HomeMy WebLinkAboutTPO044_NATIONAL EDUCATION TP0044
NEVILLE LEWIS ASSOCIATES, INC., 411 SOUTH BOYLSTON STREET, LOS ANGELES,CA 90017 (213) 482-1015
. y
April 2, 1985 �E
yn . CE1VEp
Planning
Ms.• Marie Gilliam 0eAartrn
Environmental. Cqnsultant � AAR� t Ki
•1825 Westcliff. Street, #177
Newport Beach, CA 92660 N y Rr& 14
l/
UP,,
Dear Ms. Gilliam:
Pursuant to your request for additional statistics about National Education
Corporation, the following addresses specific topics of concern.
1. Staggered work hours are practiced by departmental groups
in the following-proportions:
Department Hours
Executive 9:30 AM - 5:30 PM-
International 9:30 AM - 5:30•'PM
Legal 9:00 AM - 5:00 PM
Management Information Systems 24 Hour Operation
Human Resources 8:00 AM - 5:00 PM
Facilities 7:00 AM - 4:00 PM
Accounting 8:30 AM - 5:00 PM
Public Relations, 9:00 AM - 5:00 PM
2. ' The Headquarters group has grown in the last two pears by four
employees; one vice president, two accountants and one secretary.
3. The projected employee population growth as stated in our space
analysis report is 10% per year. The total projected population ,
for specific years is as follows: 1986 - 164; 1988 - 194;
1990 - 218.
The shared facilites such as conference rooms, -copier rooms,
storage areas and file rooms will not require additional space
in this building between now and 1990.
4. The maximum visitors per day averages .12, with a length of stay
between one and two hours.
5. The projpcted opening of this facility will be August, 1986.
PROGRAMMING SEXT PI ANNING INTERIOR DESIGN / NEW YORK DENVER DALLAS LOS ANGELES
f
'N Lit
Ms. Marie Gilliam
April 21 1985
Page 2
Should you .have *any questions regarding the above, please do not hesitate
to call me.
Sincerely,
NE�VILLE LEWIS ASSOCIATES
/Richard Dilday
Vice President
RBD/pd
cc: Mr. Glen Eichler — Stewart Woodard & Assoc.
Mr. Jack Butler National Education Corporation ,
iMr. Pat Temple - City of Newport Beach
Mr. Hardy Strozier
I
f '
I�
bhe Planning Associates
Jonathan Petke, Inc
Hardy M. Strozier, Inc
3151 AIRWAY AVENUE,SUITE 5.1 F
COSTA MESA,CALIFORNIA 92626 A�nF/YF
(71 d)556 5200 'lX,J�p
April 1, 1985
iV
Ms. Marie Gilliam
URBAN PLANNING
1825 Westcliff Drive, Suite 177
Newport Beach, CA 92660
Re: National Education Corporation
Dear Ms. Gilliam:
Last week you requested data related to the NEC project in Newport
Beach. Enclosed, you will please find a copy of the staff report
dated October 20, 1983 and a background Times article on NEC. In
addition, the following is data requested regarding the character-
istics of the sites used in the Weston Pringle and Associate study
of September 4, 1984:
1) The existing NEC sites used in the Pringle Study are
located at 4400 Campus and 1300 Bristol in Newport
Beach.
2) The number of employees per square feet at each facility
are as follows:
a) 4400 Campus=9,036 feet and 61 employees
b) 1300 Bristol=32,000 feet and 102 employees
3) Type of activity at each location is as follows:
a) 4400 Campus: Education centers division--facilities,
accounting and education
b) 1300 Bristol: Executive offices for NEC--executive,
international, legal, management information systems,
human resources and pbulic relations.
I trust this information plus the enclosed data responds to your
questions.
Very t my yours,
rdy, Stroz .er
HMS:sd
cc: Pat Temple Jack Butler
Bill Ward Jeff Brill
Jim Hewicker Glenn Eichler
a .1es �tntals . ac/Part v A- 1
`r
.: : ?:National. .Educati'on.: Corp
'After a''10-Year Buymg'Spree,')lewport Beach Company
y' Focuses on"Internal .Growth of Vocational-School' Empire:;:
, �: , . '
ByLSSsLIEBERKYAN,nntesSwffWriter'
h.David Bright of Corona del Mar' ' i g 'years at an annual average rate of -
chuckles when he tells how a grade ,20% (over the past five years, the
school teacher, once'asked his average annual increase has been .
daughter what her father did !or a " 4098.) Earnings, $9 million last
living and she piped up, ;'My dad, 'year, have nearly quadrupled since ;
1 . acquires companies,", 1978, averaging 23% annual gains r
For 10 years, it has seemed that . over, the past 40 years and 30% ;
way to the rest of the'world,too. annual gains in the past five years. ' s:
i Bright,the 49-year-old president Starting with three vocational ,
and chief executive. of Newport 'schools 10 years ago,National Edu- '
Beach-based National'Education .cation now has 48,with a combined » i
"'1' ' Corp., has taken his company on a enrollment of 35,000, as well as ,• +�
_ decade-long buying spree, collect- ' home study and industrial training
z = ing 47 new vocational schools programs enrolling another 110,000
—many of them in the emerging students.
.*` areas-of electronics.and computer
Change Ahead?
technology—and distinction as the • ` )
"yt<; nation's largest chain of vocational . But now, there are signs that the
schools, company's heady acquisition days
a$ :7 may be over—and with them, the
Rapid Growth spectacular revenue gains that have
Largely because of the acquisi- - . transformed National Education
f'- tions,National Education has grown • from a $26-million company to a t
a }, by leaps and bounds—particularly ,$158-million education conglomer-
in the six years since Bright was, ate in just five years.
named to the company's presidency. Even Bright, while-still on the !
(He took on the additional post of lookout'for good deals, concedes
chief executive in 1980.). that there are far fewer for the
Student enrollment, revenues taking and says the company's
and earnings have tripled over the future revenue and earnings growth r
past five years. •-; • will depend more on internal expan=, Let Angela Tim6 t
iAWFORD Revenues, $158 million for 1983, :sion. H. David Bright, president;' ,; ' (-
geles. have risen steadily over the past 10 The reason is the sudden national has seen corporate earnings,
interest in vocational education ' triple in the'past five years!
' spurred by high unemployment
levels and a growing awareness that
American workers need to be re- school chain for training computer
trained in developing technologies. and electronics technicians with
300 s xc,.t Although a boon for National Edu- estimated annual sales of$130 mil-*` EnroMmentt , •.w•
thouurWe fir•:•;t„, • , canon's enrollment;this new popu- lion. ,
-,studmtmonihe•7 f;,�;,,�.�•:. larity has made vocational schools So when Bright called Frey seek-;
• ;r ;, ;;;,-; - A ,;, • - either prohibitively expensive for ing negotiations to acquire or merge
r1, •.i}
' r:.;;•.;;:K : :., • buyers or unavailable for purchase. with DeVry,Frey did two things:He
L
,t :? „i.�. :;• rebuffed Bright's overture,and then
-'r` :,; Meets Roadblock
200 ` •'' `• issued a so-called "poison pill" 'of" � !
rtt.;i, r; ; ' Last sum;k°' mer,National Education preferred stock designed todiscour- i
found out first-hand just how un- age anyone from obtaining a con-
`? 1 available some of its competitors are trolling interest in the company.
•' T._ when its expansionism met a road- National Education, as a minority
block from one-time photography stockholder,is contesting the legal- i
�O0 giant Bell&Howell Co. ity of Bell&Howell's action. j
( . The drama began last July. Don (The failed acquisition bid i
N. Frey, the chairman of Chicago• marked the beginning of a run of
r based Bell & Howell, had learned bad luck for National Education and.
j: that National Education was buying one of its executives, .,
i up Bell&Howell stock=ultimately. (In the six months following
o acquiring a 4.9% interest. He announcement of the unsuccessful'
J '79 '80 .'et •82 '63 smelled a takeover attempt.Nation- bid, National Education has been
• A student-month represents al Education's archrival in the vo- the victim of three fires, two arsons
enrollment by one studont in school business,after all,is and one suspected arson. One.did
e" •"a"""" "' Bell & 9�% 't'g T)nvry ingtihdeg of $500(W dam-lee to an office huild- 3
tCOTJNTY BUSINESS
'�YOf�11Qt1�b BLtritlf ' `, i f ' • ' • •• ..L, `. ; •.Y. ,. ,I/ •• '
.N AL::�'Intemal.G r• =µ
owtiz Ana•of'Compa.nYt
�Continued from Palo A
ing, another destroyed the compa- `should averagd'15% to 20%^per,.,.".Tem] ering the optimism some.' '
ny'a headquarters building and the year(about half the pace of the past �_'What Is increasingly tough competi'.a.:
third damaged a temporary building ' five years) and earnings should,'"tion from two-year public collegesa
in which National Education is grow at an average annual rate of:.",•Eager to,capitalize on the renewed
�• ' . housed.Invest]gaton have found no 25% to 85% (roughly equal to the •popularity of,vocational schools,( " '
link between the failed Bell k ' average annual growth of-the past: .. ,these public colleges, over-the pasha-
Howell deal and the mishaps. • .five yeas;), predicts Jan Loeb, a,., 10 years,'have begun offering morel
(And in January; the son of , securities analyst for L.F. Roth-;= vocational courses,. and the:cosily
National Education Chairman John ,';child, Unterberg, Towbin in New ,.often G lesi than at private schools. '
McNaughton was fatally statbed York. • . ' such cap National Education. • 41
There is a suspect in the case.) Such optimism is not out-of line, f`,, According ,to Tom Litowski,''�
Industry analysts who have securities analysts say,because Na-. .,;,statistician with the federal govern,
watched National Education's em- tional Education has positioned,it- :inent's National Center for Educa'!1
pine-building were not surprised by self well to cash in on the"retrain- ••tion Statistics, about.2 million stu
Brlght's bold foray at Bell&Howell. ing of America"—the importance of,. den are enrolled in private traq`je;
Why shouldn't you' buy your ,which President Ronald. Reagan'., schools•and another 4 million ht
competition it you can\get away • emphasized in a speech last year on. -x; vocational programs at public•colic;•f. I .
with it?" Mary Lisanti, vice presi- .; 'jobs obsoleted by developing tech- .•."4eges,;'.;,•, - • •M .• 1
dent of research for 9,F. Hutton in 1 nology—and on a renewed concern
New York,observed in amusement among students to take courses that :Although National Education is '
Without DeVry, which analysts will lead directly to future employ-' .'Blanc in its industry, the $100 mil�, i
say would have been National Edu= ment: ::.thon a*year in revenues it gleans, i
canon's biggest prize ever,theNew- "Of the 965,000 American college from its classroom-based,vocationag
port Beach chain can expect slower seniors who graduated last spring,a ,'schools represents only a tiny frac-i
growth—but growth,nevertheless, record one-third of them left cam- .I don of total trade school revenues in' Last year was the first test of that pus without a job," Loeb observed. •. the 'United States, which Bright; ;
theory. With only one small acqui- 'Their degrees simply do not match ;estimates at$4 billion a year, .; .41 1
sition, National Education regis- the current labor requirements.-:. Chains of vocational schools such; '.
x tweoR2 tered a 17% increase in revenues Part of the'answer is vocational as National Education are a minori-1; '
emann, and a 64go increase in earnings. , training." ; ty in the industry,which is typified'
Year-earlier increases jwere 20% National Education also is profit- by small, owner-operated institO
kith all and 6%,respectively. ing from its reputation as a pioneer• , tions. But entrepreneurs interests '
1ogram. Over the nest several years,Na- in the growing field of computerized • in securing a foothold in vocational
tional Education's revenue growth teaching,analysts say. �" '•- placate we NATIONAL Pale D'
nU
REAL ESTATE LOANS
/r•y.,�.�„i"„� FIRST TD'S � Z �; ; Finest Cuisine • FIXED RATES cken,Seafood end lamb roastedClay Oven Crandoor) FULLY AMORTIZEDneheona from {4.95 M gUETS E CATERING �yO/0 �,T.V; .' : 'APR. 12.73�*d�� 2ndT.D•LOANSALSOAVA/LABLEYAL KHYBER Vanguard MortgageCorp.Cuisine of India A Full Mortgage Broker
Nonh.,Newpon Beach(714)752.5200 ' 714/956-OSW Ask for lfefhy SW-422-4721
: (
— I
SAN CLEMENTE,CALIF.
L
COMMERCIAL BUILDING
ANDLOT
Clow fo Mawgs•SHOREBIRD INC, e0 ��lt4l492-8384 y, pG p y,WE BUY
ra,' ' .;,' 41
��LEASE BACK flie IBM 'PC
Yi
{15a,0001D i1000,000 Of rrara ..
t �
'NATIONAL;: T'Focus .Is on -Growth • ,, OUE
PA
Paatiauai from Pap C •.: '.': . , , .in another innovative move to cut operating data and t pan
. 'education have found that acquisitions are the only: attract'students, National Education last year opened wo
q rfeasible answer;arnalyst Loeb said.The alternative, he ,the first four of a chain of"super achoois,"pknued to a smt
{� •said,is going throit h the long,eostlypl!e a. of gatNrng ,bring a.variety of vocational programs together under, • 4 cm
'vccreditation fornew programs . : .. '! i .• .the.same root. Three or four more such schools, 6 am
"The vocational achooi entrepreneur is eiughi in a',' including a 35,000-square-foot facility in Anaheim $ Carl
t Catch-22 situation,-he said,'because most-vocational designed to ultimately accommodate Z060 students,are 7 No
;'school students-70%at National Education,for exam- '•expected to begin operation this year. • vu
,'ple-depend on government loomand grants. But-he The granddaddy of the super-achools made its debut • KW
said the government demands that student assistance be ' 'last July in a glassy, modern building hot far -from 10 �c
spentoniyonsecredltedcoureea, ::. '. Century City. The 40,000 square feet of school space 11 we
National Education has been'making acquisitions : leased on two floors include 24 laboratories and lecturePrin
Hm
since 1974, the year it pulled itself out of the deep 'rooms, a study hall, library, lounge and bookstore. 14 t
oli
recessionary hole it shared with others in the vocational ' )Interestingly;the facility looks like the company's main i6 tatr
education industry,whose financial problems had been competition—a small college. The school offers 18- to Api
'Intensified by charges of faulty accounting practices. , month vocational courses that cost MOW and lead to .17 sk
• Expansionism was the cornerstone of National Edu- associate of arts degrees. 'ta AUr(
•cation's recovery plan. According to the plan, Bright • Administrators of the super-school argue that,unlike 19 An
said, the company would buy schools with strong most finegcWly squeezed public colleges,they offer the 20 Poe
placement potential for graduates, and sell others, most up-to-date equipment Recently, for example, 21 Pry
'including schools for training models and aviation i they were awaiting delivery on a$160,000 computer-aa- 22 Sts
:personnel, with weak employment opportunity for stated drafting device. 23 Dio
graduates.' • • "The whole.orientation is toward Job skills and 24 NK
A preference for schdols in Sun Belt states, where training,"said Pan Fuchs,education coordinator at the 25 Arc
t 'there is industrial growth and a burgeoning population Los Angeles center: In-keeping with the businesslike 2e Re
.1 'of 18-to 25-year-olds,also is part of theplan. atmosphere, she said, students must adhere to stiff 27 wy
Seed money for.the expansion,Bright said,originally attendance requirements and a dress code. 29 v.c
29 Qw
-came from a multimillion-dollar contract that one of • • Emphasis on Placing Graduates Far
In exchange,National Education schools place heavy 31 Gn32 Flo
emphasis on trying to place graduates with employers. 33 M¢
Tile Ad'le of entatlon is towai diob Depending on the course, National Education officials 34 No,
say,85% of their graduates find employment at starting 35 Nu
skills and training. k " salaries ranging from $12,000 to $20,000 a year. "The 38 Fin
i whole key is that the pay-back is very fast,"said Mary 37 Col
Lisanti, vice president of research for E. F. Hutton in 39 Ca
National Education's first schools,the Spartan School of New York, who'says she is very enthusiastic about 39 Gn
4u DO
Aeronautics in Tulsa,Okla.,received from the govern= ' 'National Education.
ment of Iraq to train aviation maintenance technicians. Although National Education managed to post earn- 41 ME
Money went along way in the early acquisition years, ings gains even at the depths of the recession, the 43 Me
Bright recalled.Typlcally,he laid owners of vocational , 'economic malaise made student ,placements. more 44 Ck
schools were so eager to sell that they accepted small difficult, stunted the growth of oh-the-job training 45 w
cash down payments and agreed 'to•lend National programs and prompted the company to, sell the 48 EB
Education the rest of the,priceat exceptionally low Anthony'Schools, a string of California real estate 47 OF
interestrates. .,schools that became money losers when the housing 49 Ru
To further reduce the purchase cost, sellers of the market collapsed. 49 Mi
The National Education Centers, which produce so G.r
dchools usually retained ownership of the land and nearly two-thirds of National Education's revenue,are
buildings,which National Education arranged to lease. expected to become more profitable because of a 600r"
The purchases also were structured so that much of projected expansion in enrollment TM
the cost was taken as tax write-offs.* were usingBlight predicts that and
National Education's student body will increase 1090 to
50•cent dollars to make the acqulaition,"Bright said. •159o'a year in the Immediate future. ON.
(Iit addition to the 47 vocational schools, National Analyst Loeb's rosy prognosis for National Education
Education over the past 10 years has acquired a home stems also from his belief that the coin Fos
nurs coin Pant will profit
urg training
textbook publishing Inter company, an from the introduction of a new computer-aided system over'
industrial training program :and International home for on-the-job technical training called ActionCode.The tc
correspondence schools.) system teaches by projecting images on a video screen : thebe
For years, the widely diverse schools that National that a student can control by touch.Bright said about 50 V.
Education purchased—ranging from the Allentown firms, including some of the country's largest, have toad.
Business School in Pennsylvania to the East Detroit- ordered the systems. He claims that these systems year,
' based RETS Electronic Schools to the Arizona Automo- promise to substantially cut the cost of workplace Educ
tive Institute to the Costa Mesa-based Bryman Schools instruction.' 1• Fn
"i for;training medical technicians—continued to be Another Area of Advancement New
recognized as individual institutions. Few knew that '
National Education was their parent company. National Education also is expected to reap profits
I But in 1982, National Education launched a new from computerization of testing materials used in
. marketing program for its school under a distinctive home-study courses.A National Education student who
logo and,the name National Education Centers" in wants to be tested can call up the computer center in
hope of developing greater visibility and national Scranton, Pa., and take a esponmulup ing to is test rs
recoanillon. punching in the numbers corresponding to his answers
on a repular push-button te)ephnn- Succ
marie e, giI Iiam, aicp
urban plannin
1825 westcliff rive, suite177
newport beach, ca 92660
714-645-0939
March 11, 1985
Ms. Patricia Temple
Environmental Coordinator
City of Newport Beach
3300 W. Newport Blvd-.
Newport Beach, CA 92663
Subject: Project Schedule
Initial Study - National Education Center
Dear Pat:
Per your request, I have outlined what I believe to be an achievable
project schedule for the above report. In the next few weeks, I will be
initiating data collection for land use and utilities analyses. The
following proposed schedule is based on the assumed completion of Wes'
expanded traffic analysis by April 1, 1985.
Completion Target
Data Collection and Impact
Analysis (except Traffic) March 29, 1985
Traffic Analysis & Report
Production April 5, 1985
Delivery of Screencheck Draft
to City of Newport Beach April 8, 1985
I will , of course, make every effort to deliver the report at an earlier
date, but I think April 5 or 8 is realistic.
I hope this target date is acceptable. If there are serious problems
with it, please give me a call .
Sincerely,
Marie E. Gilliam
MEG/if
Jhe Manning Associates
Jonathan Petke, Inc.
Hardy M. Strozier, Inc
3151 AIRWAY AVENUE,SUITE 5.1
COSTA MESA,CALIFORNIA 92626
(714(556-5200
CO
April 2, 1985 9 RECEIVCO /
s Oeparting
mcnt 10
o?'8 1985 "1"
CIV a:; it
NEWPORI •rnCN,
CAL1r• !?
Ms. Pat Temple w �c
CITY OF NEWPORT BEACH PLANNING DEPARTMENT N
3300 Newport Boulevard
Newport Beach, CA 92660
Re: National Education Corporation
Dear Ms. Temple:
I am enclosing material that provides background on National
Education Corporation. The information should help explain the
functions of NEC and the headquarter nature of the business
operations from Newport Beach.
I have also advised NEC that the probable date for hearings
before the Planning Commission will occur on April 28, 1985.
If there is a problem with achieving this date, please let
me know.
With this enclosed material and a follow up letter from Mr.
Richard Dilday, I believe all requested material has been provided
your staff and consultants. I will be in touch to establish
a mutually convenient meeting to discuss the results of your
investigation.
Very truly yours,
?Ha*rdy . trozier
HMS:sd
enc.
cc: Jim Hewicker. Jack Butler
Bill Ward Jeff Brill .
Marie Gilliam Glen Eichler
Richard Dilday
- J
Jhe J-Planning Associates
Jonathan Petke, Inc.
Hardy M. Strozier, Inc p/eoo!NFA
SUITE3151 AIRWAY AVENUE,COSTA MESA,CALIFORNIA 92626
(714(556-5200 £ NRn' 985�, 1Q
March 7, 1985
�+ N
Ms. Pat Temple
City of Newport Beach
Planning Department
3300 Newport Boulevard
Newport Beach, CA 92663
Re: National Education Corporation
Dear Ms. Temple:
National Education Corporation (NEC) has an application for a new
headquarters office building before the City of Newport Beach. I
thought it was appropriate to update you with the background for
the entitlement request, along with a perspective on NEC and their
request.
Some 12 months ago, NEC approached me as a planning consultant,
inquiring as to the ability to reconstruct their corporate head-
quarters building at the same location where their previous head-
quarters had been destroyed by fire. After this inquiry, I indicated
to the client that reconstruction would be permitted; however, the
intensity of use would be limited to a floor area ratio of .5 as
required by the traffic phasing ordinance of Newport Beach. NEC
indicated that they required an excess above the .5 FAR in order to
house their entire corporate office system within one building. At
that time, NEC was housed in three or four separate structures in
and around the greater John Wayne Airport area.
I subsequently scheduled a meeting with Jim Newicker in March, 1984,
during which either you or Bill Ward were present. In this meeting
we discussed the feasibility of exceeding the .5 FAR. It was dis-
cussed and agreed that the traffic phasing ordinance did permit the
.5 FAR to be exceeded up to 1.0 FAR, assuming that the traffic
generated by the proposed project did not exceed the characteristics
or intensity of the land use calculated at .5 FAR. That is to say, a
more intense use would be permitted so long as the traffic character-
istics were the same as a use developed at .5 FAR.
We went on to analyze those planning and transportation systems that
could accommodate such an increase, mainly focusing on transportation
management programs such as ride sharing, van pooling, staggered work
hours and general operational characteristics of the use. As we went
Ms. Pat Temple
City of Newport Beach
March 7, 1985
Page Two
on to analyze the proposed use, with its characteristics and its
proposed consolidation of three or four decentralized sites into
one location, it was felt that this type of specialized use could
probably be accommodated if, indeed, the evidence demonstrated that
the requirements of the traffic phasing ordinance were met. It was
also pointed out that such an application could probably be accom-
modated by letter request to the Planning Commission for the deviation
from the .5 FAR and site plan review of the proposed building by the
Planning Commission.
With this information and direction relayed to the client, NEC pro-
ceeded into a detailed design program for some five months, arriving
at a headquarters design that incorporated a five-story office structure
with two stories of structured parking. The architectural and opera-
tional analysis of the NEC use by the corporation revealed two issues
that required further entitlement requests to the City. The first
issue was structured parking taken on the roof structure which required
conditional use permit approval by the City of Newport Beach. Second
was a concern that the Newport Beach parking code required parking
above the NEC operational characteristics; therefore, a variance request
was needed in order to deviate from code provisions.
In summary, on December 11, 1984, applications were submitted to the
City of Newport Beach requesting:
1. To exceed the floor ratio of .5 to a level of .75 FAR.
2. Conditional Use Permit in order to provide structured parking on
the roof of the parking structure.
3. Variance from the required 326 parking spaces to a requested 280
structured spaces.
It has been and continues to be NEC's position that the key issues
before the staff are the increased intensity of use on site, and
secondly, the parking variance. It is NEC's position that the unique
operational characteristics of the headquarters use provides ample
justification, technically, for the parking variance and the requested
increase of floor area under the traffic phasing ordinance.
NEC is sensitive to and aware of the concern the City will have regarding
precedent setting issues within the greater airport office and industrial
complex. It is our opinion that the use characteristics of the headquarters
Ms. Pat Temple
City of Newport Beach
March 7, 1985
Page Three
company can be distinguished from other land uses in the area and
also can be adequately regulated and controlled, monitored and
policed via the use permit and variance permits. We would then
see not a precedent setting application and permit approved by the
City; rather, we see a legally defensible exception that is provided
for in the Newport Beach planning process providing reasonable
application of the law in the case of this headquarters use.
Thank you for your time in this matter. I hope the above review of
our project summarizes our request and our background philosophy
regarding the NEC applications.
Very truly yours,
(Hardy Strozier
Consulting Planner for
National Education Corporation
HMS/mn
cc: Jack Butler
Jeff Brill
Glenn Eichler
Jim Hewicker
Bill Ward
Marie Gilliam
Wes Pringle
m �
marie e, gil liam, aicp
urban plannin
1825 westcliffd-' suite rive, � Pca'a.�19g5
newport beach, ca, 92660 �� sENvA,
714-645-0939
January 11, 1985
Ms. Pat Temple
Environmental Coordinator
City of Newport Beach
3300 Newport Boulevard
Newport Beach, CA 92660
Subject: Proposal for Initial Study
NEC Corporate Headquarters
Dear Pat:
I am pleased to submit this proposal to prepare an Initial Study for
the environmental review of the construction of new NEC corporate
headquarters to be located on the site of an existing NEC office
building on Campus Drive. Based on our conversations, I have outlined
a scope of work (attached) which I believe will determine the type
and degree of environmental impacts which might result from the pro-
posed project.
It is my understanding that a traffic analysis for the project has
already been conducted by Weston Pringle & Associates for the applicant
and, thus, no additional traffic analysis by a traffic engineer is
included in the budget estimate. This environmental analysis will
address land use compatibility and potential growth inducing impacts
as well as the issue of consistency with the General Plan and applicable
development standards.
The attached scope includes preparation of a screencheck and draft
Initial Study but does not include any time for attendance at public
meetings. The budget outlined represents an estimate of costs and will
be billed on an hourly basis, not to exceed the budget totals without
prior notification and approval by the City. Expenses will be billed
at cost.
Ms. Pat Temple
January 11, 1985
Page 2
I hope this proposal responds adequately to your concerns regarding
this project. Your signature on the attached Scope of Work will act
as an authorization to initiate work. If you have any questions,
please give me a call .
Sincerely,
Marie E. 'lliam, AICP
MEG/if
PROPOSAL FOR
NEC CORPORATE HEADQUARTERS
INITIAL STUDY
January 11, 1985
Introduction
The following scope of work has been formulated to determine if any
potentially significant environmental impacts are likely to occur as
a result of the proposed project. The report will be prepared in
accordance with all the requirements of the City of Newport Beach and
the State of California.
Scope of Services
Marie E. Gilliam will prepare an Initial Study which will contain the
following information and will explore the following environmental issues
with regard to the proposed project:
1. Project Description: A description of the proposed project including
location, project characteristics, description of the project's
relationship to relevant plans, regulations and ordinances and a
listing of permits and required approvals will be prepared.
2. Identification of the Existing Environmental Setting: In each area of
environmental concern, a brief description of existing conditions
will be prepared.
3. Identification of Potential Environmental Effects and Measures to
Mitigate Impacts: he Initia Study wil explore the fo owing
issues based on the City's identi-fication of potential impacts and
will outline measures to mitigate adverse impacts to an acceptable
level .
a. Land Use Compatibility and Growth-inducing Affects: The potential
for the proposed project to influence the intensification of
development on similar surrounding properties will be explored.
This analysis will outline existing development intensities in the
project -vicinity and other factors influencing potential for
recycling of existing development. Other sites where a
precedent set by approval of the proposed project could
encourage such turn-over will be identified to the extent
practicable from a land use perspective, excluding any examin-
ation of economic and market influences.
b. Traffic/Circulation/Parking: Traffic and parking analyses con-
ducted by the project applicant will be reviewed and summarized
for the Initial Study. In addition to traffic generation and
impacts on existing transportation systems, the Initial Study
will assess the adequacy of proposed parking relative to
applicable regulations as well as from a functional perspective.
Operational characteristics of the proposed use will be explored
in addition to a worst case representing other potential uses
which could occupy the facility at some future time.
c. Public Services and Utilities: The Initial Study will include
a brief identification of any potentially adverse impacts on
public services and utilities.
Other environmental concerns contained in the CEQA Guidelines include air
quality, water quality, noise, soils and geology, plant and animal life,
light and glare, depletion of non-renewable natural resources, housing,
population, and energy are not considered to be potential environmental
issues due to the limited scale of the proposed project. Other concerns
such as human health, hazardous wastes, recreation, and cultural resources
are not applicable to use involved. A checklist of these items will be
included in the Initial Study.
Project Budget
The study will be prepared on a time and material basis for an estimated
maximum of $4,425.00. This fee will include the following services:
Screencheck Initial Study $2,825.00
Draft Initial Study 925.00
Estimated Expenses* 700.00
PROJECT TOTAL $4,450.00
Project Schedule
The preparation of the screencheck will be completed three weeks from
the date of authorization provided that the project does not undergo
any significant changes during the course of the study and that all
necessary information is obtained from the project apple ac nt and any
other source in a timely manner. The Draft Initial Study will be com-
pleted within two weeks, barring unforeseen circumstances.
Acceptance of Proposal
The preceding Scope of Work, budget and schedule are accepted and
initiation of work authorized as of the date indicated below.
Signature - Title
for the City of Newport Beach
Date:
*Estimated expenses includes the estimated cost of printing and
binding approximately 60 copies of the Initial Study (Screencheck
and Draft) and the cost of services of a graphic artist.
TRAFFIC R TRANSPORTATION ENGINEERING
U9 N
September 4, 1984 s RECEi
Plannin Eo 9
nePartrnont
Mr. Jeffrey A. Brill b ! FE132
National Education Corporation — cir2j9g5�° 10
OF
1300 N. Bristol Street N�yFORT3&
Newport Beach, CA 92660 cgti..
ti
Dear Mr. Brill :
This letter summarizes our review of traffic and parking factors related
to the proposed development of an office building for the National Edu-
cation Corporation on Birch Street in the City of Newport Beach. The
study is based upon information provided by your consultants, previous
studies and field studies by our firm. Traffic analyses have been com-
pleted to conform to the requirements of the Traffic Phasing Ordinance
of the City of Newport Beach.
The proposed development would contain 82,500 square feet of usable area
plus a 7,600 square foot atrium. Parking for 356 vehicles including 58
compact car spaces is proposed in both surface and structure parking
facilities. While the ultimate use of the building would be entirely
by the National Education Corporation, initially some portion may be
leased for general office use. Table 1 summarizes the anticipated uses
including estimated employment for National Education Corporation.
The site is currently vacant due to a fire which destroyed the previous
building. A project containing 72,000 square feet of building area was
approved by the City in 1979 and has been included in the Committed Pro-
ject list of the City. In 1983, the project was revised by the City to
a total of 41 ,250 square feet and the traffic related to this reduced area
is currently included in the Committed Projects list maintained by the City.
2651 EAST CHAPMAN AVENUE • SUITE 110 • FULLERTON. CALIFORNIA 92631 • (714) 871.2931
-2-
Table 1
LAND USL
National Education Corporation
LAND USE INITIAL OCCUPANCY(' ) ULTIMATE OCCUPANCY(' )
Area Emloyees Area Employees
NEC Office 64,200 SF 160 82,500 SF 260
General Office 18,300 SF - 0 0
(1 ) Initial occupancy is expected to occur in 1986 while ultimate occu-
pancy is expected to occur by 1990.
EXISTING CONDITIONS
Birch Street provides access to adjacent development and is striped to
provide two lanes of travel in each direction. At Mac Arthur Boulevard
and Bristol Street North, additional turning lanes have been provided. On-
street parking is prohibited on the east side of the street and partially
on the west side of the street. Mac Arthur Boulevard is a major arterial
with three lanes of travel in each direction and special turning lanes.
To the south, the extension of the Route 73, Corona del Mar, Freeway is
under construction. This freeway is anticipated to be completed in 1986.
Existing daily volumes are illustrated on Figure 1 . Also indicated on
Figure 1 are 1984 ICU values at intersections in the environs of the
project.
TRIP GENERATION
In order to examine traffic factors, it is necessary to estimate the
number of trips that would be generated by the project. Trip generation
rates for offuce uses have been established in the City of Newport Beach
based upon studies of general office complexes. Since National Education
LEGEND
44 Q DAILY TRAFFIC
cD VOLUMES, IN THOUSANDS
2.859 28 pR 16 7453 .9180 - ICU VALUES
QJC12 58 T 20
0
4
1.2805 " "�m N °4 SRISTOL
S7' CD Ni9661 .6360 `+
42 IIHIs rc)l_ s r 8965 kyo4X01
.9180 7678 31
.7565
epNITA 014'¢D
A
O � �
m00 -t
f-
N
9� a
F U3
FORD 6�
L
O
Jp
5PN AQ��N
W y�<<S RD.
4
O
rt)
Q
COAST HWr.
PACIFIC
EXISTING DAILY VOLUMES
AND ICU VALUES
WESTON PRINGLE AND ASSOCIATES FIGURE I
L
-3-
Corporation would be the ,We u .c.upanl, W' the building di. ulLimaLe, studies
were conducted to determine trip generation characateristics of current
National Education Corporation facilities. Field studies were conducted
from 3:30 to 6:00 PM at two existing facilities to determine trip gene-
ration characteristics. The results of these studies are sumnarized in
Table 2.
Since the rates found were substantially less than the rates utilized
for general office uses in Newport Beach, we have utilized these specific
rates for National Education Corporation. In addition, the rates based
upon employment has been utilized as this is typically a more precise
predictor of trip generation. Table 3 summarizes the trip generation rates
utilized in this study. As indicated in Table 3, the normal rates were
utilized for general office use in the building.
Estimates were made of daily, 2.5 hour peak and PM peak hour trip gene-
ration for the project. These estimates were completed for two conditions
as indicated in Table 4. Since maximum trip generation would occur in
the critical periods for the initial occupancy condition, these estimates
have been utilized for the analysis portion of this study. As indicated
in Table 4, the project is estimated to generate a maximum of 930 daily
trip ends, 190 trip ends during the 2.5 hour peak' and 95 trip ends during
the PM peak hour.
TRIP"DISTRIBUTION AND ASSIGNMENT
Trip distribution patterns have been developed for various projects in
this area of Newport Beach. These distributions have been based upon
regional employment and population data, traffic models, .interviews and
engineering judgement. This data source was utilized to develop a dis-
tribution pattern for this project which is illustrated on Figure 2.
by applying .the distribution pdLtern Irum I h1ure 2 Lo Lhe trip gene-
ration estimates in Table 4, project traffic was assigned to the street
-4-
fable 2
TRIP GENERATION STUDIES
National Education Corporation
LOCATIONS
1300 Bristol 4400 Campus Combination
In 'Out In Out- In Out
Observed Volumes
3:30-6:00 PM 19 56 10 25 29 81
4:30-5:30 PM 8 35 4 9 12 44
Trip Ends per 1 ,000 SF
2.5 Hour Peak 0.59 1 .75 1 .11 2.77 0.71 1 .97
PM Peak Hour 0.25 1 .09 0.44 1 .00 0.29 1 .07
Trip Ends per Employee
2.5 Hour Peak 0.19 0.55 0.16 0.41 0.18 0.50
PM Peak Hour 0.08 0.34 0.07 0.15 0.07 0.27
(1 ) 32,000 SF, 102 employees
(2) 9,036 SF, 61 employees
(3) 41 ,036 SF, 163 employees
-5-
Table 3
TRIP GENERATION RATES
National Education Corporation
DESCRIPTOR
LAND USE ESCPTOR I
Daily 2.5 Hour Peak PM Peak Hour
In Out In Out
Office 1000 SF 13 1 .2 3.4 0.6 1 .7
Nfc Office(l ) 1"111ployro 3.!i9 0. IR 0.50 0.07 0.77
(1 ) Based on counts of existing NEC sites in Newport Beach.
Table 4
TRIP GENERATION (1 )
National Education Corporation
LAND USE UNIT
Daily 2.5 Hour Peak PM Peak Hour
In Out In Out
Initial Occupancy (1986)
Office 18,300 SF 240 20 60 10 30
NEC Office 160 Employees 570 30 80 10 45
Totals 810 50 140 20 75
Ultimate Occupancy (1990)
Office 260 Employees 930 45 130 20 70
(1 ) The project trips expected for the Initial Occupancy were used for the
analyses since the generated trips are expected to be higher than they
will be at Ultimate Occupancy.
20% 10%
20%
DR.
QJG' T. 5%
0
30% BRISTOL a) m \�
ST NORTH
BRIST01 S-r
5%
0
° BONI TA CYN•RD
a
�O m A
a
1po r yG
IV
F d
FORD 6�
" G
O
Jp
SpN qQ��N.
y�<<S RD.
Q-
o
m
a
COAST HWy.
PACIFIC
DIRECTIONAL DISTRIBUTION
NATIONAL EDUCATION CORPORATION
WESTON PRINGLE AND ASSOCIATES FIGURE 2
-6-
system. The daily project volumes at selected lolcations are illustrated
on Figure 3. PM peak hour and 2.5 hour peak trips from the project were
assigned to the intersections based upon the distribution illustrated on
Figure 2.
TRAFFIC ANALYSIS
The potential traffic impact of the project has been analyzed in confor-
mance with the criteria of the Newport Beach Traffic Phasing Ordinance.
A total of 10 intersections were identified by the City Traffic Engineer
for inclusion in the analyses. The first analysis rrquir•od is thv "Once
Percent" test. An intersection is defined ,ds cr•iticdl by the Or•dindnce
when the project traffic exceeds one percent of existing plus committed
project plus regional growth traffic on any approach to an intersection
during the 2.5 hour peak period. A list of committed projects was pro-
vided by the City of inclusion in this' study and is contained in Table 5.
Since the project is planned to be completed in 1986, the analyses were
completed for 1987 as required by the Or•dindnce.
As was described previously, National Education Corporation has been a
part of the committed project list since 19,79. For these analyses, trips
allocated to the project were removed from the Committed Project traffic
volumes. This was based upon discussion with Ms. Pat Temple of the New-
port Beach Planning Department. Project traffic in this study includes
trips that have previously been considered to be committed.
Appendix A contains the "One .Percent" analysis sheets for the 10 inter-
sections and the results are summarized in Table 6. Review of Table 6
indicates that three intersections did not pass the "One Percent" test.
These three intersections are:
Bristol Street North and Birch Street
Bristol Street and Birch Street
Mac, Arthur- Boulevard and Birch Street,
0
0
DR. 0 cv
ao� T 0 40
0
4 RIS m` m
40 -r0�L
� STT NoRrH
0
CF
QO
QONITA CYN•RD
�4o 0
n
00
F
a G�FiD.
F W
FORD
L
O
PN JOAQ
S �IN
w
a-
0
m
a
CONST HWY.
PM:�F1G
PROJECT DAILY VOLUMES
NATIONAL EDUCATION CORPORATION
WESTON PRINGLE AND ASSOCIATES FIGURE 3
-7-
Table 5
COMMITTED PROJECTS
National Education Corporation
Hoag Hospital Flagship Hospital
Pacesetter Homes Big Canyon 10
Aeronutronic Ford Fun Zone
Back Bay Office Marriott Hotel
Civic Plaza St. Andrew's Church
Corporate Plaza YMCA
Koll Center Newport Allred Condos
Mac Arthur Court Morgan Development
Four Seasons Hotel North Ford
Block 400 Medical Newport Place
Sheraton Expansion Shokrian
Mac Arthur Court, Amend. No 1 Sea Island
Baywood Apartments Ford Aeronutronic, Amend. No. 2
Harbor Point Homes Carver Granville Office
Rudy Baron Corona del Mar Homes
Martha's Vineyard Big Canyon Villa Apts.
Valdez 1400 Dove Street
Coast Business Center 1100 Quail Street
Koll Center Npt. No. 1 Heltzer Medical Office
Ross Mollard Koll Center, Amend. No. 4A
Banning/Newport Ranch Ford Aeronutronic, Amend. No. 1
Park Lido North Ford, Amend. No. 1
Villa Point Rosan's Development
Heritage Bank
Table 6
CRITICAL INTERSECTION IDENTIFICATION(' )
National Education Corporation
LOCATION 2.5 HOUR PERCENTAGES - 1987
N_Q—-- — SB EB W
Bristol Street N. & Campus Drive - - - 0.3
Bristol. Street N. & Birch Street 1 .2 1 .6 - -
Bristol Street N. & Jamboree Road 0.1 0.1 - -
Bristol Street & Irvine Avenue - - 0.2
Bristol Street & Birch Street 1 .2 - 0.2 -
Bristol Street & Jamboree Road 0.1 0.2 - -
Jamboree Road & Mac Arthur Boulevard 0.2 0.4 - -
Jamboree Road & Campus Drive 0.8 0.3 - 0.3
Mac Arthur Boulevard & Birch Street 0.2 0.3 4.6 0.8
Mac Arthur Boulevard & Campus Drive 0.9 0.2 - -
(1 ) The "1% Traffic Volume Analysis" for Jamboree Road & MacArthur Boulevard
and Mac Arthur Boulevard & Birch Street were done using the 1983 sheets
instead of 1984 sheets since new 1984 counts were not done for these two
intersections.
-g-
As required by the Ordinance additional analyses were completed for these
three intersections. These additional analyses consisted of ICU calcula-
tions for each intersection. The ICU analysis included consideration of
existing, committed project and regional growth traffic as well as pro-
ject traffic. Table 7 summarizes the results of the ICU analyses which
are contained in Appendix B. Review of Table 7 indicates that only
Bristol Street North and Birch Street is projected to have unacceptable
(ICU value greater than 0.90) conditions with the project.
The ICU analyses have not included the completion of the Corona del Mar
Freeway extension in 1986. With this freeway extension, traffic will be
diverted from Bristol Street North and result in an acceptable condition
with the project at the Bristol Street North/Birch Street intersection.
The project would then satisfy the Traffic Phasing Ordinance requirements
and not impact traffic operations in the area.
PARY.ING
A study was made to determine current parking demand ratios at two existing
National Education Corporation facilities. The results of the field sur-
vey are summarized in Table 8 and indicate a peak demand of 32 vehicles
at 4400 Campus and 88 at 1300 Bristol . These demands are equivalent to
0.52 spaces per employee (3.54 per 1 ,000 SF) al. Yhr 440u Campus, faciIil,y
and 0.86 spaces per employee (2.75 per 1 ,000 SF) at 1300 Bristol . The
combined ratios would be 0.74 spaces per employee or 2.9 spaces per 1 ,000
square feet.
The proposed plan idnicates a parking ratio of 4.3 spaces per 1 ,000 square
feet or 1 .37 spaces per employee at ultimate usage. On either an area or
employee basis, the plan would provide more parking than required by
current usage patterns. The current ratio per 1 ,000 square feet of 2.9
would require 240 parking spaces. These analyses would indicate that
some reduction in parking supply could be proposed.
SUMMARY
This study has reviewed potentital traffic impacts of the proposed National
Education Corporation facility on Birch Street in the City of Newport
Beach. These analyses have been completed to satisfy the criteria of
the Traffic Phasing Ordinance of the City. Consideration has been given
to existing, committed project and regional growth traffic in addition
to the project. Based upon these criteria and the completion of the
extension of the Corona.del Mar Freeway, the proposed project would not
result in any traffic impacts. Parking requirements were also examined
and support found for a reduction in planned parking.
The following are principal findings of this study.
1 . Trip generation rates for existing National Education Corporation
facilities are less than those utilized in Newport Beach for general
offices.
2. The project is estimated to generate 930 daily trip ends with 190
occurring during the 2.5 hour peak and 95 during the PM peak hour.
3. Of the 10 intersections examined, three did not •pass the "One Percent"
test.
4. ICU analyses indicated that one intersection, Bristol Street North
and Birch Street, would have an ICU value greater than 0.90 with
the project and no circulation improvements.
5. With the completion of the extension of the Corona del Mar Freeway,
an acceptable condition is anticipated at the Bristol Street North/
Birch Street intersection.
6. A parking ratio of 0.74 spaces per employee or 2.9 per 1 ,000
square feet was found at existing National Education Corporation
facilities.
-10-
Tahle 7
ICU SUMMARY - 1987
National Education Corporation
1984 EXISTING EXISTING
EXISTING +REGIONAL +REGIONAL
ICU • +PROJECT FCOMMITTED
INTERSECTION +PROJECT
Bristol Street N. & Birch Street 0.9661 1 .2009 1 .2087
Bristol Street & Birch Street 0.7678 0.8471 0.8459
Mac Arthur Boulevard & Birch Street (1 ) 0.5887 0.81301 0.8920
(1) The ICU values for Mac Arthur Boulevard & Birch Street are based upon
1983 existing counts since new 1984 counts were not made for this
intersection.
Table 8
PARKING SURVEY SUMMARY
National Education Corporation
DATE DAY TIME PARKED VEHICLES
4400 C�ampui 1300 Brist.o1
8/13/84 Monday 11 :15 AM - 84
8/16/84 Thursday 3:30 PM - 61
8/21/84 Tuesday 11 :00 AM 32 88
8/30/84 Thursday 1 :00 PM 29 77
i
-I2-
7. Based upon this study, a reduction in planned parking could be
supported.
* * * *
We trust that this study will be of assistance to you and the City of
Newport Beach. If you have any questions or require additional infor-
mation, please contact us.
Respectfully submitted,
WESTON PRINGLE & ASSOCIATES
G�/-,
Weston S. Pringle, P.E.
'Registered Professional Engineer
State of California Numbers C16828 & TR565
WSP:bas
N84400
cc: Mr. Hardy Strozier
` rhe Oanning Associates
y SbY91.0 K
Jonathan Petke, Inc. 9 7 MAR
• Hardy M. Strozier, Inc
3161 AIRWAY AVENU
E,S UIFE SI
COSTA MESA,CALIFORNIA 92626
Ms. Pat Temple
4 City of Newport Beach
Planning Department
3300 Newport Boulevard
Newport Beach, CA 92663
marie e, giI Iiam, aicp
urban planning
1825 westcliff drive, suite177 g
newport beach, Ed, 92660 El�!D
714-645-0939 �E
V CIT'{OF 11
��pCtZT EEAC�'
CALIF.
February 19, 1985 ru
Ms. Patricia Temple
Environmental Coordinator
City of Newport Beach
3300 W. Newport Blvd.
Newport Beach, CA 92660
Subject: Additional Traffic Analysis
National Education Center Headquarters
Dear Pat:
Based on our recent discussion, I have contacted Wes Pringle
regarding the need for a TPO and parking analysis reflecting
standard City generation rates and regulations. Wes estimates
a cost of $1200 and I would add $50 for associated miscellaneous
costs. As F result, the original budget of $4450 will require
an augment of $1250, for a new total of $5700.
Should additional work be required after your examination of the
original traffic analysis by Wes (which is enclosed), further
budget augmentation may be necessary.
Let me know when you would like to meet to discuss this analysis.
Sincerely,
MaarrieE. Gilliam, AICP
MEG/if
Enclosure
l I l I " 1 ' , 1 , I t I J I I
TO OUR SHAREHOLDERS: new technologies. Our success this year with our existing
training products and services will be greatly enhanced in
It is a pleasure to again report that your Company has the coming year as the ActionCode'" system begins to make
achieved record results for the third quarter and nine months. its contribution to the earnings of the ICS-Intext industrial
Net earnings for the three months ended September 30, 1984 training division.Our independent study division is register-
reached $3,162,000 compared to$2,583,000 the prior year. ing its best year ever in 1984, driven by new products and
Earnings per share were$.31 for the third quarter compared improved marketing.We believe that independent study will
to$.25 reported in 1983. Revenues for the three months in- continue to grow at this pace throughout the coming year as
creased to $43,763,000 compared to the prior year's we continue to develop new opportunities both at home and
$40.658.000, in the international marketplace. Educational publishing is
Net income for the nine months ended September 30, enjoying an especially good year in 1984, and our Steck-
1984 reached$8,480,000 compared to$5,812,000 in the same Vaughn division was no exception as schools placed record
period last year.This increase in earnings includes a$.10 per orders for our Company's remedial and supplementary
share net gain resulting from the sale of our investment in educational products.
Bell & Howell. Earnings per share were$.82 in 1984 com- We enter the fourth quarter of 1994 proud of our
pared to$.57 in 1983. Revenues for the nine months increased accomplishments as we complete our tenth consecutive year
to$126,583,000 compared to$116,559,000 reported last year. of record results. As we approach year-end we remain con-
Our continued growth in earnings through the third fident that our strong financial condition and proven base of
quarter is a direct result of the strength which has developed educational products and services will provide our Company
in our industrial training and independent study operations, with further opportunities for continued growth in the year
as well as from the benefit of increased interest income ahead.
resulting from our strong cash position. National Education's
balance sheet has never been stronger, nor have our opera- Sincerely,
[ions been more nearly balanced to reduce the Company's
reliance on any single segment of its education,training and
publishing businesses.
This balance is best seen in the contribution of the
Company's rapidly developer training and independent study John J. McNaughton H. David Bright
8
sectors which have more than offset the downturn that Chairman of the Board President and
occurred in the Education Centers' operations this year. As Chief Executive Officer
we pointed out earlier in the year, the increase in employ-
ment in the U.S.has reduced the number of workers seeking
new careers.High employment rates also have made it more
difficult to attract and retain recent high school graduates who
defer post-secondary education in favor of the more readily November 7, 1984
available jobs.
We have responded to this change in the marketplace by
improving our marketing programs,particularly in the area
of high school recruitment.We have also improved our cur-
riculum and our facilities to make them more attractive to
today's graduate.
Education Center earnings were also impacted this year
by our long-term commitment to growth as exemplified in
the opening of our new "super schools". While the recent
openings of our two largest and finest schools had the result
of further reducing our earnings this year due to start-up costs, • I
we believe that the 30 percent increase in capacity that our National Education Corporation
six super schools now represent will make a major Contribu-
tion in the years ahead. II
NEC's Industrial Training Division, ICS-Intext, has r r t
benefitted from the high employment rates,as industry moves 1300 Bristol Street North
quickly to train new workers and retrain existing workers for Newport Beach, California 92660
CONSOLIDATED STATEMENTS OF EARNINGS Three Months Ended September 30 Nine Months Ended September 30
1984 1983* 1984 1983*
Net Revenues.......... .......... . .. . . .. . ..... ..... . . ........ ......... . .... ... . . .............. $43,763,000 $40,658,000 $126,583,000 $116,559,000
Costs and Expenses:
Course materials, services and instruction costs ..... . . ....... . ......... ................... . . . . . . 24,549,000 21,232,000 70,176,000 63,213,000
Selling and promotion ...... ..... . . . . . . . .. ... ..... . . ................. ... .................. .. .. 8,945,000 8,595,000 27,156,000 25,471,000
General and administrative . .. .. .... . . . . .... . ..... . ......... ......... ..................... .. .. 4,998,000 5,381,000 14,998,000 15,272,000
Amortization of acquired intangible assets .... . ..... . . . ..... . . . . ....... ........ . ... . ........ .. .. 568,000 694,000 1,951,000 2,208,000
Investment (income) expense — net . .. ....... . ..... . . . . . .. . . . . ........ ..... .. . . . .. ........ ... .. (712,000) 264,000 (748,1100) 288,000
Income before unusual items. .................. ..... . . ....... . . ........ ..... .. . . . . ............ .. 5,415,000 4,492,000 13,050,000 10,107,000
Unusual items, net** . . . ... ............ ...... ..... .. . ................ ....... . . ................ — — 1,405,000
Income before income taxes....... .. ... .. . ..... ..... . . . ................ ... .... .. ........... .. . . . 5,415,000 4,492,000 14,455,000 10,107,000
Income taxes...... . .. . . . ... ..... . .. . . . . . . . .. . ..... . . ....... . ......... . .. .... . ......... .. . . . . . . 2,253,1100 1,909,000 5,975,000 4,295,000
Net income ....... . .. . ............... ........ ..... . ......... ......... . ................ . .. . . . . . $ 3LI62,000 $ 2,583,000 $ 8,490,000 $ 5,812,000
Earnings per share . ............................... . . .. ...... .......... ...... .. ................ $.311 $.25 $.82 $.57
Weighted average number of shares outstanding*** ... . .. . ....... ...... ....... ... . . . .............. 10,163,972 10,357,7% 10,375,206 10,272,147
CONDENSED CONSOLIDATED BALANCE SHEETS September 30 December 31
1984 1993
Cash and cash equivalents... . ................. ..... . . . .. ... . . . ............. ... . . . . .................... ..... . . ..................... $ 13,726,000 $ 6,722,000
Receivables — net ..... ....................... ..... . ....................................................... . . ..................... 19,460,000 11,325,000
Inventories ........... . ...................... ..... . ....................................................... . . .................. ... 10,820,000 10,510,000
Other current assets .. . . . . ....... . . ........ ... ..... . ....................... .............. .... ......... ..... . . . ................ ... . 15,304,000 12,973,000
Total current assets .. .. . . . .. . .. . . ..... ... ... ..... . . .................... . . ... . . . ........ . ........ . . .. ..... . . .. ............... . . . . 59,310,000 41,530,000
Land, buildings and equipment — net ....... ... ..... . .................................................. ..... . ...................... 32,283,000 32,239,000
Other assets .................... .................. . .................................................. ..... . ...................... 12,889,000 27,591,000
TOTAL ASSETS .. . .. . . ... . .. ... ............. ..... . ....................................................... . ...................... $104,482,000 $101,360,000
Current liabilities .. .. . . . . . ..... . . . ...... . .... ..... . .................. .................... .. .... .. . ... ..... . ...................... $ 41,304,000 $ 39,263,000
Long-term debt .... ... . ...................... ..... . ....................................................... . ...................... 7,%0,000 9,586,000
Othernoncurrent liabilities .................... ..... ........................................................ . ...................... 2,584,000 1,285,000
Total liabilities ............................. ..... . ........... . ...................................... ..... . ...................... 51,848,000 50,134,000
Stockholders' equity .......... . ............... ..... . ..... .. ..... . . .. ................ ... .............. . ..... . ............. ... ..... . 52,634,000 51,226,000
TOTAL LIABILITIES AND EQUITY ............... . ................................................. ....... . ................ ...... $104,482,000 $101,360,000
*Reclassified to conform to 1984 classifications.
**Includes a gain of$3,503,000 ($2,133,000 after in or $.20 per share) from sale of an investment and a charge of$2,098,000
($1,091,000 after tax or $.10 per share) relating to pre-publication expenses and inventory write-off.
***Restated for three-for-two stock split.
Subject to audit.
STOCK ANALYST TAKES A LOOK AT PERCEPTRONICS & NEC
Taking Stock In The Videodisc Market
ST. PETERSBURG — Perceptronics Inc., Not only did Boksen look into NEC and
and the National Education Corporation, are two Perceptronics, he decided to personally invest.
companies whose business is producing training When asked if he thinks he'll make money off
systems. And, according to one stock market this investment, Boksen says "Oh, I certainly
researcher, they could also prove to produce big do:' Perceptronics and NEC stock are two that
returns to stockholders. are on Boksen's recommendation list, and he says
Bert Boksen, vice president of research for he usually invests whenever he makes a recom-
Raymond, James and Associates, a Florida mendation, "because I think it helps if I own a
brokerage firm, explains what Perceptronics and little bit.
NEC (National Education Corporation) are in- "I think I'm going to make a lot of money
volved in, and why he's invested his money into on the stock or I wouldn't own it," he says,
both companies' stock. adding that he's predicting that NEC will begin
Perceptronics, says Boksen, has "developed making money during this quarter. However, en-
training applications for the army. They de- vesting in stock such as these aren't for everyone.
veloped a tank gunnery simulator which uses a "I'm for recommending it strongly. I think
videodisc. One of the trends within the army is
that they're going to go into lower cost forms of it should be for the right type of investor—it's
simulation or task simulation. (The army) calls it not 'widow and orphan' type stock; it's the
'partial task simulation,' so instead of building a type. . .that has the potential to make you a lot of
full scale simulator, they'll have critical functions money, but on the other hand it's not a seasoned
which they'll teach through simulations. By situation. I'm looking into it as a long-term
applying a videodisc they can cut cost rather holding situation", Bosken said.
dramatically."
In comparison, NEC developed an industial Bert Boksen, Raymond, James and Associates,
training system called ActionCode, that is de- 1400 66th St. North, St. Petersburg, FL 33710
signed to teach electronic technicians. Raymond, (813) 381-3800.
James and Associates covers NEC's stock, said
Boksen. "When I heard how exciting (Action-
Code) looked. . .and the feedback I was getting
from National's letters, I thought I ought to look
at the product:'
RUM National Education Corporation
BAR CODE NEWS
THE JOURNAL OF BAR CODE SYSTEM APPLICATIONS NOWDEC 1983
Bar Codes
That Teach
I �
f �
e
,i
i
w w
CCE z
_2z_
mQ C c " I
Nd� ma i
and
BARCODENEWS
PUBLISHED BY: NORTH AMERICAN TECHNOLOGY, 174 CONCORD STREET, PETERBOROUGH, N.H.03458(603)924-7136
New High Tech
Training System Uses Bar
Code Technology
Read how bar code technology
is being used in a new system
designed to train workers
for high technology jobs. 6
New High-Tech Training System
Uses Bar Code Technology
Bar code technology is being applied for the first •ActionCode is cost-effective, and its state-of-the-
time in a system to help train workers for high- art technology is available at the lowest price-
technology jobs. The new "interactive instruction performance ratio of any interactive training pro-
system" being introduced by National Education Cor- gram, according to ICS-Intext.
poration's ICS-Intext Division is easier to use and • The unique feature of ActionCode is its ability,
more effective educationally than existing computer through use of videodiscs, to vividly bring train-
aided training programs. ing material to life in sound, words, color, motion
The system is designed to be used primarily by in- and pictures. What the student sees illustrated on
dustrial companies that face the task of retraining the screen is what he or she sees in reality, unlike
and reeducating workers for high-technology jobs. existing computer based systems that show only
Because of the changing nature of the economy, the computer simulated illustrations. An oscilloscope
U.S. government estimates that millions of workers on the system's screen looks like the oscilloscope
will need retraining in the 1980s. the electronics student encounters when working.
ActionCodeT11 the company's trade name for the A circuit board, with all of its detail, is captured
system, employs both bar coding and videodiscs to precisely on the ActionCode screen.
bring textbooks to life. The company calls it "the first
vocational teaching system to create a total integra- The Use of Bar Code
tion of both visual and print images." Moreover, the The ActionCode system consists of the scanning
user can interact with the system, allowing multiple wand, the video monitor with touch screen and push
choices, user responses, correction of errors, review buttons, videodiscs and a disc player, a bar coded
of previous material and further explanations of workbook and a microprocessor. Bar codes are
material as needed. printed in the workbooks along with the printed
material.
Advantages of the System
ICS-Intext said ActionCode was designed to meet
the needs of the ultimate users and to correct short-
comings of existing computer assisted systems.
Specifically, the systems advantages are these: • S;
• It is user friendly, because bar code technology , {,
allows the elimination of the computer keyboard.
Students do not need to know how to type, so r 1
time is spent learning, rather than mastering a
new machine.
•The system, with its ease of use, doesn't intrude
upon the learning process. Students use an optical '
scanning wand, bar coded workbooks and push
buttons to operate the system. The viewing •a .r;•' � .
screen is touch sensitive and further enhances Y�
student interaction with the educational material.
• The system allows each student to work at his or
her own pace. Constant testing of material is
woven throughout the program, and material is sg•
repeated as needed. If there are repeated incor- • " •g y ,
rect responses, additional material is presented to
the student to reinforce the topics being taught.
s Bar Code News Nw/Dec 1983
Tb use the material, the student runs the scanning training needs of industry. These groups consist of in-
wand over the printed bar codes. The videodisc is ac- dustry representatives from Fortune 500 companies.
tivated, bringing full color, live action material to the As a result, programs will be developed in response
screen. The video sequences expand the information to the most critical needs of industries in training and
in the text, reinforcing it and calling upon the user to retraining employees.
answer questions. By using the push button controls, Pricing of the Electronic Curriculum and of future
the student can stop, advance or reverse the video programs is expected to be 20 to 30 percent below
display. similar electronics training programs currently
Bar code technology has advanced the ActionCode available.
system beyond existing systems. By making the
system user friendly, bar coding eliminates the
keyboard, allowing those without typing skills to Bar' Code Educational System
ActionCode represents the first use of bar code in a
adapt quickly to the system. Bar codes eliminate en- computer assisted educational system. The system
try errors common with keyboard systems, which
was developed by Perceptronics, Inc., an innovator in
slow down the learning process and frustrate
students. the development of automated training systems, in
Most significantly, the bar codes allow the user to cooperation with ICS-Intext. ICS-Intext placed em-
go back to material covered earlier and instantly phasis on innovation in developing industrial training
programs, and that emphasis led to an agreement
retrieve information as needed. Due to their nature, with Perceptronics for the development of the Action-
videodiscs can be accessed immediately, whereas Code system.
computer assisted systems that employ video tapes
must be wound and rewound to locate out-of- "This innovative use of bar code and other state-of-
the-art technology has enabled ActionCode to ad-
sequence material. With ActionCode, in fact, students vane industrial training far beyond what was
are urged to review as often as needed; by opening available. For the first time, a system has totally in-
their workbooks to the desired pages and simply
passing the wand over the bar code, they can call to tegrated print and visual images;' says Leonard
the screen the pictures and voices that accompany Code
Intributet president. "We believe Action-
the written materials. Code will contribute to closing the gap between the
demand for workers in industries incorporating high-
The Educational Materials #
Equal in importance to the system itself is the
educational courseware provided by ICS-Intext. An
Electronics Curriculum has been developed and will
be available for delivery beginning in January 1984.
The 400-hour Electronics Curriculum covers basic <
electronic skills through advanced troubleshooting
techniques. It is the first in a series of industrial
maintenance technology programs that will include,
in addition to electronics, the areas of electrical skills, ' `
hydraulics, pneumatics, servomechanisms, robotics
and programmable controllers. Users of ActionCode III t ffi
will be able to select from a complete existing library ..:
of software as the curriculum is developed further by
ICS-Intext. The continued use of ActionCode would #
enable a company to establish an in-plant library of
training and maintenance courseware. Users will also
have access to National Education Corporation's na- tech manufacturing equipment and processes and the
tionwide network of resources. supply of skilled workers to maintain this new
The content of the educational program is designed equipment."
by experts in each specific field. All courseware is While the interactive videodisc method of educa-
tested and validated by well-recognized authorities tion is only one way to help close the deficit of
with experience and expertise in industry based in- skilled high-tech workers, it has proven itself to be a
structional programs. cost-efficient, effective and relatively fast way of
In addition, ICS-Intext has established an editorial educating and retraining employees. Another way of
review group to validate the Electronics Curriculum saying it is that by employing bar code in their new
against industrial training needs. A separate advisory product, ICS-Intext has provided a high-tech solution
group will assist the company in identifying future to a high-tech problem. ❑
NAT! RECENT P/E TDIIInFt].B RELATIVE DIV'D
L EDUCATIONflY$ENEh PRICE 14 RATI012.1(MMIam6.0 P/E"TI01 .19YLD NIL
Hi9b 9.3 7.8. 4.2 .4.5 _0.9 0.3 0,6 1.5 7.5_ 21 3.2, - 4.9 I 5.5..L. 8.5 24.8 20.7- 50 0.6. 0.1 0.1 01 1 0.4 1.0 1.2 .4-1- 2,2 L 3.7-L 3.3 8.2'-12.5 To Prla eye-50
Institutional Decisions r---•- - •--1---..--I- ---•- --. .,. ,.,�
3Q'63 4G'e3 /Q' 3Q'e4 30'e4 "- I ( 1 31or•2ap)it �30
to Bull 10 15 10 10 11
T _
to Bell 9 9 to 11 to '-�"'-" '-"t""'�"'-"'-2•for•1 split"-"+�--}� -••-- 25
Hldg'NOOOI 4377 4671 3932 3627 3522 i -NIh�)-.•••J--20
)e`(-._1B 1986119671 1988 1989
12 ,_T.„.._ (-'-'•'-- • --- 12 December 14.1984Velue lIm
10
1010%Nd--}..... l - .•_• 10 TIMELINESS :tw..
}'_ a 4 1 Price Psdar z .wpe
t r 1. IFS .:: ' 6 (esa Noxt 12 Mot I ewe
--{r- 0%div'd �
4.....t__.... - ._., _ _ "'"'"` .�'"" '.."Jl'('11���rrU1•.l-�'111���"__...}..:�yi-_G.._, 4 SAFETY SaI1 M[h"t to 53 eves)
3� 1 10%am d-�-h •-�•---�-- 3 BETA .85 (1.00-Market)
1' ( aNatWa Ptla abaMte
InsiderDsclslons 1984 1 ' ,•:;r`._,' 1litles PROJECTIONS
Aanl
F" itP '"'i"'"" 2 Yrla 0tln Mn'I Tetol
A E O N DIJ F MA MJ J A S O param-12.0 i ROM
to euyy 2 1 0 3 1 2 2 4 2 0 0 0 0 0 6 anent 8,0• fN'' _ "Ilk 60 (+330%) 45%
to SNI 1 3 0 1 1 1 0 0 0 0 0 1 3 0 E traded 40-' F - Ierr 40 (+185%) 31%
1968 1969. 1970 1971 19721 1973 19741 1975 1976 1977 1978 1979' 19801 1981 1 19821 1983 1 1984 1985 O vat+tr w 87.89E
.87 1.97 2.89 2.86 2.73 1.58 1,32 1.47 3.17 3.73 4.11 8.58 13.65 +3.444.26
41, 15.54 1f.15 I1.50 Revenues per sh 31.00
-- -- -- .09 .OB d.52 ,05 .10 .24 36 .44 -.70 1.0984 1,76 I30 2.7a "Cash Flow"persh 4.00
.14 .15 .17 .05 .01 d.56 .01 .05 .15 .29 .36 .48 .5764 .80 L10 1.45 Earnings per sh lei 2.75
___31
Nit Nil Dlv'd Dodd par Is) Nil
-- -- -- .14 OB OB 0 05 07 .12 ,20 �38 33 8 31 .50 .85 cup 3pending paish 95
1.01 1.21 1.37 1.75 1.17 .59 .81 .75 1.02 1W32 1.64 2.26 28226 502 5.70 7,f0 Book Value per all tcl 1J.35
6.41 5.49 5,47 8.58 6.66 8.58 656 854 6.68 659 6.38 6.43 8.543 10209.65 9.30 ommon sus tlo f0.50
45.1 47.2 18.3 61.6 NMF -- 12.2 5.3 4.2 4.2 4.4 4,8 �'6.31 .5 20.1 Bald figures are Avg nn it o ,02.71 2.87 1.31 3,94' NMF -- 1.71 .71 .54 .5560 .69 .84� 3 1,70 Value line RNe1M P7E ho 1.9% % -- _ estimates AvgAnn'IDIv'dYield Nil
CAPITAL STRUCTURE n o1913018! 8.6 9.6 21.2 14.6 26.3 55,2 39.3 113.3 135.0� 158.6 175 Revenues($inl 325
Total Debts10.1 mill, Due in 5 Yn. $9.0 mill. 5.6% 13.4% 12.9% 17.1% 17.1% 15.4% 13.fi% 12.6% 13 fi% 15.9% l6.5% 17.0% Openling Martin' 1f.0%
LT Debt $8.0 mill. LT Interest $,B mlll. .3 .6 .6 .4 1.5 3.1 51 7,3_8.9 1U,5 11.0 Depreciation(m I 13,a
Incl.$.2 mill.capital leases. .1 .3 10 1.9 2.4 3.0 4.1 5.2 5,5 1.1 11.5 14.0 Net Profit($mill) 20.0
(LT interest earned:19.3x;total interest 56, 52,0% 51.2% 48.2% 41.4 43.1% 40.1% 38.2% 37.3%i 41,7%4L5% 42.0% Inca me TaiRah 43.0%coverage:l5.ex) J13%of CaIs`U 1.0% 3.6% 4.7% 7.6% 9.0% 5.5% 4.5% 4.6% 4.1%' 5.1% 6.6% 7.0% Net Profit Margin d.9X
lelau,UncapHlliad Annual rentale55.9 m11i' 3.7 7.0 9.3 11.3 12.7 33,8 38A 540 .54.3 2.2 "a 15.a War Ing cap mil 30.0
Pension 11111114None ln'83vs.None in'82' ,3 -- .8 .6 .3 17.2 18.7 23.3 25.3 9.6 L0 5.0 Long-Term Debt(SmIID l0.0
PfdSixkNone 4.0 4.9 8.8 8.7 10.5 14.5 18.5 232 29.5 51.2 55.0 66,0 Not Worth(SmilO 1
Common Stock 9,850,064 She. (87%of Cars: 2,111 6.9% 13.5% 20.4% 220% 11.9% 14,4% 33.5% 12.3% 16.6% 19.0% 20.0% %Earns Tots ap'i &
(9.9 mill.fully diluted 3h3.) 2.3% 6.9% 14.5% 21.6 22.5% 209% 21.9% 22.5% 18.7% 17_.7%2LOX 21.0% %Earned Net Worth 20.5%
2.3% 6.9% 14.5% 19.8% 20.8% 20.9% 21.9% 22.b% 18.7% I7.7%21.0% 21.0% %Retained to Comm 20,5%
CURRENT1Po5mON 19e2 19p 8/30fN -- -- -- 8% 8% -- -- -- -- -- Nil Nil %AllDlv'dstoNetProf N
Cash Assets 4 9 6.7 13.7 BUSINESS:National Education Corp,is the nation's largest provides training programs,for industry. Sold Anthony
Receivables 592 11.3 19.5 proprietary vocational education company. Operates rest. Schools(real estate)9182.Esl'd labor costa:40%of revs.'83
InventoryluFOl 11.3 10.5 10.8 dent schools in a number of disciplines, including aero• deprec.rate:18.9%.Est'd plantage:2 ins.Has 4,100 employ.
Other 2 0 13.0 16.3 nautice,electronics,socretarlal'skllls,and automotive me- ees,1,955 shareholders.Incident own 24%of stock,Chair.
Current Assets 77.4 41.6 59.3 chanics.Also offers courses by mail and publishes edu. men: J.J. McNaughton. President: H.D. Bright. Inc.: Del,
Accra Payable 6.1 6.4 3.0 cational materials (Stock-Vaughn). Intext (acq. 8122f79) Address:1300 N.Bristol St.,Newport Beech,CA 92660.
Debt Due 1.9 2.6 2.1 Investors have been jum ing ship. Good growth should remain the order
Other _15.1 303 38.2 >
Current Liab. 23.1 39.3 41,s NEC s shares have lost 5 points 26%of their of the day well into the future.We look
market value) since our last report three for a slowing domestic economy and a re-
ANNUAL RATS 10 Yn pa 6 st bed is' ti months ago.Wall Street has been put off,we fined marketing program for high school
think,bylowerthanexpectedenrollmentsat recruitmenttogive the resident centers alift
"avenues 22,0% 37.5% 120% ,
Cash Flow" NMF•_ 37.5% 17.5% thecompanys resident education centers,as in 1986. Moreover, the company's new Ac-
Earnings NMF 22.0% 2S5% the olcpandin9U,S,economyhas reduced the tionCode interactive training system is
Bookales 5% -- 0% 1 of those unem to ed in search of re- meeting a warm reception from, co orate
Soak Value 13.6% 28.-- 21.0% p� p y g p rp
Cal. OUARTERIY REVENVES(S mdt) Full tr'almng and channeled more high schoolers giants like Ford, GM,IBM, and Kodak(re-
endar.Mar.31 tune 30 Sept.30 Dec.31 Year III into the work force. peat orders are coming in),and should break
1981 23.0 27.0 29.2 34.1 113.3 But NEC is far from sinking.In fact,we into the black next year.
1982 32.0 32.5 33.3 .37.2 135.0 are holding our 1984 earnings-per-share es- Plenty of other irons are in the fire,too,
1983 31.5 38.4 40.7 41.9 158,5 timate at$1.10,a 25%year-to-year increase, that augur well for long-term prosperity.An
1984 41.3 41.6 43.8 48.4 175 es its the enrollment disappointment, experimental effort is underwaywith &T
1985 45.0 46.8 S1,4 ste 206 higher advertising expenses and costs're- •to combine that company's machines with
Cal. EARNINGS PER SHARE te)Full lated to the startup of two additional"super" NEC's software for applications in industry.
endar Mar.31 June 30 Sept.30 Om.31 Year (i.e„ expanded curriculum) schools. Other and education. Similar joint ventures are
1981 .12 .12 .19 .18 .61 profit centers are more than making up the also taking shape with firms in England, -
1982 .13 ,10 .18 .23• .64• difference. The industrial training division Holland,and Japan.
88 i • • -
1983 .18 .14 ,25 .31 . s benefiting from the rise in employment. We think the recent priceofthisvolatile
1984 .23 18 .31 .38 1.18 Indeppendent studyy, paced by its record- equity offers an attractive buying o
lees .2! .RL IDE PAI 1.45 breakin computerlitera course and eciu- ortunit for investors em hasin
Col. QUARTERLY 0 Seat.
PAID Full g cy ' P y P g
endar Mar.31 June 30 SepL3o Doc.31 Year rational publisher Stack-Vaughn, en oying year-ahead performance as well as
19ao heavy demand for its remedial an� sup- those seeking long-term capital gains.
I9a1 plementar materials are both registering over the pull to 1987.89. (Management,
1982 NO DIVIDENDS BEING PAID beat-ever results.A substantial swing in net now in the midat of a one-million share buy-
I9a3 - investment income from a sharply improved back,thinks the price looks right.)
19a4 Cash position is also chipping in.' K,C,B/M,H.G.
(A)Through'79,based on averageprimaryl 20.Excludes nonrecurring gain:'84,200.(C) Incl. Intangibles. In '83: $8.6 mIll.4 Company's Financial Strength a
shs.outstending;fully diluted tIt ftor. Lou:'81,100.Next ego.rep'tdus late Feb."Wan.(0)In mill.,adj.for stock splits& 9tecWs Price Stability 30
Excludes extraordinary gains:74,4p;76, (a)SpKlalmshdiJdspd„77,2e;'78,3p.diva® - Price growth Persistence 190
90;76,154;'77,4p.Losses:72,559;73,1' Earnings Prsdloablllry 90
Factual matenal 16 obtained Oom ioureea believed to he reliable but anmt be guaranteed.,
This is the latest Research Report on your Company
By
THE VALUE LINE
INVESTMENT SURVEY
With the compliments of
711 THIRD AVENUE, NEW YORK, N.Y. 10017
National Education Corporation
4361 Birch Street
Newport Beach,California 92660
Telephone:714/546-7360
Telex:183 516 NEC NEI NTBH
Jack Polley 714-955-9400
NATIONAL EDUCATION CORPORATION REPORTS
TENTH CONSECUTIVE RECORD YEAR
EARNINGS PER SHARE INCREASE 33%
NEWPORT BEACH, CALIFORNIA, FEBRUARY 12, 1985--H.
David Bright, president and chief executive officer of National
Education Corporation (NYSE/PSE), today reported the Company's
tenth consecutive record year with 1984 earnings of $11,989,000
on revenues of $173,914,000.
Bright also announced that fourth quarter earnings rose to
a record high of $3,509,000 on revenues of $47,331,000.
1984 earnings were $1.17 per share compared to $.88 per
share in 1983. Fourth quarter earnings increased to $.35 per
share compared to $.31 In the year earlier period. Bright added
that full year earnings include a non-recurring gain of $.10 per
share.
National Education Corporation Is the world's leader in the
education resources industry with worldwide operations in technical
and industrial training and educational publishing.
(MORE)
r •
Three Months Ended December 31
1984 1903
Net Revenue $47,331,000 $41,945,000
Net Income 3,509,000 3,245,000
Earnings Per Share .35 .31
Average Shares Outstanding 9,899,888 10,394,888
Year Ended December 31
1984 1983
Net Revenues $173,914,000 $158,504,000
Net Income 11,989,000 9,057,000
Earnings Per Share 1.17 .88
Average Shares Outstanding 10.256,376 10,322,928
NEC-2
21285
i
i . . .
... .. ... .. ... .. :.: ... :.. MEN
ow
0 0 0 0 ■ ■■ ■ r onME ME Nunn
am am 0 0 on
0 an am am a
■. .. .. oo
no am ■ r■ .. , ...
ro■Eo C■G ■rGCo on o Eo Co In :.o
on "' "C�' " "ECCCElp.1G i� n:C
"' " �ia •'C CC GC CG 'GG n ,G'
ON 'G CC C' Cno 0 o C n o [. a Im�
am G. ■. on
o CC GC C' a G �11
■m or o ■ ■' ■ o ,r "
am o■ Ro .. �ial o. .. .■ .:G I,■ I'E
... ro .. .. . rm .. .. ■ ,.
�■■ o■ o Rr ■o 0 0 0 o rr ■
'G CC CG :G E:: :C :G :: C:. C ::
C. rr o •GC C' 'C n C.o Eo o loom
�GC.R .■ . ■ . .. .■ ..■ .....
ErR ■o no orC�'G■ .. .. C■R .. EooCGrC
o am o ■RR ■ Ro o rn a or
.■ €■■ �.■ ■:FLOE Gn �:' 6��� ugEEEEEEE
a .R o 0
CCG.'C: CCC Gr.nou, on ON�Co� r■Conm
■or�MRuoGG000 for a .■■■Doan
GCNERC C:' G::C:: C::::GG : 'C::CGG CGG
.o;ooC�o� ■■: o�EoCGam
orECo �i■■GC0 0
Mom* on Con ■■ ... .. E■■,�roo r■o nrR■ ■o
Room on o■ .. mom o. ■■ Don omo■ .. ...
G...R..m ■r ■. ... p.. ..C... G...E■.E.■.
roo o■rC■■� .■l ■cEE:o r■ ■■ or■ or r■o
on now _.r an ON ■■GGr■�..1G1■■G■..
oR nr o0 0 0■ o ■■ n■ 1 0o ro
oo■mo oro ■oro oR o■■o ■ooroo■
ooro■oo ■Rool00000■00000ro■
0000uoo 0000 ■000n000noo■
..■or.roo�ioCooE"CCCCGGCCCi'GCCCCCGGC
non000 ■■ on ■■
uon o ■or n or o■rm .o o m
r„oou■■i�aR„GG„rI,,..
COMPANY National Education Corporation MGM raumrr.kr___ xlaxmmw____ _ow[nu rull__
R[a[XY mW1.1,nou•G xixne - ... • aat [ w�.•• n�:c.. .i a x
vile na exna ox .r,. • r!c^CY6e f:°I"iici
W�E.AU
-31
55
• . AVEMDE PRIDE PAENINOD MTID 9 DDPEFHT PRIDE FAXNIN09 Mn0
A HIGH PRICE-NEXT5 YFA05
n "[ Avp Xlpm PIE iem AE[I wpm EumMs/Shale_.fMluriNgh Mkta•4�"�
B LOW PRICE-NEXT 6 YEARS
(a)Avg LawP/E_An XEatxmlMU*E/Sh3M •f
(o)Avg low Plke of Laa45 Yuld. IJYI�
- _ - (G)Recent Come Muket Low Pea.
-m (d)➢Ike WON Wf SUPP011 H.3m hsd(NI•--_•--
SNkled fime"1N law Pau OQf j+u+j
C ZONIBO
a -..,
11111-H1gft FOuu[IP NNN
Ik,Mlnus low[aralt P,:e Erw'S__W^y.%S OI Wrvpe w�-
Itl ISW
LPNerM - 14011 10 LPVYLI4t)
la ts"l)Nu)
-It P[05tat Markel ONeol lalalte Irt51 Nape
'-' - D UP-SIDE DOWNSIDE RATIO(Palentlal Calm Vs.RNA of Loss)
Nips Plitt-1-41 Mlnuf kaent Rae_
To I
•- "- "- •- 78 "79 "80"$1°82 "83 "- "- "- "- "- un
Pnsent hke M+nus Low Hke'u_
+
o- +. 01 ,-811 n821 1.83 .in[. + A heeem Fun Year S waands xto.News YWJor
AP�o.ia•wr.•�a•."eln .6 4 6.5 9.8 8.1 PowlPIUMSM S %Ramw N Palmue hke
x[.+ a Inwuw
B AVERAGE YIELD OVER NEXT 5 YEARS
A Gw.l l[re•NNYxu.l 2D•1 Avg Film PoSINIe hot 5•,Edle [AY9 Hi P,d}Sul_-. M
• tselx
INCOME-REVENUE DATA COMMON SHARE DATA •
SALES PRE-TAX NET INCOME NET %. YIELD PRICE RANGE I P•E RATIO
TAX INCOME EARNED DIVIDEND PAY- ONAVG. LOW
YEAR SHARE ml, SALES $ $ OUT PRICE HIGH LOW I HIGH
1 1h 5.1-
4.0 3.5
3 3 13.3 5.
1983 158.5 15.6 9.8 6.5 9.1 .88 24 5/ 8 1/ 28.0 9.2
1/4
AVGS.
79-83 12.29 g.o 8.1 3.6 5.4 .63 9 3/ 1 3 5/4 13.1 5
QUARTERLY
PERIOD SALESIREVENUE($ Mill ions ) PRE-TAX NET%SALES EARNED PER SNARE DIVIDENDS PAID PER SHARE -
ENDED 1984 1983 1982 1984 1983 1982 1984 1983 1982
ist0 41.3 37.5 32.0 10.5 8.4 5.7 .23 .18 .13
2nd0 41.5 38.4 32.4 11.4 6.4 3.7 .28 .14 •10
3rd0 40.7 33.3 11.0 7, ..25 118
4th0 41.9 37.2 13.0 9.3 .31 .23
NATIONAL EDUCATION CORPORATION 1983 ANNUAL REPORT
T
chnology will help us manage the information
ociety only to the extent that its members are
skilled in utilizing it."
% —John Naisbdt. Megatrends
✓ `/ v' „ CORPORATIONAL EDUCATION ' V V V V V N., V V V V V V V V V V IV
UUUU�UUUUUVVVVVVVVVVVVVVVVVVVVVVVVV�
COMPANYTHE
National Education Corporation is the world's leading
human resource development company with worldwide
operations in vocational and industrial training, educa-
tional publishing, and home health care services. A
large share of National Education's success lies in its
demonstrated ability to bridge the gap between tradi-
tional schooling and the job-specific skills needs of
business and industry. Not only is National Education
ideally positioned to benefit from the growing trend
toward vocational or skills training, but it is positioned
to serve other important growth markets as well.
Recent developments within National Education's
two operating groups include the opening of new,
highly-advanced "super schools" within the National
Education Centers group and the introduction of the
ActionCode' training system by the Training, Pub-
lishing and Services group. ActionCodes" is a revolu-
tionary training system which the Company believes is
superior to any interactive training product on the
market today. These and other innovations underscore
National Education's commitment to developing long-
term solutions that will keep it at the forefront of a
changing nation and world.
VV\/ w'\/\i\/'\iV'�/V\/'\/\/VVVVVVVVVVVVVVVVVVVVVVVVVV\
✓VVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVV
'V\_ \/�/\/V>/V1/\ \, VVVVVVVVVVVVVVVVVVVVVVVVVVVVV\
VVVVVVVVVVVVVVVVVVVVVVVVVVVV
FINANCIL I k
a�
(dollars in thousands, except per share amounts) 1983 1982 Change
Operations: Net revenues $158,504 $134,951 + 17%
Net income $ 9,057 $ 5,517 +64%
Earnings per share*:
Primary $ .88 $ .80 + 10%
Fully diluted** $ .88 $ .64 +37%
At Year End: Stockholders' equity $ 51,226 $ 29,509 +74%
Total assets $101,360 $ 86,621 + 17%
*After adjustment for stock splits.
**rhis represents a reduction from prhnary earnings per share principally as a result of the assumption that the debentures had been converted to common
stock immediately after their issuance. Upon the actual conversion in early 1983,primary,and fully diluted earnings per share are essentially the same.
■■■■■■■■■■■■■■■■■■■■■■■
■■■■gin■■■■■■�r■■■■■■■n■■
■■■��I I■■■■■■■ ■■■■■■■I 1■■
■■■■1 I I■■■■■■■ ■■■■■■■I 1■■
■■0191 1 I■■■■OR"I ■■■■■■■1 1■■
■■■■ I I I■■■■I'f I I ■■■■■■■imm
■■
■■W I I SEMEN I I 1 ■■■■■0 ■■
■■■ I I 11■■■k[ I I I I ■■■■■ ■■
■■■ I I I I■■■■ I I I I ■■■■o� ■■
■CR I I I BEEN I I I I ■■■■in ■■
■■I I I I 11■■■■ I I 1 1 ■■■ rlI
moll I I I I■■■■ III 1 ■■■■I I III 1■■
■■I I It 1111111011111111 ■■■■I I I I it 1■■
■ ■■� 1 .11. A■■■l 11111 ]■■
■ : : : ■■■ ■ ■■■■■I■U■■
/�/�/'v' �,,.i,..�,..,,v,.,. •v..w'•� •�/ v...✓vvvvvvvvvvvvvvvvvvvv�/vvvv
vvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvv�,
✓vvvvvvvvvvvvvvvvvvv�✓vvvvvvvvvvvvvvv�vvvv
vvvvvvvvvvvvvvvvvvvvvvv�✓vvv�✓ti
r.�
1983 has become our ninth consecutive year of record
setting revenues and earnings.
Earnings in 1983 were $9,057,000, a 64 percent
increase over the $5,517,000 reported in 1982. Fully
diluted earnings per share were $.88, up 37 percent from
$.64 for the year earlier. Revenues for the year grew to
$158,504,000, up from the $134,951,000 reported in 1982.
1983 had many accomplishments which not only
benefitted the results for the year just ended, but have
long term significance as well. The continued implemen-
tation of the "cluster" and "super school" concepts
announced at the end of 1982 will have a profound effect
on the growth of the Education Centers in the years
ahead. Last year, four new super schools were opened,
two in California and one each in Texas and Alabama.
Each of these schools exceeded your Company's expecta-
tions, and plans were immediately made to accelerate the
opening of additional super schools in 1984. At this time,
two new prototype schools are under construction, and
two additional sites have been located. In addition to new
school openings, the Company will continue to seek
outstanding acquisitions such as the Rhode Island Trades
Shops School which was acquired in October. This J. J. McNaughton
premier automotive school fits well into our strategy of Chairman of the Board
attaining regional dominance in important high demand
areas such as automotive training.
As we announced in our annual report one year
ago, the emphasis on the Company's growth in 1983
would be on internal expansion in both of our operating
groups—the Education Centers and the Training, 1983 and every indication is that this surge in revenues
Publishing and Services group. Expansion in revenues and earnings will continue throughout 1984. Clearly,
was achieved, with an even greater growth in bottom now the most dominant force worldwide in independent
line profitability. or home study, this ICS division has shown dramatic
The newly installed management team at our ICS- growth as a result of improved marketing concepts and
Intext industrial training division updated and re-packaged new course offerings such as computer programming.
existing products to meet industry's changing needs, and Introduced early last year, computer programming
the sales force was upgraded and expanded to meet the quickly became the fastest selling course in the 94 year
challenge of the division's newest product, the Action- history of ICS and is continuing as a leader in 1984 as
Codes" system. The highly regarded ActionCodes" well. A comprehensive course in electronics will be in-
courseware development team at Intext brought its first troduced this spring and other exciting course offerings
completed video discs and workbooks out on schedule are in development.
at year-end, and units were immediately placed in In our SteckVaughn publishing division, we
several selected industry test sites for actual workplace achieved an impressive increase in earnings over the
evaluation. ICS-Intext will initially offer both beginning prior year. During the last half of 1983, there was a
and advanced ActionCodel" electronics training—the strong recovery in the supplemental textbook market as
skill which was identified by the nation's leading school districts began to resume purchases which had
manufacturers as the most in demand. We continue been curtailed by spending cuts created by the poor
to believe that the ActionCode" system will meet our economy. We believe that sales of the highly profitable
expectations for 1984. supplementals will continue to grow in 1984.
To briefly note other major developments in the While 1983 was the first full year of operations for
Training, Publishing and Services group, the Indepen- our health care subsidiary, the year was noteworthy for
dent Study division saw its greatest growth year ever in the implementation of a new, highly experienced
2
�!X/
management team and the addition of three new offices.
Led by one of the most experienced managers in the
industry, the health care unit is currently planning
expansion of offices and services in response to major
changes taking place in the nation's health care industry.
Health care costs in America will exceed $400 billion
in 1984, and your Company is working to establish
cooperative ventures with health provider organizations
to provide not only quality in-home medical services
but development of cost containment and preventative
medicine programs as well.
In summary, all of our operating divisions benefitted
from internal improvements and expansion begun in
1983, and we believe that further contributions from
these efforts will be reflected in continued growth in
revenues and earnings in 1984.
We began the important addition of non-affiliated
members to our Board of Directors in 1983 with the
election of General David C. Jones, formerly Chairman
of the Joint Chiefs of Staff. Through the efforts of
General Jones, who heads the Board's Nominating
Committee, we were pleased early in 1984 to announce
the election of Frederic V. Malek, Executive Vice H. David Bright
President of Marriott Corporation, to your Company's President and Chief Executive Officer
board. Prior to joining Marriott, Mr. Malek served as
Deputy Director of the U.S. Office of Management and
Budget and as Special Assistant to the President of the
United States.
In further recognition of the need to create an ever
higher degree of balance of skills and depth of knowl- the fourth quarter has carried into the new year as con-
edge on your Company's board, your directors have tinued economic recovery increases the need for newly
voted to increase the size of the board. At our April trained and retrained workers. This strength coupled
annual meeting of stockholders, you will be asked to with the benefits expected from the further implemen-
elect Dr. Cecily C. Selby to the board. A well known ration of internal growth strategies introduced last year
consultant in science education, she is Chairwoman of will lead to what we believe will become the tenth
the Board of Advisors of the North Carolina School of consecutive year of record achievement for National
Science and Mathematics. Dr. Selby also serves on the Education Corporation.
boards of RCA and Avon Products. She also co-chairs
the National Science Board Commission on pre-college Sincerely,
education in science, mathematics and technology.
We are pleased that your Company has been able
to attract these three outstanding individuals as direc-
tors and believe that their contributions will be of 5;2�
inestimable value.
Early this year we announced the retirement of two J.J. McNaughton H. David Bright
long-time senior employees—Dr. Eugene Auerbach, Chairman of the Board President and
Senior Vice President, Education and Maurice Sherman,
Chief Executive Officer
Senior Vice President-Special Assistant to the President.
The Company is appreciative of their many contributions
during the early developmental years of National Educa-
tion and both currently serve as directors.
Once again, the strong momentum experienced in
3
ivvNIN/N/ NIN/ �i�i1i�/\�VVVVVVVVVVVVVVVVVVVVVVVVVV'
2'
is
tiM+ Y F_
6
Sao oft
r
n our agricultural period. . .
"in
farmers learned from the past
how to plant, how to harvest, and
how to store."
_i,
—John Naisbitt, Megatrends
rom the mid-nineteenth century on. . .
schools machined generation after
generation of young people into a pliable,
regimented work force."
—Alvin ToN/er, The Third Wave
4
/V` ,V` 'V` 'V` ,V V`
f
•III II1111111111��11 - .�i.��� � '
- 1 1
1
r
he restructuring of America from an
11
industrial to an information society will
easily be as profound as the shift from an
agricultural to an industrial society."
—John Naisbitt, Megatrends
5
'VVVVVVVVVVVVVVVVVVVV\/VV\!\�\,��!\j\/\/\/\/\/�,/�,iVVVVVVVVVVV\/VVVVVVVVVVVVVV'
✓'VVVVVVVVVVVVVVVVVVVVVVV'V �/V'v"V'V'�iV'\/ `✓�/ '�/VVVVVVVVVVVVVVVVVVVVVVVVV\,
'VVVVVVVVVVVVVVVVVVVV\/VVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVV'
✓VVVVV VVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVV�/VVVVVVVVVVVVVVVVVVV�/\,
' �' \/VVVVVVVVVVVVVVVVVV\IVVVV�
EDUCATION CENTERS
Throughout the centuries, effective training has relied
on communication, the transfer of knowledge. In the
Agricultural Age, farming techniques were passed on
from generation to generation by observation and by
personal instruction. A father, for example, taught his
son how to till the soil.
The pace of the working world abruptly quickened
in the Industrial Age; it was a quantum leap which
demanded new skills—skills that had to be learned
quickly. The new urgency to train created the need for
other methods of instruction.
In a world that was suddenly technical, prior
generations' experience was no longer relevant. The
apprentice preparing for a job and the journeyman
training for advancement turned to books, vocational/
technical schools and on-the-job instruction. The
demand for specialized skills was matched by the
demand for specialized methods of teaching them.
If the tempo of work accelerated in the Industrial
Age, it has rocketed in this volatile day and age.
Technology is seemingly developed one day, outdated
the next. To be marketable, the average worker now ,.
must be repeatedly retrained and cross-trained
throughout his career.
Today more than ever before, workers will have to
count on improved methods of effectively transferring
job skills. There is no time to waste as we are being
rapidly propelled into an entirely new age—
the Information Age.
ff
on
RIK
a: r
_.,
The rate of high-tech job growth from 1982-1995 is expected to
xceed that for total employment."
—U.S. News& World Report, January 16, 1984
6
/ NATIONAL EDUCATIONCORPORATION I '. V VVV VVVVVVVVVVVVVVVVVVVV V VVV`
✓ -v'.V,�'VVVVVVVVVVVVVVVVVVVVVVVVV�/
'V VVVVVVVVVVVVVVVVVVVVVVVVVVVV`
✓VVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVV�/VVVVV�
'�/�/VVUVVV�/U�/�/VVVVVVVVVVVVVVVV�/VVVVVVVVV��/`
netwo —
news �• �`�.,,� ,,�
4
The aviation
I program at the
internationally-known
Spartan campus
_ includes avionics.
ay's computer-oriented
office systems require the
development of specialized
information processing
skills.
omprehensive training
in radio and 7V
includes hands-on
experience in television
productions.
National Education's 47 resident 1
FNETREVENVES
schools approached a milestone $100
million mark in revenues in 1983 as
enrollments grew and the first of the
new "super schools" opened their Houston, Texas. Super schools, so
doors to students. named for their large size, with an
Completely reorganized in 1982 average capacity of 2,000 students
and renamed National Education and expanded curriculum offerings,
Centers, the schools group com- have met acceptance beyond original
pleted its finest year ever in 1983, expectations. Each new school has
as new innovations in marketing and produced excellent early enrollment 630,0 OF OPERATING INCOME
curricula expansion resulted in better growth and plans are currently under
than anticipated growth for the year. way to open at least four new super
These improvements are expected to schools in 1984. Two have already
continue into 1984 as economies of broken ground in Anaheim, Califor-
scale offer the potential for even nia and Phoenix, Arizona and are
greater profitability while the newly unique to NEC because both are
opened super schools begin to prototype schools being built from
mature. Four new super schools the ground up to the Company's
were opened last year in Los needs and specifications. Like the
Angeles and San Bernardino, Cali- super schools opened before them,
forma, Birmingham, Alabama and these new schools will offer state-of-
7
vvvvvvvv\Ir\1e vvvvvvvvvvvvvvvvvvvvvvvvvv
��� .V;•.V.,V�'v' �/ v' V •V 'J V 'V '.: vwv�wvvvvw��w�w v�����
CENTERS
NO iA
��v��vvv�vv�vv�vv��v�vv��vvv�����vvv�vvvv�
��vv��vvvvv��v v��v�vvv v�vvv�vvv�vv��v��v�
,
�.!
Automotive training
targets areas where
the job opportunities
are greatest—such as
diesel technology. ./ationat Education
I.continues to provide
a wide-range of training
in ggrowing electronics
lields. C omputeraided drafting
is revolutionizing
many fields including
an ineenng and
architecture
.
the-art training in such high demand
skills as electronics, drafting, in-
formation processing and business
administration, and medical and continue to seek outstanding acquisi-
dental office management and tions such as the Rhode Island
assisting. As the pictures in this Trades Shops School which was
report reveal, these schools are also acquired in 1983. This premier significant when implementing a
of high-tech design and offer the automotive school fits well into nationwide placement effort, which
latest in classroom equipment and our strategy of attaining regional has as its primary goal an awareness
state-of-the-art teaching techniques. dominance in important high program designed to pre-sell employ-
In addition to the two new super demand areas such as automotive ers on the high level of training and
schools scheduled for completion in training. skills competency of NEC graduates.
late summer, additional sites are cur- This thrust toward expansion, Beginning in 1983 a move was
rently being negotiated and at least both in existing locations as well made to lengthen our shorter courses
two additional schools are scheduled as new facilities, has resulted in a to eighteen month associate degree
for completion by year-end. growth philosophy that is unique in programs in order to accommodate
In addition to the excellent the industry. The rapid expansion of the additional demands of the new
acceptance of the new campuses, the curricula is possible due to a major technologies in the teaching of tradi-
Education Centers have found equal commitment made in 1982 which tional subjects. At the same time
acceptance to the cluster concept centralized the curricula develop- that these traditional courses are
which was also fast implemented ment and teacher training functions being lengthened, a move is also
last year. Cluster schools are exist- to assure that a high quality stan- under way to establish four year
ing facilities that are refitted to add dardized educational product is programs at selected locations, and
new curricula. Formerly single cur- offered nationwide. the first offerings will be announced
riculum schools, the cluster schools To further enhance the job skills later this year.
add one or more new programs that of NEC graduates, computer literacy During the remainder of 1984,
have a high job skill demand in the was added to almost all programs additional course expansion will take
local marketplace. In addition to this past year. This emphasis on place through implementation of the
cluster schools, the Company will technological enlightenment is cluster concept and additional sites
8
rul
IF
edical technicians are
Mtrained in medical
assisting and office manage-
ment to serve the growing
health care industry.
oday's electronic office
requires specialized
secretarial and technical
skills in information
processing.
EDUCATION
TOTALrMONTHS
(in thousands)
will be sought for the opening of P17
super
new super schools into key growth With 47 Education Centers
cities, particularly those within the strategically located in 20 states, 500
Sunbelt region. NEC is clearly the largest provider ..
National Education Centers of vocational/technical training in the
today are far removed from the 113
U.S. and is well positioned to con-
small, single purpose vocational tinue that leadership through the
schools of yesterday. They are expansion efforts currently in pro- ...
large, modem educational facilities gress. The need for skilled workers 86
designed to teach a wide range of increases with every surge of the
skill related subjects, and each is economy, and National Education 50
...
flexible in being able to respond to Center graduates are prepared to
the ever-changing needs of the work- take full advantage of the exciting job
place by modifying or adding pro opportunities being generated by the i
grams in order to meet the needs of new technologies which are trans-
today's employers. forming our industries and our lives.
9
\ ,` NATIONAL'`
TRAINING, PUBLISHING
! V V V V V V V V V V V V V V V V V V V V V V V V
I SERVICES
v.
ir
1 t�
r
The skills to maintain high4echnology systems are becoming
as important as the creative skills that design the systems"
—John Naisbitt, Megatrends
10
vvvvvvvvvvvvvvvvvvvvvvvv
s
f
R
�a
t
NATIONAL EDUCATION CORPORATION AND SUBSIDIARIES
Al
echnical instruction is
If delivered by the most
advanced techniques such
as computer training and
testing.
Patient education in health
The four operating divisions within and medical education
the Training, Publishing and Services is taught d both an out-
the B patient and in-hospital
group offer exciting growth potential basis.
in 1984 and beyond. During 1983 the
changes which occurred within the 3901b OF NET REVENUES
ICS-Intext division are perhaps the
most significant. ICS-Intext com-
pleted its first full year under a new
management team in 1983, and the
division has been completely restruc- system that has led to initial orders
tured, Products have been updated, from several of the nation's largest
improved and re-packaged, new pro- manufacturing organizations. In the
ducts have been introduced and a months ahead, we are confident that
new, highly experienced product additional orders for the Action-
development and sales organization Codes' system will demonstrate that
is firmly in place. ICS-Intext is the it has wide appeal throughout the 3701h OF OPERATING INCOME
developer of the highly acclaimed nation's largest training organizations.
ActionCodes"' interactive training It is currently our expectation that
system and development efforts for sales for the ActionCode'" system
the ActionCodez"' system have ex- will exceed our original projections
ceeded management's expectations at for the year. As we announced at the
every level. The fist courseware for ActionCode' system introduction, we
the new system has been completed believe that this product will make a
and is of the highest quality. It is the meaningful contribution to the earn-
quality and professionalism of the ings of the ICS-Intext division in
initial electronics courseware 1985. While the ActionCodes" system
developed for the ActionCodes" is new to the marketplace, its popu-
n
p_
r, xF..-
W ,
NATIONAL EDUCATION CORPORATION AND SUBSIDIARIES
MAO
gem% t4 4
upplemental workbooks
produced by Steck-Vaughn
emphasize remedial and basic
learning from kindergarten
through adult education.
mputer literacy is made
{/simple through a
correspondence course that
EINets"allows students includes a computer along
with personal computers with courseware.
to interact with the
Company's computer for
testing.
larity has also created new interest in
many of ICS-Intext's existing in-
dustrial training products which are
currently enjoying increased sales.
A computer literacy course for delivery of independent study pro-
industry, which was announced late grams via computer through the
in 1983, is meeting excellent market division's new EdNet" system to
r acceptance and is expected to be a owners of IBM, Apple, Radio Shack
i i r major profit contributor to the ICS- and Commodore computers. The
r Intext division in 1984. Company's computer bank in Scran-
Computer literacy was also the ton, Pennsylvania—which currently
key to major growth within the ICS handles testing for the more than
Independent Study division. A com- 60,000 students in domestic home
r puter programming course launched study—has been substantially up-
early in 1983 quickly became the graded to accept on-line computer
fastest-growing course ever offered interfaces beginning this year.
r r by the Company for independent The group's Steck Vaughn pub-
study and early indications are that lishing division again increased its
it will maintain a high level of earnings contribution to the Com-
r growth in 1984. 'Additional course pany in 1983. A leading publisher of
offerings in electronics and com- supplemental workbooks aimed at
puter-aided bookkeeping are being the remedial market, Steck-Vaughn
r "' ■ introduced early this year, and are continues to be a publishing industry
also expected to become popular. leader in profitability.
ICS Independent Study posted major Steck-Vaughn again achieved
r ■.■■ gains in revenues and earnings last earnings growth despite some sales
year and this trend in increased resistance experienced during the
enrollments and profits is expected first half of 1983 resulting from
to continue in 1984. cutbacks in school expenditures.
r In December, ICS Independent This temporary softness was attribut-
Study announced the offering of the able to the poor economy and the
12
✓VV�./�/�,�\/�,/�,�\�\/\,/\/\/\/VVVVVVVVVVVVVVVVVVVVVVVVV\�
'VV\/V v \/Vv'\f \i\/'vv'�i'\/VVVVVVVVVVVVVVVVVVVVVVVVV'
✓VVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVV\�
'VVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVVV'
,,
eO
e'
e�
large scale computer
ActionCodes system is a Nis the center of all
user-friendly highly- information processing for
interactive training system comespandence courses
that utilizes advanced laser and electronic testing.
disc technology
accompanying decline in school
funding. Sales increased noticeably delivery of high-demand acute
in the fourth quarter and are con- specialized nursing services. At the
tinuing strong into 1984, as school same time, the HealthCare Services -- -
districts replenish needed supplies. subsidiary is rapidly developing
The supplemental market covered educational programs designed to by Steck Vaughn covers a wide interface with newly forming health
spectrum from kindergarten through care cost-containment efforts being ---
adult education and new products launched by business and industry.
are being developed to include Both home health care, and cost-
remedial workbooks in math and containment and preventative
reading. medicine programs are among the =-:
The fourth operating unit in the fastest-growing segment of the �
Training, Publishing and Services nation's $400 billion health care
group is NEC's HealthCare Services industry. Three new offices were MM
subsidiary. Acquired in 1982 as a added last year and three additionalMMM
small chain of offices providing offices have been targeted for the ---
home nursing care, HealthCare first half of 1984.
Services is currently entering a new The Training, Publishing and ----
phase of expansion and diversifica- Services group will continue to offer
tion. Under new management leader- many exciting prospects for growth ----
ship with wide industry experience, in proven businesses as well as in
the division is presently creating a start-up operations within dynamic
new high degree of emphasis on the growth industries.
13
, r r. .r. , r r r , . VVVVVVVVVVVVVVVVVVVVVVVV�
VVVVVVVVVVVVVVVVVVVVVVVV'
VVVVVVVVVVVVVVVVVV�/VVVVV�
VVVV VVVVVVVVVVVVVVVVVVVVVVVV�/VVVVVVVV'
1983 Compared to 1982
Revenues for 1983 increased $23,553,000, or 17%, to part of 1982.
$158,504,000. Education Centers revenues increased 16% Education Centers income increased $2,978,000 as a
to $96,754,000 as a result of additional enrollments in result of their higher volume. Margins increased nearly
electronics, allied health and automotive courses. Four 1% as a result of economies of scale attributable to the
new "super schools" opened during 1983 also con- incremental volume. Operating income for Training,
tributed to the revenue growth. Training, Publishing and Publishing and Services declined $900,000 reflecting
Services revenues increased 19%, or $9,957,000, pri- lower volume from industrial training operations and
marily as a result of increased domestic independent both lower volume and margins in the international inde-
study enrollments, the addition of a basal product line pendent study businesses due to a weak world economy,
for the Steck Vaughn publishing operation, and a full partially offset by improved margins from the domestic
year of HealthCare Services operations acquired in independent study operation. Losses at the Anthony
December 1982. The computer programming course Schools operation were partially offset by an increase
introduced in early 1983 was a major contributor to im- in SteckVaughn publishing income.
proved independent study enrollments. Industrial training Income before taxes for 1982 increased $398,000, or
and foreign independent study volume was below the 5%, to $8,809,000. The increase in income from opera-
prior year. However, industrial training revenues did tions was partially offset by corporate expenses which
reverse this trend during the fourth quarter. increased principally as a result of expanded operations.
Education Centers income increased $5,089,000 as Additionally, the Company incurred higher net interest
a result of higher volume and a 3.6% improvement in costs in 1982 reflecting both the decline of interest in-
operating margins as a percent of revenue. The growth come on available cash as compared to 1981, as well as
in margins is attributable to incremental volume, im- the increased interest expense on higher outstanding debt
proved marketing productivity and operating efficiencies resulting principally from acquisitions.
resulting from consolidation of operations into a single
national chain, partially offset by startup costs associated Liquidity and Capital Resources
with the opening of new super schools. Operating in- The Company's primary source of liquidity is cash pro-
come for Training, Publishing and Services improved vided from operations. During the last three years, cash
$1,923,000 principally due to the increased Steck Vaughn provided from operations has increased from $10,002,000
and domestic independent study volume and a signifi- in 1981 to $18,634,000 in 1983. Cash provided from opera-
cant improvement in foreign independent study margins tions is used to finance internal growth, acquisitions and
through strengthened cost controls. This was partially debt service. During 1983, the Company established a
offset by lower operating results from industrial training $20,000,000 line of credit to fund peak cash requirements.
and startup costs related to development and marketing In October 1980, the Company issued $15,000,000 of
of the new ActionCode' courseware. 97/8% convertible subordinated debentures, using the pro-
Income before taxes for 1983 increased $6,745,000, ceeds to eliminate the bank debt previously incurred to
or 77%, to $15,554,000. The increase in income from finance the Intext acquisition. Substantially all of these
operations was partially offset by corporate expenses debentures were converted to common stock as of
which increased as a result of accelerated internal February 15, 1983. This conversion substantially
growth and the implementation of additional employee improved capitalization ratios and eliminated annual
benefit programs. The Company reduced net interest interest payments.
costs in 1983 by $1,607,000 through the conversion of The Company anticipates that internally generated
debentures into common stock early in 1983. cash will be sufficient to finance planned internal growth
1982 Compared to 1981 and capital expenditures.
Revenues increased $21,691,000, or 19%, to $134,9511000 Federal and state financial aid to students for educa-
in 1982. Education Centers revenues increased $22,220,000 tional expenses is expected to represent approximately
primarily as a result of improved volume in electronic, 65% of Education Centers revenues and 40% of con-
allied health, and business programs. Training, Publishing solidated revenues in 1984. Management does not
and Services revenues declined $529,000. The Steck- anticipate any significant change in the availability
Vaughn publishing operation achieved an 11% increase in of financial aid funding during 1984.
revenues and domestic independent study revenues in- Inflation
creased 15% due to a 24% rise in enrollment. However, The effects of inflation have had little impact on the
these increases were more than offset by reduced volume Company. Operating cost increases resulting from in-
in the industrial training operations, the international flation have generally been offset by increased selling
independent study operations, and the Anthony real prices. Replacement of buildings and equipment has not
estate license schools which were sold in the latter significantly impacted the Company's operating results.
14
✓V\^✓\/\/�/\!\./\!�,/\/�.!�./\!V V V V V V V V V V V V V V V V V V V v v v v v v
FIVE
'V�/VVVVVVVV\/\/�/VVVV�/V�V\/VVVVVVVV\/V�/VV�V�/V\/
I • FINANCIAL
Summary of Operations: Year ended December 31
(amounts in thousands, except per share amounts) 1983 1982* 1981* 1980* 1979*
Net Revenues $158,504 $1 $1 $89,251 $55,178
Costs and expenses:
Operating costs and expenses 138,160 121,327 101,753 78,783 48,196
Amortization of acquired intangible assets 4,129 2,547 2,087 1,400 403
Interest expense, net 661 2,268 1,009 2,304 1,398
Income taxes 6,497 3,292 3,212 2,719 2,222
Net Income $ 9,057 $ 5,517 $ 5,199 $ 4,045 $ 2,959
Per Share Data'*:
Primary earnings per share $.88 $.80 $.76 $.61 $.46
Fully diluted earnings per share*** $.88 $.64 $.61 $.57 $.46
Weighted average number of
shares outstanding**:
Primary 10,323 6,883 6,800 6,677 6,393
Fully diluted 10,323 9,839 9,758 7,376 6,393
Selected Financial Information
Total assets $101,360 $ 86,621 $ 75,926 $59,163 $58,190
Capital expenditures 4,872 12,005 5,006 2,569 2,462
Convertible debentures - 13,985 15,000 15,000 -
Other long-term debt 9,586 11,303 8,318 3,689 I7,209
Stockholders' equity 51,226 29,509 23,160 18,462 14,292
Return on average equity 20.9% 20.9% 25.0% 24.7% 23.1%
Pretax income as a percent of sales 9.8% 6.5% 7.4% 7.6% 9.4%
Liabilities-equity ratio 1.0-1 1.9-1 2.3-1 2.2-1 3.1-1
Actual common shares traded during the year 5,128 1,730 1,301 1,060 742
Common shares turnover ratio 90% 75% 58% 54% 42%
Price/earnings ratio (year end) based on fully
diluted earnings per share 20.5 13.1 7.6 7.5 6.5
*Reclassified to conform to 1983 classifications.
**After adjustment for stock splits and stock dividends.
***Otis represents a reduction from primary earnings per share principally as a result of the assumption that the debentures had been converted to common
stock immediately after issuance. Upon the actual conversion in early 1983,primary and fully diluted earnings per share are essentially the some.
Market and Dividend Information: The Company's Company's common stock at February 28, 1984 was
common stock is listed on the New York Stock 1,955. The high and low market prices for the Com-
Exchange and the Pacific Stock Exchange. The pany's stock during each quarter for the last two years
approximate number of stockholders of record of the were as follows:
1983 1982
High Low High Low
First Quarter $13 3/8 $ 8 1/8 $4 5/s $3 7/s
Second Quarter 24 5/s 13 4 5/s 3 7/8
Third Quarter 23 1/4 17 4 1/2 3 3/8
Fourth Quarter 20 7/8 17 1/2 8 1/2 4 3/8
The Company declared a three-for-two stock split in prices reflected above have been retroactively adjusted
January 1984, issued a two-for-one stock split in 1983 for the stock splits and the stock dividend.
and issued a 10% stock dividend in 1982. The stock
15
VUUUUU���UUUVu�VUUU�uUUu�uuuUUUUUUuuUUU ::,
CONSOLIDATED BALANCE
Assets December 31
(dollars in thousands) 1983 1982*
Current Assets:
Cash, including cash equivalents of $4,799 (1983)
and $4,200 (1982) $ 6,722 $ 4,860
Receivables, net 11,325 9,241
Inventories 10,510 11,331
Prepaid marketing expenses 7,981 6,422
Other current assets 4,992 1,953
Total current assets 41,530 33,807
Land, Buildings and Equipment, net 32,239 33,367
Acquired Intangible Assets, less accumulated
amortization of $8,807 (1983) and $6,495 (1982) 8,610 11,809
Prepublication Costs, less accumulated
amortization of $570 (1983) and $14 (1982) 5,576 5,022
Investments 10,965 16
Other Assets 2,440 2,600
$101,360 $86,621
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 6,377 $ 6,097
Accrued expenses 7,311 6,520
Accrued salaries and wages 4,116 3,244
Unearned tuition 10,636 9,516
Current portion of long-term debt 2,589 1,939
Accrued income taxes 8,234 3,433
Total current liabilities 39,263 30,749
Liabilities Payable After One Year:
Convertible subordinated debentures - 13,985
Other long-term debt, less portion due
within one year 9,586 11,303
Other noncurrent liabilities 1,285 1,075
Total liabilities 50,134 57,112
Stockholders' Equity:
Preferred stock, $.10 par value; 5,000,000 shares authorized
and unissued
Common stock, $.01 par value; 25,000,000 shares authorized;
10,197,691 shares (1983) and 4,620,338 shares (1982) outstanding 1,909 1,216
Additional paid-in capital 33,087 16,900
Retained earnings 20,128 11,393
Notes receivable under stock option plans (3,898) -
Total stockholders' equity 51,226 29,509
Commitments (Note 6)
$101,360 $86,621
See Notes to Consolidated Financial Statements.
•Reclassified to conform to 1983 classifications.
16
v v v v v vv vvvvvvvvvvvu uuvuv vv v vv vvv vv v v v v v v
'u uuuu uuuuu uuuuuu�u u uu uV uu u uuuuuuvUvu vu u"u'
CONSOLIDATED
Year ended December 31
(amounts in thousands, except per share amounts) 1983 1982* 1981*
Net Revenues $158,504 $134,951 $113,260
Costs and Expenses:
Course materials, services and instruction costs 86,015 73,326 60,545
Selling and promotion 32,625 31,380 25,958
General and administrative 19,520 16,621 15,250
Amortization of acquired intangible assets 4,129 2,547 2,087
Interest expense 1,051 2,653 2,291
Interest income (390) (385) (1,282)
Income Before Income Taxes 15,554 8,809 8,411
Income taxes 6,497 3,292 3,212
Net Income $ 9,057 $ 5,517 $ 5,199
Primary Earnings per Share $.88 $.80 $.76
Fully Diluted Earnings per Share $.88 $.64 $.61
Weighted Average Number of Shares Outstanding:
Primary 10,323 6,883 6,800
Fully diluted 10,323 9,839 9,758
See Notes to Consolidated Financial Statements.
•Reclassified to conform to 1983 classifications.
CONSOLIDATED STATEMENTS 1 SMICKHOLDERSEQUITY
Additional
Common Stock paid-in Retained
(dollars in thousands) Shares Amount capital earnings
Balance, December 31, 1980 1,980,701 $ 997 $12,853 $ 4,612
Net income 5,199
Stock dividend 205,064 136 2,846 (2,988)
Exercise of stock options 57,258 38 270
1981 translation adjustment (650)
Cumulative translation adjustment to January 1, 1981 (153)
Balance, December 31, 1981 2,243,023 1,171 15,969 6,020
Net income 5,517
Debenture conversions 66,380 44 928
Exercise of stock options 766 1 3
Two-for-one stock split 2,310,169
1982 translation adjustment (134)
Other (10)
Balance, December 31, 1982 4,620,338 1,216 16,900 11,393
Net income 9,057
Exercise of stock options 361,663 53 1,846
Debenture conversions 1,817,782 606 12,716
Three-for-two stock split 3,399,230 34 (34)
1983 translation adjustment (322)
Tax benefit from exercise of stock options 1,675
Other (1,322) (16)
Balance, December 31, 1983 10,197,69] $1,909 $33,087 $20,128
17
vvvvvvvvvvvvvvvu�/uu�/u�/�/�/�/uu�/�/vvvvvvvvvvv
CONSOLIDATED STATEMENTS CHANGES FINANCIAL
Year ended December 31
(dollars in thousands) 1983 1982* 1981*
Cash was provided by (used for):
Net income $ 9,057 $ 5,517 $ 5,199
Add (deduct) items not affecting cash in the year:
Depreciation and amortization 4,802 4,702 2,963
Amortization of acquired intangible assets 4,129 2,547 2,087
Other 646 (240) (247)
Cash provided by operations 18,634 12,526 10,002
Receivables, net (1,859) 632 (2,729)
Inventories 833 (1,556) (1,223)
Prepaid marketing expenses (1,559) (1,421) (1,836)
Accounts payable and accrued expenses 1,902 1,972 (1,593)
Unearned tuition 624 (399) 3,971
Current portion of long-term debt 650 771 563
Accrued income taxes 4,801 207 (622)
Insurance recovery receivable (3,028) — —
Adjustment from currency translation (322) (134) (803)
Other 307 (669) (33)
Net cash provided before investment and
financing activities 20,983 11,929 5,697
Investment activities:
Acquisition of businesses (1,200) (1,546) (9,806)
Additions to land, buildings and equipment, net (3,148) (10,814) (4,422)
Prepublication costs (1,110) (4,756) (280)
Investment purchases (10,949) —Net investments (16,407) (17,116) (14,508)
Financing activities:
Issuance of long-term debt 773 5,774 5,879
Long-term debt retired, including convertible debentures (16,485) (4,008) (1,409)
Common stock issued to retire convertible debentures 13,322 972 —
Exercise of stock options and related tax benefits 3,574 4 308
Notes receivable under stock option plans (3,898) —Net financing proceeds (2,714) 2,742 4,778
Increase (decrease) in cash and cash equivalents $ 1,862 $ (2,445) _La 33)
See Notes to Consolidated Financial Statements.
"Reclassified to conform to 19a3 classifications.
18
✓ vwvvvvwwvvvvvvvvvv'V
,v , . ,••,• • , uvuuuvuvuvuuu�uuuuuuu�
'�vuuuvuuuuu�vuuuvuvuuuuuvuuv�uuuvuuuvuuu�
NOTES 1 CONSOLIDATED FINANCIAL STATEMEWS
Note 1—Summary of Accounting Policies:
Principles of Consolidation
The consolidated financial statements include the method over the estimated useful lives of the various
accounts of the Company and all subsidiaries. The classes of property.
financial statements of certain foreign subsidiaries are Acquired Intangible Assets
included on the basis of a fiscal year ended October 31. Acquired intangible assets consist of course development
All significant intercompany profits, transactions and costs, copyrights, preproduction and editorial costs, and
balances have been eliminated. the excess of cost over acquired net assets purchased by
Revenues and Costs the Company in conjunction with various acquisitions.
Independent Study Contract Revenues are deferred and Such assets are being amortized over their estimated
recognized as income when cash is received, but only to useful lives, averaging approximately seven years. (See
the extent such cash can be retained by the Company. Note 11.)
Generally, the Company follows the guidelines of the Prepublication Costs
National Home Study Council in determining retention Prepublication costs related to basal textbook series are
rights. Advertising and promotional literature costs deferred and amortized over their estimated useful lives,
associated with independent study contracts are which approximate five years from the date of market
amortized over eighteen months. introduction.
Industrial Contract Revenues are recognized as income Investments
when cash is received with appropriate recognition of The investment in common and preferred shares of Bell
estimated expenses relating to servicing such contracts & Howell Co. (282,000 shares each) is carried at cost
when the Company is required to perform such services.
For those industrial contracts not requiring future servic- had a market
al December 6,0 0 an this investment
ing to clients by the Company, revenue is recognized had a market value N adjustment
and a gross unrealized
when study materials are shipped. gain of consol$2,597idated
financial statements to reflect this
Education Centers Revenues are recorded ratably over unrealized gain.
the terms of the courses which range from six months to Unearned Tuition
twenty-five months. Course service costs are charged to Unearned tuition represents the portion of student
expense as incurred. Advertising costs and salesmen's tuition payments received in advance of services
commissions are deferred and amortized into expense being performed.
within nine months of incurrence.
Inventories Income Taxes
Effective January 1, 1982, the Company changed its Deferred income taxes are provided for timing
differences between financial and taxable income.
method of inventory valuation from the lower of cost or
market on the first-in, first-out (FIFO) method to the Benefits from investment and other tax credits are
last-in, first-out (LIFO) method for substantially all reflected currently in income.
domestic inventories in the Training, Publishing and Ser- Earnings per Share
vices group. The effect of this change, which was made Earnings per share are computed based on the weighted
to better match current costs with current revenues, was average number of common shares outstanding during
insignificant. At December 31, 1983, inventories valued the respective periods, including dilutive stock options.
at current cost are not materially different from the In 1982 and 1981, earnings per share assuming full dIlu-
LIFO values reflected in the Company's financial tion were computed based on the assumption that the
statements. convertible debentures had been converted to common
Other inventories, primarily consisting of course stock immediately after their issuance (October 14,
materials, are stated at the lower of cost (FIFO) or 1980), with a corresponding increase in net income to
market. reflect a reduction in related interest expense, less
Land, Buildings and Equipment applicable taxes. Upon conversion of the debentures into
Land, buildings and equipment are stated at cost and are common stock in early 1983, primary and fully diluted
depreciated principally using the straight-line earnings per share are essentially the same.
19
/`N/
Note 2—Acquisitions:
During October 1983, the Company purchased substan- assets and operating results of Alpha are not material to
tially all of the assets and assumed certain liabilities of the consolidated financial statements.
Rhode Island Trades Shops School, Inc. (Rhode Island). During October 1982, the Company acquired
The purchase price was $1,200,000 comprised of several basal textbook programs for $2,997,000 in cash
$280,000 in cash and $920,000 in notes payable over and $1,800,000 in notes payable over five years. The
five years. The transaction was accounted for under the acquisition involved the purchase of all rights to certain
purchase method, and the results of Rhode Island's completed and uncompleted basal texts, and related
operations have been included in the Company's con- inventories and royalty advance rights.
solidated financial statements since the date of acquisi- During 1981, the Company made the following
tion. The net assets and operating results of Rhode acquisitions on the following effective dates: United
Island are not material to the consolidated financial Electronics Institute, on April 1, 1981; Bauder Fashion
statements. College, Inc., on August 5, 1981; Arizona Automotive
In November 1982, the Company purchased Institute, on October 1, 1981; Tampa Technical Institute,
substantially all of the assets and assumed certain on October 1, 1981; Skadron Business College, on
liabilities of Alpha Nurses, Inc. (renamed National November 1, 1981.
Education HealthCare Services, Inc.). The purchase The aggregate purchase price of these acquisitions
price was $1,650,000 comprised of $600,000 in short- was $7,084,500 in cash and $5,857,500 in notes. Each of
term notes due in January 1983, and the balance in the acquisitions was accounted for under the purchase
long-term notes payable over five years. The transaction method.
was accounted for under the purchase method. The net
Note 3—Income Taxes:
Taxes on income were provided as follows:
Year ended December 31
(dollars in thousands) 1983 1982 1981
Currently payable:
Federal $ 96 $ (985) $1,810
State 477 492 439
Foreign 426 130 231
Total current provision (benefit) 999 (363) 2,480
Deferred:
Federal 2,907 3,609 397
Foreign (36) 46 (90)
Total deferred provision 2,871 3,655 307
Current tax benefits not treated as a reduction of
income tax expense resulting from:*
Exercise of stock options 1,675
Realization of purchased tax benefits from safe harbor leases 952
Pre-acquisition operating losses and timing differences 425
Total income tax provision $6,497 $3,292 $3,212
+7hese items represent tax benefits reflected as reductions of the taxes currently payable, however, they are not treated as a reduction of income tax expense
for financial statement purposes.
20
vvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvvv
The major components of the deferred provision are as follows: Year ended December 31
(dollars in thousands) 1983 1982 1981
Accelerated depreciation $ 105 $ 253 $ 182
Prepaid marketing expenses currently deductible
for tax purposes 1,268 1,360 161
Amortization expense currently (not currently)
deductible for tax purposes 628 1,179 (94)
Income not currently recognized
for tax purposes 865 616
Change in nondeductible inventory reserves (137) 5 (261)
Other items, net 142 242 319
Total deferred provision $2,871 $3,655 $ 307
The Company accrues domestic income taxes which expects to remit such funds. The cumulative foreign
would become payable upon the transfer of un- earnings anticipated to be permanently reinvested in
distributed foreign earnings remitted in the form of these operations are not material.
dividends or management charges to the extent that it
A reconciliation of the provision for income taxes with the amount
computed using the federal statutory tax rate is as follows: Year ended December 31
1983 1982 1981
Federal statutory rate 46% 46% 46%
State taxes, net of federal benefit 2 3 3
Investment and other tax credits (3) (9) (4)
Foreign rate differential (2) 1 (3)
Other (1) (4) (4)
Effective tax rate 42% 37% 38%
Note 4—Retirement Plan:
The Company's subsidiary, Intext, Inc., has a retirement A comparison of accumulated plan benefits and
plan covering substantially all of its employees and the plan net assets, including balance sheet accruals, for
employees of Steck Vaughn. Intext's policy is to accrue Intext's Plan at December 31, 1982, the date of the most
and fund actuarially computed normal costs plus amor- recent actuarial valuation, is as follows:
tization of unfunded prior service costs over periods up
to forty years. (dollars in thousands) Amount
The Company has requested approval from the Pen-
sion Benefit Guarantee Board to terminate the Intext Actuarial present value of
Plan as of December 31, 1983. Upon termination of the accumulated plan benefits:
Intext Plan, all Intext and Steck-Vaughn employees are Vested $3,559
eligible to participate in the National Education Cor- Nonvested 134
poration Contributory Retirement Plan, which covers all Total $3,693
domestic full-time employees and provides for Company Net assets available for benefits $5,783
matching of contributions made to the Plan by
employees. Total retirement expense under all plans
aggregated $284,000, $338,000 and $309,000 for the The assumed rate of return used in determining the
years ended December 31, 1983, 1982 and 1981, actuarial present value of accumulated plan benefits
respectively. averaged 7%.
21
CORPORATION„NATIONAL EDUCATION %/V V V V V V V V V V V V V V V V
Note 5—Debt:
The Company's long-term debt is composed of the following: December 31
(dollars in thousands) 1983 1982
91/s% Convertible subordinated debentures $ — $13,985
Other long-term debt:
Instalment notes payable through 1988 with interest
approximating prime less 3% $ 5,896 $ 6,496
Instalment debt, payable $418,000 annually with interest
at prime 1,254 1,590
Mortgage notes, interest from 73A% to 14%, maturing on
various dates through 1994 4,856 4,942
Other 169 214
12,175 13,242
Less current portion of long-term debt (2,589) (1,939)
Total $ 9,586 $11,303
On January 14, 1983, the Company called for the have minimum and maximum interest rates of 9% and
redemption, by February 15, 1983, of the remaining 15%, respectively.
debentures outstanding at 107.875% of the principal Instalment debt and mortgage notes aggregating
amount plus accrued interest, for a total redemption $6,110,000 at December 31, 1983 were collateralized
price of $1,116 per debenture. Because of the substan- by certain real and personal property having a net book
tial premium of the market value of the Company's value of $11,882,000.
common stock over the conversion price, virtually all Aggregate maturities of long-term debt in each of
of the principal amount of the debentures were con- the following years are: 1985—$2,229,000, 1986—
verted into common stock on or before February 15, $1,934,000, 1987—$1,034,000, and 1988—$3,201,000.
1983. Such conversions have been accounted for by The Company has a $20,000,000 line of credit
crediting common stock at stated value for the common which was available and unused at December 31, 1983.
shares issued with the excess credited to additional The line of credit arrangement provides for borrowing
paid-in capital. The unamortized debt issue costs at the prime lending rate and requires the Company to
associated with the converted debt have been charged maintain compensating bank balances equal to 71/a% of
to additional paid-in capital. the total line of credit. This arrangement does not
Instalment notes payable represent debt issued in restrict the use of such balances if needed for general
connection with various acquisitions, and generally corporate purposes.
Note 6—Commitments:
Aggregate commitments at December 31, 1983 under Some of the leases contain renewal options,
noncancelable leases for land, buildings and equipment, escalation clauses, and requirements that the Company
none of which are capital leases, are as follows: pay taxes, insurance and maintenance costs. Total rent
1984—$5,935,000; 1985— $4,934,000; 1986— expense aggregated $6,782,000, $6,885,000 and
$3,828,000; 1987—$3,176,000; 1988—$2,265,000 and $5,064,000 for the years ended December 31, 1983,
thereafter—$4,705,000, totaling $24,843,000. 1982 and 1981, respectively.
22
'�/�/\/�/♦/���J�,��,i\,ice 1�%�i�iU�/�/�/�/�/�/�/�/V`�/�/�/�/�/�/�/�/�/�/�/�/�/�/�/�/`
Note 7—Stockholders' Equity:
The Company has stock option plans that authorize the mon stock at the date of grant, become exercisable one
granting of options to key employees and directors to year to five years from the date of grant, and expire in
purchase unissued common stock subject to certain con- five to fifteen years.
ditions, such as continued employment. Options are Changes during the years ended December 31, 1983,
granted at the fair market value of the Company's com- 1982 and 1981 under the plans were as follows:
Number Total
of Option Price Option
(dollars in thousands, except per share amounts) Shares Per Share Value
Balance, December 31, 1980 567,012 $ .63 to $ 4.43 $1,186
Granted 301,620 4.51 to 5.04 1,409
Exercised (194,328) .63 to 3.01 (308)
Balance, December 31, 1981 674,304 1.31 to 5.04 2,287
Granted 254,520 4.17 to 4.51 1,124
Canceled (61,608) 4.43 to 5.04 (294)
Exercised (2,301) 1.31 to 1.78 (4)
Balance, December 31, 1982 864,915 1.45 to 5.04 3,113
Granted 387,384 12.00 to 19.25 5,775
Canceled (29,707) 4.29 to 5.04 (135)
Exercised 54( 2,495) 1.45 to 12.00 (1,899)
Balance, December 31, 1983 680,097 $ 1.69 to $19.25 $6,854
Common shares reserved for future grants under years. Each officer must apply any bonuses paid him in
the above option plans totaled 468,162 and 943,209 at excess of specified target bonuses to reduce these tax-
December 31, 1983 and December 31, 1982, respective- related loans. All loans outstanding relating to the exer-
ly. Of the 680,097 shares previously granted and out- cise of stock options have been reflected as a reduction
standing, 224,297 shares were vested and exercisable at of stockholders' equity.
prices ranging from $1.69 to $18.75 per share. The Company declared a three-for-two stock split
There are no charges to income in connection with on January 9, 1984 and a two-for-one stock split on
the issuance of options. Upon exercise, proceeds from February 17, 1983. The Company issued 10% stock
the sale of shares under the stock option plans are dividends in 1982 and 1981. The fair market value of
credited to common stock and additional paid-in capital. the shares issued in connection with each of the
Stock options exercised were purchased for cash or dividends was charged to retained earnings and credited
personal notes bearing interest from 7% to 10% per to common stock at stated value with the excess
annum and repayable over five years. The Company credited to additional paid-in capital.
also loaned certain officers an amount equal to each of The share data set forth above and all per share
their income tax liabilities resulting from the exercise data in the consolidated financial statements have been
of nonqualified stock options. These loans are retroactively adjusted to reflect both the stock splits and
noninterest bearing and are due and payable in ten stock dividends.
23
�VUVu�vuVUUUUuuuUUUvuuVUuuuuVUUu uUUVuu U�
Note 8-Industry Segment Data:
Information about the Company's operations in different industries is as follows:
Year ended December 31
(dollars in thousands) 1983 1982 1981
Net Revenues Education centers $ 96,754 $ 83,158 $ 60,938
Training, publishing and services 61,750 51,793 52,322
Consolidated $158,504 $134,951 $113,260
Operating Income Education centers $ 14,629 $ 9,540 $ 6,562
Training, publishing and services 8,649 6,726 7,626
Segment operating income 23,278 16,266 14,188
General corporate expenses (7,063) (5,189) (4,768)
Interest expense, net (661) (2,268) (1,009)
Income before income taxes $ 15,554 $ 8,809 $ 8,411
Identifiable Assets Education centers $ 41,913 $ 40,382 $ 34,462
Training, publishing and services 37,438 38,488 32,000
Segment subtotal 79,351 78,870 66,462
Corporate assets 22,009 7,751 9,464
Total assets $101,360 $ 86,621 $ 75,926
Depreciation and Education centers $ 5,705 $ 4,481 $ 2,416
Amortization Training, publishing and services 3,411 2,545 2,469
Segment total $ 9,116 $ 7,026 $ 4,885
Capital Expenditures Education centers $ 2,844 $ 10,048 $ 3,900
Training, publishing and services 633 973 403
Segment total $ 3,477 $ 11,021 $ 4,303
The following table sets out the amount of consolidated net revenues,
operating income and identifiable assets by geographic area: Year ended December 31
(dollars in thousands) 1983 1982 1981
Net Revenues United States $144,891 $120,732 $ 97,253
Foreign 13,613 14,219 16,007
Consolidated $158,504 $134,951 $113,260
Operating Income United States $ 21,711 $ 16,257 $ 13,298
Foreign 1,567 9 890
Segment operating income $ 23,278 $ 16,266 $ 14,188
Identifiable Assets United States $ 74,101 $ 73,643 $ 59,464
Foreign 5,250 5,227 6,998
Segment assets $ 79,351 $ 78,870 $ 66,462
24
The Company's operations are conducted in the assets used in the Company's operations in each seg-
United States, Canada, Great Britain, Australia and ment and geographic area. Corporate assets are com-
several other foreign countries. prised principally of cash, prepaid expenses, land,
Operating income by segment and geographic area buildings and equipment and investments. In 1983, the
includes net revenues less operating expenses. The Company realigned its segment classifications to con-
operating income by segment and geographic area ex- form with its internal business structure. This change,
cludes general corporate expenses, net interest expense which had no effect on net revenues, net income or
and income taxes. Intersegment sales were immaterial total assets, has been applied retroactively to all periods
for all years presented. Identifiable assets are those presented.
Note 9—Future Tuition Income:
Future tuition income on active student contracts is composed of the following:
December 31
(dollars in thousands) 1983 1982
Unearned tuition $ 10,636 $ 9,516
Uncollected future tuition income 111,269 86,158
121,905 95,674
Less:
Allowance for cancellations (44,280) (36,111)
Estimated liability for future refunds (2,314) (1,842)
Prepaid marketing expenses (7,981) (6,422)
Future tuition income $ 67,330 $51,299
Future tuition income represents amounts estimated to related allowance for cancellations, and the correspond-
be recognized as revenue in subsequent years as ser- ing amounts carried in contracts receivable. Prepaid
vices are rendered as described in Note 1. marketing expenses and unearned tuition have been
Management has concluded, and its independent separately classified. Prior year financial statements
accountants have concurred, that it is more appropriate have been restated to conform to the 1983
to exclude from the consolidated balance sheets the un- classifications.
collected portion of future tuition income, net of the
Note 10—Land, Buildings and Equipment:
Depreciable December 31
(dollars in thousands) Lives 1983 1982
Land — $ 2,459 $ 2,453
Buildings and improvements 20-45 years 15,026 15,150
Leaseholds and improvements Life of lease 7,142 6,895
Machinery and equipment 3-10 years 14,060 12,812
Furniture and fixtures 5-10 years 8,645 7,486
47,332 44,796
Less accumulated depreciation and amortization (15,093) 1( 1,429)
Total $32,239 $33,367
25
Note 11—Unusual Items:
In 1983, the Company unified the management and ($.05 per share) has been included in amortization of
operating methodology of its Education Centers. This acquired intangible assets for the year ended
resulted in the rewriting of certain standardized December 31, 1983.
curricula to he utilized by all Education Centers. The In July and October 1983, fire damaged the
Company has determined that certain course develop- warehouse and administrative offices of the Company's
ment costs which were obtained and valued in con- corporate headquarters. The fire losses are fully insured
junction with various acquisitions have no continuing at replacement value. The Company and its insurance
value. Additionally, certain consulting agreement carrier have not yet settled the claims; however, based
commitments entered into at the time of these acquisi- on preliminary estimates, a pretax gain of $700,000
lions have also been determined to be of no future ($.03 per share) has been recorded for the year ended
value. Accordingly, a pretax charge of $1,040,000 December 31, 1983.
Note 12—Receivables:
Receivables and the related allowance for doubtful receivables are as follows:
December 31
(dollars in thousands) 1983 1982
Receivables $21,347 $17,174
Less:
Allowance for doubtful receivables (10,022) (7,933)
Receivables, net $11,325 $ 9,241
Total bad debt expense aggregated $4,082,000,
$3,439,000 and $3,418,000 for the years ended
December 31, 1983, 1982 and 1981, respectively.
26
/\/V�/VVVVVVVVVVVN/\/V\/N/vvN/ N/ v v v v v v v
V
Note 13—Quarterly Financial Data (unaudited):
Summarized quarterly financial data for 1983
and 1982 are as follows:
First Second Third Fourth
(dollars in thousands, except per share amounts) Quarter Quarter Quarter Quarter
1983
Net revenues $37,506 $38,395 $40,658 $41,945
Operating costs and expenses 34,367 35,919 36,166 36,498
Income taxes 1,331 1,055 1,909 2,202
Net income $ 1,808 $ 1,421 $ 2,583 $ 3,245
Primary earnings per share $ .18 $ .14 $ .25 $ .31
Fully diluted earnings per share* $ .18 $ .14 $ .25 $ .31
1982
Net revenues $31,995 $32,436 $33,327 $37,193
Operating costs and expenses 30,165 31,242 30,985 33,750
Income taxes 732 478 770 1,312
Net income $ 1,098 $ 716 $ 1,572 $ 2,131
Primary earnings per share $ .16 $ .10 $ .23 $ .31
Fully diluted earnings per share* $ .13 $ .10 $ .18 $ .23
*This represents a reduction from primary earnings per share principally as a result of the assumption that the debentures had been converted to common stock
immediately after issuance. Upon the actual conversion in early 1983,primary and fully diluted earnings per share are essentially the same.
REPORT
Price
NValerhouse
To the Board of Directors and Stockholders
National Education Corporation
In our opinion, the accompanying consolidated Our examinations of these statements were made in
balance sheets and the related consolidated statements of accordance with generally accepted auditing standards
income, stockholders' equity and changes in financial and accordingly included such tests of the accounting
position present fairly the financial position of National records and such other auditing procedures as we
Education Corporation and its subsidiaries at December considered necessary in the circumstances.
31, 1983 and 1982, and the results of their operations
and the changes in their financial position for each of the � J .E� J three years in the period ended December 31, 1983,
in conformity with generally accepted accounting prin-
ciples consistently applied after restatement for the Newport Beach, California
change, with which we concur, as described in Note 9. February 8, 1984
27
DIRECTORS OFFICERS
John J. McNaughton John J. McNaughton Philip J. Erdle Common Stock
Chairman of the Board Chairman of the Board ice President Traded
Eugene Auerbach, Ph.D. H. David Bright President, National Education New York Stock Exchange
Former Senior lice President President and International Pacific Stock Exchange
H. David Bright' Chief Executive Officer Jack C. Polley Trading Symbol: NEC
President and J. W. Cwiertnia Vice President Offer of 10-K
Chief Executive Officer Executive Vice President, Corporate Communications The Company's annual
Leonard W. Jaffe' 2 3 Finance and Jules Rosenblatt report filed with the
President Chief Financial Officer Vice President S.E.C. on Form 10-K is
available to an
CSC Trading Corp. Wallace O. Laub President, Education Centers stockholder, without
David C. Jonesl 3 Executive Vice President, Ronald N. Tapper charge, upon request.
Former Chairman Marketing Vice President, Operations Stockholders' inquiries
Joint Chiefs of Staff President, Training, Publishing should be sent to:
Jeffrey A. Brill and Services National Education Corporation Wallace O Laub Vice President, Secretary Executive Vice President and General Course! 1300 N. Bristol StreetTransfer Agent Newport Beach, CA 92660
Frederic V. Malek John A. Butler & Registrar Attention: Jack C. Polley,
Executive ice President, Vice President, Bank of America Vice President
Marriott Corporation Corporate Development National Trust & Corporate Communications
Harold Segal, C.P.A.' z 3 and Administration Savings Association Corporate Office
President Robert E. Dowdell Los Angeles 1300 N. Bristol Street
Segal, Chadroff& Gelon, Inc., Vice President, Newport Beach, CA 92660
Certified Public Accountants Treasurer Independent Telephone: (714) 955-9400
Maurice Sherman Accountants Telex:
Former Senior Vice President Price Rftterhouse 183-516 NEC NEI NTBH
Newport Beach
' Executive Committee
' Audit Committee
'Compensation and
Option Committee
OPERATING DIVISIONS
EDUCATION CENTERS TRAINING, PUBLISHING AND SERVICES
Jules Rosenblatt Ronald N. Tapper
Group President Group President
DIVISION PRESIDENTS:
David Court Leonard A Gingerella
National Education ICS-Intent
HealthCare Services, Inc.
David R. Crowther Cecil Spain
ICS Independent Study Division Steck-Ghughn Co.
28
v v v v v v V V V N/ V N/ V V V V V V V N/ V V V V V N/ V V V N/ N/ V V N.
GROUPANO DIVISION Jfl , •
NATIONAL EDUCATION CORPORATION
National Education Corporation
Corporate Headquarters
1300 N- Bristol Street
Newport Beach, California 92660
(714) 955-9400
EDUCATION CENTERS GROUP
National Education Centers, Inc. Alabama Florida Missouri
Headquarters Birmingham (205)323-5816 Ft. Lauderdale(305)4917171 Kansas City (816) 842-2374
4400 Campus Drive Ft. Lauderdale(305) 772-0280
Newport Beach, California 92660 Arizona Iakeworth (305) 586-2593 New Jersey
(714) 852-8100 Glendale (602)934-7M Tampa (813)238-0455 Bast Brunswick(201)249-9383
Phoenix (602)258-5901 Nutley (201)661-0600
National Education Centers Georgia
Western Region Arkansas Atlanta(404) 976-6741 Ohio
666 W. Baker Street, Suite 301 Little Rock (501)224-8200 Cuyahoga Falls(216)923-9959
Costa Mesa, California 92626 Illinois Oklahoma
(714) 754-6797/75"798 California Chicago(312)368-4911
Anaheim(714) 778-6500 Oak Park (312)383-9360 Oklahoma City(405)528-2T11
Anaheim (714)778-Z740 Tulsa (918) 836-6886
National Education Centers Canoga Park(213) 8977 Iowa 911 Pennsylvania
Central Region Cypress(714)952-8713 West Des Moines(515)223-1486
4410 W. Roosevelt Road Allentown(215)432-0311
Long Beach (213)422-6007
Room 205 Kentucky Blairsville(412)459-9500
Hillside, Illinois 60162 Los Angeles (213)479-0911 Harrisburg(717)564-4112
Los Angeles(213)481-1640 Louisville (502)449-5304
(312) 449-0200 Orange (714)978-7813 Philadelphia(215) 397-1530
Rosemead (213)573-5470 Massachusetts Rhode Island
National Education Centers Brookline(617)232-6035
Southern Region Sacramento(916)444-3936 Prmidence(401)331-3008
2100 Highway 360, Suite 1810B San Bernardino(714) 885-3896 Michigan TOM
Grand Prairie, Texas 76039 San Francisco(415)777-2500 East Detroit(313)779-5530
San Jose(408)Z75-8800 Dallas n 14)(71 )776-ll
(214) 660-2973 Torrance(213)772-1148 Livonia(313)591-3833 Houston (713)776-3656
National Education Centers Wyoming(616) 538-3170 Universal City (512)658-7397
Eastem Region Minnesota West Virginia
184 Rivervale Road Minneapolis(612)721-2481 Cross lanes(304)776-6290
Rivervale, New Jersey 07675
(201) 666-4041
TRAINING, PUBLISHING AND SERVICES GROUP
Training, Publishing and ICS National Education Health- Missouri
Services Oak& Pawnee Streets Care Services, Inc. Kansas City (913)722-0133
Headquarters. Scranton, Pennsylvania 18515 Headquarters St. Louis (314)644-3974
315 Post Road West (717) 342 7701 17000 No. Dallas Pkwy
Westport, Connecticut 06880 Suite 125 Oklahoma
(203) 227-0891 Steck Vaughn Company Dallas, Texas 75248 Oklahoma City(405)528-6096
807 Brazos Street (214) 248-2273 Texas
ICS-Intext P.O. Box 2028 Dallas (214) 263-1771
315 Post Road West Austin, Texas 78768 Arizona Ft. Worth(817)429-=3
Westport, Connecticut 06880 (512) 476-6721 Phoenix (602)2647340 Houston (713) 785-0625
(203) 227-0891
California Lubbock(806)744-8833
San Antonio(512)696-1091
Palm Springs (619)323-8960 Wichita Falls(817) 322-3781