SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): NOVEMBER 1, 2006

THE ARISTOTLE CORPORATION

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE	0-14669	06-1165854
(STATE OR OTHER JURISDICTION	(COMMISSION FILE	(I.R.S. EMPLOYER
OF INCORPORATION)	NUMBER)	IDENTIFICATION NO.)

96 CUMMINGS POINT ROAD, STAMFORD, CONNECTICUT

 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

06902

(ZIP CODE)

(203) 358-8000

(REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Page 1 of 2 Pages

Page 2 of 2 Pages

Item 2.02 Results of Operations and Financial Condition.

On November 1, 2006, The Aristotle Corporation issued a press release announcing financial results for the quarter ended September 30, 2006, a copy of which is attached as Exhibit 99.1.

Item 9.01 Financial Statements and Exhibits

(d)

Exhibits

Exhibit 99.1 - Press release of The Aristotle Corporation, dated November 1, 2006.

The information in this Form 8-K and the Exhibit attached hereto shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, unless expressly set forth by specific reference in such filing.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

THE ARISTOTLE CORPORATION
	(Registrant)
By:  /s/  H. William Smith
Name:  H. William Smith
Title:    Vice President, General Counsel
	and Secretary

  

Date: November 1, 2006

EXHIBITS

Exhibit 99.1 Press release issued November 1, 2006.

Exhibit 99.1

For Immediate Release

News Release

Contacts:

Bill Smith or Dean Johnson

The Aristotle Corporation

Phone: (203) 358-8000 or (920) 563-2446

Fax: (203) 358-0179 or (920) 563-0234

wsmith@ihc-geneve.com

int@enasco.com

The Aristotle Corporation Announces

2006 Third Quarter and Nine Month Results

Stamford, CT, November 1, 2006 - The Aristotle Corporation (NASDAQ: ARTL; ARTLP) announced today its results of operations for the third quarter and nine months ended September 30, 2006.

For the three months ended September 30, 2006, net sales increased 5.5% to $61.8 million from $58.6 million in the third quarter of 2005, and earnings before income taxes increased 13.2% to $11.4 million from $10.1 million.  For the nine months ended September 30, 2006, net sales increased 7.3% to $161.5 million from $150.6 million for the nine months ended September 30, 2005, and earnings before income taxes increased 16.2% to $26.9 million from $23.1 million.

Net earnings applicable to common stockholders in the third quarter of 2006 were $5.5 million, or $.32 per diluted common share, versus $4.0 million, or $.23 per diluted common share, in the third quarter of 2005. Net earnings applicable to common stockholders for the first nine months of 2006 were $10.7 million, or $.61 per diluted common share, compared to $7.7 million, or $.44 per diluted common share, for the comparable nine months of 2005. Net earnings applicable to common stockholders in each of the three and nine month periods of 2006 were favorably impacted by approximately $.4 million (or $.02 per diluted common share) as a net result of (i) a decrease in the valuation allowance that was established to reflect the estimate of Aristotle’s Federal net operating tax loss carryforwards (“NOL’s”) that were expected to expire unutilized at December 31, 2006 and (ii) expenses incurred by the Company in connection with Geneve Corporation’s merger proposal which was withdrawn on September 18, 2006.

In the quarter ended September 30, 2006, the valuation allowance was reduced by $.7 million to $5.8 million.  The change in the valuation allowance, related to the projected utilization of NOL’s, was due primarily to current estimates of 2006 taxable income, driven in large part by the Company’s third quarter results.  No change in the valuation allowance had been made in the quarter and nine months ended September 30, 2005.  

The reported net earnings are shown after deduction for Federal, state and foreign income tax provisions.  Approximately $3.4 million and $3.0 million in deferred income tax expense in the 2006 and 2005 third quarters, respectively, relate to the non-cash charge for utilization of NOL’s.  For the first nine months of 2006 and 2005, respectively, $7.9 million and $7.0 million of the reported deferred income tax expense relate to current year NOL utilization.  The NOL utilization for the reported quarters and year-to-date periods substantially eliminated Aristotle’s current Federal income tax liability and allowed Aristotle to retain for other business purposes the cash that would have been used for tax payments.  Except for Federal alternative minimum tax obligations arising from limitations on the utilization of the NOL’s, Aristotle anticipates that the utilization of available NOL’s will offset its Federal taxable income through 2006.  At September 30, 2006, the Condensed Consolidated Balance Sheet contains a net deferred tax asset of $7.3 million, of which $2.9 million relates to the NOL’s.

Steven B. Lapin, Aristotle’s President and Chief Operating Officer, stated, “Further to the excellent reported third quarter numbers for the Company’s peak season, which continued the favorable results of the first six months, the 5.5% organic revenue growth produced EBITDA of $11.8 million, which reflects a 9.4% increase over EBITDA for the quarter ended September 30, 2005.  In major part, the earnings growth was achieved through careful management of gross margins, including prudent purchasing practices and strategic pricing structures designed to provide unsurpassed value and service to our customers.”

 

Dean T. Johnson, Aristotle’s Chief Financial Officer, added, “Excluding the effect of the adjustment to the NOL valuation at September 30, 2006, earnings per diluted common share for the quarter ended September 30, 2006 still increased more than 20% compared to the third quarter of 2005.”  

In providing EBITDA information, Aristotle offers a non-GAAP financial measure to complement its condensed consolidated financial statements presented in accordance with GAAP.  This non-GAAP financial measure is intended to supplement the reader’s overall understanding of the Company’s current financial performance.  However, this non-GAAP financial measure is not intended to supercede or replace Aristotle’s GAAP results.  A reconciliation of the non-GAAP results to the GAAP results is provided in the “Reconciliation of GAAP Net Earnings to EBITDA” schedule below.  EBITDA is defined as earnings before income taxes, interest expense, other income and expense, depreciation and amortization.

About Aristotle

The Aristotle Corporation, founded in 1986, and headquartered in Stamford, CT, is a leading manufacturer and global distributor of educational, health, medical technology and agricultural products.  A selection of over 80,000 items is offered, primarily through more than 45 separate catalogs carrying the brand of Nasco (founded in 1941), as well as those bearing the brands of Life/Form®, Whirl-Pak®, Simulaids, Triarco, Spectrum Educational Supplies, Hubbard Scientific, Scott Resources, Haan Crafts, To-Sew, CPR Prompt®, Ginsberg Scientific and Summit Learning.  Products include educational materials and supplies for substantially all K-12 curricula, molded plastics, biological materials, medical simulators, health care products and items for the agricultural, senior care and food industries.  Aristotle has approximately 800 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 approximately 17.3 million shares outstanding of Aristotle common stock (NASDAQ: ARTL) and approximately 1.1 million shares outstanding of 11%, cumulative, convertible, voting Series I preferred stock  (NASDAQ: ARTLP); there are also approximately 11.0 million privately-held shares outstanding of 12%, cumulative, non-convertible, non-voting Series J preferred stock. Aristotle has about 4,000 stockholders of record.  

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

Safe Harbor under the Private Securities Litigation Reform Act of 1995

 

To the extent that any of the statements contained in this release are forward-looking, such statements are based on current expectations that involve a number of uncertainties and risks that could cause actual results to differ materially from those projected or suggested in such forward-looking statements.  Aristotle cautions investors that there can be no assurance that actual results or business conditions will not differ materially from those projected or suggested in such forward-looking statements as a result of various factors, including, but not limited to, the following: (i) the ability of Aristotle to obtain financing and additional capital to fund its business strategy on acceptable terms, if at all; (ii) the ability of Aristotle on a timely basis to find, prudently negotiate and consummate additional acquisitions; (iii) the ability of Aristotle to manage any to-be acquired businesses; (iv) there is not an active trading market for the Company’s securities and the stock prices thereof are highly volatile, due in part to the relatively small percentage of the Company’s securities which is not held by the Company’s majority stockholder and members of the Company’s Board of Directors and management;  (v) the ability of Aristotle to retain and utilize its Federal net operating tax loss carryforward position; and (vi) other factors identified in Item 1A, Risk Factors, contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2005.  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,
								2006		2005			2006		2005
Net sales							$	61,843		58,626			161,488		150,559
Cost of sales								38,516		37,222			100,167		93,845
					Gross profit			23,327		21,404			61,321		56,714
Selling and administrative expense								12,000		11,060			34,441		32,848
					Earnings from operations			11,327		10,344			26,880		23,866
Other (expense) income:
			Interest expense					(413)		(369)			(1,361)		(1,022)
			Interest income					18		11			20		23
			Other, net					507		116			1,335		259
								112		(242)			(6)		(740)
					Earnings before income taxes			11,439		10,102			26,874		23,126
Income tax expense:
			Current					1,215		1,064			2,970		2,286
			Deferred					2,531		2,846			6,750		6,665
								3,746		3,910			9,720		8,951
						Net earnings		7,693		6,192			17,154		14,175
Preferred dividends								2,158		2,160			6,476		6,476
					Net earnings applicable to common stockholders		$	5,535		4,032			10,678		7,699
Earnings per common share:
			Basic				$	.32		.23			.62		.45
			Diluted				$	.32		.23			.61		.44
Weighted average common shares outstanding:
			Basic					17,269,846		17,164,155			17,261,961		17,154,462
			Diluted					17,529,652		17,422,089			17,511,332		17,404,363

RECONCILIATION OF GAAP NET EARNINGS TO EBITDA

(in thousands)

(unaudited)

				Three Months Ended				Nine Months Ended
				September 30,				September 30,
				2006		2005		2006		2005
	Net earnings		$	7,693		6,192		17,154		14,175
	Add:
		Income tax expense		3,746		3,910		9,720		8,951
		Interest expense		413		369		1,361		1,022
		Other (income) expense		(525)		(127)		(1,355)		(282)
		Depreciation and amortization		511		472		1,406		1,362
	EBITDA		$	11,838		10,816		28,286		25,228

THE ARISTOTLE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 (in thousands)

Assets				September 30,  2006		December 31, 2005		September 30,   2005
				(unaudited)				(unaudited)
Current assets:
	Cash and cash equivalents Investments		$	3,306 14,172		1,803 12,856		3,011 6,019
	Accounts receivable, net			27,261		14,530		25,013
	Inventories, net			36,296		35,579		34,963
	Prepaid expenses and other			4,818		8,026		5,255
	Deferred income taxes			4,562		11,279		9,825
		Total current assets		90,415		84,073		84,086
Property, plant and equipment, net				23,873		22,361		20,421
Goodwill				14,018		13,799		13,818
Deferred income taxes				2,712		2,712		3,969
Other assets				327		408		416
		Total assets	$	131,345		123,353		122,710
Liabilities and Stockholders' Equity
Current liabilities:
	Current installments of long-term debt		$	165		606		119
	Trade accounts payable			10,939		9,013		9,436
	Accrued expenses			6,516		6,594		4,747
	Income Taxes			688		185		385
	Accrued dividends payable			-		2,159		-
		Total current liabilities		18,308		18,557		14,687
Long-term debt, less current installments				21,297		24,350		28,839
Stockholders' equity:
	Preferred stock, Series I			6,601		6,601		6,601
	Preferred stock, Series J			65,760		65,760		65,760
	Common stock			173		172		172
	Additional paid-in capital			3,327		3,119		2,773
	Retained earnings			15,569		4,891		3,368
	Accumulated other comprehensive earnings (loss)			310		(97)		510
		Total stockholders' equity		91,740		80,446		79,184
		Total liabilities and stockholders' equity	$	131,345		123,353		122,710