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, 1997
-------------
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 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, 1997, is 21,994,507 shares.
Total number of pages 12
----
LEARNING TREE INTERNATIONAL, INC.
FORM 10-Q
JUNE 30, 1997
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................ 7
PART II--OTHER INFORMATION
Item 1. Legal Proceedings.................................. 11
Item 2. Changes in Securities.............................. 11
Item 3. Defaults Upon Senior Securities.................... 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information.................................. 11
Item 6. Exhibits and Reports on Form 8-K................... 11
SIGNATURES....................................................... 12
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LEARNING TREE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, September 30,
1997 1996
------------- --------------
ASSETS (UNAUDITED)
Current assets:
Cash and cash equivalents.................................................. $ 31,497,000 $24,541,000
Short-term interest-bearing investments.................................... 31,499,000 37,000,000
Trade accounts receivable, net............................................. 18,421,000 12,652,000
Prepaid marketing expenses................................................. 1,794,000 1,084,000
Prepaid expenses and other................................................. 4,775,000 2,333,000
------------ -----------
Total current assets.................................................. 87,986,000 77,610,000
------------ -----------
Equipment and leasehold improvement, net..................................... 25,326,000 11,646,000
Deferred income taxes........................................................ 283,000 279,000
Other assets................................................................. 4,086,000 1,994,000
------------ -----------
Total assets.......................................................... $117,681,000 $91,529,000
============ ===========
LIABILITIES
Current liabilities:
Current portion of debt and capital leases................................. $ 36,000 $ 125,000
Trade accounts payable..................................................... 17,535,000 10,599,000
Deferred revenue........................................................... 25,158,000 15,611,000
Accrued liabilities........................................................ 5,552,000 5,712,000
Income taxes payable....................................................... 3,390,000 2,200,000
------------ -----------
Total current liabilities.............................................. 51,671,000 34,247,000
Long-term debt and capital leases, net of current portion.................... -- 134,000
Deferred facilities rent..................................................... 1,380,000 1,642,000
------------ -----------
Total liabilities..................................................... 53,051,000 36,023,000
------------ -----------
Commitments
STOCKHOLDERS' EQUITY
Common Stock, $.0001 par value; 75,000,000 and 25,000,000 shares
authorized, respectively; 21,995,000 shares issued and outstanding.... 2,000 2,000
Additional paid-in capital................................................. 42,992,000 42,992,000
Notes receivable from stockholders......................................... (95,000) (144,000)
Deferred compensation--stockholders........................................ (147,000) (207,000)
Cumulative foreign currency translation.................................... (1,253,000) (753,000)
Retained earnings.......................................................... 23,131,000 13,616,000
------------ -----------
Total stockholders' equity............................................ 64,630,000 55,506,000
------------ -----------
Total liabilities and stockholders' equity............................ $117,681,000 $91,529,000
============ ===========
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,
--------------------------- -----------------------------
1997 1996 1997 1996
----------- ----------- ------------ -----------
Revenues............................................. $43,881,000 $27,714,000 $115,650,000 $73,604,000
Costs of revenues................................... 18,468,000 10,297,000 48,258,000 28,498,000
----------- ----------- ------------ -----------
Gross profit........................................ 25,413,000 17,417,000 67,392,000 45,106,000
----------- ----------- ------------ -----------
Operating expenses:
Course development.................................. 3,254,000 1,746,000 8,008,000 4,420,000
Sales and marketing................................. 13,203,000 7,659,000 34,503,000 21,803 000
General and administrative.......................... 5,268,000 3,306,000 13,168,000 9,459,000
----------- ----------- ------------ -----------
21,725,000 12,711,000 55,679,000 35,682,000
----------- ----------- ------------ -----------
Income from operations............................... 3,688,000 4,706,000 11,713,000 9,424,000
----------- ----------- ------------ -----------
Other income (expense):
Interest expense.................................... (6,000) (18,000) (23,000) (37,000)
Interest income..................................... 919,000 591,000 2,639,000 1,385,000
Foreign exchange.................................... 33,000 (43,000) 50,000 (176,000)
Other............................................... (33,000) 11,000 (356,000) (4,000)
----------- ----------- ------------ -----------
913,000 541,000 2,310,000 1,168,000
----------- ----------- ------------ -----------
Income before provision for income taxes............. 4,601,000 5,247,000 14,023,000 10,592,000
Provision for income taxes........................... 1,564,000 1,547,000 4,768,000 3,124,000
----------- ----------- ------------ -----------
Net income........................................... $ 3,037,000 $ 3,700,000 $ 9,255,000 $ 7,468,000
=========== =========== ============ ===========
Net income per common share and common equivalent
share............................................ $ 0.14 $ 0.17 $ 0.42 $ 0.37
=========== =========== ============ ===========
Weighted average number of common and common
equivalent shares outstanding.................... 22,140,000 21,442,000 22,087,000 20,326,000
=========== =========== ============ ===========
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,
----------------------------
1997 1996
------------ ------------
Cash flows--operating activities:
Net income............................................................... $ 9,255,000 $ 7,468,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization....................................... 3,980,000 2,283,000
Losses on disposals of equipment, property and leasehold
improvements...................................................... 350,000 1,000
Deferred facilities rent charges.................................... (276,000) (262,000)
Amortization of deferred compensation............................... 60,000 60,000
Unrealized foreign exchange (gains) losses.......................... (88,000) 150,000
Change in net assets and liabilities:
Trade accounts receivable......................................... (5,981,000) (1,576,000)
Prepaid marketing expenses........................................ (722,000) 87,000
Prepaid expenses and other........................................ (2,330,000) (11,000)
Income taxes...................................................... 1,139,000 381,000
Trade accounts payable............................................ 6,826,000 1,601,000
Deferred revenue.................................................. 9,537,000 3,441,000
Accrued liabilities............................................... (103,000) 331,000
------------ -----------
Net cash provided by operating activities......................... 21,647,000 13,954,000
------------ -----------
Cash flows--investing activities:
Purchases of equipment, property and leasehold improvements.............. (18,030,000) (4,777,000)
Retirements of equipment, property and leasehold improvements............ 4,000 4,000
Proceeds from short-term interest-bearing investments held to maturity... 21,500,000 --
Purchases of short-term interest-bearing investments:
Investments held to maturity........................................... (14,899,000) (2,433,000)
Investments held for sale.............................................. (1,100,000) --
Other, net............................................................... (2,148,000) (847,000)
------------ -----------
Net cash used in investing activities............................. (14,673,000) (8,053,000)
------------ -----------
Cash flows--financing activities:
Principal payments of debt and capital leases............................ (223,000) (148,000)
Sales of Common Stock.................................................... -- 30,847,000
Repurchase of Common Stock............................................... -- (31,000)
Collections of stockholder notes......................................... 49,000 58,000
------------ -----------
Net cash provided by (used in) financing activities............... (174,000) 30,726,000
------------ -----------
Effects of exchange rates on cash.......................................... 156,000 (28,000)
------------ -----------
Net increase in cash and cash equivalents.................................. 6,956,000 36,599,000
Cash and cash equivalents at the beginning of the period................... 24,541,000 10,029,000
------------ -----------
Cash and cash equivalents at the end of the period......................... $ 31,497,000 $46,628,000
============ ===========
Supplemental disclosures:
Income taxes paid................................................. $ 3,614,000 $ 2,897,000
============ ===========
Interest paid..................................................... $ 21,000 $ 36,000
============ ===========
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 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, 1996 that are contained in the Company's 1996 Annual Report on
Form 10-K.
Note 2. Common Stock
------------
On December 16, 1996, the Company paid a 50% stock dividend to all
holders of its Common Stock, $.0001 Par Value ("Common Stock"). All share and
per share amounts in the accompanying financial statements and footnotes have
been retroactively restated to reflect the stock dividend.
On March 7, 1997, the Company's shareholders approved an increase in
the number of authorized shares of Common Stock from 25,000,000 shares to
75,000,000 shares.
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. For fiscal 1996, 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 (654,000 shares), be included in the calculation of the shares
outstanding for all periods presented using the treasury stock method.
Note 4. 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
both incentive stock options and non-qualified stock options for the purchase of
an aggregate of 2,250,000 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 must be greater than or equal to the fair market value of the Common
Stock on the date of grant and the exercise price of non-qualified stock options
must be greater than or equal to 75% of the fair market value of the Common
Stock on the date of the grant. 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.
On October 1, 1996, non-qualified options for approximately 631,000
shares were granted under the Stock Option Plan to substantially all employees
with at least one year of service with the Company. Subsequent grants to
employees which had then met the service requirements were for 234,000 shares.
The exercise prices of all options granted were equal to the fair market values
of the Common Stock at the dates of grant and the terms of the options are five
years. The options are subject to a four year vesting schedule at 25 percent per
year on each anniversary date. As of June 30, 1997, after adjusting for
forfeitures, options for approximately 830,000 shares were outstanding under the
Stock Option Plan.
Note 5. Recent Accounting Pronouncements
--------------------------------
The Financial Accounting Standards Board has recently issued Statement
of Financial Accounting Standards No. 128 (SFAS No. 128) "Earning per Share" and
Statement of Financial Accounting Standards No. 130 (SFAS No. 130) "Reporting
Comprehensive Income." The application of SFAS No. 128 is not permitted until
after December 15, 1997 and SFAS No. 130 is not required for fiscal years
beginning prior to December 15, 1997. The Company has not determined what the
effect of these accounting pronouncements will be when they are adopted.
6
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 corporate 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,
Internet/intranets, local and wide area computer networks, operating systems,
programming languages, database systems, graphical user interfaces, object-
oriented technology, and IT management. The Company tests and certifies IT
professionals in 22 IT job functions. The Company's instructor-led courses are
recommended for college credit by the American Council on Education. In addition
to its instructor-led courses, the Company develops, produces and markets 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.
RECENT DEVELOPMENTS
The Company has expanded the breadth of its instructor-led training
activities through the formation of two new divisions. The new Power Seminars
Division presents multi-day conferences comprised of a number of 1-day,
multimedia lecture-style seminars in key information technologies that are
undergoing rapid change. The new Learning Solutions Division provides custom-
developed training programs for larger clients who need to train large numbers
of their IT professionals and end-users. The initial focus of this new division
is on training that supports the roll-out and use of new organization-wide
information systems, tools and applications.
RESULTS OF OPERATIONS
In the third fiscal quarter ended June 30, 1997, revenues increased by
$16.2 million or 58% to $43.9 million from $27.7 million for the corresponding
quarter of the prior year. Income from operations for the quarter ended June 30,
1997 decreased $1.0 million or 22% to $3.7 million from $4.7 million for the
same quarter of fiscal 1996. Net income for the quarter ended June 30, 1997
decreased $663,000 or 18% to $3.0 million from $3.7 million for the quarter
ended June 30, 1996.
For the nine month period ended June 30, 1997, revenues increased by
$42.1 million or 57% to $115.7 million from $73.6 million for the nine months
ended June 30, 1996. Income from operations for the nine months ended June 30,
1997, increased $2.3 million or 24% to $11.7 million from $9.4 million for the
corresponding period of the prior year. Net income for the nine months ended
June 30, 1997 increased $1.8 million or 24% to $9.3 million from $7.5 million
for the corresponding period of the prior year.
The results of operations for the three and nine months ended June 30,
1997, reflect the investments made by the Company in continuing to expand its
instructor-led and multimedia CBT businesses and to launch its two new
divisions. During the third fiscal quarter, the Company invested heavily in its
product development, sales and marketing and general and administrative
infrastructures to support its new divisions as well as the rapid growth
occurring in its existing product lines. The Company expects to continue to
invest in its new divisions during its fourth fiscal quarter.
The increase in revenues in the quarter ended June 30, 1997 is
primarily the result of an increase in the number of course participants in
multi-day instructor-led courses to 26,069 from 18,976 participants in the
corresponding quarter of the prior year. For the nine months ended June 30,
1997, the number of course participants in multi-day instructor-led courses was
73,096 compared to 51,306 in the corresponding nine month period of the prior
year. The additional course participants are primarily attributable to increased
marketing and sales expenditures and an increase in the number of instructor-led
multi-day course titles to 127 in the third quarter of fiscal 1997 compared to
98 in the same period a year earlier. Revenues for the three and nine month
periods ended June 30, 1997, also reflect 4% higher average revenues per multi-
day course participant as well as revenues from the Company's multimedia CBT
product line, its Learning Solutions Division and from Power Seminars. As of
June 30, 1997, the Company had expanded its multimedia CBT course library to 48
titles and had introduced five Power Seminar titles.
The Company's cost of revenues for its instructor-led courses primarily
include the costs associated with course instructors, course materials and
equipment, freight, classroom facilities and refreshments. For its multimedia
CBT courses, cost of revenues primarily includes the costs of amortized
development, manufacturing, distribution and support. The cost of revenues for
the third quarter of fiscal 1997 increased $8.2 million or 79% to $18.5 million
from $10.3 million for the same
7
quarter in 1996. For the nine months ended June 30, 1997, the Company's cost of
revenues increased $19.8 million or 69% to $48.3 million from $28.5 million for
the corresponding period in the prior year. The increased cost of revenues,
compared to the same periods in the prior year, are primarily the result of
increases in the number of multi-day instructor-led course events, costs per
event, costs of revenues associated with the increased sales of the multimedia
CBT product line and costs associated with the start-up and delivery of the
first Learning Solutions and Power Seminars courses. The Learning Solutions and
Power Seminar courses have a higher cost per event than instructor-led courses
since they have a higher average number of attendees.
The number of multi-day instructor-led course events increased 36% in
the quarter ended June 30, 1997 to 1,623 course events from 1,190 course events
in the quarter ended June 30, 1996. For the nine month period ended June 30,
1997, the number of instructor-led course events increased 39% to 4,554 from
3,279 for the corresponding period in the prior year. Costs per instructor-led
course event increased approximately 17% and 15%, respectively, compared to the
corresponding periods in the prior year. The change in the average cost per
instructor-led course event primarily arises from a) the need to conduct more
events in hotels to handle the increased demand which has frequently exceeded
the Company's education center capacity, b) increased instructor fees, c) the
recruitment and training costs to expand the instructor force, d) costs of
acquiring, maintaining and shipping course equipment for hands-on courses which
have increased as a percentage of all courses, and e) an increase in the average
number of days for each course. To accommodate the growth in course enrollments,
the Company has increased the number and size of its education center facilities
and is seeking additional education center facilities in certain locations. In
July 1997, the Company opened a new 14 classroom education center in Rockville,
Maryland.
As a result of the increased cost per instructor-led event and the
lower margins of the Learning Solutions and Power Seminar courses (which were
not included in the prior year), the cost of revenues has increased as a
percentage of revenues to 42.1% in the quarter ended June 30, 1997 from 37.2% in
the same quarter of last year and to 41.7% for the nine months ended June 30,
1997 from 38.7% in the corresponding period of the prior year.
In response to the continued strength in market response for its
training programs, the Company is continuing to: a) expand its library of
instructor-led course titles, including the further development of titles for
its new Power Seminars Division; b) expand its multimedia CBT course library; c)
expand the activities of its new Learning Solutions Division; d) further expand
its sales, advertising and marketing expenditures; e) recruit and train
additional instructors for both new and existing course titles and f) add new
education centers and expand the number of classrooms in its existing education
centers. Accordingly, the Company's cost of revenues, course development and
sales and marketing expenditures are expected to increase substantially. There
can be no assurance that the Company will be able to achieve increased market
share after making the expenditures required by these activities.
Course development expenses include the costs of developing new
instructor-led courses, Power Seminars, multimedia CBT course titles and
Learning Solutions programs, as well as the cost of updating the Company's
existing course libraries. The principal costs are for internal product
development staff and independent consultants who serve as subject matter
experts. Course development expenses increased by approximately $1.5 million or
86% to $3.3 million for the quarter ended June 30, 1997 from $1.8 million in the
quarter ended June 30, 1996. For the nine months ended June 30, 1997, course
development expenses increased $3.6 million or 81% to $8.0 million from $4.4
million for the corresponding period in the prior year. These increases reflect
the costs associated with the Company's expansion of its library of instructor-
led and multimedia CBT courses as well as the development costs for the new
Power Seminar and Learning Solutions courses.
Sales and marketing expenses consist of salaries, commissions and the
costs of traveling 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 $5.5 million or 72% to $13.2 million for the
quarter ended June 30, 1997 from $7.7 million for the quarter ended June 30,
1996. For the nine month period ended June 30, 1997, sales and marketing
expenses increased $12.7 million or 58% to $34.5 million from $21.8 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
increased 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, to promote the CBT and Power Seminar product
lines and to communicate the availability of new course titles. The Company
intends to increase its sales and marketing expenditures during the fourth
quarter to pursue additional market share for its multi-day courses, multimedia
CBT product line and to promote its new Power Seminars products. Since the
Company expenses substantially all of its marketing costs as incurred and there
is generally a period of time between when these costs are incurred and when the
associated revenues are realized, these costs are expected to increase as a
percentage of revenues during the fourth quarter of fiscal 1997.
8
General and administrative expenses increased $2.0 million or 59% to
$5.3 million for the quarter ended June 30, 1997 compared to $3.3 million in the
same quarter of the prior year. For the nine months ended June 30, 1997, general
and administrative expenses increased $3.7 million or 39% to $13.2 million from
$9.5 million for the corresponding period in the prior year. This reflects
increases in the administrative staff and information systems capabilities to
support the current and expected future growth of the Company's base businesses,
as well as increases in transaction volumes resulting from the Learning
Solutions and Power Seminars Divisions.
Other income (expense) is primarily comprised of interest expense,
interest income and foreign currency gains and losses. Other income increased
$372,000 to $913,000 for the quarter ended June 30, 1997 from $541,000 for the
corresponding quarter in the prior year. For the nine months ended June 30,
1997, other income increased by $1.1 million to $2.3 million from $1.2 million
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 and secondary offering in
September 1996.
The provision for income taxes for the quarter ended June 30, 1997
remained unchanged from the quarter ended June 30, 1996, at $1.5 million. For
the nine months ended June 30, 1997, the provision for income taxes increased
$1.7 million to $4.8 million from $3.1 million for the corresponding period in
the prior year. The increase in the income tax provision reflects the amount of
taxable income before taxes as well as an increase in the Company's effective
tax rate for fiscal 1997. The effective tax rate for fiscal 1996 reflected the
utilization of certain foreign tax loss carryforwards and all of the Company's
remaining tax loss carryforwards were used in that year.
BACKLOG
At June 30, 1997, the Company had a backlog of orders for instructor-
led and Learning Solutions courses in the amount of $32.5 million, which
represented a 56% increase over the backlog of $20.8 million at June 30, 1996.
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 and advertising 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 and short-term interest-bearing investments
increased to $63.0 million at June 30, 1997 from $61.5 million at September 30,
1996, primarily as a result of cash provided by operations. For the nine months
ended June 30, 1997, cash provided by operations was approximately $21.6 million
compared to $14.0 million during the same period in the prior year. The increase
in cash provided by operations reflects the increases in profits and deferred
revenues arising from prepaid multi-enrollment programs. As of June 30, 1997,
the Company had a net working capital balance of $36.3 million.
9
During the nine months ended June 30, 1997, the Company invested $18.0
million in equipment and facilities compared to $4.8 million in the same period
of the prior year. This increase is primarily related to the purchase of
additional course equipment to support the growth of course events and upgrade
course equipment capabilities, and the build-out of office and classroom
facilities. While the Company expects to purchase additional course equipment
and to enter into leases for additional facilities during fiscal 1997, as of
June 30, 1997, the Company had no 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.
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 and a high rate
of growth, 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 1996 Annual Report
on Form 10-K.
10
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, 1997.
11
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 8, 1997 By: /s/ Gary R. Wright
---------------------------------------
Gary R. Wright
Chief Financial Officer
(Principal Financial Officer and
Duly Authorized Officer)
12