SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended: MARCH 31, 2001
Commission File Number 1-1003
NOBEL LEARNING COMMUNITIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 22-2465204
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
1400 N. PROVIDENCE ROAD, SUITE 3055, MEDIA, PA 19063
(Address of principal executive offices) (Zip Code)
(610) 891-8200
(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
----------- ----------
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: 6,001,198 shares of Common
Stock outstanding at May 11, 2001.
INDEX TO FORM 10-Q
Nobel Learning Communities, Inc.
Page
PART I. FINANCIAL INFORMATION Number
------
Item 1. Financial Statements
Consolidated Balance Sheets,
March 31, 2001 (unaudited) and June 30, 2000...... 2
Consolidated Statements of Income for the
nine months ended March 31, 2001 (unaudited)
and 2000 (unaudited).............................. 3
Consolidated Statements of Income for the
three months ended March 31, 2001 (unaudited)
and 2000 (unaudited).............................. 4
Consolidated Statements of Cash Flows for the
nine months ended March 31, 2001 (unaudited)
and 2000 (unaudited).............................. 5
Notes to Consolidated Interim Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations..... 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.................................. 14
Item 6. Exhibits and Reports on Form 8-K................... 17
PART I
FINANCIAL INFORMATION
"SAFE HARBOR" STATEMENT UNDER PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
The Company's fiscal 2001 outlook and all other statements in this report other
than historical facts are forward-looking statements that involve risks and
uncertainties and are subject to change at any time. The Company derives its
forward-looking statements from its 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, it cautions that there are
inherent difficulties in predicting the impact of certain factors, especially
those affecting the acceptance of the Company's newly developed and converted
schools and performance of recently acquired businesses, which could cause
actual results to differ materially from predicted results.
1
Nobel Learning Communities, Inc. and Subsidiaries
Consolidated Balance Sheets
(Dollars in thousands)
(unaudited)
Current Assets 31-Mar-01 30-Jun-00
- --------------------------------------- ------------- ----------
Cash and cash equivalents $1,786 $3,798
Accounts receivable, less allowance for
doubtful accounts of $335 and $288 in December and June of 2000 respectively 3,650 2,187
Note receivable 1,664 0
Prepaid rents 2,134 1,591
Other prepaid expenses 1,235 772
------------- ----------
Total Current Assets 10,469 8,348
------------- ----------
Property, & equipment at cost 51,102 45,392
Accumulated depreciation (19,906) (16,665)
------------- ----------
Total Property & Equipment 31,196 28,727
Property and equipment held for sale 10,206 8,078
Goodwill 49,811 50,214
Deposits and other assets 4,005 3,250
------------- ----------
Total Assets $105,687 $98,617
============= ==========
Liabilities and Stockholders' Equity
- ---------------------------------------
Current portion of long-term obligations $10,753 $6,293
Accounts payable and other current liabilities 7,914 8,819
Cash overdraft liability 2,676 3,768
Deferred revenue 8,751 6,235
------------- ----------
Total Current Liabilities 30,094 25,115
------------- ----------
Long-term obligations 25,767 23,260
Long-term subordinated debt 11,389 13,249
Deferrred gain on sale/leaseback 16 20
Minority interest in consolidated subsidiary 449 415
------------- ----------
Total Liabilities 67,715 62,059
Stockholders' Equity:
Preferred Stock, $.001 par value; 10,000,000 shares authorized, issued
and outstanding 4,587,524 at March 31, 2001, and June 30, 2000;
$5,524 aggregate liquidation preference at March 31, 2001 5 5
and June 30, 2000.
Common Stock, $.001 par value, 20,000,000 shares authorized, issued and
outstanding 6,228,238 at March 31, 2001 and 6,126,168 at June 30, 2000. 6 6
Treasury Stock, cost; 230,510 shares (1,375) (1,375)
Additional paid in capital 39,821 39,256
Accumulated deficit (485) (1,334)
------------- ----------
Total Stockholders' Equity 37,972 36,558
------------- ----------
Total Liabilities & Stockholders' Equity $105,687 $98,617
============= ==========
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.
Nobel Learning Communities Inc. and Subsidiaries
Consolidated Statements Of Income
for the nine months ended March 31, 2001 and 2000
---------------------------------------------
(Dollars in thousands except per share amounts)
(unaudited)
2001 2000
------------- ------------
Revenues $108,910 $92,004
Total operating expenses 96,314 80,128
------------- ------------
School operating profit 12,596 11,876
General and administrative expenses 8,018 6,931
------------- ------------
Operating income 4,578 4,945
Interest expense 3,216 2,478
Other income (305) (132)
Minority interest in earnings of consolidated subsidiary 34 63
------------- ------------
Income before taxes 1,633 2,536
Income taxes 724 1,065
------------- ------------
Net income 909 1,471
============= ============
Preferred stock dividends $61 $62
------------- ------------
Net income available to common stockholders $848 $1,409
============= ============
Basic earnings per share $0.14 $0.24
============= ============
Diluted earnings per share $0.12 $0.20
============= ============
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.
Nobel Learning Communities Inc. and Subsidiaries
Consolidated Statements Of Income
for the three months ended March 31, 2001 and 2000
-------------------------------------------
(Dollars in thousands except per share amounts)
(unaudited)
2001 2000
----------- -----------
Revenues $38,956 $33,127
Total operating expenses 33,683 28,185
----------- -----------
School operating profit 5,273 4,942
General and administrative expenses 2,936 2,432
----------- -----------
Operating income 2,337 2,510
Interest expense 1,030 859
Other income (47) (50)
Minority interest in earnings of consolidated subsidiary 53 27
----------- -----------
Income before taxes 1,301 1,674
Income taxes 584 703
----------- -----------
Net income 717 971
=========== ===========
Preferred stock dividends $21 $21
----------- -----------
Net income available to common stockholders $696 $950
=========== ===========
Basic earnings per share $0.12 $0.16
=========== ===========
Diluted earnings per share $0.10 $0.13
=========== ===========
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.
Nobel Learning Communities, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
for the nine months ended March 31, 2001 and 2000
(Dollars in thousands)
(unaudited)
2001 2000
---------- ----------
Net Cash Provided By Operating Activities $4,216 $6,553
Cash Flows From Investing Activities:
Proceeds from sale of real estate 4,535 1,896
Capital expenditures (12,580) (8,818)
Issuance of note receivable (1,664) -
Payment for acquisitions (536) (2,690)
---------- ----------
Net Cash Provided By (Used In) Investing Activities: (10,245) (9,612)
---------- ----------
Cash Flows From Financing Activities:
Proceeds from long term debt 10,358 9,603
Repayment of long term debt (4,109) (5,687)
Repayment of subordinated debt (1,164) (1,320)
Cash overdraft (1,092) -
Repayment of capital lease obligation (74) (66)
Payments of dividends on preferred stock (61) (62)
Proceeds from exercise of stock options 159 -
---------- ----------
Net Cash Provided by Financing Activities: 4,017 2,468
---------- ----------
Net decrease in cash and cash equivalents (2,012) (591)
Cash and cash equivalents at the beginning of the period 3,798 1,640
---------- ----------
Cash and cash equivalents at the end of the period $1,786 $1,049
========== ==========
The accompanying notes and the notes in the financial statements included in the
Registrant's Annual Report Form 10-K are an integral part of these
consolidated financial statements.
NOBEL LEARNING COMMUNITIES, INC. AND SUBSIDIARIES
Notes to Consolidated Interim Financial Statements
for the nine months ended March 31, 2001 and 2000
(unaudited)
Note 1 - Basis of Presentation
- ------------------------------
The consolidated financial statements have been prepared by the Registrant
pursuant to the rules and regulations of the Securities and Exchange Commission
("SEC") and, in the opinion of management, include all adjustments, consisting
of normal recurring adjustments, necessary to present fairly the financial
position and results of operations. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with the generally accepted accounting principals have been condensed or omitted
pursuant to such SEC rules and regulations. It is suggested that these
financial statements are read in conjunction with the consolidated financial
statements and notes thereto included in the Registrant's Annual Report on Form
10-K for the year ended June 30, 2000.
Due to the inherent seasonal nature of the education and child care businesses,
annualization of amounts in these interim financial statements may not be
indicative of the actual operating results for the full year.
Certain prior period adjustments have been reclassified to conform to the
current year's presentation.
The Company manages its business based on geographical regions within the United
States. Under SFAS 131, "Segment Reporting", the Company has aggregated these
regions based on management's belief that these regions have met the aggregation
criteria set forth in the standard.
6
Note 2 - Earnings Per Share
- ---------------------------
Earnings per share are based on the weighted average number of shares
outstanding and common stock equivalents during the period. In the calculation
of dilutive earnings per share, shares outstanding are adjusted to assume
conversion of the Company's non-interest bearing convertible preferred stock if
they are dilutive. In the calculation of basic earnings per share, weighted
average number of shares outstanding are used as the denominator. Earnings per
share are computed as follows.
For the Three Months March 31, For the Nine Months March 31,
--------------- --------------- -------------- --------------
2001 2000 2001 2000
--------------- --------------- -------------- --------------
Basic earnings per share
- -----------------------------------
Net income $717 $971 $909 $1,471
Less preferred dividends 21 21 61 62
--------------- --------------- -------------- --------------
Net income available for
common stock $696 $950 $848 $1,409
--------------- --------------- -------------- --------------
Average common stock
outstanding 5,992 5,929 5,975 5,929
--------------- --------------- -------------- --------------
Basic earnings per share $0.12 $0.16 $0.14 $0.24
================ ============== ============= =============
Dilutive earnings per share
- -----------------------------------
Net income available for
common stock and dilutive securities $717 $971 $909 $1,471
--------------- --------------- -------------- --------------
Average common stock
outstanding 5,992 5,929 5,975 5,929
Options,warrants and
and convertible securities 1,484 1,443 1,518 1,443
--------------- --------------- -------------- --------------
Average common stock and
dilutive securities outstanding 7,476 7,372 7,493 7,372
--------------- --------------- -------------- --------------
Dilutive earnings per share $0.10 $0.13 $0.12 $0.20
=============== =============== ============== ==============
Note 3 - Acquisitions
- ---------------------
In August 2000, the Company acquired the assets of Rainbow World Day Care School
in Chalfont, Pennsylvania, with a capacity of 180 students and estimated
revenues of $845,000. The purchase price consisted of $493,000 in cash and
44,131 shares of the Company's Common Stock (valued at $9.20 per share).
Note 4 - Note Receivable
- ------------------------
The note receivable of $1,664,000 represents amounts due from People for People,
Inc. related to construction cost for a proposed charter school financed by the
Company. The principal amount of the note is due August 31, 2001, and interest
therein will be paid in installments thereafter. Interest on the note accrued
at 2.5% over prime from July 11, 2000 to April 16, 2001 and at 14% through
maturity. People for People entered into a mortgage loan agreement on April 16,
2001 to fund the remaining construction cost and, upon the completion of
construction, to repay amounts due the Company.
Note 5 - Commitments and Contingencies
- --------------------------------------
The Company is engaged in legal actions arising in the ordinary course of its
business. The Company believes that the ultimate outcome of all such matters
will not have a material adverse effect on the Company's consolidated financial
position. The significance of these matters on the Company's future operating
results and cash flows depends on the level of future results of operations and
cash flows as well as on the timing and amounts, if any, of the ultimate
outcome.
The Company carries fire and other casualty insurance on its schools and
liability insurance in amounts which management believes are adequate for its
operations. As is the case with other entities in the education and preschool
industry, the Company cannot effectively insure itself against certain risks
inherent in its operations. Some forms of child abuse have sublimits per claim
in the general liability coverage.
8
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
- ---------------------
FOR THE NINE MONTHS ENDED MARCH 31, 2001 VS THE NINE MONTHS ENDED MARCH 31, 2000
Currently, the Company operates 170 schools. Since June 2000 through May 2001,
the Company has opened 23 schools and acquired 3 new schools: three elementary
schools, fourteen preschools, six schools for learning challenged (the Paladin
Academy schools), three charter schools. The Company has also closed three
underperforming schools.
Revenues for the nine months ended March 31, 2001 increased $16,906,000 or 18.4%
to $108,910,000 from $92,004,000 for the nine months ended March 31, 2000. The
increase in revenues is primarily attributable to the increase in enrollment,
tuition increases and the increase in the number of new and acquired schools and
businesses.
Same school revenue (schools that were opened in both periods) increased
$8,155,000 or 9.0% in the nine months ended March 31, 2001 compared to the same
period of the prior year. This increase is related to tuition and enrollment
increases and the maturing of schools opened in 1999. The increase in revenues
related to the 23 new schools opened totaled $8,535,000. Acquired schools
contributed additional revenues of $1,490,000. The revenues for The Activities
Club (`TAC"), a business purchased in December 1999, increased $38,000 over the
same period in the prior year. These increases were offset by a decrease in
revenues of $1,312,000 related to the closed schools.
School operating profit for the nine months ended March 31, 2001 increased
$720,000 or 6.1% to $12,596,000 from $11,876,000 for the nine months ended
March 31, 2000. Total school operating profit as a percentage of revenue
decreased from 12.9% to 11.6%.
Same school operating profit increased $1,937,000 or 16.3%. Same school
operating profit margin improved from 13.2% for the nine months ended
March 31, 2000 to 14.1% for the nine months ended March 31, 2001. The increase
in same school operating profit is due to the revenue increases, lower operating
expenses and the maturing of the schools opened in 1999. For the nine months
ended March 31, 2001 new schools incurred losses of $900,000. Included in these
losses were $824,000 associated with the Company's two Arizona based charter
schools. The losses associated with the Arizona schools are attributable to
lower than expected enrollment. Acquired schools increased school operating
income by $173,000. Operating income from TAC decreased by $435,000 as compared
to the same period in the prior year. TAC is in the process of bidding on
several large contracts for product sales. If TAC is unsuccessful in receiving
some of these contracts, the future operations of TAC could be adversely
affected. The net effect of school closings decreased school operating profit by
$55,000.
General and administrative expenses increased $1,087,000 or 15.7% from
$6,931,000 for the nine months ended March 31, 2000 to $8,018,000 for the nine
months ended March 31, 2001. As a percentage of revenue, general and
administrative expense decreased from 7.5% at March 31, 2000 to 7.4% at
March 31, 2001. This increase in general and administrative expenses was
primarily related to management additions necessary to support the continued
growth in the Company's specialty school and charter school strategies and an
increase in fees for professional services.
9
Operating income decreased $367,000 or 7.5% from $4,945,000 for the nine months
ended March 31, 2000 to $4,578,000 for the nine months ended March 31, 2001.
The decrease is the result of the increase in general and administrative
expenses and the losses associated with TAC and the two Arizona based charter
schools.
For the nine months ended March 31, 2001, EBITDA (defined as earnings before
interest, income taxes, depreciation and amortization) totaled $10,005,000.
This represents an increase of $361,000 over the comparable period. EBITDA is
not a measure of performance under generally accepted accounting principals,
however the Company and the investment community consider it an important
calculation.
Interest expense increased $738,000 or 29.8% from $2,478,000 for the nine months
ended March 31, 2000 to $3,216,000 for the nine months ended March 31, 2001. The
increase is due to increased interest rates on the Company's credit facility and
increased borrowings for acquisitions, new school development and to fund the
development of its new charter schools. This increase was offset by a reduction
in interest expense on seller subordinated debt.
Other income increased $173,000 due to interest income from various investments
in equity investments and notes receivable.
Income before taxes decreased 35.6% from $2,536,000 for the nine months ended
March 31, 2000 to $1,633,000 for the nine months ended March 31, 2001.
Income tax expense totaled $724,000 for the nine months ended March 31, 2001
which reflects a 44.3% effective tax rate. This rate is in excess of amounts
computed by applying federal income tax rates to income before income taxes due
primarily to non-deductible goodwill incurred with acquisitions for stock and
state income taxes.
FOR THE THIRD QUARTER ENDED MARCH 31, 2001 VS THE THIRD QUARTER ENDED
MARCH 31, 2000
Revenues for the third quarter ended March 31, 2001 increased $5,829,000 or
17.6% to $38,956,000 from $33,127,000 for the third quarter ended
March 31, 2000. The increase in revenues is primarily attributable to the
increase in enrollment, tuition increases and the increase in the number of new
and acquired schools and businesses.
Same school revenue (schools that were opened in both periods) increased
$2,169,000 or 6.7% in the three months ended March 31, 2001 compared to the same
period of the prior year. This increase is related to tuition and enrollment
increases and the maturing of schools opened in 1999. The increase in revenues
related to the 23 new schools opened totaled $3,693,000. Acquired schools
contributed additional revenues of $549,000 in the third quarter. These
increases were offset by a decrease in revenues of $353,000 related to the
schools closings as compared to the same period in the prior year and by a
decrease in revenues from TAC of $229,000.
School operating profit for the third quarter ended March 31, 2001 increased
$331,000 or 6.7% to $5,273,000 from $4,942,000 for the third quarter ended
March 31, 2000. Total school operating profit margin decreased from 14.9%
to 13.5%.
10
Same school operating profit increased $485,000 or 9.9%. Same school operating
profit margin improved from 15.1% for the three months ended March 31, 2000 to
15.5% for the three months ended March 31, 2001. The increase in same school
operating profit is due to the revenue increases, lower operating expenses and
the maturing of the schools opened in 1999. For the three months ended
March 31, 2001 new schools did not incur additional losses over the prior year;
however, losses of $181,000 were associated with the two new Arizona based
charter schools. The losses associated with the Arizona schools are attributable
to lower than expected enrollment. Acquired schools increased school operating
income by $60,000. Operating income from TAC decreased by $193,000 during the
third quarter. TAC is in the process of bidding on several large contracts for
product sales. If TAC is unsuccessful in receiving some of these contracts, the
future operations of TAC could be adversely affected. The net effect of school
closings decreased school operating profit by $21,000 as compared to the same
period in the prior year.
General and administrative expenses increased $504,000 or 20.7% from $2,432,000
for the third quarter ended March 31, 2000 to $2,936,000 for the third quarter
ended March 31, 2001. As a percentage of revenue, general and administrative
expense increased from 7.3% at March 31, 2000 to 7.5% at March 31, 2001. This
increase in general and administrative expenses was primarily related to
management additions necessary to support the continued growth in the Company's
specialty school and charter school strategies and an increase in fees for
professional services.
Operating income decreased $173,000 or 6.9% from $2,510,000 for the quarter
ended March 31, 2000 to $2,337,000 for the quarter ended March 31, 2001. The
decrease is the result of the increase in general and administrative expenses
and the losses associated with TAC and the two Arizona based charter schools.
For the third quarter of fiscal 2001, EBITDA (defined as earnings before
interest, income taxes, depreciation and amortization) totaled $4,064,000. This
represents an decrease of $105,000 over the comparable period. EBITDA is not a
measure of performance under generally accepted accounting principals, however
the Company and the investment community consider it an important calculation.
Interest expense increased $171,000 or 20.0% from $859,000 for the quarter ended
March 31, 2000 to $1,030,000 for the quarter ended March 31, 2001. The increase
is due to increased borrowings for acquisitions, new school development and to
fund the development of its new charter schools. This increase was offset by a
reduction in interest expense on seller subordinated debt.
Income before taxes decreased 22.3% from $1,674,000 for the quarter ended March
31, 2000 to $1,301,000 for the quarter ended March 31, 2001.
Income tax expense totaled $584,000 for the quarter ended March 31, 2001, which
reflects a 44.9% effective tax rate. This rate is in excess of amounts computed
by applying federal income tax rates to income before income taxes due
primarily to non-deductible goodwill incurred with acquisitions for stock and
state income taxes.
11
Liquidity and Capital Resources
- -------------------------------
Management is pursuing a four-pronged growth strategy for the Company, which
includes (1) internal growth of existing schools through the expansion of
certain facilities, (2) new school development in both existing and new markets,
(3) strategic acquisitions, and (4) development of new education businesses.
The Company's principal sources of liquidity are (1) cash flow generated from
operations, (2) available borrowings under the Company's $35.0 million Amended
and Restated Loan and Security Agreement, (3) the use of site developers to
build schools and lease them to the Company, and (4) issuance of subordinated
indebtedness or shares of common stock to sellers in acquisition transactions.
The Company identifies growth markets through both extensive demographic studies
and an analysis of the existing educational systems in the area. The Company
seeks to grow through a cluster approach whereby several preschools feed into an
elementary school.
In order for the Company to continue its acquisition strategy and development of
new education business, the Company will continue to seek additional funds
through debt and equity financing. Also, the Company and its senior lender are
currently negotiating to increase the Company's available borrowing by
$5,000,000.
The Company anticipates that its existing principal credit facilities, cash
generated from operations and from anticipated proceeds of sale and leaseback
transactions relating to certain real properties, and continued support of site
developers to build and lease schools will be sufficient to satisfy working
capital needs, capital expenditures and renovations and the building of new
schools in the near term future. If the Company is unsuccessful in consummating
the increase in available senior lender borrowings referenced above or such sale
and leaseback transactions, it may need to postpone certain capital
expenditures. If neither of these transactions occur on a timely basis, the
Company may have to seek a temporary postponement on certain senior debt
repayments until one of the transactions mentioned above is consummated.
Adverse consequences to the Company of any such postponement would be related to
the period of delay and the amount of the capital expenditures postponed.
In March 1999 the Company entered into an Amended and Restated Loan and Security
Agreement which increased the Company's available borrowing to $35,000,000.
Four separate facilities were established under the Amended and Restated Loan
and Security Agreement: (1) $7,000,000 Working Capital Credit Facility A,
(2) $3,000,000 Working Capital Credit Facility B (which is tied to the Company's
cash management arrangement), (3) $15,000,000 Acquisition Credit Facility and
(4) $10,000,000 Term Loan.
Working Capital Credit Facility A and B funds are available until March 2002. On
March 9, 2001, the Amended and Restated Loan and Security Agreement was amended
to extend the date of the first principal payments under the Acquisition Credit
Facility to July 2001. At that time the outstanding principal under the
Acquisition Credit Facility will be converted into a term loan which will
require principal payments in 16 quarterly installments.
Under the Term Loan Facility, quarterly principal payments of $250,000 were
required the four quarters from April 2000 through January 2001; thereafter
quarterly installment of $562,500 are required until January 2005.
12
At March 31, 2001, $7,466,000 was outstanding under Working Capital Credit
Facility A and Working Capital Credit Facility B, $15,000,000 was outstanding
under the Acquisition Credit Facility and $9,000,000 was outstanding under the
Term Loan.
In October and November 2000, the Company received a total of approximately
$2,800,000 from two transactions. The Company was reimbursed for its leasehold
improvements for one of its charter schools and entered into a sale and
leaseback transaction for one of its private schools. In February 2001, the
Company completed an additional sale leaseback transaction for $863,000 related
to a private school.
Total cash and cash equivalents decreased $2,012,000 from $3,798,000 at
June 30, 2000 to $1,786,000 at March 31, 2001. The net decrease was related to
$12,580,000 in capital expenditures for new school openings, charter schools and
acquisitions offset by an increase in cash provided from operations totaling
$4,216,000 and net borrowings on the senior credit facility of $6,249,000
The working capital deficit increased $2,858,000 from $16,767,000 at
June 30, 2000 to $19,625,000 at March 31, 2001. The increase is primarily the
result of the increase in deferred revenue totaling $2,516,000 and an increase
of $4,460,000 in current maturities in long term debt. These increases were
offset by an increase of $543,000 in prepaid rents, an increase of $1,463,000 in
accounts receivable, the issuance of a note receivable of $1,664,000 and a
decrease in accounts payable and accrued liabilities of $905,000. The increase
in deferred revenues is related to the prepayment of annual and semi-annual
tuition by parents before the beginning of the school year. The increase in
current maturities of long term debt is due to payments that will be required to
be paid on the Company's senior credit facility over the next twelve months. The
increase in accounts receivable is due to the timing of payments from charter
schools under management contract and the timing of current tuition payments.
Recently Issued Accounting Standards
- ------------------------------------
Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting for
Derivative Instruments and Hedging Activities, establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. This
statement requires that an entity recognize all derivatives as either assets or
liabilities and measure those instruments at fair value. The new standard
becomes effective for the Company's fiscal year 2002. The Company does not
believe the adoption of SFAS No. 133 will have a material impact on its
financial position or results of operations.
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin ("SAB") 101, Revenue Recognition in Financial Statements, which
provides guidance related to revenue recognition. SAB 101 allows companies to
report any changes in revenue recognition related to adopting its provisions as
an accounting change at the time of implementation in accordance with Accounting
Principles Board Opinion No. 20, Accounting Changes. SAB 101 becomes effective
for the fourth quarter of the Company's fiscal year 2001, however, early
implementation is acceptable. The Company does not believe the adoption of SAB
No. 101 will have a material impact on its financial position or results of
operations.
13
Part II
-------
Other Information
ITEM 1 - LEGAL PROCEEDINGS
On April 30, 2001, the Company entered into a mutually amicable Settlement
Agreement of its lawsuit entitled Nobel Learning Communities, Inc. and Paladin
Academy, LLC v. Developmental Resource Center, Inc., Dr. Deborah Levy,. L.D.
Learning.Com and Emily Levy, Case No. 00-3286 CIV-KING, filed in the federal
district court for the Southern District of Florida. All claims between the
various parties were released. In connection with the Settlement Agreement,
Developmental Resource Center, Inc. transferred to the Company all its equity
interest in Paladin Academy, LLC, which is now owned 100% by the Company. Also,
certain payments were made between the various parties to the litigation, none
of which are material to the operations of the Company.
14
Item 6. Exhibits and Reports on Form 8-K
None
15
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 thereunto duly authorized.
NOBEL LEARNING COMMUNITIES, INC.
Dated: May 14, 2001 By: /s/ William E. Bailey
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William E. Bailey
Vice President/Chief Financial Officer
(duly authorized officer and
principal financial officer)
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