The Aristotle Corporation Announces 2009 Third Quarter and Nine Month Results

The Aristotle Corporation (NASDAQ: ARTL; ARTLP) announced today its results of operations for the third quarter and nine months ended September 30, 2009.

Net earnings applicable to common stockholders for the first nine months of 2009 were $8.3 million, or $.46 per diluted common share, compared to $12.0 million, or $.67 per diluted common share, for the comparable nine months of 2008. Pursuant to a final settlement with the Internal Revenue Service of an audit previously reported by the Company, the nine months ended September 30, 2009 includes additional Federal income taxes of $.5 million and $1.0 million for the 2006 and 2007 tax years, respectively, plus approximately $.1 million of interest, related to a partial disallowance of the Company’s historical Federal net operating tax losses that were utilized. Such amounts reduced net income for the nine months ended September 30, 2009 by approximately $.09 per diluted common share. For the third quarter ended September 30, 2009, net earnings applicable to common stockholders were $4.8 million, or $.27 per diluted common share, compared to $4.7 million, or $.26 per diluted common share, in the third quarter of 2008. An adjustment to the initial IRS settlement reduced the Federal tax expense by $.3 million and the related interest expense by $.1 million, or approximately $.02 per diluted common share, in the three and nine months ended September 30, 2009. No additional taxes were due for any years prior to 2006.

In the nine months ended September 30, 2009, net sales decreased 7.8% to $158.9 million from $172.2 million in the nine months ended September 30, 2008. Earnings from operations decreased by 11.5% in the first nine months of 2009 to $26.8 million, or 16.9% of net sales. In the first nine months of 2008, earnings from operations totaled $30.3 million (including a $.7 million insurance recovery), or 17.6% of net sales. In the third quarter of 2009, net sales decreased 5.9% to $61.1 million from $65.0 million in the third quarter of 2008. Earnings from operations decreased by 2.6% in the third quarter of 2009 to $11.4 million, or 18.6% of net sales. In the same quarter of 2008, earnings from operations totaled $11.7 million, or 17.9% of net sales.

About Aristotle

The Aristotle Corporation, founded in 1986, and headquartered in Stamford, CT, is a leading manufacturer and global distributor of educational, health, medical technology and agricultural products. A selection of over 80,000 items is offered, primarily through 50 separate catalogs carrying the brand of Nasco (founded in 1941), as well as those bearing the brands of Life/Form®, Whirl-Pak®, Simulaids, Triarco, Spectrum Educational Supplies, Hubbard Scientific, Scott Resources, Haan Crafts, CPR Prompt®, Ginsberg Scientific and Summit Learning. Products include educational materials and supplies for substantially all K-12 curricula, molded plastics, biological materials, medical simulators, health care products and items for the agricultural, senior care and food industries. Aristotle has approximately 850 full-time employees at its operations in Fort Atkinson, WI, Modesto, CA, Fort Collins, CO, Plymouth, MN, Saugerties, NY, Chippewa Falls, WI, Otterbein, IN and Newmarket, Ontario, Canada.

There are 18.0 million shares outstanding of Aristotle common stock (NASDAQ: ARTL) and 1.1 million shares outstanding of Series I preferred stock (NASDAQ: ARTLP); there are also 11.0 million privately-held shares outstanding of Series J preferred stock. Aristotle has about 3,600 stockholders of record.

Further information about Aristotle can be obtained on its website, at aristotlecorp.net.

Safe Harbor under the Private Securities Litigation Reform Act of 1995

To the extent that any of the statements contained in this release are forward-looking, such statements are based on current expectations that involve a number of uncertainties and risks that could cause actual results to differ materially from those projected or suggested in such forward-looking statements. Aristotle cautions investors that there can be no assurance that actual results or business conditions will not differ materially from those projected or suggested in such forward-looking statements as a result of various factors, including, but not limited to, the following: (i) the ability of Aristotle to obtain financing and additional capital to fund its business strategy on acceptable terms, if at all; (ii) the ability of Aristotle on a timely basis to find, prudently negotiate and consummate additional acquisitions; (iii) the ability of Aristotle to manage any to-be acquired businesses; (iv) there is not an active trading market for the Company’s securities and the stock prices thereof are highly volatile, due in part to the relatively small percentage of the Company’s securities which is not held by the Company’s majority stockholder and members of the Company’s Board of Directors and management; and (v) other factors identified in Item 1A, Risk Factors, contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008. As a result, Aristotle’s future development efforts involve a high degree of risk. For further information, please see Aristotle’s filings with the Securities and Exchange Commission, including its Forms 10-K, 10-K/A, 10-Q and 8-K.

THE ARISTOTLE CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except share and per share data) (Unaudited)
					Three Months Ended							Nine Months Ended
					September 30,							September 30,
					2009			2008				2009			2008
Net sales				$	61,128			64,976				158,854			172,202
Cost of sales					37,089			40,123				95,440			105,116
Gross profit					24,039			24,853				63,414			67,086
Selling and administrative expense					12,669			13,178				36,607			36,795
Earnings from operations					11,370			11,675				26,807			30,291
Other (expense) income:
Interest expense					(104	)		(260	)			(733	)		(833	)
Other, net					167			(428	)			448			162
					63			(688	)			(285	)		(671	)
Earnings before income taxes					11,433			10,987				26,522			29,620
Income tax expense (benefit):
Current					4,371			4,234				11,616			10,568
Deferred					95			(109	)			156			564
					4,466			4,125				11,772			11,132
Net earnings					6,967			6,862				14,750			18,488
Preferred dividends					2,155			2,155				6,467			6,467
Net earnings applicable to common stockholders				$	4,812			4,707				8,283			12,021
Earnings per common share:
Basic				$	.27			.26				.46			.67
Diluted				$	.27			.26				.46			.67
Weighted average common shares outstanding:
Basic					17,962,875			17,962,875				17,962,875			17,962,209
Diluted					17,962,875			17,968,921				17,962,875			17,971,305

THE ARISTOTLE CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands)
Assets					September 30, 2009			December 31, 2008			September 30, 2008
					(unaudited)						(unaudited)
Current assets:
Cash and cash equivalents				$	29,690			15,290			7,138
Marketable securities					4,220			4,437			2,480
Investments					2,996			2,876			21,991
Accounts receivable, net					24,065			14,048			26,175
Inventories, net					39,716			44,653			42,388
Prepaid expenses and other					4,478			8,542			4,000
Income tax receivable					-			5,396			-
Deferred income taxes					4,070			4,644			1,788
Total current assets					109,235			99,886			105,960
Property, plant and equipment, net					27,530			27,808			28,429
Goodwill					14,162			13,712			14,186
Deferred income taxes					6,668			6,668			5,646
Investments					4,318			4,318			4,318
Other assets					1,127			884			817
Total assets				$	163,040			153,276			159,356
Liabilities and Stockholders' Equity
Current liabilities:
Current installments of long-term debt				$	309			294			299
Trade accounts payable					7,820			9,576			9,331
Accrued expenses					12,907			11,641			7,537
Income taxes					2,057			-			184
Accrued dividends payable					-			2,156			-
Total current liabilities					23,093			23,667			17,351
Long term debt, less current installments					10,126			10,364			10,434
Long term pension obligations					5,587			5,891			2,115
Other long term accruals					2,489			2,467			2,458
Stockholders' equity:
Preferred stock, Series I					6,489			6,489			6,489
Preferred stock, Series J					65,760			65,760			65,760
Common stock					180			180			180
Additional paid-in capital					7,690			7,690			7,685
Retained earnings					43,262			34,979			46,985
Accumulated other comprehensive loss					(1,636	)		(4,211	)		(101	)
Total stockholders' equity					121,745			110,887			126,998
Total liabilities and stockholders' equity				$	163,040			153,276			159,356