 and beyond. The Company is now positioned with what is believed to be an industry-leading capability to deliver its significantly expanded K-12 and post-secondary content offering in a LAN, WAN or Internet-based environment to all relevant operating systems, platforms and databases.
"Our overall 2003 results included larger order size metrics, two record quarterly performances, and the strongest potential transaction backlog in the Company's history," Butler said. "Considering our significant new products, updated product functionality, expanded marketing programs and brand recognition that converged in the last half of the year, we believe AEC is in a strong starting position for 2004. In addition, the subsidiaries have been repositioned to not materially affect consolidated earnings, which should also bode well for continued consolidated financial performance.
"Finally, the preliminary 2004 first quarter results for our AEC business unit appear to be on target to hit planned performance levels, providing a good foundation for the year. This foundation, combined with the overall strength in AEC's competitive posture, should better position the Company to improve upon its 2003 financial performance."
The Company's Java-based technology, the A+nyWhere Learning System Versions 3.0 and 4.0 of educational software products, provides for an integrated offering of grade levels 1-12 software for Reading, Mathematics, Language Arts, Science, Writing, History, Government, Economics and Geography. In addition, the Company provides assessment testing and instructional content for the General Educational Development (GED) test. All company products are designed to provide for LAN, WAN and Internet delivery options and support Windows, UNIX and Macintosh platforms. The Company has developed a computer adaptive, companion academic skill assessment testing tool to provide educators with the resources to more effectively use the Company's curriculum content aligned to important state and national academic standards. Spanish-language versions are available for Mathematics and Language Arts for grade levels 1-8. The Company's curriculum content is aligned to the other third party digital resources such as the World Book Multimedia Encyclopedia and GoKnow's scientifically based, Internet accessible curriculum and reference materials, which may be accessed directly from A+LS lessons. The A+LS comprehensive family of educational software is now in use in over 11,000 schools, centers of adult literacy, colleges and universities, and correctional institutions in the U.S., UK and other international locations. A+dvancer, the Company's new diagnostic, prescriptive test and online developmental curriculum offering, is aligned to ACCUPLACER On-Line, the leading college admissions test for students requiring developmental support to enroll in full credit secondary coursework in mathematics, reading, algebra and writing.
Note: Certain matters discussed above concerning the future performance of the Company are forward-looking statements intended to qualify for the safe harbors from liabilities established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified as such by words such as "believes," "anticipates," "plans," "expects" or words of similar import. The future performance of the Company is subject to a number of factors including, but not limited to, general economic conditions, competitive activity and funding available to schools.
THE AMERICAN EDUCATION CORPORATION
7506 BROADWAY EXTENSION
OKLAHOMA CITY, OK 73116
1-800-34APLUS
www.amered.com
-0-
Statement of Operations
Three Months Ended Three Months Ended
December 31, 2003 December 31, 2002 %
(unaudited) (unaudited) Change
-------------------- -------------------- --------
Sales $1,960,609 $1,445,006 36%
Operating (loss) (307,181) (877,545) 65%
Net (loss) (228,789) (762,218) 70%
Earnings per share
- primary (.016) (.053) 70%
diluted (.015) (.053) 72%
EBITDA $117,110 $(454,420) (a)
Twelve Months Ended Twelve Months Ended
December 31, 2003 December 31, 2002 %
(audited) (audited) Change
-------------------- -------------------- --------
Sales $8,598,868 $8,483,160 1%
Operating income (loss) 535,901 (792,855) (a)
Net income (loss) 173,577 (761,884) (a)
Earnings per share
- primary .012 (.053) (a)
diluted .011 (.053) (a)
EBITDA $2,153,306 $561,233 284%
Balance Sheet Data
December 31, December 31,
2003 2002 %
(audited) (audited) Change
-------------------- -------------------- --------
Current Assets $3,293,259 $2,529,246 30%
Total Assets 9,810,546 9,317,066 5%
Current Liabilities 2,510,276 3,100,502 (19%)
Stockholders' Equity 5,711,287 5,811,508 (2%)
(a) Not Meaningful
--------------------------------------------------------------------------------
Contact:
The American Education Corporation
Jeffrey E. Butler, 800-34APLUS or 800-222-2811
jeb@amered.com
www.amered.com
or
Halliburton Investor Relations
Geralyn DeBusk, 972-458-8000
--------------------------------------------------------------------------------
Source: The American Education Corporation |
