<PAGE>
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UNITED STATES
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, 1999
OR
[_] 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 0-25283
----------------
CORINTHIAN COLLEGES, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 33-0717312
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
</TABLE>
6 Hutton Centre Drive, Suite 400, Santa Ana, California
(Address of principal executive offices)
92707
(Zip Code)
(714) 427-3000
(Registrant's telephone number, including area code)
----------------
Indicate by check mark whether the registrant (1) has filed all reports
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 [_]
At February 10, 2000, 10,345,623 shares of Common Stock and Nonvoting Common
Stock of the Registrant were outstanding.
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<PAGE>
CORINTHIAN COLLEGES, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PAGE
NO.
----
<C> <S> <C>
PART I--FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets at June 30, 1999 and
December 31, 1999............................................... 3
Condensed Consolidated Statements of Operations for the quarter
and six months ended December 31, 1998 and 1999................. 4
Condensed Consolidated Statements of Cash Flows for the six
months ended December 31, 1998 and 1999......................... 5
Notes to Condensed Consolidated Financial Statements............ 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations........................................... 7
Item 3. Quantitative and Qualitative Disclosure about Market Risk....... 11
PART II--OTHER INFORMATION
Item 1. Legal Proceedings............................................... 11
Item 6. Exhibits........................................................ 11
Signatures............................................................... 12
</TABLE>
2
<PAGE>
PART I--FINANCIAL INFORMATION
Item 1. Financial Statements
CORINTHIAN COLLEGES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1999
-------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents.............................. $ 1,787 $ 7,450
Restricted cash........................................ 10 10
Marketable investments................................. 14,501 15,774
Accounts receivable, net of allowance for doubtful
accounts of $3,258 and $3,609 at June 30, 1999 and
December 31, 1999, respectively....................... 11,385 14,228
Student notes receivable, net of allowance for doubtful
accounts of $463 and $407 at June 30, 1999 and
December 31, 1999, respectively....................... 1,959 1,243
Deferred income taxes.................................. 1,901 2,161
Prepaid expenses and other current assets.............. 4,037 4,269
------- -------
Total current assets................................ 35,580 45,135
PROPERTY AND EQUIPMENT, net.............................. 10,981 11,653
OTHER ASSETS:
Intangibles, net of accumulated amortization of $3,110
and $3,656 at June 30, 1999 and December 31, 1999,
respectively.......................................... 21,218 20,672
Student notes receivable, net of allowance for doubtful
accounts of $1,435 and $1,102 at June 30, 1999 and
December 31, 1999, respectively....................... 5,175 3,448
Deposits and other assets.............................. 903 1,300
------- -------
TOTAL ASSETS........................................ $73,857 $82,208
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable....................................... $ 4,828 $ 5,092
Accrued compensation and related liabilities........... 5,749 5,269
Accrued expenses....................................... 618 947
Accrued interest....................................... 34 32
Income tax payable..................................... 1,848 1,997
Prepaid tuition........................................ 3,257 5,002
Current portion of long-term debt...................... 138 139
------- -------
Total current liabilities............................. 16,472 18,478
------- -------
LONG-TERM DEBT, net of current portion................... 3,396 3,325
------- -------
OTHER LONG-TERM LIABILITIES.............................. -- 1
------- -------
DEFERRED INCOME TAXES.................................... 453 636
------- -------
STOCKHOLDERS' EQUITY:
Common Stock, $0.0001 par value:
Common Stock, 40,000 shares authorized, 9,169 shares
issued and outstanding at June 30, 1999 and December
31, 1999, respectively............................... 1 1
Nonvoting Common Stock, 2,500 shares authorized, 1,177
shares issued and outstanding at June 30, 1999 and
December 31, 1999 respectively....................... -- --
Additional paid-in capital............................. 49,609 49,609
Retained earnings...................................... 3,926 10,158
------- -------
Total stockholders' equity.......................... 53,536 59,768
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.......... $73,857 $82,208
======= =======
</TABLE>
See accompanying notes.
3
<PAGE>
CORINTHIAN COLLEGES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
December 31, December 31,
---------------- ----------------
1998 1999 1998 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
NET REVENUE............................... $32,974 $42,183 $63,270 $80,828
------- ------- ------- -------
OPERATING EXPENSES:
Educational services.................... 18,711 23,020 36,689 44,581
General and administrative.............. 3,468 4,266 6,758 8,141
Marketing and advertising............... 7,221 8,681 14,856 18,161
------- ------- ------- -------
Total operating expenses.............. 29,400 35,967 58,303 70,883
------- ------- ------- -------
Income from operations................ 3,574 6,216 4,967 9,945
INTEREST EXPENSE, (INCOME), net........... 791 (366) 1,694 (740)
------- ------- ------- -------
Income before provision for income
taxes.................................. 2,783 6,582 3,273 10,685
PROVISION FOR INCOME TAXES................ 1,265 2,730 1,460 4,454
------- ------- ------- -------
NET INCOME................................ $ 1,518 $ 3,852 $ 1,813 $ 6,231
======= ======= ======= =======
INCOME ATTRIBUTABLE TO COMMON
STOCKHOLDERS:
Net income.............................. $ 1,518 $ 3,852 $ 1,813 $ 6,231
Less preferred stock dividends.......... (147) -- (280) --
------- ------- ------- -------
Net income attributable to common
stockholders........................... $ 1,371 $ 3,852 $ 1,533 $ 6,231
======= ======= ======= =======
INCOME (PER SHARE) ATTRIBUTABLE TO COMMON
STOCKHOLDERS:
Basic................................... $ 0.26 $ 0.37 $ 0.29 $ 0.60
======= ======= ======= =======
Diluted................................. $ 0.19 $ 0.37 $ 0.21 $ 0.60
======= ======= ======= =======
Weighted average number of common shares
outstanding:
Basic................................... 5,236 10,346 5,236 10,346
======= ======= ======= =======
Diluted................................. 7,333 10,415 7,333 10,406
======= ======= ======= =======
</TABLE>
See accompanying notes.
4
<PAGE>
CORINTHIAN COLLEGES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended
December 31,
----------------
1998 1999
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................. $ 1,813 $ 6,231
Adjustments to reconcile net income to net cash provided by
(used in) operating activities--
Depreciation and amortization............................ 1,682 1,815
Deferred income taxes.................................... 250 (77)
Changes in assets and liabilities:
Accounts receivable.................................... (1,628) (2,843)
Student notes receivable............................... (226) 2,443
Prepaid expenses and other assets...................... (914) (640)
Accounts payable....................................... 918 264
Accrued expenses....................................... (474) (152)
Income tax payable..................................... 105 149
Prepaid tuition........................................ 129 1,745
------- -------
Net cash provided by operating activities............ 1,655 8,935
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Phillips Colleges acquisition purchase price adjustment.... 402 --
Change in marketable investments, net...................... -- (1,273)
Capital expenditures....................................... (1,168) (1,929)
------- -------
Net cash used in investing activities................ (766) (3,202)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in deferred financing costs....................... (259) --
Borrowings under long-term debt............................ 3,200 --
Principal repayments on long-term debt..................... (5,765) (70)
------- -------
Net cash used in financing activities................ (2,824) (70)
------- -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS......... (1,935) 5,663
CASH AND CASH EQUIVALENTS, beginning of period............... 2,402 1,787
------- -------
CASH AND CASH EQUIVALENTS, end of period..................... $ 467 $ 7,450
======= =======
</TABLE>
See accompanying notes.
5
<PAGE>
CORINTHIAN COLLEGES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1--The Company and Basis of Presentation
Corinthian Colleges, Inc. (the "Company") is in the business of operating
degree and non-degree granting private, for-profit post-secondary schools
devoted to career program training primarily in the medical, technical and
business fields.
The accompanying unaudited consolidated financial statements have been
prepared on the same basis as the annual consolidated financial statements
and, in the opinion of management, reflect all adjustments, which include only
normal recurring adjustments, necessary to present fairly the financial
condition and results of operation of the Company. These consolidated
financial statements and notes thereto are unaudited and should be read in
conjunction with the Company's audited financial statements included in the
Company's Report on Form 10-K, as filed with the Securities and Exchange
Commission (the "SEC") on September 27, 1999. The results of operations for
the three months and six months ended December 31, 1999 are not necessarily
indicative of results that could be expected for the entire fiscal year.
The consolidated financial statements as of December 31, 1999 and for the
three months and six months then ended are consolidated and include the
accounts of the Company and its wholly-owned subsidiaries. All significant
intercompany balances and transactions have been eliminated in consolidation.
Note 2--Weighted Average Number of Common Shares Outstanding
The table below indicates the weighted average number of common share
calculations used in computing basic and diluted net income per common share
utilizing the treasury stock method (in thousands):
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
December 31, December 31,
------------ ------------
1998 1999 1998 1999
----- ------ ----- ------
<S> <C> <C> <C> <C>
Basic common shares outstanding................... 5,236 10,346 5,236 10,346
Effects of dilutive securities:
Warrants........................................ 968 -- 968 --
Non-vested executive Common Stock............... 275 -- 275 --
Non-vested executive Nonvoting Common Stock..... 827 -- 827 --
Stock options................................... 27 69 27 60
----- ------ ----- ------
Diluted common shares outstanding................. 7,333 10,415 7,333 10,406
===== ====== ===== ======
</TABLE>
6
<PAGE>
CORINTHIAN COLLEGES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Note 3--Post Retirement Benefit Obligation
The Company has elected to provide certain postretirement benefits to
certain key employees. Accordingly, the Company has adopted SFAS No. 106
"Accounting For Postretirement Benefits Other Than Pensions". The adoption of
SFAS No. 106 did not have a material effect on the Company's consolidated
financial position or results of operations.
Note 4--Governmental Regulation
In its Report on Form 10-K for the fiscal year ended June 31, 1999, the
Company reported that the Inspector General's Office (the "IG") of the U.S.
Department of Education (the "DOE") had visited the Company's headquarters to
examine the Company's compliance with the 85/15 Rule (now the 90/10 Rule) and
to review in general the Company's administration of Title IV funds. The IG
has now issued its final audit report to the DOE and has not recommended any
action be taken against the Company as a result of its examination.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
This Quarterly Report on Form 10-Q contains statements that may constitute
"forward-looking statements" as defined by the U.S. Private Securities
Litigation Reform Act of 1995. Such forward-looking statements can be
identified by the use of forward-looking terminology such as "believes,"
"estimates," "anticipates," "continues," "contemplates," "expects," "may,"
"will," "could," "should" or "would," or the negatives thereof. Such
statements are based on the intent, belief or expectation of the Company as of
the date of this Quarterly Report. Any such forward-looking statements are not
guarantees of future performance and may involve risks and uncertainties that
are outside the control of the Company. Results may differ materially from the
forward-looking statements contained herein as a result of changes in
governmental regulations, including those governing student financial aid, the
effect of competitive pressures on the Company's tuition pricing, and other
factors, including those discussed under the heading entitled "Additional
Risks Related to the Business" in the Company's Annual Report on Form 10-K
(File No. 0-25283) and other documents periodically filed with the Securities
and Exchange Commission. The Company expressly disclaims any obligation to
release publicly any updates or revisions to any forward-looking statement
contained herein to reflect any change in the Company's expectations with
regard thereto or any change in events, conditions or circumstances on which
any such statement is based. The following discussion of the Company's results
of operations and financial condition should be read in conjunction with the
interim unaudited condensed financial statements of the Company and the notes
thereto included herein and in conjunction with the information contained in
the aforementioned Report on Form 10-K.
Results of Operations
Three Months Ended December 31, 1999 Compared to Three Months Ended December
31, 1998
Net revenues increased $9.2 million, or 27.9%, from $33.0 million in the
second quarter of fiscal 1999 to $42.2 million in the second quarter of fiscal
2000, due primarily to a 16.4% increase in the average student population
during the quarter and a 9.7% increase in the average tuition rate per
student. At December 31, 1999, the total student population was 17,537,
compared with 15,073 at December 31, 1998.
Educational services expense increased $4.3 million, or 23.0%, from $18.7
million in the second quarter of fiscal 1999 to $23.0 million in the second
quarter of fiscal 2000, due primarily to the increase in student population,
wage increases for employees, higher bad debt expense resulting from higher
revenue, the cost of two new locations opened in the third quarter of fiscal
1999, and higher rent from certain school relocations to larger upgraded
facilities and annual lease escalations. As a percentage of net revenue,
educational services expense decreased from 56.7% to 54.6%.
7
<PAGE>
CORINTHIAN COLLEGES, INC. AND SUBSIDIARIES
General and administrative expense increased $0.8 million, or 23.0%, from
$3.5 million in the second quarter of fiscal 1999 to $4.3 million in the
second quarter of fiscal 2000, primarily as a result of (i) additional
headquarters staff to support operations, (ii) wage increases for employees,
and (iii) increased performance bonus accrual. As a percentage of net revenue,
general and administrative expense decreased from 10.5% to 10.1%.
Marketing and advertising expense increased $1.5 million, or 20.2%, from
$7.2 million in the second quarter of fiscal 1999 to $8.7 million in the
second quarter of fiscal 2000, primarily as a result of increased advertising
expenditures due both to an increase in the quantity of advertisements and
general cost inflation for advertising products and increased staff costs
resulting from wage increases and additional admissions representatives. As a
percentage of net revenue, marketing and advertising expense decreased from
21.9% to 20.6%.
Net interest income was $0.4 million in the second quarter of fiscal 2000
versus net interest expense of $0.8 million in the second quarter of fiscal
1999, or an improvement of $1.2 million, due primarily to the repayment of
debt with a portion of the proceeds from the Company's initial public offering
in February 1999 and interest income from short-term investments.
The Company's effective income tax rate decreased from 45.5% in the second
quarter of fiscal 1999 to 41.5% in the second quarter of fiscal 2000 due to a
reduction in the effective rate for state income taxes.
Net income increased $2.3 million, or 153.8%, from $1.5 million in the
second quarter of fiscal 1999 to $3.9 million in the second quarter of fiscal
2000, due primarily to the factors discussed above.
Six Months Ended December 31, 1999 Compared to Six Months Ended December 31,
1998
Net revenues increased $17.6 million, or 27.8%, from $63.3 million in the
first six months of fiscal 1999 to $80.8 million in the first six months of
fiscal 2000, due primarily to a 15.4% increase in the average student
population during the six month period and a 10.1% increase in the average
tuition rate per student.
Educational services expense increased $7.9 million, or 21.5%, from $36.7
million in the first six months of fiscal 1999 to $44.6 million in the first
six months of fiscal 2000, due primarily to the increase in student
population, wage increases for employees, higher bad debt expense resulting
from higher revenue, cost of two new locations opened in the third quarter of
fiscal 1999, and higher rent from certain school relocations to larger
upgraded facilities and annual lease escalations. As a percentage of net
revenue, educational services expense decreased from 58.0% to 55.2%.
General and administrative expense increased $1.4 million, or 20.5%, from
$6.8 million in the first six months of fiscal 1999 to $8.1 million in the
first six months of fiscal 2000, primarily as a result of (i) additional
headquarters staff to support operations, (ii) wage increases for employees,
and (iii) increased performance bonus accrual. As a percentage of net revenue,
general and administrative expense decreased from 10.7% to 10.1%.
Marketing and advertising expense increased $3.3 million, or 22.2%, from
$14.9 million in the first six months of fiscal 1999 to $18.2 million in the
first six months of fiscal 2000, primarily as a result of increased
advertising expenditures due both to an increase in the quantity of
advertisements and general cost inflation for advertising products and
increased staff costs resulting from wage increases and additional admissions
representatives. As a percentage of net revenue, marketing and advertising
expense decreased from 23.5% to 22.5%.
Net interest income was $0.7 million in the first six months of fiscal 2000
versus net interest expense of $1.7 million in the first six months of fiscal
1999, or an improvement of $2.4 million, due primarily to the repayment of
debt with a portion of the proceeds from the Company's initial public offering
in February 1999 and interest income from short-term investments.
8
<PAGE>
CORINTHIAN COLLEGES, INC. AND SUBSIDIARIES
The Company's effective income tax rate decreased from 44.6% in the first
six months of fiscal 1999 to 41.7% in the first six months of fiscal 2000 due
to a reduction in the effective rate for state income taxes.
Net income increased $4.4 million, or 243.7%, from $1.8 million in the first
six months of fiscal 1999 to $6.2 million in the first six months of fiscal
2000, due primarily to the factors discussed above.
Tuition Price Increases
The 9.7% and 10.1% increases in the average tuition rate per student for the
quarter and six months ended December 31, 1999, respectively, resulted from a
combination of (i) tuition price increases averaging approximately 7.5%, (ii)
increase in the percentage of students in higher cost programs, and (iii) the
effect of graduation and attrition of students in certain degree-granting
colleges that had fixed tuition contracts significantly below the prevailing
rate being charged new students. Under prior ownership, students in these
colleges were guaranteed a fixed tuition price for the duration of their
programs. Thus, any subsequent tuition price increases applied only to new
students. Subsequent to the Company's acquisition of these colleges, the
pricing mechanism has been changed so that tuition increases now affect both
new students and continuing students. However, the Company honored the fixed
price commitment to those students already in school when the Company acquired
the colleges. The result is a greater increase in the average tuition rate per
student than the actual period to period tuition price increase because of the
period to period mix impact of new to "grandfathered" students. The Company
expects that the majority of the remaining "grandfathered" students will
graduate or discontinue by the end of fiscal 2000. After that time, the
Company expects period to period increases in the average tuition rate per
student to more closely track the actual tuition price increases implemented
period to period. Accordingly, the average tuition rate increases discussed
herein are not necessarily indicative of average rate increases that may occur
in the future.
Seasonality and Other Factors Affecting Quarterly Results
The Company's revenues normally fluctuate as a result of seasonal variations
in its business, principally in its total student population. Student
population varies as a result of new student enrollments, graduates and
student attrition. The Company's expenses, however, do not vary as
significantly as student population and revenue. The Company expects quarterly
fluctuations in operating results to continue as a result of seasonal
enrollment patterns. Such patterns may change, however, as a result of
acquisitions, new school openings, new program introductions and increased
high school enrollments. The operating results for any quarter are not
necessarily indicative of the results that could be expected for the full
fiscal year or for any future period.
Liquidity and Capital Resources
Cash provided by operating activities totaled $8.9 million in the first six
months of fiscal 2000 compared to $1.7 million provided by operating
activities in the same period of fiscal 1999. The Company had $26.7 million of
working capital as of December 31, 1999 compared to $19.1 million of working
capital as of June 30, 1999. The increase in working capital was due primarily
to favorable operating results during the period.
Capital expenditures increased from $1.2 million in the six months ended
December 31, 1998 to $1.9 million in the same period in 1999. The increase was
due to the upgrading of school equipment and facilities and purchases of
additional equipment to accommodate the increasing student population. Capital
expenditures for fiscal 2000 are expected to increase as the student
population increases and the Company continues to upgrade and expand current
facilities and equipment and add new campuses.
The Company believes that it's current working capital and expected cash
flow from operations, supplemented from time to time by borrowings from the
revolving credit facility with Union Bank of California,
9
<PAGE>
CORINTHIAN COLLEGES, INC. AND SUBSIDIARIES
will provide adequate funds for ongoing operations, planned routine capital
expenditures, planned expansion to new locations and debt service during the
term of the revolving credit agreement.
The Company leases all of its facilities except five. The Company expects
that future commitments on existing leases will be paid from cash flow from
operations.
Year 2000 Compliance
The information provided below constitutes a "Year 2000 Readiness
Disclosure" for purposes of the Year 2000 Information and Readiness Disclosure
Act.
Introduction. Through the first month of the Year 2000, the Company's
computer systems appear to be functioning normally and have not experienced
any significant issues associated with the Year 2000 problem. In 1997, the
Company began the process of identifying necessary changes to its computer
programs and hardware and assessing the progress of its significant vendors in
their remediation efforts to address the Year 2000 computer problem. The
discussion below details the Company's efforts to ensure Year 2000 compliance.
State of Readiness. The Company identified and evaluated the readiness of
its internal and third party information technology and non-information
technology systems which, if not Year 2000 compliant, could have a direct
major impact to the Company. This evaluation identified the following initial
areas of concern: (i) the Company's accounting and financial reporting system,
(ii) the Company's proprietary student database system (Schools Automation
System or "SAS"), (iii) the systems of third party vendors which process
student financial aid applications and loans for the Company, and (iv) the
DOE's systems for processing and disbursing student financial aid.
The Company's accounting and financial reporting system was upgraded with
the provider's latest release which is certified to be Year 2000 compliant.
The Company's SAS system was not initially compliant and a project plan was
developed to bring this system into compliance. The remediation project is now
complete and fully tested. The Company also assessed the state of readiness of
its major servers and shared hardware devices, and those hardware systems
which were not already Year 2000 compliant have been made so through upgrades
of operating system software.
Based on its assessment, its vendors' representations, and performance to
date, the Company believes that the systems of its significant third party
vendors which provide student financial aid and loan processing are Year 2000
compliant.
The Company is highly dependent on student funding provided through Title IV
of the Higher Education Act and administered by the DOE. Processing of student
applications for this funding and actual disbursement of a significant portion
of these funds are accomplished through the DOE's computer systems. According
to the DOE, their systems have now been renovated, independently validated and
verified, and certified to be Year 2000 compliant. As of this date, the
Company has not experienced any Year 2000 related problems in processing its
applications for student funding. However, any significant problems in the
DOE's systems could result in interruption of funding for the Company's
students and have a material adverse impact on the Company, its business and
results of operations.
Year 2000 Costs. The Company has completed all expected spending on its Year
2000 remediation projects.
Risks from Year 2000 Issues. The Company believes the greatest Year 2000
compliance risk, in terms of magnitude of risk, is that the DOE's systems
experience a failure, despite our experience to date, and Title IV funding for
the Company's students could be interrupted for a period of time. Other than
public comments provided by the DOE, the Company is unable to predict the
likelihood of this risk occurring. Any significant interruption of this
funding could have a material adverse effect on the Company's results of
operations, liquidity or financial condition.
10
<PAGE>
CORINTHIAN COLLEGES, INC. AND SUBSIDIARIES
Contingency Plans. At this time, the Company believes its systems are Year
2000 compliant and is satisfied that its significant vendors are also
compliant. As such, the Company has not developed any specific contingency
plans to address an unforeseen Year 2000 computer failure. Based on the DOE's
assertion that it is Year 2000 compliant, and our experience to date, the
Company also has not developed a contingency plan to deal with a failure of
the DOE's systems because of the Year 2000 problem.
Item 3. Quantitative and Qualitative Disclosure about Market Risk
The Company does not utilize interest rate swaps, forward or option
contracts on foreign currencies or commodities, or other types of derivative
financial instruments. The only assets or liabilities of the Company which are
subject to risks from interest rate changes are (i) the mortgage debt of the
Company in the aggregate amount of $3.5 million, (ii) notes receivable from
students for the aggregate amount of $4.7 million, and (iii) marketable
investments of $15.8 million, all at December 31, 1999. The mortgage debt of
the Company, the student notes receivable, and the marketable investments are
all at fixed interest rates. The Company does not believe it is subject to
material risks from reasonably possible near-term changes in market interest
rates.
PART II--OTHER INFORMATION
Item 1. Legal Proceedings.
The Company is subject to disputes, claims and litigation in the ordinary
course of its business. In its Report on Form 10-K filed for the fiscal year
ended June 30, 1999, the Company reported that a group of students in its
Duff's Business Institute court reporting program had filed suit against the
Company and certain of its subsidiaries. At the time of the Report on Form 10-
K, all such students had voluntarily dismissed their suit and the Company had
agreed to engage in non-binding mediation in an attempt to resolve the
students' complaints.
During the quarter ended December 31, 1999, the Company settled its disputes
with all but two of such students for an amount the Company does not believe
to be material. The cost of settling the disputes was expensed during the
quarter ended December 31, 1999. The Company does not believe that the
disputes with the remaining two students, or any other currently pending legal
proceeding against the Company, are likely to result in a material adverse
effect on the Company's financial condition, results of operations or
liquidity.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
<TABLE>
<C> <S>
27 Financial Data Schedule.
</TABLE>
(b) Reports on Form 8-K:
None.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
CORINTHIAN COLLEGES, INC.
/s/ David G. Moore
_____________________________________
February 11, 2000 David G. Moore
President and Chief Executive
Officer
(Principal Executive Officer)
/s/ Frank J. McCord
_____________________________________
February 11, 2000 Frank J. McCord
Executive Vice President and
Chief Financial Officer
(Principal Accounting Officer)
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET, INCOME STATEMENTS AND STATEMENTS OF CASH FLOWS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 7,450
<SECURITIES> 15,774
<RECEIVABLES> 24,037
<ALLOWANCES> 5,118
<INVENTORY> 0
<CURRENT-ASSETS> 45,135
<PP&E> 18,544
<DEPRECIATION> 6,891
<TOTAL-ASSETS> 82,208
<CURRENT-LIABILITIES> 18,478
<BONDS> 3,464
0
0
<COMMON> 1
<OTHER-SE> 59,767
<TOTAL-LIABILITY-AND-EQUITY> 82,208
<SALES> 0
<TOTAL-REVENUES> 80,828
<CGS> 0
<TOTAL-COSTS> 70,883
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 4,702
<INTEREST-EXPENSE> (740)
<INCOME-PRETAX> 10,685
<INCOME-TAX> 4,454
<INCOME-CONTINUING> 6,231
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,231
<EPS-BASIC> 0.60
<EPS-DILUTED> 0.60
</TABLE>
