Educational Development Corporation CEO Speaks About His Company

Jul. 9.07 | About: Educational Development (EDUC)

On July 9, The Wall Street Transcript interviewed Randall White, President and CEO of Educational Development Corporation (NASDAQ:EDUC). Key excerpts follow:

TWST: We'd like to begin with a brief historical sketch of Educational Development, and a picture of the things you are doing right now.

Mr. White: We're in the publishing business. We are actually in two industries -publishing and direct selling. We publish children's books from England. We take all the products from Usborne Books in England and then publish them in the United States. We have a publishing division that sells to retail stores. We have about 5,000 stores we sell to. Borders and Barnes & Noble are our largest single customers. The other division is a direct selling division, where we have a sales force of women who do home parties. They also go into the school library market. We have around 10,000 ladies right now, and that's the largest division in the company and where we tend to look for growth to come from.

TWST: From what I gathered, there is no real threat to you from the Internet, but what is your feeling about the presence of the Internet?

Mr. White: The Internet has a major effect on us. One, the strength of our list in previous years has been reference books. We have encyclopedias of science and dictionaries of chemistry, physics, biology and archaeology for 10- to 15-year-old children. The Internet has certainly changed that marketplace, and now that there is so much information available, children can find reference material on the Internet that is up to date. To combat that, we researched over 10,000 Websites that are suitable for children and incorporated those in our books. For instance, if you reading an encyclopedia, there could be a page about plant growth, we will have a Website referenced on that page about that specific subject. So we are the leading publisher in the world incorporating the printed word with the Internet. These are child safe Websites where we can control the access electronically. If something changes about the Website, we can delete it. The Website address is not printed in the book, but it gives you a link to the Website. So it's a quite interesting concept of linking the Internet to the printed word. Again, we are the leading publisher in the nation that does that. The other impact that the Internet has is in sales, because everything now is a commodity. You see that with the proliferation of the big Websites like Amazon. It's harder to sell anything at retail price and all publishers have the same problem since things are so readily available on the Internet. That's the biggest impact that we have. In the home party plan, our sales consultants are selling in the home at full retail competing with discounted merchandise from other sources. We combat that with providing the sales consultants with their own websites that have special purchases at discounted prices.

TWST: What are your main strategies as you look out over the next three of four years?

Mr. White: Our main strategy is to try to increase our market penetration. We did about $32 million last year. So when you are talking about a $1.3 billion marketplace, there is room to grow. We have the premier products, so it's a matter of being the best in our marketing to retail stores and through the home party plan. We definitely think that the product that we represent is capable of increasing our market penetration.

TWST: What would be the two or three best reasons for the long-term investor to look closely at Educational Development Corporation?

Mr. White: I think it's the strong balance sheet that we have right now. In fact, through pretty flat sales, we maintained our profit margins. We are poised to grow. We've had growth in the past, just not in the last two to three years. But an investor would look at us and say, "They have a very rich product line. They have a seasoned, experienced management team that has been here through success, and that growth will come." In the meantime, we are a solid cash-generating, dividend-paying company. So investors have an opportunity to invest in solid companies with upside potential for growth prospects.