FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2001
Commission File Number 1-13722
WHITMAN EDUCATION GROUP, INC.
(Exact Name of Registrant as Specified in its Charter)
Florida 22-2246554
----------------------------- ----------------------
State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
4400 Biscayne Boulevard, Miami, Florida 33137
---------------------------------------------
(Address of Principal Executive Offices)
(305) 575-6510
-----------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
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 __X___ No ______
Indicate the number of shares outstanding of each of issuer's classes of
common stock, as of the latest practicable date.
As of August 1, 2001, there were 13,664,731 shares of common stock
outstanding.
1
WHITMAN EDUCATION GROUP, INC.
Form 10-Q
June 30, 2001
TABLE OF CONTENTS
Page
PART I - Financial Information
Item 1. Financial Statements........................................ 3
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations......................... 11
PART II - Other Information
Item 6. Exhibits and Reports on Form 8-K........................... 15
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WHITMAN EDUCATION GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, MARCH 31,
2001 2001
--------------- ---------------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents............. $ 3,017,752 $ 5,892,779
Accounts receivable, net.............. 26,184,604 26,134,128
Inventories........................... 1,456,256 1,516,439
Deferred tax assets, net.............. 3,742,038 3,742,038
Other current assets.................. 1,584,882 1,551,714
--------------- ---------------
Total current assets................ 35,985,532 38,837,098
Property and equipment, net............. 11,380,722 11,727,583
Deposits and other assets, net ......... 2,382,675 2,165,024
Goodwill, net........................... 9,306,922 9,306,922
--------------- ---------------
Total assets........................ $ 59,055,851 $ 62,036,627
=============== ===============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable...................... $ 1,392,646 $ 2,356,996
Accrued expenses...................... 3,403,495 3,106,146
Income taxes payable.................. 55,063 -
Current portion of capitalized
lease obligations................... 1,822,104 1,859,195
Current portion of capital
expenditure note payable............ 866,667 541,667
Deferred tuition revenue.............. 22,173,448 22,500,137
--------------- ---------------
Total current liabilities........... 29,713,423 30,364,141
Capitalized lease obligations........... 3,038,137 3,379,826
Capital expenditure note payable........ 5,633,333 5,958,333
Line of credit.......................... - 1,789,897
Commitments and contingencies
Stockholders' equity:
Common stock, no par value,
authorized 100,000,000 shares;
issued and outstanding 13,664,681
shares at June 30, 2001 and
13,642,472 shares at March 31,2001.. 22,778,114 22,748,613
Additional paid-in capital............ 674,173 674,173
Accumulated deficit................... (2,781,329) (2,878,356)
--------------- ---------------
Total stockholders' equity.......... 20,670,958 20,544,430
--------------- ---------------
Total liabilities and
stockholders' equity.............. $ 59,055,851 $ 62,036,627
=============== ===============
See accompanying notes to financial statements.
3
Whitman Education Group, Inc. And Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
For the Three Months Ended
June 30,
------------------------------------------
2001 2000
----------------- ------------------
Net revenues..................... $ 20,518,116 $ 18,879,430
Costs and expenses:
Instructional and educational
support...................... 13,742,210 12,917,819
Selling and promotional........ 3,362,968 3,366,623
General and administrative..... 3,091,962 2,958,706
----------------- ------------------
Total costs and expenses......... 20,197,140 19,243,148
----------------- ------------------
Income (loss) from operations.... 320,976 (363,718)
Other (income) and expenses:
Interest expense............... 268,714 222,455
Interest income................ (109,449) (84,568)
----------------- ------------------
Income (loss) before income tax
(provision) benefit and
cumulative effect of change in
accounting principle........... 161,711 (501,605)
Income tax (provision) benefit... (64,684) 199,839
----------------- ------------------
Income (loss) before cumulative
effect of change in accounting
principle...................... 97,027 (301,766)
Cumulative effect of change in
accounting principle, net of
tax............................ - (563,971)
----------------- ------------------
Net income (loss)................ $ 97,027 $ (865,737)
================= ==================
Basic and diluted income (loss)
per share:
Income (loss) before cumulative
effect of change in accounting
principle...................... $ .01 $ (.02)
Cumulative effect of change in
accounting principle, net of
tax............................ - (.04)
================= ==================
Net income (loss)................ $ .01 $ (.06)
================= ==================
Weighted average common shares
outstanding:
Basic ......................... 13,648,779 13,367,183
================= ==================
Diluted........................ 13,879,583 13,367,183
================= ==================
See accompanying notes to financial statements.
4
WHITMAN EDUCATION GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE THREE MONTHS ENDED
JUNE 30,
-------------------------------------
2001 2000
---------------- ---------------
Cash flows from operating activities:
Net income (loss)....................... $ 97,027 $ (865,737)
Adjustments to reconcile net income
(loss) to net cash used in
operating activities:
Depreciation and amortization........ 984,210 1,005,580
Bad debt expense..................... 1,121,434 874,466
Deferred tax benefit................. - (575,819)
Changes in operating assets and
liabilities:
Accounts receivable............ (1,171,910) (765,649)
Inventories.................... 60,183 87,848
Other current assets........... (33,827) (88,984)
Deposits and other assets...... (217,653) 36,608
Accounts payable............... (964,350) 340,160
Accrued expenses............... 297,349 (737,716)
Income taxes payable........... 55,063 -
Deferred tuition revenue....... (326,689) (540,838)
---------------- ---------------
Net cash used in operating
activities........................... (99,163) (1,230,081)
---------------- ---------------
Cash flows from investing activities:
Purchase of property and equipment...... (416,076) (765,731)
---------------- ---------------
Net cash used in investing
activities........................... (416,076) (765,731)
---------------- ---------------
Cash flows from financing activities:
Proceeds from line of credit and
long-term debt....................... 5,746,081 5,436,211
Principal payments on line of credit,
long-term debt and capital lease
obligations ......................... (8,135,370) (8,957,178)
Repurchase of treasury shares........... - (127,936)
Proceeds from exercise of options....... 29,501 -
---------------- ---------------
Net cash used in financing activities... (2,359,788) (3,648,903)
---------------- ---------------
Decrease in cash and cash equivalents... (2,875,027) (5,644,715)
Cash and cash equivalents at beginning
of year.............................. 5,892,779 6,056,738
---------------- ---------------
Cash and cash equivalents at end of
period............................... $3,017,752 $ 412,023
================ ===============
Supplemental disclosures of noncash
financing and investing activities:
Equipment acquired under capital
leases............................... $ 220,612 $ 655,793
================ ===============
Supplemental disclosures of cash flow
information:
Interest paid........................... $ 268,714 $ 209,946
================ ===============
See accompanying notes to financial statements.
5
WHITMAN EDUCATION GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1.GENERAL
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with the instructions to Form 10-Q and, in the
opinion of the management, include all adjustments, which are of a normal
recurring nature, necessary for a fair presentation of financial position and
the results of operations and cash flows for the periods presented. However, the
financial statements do not include all information and footnotes required for a
presentation in accordance with accounting principles generally accepted in the
United States of America. These condensed consolidated financial statements
should be read in conjunction with the consolidated financial statements and the
notes thereto included or incorporated by reference in our Form 10-K for the
fiscal year ended March 31, 2001. The results of operations for the interim
periods are not necessarily indicative of the results of operations to be
expected for the full year.
The accompanying financial statements include the accounts of Whitman
Education Group, Inc., and its wholly-owned subsidiaries, Ultrasound Technical
Services, Inc. ("Ultrasound Diagnostic Schools"), Sanford Brown College, Inc.
("Sanford-Brown College") and CTU Corporation ("Colorado Technical University").
All intercompany accounts and transactions have been eliminated. Hereafter,
reference to "Whitman" shall include collectively Whitman Education Group, Inc.
and its operating subsidiaries, Ultrasound Diagnostic Schools, Sanford-Brown
College and Colorado Technical University.
Whitman experiences seasonality in its quarterly results of operations as a
result of changes in the level of student enrollment. New enrollment in
Whitman's schools tends to be lower in the first and second fiscal quarters
covering the summer months which are traditionally associated with recess from
school. Costs are generally not significantly affected by seasonal factors on a
quarterly basis. Accordingly, quarterly variations in net revenues will result
in fluctuations in income from operations on a quarterly basis.
2.RECLASSIFICATION
Certain prior year amounts have been reclassified to conform to the fiscal
2002 presentation. These changes had no effect on previously reported net income
(loss).
6
WHITMAN EDUCATION GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
3. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share:
FOR THE THREE MONTHS
ENDED JUNE 30,
-------------------------------
2001 2000
------------ ------------
Numerator:
Income (loss) before cumulative effect of
change in accounting principle.............. $ 97,027 $ (301,766)
Cumulative effect of change in accounting
principle, net of tax....................... - (563,971)
------------ -------------
Net income (loss)............................. $ 97,027 $ (865,737)
============ =============
Denominator:
Denominator for basic earnings per share -
weighted average shares................... 13,648,779 13,367,183
Effect of dilutive securities:
Employee stock options...................... 230,804 -
------------ -------------
Dilutive potential common shares............ 230,804 -
Denominator for diluted
earnings per share -
adjusted weighted -
average shares and assumed conversions.. 13,879,583 13,367,183
============ =============
Basic and diluted income (loss) before
cumulative effect of change in
accounting principle....................... $ 0.01 $ (0.02)
Cumulative effect of change in accounting
principle, net of tax...................... - (0.04)
------------ -------------
Basic and diluted net income (loss) per share. $ 0.01 $ (0.06)
============ =============
7
WHITMAN EDUCATION GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
4. NEW ACCOUNTING PRONOUNCEMENTS
In April 2001, Whitman adopted Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
133"). SFAS 133 establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts and for hedging activities. It requires that an entity recognize all
derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. Because Whitman does not
use derivatives, the adoption of SFAS 133 did not have any effect on Whitman's
earnings or financial position.
5. GOODWILL
In June 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 141, "Business Combinations", and No. 142,
"Goodwill and Other Intangible Assets" ("SFAS 141 and 142"), effective for
fiscal years beginning after December 15, 2001. Under the new rules, goodwill
(and intangible assets deemed to have indefinite lives) will no longer be
amortized but will be subject to annual impairment tests. Other intangible
assets will continue to be amortized over their useful lives.
Whitman has elected to adopt the provisions of SFAS 141 and 142 effective
April 1, 2001. Application of the nonamortization provision of SFAS 142 resulted
in an increase in net income of $43,000 net of taxes for the three months ended
June 30, 2001. Pro forma net loss and net loss per basic and diluted share
amounts, for the three months ended June 30, 2000, had SFAS 141 and 142 been
applied retroactively, are approximately ($823,000) and ($.06), respectively.
During fiscal 2002, Whitman will perform the first of the required
impairment tests of goodwill. Whitman has not yet determined what, if any,
effect this test will have on the earnings and financial position of Whitman.
6. INCOME (LOSS) PER SHARE
Basic income (loss) before cumulative effect of change in accounting
principle, cumulative effect of change in accounting principle, net of tax and
net income (loss) per common share is computed using the weighted average number
of common shares outstanding during the period. Diluted income (loss) before
cumulative effect of change in accounting principle, cumulative effect of change
in accounting principle, net of tax and net income (loss) per share is computed
using the weighted average number of common and common equivalent shares
outstanding during the period.
8
WHITMAN EDUCATION GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
7. COMPREHENSIVE INCOME (LOSS)
Whitman complies with the provisions of Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130"). SFAS 130
establishes rules for the reporting and display of comprehensive income and its
components. SFAS 130 requires unrealized gains or losses on Whitman's
available-for-sale securities to be included in "other comprehensive loss."
For the three months ended June 30, 2001 and June 30, 2000, total
comprehensive income was $97,027 and comprehensive loss was $865,737,
respectively.
8. CONTINGENCIES
On May 4, 2000, Whitman, in conjunction with its insurance carriers,
reached an agreement in principle to settle the class action lawsuit, Cullen,
et. al. v. Whitman Education Group, Inc., et. al. The settlement agreement
covers students who attended Whitman's Ultrasound Diagnostic Schools any time
from August 1, 1994 to August 1, 1998 in either the general ultrasound program
or the non-invasive cardiovascular technology program. The settlement agreement
provided for payment of $5,970,000 in cash and approximately $1,346,000 in loan
forgiveness of delinquent obligations owed by students to Whitman's Ultrasound
Diagnostic Schools. The actual cash payment of approximately $5,970,000 was
funded by Whitman contributing $1,170,000 and Whitman's insurance carriers
contributing $4,800,000. Whitman also contributed $1,346,000 in debt
forgiveness, all of which was fully reserved or previously written-off at March
31, 2000. Whitman also provided for a reserve for potential claims from members
of the class action lawsuit who elected not to participate in the settlement.
This reserve was estimated based on historical student settlement experience. As
a result of the cash settlement payment and estimated reserves, Whitman recorded
a one-time, after-tax charge to earnings of approximately $930,000, or $.07 per
share in the fiscal quarter ended March 31, 2000. Although management denied the
allegations of the lawsuit, and believed the key allegations to be without
merit, Whitman entered into the settlement to resolve litigation in a
satisfactory business manner, to avoid disruption of Whitman's business, and to
allow Whitman to pursue its mission of providing quality education to its
students.
9. SEGMENT AND RELATED INFORMATION
Whitman complies with the provisions of Statement of Financial Accounting
Standards No. 131, "Disclosures About Segments of an Enterprise and Related
Information" ("SFAS 131"). SFAS 131 establishes standards for the way that
public business enterprises report information about operating segments in
annual financial statements and requires that those enterprises report selected
information about operating segments in interim financial reports. It also
establishes standards for related disclosures about products and services,
geographic areas and major customers.
9
WHITMAN EDUCATION GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
9. SEGMENT AND RELATED INFORMATION - CONTINUED
Whitman is organized into two reportable segments, the University Degree
Division and the Associate Degree Division. The University Degree Division
primarily offers bachelor, master and doctorate degrees through Colorado
Technical University. The Associate Degree Division offers associate degrees and
diplomas or certificates through Sanford-Brown College and Ultrasound Diagnostic
Schools.
Whitman's revenues are not materially dependent on a single customer or
small group of customers.
Summarized financial information concerning Whitman's reportable segments
is shown in the following table:
FOR THE THREE MONTHS ENDED
JUNE 30,
-------------------------------------
2001 2000
----------------- ----------------
Net revenues:
Associate Degree Division...... $15,288,208 $14,185,115
University Degree Division..... 5,229,908 4,694,315
----------------- ----------------
Total.......................... $20,518,116 $18,879,430
================= ================
Income (loss) before income tax
(provision) benefit and
cumulative effect of change in
accounting principle:
Associate Degree Division...... $ 68,855 $ (598,589)
University Degree Division..... 704,424 620,051
Other.......................... (611,568) (523,067)
----------------- ----------------
Total.......................... $ 161,711 $ (501,605)
================= ================
June 30, 2001 March 31, 2001
----------------- ----------------
Total assets:
Associate Degree Division...... $44,216,357 $48,327,713
University Degree Division..... 9,914,853 11,895,647
Other.......................... 4,924,641 1,813,267
----------------- ----------------
Total.......................... $59,055,851 $62,036,627
================= ================
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the consolidated financial statements of Whitman, the related notes to the
consolidated financial statements and Management's Discussion and Analysis of
Financial Condition and Results of Operations included in Whitman's Form 10-K
for the year ended March 31, 2001 and the condensed consolidated financial
statements and the related notes to the condensed consolidated financial
statements included in Item 1 of this Quarterly Report on Form 10-Q. Except for
the historical matters contained herein, statements made in this report are
forward-looking and are made pursuant to the safe harbor provisions of the
Securities Litigation Reform Act of 1995. Such statements may include, but are
not limited to, projections of revenues, income and cash flows, and Whitman's
financing needs and plans for future resources, working capital and operations.
Investors are cautioned that forward-looking statements involve risks and
uncertainties, including, but not limited to, regulatory, licensing and
accreditation risks inherent in operating proprietary postsecondary educational
institutions, (including risks relating to the continued eligibility of our
schools to receive funds under Title IV Programs), risks relating to
unanticipated attrition or reductions in student enrollment, risks relating to
the availability of financing and risks relating to the effect of the adoption
of SFAS 141 and 142, which may cause our actual results, performance or
achievements to differ materially from the results expressed in the
forward-looking statements made in this report. Other factors that may affect
our future results include certain economic, competitive, governmental and other
factors discussed in our filings with the Securities and Exchange Commission. We
assume no responsibility to update forward-looking statements made herein or
otherwise.
11
RESULTS OF OPERATIONS
The following table sets forth the percentage relationship of certain
statement of operations data to net revenues for the periods indicated:
FOR THE THREE MONTHS ENDED
JUNE 30,
------------------------------
2001 2000
------------ -------------
Net revenues................................ 100.0% 100.0%
Costs and expenses:
Instructional and educational support.... 67.0 68.4
Selling and promotional.................. 16.4 17.8
General and administrative............... 15.0 15.7
------------ -------------
Total costs and expenses.................... 98.4 101.9
------------ -------------
Income (loss) from operations............... 1.6 (1.9)
Other (income) and expenses:
Interest expense......................... 1.3 1.2
Interest income.......................... (0.5) (0.4)
------------ -------------
Income (loss) before income tax (provision)
benefit and cumulative effect of
change in accounting principle........... 0.8 (2.7)
Income tax (provision) benefit.............. (0.3) 1.1
------------ -------------
Income (loss) before cumulative effect of
change in accounting principle........... 0.5 (1.6)
Cumulative effect of change in accounting
principle, net of tax.................... - (3.0)
------------ -------------
Net income (loss)........................... 0.5% (4.6)%
============ =============
THREE MONTHS ENDED JUNE 30, 2001 COMPARED TO THE
THREE MONTHS ENDED JUNE 30, 2000
Net revenues increased by $1.6 million or 8.7% to $20.5 million for the
three months ended June 30, 2001 from $18.9 million for the three months ended
June 30, 2000. This increase was primarily due to a 4.2% increase in average
student enrollment and an increase in tuition rates.
The University Degree Division experienced a 9.3% increase in average
student enrollment and the Associate Degree Division experienced a 1.7% increase
in average student enrollment. The increase in student enrollment in the
University Degree Division was primarily due to increased enrollment at Colorado
Technical University's Colorado Springs and Sioux Falls campuses. The increase
in student enrollment in the Associate Degree Division was primarily due to
increased enrollment in the medical assisting program and the health information
specialist program offered by the Ultrasound Diagnostic Schools.
12
RESULTS OF OPERATIONS - CONTINUED
Instructional and educational support expenses increased by $0.8 million or
6.4% to $13.7 million for the three months ended June 30, 2001 from $12.9
million for the three months ended June 30, 2000. As a percentage of net
revenues, instructional and educational support expenses decreased to 67.0% for
the three months ended June 30, 2001 as compared to 68.4% for the three months
ended June 30, 2000. The increase in instructional and educational support
expenses was primarily due to an increase in payroll and related benefits for
faculty and student support personnel to support the increase in enrollment.
Selling and promotional expenses remained consistent at $3.4 million for
the three months ended June 30, 2001 and June 30, 2000. As a percentage of net
revenues, selling and promotional expenses decreased to 16.4% for the three
months ended June 30, 2001 as compared to 17.8% for the three months ended June
30, 2000.
General and administrative expenses increased by $0.1 million or 4.5% to
$3.1 million for the three months ended June 30, 2001 from $3.0 million for the
three months ended June 30, 2000. As a percentage of net revenues, general and
administrative expenses decreased to 15.0% for the three months ended June 30,
2001 as compared to 15.7% for the three months ended June 30, 2000.
We reported income from operations of $0.3 million for the three months
ended June 30, 2001 as compared to a loss from operations of $0.4 million for
the three months ended June 30, 2000. This increase in profitability was
primarily due to an increase in income from operations of $0.7 million in the
Associate Degree Division.
We reported net income of $0.1 million for the months ended June 30, 2001
and a net loss of $0.9 million for the three months ended June 30, 2000. The
increase in net profits was primarily due to the $0.7 million increase in
operating profits in the Associate Degree Division and the implementation of SEC
Staff Accounting Bulletin No. 101 effective April 1, 2000, which resulted in a
one-time charge after taxes of $0.6 million for the three months ended June 30,
2000.
SEASONALITY
We experience seasonality in our quarterly results of operations as a
result of changes in the level of student enrollment. New enrollment in our
schools tends to be lower in the first and second fiscal quarters covering the
summer months which are traditionally associated with recess from school. Costs
are generally not significantly affected by the seasonal factors on a quarterly
basis. Accordingly, quarterly variations in net revenues will result in
fluctuations in income from operations on a quarterly basis.
13
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents at June 30, 2001 and March 31, 2001 were $3.0
million and $5.9 million, respectively. Our working capital totaled $6.3 million
at June 30, 2001 and $8.5 million at March 31, 2001.
Net cash of $0.1 million and $1.2 million were used in operating activities
for the three months ended June 30, 2001 and 2000, respectively. The decrease in
cash used in operating activities of $1.1 million was primarily due to an
increase in net profits of $1.0 million.
Net cash of $0.4 million and $0.8 million were used in investing activities
for the three months ended June 30, 2001 and 2000, respectively. The decrease in
cash used in investing activities of $0.4 million was due to a decrease in cash
used for capital expenditures.
Net cash of $2.4 million and $3.6 million were used in financing activities
for the three months ended June 30, 2001 and 2000, respectively. The decrease in
cash used in financing activities was due to a decrease of $1.3 million in net
payments on long-term debt and capitalized lease obligations.
We have a $2.0 million line of credit which expires on June 30, 2002. At
June 30, 2001, we had no outstanding balance under this facility and letters of
credit outstanding of $0.2 million which reduced the amount available for
borrowing. The amounts borrowed under this facility for the three months ended
June 30, 2001 were primarily used for operations, repayment of debt and capital
expenditures.
On November 5, 1999, our Board of Directors authorized the repurchase of up
to $1.0 million of our common stock. Any repurchases may be made from time to
time in the open market or through privately negotiated transactions. We
anticipate that any repurchase of shares will be funded through cash from
operations. During the three months ended June 30, 2001, we did not repurchase
any shares of our common stock and during the three months ended June 30, 2000,
we repurchased 90,000 shares of our common stock for approximately $128,000.
Since the inception of the repurchase program, we have repurchased 285,100
shares of our common stock for approximately $498,000.
Our primary source of operating liquidity is the cash received from
payments of tuition and fees. Most students attending our schools receive some
form of financial aid under Title IV Programs. We receive approximately 71% of
our funding from the Title IV Programs. Disbursements under each program are
subject to disallowance and repayment by the schools.
We believe that with our working capital, our cash flow from operations,
our line of credit and our expected increased financings under capital lease
obligations to fund capital expenditures, we will have adequate resources to
meet our anticipated operating requirements for the foreseeable future.
14
NEW ACCOUNTING PRONOUNCEMENT
In June 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 141, "Business Combinations", and No. 142,
"Goodwill and Other Intangible Assets" ("SFAS 141 and 142"), effective for
fiscal years beginning after December 15, 2001. Under the new rules, goodwill
(and intangible assets deemed to have indefinite lives) will no longer be
amortized but will be subject to annual impairment tests. Other intangible
assets will continue to be amortized over their useful lives.
Whitman has elected to adopt the provisions of SFAS 141 and 142 effective
April 1, 2001. Application of the nonamortization provision of the Statement
resulted in an increase in net income of $43,000 net of taxes for the three
months ended June 30, 2001. Pro forma net loss and net loss per basic and
diluted share amounts, for the three months ended June 30, 2000, had SFAS 141
and 142 been applied retroactively, were approximately ($823,000) and ($.06),
respectively.
During fiscal 2002, Whitman will perform the first of the required
impairment tests of goodwill. Whitman has not yet determined what the effect of
this test will be on its earnings and financial position of Whitman.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
---------
No exhibits
(b) Reports on Form 8-K
-------------------
On April 3, 2001, Whitman filed a Current Report on Form 8-K March 30,
2001. In that report, Whitman furnished information relating to presentation to
investors pursuant to Item 9 of Form 8-K and Regulation FD.
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.
WHITMAN EDUCATION GROUP, INC.
By: /s/ FERNANDO L. FERNANDEZ
-------------------------
Fernando L. Fernandez
Vice President - Finance,
Chief Financial Officer,
Treasurer and Secretary
Date: August 7, 2001