-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LwagzfwWp8W45vbf/4pP4WOvGQTcJ0+6Cxui4Neug52wK4sWdS4q3eQ8BJT/wopJ Ksbv/ivu+bsUBoA/Kma9UA== 0000775820-97-000002.txt : 19970613 0000775820-97-000002.hdr.sgml : 19970613 ACCESSION NUMBER: 0000775820-97-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970506 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHILDRENS DISCOVERY CENTERS OF AMERICA INC CENTRAL INDEX KEY: 0000775820 STANDARD INDUSTRIAL CLASSIFICATION: 8351 IRS NUMBER: 061097006 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-14368 FILM NUMBER: 97596404 BUSINESS ADDRESS: STREET 1: 851 IRWIN ST STE 200 CITY: SAN RAFAEL STATE: CA ZIP: 94901 BUSINESS PHONE: 4152574200 MAIL ADDRESS: STREET 1: 851 IRWIN STREET STREET 2: SUITE 200 CITY: SAN RAFAEL STATE: CA ZIP: 94901 10-Q 1 1997 1ST QUARTER 10-Q SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549 FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1997. TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________ to ___________ Commission File No. 0-14368 CHILDREN'S DISCOVERY CENTERS OF AMERICA, INC. (Exact name of registrant as specified in its charter) DELAWARE 061097006 State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 851 Irwin Street, Suite 200, San Rafael, California 94901 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (415) 257-4200 851 Irwin Street, Suite 200, San Rafael, California 94901 (Registrant's former address, if changed since last report) 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 ( ) As of May 1, 1997, the Registrant had outstanding 6,306,958 shares of Common Stock, $.01 par value, and 2,135 shares of Special Stock, denominated Series A Convertible Preferred Stock, $.01 par value, convertible into 388,182 shares of Common Stock. CHILDREN'S DISCOVERY CENTERS OF AMERICA, INC. FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1997 INDEX Page PART I. FINANCIAL INFORMATION 3 ITEM 1. Condensed Consolidated Financial Statements (Unaudited) a) Condensed Consolidated Balance Sheets -- 4 March 31, 1997 and December 31, 1996 b) Condensed Consolidated Statements of 6 Income -- Three-month periods ended March 31, 1997 and 1996 c) Condensed Consolidated Statements of 7 Cash Flows -- Three-months ended March 31, 1997 and 1996 d) Notes to Condensed Consolidated Financial 9 Statements ITEM 2. Management's Discussion and Analysis 10 of Financial Condition and Results of Operations ITEM 3. Quantitative and Qualitative Disclosures about Market Risk 12 PART II. OTHER INFORMATION 12 Signatures 13 PART I - FINANCIAL INFORMATION The condensed consolidated financial statements included herein have been prepared by Children's Discovery Centers of America, Inc. (the "Company") without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. While certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, the Company believes that the disclosures made herein are adequate to make the information presented not misleading. It is recommended that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 1996. In the opinion of the Company, all adjustments consisting only of normal recurring adjustments, necessary to present fairly the financial position of the Company as of March 31, 1997, and the results of its operations for the three-month periods ended March 31, 1997 and 1996, have been included. ITEM 1. FINANCIAL STATEMENTS CHILDREN'S DISCOVERY CENTERS OF AMERICA, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS MARCH 31, 1997 AND DECEMBER 31, 1996 ________________________________________________________________________________ (UNAUDITED)
March 31, December 31, 1997 1996 In thousands ASSETS CURRENT ASSETS: Cash and cash equivalents $5,540 $4,826 Short-term investments 7,730 6,914 Accounts receivable, net 1,662 2,584 Prepaid expenses and other current 1,239 1,624 assets ------ ------ Total Current Assets 16,171 15,948 ------ ------ PROPERTY, PLANT AND EQUIPMENT: Land 1,320 1,320 Buildings 6,188 6,179 Furniture, fixtures & equipment 11,214 11,015 Transportation equipment 2,277 2,233 Leasehold improvements 9,085 8,832 Construction in progress 814 750 ------ ------ 30,898 30,329 Less: Accumulated depreciation and (9,514) (8,798) amortization ------ ------ 21,384 21,531 INTANGIBLE ASSETS 34,672 35,381 OTHER 2,558 1,752 ------ ------ TOTAL ASSETS $74,785 $74,612 ======= ======= See accompanying notes which are an integral part of these statements.
CHILDREN'S DISCOVERY CENTERS OF AMERICA, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS MARCH 31, 1997 AND DECEMBER 31, 1996 ________________________________________________________________________________ (UNAUDITED)
March 31, December 31, 1997 1996 In thousands (except share data) LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current portion of long-term debt $2,140 $ 2,095 Accounts payable 480 501 Payroll and related accruals 3,098 3,005 Other accrued liabilities 1,281 1,092 ----- ----- Total Current Liabilities 6,999 6,693 LONG-TERM DEBT: Net of current portion 15,946 16,634 ACCRUED STRAIGHT LINE RENT 1,034 998 ------ ------ TOTAL LIABILITIES 23,979 24,325 ------ ------ STOCKHOLDERS' EQUITY: Special Stock: Authorized 5,000,000 shares; outstanding: Series A Convertible Preferred, par value $.01 per share, liquidation value $2,135 in 1997 and 1996; 2,135 shares outstanding in 1997 and -0- -0- 1996 Common Stock, par value $.01 per share Authorized 20,000,000 shares; issued and outstanding 6,306,958 in 133 133 1997 and 1996 Treasury Stock (7,200,844 shares in 1997 -0- -0- and 1996) Paid-in capital in excess of par 52,722 52,722 Loans to stockholder officers ( 710 ) ( 710 ) Unrealized gain (loss) on short-term ( 6 ) 0 investments Accumulated deficit (1,333) (1,858) ------ ------ Total Stockholders' Equity 50,806 50,287 ------ ------ TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $74,785 $74,612 ======= ======= See accompanying notes which are an integral part of these statements.
CHILDREN'S DISCOVERY CENTERS OF AMERICA, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE-MONTHS ENDED MARCH 31, 1997 AND 1996 (UNAUDITED)
Three-months Ended March 31 1997 1996 In thousands (except per share data) REVENUE FROM OPERATIONS: $22,643 $21,178 OPERATING EXPENSES: Payroll & related costs 11,977 11,342 Direct costs 5,946 5,700 General & administrative 2,024 1,763 Depreciation 715 537 Amortization 711 688 Advertising & promotion 215 227 ------ ------ Total operating expenses 21,588 20,257 Operating profit 1,055 921 OTHER EXPENSE, net 295 335 ------ ------ Income before provision for income taxes 760 586 PROVISION FOR INCOME TAXES 235 120 ------ ------ NET INCOME $ 525 $ 466 ==== ===== NET INCOME PER SHARE: $0.08 $0.07 ===== ===== AVERAGE NUMBER OF COMMON AND COMMON EQUIVALENT SHARES: 6,767 6,701 ===== ===== See accompanying notes which are an integral part of these statements.
CHILDREN'S DISCOVERY CENTERS OF AMERICA, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE-MONTHS ENDED MARCH 31, 1997 AND 1996 (UNAUDITED)
Three-months Ended March 31 1997 1996 In thousands CASH FLOWS FROM OPERATING ACTIVITIES: Net income $525 $466 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 715 537 Amortization 711 688 Changes in assets and liabilities: Accounts receivable 922 71 Prepaid expenses and other current 385 (616) assets Accounts payable ( 21) (104) Payroll and related accruals 93 311 Accrued liabilities and other ( 23) 189 ----- ----- Net cash provided by operating 3,307 1,542 activities CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of short-term investments ( 822) (590) Proceeds from sale of short-term - - investments Payments for acquisitions of child care ( 88) ( 58) centers Payments for the start-up of centers - ( 97) Purchases of property, plant and ( 544) (510) equipment Other ( 366) 4 ------- ------- Net cash used in investing activities (1,820) (1,251) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of long-term debt - 66 Repayments of long-term debt ( 773) ( 648) Net cash used for financing activities ( 773) ( 582) ------ ------ Net increase(decrease) in cash and cash 714 ( 291) equivalents CASH AND CASH EQUIVALENTS: Beginning of period 4,826 2,920 ----- ----- End of period $5,540 $2,629 ====== ====== See accompanying notes which are an integral part of these statements.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED): continued Supplemental Disclosures of Cash Flow Information:
Cash paid during the three-months ended March 31 (in thousands) for: 1997 1996 Interest $400 $420 Income taxes 16 46
Supplemental Schedule of Noncash Investing and Financing Activities:
The Company acquired and opened one additional center during the three-months ended March 31,1997 and two additional centers during the three- months ended March 31, 1996 (in thousands): 1997 1996 Cash payments $88 $58 Notes issued to sellers 130 164 ---- ---- Total value of centers acquired $218 $222 ==== ==== See accompanying notes which are an integral part of these statements.
CHILDREN'S DISCOVERY CENTERS OF AMERICA, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 1997 (UNAUDITED) (1) General The accounting policies followed during the interim periods presented are in conformity with generally accepted accounting principles and are consistent with those applied for annual periods. Operational comparisons between the three-month periods of 1997 and 1996 are affected by the net addition of a total of nine centers in 1996 and one center for the first three-months of 1997 (see "Management's Discussions and Analysis of Financial Condition and Results of Operations" below). For a complete discussion of the Company's accounting policies, refer to the Company's Annual Report on Form 10-K for the year ended December 31, 1996, previously filed. Consolidation The condensed consolidated financial statements include the accounts of Children's Discovery Centers of America, Inc. and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated. Certain reclassifications have been made to the 1996 financial statements to conform to the 1997 presentation. The preparation of these condensed consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Earnings per Share At the end of 1997, the Company will report its Earnings per Share (EPS) based upon the recently issued Statement of Financial Accounting Standards No. 128 (SFAS No. 128), "Earnings per Share". The pro forma effect of this accounting change on the quarter ended March 31 is:
1997 1996 Primary EPS as reported $ .08 $ .07 Pro forma effect of SFAS No. 128 $ .00 $ .00 Basic EPS pro forma $ .08 $ .07 Fully diluted EPS as reported $ .08 $ .07 Pro forma effect of SFAS No. 128 $ .00 $ .00 Diluted EPS pro forma $ .08 $ .07
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General Since January 1, 1996, the Company acquired or opened fifteen centers and closed six centers. The results of acquired or disposed of centers are included in the Company's financial statements from the date of acquisition or until the date of disposition. Accordingly, the period to period results may fluctuate depending upon the timing of the Company's acquisition or disposition of centers. Historically, the Company's operating revenue has followed the seasonality of a school year, declining during the summer months and the year-end holiday period. Results of Operations Revenues from Operations increased 7% to $22,643,000 in the first quarter of 1997, as compared to $21,178,000 in the first quarter of 1996. The increase in revenues was attributable to the increase in the number of centers and to an increase in revenues in the Company's existing centers. Revenues for those centers open in both periods increased from 1996 by approximately 4.5% for the quarter. Increased tuition rates are responsible for 3.5% of the revenue increase and increases in enrollments are responsible for the remaining 1% revenue increase. Payroll and related costs increased by $635,000 or 6% , for the first quarter of 1997, as compared to the first quarter of 1996 due to the increase in the number of centers operated and to the increased pay rates at its existing centers. Payroll and related costs as a percentage of revenues, however, decreased to 52.9% in the first quarter of 1997 from 53.6% in the first quarter of 1996. The decrease in payroll and related expenses as a percentage of revenue was due to an increase in supervisory controls and procedures instituted during 1996 and to the Company having raised its tuition rates at a higher rate than its payroll rates. Direct costs increased by $246,000 or 4%, for the first quarter of 1997, as compared to the first quarter of 1996, due mainly to the increase in the number of centers operated. As a percentage of revenue, however, direct costs decreased to 26.3% in the first quarter of 1997 from 26.9% in the first quarter of 1996. The decrease as a percentage of revenue was due mainly to lower maintenance and repairs cost and lower utility cost. These costs were lower due to a milder winter in 1997 than in 1996 and to stronger internal controls. Depreciation and amortization expense increased to $1,426,000 in the first quarter of 1997 as compared to $1,225,000 in the first quarter of 1996. This increase was due mainly to the increase in new centers acquired during 1996 and to the improvements made by the Company in its existing centers. Advertising and promotion expense as a percentage of revenues has remained constant at approximately 1% for both periods. General and administrative expense as a percentage of total revenues increased to 8.9% for the first quarter of 1997 from 8.3% in the corresponding period of 1996. The increase as a percentage of revenue is due to the addition of supervisory and financial personnel to enhance management and financial controls and to prepare for future growth in the number of new centers. Other expense, net decreased by $40,000 for the first quarter of 1997 as compared to the first quarter of 1996. The decrease was due to higher interest income of $12,000 for the first quarter of 1997 due to higher cash balances and to lower interest expense of $28,000 for the first quarter of 1997 due to lower debt balances. The effective tax rate increased from 20% for the three-months ended March 31, 1996 to 31% for the three-months ended March 31, 1997. This increase in effective tax rate reflects the lesser impact of the Company's net operating loss carryforwards, tax exempt income and tax credits on the Company's higher pretax income. Liquidity and Capital Resources Since its inception, the Company has grown primarily through the acquisition of existing child care centers. For acquisitions of individual centers or small chains, it is the Company's general practice to acquire centers for a combination of cash and notes to sellers. These notes are payable generally over ten years. As of March 31, 1997, $13,195,000 in principal of such notes was outstanding. Since many sellers of centers own the facilities in which the centers are operated, the Company is often able to lease these facilities on a long-term basis through the exercise of successive options, while avoiding long-term obligations. Capital resources for the cash portion of acquisitions have generally been obtained through private sales of the Company's securities at various times since inception and public offerings of Common Stock. During the first three-months of 1997, net cash provided by operations was $3,307,000. This internally generated cash funded all of the Company's cash needs for purchases of property, plant and equipment, scheduled debt repayments, and the Company's investment in new centers. During the three-months, the Company issued or assumed a total of approximately $130,000 of indebtedness related to acquisitions. The Company's management believes that the Company's internally generated cash will cover its cash requirements for the foreseeable future and, along with its existing cash balances, will allow it to continue to grow through the acquisition of additional child care centers and the development of additional employer sponsored centers. The Company also has available to it up to $1,250,000 under an unsecured line of credit furnished by a commercial bank. Amounts drawn down bear interest at the rate of .75% above the bank's prime rate, and will be due and payable in full on July 1, 1997. The Company currently has no commitments for capital expenditures, which might be deemed, either individually or in the aggregate, material to its business. PART I - ITEM 3. Quantitative and Qualitative Disclosures about Market Risks None PART II - OTHER INFORMATION None. 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. CHILDREN'S DISCOVERY CENTERS OF AMERICA, INC. By: /s/ Richard A. Niglio Richard A. Niglio Chief Executive Officer By: /s/ Randall J. Truelove Randall J. Truelove Vice President, Finance Chief Accounting Officer Date: May 1, 1997 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. CHILDREN'S DISCOVERY CENTERS OF AMERICA, INC. By: Richard A. Niglio Chief Executive Officer By: Randall J. Truelove Vice President, Finance Chief Accounting Officer Date: May 1, 1997 EX-27 2 FDS --
5 1996 10-K 0000775820 Children's Discovery Centers of America, Inc. 1,000 3-mos Dec-31-1997 Jan-01-1997 Mar-31-1997 5,540 7,730 1,662 0 0 16,171 30,898 (9,514) 74,785 6,999 0 0 0 133 50,673 74,785 22,643 22,643 21,588 21,588 295 0 0 760 235 525 0 0 0 525 0.08 0.08
-----END PRIVACY-ENHANCED MESSAGE-----