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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) : February 24, 1997
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The Learning Company, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 0-13069 94-2562108
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(State or other jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
One Athenaeum Street
Cambridge, Massachusetts 02142
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(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code: (617) 494-1200
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Item 5. Other Events.
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On February 24, 1997, the Company terminated its business relationship with
Stream International, Inc. ("Stream"). Stream had been providing the Company
with duplication, assembly, and fulfillment services for certain of the
Company's products. In September 1996, Stream relocated the operations to a new
facility. The Company terminated the relationship due to Stream's inability to
perform its contractual obligations at the new location. On a going-forward
basis, the Company's products will be manufactured and distributed through BMG
Entertainment ("BMG"), a Division of Bertelsmann AG. The Company believes that
its new relationship with BMG will reduce lead time and expedite product
delivery, improve inventory management practices, reduce manufacturing costs and
provide quality service to its customers.
On February 26, 1997, the Company filed suit against Stream in
Massachusetts Superior Court for Middlesex County, seeking injunctive relief and
damages resulting from Stream's delayed and defective performance of its
manufacturing and distribution obligations. Specifically, the Complaint asserts
that the Company has been harmed by Stream's misrepresentations, breaches of
guarantee, breaches of duty, and conversion. While the Company remains in the
process of assessing the full nature and amount of its damages, the Company
currently estimates that in the litigation it will be seeking direct and
consequential damages from Stream in an amount in excess of $38 million.
The Company sought a pretrial determination of the status of certain
proprietary materials in the possession of Stream, which are used in the
manufacture of the Company's products. On March 10, 1997 the Court ordered that
Stream place said materials in escrow with an independent third-party pending
the resolution of the action. The Court did not place restrictions on the sale
of certain inventory in Stream's possession.
Stream has responded to the Complaint by denying the Company's claims and
asserting counterclaims for certain outstanding invoices and other matters in
the amount of approximately $26 million.
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SIGNATURE
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.
THE LEARNING COMPANY, INC.
By /s/ Michael J. Perik
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Michael J. Perik
Chief Executive Officer
Date: March 21, 1997