Attached files
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EX-31.2 - EXHIBIT 31.2 - National American University Holdings, Inc. | c05936exv31w2.htm |
EX-31.1 - EXHIBIT 31.1 - National American University Holdings, Inc. | c05936exv31w1.htm |
EX-32.1 - EXHIBIT 32.1 - National American University Holdings, Inc. | c05936exv32w1.htm |
EX-32.2 - EXHIBIT 32.2 - National American University Holdings, Inc. | c05936exv32w2.htm |
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-K/A
Amendment
No. 1
ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended May 31, 2010
Commission File No. 001-34751
National American University Holdings, Inc.
(Exact name of registrant as specified in its charter)
Delaware | 83-0479936 | |
(State or other jurisdiction | (I.R.S. Employer | |
of incorporation or organization) | Identification No.) | |
5301 S. Highway 16, Suite 200 | ||
Rapid City, SD | 57701 | |
(Address of principal executive offices) | (Zip Code) |
(605) 721-5200
(Registrants telephone number, including area code)
(Registrants telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, $.0001 par Value | The NASDAQ Stock Market | |
Title of each class | Name of each exchange on which registered |
Securities registered pursuant to section 12(g) of the Act:
None
(Title of class)
None
(Title of class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule
405 of the Securities Act. Yes o No þ
Indicate by check mark if the registrant is not required to file reports pursuant to Section
13 or Section 15(d) of the Act. Yes o No þ
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. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate website, if any, every Interactive Data File required to be submitted and posted pursuant
to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for
such shorter period that the registrant was required to submit and post such files). Yes o No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation
S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of
registrants knowledge, in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definition of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act.
Large accelerated filer o | Accelerated filer o | Non-accelerated filer o (Do not check if a smaller reporting company) |
Smaller reporting company þ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act). Yes o No þ
As of August 16, 2010, there were 26,369,653 shares of Common Stock, $0.0001 par value per
share outstanding.
The aggregate market value of the registrants common stock held by non-affiliates computed by
reference to the price at which the common equity was last sold as of November 30, 2009, the last
business day of the registrants most recently completed second fiscal quarter, was approximately
$27.1 million.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the Registrants Definitive Proxy Statement for its 2010 Annual Meeting of
Stockholders (which is expected to be filed with the Commission within 120 days after the end of
the Registrants 2010 fiscal year) are incorporated by reference into Part III of this Report.
Table of Contents
EXPLANATORY NOTE
The registrant filed with the Securities and Exchange Commission an Annual Report on Form 10-K
for the year ended May 31, 2010 on August 18, 2010 (the Form 10-K). The registrant is filing
this Amendment No. 1 to amend Item 8. Financial Statements and Supplemental Data in Part II of the
Form 10-K solely to correct the inadvertent omission of the signature of Deloitte & Touche LLP, the
registrants Independent Registered Public Accounting Firm, on the Report of Independent
Registered Public Accounting Firm. The registrant had received a signed Report of Independent
Registered Public Accounting Firm from Deloitte & Touche LLP prior to filing the Form 10-K with the
Securities and Exchange Commission.
As required by Rule 12b-15 under the Securities Exchange Act of 1934, as amended, new
certifications by our principal executive officer and principal financial officer are being filed
as exhibits to this Amendment No. 1 on Form 10-K/A under Item 15 hereof. Except as expressly set
forth in this Amendment No. 1, the Form 10-K has not been amended, updated or otherwise modified.
NATIONAL AMERICAN UNIVERSITY HOLDINGS, INC AND SUBSIDIARIES
FORM 10-K
INDEX
Page | ||||||||
3 | ||||||||
33 | ||||||||
Exhibit 31.1 | ||||||||
Exhibit 31.2 | ||||||||
Exhibit 32.1 | ||||||||
Exhibit 32.2 |
-2-
Table of Contents
Item 8. Financial Statements and Supplementary Data.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
National American University Holdings, Inc.
Page | ||||
Annual Financial Statements: |
||||
4 | ||||
5 | ||||
6 | ||||
8 | ||||
9 | ||||
11 | ||||
Financial Statement Schedules |
||||
All schedules are omitted because they are not applicable or not required. |
-3-
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
National American University Holdings, Inc. and Subsidiaries
Rapid City, South Dakota
National American University Holdings, Inc. and Subsidiaries
Rapid City, South Dakota
We have audited the accompanying consolidated balance sheets of National American
University Holdings, Inc. and subsidiaries (the Company) as of May 31, 2010 and 2009, and the
related consolidated statements of operations and comprehensive income (loss), stockholders
equity, and cash flows for each of the three years in the period ended May 31, 2010. These
financial statements are the responsibility of the Companys management. Our responsibility is
to express an opinion on the financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material
misstatement. The Company is not required to have, nor were we engaged to perform, an audit of
its internal control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of
the Companys internal control over financial reporting. Accordingly, we express no such
opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material
respects, the financial position of National American University Holdings, Inc. and subsidiaries
as of May 31, 2010 and 2009, and the results of their operations and their cash flows for each
of the three years in the period ended May 31, 2010, in conformity with accounting principles
generally accepted in the United States of America.
Minneapolis, Minnesota
August 18, 2010
August 18, 2010
-4-
Table of Contents
NATIONAL AMERICAN UNIVERSITY HOLDINGS, INC.
AND SUBSIDIARIES
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF MAY 31, 2010 AND 2009
(In thousands except share and per share data)
(In thousands except share and per share data)
2010 | 2009 | |||||||
ASSETS |
||||||||
CURRENT ASSETS: |
||||||||
Cash and cash equivalents |
$ | 8,695 | $ | 3,508 | ||||
Short term investments |
11,109 | 4,417 | ||||||
Student receivables net of allowance of $203 and $115
at May 31, 2010 and 2009, respectively |
1,823 | 1,207 | ||||||
Other receivables |
952 | 203 | ||||||
Bookstore inventory |
920 | 604 | ||||||
Deferred income taxes |
1,574 | 1,090 | ||||||
Prepaid and other current assets |
1,759 | 410 | ||||||
Total current assets |
26,832 | 11,439 | ||||||
Total Property and Equipment Net (Note 1) |
15,881 | 12,152 | ||||||
OTHER ASSETS: |
||||||||
Condominium inventory |
3,046 | 3,802 | ||||||
Land held for future development |
312 | 312 | ||||||
Course development net of accumulated amortization
of $1,149 and $804 at May 31,
2010 and 2009, respectively |
768 | 767 | ||||||
Other |
447 | 393 | ||||||
4,573 | 5,274 | |||||||
TOTAL |
$ | 47,286 | $ | 28,865 | ||||
LIABILITIES AND STOCKHOLDERS EQUITY |
||||||||
CURRENT LIABILITIES: |
||||||||
Long-term debt current portion |
$ | 0 | $ | 2,147 | ||||
Line of credit real estate |
0 | 3,305 | ||||||
Accounts payable |
4,315 | 3,564 | ||||||
Dividends payable |
11,116 | 0 | ||||||
Student accounts payable |
322 | 314 | ||||||
Deferred income |
305 | 367 | ||||||
Income tax payable |
231 | 551 | ||||||
Accrued and other liabilities |
6,109 | 4,900 | ||||||
Total current liabilities |
22,398 | 15,148 | ||||||
LONG-TERM DEBT Net of current portion |
0 | 6,507 | ||||||
DEFERRED INCOME TAXES |
1,151 | 1,503 | ||||||
OTHER LONG-TERM LIABILITIES |
2,380 | 815 | ||||||
COMMITMENTS AND CONTINGENCIES |
||||||||
STOCKHOLDERS EQUITY: |
||||||||
Common stock (50,000,000 authorized, 21,819,653
issued and outstanding as of May 31,
2010, 0 issued and outstanding as of May 31, 2009; $0.0001 par value per share) |
2 | 0 | ||||||
Additional paid-in capital |
19,165 | 385 | ||||||
Retained earnings |
2,389 | 7,251 | ||||||
Accumulated other comprehensive income |
96 | 109 | ||||||
21,652 | 7,745 | |||||||
Less treasury stock at cost |
0 | (1,869 | ) | |||||
Total National American University Holdings, Inc. stockholders equity |
21,652 | 5,876 | ||||||
Non-controlling interest |
(295 | ) | (984 | ) | ||||
Total equity |
21,357 | 4,892 | ||||||
TOTAL |
$ | 47,286 | $ | 28,865 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
-5-
Table of Contents
NATIONAL AMERICAN UNIVERSITY HOLDINGS, INC.
AND SUBSIDIARIES
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
FOR THE YEARS ENDED MAY 31, 2010, 2009 AND 2008
(In thousands except share and per share data)
(In thousands except share and per share data)
2010 | 2009 | 2008 | ||||||||||
REVENUE: |
||||||||||||
Academic revenue |
$ | 82,418 | $ | 56,874 | $ | 44,218 | ||||||
Auxiliary revenue |
5,528 | 4,036 | 4,062 | |||||||||
Rental income apartments |
918 | 890 | 782 | |||||||||
Condominium sales |
932 | 784 | 395 | |||||||||
Total revenue |
89,796 | 62,584 | 49,457 | |||||||||
OPERATING EXPENSES: |
||||||||||||
Cost of educational services |
20,419 | 17,398 | 15,130 | |||||||||
Selling, general and administrative |
49,886 | 37,626 | 32,642 | |||||||||
Auxiliary expense |
2,076 | 1,595 | 1,523 | |||||||||
Cost of condominium sales |
761 | 558 | 122 | |||||||||
Loss on disposition of property |
29 | 3 | 5 | |||||||||
Total operating expenses |
73,171 | 57,180 | 49,422 | |||||||||
OPERATING INCOME |
16,625 | 5,404 | 35 | |||||||||
OTHER INCOME (EXPENSE): |
||||||||||||
Interest income |
206 | 242 | 282 | |||||||||
Interest expense |
(525 | ) | (834 | ) | (1,023 | ) | ||||||
Other income net |
218 | 93 | 92 | |||||||||
Total other expense |
(101 | ) | (499 | ) | (649 | ) | ||||||
INCOME (LOSS) BEFORE INCOME TAXES |
16,524 | 4,905 | (614 | ) | ||||||||
INCOME TAX (EXPENSE) BENEFIT |
(6,485 | ) | (1,797 | ) | 231 | |||||||
NET INCOME (LOSS) |
10,039 | 3,108 | (383 | ) | ||||||||
NET (INCOME) LOSS ATTRIBUTABLE TO
NON-CONTROLLING INTEREST |
(4 | ) | 13 | (37 | ) | |||||||
NET INCOME (LOSS) ATTRIBUTABLE TO NATIONAL
AMERICAN UNIVERSITY HOLDINGS, INC. AND
SUBSIDIARIES |
10,035 | 3,121 | (420 | ) | ||||||||
OTHER COMPREHENSIVE INCOME (LOSS)
|
||||||||||||
Unrealized gains (losses) on investments |
(13 | ) | 81 | 117 | ||||||||
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE
TO
NATIONAL AMERICAN UNIVERSITY HOLDINGS,
INC. |
$ | 10,022 | $ | 3,202 | $ | (303 | ) | |||||
The accompanying notes are an integral part of these consolidated financial statements.
(continued)
-6-
Table of Contents
NATIONAL AMERICAN UNIVERSITY HOLDINGS, INC.
AND SUBSIDIARIES
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED MAY 31, 2010, 2009 AND 2008
(In thousands except share and per share data)
FOR THE YEARS ENDED MAY 31, 2010, 2009 AND 2008
(In thousands except share and per share data)
2010 | 2009 | 2008 | ||||||||||
Basic EPS |
||||||||||||
Class A |
||||||||||||
Distributed earnings |
$ | 135.89 | $ | 2.00 | $ | 2.00 | ||||||
Undistributed earnings |
(40.64 | ) | 29.21 | (6.20 | ) | |||||||
Total |
$ | 95.25 | $ | 31.21 | $ | (4.20 | ) | |||||
Common |
||||||||||||
Distributed earnings |
$ | 0.22 | $ | | $ | | ||||||
Undistributed earnings |
(0.26 | ) | | | ||||||||
Total |
$ | (0.04 | ) | $ | | $ | | |||||
Diluted EPS |
||||||||||||
Class A |
||||||||||||
Distributed earnings |
$ | 135.89 | $ | 2.00 | $ | 2.00 | ||||||
Undistributed earnings |
(40.64 | ) | 29.21 | (6.20 | ) | |||||||
Total |
$ | 95.25 | $ | 31.21 | $ | (4.20 | ) | |||||
Common |
||||||||||||
Distributed earnings |
$ | 0.22 | $ | | $ | | ||||||
Undistributed earnings |
(0.26 | ) | | | ||||||||
Total |
$ | (0.04 | ) | $ | | $ | | |||||
Weighted Average Shares
outstanding |
||||||||||||
Basic EPS |
||||||||||||
Class A |
100,000 | 100,000 | 100,000 | |||||||||
Common |
3,103,847 | n/a | n/a | |||||||||
Diluted EPS |
||||||||||||
Class A |
100,000 | 100,000 | 100,000 | |||||||||
Common |
3,103,959 | n/a | n/a |
The accompanying notes are an integral part of these consolidated financial statements.
(concluded) | (concluded) |
-7-
Table of Contents
NATIONAL AMERICAN UNIVERSITY HOLDINGS, INC.
AND SUBSIDIARIES
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
FOR THE YEARS ENDED MAY 31, 2010, 2009 AND 2008
(In thousands except share and per share data)
(In thousands except share and per share data)
Accumulated | Equity | |||||||||||||||||||||||||||
Additional | other | attributable to | Total | |||||||||||||||||||||||||
Common | paid-in | Retained | comprehensive | Treasury | non-controlling | stockholders | ||||||||||||||||||||||
stock | capital | Earnings | income | stock | interest | equity | ||||||||||||||||||||||
Balance May 31, 2007 |
$ | 0 | $ | 385 | $ | 4,664 | $ | (89 | ) | $ | (1,869 | ) | $ | (1,008 | ) | $ | 2,083 | |||||||||||
Dividends declared |
0 | 0 | (57 | ) | 0 | 0 | 0 | (57 | ) | |||||||||||||||||||
Comprehensive income: |
||||||||||||||||||||||||||||
Net income (loss) |
0 | 0 | (420 | ) | 0 | 0 | 37 | (383 | ) | |||||||||||||||||||
Unrealized gain on
investments |
0 | 0 | 0 | 117 | 0 | 0 | 117 | |||||||||||||||||||||
Balance May 31, 2008 |
$ | 0 | $ | 385 | $ | 4,187 | $ | 28 | $ | (1,869 | ) | $ | (971 | ) | $ | 1,760 | ||||||||||||
Dividends declared |
0 | 0 | (57 | ) | 0 | 0 | 0 | (57 | ) | |||||||||||||||||||
Comprehensive income: |
||||||||||||||||||||||||||||
Net income (loss) |
0 | 0 | 3,121 | 0 | 0 | (13 | ) | 3,108 | ||||||||||||||||||||
Unrealized gain on
investments |
0 | 0 | 0 | 81 | 0 | 0 | 81 | |||||||||||||||||||||
Balance May 31, 2009 |
$ | 0 | $ | 385 | $ | 7,251 | $ | 109 | $ | (1,869 | ) | $ | (984 | ) | $ | 4,892 | ||||||||||||
Recapitalization of
Dlorah, Inc. |
1 | 22,508 | 0 | 0 | 0 | 0 | 22,509 | |||||||||||||||||||||
Retirement of treasury
stock |
0 | (1,869 | ) | 0 | 0 | 1,869 | 0 | 0 | ||||||||||||||||||||
Merger costs associated
with reverse merger |
0 | (3,365 | ) | 0 | 0 | 0 | 0 | (3,365 | ) | |||||||||||||||||||
Contributed capital from
non-controlling
interest
holders |
0 | 0 | 0 | 0 | 0 | 685 | 685 | |||||||||||||||||||||
Share based
compensation expense |
0 | 1,507 | 0 | 0 | 0 | 0 | 1,507 | |||||||||||||||||||||
Conversion of Class A
shares to common |
1 | (1 | ) | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||
Dividends declared |
0 | 0 | (14,897 | ) | 0 | 0 | 0 | (14,897 | ) | |||||||||||||||||||
Comprehensive income: |
||||||||||||||||||||||||||||
Net income |
0 | 0 | 10,035 | 0 | 0 | 4 | 10,039 | |||||||||||||||||||||
Unrealized loss on
investments |
0 | 0 | 0 | (13 | ) | 0 | 0 | (13 | ) | |||||||||||||||||||
Balance May 31, 2010 |
$ | 2 | $ | 19,165 | $ | 2,389 | $ | 96 | $ | 0 | $ | (295 | ) | $ | 21,357 | |||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
-8-
Table of Contents
NATIONAL AMERICAN UNIVERSITY HOLDINGS, INC.
AND SUBSIDIARIES
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MAY 31, 2010, 2009 AND 2008
(In thousands except share and per share data)
(In thousands except share and per share data)
2010 | 2009 | 2008 | ||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||||||
Net income (loss) |
$ | 10,039 | $ | 3,108 | $ | (383 | ) | |||||
Adjustments to reconcile net income (loss) to net cash flows
provided by operating activities: |
||||||||||||
Depreciation and amortization |
2,320 | 2,165 | 2,114 | |||||||||
Gain on disposition of property and equipment |
(89 | ) | (110 | ) | (268 | ) | ||||||
Provision for uncollectable tuition |
2,355 | 1,638 | 1,357 | |||||||||
Noncash compensation expense |
1,507 | 0 | 0 | |||||||||
Deferred income taxes |
(453 | ) | 192 | (342 | ) | |||||||
Changes in assets and liabilities: |
||||||||||||
Accounts and other receivables |
(3,750 | ) | (1,670 | ) | (1,547 | ) | ||||||
Student notes |
(17 | ) | 0 | 0 | ||||||||
Bookstore inventory |
(316 | ) | (54 | ) | (164 | ) | ||||||
Prepaid and other current assets |
(1,179 | ) | 187 | (164 | ) | |||||||
Condominium inventories |
756 | 529 | 0 | |||||||||
Accounts payable |
324 | (29 | ) | 1,509 | ||||||||
Deferred income |
(62 | ) | 103 | 71 | ||||||||
Other long-term liabilities |
758 | 103 | 129 | |||||||||
Income tax receivable/payable |
(320 | ) | 1,352 | (39 | ) | |||||||
Accrued and other liabilities |
1,209 | 1,709 | 435 | |||||||||
Net cash flows provided by operating activities |
13,082 | 9,223 | 2,708 | |||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||||||
Purchases of investments |
(16,397 | ) | (2,100 | ) | (549 | ) | ||||||
Proceeds from sale of investments |
9,687 | 941 | 1,579 | |||||||||
Purchases of property and equipment |
(4,671 | ) | (815 | ) | (3,511 | ) | ||||||
Proceeds from sale of property and equipment |
167 | 211 | 396 | |||||||||
Payments (issuance) of student notes |
0 | 22 | (19 | ) | ||||||||
Course development |
(346 | ) | (220 | ) | (188 | ) | ||||||
Construction of development property with line of credit
borrowings |
0 | (452 | ) | (3,879 | ) | |||||||
Other |
(7 | ) | 1 | (1 | ) | |||||||
Net cash flows used in investing activities |
(11,567 | ) | (2,412 | ) | (6,172 | ) | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||||||
Borrowings on lines of credit |
0 | 2,650 | 2,985 | |||||||||
Repayments of lines of credit |
(3,305 | ) | (5,796 | ) | (1,514 | ) | ||||||
Decrease in outstanding checks in excess of book balance |
0 | 0 | (1,040 | ) | ||||||||
Borrowings of long-term debt |
0 | 0 | 3,151 | |||||||||
Repayments of long-term debt |
(8,654 | ) | (2,660 | ) | (1,990 | ) | ||||||
Construction of development property with line of credit
borrowings |
0 | 452 | 3,879 | |||||||||
Contributed capital by non-controlling interest holders |
685 | 0 | 0 | |||||||||
Cash received in reverse merger |
22,092 | 0 | 0 | |||||||||
Cash paid for merger costs |
(3,365 | ) | 0 | 0 | ||||||||
Dividends paid |
(3,781 | ) | (57 | ) | (57 | ) | ||||||
Net cash flows provided by (used in) financing
activities |
3,672 | (5,411 | ) | 5,414 | ||||||||
(continued)
The accompanying notes are an integral part of these consolidated financial statements.
-9-
Table of Contents
NATIONAL AMERICAN UNIVERSITY HOLDINGS, INC.
AND SUBSIDIARIES
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MAY 31, 2010, 2009 AND 2008
(In thousands except share and per share data)
(In thousands except share and per share data)
2010 | 2009 | 2008 | ||||||||||
NET INCREASE IN CASH AND CASH EQUIVALENTS |
$ | 5,187 | $ | 1,400 | $ | 1,950 | ||||||
CASH AND CASH EQUIVALENTS Beginning of year |
3,508 | 2,108 | 158 | |||||||||
CASH AND CASH EQUIVALENTS End of period |
$ | 8,695 | $ | 3,508 | $ | 2,108 | ||||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: |
||||||||||||
Cash paid for interest net of $0, $38, and $0 capitalized
during the years ended May 31, 2010, 2009 and 2008,
respectively |
$ | 554 | $ | 848 | $ | 1,008 | ||||||
Cash paid during the year for income taxes |
$ | 7,884 | $ | 254 | $ | 150 | ||||||
Dividends declared, unpaid |
$ | 11,116 | $ | | $ | | ||||||
(concluded)
The accompanying notes are an integral part of these consolidated financial statements.
-10-
Table of Contents
NATIONAL AMERICAN UNIVERSITY HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts, except share and per share, in thousands)
1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Nature of Operations National American University Holdings, Inc., formerly known as Camden
Learning Corporation (the Company), was incorporated in the State of Delaware on April 10,
2007. The Company was a special purpose acquisition company formed to serve as a vehicle for
the acquisition of an operating business. On November 23, 2009, Dlorah, Inc., a South Dakota
corporation (Dlorah), became a wholly-owned subsidiary of the Company (the Transaction),
pursuant to an Agreement and Plan of Reorganization between the Company and Dlorah. In
connection with the Transaction, the stockholders of Dlorah received approximately 77% of the
equity of the Company, and Dlorah was deemed to be the acquirer for accounting purposes. The
Transaction has been accounted for as a reverse merger accompanied by a recapitalization. As a
result of the Transaction, the historical results of Dlorah became the historical results of the
Company. The accompanying consolidated balance sheet for the year ended May 31, 2009, and the
statements of operations, stockholders equity and cash flows for the years ended May 31, 2009
and 2008 have been updated to reflect the effects of the recapitalization on common stock,
stockholders equity accounts and earnings per share.
The Companys common stock is listed on The Nasdaq Global Market. The Company owns and operates
National American University (NAU or the University). NAU is a regionally accredited,
for-profit, multi-campus institution of higher learning, offering Associate, Bachelors and
Masters degree programs in business-related disciplines, such as accounting, applied
management, business administration and information technology, and in healthcare-related
disciplines, such as nursing and healthcare management. Courses are offered through educational
sites, as well as online via the Internet. Operations include educational sites located in
Colorado, Kansas, Minnesota, Missouri, New Mexico, South Dakota and Texas, and distance learning
operations and central administration offices located in Rapid City, South Dakota. A substantial
portion of NAUs academic income is dependent upon federal student financial aid programs,
employer tuition assistance, online learning programs and contracts to provide instruction and
course materials to other educational institutions. To maintain eligibility for financial aid
programs, NAU must comply with Department of Education requirements, which include, among other
items, the maintenance of certain financial ratios.
The Company, through its Fairway Hills real estate division, also manages apartment units and
develops and sells multi-family residential real estate in the Rapid City, South Dakota area.
Approximately 92%, 91% and 89% of the Companys total revenues for the years ended May 31, 2010,
2009 and 2008, respectively were derived from NAUs academic revenue.
Principles of Consolidation The Companys fiscal year end is May 31. The Company
consolidates the accounts of all wholly owned divisions, including NAU, the Fairway Hills Park
and Recreational Association, the Park West Owners Association, the Vista Park
Owners Association, and the Companys interest in Fairway Hills Section III Partnership (the
Partnership). The Partnership is 50% owned by the Company and 50% owned by individual family
members, most of whom are also either direct or indirect stockholders of the Company. All
material intercompany transactions and balances have been eliminated in consolidation.
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The Partnership is deemed to be a variable interest entity (VIE) under Financial Accounting
Standards Board (FASB) Accounting Standards Codification (ASC) Topic 810-10, Consolidation.
An enterprise is required to consolidate a VIE if that enterprise is the primary beneficiary. An
enterprise is considered the primary beneficiary if it has a variable interest that will absorb
a majority of the entitys expected losses, receive a majority of the entitys expected residual
returns, or both.
The Company has determined that the Partnership qualifies as a VIE and that the Company is the
primary beneficiary of the Partnership. Accordingly, the Company consolidated assets,
liabilities, and net income of the Partnership within its consolidated balance sheets and
statements of operations. As of May 31, 2010 and 2009, the consolidated balance sheets include
Partnership assets of $1,107 and $1,230, respectively, and Partnership liabilities of $64 and
$1,022, respectively. The consolidated statements of operations included Partnership net income
(loss) of $8, $(26), and $74 for the years ended May 31 2010, 2009 and 2008, respectively.
Estimates The preparation of financial statements in conformity with the United States
generally accepted accounting principles requires management to make estimates and assumptions
that affect the amounts and disclosures reported in the financial statements. On an ongoing
basis, the Company evaluates the estimates and assumptions, including those related to revenue
recognition, bad debts, fixed assets, income taxes, benefit plans, and certain accruals. Actual
results could differ from those estimates.
Cash and Cash Equivalents The Company considers all highly liquid debt instruments with
original maturities of three months or less to be cash equivalents. Cash is held in bank
accounts that periodically exceed insured limits; however, no losses have occurred, and the
Company believes the risk of loss is not significant.
Investments The Companys investments consist of government-backed bonds and certificates of
deposit. The bonds are classified as available-for-sale. Available-for-sale securities
represent securities carried at fair value in the accompanying consolidated balance sheets.
Unrealized gains and losses on these securities are excluded from earnings and are reported net
of taxes as a separate component of stockholders equity. For purposes of calculating gross
realized gains and losses on sales of investments, the amortized cost of each investment sold is
used. The net realized gains and losses on sales of investments totaled $0 for each of the years
ended May 31, 2010 and 2009, and approximately $2 and $1 for the year ended May 31, 2008. The
net realized gain or loss is included in other income net in the accompanying consolidated
statements of operations.
The Companys investments were comprised of the following at May 31(in thousands):
2010 | 2009 | |||||||||||||||||||||||
Gross | Gross | Gross | Gross | |||||||||||||||||||||
Unrealized | Unrealized | Unrealized | Unrealized | |||||||||||||||||||||
Fair | Holding | Holding | Fair | Holding | Holding | |||||||||||||||||||
Value | Gains | Losses | Value | Gains | Losses | |||||||||||||||||||
U.S. Treasury debt securities |
$ | 10,348 | $ | 145 | $ | | $ | 2,373 | $ | 143 | $ | | ||||||||||||
Certificates of deposit |
655 | 13 | | 1,934 | 17 | | ||||||||||||||||||
Other debt securities |
106 | 5 | | 110 | 10 | | ||||||||||||||||||
Total |
$ | 11,109 | $ | 163 | $ | | $ | 4,417 | $ | 170 | $ | | ||||||||||||
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As of May 31, 2010, the Companys investment maturity dates are as follows (in thousands):
Gross | Gross | Gross | ||||||||||||||||||
Unrealized | Unrealized | Unrealized | ||||||||||||||||||
Amortized | Holding | Holding Losses | Holding Losses | Fair | ||||||||||||||||
Cost | Gains | < 1 Year | > 1 Year | Value | ||||||||||||||||
Less than one year |
$ | 8,626 | $ | 13 | $ | | $ | | $ | 8,639 | ||||||||||
One to five years |
2,320 | 150 | | | 2,470 | |||||||||||||||
Total |
$ | 10,946 | $ | 163 | $ | | $ | | $ | 11,109 | ||||||||||
Declines in the fair value of individual securities classified as available-for-sale below their
amortized cost that are determined to be other than temporary result in write-downs of the
individual securities to their fair value, with the resulting write-downs included in current
earnings as realized losses. Unrealized losses that may occur are generally due to changes in
interest rates and, as such, are considered by the Company to be temporary. Management evaluates
securities for other-than-temporary impairment on at least a quarterly basis, and more
frequently when economic or market concerns warrant such evaluation. Consideration is given to
(1) length of time and the extent to which the fair value has been less than cost, (2) the
financial condition and near-term prospects of the issuer, and (3) the intent and ability of the
Company to retain its investments in the issuer for a period of time sufficient to allow for any
anticipated recovery in fair value.
Student Accounts Receivable Student accounts receivable are recorded at estimated net
realizable value and are revised periodically based on estimated future collections. Interest
and service charges are applied to all past due student accounts receivable; however,
collections are first applied to principal balances until such time that the entire principal
balance has been received. Student accounts are charged off only when reasonable collection
means are exhausted. The University has determined that most accounts with an outstanding
balance of 180 days after the start of the term are uncollectible. Bad debt expense is included
in cost of educational services on the consolidated statements of operations.
Other Receivables Other receivables consist of institutional which are amounts due from other
educational institutions to which the University provides instruction and course materials and
are stated at net realizable value.
Bookstore Inventory Inventories consist mainly of textbooks and supplies. Inventories are
stated at the lower of cost or market. Cost is determined by the first-in, first-out method.
Property and Equipment Property and equipment are stated at cost. Renewals and improvements
are capitalized, while repairs and maintenance are expensed when incurred. Upon the retirement,
sale or disposition of assets, costs and related accumulated depreciation are eliminated from
the accounts and any gain or loss is reflected in operating income. For financial statement
purposes, depreciation is computed using the straight-line method over the following estimated
useful lives:
Years | ||||
Buildings and building improvements |
1940 | |||
Land improvements |
1020 | |||
Furniture, vehicles, and equipment |
515 |
For tax purposes, depreciation is computed using the straight-line and accelerated methods.
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Property and equipment net consists of the following as of May 31:
2010 | 2009 | |||||||
Land |
718 | 718 | ||||||
Land improvements |
374 | 374 | ||||||
Buildings and building improvements |
18,300 | 16,147 | ||||||
Furniture, vehicles, and equipment |
17,316 | 14,564 | ||||||
Total gross property and equipment |
36,708 | 31,803 | ||||||
Less Accumulated Depreciation |
(20,827 | ) | (19,651 | ) | ||||
Total net property and equipment |
$ | 15,881 | $ | 12,152 | ||||
Capitalized Course Development Costs The University internally develops curriculum and
electronic instructional materials for certain courses. The curriculum is primarily developed by
employees and contractors. The curriculum is integral to the learning system. Customers do not
acquire the curriculum or future rights to it.
The Company capitalizes course development costs. Costs that qualify for capitalization are
external direct costs, payroll, and payroll-related costs. Costs related to general and
administrative functions are not capitalizable and are expensed as incurred. Capitalization ends
at such time that the course and/or material is available for general use by faculty and
students. After becoming available for general use, the costs are amortized on a
course-by-course basis over a period of three to five years. After the amortization period
commences, the cost of maintenance and support is expensed as incurred. If it is determined that
the curriculum will not be used, the capitalized curriculum costs are written off and expensed
in the period of this determination.
Impairment of Long-Lived Assets Long-lived assets are reviewed for impairment when
circumstances indicate the carrying value of an asset may not be recoverable. For assets that
are to be held and used, an impairment loss is recognized when the estimated undiscounted cash
flows associated with the asset or group of assets is less than their carrying value. If
impairment exists, an adjustment is made to write the asset down to its fair value, and a loss
is recorded as the difference between the carrying value and fair value. Fair values are
determined based on quoted market values, discounted cash flows, or internal and external
appraisals, as applicable. Assets to be held for sale are carried at the lower of carrying value
or fair value, less cost to sell. The Company had no impairments in 2010, 2009 or 2008
Condominium Inventory Condominium inventory is stated at cost (including capitalized
interest. Condominium construction costs are accumulated on a specific identification basis.
Under the specific identification basis, cost of revenues includes all applicable land
acquisition, land development and specific construction costs (including direct and indirect
costs) of each condominium paid to third parties. Land acquisition, land development and
condominium construction costs do not include employee related benefit costs. The specific
construction and allocated land costs of each condominium, including models, are included in
direct construction. Allocated land acquisition and development costs are estimated based on the
total costs expected in a project. Direct construction also includes amounts paid through the
closing date of the condominium for construction materials and contractor costs. Condominium
inventory is recorded as a long term asset due to the normal operating cycle being greater than
one year.
Deferred Income Taxes Deferred income taxes are provided using the asset and liability method
whereby deferred tax assets and deferred tax liabilities are recognized for taxable temporary
differences. Temporary differences are the differences between the carrying amount of assets and
liabilities for financial reporting purposes and the amounts used for income tax purposes.
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Non-Controlling Interest The non-controlling interest presented on the consolidated
statements of operations represents the individual owners share of the Partnerships income or
loss. The consolidated balance sheet amount Non-controlling interest represents the individual
owners share of the Partnership obligations in excess of Partnership assets. The Company has
determined the non-controlling owners to have a legal obligation to fund such deficits and
believes it is fully collectable at May 31, 2010.
Financial Instruments As of May 31, 2010 and 2009, the Companys financial instruments
consisted of cash equivalents, investments, accounts receivable, accounts payable, and long-term
liabilities. The fair value of fixed-rate liabilities is estimated based on current rates
offered to the Company for instruments with similar ratings and maturities. The difference
between the carrying value of these financial instruments and their fair value was not material
as of May 31, 2010 and 2009.
Academic Revenue Recognition Academic revenue represents tuition revenue and the revenue
generated through our affiliate relationships. Tuition revenue and affiliate revenue is recorded
ratably over the length of respective courses. Academic revenue also includes certain fees and
charges assessed at the start of each term. The portion of tuition and registration fees
payments received but not earned is recorded as student accounts payable and reflected as a
current liability on the accompanying consolidated balance sheets, as such amount represents
revenue that the Company expects to earn within the next year. Academic revenue is reported net
of adjustments for refunds and scholarships. If a student withdraws prior to the completion of
the academic term, students are refunded the portion of tuition and registration fees already
paid, that pursuant to the Companys refund policy and applicable federal and state law and
accrediting agency standards, the Company is not entitled to. Refunds and scholarships are
recorded during the respective terms.
Auxiliary Revenue Auxiliary revenue represents revenues from the Universitys food service,
bookstore, and dormitory operations. Revenue is recognized as items are sold and services are
performed.
Rental Income Rental income is primarily obtained from tenants of three apartment complexes
under short-term operating leases. Tenants are required to pay rent on a monthly basis. Rent not
paid by the end of the month is considered past due, while rent paid in advance is included in
deferred income on the accompanying consolidated balance sheets. If a tenant becomes 60 days
past due, eviction procedures are started.
Rental Expense The University accounts for rent expense under its long-term operating leases
using the straight-line method. Certain of the Universitys operating leases contain rent
escalator provisions. Accordingly, a $2,380 and $663, deferred rent and tenant improvement
liability at May 31, 2010 and 2009, respectively, is recorded in other long-term liabilities on
the accompanying consolidated balance sheets.
Advertising The University follows the policy of expensing the cost of advertising as
incurred. Advertising costs of $7,614, $6,151 and $5,339 for 2010, 2009 and 2008, respectively,
are included in selling, general, and administrative expenses on the accompanying consolidated
statements of operations.
Business Expansion and Development The University continues to commit resources to the
development of new branch campuses and new programs, as well as the expansion of existing
programs into new markets. During the year ended May 31, 2010, the University continued to
develop a campus in the state of Texas, additional hybrid learning centers in Lees Summit,
Missouri; Minnetonka, Minnesota; Denver, Colorado; Dallas, Texas; Wichita,
Kansas; and Colorado Springs, Colorado and continued to develop and expand the nursing and
distance learning programs. Business expansion and development costs include salaries, marketing
and advertising, and other third-party expenses incurred to support such development and
expansion. The amounts are included in selling, general, and administrative expenses in the
accompanying consolidated statements of operations and totaled $6,529, $3,241 and $4,758 in
2010, 2009 and 2008, respectively.
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2. | RECLASSIFICATION |
Certain items have been reclassified within operating expenses in the 2009 and 2008 statements
of operations in order to conform with the 2010 presentation. Specifically, rent expense (which
included rent, common area maintenance (CAM) fees, and property taxes) was reclassified from
selling, general and administrative to cost of education. The reclassification totaled $4,582
and $4,259 in 2009 and 2008, respectively. There was no impact to operating income or net
income (loss) as previously reported.
3. | EARNINGS PER SHARE |
Basic earnings per share is computed by dividing net income available to common stockholders by
the weighted average number of shares of common stock outstanding during the applicable period.
Diluted earnings per share reflect the potential dilution that could occur assuming vesting,
conversion or exercise of all dilutive unexercised warrants and restricted stock. As described
in Note 11, the Company had one class of common stock outstanding as of May 31, 2010. The class
A stock was converted to common stock on May 27, 2010; however, due to the limited number of
days between the conversion and the end of the year, the Company utilized the two class method
to calculate and report earnings per share for each class of stock for 2010. For purposes of
calculating basic and diluted earnings per share, undistributed earnings are allocated to the
Class A stock and common stock based on the proportion of weighted average outstanding shares of
each class of stock for the year ending May 31. During the periods shown below in 2009 and
2008, only one class of common stock was outstanding and there were no dilutive securities
outstanding.
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Table of Contents
For the year | ||||||||||||
ended May 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
Numerator: |
||||||||||||
Net income |
10,035,000 | 3,121,000 | (420,000 | ) | ||||||||
Distributed earnings (DE) |
14,900,751 | 200,000 | 200,000 | |||||||||
Undistributed earnings (UE) |
(4,865,751 | ) | 2,921,000 | (620,000 | ) | |||||||
UE attributable to Class A basic |
(4,063,868 | ) | 2,921,000 | (620,000 | ) | |||||||
UE attributable to Common basic |
(801,883 | ) | n/a | n/a | ||||||||
DE attributable to Class A basic |
13,588,792 | 200,000 | 200,000 | |||||||||
Denominator: |
||||||||||||
Class A shares basic and diluted |
100,000 | 100,000 | 100,000 | |||||||||
Weighted average shares
outstanding used to compute basic net
income per common share |
3,103,847 | n/a | n/a | |||||||||
Effect of Unvested compensatory
restricted shares |
112 | n/a | n/a | |||||||||
Common Shares used to compute
diluted net income per share |
3,103,959 | n/a | n/a | |||||||||
Basic net income per Class A share |
95.25 | 31.21 | (4.20 | ) | ||||||||
Basic net loss per Common share |
(0.04 | ) | | | ||||||||
Diluted net income per Class A share |
95.25 | 31.21 | (4.20 | ) | ||||||||
Diluted net loss per Common share |
(0.04 | ) | | |
Outstanding warrants of 2,800,000 were not included in the computation of diluted net income per
common share in 2010 because their effect would be antidilutive.
4. | RECENTLY ADOPTED AND NEW ACCOUNTING PRONOUNCEMENTS |
In June 2009, the FASB issued a new standard to update FASB ASC Topic 810, Consolidation. This
standard is intended to improve financial reporting by enterprises involved with VIEs. This
standard is effective as of the beginning of each reporting entitys first annual reporting
period that begins after November 15, 2009, for interim periods within the first annual
reporting period, and for interim and annual reporting periods thereafter. This will be
effective for the Companys fiscal year beginning June 1, 2010. The Company is evaluating the
impact of this statement on its consolidated financial statements and does not expect a material
impact as a result of adoption of this standard.
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In January 2010, the FASB issued Accounting Standards Update 2010-06 Fair Value Measurement and
Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements. This guidance
provides for the following new required disclosures related to fair value measurements: 1) the
amounts of and reasons for significant transfers in and out of level one and level two inputs
and 2) separate presentation of purchases, sales, issuances, and settlements on a gross basis
rather than as one net number for level three reconciliations. The guidance also clarifies
existing disclosures as follows: 1) provide fair value measurement disclosures for each class of
assets and liabilities and 2) provide disclosures about the valuation techniques and inputs used
for both recurring and nonrecurring level two or level three inputs. The new disclosures and
clarifications of existing disclosures were effective for the Companys fourth quarter ended May
31, 2010. Disclosures about purchases, sales, issuances, and settlements in the roll forward of
activity for level three fair value measurements will be effective for the Companys fourth
quarter ended May 31, 2011. The Company has adopted this standard, but it did not have a
material effect on the Companys financial statements.
In June 2009, the FASB issued Accounting Standards Subsequent Events (Topic 855) which
established general standards of accounting for an disclosure of events that occur after the
balance sheet date, but before the financial statements are issued or available to be issued.
This Standard is effective for financial periods ending after June 30, 2009. Then in February
2010, the FASB issued Accounting Standards Update 2010-09 Subsequent Events (Topic 855):
Amendments to Certain Recognition and Disclosure Requirements. This standard eliminates the
requirement of an SEC filer to disclose the date through which subsequent events have been
evaluated. The Company has adopted the new and updated standard and it did not have a material
effect on the Companys consolidated balance sheet or required financial statement disclosures.
5. | DEPARTMENT OF EDUCATION REQUIREMENTS |
The University extends unsecured credit to a portion of the students who are enrolled throughout
the campuses for tuition and other educational costs. A substantial portion of credit extended
to students is repaid through the students participation in various federal financial aid
programs authorized by Title IV Higher Education Act of 1965, as amended (HEA). The University
is required under 34 CFR 600.5(d) to maintain at least 10% of its revenues from non-Title IV HEA
program funds. The University believes they are in compliance with this requirement for the
years ended May 31, 2010, 2009, and 2008 as shown in the underlying calculation:
2010 | 2009 | 2008 | ||||||||||||||||||||||
Title IV HEA
funds received |
58,250,685 | 39,877,405 | 30,016,817 | |||||||||||||||||||||
Academic revenue
(cash basis) |
76,545,809 | =76.10 | % | 55,733,845 | =71.55 | % | 44,371,114 | =67.65 | % |
To participate in Title IV Programs, a school must be authorized to offer its programs of
instruction by relevant state education agencies, be accredited by an accrediting commission
recognized by the DOE, and be certified as an eligible institution by the DOE. For this reason,
the schools are subject to extensive regulatory requirements imposed by all of these entities.
After the schools receive the required certifications by the appropriate entities, the schools
must demonstrate their compliance with the DOE regulations of the Title IV Programs on an
ongoing basis. Included in these regulations is the requirement that the Company must satisfy
specific standards of financial responsibility. The DOE evaluates institutions for compliance
with these standards each year, based upon the institutions annual audited financial
statements, as well as following a change in ownership of the institution. Under regulations
which took effect July 1, 1998, the DOE calculates the institutions composite score for
financial responsibility based on its (i) equity ratio, which measures the institutions capital
resources, ability to borrow and financial viability; (ii) primary reserve ratio, which measures
the institutions ability to support current operations from expendable resources; and (iii) net
income ratio, which measures the institutions ability to operate at a profit. This composite
score can range from -1 to +3.
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An institution that does not meet the DOEs minimum composite score requirements of 1.5 may
establish its financial responsibility by posting a letter of credit or complying with
additional monitoring procedures as defined by the DOE. Based on the consolidated financial
statements for the 2010, 2009, and 2008 fiscal years, the Universitys calculations result in a
composite score of 2.4, 1.6, and 0.5, respectively. Therefore the University currently meets the
minimum composite score requirement as most recently required by the DOE.
6. | LONG-TERM DEBT |
During the year ended May 31, 2010, the Company utilized reserved cash to pay all outstanding
debt in full as the secondary offering did not close until June 1, 2010. At May 31, 2010 and
2009, long-term debt consisted of the following:
Notes Payable | 2010 | 2009 | ||||||
Note payable to Great Western Bank; matures February 2014;
requires monthly payments of $42, including principal and interest;
accrues interest at 6.45%; secured by real estate and personally
guaranteed by a Company stockholder. |
$ | 0 | $ | 3,582 | ||||
Note payable to Wells Fargo Bank; matures June 1, 2011; requires
monthly payments of $30 including principal and interest;
accrues interest at 6%; secured by cash, savings, and investment
accounts held at Wells Fargo Bank. |
0 | 714 | ||||||
Note payable to Great Western Bank; matures March 26, 2012;
requires monthly payments of $19, including principal and interest;
accrues interest at a variable rate (a) (3.25% at May 31, 2009);
secured by substantially all assets of NAU and personally
guaranteed by a Company stockholder. |
0 | 611 | ||||||
Note payable to Great Western Bank; matures November 28, 2012;
requires monthly payments of $13, including principal and interest;
accrues interest at a variable rate (a) (4% at May 31, 2009); secured
by substantially all assets of NAU and personally guaranteed by a
Company stockholder. |
0 | 499 | ||||||
Note payable to Great Western Bank; matures August 17, 2011;
requires monthly payments of $15, including principal and interest;
accrues interest at a variable rate (a) (5% at May 31, 2009); secured
by substantially all assets of NAU and personally guaranteed by a
Company stockholder. |
0 | 364 | ||||||
Note payable to Great Western Bank; matures May 18, 2011;
requires monthly payments of $13, including principal and interest;
accrues interest at a variable rate (a) (3.25% at May 31, 2009);
secured by substantially all assets of NAU and personally guaranteed
by a Company stockholder. |
0 | 264 |
(continued)
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Notes Payable | 2010 | 2009 | ||||||
Note payable to Great Western Bank; matured on May 18, 2010;
requires monthly payments of $16, including principal and interest;
accrues interest at a variable rate (a) (3.25% at May 31, 2009);
secured by substantially all assets of NAU and personally
guaranteed
by a Company stockholder. |
$ | 0 | $ | 175 | ||||
Note payable to Great Western Bank; matures on December 8, 2010;
requires monthly payments of $10, including principal and interest;
accrues interest at a variable rate (a) (4% interest at May 31,
2009);
secured by substantially all assets of NAU and personally
guaranteed
by a Company stockholder. |
0 | 177 | ||||||
Note payable to Great Western Bank; matures on September 25,
2010; requires monthly payments of $9, including principal and
interest; accrues interest at a variable rate (a) (3.25% at May 31,
2009); secured by substantially all assets of NAU and personally
guaranteed by a Company stockholder. |
0 | 137 | ||||||
Note payable to Great Western Bank; matured on June 2, 2010;
requires monthly payments of $2, including principal and interest;
accrues interest at a variable rate (a) (3.25% at May 31, 2009);
secured by substantially all assets of NAU and personally
guaranteed
by a Company stockholder. |
0 | 24 | ||||||
Notes payable to related parties |
0 | 1,147 | ||||||
Other notes payable |
0 | 960 | ||||||
Total long-term debt |
0 | 8,654 | ||||||
Less current portion |
0 | 2,147 | ||||||
Long-term
portion |
0 | 6,507 | ||||||
(a) | Variable rates are based on prime rate plus an adjustment, which is specific to each note
payable agreement. |
(concluded)
The Company was in compliance with all debt covenants at May 31, 2009.
7. | LINES OF CREDIT |
The University maintains a $2,000 revolving line of credit with Great Western Bank that matures
in September 2010. Advances under the line bear interest at a variable rate based on prime (5%
at May 31, 2010) and are secured by substantially all assets of the University and the personal
guarantee of a Company shareholder. No advances had been made on this line of credit at May 31,
2010 or 2009.
The University also has available an additional $3,000 line of credit with Wells Fargo Bank that
matures in April 2011. Advances under the line bear interest at a variable rate based on prime
(4.50% at May 31, 2010) and are secured by checking, savings, and investment accounts held by
Wells Fargo Bank. No advances had been made on this line of credit at May 31, 2010 or 2009.
During 2009, the Company utilized a line of credit with Great Western Bank to fund the
construction of a new building (see Note 15). The line of credit had borrowings of $3,305 at
May 31, 2009, and was paid in full and closed during the year ended May 31, 2010.
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8. | LEASES |
The University leases building facilities for branch operations and equipment for classroom
operations under operating leases with various terms and conditions. Total rent expense for the
years ended May 31, 2010, 2009 and 2008, was $3,752, $3,506 and $3,542, respectively.
Future minimum lease payments on noncancelable operating leases for the five years ending May 31
are as follows:
2011 |
$ | 3,898 | ||
2012 |
3,571 | |||
2013 |
3,365 | |||
2014 |
3,374 | |||
2015 |
3,345 | |||
Thereafter |
17,489 |
9. | INCOME TAXES |
Components of the provision for income taxes for the years ended May 31, 2010, 2009 and 2008,
were as follows:
2010 | 2009 | 2008 | ||||||||||
Current tax expense: |
||||||||||||
Federal |
$ | 6,116 | $ | 1,562 | $ | 108 | ||||||
State |
780 | 43 | 3 | |||||||||
6,896 | 1,605 | 111 | ||||||||||
Deferred tax expense (benefit): |
||||||||||||
Federal |
(382 | ) | 162 | (320 | ) | |||||||
State |
(29 | ) | 30 | (22 | ) | |||||||
(411 | ) | 192 | (342 | ) | ||||||||
Total tax expense (benefit) |
$ | 6,485 | $ | 1,797 | $ | (231 | ) | |||||
The effective tax rate varies from the statutory federal income tax rate for the following
reasons:
2010 | 2009 | 2008 | ||||||||||
Statutory |
34.0 | % | 34.0 | % | 34.0 | % | ||||||
State income taxes net of federal benefit |
3.0 | 1.5 | 3.0 | |||||||||
Permanent differences |
2.3 | 1.1 | 0.6 | |||||||||
Effective income tax rate |
39.3 | % | 36.6 | % | 37.6 | % | ||||||
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Deferred income taxes reflect the tax effects of temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the amounts used for
income tax purposes. Significant components of the Companys deferred assets (liabilities) as of
May 31 were as follows:
2010 | 2009 | |||||||
Deferred income tax assets: |
||||||||
Account receivable allowances |
$ | 96 | $ | 63 | ||||
Bad debt write-offs |
594 | 411 | ||||||
Charitable contributions |
0 | 135 | ||||||
Accrued salaries |
1,226 | 619 | ||||||
Start up costs |
411 | 0 | ||||||
Deferred rent |
869 | 239 | ||||||
Total deferred income tax assets |
3,196 | 1,467 | ||||||
Deferred income tax liabilities: |
||||||||
Fixed assets and course development |
(2,482 | ) | (1,680 | ) | ||||
Prepaid expenses |
(236 | ) | (139 | ) | ||||
Other |
(55 | ) | (61 | ) | ||||
Total deferred income tax liabilities |
(2,773 | ) | (1,880 | ) | ||||
Net deferred income tax assets (liabilities) |
$ | 423 | $ | (413 | ) | |||
The Company has complied with ASC Topic 740, Income Taxes, formerly FIN No. 48, Accounting for
Uncertainty in Income Taxes an interpretation of FASB Statement No. 109, which requires that
income tax positions must be more likely than not to be sustained based solely on their
technical merits in order to be recognized. The Company has recorded no liability for uncertain
tax positions. The Company has elected to record interest and penalties from unrecognized tax
benefits in the tax provision.
The Company files income tax returns in the U.S. federal jurisdiction and various states.
Because of closure of an Internal Revenue Service examination, the Company is no longer subject
to U.S. federal income tax examinations for years before 2007 and, generally, is no longer
subject to state and local income tax examinations by tax authorities for years before 2005.
10. | EMPLOYEE COMPENSATION PLANS |
Employee Benefit Plan Payable The Company sponsors a 401(k) plan for its University
employees, which provides for a discretionary match, net of forfeitures, of up to 5%. The
University uses certain consistently applied operating ratios to determine contributions. The
Universitys contributions were $447, $364 and $207 for the years ended May 31, 2010, 2009, and
2008, respectively.
Compensation Plans The Company had entered into an employment agreement dated January 3,
2005, as amended, with Robert Buckingham, an executive officer of the Company. The agreement
required, among other things, an annual incentive payment of 10% of the Companys annual income
as defined in the agreement, which was paid out annually. For the years ended May 31, 2010, 2009
and 2008, the Company recorded $793, $709 and $193, respectively, as an expense in selling,
general, and administrative expenses in the accompanying consolidated statements of operations.
Furthermore, the agreement provided for a deferred compensation payment payable upon retirement
or death equal to one years salary.
On March 19, 2010, the Company entered into a Termination of Employment Agreement and Release
Agreement (the Termination Agreement). Under the Termination Agreement, the parties terminated
the Employment Agreement, which contained the terms and conditions of Mr. Buckinghams
employment with the Company as an executive officer of the Company, and which was filed as an
exhibit to the Companys Current Report on Form 8-K on November 30, 2009. Accrued incentive
payments and accrued deferred compensation totaled $821 and $153 at May 31, 2009 and $286 and
$142 at May 31, 2008, respectively.
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The Company has also entered into employment agreements with Dr. Ronald Shape, Chief Executive
Officer and Chief Financial Officer, and Dr. Jerry Gallentine, President, that require, among
other things, an annual incentive payment, as defined in the agreements. The incentive payments
are paid in installments each year, are recorded in selling, general and administrative expenses
and accrued other liabilities in the accompanying consolidated financial statements, and total
$749, $338 and $19 for 2010, 2009 and 2008, respectively.
11. | STOCKHOLDERS EQUITY |
The authorized capital stock for the Company is 51,000,000, consisting of (i) 50,000,000 shares
of Common Stock, par value $0.0001 and (ii) 1,000,000 shares of Preferred Stock, par value
$0.0001. Authorized Class A Common Stock of 100,000 shares, par value $0.0001, were converted
to Common Stock during the year ended May 31, 2010 at a rate of 157.3 shares of Common Stock for
each share of Class A Common Stock.
Of the authorized shares, 21,819,653 shares of Common Stock were issued and outstanding as of
May 31, 2010. No shares of Preferred Stock were outstanding.
The
Common Stock outstanding includes 15,730,000 shares of Common Stock
converted from Class A Common Stock. Also included are 250,000 shares of restricted Common Stock issued to
the former Dlorah stockholders, and the 575,000 shares of restricted Common Stock issued to
Camden Learning LLC, in connection with the Transaction. The restriction lapsed on March 23,
2010, when the Companys Common Stock traded at or above $8.00 for 60 consecutive days. The
Common Stock outstanding also includes 246,048 shares of restricted
Common Stock issued to our management and directors, 221,048 of which were
granted under the Companys 2009 Stock Option and Compensation Plan (the Plan), and 25,000
shares of restricted Common Stock granted to the Companys Chief Executive Officer outside of
the Plan. The remaining 5,018,605 shares of Common Stock that were issued and outstanding as of May 31, 2010 were issued and outstanding as of the closing
of the Transaction.
Also, in connection with the Transaction, the former Dlorah stockholders were issued, in the
aggregate, warrants to purchase up to 2,800,000 shares of Common Stock at $5.50 per share that
will expire if not converted by November 23, 2011. These warrants contain a cashless exercise
feature. These warrants remained outstanding and have not been exercised as of May 31, 2010.
The Company also granted restricted stock awards in November 2009, December 2009, and March 2010
to promote the long-term interests of the Company and its stockholders by using such awards as a
means for attracting and retaining directors and key employees. The fair value of restricted
stock awards were calculated using the Companys stock price as of the associated grant date and
accrued ratably as compensation expense over the vesting period of the award. The amounts
recognized in compensation expense were $1,507 for the year ended May 31, 2010. Federal and
state payroll taxes totaling $600 related to these awards were also included in compensation
expense for 2010. As of May 31, 2010 there was $807 of total unrecognized compensation cost
related to the restricted stock awards discussed above that will be recognized over a period
extending to May 31, 2012.
On March 19, 2010, the Company issued to the Companys Chief Executive Officer and Chief
Financial Officer, 50,000 shares of restricted Common Stock under the Plan and an additional
25,000 shares of restricted Common Stock pursuant to a Restricted Stock Award Agreement dated
March 19, 2009. These shares, which vest over a three-year period if certain performance
criteria are satisfied, were issued in connection with the forfeiture of 75,000
shares of restricted Common Stock previously granted to one individual under the Plan on
November 30, 2009.
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On March 19, 2010, the Company issued to the Companys President, 12,500 shares of restricted
Common Stock under the Plan. These shares, which vest over a three-year period if certain
performance criteria are satisfied, were issued in connection with the forfeiture of 12,500
shares of restricted Common Stock previously granted to this individual under the Plan on
November 30, 2009.
Restricted Share Awards
The following table summarizes restricted share award activity under all plans:
Weighted | ||||||||
Average | ||||||||
Grant Date | ||||||||
Restricted Shares Outstanding | Shares | Fair Value | ||||||
Balance, June 1, 2009 |
0 | $ | | |||||
Granted |
308,548 | 8.95 | ||||||
Vested |
(110,715 | ) | 10.22 | |||||
Forfeited |
(87,500 | ) | 7.75 | |||||
Balance, May 31, 2010 |
110,333 | $ | 8.64 | |||||
Dividends
The holders of Class A Common Stock were entitled to a quarterly dividend equal to $0.11 per
quarter (for a total of $0.44 per year) per share of the Common Stock into which such Class A
Common Stock was convertible, paid when and if declared by the Board of Directors for 8
installments in accordance with the merger agreement for the Transaction. If a dividend is paid
on the Class A Common Stock, a dividend equal to one-fourth of the per share amount of any Class
A Common Stock dividend paid also had to be paid to holders of Common Stock. A dividend
totaling $1,896 was declared on November 30, 2009, and $1,868 was paid in January and February
2010. A dividend totaling $1,896 was declared on January 27, 2010 and $1,868 was paid in March
2010. On May 10, 2010, the Company issued a press release to announce that on April 26, 2010,
its Board of Directors declared, subject to the satisfaction of the condition set forth below, a
one-time special cash dividend in the amount of $0.1609694 per share on each share of the
Companys Common Stock and in the amount of $0.6438774 per share on each share of the Companys
Common Stock issuable upon conversion of the Class A Common Stock, in each case all shares
outstanding and of record as of the close of business on May 20, 2010. This special dividend
totaled $11,116 of which $11,108 was paid on June 4, 2010 with the difference related to the
restricted shares which will be payable once the restrictions lapse. Therefore, all 8
installments of the dividends in accordance with the merger agreement for the Transaction have
been declared and paid.
12. | COMMITMENTS AND CONTINGENCIES |
From time to time, the Company is a party to various claims, proceedings, or lawsuits relating
to the conduct of its business. Although the outcome of litigation cannot be predicted with
certainty and some lawsuits, claims, or proceedings may be disposed of unfavorably to the
Company, management believes, based on facts presently known, that the outcome of such legal
proceedings and claims will not have a material adverse effect on the Companys consolidated
financial position, cash flows or future results of operations.
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The Company is subject to extensive regulation by federal and state governmental agencies and
accrediting bodies. On an ongoing basis, the Company evaluates the results of internal
compliance monitoring activities and those of applicable regulatory agencies and, when
appropriate, records liabilities to provide for the estimated costs of any necessary
remediation. There are no current outstanding regulatory actions, but the Company cannot predict
the outcome of future program reviews and any unfavorable outcomes could have a material adverse
effect on the results of the Companys results of operations, cash flows, and financial
position.
13. | SELF-INSURED HEALTH INSURANCE |
The Company maintains a self-insured health insurance plan for employees. Under this plan, the
Company pays a monthly fee to their administrator, as well as claims submitted by their
participants. As there generally is a lag between the time a claim is incurred by a
participant and the time the claim is submitted, the Company has recorded a liability for
outstanding claims of approximately $311 and $422 at May 31, 2010 and 2009, respectively. Such
liability is reported with accrued liabilities in the accompanying consolidated balance
sheets. At May 31, 2010, the Companys maximum aggregate risk was approximately $2,282. The
maximum specific risk per participant is $50 per year, although total risk for all
participants will not exceed the noted maximum aggregate risk for the year.
14. | RELATED-PARTY TRANSACTIONS |
The Company is required under 34 CFR668.23(d) to disclose all related-party transactions (as
defined within the regulation) regardless of materiality to the consolidated financial
statements. As described in Note 6, certain notes payable were personally guaranteed by a
stockholder of the Company and notes payable were due to stockholders and related parties at May
31, 2010 and 2009, of $0 and $1,147, respectively. In addition, rent totaling $1.0 per month was
paid to related parties for home office space under month-to-month leases in 2009 and 2008, and
$0.5 per month was paid in 2010. All other related-party transactions were intercompany amounts
that are eliminated in consolidation.
15. | CONDOMINIUM PROJECT |
During 2008, the Company broke ground on a new building designed to contain 24 condominium units
to be sold to the general public. The project was funded by a construction line of credit and
was completed in 2009. These condominium units are accounted for within condominium inventories
within the consolidated balance sheets, and the sales of the condominium units are recorded
within condominium sales within the consolidated statements of operations. Seven units have been
sold as of May 31, 2010.
In addition, five units of an existing 48-unit apartment building have been sold as
condominiums, with the remaining units available for sale or lease. These condominium units are
accounted for within net property and equipment within the consolidated balance sheets, and the
sales of the condominium units are recorded within other income net within the consolidated
statements of operations.
16. | FAIR VALUE MEASUREMENTS |
Fair value is defined as the exchange price that would be received for an asset or paid to
transfer a liability (an exit price) in the principal or most advantageous market for the asset
or liability in an orderly transaction between market participants on the measurement date.
Following is a description of each category in the fair value hierarchy and the financial assets
and liabilities of the Company that are included in each category at May 31, 2010 and 2009:
Level 1 Quoted prices in active markets for identical assets or liabilities. The types of
assets and liabilities included in Level 1 are highly liquid and actively traded instruments
with quoted market prices.
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Level 2 Observable inputs other than Level 1 prices, such as quoted prices for similar assets
or liabilities; quoted prices in markets that are not active; or other inputs that are
observable or can be corroborated by observable market data for substantially the full term of
the assets or liabilities. The type of assets and liabilities included in Level 2 are typically
either comparable to actively traded securities or contracts or priced with models using
observable inputs.
Level 3 Unobservable inputs that are supported by little or no market activity and that are
significant to the fair value of the assets or liabilities. The type of assets and liabilities
included in Level 3 are those with inputs requiring significant management judgment or
estimation. The Company does not have any Level 3 assets or liabilities.
In accordance with the fair value hierarchy, the following table shows the fair value as of May
31, 2010 and 2009, of those financial assets that are measured at fair value on a recurring
basis, according to the valuation techniques the Company used to determine their fair market
value. No other financial assets or liabilities are measured at fair value on a recurring or
nonrecurring basis at May 31, 2010 or 2009.
Quoted | ||||||||||||||||
Prices in | Other | |||||||||||||||
Active | Observable | |||||||||||||||
Markets | Inputs | Unobservable | ||||||||||||||
(Level 1) | (Level 2) | Inputs (Level 3) | Fair Value | |||||||||||||
May 31, 2010 |
||||||||||||||||
Investments |
||||||||||||||||
Cds and money market accounts |
$ | 1,547 | $ | 411 | $ | | $ | 1,958 | ||||||||
US treasury bills and notes |
10,456 | | | 10,456 | ||||||||||||
Total assets at fair value |
$ | 12,003 | $ | 411 | $ | | $ | 12,414 | ||||||||
May 31, 2009 |
||||||||||||||||
Investments |
||||||||||||||||
Cds and money market accounts |
$ | 1,816 | $ | 231 | $ | | $ | 2,047 | ||||||||
US treasury bills and notes |
2,483 | | | 2,483 | ||||||||||||
Total assets at fair value |
$ | 4,299 | $ | 231 | $ | | $ | 4,530 | ||||||||
17. | COMPLETED MERGER |
In August 2009, the Company, then known as Camden Learning Corporation, and Dlorah entered into
an Agreement and Plan of Reorganization, under which the Company agreed to purchase all of the
ownership interests in Dlorah for cash and stock.
In connection with the approval of the Transaction, the Companys stockholders adopted an
amendment to its amended and restated articles of incorporation (i) to change the Companys
corporate name to National American University Holdings, Inc., (ii) to create a new class of
common stock to be designated as Class A Common Stock, par value $0.0001 per share (the Class A
Stock), (iii) to increase the Companys authorized capital stock from 21,000,000 shares
consisting of 20,000,000 shares of common stock, par value $0.0001 per share (the Common
Stock), and 1,000,000 shares of preferred stock, par value $0.0001 per share (the Preferred
Stock), to 51,100,000 shares, consisting of 50,000,000 shares of Common Stock, 100,000 shares
of Class A Stock, and 1,000,000 shares of Preferred Stock, and (iv) to remove the provisions
related to the Companys status as a blank check company, including, among other things, the
classification of the board of directors, and to make the Companys corporate existence
perpetual. Furthermore, the Companys stockholders adopted the 2009 Stock Option and
Compensation Plan (the Incentive Plan) pursuant to which the Company reserved 1,300,000 shares
of Common Stock for issuance pursuant to the Incentive Plan.
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The Transaction closed on November 23, 2009, and on that date, Dlorah became a wholly owned
subsidiary of the Company. The stockholders of Dlorah received shares and warrants representing
approximately 77% of the Companys issued capital shares. The Transaction was accounted for as
a reverse merger accompanied by a recapitalization of the Company. Under this accounting
method, Dlorah was considered the acquirer for accounting purposes because it obtained effective
control of the Company as a result of the acquisition. This determination was primarily based
on the following facts: Dlorahs retention of a significant voting interest in the Company;
Dlorahs appointment of a majority of the members of the Companys initial board of directors;
Dlorahs operations comprising the ongoing operations of the Company; and Dlorahs senior
management serving as the senior management of the Company. Under this method of accounting,
the recognition and measurement provisions of the accounting guidance for business combinations
do not apply and therefore, the Company did not recognize goodwill or other intangible assets.
Instead, the Transaction has been treated as the equivalent of Dlorah issuing stock for the net
monetary assets of the Company, primarily cash, which are stated at their carrying value.
Because of the reverse merger, the historical results represent those of Dlorah.
At the time of the Transaction, all the issued and outstanding equity interests of Dlorah were
automatically converted into the right to receive (i) 100,000 shares of Class A Stock,
automatically convertible after two years (or earlier if elected by the stockholders, which was
done in the fourth quarter of fiscal year 2010) into 15,730,000 shares of the Common Stock at a
ratio of 157.3 shares of Common Stock for every one share of Class A Stock, (ii) 2,800,000 newly
issued common stock purchase warrants (the Warrants) at a purchase price of $5.50 per share,
and (iii) 250,000 shares of Restricted Common Stock that are not freely tradable until such time
as the Common Stock trades at or above $8.00 per share for any 60 consecutive trading day
period, provided that such shares shall be forfeited on the fifth anniversary of the date of
issuance if such restriction has not been satisfied by then. This restriction lapsed on March
23, 2010.
Additionally, the Company has entered into an employment agreement with its chairman of the
board of directors through December 2011, which was later terminated (see Note 10).
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Table of Contents
18. | SEGMENT REPORTING |
Operating segments are defined as business areas or lines of an enterprise about which financial
information is available and evaluated on a regular basis by the chief operating decision
makers, or decision-making groups, in deciding how to allocate capital and other resources to
such lines of business.
The Company operates two operating and reportable segments: National American University (NAU)
and other. The NAU segment contains the revenues and expenses associated with the university
operations and the allocated portion of corporate overhead. The other segment contains
everything else. These operating segments are divisions of the Company for which separate
financial information is available and evaluated regularly by executive management in deciding
how to allocate resources and in assessing performance.
General administrative costs of the Company are allocated to specific divisions of the Company.
The majority of the Companys revenue is derived from the NAU division, which provides
undergraduate and graduate education programs. NAU derives its revenue primarily from student
tuition. The other division operates multiple apartment and condominium complexes and derives
its revenues primarily from condominium sales and rental income (in thousands).
-28-
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2010 | 2009 | |||||||||||||||||||||||
Consolidated | Consolidated | |||||||||||||||||||||||
NAU | Other | Total | NAU | Other | Total | |||||||||||||||||||
Revenue: |
||||||||||||||||||||||||
Academic revenue |
$ | 82,418 | $ | 0 | $ | 82,418 | $ | 56,874 | $ | 0 | $ | 56,874 | ||||||||||||
Auxiliary revenue |
5,528 | 0 | 5,528 | 4,036 | 0 | 4,036 | ||||||||||||||||||
Rental income apartments |
0 | 918 | 918 | 0 | 890 | 890 | ||||||||||||||||||
Condominium sales |
0 | 932 | 932 | 0 | 784 | 784 | ||||||||||||||||||
Total revenue |
87,946 | 1,850 | 89,796 | 60,910 | 1,674 | 62,584 | ||||||||||||||||||
Operating expenses: |
||||||||||||||||||||||||
Costs of
educational services(1) |
20,419 | 0 | 20,419 | 17,398 | 0 | 17,398 | ||||||||||||||||||
Selling, general and administrative(1) |
48,238 | 1,648 | 49,886 | 36,349 | 1,277 | 37,626 | ||||||||||||||||||
Auxiliary expense |
2,076 | 0 | 2,076 | 1,595 | 0 | 1,595 | ||||||||||||||||||
Cost of condominium sales |
0 | 761 | 761 | 0 | 558 | 558 | ||||||||||||||||||
Loss of disposition of property |
29 | 0 | 29 | 3 | 3 | |||||||||||||||||||
Total operating expenses |
70,762 | 2,409 | 73,171 | 55,345 | 1,835 | 57,180 | ||||||||||||||||||
Income (loss) from operations |
17,184 | (559 | ) | 16,625 | 5,565 | (161 | ) | 5,404 | ||||||||||||||||
Other income (expense): |
||||||||||||||||||||||||
Interest income |
200 | 6 | 206 | 242 | 0 | 242 | ||||||||||||||||||
Interest expense (2) |
(125 | ) | (400 | ) | (525 | ) | (375 | ) | (459 | ) | (834 | ) | ||||||||||||
Other income net |
0 | 218 | 218 | 0 | 93 | 93 | ||||||||||||||||||
Total other expense |
75 | (176 | ) | (101 | ) | (133 | ) | (366 | ) | (499 | ) | |||||||||||||
Income (loss) before taxes |
$ | 17,259 | $ | (735 | ) | $ | 16,524 | $ | 5,432 | $ | (527 | ) | $ | 4,905 | ||||||||||
Total assets |
$ | 33,085 | $ | 14,201 | $ | 47,286 | $ | 20,620 | $ | 8,245 | $ | 28,865 | ||||||||||||
Expenditures for long-lived assets (3) |
$ | 3,385 | $ | 1,286 | $ | 4,671 | $ | 764 | $ | 503 | $ | 1,267 | ||||||||||||
Depreciation and amortization |
$ | 1,811 | $ | 509 | $ | 2,320 | $ | 1,830 | $ | 335 | $ | 2,165 | ||||||||||||
(1) | As discussed in Note 2, $4,582 and $4,259 of rent expense have been reclassified from selling,
general, and administrative to cost of educational services to conform to the current presentation.
A portion of these amounts were previously allocated to the Other segment in error. As such, the
amounts for 2009 and 2008 have been restated to properly reflect the entire balance within the NAU
segment. |
|
(2) | An error in the allocation of $62 of interest expense to the NAU operating segment has been
corrected to present the interest expense in the Other operating segment. |
|
(3) | The amount for 2009 and 2008 was restated to reflect actual cash paid rather than captial
additions, as was previously presented in prior period financial statements. |
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Table of Contents
2008 | ||||||||||||
Consolidated | ||||||||||||
NAU | Other | Total | ||||||||||
Revenue: |
||||||||||||
Academic revenue |
$ | 44,218 | $ | 0 | $ | 44,218 | ||||||
Auxiliary revenue |
4,062 | 0 | 4,062 | |||||||||
Rental income apartments |
0 | 782 | 782 | |||||||||
Condominium sales |
0 | 395 | 395 | |||||||||
Total revenue |
48,280 | 1,177 | 49,457 | |||||||||
Operating expenses: |
||||||||||||
Costs of educational services (1) |
15,130 | 0 | 15,130 | |||||||||
Selling, general and administrative (1) |
30,857 | 1,785 | 32,642 | |||||||||
Auxiliary expense |
1,523 | 0 | 1,523 | |||||||||
Cost of condominium sales |
0 | 122 | 122 | |||||||||
Loss of disposition of property |
5 | 0 | 5 | |||||||||
Total operating expenses |
47,515 | 1,907 | 49,422 | |||||||||
Income (loss) from operations |
765 | (730 | ) | 35 | ||||||||
Other income (expense): |
||||||||||||
Interest income |
282 | 0 | 282 | |||||||||
Interest expense (2) |
(762 | ) | (261 | ) | (1,023 | ) | ||||||
Other income net |
1 | 91 | 92 | |||||||||
Total other expense |
(479 | ) | (170 | ) | (649 | ) | ||||||
Income (loss) before taxes |
$ | 286 | $ | (900 | ) | $ | (614 | ) | ||||
Total assets |
||||||||||||
Expenditures for long-lived assets (3) |
$ | 3,202 | $ | 4,188 | $ | 7,390 | ||||||
Depreciation and amortization |
$ | 1,783 | $ | 331 | $ | 2,114 | ||||||
(1) | As discussed in Note 2, $4,582 and $4,259 of rent expense have been reclassified from selling,
general, and administrative to cost of educational services to conform to the current presentation.
A portion of these amounts were previously allocated to the Other segment in error. As such, the
amounts for 2009 and 2008 have been restated to properly reflect the entire balance within the NAU
segment. |
|
(2) | An error in the allocation of
$84 of interest expense to the NAU operating segment has been
corrected to present the interest expense in the Other operating segment. |
|
(3) | The amount for 2009 and 2008 was restated to reflect actual cash paid rather than captial
additions, as was previously presented in prior period financial statements. |
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19. | SUMMARIZED QUARTERLY FINANCIAL DATA (UNAUDITED) |
The following table sets forth selected unaudited quarterly financial information for the last
eight quarters:
Quarter | ||||||||||||||||
First | Second | Third | Fourth | |||||||||||||
Fiscal Year Ended May 31, 2009 |
||||||||||||||||
Revenues |
$ | 12,117 | $ | 15,593 | $ | 16,517 | $ | 18,357 | ||||||||
Income from operations |
$ | (533 | ) | $ | 2,165 | $ | 1,848 | $ | 1,924 | |||||||
Net income (loss) |
(318 | ) | 1,274 | 1,057 | 1,095 | |||||||||||
Net income (loss) attributable to
NAUH and Subs |
(378 | ) | 1,302 | 1,081 | 1,116 | |||||||||||
Net income per share (common): |
||||||||||||||||
Basic undistributed |
n/a | n/a | n/a | n/a | ||||||||||||
Diluted undistributed |
n/a | n/a | n/a | n/a |
Quarter | ||||||||||||||||
First | Second | Third | Fourth | |||||||||||||
Fiscal Year Ended May 31, 2010 |
||||||||||||||||
Revenues |
$ | 17,264 | $ | 23,437 | $ | 23,610 | $ | 25,485 | ||||||||
Income from operations |
$ | 2,252 | $ | 6,299 | $ | 4,743 | $ | 3,331 | ||||||||
Net income |
1,250 | 3,697 | 3,002 | 2,090 | ||||||||||||
Net income attributable to NAUH
and Subs |
1,259 | 3,704 | 2,972 | 2,100 | ||||||||||||
Net income per share (common): |
||||||||||||||||
Basic undistributed |
n/a | 0.11 | 0.05 | 0.42 | ||||||||||||
Diluted undistributed |
n/a | 0.10 | 0.05 | 0.42 |
The EPS data for the fiscal year ended May 31, 2009 and the first quarter ended August 31, 2009
is not applicable as the Company was not a public company and the Companys earnings were only
attributable to Class A shareholders.
Subsequent to the filing of the Form 10-Q for the quarter ended February 28, 2010, the Company
identified errors in the calculation of undistributed earnings per share Class A, basic and
dilutive; distributed earnings per share Common, basic and dilutive; and weighted average
shares outstanding Common, basic and dilutive for the three and nine months periods ended
February 28, 2010.
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The effect of the correction on previously reported earnings per share and related weighted
average shares outstanding are summarized in the following table.
Three Months Ended | Nine Months Ended | |||||||||||||||
February 28, 2010 | February 28, 2010 | |||||||||||||||
As reported | As corrected | As reported | As corrected | |||||||||||||
Basic EPS |
||||||||||||||||
Class A |
||||||||||||||||
Distributed earnings |
$ | 17.30 | 17.30 | $ | 34.61 | 34.61 | ||||||||||
Undistributed earnings |
$ | 8.08 | 8.16 | $ | 37.03 | 37.17 | ||||||||||
Total |
$ | 25.38 | $ | 25.46 | $ | 71.64 | $ | 71.78 | ||||||||
Common |
||||||||||||||||
Distributed earnings |
$ | 0.03 | 0.03 | $ | 0.15 | 0.06 | ||||||||||
Undistributed earnings |
$ | 0.05 | 0.05 | $ | 0.24 | 0.24 | ||||||||||
Total |
$ | 0.08 | $ | 0.08 | $ | 0.39 | $ | 0.30 | ||||||||
Diluted EPS |
||||||||||||||||
Class A |
||||||||||||||||
Distributed earnings |
$ | 17.30 | $ | 17.30 | $ | 34.61 | $ | 34.61 | ||||||||
Undistributed earnings |
$ | 7.59 | $ | 7.66 | $ | 36.03 | $ | 36.19 | ||||||||
Total |
$ | 24.89 | $ | 24.96 | $ | 70.64 | $ | 70.80 | ||||||||
Common |
||||||||||||||||
Distributed earnings |
$ | 0.02 | $ | 0.03 | $ | 0.12 | $ | 0.06 | ||||||||
Undistributed earnings |
$ | 0.05 | $ | 0.05 | $ | 0.23 | $ | 0.23 | ||||||||
Total |
$ | 0.07 | $ | 0.08 | $ | 0.35 | $ | 0.29 | ||||||||
Weighted Average Shares outstanding |
||||||||||||||||
Basic EPS |
||||||||||||||||
Class A |
100,000 | 100,000 | 100,000 | 100,000 | ||||||||||||
Common |
5,206,105 | 5,018,605 | 1,868,858 | 1,801,551 | ||||||||||||
Diluted EPS |
||||||||||||||||
Class A |
100,000 | 100,000 | 100,000 | 100,000 | ||||||||||||
Common |
6,557,798 | 6,370,298 | 2,354,081 | 2,276,277 |
20. | SUBSEQUENT EVENTS |
On March 23, 2010, the Company filed a registration statement on Form S-1 with the Securities
and Exchange Commission for the offer and sale of up to 7,000,000 shares of its Common Stock (1/2
coming from selling stockholders). This sale of 7 million shares closed on June 1, 2010. Also,
pursuant to an option granted by the Company, the underwriters purchased an additional 1,050,000
shares of Common Stock to cover over-allotments. The Company received $32,077 in June 2010 which
was net of the underwriters discount. The Company then paid the costs associated with this
registration which included the special dividend of $11,116 and other expenses estimated at $1,500.
The Company did not receive any proceeds from the sale of the shares by the selling stockholders.
The remainder of the proceeds is for growth initiatives (including academic programs, services for
students and faculty and expansion of educational sites) and general corporate purposes.
An additional condo unit in Vista Park was sold in August 2010.
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Table of Contents
PART IV
Item 15. Exhibits and Financial Statement Schedules
(a)(1) Financial Statements
All required financial statements of the registrant are set forth under Item 8 of this annual
report on Form 10-K.
(a)(2) Financial Statement Schedule
The
financial statement schedules of the registrant are not required.
(b) Exhibits
Exhibit No. | Description | |||
31.1 | Certification of Chief Executive Officer pursuant
to Securities Exchange Act Rules 13a-15(e) and 15d-15(e) as adopted pursuant to Section 302
of the Sarbanes-Oxley Act of 2002. |
|||
31.2 | Certification of Chief Financial Officer pursuant
to Securities Exchange Act Rules 13a-15(e) and 15d-15(e) as adopted pursuant to Section 302
of the Sarbanes-Oxley Act of 2002. |
|||
32.1 | Certification of Chief Executive Officer pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002. |
|||
32.2 | Certification of Chief Financial Officer pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002. |
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Table of Contents
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
National American University Holdings, Inc. |
||||
By: | /s/ Ronald L. Shape | |||
Name: | Ronald L. Shape, Ed. D. | |||
Title: | Chief Executive Officer and Chief Financial Officer (principal executive officer, principal financial officer and principal accounting officer) |
Dated as
of September 23, 2010.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the capacities indicated
as of September 23, 2010.
Name | Title | |
/s/ Robert D. Buckingham
|
Chairman of the Board of Directors | |
/s/ Jerry L. Gallentine
|
President and Director | |
/s/ Therese Crane
|
Director | |
/s/ R. John Reynolds
|
Director | |
/s/ Thomas D. Saban
|
Director | |
/s/ David L. Warnock
|
Director | |
Director |
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