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, 2000
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 Number)
4400 Biscayne Boulevard, Miami, Florida 33137
----------------------------------------------
(Address of Principal Executive Offices)
(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 3, 2000, there were 13,334,917 shares of common stock
outstanding.
1
<PAGE>
WHITMAN EDUCATION GROUP, INC.
Form 10-Q
June 30, 2000
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............................. 13
Item 6. Exhibits and Reports on Form 8-K.............. 13
2
<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,
2000 2000
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents..................... $ 412,023 $ 6,056,738
Accounts receivable, net...................... 26,089,986 26,198,803
Inventories................................... 1,321,601 1,409,449
Deferred tax assets, net...................... 3,376,787 2,800,968
Other current assets.......................... 1,919,866 1,830,882
------------ ------------
Total current assets......................... 33,120,263 38,296,840
Property and equipment, net.................... 11,773,037 11,284,404
Deposits and other assets, net................. 3,313,802 3,351,370
Goodwill, net.................................. 9,522,112 9,593,841
------------ ------------
Total assets................................. $57,729,214 $62,526,455
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.............................. $ 1,685,898 $ 1,345,738
Accrued expenses.............................. 4,994,167 5,731,883
Current portion of capitalized
lease obligations............................ 1,513,761 1,454,792
Deferred tuition revenue...................... 21,048,985 21,589,823
------------ ------------
Total current liabilities.................... 29,242,811 30,122,236
Capitalized lease obligations.................. 3,701,464 3,561,818
Long-term debt................................. 4,493,658 7,557,447
Commitments and contingencies
Stockholders' equity:
Common stock, no par value,
authorized 100,000,000 shares;
issued and outstanding 13,334,917 shares
at June 30, 2000 and 13,412,455 shares
at March 31, 2000........................... 21,939,335 22,067,271
Additional paid-in capital................... 674,173 674,173
Accumulated deficit.......................... (2,322,227) (1,456,490)
------------ ------------
Total stockholders' equity.................. 20,291,281 21,284,954
------------ ------------
Total liabilities and
stockholders' equity....................... $57,729,214 $62,526,455
============ ============
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
WHITMAN EDUCATION GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
JUNE 30,
---------------------------------
2000 1999
-------------- --------------
<S> <C> <C>
Net revenues......................... $ 18,879,430 $ 17,990,547
Costs and expenses:
Instructional and
educational support............. 12,888,358 12,838,997
Selling and promotional........... 3,269,728 2,628,693
General and administrative........ 3,085,062 3,085,134
-------------- --------------
Total costs and expenses............. 19,243,148 18,552,824
-------------- --------------
Loss from operations................. (363,718) (562,277)
Other (income) and expenses:
Interest expense.................. 222,455 284,380
Interest income................... (84,568) (72,297)
-------------- --------------
Loss before income tax
benefit and cumulative
effect of change in
accounting principle............ (501,605) (774,360)
Income tax benefit................... 199,839 308,505
-------------- --------------
Loss before cumulative
effect of change in
accounting principle............ (301,766) (465,855)
Cumulative effect of
change in accounting
principle, net of tax........... (563,971) -
-------------- --------------
Net loss............................. $ (865,737) $ (465,855)
============== ==============
Net loss per share
(basic and diluted):
Loss before cumulative
effect of change in
accounting principle............ $ (.02) $ (.03)
Cumulative effect of
change in accounting
principle, net of tax........... (.04) -
-------------- --------------
Net loss............................ $ (.06) $ (.03)
============== ==============
Weighted average common
shares outstanding:
Basic and diluted............... 13,367,183 13,427,663
============== ==============
</TABLE>
See accompanying notes to financial statements.
4
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WHITMAN EDUCATION GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
JUNE 30,
---------------------------
2000 1999
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.......................................... $ (865,737) $ (465,855)
Adjustments to reconcile net loss to
net cash (used in) provided by
operating activities:
Depreciation and amortization.................. 1,005,580 1,100,630
Bad debt expense............................... 874,466 797,388
Deferred tax benefit........................... (575,819) (308,505)
Changes in operating assets and
liabilities:
Accounts receivable.......................... (765,649) 4,371,083
Inventories.................................. 87,848 102,435
Other current assets......................... (88,984) (430,340)
Deposits and other assets.................... 36,608 (116,053)
Accounts payable............................. 340,160 21,089
Accrued expenses............................. (737,716) 404,816
Income taxes payable......................... - (898,664)
Deferred tuition revenue..................... (540,838) (4,383,704)
Other liabilities............................ - (64,853)
------------ ------------
Net cash (used in) provided by
operating activities.............................. (1,230,081) 129,467
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment................ (765,731) (143,842)
------------ ------------
Net cash used in investing activities............. (765,731) (143,842)
------------ ------------
Cash flows from financing activities:
Proceeds from line of credit
and long-term borrowings ...................... 5,436,211 15,040,902
Principal payments on line of
credit, long-term borrowings, capital
lease obligations and other liabilities........ (8,957,178) (17,824,122)
Purchase of common stock.......................... (127,936) -
----------- ------------
Net cash used in financing activities............. (3,648,903) (2,783,220)
----------- ------------
Decrease in cash and cash equivalents............. (5,644,715) (2,797,595)
Cash and cash equivalents at beginning of year.... 6,056,738 4,267,110
----------- ------------
Cash and cash equivalents at end of year.......... $ 412,023 $ 1,469,515
=========== ============
SUPPLEMENTAL DISCLOSURES OF NONCASH
FINANCING AND INVESTING ACTIVITIES:
Equipment acquired under capital leases........... $ 655,793 $ 503,254
=========== ============
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Interest paid..................................... $ 209,946 $ 313,812
============ ============
Income taxes paid................................. $ - $ 1,266,287
============ ============
</TABLE>
See accompanying notes to financial statements.
5
<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, 2000. 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 CTU Corporation ("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. RECLASSIFICATION
Certain prior year amounts have been reclassified to conform to the fiscal
2001 presentation. These changes had no effect on previously reported net loss.
3. NEW ACCOUNTING PRONOUNCEMENT
The Securities and Exchange Commission ("SEC") issued Staff Accounting
Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB 101") in
December 1999. Prior to the release of SAB 101, our revenue recognition policy
was in compliance with generally accepted accounting principles. Whitman began
following the guidance provided by SAB 101 effective April 1, 2000 and recorded
a cumulative effect of a change in accounting principle of approximately
$564,000, net of taxes of approximately $376,000, for the three months ended
June 30, 2000. In conformity with SAB 101, Whitman changed the method by which
it recognizes revenue for laboratory and registration fees charged to a student.
Previously, laboratory and registration fees were recognized as revenue at the
beginning of an academic term or year, as applicable. As of April 1, 2000,
6
<PAGE>
WHITMAN EDUCATION GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
3. NEW ACCOUNTING PRONOUNCEMENT - CONTINUED
Whitman began recognizing revenue for these fees ratably over the life of an
education program. Pro forma net loss and net loss per share amounts, for the
three months ended June 30, 1999, assuming the new accounting principle is
applied retroactively are $331,271 and $.02, respectively.
4. EARNINGS PER SHARE
For the three months ended June 30, 2000 and June 30, 1999, there was no
difference between basic and diluted earnings per share.
5. 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, 2000 and June 30, 1999, total
comprehensive losses were $865,737 and $465,855, respectively.
6. 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. On May 15, 2000, the maturity date on the line of credit was
extended from October 1, 2000 to June 30, 2002.
7. CONTINGENCIES
In May 2000, Whitman (in conjunction with its insurance carriers) reached
an agreement in principle to settle the previously reported case styled Cullen,
et. al. v. Whitman Education Group, Inc., et. al., in the United States District
Court for the Eastern District of Pennsylvania (Civil Action No. 98-CV-4076).
The settlement agreement, which was signed by the parties and preliminarily
approved by the Court, covers students who attended Whitman's Ultrasound
Diagnostic Schools any time from August 1, 1994 to August 1, 1998 in either the
general ultrasound program or the non-invasive cardiovascular technology
program. As a result of the proposed settlement, Whitman recorded a one-time,
after-tax charge to earnings of approximately $900,000, or $0.07 per share in
the fiscal quarter ended March 31, 2000. Although management denied the
allegations of the lawsuit, and believed the key allegations to be without
merit, Whitman entered into the settlement to resolve litigation in a
satisfactory business manner, to avoid disruption of Whitman's business, and to
allow Whitman to pursue its mission of providing quality education to its
enrolled students.
7
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WHITMAN EDUCATION GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
8. SEGMENT AND RELATED INFORMATION
In fiscal 1999, Whitman adopted the provisions 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 Diagnostic Schools.
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,
--------------------------------
2000 1999
-------------- --------------
<S> <C> <C>
Net revenues:
Associate Degree Division........... $ 14,185,115 $ 13,096,581
University Degree Division.......... 4,694,315 4,893,966
-------------- --------------
Total .............................. $ 18,879,430 $ 17,990,547
============== ==============
Loss before income tax benefit
and cumulative effect of change
in accounting principle:
Associate Degree Division........... $ (598,589) $ (254,798)
University Degree Division.......... 620,051 100,611
Other............................... (523,067) (620,173)
-------------- --------------
Total............................... $ (501,605) $ (774,360)
============== ==============
June 30, 2000 March 31, 2000
------------- --------------
Total assets:
Associate Degree Division........... $ 45,410,351 $ 49,223,023
University Degree Division.......... 9,213,959 11,152,738
Other............................... 3,104,904 2,150,694
------------- --------------
Total............................... $ 57,729,214 $ 62,526,455
============= ==============
</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 the
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, 2000 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 may include, but are
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)
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 postsecondary educational institutions, risks relating to
unanticipated attrition or reductions in student enrollment, risks that
marketing efforts may not achieve anticipated results, risks that new programs
may not be implemented on a timely basis or be successful, which may cause our
actual results, performance or achievements to differ materially from the
forward-looking statements made in the report or otherwise made by or on our
behalf. Other factors that may affect our future results include certain
economic, competitive, governmental and other factors discussed in our filings
with the Securities and Exchange Commission. We assume no responsibility to
update forward-looking statements made herein or otherwise.
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,
------------------------------------
2000 1999
-------------- ---------------
<S> <C> <C>
Net revenues........................... 100.0% 100.0%
Costs and expenses:
Instructional and
educational support............. 68.3 71.4
Selling and promotional........... 17.3 14.6
General and administrative........ 16.3 17.1
-------------- ----------------
Total costs and expenses............... 101.9 103.1
-------------- ----------------
Loss from operations................... (1.9) (3.1)
Other (income) and expenses:
Interest expense.................. 1.2 1.6
Interest income................... (0.4) (0.4)
-------------- ----------------
Loss before income tax benefit
and cumulative effect of
change in accounting principle.... (2.7) (4.3)
Income tax benefit..................... 1.1 1.7
-------------- ----------------
Loss before cumulative effect of
change in accounting principle.... (1.6) (2.6)
Cumulative effect of change in
accounting principle, net of tax.. (3.0) -
-------------- ----------------
Net loss............................... (4.6)% (2.6)%
============== ================
</TABLE>
THREE MONTHS ENDED JUNE 30, 2000
COMPARED TO THE THREE MONTHS ENDED JUNE 30, 1999
Net revenues increased by $0.9 million or 4.9% to $18.9 million for the
three months ended June 30, 2000 from $18.0 million for the three months ended
June 30, 1999. Excluding Huron University, which was sold in August 1999, net
revenues increased by $1.5 million or 8.8% to $18.9 million for the three months
ended June 30, 2000 from $17.4 million for the three months ended June 30, 1999.
This increase was primarily due to a 5.4% increase in average student
enrollment.
9
<PAGE>
RESULTS OF OPERATIONS - CONTINUED
Excluding Huron University, the University Degree Division experienced a
4.8% increase in average student enrollment and the Associate Degree Division
experienced a 5.8% increase in average student enrollment. The increase in
student enrollment in the University Degree Division was primarily due to
increased enrollment at Colorado Technical University's Sioux Falls campus. The
increase in student enrollment in the Associate Degree Division was primarily
due to increased enrollment in the medical assisting program and the health
information specialist program offered by the Ultrasound Diagnostic Schools.
Instructional and educational support increased by $0.1 million or 0.4% to
$12.9 million for the three months ended June 30, 2000 from $12.8 million for
the three months ended June 30, 1999. As a percentage of net revenues,
instructional and educational support expenses decreased to 68.3% for the three
months ended June 30, 2000 as compared to 71.4% for the three months ended June
30, 1999. Excluding Huron University, instructional and educational support
expenses increased by $1.2 million or 10.6% to $12.9 million for the three
months ended June 30, 2000 from $11.7 million for the three months ended June
30, 1999. Excluding Huron University, as a percentage of net revenues,
instructional and educational support expenses increased to 68.3% for the three
months ended June 30, 2000 as compared to 67.1% for the three months ended June
30, 1999. This increase in instructional and educational support expenses was
primarily due to an increase of $0.6 million in the Associate Degree Division
and $0.6 million in the University Degree Division. The increase in
instructional and educational support expenses in the Associate Degree Division
was primarily due to an increase in payroll and related benefits for faculty,
academic administrators and student support personnel to support the increase in
enrollment. The increase in instructional and educational support expenses in
the University Degree Division was primarily due to an increase in payroll and
related benefits for faculty and student support personnel to support the
increase in enrollment and the start up of Colorado Technical University's
online program.
Selling and promotional expenses increased by $0.7 million or 24.4% to $3.3
million for the three months ended June 30, 2000 from $2.6 million for the three
months ended June 30, 1999. As a percentage of net revenues, selling and
promotional expenses increased to 17.3% for the three months ended June 30, 2000
as compared to 14.6% for the three months ended June 30, 1999. Excluding Huron
University, selling and promotional expenses increased by $0.8 million or 32.8%
to $3.3 million for the three months ended June 30, 2000 from $2.5 million for
the three months ended June 30, 1999. Excluding Huron University, as a
percentage of net revenues, selling and promotional expenses increased to 17.3%
for the three months ended June 30, 2000 as compared to 14.2% for the three
months ended June 30, 1999. This increase in selling and promotional expenses
was primarily due to an increase in advertising expenses in the Associate Degree
Division and the University Degree Division resulting from marketing efforts
directed at increasing enrollment.
General and administrative expenses remained consistent at $3.1 million for
the three months ended June 30, 2000 and June 30, 1999. As a percentage of net
revenues, general and administrative expenses decreased to 16.3% for the three
10
<PAGE>
RESULTS OF OPERATIONS - CONTINUED
months ended June 30, 2000 as compared to 17.1% for the three months ended June
30, 1999. Excluding Huron University, general and administrative expenses
remained consistent at $3.1 million for the three months ended June 30, 2000 and
June 30, 1999. Excluding Huron University, as a percentage of net revenues,
general and administrative expenses decreased to 16.3% for the three months
ended June 30, 2000 as compared to 17.7% for the three months ended June 30,
1999.
We reported a loss from operations of $0.4 million for the three months
ended June 30, 2000 as compared to a loss from operations of $0.5 million for
the three months ended June 30, 1999. Excluding Huron University, income from
operations decreased by $0.6 million to a loss from operations of $0.4 million
for the three months ended June 30, 2000 from income from operations of $0.2
million for the three months ended June 30, 1999. This decrease was primarily
due to a decrease in income from operations of $0.4 million in the Associate
Degree Division due to an increase of $0.7 million in selling and promotional
expense.
We reported a net loss of $0.9 million and a net loss of $0.5 million for
the three months ended June 30, 2000 and 1999, respectively. The increase in net
loss was primarily due to the implementation of SEC Staff Accounting Bulletin
No. 101 effective April 1, 2000, which resulted in a one-time charge after taxes
of $0.6 million.
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, which was sold in August 1999,
were significantly affected by seasonality. As a more traditional university,
Huron University experienced 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 $0.7 million at
Huron University for the three months ended June 30, 1999. Due to the sale of
Huron University, our operating results were not affected by the operations of
Huron University for the three months ended June 30, 2000.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents at June 30, 2000 and June 30, 1999 were $0.4
million and $6.1 million, respectively. Our working capital totaled $3.9 million
at June 30, 2000 and $8.2 million at June 30, 1999.
Net cash of $1.2 million was used in operating activities for the three
months ended June 30, 2000 and $0.1 million was provided by operating activities
for the three months ended June 30, 1999. The increase in cash used of $1.3
million was primarily due to an increase in accounts receivable and a decrease
in deferred tuition revenue.
11
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES - CONTINUED
Net cash of $0.8 million and $0.1 million was used in investing activities
for the three months ended June 30, 2000 and 1999, respectively. The increase of
$0.7 million was due to an increase in capital expenditures.
Net cash of $3.6 million and $2.8 million was used in financing activities
for the three months ended June 30, 2000 and 1999, respectively. The increase in
cash used was due to an increase of $0.8 million in net payments on long-term
debt and capitalized lease obligations.
We have an $8.5 million line of credit which expires on June 30, 2002. At
June 30, 2000, we had $4.5 million outstanding under this facility and letters
of credit outstanding of $0.5 million which reduced the amount available for
borrowing. The amounts borrowed under this facility for the three months ended
June 30, 2000 were primarily used for operations, repayment of debt and capital
expenditures.
On November 5, 1999, our Board of Directors authorized the repurchase of up
to $1.0 million of our common stock. The repurchases will be made from time to
time in the open market or through privately negotiated transactions. We
anticipate that the repurchase of shares will be funded through cash from
operations. During the three months ended June 30, 2000, we repurchased 90,000
shares of our common stock for approximately $128,000 and since the inception of
the repurchase program we have repurchased 285,000 shares of our common stock
for approximately $498,000.
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 75% 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 credit 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.
NEW ACCOUNTING PRONOUNCEMENT
Effective April 1, 2000, we implemented SAB 101 and changed the method by
which we recognize revenue for laboratory and registration fees charged to a
student. In fiscal 2001, we began recognizing revenue for these fees ratably
over the life of an education program. Previously, we recognized laboratory and
registration fees as revenue at the beginning of our academic term or year, as
applicable. We recorded the cumulative effect of the change in accounting of
approximately $564,000, net of taxes, in the three months ended June 30, 2000.
12
<PAGE>
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
In May 2000, we (in conjunction with our insurance carriers) reached an
agreement in principle to settle the previously reported case styled Cullen, et.
al. v. Whitman Education Group, Inc., et. al., in the United States District
Court for the Eastern District of Pennsylvania (Civil Action No. 98-CV-4076).
The settlement agreement, which was signed by the parties and preliminarily
approved by the Court, covers students who attended our Ultrasound Diagnostic
Schools any time from August 1, 1994 to August 1, 1998 in either the general
ultrasound program or the non-invasive cardiovascular technology program. As a
result of the proposed settlement, we recorded a one-time, after-tax charge to
earnings of approximately $900,000, or $0.07 per share in the fiscal quarter
ended March 31, 2000. Although management denied the allegations of the lawsuit,
and believed the key allegations to be without merit, we entered into the
settlement to resolve litigation in a satisfactory business manner, to avoid
disruption of our business, and to allow us to pursue our mission of providing
quality education to our enrolled students.
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, 2000.
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: AUGUST 8, 2000
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