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, 2004 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)
5800 Foxridge, Suite 500
Mission, Kansas 66202 &
nbsp;
(Address of Principal Executive Office) (Zip Code)
Registrant’s telephone number, including area code: (913) 831-9977
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 _____
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes X No _____
As of July 16, 2004 Concorde Career Colleges, Inc. had 5,994,571 shares of Common Stock outstanding.
CONCORDE CAREER COLLEGES, INC.
FORM 10-Q
SIX MONTHS ENDED JUNE 30, 2004
INDEX
PART I – FINANCIAL INFORMATION
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Item 1. |
Financial Statements |
Page |
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Notes to Condensed Consolidated Financial Statements |
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Note 1, 2, and 3 |
2 |
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Note 4 |
3 |
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Condensed Consolidated Balance Sheets |
4 |
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Condensed Consolidated Statements of Operations |
6 |
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Condensed Consolidated Statements of Cash Flows |
7 |
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Consolidated Statement of Changes in Stockholders’ Equity |
8 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
9 |
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Item 3. |
Quantitative and Qualitative Disclosures about Market Risk |
16 |
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Item 4. |
Controls and Procedures |
16 |
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PART II – OTHER INFORMATION |
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Item 1 |
Legal Proceedings |
16 |
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Item 2. |
Change in Securities, Use of Proceeds and Issuer Purchases of Equity Securities |
16 |
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Item 3. |
Defaults Upon Senior Securities |
17 |
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Item 4. |
Submission of Matters to a Vote of Security Holders |
17 |
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Item 5. |
Other Information |
17 |
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Item 6. |
Exhibits and Reports on Form 8-K |
17 |
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Signatures |
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18 |
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Exhibit 11 |
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19 |
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Exhibit 31-1 |
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20 |
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Exhibit 31-2 |
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21 |
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Exhibit 32-1 |
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22 |
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Exhibit 32-2 |
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23 |
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PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
CONCORDE CAREER COLLEGES, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2004
Overview
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 and may relate to: (i) the ability of the company to realize increased enrollments from investments in infrastructure made over the past years; (ii) ED’s enforcement or interpretation of existing statutes and regulations affecting the Company’s operations; and (iii) the sufficiency of the Company’s working capital, financings and cash flow from operating activities for the Company’s future operating and capital requirements. 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, pot
ential adverse effects of regulations; impairment of federal funding; adverse legislative action; student loan defaults; 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.
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 Securities and Exchange Commission (“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. The condensed consolidated balance sheet of the Company as of December 31, 20031 has been derived from the audited consolidated balance sheet of the Company as of that date. These condensed financial statements should be read in conjunction w
ith the financial statements and the notes thereto included in the Company’s 20013 Annual Report on Form 10-K that was filed by the Company with the Commission on March 15, 2004 (the “20031 Form 10-K”) incorporated herein by reference.
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. 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. The Company has litigation pending which arose in the normal course of business. See further discussion in Part II, Item 1 - “Legal Proceedings”.
Note 2:
Diluted earnings per share is computed by deducting interest from convertible debt, net of tax and imputed preferred dividends from net income (loss) 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 preferred stock assumed converted to common stock.
Note 3:
On February 27, 2003 the Board of Directors unanimously adopted the Concorde Career Colleges, Inc. 2003 Long-term Executive Compensation Plan (the “Compensation Plan”). The Company’s shareholders approved the Compensation Plan at the Annual Meeting held on May 22, 2003. The Compensation Plan provides an aggregate 200,000 incentive stock options to be issued to certain employees as authorized by the Compensation Committee of the Board of Directors.
The Company has additional incentive stock option plans (the “2002 Option Plan,” “2000 Option Plan” and “1998 Option Plan”) which authorize the Company to issue 300,000, 125,000 and 250,000 shares, respectively, of its common stock to certain officers and employees of the Company. Options for all plans, including the 2003 Compensation Plan, are granted at fair market value or greater on the date of grant for a term of not more than ten years unless options are canceled due to terms of the option plan. As of June 30, 2004, an aggregate 151,800 shares remain available to be granted pursuant to the 1998, 2000, 2002 and 2003 option plans.
On February 27, 2003 the Board of Directors unanimously adopted the Concorde Career Colleges, Inc. Restated Employee Stock Purchase Plan (“Employee Plan”). The Plan was approved by the Company’s shareholders at its Annual Meeting held on May 22, 2003. The Employee Plan is similar to the previous Employee Stock Purchase Plan that expired September 30, 2003. An aggregate of 75,000 shares of Common Stock of the Company are subject to the Employee Plan and are reserved for issuance under such Plan. Options to purchase 15,000 shares of Common Stock of the Company are to be offered to participants for purchase in the first year (commencing October 1, 2003 and ending September 30, 2004) and each of the four succeeding plan years. The option price of Common Stock purchased with payroll deductions made during such annual, semi-annual or calendar-quarterly o
ffering for participant therein shall be the lower of:
(a) 95% of the closing price of the Common Stock on the Offering Commencement Date or the nearest prior business day on which trading occurred on the NASDAQ Stock Market; or
(b) 95% of the closing price of the Common Stock on the Offering Termination Date or the nearest prior business day on which trading occurred on the NASDAQ Stock Market.
Note 4:
The Company has stock-based employee compensation plans. The Company accounts for these plans under the recognition and measurement principles of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. Stock-based employee compensation cost is not reflected in the results of operations, as all options granted under those plans had an exercise price equal to or exceeding the market value of the underlying common stock on the grant date. The following table illustrates the effect on net income and income per share if the Company had applied the fair value provisions of Statement of Financial Accounting Standard (SFAS) No. 123, Accounting for Stock-Based Compensation, to stock-based employee compensation.
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Six Months Ended June 30, |
Three Months Ended June 30, |
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2004 |
|
|
2003 |
|
|
2004 |
|
|
2003 |
|
|
|
|
|
|
|
|
|
|
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Net income as reported |
|
$ |
2,501,000 |
|
$ |
3,020,000 |
|
$ |
1,197,000 |
|
$ |
1,485,000 |
|
|
|
|
|
|
|
|
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Total stock-based employee compensation cost determined under the fair value based method, net of income taxes |
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|
401,000 |
|
|
275,000 |
|
|
200,000 |
|
|
137,000 |
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|
|
|
|
|
|
|
|
|
|
|
Pro forma net income |
|
$ |
2,100,000 |
|
$ |
2,745,000 |
|
$ |
997,000 |
|
$ |
1,348,000 |
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Income per share |
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Basic – as reported |
|
$ |
.42 |
|
$ |
.52 |
|
$ |
.20 |
|
$ |
.25 |
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|
|
|
|
|
|
|
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|
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Basic – pro forma |
|
$ |
.35 |
|
$ |
.47 |
|
$ |
.17 |
|
$ |
.23 |
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|
|
|
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Diluted – as reported |
|
$ |
.39 |
|
$ |
.48 |
|
$ |
.19 |
|
$ |
.24 |
|
|
|
|
|
|
|
|
|
|
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Diluted – pro forma |
|
$ |
.33 |
|
$ |
.44 |
|
$ |
.16 |
|
$ |
.21 |
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(The remainder of this page was left intentionally blank.)
CONCORDE CAREER COLLEGES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
ASSETS
| |
|
June 30, 2004 |
|
|
|
December 31,2003 |
|
|
Current Assets: |
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
15,880,000 |
|
|
|
$ |
17,250,000 |
|
|
Restricted short-term investments |
|
|
367,000 |
|
|
|
|
|
|
|
Short-term investments |
|
|
3,056,000 |
|
|
|
|
2,563,000 |
|
|
Receivables |
|
|
|
|
|
|
|
|
|
|
Accounts and notes receivable |
|
|
25,169,000 |
|
|
|
|
24,247,000 |
|
|
Allowance for uncollectible accounts |
|
|
(2,089,000 |
) |
|
|
|
(1,652,000 |
) |
| |
|
|
|
|
|
|
|
|
Net receivables |
|
|
23,080,000 |
|
|
|
|
22,595,000 |
|
|
Recoverable income taxes |
|
|
410,000 |
|
|
|
|
|
|
|
Deferred income taxes |
|
|
833,000 |
|
|
|
|
833,000 |
|
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Supplies and prepaid expenses |
|
|
2,756,000 |
|
|
|
|
2,400,000 |
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| |
|
|
|
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Total current assets |
|
|
46,382,000 |
|
|
|
|
45,641,000 |
|
| |
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Fixed assets, net of accumulated depreciation of 6,936,000 at June 30, 2004 and 6,042,000 at December 31, 2003 |
|
|
6,777,000 |
|
|
|
|
4,928,000 |
|
| |
|
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Other Assets: |
|
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|
|
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Long-term notes receivable |
|
|
1,284,000 |
|
|
|
|
1,327,000 |
|
|
Allowance for uncollectible notes |
|
|
(432,000 |
) |
|
|
|
(348,000 |
) |
|
Goodwill |
|
|
954,000 |
|
|
|
|
954,000 |
|
|
Intangible, net |
|
|
164,000 |
|
|
|
|
184,000 |
|
| |
|
|
|
|
|
|
|
|
Total other assets |
|
|
1,970,000 |
|
|
|
|
2,117,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
$ |
55,129,000 |
|
|
|
$ |
52,686,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
The accompanying notes are an integral part of these condensed consolidated financial statements.
(The remainder of this page was left intentionally blank.)
CONCORDE CAREER COLLEGES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
LIABILITIES AND STOCKHOLDERS’ EQUITY
| |
|
June 30, 2004 |
|
|
|
December 31, 2003 |
|
|
Current Liabilities: |
|
|
|
|
|
|
|
|
|
|
Deferred revenues |
|
$ |
25,410,000 |
|
|
|
$ |
25,540,000 |
|
|
Accrued salaries and wages |
|
|
1,488,000 |
|
|
|
|
1,889,000 |
|
|
Accounts payable |
|
|
2,581,000 |
|
|
|
|
2,883,000 |
|
|
Accrued liabilities |
|
|
1,948,000 |
|
|
|
|
1,279,000 |
|
|
Accrued income taxes payable |
|
|
|
|
|
|
|
4,000 |
|
| |
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
31,427,000 |
|
|
|
|
31,595,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred Income Taxes |
|
|
428,000 |
|
|
|
|
428,000 |
|
|
Stockholders’ Equity |
|
|
|
|
|
|
|
|
|
|
Common stock, ($.10 par value, 19,400,000 shares authorized) 6,283,632 shares issued and 5,992,559 shares outstanding at June 30, 2004 and 6,254,140 shares issued and 5,963,030 shares outstanding at December 31, 2003 |
|
|
628,000 |
|
|
|
|
625,000 |
|
|
Capital in excess of par |
|
|
14,343,000 |
|
|
|
|
14,236,000 |
|
|
Retained Earnings |
|
|
9,455,000 |
|
|
|
|
6,954,000 |
|
|
Less treasury stock, 291,073 shares in 2004 and 291,110 in
2003, at cost |
|
|
(1,152,000 |
) |
|
|
|
(1,152,000 |
) |
| |
|
|
|
|
|
|
|
|
Total stockholders’ equity |
|
|
23,274,000 |
|
|
|
|
20,663,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
$ |
55,129,000 |
|
|
|
$ |
52,686,000 |
|
| |
|
|
|
|
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|
The accompanying notes are an integral part of these condensed consolidated financial statements.
(The remainder of this page was left intentionally blank.)
CONCORDE CAREER COLLEGES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
|
Six Months
Ended June 30, |
Three Months
Ended June 30, |
| |
2004 |
2003 |
2004 |
2003 |
|
| |
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Net Revenue |
$ |
41,002,000 |
$ |
35,250,000 |
$ |
20,627,000 |
$ |
17,891,000 |
|
|
Costs and Expenses: |
|
|
|
|
|
|
|
|
|
|
Instruction costs and services |
|
12,907,000 |
|
10,597,000 |
|
6,451,000 |
|
5,339,000 |
|
|
Selling and promotional |
|
5,456,000 |
|
4,456,000 |
|
2,803,000 |
|
2,334,000 |
|
|
General and administrative |
|
16,894,000 |
|
14,265,000 |
|
8,499,000 |
|
7,281,000 |
|
|
Provision for uncollectible accounts |
|
1,734,000 |
|
1,081,000 |
|
955,000 |
|
566,000 |
|
| |
|
|
|
|
|
|
Total Expenses |
|
36,991,000 |
|
30,399,000 |
|
18,708,000 |
|
15,520,000 |
|
| |
|
|
|
|
|
|
Operating Income |
|
4,011,000 |
|
4,851,000 |
|
1,919,000 |
|
2,371,000 |
|
|
Interest and Other Non-Operating Income |
|
90,000 |
|
92,000 |
|
44,000 |
|
48,000 |
|
|
Interest Expense |
|
|
|
24,000 |
|
|
|
|
|
| |
|
|
|
|
|
|
Income Before Provision For Income Taxes |
|
4,101,000 |
|
4,919,000 |
|
1,963,000 |
|
2,419,000 |
|
|
Provision For Income Taxes |
|
1,600,000 |
|
1,899,000 |
|
766,000 |
|
934,000 |
|
| |
|
|
|
|
|
|
Net Income |
$ |
2,501,000 |
$ |
3,020,000 |
$ |
1,197,000 |
$ |
1,485,000 |
|
| |
|
|
|
|
|
|
Weighted Average Shares Outstanding: |
|
|
|
|
|
|
|
|
|
|
Basic |
|
5,987,000 |
|
5,853,000 |
|
5,990,000 |
|
5,860,000 |
|
|
Diluted |
|
6,349,000 |
|
6,279,000 |
|
6,330,000 |
|
6,317,000 |
|
|
Net Income Per Share: |
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
.42 |
$ |
.52 |
$ |
.20 |
$ |
.25 |
|
|
Diluted |
$ |
.39 |
$ |
.48 |
$ |
.19 |
$ |
.24 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
(The remainder of this page was left intentionally blank.)
CONCORDE CAREER COLLEGES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
| |
|
Six Months Ended June 30, |
| |
|
2004 |
|
2003 |
|
| |
|
|
|
|
|
|
Cash Flows – Operating Activities: |
|
|
|
|
|
|
|
|
Net Income |
|
$ |
2,501,000 |
|
$ |
3,020,000 |
|
|
Adjustment to reconcile net income to net cash provided by operating activities - |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
953,000 |
|
|
708,000 |
|
|
Provision for uncollectible accounts |
|
|
1,734,000 |
|
|
1,081,000 |
|
|
Change in assets and liabilities |
|
|
|
|
|
|
|
|
(Increase) in receivables, net |
|
|
(2,559,000 |
) |
|
(4,975,000 |
) |
|
Increase (Decrease) in deferred revenue |
|
|
(130,000 |
) |
|
3,810,000 |
|
|
Increase (Decrease) in income taxes payable/receivable |
|
|
(414,000 |
) |
|
492,000 |
|
|
Increase (Decrease) in accounts payable, accrued expenses and other |
|
|
(429,000 |
) |
|
553,000 |
|
| |
|
|
|
|
|
|
Total adjustments |
|
|
(845,000 |
) |
|
1,669,000 |
|
| |
|
|
|
|
|
|
Net operating activities |
|
|
1,656,000 |
|
|
4,689,000 |
|
| |
|
|
|
|
|
|
Cash Flows-Investing Activities: |
|
|
|
|
|
|
|
|
Purchase of short-term investments |
|
|
(860,000 |
) |
|
17,000 |
|
|
Capital expenditures |
|
|
(2,276,000 |
) |
|
(1,463,000 |
) |
| |
|
|
|
|
|
|
Net investing activities |
|
|
(3,136,000 |
) |
|
(1,446,000 |
) |
| |
|
|
|
|
|
|
Cash Flows-Financing Activities: |
|
|
|
|
|
|
|
|
Treasury stock purchased |
|
|
---- |
|
|
(35,000 |
) |
|
Dividends paid |
|
|
---- |
|
|
(218,000 |
) |
|
Stock purchase plan |
|
|
56,000 |
|
|
59,000 |
|
|
Stock options exercised |
|
|
54,000 |
|
|
22,000 |
|
| |
|
|
|
|
|
|
Net financing activities |
|
|
110,000 |
|
|
(172,000 |
) |
| |
|
|
|
|
|
|
Net Increase (Decrease) in Cash and Cash Equivalents |
|
|
(1,370,000 |
) |
|
3,071,000 |
|
|
Cash and Cash Equivalents at Beginning of Period |
|
|
17,250,000 |
|
|
9,777,000 |
|
| |
|
|
|
|
|
|
Cash and Cash Equivalents at End of Period |
|
$ |
15,880,000 |
|
$ |
12,848,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosures of Cash Flow Information |
|
|
|
|
|
|
|
|
Cash Paid During the Period For: |
|
|
|
|
|
|
|
|
Interest |
|
$ |
---- |
|
$ |
39,000 |
|
|
Income taxes |
|
|
2,015,000 |
|
|
1,408,000 |
|
|
Conversion of subordinated debt to common stock through exercise of warrants |
|
|
---- |
|
|
3,500,000 |
|
|
Reimbursement of accounts receivable expended on leasehold improvements |
|
|
(467,000 |
) |
|
---- |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
(The remainder of this page was left intentionally blank.)
CONCORDE CAREER COLLEGES, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2004
(unaudited)
| |
|
Common Stock |
Capital in Excess of Par |
Retained Earnings (Deficit) |
Treasury Stock |
Total |
|
| |
|
|
|
|
|
|
|
|
BALANCE, December 31, 2003 |
|
$ |
625,000 |
$ |
14,236,000 |
$ |
6,954,000 |
$ |
(1,152,000 |
$ |
20,663,000 |
|
|
Net Income |
|
|
|
|
|
|
2,501,000 |
|
|
|
2,501,000 |
|
|
Stock Options Exercised |
|
|
3,000 |
|
51,000 |
|
|
|
|
|
54,000 |
|
|
Employee Stock Purchase Plan |
|
|
|
|
56,000 |
|
|
|
|
|
56,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
BALANCE, June 30, 2004 |
|
$ |
628,000 |
$ |
14,343,000 |
$ |
9,455,000 |
$ |
(1,152,000 |
$ |
23,274,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, December 31, 2002 |
|
$ |
485,000 |
$ |
9,831,000 |
$ |
791,000 |
$ |
(1,117,000 |
$ |
9,990,000 |
|
|
Net Income |
|
|
|
|
|
|
3,020,000 |
|
|
|
3,020,000 |
|
|
Warrants Exercised |
|
|
129,000 |
|
3,371,000 |
|
|
|
|
|
3,500,000 |
|
|
Stock Options Exercised |
|
|
1,000 |
|
21,000 |
|
|
|
|
|
22,000 |
|
|
Employee Stock Purchase Plan |
|
|
1,000 |
|
58,000 |
|
|
|
|
|
59,000 |
|
|
Treasury Stock Purchased |
|
|
_________ |
|
___________ |
|
___________ |
|
(35,000 |
|
(35,000 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
BALANCE, June 30, 2003 |
|
$ |
616,000 |
$ |
13,281,000 |
$ |
3,811,000 |
$ |
(1,152,000 |
$ |
16,556,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
(The remainder of this page was left intentionally blank.)
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following table presents certain consolidated statement of operations items as a percentage of total revenue for periods indicated.
|
|
Six Months
Ended June 30, |
Three Months
Ended June 30, |
|
|
|
|
|
2004 |
2003 |
2004 |
2003 |
|
Revenue |
100.0% |
100.0% |
100.0% |
100.0% |
|
Operating Expenses: |
|
|
|
|
|
Instruction costs and services |
31.5 |
30.1 |
31.3 |
29.8 |
|
Selling and promotional |
13.3 |
12.6 |
13.6 |
13.0 |
|
General and administrative |
41.2 |
40.4 |
41.2 |
40.7 |
|
Provision for uncollectible accounts |
4.2 |
3.1 |
4.6 |
3.2 |
|
|
|
|
|
|
Total operating expenses |
90.2 |
86.2 |
90.7 |
86.7 |
|
Operating income |
9.8 |
13.8 |
9.3 |
13.3 |
|
Other non-operating income |
0.2 |
0.3 |
0.2 |
0.3 |
|
Interest expense |
--- |
0.1 |
--- |
--- |
|
|
|
|
|
|
Income before provision for income taxes |
10.0 |
14.0 |
9.5 |
13.5 |
|
Provision for income taxes |
3.9 |
5.4 |
3.7 |
5.2 |
|
|
|
|
|
|
Net income |
6.1% |
8.6% |
5.8% |
8.3% |
|
|
|
|
|
|
|
|
|
|
|
(The remainder of this page was left intentionally blank.)
Results of Operations
General
The Company owns and operates proprietary, postsecondary institutions that offer career vocational training programs primarily in the allied health field. As of June 30, 2004, the Company operated campuses at 11 12 locations in six seven states (the “Campuses”). The Company’s revenue is derived almost entirely from tuition, textbook sales, fees and charges paid by, or on behalf of, our students. A large number of the Company’s students paid a substantial portion of tuition and other fees with funds received through student assistance financial aid programs under Title IV of the Higher E
ducation Act of 1965, as amended (the "HEA"). The Company received approximately 8381% of cash receipts from such funds for the year ended December 31, 20012003.
The Company’s strategy over the next two years is to grow revenue primarily by increasing the number of programs offered at each of its twelve campuses. Programs that are currently being offered by the Company will be transplanted to other campuses. Campuses currently offer an average of five of the Company’s twelve primary programs. The Company has experience teaching each of the programs targeted for transplant, however due to regulatory requirements each transplanted program must receive its own regulatory approvals before being offered at a campus. The Company has not achieved its goal of transplanting new programs in 2003 and early 2004. The Company is generally required to hire staff, purchase equipment and have classroom space available prior to submitting new programs to accreditation bodies for approval. As a result the Company has incurred exp
enses for new program transplants (occupancy, depreciation and faculty) in advance of student enrollments.
The Company has invested capital expenditures to improve and expand facilities over the last two and one-half years. Additional space has been added at all of the Company’s locations. Four Campuses were moved to larger facilities in the past two years, San Bernardino, California in February 2003, Arlington, Texas in June 2003, San Diego, California in January 2004, and Denver, Colorado in March 2004. The Portland, Oregon Campus will be moved to a new facility in late 2004. Capital expenditures to improve facilities and equipment were $1,842,000 in 2002, $3,237,000 in 2003, and $2,276,000 for the first six months of 2004.
The addition of classrooms and upgraded facilities has, and will provide the Company the space to expand program offerings at its Campuses. Three programs were added in 2003, Practical Nursing, Medical Assistant, and Surgical Technology. One program was added in the first quarter of 2004, Dental Assistant, and two programs were added in the second quarter of 2004, Surgical Technology and Health Unit Coordinator. In addition, four programs have met all necessary regulatory approvals and will begin enrolling students in the third and fourth quarters of 2004, two Associate of Science in Respiratory Therapy programs, one Pharmacy Technician program and one Surgical Technologist program.
The Company’s revenue varies based on student enrollment and population. The number of students that attend our Campuses, the number of new enrollments during a fiscal period, student retention rates and general economic conditions impact student population. The introduction of new programs at certain campuses, improved advertising effectiveness and student retention have been significant factors of increased student population in the last two three years.
The Company and each of its campuses are subject to extensive regulation. These regulations cover virtually all phases of the Company’s operations, including the Company’s educational programs, facilities, instructional and administrative staff, administrative procedures, financial operations and financial strength. They also affect the Company’s ability to acquire or open additional Campuses or change the Company’s corporate structure. These regulatory agencies periodically revise their requirements and modify their interpretations of existing requirements. Each of the Company’s Campuses must be authorized by the state in which it operates, accredited by an accrediting commission that the U.S. Department of Education ("ED") recognizes, and certified by the ED to participate in Title IV Programs. Any substantial restrictions on the Campus
es ability to participate in Title IV Programs would adversely affect our ability to enroll students, expand programs and student population.
The Company had a reduction in enrollments in one clinical program at one campus due to state board programmatic provisional approval. The company received notification in May 2004 that the program would not be allowed to enroll additional students until yearly average minimum pass rates on the licensure examination for graduates were within acceptable levels as required by the state board. As a result the campus will not enroll students in the program without obtaining state board approval. The company believes that it has made appropriate changes to increase pass rates to an acceptable level. However, there can be no assurance that the state board will approve additional enrollments in the future and the board may require the Company to terminate the program. This change reduce
d potential enrollments by approximately 150 for 2004 with 48 of the reduction occurring in the second quarter of 2004.
The Company establishes an accounts receivable and a corresponding deferred revenue liability for each student upon commencement of a program of study. The deferred revenue liability, consisting of tuition and non-refundable registration fees, is recognized into income ratably over the length of the program. If a student withdraws from a program, the unearned portion of the tuition for which the student has paid is refunded on a pro-rata basis. Textbook and uniform sales are recognized when they occur. Any unpaid balance due when the student withdraws is generally due directly from the student, not from a federal or state agency.
Accounts receivable are due from students and are expected to be paid primarily through the use of federal and state sources of funds. Students are responsible for amounts not available through federal and state sources and unpaid amounts due when the student withdraws. The Company expects that non-Title IV accounts and notes receivable due from students may continue to increase in the future and that the related provision for uncollectible accounts may also increase dependent upon the Company’s collection effectiveness and student retention.
SIX MONTHS ENDED JUNE 30, 2004 COMPARED TO
SIX MONTHS ENDED JUNE 30, 2003
Student enrollments increased 163 or 3.5% to 4,829 for the six months ended June 30, 2004 compared to 4,666 in 2003. Three new programs added to existing campuses in 2004 accounted for 99 additional enrollments. Enrollments increased 137 as a result of two programs that were added in the last half of 2003. Enrollments decreased 48 at one campus due to a state board programmatic provisional approval (see discussion above). The remaining decrease of 25 was a result of decreased enrollments in current programs. The Company had 947 enrollments in clinical programs and 3,882 in core programs in 2004 compared to 950 enrollments in clinical programs and 3,716 in core programs in 2003. Student population increased 3.1% to 5,751 at June 30, 2004 compared to 5,579 at June 30, 2003. Average student population for the six months ending June 30, 2004 increased 9.7% to 6,136 c
ompared to 5,595 for the same period in 2003.
Net income of $2,501,000 was recorded for the six months ended June 30, 2004 compared to $3,020,000 in 2003. Profit decreased as expenses accelerated at a faster rate than revenue. The six months ended June 30, 2004 included $131,000 of payroll expense related to one additional day of accrued payroll as compared to the prior year first six months. The first quarter had one additional day of payroll. All of the remaining quarters have the same number of payroll days as 2003.
The Company is generally required to hire staff, purchase equipment and have classroom space available prior to submitting new programs to accreditation bodies for approval. As a result the Company has incurred expenses for new program transplants (occupancy, depreciation and faculty) in advance of student enrollments.
Revenue increased 16.3% or $5,752,000 to $41,002,000 for the six months ended June 30, 2004 compared to $35,250,000 for the same period in 2003. The revenue increased due to higher student enrollments, increased average student population and an approximate 5% tuition increase compared to 2003.
Instruction Costs and Services – increased 21.8% or $2,310,000 to $12,907,000 compared to $10,597,000 in 2003. The increase was primarily a result of increased salary expense compared to 2003. Salaries increased $1,761,000 due to higher wages and an increase in the number of staff compared to 2003. The Company had 49 additional full time equivalent (“FTE”) employees for the six months ended June 30, 2004 compared to the six months ended June 30, 2003. The Company has added additional instructional staff in anticipation of program transplants. Wage expense paid prior to programs starting was $130,000 for the six months ended June 30, 2004. Textbooks, uniforms and classroom supplies accounted for the remaining increase.
Selling and Promotional –increased 22.4% or $1,000,000 to $5,456,000 compared to $4,456,000 in 2003. The increase is primarily a result of additional television, newspaper, and Internet advertising compared to 2003. Salaries increased $241,000 or 13.5% compared to 2003. The increase is a result of increased salaries and approximately 5 additional FTE employees compared to 2003.
General and Administrative – increased 18.4% or $2,629,000 to $16,894,000 compared to $14,265,000 in 2003. Rent expense increased $619,000. The increase was the result of normal rent increases, campus expansions, and an acceleration of the rent for the old Denver campus location. Four campuses were moved to new locations in 2003 and 2004 and additional space was leased at several campuses. Approximately 55,000 additional square feet was leased at June 30, 2004 compared to June 30, 2003. The Denver, Colorado Campus was moved to a new location during March 2004. The lease on the previous location expires July 31, 2004. The Company expensed the remaining lease liability of $103,000 for the old location in the first quarter of 2004. Payroll increased $558,000 compared to 2003. Additional employees due to larger enrol
lment, higher wages, and one additional day of payroll were factors in the increase. Depreciation expense increased $236,000 as capital expenditures increased during 2004. Capital expenditures were primarily related to leasehold improvements and new equipment for two campus moves and leasehold improvements and new equipment for new programs. The Company has increased capital expenditures in the last two years in preparation of transplanting programs and moving campuses to new expanded facilities. Professional fees increased $188,000 due to regulatory filings and legal costs. Health insurance expense increased $245,000 due to increased claims, administrative expenses, and additional employees participating in the health plan. Employee procurement increased $135,000 due to hiring additional employees. The Company also experienced increased expenses in several other categories as average student population increased 9.7%.
Provision for Uncollectible Accounts – increased $653,000 to $1,734,000 compared to $1,081,000 in 2003. Students that dropped from their program of study as a percentage of population increased to 6.2% in 2004 from 5.6% at June 30, 2003. Accounts receivable due from dropped students is generally less collectible than balances due from graduates. Therefore, an increase in the drop percentage in future quarters may lead to an increase in the provision for uncollectible accounts as a percentage of revenue in future periods.
Interest and Other Non-Operating Income – decreased to $90,000 for the six months ended June 30, 2004 compared to $92,000 in 2003. The Company maintains its cash and temporary investments in short-term highly liquid accounts including CD’s and money markets.
Interest Expense – was $24,000 for the six months ended June 30, 2003. The Company’s subordinated debt was eliminated in February 2003 and the Company was no longer required to make interest payments after that date. See discussion under Liquidity and Capital Resources.
Provision for Income Taxes – a tax provision of $1,600,000 or 39.0% of pretax income was recorded for the six months ended June 30, 2004 compared to $1,899,000 or 38.6% in 2003.
EPS and Weighted Average Common Shares – Basic weighted average common shares increased to 5,987,000 in 2004 from 5,853,000 in 2003. Common shares increased due to the Company’s employee stock purchase plan and stock options exercised. Basic income per share was $.42 in 2004 compared with $.52 in 2003. Diluted weighted average common shares outstanding increased to 6,349,000 in 2004 from 6,279,000 in 2003. The average common shares increased due to stock options not yet exercised. Diluted income per share was $.39 for the six months ended June 30, 2004 compared with $.48 for 2003.
THREE MONTHS ENDED JUNE 30, 2004 COMPARED TO
THREE MONTHS ENDED JUNE 30, 2003
Student enrollments decreased 29 or 1.3% to 2,154 for the three months ended June 30, 2004 compared to 2,183 in 2003. Three new program added to existing Campuses in 2004 accounted for 66 additional enrollments. Enrollments increased 62 as a result of two programs that were added in the last half of 2003. Enrollments decreased 48 at one Campus due to a state board programmatic provisional approval. The remaining decrease of 109 enrollments was a result of decreased enrollments in current programs. The Company had 435 enrollments in clinical programs and 1,719 in core programs in 2004 compared to 454 enrollments in clinical programs and 1,729 in core programs in 2003. Student population increased 3.1% to 5,751 at June 30, 2004 compared to 5,579 at June 30, 2003. Average student population for the three months ending June 30, 2004 increased 7.5% to 5,995 compared t
o 5,579 for the same period in 2003.
Net income of $1,197,000 was recorded for the three months ended June 30, 2004 compared to $1,485,000 in 2003. Profit decreased as expenses accelerated at a faster rate than revenue.
The Company is generally required to hire staff, purchase equipment and have classroom space available prior to submitting new programs to accreditation bodies for approval. As a result the Company has incurred expenses for new program transplants (occupancy, depreciation and faculty) in advance of student enrollments.
Revenue increased 15.3% or $2,736,000 to $20,627,000 for the three months ended June 30, 2004 compared to $17,891,000 for the same period in 2003. Revenue increased due to increased average student population and a tuition increase of approximately 5%.
Instruction Costs and Services – increased 20.8% or $1,112,000 to $6,451,000 compared to $5,339,000 in 2003. The increase was primarily a result of increased salary expense compared to 2003. Salaries increased $882,000 due to higher wages and an increase in the number of staff compared to 2003. The Company had 49 additional FTE employees for the quarter ended June 30, 2004 compared to the quarter ended June 30 2003. The Company has added additional instructional staff in anticipation of program transplants. Wage expenses paid prior to programs starting was $86,000 for the quarter ended June 30, 2004. Textbooks, uniforms, and classroom supplies accounted for the remaining increase.
Selling and Promotional –increased 20.1% or $469,000 to $2,803,000 compared to $2,334,000 in 2003. The increase is primarily a result of additional television, newspaper, and Internet advertising compared to 2003. Salaries increased $115,000 or 12.8% compared to 2003.
General and Administrative – increased 16.7% or $1,218,000 to $8,499,000 compared to $7,281,000 in 2003. Rent expense increased $223,000. The increase was the result of normal rent increases and campus expansions. Payroll increased $253,000 compared to 2003. Depreciation expense increased $137,000 as capital expenditures increased during 2004. Capital expenditures were primarily related to leasehold improvements and new equipment for two campus moves and for new programs. The Company has increased capital expenditures in the last two years in preparation of transplanting programs and moving campuses to new expanded facilities. Health insurance increased $185,000 due to increased claims, administrative expenses, and additional employees participating in the health plan. Employee procurement increased $96,000 due t
o hiring additional employees. The Company also experienced increased expenses in several other categories as average student population increased 7.5%.
Provision for Uncollectible Accounts – increased $389,000 to $955,000 compared to $566,000 in 2003. Students that dropped from their program of study as a percentage of population increased to 6.7% in 2004 from 5.7% at June 30, 2003. Accounts receivable due from dropped students is generally less collectible than balances due from graduates. Therefore, an increase in the drop percentage in future quarters may lead to an increase in the provision for uncollectible accounts as a percentage of revenue in future periods.
Interest and Other Non-Operating Income – decreased to $44,000 for the quarter ended June 30, 2004 compared to $48,000 in 2003. The Company maintains its cash and temporary investments in short term highly liquid accounts including CD’s and money markets.
Interest Expense –The Company’s subordinated debt was eliminated in February 2003 and the Company was no longer required to make interest payments after that date. See discussion under Liquidity and Capital Resources.
Provision for Income Taxes – a tax provision of $766,000 or 39.0% of pretax income was recorded for the quarter ended June 30, 2004 compared to $934,000 or 38.6% in 2003.
EPS and Weighted Average Common Shares – Basic weighted average common shares increased to 5,990,000 in 2004 from 5,860,000 in 2003. Common shares increased due to the Company’s employee stock purchase plan and stock options exercised. Basic income per share was $.20 in 2004 compared with $.25 in 2003. Diluted weighted average common shares outstanding increased to 6,330,000 in 2004 from 6,317,000 in 2003. The average common shares increased due to stock options not yet exercised. Diluted income per share was $.19 for the quarter ended June 30, 2004 compared with $.24 for 2003.
Liquidity and Capital Resources
Credit Facility
The Company secured a $3,000,000 revolving credit facility with Security Bank of Kansas City in March 31, 1997. The amount available under the facility is offset by the letter of credit discussed below. As a result, $2,882,000 was available under the facility at June 30, 2004. This facility is due to expire on April 30, 2005. However, the Company currently maintains a large cash and temporary investment balance and may not renew this facility in the future. Funds borrowed under this facility, if any, will be used for general corporate purposes. This facility has a variable interest rate of prime plus one percent, and no commitment fee. The credit facility is secured by all cash, accounts and notes receivable, furniture and equipment, and capital stock of the subsidiaries. The Company is
required to maintain a minimum level of subordinated debt plus consolidated tangible net worth of not less than $7,600,000 as part of this agreement. The Company is currently in compliance with this agreement. The Company has not borrowed any funds under this facility.
On June 30, 2004, the Company was obligated under a $118,000 letter of credit as security for a lease on the Garden Grove, California location. The letter of credit can only be drawn upon if there is a default under the lease agreement and will remain an obligation of the Company until it expires October 2, 2004.
Other
The Company entered into a $367,000 letter of credit with Commerce Bank in March 2004. The letter of credit is used to secure workers compensation claims for the Company’s worker’s compensation insurance from April 1, 2004 through March 31, 2005. The letter of credit is secured by certificates of deposit in the same amount that expire on March 31, 2005.
The Company changed its workers compensation insurance plan from a guaranteed cost plan to a high deductible plan effective April 1, 2004. The high deductible plan requires the Company to pay all workers compensation claims for the plan year as they are incurred up to certain limits in addition to a premium paid to the insurance carrier for claims processing and administrative costs. The Company will pay individual claims up to $250,000 with an annual aggregate deductible of $1,250,000. The previous plan required the Company to pay premiums to its insurance carrier for all estimated costs of the workers compensation insurance with the carrier assuming all risk for individual claims with no deductible. The Company believes that by assuming the risk associated with the new plan that it will reduce the overall cost associated with workers compensation insurance for
current and future periods. The Company’s workers compensation claims for any of the prior four years has not exceeded $367,000 and in most years has been significantly below this amount.
Contractual Obligations and Commercial Commitments
The Company’s contractual obligations and other commercial commitments are summarized below as of June 30, 2004:
|
Year Ending December 31, |
|
Facility
Operating Leases |
|
Other
Operating Lease |
|
Capital Asset Obligations |
|
Purchase Obligations |
|
|
|
|
|
|
|
|
|
|
|
|
2004 (remainder of year) |
|
$ |
2,410,000 |
|
$ |
7,000 |
|
$ |
628,000 |
|
$ |
305,000 |
|
|
2005 |
|
|
5,116,000 |
|
|
8,000 |
|
|
--- |
|
|
101,000 |
|
|
2006 |
|
|
4,906,000 |
|
|
--- |
|
|
--- |
|
|
45,000 |
|
|
2007 |
|
|
4,591,000 |
|
|
--- |
|
|
--- |
|
|
--- |
|
|
2008 |
|
|
4,296,000 |
|
|
--- |
|
|
--- |
|
|
--- |
|
|
Thereafter |
|
|
24,155,000 |
|
|
--- |
|
|
--- |
|
|
--- |
|
| |
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
45,474,000 |
|
$ |
15,000 |
|
$ |
628,000 |
|
$ |
451,000 |
|
| |
|
|
|
|
|
|
|
|
|
Facility operating leases consist of the Company rental agreements for its building and office space rentals.
The other operating lease is for the Chief Executive Officer’s automobile.
Capital asset obligations consist of contracts for leasehold improvements and furniture for the Portland, Oregon campus move which is scheduled for the fourth quarter of 2004 and upgrades at three other campuses.
Purchase obligations consist of outstanding purchase orders and commitments for telecommunications and copier contracts.
Cash Flows and Other
Cash provided by operating activities was $1,656,000 in for the six months ended June 30, 2004 compared with $4,689,000 in 20012003. Cash flows from operating activities increaseddecreased primarily due to an increase in accounts receivables less deferred revenue of $2,689,000 compared to an increase of $1,165,000 in 2003 and a decrease in accounts payable and net income compared to 2003.
an increase in net income of $974,000, offset by an increase in accounts receivable, net of deferred revenue and the provision for uncollectible accounts, of $1,041,000. Cash used in investing activities was $1,3913,136,000 for the six months ended June 30, 2004 compared to $130,1,446,000 in 20031. Capital expenditure spending increased $1,063,000 in 2004 compared to 2003. The Company purchased $860,000 in short term investments in 2004 compared to a minimal change in short-term investments during 2003. Ca
pital expenditures increased as the Company moved two campuses during 2004. Capital expenditures for the two campuses were approximately $1,906,000. The remaining capital expenditures were for leasehold improvements and computers at current locations.
Cash provided by financing activities was $110,000 for the six months ended June 30, 2004 compared with cash used of $172,000 in 2003. The primary difference between the quarters was a result of dividends paid in 2003. The Company paid to Cahill-Warnock a dividend equal to $4.08 per share of the Class B Voting Convertible Preferred Stock on February 7, 2003. This constituted all dividend payments owed to Cahill-Warnock, including the fourth quarter 2002 dividend of $43,500 and a special dividend to encourage the conversion of the Preferred Stock. In addition, stock options exercised increased in 2004 and there was no treasury stock purchased in 2004.
The Company’s Board of Directors approved a 500,000 shares repurchase program in August 2000. As of June 30, 2004, the Company had purchased a total of 278,935 shares at an average price of $3.92 pursuant to the buy back plan. The Company’s last purchase was 2,800 shares at $12.52 per share in the first quarter of 2003. The share repurchase plan remains in effect.
On February 27, 2003, the Board of Directors unanimously adopted the Concorde Career Colleges, Inc. 2003 Long-term Executive Compensation Plan (the “Compensation Plan”). The Company’s shareholders approved the Compensation Plan at the Annual Meeting held on May 22, 2003. The Compensation Plan provides an aggregate 200,000 incentive stock options to be issued to certain employees as authorized by the Compensation Committee of the Board of Directors.
The Company has additional incentive stock option plans (the “2002 Option Plan,” “2000 Option Plan” and the “1998 Option Plan”) which authorize the Company to issue 300,000, 125,000 and 250,000 shares, respectively, of its common stock to certain officers and employees of the Company. Options for all plans, including the 2003 Compensation Plan, are granted at fair market value or greater on the date of grant for a term of not more than ten years unless options are canceled due to employee termination. As of June 30, 2004, 151,800 shares remain available to be granted with the 1998, 2000, 2002, and 2003 option plans.
On February 27, 2003 the Board of Directors unanimously adopted the Concorde Career Colleges, Inc. Restated Employee Stock Purchase Plan (“Employee Plan”). The Plan was approved by the Company’s shareholders at its Annual Meeting held on May 22, 2003. An aggregate of 75,000 shares of Common Stock of the Company are subject to the Employee Plan and are reserved for issuance under such Plan. Options to purchase 15,000 shares of Common Stock of the Company are to be offered to participants for purchase in the first year (commencing October 1, 2003 and ending September 30, 2004) and each of the four succeeding plan years. The option price of Common Stock purchased with payroll deductions made during such annual, semi-annual or calendar-quarterly offering for participant therein shall be the lower of:
(a) 95% of the closing price of the Common Stock on the Offering Commencement Date or the nearest prior business day on which trading occurred on the Nasdaq Stock Market; or
(b) 95% of the closing price of the Common Stock on the Offering Termination Date or the nearest prior business day on which trading occurred on the Nasdaq Stock Market.
The Company meets its working capital, capital equipment purchases and cash requirements with funds generated internally. Management currently expects its cash on hand, funds from operations and borrowings available under existing credit facilities to be sufficient to cover both short-term and long-term operating requirements. However, cash flows are dependent on the Company’s ability to maintain Title IV eligibility, maintain demand for programs and to minimize uncollectible accounts receivable through effective collections and improved retention.
Safe Harbor Statement
This Form 10-Q contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”), and the Company intends that such forward-looking statements be subject to the safe harbors created thereby. Statements in this Form 10-Q containing the words “estimate,” “project,” “anticipate,” “expect,” “intend,” “believe,” and similar expressions may be deemed to create forward-looking statements which, if so deemed, speak only as of the date the statement was made. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
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 and may relate to: (i) the ability of the company to realize increased enrollments from investments in infrastructure made over the past years; (ii) ED’s enforcement or interpretation of existing statutes and regulations affecting the Company’s operations; and (iii) the sufficiency of the Company’s working capital, financings and cash flow from operating activities for the Company’s future operating and capital requirements. 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, pot
ential adverse effects of regulations; impairment of federal funding; adverse legislative action; student loan defaults; 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.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The Company’s exposure to market risk for changes in interest rates relate to the increase or decrease in the amount of interest income the Company can earn on short-term investments in certificate of deposits and cash balances. Because the Company’s investments are in short-term, investment-grade, interest-bearing securities, the Company is exposed to minimum risk on the principal of those investments. The Company ensures the safety and preservation of its invested principal funds by limiting default risks, market risk and investment risk. The Company does not use derivative financial instruments. The Company’s cash is deposited into several checking accounts, money market accounts and certificates of deposit. The interest rates for the money market accounts and certificates of deposit ranged from .75% to 2.03% at June 30, 2004. As of the end of t
he period covered by this quarterly report on Form 10-Q, the Company’s exposure to fluctuations in the interest rates for its’ money market accounts and certificates of deposit are minimal.
Item 4. Controls and Procedures
We maintain a set of disclosure controls and procedures and internal controls designed to ensure that information required to be disclosed in our filings under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. Our principal executive and financial officers have evaluated our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q and have determined that such disclosure controls and procedures are effective to provide reasonable assurance that material information relating to the Company is made known to management, including the CEO and CFO, particularly during the periods when the Company’s periodic reports are prepared. There were no significant changes in internal controls or
other factors that could significantly affect internal controls, including any corrective actions with regard to significant deficiencies and material weaknesses.
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings
The Company is sued from time to time by a student or students who claim to be dissatisfied with the results of their program of study. Typically, the claims allege a breach of contract; deceptive advertising and misrepresentation and the student or students seek reimbursement of tuition. Punitive damages sometimes are also sought. In addition, ED may allege regulatory violations found during routine program reviews. The Company has, and will continue to dispute these findings as appropriate in the normal course of business. In the opinion of the Company’s management, resolution of such pending litigation and disputed findings will not have a material effect on the Company’s financial condition or its results of operation.
The Company is not aware of any material violation by the Company of applicable local, state and federal laws.
Item 2. Change in Securities, Use of Proceeds and Issuer Purchases of Equity Securities
Issuer Purchases of Equity Securities:
|
Period |
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Total Number of Shares Purchased |
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Average Price Paid per Share |
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Total Number of Shares Purchased as Part of Publicly Announced Program (1) |
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221,065 Shares May Yet Be Purchased Under this Program |
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April 1, 2004 –
April 30, 2004 |
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---- |
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---- |
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---- |
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---- |
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May 1, 2004 –
May 31, 2004 |
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---- |
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---- |
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---- |
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---- |
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June 1, 2004 –
June 30, 2004 |
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---- |
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---- |
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---- |
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---- |
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Total |
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---- |
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---- |
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---- |
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---- |
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(1) On August 22, 2000, the Company announced that the Board of Directors approved a stock repurchase of up to 500,000 shares of the Company’s stock. As of June 30, 2004, the Company had acquired 278,935 shares at an average price of $3.92.
Item 3. Defaults upon Senior Securities – None
Item 4. Submission of Matters to a Vote of Security Holders
a) The Company held its 2004 Annual Meeting of Stockholders (“Annual Meeting”) on May 27, 2004. On the Record Date, the Company had 5,820,851 shares of Common Stock issued and outstanding and entitled to vote at the Annual Meeting.
b) Proxies for the meeting were solicited pursuant to Regulation 14A; there was no solicitation in opposition to management’s nominees for Directors as listed in such Proxy Statement and all such nominees were elected. The voting was as follows:
|
Election of five Directors: |
For |
Withheld |
| |
|
|
|
1. Jack L. Brozman |
5,811,187 |
9,664 |
|
|
|
|
|
|
|
|
3. Thomas K. Sight |
5,811,428 |
9,423 |
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4. Janet M. Stallmeyer |
5,811,833 |
9,018 |
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5. David L. Warnock |
5,263,019 |
557,832 |
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|
c) Ratification of the appointment of the independent auditors for the Company for 2004 was voted as follows:
|
|
For |
Against |
Withheld |
|
BKD, LLP |
5,819,936 |
875 |
40 |
Item 5. Other Information- None
Item 6. Exhibits and Reports on Form 8-K
A) 3-1 Restated Certificate of Incorporation of the Corporation, as amended (Incorporated by reference to Exhibit 3(a) of the Annual Report on Form 10-K for the year ended December 31, 1994).
3-1 Amended and Restated Bylaws of the Corporation (Incorporated by reference to Exhibit 3(b) of the Annual Report on Form 10-K for the year ended December 31, 1991).
11 Computation of per share earnings.
31-1 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31-2 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32-1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002.
32-2 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
B) The Company filed a report on Form 8-K dated January 15, 2004, furnishing under Item 12 a press release reporting its estimated revenue, operating margin percentage, diluted earnings per share, student enrollment, average student population and ending population for 2003 and estimated revenue and diluted earnings per share for 2004.
The Company filed a report on Form 8-K dated February 25, 2004, furnishing under Item 12 a press release reporting the Company’s results of operations for the year ended December 31, 2003.
The Company filed a report on Form 8-K dated April 21, 2004, furnishing under Item 12 a press release reporting the Company’s results of operations for the quarter ended March 31, 2004.
The Company filed a report on Form 8-K dated August 2, 2004, furnishing under Item 12 a press release reporting the Company’s results of operations for six months ended June 30, 2004.
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.
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CONCORDE CAREER COLLEGES, INC.
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| Date: August 3, 2004 |
By: |
/s/ Jack L. Brozman |
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Title Chief Executive Officer |
| Date: August 3, 2004 |
By: |
/s/ Paul R. Gardner |
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Title Chief Financial Officer
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