<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended: March 31, 2000
Commission File Number 1-1003
NOBEL LEARNING COMMUNITIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 22-2465204
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
1400 N. Providence Road, Suite 3055, Media, PA 19063
(Address of principal executive offices) (Zip Code)
(610) 891-8200
(Registrant's telephone number, including area code)
Indicate by check whether the registrant (1) has filed all report(s) 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 ___
---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 5,924,698 shares of Common
Stock outstanding at February 12, 2000.
<PAGE>
INDEX TO FORM 10-Q
Nobel Learning Communities, Inc.
<TABLE>
<CAPTION>
Page
PART I. FINANCIAL INFORMATION Number
------
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets, March 31, 2000 (unaudited) and June 30,
1999........................................................................ 2
Consolidated Statements of Income for the nine months ended March 31,
2000 (unaudited) and 1999 (unaudited)....................................... 3
Consolidated Statements of Income for the three months ended March 31,
2000 (unaudited) and 1999 (unaudited)....................................... 4
Consolidated Statements of Cash Flows for the nine months ended March
31, 2000 (unaudited) and 1999 (unaudited)................................... 5
Notes to Consolidated Interim Financial Statements.......................... 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations....................................................... 9
PART II. OTHER INFORMATION
Item 6. Exhibits and Report on Form 8-K............................................. 14
</TABLE>
<PAGE>
PART I
Financial Information
"Safe Harbor" Statement under Private Securities Litigation Reform Act of 1995
The Company's fiscal 2000 outlook and all other statements in this report other
than historical facts are forward-looking statements that involve risks and
uncertainties and are subject to change at any time. The Company derives its
forward-looking statements from its operating budgets and forecasts, which are
based upon detailed assumptions about many important factors such as market
demand, market conditions and competitive activities. While the Company
believes that its assumptions are reasonable, it cautions that there are
inherent difficulties in predicting the impact of certain factors, especially
those affecting the acceptance of the Company's newly developed and converted
schools and performance of recently acquired businesses, which could cause
actual results to differ materially from predicted results.
<PAGE>
Nobel Learning Communities,
Inc. and Subsidiaries
Consolidated Balance Sheets
(Dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
Current Assets March 31, 2000 June 30 1999
- --------------------------------------- -------------- -------------
<S> <C> <C>
Cash and cash equivalents $ 1,049 $ 1,640
Accounts receivable, less allowance for 1,757 1,689
doubtful accounts of $197 in March 2000 and $177 in June of 1999
Prepaid rents 680 859
Other prepaid expenses 450 844
------------- -------------
Total Current Assets 3,936 5,032
------------- -------------
Property and equipment, at cost 45,375 37,024
Accumulated depreciation (15,153) (12,324)
------------- -------------
Total Property & Equipment 30,222 24,700
Property and equipment held for sale 708 1,202
Goodwill 48,241 45,725
Deposits and other assets 2,769 3,347
Deferred tax asset 1,536 1,019
------------- -------------
Total Assets $ 87,412 $ 81,025
============= =============
Liabilities and Stockholders' Equity
- ---------------------------------------
Current portion of long-term obligations $ 3,627 $ 2,209
Accounts payable and other current liabilities 9,054 8,236
Cash overdraft liability 0 1,792
Unearned income 7,183 4,882
------------- -------------
Total Current Liabilities 19,864 17,119
------------- -------------
Long-term obligations 18,111 15,316
Long-term subordinated debt 13,276 13,831
Capital lease obligations 0 73
Deferrred gain on sale/leaseback 22 27
Minority interest in consolidated subsidiary 568 514
------------- -------------
Total Liabilities 51,841 46,880
Stockholders' Equity:
Preferred stock, $.001 par value; 10,000,000 shares authorized, issued
and outstanding 4,593,542 at March 31, 2000, and June 30, 1999; $5,530
aggregate liquidation preference at March 31, 2000 and June 30, 1999 5 5
Common stock, $.001 par value, 20,000,000 shares authorized, issued and
outstanding 5,924,698 at March 31, 2000 and 5,921,365 at June 30, 1999. 6 6
Treasury stock, cost; 236,810 shares (1,375) (1,375)
Additional paid in capital 39,256 39,239
Accumulated deficit (2,321) (3,730)
------------- -------------
Total Stockholders' Equity 35,571 34,145
------------- -------------
Total Liabilities and Stockholders' Equity $ 87,412 $ 81,025
============= =============
</TABLE>
The accompanying notes and the notes in the financial statements included in the
Registrant's Annual Report on Form 10-K are an integral part of these financial
statements.
2
<PAGE>
Nobel Learning Communities Inc. and Subsidiaries
Consolidated Statements Of Income
for the nine months ended March 31, 2000 and 1999
---------------------------------------------------
(Dollars in thousands except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
2000 1999
-------- --------
<S> <C> <C>
Revenues $ 92,004 $ 80,627
Operating expenses
Personnel cost 43,830 38,997
Center operating cost 13,807 12,004
Insurance, taxes, rent and other 17,798 16,108
Depreciation and amortization 4,276 3,748
-------- --------
Total operating expenses 79,711 70,857
-------- --------
School operating profit 12,293 9,770
General and administrative expenses 6,931 5,685
New school development costs 417 342
-------- --------
Operating income 4,945 3,743
Interest expense 2,478 2,262
Other income (132) (188)
Minority interest in earnings of consolidated subsidiary 63 53
-------- --------
Income before taxes 2,536 1,616
Income taxes 1,065 679
-------- --------
Net income 1,471 937
======== ========
Preferred stock dividends $ 62 $ 63
======== ========
Net income available to common stockholders $ 1,409 $ 874
======== ========
Basic earnings per share $ 0.24 $ 0.14
======== ========
Diluted earnings per share $ 0.20 $ 0.13
======== ========
</TABLE>
The accompanying notes and the notes in the financial statements included in the
Registrant's Annual Report on Form 10-K are an integral part of these
financial statements.
3
<PAGE>
Nobel Learning Communities Inc. and Subsidiaries
Consolidated Statements Of Income
for the three months ended March 31, 2000 and 1999
(Dollars in thousands except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
2000 1999
------------ --------------
<S> <C> <C>
Revenues $ 33,127 $ 28,975
Operating expenses
Personnel cost 15,820 13,848
Center operating cost 4,653 4,042
Insurance, taxes, rent and other 6,141 5,638
Depreciation and amortization 1,509 1,299
---------- -----------
Total operating expenses 28,123 24,827
---------- -----------
School operating profit 5,004 4,148
General and administrative expenses 2,432 2,090
New school development costs 62 37
---------- -----------
Operating income 2,510 2,021
Interest expense 859 748
Other income (50) (20)
Minority interest in earnings of consolidated subsidiary 27 18
---------- -----------
Income before taxes 1,674 1,275
Income taxes 703 535
---------- -----------
Net income 971 740
========== ===========
Preferred stock dividends $ 21 $ 21
========== ===========
Net income available to common stockholders $ 950 $ 719
========== ===========
Basic earnings per share $ 0.16 $ 0.12
========== ===========
Diluted earnings per share $ 0.13 $ 0.10
========== ===========
</TABLE>
The accompanying notes and the notes in the financial statements included in the
Registrant's Annual Report on Form 10-K are an integral part of these financial
statements.
4
<PAGE>
Nobel Learning Communities, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
for the nine months ended March 31, 2000 and 1999
---------------------------------------------------
(Dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
2000 1999
-------- ----------
<S> <C> <C>
Net Cash Provided By Operating Activities $ 6,553 $ 6,883
Cash Flows From Investing Activities:
Proceeds from sale of real estate 1,896 1,720
Capital expenditures (8,818) (5,149)
Payment for acquisitions (2,690) (3,448)
------- --------
Net Cash Used In Investing Activities: (9,612) (6,877)
------- --------
Cash Flows From Financing Activities:
Purchase of treasury stock 0 (1,000)
Repayment of capital lease obligation (66) (67)
Payments of dividends on preferred stock (62) (63)
Proceeds from long term debt 9,603 15,035
Repayment of long term debt (5,687) (20,940)
Repayment of subordinated debt (1,320) (2,165)
Proceeds from subordinated debt 0 10,000
------- --------
Net Cash Provided by Financing Activities: 2,468 800
------- --------
Net increase (decrease) in cash and cash equivalents (591) 806
Cash and cash equivalents at the beginning of the period 1,640 408
------- --------
Cash and cash equivalents at the end of the period $ 1,049 $ 1,214
======= ========
</TABLE>
The accompanying notes and the notes in the financial statements included in the
Registrant's Annual Report Form 10-K are an integral part of these consolidated
financial statements.
5
<PAGE>
NOBEL LEARNING COMMUNITIES, INC. AND SUBSIDIARIES
Notes to Consolidated Interim Financial Statements
for the six months ended December 30, 1999 and 1998
(unaudited)
Note 1 - Basis of Presentation
- ------------------------------
The consolidated financial statements have been prepared by the Registrant
pursuant to the rules and regulations of the Securities and Exchange Commission
("SEC") and, in the opinion of management, include all adjustments, consisting
of normal recurring adjustments, necessary to present fairly the financial
position and results of operations. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with the
generally accepted accounting principals have been condensed or omitted pursuant
to such SEC rules and regulations. It is suggested that these financial
statements are read in conjunction with the consolidated financial statements
and notes thereto included in the Registrant's Annual Report on Form 10-K for
the year ended June 30, 1999.
Due to the inherent seasonal nature of the education and child care businesses,
annualization of amounts in these interim financial statements may not be
indicative of the actual operating results for the full year.
The Company manages its business based on geographical regions within the United
States. Under SFAS 131, "Segment Reporting", the Company has aggregated these
regions based on management's belief that these regions have met the aggregation
criteria set forth in the standard.
Note 2 - Earnings Per Share
- ---------------------------
Earnings per share are based on the weighted average number of shares
outstanding and common stock equivalents during the period. In the calculation
of dilutive earnings per share, shares outstanding are adjusted to assume
conversion of the Company's non-interest bearing convertible preferred stock if
they are dilutive. In the calculation of basic earnings per share, weighted
average number of shares outstanding are used as the denominator. Earnings per
share are computed as follows.
6
<PAGE>
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
------------------------------- ------------------------------
March 31, 2000 March 31, 1999 March 31, 2000 March 31, 1999
------------------------------- ------------------------------
<S> <C> <C> <C> <C>
Basic earnings per share
- ------------------------
Net income $ 971 $ 740 $ 1,471 $ 937
Less preferred dividends $ 21 $ 21 $ 62 $ 63
-------------- -------------- -------------- --------------
Net income available for
common stock $ 950 $ 719 $ 1,409 $ 874
-------------- -------------- -------------- --------------
Average common stock
outstanding 5,929 5,979 5,929 6,074
Basic earnings per share $ 0.16 $ 0.12 $ 0.24 $ 0.14
-------------- -------------- -------------- --------------
Dilutive earnings per share
- ---------------------------
Net income available for
common stock and dilutive securities $ 971 $ 740 $ 1,471 $ 937
Average common stock outstanding 5,929 5,979 5,929 6,074
Additional common shares
resulting from dilutive securities - - - -
Options,warrants and
convertible securities 1,443 1,257 1,443 1,257
-------------- -------------- -------------- --------------
Average common stock and
dilutive securities outstanding 7,372 7,236 7,372 7,331
Dilutive Earnings Per Share $ 0.13 $ 0.10 $ 0.20 $ 0.13
============== ============== ============== ==============
</TABLE>
Note 3 - Dispositions
On July 30, 1999, the Company sold the business the vicinity of operations of
the nine schools located in Indianapolis, Indiana to Children's Discovery Center
of America, Inc., which is controlled by Knowledge Universe for a total of
$550,000 in cash. Knowledge Universe, through KU Learning, LLC, controls a
significant percentage of the Company's stock. No gain or loss on the sale was
recorded for the sale of the operations as the Company had previously written
down the carrying value of the business at December 31, 1997.
7
<PAGE>
Note 4 - Acquisitions
- ---------------------
On September 9, 1999, the Company acquired the capital stock of Houston Learning
Academy, Inc., which operates schools in Houston, Texas for a purchase price of
$1,350,000 in cash and $615,000 in a subordinated note. Additionally, the
Company entered into a non-compete agreement with the former owner for a total
of $25,000. Houston Leaning Academy is an alternative high school program,
consisting of five schools and several hospital contracts. Revenues total
approximately $1,600,000, and capacity equals approximately 370 students for the
schools for the last fiscal year. In connection with the acquisition, the
Company also purchased for $25,000 an option to buy the management agreement for
a charter school operating in Houston, Texas.
On August 2, 1999, the Company acquired the land, building and assets of
Atlantic City Prep School located in Northfield, New Jersey for approximately
$757,000. The school has a capacity of 200 children and annual revenues of
approximately $400,000.
On December 17, 1999, the Company entered into a transaction with Children's
Out-of-School Time, Inc. ("COST") to form The Activities Club, Inc. ("TAC"),
which is owned 80% by the Company and 20% by COST. In the transaction, Nobel
contributed $625,000 to the capital of TAC, and TAC distributed such cash to
COST. TAC also issued to COST a 7% subordinated promissory note in the amount of
$175,000. If a specified earnings threshold is met, Nobel will be required to
make an additional cash payment to TAC, which TAC would then distribute to COST.
Further, commencing in December 2002, COST has the right to require Nobel to
purchase its interest in TAC for the greater of $500,000 and a formula price
based on TAC's earnings before interest, taxes, depreciation and amortization.
On December 3, 1999, the Company acquired the assets of Play and Learn Child
Development Center, with a capacity of 100 and estimated annual revenues of
$600,000. On February 11, 2000, the Company acquired the assets of High Road
Academy in Boca Raton, Florida, with a capacity of 100 and estimated annual
revenues of $700,000. High Road Academy is a specialty school for children with
learning disabilities. On February 17, 2000, the Company acquired the assets of
David Sikes Child Care, Inc., in Norcross, Georgia with the capacity of
enrollment for 252 children and estimated annual revenues of $822,041. The
purchase price for these three schools totaled $1,064,000 of which $682,000 was
in cash, $282,000 was in subordinated notes and $100,000 was in assumed
liabilities.
Note 5 - Commitments and Contingencies
- --------------------------------------
The Company is engaged in legal actions arising in the ordinary course of its
business. The Company believes that the ultimate outcome of all such matters
will not have a material adverse effect on the Company's consolidated financial
position. The significance of these matters on the Company's future operating
results and cash flows depends on the level of future results of operations and
cash flows as well as on the timing and amounts, if any, of the ultimate
outcome.
8
<PAGE>
The Company carries fire and other casualty insurance on its schools and
liability insurance in amounts which management believes are adequate for its
operations. As is the case with other entities in the education and preschool
industry, the Company cannot effectively insure itself against certain risks
inherent in its operations. Some forms of child abuse have sublimits per claim
in the general liability coverage.
Note 6 - New Pronouncements
- ---------------------------
In June 1998, the FASB issues SFAS 133, "Accounting for Derivative Instruments
and Hedging Activities," which was amended in June 1999 and which is effective
for fiscal years beginning after June 15, 2000. This statement establishes
accounting and reporting standards for derivative instruments and for hedging
activities. It requires that an entity recognize all derivatives as either
assets or liabilities in the statement of financial position and measure those
instruments at fair value. SFAS 133 also expanded the definition of a derivative
to include most commodity contracts that require physical delivery. The
accounting for changes in the fair value of a derivative depends on the intended
use of the derivative and the resulting designation. The company intends to
adopt this statement as of July 1, 2000. The impact of the adoption of this
statement on the Company's net income is not yet determinable.
9
<PAGE>
Item 2 Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
- ---------------------
For the Nine Months Ended March 31, 2000 vs the Nine Months ended March 31, 1999
Currently, the Company operates 149 schools. Since June 30, 1998, the Company
has opened or acquired 31 new schools: six elementary schools, nine preschools,
nine schools for learning challenged (the Paladin Academy schools), one charter
school and six specialty high schools (Houston Learning Academy). The Company
has also closed or sold 15 underperforming schools, nine of which were the
Indianapolis schools disposed of in July 1999.
Revenues for the nine months ended March 31, 2000 increased $11,377,000 or 14.1%
to $92,004,000 from $80,627,000 for the nine months ended March 31, 1999. The
increase in revenues is primarily attributable to an increase in enrollment, and
the increase in the number of schools.
Same school revenue (schools that were opened in both periods) increased
$6,530,000 or 9.0% in the nine months ended March 31, 2000 compared to the same
period of the prior year. This increase is related to tuition and enrollment
increases, which is partially due to an improved summer program, and partially
due to improved enrollments. The increase in revenues related to the 31 schools
opened or acquired totaled $8,348,000. These increases were offset by a decrease
in revenues of $3,501,000 related to the closing of 15 underperforming schools.
School operating profit for the nine months ended March 31, 2000 increased
$2,523,000 or 25.8% to $12,293,000 from $9,770,000 for the nine months ended
March 31, 1999. Total school operating profit as a percentage of revenue
increased from 12.1% to 13.4%. The improvement in operating margin was due to
lower personnel costs as a percentage of revenue which improved 0.8% to 47.6% of
revenues and by lower insurance, taxes and rent expense as a percentage of
revenue which decreased 0.7% to 19.3% of revenues.
Same school operating profit increased $1,430,000 or 14.1%. Same school
operating profit margin improved from 13.9% for the nine months ended March 31,
1999 to 14.5% for the nine months ended March 31, 2000. The increase in same
school operating profit is due to the revenue increases and lower operating
expenses. The 31 new or acquired schools accounted for an additional $1,267,000
in school operating profit. School closings positively affected the increase in
school operating profit by $251,000.
This increase in school operating profit was offset by the absence of certain
reductions in insurance and property tax expense that had positively affected
school operating profit in the quarter ended December 31, 1998. In the second
quarter of last year, the Company realized savings in insurance and property tax
expense that positively affected school operating profit. Insurance premium
costs for the most recently ended policy year ended in 1998 were less than
expected by $225,000. Property tax expense was reduced by $200,000 in the second
quarter of last year as a result of over-estimated property tax liability on
several properties.
General and administrative expenses increased $1,246,000 or 21.9% from
$5,685,000 for the nine months ended March 31, 1999 to $6,931,000 for the nine
months ended March 31, 2000. As a
10
<PAGE>
percentage of revenue, general and administrative expense increased from 7.1% at
March 31, 1999 to 7.5% at March 31, 2000. This increase was related to
management additions necessary to support the continued growth of the Company in
its new business initiatives such as Charter schools and the Paladin schools for
the learning challenged.
New school development costs increased $75,000 or 21.9% from $342,000 for the
nine months ended March 31, 1999 to $417,000 for the nine months ended March 31,
2000. The increase is a result of timing of the opening of the schools.
Operating income increased $1,202,000 or 32.1% from $3,743,000 for the nine
months ended March 31, 1999 to $4,945,000 for the nine months ended March 31,
2000. The increase is the result of an increase in school operating profit as
described above offset by the increase in general and administrative expenses.
For the nine months ended March 31, 2000, EBITDA (defined as earnings before
interest, income taxes, depreciation and amortization) totaled $9,290,000. This
represents an increase of $1,664,000 over the comparable period. EBITDA is not a
measure of performance under generally accepted accounting principals, however
the Company and the investment community consider it an important calculation.
Interest expense increased $216,000 or 9.6% from $2,262,000 for the nine months
ended March 31, 1999 to $2,478,000 for the nine months ended March 31, 2000. The
increase is due to increased borrowings on the Company's credit facility as a
result of recent acquisitions offset by a reduction in interest expense related
to the repayment of seller subordinated indebtedness.
Income before taxes increased 56.9% from $1,616,000 for the nine months ended
March 31, 1999 to $2,536,000 for the nine months ended March 31, 2000.
Income tax expense totaled $1,065,000 for the nine months ended March 31, 2000
which reflects a 42% effective tax rate.
For the Third Quarter Ended March 31, 2000 vs the Third Quarter ended March 31,
1999
Revenues for the third quarter ended March 31, 2000 increased $4,152,000 or
14.3% to $33,127,000 from $28,975,000 for the third quarter ended March 31,
1999. The increase in revenues is primarily attributable to the increase in
enrollment and the increase in the number of schools.
Same school revenue (schools that were opened in both periods) increased
$1,941,000 or 7.4% in the third quarter of 2000 compared to the prior year. This
increase is related to tuition and enrollment increases. The increase in
revenues related to the 31 schools opened or acquired totaled $3,409,000. These
increases were offset by a decrease in revenues of $1,198,000 related to the
closing of 15 underperforming schools.
School operating profit for the third quarter ended March 31, 2000 increased
$856,000 or 20.6% to $5,004,000 from $4,148,000 for the third quarter ended
March 31, 1999. Total school operating profit margin increased from 14.3% to
15.1%. The improvement in operating margin was due to lower insurance, taxes and
rent expense as a percentage of revenue which decreased 1.0% to 18.5% of
revenues.
11
<PAGE>
Same school operating profit increased $274,000 or 6.3%. Same school operating
profit as a percentage of revenue decreased slightly from 16.5% for the third
quarter ended March 31, 1999 to 16.4% for the third 11 quarter ended March 31,
2000. The increase in same school operating profit is due to the revenue
increases. The 31 new or acquired schools accounted for an additional $488,000
in school operating profit. School closings positively affected the increase in
school operating profit by $94,000.
General and administrative expenses increased $342,000 or 16.4% from $2,090,000
for the third quarter ended March 31, 1999 to $2,432,000 for the third quarter
ended March 31, 2000. As a percentage of revenue, general and administrative
expense increased slightly from 7.2% at March 31, 1999 to 7.3% at March 31,
2000. This increase was related to management additions necessary to support the
continued growth of the Company in its new business initiatives.
New school development costs increased $25,000 from $37,000 for the quarter
ended March 31, 1999 to $62,000 for the quarter ended March 31, 2000. The
increase is a result of timing of the opening of the schools.
Operating income increased $489,000 or 24.2% from $2,021,000 for the quarter
ended March 31, 1999 to $2,510,000 for the quarter ended March 31, 2000. The
increase is the result of an increase in school operating profit as described
above offset by the increase in general and administrative expenses and
increased new school development cost.
Other income increased $30,000 from $20,000 for the third quarter ended March
31, 1999 to $50,000 for the third quarter ended March 31, 2000. The increase in
other income is due to interest income received in sale leaseback transactions.
For the third quarter of fiscal 2000, EBITDA (defined as earnings before
interest, income taxes, depreciation and amortization) totaled $4,042,000. This
represents an increase of $720,000 over the comparable period. EBITDA is not a
measure of performance under generally accepted accounting principals, however
the Company and the investment community consider it an important calculation.
Interest expense increased $111,000 or 14.8% from $748,000 for the quarter ended
March 31, 1999 to $859,000 for the quarter ended March 31, 2000. The increase is
due to increased borrowings on the Company's credit facility as a result of
recent acquisitions offset by a reduction in interest expense related to
amortization of seller subordinated indebtedness.
Income before taxes increased 31.3% from $1,275,000 for the quarter ended March
31, 1999 to $1,674,000 for the quarter ended March 31, 2000.
Income tax expense totaled $703,000 for the quarter ended March 31, 2000 which
reflects a 42% effective tax rate.
Liquidity and Capital Resources
- -------------------------------
Management is pursuing a four-pronged growth strategy for the Company, which
includes (1) internal growth of existing schools through the expansion of
certain facilities, (2) new school development in both existing and new markets,
(3) strategic acquisitions, and (4) development of new education
12
<PAGE>
businesses. The Company's principal sources of liquidity are (1) cash flow
generated from operations, (2) available borrowings under the Company's
$35,000,000 Amended and Restated Loan and Security Agreement, (3) the use of
site developers to build schools and lease them to the Company, and (4) issuance
of subordinated indebtedness or shares of common stock to sellers in acquisition
transactions.
The Company anticipates that its existing principal credit facilities, cash
generated from operations, and continued support of site developers to build and
lease schools will be sufficient to satisfy working capital needs, capital
expenditures and renovations and the building of new schools in the near term
future.
The Company continues to look for quality acquisition candidates. The Company
identifies growth markets through both extensive demographic studies and an
analysis of the existing educational systems in the area. The Company seeks to
grow through a cluster approach whereby several preschools feed into an
elementary school. In order for the Company to continue its acquisition
strategy, the Company will continue to seek additional funds through debt or
equity financing.
In March 1999 the Company entered into an Amended and Restated Loan and Security
Agreement which increased the Company's available borrowing to $35,000,000. Four
separate facilities were established under the Amended and Restated Loan and
Security Agreement: (1) $7,000,000 Working Capital Credit Facility A, (2)
$3,000,000 Working Capital Credit Facility B (which is tied to the Company's
cash management arrangement), (3) $15,000,000 Acquisition Credit Facility and
(4) $10,000,000 Term Loan.
Working Capital Credit Facility A and B funds are available until March 2002.
Under the Acquisition Credit Facility, no principal payments are required until
March 2001. At that time the outstanding principal under the Acquisition Credit
Facility will be converted into a term loan which will require principal
payments in 16 quarterly installments.
Under the Term Loan Facility, no principal payments are required until April
2000. Quarterly installments of $250,000 are required the first four quarters
(through January 2001); thereafter quarterly installments of $562,500 are
required until January 2005.
At March 31, 2000 $5,261 was outstanding under Working Capital Credit Facility A
and Working Capital Credit Facility B, $3,729 was outstanding under the
Acquisition Credit Facility and $10,000,000 was outstanding under the Term Loan.
Total cash and cash equivalents decreased by $591,000 to $1,049,000 at March 31,
2000. The net decrease was a result of the acquisitions of schools and capital
expenditures which occurred in the nine months ended March 31, 2000. Cash
provided from operations totaled $6,553,000 at March 31, 2000. The slight
decrease in the cash flow from operations, totaling $330,000 compared to March
31 1999, was the result of several factors. The increase in net income of
$534,000 was offset by an increase in accounts receivable of $68,000, an
increase in deferred taxes of $517,000 and a decrease in other assets of
$443,000 and a decrease in bank overdraft of $1,792,000.
The working capital deficit increased $4,034,000 to $16,121,000 at March 31,
2000. The increase is primarily the result of (1) a decrease in prepaid rents
and expenses totaling $572,000 related to timing, (2) an increase in deferred
revenue totaling $2,301,000 and (3) an increase in accounts payable and accrued
expenses of $818,000. The increase in deferred revenues is a result of the
timing of the school year. June, which is the end of the school year, typically
has the lowest deferred revenue balance.
13
<PAGE>
Part II
-------
Other Information
27 Financial Data Schedule
14
<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.
NOBEL LEARNING COMMUNITIES, INC.
Dated: May 15, 2000 By: /s/ William E. Bailey
----------------------------------------
William E. Bailey
Vice President/Chief Financial Officer
(duly authorized officer and
principal financial officer)
15
<PAGE>
Exhibits
Exhibit
Number Description of Exhibit
27 Financial Data Schedule
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 9-MOS
<FISCAL-YEAR-END> JUN-30-2000 JUN-30-1999
<PERIOD-START> JUL-01-1999 JUL-01-1998
<PERIOD-END> MAR-31-2000 MAR-31-1999
<CASH> 1,049 1,640
<SECURITIES> 0 0
<RECEIVABLES> 1,757 1,689
<ALLOWANCES> (197) (177)
<INVENTORY> 0 0
<CURRENT-ASSETS> 3,936 5,032
<PP&E> 45,375 37,024
<DEPRECIATION> (15,153) (12,324)
<TOTAL-ASSETS> 87,412 81,025
<CURRENT-LIABILITIES> 19,864 17,119
<BONDS> 0 0
0 0
5 5
<COMMON> 6 6
<OTHER-SE> 35,560 34,134
<TOTAL-LIABILITY-AND-EQUITY> 87,412 81,025
<SALES> 92,004 80,627
<TOTAL-REVENUES> 92,004 80,627
<CGS> 79,711 70,857
<TOTAL-COSTS> 87,059 76,884
<OTHER-EXPENSES> (69) (135)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 2,478 2,262
<INCOME-PRETAX> 2,536 1,616
<INCOME-TAX> 1,065 679
<INCOME-CONTINUING> 1,471 937
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,471 937
<EPS-BASIC> 0.24 0.14
<EPS-DILUTED> 0.20 0.13
</TABLE>
