1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 5, 1997
Commission File Number 0-13069
THE LEARNING COMPANY, INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 94-2562108
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
ONE ATHENAEUM STREET
CAMBRIDGE, MASSACHUSETTS 02142
(Address of Principal Executive Offices)
(617) 494-1200
(Registrant's Telephone Number, Including Area Code)
Indicate by check [x] 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
----- -----
As of May 1, 1997, there were 44,662,374 outstanding shares of the
issuer's common stock, par value $.01 per share.
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THE LEARNING COMPANY, INC.
--------------------------
TABLE OF CONTENTS
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Part I - Financial Information
------------------------------
Page
----
ITEM 1. Condensed Consolidated Financial Statements:
Condensed Consolidated Balance Sheets at
March 31, 1997 (unaudited) and December 31, 1996. ............ 3
Condensed Consolidated Statements of
Operations for the Three Months
Ended March 31, 1997 and 1996 (unaudited) .................... 4
Condensed Consolidated Statements of
Cash Flows for the Three Months
Ended March 31, 1997 and 1996 (unaudited) .................... 5
Notes to Condensed Consolidated Financial Statements ......... 7
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations .......................... 8
Part II - Other Information
---------------------------
ITEM 1. Legal Proceedings ............................................ 13
ITEM 6. Exhibits and Reports on Form 8-K ............................. 13
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
THE LEARNING COMPANY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
March 31, December 31,
1997 1996
-------- -----------
(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $100,029 $110,120
Accounts receivable (less allowances for returns
of $12,724 and $15,191, respectively) 68,826 79,610
Inventories 16,887 15,894
Other current assets 23,450 20,349
-------- --------
209,192 225,973
Intangible assets, net 423,227 544,570
Other long-term assets 23,043 22,975
-------- --------
$655,462 $793,518
======== ========
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 57,402 $ 66,658
Current portion of long-term debt 5,761 2,819
Current portion of related party debt 2,727 5,264
Merger related accruals 6,625 10,667
Revolving line of credit 25,000 25,000
Purchase price payable 3,245 3,245
-------- --------
100,760 113,653
-------- --------
LONG-TERM OBLIGATIONS:
Senior Convertible Notes 321,650 331,650
Senior Convertible/Exchangeable Note - Related Party 150,000 150,000
Other long-term obligations 4,931 6,358
-------- --------
476,581 488,008
-------- --------
DEFERRED INCOME TAXES 80,859 86,920
STOCKHOLDERS' (DEFICIT) EQUITY (2,738) 104,937
-------- --------
$655,462 $793,518
======== ========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.
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THE LEARNING COMPANY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
Three Months Ended
March 31,
-------------------------
1997 1996
--------- --------
REVENUES $ 81,027 $ 71,133
COSTS AND EXPENSES:
Costs of production 21,484 20,455
Sales and marketing 18,726 15,380
General and administrative 7,178 6,862
Research and development 10,091 7,897
Amortization and merger related charges 124,721 90,512
--------- --------
182,200 141,106
--------- --------
OPERATING LOSS (101,173) (69,973)
INTEREST EXPENSE, net (5,528) (6,348)
--------- --------
LOSS BEFORE TAXES (106,701) (76,321)
PROVISION FOR INCOME TAXES:
Current 4,417 3,479
Deferred (4,417) (3,479)
--------- --------
-- --
--------- --------
NET LOSS $(106,701) $(76,321)
========= ========
NET LOSS PER SHARE $ (2.32) $ (2.32)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 46,007,000 32,874,000
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.
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THE LEARNING COMPANY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
Three Months Ended
March 31,
--------------------------
1997 1996
--------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(106,701) $(76,321)
Adjustments to reconcile net loss to net cash
provided by (used for) operating activities:
Depreciation and amortization 126,101 90,512
Provisions for returns and doubtful accounts 8,449 9,230
Changes in operating assets and liabilities:
Accounts receivable 2,335 (21,897)
Accounts payable and accruals (14,078) 3,406
Other (6,215) 1,483
--------- --------
9,891 6,413
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of fixed assets and other (3,882) (2,855)
Payment of merger related accruals (7,898) (9,909)
Purchase price payable -- (25,088)
--------- --------
(11,780) (37,852)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments under capital leases
and long-term debt (207) (4,695)
Repurchase of Senior Convertible Notes (7,000) --
Repurchase of common stock (121) --
Borrowings under line of credit -- 25,000
Proceeds from issuance of common stock
related to exercise of stock options 516 12,046
Other 54 --
--------- --------
(6,758) 32,351
--------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (1,444) (1,265)
--------- --------
NET CHANGE IN CASH AND CASH EQUIVALENTS (10,091) (353)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 110,120 77,832
--------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 100,029 $ 77,479
========= ========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.
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THE LEARNING COMPANY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
(IN THOUSANDS)
(UNAUDITED)
Three Months Ended
March 31,
-------------------------
1997 1996
---------- ----------
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES:
Common stock issued to settle note payable
to related party $ -- $3,053
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.
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THE LEARNING COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
1. BASIS OF PRESENTATION
The condensed consolidated financial statements of The Learning Company, Inc.
(formerly known as SoftKey International Inc.) ("TLC" or the "Company") for the
three months ended March 31, 1997 and 1996 are unaudited and reflect all
adjustments, consisting of normal recurring adjustments, which are, in the
opinion of management, necessary for a fair presentation of the results for the
interim periods. These condensed consolidated financial statements should be
read in conjunction with the consolidated financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the year ended January
4, 1997. The results of operations for the three months ended March 31, 1997 are
not necessarily indicative of the results for the entire year ending December
31, 1997.
The first quarter reporting period for 1997 ended on April 5, 1997 and the first
quarter reporting period for 1996 ended on April 6, 1996. The period from
January 5, 1997 to April 5, 1997 is referred to as the "Three Months Ended March
31, 1997" or the "First Quarter 1997", and the period from January 7, 1996 to
April 6, 1996 is referred to as the "Three Months Ended March 31, 1996" or the
"First Quarter 1996" throughout these financial statements. For clarity of
presentation and comparison, all references to the Year Ended December 31, 1996
relate to the period January 7, 1996 to January 4, 1997.
2. GOODWILL AND OTHER INTANGIBLE ASSETS
The excess cost over the fair value of net assets acquired is recorded as
goodwill and other identifiable intangible assets are amortized on a
straight-line basis over 2 years, except for the goodwill associated with the
Company's Canadian income tax software business, which is being amortized on a
straight-line basis over its estimated useful life of 40 years. Deferred
financing costs are being amortized on a straight-line basis over the term of
the related debt financing. The carrying value of goodwill and intangible assets
is reviewed on a quarterly and annual basis for the existence of facts or
circumstances both internally and externally that may suggest impairment or a
change in useful life. To date no such impairment or change in useful life has
occurred. Should there be an impairment in the future, the Company will measure
the amount of the impairment based on discounted expected future cash flows. The
cash flow estimates that will be used will contain management's best estimates,
using appropriate and customary assumptions and projections at the time.
3. CONTINGENCIES
On February 24, 1997, the Company terminated its business relationship with
Stream International, Inc. ("Stream") which had been providing duplication,
assembly and fulfillment services for certain of the Company's products. The
Company terminated the relationship due to Stream's inability to perform its
obligations under its contract after it relocated the facility responsible for
the manufacture of the Company's product. The Company filed suit against Stream
and currently estimates that in litigation it will be seeking direct and
consequential damages from Stream in an amount in excess of $38 million. Stream
has asserted counterclaims for certain outstanding invoices and other matters in
the amount of approximately $26 million. Management believes that the outcome of
these claims will not have a material adverse effect on the financial position
or results of operations of the Company.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following information should be read in conjunction with the consolidated
financial statements and the notes thereto and in conjunction with Management's
Discussion and Analysis of Financial Condition and Results of Operations in the
Company's Annual Report on Form 10-K for the year ended January 4, 1997. All
dollar amounts presented in this Management's Discussion and Analysis of
Financial Condition and Results of Operations are presented in thousands, except
per share amounts. Certain of the information contained in this Quarterly Report
on Form 10-Q which are not historical facts may include "forward-looking
statements" within the meaning of Section 21E of the Securities Exchange Act of
1934, as amended (the "Exchange Act"). The Company's actual results may differ
materially from those set forth in such forward-looking statements. Certain
risks and uncertainties including, but not limited to, those discussed below in
"Factors Affecting Future Operating Results," as well as in the Company's Annual
Report on Form 10-K for the 1996 fiscal year as filed with the Securities and
Exchange Commission (the "SEC"), as well as other factors, may also cause actual
results to differ materially from those projected. The Company assumes no
obligation to update these forward-looking statements to reflect actual results
or changes in factors or assumptions affecting such forward-looking statements.
The information contained in this Management's Discussion and Analysis of
Financial Condition and Results of Operations is provided pursuant to applicable
regulations of the SEC and is not intended to serve as a basis for projections
of future events.
INTRODUCTION
The Learning Company, Inc. ("TLC" or the "Company") develops and publishes a
broad range of high quality consumer software for personal computers ("PCs")
that educate across every age category, from young children to adults. The
Company's primary emphasis is in education and reference software, but it also
offers a selection of lifestyle, productivity and, to a lesser extent,
entertainment products, both in North America and internationally.
The Company's families of educational products are principally sold under The
Learning Company and MECC brands and include the "Reader Rabbit" family, "Trail"
family, "Treasure" family, "Super Solvers" family, "Writing and Creativity
Tools" family, "College Prep" family, and the "Foreign Languages" family. In
addition to consumer versions, the Company also publishes school editions of a
number of these products. The Company's reference products include a line of
Compton's Home Library branded products (including Compton's Interactive
Encyclopedia) as well as the American Heritage Talking Dictionary, Mosby's
Medical Encyclopedia and BodyWorks. The Company's premium productivity and
lifestyle products are largely published under the SoftKey brand. The Company
also publishes lower priced boxed products under the "Key" and "Classic" brands
and a line of budget, jewel-case only products under the "Platinum" brand.
The Company distributes its products through retail channels, including direct
sales to computer electronics stores, office superstores, mass merchandisers,
discount warehouse stores and software specialty stores which control over
23,000 North American storefronts. The Company also sells its products directly
to consumers through the mail, telemarketing and the Internet, and directly to
schools. The Company's international sales are conducted from subsidiaries in
Germany, France, Holland, Ireland, the United Kingdom, Australia and Japan. The
Company also derives revenue from licensing its products to original equipment
manufacturers ("OEMs") which bundle the Company's products for sale with
computer systems or components and through on-line offerings.
RESULTS OF OPERATIONS
NET LOSS. The Company incurred a net loss of $106,701 ($2.32 per share) on
revenues of $81,027 in the First Quarter 1997 as compared to a net loss of
$76,321 ($2.32 per share) on revenues of $71,133 in the First Quarter 1996. The
increase in revenue is primarily a result of the acquisition of MECC in May 1996
and
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smaller acquisitions in Europe. The net loss in the First Quarter 1997 and
in the First Quarter 1996 is a result of the amortization of goodwill and other
merger related costs of $124,721 and $90,512, respectively.
REVENUES. Revenues by distribution channel for the First Quarter 1997 as
compared to the First Quarter 1996 are as follows:
Three Months Ended March 31,
-----------------------------------
1997 % of 1996 % of
total total
revenue revenue
------- ------- ------- -------
Retail $36,313 45 $34,159 48
OEM 5,169 6 6,335 9
School 5,574 7 2,422 3
Direct response 10,975 14 6,529 9
International 16,634 21 11,254 16
Tax software and services 6,362 7 10,434 15
------- --- ------- ---
$81,027 100 $71,133 100
======= === ======= ===
Total revenues increased 14% in the First Quarter 1997 as compared to the First
Quarter 1996 due to several factors, including the effect of revenues from the
acquisition of MECC. Retail revenues increased primarily as a result of the
acquisition of MECC, lowering of the retail price on a selection of core
educational products which increased the volume of revenues and the introduction
of the Classics line of budget educational products. During the first quarter of
1997, the Company experienced lower dollar and unit market share in the retail
consumer software market in the United States as compared to the prior year on a
pro forma basis. The Company believes that this combined company loss of retail
market share in the United States is due primarily to the entrance of large
competitors with well known brands such as Disney and Mattel and due to the
success of a certain number of its competitors' strategies to introduce lower
priced offerings and reduce current pricing. International sales increased
primarily as a result of an increase in translated foreign language versions of
the Company's products available for sale and the increased sales from the
acquisition of Edusoft S.A. in France and Domus Software B.V. in Holland, which
were both acquired in the fall of 1996. OEM revenues decreased due to the
cyclical nature of the OEM business being tied to evolving technologies. Direct
response revenues increased due to increased revenues from TLC's outbound
telephone sales program and new relationships for the direct selling of the
Company's products. School sales increased as a result of the acquisition of
MECC in May 1996. Revenues from the Tax Division declined for the First Quarter
1997 as compared to the First Quarter 1996 as a result of product introductions
being shipped earlier in the income tax season in order to meet customer
delivery dates.
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COSTS AND EXPENSES. The Company's costs and expenses and the respective
percentages of revenues for the First Quarter 1997 as compared to the First
Quarter 1996 are as follows:
Three Months ended March 31,
-----------------------------------------
% of % of
1997 Revenues 1996 Revenues
-------- -------- ------- --------
Costs of production $21,484 27 $20,455 29
Sales and marketing 18,726 23 15,380 22
Research and development 10,091 12 7,897 11
General and administrative 7,178 9 6,862 9
------- -- ------- --
$57,479 71 $50,594 71
======= == ======= ==
Total costs and expenses remained constant as a percentage of revenues at 71% in
the First Quarter 1997 as compared to the First Quarter 1996. The total costs
and expenses remaining consistent as a percentage of revenues reflects an
increase in the amount spent on research and development and sales and marketing
offset by an improvement in gross margins as cost reduction measures implemented
in 1996 have begun to be realized.
Costs of production includes the cost of manuals, packaging, diskettes,
duplication, assembly and fulfillment charges. In addition, costs of production
includes royalties paid to third-party developers and inventory obsolescence
reserves. Costs of production, as a percentage of revenues, decreased in the
First Quarter 1997 to 27% of revenues, as compared to 29% for the First Quarter
1996. The decrease in costs of production as a percentage of revenues was caused
by reduced prices on the cost to manufacture product and the impact from MECC
having historically products with lower costs of production in the school
channel than the Company prior to this acquisition and an increase in sales in
the school and direct response channels, all of which typically have lower costs
of production than the Company's traditional retail box product.
Sales and marketing expenses increased to 23% of revenues in the First Quarter
1997 as compared to 22% of revenues in the First Quarter 1996. The percentage
increase was a result of the Company's increased marketing efforts to enhance
retail market share by increasing spending on channel promotions and new product
launches.
Research and development expenses increased to 12% of revenues in the First
Quarter 1997 as compared to 11% of revenues in the First Quarter 1996. The
increase is a result of the Company's continued commitment to the next
generation of high quality internally developed software.
General and administrative expenses remained constant at 9% of revenues for both
the First Quarter 1997 and the First Quarter 1996.
During the First Quarter 1997 and the First Quarter 1996, charges of $124,721
and $90,512, respectively, resulting from the acquisitions of The Former
Learning Company, Compton's New Media, Inc. and Compton's Learning Company
(collectively "Compton's") and MECC were incurred. These amounts relate to the
amortization of goodwill and acquired technology related assets plus the costs
incurred to close the Company's Israeli research and development site.
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LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents decreased from $110,120 at December 31, 1996 to
$100,029 at March 31, 1997. This decrease was attributable to the cash payment
of approximately $19,000 of long-term debt, merger related liabilities and
purchases of equipment offset by cash generated from operations of approximately
$10,000.
As of May 5, 1997 the Company has outstanding $321,650 principal amount 5 1/2%
Senior Convertible Notes due 2000 (the "Senior Convertible Notes") and $150,000
principal amount 5 1/2% Senior Convertible/Exchangeable Notes due 2000 held by
Tribune Company (the "Tribune Notes"). The Senior Convertible Notes and Tribune
Notes will be redeemable by the Company on or after November 2, 1998 at
declining redemption prices. Should the Senior Convertible Notes and the Tribune
Notes not convert under their terms into common stock, there can be no
assurances that the Company will have sufficient cash flows from future
operations to meet payment requirements under the debt or be able to re-finance
the notes under favorable terms or at all.
On August 1, 1996, the Company announced that its Board of Directors authorized
the repurchase by the Company over the next twelve months of up to $50,000
principal amount of its Senior Convertible Notes from time to time in the open
market and privately negotiated transactions. Any purchases would depend on
price, market conditions and other factors. The Company intends to use its
excess cash flow from operations for any such purchases. During the First
Quarter 1997 Senior Convertible Notes declined by $10,000.
In March 1997, the Company announced that its Board of Directors authorized the
repurchase by the Company of up to 3 million shares of its common stock from
time to time in open market and privately negotiated transactions. Any purchases
would depend on price, market conditions and other factors. During the First
Quarter 1997 the Company repurchased 20,000 shares at a cost of $121.
The Company has in place a revolving line of credit (the "Line") to provide for
a maximum availability of $50,000. Borrowings under the Line become due on July
1, 1998 and bear interest at the prime rate (8.25% at March 31, 1997). The Line
is subject to certain financial covenants, is secured by a general security
interest in certain operating subsidiaries of the Company and by a pledge of the
stock of certain of its subsidiaries. The Line is guaranteed by the Company.
There was $25,000 drawn on the Line at March 31, 1997.
Income generated by the Company's subsidiaries in certain foreign countries
cannot be repatriated to the Company in the United States without payment of
additional taxes since the Company does not currently receive a U.S. tax credit
with respect to income taxes paid by the Company (including its subsidiaries) in
those foreign countries.
At the present time, the Company expects that its cash flows from operations
will be sufficient to finance the Company's operations for at least the next
twelve months. Longer-term cash requirements are dictated by a number of
external factors, which include the Company's ability to launch new and
competitive products, the strength of competition in the consumer software
industry and the growth of the home computer and software markets. In addition,
the Company's Senior Convertible Notes and Tribune Notes mature in the year
2000. If not converted to common stock, the Company may be required to secure
alternative financing sources. There can be no assurance that alternative
financing sources will be available on terms acceptable to the Company in the
future or at all. The Company continuously evaluates products and technologies
for acquisitions, however no estimation of short-term or long-term cash
requirements for such acquisitions can be made at this time.
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FUTURE OPERATING RESULTS
The Company operates in a rapidly changing environment that is subject to many
risks and uncertainties. Some of the important risks and uncertainties which may
cause the Company's operating results to differ materially or adversely are
discussed below and in the Company's Annual Report on Form 10-K for the 1996
fiscal year on file with the SEC.
The Company's future operating results are subject to a number of uncertainties,
including its ability to develop and introduce new products, the introduction of
competitive products and general economic conditions. In addition, the Company
competes for retail shelf space and general consumer awareness with a number of
companies that market consumer software, including competitors and potential
competitors that possess significantly greater capital, marketing resources and
brand recognition than the Company. Furthermore, the rapid changes in the market
and the increasing number of new products available to consumers have increased,
and are expected to continue to increase, the degree of consumer acceptance risk
with respect to any specific title that the Company may publish.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
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 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 continues to assess the full nature and amount of its damages,
the Company currently estimates that in 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 such
materials in escrow with an independent third-party pending 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.
The Company is subject to various other pending claims. Management, after review
and consultation with counsel, considers that any liability from the disposition
of such lawsuits in the aggregate would not have a material adverse effect upon
the consolidated financial position or results of operations of the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(A) EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
2.1 Amended and Restated Combination Agreement by and among WordStar
International Incorporated, SoftKey Software Products Inc., Spinnaker
Software Corporation and SSC Acquisition Corporation dated as of
August 17, 1993, as amended(1)
3.1 Restated Certificate of Incorporation, as amended(2)
3.2 Bylaws of the Company, as amended(2)
4.1 Indenture dated as of October 16, 1995 between the Company and State
Street Bank and Trust Company, as Trustee, for 5 1/2% Senior
Convertible Notes due 2000 (the "Indenture")(3)
4.2 First Supplemental Indenture to the Indenture, dated as of November
22, 1995, by and between the Company and State Street Bank and Trust
Company, as Trustee(4)
4.3 Note Resale Registration Rights Agreement dated as of October 23, 1995
by and between the Company, on the one hand, and the Initial
Purchasers set forth therein, on the other hand (the "Registration
Rights Agreement")(4)
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4.4 Letter Agreement dated November 22, 1995 amending the Registration
Rights Agreement(4)
4.5 Form of Securities Resale Registration Rights Agreement by and among
the Company and Tribune Company(5)
4.6 Form of Indenture between the Company and State Street Bank and Trust
Company, as Trustee, for 5 1/2% Senior Convertible/Exchangeable Notes
Due 2000(6)
10.1 Employment Agreement dated as of April 9, 1997 by and between the
Company and Michael J. Perik(*)
10.2 Employment Agreement dated as of April 9, 1997 by and between the
Company and Kevin O'Leary(*)
10.3 Employment Agreement dated as of April 7, 1997 by and between the
Company and Martin Rice(*)
- -------------
(*) Denotes management contract or compensatory plan or arrangement.
(1) Incorporated by reference to schedules included in the Company's definitive
Joint Management Information Circular and Proxy Statement dated December
27, 1993.
(2) Incorporated by reference to exhibits filed with the Company's Quarterly
Report on Form 10-Q for the quarterly period ended July 6, 1996.
(3) Incorporated by reference to exhibits filed with the Company's Quarterly
Report on Form 10-Q for the quarterly period ended September 30, 1995.
(4) Incorporated by reference to exhibits filed with Company's Registration
Statement on Form S-3 (Reg No. 333-145), filed January 26, 1996.
(5) Filed as exhibits to the Agreement and Plan of Merger dated November 30,
1995 by and among the Company, Cubsco I, Inc., Cubsco II, Inc., Tribune
Company, Compton's NewMedia, Inc. and Compton's Learning Company,
incorporated by reference to exhibits filed with the Company's Current
Report on Form 8-K dated December 11, 1995.
(6) Incorporated by reference to exhibits filed with the Company's Current
Report on Form 8-K dated December 11, 1995.
(B) REPORTS ON FORM 8-K
The Company filed a Current Report on Form 8-K dated March 21, 1997
reporting the termination of its business relationship with Stream on
February 24, 1997 and the subsequent filing by the Company of a lawsuit
against Stream. See Item 1 - Legal Proceedings.
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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.
THE LEARNING COMPANY, INC.
/s/ R. Scott Murray
-------------------------------
R. Scott Murray
Executive Vice President and Chief
Financial Officer
(principal financial and accounting officer)
May 15, 1997
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EXHIBIT INDEX
-------------
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
- ------ ----------- ------
2.1 Amended and Restated Combination Agreement by and among
WordStar International Incorporated, SoftKey Software
Products Inc., Spinnaker Software Corporation and SSC
Acquisition Corporation dated as of August 17, 1993,
as amended(1)
3.1 Restated Certificate of Incorporation, as amended(2)
3.2 Bylaws of the Company, as amended(2)
4.1 Indenture dated as of October 16, 1995 between the Company
and State Street Bank and Trust Company, as Trustee, for
5 1/2% Senior Convertible Notes due 2000 (the "Indenture")(3)
4.2 First Supplemental Indenture to the Indenture, dated as of
November 22, 1995, by and between the Company and State
Street Bank and Trust Company, as Trustee(4)
4.3 Note Resale Registration Rights Agreement dated as of
October 23, 1995 by and between the Company, on the one hand,
and the Initial Purchasers set forth therein, on the other
hand (the "Registration Rights Agreement")(4)
4.4 Letter Agreement dated November 22, 1995 amending the
Registration Rights Agreement(4)
4.5 Form of Securities Resale Registration Rights Agreement by
and among the Company and Tribune Company(5)
4.6 Form of Indenture between the Company and State Street Bank
and Trust Company, as Trustee, for 5 1/2% Senior Convertible/
Exchangeable Notes Due 2000(6)
10.1 Employment Agreement dated as of April 9, 1997 by and between
the Company and Michael J. Perik(*)
10.2 Employment Agreement dated as of April 9, 1997 by and between
the Company and Kevin O'Leary(*)
10.3 Employment Agreement dated as of April 7, 1997 by and between
the Company and Martin Rice(*)
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(*) Denotes management contract or compensatory plan or arrangement.
(1) Incorporated by reference to schedules included in the Company's definitive
Joint Management Information Circular and Proxy Statement dated December
27, 1993.
(2) Incorporated by reference to exhibits filed with the Company's Quarterly
Report on Form 10-Q for the quarterly period ended July 6, 1996.
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(3) Incorporated by reference to exhibits filed with the Company's Quarterly
Report on Form 10-Q for the quarterly period ended September 30, 1995.
(4) Incorporated by reference to exhibits filed with Company's Registration
Statement on Form S-3 (Reg No. 333-145), filed January 26, 1996.
(5) Filed as exhibits to the Agreement and Plan of Merger dated November 30,
1995 by and among the Company, Cubsco I, Inc., Cubsco II, Inc., Tribune
Company, Compton's NewMedia, Inc. and Compton's Learning Company,
incorporated by reference to exhibits filed with the Company's Current
Report on Form 8-K dated December 11, 1995.
(6) Incorporated by reference to exhibits filed with the Company's Current
Report on Form 8-K dated December 11, 1995.
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