Educational Development Corporation Announces Executed Fifth Amendment to Credit Agreement

Rhea-AI Summary

On June 17, 2024, Educational Development (NASDAQ: EDUC) announced the execution of the Fifth Amendment to its Existing Credit Agreement with BOKF, NA. Effective May 31, 2024, this Amendment reduces the maximum availability of the Revolving Loan to $7.0 million until October 4, 2024. The Amendment mandates a further decrease to $4.5 million upon the sale of the Company's Headquarters. The Company has entered into a contract with Rockford Holdings for the sale of its headquarters and distribution warehouse, expected to close by September 12, 2024. The proceeds from this sale will be used to repay the outstanding borrowings. CEO Craig White expressed satisfaction with the Amendment, citing it as essential for maintaining operational support and focusing on returning to profitability.

Positive

• The executed Fifth Amendment extends the borrowing capacity on the line of credit until October 4, 2024.
• The sale of the headquarters and distribution warehouse is expected to generate funds to repay all outstanding borrowings.
• The company will have an available line of $4.5 million post-sale to support ongoing operations.
• The company is focusing on returning to profitability, which is a positive outlook for investors.

Negative

• The maximum availability of the Revolving Loan has been reduced to $7.0 million.
• An additional decrease to $4.5 million is required upon the sale of the Company's Headquarters.
• Dependence on the sale of the headquarters to repay borrowings indicates financial strain.
• The timeframe for the sale completion extends to September 12, 2024, which is several months away.

Insights

Financial Analyst

The amendment to the credit agreement increases the revolving loan commitment to $7.0 million until October 4, 2024, with a subsequent reduction to $4.5 million after the sale of the company's headquarters. This move can be seen as a strategic financial maneuver to ensure liquidity in the short term while aligning with the company's plans to sell real estate assets.

The sale of the Hilti Complex is a significant event for the company as it intends to use the proceeds to pay off existing debts. This can improve the company's balance sheet by reducing liabilities and potentially lowering interest expenses. However, the sale of a core asset like the headquarters and distribution warehouse might raise concerns regarding operational efficiency and potential relocation costs.

From a retail investor's perspective, this transaction could be interpreted as a short-term liquidity improvement but it's essential to consider the long-term implications of divesting a major asset. The ability to maintain operational efficiency post-sale will be critical. The company's commitment to returning to profitability will be closely monitored in upcoming earnings reports.

Market Research Analyst

The real estate transaction with Rockford Holdings not only ensures liquidity but also aligns with Educational Development Corporation's strategic focus. The headquarters sale indicates a shift towards asset-light operations, which can be advantageous in terms of reducing fixed costs and increasing operational flexibility. However, this move carries potential risks, such as disruption during the transition period and possible increases in logistical costs if new facilities are required.

For investors, it's important to watch how the company will manage operations during and after the transition. The successful implementation of this strategy can result in an improved cost structure and better margins in the long run, contributing positively to the company's profitability goals. However, the short-term impact on operational continuity and costs needs close monitoring.

Tulsa, Oklahoma--(Newsfile Corp. - June 17, 2024) - Educational Development Corporation (NASDAQ: EDUC) (the "Company") executed the Fifth Amendment ("Amendment") to the Existing Credit Agreement ("Amendment") with BOKF, NA (the "Lender"). The Amendment, effective May 31, 2024, adjusts the maximum availability of the Revolving Loan commitment to $7.0 million through the maturity date of October 4, 2024. The Amendment also requires an additional decrease in the Revolving Loan to $4.5 million from the effective date of the sale of the Company's Headquarters building.

On June 12, 2024 the Company announced the executed Commercial Real Estate Contract ("Contract") with Rockford Holdings ("Rockford" or "Buyer") for the sale of the Company's headquarters and distribution warehouse located at 5400-5402 South 122^nd East Avenue, Tulsa, Oklahoma 74146 (the "Hilti Complex"). The Contract is expected to be completed by September 12, 2024.

Per Craig White, President and Chief Executive Officer, "We are pleased with the execution of this amendment as it continues to provide borrowing capacity on our line of credit with our bank. The period of the extension of the Revolving Loan through October 4^th, 2024 is aligned with the expected timeframe for closing on the sale of the Hilti Complex."

Mr. White continued, "The funds received from the sale of the Hilti Complex are expected to completely pay off the borrowings under the Revolver and Term Loans outstanding with our Lender. Having an available line of $4.5 million, following the close, ensures we have sufficient support to continue operations as we focus on returning to profitability."

About Educational Development Corporation (EDC)

EDC began as a publishing company specializing in books for children. EDC is the owner and exclusive publisher of Kane Miller Books ("Kane Miller"); Learning Wrap-Ups, maker of educational manipulatives; and SmartLab Toys, maker of STEAM-based toys and games. EDC is also the exclusive United States MLM distributor of Usborne Publishing Limited ("Usborne") children's books. EDC-owned products are sold via 4,000 retail outlets and EDC and Usborne products are offered by independent brand partners who hold book showings through social media, book fairs with schools and public libraries, in individual homes, as well as other in-person events and internet sales.

Contact:
Educational Development Corporation
Craig White, (918) 622-4522

Investor Relations:
Three Part Advisors, LLC
Steven Hooser (214) 872-2710

To view the source version of this press release, please visit https://www.newsfilecorp.com/release/213354

FAQ

What is the significance of the Fifth Amendment to EDUC's Credit Agreement?

The Fifth Amendment reduces the maximum availability of the Revolving Loan to $7.0 million and requires a further reduction to $4.5 million upon the sale of the Company's Headquarters.

Why is Educational Development selling its headquarters?

The Company is selling its headquarters to generate funds to repay its outstanding borrowings and to maintain sufficient operational support.

When is the sale of EDUC's headquarters expected to be completed?

The sale of the headquarters is expected to be completed by September 12, 2024.

How will the proceeds from the headquarters sale be used by EDUC?

The proceeds will be used to completely pay off the borrowings under the Revolver and Term Loans outstanding with the Lender.

What is the expected impact on EDUC's borrowing capacity after the sale?

After the sale, EDUC will have an available line of $4.5 million to support its operations.