Mail Stop 0407
February 25, 2005
Via U.S. Mail and Fax
Mr. Thomas Frank
Chief Financial Officer
Nobel Learning Communities, Inc.
1615 West Chester Pike
Suite 200
West Chester, PA 19382-6223
RE: Nobel Learning Communities, Inc.
Form 10-K for the fiscal year ended July 3, 2004
Filed September 15, 2004
Form 10-Q for the quarter ended January 1, 2005
File No. 000-27024
Dear Mr. Frank:
We have reviewed the above referenced filings and have the
following comments. We have limited our review to only your
financial statements and related disclosures and will make no
further
review of your documents. As such, all persons who are
responsible
for the adequacy and accuracy of the disclosure are urged to be
certain that they have included all information required pursuant
to
the Securities Exchange Act of 1934. Please address the following
comments in future filings. If you disagree, we will consider
your
explanation as to why our comment is inapplicable or a future
revision is unnecessary. Please be as detailed as necessary in
your
explanation. In some of our comments, we may ask you to provide
us
with supplemental information so we may better understand your
disclosure. After reviewing this information, we may or may not
raise additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
Form 10-K for the year ended July 3, 2004
Item 7. Management Discussion and Analysis, page 12
1. We note that you identify a number of factors that contributed
to
the change in revenue year over year, including tuition changes,
enrollment changes, and shift from full time to part time
attendance.
To the extent possible, expand your disclosure in future filings
to
quantify the impact of each factor in any instance where you
discuss
increases and decreases to prior period amounts. Refer to Item
303
of Regulation S-K.
2. In future filings, expand the School Operating Profit section
of
your disclosure to discuss material changes from year to year in
each
"operating expense" line item to the extent necessary for an
understanding of your businesses as required by Instruction 4 of
Item
303(a) of Regulation S-K. Explain and individually quantify the
material factors underlying each material line item change.
3. Further, in future filings discuss not only the causes of
historical changes in your results of operations, but also any
known
trends or uncertainties that are expected to have a material
impact
on your revenues or income from operations in future periods. In
addition to Item 303 of Regulation S-K, also refer to the guidance
in
the Commission`s Release No. 33-8350 issued in December 2003.
Consolidated Statements of Operations, page F-4
4. Your presentation of "school operating profit" is confusing
since
it excludes certain operating expenses and is similar in title to
"operating income." In addition, the caption "school operating
profit" may be considered a non-GAAP measure under Item 10 of
Regulation S-K. Please revise your presentation or tell us why
you
believe that such presentation is appropriate.
Note 1. Summary of Significant Accounting Policies and Company
Background
Accounts Receivable and Credit Risk, page F-8
5. You disclose that your accounts receivable are comprised
primarily
of tuition due from parents and governmental agencies. Describe
for
us the nature in which these governmental receivables are
generated
and tell us your revenue recognition policy for these
transactions.
Note 3. Discontinued Operations, page F-13
6. You indicate that the 5 schools classified as held for sale
were
placed in this category during fiscal 2003. Given that these 5
schools have been classified as held for sale for greater than one
year, please tell us how you considered the guidance in paragraph
30
of SFAS 144 in determining that it was appropriate to classify
them
as held for sale at June 30, 2003 and July 3, 2004. In addition,
disclose in future filings the manner and timing of the expected
disposal of the schools held for sale. Refer to paragraph 47a. of
SFAS 144 for guidance.
7. Revise your presentation of "operating loss" for discontinued
operations to include goodwill impairment, write down of property
and
equipment and accrual for future lease obligations.
Note 6. Goodwill, page F-15
8. We note that you have identified ten reporting units for
purposes
of testing goodwill for impairment. Tell us how you determined
these
reporting units under the guidance in SFAS 142.
Note 8. Intangible Assets, net, page F-16
9. We note your disclosure that you recorded two non-compete
agreements with two former executives for $705,000 in fiscal 2004.
Clarify for us how you have accounted for these agreements and how
you determined their value. In this regard, we note at page F-32
that the annual payments made with respect to these agreements are
being expensed annually.
Note 11. Debt, page F-18
10. We note your disclosure that you transferred your rights under
the interest rate swap agreement to Harris Trust and Savings Bank.
Describe this transaction for us in more detail. Tell us what
remaining rights you have with respect to the swap and how this
transaction affected your accounting for the swap under SFAS 133.
Note 22. Related Party Transactions, page F-32
11. You indicate that during the first quarter 2004, you recorded
a
charge of approximately $1,290,000 for the present value of the
future payments to be made with respect to the consulting
agreements
with Mr. A.J. Clegg and Mr. John Frock. Tell us your basis for
recording an expense for these services in the current period. In
this regard, we note that these consulting services are to be
provided in future periods.
Note 23. Segment Information, page F-33
12. Tell us how you have determined that your private schools
comprise one reportable segment. If you have aggregated several
operating segments into one reportable segment, tell us how you
determined that you met the criteria for aggregation in paragraph
17
of SFAS 131, including the requirement that the segments have
similar
economic characteristics. In addition, explain for us your
disclosure at page 6 of your Form 10-Q for the quarter ended
January
1, 2005, which states that as of January 1, 2005, the company
operates in one segment.
13. Within your Segment Information note, you indicate that The
Activities Club and charter schools are included within the Other
category. Tell us whether the Paladin Academy and Houston
Learning
Academy are also included within this Other category, and if so,
expand your disclosure in future filings to state this fact.
Item 9A. Controls and Procedures, page 30
14. We note that your Chief Executive Officer and Chief Financial
Officer have "concluded that...the Company`s disclosure controls
and
procedures were effective in ensuring that all material
information
required to be disclosed in the reports that the Company files or
submits under the Exchange Act have been made known to them in a
timely fashion."Supplementally, please confirm, if true, that your
officers also concluded that the disclosure controls and
procedures
were also effective in ensuring that information required to be
disclosed by the company in the reports that it files or submits
under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the SEC`s rules and
forms. See Rule 13a-15(e) of the Exchange Act. Confirm that you
will provide similar disclosure in your future filings.
Alternatively, if true, please simply state in future filings that
your disclosure controls and procedures are effective.
15. We note that the statement that there were no "significant
changes" during the fiscal quarter ended July 3, 2004 that
materially
affected, or are reasonably likely to affect, your internal
controls
over financial reporting. Please note that Item 308(c) of
Regulation
S-K requires disclosure of any changes, not just significant
changes,
in internal controls over financial reporting that would have a
material effect. Supplementally, please confirm, if true, that
there
was no change in your internal control over financial reporting
that
occurred during the fiscal quarter ended July 3, 2004 that has
materially affected, or is reasonably likely to materially affect,
your internal control over financial reporting, and provide the
disclosure required by Item 308(c) of Regulation S-K in future
filings. In this regard, we note that your Forms 10-Q filed
subsequent to this Form 10-K appear to reflect the new Item 308(c)
language.
Form 10-Q for the quarter ended January 1, 2005
Item 4. Controls and Procedures
16. We note your disclosure that your "disclosure controls and
procedures are designed to provide reasonable assurance that the
information required to be disclosed in this Quarterly Report on
Form
10-Q has been appropriately recorded, processed, summarized and
reported." Supplementally, please confirm, if true, that your
disclosure controls and procedures were designed to provide
reasonable assurance that information required to be disclosed in
the
reports that you file under the Exchange Act is recorded,
processed,
summarized and reported, within the time periods specified in the
Commission`s rules and forms and were also designed to ensure that
information required to be disclosed in the reports that you file
or
submit under the Exchange Act is accumulated and communicated to
your
management, including your Chief Executive Officer and Chief
Financial Officer, to allow timely decisions regarding required
disclosure. See Rule 13a-15(e) of the Exchange Act. Please also
confirm that the Chief Executive and Chief Financial Officers
concluded that the disclosure controls and procedures were
effective
in providing reasonable assurance of achieving their intended
objectives. Alternatively, please remove the "reasonable
assurance"
language and simply state in future filings, if true, that your
disclosure controls and procedures are effective.
* * * *
Please respond to these comments within 10 business days or
tell us when you will provide us with a response. Please furnish
a
letter that keys your responses to our comments and provides any
requested supplemental information. Please file your response
letter
on EDGAR.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they
are
responsible for the accuracy and adequacy of the disclosures they
have made.
In connection with responding to our comments, please
provide,
in writing, a statement from the company acknowledging that
* the company is responsible for the adequacy and accuracy of the
disclosure in the filings;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filings; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in our review of your filings or
in
response to our comments on your filings.
You may contact Adam Washecka, Staff Accountant, at (202)
824-
5569 or Melissa Hauber, Senior Staff Accountant, at (202) 942-2858
if
you have questions regarding comments on the financial statements
and
related matters. Please contact me at (202) 942-1990 with any
other
questions.
Sincerely,
Larry Spirgel
Assistant Director
??
??
??
??
Mr. Thomas Frank
Nobel Learning Communities, Inc.
February 25, 2005
Page 6