UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

[X] Quarterly report pursuant to Section 13 and 15 (d) of the Securities
Exchange Act of 1934

For the quarterly period ended June 30, 2001
-------------

[_] Transition report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934

For the transition period from____________to___________

Commission file number 0-27248
-------

Learning Tree International, Inc.
---------------------------------
(Exact name of registrant as specified in its charter)

Delaware 95-3133814
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)

6053 West Century Boulevard, Los Angeles, CA 90045
--------------------------------------------------
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code (310) 417-9700
--------------

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

Yes X No
--------- --------

The number of shares of common stock, $.0001 par value, outstanding as of August
3, 2001, is 19,240,545 shares.

Total number of pages 18
--

LEARNING TREE INTERNATIONAL, INC.

FORM 10-Q

June 30, 2001

TABLE OF CONTENTS

Part I--Financial Statements
Page
----
Item 1. Financial Statements:

Condensed Consolidated Balance Sheets....................................................... 3
Condensed Consolidated Statements of Operations............................................. 4
Condensed Consolidated Statements of Stockholders' Equity................................... 5
Condensed Consolidated Statements of Cash Flows............................................. 6
Notes to Condensed Consolidated Financial Statements........................................ 7

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.......... 9

Part II--Other Information

Item 1. Legal Proceedings.............................................................................. 17
Item 2. Changes in Securities.......................................................................... 17
Item 3. Defaults Upon Senior Securities................................................................ 17
Item 4. Submission of Matters to a Vote of Security Holders............................................ 17
Item 5. Other Information.............................................................................. 17
Item 6. Exhibits and Reports on Form 8-K............................................................... 17

Signatures............................................................................................... 18

PART I-FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

LEARNING TREE INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

June 30, September 30,
2001 2000
------------ ------------

ASSETS (Unaudited)
Current assets:
Cash and cash equivalents........................................................ $101,397,000 $116,231,000
Short-term interest-bearing investments.......................................... -- 37,882,000
Trade accounts receivable, net................................................... 19,139,000 25,565,000
Prepaid marketing expenses....................................................... 1,910,000 1,723,000
Prepaid income taxes............................................................. 5,973,000 --
Prepaid expenses and other....................................................... 5,939,000 5,251,000
------------ ------------
Total current assets........................................................... 134,358,000 186,652,000

Equipment, property and leasehold improvements, net............................... 28,430,000 22,752,000
Long-term interest-bearing investments............................................ 8,450,000 8,824,000
Other assets...................................................................... 2,119,000 2,125,000
------------ ------------
Total assets................................................................... $173,357,000 $220,353,000
============ ============

LIABILITIES
Current liabilities:
Trade accounts payable........................................................... $ 12,213,000 $ 15,283,000
Deferred revenue................................................................. 59,992,000 53,327,000
Accrued liabilities.............................................................. 9,307,000 11,820,000
Income taxes payable............................................................. 2,130,000 4,729,000
------------ ------------
Total current liabilities...................................................... 83,642,000 85,159,000

Deferred income taxes............................................................. 79,000 82,000
Deferred facilities rent.......................................................... 2,637,000 2,317,000
------------ ------------
Total liabilities.............................................................. 86,358,000 87,558,000
------------ ------------

Commitments and Contingencies

STOCKHOLDERS' EQUITY
Common Stock, $.0001 par value, 75,000,000 shares authorized,
19,241,000 and 22,119,000 shares issued and outstanding, respectively........... 2,000 2,000
Additional paid-in capital....................................................... 1,660,000 52,649,000
Cumulative foreign currency translation.......................................... (5,448,000) (4,007,000)
Retained earnings................................................................ 90,785,000 84,151,000
------------ ------------
Total stockholders' equity..................................................... 86,999,000 132,795,000
------------ ------------
Total liabilities and stockholders' equity..................................... $173,357,000 $220,353,000
============ ============

See accompanying notes to condensed consolidated financial statements.

LEARNING TREE INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

Three Months Ended Nine Months Ended
June 30, June 30,
--------------------------- -----------------------------
2001 2000 2001 2000
----------- ----------- ------------ ------------

Revenues....................................... $57,833,000 $63,024,000 $177,927,000 $165,420,000
Cost of revenues............................... 23,933,000 22,261,000 71,701,000 59,330,000
----------- ----------- ------------ ------------
Gross profit................................. 33,900,000 40,763,000 106,226,000 106,090,000
----------- ----------- ------------ ------------

Operating expenses:
Course development........................... 2,957,000 2,699,000 8,893,000 7,598,000
Sales and marketing.......................... 16,095,000 14,036,000 47,676,000 41,172,000
General and administrative................... 6,828,000 6,520,000 20,243,000 18,519,000
----------- ----------- ------------ ------------
25,880,000 23,255,000 76,812,000 67,289,000
----------- ----------- ------------ ------------

Income from operations......................... 8,020,000 17,508,000 29,414,000 38,801,000
----------- ----------- ------------ ------------

Other income (expense):
Interest expense............................. (3,000) (7,000) (7,000) (12,000)
Interest income.............................. 1,176,000 1,896,000 5,689,000 4,797,000
Foreign exchange............................. 70,000 (149,000) (464,000) (292,000)
Other........................................ 98,000 (307,000) (38,000) (149,000)
----------- ----------- ------------ ------------
1,341,000 1,433,000 5,180,000 4,344,000
----------- ----------- ------------ ------------

Income before provision for income taxes....... 9,361,000 18,941,000 34,594,000 43,145,000
Provision for income taxes..................... 3,323,000 6,629,000 12,281,000 15,100,000
----------- ----------- ------------ ------------
Net income..................................... $ 6,038,000 $12,312,000 $ 22,313,000 $ 28,045,000
=========== =========== ============ ============

Earnings per common share...................... $ 0.31 $ 0.56 $ 1.06 $ 1.29
=========== =========== ============ ============

Earnings per common share assuming
dilution...................................... $ 0.31 $ 0.54 $ 1.03 $ 1.25
=========== =========== ============ ============

Weighted average number of shares
outstanding................................... 19,402,000 21,793,000 21,050,000 21,699,000
=========== =========== ============ ============

Diluted shares outstanding..................... 19,742,000 22,717,000 21,689,000 22,370,000
=========== =========== ============ ============

See accompanying notes to condensed consolidated financial statements.

LEARNING TREE INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)

Notes Foreign
Additional Receivable Currency Total
Common Paid-In From Translation Retained Stockholders'
Stock Capital Stockholders Adjustment Earnings Equity
------- ----------- ------------- ------------ ----------- -------------

Balance,
September 30, 1999........... $ 2,000 $39,888,000 $ (6,000) $ (1,300,000) $ 47,056,000 $ 85,640,000

Comprehensive income:
Net income................. -- -- -- -- 28,045,000 28,045,000

Foreign currency
translation............... -- -- -- (1,549,000) -- (1,549,000)
-------------
Comprehensive income......... 26,496,000

Stock option exercises....... -- 5,845,000 -- -- -- 5,845,000

Tax benefit related to stock
option exercises.......... -- 1,253,000 -- -- -- 1,253,000

Collection of notes
receivable................. -- -- 6,000 -- -- 6,000
------- ----------- ------------ ------------ ------------ -------------

Balance at
June 30, 2000................. $ 2,000 $46,986,000 $ -- $ (2,849,000) $ 75,101,000 $ 119,240,000
======= =========== ============ ============ ============ =============
Balance,
September 30, 2000........... $ 2,000 $52,649,000 $ -- $ (4,007,000) $ 84,151,000 $ 132,795,000

Comprehensive income:
Net income................. -- -- -- -- 22,313,000 22,313,000

Foreign currency
translation............... -- -- -- (1,441,000) -- (1,441,000)
-------------

Comprehensive income......... 20,872,000

Stock option exercises....... -- 4,410,000 -- -- -- 4,410,000

Tax benefit related to
stock option exercises.... -- 1,595,000 -- -- -- 1,595,000

Stock repurchases............ -- (56,994,000) -- -- (15,679,000) (72,673,000)
------- ----------- ------------ ------------ ----------- -------------

Balance at
June 30, 2001................. $ 2,000 $ 1,660,000 $ -- $ (5,448,000) $90,785,000 $ 86,999,000
======= =========== ============ ============ =========== =============

See accompanying notes to condensed consolidated financial statements.

LEARNING TREE INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

For the Nine Months
Ended June 30,
---------------------------
2001 2000
------------ ------------

Cash flows--operating activities:
Net income........................................................ $ 22,313,000 $ 28,045,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.................................. 6,113,000 6,491,000
Unrealized foreign exchange losses............................. 390,000 215,000
Deferred facilities rent charges............................... 353,000 (300,000)
Losses on retirements of equipment and leasehold improvements.. 141,000 144,000
Change in net assets and liabilities:
Trade accounts receivable................................... 5,967,000 (8,181,000)
Prepaid marketing expenses.................................. (189,000) 739,000
Prepaid expenses and other.................................. (846,000) (1,411,000)
Income taxes................................................ (6,790,000) 5,580,000
Trade accounts payable...................................... (2,704,000) (54,000)
Deferred revenue............................................ 7,967,000 13,891,000
Accrued liabilities......................................... (2,282,000) 3,635,000
------------ ------------
Net cash provided by operating activities...................... 30,433,000 48,794,000
------------ ------------

Cash flows--investing activities:
Purchases of equipment, property and leasehold improvements....... (12,418,000) (4,936,000)
Retirements of equipment, property and leasehold improvements..... 52,000 874,000
Sales of short-term interest-bearing investments:
Investments held to maturity................................... 68,615,000 94,106,000
Investments held for sale...................................... -- 37,800,000
Purchases of short-term interest-bearing investments:
Investments held to maturity................................... (30,733,000) (56,899,000)
Investments held for sale...................................... -- (38,600,000)
Other, net......................................................... (65,000) (862,000)
------------ ------------
Net cash provided by investing activities................... 25,451,000 31,483,000
------------ ------------

Cash flows--financing activities:
Repurchases of Common Stock....................................... (72,673,000) --
Proceeds from exercise of stock options........................... 4,410,000 5,845,000
Collections of stockholder notes receivable....................... -- 6,000
------------ ------------
Net cash provided by (used in) financing activities......... (68,263,000) 5,851,000
------------ ------------

Effects of exchange rates on cash................................... (2,455,000) (1,995,000)
------------ ------------
Net increase (decrease) in cash and cash equivalents................ (14,834,000) 84,133,000
Cash and cash equivalents at the beginning of the period............ 116,231,000 33,059,000
------------ ------------
Cash and cash equivalents at the end of the period.................. $101,397,000 $117,192,000
============ ============

Supplemental disclosures:
Income taxes paid................................................. $ 13,331,000 $ 8,101,000
============ ============
Interest paid..................................................... $ -- $ 6,000
============ ============

See accompanying notes to condensed consolidated financial statements.

LEARNING TREE INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 1 Operations and Significant Accounting Policies:
-----------------------------------------------

The accompanying condensed consolidated financial statements have been
prepared by the Company pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such
regulations. Certain prior period balances have been reclassified to conform
with the current period presentation. The condensed consolidated financial
statements reflect all adjustments and disclosures which are, in the opinion of
management, necessary for a fair presentation. All such adjustments are of a
normal recurring nature. The condensed consolidated financial statements in
this Quarterly Report on Form 10-Q should be read in conjunction with the
consolidated financial statements and notes thereto for the fiscal year ended
September 30, 2000 that are contained in the Company's 2000 Annual Report on
Form 10-K.

Note 2 Computation of Earnings per Common Share and Earnings per Common Share
----------------------------------------------------------------------
Assuming Dilution:
------------------

Earnings per common share and earnings per common share assuming dilution
are computed using the weighted average number of shares of Common Stock
outstanding during the period. Earnings per common share assuming dilution are
computed by including the dilutive effect, if any, of all outstanding options to
purchase Common Stock using the treasury stock method. To calculate the number
of diluted shares outstanding, 340,000 shares and 639,000 shares were added to
the weighted average number of shares outstanding for the three and nine month
periods ended June 30, 2001, respectively. Approximately 924,000 shares and
671,000 shares were added to the weighted average number of shares outstanding
for the three and nine month periods ended June 30, 2000, respectively.
Approximately 1,586,000 stock options were excluded from the calculation of
earnings per common share assuming dilution for the quarter ended June 30,
2001 because they were antidilutive.

Note 3 Litigation:
----------

On August 6, 1998, a class action lawsuit was filed against Learning Tree
and certain officers and directors of Learning Tree in the United States
District Court for the Central District of California (Schlagal v. Learning Tree
International et al., Case No. 98-6384 ABC), purportedly on behalf of persons
who purchased Learning Tree's Common Stock between May 8, 1997 and May 13, 1998.

In May 2000, plaintiffs and defendants executed a Stipulation of Settlement
("Settlement Stipulation") in the Schlagal Action, which was filed with the
Court. The Settlement Stipulation provided, among other things, for dismissal
of the Schlagal Action against all defendants. Counsel for plaintiffs provided
written notice of the Settlement Stipulation to class members, giving them the
opportunity to object to the Settlement Stipulation or to opt out of
participation in the settlement. Only four class members opted out.

On August 7, 2000, the Court gave its final approval to the Settlement
Stipulation and signed and filed a Judgment which, among other things, dismissed
the Schlagal action against all defendants. The Judgment is now final and non-
appealable.

Note 4 Repurchase of Company Stock:
----------------------------

On November 27, 2000, the Board of Directors of the Company authorized the
reinstatement of the stock repurchase plan. During the third quarter ended June
30, 2001, the Company repurchased 1,729,100 shares of Common Stock for
$36,347,000. In total, during the nine month period ended June 30, 2001, the
Company repurchased 3,142,400 shares of Common Stock for $72,673,000. The
Company may make additional purchases through open-market transactions based
upon market conditions and pursuant to the requirements of Rule 10b-18 of the
Securities Exchange Act of 1934. There can be no assurance that the Company
will repurchase additional shares of Common Stock.

Item. 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

Except for historical information contained herein, the matters discussed
in this Form 10-Q are forward-looking statements that are subject to certain
risks and uncertainties that could cause actual results to differ materially
from those set forth in such forward-looking statements. Such risks and
uncertainties include, without limitation, the Company's dependence on the
timely development, introduction and customer acceptance of courses and
products; risks in technology development and introduction; risks associated
with the introduction of distance learning both by the Company and its
competitors; the impact of competition and pricing pressures; the Company's
ability to attract and retain key management and other personnel; risks
associated with international operations, including currency fluctuations; the
effect of changing economic conditions; the Company's ability to maintain its
current operating margins; the effect of adverse weather conditions, strikes and
other external events; and the other risks and uncertainties detailed from time
to time in Learning Tree's filings with the Securities and Exchange Commission,
including Learning Tree's 2000 Annual Report on Form 10-K and in Exhibit 99
"Risk Factors" thereto.

Overview

Learning Tree International, Inc. ("the Company") is a leading worldwide
provider of education and training to information technology ("IT")
professionals in business and government organizations. The Company develops,
markets and delivers a broad, proprietary library of instructor-led course
titles focused on client/server systems, intranet/Internet technologies,
computer networks, operating systems, programming languages, databases, object-
oriented technology and IT management. In addition, the Company provides custom
developed training for larger clients who need to train large numbers of their
IT professionals and end-users, and tests and certifies IT professionals. The
Company's instructor-led courses are recommended for college credit by the
American Council on Education.

In the past, the Company has delivered certain of its courses by using a
computer-based training method ("CBT") on CD-ROMs. In 1999, the Company
discontinued further development of its CBT courses, and substantially reduced
its sales and marketing of these courses. During fiscal 2000, sales of CBT
contributed a small amount of relatively high margin revenues, and by the end of
fiscal 2000 sales of CBT courses were largely discontinued.

The Company has engaged in limited testing of a system for delivering its
courses over the Internet ("e-learning"). Until the Company develops what it
believes could be a profitable e-learning business model, it expects to limit
its ongoing investment in e-learning. There can be no assurance that the
Company will be able to successfully develop or profitably implement its current
or any other e-learning strategy.

Results of Operations

In the third quarter ended June 30, 2001, revenues decreased by 8% to $57.8
million from $63.0 million for the corresponding quarter of the prior year.
Income from operations for the quarter ended June 30, 2001 decreased by 54% to
$8.0 million versus $17.5 million for the same quarter of fiscal 2000. Net
income for the quarter ended June 30, 2001 decreased by 51% to $6.0 million from
$12.3 million for the same period last year.

For the nine month period ended June 30, 2001, year-to-date revenues
increased by 8% to $177.9 million from $165.4 million for the nine months ended
June 30, 2000. Income from operations for the nine months ended June 30, 2001,
decreased by 24% to $29.4 million versus $38.8 million for the corresponding
period of

the prior year. Net income for the nine months ended June 30, 2001 decreased by
20% to $22.3 million versus $28.0 million for the corresponding period of the
prior year.

The decline in revenues in the third quarter of fiscal 2001 was primarily
the result of a 4% decrease in the number of multi-day course participants to
37,516 compared to 39,172 in the corresponding three months of the prior year
and a 1% decrease in average revenue per multi-day course participant. The
decrease in the number of multi-day course participants is primarily the result
of the economic slowdown in the IT industry, which the Company believes has
resulted in more cautious spending by its customers. For the nine months ended
June 30, 2001, the increase in revenues resulted primarily from a 12% increase
in the number of multi-day course participants to 113,335 compared to 101,450 in
the corresponding nine months of the prior year, partially offset by a 1%
decrease in average revenue per multi-day course participant. This increase in
course participants reflects better market conditions for IT training during the
first quarter of fiscal 2001 and an increase in expenditures for course
development, sales and marketing. Additionally, since the sales of CBT courses
were largely discontinued as of September 30, 2000, total revenues reflect a
reduction in CBT revenues in both the three months and nine months ended June
30, 2001 as compared to the same periods of the prior year.

For both the three month and nine month periods ended June 30, 2001, the
average revenue per attendee declined 1% as compared to the same periods in the
prior fiscal year. These trends primarily reflect the impact of changes in
foreign exchange rates compared to the exchange rates that prevailed during the
corresponding periods in fiscal 2000. Changes in exchange rates compared with
last year adversely affected revenues by approximately 4% in the third quarter
of fiscal 2001 and 5% in the comparable year-to-date period. The effect of
changes in foreign exchange rates was partially offset by the impact of
increases in prices. Excluding the impact of exchange rate changes, the average
revenue per multi-day course participants increased 3% in local currencies for
the three months ended June 30, 2001 compared to the same quarter of the prior
year and 4% for the nine months ended June 30, 2001 compared to the year-to-date
period.

The Company's cost of revenues for its instructor-led courses primarily
includes the costs associated with course instructors, course materials and
equipment, freight, classroom facilities and refreshments. The cost of revenues
increased to 41.4% of revenues in the third quarter of fiscal 2001 compared to
35.3% in the third quarter of fiscal 2000. For the nine months ended June 30,
2000, the cost of revenues increased to 40.3% of revenues compared to 35.9% for
the same period in fiscal 2000. The change in margins in instructor-led courses
in the third quarter of fiscal 2001 reflects an 11% decrease in revenue per
multi-day course event and a 3% increase in cost per multi-day course event. For
the nine months ended June 30, 2001, the change in margins in the Company's
instructor-led courses reflects a 7% decrease in revenue per multi-day course
event and a 2% increase in cost per multi-day course event. The decrease in
revenue per multi-day course event primarily reflects a decrease in average
attendees per event and the decrease in average revenue per attendee. The higher
cost per multi-day course event is primarily due to increased instructor
training and recruiting activities, expansion costs associated with the
Company's education centers in New York City, Chicago and Atlanta, and an
increase in lease rates for the Company's education center in Reston, Virginia.
The increased cost per multi-day course event was partially offset by the impact
of changes in foreign exchange rates compared to the exchange rates that
prevailed during the corresponding periods in fiscal 2000. Excluding the impact
of foreign exchange rate changes, the cost per multi-day course event would have
been 7% higher for both the same quarter of the prior year and the year-to-date
period. In addition, the overall cost of revenues increased as a percent of
revenues in part because of the reduction in relatively high margin CBT sales
during fiscal 2001.

For the third quarter of fiscal 2001, the cost of revenues increased by 8%
to $23.9 million from $22.3 million for the same quarter of fiscal 2000. For the
nine months ended June 30, 2001, the Company's cost of revenues increased by 21%
to $71.7 million from $59.3 million for the corresponding period in the prior
year. The increase in the cost of revenues compared to the same period in the
prior year primarily reflects a 6% increase in the number of course events
during the third quarter of fiscal 2001 and a 19% increase for the year-to-date
period. During the third quarter of fiscal 2001, the number of multi-day
instructor-led course events was 2,551 compared to 2,413 during the same period
last year. For the nine months ended June 30, 2001, the number of multi-day
instructor-led courses was 7,534 compared to 6,308 for the corresponding period
in fiscal 2000. In addition, this increase is due to higher instructor training
and recruiting activities, education center expansion costs, and higher lease
rates. These higher costs are partially offset by the impact of changes in
foreign exchange rates.

Course development expense includes the costs of developing new course
titles and updating the Company's existing course library. The principal costs
are for internal product development staff and independent consultants who serve
as subject matter experts. Course development expense was 5.1% of revenue during
the third quarter of fiscal 2001 compared to 4.3% for the same period of fiscal
2000. For the nine months ended June 30, 2001, course development expense was
5.0% of revenue compared to 4.6% of revenue for the corresponding period in the
prior year. Course development expenses increased by 10% to $3.0 million for the
quarter ended June 30, 2001 from $2.7 million in the quarter ended June 30,
2000. For the nine months ended June 30, 2001, course development expenses
increased by 17% to $8.9 million from $7.6 million for the corresponding period
in the prior year. These increases are primarily due to an increase in the
number of instructor-led course titles that were developed during the period, as
well as a modest increase in the Company's investment in e-learning.

The Company offered 163 multi-day course titles as of June 30, 2001,
compared to 145 a year earlier. The Company has recently released additional
multi-day course titles on topics such as Windows 2000, SQL Server 2000, Web
development, C# programming, UNIX, Security, Cisco Switched Networks, Oracle9i,
Technical Writing and IT Management. The change in the size of the multi-day
course library reflects the net effect of the introduction of new titles and the
retirement of old titles. Old titles are retired when the profits they generate
are not sufficient to justify the ongoing cost of marketing them and maintaining
their technological content. The actual number of instructor-led course titles
which the Company will produce, and their delivery dates, are subject to a
number of factors such as the hiring and training of staff, perceived customer
demand, and the availability of subject matter experts. There can be no
assurance that the Company will develop more titles than it retires in any
period. Course development costs may increase in the future as the Company
continues to expand its instructor-led training course library and explores the
development of Internet distance learning approaches and technologies.

Sales and marketing expenses include salaries, commissions and travel-
related costs for sales and marketing personnel, the costs of designing,
producing and distributing direct mail marketing and media advertisements, and
the costs of information systems to support these activities. The Company
generally tries to adjust its expenditures for sales and marketing depending on
its expectations of future customer demand and other factors. However, if the
Company's assumptions prove to be wrong, any significant revenue shortfall would
have a material adverse effect on the Company's results of operations.

Sales and marketing expenses increased by 15% to $16.1 million for the
quarter ended June 30, 2001 from $14.0 million for the quarter ended June 30,
2000. For the nine months ended June 30, 2001, sales and marketing expenses
increased by 16% to $47.7 million from $41.2 million for the corresponding
period in the prior fiscal year. The increase primarily reflects increased
marketing activities and marketing costs and

increases in the number of sales personnel. For the nine months ended June 30,
2001, the increase also reflects increased selling commission due to the higher
level of sales. Sales and marketing expense for the quarter ended June 30, 2001
increased as a percentage of revenues to 27.8% compared to 22.3% for the quarter
ended June 30, 2000. Sales and marketing expenses for the nine months ended June
30, 2001 increased to 26.8% as a percentage of revenues compared to 24.9% for
the same period last year.

General and administrative expenses increased by 5% to $6.8 million for the
quarter ended June 30, 2001 compared to $6.5 million in the same quarter of the
prior year. For the nine months ended June 30, 2001, general and administrative
expenses increased by 9% to $20.2 million from $18.5 million for the
corresponding period in the prior year. The increase in general and
administrative expenses reflects increases in administrative staff and related
costs. As a percentage of revenue, these costs increased to 11.8% in the
quarter ended June 30, 2001 from 10.3% in the corresponding period of the prior
year. In the nine months ended June 30, 2001, these costs increased slightly to
11.4% from 11.2% as a percentage of revenue as compared to the same period of
the 2000 fiscal year.

Other income (expense) is primarily comprised of interest income and
foreign currency transaction gains and losses. Other income (expense) decreased
by 6% to $1.3 million for the quarter ended June 30, 2001 versus $1.4 million
for the corresponding quarter in the prior year. For the nine months ended June
30, 2001, other income (expense) increased by 19% to $5.2 million from $4.3
million for the corresponding nine month period in the prior year. Interest
income decreased to $1.2 million for the quarter ended June 30, 2001 compared to
$1.9 million in the same quarter of the prior year primarily due to lower cash
balances and interest rates. This decrease was partially offset by foreign
exchange gains of $70,000 recorded in the third quarter of fiscal 2001, compared
to foreign exchange losses of $149,000 in the third quarter of fiscal 2000. For
the nine months ended June 30, 2001, interest income increased to $5.7 million
from $4.8 million for corresponding period in the prior year. This increase was
partially offset by foreign exchange losses of $464,000 in the nine months ended
June 30, 2001, compared with foreign exchange losses of $292,000 in the
corresponding period of the prior year. These transaction gains and losses
arose from receivables and payables denominated in currencies other than the
functional currencies of the Company's foreign subsidiaries.

The provision for income taxes decreased $3.3 million to $3.3 million for
the quarter ended June 30, 2001 compared to $6.6 million for the same quarter of
the prior year. For the nine months ended June 30, 2001, the provision for
income taxes decreased $2.8 million to $12.3 million from $15.1 million for the
same period a year ago. The decreases in the income tax provision reflect the
decreases in taxable income, partially offset by a slight increase in the
effective tax rate.

Fluctuations in Quarterly Results

Historically, the Company's quarterly operating results have fluctuated,
and fluctuations are expected to continue in the future. The Company tries to
adjust its expenditures for course development, sales and marketing depending on
its expectations of future customer demand and other factors. However, if the
Company's assumptions prove to be wrong, and revenues fall short of
expectations, the Company may not be able to adjust its expenditures quickly
enough to compensate for lower than anticipated revenues. Any significant
revenue shortfall would therefore have a material adverse effect on the
Company's results of operations.

The Company's quarterly operating results may fluctuate based on other
factors including: the frequency and availability of course events; the number
of weeks in a quarter during which courses can be conducted; the timing,
frequency and size of, and response to the Company's direct mail marketing and
advertising campaigns; the timing of the introduction of new course titles; the
mix between course events held at customer-sites and

course events held in the Company's education centers and hotels; competitive
forces within current and anticipated future markets served by the Company; the
Company's ability to attract customers and meet their expectations; currency
fluctuations and other risks of international operations; natural disasters,
external strikes, and other external factors; and general economic conditions
and industry-specific slowdowns. Fluctuations in quarter-to-quarter results may
also occur as a result of differences in the timing of the Company's spending on
development and marketing of its courses and receiving revenues from its
customers.

The Company's quarterly revenues and income typically reflect seasonal
patterns. Generally, the Company's revenue and operating income are greater in
the second half of its fiscal year (April through September) than in the first
half (October through March). This is due in large part to seasonal spending
patterns of the Company's customers, which are affected by factors such as:
their budgetary considerations; factors specific to their business or industry;
and weather, holiday and vacation considerations. There can be no assurance that
these seasonal factors or their effects will remain the same in the future.

Liquidity and Capital Resources

Cash and cash equivalents and short-term interest-bearing investments
decreased to $101.4 million at June 30, 2001 from $154.1 million at September
30, 2000, primarily as a result of cash used for repurchases of Common Stock,
income tax payments, expansion costs related to the Company's education centers
in New York, Chicago and Atlanta, and investments in new and upgraded course
equipment. The decrease was partially offset by cash provided by operations and
proceeds from the exercise of stock options. For the nine months ended June 30,
2001, cash provided by operations was approximately $30.4 million compared to
$48.8 million during the same period in the prior year. This decrease in cash
provided by operations primarily reflects the change in profitability and higher
income tax payments. At June 30, 2001, the Company had working capital of $50.7
million.

In November 2000, the Board of Directors of the Company authorized the
reinstatement of the Company's stock repurchase plan. During the third quarter
ended June 30, 2001, the Company repurchased 1,729,100 shares of Common Stock
for $36,347,000. In total, during the nine month period ended June 30, 2001,
the Company repurchased 3,142,400 shares of Common Stock for $72,673,000. The
Company may make additional purchases through open-market transactions based
upon market conditions and pursuant to the requirements of Rule 10b-18 of the
Securities Exchange Act of 1934. There can be no assurance that the Company
will repurchase additional shares of Common Stock.

For the nine months ended June 30, 2001, the Company invested $12.4 million
in equipment and facilities compared to $4.9 million in the same period of the
prior year. The higher level of investment during the current year was
primarily related to the build-out of education center facilities in New York,
Chicago and Atlanta and the purchase of new and upgraded course equipment. As
of June 30, 2001, the Company had no other material future purchase obligations,
capital commitments or debt and believes that its cash and cash equivalents, its
short-term interest-bearing investments and the cash provided by its operations
will be sufficient to meet its cash requirements for the foreseeable future.

Quantitative and Qualitative Disclosures About Market Risk

The Company's cash equivalents and short-term investment portfolio is
diversified and consists primarily of investment grade securities. Investments
are held with high-quality financial institutions, government and government
agencies, and corporations, thereby reducing credit risk concentrations. The
fair value of the Company's portfolio of marketable securities would not be
significantly impacted by either a 10 percent (50 basis point) increase or
decrease in the rates of interest due primarily to the short-term nature of the
portfolio. The Company does not hold or issue derivative financial instruments.

The Company's consolidated financial statements are prepared in U.S.
dollars, while the operations of its foreign subsidiaries are conducted in their
respective local currencies. Consequently, changes in exchange rates can result
in exchange losses. The Company does not hedge against the risks associated
with fluctuations in exchange rates and therefore continues to be subject to
such risks. The Company may use hedging techniques in the future. However,
there can be no assurance that any hedging techniques implemented by the Company
would be successful in eliminating or reducing the effects of currency
fluctuations.

Outlook For Fiscal 2001

Backlog. At June 30, 2001, the Company had a backlog of orders for
instructor-led courses of $37.0 million, which represented a 2% increase
compared to the backlog of $36.2 million at June 30, 2000. At July 31, 2001,
the Company had a backlog of orders for instructor-led courses of $36.5 million,
which represented a 1% decrease compared to the backlog of $36.7 million at July
31, 2000. Only a portion of the Company's backlog is funded. There can be no
assurance that orders comprising the backlog will be realized as revenue.

Fiscal 2001 Outlook. Throughout this document, there have been various
forward-looking statements. However, all of the statements in this section are
forward-looking and are subject to various risks and uncertainties, including
those detailed from time to time in the Company's filings with the Securities
and Exchange Commission including the Company's 2000 Annual Report on Form 10-K
and "Risk Factors," filed as Exhibit 99. As economic and market conditions
change during fiscal 2001, the Company's future revenues, plans and expenditures
will vary from the observations below, and these differences may be material.

Approximately 40% of the Company's business is conducted in European
currencies. Accordingly, fluctuations in the exchange rates of European
currencies will impact future revenues and expenses. If current exchange rates
remain stable for the remainder of fiscal 2001, the Company believes that its
fiscal 2001 revenue will be approximately 5% less than it would have been had
the average exchange rates during fiscal 2000 prevailed throughout fiscal 2001.

Changes in exchange rates that have an adverse effect on the Company's
foreign revenues, also reduce its foreign expenses when translated into dollars.
If current exchange rates remain stable through the remainder of fiscal 2001,
the Company estimates that net income for the year would be approximately 5%
lower than the Company would otherwise achieve had fiscal 2000 average exchange
rates prevailed throughout fiscal 2001.

The recent uncertainty surrounding economic conditions, especially in the
corporate information technology sector, makes it difficult to forecast the
Company's growth rate. During weak economic conditions, the Company's growth
rate generally slows. The recent rate of enrollments for courses at the
Company's education centers has been about the same as it was a year earlier,
while bookings for future customer-site courses have recently been significantly
lower than in the comparable period last year.

The Company believes that some of the factors that could affect fourth
quarter revenues include the following:

. At June 30, 2001, the Company's backlog of $37.0 million was 2% higher
than at June 30, 2000. At July 31, 2001, the Company's backlog of $36.5
million was 1% lower than at July 31 last year, primarily reflecting the
slowdown during July in bookings for customer site courses.

. In the most recent marketing programs, the Company announced seven new
course titles that will have their initial presentations during the
fourth fiscal quarter and expects to retire about six course titles. The
Company expects to have approximately 164 course titles in the fourth
quarter.

. Changes in exchange rates compared with last year are expected to
adversely affect revenues by approximately 3% in the quarter.

Based on these factors and the Company's current assessment of general economic
conditions, the Company believes that its instructor-led base business in the
fourth quarter will be between 8% and 10% lower than last year. Additionally,
the Company expects to realize no CBT course revenues in the fourth quarter of
fiscal 2001, as this product line was largely discontinued at the end of
September 2000.

During the fourth quarter of fiscal 2001, the Company expects the following
factors to adversely affect its gross margins by approximately 6% compared to
the fourth quarter in the prior fiscal year:

. Lower attendees per event, primarily the result of the slowing in
enrollment growth rates

. The absence of high margin CBT revenues

. Expansion costs associated with the Company's education centers in New
York City, Chicago and Atlanta

. Increased lease rates for the Company's education center in Reston,
Virginia

The Company expects the amount of its fourth quarter sales and marketing
expenses to be between the amounts it expended in the second and third quarters.
The Company expects that its aggregate expenditures for course development and
general and administrative expenses will be approximately the same in the fourth
quarter as incurred in the third quarter.

Interest income reflects changes in the Company's cash balances as well as
changes in interest rates. During the third quarter of fiscal 2001, the
Company's cash and interest-bearing investments decreased by $35.2 million.
This decrease reflects the $36,347,000 expenditure on repurchases of the
Company's Common Stock during the third quarter as well as the construction of
the Company's new Atlanta education center, partially offset by cash from
operations. Additionally, interest rates in the United States have recently
declined 1% and there may be further rate reductions in the future. As a result,
interest income can be expected to decline in the fourth quarter compared with
the levels in earlier quarters.

The Company estimates that its tax rate in fiscal 2001 will be
approximately 35.5%.

Changes in economic conditions, and especially the slowdown in corporate
spending for IT, make it difficult to forecast future revenues. While some
trends indicate a further slowdown, others indicate that the slowdown may be
nearing a bottom, while still others indicate a future return to growth. If
enrollments for courses at the Company's education centers and bookings for
customer-site courses continue at current rates, the Company believes that
revenues in its first quarter of fiscal 2002 will increase from those of its
fourth quarter of fiscal 2001 by about 6%.

To date, the Company has maintained an aggressive sales and marketing
program. During fiscal 2002, the Company intends to gradually adjust sales and
marketing expenditures in accordance with expected revenue levels. The goal of
this approach is to expand market share and to strengthen the Company's position
for the time when the corporate IT environment begins to improve. The Company
also plans to focus on improving the efficiency and effectiveness of its
operations, since the extent and duration of the current slowdown remains
uncertain.

Beyond the first quarter of next year, it is likely that the Company's
revenues will be influenced by spending trends in the corporate marketplace for
information technology. The Company plans to monitor these trends, and may make
adjustments to its business plans as the 2002 fiscal year unfolds.

PART II - OTHER INFORMATION

Item 1: LEGAL PROCEEDINGS

Item 2. CHANGES IN SECURITIES

Not Applicable

Item 3. DEFAULTS UPON SENIOR SECURITIES

Not Applicable

Item 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

None

Item 5. OTHER INFORMATION

Not Applicable

Item 6. EXHIBITS AND REPORTS ON FORM 8-K

a) Exhibits
Not applicable

b) Reports on Form 8-K

No reports on Form 8-K were filed during the three months ended
June 30, 2001.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

LEARNING TREE INTERNATIONAL, INC.

Dated: August 14, 2001 By: /s/ Gary R. Wright
---------------------------------
Gary R. Wright
Chief Financial Officer
(Principal Financial Officer and
Duly Authorized Officer)