SEC Company Response from NOBEL LEARNING COMMUNITIES INC (CIK 0000721237) — May 2, 2005
NOBEL LEARNING COMMUNITIES INC (CIK 0000721237)
Date: May 2, 2005 · CIK: 0000721237 · Accession: 0001193125-05-091572
AI Filing Summary & Sentiment
File numbers found in text: 000-27024
Referenced dates: April 15, 2005
Letter
Letter to the SEC
April 29, 2005
Via EDGAR
Via Facsimile
United States Securities and Exchange Commission
Division of Corporation Finance
450 Fifth Street, NW
Washington, D.C. 20549
Attention: Larry Spirgel, Assistant Director
Re: Nobel Learning Communities, Inc.
Form 10-K for the fiscal year ended July 3, 2004
Filed September 15, 2004
Form 10-Q for the quarter ended January 1, 2005
File No. 000-27024
Ladies and Gentlemen:
This letter responds to the Staff’s comment letter dated April 15, 2005, regarding the above captioned Form 10-K for the fiscal year ended July 3, 2004, and Quarterly Report on Form 10-Q for the quarter ended January 1, 2005, each filed by Nobel Learning Communities, Inc. (“NLCI”). For your convenience, each of the Staff’s comments has been reproduced, followed by NLCI’s response to such comment.
1. We note from your responses to our previously issued comments 8 & 12. It is still unclear to us how you determined your operating segments and reporting units under the guidance of SFAS 131 and SFAS 142. In this regard, please address the following items:
•
Clarify for us who you have identified as your chief operating decision maker and segment managers, as defined by paragraphs 12 and 14 of SFAS 131, respectively.
•
To further assist us in our understanding of your operations, please provide us with an organizational chart of the company that identifies the various levels of management and summarizes their responsibilities.
•
Please provide us with an example of all reports that are reviewed by your chief operating decision maker and segment management.
Nobel Learning Communities, Inc. · 1615 West Chester Pike · West Chester PA 19382-7956
Telephone: 484-947-2000 · Fax: 484-947-2003
•
Please clarify your statement that “operating results for all schools are reviewed by management monthly by school…” Tell us who reviews these results and whether they are reviewed by either the chief operating decision maker or segment management. In light of this information, tell us why you believe that each school is neither an operating segment nor a reporting unit.
Response Introduction
To clarify our use of the guidance of both SFAS 131 and SFAS 142 in response to the questions as to whether NLCI has an internal management structure that supports the definition of reporting unit, NLCI used the guidance of SFAS 142 paragraph 30 “A reporting unit is an operating segment or one level below an operating segment (referred to as a component)”, and “The relevant provisions of Statement 131 and related interpretative literature shall be used to determine the reporting units of an entity.” In addition the guidance of paragraph 31 “An entity that is not required to report segment information in accordance with Statement 131 is nonetheless required to test for good will impairment at the reporting unit level. The entity shall use the guidance in paragraphs 10-15 of Statement 131 to determine its operating segments for purposes of determining its reporting units.”
From this guidance NLCI concluded;
1) it is expected that an entity can have reporting units, for purposes testing of goodwill impairment that exist one level below the operating segment and as such are not individual operating segments,
2) the guidance of SFAS 131 is to be used substituting the term “operating segment” with either “reporting unit” or “component” and,
3) the qualitative guidance of paragraphs 10-15 of SFAS 131 are to be used to determine whether an entity has a reporting unit or component and once so determined by an entity, the guidance of paragraph 17 of SFAS 131, ‘Two or more operating segments may be aggregated” whether or not economic similarities exist, guides the determination as to whether an entity may or may not consolidate reporting units.
Additive to number 3 above is the determination by NLCI that this is a meaningful and purposeful analysis in the spirit of the aforementioned guidance to determine goodwill impairment based on how the goodwill was acquired, in this case geographically. The fact that NLCI determined there were 10 reporting units is determinative of its intent to follow the guidance.
Response to additional request for information
Bullet one
For purposes of the private school segment, in accordance guidance of SFAS 131 paragraph 12 “Often the chief operating decision maker of an enterprise is its chief operating decision maker, but it may be a group consisting of, for example, the enterprise’s president, executive vice presidents, and others.”, NLCI’s chief operating decision maker is comprised of its Chief Operating Officer and the Regional Vice Presidents/Directors who report directly to the Chief Operating Officer.
For the purpose of reporting units, the chief operating decision makers are NLCI’s Executive Directors (ED). These are each identified on the attached organization chart. Each ED has a group of schools in a common geography. Each ED conducts regular reviews of her/his respective operations and is directly accountable for her/his respective results and is responsible for allocation of resources within her/his respective areas. In addition to resource allocation and performance reviews each ED also prepares annual budgets for her/his respective areas.
Bullet two
As requested, we have provided an eight page organization chart for NLCI identifying the various levels of management. The responsibilities of each position are summarized above and presented by the hierarchy displayed in the organization chart.
Bullet three
As requested, an example of the weekly and monthly reports reviewed by the respective chief decision makers is attached.
Bullet four
In regards to our private school operating segment. - The organization chart and report examples provided in this response clarify the COO role. The COO, as chief operating decision maker of the private school segment, receives and reviews weekly and monthly information in summary for the private school segment (see the one page report examples with “Summary” in the title.) The COO is charged with acting on this information to guide allocation of resources and manage performance in the private school segment.
In regards to reporting units. - The organization chart and report examples provided in this response clarify what is meant by our statement that “operating results for all schools are reviewed by management monthly by school…”. The EDs, as chief operating decision makers, receive and review weekly and monthly information for her/his respective districts. They are charged with acting on this information to allocate resources and manage performance in her/his district.
As to whether each school comprises an operating segment, NLCI believes it has followed the guidance of SFAS 131 correctly. The schools/districts and regions that comprise its private school business are in fact the same business for the required qualitative reasons. The private school business is “run” by its chief operating decision maker, the group consisting of the COO and Regional VP’s.
In regards as to whether each school comprises a reporting unit, NLCI concludes it has followed the guidance of first SFAS 142 and then by reference to SFAS 131 correctly. The districts, which comprise the reporting units used for evaluation of goodwill impairment, were selected based on their geographic relevance, use of our existing internal reporting structure and related reports driving evaluation of unit performance by reporting unit management. Additionally, NLCI concluded that the way in which the goodwill was acquired is meaningful and believed the impairment evaluation was best performed on the geographic basis which is consistent with the manner in which the goodwill was obtained. Finally, NLCI embraced the fact that the Board intended to provide an entity with the ability to identify a reporting unit separate from its operating segment. This is clearly in the spirit of what the Board intended in this guidance.
NLCI believes it has comprehensively and concisely responded the issues raised by the Staff. We respectfully request the Staff’s cooperation in reviewing the response so that we can continue to timely comply with our ongoing filing obligations. To facilitate your review, we would be pleased to meet with you in person or conduct a conference call to respond to any questions or comments you may have. Please contact me at (484) 947-2030 or NLCI’s outside counsel, Richard P. Jaffe, at (215) 864-8901. Thank you.
Sincerely,
/s/ Thomas Frank
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CORRESP 1 filename1.htm Letter to the SEC April 29, 2005 Via EDGAR Via Facsimile United States Securities and Exchange Commission Division of Corporation Finance 450 Fifth Street, NW Washington, D.C. 20549 Attention: Larry Spirgel, Assistant Director Re: Nobel Learning Communities, Inc. Form 10-K for the fiscal year ended July 3, 2004 Filed September 15, 2004 Form 10-Q for the quarter ended January 1, 2005 File No. 000-27024 Ladies and Gentlemen: This letter responds to the Staff’s comment letter dated April 15, 2005, regarding the above captioned Form 10-K for the fiscal year ended July 3, 2004, and Quarterly Report on Form 10-Q for the quarter ended January 1, 2005, each filed by Nobel Learning Communities, Inc. (“NLCI”). For your convenience, each of the Staff’s comments has been reproduced, followed by NLCI’s response to such comment. 1. We note from your responses to our previously issued comments 8 & 12. It is still unclear to us how you determined your operating segments and reporting units under the guidance of SFAS 131 and SFAS 142. In this regard, please address the following items: • Clarify for us who you have identified as your chief operating decision maker and segment managers, as defined by paragraphs 12 and 14 of SFAS 131, respectively. • To further assist us in our understanding of your operations, please provide us with an organizational chart of the company that identifies the various levels of management and summarizes their responsibilities. • Please provide us with an example of all reports that are reviewed by your chief operating decision maker and segment management. Nobel Learning Communities, Inc. · 1615 West Chester Pike · West Chester PA 19382-7956 Telephone: 484-947-2000 · Fax: 484-947-2003 • Please clarify your statement that “operating results for all schools are reviewed by management monthly by school…” Tell us who reviews these results and whether they are reviewed by either the chief operating decision maker or segment management. In light of this information, tell us why you believe that each school is neither an operating segment nor a reporting unit. Response Introduction To clarify our use of the guidance of both SFAS 131 and SFAS 142 in response to the questions as to whether NLCI has an internal management structure that supports the definition of reporting unit, NLCI used the guidance of SFAS 142 paragraph 30 “A reporting unit is an operating segment or one level below an operating segment (referred to as a component)”, and “The relevant provisions of Statement 131 and related interpretative literature shall be used to determine the reporting units of an entity.” In addition the guidance of paragraph 31 “An entity that is not required to report segment information in accordance with Statement 131 is nonetheless required to test for good will impairment at the reporting unit level. The entity shall use the guidance in paragraphs 10-15 of Statement 131 to determine its operating segments for purposes of determining its reporting units.” From this guidance NLCI concluded; 1) it is expected that an entity can have reporting units, for purposes testing of goodwill impairment that exist one level below the operating segment and as such are not individual operating segments, 2) the guidance of SFAS 131 is to be used substituting the term “operating segment” with either “reporting unit” or “component” and, 3) the qualitative guidance of paragraphs 10-15 of SFAS 131 are to be used to determine whether an entity has a reporting unit or component and once so determined by an entity, the guidance of paragraph 17 of SFAS 131, ‘Two or more operating segments may be aggregated” whether or not economic similarities exist, guides the determination as to whether an entity may or may not consolidate reporting units. Additive to number 3 above is the determination by NLCI that this is a meaningful and purposeful analysis in the spirit of the aforementioned guidance to determine goodwill impairment based on how the goodwill was acquired, in this case geographically. The fact that NLCI determined there were 10 reporting units is determinative of its intent to follow the guidance. Response to additional request for information Bullet one For purposes of the private school segment, in accordance guidance of SFAS 131 paragraph 12 “Often the chief operating decision maker of an enterprise is its chief operating decision maker, but it may be a group consisting of, for example, the enterprise’s president, executive vice presidents, and others.”, NLCI’s chief operating decision maker is comprised of its Chief Operating Officer and the Regional Vice Presidents/Directors who report directly to the Chief Operating Officer. For the purpose of reporting units, the chief operating decision makers are NLCI’s Executive Directors (ED). These are each identified on the attached organization chart. Each ED has a group of schools in a common geography. Each ED conducts regular reviews of her/his respective operations and is directly accountable for her/his respective results and is responsible for allocation of resources within her/his respective areas. In addition to resource allocation and performance reviews each ED also prepares annual budgets for her/his respective areas. Bullet two As requested, we have provided an eight page organization chart for NLCI identifying the various levels of management. The responsibilities of each position are summarized above and presented by the hierarchy displayed in the organization chart. Bullet three As requested, an example of the weekly and monthly reports reviewed by the respective chief decision makers is attached. Bullet four In regards to our private school operating segment. - The organization chart and report examples provided in this response clarify the COO role. The COO, as chief operating decision maker of the private school segment, receives and reviews weekly and monthly information in summary for the private school segment (see the one page report examples with “Summary” in the title.) The COO is charged with acting on this information to guide allocation of resources and manage performance in the private school segment. In regards to reporting units. - The organization chart and report examples provided in this response clarify what is meant by our statement that “operating results for all schools are reviewed by management monthly by school…”. The EDs, as chief operating decision makers, receive and review weekly and monthly information for her/his respective districts. They are charged with acting on this information to allocate resources and manage performance in her/his district. As to whether each school comprises an operating segment, NLCI believes it has followed the guidance of SFAS 131 correctly. The schools/districts and regions that comprise its private school business are in fact the same business for the required qualitative reasons. The private school business is “run” by its chief operating decision maker, the group consisting of the COO and Regional VP’s. In regards as to whether each school comprises a reporting unit, NLCI concludes it has followed the guidance of first SFAS 142 and then by reference to SFAS 131 correctly. The districts, which comprise the reporting units used for evaluation of goodwill impairment, were selected based on their geographic relevance, use of our existing internal reporting structure and related reports driving evaluation of unit performance by reporting unit management. Additionally, NLCI concluded that the way in which the goodwill was acquired is meaningful and believed the impairment evaluation was best performed on the geographic basis which is consistent with the manner in which the goodwill was obtained. Finally, NLCI embraced the fact that the Board intended to provide an entity with the ability to identify a reporting unit separate from its operating segment. This is clearly in the spirit of what the Board intended in this guidance. NLCI believes it has comprehensively and concisely responded the issues raised by the Staff. We respectfully request the Staff’s cooperation in reviewing the response so that we can continue to timely comply with our ongoing filing obligations. To facilitate your review, we would be pleased to meet with you in person or conduct a conference call to respond to any questions or comments you may have. Please contact me at (484) 947-2030 or NLCI’s outside counsel, Richard P. Jaffe, at (215) 864-8901. Thank you. Sincerely, /s/ Thomas Frank Thomas Frank Chief Financial Officer Nobel Learning Communities, Inc. cc: Adam Washecka Kathy Herman Richard P. Jaffe Nobel Learning Communities Weekly Operations Report - April 05 - Summary Weeks in Month 4 Week # 2 $ scale $ 1,000 Net Revenue Bud Apr Bud MTD Act MTD PY Act MTD Var MTD Act v Bud % % of Full Month Bud Var Act v PY % Base Schools North $ 4,480 $ 2,240 $ 2,253 $ 2,145 $ 13 1 % 50 % $ 108 5.0 % South 4,030 2,015 1,987 1,917 (28 ) (1 %) 49 % 70 3.7 % West 4,587 2,293 2,161 2,107 (132 ) (6 %) 47 % 54 2.6 % 13,098 6,549 6,401 6,168 (148 ) (2 %) 49 % 233 3.8 % New Schools(1) North 181 90 82 1 (9 ) (10 %) 45 % South 81 40 52 (0 ) 12 30 % 65 % West 77 39 36 27 (3 ) (8 %) 46 % 339 169 170 28 0 0 % 50 % All Schools North 4,661 2,331 2,335 2,146 4 0 % 50 % 189 8.8 % South 4,111 2,055 2,039 1,917 (16 ) (1 %) 50 % 122 6.4 % West 4,664 2,332 2,197 2,134 (135 ) (6 %) 47 % 63 2.9 % Division Total 13,436 6,718 6,571 6,197 (147 ) (2 %) 49 % 374 6.0 % Paladin 152 76 77 69 1 1 % 51 % 8 11.8 % HLA 214 107 101 91 (6 ) (6 %) 47 % 10 10.6 % Charter 179 89 89 89 0 0 % 50 % 0 0.5 % Sub-total 13,982 6,991 6,838 6,445 (153 ) (2 %) 49 % 392 6.1 % Closed Schools 367 184 249 (184 ) (100 %) 0 % (249 ) (100.0 %) Sub-total 14,349 7,174 6,838 $ 6,694 (337 ) (5 %) 48 % $ 143 2.1 % TAC & Registr Accrual 158 79 62 (17 ) (22 %) 39 % Nobel Total $ 14,507 $ 7,254 $ 6,899 ($ 354 ) (5 %) 48 % — — — Payroll Bud Apr Bud MTD Act MTD Var MTD Bud % of Rev Act % of Rev Var % of Rev North $ 1,905 $ 952 $ 943 $ 10 40.9 % 40.4 % 0.5 % South 1,680 840 829 11 40.9 % 40.7 % 0.2 % West 1,772 886 837 49 38.0 % 38.1 % (0.1 %) Division Total 5,356 2,678 2,609 69 39.9 % 39.7 % 0.2 % Paladin 47 24 23 1 30.9 % 29.7 % 1.2 % HLA 71 36 36 (1 ) 33.3 % 36.1 % (2.7 %) Charter 0 0 0 0 0.0 % 0.0 % 0.0 % Sub-total 5,475 2,737 2,668 69 39.2 % 39.0 % 0.1 % Closed Schools 172 86 86 Sub-total 5,647 2,824 2,668 155 TAC & Registr Accrual 38 19 19 0 Nobel Total $ 5,685 $ 2,843 $ 2,687 $ 155 39.2 % 39.0 % 0.2 % — — Contribution Margin Bud Apr Bud MTD Act MTD Var MTD % North $ 2,756 $ 1,378 $ 1,392 $ 14 1 % South 2,431 1,216 1,210 (6 ) (0 %) West 2,892 1,446 1,360 (86 ) (6 %) Division Total 8,080 4,040 3,962 (78 ) (2 %) Paladin 105 53 54 1 3 % HLA 143 71 64 (7 ) (10 %) Charter 179 89 89 0 0 % Sub-total 8,507 4,253 4,169 (84 ) (2 %) Closed Schools 195 97 0 (97 ) (100 %) Sub-total 8,702 4,351 4,169 (181 ) (4 %) TAC & Registr Accrual 120 60 43 (17 ) 29 % Nobel Total $ 8,822 $ 4,411 $ 4,212 ($ 199 ) (5 %) (1) Schools open less than 13 months Weekly Detail Financial Report Weekly Operations Report - April 05 - Summary Weeks in Month 4 Week # 2 Scale $ 1,000 SCH # NAME Principle Type New Revenue First Last Bud 4/1 Act 4/8 Act 4/15 Act 4/22 Act 4/29 Act MTD % of Budget V Bud Prorated PY Week PY MTD V PY MTD 9 North Wales Merry Linde PS W 73.9 17.3 17.6 0.0 0.0 35.0 47 % ($ 2.0 ) 17.4 34.9 0 % 10 Plymouth Meeting Stacy Schulster PS W 87.0 19.6 20.4 0.0 0.0 40.0 46 % (3.5 ) 20.7 41.7 (4 %) 702 Lehigh Valley Tawni Connor PS W 62.8 17.6 17.8 0.0 0.0 35.4 56 % 4.0 16.0 32.0 10 % 706 New Britian Pamela Denato PS W 81.1 16.1 16.3 0.0 0.0 32.4 40 % (8.1 ) 19.9 39.8 (19 %) 708 Marple Marcia Wileczek PS W 98.2 25.0 25.2 0.0 0.0 50.3 51 % 1.1 22.5 45.7 10 % 709 Newtown Grant Rose Shaefer PS W 73.3 20.9 21.1 0.0 0.0 42.0 57 % 5.4 17.7 35.6 18 % 712 Royersford Donna Haas PS W 94.2 25.5 24.7 0.0 0.0 50.2 53 % 3.1 22.4 44.9 12 % 713 Audubon Karen Stewart PS W 98.6 24.3 23.4 0.0 0.0 47.6 48 % (1.7 ) 24.2 48.8 (2 %) 714 Oaks Cindie Page EL M 88.5 21.0 21.0 0.0 0.0 42.0 47 % (2.3 ) 20.6 41.1 2 % 715 Penn Mutual Zakiyyah Harley PS W 72.4 18.2 18.0 0.0 0.0 36.3 50 % 0.0 16.4 33.1 10 % 716 Chadlfont Jane Deriscavage PS W 81.2 18.5 17.6 0.0 0.0 36.1 44 % (4.5 ) 19.9 38.9 (7 %) 4424 Oaks (714) Paladin Cindie Page EL N13 M 1.5 0.5 0.5 0.0 0.0 0.9 62 % 0.2 0.4 0.7 25 % PA-1 Donna Knoll-total excl New N13 911.2 224.0 223.2 0.0 0.0 447.1 49 % (8.47 ) 217.8 436.4 2 % PA-1 Donna Knoll - Total 912.7 224.4 223.6 0.0 0.0 448.0 49 % (8.29 ) 218.2 437.1 2 % 8 Wayne Heather Furlong PS W 85.1 24.5 21.5 0.0 0.0 45.9 54 % 3.37 20.5 40.9 12 % 14 Great Valley Kim Robinson PS W 111.3 29.6 28.4 0.0 0.0 58.0 52 % 2.34 26.8 53.3 9 % 15 West Goshen Joe Rodia EL M 81.2 20.8 21.3 0.0 0.0 42.2 52 % 1.59 18.0 35.8 18 % 17 Exton Christine Herzog PS W 76.9 19.6 19.7 0.0 0.0 39.2 51 % 0.82 19.1 38.3 2 % 52 Manapalan Elem Gerri Kromann EL M 236.5 59.7 60.0 0.0 0.0 119.7 51 % 1.38 57.6 115.2 4 % 704 Brandywine Heather Domsohn PS W 100.3 22.5 21.8 0.0 0.0 44.3 44 % (5.89 ) 23.9 47.4 (7 %) 705 Camp Hill Christine Rogers PS W 47.6 12.4 13.1 0.0 0.0 25.5 54 % 1.77 12.3 24.2 5 % 707 Stoneridge Jessica Hamilton PS W 80.9 20.5 20.1 0.0 0.0 40.6 50 % 0.11 20.6 41.0 (1 %) 710 Lancaster Cindy Skalla PS W 78.4 22.7 22.2 0.0 0.0 44.9 57 % 5.69 19.4 39.1 15 % 711 Chaddsford Diana Mallon PS W 96.3 24.0 23.2 0.0 0.0 47.2 49 % (0.90 ) 23.4 48.1 (2 %) PA-2 Loraine DiScuillo-Total excl New N13 994.5 256.3 251.2 0.0 0.0 507.5 51 % 10.29 241.8 483.4 5 % PA-2 Loraine DiScuillo-Total 994.5 256.3 251.2 0.0 0.0 507.5 51 % 10.29 241.8 483.4 5 % 1 Main Street Allyson Collura PS W 77.7 24.0 23.9 0.0 0.0 47.9 62 % 9.06 18.4 38.5 24 % 6 Washington Twp Regina Sullivan PS W 93.0 23.1 23.8 0.0 0.0 46.9 50 % 0.35 22.1 44.1 6 % 7 Moorestown Lisa O’Rourke PS W 97.2 26.2 26.3 0.0 0.0 52.5 54 % 3.86 21.1 43.0 22 % 12 Voorhees Elementary Gloria Gittelman EL M 64.5 13.9 14.0 0.0 0.0 27.8 43 % (4.41 ) 14.1 27.8 0 % 18 Evesham Natalie Brown PS W 90.2 24.3 24.6 0.0 0.0 48.9 54 % 3.82 19.9 40.4 21 % 19 Glassboro Michelle Metz PS W 63.1 17.2 17.6 0.0 0.0 34.8 55 % 3.20 14.7 30.0 16 % 50 Toms River Marisa Tomaro PS N13 W 92.0 23.9 17.8 0.0 0.0 41.6 45 % (4.37 ) 0.0 0.0 54 Wayne Amy Emann PS W 63.3 15.5 13.7 0.0 0.0 29.2 46 % (2.49 ) 15.3 29.1 0 % 55 Kings Grant Tracy Feighery PS W 90.9 23.2 24.0 0.0 0.0 47.2 52 % 1.74 22.7 45.3 4 % 4422 Voorhees (12) Gloria Gittelman PS W 8.9 0.9 0.9 0.0 0.0 1.7 19 % (2.72 ) 1.9 3.7 (54 %) NJ-1 Melissa Bailey-Total Excl New N13 648.9 168.2 168.7 0.0 0.0 336.9 52 % 12.41 150.0 301.9 12 % NJ-1 Melissa Bailey-Total 740.9 192.1 186.4 0.0 0.0 378.5 51 % 8.05 150.0 301.9 25 % 20 Emerson Fran Birlingmair PS W 58.7 15.0 13.4 0.0 0.0 28.4 48