FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1997
Commission File Number 1-13722
WHITMAN EDUCATION GROUP, INC.
Florida 22-2246554
- ------------------------------- ---------------------
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4400 Biscayne Boulevard, Miami, Florida 33137
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(Address of principal executive offices) (Zip Code)
(305) 575-6510
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(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
---- -----
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
AS OF FEBRUARY 11, 1998, THERE WERE 13,193,882 SHARES OF COMMON STOCK
OUTSTANDING.
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<PAGE>
WHITMAN EDUCATION GROUP, INC.
FORM 10-Q
DECEMBER 31, 1997
TABLE OF CONTENTS
PAGE
------
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.............................. 3
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.............. 10
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.................. 14
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<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WHITMAN EDUCATION GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1997
----------------- -------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................... $ 1,268,006 $ 3,853,932
Restricted cash..................................................... -- 511,927
Accounts receivable, net ........................................... 20,026,832 18,159,383
Inventories......................................................... 1,470,127 1,084,124
Deferred income taxes............................................... 853,267 853,267
Other current assets................................................ 1,525,202 1,072,511
--------------- ---------------
Total current assets..................................................... 25,143,434 25,535,144
Property and equipment, net ............................................. 12,682,755 10,062,815
Marketable securities.................................................... 202,500 296,250
Deposits and other assets, net .......................................... 1,384,042 1,607,120
Goodwill, net............................................................ 10,293,685 10,516,165
--------------- ---------------
$ 49,706,416 $ 48,017,494
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................................... $ 1,641,744 $ 2,390,283
Accrued expenses.................................................... 2,397,686 2,873,923
Income taxes payable................................................ 28,663 34,816
Short-term notes payable............................................ 1,056,018 --
Current portion of capitalized lease obligations.................... 905,064 1,040,403
Current portion of long-term debt................................... 309,822 540,565
Deferred tuition revenue............................................ 15,065,202 12,999,348
--------------- --------------
Total current liabilities................................................ 21,404,199 19,879,338
Other liabilities........................................................ 771,972 921,859
Capitalized lease obligations............................................ 2,617,591 2,013,125
Long-term debt........................................................... 8,636,410 9,096,017
Commitments and contingencies
Stockholders' equity:
Common stock, no par value, authorized 100,000,000 shares,
issued and outstanding 13,193,582 shares at December 31, 1997 and 22,192,827 20,584,014
12,677,582 shares at March 31, 1997 ..............................
Additional paid-in capital.......................................... 671,536 671,536
Accumulated deficit................................................. (5,485,096) (4,139,122)
Treasury stock, 239,694 shares...................................... (1,009,273) (1,009,273)
Net unrealized loss on noncurrent marketable securities............. (93,750) --
--------------- ---------------
Total stockholders' equity............................................... 16,276,244 16,107,155
--------------- ---------------
$ 49,706,416 $ 48,017,494
=============== ===============
See accompanying notes to financial statements.
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</TABLE>
<PAGE>
WHITMAN EDUCATION GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
DECEMBER 31,
1997 1996
--------------- ---------------
<S> <C> <C>
Net revenues..................................... $ 15,926,343 $ 11,409,663
Costs and Expenses:
Instructional and educational support ......... 10,378,089 7,760,032
Selling and promotion.......................... 2,089,036 1,974,133
General and administrative .................... 2,523,283 2,898,224
--------------- ---------------
Total costs and expenses......................... 14,990,408 12,632,389
--------------- ---------------
Income (loss) from operations.................... 935,935 (1,222,726)
Interest expense, net............................ 322,500 196,493
--------------- ---------------
Income (loss) before income taxes ............... 613,435 (1,419,219)
Income tax benefit .............................. -- 26,999
--------------- ---------------
Net income (loss)................................ $ 613,435 $ (1,392,220)
=============== ===============
Net income (loss) per share:
Basic.......................................... $ .05 $ (.12)
Diluted........................................ $ .04 $ (.12)
Weighted average common shares outstanding:
Basic.......................................... 12,919,832 11,983,320
Diluted........................................ 14,410,889 11,983,320
</TABLE>
See accompanying notes to financial statements.
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<PAGE>
WHITMAN EDUCATION GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
DECEMBER 31,
1997 1996
--------------- ---------------
<S> <C> <C>
Net revenues..................................... $ 43,869,138 $ 33,893,512
Costs and Expenses:
Instructional and educational support.......... 29,861,463 21,926,182
Selling and promotion.......................... 6,273,904 5,020,258
General and administrative..................... 8,250,284 8,295,682
--------------- ---------------
Total costs and expenses......................... 44,385,651 35,242,122
--------------- ---------------
Loss from operations............................. (516,513) (1,348,610)
Interest expense, net............................ 829,461 656,396
--------------- ---------------
Loss before income taxes ........................ (1,345,974) (2,005,006)
Income tax benefit............................... -- 204,736
--------------- ---------------
Net loss ........................................ $ (1,345,974) $ (1,800,270)
================ ===============
Net loss per share:
Basic.......................................... $ (.11) $ (.16)
Diluted........................................ $ (.11) $ (.16)
Weighted average common shares outstanding:
Basic.......................................... 12,758,851 11,082,369
Diluted........................................ 12,758,851 11,082,369
</TABLE>
See accompanying notes to financial statements.
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<PAGE>
WHITMAN EDUCATION GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
DECEMBER 31,
1997 1996
--------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Net loss..................................................... $ (1,345,974) $ (1,800,270)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization........................... 2,536,087 1,940,090
Bad debt expense........................................ 1,962,925 1,911,953
Deferred tax benefit.................................... -- (228,501)
Changes in operating assets and liabilities:
Restricted cash...................................... 511,927 (712)
Accounts receivable.................................. (3,830,374) (2,489,603)
Inventories.......................................... (386,003) (108,817)
Other current assets................................. (601,293) (441,207)
Deferred costs....................................... (2,936) (81,759)
Deposits and other assets............................ (76,434) (187,686)
Accounts payable..................................... (748,539) 557,066
Accrued expenses..................................... (476,237) 454,092
Income taxes payable................................. (6,153) (147,294)
Deferred tuition revenue............................. 2,065,854 (1,701,254)
Other liabilities.................................... (149,887) --
--------------- ---------------
Net cash used in operating activities........................ (547,037) (2,323,902)
--------------- ---------------
Cash flows from investing activities:
Purchase of property and equipment .......................... (3,279,249) (2,374,604)
Payments into escrow for acquisition
of Sanford-Brown College................................ 16,058 (162,330)
--------------- ---------------
Net cash used in investing activities........................ (3,263,191) (2,536,934)
--------------- ---------------
Cash flows from financing activities:
Proceeds from revolving line of credit and long-term
borrowings................................................. 25,636,986 25,293,627
Principal payments on revolving line of credit,
long-term borrowings and other liability................... (26,327,336) (26,139,438)
Principal payments on capitalized lease obligations.......... (750,179) (800,977)
Proceeds from short-term notes payable....................... 1,056,018 --
Proceeds from exercise of options and warrants .............. 1,608,813 385,226
Proceeds from sale of common stock .......................... -- 6,479,620
Proceeds from Huron acquisition.............................. -- 1,200,683
--------------- ----------------
Net cash provided by financing activities.................... $ 1,224,302 $ 6,418,741
--------------- ----------------
</TABLE>
Continued on the following page.
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<PAGE>
WHITMAN EDUCATION GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
DECEMBER 31,
1997 1996
--------------- ---------------
<S> <C> <C>
(Decrease) increase in cash and cash equivalents............. $ (2,585,926) $ 1,557,905
Cash and cash equivalents at beginning of period............. 3,853,932 2,762,141
CTU activity for the three months ended
March 31, 1996............................................ -- (15,423)
--------------- ---------------
Cash and cash equivalents at end of period................... $ 1,268,006 $ 4,304,623
=============== ===============
SUPPLEMENTAL DISCLOSURES OF NONCASH FINANCING AND
INVESTING ACTIVITIES:
Stock issued in connection with acquisition of
Sanford-Brown College...................................... $ -- $ 3,750,000
=============== ==============
Equipment acquired under capital leases...................... $ 1,219,306 $ 358,472
=============== ==============
Treasury stock issued in connection with purchase
of DFAS.................................................... $ -- $ 203,000
=============== ==============
Value of stock options issued for services rendered.......... $ -- $ 55,036
=============== ==============
Assets acquired in Huron acquisition......................... $ -- $ 1,467,220
=============== ==============
Liabilities assumed in Huron acquisition..................... $ -- $ 2,667,903
=============== ==============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid................................................ $ 877,887 $ 650,167
=============== ==============
Income taxes paid............................................ $ 1,343 $ 220,495
=============== ==============
</TABLE>
See accompanying notes to financial statements.
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<PAGE>
WHITMAN EDUCATION GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. GENERAL
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with the instructions to Form 10-Q and, in the
opinion of the management of the Company, include all adjustments, which are of
a normal recurring nature, necessary for a fair presentation of financial
position and the results of operations and cash flows for the periods presented.
However, the financial statements do not include all information and footnotes
required for a presentation in accordance with generally accepted accounting
principles. These condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and the notes thereto
included or incorporated by reference in the Company's Form 10-K for the fiscal
year ended March 31, 1997. The results of operations for the interim periods are
not necessarily indicative of the results of operations to be expected for the
full year.
The accompanying financial statements include the accounts of Whitman
Education Group, Inc., and its wholly-owned subsidiaries, Ultrasound Technical
Services, Inc. ("Ultrasound Diagnostic Schools"), Sanford-Brown College, Inc.
("Sanford-Brown College") and MDJB, Inc. ("Colorado Technical University"). All
intercompany accounts and transactions have been eliminated.
The Company experiences seasonality in its quarterly results of operations
as a result of changes in the level of student enrollment. New enrollment in the
Company's schools tends to be lower in the first and second fiscal quarters
covering the summer months which are traditionally associated with recess from
school, with the greatest seasonal effect in the second quarter. Costs are
generally not significantly affected by the seasonal factors on a quarterly
basis. Accordingly, quarterly variations in net revenues will result in
fluctuations in income from operations on a quarterly basis.
2. ACQUISITION OF HURON UNIVERSITY
On December 30, 1996, Colorado Technical University acquired the South
Dakota operations and certain assets at two campuses of Huron University. The
acquisition was accounted for using the purchase method of accounting and,
accordingly, operations were included in the Company's Statement of Operations
beginning on January 1, 1997.
The following unaudited pro forma information combines the results of
operations of Whitman and Huron University for the three and nine months ended
December 31, 1996 as if the transaction had occurred at April 1, 1996, after
giving effect to certain adjustments including additional rent expense and
reductions in interest and depreciation expense (amounts are in thousands,
except per share amounts).
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31, 1996 DECEMBER 31, 1996
------------------ ------------------
<S> <C> <C>
Net revenues................. $ 12,961 $ 36,627
Net loss .................... $ (1,167) $ (2,466)
Basic net loss per share..... $ (.10) $ (.22)
Diluted net loss per share... $ (.10) $ (.22)
</TABLE>
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<PAGE>
3. EARNINGS PER SHARE
In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, Earnings per Share. Statement 128
replaced the previously reported primary and fully diluted earnings per share
with basic and diluted earnings per share. Unlike primary earnings per share,
basic earnings per share excludes any dilutive effects of options, warrants and
convertible securities. Diluted earnings per share is very similar to the
previously reported fully diluted earnings per share. All earnings per share
amounts for all periods have been presented, and where necessary, restated to
conform to the Statement 128 requirements.
The following table sets forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
------------------------------------ -----------------------------------
1997 1996 1997 1996
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Numerator:
Net income (loss)................... $ 613,435 $ (1,392,220) $ (1,345,974) $ (1,800,270)
Denominator:
Denominator for basic
earnings per share -
weighted-average shares........... 12,919,832 11,983,320 12,758,851 11,082,369
Effect of dilutive securities:
Employee stock options............ 964,783 -- -- --
Warrants.......................... 526,274 -- -- --
--------------- --------------- --------------- ---------------
Dilutive potential common
shares............................ 1,491,057 -- -- --
Denominator for diluted
earnings per share -
adjusted weighted-
average shares and
assumed conversions............. 14,410,889 11,983,320 12,758,851 11,082,369
=============== =============== =============== ===============
Basic earnings (loss) per share........ $ .05 $ (.12) $ (.11) $ (.16)
=============== =============== =============== ===============
Diluted earnings (loss) per share...... $ .04 $ (.12) $ (.11) $ (.16)
=============== =============== =============== ===============
</TABLE>
4. CONTINGENCIES
The Company is a party to routine litigation incidental to its business.
Management does not believe that an adverse result in any or all of such routine
litigation will have a material adverse effect on the Company's financial
condition or results of operations.
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<PAGE>
5. WARRANTS
On October 30, 1997, a limited partnership beneficially owned by the
Chairman of the Board exercised warrants to purchase 500,000 shares at an
exercise price of $3.125 per share.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the consolidated financial statements of the Company, the related notes to
consolidated financial statements and Management's Discussion and Analysis of
Financial Condition and Results of Operations included in the Company's Form
10-K for the year ended March 31, 1997 and the condensed consolidated financial
statements and the related notes to the condensed consolidated financial
statements included in Item 1 of this Quarterly Report on Form 10-Q. Except for
the historical matters contained herein, statements made in this report are
forward looking and are made pursuant to the safe harbor provisions of the
Securities Litigation Reform Act of 1995. Investors are cautioned that forward
looking statements involve risks and uncertainties that may affect the Company's
business and prospects, including economic, competitive, governmental and other
factors discussed in this report and in the Company's filings with the
Securities and Exchange Commission.
RESULTS OF OPERATIONS
The following table sets forth the percentage relationship of certain
statement of operations data to net revenues for the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
------------------------------- ----------------------------------
1997 1996 1997 1996
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Net revenues................................ 100.0% 100.0% 100.0% 100.0%
Costs and expenses:
Instructional and educational support.... 65.2 68.0 68.1 64.7
Selling and promotion.................... 13.1 17.3 14.3 14.8
General and administrative............... 15.8 25.4 18.8 24.5
--------- ---------- ---------- ---------
Total costs and expenses.................... 94.1 110.7 101.2 104.0
--------- ---------- ---------- ---------
Income (loss) from operations............... 5.9 (10.7) (1.2) (4.0)
Interest expense, net....................... 2.0 1.7 1.9 1.9
--------- ---------- ---------- ---------
Income (loss) before income taxes........... 3.9 (12.4) (3.1) (5.9)
Income tax benefit.......................... -- 0.2 -- 0.6
--------- ---------- ---------- ---------
Net income (loss)........................... 3.9% (12.2)% (3.1)% (5.3)%
========== ========== =========== ==========
</TABLE>
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<PAGE>
THREE MONTHS ENDED DECEMBER 31, 1997 COMPARED TO THE THREE MONTHS ENDED DECEMBER
31, 1996
Net revenues increased by $4.5 million or 39.6% to $15.9 million for the
three months ended December 31, 1997 from $11.4 million for the three months
ended December 31, 1996. The increase was primarily due to an increase in
average student enrollment. Student enrollment increased 29.0% overall with the
University Degree Division experiencing a 38.1% increase and the Associate
Degree Division experiencing a 24.2% increase.
The increase in student enrollment in the University Degree Division
resulted in increased net revenues of $1.6 million or 54.3%. This increase was
primarily due to the opening of a Colorado Technical University campus in Denver
in October 1996 and the acquisition of Huron University in December 1996.
The increase in student enrollment in the Associate Degree Division
resulted in increased net revenues of $2.9 million or 34.3%. The increased
enrollment was primarily in the medical assisting program offered by the
Ultrasound Diagnostic Schools.
Instructional and educational support increased by $2.6 million or 33.7% to
$10.4 million for the three months ended December 31, 1997 from $7.8 million for
the three months ended December 31, 1996. As a percentage of net revenues,
instructional and educational support expenses were 65.2% and 68.0%,
respectively, for the three months ended December 31, 1997 and December 31,
1996. The increase in instructional and educational support expenses was
primarily due to the opening and acquisition of new campuses at the University
Degree Division and the addition of student support personnel, the upgrade of
equipment and facilities and an increase in the cost of books sold at the
Associate Degree Division as a result of the growth in enrollments. As a
percentage of net revenues, instructional and educational support expenses
decreased primarily due to a greater rate of increase in net revenues at the
Associate Degree Division than the rate of increase in such expenses necessary
to support the increase in enrollment.
Selling and promotion expenses increased by $.1 million or 5.8% to $2.1
million for the three months ended December 31, 1997 from $2.0 million for the
three months ended December 31, 1996. As a percentage of net revenues, selling
and promotion expenses decreased to 13.1% for the three months ended December
31, 1997 as compared to 17.3% for the three months ended December 31, 1996. The
decrease in selling and promotion expenses, as a percentage of net revenues, was
primarily due to a decrease in such expenses at the University Degree Division
due to pre-opening and marketing costs incurred during the third quarter of the
prior year related to Colorado Technical University's new Denver campus and
Huron University. Selling and promotion expenses increased by $.2 million or
13.3% at the Associate Degree Division due to continued efforts to increase
enrollment.
General and administrative expenses decreased by $.4 million or 12.9% to
$2.5 million for the three months ended December 31, 1997 from $2.9 million for
the three months ended December 31, 1996. As a percentage of net revenues,
general and administrative expenses were 15.8% and 25.4%, respectively, for the
three months ended December 31, 1997 and December 31, 1996. The decrease in
general and administrative expenses was due primarily to a reduction in bad debt
expense at the Associate Degree Division due to improved cash collections. The
decrease in general and administrative expenses as a percentage of net revenues
was due to the Company's ability to increase revenues as a result of an increase
in student enrollment at a greater rate than the rate of increase in
administrative operating costs necessary to support the increase in enrollment.
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<PAGE>
The Company reported net income of $613,000 for the three months ended
December 31, 1997 as compared to a net loss of $1,392,000 for the three months
ended December 31, 1996. Net income for the three months ended December 31, 1997
was primarily a result of a 39.6% increase in net revenues primarily generated
from an increase in student enrollment combined with a 19.4% increase in
operating costs to support the increase in enrollment.
NINE MONTHS ENDED DECEMBER 31, 1997 COMPARED TO THE NINE MONTHS ENDED
DECEMBER 31, 1996
Net revenues increased by $10.0 million or 29.4% to $43.9 million for the
nine months ended December 31, 1997 from $33.9 million for the nine months ended
December 31, 1996. The increase was primarily due to an increase in average
student enrollment. Student enrollment increased 21.3% overall with the
University Degree Division experiencing a 34.9% increase and the Associate
Degree Division experiencing a 15.2% increase.
The increase in student enrollment in the University Degree Division
resulted in increased net revenues of $3.8 million or 48.7%. This increase was
primarily due to the opening of a Colorado Technical University campus in Denver
in October 1996 and the acquisition of Huron University in December 1996.
The increase in student enrollment in the Associate Degree Division
resulted in increased net revenues of $6.1 million or 23.6%. The increased
enrollment was primarily in the medical assisting programs offered by the
Ultrasound Diagnostic Schools.
Instructional and educational support increased by $7.9 million or 36.2% to
$29.8 million for the nine months ended December 31, 1997 from $21.9 million for
the nine months ended December 31, 1996. As a percentage of net revenues,
instructional and educational support expenses were 68.1% and 64.7%,
respectively, for the nine months ended December 31, 1997 and December 31, 1996.
The increase in instructional and educational support expenses was primarily due
to the opening and acquisition of new campuses at the University Degree
Division, and the addition of student support personnel, the upgrade of
equipment and facilities and an increase in the cost of books sold at the
Associate Degree Division.
Selling and promotion expenses increased by $1.3 million or 25.0% to $6.3
million for the nine months ended December 31, 1997 from $5.0 million for the
nine months ended December 31, 1996. As a percentage of net revenues, selling
and promotion expenses were 14.3% and 14.8%, respectively, for the nine months
ended December 31, 1997 and December 31, 1996. The increase in selling and
promotion expenses was primarily due to an increase in such costs at the
University Degree Division related to Colorado Technical University's new Denver
campus and Huron University and continued efforts to increase enrollment at the
Associate Degree Division.
General and administrative expenses were $8.3 million for the nine months
ended December 31, 1997 and December 31, 1996. As a percentage of net revenues,
general and administrative expenses were 18.8% and 24.5%, respectively, for the
nine months ended December 31, 1997 and December 31, 1996. The decrease in
general and administrative expenses as a percentage of net revenues was
primarily due to a reduction in bad debt and payroll expense at Sanford-Brown
College due to improved cash collections and the consolidation of personnel
functions. In addition, the decrease in such expenses as a percentage of net
revenues was due to the Company's ability to increase revenues as a result of an
increase in student enrollment at a greater rate than the rate of increase in
administrative operating costs necessary to support the increase in enrollment.
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<PAGE>
The Company reported a net loss of $1.3 million and $1.8 million for the
nine months ended December 31, 1997 and 1996, respectively. The net loss for the
nine months ended December 31, 1997 was primarily due to operating losses of
$1.9 million sustained by the campuses of Colorado Technical University
established since the beginning of the third quarter ended December 31, 1996.
SEASONALITY
The Company experiences seasonality in its quarterly results of operations
as a result of changes in the level of student enrollment. New enrollment in the
Company's schools tends to be lower in the first and second fiscal quarters
covering the summer months which are traditionally associated with recess from
school, with the greatest seasonal effect in the second quarter. Costs are
generally not significantly affected by the seasonal factors on a quarterly
basis. Accordingly, quarterly variations in net revenues will result in
fluctuations in income from operations on a quarterly basis.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents at December 31, 1997 and March 31, 1997 were $1.3
million and $3.9 million, respectively. The Company's working capital totalled
$3.7 million at December 31, 1997 and $5.7 million at March 31, 1997.
Net cash of $.5 million was used for operating activities for the nine
months ended December 31, 1997 compared to net cash of $2.3 million used for the
nine months ended December 31, 1996. The decrease of $1.8 million was primarily
due to the benefit to operating cash flow from an increase in deferred tuition
revenue and a decline in the net loss as compared to the prior year.
Net cash of $3.3 million and $2.5 million was used for investing activities
for the nine months ended December 31, 1997 and 1996, respectively. The increase
of $.8 million was primarily due to an increase in capital expenditures for the
upgrade and expansion of school facilities.
Net cash of $1.2 million was provided by financing activities for the nine
months ended December 31, 1997, a decrease of $5.2 million from the nine months
ended December 31, 1996. This decrease was primarily due to a private placement
in the prior year of 1,000,000 shares of the Company's common stock to an
unaffiliated institutional investor for $6.5 million.
The Company has bank lines of credit of $2.0 million expiring in May 1998
and a revolving credit facility maturing in April 1999 in the amount of $7.5
million. At December 31, 1997, the Company had $6.8 million outstanding and $2.7
million available under these facilities. Borrowings under these facilities
decreased by $.7 million from the amounts outstanding at March 31, 1997. The
amounts borrowed under the working capital facility for the nine months ended
December 31, 1997 were primarily used for operations and capital expenditures.
-13-
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
27 Financial Data Schedule
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed by the Company during the quarter
ended December 31, 1997.
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<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 thereunto duly authorized.
WHITMAN EDUCATION GROUP, INC.
(Registrant)
Date: February 13, 1998 /S/ FERNANDO L. FERNANDEZ
------------------------------------------
FERNANDO L. FERNANDEZ
VICE PRESIDENT - FINANCE,
CHIEF FINANCIAL OFFICER AND TREASURER
-15-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1998
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