SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A-1
Current Report
Pursuant to Section 13 or 15(d) of
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) March 29, 1996
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WHITMAN EDUCATION GROUP, INC.
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(Exact Name of Registrant as Specified in Its Charter)
New Jersey
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(State or Other Jurisdiction of Incorporation)
1-13722 22-2246554
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(Commission File No.) (IRS Employer Identification No.)
4400 Biscayne Boulevard, 6th Floor, Miami, Florida 33137
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(Address of Principal Executive Offices) (Zip Code)
(305) 575-6534
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(Registrant's Telephone Number, Including Area Code)
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(Former Name or Former Address, if Changed Since Last Report)
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Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
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(a) Financial Statements of Businesses Acquired:
Independent Auditors' Report ................................................... 3
Consolidated Balance Sheets .................................................... 4
Consolidated Statements of Income .............................................. 5
Consolidated Statements of Changes in Stockholders' Equity ..................... 6
Consolidated Statements of Cash Flows .......................................... 7
Notes to Consolidated Financial Statements ..................................... 8
Registrant incorporates herein pursuant to Rule 12b-23 the audited financial
information with respect to Sanford Brown College, Inc. for the fiscal years
ended October 31, 1994, 1993, and 1992 from Registrant's Current Report on Form
8K/A-2 filed with the Commission on February 13, 1996.
(b) Pro Forma Financial Information:
Introduction to Unaudited Pro Forma Condensed
Combined Financial Information ............................................ 15
Unaudited Pro Forma Condensed Combined Balance Sheet ......................... 17
Unaudited Pro Forma Condensed Combined Statement
of Operations for Registrant and M.D.J.B. for the
nine month periods ended December 31, 1995 and
September 30, 1995, respectively ......................................... 18
Unaudited Pro Forma Condensed Combined Statement
of Operations for the Registrant, Sanford Brown
College, Inc. and M.D.J.B. for the year ended
March 31, 1995, the period from April 1, 1994
through December 20, 1994 and for the year ended
December 31, 1994, respectively............................................ 19
Unaudited Pro Forma Condensed Combined Statement
of Operations for the Registrant and M.D.J.B. for
the years ended March 31, 1994 and
December 31, 1993, respectively ........................................... 20
Unaudited Pro Forma Condensed Combined Statement
of Operations for the Registrant and M.D.J.B.
for the years ended March 31, 1993 and
December 31, 1992, respectively ........................................... 21
Notes to Unaudited Pro Forma Condensed Combined
Financial Information ..................................................... 22
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2
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INDEPENDENT AUDITORS' REPORT
To the Board of Directors
M.D.J.B., Inc.
Colorado Springs, Colorado
We have audited the accompanying consolidated balance sheets of M.D.J.B., Inc.
and subsidiary as of December 31, 1995 and 1994, and the related consolidated
statements of income, changes in stockholders' equity, and cash flows for the
three years in the period ended December 31, 1995. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
M.D.J.B., Inc. and subsidiary as of December 31, 1995 and 1994, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1995, in conformity with generally accepted accounting
principles.
As discussed in Note 1 to the consolidated financial statements, M.D.J.B., Inc.
and subsidiary changed its method of accounting for advertising costs in 1995.
STOCKMAN KAST RYAN & SCRUGGS, P.C.
Colorado Springs, Colorado
February 6, 1996
(except Note 10 as to which
the date is March 29, 1996)
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M.D.J.B., INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
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December 31,
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1995 1994
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash (Note 3) $ 718,060 $ 129,177
Cash reserved for refunds (Note 8) 34,026 34,026
Accounts receivable, net of allowance for doubtful accounts
of $12,705 and $10,944 at 1995 and 1994 (Note 3) 2,247,241 1,750,727
Merchandise and supplies inventory (Note 3) 258,720 235,089
Prepaid expenses 150,579 292,095
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Total current assets 3,408,626 2,441,114
PROPERTY AND EQUIPMENT, Net (Notes 2, 3 and 4) 1,870,613 1,649,326
OTHER ASSETS 67,950 37,504
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TOTAL $5,347,189 $4,127,944
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable, including checks written against
future deposits of $143,691 at December 31, 1994 $ 434,064 $ 622,422
Accrued expenses 61,780 167,957
Income taxes payable (Note 5) 257,031 122,651
Current portion of obligations under capitalized leases (Note 4) 315,560 204,492
Current portion of deferred income tax liability (Note 5) 27,758
Prepaid tuition and fees 119,974 135,063
Deferred tuition and fees 1,828,739 1,653,993
---------- ----------
Total current liabilities 3,017,148 2,934,336
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LONG-TERM LIABILITIES
Long-term revolving note (Note 3) 1,000,000
Obligations under capitalized leases, net of current portion (Note 4) 385,439 222,884
Deferred income tax liability, net of current portion (Note 5) 3,640 46,232
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Total long-term liabilities 1,389,079 269,116
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Total liabilities 4,406,227 3,203,452
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COMMITMENTS AND CONTINGENCIES (Notes 7 and 8)
STOCKHOLDERS' EQUITY
Common stock, no par value, 10,000,000 shares authorized, 1,074,847
and 1,168,122 shares outstanding at 1995 and 1994 (Note 6) 155,794 436,899
Retained earnings 785,168 487,593
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Total stockholders' equity 940,962 924,492
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TOTAL $5,347,189 $4,127,944
========== ==========
</TABLE>
See notes to consolidated financial statements.
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M.D.J.B., INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
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For the Year Ended December 31,
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1995 1994 1993
<S> <C> <C> <C>
REVENUES
Tuition and fees, net of scholarships of $593,051,
$573,875 and $624,237 for 1995, 1994 and 1993 $ 7,389,804 $ 6,538,737 $ 6,087,274
Bookstore sales 833,222 722,459 735,046
Marketing division sales 650,926 521,816 172,812
Other 50,013 84,511 67,404
-------------- ------------- --------------
Total 8,923,965 7,867,523 7,062,536
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OPERATING EXPENSES
Cost of educational services 6,055,535 5,662,689 5,448,285
General and administrative costs 1,894,698 1,456,479 1,294,310
Cost of marketing division sales 406,764 342,059 96,350
-------------- ------------- --------------
Total 8,356,997 7,461,227 6,838,945
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INCOME FROM OPERATIONS 566,968 406,296 223,591
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OTHER INCOME (EXPENSE)
Interest income 3,574 16,295
Interest expense (50,787) (42,821) (38,488)
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Total (47,213) (42,821) (22,193)
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INCOME BEFORE PROVISIONS FOR
INCOME TAXES 519,755 363,475 201,398
PROVISIONS FOR INCOME TAXES (Note 5) 222,180 155,107 62,140
-------------- ------------- --------------
NET INCOME $ 297,575 $ 208,368 $ 139,258
============== ============= ==============
</TABLE>
See notes to consolidated financial statements.
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M.D.J.B., INC. AND SUBSIDIARY
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CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
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Common Stock Retained
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Shares Amount Earnings Total
<S> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1993 1,104,000 $ 333,000 $ 139,967 $ 472,967
Repurchase and cancellation
of stock previously issued (36,583) (112,999) (112,999)
Issuance of common stock for cash 131,458 315,524 315,524
Net income 139,258 139,258
------------ ----------- ----------- -----------
BALANCE, DECEMBER 31, 1993 1,198,875 535,525 279,225 814,750
Repurchase and cancellation
of stock previously issued (30,753) (98,626) (98,626)
Net income 208,368 208,368
------------ ----------- ----------- -----------
BALANCE, DECEMBER 31, 1994 1,168,122 436,899 487,593 924,492
Repurchase and cancellation
of stock previously issued (102,000) (306,000) (306,000)
Issuance of common stock for cash 8,725 24,895 24,895
Net income 297,575 297,575
------------ ----------- ----------- -----------
BALANCE, DECEMBER 31, 1995 1,074,847 $ 155,794 $ 785,168 $ 940,962
============ =========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
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M.D.J.B., INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
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For the Year Ended December 31,
----------------------------------------------
1995 1994 1993
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 297,575 $ 208,368 $ 139,258
Adjustments to reconcile net income to cash
provided by (used in) operating activities:
Depreciation and amortization 505,873 442,867 408,995
Common stock issued in lieu of cash compensation 59,523
Deferred income taxes (34,851) 32,456 12,140
Changes in operating assets and liabilities:
Cash reserved for refunds (34,026)
Accounts receivable (496,514) (226,583) (309,168)
Inventory (23,631) (23,275) (18,643)
Prepaid expenses 187,916 15,729 3,015
Accounts payable (188,358) 79,062 62,755
Accrued expenses (106,177) 10,583 (151,267)
Income taxes payable 98,881 69,435 (56,260)
Deferred and prepaid tuition and fees 159,657 103,958 (255,680)
Other 3,476 37,903 7,476
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Net cash provided by (used in) operating activities 403,847 716,477 (97,856)
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INVESTING ACTIVITIES
Net cash used in investing activities --
Purchases of property and equipment (271,665) (253,992) (226,320)
------------- ----------- -----------
FINANCING ACTIVITIES
Principal payments on capital lease obligations (262,194) (233,699) (191,439)
Borrowings under long-term revolving note 1,000,000
Net borrowings (repayments) under line
of credit agreement (37,000) 37,000
Proceeds from sale of common stock 24,895 213,024
Repurchase of common stock (153,000) (98,626) (112,999)
Principal payments on note to former stockholder (153,000)
Principal payments received on notes 109,478
------------- ------------ -----------
Net cash provided by (used in) financing activities 456,701 (369,325) 55,064
------------- ------------ -----------
NET INCREASE (DECREASE) IN CASH 588,883 93,160 (269,112)
CASH, Beginning of year 129,177 36,017 305,129
------------- ----------- -----------
CASH, End of year $ 718,060 $ 129,177 $ 36,017
============= =========== ===========
SUPPLEMENTAL NONCASH FINANCING
AND INVESTING ACTIVITIES
Equipment acquired under capital leases $ 443,017 $ 251,017 $ 235,251
Note issued in connection with purchase of treasury stock 153,000
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for income taxes 148,405 52,217 109,790
Cash paid for interest 50,787 47,375 37,153
</TABLE>
See notes to consolidated financial statements.
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M.D.J.B., INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business -- M.D.J.B., Inc. (M.D.J.B.) is the sole shareholder of
Colorado Technical University, Inc. (Colorado Tech). M.D.J.B.'s
principal operations are those of Colorado Tech. Colorado Tech is a
for-profit private educational institution which offers higher
education in engineering, computer science, and high-tech management.
It is accredited by the North Central Association of Colleges and
Schools Commission on Institutions of Higher Education. Colorado Tech
offers programs leading to Associates, Bachelors, Masters and Doctorate
degrees. It also offers professional certificates and customized
corporate training which are not a part of these degree programs.
Colorado Tech currently operates from one campus located in Colorado
Springs, Colorado. Most of its students are from Colorado Springs and
nearby communities.
M.D.J.B. also provides marketing services to the general public
through its marketing division, Concept Communications.
Principles of Consolidation -- The consolidated financial statements
include the accounts of M.D.J.B. and Colorado Tech. Intercompany
transactions and balances have been eliminated.
Revenue and Expense Recognition -- M.D.J.B. recognizes revenues and
expenses on the accrual basis. Tuition and fee income is recognized as
revenue over the term of the course to which it relates.
In December 1993, the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants issued Statement of
Position 93-7 (SOP), "Reporting on Advertising Costs." The SOP
generally requires advertising costs to be expensed as incurred.
M.D.J.B. adopted the SOP effective January 1, 1995. In adopting the
SOP, M.D.J.B.'s total advertising, selling and promotional costs are
expensed as incurred in 1995 rather than deferred and amortized, as in
prior periods. Adoption of the SOP in 1995 resulted in charges of
$527,660 for 1995 which consists of two components: $89,600 results
from the amortization of the prepaid marketing balance at December 31,
1994 and $438,060 results from marketing expenditures incurred during
1995. Prior to adopting the SOP, marketing costs were deferred and
amortized to expense in the subsequent calendar quarter.
Merchandise and Supplies Inventories -- Inventories consist of books,
classroom supplies and other items which are valued at the lower of
first-in, first-out (FIFO) cost or market.
Property and Equipment -- Property and equipment are recorded at cost.
Depreciation, including amortization of capitalized leases, is
calculated using the straight-line method over the assets estimated
useful lives as follows: equipment -- five years; furniture, fixtures
and improvements -- ten years; and capitalized equipment leases -- over
the lease term which is generally three to five years.
<PAGE>
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
Prepaid and Deferred Tuition and Fees -- Prepaid tuition and fees
consist of tuition and fees collected by M.D.J.B. which are in excess
of amounts due for the current quarter. These amounts are classified as
prepaid tuition. Should the student not register for further classes,
the amount is refunded.
Deferred tuition and fees represent tuition and fee income which will
be earned in the following quarter. Upon registration for classes, a
student's account is charged for the student's tuition and fees, and
revenue is deferred until the quarter begins. Tuition and fees are
generally refundable up to two weeks after the start of a quarter.
Use of Estimates -- The preparation of M.D.J.B.'s financial statements
in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting period.
Actual results could differ from those estimates.
Reclassifications -- Certain reclassifications of prior years' amounts
have been made to conform to the current year presentation.
2. PROPERTY AND EQUIPMENT
Property and equipment consist of the following at December 31:
1995 1994
Equipment $ 1,568,391 $ 1,466,199
Furniture, fixtures and improvements 1,436,287 1,282,713
Capitalized equipment leases 1,103,820 721,141
------------ -------------
4,108,498 3,470,053
Less accumulated depreciation 2,237,885 1,820,727
------------ -------------
Net $ 1,870,613 $ 1,649,326
============ ==============
3. LONG-TERM REVOLVING NOTE
M.D.J.B. has a $1,000,000 long-term revolving note with a bank under a
loan agreement which expires May 30, 1997. Interest is payable monthly
at 1% over the bank's prime rate with an interest rate floor of 7 1/2%
and ceiling of 12 1/2%. The line of credit is secured by cash, accounts
receivable, inventory and equipment and is guaranteed by the President
of M.D.J.B. The loan agreement requires M.D.J.B. to maintain certain
minimum financial ratios, all of which have been met at December 31,
1995.
<PAGE>
4. CAPITAL LEASES
M.D.J.B. leases certain of its property and equipment under capital
lease agreements. As of December 31, 1995, future annual minimum lease
payments under capital leases are as follows:
1996 $ 355,192
1997 268,315
1998 138,925
1999 11,814
-----------
Total minimum lease payments 774,246
Less amount representing interest at 7.75% per annum 73,247
-----------
Present value of capitalized lease obligations 700,999
Less current portion 315,560
-----------
Long-term portion $ 385,439
===========
Accumulated depreciation on assets under capital leases was $315,128,
$169,855 and $92,554 at December 31, 1995, 1994 and 1993, respectively.
5. INCOME TAXES
M.D.J.B. files a consolidated income tax return with its wholly-owned
subsidiary, Colorado Tech.
The provisions for income taxes consist of the following for the years
ended December 31,
1995 1994 1993
Current federal and state income taxes $257,031 $122,651 $ 50,000
Deferred federal and state income taxes (34,851) 32,456 12,140
---------- -------- --------
Total $222,180 $155,107 $ 62,140
========== ======== =========
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5. INCOME TAXES, continued
The difference between the statutory income tax rates and the effective
tax rates are summarized below for the years ended December 31:
1995 1994 1993
Statutory tax rate 34.0% 34.0% 34.0%
State income taxes, net 1.1 1.0
Organizational costs not deductible 4.8
Permanent differences 2.8 5.4
Other, net 2.3 (3.1)
------- ------- ------
42.7% 42.7% 30.9%
======= ======= ======
Temporary differences, giving rise to the deferred tax liability,
consist primarily of excess depreciation and prepaid expenses deducted
for income tax purposes over the amount deducted for financial
reporting purposes. Deferred income tax liabilities consist of the
following at December 31:
1995 1994
Depreciation $ 8,840 $ 46,390
Accounts receivable reserves (5,200) (3,700)
Prepaid expenses 31,300
---------- ---------
Deferred income tax liability $ 3,640 $ 73,990
========== =========
6. COMMON STOCK
During 1993, in accordance with the M.D.J.B. Stock Bonus Plan, the
Board of Directors of M.D.J.B. authorized the issuance of 19,841 shares
of M.D.J.B.'s common stock to certain employees and officers of
M.D.J.B. as bonuses for services provided. The shares issued were
valued at $3.00 per share which was the most recent selling price of
the stock at the date authorized.
During 1993, M.D.J.B. also issued shares of stock to employees in
accordance with M.D.J.B.'s Stock Purchase Policy which allows employees
to purchase shares of stock equal to their profit sharing bonus.
During 1995, M.D.J.B. purchased 102,000 shares of its common stock for
$3.00 per share. These shares were cancelled in 1995.
<PAGE>
6. COMMON STOCK, continued
M.D.J.B. and all of its stockholders are parties to a stock redemption
agreement which requires stockholders who wish to sell their shares to
offer such shares for sale to M.D.J.B. and, if M.D.J.B. declines to
repurchase the shares, then to other M.D.J.B. stockholders. If both
M.D.J.B. and the other M.D.J.B. stockholders decline to purchase the
shares, all restrictions are then removed from the shares and they may
be sold to other parties. The agreement also provides that M.D.J.B.
will purchase shares from stockholders upon a death or disability.
The agreement provides for its termination upon the merger of M.D.J.B.
In connection with the Plan of Merger described in Note 10, M.D.J.B.
stockholders have approved the suspension of all redemption provisions
of the agreement until termination of the Merger Agreement.
7. COMMITMENTS AND CONTINGENCIES
M.D.J.B. leases its building and additional office space under
noncancelable operating leases. Future annual minimum lease payments
are as follows:
1996 $ 529,255
1997 520,768
1998 527,413
1999 535,580
2000 543,746
Thereafter 4,286,680
--------------
Total $ 6,943,442
==============
Rental expense on operating leases was $510,996, $496,585 and $483,929
during 1995, 1994 and 1993, respectively.
8. STUDENT FINANCIAL ASSISTANCE PROGRAMS
Colorado Tech participates in various Federal and State of Colorado
student financial assistance programs. These programs provide grants
and loans to eligible students. Through these programs, Colorado Tech
awards student financial assistance based on the number of credit hours
for which a student registers. During 1995, 1994 and 1993, students of
Colorado Tech received $2,551,722, $2,466,320 and $1,857,462,
respectively, in Student Financial Aid funds, which they used to pay
educational costs. Should Colorado Tech be limited, suspended or
terminated from participating in these programs, or the programs be
reduced or terminated, it would have a material negative impact on the
results of operations, liquidity and net worth of M.D.J.B.
<PAGE>
8. STUDENT FINANCIAL ASSISTANCE PROGRAMS, continued
The student financial assistance programs administered by Colorado Tech
are subject to program reviews by the U.S. Department of Education,
Colorado Commission on Higher Education (CCHE) and the Colorado Student
Loan Program (CSLP). These reviews could produce disallowed costs that
would result in liabilities to Colorado Tech. In addition, the programs
are audited every year by an independent certified public accountant.
The U.S. Department of Education, CCHE, and CSLP have completed
examinations through June 30, 1993. The independent certified public
accountants have completed their examinations through June 30, 1995.
These examinations resulted in no material exceptions or liabilities.
These programs require Colorado Tech to maintain certain minimum
financial ratios as well as other financial requirements, including the
maintenance of an acid test ratio of not less than one to one. At
December 31, 1995, Colorado Tech had met the required minimum financial
ratios and other financial requirements. Beginning in 1994, Colorado
Tech is required to maintain minimum cash reserves for the refund of
Federal student financial assistance equal to one quarter of the total
dollar amount of refunds paid in the previous year. The refund of
student financial assistance funds occurs if a recipient of Federal
student financial assistance takes fewer credit hours than they had
originally been registered and upon which awards had been made. To
comply with Federal regulations, at both December 31, 1995 and 1994,
Colorado Tech had $34,026 reserved for possible future refunds. The
amount reserved is in excess of the minimum Federal requirements for
both years and the funds are maintained in a separate bank account.
During the years ended December 31, 1995 and 1994, Colorado Tech paid
refunds of $52,630 and $135,237, respectively. Actual refunds due at
December 31, 1995 and 1994 of $6,126 and $4,040, respectively, are
included in current liabilities. Deferred and prepaid tuition and fees
recorded in the accompanying balance sheets include amounts for
possible future refunds.
9. EMPLOYEE BONUS PLAN AND RETIREMENT SAVINGS PLAN
Employee Bonus Plan -- M.D.J.B. maintains an employee bonus plan for
full-time and part-time employees of Colorado Tech and M.D.J.B. Amounts
provided are determined at the discretion of the Board of Directors.
Employee bonus expense for 1995, 1994 and 1993 was $82,000, $63,051 and
$57,600, respectively, and is included with salaries and employee
benefits in the accompanying statements of income.
Retirement Savings Plan -- M.D.J.B. maintains a 401(k) retirement
savings plan for its full- time employees. Each participant in the plan
may elect to contribute up to 15% of annual salary to the plan, subject
to certain limitations. M.D.J.B. may make contributions to the plan.
M.D.J.B. made contributions of $27,346 to the plan during 1995.
M.D.J.B. made no contributions to the plan during 1994 and 1993.
<PAGE>
10. MERGER WITH WHITMAN EDUCATION GROUP, INC.
On March 29, 1996, M.D.J.B. merged with Whitman Education Group, Inc.
The merger results in M.D.J.B. becoming a wholly-owned subsidiary of
Whitman Education Group, Inc.
<PAGE>
Whitman Education Group, Inc.
Introduction to Unaudited Pro Forma Condensed
Combined Financial Information
Whitman Education Group , Inc. ("Whitman" or "the Company") merged with
M.D.J.B., Inc. ("M.D.J.B.") on March 29, 1996. The following unaudited pro forma
condensed financial information presents the combined financial position and
results of operations of the merged entities as if the merger had been
consummated at earlier dates. Whitman and M.D.J.B. have fiscal year ends of
March 31, and December 31, respectively.
The unaudited pro forma condensed combined balance sheet combines Whitman's
December 31, 1995 historical condensed consolidated balance sheet with
M.D.J.B.'s September 30, 1995 historical condensed consolidated balance sheet.
The unaudited pro forma condensed combined statements of operation combine
Whitman's consolidated results of operations for the nine months ended December
31, 1995 and for each of the three years in the period ended March 31, 1995 with
M.D.J.B.'s consolidated results of operations for the nine months ended
September 30, 1995 and for each of the three years in the period ended December
31, 1994, respectively. The unaudited pro forma combined financial information
gives effect to the acquisition of M.D.J.B. on the pooling of interest basis of
accounting. The unaudited pro forma condensed combined balance sheet gives
effect to the transaction as if it had occurred on December 31, 1995. The
unaudited pro forma condensed combined statements of operations assume that the
transaction occurred as of the beginning of the periods presented.
Whitman acquired Sanford-Brown College ("SBC") on December 21, 1994. The
acquisition was accounted for using the purchase method of accounting. The
acquired assets and liabilities of SBC are included in Whitman's condensed
consolidated balance sheet as of December 31, 1995. Whitman's consolidated
results of operations include the operating results of SBC from the date of
acquisition. Pro forma results of operations for the year ended March 31, 1995
assume the acquisition of SBC occurred on April 1, 1994.
The unaudited pro forma adjustments are based upon currently available
information and upon certain assumptions that management of the Company believes
are reasonable under the circumstances. The unaudited pro forma condensed
combined financial information is intended for informational purposes only and
is not necessarily indicative of the future financial position or future results
of operations of the combined company, or of the financial position or results
of operations of the combined company that would have actually occurred had the
merger with M.D.J.B. been in effect as of the date or the periods presented.
<PAGE>
Whitman Education Group, Inc.
Introduction to Unaudited Pro Forma Condensed
Combined Financial Information (continued)
These unaudited pro forma combined financial statements and the accompanying
notes should be read in conjunction with and are qualified in their entirety by
the Whitman and MDJB consolidated financial statements and the SBC financial
statements and the respective related notes thereto.
<PAGE>
<TABLE>
<CAPTION>
Whitman Education Group, Inc.
Unaudited Pro Forma Condensed Combined Balance Sheet
HISTORICAL HISTORICAL
WHITMAN M.D.J.B.
DECEMBER 31, SEPTEMBER 30, PRO FORMA PRO FORMA
1995 1995 ADJUSTMENTS COMBINED
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 517,399 $ 334,802 $ -- $ 852,201
Restricted cash 100,000 34,026 -- 134,026
Accounts receivable, net 13,626,816 1,993,529 -- 15,620,345
Other current assets 962,718 489,891 -- 1,452,609
------------ ------------ ------------ ------------
Total current assets 15,206,933 2,852,248 -- 18,059,181
Equipment and leasehold improvements, net 5,363,631 1,676,278 -- 7,039,909
Deposits and other assets 2,007,705 34,734 -- 2,042,439
Goodwill, net 2,546,828 -- -- 2,546,828
Restricted cash - escrow 2,400,000 -- -- 2,400,000
============ ============ ============ ============
Total assets $ 27,525,097 $ 4,563,260 $ -- $ 32,088,357
============ ============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
expenses $ 1,859,262 $ 524,355 (1)$ 600,000 $ 2,983,617
Current portion of long-term debt 7,891,586 213,556 -- 8,105,142
Deferred tuition revenue 10,445,356 1,906,349 -- 12,351,705
------------ ------------ ------------ ------------
Total current liabilities 20,196,204 2,644,260 600,000 23,440,464
Deferred income taxes 73,990 (8) (73,990) --
Long-term debt 2,173,571 983,163 -- 3,156,734
Stockholders' equity 5,155,322 861,847 (1) (600,000) 5,491,159
-- (8) 73,990 --
============ ============ ============ ============
$ 27,525,097 $ 4,563,260 $ -- $ 32,088,357
============ ============ ============ ============
</TABLE>
See accompanying notes to the unaudited pro forma condensed combined financial
statements.
<PAGE>
<TABLE>
<CAPTION>
Whitman Education Group, Inc.
Unaudited Pro Forma Condensed Combined Statement of Operations
HISTORICAL HISTORICAL
WHITMAN M.D.J.B.
NINE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30, PRO FORMA PRO FORMA
1995 1995 ADJUSTMENTS COMBINED
--------------------- --------------------- --------------- -----------------
<S> <C> <C> <C> <C>
Tuition and other revenues, net $21,567,831 $6,420,823 $27,988,654
Cost of educational services 12,587,040 4,097,154 16,684,194
Student services and administrative expenses 9,373,268 1,949,548 11,322,816
--------------------- --------------------- --------------- -----------------
(Loss) income from operations (392,477) 374,121 (18,356)
Interest income (expense), net (842,023) (34,762) (876,785)
--------------------- --------------------- --------------- -----------------
(Loss) income from continuing operations
before income taxes (1,234,500) 339,359 (895,141)
Income tax expense 67,212 120,899 188,111
===================== ===================== =============== =================
Net (loss) income from continuing operations $ (1,301,712) $ 218,460 $ (1,083,252)
===================== ===================== =============== =================
Net (loss) per common share (3), (10) $ (.17) $ (.11)
===================== =================
Weighted average common shares and common
share equivalents (10) 7,731,166 (2),(10)2,499,870 10,231,036
</TABLE>
See accompanying notes to the unaudited pro forma condensed combined financial
statements.
<PAGE>
<TABLE>
<CAPTION>
WHITMAN EDUCATION GROUP, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
HISTORICAL HISTORICAL HISTORICAL
WHITMAN SBC M.D.J.B.
YEAR ENDED PERIOD YEAR ENDED
MARCH 31, 4/1/94- PRO FORMA DECEMBER PRO FORMA PRO FORMA
1995 12/20/94 ADJUSTMENTS SUBTOTAL 31, 1994 ADJUSTMENTS COMBINED
------------ ------------ ------------- ------------ ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Tuition and other revenues,
net $11,759,258 $10,773,344 $22,532,602 $7,867,523 $30,400,125
Cost of educational services 6,179,696 5,565,279 11,744,975 5,662,689 17,407,664
Student services and
administrative expenses 5,699,426 4,399,164 (4) $ 55,400 10,153,990 1,798,538 11,952,528
------------ ------------ ------------- ------------ ----------- ------------ -------------
(Loss) income from operations
operations (119,864) 808,901 (55,400) 633,637 406,296 1,039,933
Interest income (expense),
net (268,050) 7,862 (5) (152,500) (412,688) (42,821) (455,509)
------------ ------------ ------------- ------------ ----------- ------------ -------------
(Loss) income from continuing
operations before income
taxes (387,914) 816,763 (207,900) 220,949 363,475 584,424
Income tax expense
(benefit) (32,935) 195,898 (6) (57,900) 105,063 155,107 260,170
------------ ------------ ------------- ----------- ------------- ------------ -------------
Net (loss) income from
continuing operations $ (354,979) $ 620,865 $(150,000) $ 115,886 $ 208,368 $ 324,254
============ ============= ============= ============ ============= ============ =============
Net (loss) income per common
share (3), (10) $ (.05) $ .01 $ .03
============ ============ =============
Weighted average common
shares and common share
equivalents (10) 7,199,986 (7),(10) 142,100 8,363,698 (2),(10) 2,499,870 10,863,568
(9),(10) 1,021,612
</TABLE>
See accompanying notes to the unaudited pro forma condensed combined financial
statements.
<PAGE>
<TABLE>
<CAPTION>
WHITMAN EDUCATION GROUP, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
HISTORICAL HISTORICAL
WHITMAN M.D.J.B.
YEAR ENDED YEAR ENDED
MARCH 31, DECEMBER 31, PRO FORMA PRO FORMA
1994 1993 ADJUSTMENTS COMBINED
-------------------- ---------------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Tuition and other revenues, net $6,158,203 $7,062,536 $13,220,739
Cost of educational services 3,415,312 5,448,285 8,863,597
Student services and administrative
expenses 2,427,051 1,390,660 3,817,711
-------------------- ---------------------- ---------------- -----------------
Income from operations 315,840 223,591 539,431
Interest income (expense), net (21,885) (22,193) (44,078)
-------------------- ---------------------- ---------------- -----------------
Income from continuing operations
before income taxes 293,955 201,398 495,353
Income tax expense 80,394 62,140 142,534
------------------- ---------------------- -----------------
Net income from continuing operations $ 213,561 $ 139,258 $ 352,819
=================== ===================== ================ =================
Net income per common share (3), (10) $ .03 $ .04
=================== =================
Weighted average common shares and common
share equivalents (10) 7,291,772 (2),(10)2,499,870 9,791,642
</TABLE>
See accompanying notes to the unaudited pro forma condensed combined financial
statements.
<PAGE>
<TABLE>
<CAPTION>
WHITMAN EDUCATION GROUP, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
HISTORICAL HISTORICAL
WHITMAN M.D.J.B.
YEAR ENDED YEAR ENDED
MARCH 31, DECEMBER 31, PRO FORMA PRO FORMA
1993 1992 ADJUSTMENTS COMBINED
--------------------- ---------------------- ------------------ ----------------
<S> <C> <C> <C> <C>
Tuition and other revenues, net $4,268,406 $6,512,779 $10,781,185
Cost of educational services 2,557,344 4,761,987 7,319,331
Student services and administrative
expenses 1,830,134 1,217,322 3,047,456
--------------------- ---------------------- ------------------ ----------------
(Loss) income from operations (119,072) 533,470 414,398
Interest income (expense), net 25,496 (20,504) 4,992
--------------------- ---------------------- ------------------ ----------------
(Loss) income from continuing
operations before income taxes (93,576) 512,966 419,390
Income tax expense 21,742 180,070 201,812
--------------------- ---------------------- ------------------ ----------------
Net (loss) income from continuing
operations $ (115,318) $ 332,896 $ 217,578
===================== ====================== ================== ================
Net (loss) per common share (3), (10) $ (0.02) $ 0.02
===================== ================
Weighted average common shares and common
share equivalents (10) 7,068,868 (2),(10) 2,499,870 9,568,738
</TABLE>
See accompanying notes to the unaudited pro forma condensed combined financial
statements.
<PAGE>
Whitman Education Group, Inc.
Notes to Unaudited Pro Forma Condensed Combined
Financial Information
1. The costs associated with the merger of Whitman and M.D.J.B. of
approximately $600,000 relate primarily to legal and accounting fees. All
of these costs will be charged against operations of the combined company
in March of 1996. Accordingly, the effects of these costs have not been
reflected in the unaudited pro forma condensed combined balance sheet.
2. Reflects the issuance of 2,499,870 shares of Whitman Common Stock in
exchange for all outstanding shares of M.D.J.B. based on an exchange ratio
of 1.163 shares of Whitman Common Stock exchanged for each share of
M.D.J.B. stock.
3. Pro forma income (loss) per common share was computed by dividing pro forma
net income (loss) by the pro forma combined weighted average number of
common shares outstanding. The pro forma combined weighted average number
of common and common equivalent shares assumes that the 2,499,870 shares
were outstanding as of the beginning of each period presented.
4. Reflects amortization expense of deferred financing fees and goodwill
related to the SBC acquisition for the period from April 1, 1994 through
December 20, 1994. Goodwill is being amortized using the straight-line
method over a 40 year period.
5. Estimate for additional interest expense for the period from April 1, 1994
through December 20, 1994 on the assumed average outstanding SBC
acquisition loan balance at prime minus 1/2% (actual interest rate on the
SBC acquisition loan).
6. Reflects pro forma tax expense attributable to SBC's income in accordance
with the provisions of Statement of Financial Accounting Standards No. 109,
after giving effect to the pro forma acquisition adjustments. SBC had
elected S-Corp filing status for federal income tax purposes.
7. Reflects issuance of 196,464 shares of Whitman Common Stock in conjunction
with the acquisition of SBC as if the shares were issued effective April 1,
1994.
8. Reduces Whitman's valuation allowance related to its deferred tax assets to
the extent that it is expected to be offset by M.D.J.B.'s taxable temporary
differences in periods when the companies are expected to file a
consolidated tax return. This adjustment will be reflected in operations in
March of 1996.
<PAGE>
Whitman Education Group, Inc.
Notes to Unaudited Pro Forma Condensed Combined
Financial Information (Continued)
9. Reflects as common stock the 1,021,612 shares of Whitman Common Stock held
in escrow pursuant to the SBC acquisition agreement since, on a pro-forma
basis, their effect is not anti-dilutive for the year ended March 31, 1995
and, accordingly, considered outstanding for the full year on a pro forma
basis. See Note 13 to the March 31, 1995 and 1994 Whitman financial
statements incorporated by reference herein.
10. The Company's Board of Directors approved a two for one stock split of the
Company's common stock effective April 29, 1996. Accordingly, this stock
split has been reflected as if it had occurred at the beginning of all
periods presented.
<PAGE>
EXHIBIT INDEX
Exhibit 2.1 - Agreement and Plan of Merger(1)
Exhibit 2.2 - First Amendment to Agreement and Plan of
Merger(2)
Exhibit 3 - Certificate of Incorporation, as amended(3)
Exhibit 23.1 - Consent of Stockman Kast Ryan & Scruggs, P.C.
Exhibit 23.2 - Consent of KPMG Peat Marwick LLP
Exhibit 10.35 - Employment Agreement dated as of March 29, 1996
by and between M.D.J.B., Inc. and David
O'Donnell(4)
- --------
1 Filed as an exhibit to Registrant's Report on Form 8-K dated
September 12, 1995 and pursuant to Rule 12b-32 incorporated
herein by reference.
2 Filed as an Exhibit to Registrant's Registration Statement
(No. 33-64153) on Form S-4 filed with the Commission
on January 19, 1996, as amended, and pursuant to Rule 12b-32
incorporated herein by reference.
3 Previously filed.
4 Previously filed.
24
<PAGE>
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 hereunto duly authorized.
WHITMAN EDUCATION GROUP, INC.
By: /S/ RANDY S. PROTO
---------------------------
Randy S. Proto, President
Date: May 13, 1996
25
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Form 8-K/A-1 of Whitman Education Group, Inc.
(File No. 1-13722), dated March 29, 1996, of our report dated February 6, 1996
and March 29, 1996.
/s/ Stockman Kast Ryan & Scruggs, P.C.
- ----------------------------------------
Stockman Kast Ryan & Scruggs, P.C.
Colorado Springs, Colorado
May 7, 1996
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Whitman Education Group, Inc.
We consent to the incorporation by reference in the registration statement on
Form 8-K/A-1 of Whitman Education Group, Inc. of our report dated November 28,
1994, with respect to the balance sheets of Sanford Brown College, Inc. as of
October 31, 1994 and 1993, and the related statements of earnings, shareholder's
equity, and cash flows for each of the years in the three-year period ended
October 31, 1994, which report appears in the Form 8-K/A-2 of Whitman Education
Group, Inc. dated February 13, 1996.
/s/ KPMG Peat Marwivk LLP
- -------------------------
KPMG Peat Marwick LLP
St. Louis, Missouri
May 8, 1996
