<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 September 30, 1997 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 October 28, 1997 Concorde Career Colleges, Inc. had 7,100,676 shares of
Common Stock outstanding.
================================================================================
<PAGE>
CONCORDE CAREER COLLEGES, INC.
Form 10-Q
Nine Months Ended September 30, 1997
INDEX
PART I - - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
<S> <C> <C>
Item 1. Financial Statements............................................. 1
Notes To Condensed Consolidated Financial Statements............. 1
Note 1:.................................................... 1
Note 2:.................................................... 2
Note 3:.................................................... 3
Note 4:.................................................... 3
Condensed Consolidated Balance Sheets............................ 4
Condensed Consolidated Statements Of Operations.................. 6
Condensed Consolidated Statements Of Cash Flows.................. 8
Consolidated Statement Of Changes In Stockholders' Equity........ 9
Item 2. Management's Discussion And Analysis Of Financial Condition And
Results Of Operations.......................................... 10
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings................................................ 18
Item 2. Change In Securities -- None..................................... 18
Item 3. Defaults Upon Senior Securities -- None.......................... 18
Item 4. Submission Of Matters To A Vote Of Security Holders -- None...... 18
Item 5. Other Information -- None........................................ 18
Item 6. Exhibits......................................................... 18
Signatures................................................................ 19
</TABLE>
<PAGE>
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
--------------------
CONCORDE CAREER COLLEGES, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
Overview
The discussion set forth below, as well as other portions of this Form
10-Q, may contain forward-looking comments. Such comments are based upon
information currently available to management and management's perception
thereof as of the date of this Form 10-Q. Actual results of the Company's
operations could materially differ from those forward-looking comments. The
differences could be caused by a number of factors or combination of factors
including, but not limited to, potential adverse effects of regulations;
impairment of federal funding; adverse legislative action; student loan default
rates; changes in federal or state authorization or accreditation; changes in
market needs and technology; changes in competition and the effects of such
changes; changes in the economic, political or regulatory environments;
litigation involving the Company; changes in the availability of a stable labor
force; or changes in management strategies. Readers should take these factors
into account in evaluating any such forward-looking comments.
Restatement of Prior Period
The financial statements for the third and fourth quarters of 1996 and year
ended December 31, 1996 have been restated to defer and recognize income from a
non-compete agreement associated with the August 1996 sale of assets of
Person/Wolinsky Associates, Inc. over the ten-year term of the non-compete
agreement. The effect of this restatement was to reduce net income and earnings
per share in the third quarter and year ended December 31, 1996 by $257,000 and
$243,000 and $.04 and $.03, respectively and to increase net income and earnings
per share in the fourth quarter by $14,000 and $.01, respectively. During the
third quarter of 1996, the Company originally reported in income, as a one-time
benefit under the caption Gain on Sales of Assets, $407,000 representing the
pre-tax net present value of the non-compete agreement. The Company accounted
for the agreement in accordance with what it believed was its substance - ten
year seller financing. In the third quarter of 1997, the United States
Securities and Exchange Commission ("the SEC") notified the Company that it
would require the legal form of the agreement to prevail and that income from
the non-compete agreement should be deferred and recorded in income over the
term of the agreement. The Company accepted the SEC's determination. Payments
under the agreement are due in ten equal annual installments of $75,000 each,
commencing on December 15, 1996. The 1996 payment was received as scheduled.
Accretion of the present value amount to the cash amount due under the agreement
is being made on the interest method. The effect of this restatement is to
reduce net income in the three- and nine-month periods ended September 30, 1996
by $257,000, or $0.04 per share.
Restatement of Earnings Per Share
During the third quarter of 1997, the Company restated its earnings per share
calculations for the three months ended March 31, 1997 and for the six months
ended June 30, 1997 to add to income available for common shareholders,
$1,210,000 which represents the excess of the carrying value of the preferred
stock over the amount of cash paid to the holder of the preferred stock retired
on February 25, 1997 over the amount of cash paid to the holder of the preferred
stock (See the Company's annual report on Form 10K/A for a full description of
the refinancing). This restatement increased primary earnings per share and
fully diluted earnings per share by $.13 and $.13, respectively, for the three
months ended March 31, 1997 and $.13 and $.12, respectively, for the six months
ended June 30, 1997 from the previously reported amounts.
Accounting Change
As described in Note 2, during the third quarter of 1997, the Company changed
its method of recognizing revenue.
NOTES TO FINANCIAL STATEMENTS
Note 1:
- -------
The condensed interim consolidated financial statements included herein
have been prepared by the Company, without audit, pursuant to the rules and
regulations of the SEC. 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 are read in conjunction with the financial
statements and the notes thereto included in the Company's 1996 Report on Form
10-K that was filed by the Company with the Commission on March 31, 1997 and the
amended Form 10-K/A referred to above.
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 education business, the
change in accounting method, and the adjustment to tax contingency reserves
(Note 3), 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.
<PAGE>
The Company has litigation pending which arose in the normal course of
business. See further discussion in Part I item 2 "Contingencies" and Part II
item 1 "Legal Proceedings".
Note 2:
- ------
During the third quarter of 1997 the Company changed its method of
recognizing tuition revenue. Under the new method, tuition revenue is
recognized ratably over the period of the program. The Company previously used
a method in which a portion of tuition revenue was recognized in the month a
student began attending classes to offset the costs incurred in obtaining the
new student. The remaining tuition income was deferred and recognized over the
term of the program.
The Company believes the new method of revenue recognition is more
representative of current industry practice and is a preferable accounting
method.
The effect of both the cumulative change for prior years and the change for
the nine months ended September 30, 1997 was to decrease net income after
cumulative change in accounting principle by $903,000 ($0.09 per share). The
cumulative effect on income of the change on prior years (after reduction for
income taxes of $421,000) was a reduction of $659,000. The effect of the change
on the nine months ended September 30, 1997 was to decrease income before
cumulative effect of a change in accounting principle by $244,000 ($0.02 per
share). The effect of the change on the three months ended September 30, 1997
was to decrease net income by $250,000 ($0.02 per share).
The effects of the change in the accounting for tuition revenue, the
restatement of the non-compete agreement and the restatement of the earnings per
share calculation for the preferred stock redemption as described above on the
first and second quarters of 1997 are as follows:
<TABLE>
<CAPTION>
Three Months Ended
------------------
March 31, 1997 June 30, 1997
-------------- -------------
<S> <C> <C>
Net income (loss) as originally reported $505,000 $(109,000)
Effect of restatement of non-compete agreement 11,000 12,000
Effect of change in revenue recognition method (36,000) 42,000
-------- ---------
Income before cumulative effect of a change in
accounting principle 480,000 (55,000)
Cumulative effect on prior years (to December
31, 1996) of change in revenue recognition
method (659,000)
-------- ---------
Net loss as restated $(179,000) $ (55,000)
========= =========
</TABLE>
<TABLE>
<CAPTION>
Fully Fully
Primary Diluted Primary Diluted
------- ------- ------- -------
<S> <C> <C> <C> <C>
Per share amounts:
Net income (loss) as originally reported $.06 $.05 $(.02) $(.02)
Effect of restatement of non-compete agreement .00 .00 .00 .00
Effect of change in revenue recognition
method .00 .00 .01 .01
---- ---- ----- -----
Income before cumulative effect of a change
in accounting principle .06 .05 (.01) (.01)
Cumulative effect on prior years (to
December 31, 1996) of change in revenue
recognition method (.08) (.07)
Effect of preferred stock redemption .13 .13 .00 .00
---- ---- ----- -----
Net income (loss) as restated $.11 $.11 $(.01) $(.01)
==== ==== ===== =====
</TABLE>
2
<PAGE>
Note 3:
- -------
During the third quarter of 1997, the Company and the Internal Revenue
Service signed agreements relating to outstanding tax issues for tax years 1988
through 1992. During the course of this examination, which was initiated in
1992, the Company recorded loss contingencies for additional interest and
federal and state income taxes. As a result of the final agreement, the Company
released book tax contingencies during 1997 totaling $650,000, $550,000 of which
was recorded in the third quarter.
Note 4:
- -------
Primary earnings per share is computed by deducting accrued and imputed
preferred dividends from net income, adding the excess of the carrying value
of the preferred stock retired over the amount of cash paid, and adding
convertible subordinated debt interest net of income taxes (if dilutive) in
order to determine net income attributable to common shareholders. This amount
is then divided by weighted average number of common shares outstanding and
common stock equivalents (if dilutive) arising from stock options and for
warrants assumed converted to common stock.
Fully diluted earnings per share is computed by deducting accrued preferred
dividends from net income, adding the excess of the carrying value of the
preferred stock retired over the amount of cash paid, and adding convertible
subordinated debt interest net of income taxes (if dilutive). This amount is
then divided by the weighted average number of common shares outstanding during
the year after giving effect for common stock equivalents (if dilutive) arising
from stock options and for warrants and preferred stock assumed converted to
common stock.
(The remainder of this page left intentionally blank.)
3
<PAGE>
CONCORDE CAREER COLLEGES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
(unaudited)
ASSETS
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996 (1)
------------- ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents......................... $ 4,850,000 $ 4,261,000
Net receivables
Accounts receivable.......................... 17,088,000 16,756,000
Notes receivable............................. 3,218,000 4,392,000
Allowance for uncollectible accounts......... (1,424,000) (1,645,000)
----------- -----------
18,882,000 19,503,000
Deferred income taxes............................. 1,273,000 916,000
Supplies and prepaid expenses..................... 925,000 732,000
----------- -----------
Total current assets.................... 25,930,000 25,412,000
FIXED ASSETS, NET:..................................... 2,854,000 2,539,000
INTANGIBLE ASSETS, NET
less accumulated amortization of $1,096,000 at
September 30, 1997 and $1,777,000 at December 31,
1996, respectively................................ 638,000 768,000
OTHER ASSETS:
Long-term notes receivable........................ 3,038,000 3,001,000
Allowance for uncollectible notes................. (844,000) (1,243,000)
Deferred income taxes............................. 453,000
Other............................................. 414,000 390,000
---------- -----------
Total other assets........................... 3,061,000 2,148,000
---------- -----------
$32,483,000 $30,867,000
=========== ===========
(1) See Item 1, restatement of prior period.
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
CONCORDE CAREER COLLEGES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996 (1)
------------ -----------
<S> <C> <C>
CURRENT LIABILITIES:
Deferred student tuition.................................................. $18,235,000 $16,572,000
Current debt due related party............................................ 400,000
Accrued salaries and wages................................................ 556,000 862,000
Current income taxes payable.............................................. 59,000 439,000
Accounts payable and other accrued liabilities............................ 3,027,000 2,731,000
----------- -----------
Total current liabilities............................................ 21,877,000 21,004,000
OTHER LONG-TERM LIABILITIES................................................. 366,000 385,000
DEFERRED INCOME TAXES....................................................... 287,000
SUBORDINATED DEBT DUE TO RELATED PARTY, CENCOR.............................. 2,419,000
SUBORDINATED DEBT DUE TO RELATED PARTY, CAHILL-WARNOCK...................... 3,500,000
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred Stock, ($.10 par value, 600,000 shares authorized)
Class A, 260,385 shares issued and outstanding......................... 26,000
Class B, 55,147 shares issued and outstanding.......................... 6,000
Common stock, $.10 par value, 19,400,000 shares authorized, 7,122,476
shares issued and 7,095,676 shares outstanding at September 30, 1997,
6,993,376 shares issued and 6,966,576 shares outstanding at
December 31, 1996...................................................... 712,000 699,000
Capital in excess of par.................................................. 7,967,000 7,736,000
Accumulated deficit....................................................... (1,884,000) (1,628,000)
Less-treasury stock, 26,800 shares, at cost............................... (61,000) (61,000)
----------- -----------
Total stockholders' equity............................................. 6,740,000 6,772,000
----------- -----------
$32,483,000 $30,867,000
=========== ===========
</TABLE>
(1) See Item 1, restatement of prior period.
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
AND THE THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(unaudited)
<TABLE>
<CAPTION>
Nine Months Three Months
Ended September 30, Ended September 30,
------------------------- ----------------------
1997 1996 (1) 1997 1996 (1)
----------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
STUDENT TUITION AND
OTHER REVENUE......................... $27,926,000 $30,620,000 $9,319,000 $10,318,000
----------- ----------- ---------- ----------
OPERATING EXPENSES:
Payroll costs......................... 13,590,000 13,789,000 4,557,000 4,375,000
Occupancy............................. 3,600,000 3,627,000 1,173,000 1,095,000
Instructional materials and supplies.. 2,197,000 2,500,000 846,000 638,000
Advertising........................... 2,462,000 2,208,000 914,000 783,000
Other general and administrative...... 4,494,000 4,399,000 1,544,000 1,670,000
Provision for uncollectible accounts.. 1,139,000 2,225,000 304,000 1,136,000
----------- ----------- ---------- ----------
Total operating expenses.......... 27,482,000 28,748,000 9,338,000 9,697,000
----------- ----------- ---------- ----------
OPERATING INCOME (LOSS)................. 444,000 1,872,000 (19,000) 621,000
INTEREST EXPENSE........................ 230 000 743,000 48,000 (344,000)
----------- ----------- ---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES
AND GAIN (LOSS) ON SALE OF ASSETS..... 214,000 1,129,000 (67,000) 965,000
GAIN (LOSS) ON SALE OF ASSETS........... 313,000 (223,000) (223,000)
----------- ----------- ---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES....... 527,000 906,000 (67,000) 742,000
PROVISION (BENEFIT) FOR INCOME TAXES.... (415,000) 178,000 (584,000) 137,000
----------- ----------- ---------- ----------
INCOME BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE........ 942,000 728,000 517,000 605,000
----------- ----------- ---------- ----------
CUMULATIVE EFFECT ON PRIOR YEARS (TO
DECEMBER 31, 1996) OF CHANGE IN
REVENUE RECOGNITION METHOD (Note 2)... (659,000)
----------- ----------- ---------- ----------
Net Income $ 283,000 $ 728,000 $ 517,000 $ 605,000
=========== =========== ========== ==========
(Continued)
</TABLE>
(1) See Item 1, restatement of prior period.
6
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
AND THE THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(unaudited)
<TABLE>
<CAPTION>
Nine Months Three Months
Ended September 30, Ended September 30,
----------------------- -----------------------
1997 1996 (1) 1997 1996 (1)
---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
WEIGHTED AVERAGE COMMON AND COMMON
SHARE EQUIVALENTS OUTSTANDING
Primary............................ 9,952,000 7,703,000 10,622,000 7,713,000
========== ========= ========== =========
Fully Diluted...................... 10,979,000 7,712,000 11,791,000 7,715,000
AMOUNTS PER COMMON SHARE: PRIMARY ========== ========= ========== =========
INCOME BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE....... $ .22 $ .07 $ .05 $ .07
CUMULATIVE EFFECT ON PRIOR YEARS (TO
DECEMBER 31, 1996) OF CHANGE IN
REVENUE RECOGNITION METHOD (Note 2).. (.07)
---------- --------- ---------- ---------
Net Income......................... $ .15 $ .07 $ .05 $ .07
========== ========= ========== =========
AMOUNTS PER COMMON SHARE: FULLY DILUTED
INCOME BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE $ .21 $ .07 $ .05 $ .07
CUMULATIVE EFFECT ON PRIOR YEARS
(TO DECEMBER 31, 1996) OF CHANGE
IN REVENUE RECOGNITION METHOD (Note 2) (.07)
---------- --------- ---------- ---------
$ .14 $ .07 $ .05 $ .07
========== ========= ========== =========
PRO FORMA AMOUNTS ASSUMING THE NEW
METHOD OF RECOGNIZING REVENUE IS
APPLIED RETROACTIVELY (Note 2)
Net Income......................... $ 942,000 $ 561,000 $ 517,000 $ 481,000
Net Income Per Common Share:
Primary............................ $ .21 $ .05 $ .05 $ .06
Fully Diluted...................... $ .20 $ .05 $ .05 $ .06
</TABLE>
(1) See Item 1, restatement of prior period.
See accompanying notes to condensed consolidated financial statements.
7
<PAGE>
CONCORDE CAREER COLLEGES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(unaudited)
<TABLE>
<CAPTION>
CASH FLOWS --OPERATING ACTIVITIES: 1997 1996
---- ----
<S> <C> <C>
Net income............................................ $ 283,000 $ 728,000 (1)
----------- ----------
Adjustments to reconcile net income to net
cash provided by operating activities -
Loss (Gain) on sale of assets........................ (313,000) 223,000
Depreciation and amortization........................ 691,000 811,000
Provision for losses on receivables.................. 1,139,000 2,225,000
Cumulative effect of change in accounting principle.. 659,000
Change in assets and liabilities, net -
Change in receivables............................. (1,079,000) (3,895,000)
Change in deferred student tuition................ 1,663,000 1,523,000
Change in deferred income taxes................... (1,097,000) 457,000
Change in accrued income taxes.................... (380,000) (468,000)
Other changes in assets and liabilities, net...... (1,195,000) (1,042,000)
----------- -----------
Total adjustments............................. 88,000 (166,000)
----------- -----------
Net operating activities...................... 371,000 562,000
----------- -----------
CASH FLOWS --INVESTING ACTIVITIES:
Proceeds from asset sales............................. 1,025,000 929,000
Capital expenditures.................................. (1,232,000) (370,000)
----------- -----------
Net investing activities...................... (207,000) 559,000
----------- -----------
CASH FLOWS --FINANCING ACTIVITIES:
Class A Preferred stock redemption.................... (1,302,000) (352,000)
Class A Preferred stock dividend payments............. (467,000)
Principal payments on debt due CenCor................. (2,819,000) (1,482,000)
Class B Preferred stock issued........................ 1,500,000
Subordinated debt issued to Cahill-Warnock............ 3,500,000
Stock options exercised............................... 13,000
----------- -----------
Net financing activities...................... 425,000 (1,834,000)
----------- -----------
Net...................................... 589,000 (713,000)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD................................. 4,261,000 3,295,000
----------- -----------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD....................................... $4,850,000 $2,582,000
========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest............................................ $225,000 $161,000
Income taxes........................................ 629,000 761,000
Cash received during the period for:
Interest............................................ 329,000 299,000
</TABLE>
(1) See Item 1, restatement of prior period.
See accompanying notes to condensed consolidated financial statements.
8
<PAGE>
CONCORDE CAREER COLLEGES, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(unaudited)
<TABLE>
<CAPTION>
Capital
Preferred Common in Excess Accumulated Treasury
Stock Stock of Par Deficit Stock
--------- -------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1996 (1)......... $ 26,000 $699,000 $ 7,736,000 $(1,628,000) $(61,000)
Class A Preferred Stock Redemption... (26,000) (1,276,000)
Class B Preferred Stock Issuance..... 6,000 1,435,000
Stock Options Exercised.............. 13,000
Class A Preferred Dividend Payments.. (467,000)
Class B Preferred Stock Accretion.... 72,000 (72,000)
Net Income........................... 283,000
-------- -------- ----------- ----------- --------
BALANCE, September 30, 1997 $ 6,000 $712,000 $ 7,967,000 $(1,884,000) $(61,000)
======== ======== =========== =========== =========
</TABLE>
(1) See Item 1, restatement of prior period.
See accompanying notes to condensed consolidated financial statements.
(The remainder of this page was left intentionally blank.)
9
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The Company owns and operates twelve proprietary postsecondary campuses
that offer career education, primarily in the allied health field (the
"Campuses"). The Company previously owned Person/Wolinsky Associates, which
offered review courses for the CPA exam. The assets of Person/Wolinsky
Associates were sold on August 2, 1996. In addition the Company sold the assets
of its San Jose, California School in August 1996. The following table presents
the revenue for the Campuses and the CPA Review Courses for the periods
indicated. Revenues for 1997 are calculated on a pro rata basis. See Note 2 to
the Condensed Consolidated Financial Statements. Amounts are in thousands.
<TABLE>
<CAPTION>
Nine Months Three Months
Ended September 30, Ended September 30,
-------------------- -------------------
1997 1996 (1) 1997 1996 (1)
------- -------- -------- --------
<S> <C> <C> <C> <C>
Campuses........................ $27,922 $ 29,393 $9,319 $ 10,314
CPA Review Courses.............. 4 1,227 4
------- -------- ------ --------
Total..................... $27,926 $ 30,620 $9,319 $ 10,318
======= ======== ====== ========
</TABLE>
The following table presents the relative percentage of revenues derived
from the Campuses and the CPA Review Courses and certain consolidated statement
of operations items as a percentage of total revenue for periods indicated.
<TABLE>
<CAPTION>
Nine Months Three Months
Ended September 30, Ended September 30,
------------------- -------------------
1997 1996(1) 1997 1996(1)
------ -------- ------ --------
<S> <C> <C> <C> <C>
Campuses............................................ 100.0% 96.0% 100.0% 100.0%
CPA Review Courses.................................. 4.0
----- ----- ----- -----
Total............................................... 100.0 100.0 100.0 100.0
===== ===== ===== =====
Operating expenses:
Payroll costs..................................... 48.7 45.0 48.9 42.4
Occupancy......................................... 12.9 11.8 12.6 10.6
Instructional materials and supplies.............. 7.9 8.2 9.1 6.2
Advertising....................................... 8.8 7.2 9.8 7.6
Other general & administrative.................... 16.1 14.4 16.6 16.2
Provision for uncollectible accounts.............. 4.1 7.3 3.3 11.0
----- ----- ----- -----
Total............................................. 98.5 93.9 100.3 94.0
Operating income (loss)............................. 1.5 6.1 (.3) 6.0
Interest expense.................................... .8 2.4 .5 (3.4)
----- ----- ----- -----
Income (loss) before income taxes and gain on sale.. .7 3.7 (.8) 9.4
Gain (loss) on sale of assets....................... (1.1) .7 2.2
----- ----- ----- -----
Income (loss) before income taxes................... 1.8 3.0 (.8) 7.2
Provision (benefit) for income taxes................ (1.6) .6 (6.3) 1.3
----- ----- ----- -----
Income before cumulative effect of change in
accounting principle........................ 3.4 2.4 5.5 5.9
Cumulative effect in prior-years of change in
revenue recognition method.................. (2.4)
----- ----- ----- -----
Net Income ......................................... 1.0% 2.4% 5.5% 5.9%
===== ===== ===== =====
</TABLE>
(1) See Item 1, restatement of prior period.
10
<PAGE>
Results of Operations
QUARTER ENDED SEPTEMBER 30, 1997 COMPARED TO
QUARTER ENDED SEPTEMBER 30, 1996
During the third quarter of 1997 the Company changed its method of
recognizing revenue. Under the new method, tuition income is recognized pro rata
over the period of the program. The Company previously used a method whereby a
portion of tuition income was recognized in the month a student began attending
classes to offset the costs incurred in obtaining new students. The remaining
tuition was deferred and recognized over the term of the program.
If the pro rata method of revenue recognition had not been applied during
the third quarter of 1997, the results would have been as follows:
<TABLE>
<CAPTION>
Three Months
Ended September 30, 1997
----------------------------
Pro Rata Previous Method
---------- ---------------
<S> <C> <C>
Revenue.................................... $9,319,000 $9,736,000
Operating Income (Loss).................... (19,000) 398,000
Income Before Cumulative Effect of
Change in Revenue Recognition Method...... 517,000 767,000
</TABLE>
Net income decreased $88,000 to $517,000 for the three months ended
September 30, 1997 compared to $605,000 for the same period in 1996.
During August 1996 the Company sold the assets of Person/Wolinsky
Associates, which offered review courses for the CPA exam. In addition, the
company sold the assets of its San Jose, California location in August 1996. The
Company originally recognized a gain of $184,000 on both transactions. However,
part of the sale of Person / Wolinsky included a non-compete agreement that was
recorded by the Company as a financing transaction. The Company filed an amended
Annual Report on Form 10-K/A on November 13, 1997. As a result of the
restatement, the Company recorded a loss of $223,000 in the third quarter of
1996 on these sales.
Total revenue decreased 9.7% or $999,000 to $9,319,000 for the three months
ended September 30, 1997 compared to $10,318,000 for the same period in 1996.
The change in revenue recognition accounted for $417,000 of the decrease. Also
during August 1996 the Company sold the assets of the San Jose, California
School. The Asset Sales accounted for a reduction of $267,000 in revenue for the
three months ended September 30, 1997 compared to the same period in 1996.
Student population from the twelve operating campuses decreased slightly which
accounted for the remaining decrease of $315,000.
Total operating expenses decreased $359,000 or 3.7% to $9,338,000 compared
to $9,697,000 for the three months ended September 30, 1996. Operating expenses
for remaining operations decreased $61,000 to $9,338,000 compared to $9,399,000
in 1996.
Payroll increased $182,000 to $4,557,000 compared to $4,375,000 for the
three months ending September 30, 1996. Payroll decreased $56,000 due to the
Asset Sales. Remaining operations increased payroll $238,000 due to additional
staff and upgrading the quality of staff and faculty.
Occupancy increased $78,000 or 7.1% to $1,173,000 from $1,095,000 in 1996.
Occupancy decreased $31,000 due to the Asset Sales. The offsetting increase of
$109,000 is primarily due to increased rent as the Company added additional
space at several locations.
Material and supplies increased $208,000 or 32.6% to $846,000 compared to
$638,000 in 1996. The increase is primarily due to the timing of textbook
expense.
11
<PAGE>
Advertising increased $131,000 or 16.7% to $914,000 from $783,000 in 1996.
The Asset Sales resulted in a decrease of $45,000. The resulting increase of
$176,000 is due to additional newspaper, television, and direct mail
advertising.
General and administrative expenses decreased $126,000 or 7.5% to
$1,544,000 from $1,670,000 in 1996. The Asset Sales accounted for a decrease of
$32,000. The remaining decrease of $94,000 is primarily due to decreased
professional fees.
In the third quarter of 1996, the Company increased its reserve for bad
debts by approximately $559,000 due to the large number of student notes being
collected at the Campuses instead of a professional note servicer. The Company
subsequently adopted a policy that all new student notes would be serviced by a
note servicer, which has resulted in a better collection rate. As a result, the
1997 provision for uncollectable accounts of $304,000 is $832,000 lower than the
$1,136,000 recorded in 1996.
Interest expense on the Company's subordinated debt was $48,000 in 1997. In
1996, the interest expense was a negative $344,000, which was the result of
reducing an interest accrual due to CenCor, Inc. by $422,000. The interest
accrual fluctuated according to changes in the Company's stock price.
As a result of the resolution of outstanding issues relating to tax years
1988 through 1992, the Company recorded a favorable adjustment of approximately
$550,000 in its tax contingencies. This resulted in a net tax benefit of
$584,000 compared to a provision of $137,000 in 1996. (See Note 3 to the
Condensed Consolidated Financial Statements.)
Primary earnings per weighted average common and common share equivalent
(EPS) was $0.05 for the three-months ended September 30, 1997 and $0.07 for the
same period in 1996. Primary EPS is shown after a reduction for preferred stock
dividends of $32,000 and an addition of $27,000 for convertible debt interest in
1997 and a reduction of $50,000 for preferred stock dividends in 1996.
(The remainder of this page left intentionally blank.)
12
<PAGE>
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO
NINE MONTHS ENDED SEPTEMBER 30, 1996
The non-recurring events discussed in the three-month comparative financial
results also apply to the year-to-date discussion. These events include the sale
of assets during the third quarter of 1996 and the change in accounting method
for revenue recognition and the tax contingency adjustment during the third
quarter of 1997.
If the pro rata method of revenue recognition had not been applied, the
results would have been as follows:
<TABLE>
<CAPTION>
Nine Months
Ended September 30, 1997
------------------------
Pro Rata Previous Method
------------ ---------------
<S> <C> <C>
Revenue....................................... $27,926,000 $28,337,000
Operating Income.............................. 444,000 855,000
Income Before Cumulative Effect of Change
in accounting principle...................... 942,000 1,186,000
Net Income.................................... 283,000 1,186,000
</TABLE>
Net income decreased $445,000 to $283,000 for the nine months ended
September 30, 1997 compared to $728,000 for the same period in 1996. The change
in revenue recognition decreased net income by $903,000, while the tax
contingency adjustment resulted in a year-to-date benefit of $650,000.
Total revenue decreased 8.8% or $2,694,000 to $27,926,000 for the nine
months ended September 30, 1997 compared to $30,620,000 for the same period in
1996. The change in revenue recognition accounted for $411,000 of the decrease.
The Asset Sales accounted for a reduction of $2,224,000 in revenue compared to
1996. The remaining decrease is due to a slight decrease in student population
compared to 1996.
Total operating expenses decreased $1,266,000 or 4.4% to $27,482,000
compared to $28,748,000 for the nine months ended September 30, 1996. Operating
expenses for remaining operations increased $1,181,000 or 4.5% to $27,469,000
from $26,288,000 in 1996.
Payroll decreased $199,000 or 1.4% to $13,590,000 compared to $13,789,000
in 1996. Payroll decreased $1,063,000 as a result of the Asset Sales. The
$864,000 offsetting increase is due to higher salaries and increased staff.
Occupancy decreased $27,000 to $3,600,000 from $3,627,000 in 1996.
Occupancy decreased $461,000 due to the Asset Sales. Rent expense increased
$320,000 compared to 1996 as the Company increased space at several locations
and incurred additional rent for the North Hollywood location. The remaining
increase of $114,000 is due to additional utilities and insurance expense.
Material and supplies decreased $303,000 or 12.1% to $2,197,000 compared to
$2,500,000 in 1996. The Asset Sales accounted for $383,000 of the decrease. The
offsetting increase of $80,000 was due to increased textbook expense.
Advertising increased $254,000 or 11.5% to $2,462,000 from $2,208,000 in
1996. The Asset Sales resulted in a decrease of $208,000. The resulting increase
of $462,000 is due to increases in newspaper, television, and direct mail
advertising.
General and administrative expenses increased $95,000 or 2.2% to $4,494,000
from $4,399,000 in 1996. The Asset Sales accounted for a decrease of $207,000.
The resulting increase of $302,000 is primarily due to increased professional
fees, group health insurance, and costs related to the collection of the
Company's notes due from students.
Bad debt expense decreased $1,086,000 or 48.8% to $1,139,000 from
$2,225,000 in 1996. The majority of this decrease is due to the Company
increasing the provision for bad debts by approximately $559,000 in the third
quarter of 1996. This increase was due to a large number of notes being
collected by the campuses instead of a professional note servicer. In the fourth
quarter of 1996, the Company adopted a policy that all new students be serviced
by a professional servicing agency which has resulted in a better collection
rate and accounts for the decrease in the provision for bad debt.
13
<PAGE>
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO
NINE MONTHS ENDED SEPTEMBER 30, 1996
Interest expense decreased $513,000 to $230,000 from $743,000 in 1996.
During 1996, interest expenses included an accrual for interest due CenCor that
was based on the Company's stock price.
The gain from the sale of the Company's Michigan property sale was $313,000
before any tax effect. During 1996 the Company recorded a loss of $223,000 on
the sale of assets from Person/Wolinsky and the San Jose, California Campus.
See further discussion in "Liquidity and Capital Resources."
In 1997, a tax benefit of $415,000 was recorded compared to a provision of
$178,000, an effective tax rate of 25.0% in 1996. The tax benefit in 1997
resulted from an adjustment of $650,000 to the Company's tax contingencies.
(See Note 3 to the Condensed Consolidated Financial Statements.)
Primary EPS was $0.15 for the nine-months ended September 30, 1997 and
$0.07 for the same period in 1996. Primary EPS is shown after a reduction for
preferred stock dividends of $100,000 and additions of $64,000 for convertible
debt interest and $1,210,000 for the Class A preferred stock redemption in 1997
and a reduction of $169,000 for preferred stock dividends in 1996. Fully diluted
EPS was $0.14 for the nine-months ended September 30, 1997 and $0.07 for the
same period in 1996. Fully diluted EPS is shown after a reduction for preferred
stock dividends of $28,000 and additions of $64,000 for convertible debt
interest and $1,210,000 for the Class A Preferred Stock Redemption in 1997 and a
reduction of $169,000 for preferred stock dividends in 1996.
(The remainder of this page left intentionally blank.)
14
<PAGE>
Liquidity and Capital Resources
CenCor, Inc. Agreement
The Restructuring Agreement between the Company and CenCor was effective
for the period between October 30, 1992 and February 25, 1997. See the Company's
1996 Annual Report on Form 10-K for additional information concerning
transactions related to this agreement and the Refinancing on February 25, 1997
which information is incorporated herein by reference. At September 30, 1997 the
remaining commitment related to written off receivables was $87,000.
Bank Financing
In conjunction with the Refinancing, the Company negotiated a $3,000,000
secured revolving credit facility on March 13, 1997 with Security Bank of Kansas
City. This facility expires on April 30, 1998. Funds borrowed under this
facility will be used for working capital purposes. This facility has a variable
interest rate of prime plus one percent, and no commitment fee. It is secured by
all cash, accounts and notes receivable, furniture and equipment, and capital
stock of the subsidiaries. At September 30, 1997 the Company had not borrowed
any funds against the new bank line of credit.
Cash Flows and Other
Net cash provided by operating activities decreased to $371,000 for the
nine months ended September 30, 1997 compared to $562,000 during the same period
in 1996. Net receivables after provision for losses on receivables increased
$1,079,000 in 1997 compared to an increase of $3,895,000 in 1996. Deferred
student tuition increased in 1997 by $1,663,000 compared to an increase of
$1,523,000 in 1996.
Capital expenditures for the nine months ended September 30, 1997 were
$1,232,000 compared to $370,000 in 1996. Year to date expenditures were
primarily for additional classroom equipment and leasehold improvements. The
Company moved its North Hollywood, California School to a new location on July
28, 1997. The new building provides a much-improved facility with better access
and additional space for new programs. At September 30, 1997 the Company had
paid approximately $924,000 toward equipment and improvements at the North
Hollywood Campus.
The San Diego Campus was notified in September that it was no longer
eligible to participate in the Family Federal Education Loan (the "FFEL")
Program. The Campus did not maintain loan eligibility because its Cohort Default
Rates for three consecutive published years were not below 25%. In anticipation
of the loss of the FFEL Program, the Campus had previously arranged alternative
sources of financing for its students. The Campus is continuing to operate and
provides qualified students with access to Federal Pell grants and alternative
sources of student loans. The San Diego Campus enrolls approximately 7 percent
of the Company's total student population as of September 30, 1997. The Company
is uncertain if enrollment at the San Diego Campus will materially change.
Contingencies
In September 1997, the Bureau of Consumer Protection of the United States
Federal Trade Commission (the "FTC") notified the Company that it was conducting
an inquiry related to the Company's offering and promotion of vocational or
career training. The Company is cooperating with the FTC to the fullest extent
possible, and believes it has not engaged in any activity that would violate FTC
regulations. The Company believes the inquiry is one of several being conducted
by the FTC pertaining to vocational postsecondary training institutions. There
is not sufficient information available at this stage to determine the financial
impact on the Company, if any.
The Company generally relies on the availability of various federal and
state student financial aid programs to provide funding for the students
attending the Campuses. The Company also relies on the availability of lending
institutions willing to participate in these programs and to grant loans to
these students. If all of the Campuses 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.
15
<PAGE>
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 cases were
dismissed by the plaintiffs; however, over time three others were filed seeking
similar relief on behalf of a total of 95 plaintiffs. See Part II "Legal
Proceedings".
The Company's campuses received their official published 1994 Cohort
Default Rates (the "CDR") from the United States Department of Education (the
"ED"), and the results of their erroneous data and servicing appeals. Except for
the San Diego, California Campus, all of the Company's campuses have 1994
default rates less than 25 percent, and are therefore eligible to continue
participating in the FFEL program. See discussion in Item 2, cash flows and
others.
In 1991, ED notified the Company that the Southern Career Institute (the
"SCI"), a proprietary, post-secondary vocational home study school acquired
through a wholly owned subsidiary in 1990, was ineligible to participate in
federal student financial assistance programs. The Company subsequently received
notices requesting payments to ED of approximately $2.7 million relating to
student financial assistance funds disbursed between June and November 1990. See
the Company's 1996 Annual Report on Form 10-K/A, Item 7 "Contingencies"
incorporated herein by reference. In September 1997, ED again sent notices to
the Company requesting payment. The Company responded by restating its offer to
settle for the amount in the SCI bank account which is currently $30,000 and
requested an opportunity to review documents and for a hearing. The Company has
been informed verbally that ED is in the process of reviewing this matter.
(The remainder of this page left intentionally blank.)
16
<PAGE>
New Accounting Standards
Statement of Financial Accounting Standards No. 128 "Earnings per Share"
(SFAS 128) was issued in February 1997, effective for financial statements for
interim and annual periods ending after December 15, 1997. The statement
specifies the computation, presentation, and disclosure requirements for
earnings per share. The statement requires the computation of earnings per share
be computed by dividing income available to common stockholders by the weighted
average number of common shares outstanding during the period. Diluted earnings
per share is computed giving effect to all dilutive potential common shares that
were outstanding during the period (i.e., the denominator used in the basic
calculation is increased to include the number of additional common shares that
would have been outstanding if the dilutive potential common shares had been
issued). SFAS 128 requires the Company to present basic and diluted per share
amounts for income from continuing operations and for net income on the face of
the income statement.
Although early adoption of SFAS 128 is not permitted, pro forma earnings
per share amounts may be disclosed. Accordingly, if the Company's earnings per
share had been computed in accordance with SFAS 128 for the three and nine
months ended September 30, 1997 and 1996, pro forma earnings per share would
have been as follows:
<TABLE>
<CAPTION>
Basic Diluted
Three Months Three Months
Ended September 30, Ended September 30,
------------------- -------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Pro Forma Earnings Per Share:
Income before cumulative effect of change
in accounting principle................. $.07 $.08 $.05 $.07
Cumulative effect on prior years
(to December 31, 1996)..................
---- ---- ---- ----
Net income................................. .07 .08 .05 .07
==== ==== ==== ====
</TABLE>
<TABLE>
<CAPTION>
Basic Diluted
Nine Months Nine Months
Ended September 30, Ended September 30,
------------------- -------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Pro Forma Earnings Per Share:
Income before cumulative effect of change
in accounting principle................. $.29 $.08 $.20 $.07
Cumulative effect on prior years
(to December 31, 1996).................. (.09) (.06)
---- ---- ---- ----
Net income................................. $.20 $.08 $.14 $.07
==== ==== ==== ====
</TABLE>
(The remainder of this page left intentionally blank.)
17
<PAGE>
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
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 cases were
dismissed by the plaintiffs; however, over time, three others were filed seeking
similar relief on behalf of a total of 95 plaintiffs. Conversion of one of the
three cases to a class action has been attempted; however, the plaintiffs'
motion for class certification was denied on April 18, 1997. On May 19, 1997,
the purported class representative appealed the order denying certification of
the class. The purported class representative and the Company have filed all
appropriate appellate briefs, the last on being filed on October 15, 1997.
During the attempted certification, action on the other two cases has been
stayed. The plaintiffs seek unspecified monetary damages. The Company believes
these suits are without merit, and will continue to strongly defend against them
vigorously. See the Company's 1996 Annual Report on Form 10-K/A Item 7 --
"Contingencies", incorporated by reference.
The Company has other 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.
In September 1997, the FTC notified the Company that it was conducting an
inquiry related to the Company's offering and promotion of vocational or career
training. See Part I -- "Contingencies".
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 Information -- None
--------------------------
Item 6. Exhibits
--------
11 Computation of per share earnings
18 Independent Accountants' Preferability Letter
27 Financial Data Schedule
. No Reports on Form 8-K were filed during the period.
(The remainder of this page left intentionally blank.)
18
<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: November 18, 1997
By: /s/ Robert R. Roehrich
------------------------------------------
Robert R. Roehrich, Chief Executive Officer
By: /s/ Gregg Gimlin
------------------------------------------
Gregg Gimlin, Chief Financial Officer
(The remainder of this page was left intentionally blank.)
19
<PAGE>
(EXHIBIT 11)
CONCORDE CAREER COLLEGES, INC.
COMPUTATION OF PER SHARE EARNINGS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
AND THE THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
<TABLE>
<CAPTION>
Primary EPS Fully Diluted EPS
Nine Months Nine Months
Ended September 30, Ended September 30,
-------------------- --------------------
1997 1996 (1) 1997 1996 (1)
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Weighted Average Shares Outstanding....... 7,012,000 6,959,000 7,012,000 6,959,000
Options................................... 894,000 744,000 1,044,000 753,000
Debt/Non Detachable Warrants.............. 2,046,000 2,046,000
Class B Preferred Stock .................. 877,000
---------- ---------- ----------- ----------
Adjusted Weighted Average Shares.......... 9,952,000 7,703,000 10,979,000 7,712,000
---------- ---------- ----------- ----------
Net Income (Loss)......................... $ 283,000 $ 728,000 $ 283,000 $ 728,000
Class A Preferred Stock Redemption........ 1,210,000 1,210,000
Class A Preferred Dividends............... (28,000) (169,000) (28,000) (169,000)
Class B Preferred Dividends-Imputed....... (72,000)
Interest on Convertible Debt, Net of Tax.. 64,000 64,000
---------- ---------- ----------- ----------
Income Available to Common Shareholders... $1,457,000 $ 559,000 $ 1,529,000 $ 559,000
---------- ---------- ----------- ----------
Earnings per Weighted Average Shares...... $ 0.15 $ 0.07 $ 0.14 $ 0.07
========== ========== =========== ==========
</TABLE>
<TABLE>
<CAPTION>
Three Months Three Months
Ended September 30, Ended September 30,
-------------------- --------------------
1997 1996 1997 1996
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Weighted Average Shares Outstanding....... 7,070,000 6,962,000 7,070,000 6,962,000
Options................................... 978,000 751,000 1,044,000 753,000
Debt/Non Detachable Warrants.............. 2,574,000 2,574,000
Class B Preferred Stock................... 1,103,000
----------- ---------- ----------- ----------
Adjusted Weighted Average Shares.......... 10,622,000 7,713,000 11,791,000 7,715,000
----------- ---------- ----------- ----------
Net Income (Loss)......................... $ 517,000 $ 605,000 $ 517,000 $ 605,000
Class A Preferred Dividends............... (50,000) (50,000)
Class B Preferred Dividends-Imputed....... (32,000)
Interest on Convertible Debt, Net of Tax.. 27,000 27,000
----------- ---------- ----------- ----------
Income Available to Common Shareholders... $ 512,000 $ 555,000 $ 544,000 $ 555,000
----------- ---------- ----------- ----------
Earnings per Weighted Average Shares...... $ 0.05 $ 0.07 $ 0.05 $ 0.07
=========== ========== =========== ==========
</TABLE>
(1) See Item 1, restatement of prior period.
<PAGE>
(EXHIBIT 18)
October 30, 1997
To the Board of Directors
of Concorde Career Colleges, Inc.
Dear Directors:
We have been furnished with a copy of Concorde Career Colleges Inc.'s Form 10-Q
for the quarter ended September 30, 1997. Note 2 therein describes a change in
tuition income recognition policies from a method that recognized a
disproportionately larger portion of the tuition income in the month a student
began attending classes, with the remainder deferred and recognized ratably over
the term of the program, to a method that initially defers all tuition income
and recognizes the tuition income ratably over the term of the program. It
should be understood that the preferability of one acceptable method of tuition
income recognition over another has not been addressed in any authoritative
accounting literature and in arriving at our opinion expressed below, we have
relied on management's business planning and judgment. Based upon our
discussions with management and the stated reasons for the change, we believe
that such change represents, in your circumstances, the adoption of a preferable
alternative accounting principle for recognizing tuition income in conformity
with Accounting Principles Board Opinion No. 20.
We have not made an audit in accordance with generally accepted auditing
standards of the financial statements of Concorde Career Colleges, Inc. for the
three-month or nine-month periods ended September 30, 1997 or September 30, 1996
and, accordingly, we express no opinion thereon or on the financial information
filed as part of the Form 10-Q of which this letter is to be an exhibit.
Yours very truly,
PRICE WATERHOUSE LLP
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-START> JAN-01-1997 JUL-01-1997
<PERIOD-END> SEP-30-1997 SEP-30-1997
<CASH> 4,850,000 0
<SECURITIES> 0 0
<RECEIVABLES> 20,306,000 0
<ALLOWANCES> 1,424,000 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 25,930,000 0
<PP&E> 12,537,000 0
<DEPRECIATION> 9,683,000 0
<TOTAL-ASSETS> 32,483,000 0
<CURRENT-LIABILITIES> 21,877,000 0
<BONDS> 3,500,000 0
0 0
6,000 0
<COMMON> 712,000 0
<OTHER-SE> 6,022,000 0
<TOTAL-LIABILITY-AND-EQUITY> 32,483,000 0
<SALES> 27,926,000 9,319,000
<TOTAL-REVENUES> 27,926,000 9,319,000
<CGS> 0 0
<TOTAL-COSTS> 26,343,000 9,034,000
<OTHER-EXPENSES> (313,000) 0
<LOSS-PROVISION> 1,139,000 304,000
<INTEREST-EXPENSE> 230,000 48,000
<INCOME-PRETAX> 527,000 (67,000)
<INCOME-TAX> (415,000) (584,000)
<INCOME-CONTINUING> 942,000 517,000
<DISCONTINUED> 0 0
<EXTRAORDINARY> (659,000) 0
<CHANGES> 0 0
<NET-INCOME> 283,000 517,000
<EPS-PRIMARY> .15 .05
<EPS-DILUTED> .14 .05
</TABLE>
