<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter ended June 30, 1995 Commission File No. 0-16992
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CONCORDE CAREER COLLEGES, INC.
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(exact name of registrant as specified in its charter)
Delaware 43-1440321
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(State or other jurisdiction of (I. R. S. Employer Identification
Incorporation or Organization) Number)
4th Floor, City Center Square
12th & Baltimore, P. O. Box 26610
Kansas City, Missouri 64196
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(Address of Principal Executive Office) (Zip Code)
Registrant's telephone number, including area code: (816) 474-8002
---------------------------
Securities registered pursuant to Section 12(g) of the Act:
Common Stock $.10 Par Value
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.
(1) Yes X No (2) Yes X No
--- --- --- ---
As of August 7, 1995, Concorde Career Colleges, Inc. had 6,952,176 shares of
Common Stock outstanding, with a market value of $2,607,000.
<PAGE>
PART I - FINANCIAL INFORMATION
------------------------------
CONCORDE CAREER COLLEGES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, 1995 AND DECEMBER 31, 1994
ASSETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1995 1994
----------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents.......................... $ 3,085,000 $ 1,182,000
Refundable income taxes............................ 151,000
Net receivables --
Accounts receivable.............................. 18,583,000 20,412,000
Notes receivable for student tuition............. 3,038,000 2,117,000
Allowance for uncollectible accounts............. (2,128,000) (2,491,000)
----------- -----------
19,493,000 20,038,000
Supplies and prepaid expenses...................... 1,418,000 1,194,000
----------- -----------
Total current assets............................. 23,996,000 22,565,000
PROPERTY and EQUIPMENT, at cost:
Furniture and equipment............................ 9,339,000 9,013,000
Leasehold improvements............................. 2,410,000 2,305,000
Building and land.................................. 490,000 488,000
----------- -----------
12,239,000 11,806,000
Less--Accumulated depreciation and amortization.... 8,567,000 8,136,000
----------- -----------
Net property and equipment..................... 3,672,000 3,670,000
COST IN EXCESS OF NET TANGIBLE ASSETS OF BUSINESSES
ACQUIRED, less accumulated amortization of
$2,368,000 at June 30, 1995 and $3,160,000 at
December 31, 1994, respectively.................... 2,070,000 2,199,000
OTHER ASSETS:
Long-term notes receivable for student tuition less
allowance for uncollectible accounts of $421,000
at June 30, 1995 and $383,000 at December 31,
1994, respectively............................... 1,390,000 1,935,000
Other.............................................. 71,000 108,000
----------- -----------
Total other assets............................. 1,461,000 2,043,000
----------- -----------
$31,199,000 $30,477,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
Page 1 of 12
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CONCORDE CAREER COLLEGES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, 1995 AND DECEMBER 31, 1994
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1995 1994
------------ ------------
<S> <C> <C>
CURRENT LIABILITIES:
Deferred student tuition...................................... $16,286,000 $14,349,000
Current debt maturities....................................... 2,974,000 3,150,000
Accounts payable.............................................. 502,000 717,000
Accrued income taxes.......................................... 41,000
Accrued salaries and wages.................................... 765,000 600,000
Accrued interest.............................................. 130,000 526,000
Current deferred income taxes................................. 230,000 424,000
Other accrued liabilities..................................... 1,497,000 886,000
----------- -----------
Total current liabilities................................ 22,425,000 20,652,000
LONG TERM DEBT.................................................. 1,343,000
OTHER LONG-TERM LIABILITIES..................................... 116,000 57,000
DEFERRED INCOME TAXES........................................... 587,000 739,000
SUBORDINATED DEBT DUE TO RELATED PARTY.......................... 2,680,000 2,611,000
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.10 par value, 600,000 shares authorized
300,000 shares issued and outstanding...................... 30,000 30,000
Common stock, $.10 par value, 19,400,000 shares authorized,
6,978,976 shares issued and 6,952,176 shares outstanding... 698,000 698,000
Capital in excess of par...................................... 8,128,000 8,128,000
Accumulated deficit........................................... (3,404,000) (3,720,000)
Less--treasury stock, 26,800 shares, at cost.................. (61,000) (61,000)
----------- -----------
Total stockholders' equity............................... 5,391,000 5,075,000
----------- -----------
$31,199,000 $30,477,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
Page 2 of 12
<PAGE>
CONCORDE CAREER COLLEGES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994
AND THE THREE MONTHS ENDED JUNE 30, 1995 AND 1994
<TABLE>
<CAPTION>
Six Months Three Months
Ended June 30, Ended June 30,
-------------- --------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
STUDENT TUITION AND
OTHER REVENUE:........................ $18,346,000 $16,802,000 $8,457,000 $7,989,000
----------- ----------- ---------- ----------
OPERATING EXPENSES:
Payroll costs......................... 8,515,000 7,785,000 4,156,000 3,882,000
Occupancy............................. 2,616,000 2,758,000 1,224,000 1,210,000
Instructional materials and supplies.. 1,655,000 1,595,000 661,000 759,000
Advertising........................... 1,323,000 1,368,000 673,000 658,000
Other general and administrative...... 2,775,000 2,362,000 1,266,000 1,219,000
Provision for uncollectible accounts.. 746,000 953,000 284,000 612,000
----------- ----------- ---------- ----------
Total operating expenses......... 17,630,000 16,821,000 8,264,000 8,340,000
----------- ----------- ---------- ----------
OPERATING INCOME........................ 716,000 (19,000) 193,000 (351,000)
INTEREST EXPENSE........................ 365,000 555,000 175,000 285,000
----------- ----------- ---------- ----------
INCOME BEFORE INCOME TAXES.............. 351,000 (574,000) 18,000 (636,000)
PROVISION (BENEFIT) FOR INCOME TAXES.... 35,000 (125,000) 2,000 (150,000)
----------- ----------- ---------- ----------
NET INCOME.............................. $ 316,000 $ (449,000) $ 16,000 $ (486,000)
=========== =========== ========== ==========
WEIGHTED AVERAGE COMMON AND
COMMON SHARE EQUIVALENTS
OUTSTANDING........................... 7,390,888 6,952,176 7,444,603 6,952,176
=========== =========== ========== ==========
EARNINGS PER WEIGHTED AVERAGE
COMMON AND COMMON SHARE
EQUIVALENTS OUTSTANDING............... $ 0.04 $ (0.06) $ 0.0 $ (0.07)
=========== =========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
Page 3 of 12
<PAGE>
CONCORDE CAREER COLLEGES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
CASH FLOWS -- OPERATING ACTIVITIES:
Net income (loss).................................... $ 316,000 $ (449,000)
Adjustments to reconcile net income to net cash
provided by operating activities -
Depreciation and amortization...................... 585,000 681,000
Provision for losses on accounts receivable........ 746,000 953,000
Change in assets and liabilities, net -
Decrease (Increase) in receivables............... 345,000 (886,000)
Increase in deferred student tuition............. 1,936,000 2,090,000
Decrease in deferred income taxes................ (346,000) (125,000)
Increase in accrued income taxes.................. 41,000
Other changes in assets and liabilities, net..... 231,000 (910,000)
--------- ---------
Total adjustments.............................. 3,538,000 1,803,000
--------- ---------
Net............................................ 3,854,000 1,354,000
CASH FLOWS -- INVESTING ACTIVITIES:
Sale of property & equipment......................... 106,000
Capital expenditures................................. (433,000) (117,000)
--------- ---------
Net................................................ (433,000) (11,000)
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CASH FLOWS -- FINANCING ACTIVITIES:
Principal payments on long-term debt................. (1,518,000) (579,000)
--------- ---------
Net................................................ (1,518,000) (579,000)
--------- ---------
NET................................................... 1,903,000 764,000
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD...... 1,182,000 1,663,000
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD............ $ 3,085,000 $2,427,000
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest........................................... $ 190,000 $ 259,000
Income taxes....................................... 194,000 40,000
Cash received during the period for:
Interest........................................... 175,000 213,000
Income tax refunds................................. -- --
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
Page 4 of 12
<PAGE>
CONCORDE CAREER COLLEGES, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1995
The condensed interim financial statements included herein have been prepared
by the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared according to
generally accepted accounting principles have been condensed or omitted pursuant
to such rules and regulations although the Company believes that the disclosures
are adequate to make the information presented not misleading. It is suggested
that these condensed financial statements be read in conjunction with the
financial statements and the notes thereto included in the Company's latest Form
10-K Annual Report for 1994 that was filed by the Company on March 30, 1995.
The information included in these interim financial statements reflects all
normal recurring adjustments that are, in the opinion of management, necessary
to fairly state the results of the periods presented.
Due to the inherent seasonal nature of the career training business,
annualization of amounts in these interim financial statements may not
necessarily be indicative of the actual operating results for the full year.
(The remainder of this page was left intentionally blank.)
Page 5 of 12
<PAGE>
ITEM 2.) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Company owns and operates proprietary postsecondary schools which offer
career training, primarily in the allied health field (the "Health Vocational
Schools.") In addition, the Company previously operated schools with career
training in other fields (together the "Schools.") The Company also owns
Person/Wolinsky Associates, which offers review courses for the CPA exam (the
"CPA Review Courses.") The following table presents the revenue for each
category of School and the CPA Review Courses for the periods indicated.
Amounts are in thousands.
<TABLE>
<CAPTION>
Year Ended Six Months Three Months
December 31, Ended June 30, Ended June 30,
--------------------------- ---------------- --------------
1994 1993 1992 1995 1994 1995 1994
------- ------- ------- ------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Health Vocational &
Computer Schools...... $31,169 $30,564 $37,824 $17,096 $15,053 $8,422 $7,846
Travel Service School... 291 841 1,062 290 99
Paralegal Courses....... 545
CPA Review Courses...... 3,572 3,376 3,217 1,250 1,459 35 44
------- ------- ------- ------- ------- ------ ------
Total................... $35,032 $34,781 $42,648 $18,346 $16,802 $8,457 $7,989
======= ======= ======= ======= ======= ====== ======
</TABLE>
The following table presents the relative percentage of revenues derived
from each category of Resident School Courses and the CPA Review Courses and
certain consolidated statement of earning items as a percentage of total revenue
for periods indicated.
<TABLE>
<CAPTION>
Year Ended Six Months Three Months
December 31, Ended June 30, Ended June 30,
---------------------- --------------- ----------------
1994 1993 1992 1995 1994 1995 1994
------ ------ ------ ----- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Health Vocational &
Computer Schools........ 89.0% 87.9% 88.7% 93.2% 89.6% 99.6% 98.2%
Travel Service School.... 0.8 2.4 2.5 1.7 1.2
Paralegal Courses........ 1.3
CPA Review Courses....... 10.2 9.7 7.5 6.8 8.7 0.4 0.6
----- ----- ------ ----- ----- ----- -----
Total.................... 100.0 100.0 100.0 100.0 100.0 100.0 100.0
===== ===== ====== ===== ===== ===== =====
Operating expenses:
Payroll................. 45.0 45.7 41.7 46.4 46.3 49.1 48.6
Occupancy............... 15.5 12.7 17.8 14.3 16.4 14.5 15.1
Materials and supplies.. 9.4 7.4 10.7 9.0 9.5 7.8 9.5
Advertising............. 7.4 8.2 8.4 7.2 8.1 8.0 8.2
Other general &
administrative......... 15.0 11.2 17.1 15.1 14.1 15.0 15.3
Provision for
uncollectible accounts. 5.2 9.9 31.0 4.1 5.7 3.3 7.7
----- ----- ------ ----- ----- ----- -----
Total................... 97.5 95.1 126.7 96.1 100.1 97.7 104.4
Operating income (loss).. 2.5 4.9 (26.7) 3.9 (0.1) 2.3 (4.4)
Interest expense......... 3.1 3.3 3.8 2.0 3.3 2.1 3.6
----- ----- ------ ----- ----- ----- -----
Income (loss) before
income taxes............ (0.6) 1.6 (30.5) 1.9 (3.4) 0.2 (8.0)
Provision (benefit) for
income taxes............ (0.6) 0.4 (7.9) 0.2 (0.7) 0.0 (1.9)
----- ----- ------ ----- ----- ----- -----
Net income (loss)........ (0.0)% 1.2% (22.6)% 1.7% (2.7)% 0.2% (6.1)%
===== ===== ====== ===== ===== ===== =====
</TABLE>
Page 6 of 12
<PAGE>
RESULTS OF OPERATIONS
QUARTER ENDED JUNE 30, 1995 COMPARED TO
QUARTER ENDED JUNE 30, 1994
Total revenue increased by $468,000 from $7,989,000 to $8,457,000 during the
second quarter of 1995 compared to the same period in 1994. Revenues for CPA
Review Courses were down 20.5% from $44,000 in 1994 to $35,000 in 1995.
Revenues at the Resident Schools increased by 6.0% from $7,945,000 in 1994 to
$8,422,000 in 1995. During the second quarter of 1994, the Company closed its
Health Vocational School at Van Nuys, California and sold the assets of the
Travel Operations School. The Company closed its Health Vocational School in
Minneapolis, Minnesota in the fourth quarter of 1994. Revenue at the Travel
Operations School was $99,000 in the second quarter of 1994.
Payroll expenses increased 7.1% or $274,000, to $4,156,000 for the three
months ended June 30, 1995 compared to $3,882,000 for the same period in 1994.
Decreases in payroll expense from the closing of two schools and the sale of a
third school in 1994 were offset by increased salaries and staff levels at
existing schools. The number of employees increased approximately 5% as of June
30, 1995 compared to June 30, 1994. The Company has continued to upgrade the
quality of the School's staff and faculty.
Occupancy expense increased 1.2% or $14,000 to $1,224,000 in 1995 compared to
$1,210,000 in 1994 due to a one time expense at one location. Instructional
materials and supplies expense decreased 12.9% or $98,000 to $661,000 in 1995
compared to $759,000 in 1994.
Other general and administrative expenses increased 3.9% or $47,000 to
$1,266,000 in 1995 compared to $1,219,000 in 1994. Decreases in amortization
and professional fees were offset by increases in default management services
and scholarship expenses.
Provision for uncollectible accounts decreased 53.6% or $328,000 to $284,000
in 1995 from $612,000. The decrease reflects the increasing proportion of Title
IV Funds used by the Health Vocational Schools. Title IV Funds are generally
collected earlier that other receivables. This is reflected in a decrease in
student accounts and notes receivable, net of deferred student tuition
outstanding at June 30, 1995 as compared to the same period in 1994.
Interest expense decreased 38.6% or $110,000 to $175,000 in 1995 from $285,000
in 1994. This decrease is due to reduced bank and subordinated debt as
discussed in "Liquidity and Resources."
In 1995, a tax provision of $2,000 or 11.1% was recorded compared to a benefit
of $150,000 or 23.6% in 1994. This provision is a result of evaluating the
Company's needs as it related to provision for assessment of taxes. Future
evaluation of the provision for assessment of taxes may increase or decrease the
overall provision for income taxes.
SIX MONTHS ENDED JUNE 30, 1995 COMPARED TO
SIX MONTHS ENDED JUNE 30, 1994
Total revenue increased $1,544,000, from $16,802,000 to $18,346,000 for the
six months ended June 30, 1995 compared to the same period in 1994. Revenues
for CPA Review Courses decreased 14%, from $1,459,000 in 1994 to $1,249,000 in
1995. Revenues at the Resident Schools increased 14% from $15,053,000 in 1994
to $17,097,000 in 1995. Revenue at the Travel Operations School was $289,000 in
the first six months of 1994.
The consolidated profit in 1995, as in 1994, received a substantial benefit
from the CPA Review Courses. The 1995 results of the CPA Review Courses are
comparable to the 1993 results. However, due to an usually high number of
enrollments in the Spring 1994 Session, revenues were down 14% and profit down
60% in 1995 compared to 1994. Because the CPA examination is administered twice
each year, the operations of the CPA Review Courses are seasonal, impacting the
results of the Company during the quarters ending March 31 and September 30.
Page 7 of 12
<PAGE>
Payroll expenses increased 9.4% or $730,000, to $8,515,000 for the six months
ended June 30, 1995 compared to $7,785,000 for the same period in 1994.
Decreases in payroll expense from the closing of two schools and the sale of a
third school in 1994 were offset by increased salaries and staffing levels at
existing schools.
Occupancy expense decreased 5.1% or $142,000 to $2,616,000 in 1995 compared to
$2,758,000 in 1994. This decrease is primarily due to the closing or sale of
three schools in 1994.
Instructional materials and supplies expense increased 3.8% or $60,000 to
$1,655,000 in 1995 compared to $1,595,000 in 1994. Textbook expense has
increased as curriculum has been updated and improved. Also uniform expense
increased due to additional uniforms being provided to students.
Other general and administrative expenses increased 17.5% or $413,000 to
$2,775,000 in 1995 compared to $2,362,000 in 1994. A provision of $282,000 was
established in the first quarter of 1995 when the Company was informed that it's
Lauderdale Lakes, Florida school will be required to refund Title IV funds to
Government Agencies. Those funds have been previously disbursed to the School's
students.
Provision for uncollectible accounts decreased 21.7% or $207,000 to
$746,000 in 1995 from $953,000 in 1994. This decrease is primarily due to the
decrease in student accounts and notes receivable, net of deferred student
tuition outstanding at June 30, 1995 as compared to June 30, 1994.
Interest expense decreased 34.2% or $190,000, to $365,000 in 1995 from
$555,000 in 1994. This decrease is due to reduced bank debt and reduced
subordinated debenture as discussed in "Liquidity and Resources."
In 1995, a tax provision of $35,000 or 10% was recorded compared to a tax
benefit of $125,000 or 21.8% in 1994. This provision is a result of evaluating
the Company's needs as it relates to provision for assessment of taxes. Future
evaluation of the provision for assessment of taxes may increase or decrease the
overall provision for income taxes.
LIQUIDITY AND CAPITAL RESOURCES
In October 1992 the Company issued to CenCor, Inc. ("CenCor") a Junior
Secured Debenture ("the Debenture") in the principal amount of $5,422,307.
Interest on the Debenture accrues from October 30, 1992, no principal or
interest is to be paid until June 30, 1996. The entire balance of the Debenture
is due July 31, 1997. In addition to compounded quarterly interest, initially
at 1% over the effective rate charged by the Company's bank lender, CenCor is
entitled to an amount equal to 25% of the market value of the Company's
outstanding common stock in excess of $3,500,000 at July 31, 1997.
Effective November 15, 1994 CenCor exchanged $3,000,000 face value of the
Debenture for 300,000 shares of Cumulative Preferred Stock ("the Preferred
Stock"). The Preferred Stock, $.10 par value, has a per share liquidation
preference of $10.00. Cumulative quarterly dividends accrue at a rate equal to
73% of the then current interest rate on the Debenture. The dividends cumulate
until such time as the Debenture has been repaid in full which is currently
scheduled for July 31, 1997. At such time, the accumulated quarterly dividends
will be paid ratably over the ensuing 12 fiscal quarters. The Preferred Stock
has no mandatory redemption date but the Company may redeem the Preferred Stock,
in whole or in part, at any time, at liquidation value plus accrued cumulative
dividends. The exchange reduced long-term debt and increased the equity of the
Company by $3,000,000. By virtue of the reduced debt, interest will be reduced
in future periods which will improve income before taxes, but the Company will
incur non-deductible dividends on the preferred shares.
Page 8 of 12
<PAGE>
Additionally, the Company has a bank term loan. Total scheduled payments
during 1995 are approximately $3,150,000. The Company has made and anticipates
future loan payments will be made from cash flows from operating activities
generated in 1995 as the Company continues to collect its accounts receivable
more effectively and has eliminated negative cash flows relating to the three
schools closed or sold in 1994. The balance of this bank debt was $4,493,000 at
December 31, 1994 and $2,974,000 at June 30, 1995. A final payment of
$1,343,000 is due in January 1996.
Net cash provided by operating activities increased $2,051,000 to
$3,854,000 for the six months ended June 30, 1995 as compared to the same period
in 1994. Depreciation and amortization decreased $96,000 to $585,000 in 1995 as
compared to $681,000 in 1994. This decrease is a result of fully amortized or
depreciated assets. Provision for uncollectible accounts decreased as the
related receivables decreased. Deferred student tuition increased in 1995 by
$1,936,000 compared to an increase of $2,090,000 in 1994. Other changes in
assets and liabilities increased $231,000 in 1995. This increase was
attributable to increases in accrued expenses and other liabilities.
Capital expenditures in 1995 were $433,000 compared to $117,000 in 1994.
In 1995 leasehold improvements were made at two locations for additional
programs. In 1994 expenditures were primarily for additional classroom
equipment. Certain debt agreements limit annual capital expenditures to
$500,000. Cash received from the sale of equipment from closed and sold schools
was $106,000 in 1994. Financing activities consumed $1,518,000 in 1995 compared
to $579,000 in 1994. All financing activities were for payment of outstanding
debt.
The Company generally relies on the availability of various federal and
state student financial aid programs to provide funding for the students
attending the Company's Schools. The Company also relies on the availability of
lending institutions willing to participate in these programs and to grant loans
to these students. If the Company's Schools would be limited, suspended or
terminated from participation in the federal or state student financial aid
programs, or if lending institutions withdrew access to student loans, the
Company's continuing operations would be in doubt. Management does not
anticipate any material change in liquidity based on the Company's Schools'
participation in these programs.
INFLATION AND GENERAL ECONOMIC CONDITIONS
Inflation has not been a significant factor to the Company due to the
moderate levels of inflation over the past several years. The Company does not
foresee any detrimental effects from inflation as long as the inflation rate
remains at a normal level. If the rate of inflation increases above the current
level, the Company believes it will be able to pass along higher costs through
increased tuition rates.
(The remainder of this page was left intentionally blank.)
Page 9 of 12
<PAGE>
PART II OTHER INFORMATION
-------------------------
ITEM 1. CONTINGENCIES AND LITIGATION:
Southern Career Institute
On May 31, 1990, the Company, through a wholly-owned subsidiary, Concorde
Career Institute, Inc., a Florida corporation, acquired substantially all the
assets of Southern Career Institute, Inc., a proprietary, postsecondary
vocational home-study school specializing in paralegal education, for a total
investment of $5,383,000. The acquisition was accounted for as a purchase and
after the acquisition the school was operated as Southern Career Institute
(SCI).
In 1991, an accrediting commission failed to reaffirm accreditation of SCI
under the ownership of Concorde Career Institute, Inc. Also in 1991, SCI
received notice from the Department of Education (DOE) alleging that commencing
June 1, 1990 SCI was ineligible to participate in federal student financial
assistance programs. The DOE gave notice that it intends to require SCI to
repay all student financial assistance funds disbursed from June 1, 1990 to
November 7, 1990, the effective date upon which the DOE discontinued disbursing
student financial assistance funds. The amount being claimed by DOE is not
determinable, but the total of the amounts shown on six separate notices dated
January 13, 1994 is approximately $2.7 million. By letter dated February 24,
1994, counsel for SCI provided certain information to the collection agency for
DOE and offered to settle all claims of DOE for the $9,828 on deposit in the SCI
bank account. As of May 5, 1995, neither SCI nor its counsel has received a
response to the settlement offer.
Because management of SCI had determined in late 1991 to wind down SCI's
operations and discontinue its business, SCI entered into a transaction with an
entity created by the former owner of Southern Career Institute, Inc. as the
purchaser. The purchaser acquired SCI's tuition receivables and agreed to
"teach-out" the then enrolled students, but did not assume any obligations to
DOE. The purchaser also agreed to pay SCI a portion of amounts it realized on
collections of the tuition receivables in excess of its operating costs. As of
March 21, 1995, SCI had received payments totaling approximately $30,000
pursuant to that agreement.
In light of applicable corporate law which limits the liability of
stockholders and the manner in which SCI was operated by Concorde Career
Institute, Inc. as a subsidiary of the Company, it is the opinion of management
of the Company that the Company will not be liable for debts of SCI. Therefore,
if SCI is required to pay the DOE's claims it is the opinion of management it
will not have a material adverse impact on the Company's financial condition and
its results of operations.
Department of Education Matters
On May 1, 1995 the Company received notification from the DOE of a
clarification in refund calculations for students that have withdrawn or dropped
from school. Portions of the Department's refund regulation have been
challenged in court by other schools. The court has prohibited the DOE from
enforcing certain provisions of the refund regulation for those schools filing
suit. The DOE has stated that it will apply this relief from the date of the
injunction, November 28, 1994 to all institutions until the lawsuits have been
settled. The Company has established an escrow account for the portion of the
refund calculation in question. This pertains to refunds made prior to November
28, 1994. In the event that the DOE loses the lawsuit the Company may be
allowed to release the money in the escrow account for use in operations and may
benefit from a decrease in provision for bad debt expense.
Page 10 of 12
<PAGE>
Other
During July 1993, nine former students of the Jacksonville, Florida school
filed individual lawsuits against the school, alleging deceptive trade
practices, breach of contract, and fraud and misrepresentation. These suits
have since been dismissed, and these and additional former students have been
added to another complaint which was filed in the Circuit Court, Fourth Judicial
District, Duval County, Florida (Case 93-04005-CA). The latter case was served
on August 26, 1993, and has since been amended and now comprises 69 plaintiffs.
The Company filed various objections and motions, including Motions to Dismiss
and Motions to Strike. After hearings, the trial court dismissed the lawsuit,
but allowed the lawsuit to be amended on behalf of one plaintiff, and authorized
the remaining plaintiffs to file individual suits if they so desired. The order
of dismissal was appealed and reversed. During the appeal process, two
additional suits making essentially the same claims have been filed. The matter
is still in discovery. The Company believes these suits are without merit and
plans to defend against them vigorously. In August 1995 an amended complaint
was filed adding 25 more plantiffs to the lawsuit.
In July 1995, the Department of Education, issued its initial program
review report related to the program review it conducted at Concorde's
Jacksonville School, in July 1994. The Department conducted the review in part,
as a result of being made aware of the contents of the lawsuit described above.
One purpose of the review was to determine whether the School misrepresented the
nature of its educational programs, its financial charges, or the employability
of its graduates. The Department found that the School did make such
misrepresentations. Currently no fines have been assessed by the Department.
The Company believes the Department's methodology was significantly flawed, and
that this finding is totally without merit. However the Department is proposing
an informal fine for this finding. The Company is unable to estimate the amount
of the proposed fine and has not established any related reserves. The Company
plans to appeal and challenge this finding vigorously. If the Company fails in
its appeals and challenges, the Department may initiate formal administrative
action. Formal administrative action may include initiation of a formal fine
for an amount greater than the informal fine or action to limit, suspend, and/or
terminate the School's eligibility to participate in the Title IV programs.
The Company has litigation pending which arose in the ordinary course of
business. Litigation is subject to many uncertainties and the outcome of the
individual matters is not presently determinable. It is management's opinion
that this litigation will not result in liabilities that would have a material
adverse effect on the Company's financial position or results of operations.
ITEM 2. CHANGE IN SECURITIES -- NONE
ITEM 3. DEFAULTS UPON SENIOR SECURITIES -- NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS -- NONE
ITEM 5. OTHER MATERIALLY IMPORTANT EVENTS -- NONE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K -- NONE
(The remainder of this page was left intentionally blank.)
Page 11 of 12
<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.
CONCORDE CAREER COLLEGES, INC.
DATED: AUGUST 7, 1995 BY: /S/ JACK L. BROZMAN
-----------------------------------------
JACK L. BROZMAN, PRESIDENT
BY: /S/ GREGG GIMLIN
-----------------------------------------
GREGG GIMLIN, CHIEF FINANCIAL OFFICER
Page 12 of 12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
FORM 10-Q JUNE 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1995
<PERIOD-START> JAN-01-1995 APR-01-1995
<PERIOD-END> JUN-30-1995 JUN-30-1995
<CASH> 3,085 0
<SECURITIES> 0 0
<RECEIVABLES> 21,621 0
<ALLOWANCES> 2,128 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 23,996 0
<PP&E> 12,239 0
<DEPRECIATION> 8,567 0
<TOTAL-ASSETS> 31,199 0
<CURRENT-LIABILITIES> 22,425 0
<BONDS> 2,680 0
<COMMON> 698 0
0 0
30 0
<OTHER-SE> 4,663 0
<TOTAL-LIABILITY-AND-EQUITY> 31,199 0
<SALES> 18,346 8,457
<TOTAL-REVENUES> 18,346 8,457
<CGS> 0 0
<TOTAL-COSTS> 16,884 7,980
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 746 284
<INTEREST-EXPENSE> 365 175
<INCOME-PRETAX> 351 18
<INCOME-TAX> 35 2
<INCOME-CONTINUING> 316 16
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 316 16
<EPS-PRIMARY> .04 .00
<EPS-DILUTED> .04 .00
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
Form 10-Q March 31, 1995 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 2,984,000
<SECURITIES> 0
<RECEIVABLES> 23,397,000
<ALLOWANCES> 2,618,000
<INVENTORY> 0
<CURRENT-ASSETS> 24,914,000
<PP&E> 12,035,000
<DEPRECIATION> 8,364,000
<TOTAL-ASSETS> 32,621,000
<CURRENT-LIABILITIES> 23,767,000
<BONDS> 2,680,000
<COMMON> 698,000
0
30,000
<OTHER-SE> 4,648,000
<TOTAL-LIABILITY-AND-EQUITY> 32,621,000
<SALES> 9,889,000
<TOTAL-REVENUES> 9,889,000
<CGS> 0
<TOTAL-COSTS> 8,903,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 463,000
<INTEREST-EXPENSE> 190,000
<INCOME-PRETAX> 333,000
<INCOME-TAX> 33,000
<INCOME-CONTINUING> 300,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 300,000
<EPS-PRIMARY> .04
<EPS-DILUTED> 0
</TABLE>
