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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 March 31, 1996 Commission File No. 0-16992
-------------- -------
CONCORDE CAREER COLLEGES, INC.
- --------------------------------------------------------------------------------
(exact name of registrant as specified in its charter)
Delaware 43-1440321
- ------------------------------- -------------------------------------
(State of 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
- -------------------------------------------------------------------------------
(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 April 22, 1996 Concorde Career Colleges, Inc. had 6,958,376 shares of
Common Stock outstanding, with a market value of $7,397,000.
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CONCORDE CAREER COLLEGES, INC.
FORM 10-Q
THREE MONTHS ENDED MARCH 31, 1996
INDEX
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Notes to Condensed Consolidated Financial Statements
Note 1.......................................................... 1
Note 2.......................................................... 1
Condensed Consolidated Balance Sheets................................. 2,3
Condensed Consolidated Statements of Operations....................... 4
Condensed Consolidated Statements of Cash Flows....................... 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results Operations....................................... 6
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.............................................. 10
Exhibits and Reports on Form 8-K........................................ 11
Signatures.............................................................. 12
</TABLE>
v
<PAGE>
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
--------------------
CONCORDE CAREER COLLEGES, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
Note 1:
- ------
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 1995 that was filed by the Company on March 29, 1996.
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 preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Note 2:
- ------
Earnings per weighted average common and common equivalent share is shown
net of preferred stock dividends (not declared) of $59,000 in 1996 and $62,000
in 1995. Cumulative dividends in arrears on the Preferred Stock was $338,000 as
of March 31, 1996.
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Page 1
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CONCORDE CAREER COLLEGES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, 1996 AND DECEMBER 31, 1995
ASSETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
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<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents.......................... $ 3,565,000 $ 3,295,000
Net receivables --
Accounts receivable............................. 16,325,000 17,055,000
Notes receivable for student tuition............ 3,635,000 3,188,000
Allowance for uncollectible accounts............ (1,402,000) (1,394,000)
----------- -----------
18,558,000 18,849,000
Deferred income taxes.............................. 279,000 170,000
Supplies and prepaid expenses...................... 858,000 914,000
----------- -----------
Total current assets 23,260,000 23,228,000
PROPERTY and EQUIPMENT, net:......................... 3,086,000 3,220,000
COST IN EXCESS OF NET TANGIBLE ASSETS OF BUSINESSES
ACQUIRED, less accumulated amortization of
$2,655,000 at March 31, 1996 and $2,591,000
at December 31, 1995, respectively................. 1,783,000 1,847,000
OTHER ASSETS:
Long-term notes receivable for student tuition
less allowance for uncollectible accounts of
$833,000 at March 31, 1996 and $709,000 at
December 31, 1995, respectively................... 2,891,000 2,495,000
Other.............................................. 16,000 30,000
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Total other assets.............................. 2,907,000 2,525,000
----------- -----------
$31,036,000 $30,820,000
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated statements.
Page 2
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CONCORDE CAREER COLLEGES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, 1996 AND DECEMBER 31, 1995
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
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<S> <C> <C>
CURRENT LIABILITIES:
Deferred student tuition........................... $15,279,000 $15,248,000
Current debt maturities............................ 950,000 215,000
Accrued salaries and wages......................... 1,016,000 951,000
Accrued interest................................... 5,000 12,000
Current deferred income taxes...................... 399,000 471,000
Other accrued liabilities and accounts payable..... 2,489,000 2,413,000
----------- -----------
Total current liabilities...................... 20,138,000 19,310,000
LONG TERM DEBT...................................... 1,343,000
OTHER LONG-TERM LIABILITIES......................... 248,000 80,000
DEFERRED INCOME TAXES............................... 690,000 690,000
SUBORDINATED DEBT DUE TO RELATED PARTY.............. 2,737,000 2,723,000
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, 6,985,176 shares issued and 6,958,376
shares outstanding................................. 698,000 698,000
Capital in excess of par........................... 8,128,000 8,128,000
Accumulated deficit................................ (1,572,000) (2,121,000)
Less-treasury stock, 26,800 shares, at cost........ (61,000) (61,000)
----------- -----------
Total stockholders' equity........................ 7,223,000 6,674,000
----------- -----------
$31,036,000 $30,820,000
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated statements.
Page 3
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CONCORDE CAREER COLLEGES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
------------------------------
1996 1995
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<S> <C> <C>
STUDENT TUITION AND
OTHER REVENUE:...................... $11,032,000 $9,889,000
----------- ----------
OPERATING EXPENSES:
Payroll costs....................... 4,924,000 4,359,000
Occupancy........................... 1,349,000 1,391,000
Instructional materials and supplies. 1,071,000 998,000
Advertising......................... 711,000 647,000
Other general and
administrative..................... 1,454,000 1,508,000
Provision for
uncollectible accounts............. 522,000 463,000
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Total operating expenses......... 10,031,000 9,366,000
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OPERATING INCOME....................... 1,001,000 523,000
INTEREST EXPENSE....................... 270,000 190,000
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INCOME BEFORE INCOME TAXES............. 731,000 333,000
PROVISION FOR INCOME TAXES............. 183,000 33,000
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NET INCOME............................. $ 548,000 $ 300,000
=========== ==========
WEIGHTED AVERAGE COMMON AND
COMMON SHARE EQUIVALENTS
OUTSTANDING......................... 7,645,000 7,388,000
=========== ==========
EARNINGS PER WEIGHTED
AVERAGE
COMMON AND COMMON SHARE
EQUIVALENTS OUTSTANDING
(Note 2)........................... $ 0.06 $ 0.03
=========== ==========
</TABLE>
See accompanying notes to condensed consolidated statements.
Page 4
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CONCORDE CAREER COLLEGES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
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<S> <C> <C>
CASH FLOWS --OPERATING ACTIVITIES:
Net income......................................... $ 548,000 $ 300,000
Adjustments to reconcile net income to net
cash provided by operating activities -
Depreciation and amortization.................... 271,000 305,000
Provision for losses on accounts receivable...... 522,000 463,000
Change in assets and liabilities, net -
Change in receivables......................... (626,000) (1,084,000)
Change in deferred student tuition............ 31,000 1,723,000
Change in deferred income taxes............... (181,000) (150,000)
Change in accrued income taxes............... 32,000
Other changes in assets and liabilities, net.. 446,000 1,212,000
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Total adjustments......................... 463,000 2,501,000
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Net..................................... 1,011,000 2,801,000
CASH FLOWS --INVESTING ACTIVITIES:
Capital expenditures............................... (60,000) (229,000)
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Net....................................... (60,000) (229,000)
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CASH FLOWS --FINANCING ACTIVITIES:
Principal payments on long-term debt............... (681,000) (770,000)
---------- -----------
Net....................................... (681,000) (770,000)
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Net....................................... 270,000 1,802,000
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD............................. 3,295,000 1,182,000
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CASH AND CASH EQUIVALENTS
AT END OF PERIOD.................................. $3,565,000 $ 2,984,000
========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest......................................... $ 22,000 $ 104,000
Income taxes..................................... 364,000
Cash received during the period for:
Interest......................................... 70,000 84,000
Income tax refunds...............................
</TABLE>
See accompanying notes to condensed consolidated statements.
Page 5
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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 (together the Resident
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 the Resident Schools and the CPA Review Courses for the
periods indicated. Amounts are in thousands.
<TABLE>
<CAPTION>
Three Months
Ended March 31,
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<S> <C> <C>
1996 1995
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Resident Schools... $ 9,850 $8,675
CPA Review Courses.. 1,182 1,214
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Total.......... $11,032 $9,889
======= ======
</TABLE>
The following table presents the relative percentage of revenues derived
the Resident Schools and the CPA Review Courses and certain consolidated
statement of earning items as a percentage of total revenue for periods
indicated.
<TABLE>
<CAPTION>
Three Months
Ended March 31,
----------------
<S> <C> <C>
1996 1995
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Allied Health & Computer Schools....... 89.3% 87.7%
CPA Review Courses...................... 10.7 12.3
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Total................................... 100.0 100.0
===== =====
Operating expenses:
Payroll............................... 44.6 44.1
Occupancy............................. 12.2 14.1
Materials and supplies................ 9.7 10.1
Advertising........................... 6.5 6.5
Other general & administrative........ 13.2 15.2
Provision for uncollectible accounts.. 4.7 4.7
----- -----
Total................................. 90.9 94.7
Operating income........................ 9.1 5.3
Interest expense........................ 2.4 1.9
----- -----
Income before income taxes.............. 6.7 3.4
Provision for income taxes.............. 1.7 0.4
----- -----
Net income.............................. 5.0% 3.0%
===== =====
</TABLE>
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Page 6
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RESULTS OF OPERATIONS
QUARTER ENDED MARCH 31, 1996 COMPARED TO
QUARTER ENDED MARCH 31, 1995
Net income increased $248,000 or 82.7% to $548,000 for the three months
ended March 31, 1996 compared to net income of $300,000 in 1995. The 1995 net
income was adversely affected by a $282,000 accrual discussed below. Total
revenue increased 11.6%, or $1,143,000 to $11,032,000 for the three months ended
March 31, 1996 compared to $9,889,000 in 1995. The increase is a result of
enrollment increases and a modest price increase in the second quarter of 1995.
Revenue for the CPA Review Course decreased 2.6% or $32,000 to $1,182,000
from $1,214,000 in 1995. This continues to downward trend from 1994. Revenue for
the three months ended March 31, 1995 was down 17% from the same period in 1994.
Operating income for the quarter was $111,000 in 1996 compared to $276,000 in
1995. The declining revenue is attributed to aggressive competition and fewer
CPA exam candidates. Because the CPA exam 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.
Total operating expenses increased $665,000 or 7.1% to $10,031,000 for the
three months ended March 31, 1996 compared to $9,366,000 in 1995.
Payroll increased $565,000 or 13.0% to $4,924,000 in 1996 compared to
$4,359,000 in 1995. The Company has added additional staff as enrollment has
increased. In addition, the Company continues to upgrade the quality of staff
and faculty.
Occupancy decreased $42,000 or 3.0% to $1,349,000 in 1996 compared to
$1,391,000 in 1995. This decrease was primarily due to a one time $90,000 credit
for insurance expense in 1996.
Instructional materials and supplies expense increased 7.3% or $73,000 to
$1,071,000 in 1996 compared to $998,000 in 1995. Textbook expense has increased
reflecting the increase in enrollments.
Advertising increased 9.9% or $64,000 to $711,000 in 1996 compared to
$647,000 in 1995.
Other general and administrative expenses decreased 3.6% or $54,000 to
$1,454,000 in 1996 from $1,508,000 in 1995. The decrease was partially due to a
provision of $282,000 established in the first quarter of 1995 when the Company
was informed that its Lauderdale Lakes, Florida School would be required to
refund Title IV funds to government agencies. This decrease was offset by
increases in outside services, printing, and scholarship expenses.
Provision for uncollectible accounts increased 12.7% or $59,000 to $522,000
in 1996 compared to $463,000 in 1995. Beginning in the fourth quarter of 1995,
the Company instituted a plan to reduce reliance on Title IV funding, and began
financing a larger portion of student tuition with promissory notes. Promissory
notes typically require a larger provision for uncollectible accounts.
Interest expense increased 42.1% or $80,000 to $270,000 in 1996 from
$190,000 in 1995. Decreases due to reduced bank and subordinated debt, were
offset by a $158,000 charge to interest for an additional payment due CenCor in
1997. See discussion in "Liquidity and Resources."
In 1996, a tax provision of $183,000 or 25.0% was recorded compared to
$33,000 or 10.0% in 1995. This provision is a result of evaluating the Company's
needs as it related to provision for assessment of taxes. During future
evaluation the provision for assessment of taxes may increase or decrease the
overall provision for income taxes.
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Weighted average common and common share equivalents outstanding increased
to 7,645,000 from 7,388,000. This increase is due to the dilutive effect of the
Company's incentive stock option plan. Earnings per weighted average common and
common share equivalent (EPS) was $0.06 and $0.03 at March 31, 1996 and 1995,
respectively. EPS is shown net of preferred stock dividends (not declared) of
$59,000 in 1996 and $62,000 in 1995. Cumulative dividends in arrears on the
Preferred Stock was $338,000 as of March 31, 1996.
LIQUIDITY AND CAPITAL RESOURCES
Effective October 30, 1992, the Company and CenCor, Inc. ("CenCor") entered
into a Restructuring, Security and Guaranty Agreement pursuant to which the
Company was released from its obligations relating to assumed subordinated
indebtedness issued by CenCor. As consideration for the release, the Company
issued to CenCor a Junior Secured Debenture (the "Debenture") in the principal
amount of $5,422,307, representing the full principal amount of the assumed
subordinated debt and accrued interest through October 30, 1992. Although
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, at July 31,
1997 CenCor is entitled to an amount equal to 25% of the amount by which the
"market capitalization" of the Company exceeds $3,500,000. Market capitalization
is the total common shares of the Company multiplied by the highest average
share price (high-bid) for any period of 30 consecutive trading days between
January 1, 1997 and June 30, 1997. At March 31, 1996 this payment was accrued
and would have been valued at $158,000. As the Company's average stock price
increases the payment due increases. (See the table below.) Management will
continue to accrue an estimate of the payment based on the average stock price.
Other terms of the Agreement are substantially equivalent to the terms of the
Company's secured bank debt agreement.
The table below reflects the payment due CenCor at July 31, 1997 if the
average high-bid stock price reaches the stated levels:
<TABLE>
<CAPTION>
Stock Price Payment Due
----------- -----------
<S> <C>
$ .50 $ -0-
.75 429,000
1.00 864,000
1.50 1,733,000
2.00 2,603,000
</TABLE>
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.
Additionally, the Company has a bank term loan. The Company has made and
anticipates future loan payments will be made from cash flows from operating
activities. The balance of this bank debt was $1,343,000 at December 31, 1995
and $671,000 at March 31, 1996. The Company anticipates paying the remaining
balance in 1996.
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Net cash provided by operating activities was $1,011,000 for the three
months ended March 31, 1996 a decrease of $1,790,000 as compared to the same
period in 1995. Receivables increased $626,000 in 1996 compared to an increase
of $1,084,000 in 1995. Deferred student tuition increased $31,000 compared to an
increase of $1,723,000 in 1995. Other changes in assets and liabilities
increased $446,000 in 1996 compared to an increase of $1,212,000 in 1995. The
decrease of $766,000 was attributable to decreased accrued expenses and other
liabilities.
Capital expenditures in 1996 were $60,000 compared to $229,000 in 1995. In
1996 and 1995 capital expenditures were primarily for additional classroom
equipment. Certain debt agreements limit annual capital expenditures to
$500,000. Principal payments on long term debt were $681,000 in 1996 compared to
$770,000 in 1995.
During the fourth quarter of 1995, the Company increased the number of
institutional loans provided by the Company's Schools for their students.
Institutional loans are loans made by the School to the School's students. As a
result the ratio of current to long term net accounts and notes receivable
decreased to 86.5% at March 31, 1996 compared to 88.3% at December 31, 1995.
This has not had a material impact on the Company's cash flow. However,
increased reliance on institutional loans may have an impact on future liquidity
and may increase bad debt expense. Net cash flow for the three months ending
March 31, 1996 decreased $1,532,000 compared to the same period in 1995.
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.
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Page 9
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PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
-----------------
Department of Education Matters
During 1994 the Department of Education ("DOE") performed a program review
at the Company's Jacksonville, Florida School. As a result of the program
review, the DOE reported a preliminary finding of differences between the
academic program of study as listed in the School's catalog and the programs of
study actually provided to students. No specific liability has been proposed as
a result of this preliminary finding, but the DOE's report stated that the
School would be liable for certain "second and subsequent payments" made to
students who did not complete the program of study. Management believes that the
preliminary finding is in error. The company vigorously contested this
preliminary finding and submitted information supporting its position. The
program reviewer is still considering this issue and has not yet issued a final
report. This finding (if made) also will be applicable to the Company's other
Florida Schools.
The DOE regularly conducts program reviews of educational institutions
participating in Title IV programs. The Company is disputing a program review
finding concerning "pro rata" refunds at one School. In February 1996, an
Administrative Law Judge ruled against the Company, and the issue is currently
on appeal to the Secretary of Education.
In 1994, the DOE established a policy of recertifying all Schools
participating in Title IV programs every five years. Notification has not yet
been received for three Schools, full certification has been received for seven
Schools, and three Schools received provisional certification. Provisional
certification limits the School's ability to add programs or change the level of
educational award and requires that the School forfeit its right to due process
under DOE guidelines.
The DOE is authorized to limit, suspend, or terminate the eligibility of a
school to participate in Federal Title IV student loan programs if the rate of
students who default on their loans during a defined period is equal to or
exceeds 25% during each of the three most recent fiscal years. The 1993 and 1992
rates have been published for the Company's Schools, and seven of the Schools
have rates that equal or exceed 25% for these years. The 1994 rates are expected
to be published later in 1996. The Company is pursuing administrative appeals
seeking to reduce these rates, and is also challenging the DOE's authority to
enforce the 1992 rates due to invalid regulations. As a result of litigation,
the Company's 1991 rates have been suspended.
While the outcome of matters pertaining to the DOE and litigation cannot be
determined with certainty, management believes that the final outcome will not
have a material impact on its results of operations or its financial position.
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 intended 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
Page 10
<PAGE>
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 April 26, 1996, 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
April 26, 1996, 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.
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 was amended to comprise 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 May 1995, plaintiffs requested permission to
amend the complaint by the 69 plaintiffs to convert the case to a class action,
which class would include the plaintiffs in all three cases. The Company opposed
the motion, and the proposed class action complaint was dismissed in August
1995, with permission to amend again. The amended class action complaint was
filed in August 1995, and the Company again moved to dismiss the complaint, and
to strike portions from the complaint. The motion to dismiss was denied November
7, 1995; the motion to strike was granted in part and denied in part. The
Company has answered the complaint, and filed numerous affirmative defenses.
Discovery restricted to class certification issues is currently ongoing, with a
hearing to determine whether or not the class should be certified anticipated in
the late fall, 1996. In the meantime, all activity and progress in the other
suits have been stayed. The Company will strongly oppose class certification.
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 and the litigation above 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
---------------------------------------
Page 11
<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: MAY 1, 1996
BY: /s/ JACK L. BROZMAN
------------------------------------
JACK L. BROZMAN, PRESIDENT
BY: /S/ GREGG GIMLIN
------------------------------------
GREGG GIMLIN, CHIEF FINANCIAL OFFICER
Page 12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
Form 10-Q March 31, 1996 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-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 3,565,000
<SECURITIES> 0
<RECEIVABLES> 19,960,000
<ALLOWANCES> 1,402,000
<INVENTORY> 0
<CURRENT-ASSETS> 23,260,000
<PP&E> 12,425,000
<DEPRECIATION> 9,339,000
<TOTAL-ASSETS> 31,036,000
<CURRENT-LIABILITIES> 20,138,000
<BONDS> 2,737,000
<COMMON> 698,000
0
30,000
<OTHER-SE> 6,495,000
<TOTAL-LIABILITY-AND-EQUITY> 31,036,000
<SALES> 11,032,000
<TOTAL-REVENUES> 11,032,000
<CGS> 0
<TOTAL-COSTS> 9,509,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 522,000
<INTEREST-EXPENSE> 270,000
<INCOME-PRETAX> 731,000
<INCOME-TAX> 183,000
<INCOME-CONTINUING> 548,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 548,000
<EPS-PRIMARY> .07
<EPS-DILUTED> .06
</TABLE>
