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Nobel Learning Communities, Inc. Business Information, Profile, and History

company schools clegg horse

1615 West Chester Pike
West Chester, Pennsylvania 19382
U.S.A.

Company Perspectives:

The company's mission is to create unique educational environments bu ilt on sound research, qualified instruction, and local communities o f learning that foster academic excellence, instill a love of active learning, and provide experiences that enable all students to acquire a foundation of skills for lifelong achievement ... increasing value to our families, our shareholders, and our employees. We nurture cre ativity and exploration in learning; respect children, parents, emplo yees, and the environment; foster collaboration in our community of l earners; meet the needs of children and the expectations of their par ents; provide educational programs that consistently meet quality ass urance criteria; develop and improve instructional delivery of our pr ograms; demonstrate accountability and effectiveness to our constitue ncies; build and maintain our learning communities on a foundation of integrity and high standards.

History of Nobel Learning Communities, Inc.

Nobel Learning Communities, Inc., operates private schools that serve students from preschool through high school. The company runs approx imately 150 schools in 14 states, including its largest school operat ion, the California-based Merryhill School system, which consists of 30 preschools, elementary schools, and middle schools. The company bu ilds and acquires its educational facilities in clusters, thereby cre ating a network within a community that can accommodate a child throu ghout his or her primary and secondary education. Nobel schools are g enerally open between 6:30 a.m. and 6:00 p.m., providing child superv ision for the company's target customers, single-parent and double-in come families. Nobel schools operate under various names, including M erryhill School, Chesterbrook Academy, Northwest Schools, and Houston Learning Academy. The company also operates corporate child-care cen ters and summer camps. Educational conglomerate Knowledge Universe ow ns 25 percent of Nobel Learning.

Origins

It took roughly a decade before Nobel arrived at the strategy, the co rporate structure, and the leader capable of achieving consistent suc cess. The years in between were difficult, a period when Nobel operat ed under a different name and pursued a different corporate mission. Nobel began operating in 1984 as Rocking Horse Child Care Centers of America Inc., a Cherry Hill, New Jersey-based operator of private chi ld-care centers.

Rocking Horse began modestly, with a single child-care center that re corded $48,000 in revenue during its first year of operation. Roc king Horse did not expand until April 1986, but once it began develop ing into a chain of day-care centers, the company did so with fervor. By the end of 1986, the company's revenue total had increased mighti ly, swelling to nearly $3 million as it began an aggressive acqui sition campaign. Between April 1986 and October 1987, Rocking Horse a cquired 31 child-care centers and constructed two new facilities, ext ending its operating territory to an eight-state area. The company's energetic growth, however, did not translate into profitability. Rock ing Horse posted a net loss of $3.2 million in 1986, $300,000 more than it collected in revenue.

Despite the loss, the company continued to expand into the late 1980s . Rocking Horse raised $5 million in a public offering of stock i n October 1987, the capital from which was used, as its president, Jo hn W. Quaintance, told the Philadelphia Business Journal in th e October 12, 1987, issue, "to continue our acquisition strategy." By the end of 1988, the company operated 41 of what it called "preschoo l learning centers." There were ten each in Georgia and Florida, eigh t in South Carolina, four each in Illinois and Pennsylvania, three in New Jersey, and one each in Maine and Massachusetts. Rocking Horse h eld licenses to accommodate 5,538 children, allowing an average of 13 5 children per center. The company charged between $43 to $14 0 per week for its child-care services, the nature of which represent ed the hidden and unexploited strength of the chain. To distinguish i tself from the scores of other child-care companies in existence, Roc king Horse used professionally developed educational and recreational programs administered by trained supervisors and teachers. By tailor ing itself as more than a traditional day-care provider, the company' s management hoped to attract parents and their children away from th e competition, but the strategy never worked, at least not financiall y. By the end of the decade, Rocking Horse was a company suffering fr om profound financial problems.

As Rocking Horse entered the 1990s, the signs of financial distress w ere alarmingly abundant. Saddled with an extremely large bank loan it could not pay, Rocking Horse had difficulty convincing its bank to a pprove a lease on a company vehicle. The company had a negative net w orth of $3.8 million and was reeling from the effects of successi ve annual losses. After Rocking Horse defaulted on its loans, the acc ounting firm of Coopers Lybrand issued a statement based on the child -care provider's 1991 results, stating that it was unsure if Rocking Horse had the capacity to survive.

Clegg Leading Revival in 1992

The task of rescuing Rocking Horse fell to a new management team head ed by A.J. "Jack" Clegg, whose arrival marked the beginning of a new and decidedly more successful era. Clegg's professional background in cluded the 1979 founding of Empery Corporation, an operator of cable television and printing business. At Empery, Clegg served as chairman , president, and chief executive officer from 1979 to 1992, but his d uties at Empery represented only a fraction of his business backgroun d in the decade preceding his arrival at Rocking Horse. Between 1983 and 1993, Clegg served as chairman and chief executive officer of TVC , Inc., a distributor of cable television components. During the same period he also held identical titles at Design Mark Industries, a ma nufacturer of electronic senswitches. Clegg served as chairman and ch ief executive officer of Globe Ticket and Label Company from 1984 to 1991 and was on the board of directors of Ferguson International Hold ings PLC. In the academic world, he was a member of the Advisory Boar d of Drexel University, an honor bestowed on the then-50-year-old Cle gg in 1989.

When Clegg joined Rocking Horse in May 1992, he inherited a company t hat had lost $10.2 million during the previous two years. The los ses were out of control, delivering staggering blows to a company tha t only generated roughly $30 million in annual sales. Clegg worke d quickly to trim the company's liability, reducing Rocking Horse's d ebt by nearly $7 million within a year. He raised money for much- needed restructuring through private placements, initially raising 36;2 million by selling stock and private holdings and raising anothe r $2.5 million in 1993. Thanks to Clegg's restorative efforts, Ro cking Horse reversed it losses, going from losing $3.8 million in 1991 to posting a profit of $1.8 million in 1992. Revenues slipp ed during the first stages of the turnaround, dropping from $34.7 million in 1991 to $33.5 million in 1992--a consequence of havin g to divest several child-care centers--but the company was on the me nd. After the restructuring and divestitures, the company operated 44 child-care centers in 11 states, with the most significant addition in northern California where Rocking Horse operated 29 schools called the Merryhill County Schools. As Clegg looked beyond the immediate n eed to arrest the company's money-losing ways, the Merryhill system w ould serve as his blueprint for the future.

Aside from Clegg's focus on financial matters, the survival of Rockin g Horse depended on another contribution from its new chairman, presi dent, and chief executive officer. In the course of inspecting Rockin g Horse's properties, Clegg visited one of the company's Merryhill sc hools, then operating as a division of Rocking Horse. During his visi t, Clegg noted the focus on offering curriculum-based programs to the children. Rather than merely offering custodial care, Rocking Horse, Clegg realized, was offering something beyond the services of a baby sitter. "The company never really took advantage of the fact that it had something relatively unique," Clegg told the Philadelphia Busi ness Journal in a May 23, 1997, interview. Educational programs r epresented Rocking Horse's distinguishing mark, a specialty that Cleg g intended to use as the emphasis underpinning Rocking Horse's expans ion.

With a clear vision of what the company should become, Clegg began ma king wholesale changes. He began converting the company's child-care centers into curriculum-based preschools, a shift in strategy that ca lled for a new corporate title. In 1993, Rocking Horse Child Care Cen ters of America was dropped in favor of Nobel Education Dynamics, Inc . Once the company's financial health was restored, Clegg also began acquiring and expanding preschools, elementary, and middle schools, a mode of expansion that touched off in 1994. An integral aspect of th e company's expansion strategy involved grouping its properties aroun d each other. Clegg did not try to establish a presence in a wide geo graphic area; instead, he only moved into new territory if he was abl e to acquire additional nearby properties, a strategy he likened to p laying the board game Monopoly. "If we go into a brand-new area," Cle gg explained in his May 23, 1997 interview with the Philadelphia B usiness Journal, "we will buy [an existing] school and use that s chool base to build clusters." According to the plan, the acquisition or construction of a preschool was followed by the addition of other preschools within the same vicinity. After establishing a network of preschools in a given area, the company next built centrally located elementary and middle schools, thereby creating a system that could accommodate the same pupil through his or her preschool, elementary, and middle school years.

Adhering to its blueprint for expansion, Nobel began acquiring facili ties within roughly the same geographic area that Rocking Horse had p enetrated. By the end of 1995, the company had 101 facilities in oper ation within an 11-state region. The process of acquiring and convert ing preschools into accredited private elementary schools was in full swing, as Clegg targeted the children of single-parent families and two-income families to fill his growing number of educational facilit ies. Nobel schools provided child supervision from 6:30 a.m. to 6:00 p.m., a schedule that conformed to the work schedule of most parents. Public schools, by contrast, typically provided child supervision fr om 8:30 a.m. to 3:00 p.m., which generally required single parents or double-income parents to pay for after-school child-care services. T he savings partially offset Nobel's average tuition of $5,500, a fee that was 17 percent below the average $6,630 tuition at priva te nonparochial schools. Educationally, Nobel schools also compared f avorably to other private schools, with Nobel students scoring one to two grades above their grade level, according to the Stanford Achiev ement Test, a standardized reading and math test.

Nobel's operating hours, its curriculum, and its tuition fees disting uished the company from many of its competitors. The company presente d itself as an intriguing alternative to a specific sector of the mar ket, leading one industry analyst to remark, "Nobel is the first priv ate educator to provide solutions at a price the middle class can aff ord," as quoted in the January 1996 issue of Money magazine. O f importance, Clegg's approach to education operated on a sound finan cial footing as well. The company's primary schools earned 22 percent profit margins, a figure that was achieved in large part because Nob el operated with minimal overhead and without burdensome bureaucracy. Nobel's facilities were modest structures without the manicured lawn s and architecturally elegant buildings found at the most expensive p rivate schools. Nobel schools typically employed fewer support person nel than their private and public counterparts, and teachers' salarie s averaged 41 percent less than the $37,000 average salary of pub lic school teachers. Despite the lower pay, teachers welcomed the opp ortunity to work at Nobel, where average class sizes were smaller tha n at public schools--17 students per class versus 24 students per cla ss--and where the pupils were generally more committed to learning, i n large part because the schools had the ability to turn away childre n with disciplinary problems.

With a proven business model, Clegg entered the latter half of the 19 90s ready to expand his concept by creating clusters of Nobel communi ties. By the beginning of 1996, 13 of the company's properties in Cal ifornia had been converted to elementary schools catering to students from kindergarten through the eighth grade. Clegg intended to nearly triple the number of converted schools during the next two years, as well as to convert approximately 70 percent of Nobel's 51 preschools to kindergarten through second-grade schools. Clegg also announced a ggressive acquisition plans, endeavoring to dramatically increase the $44 million in sales the company recorded at the end of 1995.

Late 1990s Diversification

As Clegg pursued his ambitious expansion plans, another change in the company's corporate title was needed to more accurately reflect the strategy driving it forward. In 1998, the company adopted the name No bel Learning Communities, Inc., indicative of Clegg's desire to serve the educational needs of all children within a given community. Towa rd this end, the company's acquisition campaign enabled Clegg to crea te a more entrenched position within Noble communities--between 1994 and 1999, 68 schools were acquired--but the last years of the decade also saw Nobel target other segments of a community's student base. I n 1998, the company formed a joint venture with Developmental Resourc e Center, Inc. (DRC), owned by Dr. Deborah Levy, a developer of speci al education programs. Under the terms of the agreement, Paladin Acad emy LLC was formed, a joint venture project 80 percent owned by Nobel and 20 percent owned by DRC. The joint venture gave Nobel control of three schools in Florida that specialized in full-day programs, summ er camps, testing services, and clinics for kindergarten through 12th grade students challenged by learning disabilities such as dyslexia and attention deficit disorder. In 1999, Nobel added three more Palad in Academy locations, offering the specialized educational programs i n the classrooms of existing Noble schools. Based on the performance of the new Paladin Academy schools, the company planned to open addit ional schools in areas where Nobel schools were clustered.

Nobel also moved in several other new directions in 1999, as Clegg sh aped the company into a comprehensive education facility for the next century. Late in 1999, Nobel began offering tutorial and diagnostic programs under the name Nobel Learning Advantage. The programs, which the company planned to market to Nobel students and non-Nobel studen ts both, were offered at two of Nobel's schools in 1999, with a compa nywide rollout scheduled to begin in January 2000. Nobel entered the charter school market in 1999 as well, facilitating a nonprofit entit y's application for a charter from the School District of Philadelphi a. Under the terms of a five-year management contract, Nobel agreed t o provide administrative and construction management services to the charter school, which funded its own operations through payments from the School District of Philadelphia. The last year of the decade als o saw Nobel acquire the Houston Learning Academy, an operator of five specialty high schools in Houston, Texas. The schools offered half-d ay curriculum programs focused on individualized attention.

As Nobel prepared for further expansion in the 21st century, the achi evements of the 1990s suggested that energetic growth lay ahead. The company eclipsed the $100 million-in-sales mark in 1999, recordin g $109 million in sales, more than twice the total collected five years earlier. With the additions to the company's operating scope m ade in 1999, the opportunities for growth increased commensurately, p ositioning Nobel to attract students of all ages and abilities within a given community. After righting a floundering enterprise, Clegg de monstrated the ability and willingness to expand aggressively and str ategically, a behavior he promised to display in the years ahead.

Changes in the 2000s

Nobel had long been compared with another very visible for-profit, pu blicly-traded education company, Edison Schools. Edison had well-know n figures at its head, its media mogul founder Chris Wittle and Chair man Benno Schmidt, who had been president of Yale. Edison enjoyed a r ising stock price in the early 2000s, yet the company lost money and was not expected to reach profitability for several more years. In co ntrast, Nobel was profitable from the mid-1990s through the dawn of t he 21st century. It was still a relatively small company, and its sto ck traded much lower than Edison's, yet it seemed to have something g oing for it that its more visible competitor did not. Clegg explained his company's success in a profile in Inc. (December 2000) by saying education was "not a money problem. It's a money-management p roblem." Nobel kept its overhead low, and instead of requiring its se parate schools to conform to a complex financial pattern, it asked it s executives to be accountable for three key cost-control measures. T he company kept an eye on general and administrative expenses as a pe rcentage of tuition, strived for a high occupancy rate for each schoo l, and kept down school employee costs as a percentage of tuition. Cl egg's formula seemed to work even as the U.S. economy stumbled into r ecession with the end of the long bull market of the 1990s. Part of t his may have been because, although economic conditions were generall y poor in the United States in the early 2000s, the education market continued to grow. The total K-12 market was estimated at $2.5 bi llion in 2001, and it was growing at around 20 percent annually. The for-profit education industry seemed to be a protected niche, and Nob el seemed to be insulated from the economic stress that damaged other industries at the time.

Yet the rosy forecasts of the first few years of the new millennium d id not seem to come true for Nobel Learning. The company began to los e money, a proposed merger fell through, and senior management left t he company. The first clue that the situation was changing at Nobel c ame when the company announced in mid-2002 that it was being bought o ut and taken private by an entity formed by two investment companies and certain Nobel senior executives. The buyout was offered for $ 7.75 per share, which came down to some $110 million, including t he assumption of debt. Chairman and CEO Clegg welcomed the offer when it was first made. The deal did not go through, however, with the bu yout group claiming that it did not think the merger was financeable at the price it had offered. A few weeks after the termination of the merger in early 2003, Nobel announced that Knowledge Universe, the e ducation holding company that already owned approximately 16 percent of the company, would invest an additional $5 million and take wh at amounted to 25 percent ownership. Two Knowledge Universe executive s gained seats on Nobel's board of directors. When the two new direct ors joined Nobel Learning, the company announced that it would split the chairman and chief executive position. Both jobs had been held by Jack Clegg, and the company began searching for a new CEO. A few mon ths later, in July 2003, Nobel announced that it had gotten another b ig investment, this time $6 million from a Baltimore-based privat e equity firm called Camden Partners. Camden's founder, David Warnock , served on the boards of several education companies, and he joined Nobel's board as well. One month later, Nobel announced that Chairman and CEO Jack Clegg had resigned.

By the end of fiscal 2003, it was clear that Nobel had lost more than $11.5 million on revenue of almost $150 million. Aside from Jack Clegg, many others in senior management left the company, includ ing the chief operating officer and the chief financial officer. Nobe l began to close some of its schools, and sought to refinance its deb t. The company's new management team, led by the new president and CE O George Bernstein, worked to increase enrollment at its schools, to evaluate the company's real estate portfolio, and to bring in indepen dent directors with education experience to its board. A year later, the company had reduced its debt, brought in money through sales of a ssets, and raised its school operating profit, but Nobel still finish ed 2004 with a net loss of close to $6.6 million.

Nobel closed more schools, bringing its total number from 179 in earl y 2003 to 150 at the end of 2005. Revenue grew to $164 million, a nd the company finished 2005 in the black, with a profit of some $ ;2.5 million. Nobel further reduced its debt, and its school enrollme nt began to grow for the first time since 2002. The new management te am was at work on a variety of fronts, improving marketing, investing in new curricula, training its staff, and putting money into its bui ldings and real estate. The company seemed to have reversed its poor performance of the last two years.

Principal Subsidiaries: Merryhill Schools, Inc.; Merryhill Sch ools Nevada, Inc.; Chesterbrook Academy; Northwest Schools; Houston L earning Academy.

Principal Competitors: Bright Horizons Family Solutions, Inc.; Edison Schools Inc.; Imagine Schools, Inc.

Chronology

  • Key Dates:
  • 1984: Rocking Horse Child Care Centers of America is founded.
  • 1988: Following the company's first acquisition campaign, ther e are 41 Rocking Horse child-care centers in operation.
  • 1992: A.J. Clegg is hired as chairman and chief executive offi cer.
  • 1993: Rocking Horse changes its name to Nobel Education Dynami cs, Inc.
  • 1998: The company is renamed Nobel Learning Communities, Inc.
  • 2003: Knowledge Universe increases its stake to 25 percent; Ja ck Klegg resigns.
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