SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended: December 31, 2003
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
For the transition period from to
Commission File Number 1-10031
NOBEL LEARNING COMMUNITIES, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 22-2465204 | |
| (State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification No.) | |
| 1615 West Chester Pike, West Chester, PA | 19382 | |
| (Address of principal executive offices) | (Zip Code) | |
(484) 947-2000
(Registrant’s telephone number, including area code)
Indicate by check whether the registrant (1) has filed all report(s) required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicated by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2b of the Exchange Act) Yes ¨ No x
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 6,799,375 shares of Common Stock outstanding at February 10, 2004.
Nobel Learning Communities, Inc.
ii
Financial Information
“Safe Harbor” Statement under Private Securities Litigation Reform Act of 1995
Certain statements set forth in or incorporated by reference in this Quarterly Report on Form 10-Q constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include, without limitation, the Company’s outlook for the fiscal year ended June 30, 2004 (“Fiscal 2004”), other statements in this report other than historical facts relating to the financial conditions, results of operations, plans, objectives, future performance and business of the Company. In addition, words such as “believes,” “anticipates,” “expects,” “intends,” “estimates,” and similar expressions are intended to identify forward-looking statements, but are not the exclusive means of identifying such statements. Such statements are based on management’s currently available operating budgets and forecasts, which are based upon detailed assumptions about many important factors such as market demand, market conditions and competitive activities. While the Company believes that its assumptions are reasonable, readers are cautioned that there are inherent difficulties in predicting the impact of certain factors, especially those affecting the acceptance of the Company’s newly developed schools and businesses and performance of recently acquired businesses, which could cause actual results to differ materially from predicted results. Readers are cautioned that the forward-looking statements reflect management’s analysis only as of the date hereof, and the Company assumes no obligation to update these statements. Actual future results, events and trends may differ materially from those expressed in or implied by such statements depending on a variety of factors set forth throughout this Quarterly Report on Form 10-Q.
1
Nobel Learning Communities, Inc. and Subsidiaries
Consolidated Balance Sheets
(Dollars in thousands, except share amounts)
| (unaudited) | ||||||||
| December 31, 2003 |
June 30, 2003 |
|||||||
| ASSETS |
||||||||
| Cash and cash equivalents |
$ | 3,953 | $ | 4,722 | ||||
| Accounts receivable, less allowance for doubtful accounts of $837 at December 2003 and $803 at June 2002 |
4,367 | 5,111 | ||||||
| Notes receivable |
132 | 220 | ||||||
| Refundable income taxes |
715 | 1,203 | ||||||
| Deferred tax asset |
2,100 | 2,941 | ||||||
| Prepaid rent |
2,457 | 2,455 | ||||||
| Prepaid insurance and other |
1,878 | 1,941 | ||||||
| Property and equipment held for sale |
4,782 | 8,503 | ||||||
| Total Current Assets |
20,384 | 27,096 | ||||||
| Property and equipment, at cost |
61,267 | 57,602 | ||||||
| Accumulated depreciation and amortization |
(33,691 | ) | (30,147 | ) | ||||
| Total property and equipment |
27,576 | 27,455 | ||||||
| Goodwill |
39,965 | 39,965 | ||||||
| Intangible assets, net |
789 | 197 | ||||||
| Investment, net of $1,000 allowance |
1,500 | 1,500 | ||||||
| Deferred tax asset |
1,312 | 863 | ||||||
| Deposits and other assets |
818 | 892 | ||||||
| Total Assets |
$ | 92,344 | $ | 97,968 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Current portion of long-term obligations |
$ | 16,986 | $ | 24,860 | ||||
| Current portion of swap contract |
644 | 910 | ||||||
| Cash overdraft liability |
3,775 | 3,429 | ||||||
| Accounts payable and other current liabilities |
9,488 | 10,662 | ||||||
| Unearned income |
11,473 | 10,330 | ||||||
| Total Current Liabilities |
42,366 | 50,191 | ||||||
| Long-term obligations |
580 | 677 | ||||||
| Long-term subordinated debt |
9,807 | 9,928 | ||||||
| Other long term liabilities |
1,201 | 3 | ||||||
| Minority interest in consolidated subsidiary |
99 | 94 | ||||||
| Total Liabilities |
54,053 | 60,893 | ||||||
| Commitments and Contingencies |
||||||||
| Stockholders’ Equity: |
||||||||
| Preferred stock, $0.001 par value; 10,000,000 shares authorized, issued and outstanding 6,419,033 at December 2003 and 5,920,797 at June 2003. $14,434 and $11,524 aggregate liquidation preference at December 2003 and June 2003, respectively |
6 | 6 | ||||||
| Common stock, $0.001 par value; 20,000,000 shares authorized, issued 6,698,569 at December 2003 and 6,612,109 at June 2003, outstanding 6,468,059 at December 2003 and 6,381,599 at June 2003 |
7 | 6 | ||||||
| Treasury stock, cost; 230,510 shares |
(1,375 | ) | (1,375 | ) | ||||
| Additional paid-in capital |
50,988 | 47,753 | ||||||
| Accumulated deficit |
(10,936 | ) | (8,778 | ) | ||||
| Accumulated other comprehensive loss |
(399 | ) | (537 | ) | ||||
| Total Stockholders’ Equity |
38,291 | 37,075 | ||||||
| Total Liabilities and Stockholders’ Equity |
$ | 92,344 | $ | 97,968 | ||||
The accompanying notes and the notes in the financial statements included in the Registrant’s Annual Report on Form 10-K are an integral part of these financial statements.
2
Nobel Learning Communities, Inc. and Subsidiaries
Consolidated Statements of Operations
(Dollars in thousands except per share data)
(unaudited)
| For the Three Months Ended |
For the Six Months Ended |
|||||||||||||||
| December 31, 2003 |
December 31, 2002 |
December 31, 2003 |
December 31, 2002 |
|||||||||||||
| Revenues |
$ | 40,192 | $ | 37,866 | $ | 75,458 | $ | 70,534 | ||||||||
| Operating expenses: |
||||||||||||||||
| Personnel costs |
19,387 | 18,048 | 36,710 | 34,004 | ||||||||||||
| School operating costs |
5,820 | 5,232 | 11,524 | 10,447 | ||||||||||||
| Insurance, taxes, rent and other |
8,627 | 8,219 | 17,218 | 16,177 | ||||||||||||
| Depreciation and amortization |
1,220 | 1,256 | 2,406 | 2,494 | ||||||||||||
| New school development |
— | 33 | 44 | 210 | ||||||||||||
| Total operating expenses |
35,054 | 32,788 | 67,902 | 63,332 | ||||||||||||
| School operating profit |
5,138 | 5,078 | 7,556 | 7,202 | ||||||||||||
| Goodwill impairment |
— | 2,200 | — | 2,200 | ||||||||||||
| Transaction related cost |
— | 600 | — | 1,018 | ||||||||||||
| General and administrative expenses |
3,179 | 3,005 | 7,889 | 5,716 | ||||||||||||
| Operating income (loss) |
1,959 | (727 | ) | (333 | ) | (1,732 | ) | |||||||||
| Interest expense |
1,076 | 817 | 1,919 | 1,689 | ||||||||||||
| Other (income) expense |
(68 | ) | (4 | ) | (59 | ) | 15 | |||||||||
| Minority interest in income |
4 | 6 | 5 | 10 | ||||||||||||
| Income (loss) from continuing operations before income taxes |
947 | (1,546 | ) | (2,198 | ) | (3,446 | ) | |||||||||
| Income tax expense (benefit) |
312 | 269 | (840 | ) | (511 | ) | ||||||||||
| Income (loss) from continuing operations |
635 | (1,815 | ) | (1,358 | ) | (2,935 | ) | |||||||||
| Income (loss) from discontinued operations, net of income tax effect |
23 | (1,556 | ) | (550 | ) | (2,291 | ) | |||||||||
| Net income (loss) |
658 | (3,371 | ) | (1,908 | ) | (5,226 | ) | |||||||||
| Preferred stock dividends |
133 | 21 | 250 | 41 | ||||||||||||
| Income (loss) available to common shareholders |
$ | 525 | $ | (3,392 | ) | $ | (2,158 | ) | $ | (5,267 | ) | |||||
| Basic income (loss) per share: |
||||||||||||||||
| Income (loss) from continuing operations |
$ | 0.08 | $ | (0.29 | ) | $ | (0.25 | ) | $ | (0.47 | ) | |||||
| Discontinued operations |
0.00 | $ | (0.24 | ) | (0.09 | ) | (0.36 | ) | ||||||||
| Income (loss) per share |
$ | 0.08 | $ | (0.53 | ) | $ | (0.34 | ) | $ | (0.83 | ) | |||||
| Dilutive income (loss) per share: |
||||||||||||||||
| Income (loss) from continuing operations |
$ | 0.07 | $ | (0.29 | ) | $ | (0.25 | ) | $ | (0.47 | ) | |||||
| Discontinued operations |
0.00 | (0.24 | ) | (0.09 | ) | (0.36 | ) | |||||||||
| Income (loss) per share |
$ | 0.07 | $ | (0.53 | ) | $ | (0.34 | ) | $ | (0.83 | ) | |||||
The accompanying notes and the notes in the financial statements included in the Registrant’s Annual Report on Form 10-K are an integral part of these financial statements.
3
Nobel Learning Communities, Inc. and Subsidiaries
Consolidated Statements of Cash Flow
For the Six Months Ended December 31, 2003 and 2002
(Dollars in thousands)
| 2003 |
2002 |
|||||||
| Cash Flows from Operating Activities: |
||||||||
| Net loss |
$ | (1,908 | ) | $ | (5,226 | ) | ||