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, 1996
-------------
or
{_} 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 33-97842
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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
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(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
7, 1996, is 14,263,012 shares.
Total number of pages 13
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LEARNING TREE INTERNATIONAL, INC.
FORM 10-Q
JUNE 30, 1996
TABLE OF CONTENTS
PAGE
----
PART I--FINANCIAL STATEMENTS
Item 1. Financial Statements:
Consolidated Balance Sheets................................... 3
Consolidated Statements of Operations......................... 4
Consolidated Statements of Cash Flows......................... 5
Notes to Consolidated Financial Statements.................... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................... 8
PART II--OTHER INFORMATION
Item 1. Legal Proceedings............................................. 12
Item 2. Changes in Securities......................................... 12
Item 3. Defaults Upon Senior Securities............................... 12
Item 4. Submission of Matters to a Vote of Security Holders........... 12
Item 5. Other Information............................................. 12
Item 6. Exhibits and Reports on Form 8-K.............................. 12
SIGNATURES.............................................................. 13
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LEARNING TREE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, September 30,
1996 1995
------------- --------------
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents............................................... $46,628,000 $10,029,000
Short-term interest-bearing investments held to maturity................ 2,434,000 --
Trade accounts receivable, net.......................................... 10,102,000 8,623,000
Prepaid marketing expenses.............................................. 616,000 707,000
Prepaid expenses and other.............................................. 2,022,000 1,977,000
----------- -----------
Total current assets................................................... 61,802,000 21,336,000
----------- -----------
Equipment and leasehold improvement, net................................. 8,209,000 5,756,000
Deferred income taxes.................................................... 476,000 478,000
Other assets............................................................. 1,683,000 857,000
----------- -----------
Total assets........................................................... $72,170,000 $28,427,000
=========== ===========
LIABILITIES
Current liabilities:
Current portion of debt and capital leases.............................. $ 132,000 $ 191,000
Trade accounts payable.................................................. 8,404,000 6,852,000
Deferred revenue........................................................ 13,698,000 10,346,000
Accrued liabilities..................................................... 4,651,000 4,381,000
Income taxes payable.................................................... 1,509,000 1,073,000
----------- -----------
Total current liabilities.............................................. 28,394,000 22,843,000
Long-term debt and capital leases, net of current portion................ 164,000 272,000
Deferred facilities rent................................................. 1,738,000 2,007,000
----------- -----------
Total liabilities...................................................... 30,296,000 25,122,000
----------- -----------
Commitments
STOCKHOLDERS' EQUITY
Class A Common Stock, $.0001 par value, 23,000,000 shares authorized,
9,955,000 shares ($1,000) issued and outstanding, including
additional paid-in capital of $7,000................................... -- 8,000
Class B Common Stock, nonvoting, $.0001 par value, 2,000,000 shares
authorized, 1,417,000 shares issued and outstanding, including
additional paid-in capital of $1,209,000............................... -- 1,209,000
Common Stock, $.0001 par value, 25,000,000 shares authorized,
14,263,000 shares issued and outstanding............................... 1,000 --
Additional paid-in capital.............................................. 32,023,000 --
Notes receivable from stockholders...................................... (156,000) (679,000)
Deferred compensation--stockholders..................................... (227,000) (287,000)
Cumulative foreign currency translation................................. (734,000) (882,000)
Retained earnings....................................................... 10,967,000 3,936,000
----------- -----------
Total stockholders' equity............................................. 41,874,000 3,305,000
----------- -----------
Total liabilities and stockholders' equity............................. $72,170,000 $28,427,000
=========== ===========
See accompanying notes to consolidated financial statements.
3
LEARNING TREE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Nine Months Ended
June 30, June 30,
------------------------------ ---------------------------
1996 1995 1996 1995
-------------- ------------- ------------- -----------
Revenues..................... $27,714,000 $21,849,000 $73,604,000 $58,091,000
Costs of revenues............ 10,297,000 8,247,000 28,498,000 22,359,000
----------- ----------- ----------- -----------
Gross profit............. 17,417,000 13,602,000 45,106,000 35,732,000
----------- ----------- ----------- -----------
Operating expenses:
Course development....... 1,746,000 1,351,000 4,420,000 3,579,000
Sales and marketing...... 7,659,000 6,181,000 21,803,000 16,829,000
General and
administrative.......... 3,306,000 3,007,000 9,459,000 8,995,000
----------- ----------- ----------- -----------
12,711,000 10,539,000 35,682,000 29,403,000
----------- ----------- ----------- -----------
Income from operations....... 4,706,000 3,063,000 9,424,000 6,329,000
----------- ----------- ----------- -----------
Other income (expense):
Interest expense......... (18,000) (16,000) (37,000) (58,000)
Interest income.......... 591,000 53,000 1,385,000 147,000
Foreign exchange......... (43,000) 27,000 (176,000) 239,000
Other.................... 11,000 33,000 (4,000) 62,000
----------- ----------- ----------- -----------
541,000 97,000 1,168,000 390,000
----------- ----------- ----------- -----------
Income before provision for
income taxes................ 5,247,000 3,160,000 10,592,000 6,719,000
Provision for income taxes... 1,547,000 603,000 3,124,000 1,268,000
----------- ----------- ----------- -----------
Net income................... $ 3,700,000 $ 2,557,000 $ 7,468,000 $ 5,451,000
=========== =========== =========== ===========
Net income per common share
and common equivalent
share..................... $ 0.26 $ 0.22 $ 0.55 $ 0.48
=========== =========== =========== ===========
Weighted average number of
common and common
equivalent shares
outstanding............. 14,294,000 11,371,000 13,551,000 11,363,000
=========== =========== =========== ===========
See accompanying notes to consolidated financial statements.
4
LEARNING TREE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
June 30,
---------------------------
1996 1995
----------- ------------
Cash flows--operating activities:
Net income............................................................... $ 7,468,000 $ 5,451,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization......................................... 2,283,000 1,479,000
Deferred facilities rent charges...................................... (262,000) (415,000)
Amortization of deferred compensation................................. 60,000 --
Unrealized foreign exchange (gains) losses............................ 150,000 (327,000)
Change in net assets and liabilities:
Trade accounts receivable......................................... (1,576,000) (899,000)
Prepaid marketing expenses........................................ 87,000 (114,000)
Prepaid expenses and other........................................ (11,000) (550,000)
Income taxes...................................................... 381,000 459,000
Trade accounts payable............................................ 1,601,000 660,000
Deferred revenue.................................................. 3,441,000 1,311,000
Accrued liabilities............................................... 331,000 1,059,000
----------- -----------
Net cash provided by operating activities............................. 13,953,000 8,114,000
----------- -----------
Cash flows--investing activities:
Purchases of equipment and leasehold improvements........................ (4,777,000) (2,611,000)
Retirements of equipment................................................. 5,000 102,000
Purchases of short-term interest-bearing investments held to maturity.... (2,433,000) --
Other, net............................................................... (847,000) 6,000
----------- -----------
Net cash used in investing activities................................. (8,052,000) (2,503,000)
----------- -----------
Cash flows--financing activities:
Principal payments of debt and capital leases............................ (148,000) (687,000)
Proceeds from additional debt............................................ -- 157,000
Sales of Common Stock.................................................... 30,847,000 2,000
Repurchase of Common Stock............................................... (31,000) (195,000)
Collections of stockholder notes......................................... 58,000 21,000
----------- -----------
Net cash provided by (used in) financing activities................... 30,726,000 (702,000)
----------- -----------
Effects of exchange rates on cash......................................... (28,000) 24,000
----------- -----------
Net increase in cash and cash equivalents................................. 36,599,000 4,933,000
Cash and cash equivalents at the beginning of the period.................. 10,029,000 2,774,000
----------- -----------
Cash and cash equivalents at the end of the period........................ $46,628,000 $ 7,707,000
=========== ===========
Supplemental disclosures:
Income taxes paid...................................................... $ 2,897,000 $ 1,077,000
=========== ===========
Interest paid.......................................................... $ 36,000 $ 68,000
=========== ===========
See accompanying notes to consolidated financial statements.
5
LEARNING TREE INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO 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 should be
read in conjunction with the consolidated financial statements and notes
thereto for the fiscal year ended September 30, 1995 that are contained in
the Company's Amendment No. 3 to Form S-1 Registration Statement dated
December 5, 1995.
Note 2. Stock Split
-----------
On October 5, 1995, the Company effected a 3.66 for 1 split of
the Company's Class A Voting Common Stock and Class B Non-Voting Common
Stock. All share and per share amounts in the accompanying financial
statements and footnotes have been retroactively restated to reflect the
stock split.
Note 3. Computation of Net Income per Common share and Common Equivalent
----------------------------------------------------------------
Share:
-----
Net income per common share and common equivalent share is
computed using the weighted average number of shares of Common Stock
outstanding during the period. The weighted average number of common and
common equivalent shares outstanding was computed pursuant to the rules of
the Securities and Exchange Commission. Such rules require that common
stock and common stock equivalents issued by the Company during the twelve
months preceding the Company's initial public offering at prices below the
public offering price (436,000 shares) be included in the calculation of
the shares outstanding for all periods presented, using the treasury stock
method.
Note 4: Public Offering
---------------
On December 6, 1995, 3,000,000 shares of the Company's Common
Stock were sold in an initial public offering, of which 2,500,000 shares
were sold by the Company and 500,000 shares were sold by certain
stockholders of the Company. The Company did not receive any proceeds from
the sale of shares by its stockholders. However, the Company received net
proceeds of approximately $26.0 million from its sale of shares in the
initial public offering. Such proceeds are being used for working capital
and general purposes, including: (i) increasing the marketing and
advertising of the Company's computer-based classroom training courses,
(ii) developing additional classroom courses, (iii) developing proprietary
software for the Company's multimedia computer-based training courses, and
(iv) for general corporate purposes. The Company also may use a portion of
the net proceeds to acquire technologies and related assets or businesses
complementary to its operations.
Effective as of the closing of the initial public offering on
December 6, 1995, each outstanding share of Class B Non-Voting Common Stock
was converted into one fully paid and non-assessable share of Class A
Voting Common Stock and, thereafter, the Common Stock ceased to be divided
into series and instead consists of a single class. There were 1,417,000
shares of Class B Non-Voting Common Stock outstanding at September 30,
1995.
On January 5, 1996, an additional 450,000 shares of Common Stock
were sold by the Company pursuant to a purchase option granted to the
underwriters at the time of the initial public offering solely to cover
over allotments. The Company received net proceeds of approximately $4.8
million after deducting underwriter commissions and other stock issuance
costs.
6
Note 5: Stock Option Plan
-----------------
In October 1995, the Company and its stockholders adopted the
1995 Stock Option Plan (the "Stock Option Plan"), which provides for the
issuance of incentive stock options within the meaning of Section 422 of
the Internal Revenue Code and non-qualified stock options to purchase an
aggregate of up to 1,500,000 shares of the Common Stock of the Company.
The Stock Option Plan permits the grant of options to officers, employees,
directors and consultants of the Company. The exercise price of incentive
stock options granted will be greater than or equal to their fair market
value at the date of grant, and the maximum term of all options may not
exceed ten years. The vesting schedule and the period required for full
exercisability of the stock options are at the discretion of the Board of
Directors but in no event can they be less than six months. No options
have been granted under the Stock Option Plan.
Note 6: Cash Flow Information
---------------------
In March 1996, the Company repurchased 26,393 shares of Common
Stock from employees for the cancellation of notes receivable from such
stockholders in the amount of $446,000. In addition, during March 1996,
notes receivable from stockholders in the amount of $19,000 were offset
against the equivalent amount of notes payable to such stockholders.
During the nine months ended June 30, 1995, the Company
repurchased 153,000 shares of Common Stock from employees for the
cancellation of notes receivable from such stockholders in the amount of
$23,000 and the issuance of notes payable by the Company of $195,000.
During this same period, the Company sold Common Stock to employees and
received promissory notes of $22,000 as partial consideration therefor.
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
Learning Tree International, Inc. (the "Company"), is a leading
worldwide provider of education and training for information technology
("IT") professionals in business and government organizations. The Company
develops, markets and delivers a broad, proprietary library of instructor-
led course titles which are focused on client/server systems,
Internet/intranets, local and wide area computer networks, operating
systems, databases, programming languages, graphical user interfaces,
object-oriented technology and IT management. The Company tests and
certifies IT professionals in 18 IT job functions. The Company's courses
are recommended for college credit by the American Council on Education.
In addition to its instructor-led courses, the Company has
developed and is expanding a line of interactive computer-based training
courses incorporating audio and graphical elements ("multimedia CBT") that
are designed for both stand-alone CD-ROM and network-based delivery.
The Company's revenues have grown to record levels in both the
three and nine periods ended June 30, 1996, increasing by 27% over the same
periods in fiscal 1995. Further, the Company's backorder as of June 30,
1996 has grown by 30% when compared to June 30, 1995. In response to the
continued strength in enrollments, the Company has accelerated its
development of new course titles, expanded its future direct mailing plans
to capture additional market share and has taken steps to expand the number
of classrooms in its education centers. However, there can be no assurance
that the Company will be able to achieve increased market share even after
making the expenditures required by these activities.
RESULTS OF OPERATIONS
For the quarter ended June 30, 1996, revenues increased by $5.9
million or 27% to $27.7 million from $21.8 million for the corresponding
quarter in the prior year. Income from operations for the quarter ended
June 30, 1996 increased $1.6 million or 54% to $4.7 million from $3.1
million for the same quarter of fiscal 1995. For the quarter ended June
30, 1996, net income increased $1.1 million or 45% to $3.7 million from
$2.6 million for the quarter ended June 30, 1995.
For the nine months ended June 30, 1996, revenues increased by
$15.5 million or 27% to $73.6 million from $58.1 million for the nine
months ended June 30, 1995. Income from operations for the nine months
ended June 30, 1996 increased $3.1 million or 49% to $9.4 million from $6.3
million for the corresponding period in the prior year. Net income for the
nine months ended June 30, 1996 increased $2.0 million or 37% to $7.5
million from $5.5 million for the corresponding period in the prior year.
The growth of revenues is due, in part, to an increase in the
number of course participants to 18,942 in the quarter ended June 30, 1996,
from 16,335 participants in the corresponding quarter of the prior year.
For the nine months ended June 30, 1996, the number of course participants
was 51,272 compared to 44,934 in the corresponding nine month period of the
prior year. The additional course participants are primarily attributable
to increased direct mail marketing and an increase in the number of course
titles to 98 in the third quarter of fiscal 1996, compared to 82 in the
same period a year earlier. In addition, the growth in course participants
is attributable to the expansion of the number of Learning Tree-site course
events which the Company held at sites other than its education centers in
order to broaden its customer base. Revenues for the three and nine month
periods ended June 30, 1996, also reflect higher average revenues per
course participant. The increase in the average revenue per course
participant is attributable to the increase in the proportion of higher-
paying single course event participants over those attending under the
discounted Passport Program as well as increased prices for customer-site
course events.
8
The Company's cost of revenues primarily includes the costs
associated with the course instructor, course materials and equipment,
freight, classroom facilities and refreshments. The cost of revenues for
the third quarter of fiscal 1996 increased $2.1 million or 25% to $10.3
million from $8.2 million for the same quarter in 1995. For the nine
months ended June 30, 1996, the cost of revenues increased $6.1 million or
27% to $28.5 million from $22.4 million for the corresponding period in the
prior year. The increase in the cost of revenues for the three and nine
month periods ended June 30, 1996 as compared to the same periods in the
prior year, is primarily the result of an increased number of course
events. The number of course events increased 18% in the quarter ended
June 30, 1996 to 1,190 course events from 1,011 course events in the
quarter ended June 30, 1995. For the nine month period ended June 30,
1996, the number of course events increased 19% to 3,279 from 2,745 for the
corresponding period in the prior year. Costs per course event increased
approximately 6%, compared to the corresponding periods in the prior year.
The change in the average cost per course event primarily reflects the
higher costs of conducting more course events at sites other than education
centers due to education center capacity constraints, an increase in the
number of courses held in cities where the Company has not established an
education center and an increase in the number of Learning Tree-site
courses compared to those held at customer sites. To accommodate the
growth in course enrollments, the Company is seeking additional education
center facilities in certain locations. In July 1996, the Company acquired
new facilities in Reston, Virginia for the sales, operations and
administrative staff of its United States subsidiary. The space presently
occupied by these employees, also in Reston, Virginia, will be converted to
classroom facilities.
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
expenses increased by $395,000 or 29% to $1.7 million for the quarter ended
June 30, 1996 from $1.4 million in the quarter ended June 30, 1995. For
the nine months ended June 30, 1996, course development expenses increased
$841,000 or 24% to $4.4 million from $3.6 million for the corresponding
period in the prior year. These increases reflect the costs associated
with the Company's strategy of expanding its course library to meet its
customers' growing technology training needs, updating and maintaining a
growing course title library and developing a multimedia CBT product line.
In light of the strength in course enrollments, the Company plans to
capitalize on the opportunity to grow market share by accelerating the
growth of its course library, including additional titles in the areas of
the Internet, intranets, Java and Windows NT. As a result, course
development expenses are expected to continue to increase through the
remainder of fiscal 1996. Based upon the number of course titles presently
available and those nearing completion of the development process,
approximately 110 course titles are expected to be offered during the
fourth quarter of fiscal 1996.
To obtain greater control over the multimedia CBT development
process, course quality and costs of development the Company has rapidly
expanded its in-house multimedia CBT development team and discontinued the
use of outside CBT course developers. Since introducing its first
multimedia CBT course title in February 1996, the Company has accelerated
its development process and has released ten multimedia CBT course titles
to date. The Company began the initial marketing of its multimedia CBT
product line in January 1996, and intends to expand these sales and
marketing activities commensurate with the growth of titles in its
multimedia CBT library. While the Company continues to anticipate that its
revenues in fiscal 1996 will be derived almost exclusively from instructor-
led training, to date the Company has received orders from approximately
200 corporate and government customers for its multimedia CBT courses.
Sales and marketing expense consists of 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. Sales and marketing expenses increased $1.5 million or 24% to
$7.7 million for the quarter ended June 30, 1996 from $6.2 million for the
quarter ended June 30, 1995. For the nine months ended June 30, 1996,
sales and marketing expenses increased by $5.0 million or 30% to $21.8
million from $16.8 million for the corresponding period in the prior year.
The increase in sales and marketing expenses is due to an increase in
telemarketing and field sales staff and direct mail marketing intended to
reach a broader range of potential customers, to expand business with
current customers, to expand the Company's presence in certain U.S. cities
and to communicate the availability of new course titles. Accordingly, for
the first nine months of 1996, sales and marketing expenses increased to
30% of revenues compared to 29% in the same period of 1995. The Company
intends to continue expanding its direct mail and sales activities and
anticipates that its sales and marketing expenditures will continue to
exceed 1995 expenditures as a percentage of revenues.
9
General and administrative expenses increased $299,000 or 10% to
$3.3 million for the quarter ended June 30, 1996 compared to the same
quarter of the prior year. For the nine months ended June 30, 1996,
general and administrative expenses increased $464,000 or 5% to $9.5
million from $9.0 million for the corresponding period in the prior year.
As a percentage of revenue, general and administrative expenses have
declined to 13% from 15% in the prior year as a result of increased
leveraging of the Company's infrastructure to support a higher sales
volume.
Other income (expense) is primarily comprised of interest
expense, interest income and foreign currency gains and losses. Other
income increased $444,000 to $541,000 for the quarter ended June 30, 1996
from $97,000 for the corresponding quarter in the prior year. For the nine
months ended June 30, 1996, other income increased $778,000 to $1.2 million
from $390,000 for the corresponding nine month period in the prior year.
These increases were primarily attributable to additional interest income
arising from higher cash balances which have been generated by operations
and from the proceeds of the Company's initial public offering in December
1995. The increase in interest income was partially offset by foreign
exchange losses of $43,000 and $176,000, respectively, in the three and
nine month periods ended June 30, 1996, compared to foreign exchange gains
of $27,000 and $239,000, respectively, in the corresponding periods of the
prior year.
The provision for income taxes increased $944,000 to $1.5 million
for the quarter ended June 30, 1996, from $603,000 for the quarter ended
June 30, 1995. For the nine months ended June 30, 1996, the provision for
income taxes increased $1.8 million to $3.1 million from $1.3 million for
the corresponding period in the prior year. This increase reflects an
increase in income before taxes as well as an increase in the effective tax
rate in the current period due to a smaller benefit from the utilization of
tax loss carryforwards in fiscal 1996 compared to 1995.
BACKLOG
At June 30, 1996, the Company had a backlog of orders for courses
in the amount of $20.6 million, which represented a 30% increase over the
backlog of $15.8 million at June 30, 1995. Only a portion of the Company's
backlog is funded. There can be no assurance that the growth in the
backlog will continue or that orders comprising the backlog will be
realized as revenue.
FLUCTUATIONS IN QUARTERLY RESULTS
The Company's operating results may fluctuate based on various
factors, including the frequency of course events, the timing, frequency
and size of, and response to, the Company's direct mail marketing
campaigns, the timing of the introduction of new course titles and
alternate delivery methods, the mix between customer-site course events and
Learning Tree-site course events, competitive forces within the current and
anticipated future markets served by the Company, the spending patterns of
its customers, currency fluctuations, inclement weather and general
economic conditions. Fluctuations in quarter-to-quarter results may also
occur depending on differences in the timing of, and the time period
between, the Company's expenditures on the development and marketing of its
courses and the receipt of revenues.
The Company's revenues and income have historically varied
significantly from quarter to quarter due to seasonal and other factors.
The Company generally has greater revenue and operating income in the
second half of its fiscal year (April through September) than in the first
half of its fiscal year (October through March). This seasonality is due
in part to seasonal spending patterns of the Company's customers arising
from budgetary and other business factors as well as weather, holiday and
vacation considerations. In addition, the seasonality of the Company's
operating results reflects the quarterly differences in the frequency and
size of the Company's direct mail marketing campaigns. There can be no
assurance that these seasonal effects will remain the same in the future.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents increased from $10.0 million at
September 30, 1995 to $46.6 million at June 30, 1996, primarily as a result
of the $30.8 million of net proceeds received from the Company's initial
public offering and cash provided by operations. For the nine months ended
June 30, 1996, cash provided by operations was approximately $14.0 million
compared to $8.1 million during the same period in the prior year. The
increase in cash provided by operations reflects the increase in
profitability and increases in deferred revenues arising from prepaid
multi-enrollment programs. At June 30, 1996, the Company had working
capital of $33.4 million and had unused available lines of credit of
approximately $464,000.
10
During the nine months ended June 30, 1996, the Company invested
$4.8 million in equipment and leasehold improvements compared to $2.6
million in the same period of the prior year. This increase is primarily
related to additional course equipment to support the growth of course
events and to upgrade course equipment capabilities. The Company expects to
continue to invest in additional equipment and facilities during the fourth
quarter of fiscal 1996 and in fiscal 1997. In June 1996, the Company
entered into an agreement to either purchase or lease certain office
facilities for its United States subsidiary. As of June 30, 1996, the
Company had no other material future purchase obligations, capital
commitments or debt. Accordingly, management believes that its cash and
cash equivalents on-hand and the cash provided by operations will be
sufficient to meet the Company's cash requirements for the foreseeable
future.
FORWARD-LOOKING INFORMATION
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 new courses and products, the impact of competition and downward pricing
pressures, the effect of changing economic conditions, risks in technology
development, the risks involved in currency fluctuations, and the other
risks and uncertainties detailed from time to time in the Company's filings
with the Securities and Exchange Commission, including the Company's
Registration Statement on Form S-1 and its Final Prospectus dated December
6, 1995.
11
PART II - OTHER INFORMATION
Item 1: LEGAL PROCEEDINGS
None
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
27.1 Financial Data Schedule
b) Reports on Form 8-K
No reports on Form 8-K were filed during the three months
ended June 30, 1996.
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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 7, 1996 By: /s/ Gary R. Wright
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Gary R. Wright
Chief Financial Officer
(Principal Financial Officer and
Duly Authorized Officer)
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