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 June 30, 1999
Commission File Number 1-13722
WHITMAN EDUCATION GROUP, INC.
Florida 22-2246554
- ------------------------------- -------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4400 Biscayne Boulevard, Miami, Florida 33137
---------------------------------------------------
(Address of principal executive offices) (Zip Code)
(305) 575-6510
--------------------------------------------------
(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 issuer's classes of
common stock, as of the latest practicable date.
As of August 6, 1999, there were 13,436,550 shares of common stock
outstanding.
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<PAGE>
WHITMAN EDUCATION GROUP, INC.
FORM 10-Q
JUNE 30, 1999
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..................... 8
PART II - OTHER INFORMATION
Item 1. Legal Proceedings....................................... 12
Item 4. Submission of Matters to a Vote of Security Holders..... 13
Item 6. Exhibits and Reports on Form 8-K........................ 13
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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>
JUNE 30, MARCH 31,
1999 1999
---------------- ----------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................ $ 1,469,515 $ 4,267,110
Accounts receivable, net................. 21,946,062 27,114,533
Inventories.............................. 1,348,380 1,450,815
Deferred tax assets, net................. 2,871,210 2,562,705
Other current assets..................... 1,933,093 1,504,878
---------------- ----------------
Total current assets................. 29,568,260 36,900,041
Property and equipment, net.................. 13,643,668 14,002,764
Deposits and other assets, net............... 1,865,396 1,761,220
Goodwill, net................................ 9,835,154 9,915,590
---------------- ----------------
Total assets........................ $ 54,912,478 $ 62,579,615
================ ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable....................... $ 1,963,829 $ 1,942,740
Accrued expenses....................... 3,454,187 3,049,371
Income taxes payable................... - 898,664
Current portion of capitalized
lease obligations................... 1,503,628 1,517,912
Current portion of long-term debt...... 356,189 472,994
Deferred tuition revenue............... 16,192,210 20,575,914
---------------- ----------------
Total current liabilities........... 23,470,043 28,457,595
Other liabilities........................... 409,989 474,842
Capitalized lease obligations............... 3,286,590 3,249,934
Long-term debt.............................. 6,586,963 8,772,496
Commitment and contingencies
Stockholders' equity:
Common stock, no par value, authorized
100,000,000 shares issued and
outstanding 13,431,550 at
June 30, 1999 and 13,423,212 shares
at March 31, 1999................... 21,907,546 21,907,546
Additional paid-in capital............. 671,536 671,536
Accumulated deficit.................... (1,420,189) (954,334)
---------------- ----------------
Total stockholders' equity......... 21,158,893 21,624,748
---------------- ----------------
Total liabilities and
stockholders' equity............ $ 54,912,478 $ 62,579,615
================ ================
</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 THREE MONTHS ENDED
JUNE 30,
-----------------------------------
1999 1998
-------------- ---------------
<S> <C> <C>
Net revenues............................... $ 17,990,547 $ 15,767,907
Costs and expenses:
Instructional and educational
support............................ 12,586,967 10,881,591
Selling and promotional............... 2,628,693 2,597,616
General and administrative............ 3,337,164 3,022,579
-------------- ---------------
Total costs and expenses................... 18,552,824 16,501,786
-------------- ---------------
Loss from operations....................... (562,277) (733,879)
Other (income) and expenses:
Interest expense...................... 284,380 318,221
Interest income....................... (72,297) (68,803)
-------------- ---------------
Loss before income tax benefit............. (774,360) (983,297)
Income tax benefit......................... 308,505 343,000
-------------- ---------------
Net loss................................... $ (465,855) $ (640,297)
============== ===============
Net loss per share:
Basic and diluted..................... $ (0.03) $ (0.05)
============== ===============
Weighted average common share outstanding:
Basic and diluted..................... 13,427,663 13,198,767
============== ===============
</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 THREE MONTHS ENDED
JUNE 30,
-------------------------------
1999 1998
------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................... $ (465,855) $ (640,297)
Adjustments to reconcile net loss to
net cash provided by operating
activities:
Depreciation and amortization........ 1,100,630 984,698
Bad debt expense..................... 797,388 662,487
Deferred tax benefit................. (308,505) (343,000)
Changes in operating assets
and liabilities:
Accounts receivable................ 4,371,083 571,691
Inventories........................ 102,435 187,437
Other current assets............... (430,340) (426,678)
Deposits and other assets.......... (116,053) 2,029
Accounts payable................... 21,089 685,559
Accrued expenses................... 404,816 1,480,356
Income taxes payable............... (898,664) (127,133)
Deferred tuition revenue........... (4,383,704) (2,458,879)
Other liabilities.................. (64,853) (53,902)
------------ --------------
Net cash provided by operating activities... 129,467 524,368
------------ --------------
CASH FLOWS FROM INVESTING ACTIVITY:
Purchase of property and equipment.......... (143,842) (1,134,156)
------------ --------------
Net cash used in investing activity......... (143,842) (1,134,156)
------------ --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolving line of credit
and long-term borrowings and
capitalized lease obligations.......... 15,040,902 12,591,166
Principal payments on revolving line
of credit, long-term borrowings,
capital lease obligations and
other liabilities...................... (17,824,122) (15,105,251)
Proceeds from exercise of options
and warrants........................... - 3,812
------------ --------------
Net cash used in financing activities....... (2,783,220) (2,510,273)
------------ --------------
Decrease in cash and cash equivalents....... (2,797,595) (3,120,061)
Cash and cash equivalents at
beginning of year...................... 4,267,110 3,384,336
------------ --------------
Cash and cash equivalents at end of year.... $ 1,469,515 $ 264,275
============ ==============
SUPPLEMENTAL DISCLOSURES OF NONCASH
FINANCING AND INVESTMENT ACTIVITIES:
Equipment acquired under capital leases..... $ 503,254 $ 165,491
============ ==============
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Interest paid............................... $ 313,812 $ 287,791
============ ==============
Income taxes paid........................... $ 1,266,287 $ 142,125
============ ==============
</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 Whitman, 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 Whitman's Form 10-K for the fiscal year ended March
31, 1999. 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. Hereafter,
reference to "Whitman" shall include collectively Whitman Education Group, Inc.
and its operating subsidiaries, Ultrasound Diagnostic Schools, Sanford-Brown
College and Colorado Technical University.
Whitman experiences seasonality in its quarterly results of operations as a
result of changes in the level of student enrollment. New enrollment in
Whitman'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. Costs are generally not significantly affected by the seasonable factors
on a quarterly basis. Accordingly, quarterly variations in net revenues will
result in fluctuations in income from operations on a quarterly basis.
2. EARNINGS PER SHARE
For the three months ended June 30, 1999 and 1998, there was no difference
between basic and diluted earnings per share.
3. COMPREHENSIVE LOSS
In fiscal 1999, Whitman adopted Statement of Financial Accounting Standards
No. 130, "Reporting Comprehensive Income." Statement 130 establishes new rules
for the reporting and display of comprehensive income and its components.
Statement 130 requires unrealized gains or losses on Whitman's
available-for-sale securities, which prior to its adoption were recorded
separately in stockholders' equity, to be included in "other comprehensive
loss."
For the three months ended June 30, 1999 and June 30, 1998, total
comprehensive losses were $465,855 and $625,297, respectively.
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<PAGE>
WHITMAN EDUCATION GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)
4. DEBT
On May 28, 1999, Whitman entered into an $8.5 million line of credit which
is secured by all of the assets of Whitman. The interest rate on the line of
credit is variable and is equal to the sum of 2.90% and the 30-day commercial
paper rate. The line of credit has an expiration date of June 30, 2000. On May
28, 1999, Whitman repaid the outstanding balance due on the $7.5 million
revolver note. In addition, Whitman repaid the outstanding balances due on the
notes payable at March 31, 1999 of $210,005 and $844,629.
5. DISPOSITION OF HURON UNIVERSITY
On May 3, 1999, Colorado Technical University, Inc., an indirect
wholly-owned subsidiary of Whitman, entered into an Amended and Restated
Contribution Agreement pursuant to which the assets and certain liabilities of
its Huron University campus in Huron, South Dakota will be transferred to Newco,
LLC., a South Dakota limited liability company formed by existing members of
Huron University's management team. In connection with the transaction, Colorado
Technical University will contribute the operating assets of Huron University
and $500,000 to Newco, and Newco will issue Colorado Technical University, Inc.
membership interests equal to 19.9% of the membership interests of Newco and
assume the third party liabilities of Huron University. The membership interests
would have a liquidation preference equal to the net value of the assets and
cash contributed by Colorado Technical University.
Completion of the transaction is subject to various conditions, including
the obtaining of adequate financing by the new ownership group, the obtaining of
all necessary state and other governmental agency approvals, the attaining of
independent accreditation of Huron University by the North Central Association
of Colleges and Schools and Huron University independently qualifying for
participation in federal Title IV student financial assistance programs
administered by the United States Department of Education. Subject to the
occurrence of these conditions, the parties will seek to close the transaction
in the second half of calendar 1999. There can be no assurance, however, that
any of the foregoing conditions will be satisfied. Accordingly, there can be no
assurance that the proposed transaction will be consummated.
6. CONTINGENCIES
In July 1999, in the previously reported case styled, Cullen, et al. v.
Whitman Education Group, Inc., in the United States District Court for the
Eastern District of Pennsylvania (Civil Action No. 98-CV-4076), the Court
certified a class of all students in the general ultrasound program who incurred
financial obligations (federally guaranteed student loans or aid) from August 1,
1994 to August 1, 1998 to attend an Ultrasound Diagnostic School. However, the
Court rejected the plaintiffs' theories that the Ultrasound Diagnostic School
made misrepresentations to students and to its accrediting body and allowed the
case to proceed as a class action only to the extent that the plaintiffs could
prove that the schools "did not meet even the most minimal requirements of a
vocational program." We believe that the lawsuit is without merit and intend to
continue to vigorously defend it. While the outcome cannot be predicted with
certainty, if determined adversely to us, it could have a material adverse
effect on our financial position and results of operations.
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<PAGE>
WHITMAN EDUCATION GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)
7. SEGMENT AND RELATED INFORMATION
In fiscal 1999, Whitman adopted the provision of Statement of Financial
Accounting Standards No. 131, "Disclosures About Segments of an Enterprise."
Whitman is organized by two reportable segments, the University Degree Division
and the Associate Degree Division through three wholly-owned subsidiaries. The
University Degree Division primarily offers bachelor, master and doctorate
degrees through Colorado Technical University. The Associate Degree Division
offers associate degrees and diplomas or certificates through Sanford-Brown
College and Ultrasound Technical Services.
Whitman's revenues are not materially dependent on a single customer or
small group of customers.
Summarized financial information concerning the Whitman reportable segments
is shown in the following table:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
JUNE 30,
1999 1998
--------------- ----------------
<S> <C> <C>
Net revenues:
Associate Degree Division.............. $ 13,096,581 $ 11,785,156
University Degree Division............. 4,893,966 3,982,751
Other.................................. - -
--------------- ----------------
Total ................................. $ 17,990,547 $ 15,767,907
=============== ================
Loss before income tax benefit:
Associate Degree Division.............. $ (254,798) $ 425,543
University Degree Division............. 100,611 (827,650)
Other.................................. (620,173) (581,190)
--------------- ----------------
Total.................................. $ (774,360) $ (983,297)
=============== ================
JUNE 30, 1999 MARCH 31, 1999
--------------- ----------------
Total assets:
Associate Degree Division.............. $ 43,078,999 $ 48,250,099
University Degree Division............. 9,580,157 13,341,559
Other.................................. 2,253,322 987,957
--------------- ----------------
Total.................................. $ 54,912,478 $ 62,579,615
=============== ================
</TABLE>
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 Whitman, the related notes to
consolidated financial statements and Management's Discussion and Analysis of
Financial Condition and Results of Operations included in Whitman's Form 10-K
for the year ended March 31, 1999 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. Such statements
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<PAGE>
WHITMAN EDUCATION GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS - (CONTINUED)
may include, but are not limited to, projections of revenues, income and cash
flows, and Whitman's financing needs and plans for future operations. Investors
are cautioned that forward looking statements involve risks and uncertainties,
including, but not limited to, regulatory, licensing and accreditation risks
inherent in operating proprietary post-secondary educational institutions, which
may cause Whitman's actual results, performance or achievements to differ
materially from the forward looking statements made in the report or otherwise
made by or on behalf of Whitman. Factors that may affect future results include
the unanticipated operational impact of Year 2000 issues, the ultimate
resolution of legal proceedings involving Whitman and certain economic,
competitive, governmental and other factors discussed in this report and in
Whitman'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>
FOR THE THREE MONTHS ENDED
JUNE 30,
-------------------------------
1999 1998
-------------- --------------
<S> <C> <C>
Net revenues................................. 100.0% 100.0%
Costs and expenses:
Instructional and educational support... 70.0 69.0
Selling and promotional................. 14.6 16.5
General and administrative.............. 18.5 19.2
-------------- --------------
Total costs and expenses..................... 103.1 104.7
-------------- --------------
Loss from operations......................... (3.1) (4.7)
Other (income) and expenses:
Interest expense........................ 1.6 2.0
Interest income......................... (0.4) (0.4)
-------------- --------------
Loss before income tax benefit............... (4.3) (6.3)
Income tax benefit........................... 1.7 2.2
-------------- --------------
Net loss..................................... (2.6)% (4.1)%
============== ==============
</TABLE>
THREE MONTHS ENDED JUNE 30, 1999 COMPARED TO THE THREE MONTHS ENDED JUNE 30,
1998
Net revenues increased by $2.2 million or 14.1% to $18.0 million for the
three months ended June 30, 1999 from $15.8 million for the three months ended
June 30, 1998. The increase was primarily due to an increase in average student
enrollment. Average student enrollment increased 10.9% overall with the
University Degree Division experiencing a 12.6% increase and the Associate
Degree Division experiencing a 10.0% increase.
-9-
<PAGE>
WHITMAN EDUCATION GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)
RESULTS OF OPERATIONS - (CONTINUED)
Instructional and educational support increased by $1.7 million or 15.7% to
$12.6 million for the three months ended June 30, 1999 from $10.9 million for
the three months ended June 30, 1998. As a percentage of net revenues,
instructional and educational support expenses were 70.0% and 69.0%,
respectively, for the three months ended June 30, 1999 and June 30, 1998. The
increases in instructional and educational support expenses were primarily due
to the addition of faculty and student support personnel, the addition of
equipment, and the expansion of six facilities in the Associate Degree Division.
These increases were necessary to support the growth in enrollments.
Selling and promotional expenses increased $31,000 or 1.2% to $2.6 million
for the three months ended June 30, 1999 from $2.6 million for the three months
ended June 30, 1998. As a percentage of net revenues, selling and promotional
expenses decreased to 14.6 % for the three months ended June 30, 1999 as
compared to 16.5% for the three months ended June 30, 1998. The decrease in
selling and promotional expenses as a percentage of net revenues was due to an
increase in revenues at a greater rate than the rate of increase in selling and
promotional expenses.
General and administrative expenses increased by $0.3 million or 10.4% to
$3.3 million for the three months ended June 30, 1999 from $3.0 million for the
three months ended June 30, 1998. The increase in general and administrative
expenses was primarily due to an increase in administrative costs necessary to
support the growth in student population. As a percentage of net revenues,
general and administrative expenses were 18.5% and 19.2%, respectively, for the
three months ended June 30, 1999 and June 30, 1998. The decrease in general and
administrative expenses as a percentage of net revenues was due to our ability
to increase revenues at a greater rate than the rate of increase in
administrative operating costs.
We reported a net loss of $0.5 million for the three months ended June 30,
1999 as compared to a net loss of $0.6 million for the three months ended June
30, 1998. The decrease in the net loss was primarily due to an increase in
operating income of $0.9 million generated from the University Degree Division,
which was partially offset by a decrease in operating income of $0.7 million
from the Associate Degree Division.
SEASONALITY
We experience seasonality in our quarterly results of operations as a
result of changes in the level of student enrollment. New enrollment in our
schools tends to be lower in the first and second fiscal quarters covering the
summer months which are traditionally associated with recess from school. 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.
The operating results of Huron University are significantly affected by
seasonality. As a more traditional university, Huron University experiences a
significant decline in revenues during the late spring and summer. The decline
in revenues combined with a relatively constant level of operating expenses
resulted in operating losses of $734,000 and $913,000 at Huron University for
the three months ended June 30, 1999 and 1998, respectively.
-10-
<PAGE>
Whitman Education Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited) - (Continued)
YEAR 2000 ISSUE
We have implemented a process for identifying, prioritizing and modifying
or replacing certain computer and other systems and programs that may be
affected by the Year 2000 issue. We are also monitoring the adequacy of the
manner in which certain third parties and third party vendors of systems are
attempting to address the Year 2000 issue. We have substantially completed an
assessment of our computer systems and believe that with the modifications made
to existing software and the conversions made to new software, the Year 2000
issue will not pose significant operational problems to our information systems.
We expect to complete testing of the Year 2000 issues by the Fall of 1999, which
would be prior to any anticipated impact on our operating systems.
We are highly dependent on student funding provided through Title IV
programs. Processing of student applications for this funding and actual
disbursement of a significant portion of these funds are accomplished through
the Department of Education's computer systems. Should the Department of
Education experience Year 2000 related disruptions, it could result in
interruption of funding for our students. Any prolonged interruption would have
a material adverse impact on our business, results of operations, liquidity and
financial condition. In April 1999, the Department of Education announced that
all of its 175 data systems, including its 14 mission-critical systems, are Year
2000 compliant.
Based on the assessment performed to date, costs of addressing potential
problems are not currently expected to have a material adverse impact on our
financial position, results of operations or cash flows in future periods. While
we believe our process is designed to be successful, because of the complexity
of the Year 2000 issue, and the interdependence of organizations using computer
systems, it is possible that our efforts or those of third parties with whom we
interact, will not be successful or satisfactorily completed in a timely
fashion.
Based on the modifications and conversions of software made to date and the
assessment of embedded devices that have been identified at our facilities to
date, we do not believe that contingency planning is warranted at this time. The
assessment of outside third parties is underway, and the results of this
assessment, when completed, may reveal the need for contingency planning at a
later date. We will regularly evaluate the need for contingency planning based
on the progress and findings of the Year 2000 project.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents at June 30, 1999 and March 31, 1999 were $1.5
million and $4.3 million, respectively. Our working capital totaled $6.1 million
at June 30, 1999 and $8.4 million at March 31, 1999.
Net cash of $0.1 million and $0.5 million was provided by operating
activities for the three months ended June 30, 1999 and 1998, respectively. The
decrease of $0.4 million was primarily due to a decrease in accounts payable and
accrued expenses due to the timing of payments.
Net cash of $0.1 million and $1.1 million was used in investing activities
for the three months ended June 30, 1999 and 1998, respectively. The decrease of
$1.0 million was due to a decrease in cash used for capital expenditures.
Net cash of $2.8 million and $2.5 million was used in financing
activities for the three months ended June 30, 1999 and 1998, respectively.
The increase in cash used was due to an increase of $0.3 million in
-11-
<PAGE>
WHITMAN EDUCATION GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES - (CONTINUED)
net payments on long-term borrowings.
We have an $8.5 million line of credit which expires on June 30, 2000. At
June 30, 1999, we had $5.8 million outstanding under this facility and letters
of credit outstanding of $820,000 which reduced the amount available for
borrowing. The amounts borrowed under this facility for the three months ended
June 30, 1999 were primarily used for operations, repayment of debt and capital
expenditures. We intend to refinance or extend our line of credit facility on a
long-term basis prior to June 30, 2000.
Our primary source of operating liquidity is the cash received from
payments of tuition and fees. Most students attending our schools receive some
form of financial aid under Title IV Programs. We receive approximately 71% of
our funding from the Title IV Programs. Disbursements under each program are
subject to disallowance and repayment by the schools.
We believe that with our working capital, our cash flow from operations,
our working capital facilities and our expected increased financings under
capital lease obligations to fund capital expenditures, we will have adequate
resources to meet our anticipated operating requirements for the foreseeable
future.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In July 1999, in the previously reported case styled, Cullen, et al. v.
Whitman Education Group, Inc., in the United States District Court for the
Eastern District of Pennsylvania (Civil Action No. 98-CV-4076), the Court
certified a class of all students in the general ultrasound program who incurred
financial obligations (federally guaranteed student loans or aid) from August 1,
1994 to August 1, 1998 to attend an Ultrasound Diagnostic School. However, the
Court rejected the plaintiffs' theories that the Ultrasound Diagnostic School
made misrepresentations to students and to its accrediting body and allowed the
case to proceed as a class action only to the extent that the plaintiffs could
prove that the schools "did not meet even the most minimal requirements of a
vocational program." We believe that the lawsuit is without merit and intend to
continue to vigorously defend it. While the outcome cannot be predicted with
certainty, if determined adversely to us, it could have a material adverse
effect on our financial position and results of operations.
-12-
<PAGE>
WHITMAN EDUCATION GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
ANNUAL SHAREHOLDERS' MEETING
- ----------------------------
On August 6, 1999, the Company held its annual meeting of shareholders. The
only business transacted at that meeting was the election of directors. All of
the nominees for director were elected by the vote set forth opposite their
names in the table below:
<TABLE>
<CAPTION>
ELECTION OF DIRECTORS FOR WITHHELD
------------------------- ---------- ----------
<S> <C> <C>
Phillip Frost, M.D. 11,831,292 223,238
Richard C. Pfenniger, Jr. 11,978,055 76,475
Jack R. Borsting, Ph.D. 11,978,055 76,475
Peter S. Knight 11,977,955 76,575
Lois F. Lipsett, Ph.D. 11,978,255 76,275
Richard M. Krasno, Ph.D. 11,978,255 76,275
Percy A. Pierre, Ph.D. 11,978,255 76,275
Neil Flanzraich 11,978,255 76,275
A. Marvin Strait 11,978,255 76,275
</TABLE>
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 Whitman during the quarter ended June
30, 1999.
-13-
<PAGE>
WHITMAN EDUCATION GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)
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)
By: /s/ FERNANDO L. FERNANDEZ
--------------------------------------
Fernando L. Fernandez
Vice President - Finance,
Chief Financial Officer, Treasurer and
Secretary
Date: ______________________
-14-
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<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-01-1999
<PERIOD-END> JUN-30-1999
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<SECURITIES> 0
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0
0
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