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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
x |
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the fiscal year ended September 30, 2002 |
¨ |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the transition period from
to
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Commission File Number: 0-27248
LEARNING TREE INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
| Delaware |
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95-3133814 |
| (State or other jurisdiction of incorporation or organization) |
|
(I.R.S. Employer Identification Number) |
6053 West Century Boulevard
Los Angeles, CA 90045-0028
(310) 417-9700
(Address, including zip code and telephone number, including area code, of
registrant’s principal
executive offices)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock
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 ¨
Indicate by check mark if disclosure of delinquent filers pursuant to item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of
registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K: x
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the
Act). Yes x No ¨
The aggregate market value of the common stock, $.0001 par value, held by non-affiliates of the registrant, as of
December 6, 2002, was $143,444,000. (Excludes 8,268,668 shares held by directors and officers of the Registrant since such persons may be deemed to be affiliates.)
The number of shares of common stock, $.0001 par value, outstanding as of December 6, 2002, was 17,619,633 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive Proxy Statement of the registrant to be delivered to shareholders in connection with the 2003 Annual Meeting of Shareholders are incorporated by reference into Part III,
Items 10, 11, 12 and 13 of this Form 10-K.
LEARNING TREE INTERNATIONAL, INC. AND SUBSIDIARIES
ANNUAL REPORT ON FORM 10-K
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| Part I |
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| Part II |
| Item 5. |
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| Part III |
| Item 10. |
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| Item 11. |
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| Part IV |
| Item 15. |
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2
Except for historical statements and discussions, this discussion consists of “forward-looking statements.” All
plans, projections, and future estimates are forward-looking statements which, in some, but not all, cases, are identified by words such as “anticipate,” “estimate,” “project,” “believe,” “expect,”
and similar expressions. Please do not put undue reliance on forward-looking statements. Forward-looking statements are based on certain factors and assumptions about future risks and uncertainties. Many, but not all, of these factors and
assumptions are identified in Exhibit 99, “Risk Factors.” Although Learning Tree International, Inc. (“Learning Tree”) believes that the assumptions are reasonable, it is likely that at least some of the forward-looking
statements will not come true. Accordingly, Learning Tree’s actual results will differ from those suggested by any forward-looking statement, and those differences could be material. Factors that could cause or contribute to such differences
include, among others, those factors included under “Risk Factors” in Exhibit 99, as well as those discussed in other places in Learning Tree’s filings with the SEC. For example, actual results could differ materially from those
projected as a result of Learning Tree’s dependence on the timely development, introduction and customer acceptance of courses and products; risks in technology development and introduction; risks associated with the introduction of e-learning
either by Learning Tree or its competitors; the impact of competition and pricing pressures; Learning Tree’s ability to attract and retain key management and other personnel; risks associated with international operations, including currency
fluctuations; the effect of changing economic conditions; Learning Tree’s ability to maintain its current operating margins; the effect of adverse weather conditions, strikes, acts of war or terrorism; and other external events. Should one or
more of these risks, or any other risk, materialize, or should one or more of the underlying assumptions prove incorrect, Learning Tree’s actual results may vary materially from those anticipated, estimated, expected or projected. In light of
the risks and uncertainties, there can be no assurance that any forward-looking information will in fact prove to be correct. Learning Tree does not undertake any obligation to update forward-looking statements.
PART I
Overview
Learning Tree is a leading worldwide vendor-independent provider of training to information technology (“IT”) professionals
working in business and government organizations. Since its founding in 1974, Learning Tree has provided high quality training to over 1.3 million IT professionals. In fiscal 2002, Learning Tree provided training to over 111,000 course participants.
Approximately two-thirds of Learning Tree participants come from Fortune 1000-level companies, their international equivalents and government organizations, and approximately one-third come from small and medium-size companies.
Learning Tree offers a broad, proprietary library of intensive four- and five-day instructor-led courses, comprising 158
different course titles representing over 4,000 hours of training at September 30, 2002. Learning Tree courses focus on client/server technology, operating systems, programming languages, intranet/Internet/Web applications, computer networks,
computer and network security, databases, software engineering, object-oriented technology and IT management.
As
a vendor-independent provider of IT training, Learning Tree designs its own courses to provide participants an unbiased perspective of software and hardware products and the ability to compare and integrate multiple platforms and technologies from
various vendors in a single course. Learning Tree uses a well-defined, systematic approach in developing and updating its course library to provide training that is immediately relevant to course participants working in a broad range of applications
and industries. Learning Tree courses are highly interactive and are translated into French, Swedish and Japanese. Learning Tree’s courses are recommended for one to two semester hours of college credit by the American Council on Education, and
are accepted for college credit at the University of Phoenix. Learning Tree’s proprietary course development process also allows it to customize its courses for delivery at its customers’ sites.
3
Learning Tree had 974 instructors on September 30, 2002, each of whom was an IT
professional combining expert knowledge with extensive practical experience. On average, each expert instructor teaches eight to ten Learning Tree course events per year on an “as-needed” basis. During the rest of the year, Learning Tree
instructors apply the IT skills they teach as either full-time employees for other companies or as independent consultants.
Learning Tree offers its proprietary courses through local operations in the United States, United Kingdom, France, Canada, Sweden, Japan and Hong Kong, and generates approximately half of its revenue internationally. Each Learning
Tree operating subsidiary is staffed by local nationals responsible for delivery of Learning Tree courses in that country. Learning Tree’s infrastructure and logistical capabilities allow it to coordinate, plan and deliver its courses at
Learning Tree’s education centers, hotel and conference facilities and customer sites worldwide. During fiscal 2002, Learning Tree presented courses in 27 countries.
Learning Tree has only one material operating segment which is the design and delivery of advanced technology training courses and related services. See Note 7 of
“Notes to Consolidated Financial Statements” for certain financial data regarding operating segments and geographic regions. Learning Tree also has engaged in limited development and testing of a system for delivering its courses over the
Internet (“e-learning”). See “Markets and Competition.”
Learning Tree’s Business
Strategy
The market for IT training is driven by technological change. As the applications of technology
evolve and expand, organizations may find it difficult to fully utilize the latest information technologies because their IT professionals lack up-to-date knowledge and skills. Most organizations address this challenge by retraining their existing
IT professionals and training new IT professionals as they are hired. Furthermore, since many businesses use hardware and software products provided by a variety of vendors, their IT professionals require training that applies across vendors,
platforms and operating systems.
Learning Tree’s objective is to strengthen its position as one of the
world’s leading providers of high-end training to IT professionals in business and government organizations through the following long-term strategies:
Commitment to the Highest Possible Quality Training. Since its founding in 1974, Learning Tree has considered the quality of its courses to be the most important driver of
its long-term success. Based on evaluations from course participants in fiscal 2002, Learning Tree again set new quality records for both the effectiveness of its instructors and the overall value of its courses.
High Quality Instructor Team. At September 30, 2002, Learning Tree had 974 course instructors located around
the world, each of whom was an IT professional combining both expert knowledge and extensive “real world” experience. Learning Tree instructors teach an average of eight to ten Learning Tree course events per year on an
“as-needed” basis. During the rest of the year they apply the IT skills that they teach, either as full-time employees for other companies or as independent consultants. This “on-demand” structure enables Learning Tree to quickly
schedule additional courses anywhere in the world and to respond efficiently to its customers’ needs for IT training. In addition, because Learning Tree instructors spend an average of over 80% of their time working in industry settings, they
provide Learning Tree with a unique access to industry experts on technology trends throughout the world.
Learning Tree’s success depends on its ability to attract and retain highly skilled instructors. See Exhibit 99, “Risk Factors.” Learning Tree uses a highly systemized program in each of its local operating
subsidiaries to recruit, train, coach, manage and evaluate its instructor team.
Broad Proprietary Course
Library. Learning Tree offers a broad, proprietary library of 158 instructor-led course titles comprising over 4,000 hours of classroom instruction covering a wide range of IT software and
4
hardware technologies. Learning Tree’s instructor-led intensive four- and five-day courses are recommended for one to two semester hours of college credit by the American Council on
Education and are accepted for college credit at the University of Phoenix. The following table breaks down the number of Learning Tree course titles by curriculum:
Courses by Curriculum at September 30, 2002
| Curriculum
|
|
Number of Course Titles
|
|
Total Hours of Training
|
| Windows |
|
20 |
|
576 |
| SQL Server |
|
11 |
|
294 |
| Datacomm and Local Area Networks |
|
4 |
|
96 |
| Internetworking |
|
9 |
|
234 |
| WAN and Telecommunications |
|
5 |
|
120 |
| Web Development |
|
14 |
|
342 |
| Internet Security |
|
6 |
|
144 |
| Java Programming |
|
7 |
|
168 |
| UNIX/Linux/Solaris |
|
10 |
|
240 |
| Oracle Database Systems |
|
13 |
|
354 |
| Notes and Domino |
|
5 |
|
126 |
| PC Support |
|
2 |
|
48 |
| Programming |
|
10 |
|
240 |
| Windows Programming |
|
18 |
|
468 |
| Software Development Methods |
|
13 |
|
318 |
| IT Management |
|
11 |
|
258 |
| |
|
|
|
|
| Total |
|
158 |
|
4,026 |
| |
|
|
|
|
As a vendor-independent provider of IT training, Learning Tree
designs its courses to provide participants an unbiased perspective of software and hardware products and the ability to compare and integrate multiple platforms and technologies from various vendors in a single course. Drawing from the expertise of
Learning Tree’s international team of instructors, each Learning Tree course presents multiple points of view concerning technology applications as used around the world. Learning Tree courses are designed to be highly interactive; most involve
“hands-on” training on networked Pentium-based workstations so that participants can practice and assimilate the skills being taught. Participants spend a significant portion of each hands-on Learning Tree course working on computer-based
exercises, participating in group workshops and class interactions, and receive extensive course materials that facilitate learning and serve as a post-course reference tool.
Over its 28-year history, Learning Tree has developed and implemented a well-defined, systematic approach to rapidly develop, customize and update its course library and to
translate its course content into multiple languages. Learning Tree continuously updates and expands its course content and adds new course titles to keep pace with the introduction of new IT hardware, software and networking technologies and to
reflect the evolving IT training needs of its customers. To identify potential new courses for development, Learning Tree incorporates feedback from the development groups of leading IT vendors, Learning Tree’s own worldwide instructor team,
course participants, and corporate customers. In fiscal 2002, Learning Tree developed 17 new titles and retired 22 titles. There can be no assurance that Learning Tree will develop more titles than it retires in any period nor that Learning Tree
will develop courses that keep pace with the introduction of new hardware, software and networking technologies. See exhibit 99, “Risk Factors.”
International Infrastructure and Logistics Capability. Learning Tree meets customers’ demands for scheduling flexibility by delivering course events frequently and at
multiple locations around the world.
5
Participants can attend any one of Learning Tree’s 158 courses that, on average, are presented more than once per week around the world. Learning Tree’s sophisticated infrastructure and
logistics capability allow it to coordinate, plan and deliver its courses at its education centers, hotel and conference facilities and at its customers’ sites worldwide. Learning Tree can also present standard or customized courses on demand
at its customers’ facilities whenever and wherever they desire. By using its large team of instructors, its course development and customization processes, its team of customer support specialists, its logistics team and its hundreds of
classroom computer workstations, Learning Tree can rapidly deliver any of its courses to any location in the world.
In fiscal 2002, Learning Tree presented 8,218 course events at its education centers and at third-party and customer sites in a total of 27 countries. Learning Tree operates through wholly-owned subsidiaries in the United States
(opened in 1974), France (opened in 1977), the United Kingdom (opened in 1978), Canada (opened in 1985), Sweden (opened in 1986), Japan (opened in 1989), and Hong Kong (opened in 1997). Each Learning Tree subsidiary is staffed by local nationals
responsible for the sales and delivery of courses in that country. Learning Tree’s international operations produced approximately half of Learning Tree’s revenues in fiscal 2002, as they have throughout Learning Tree’s history. Such
international operations face certain risks inherent to international businesses, such as currency fluctuations; potential difficulties in translating course subject matter into foreign languages; varying political and economic conditions; changes
in government regulation; trade barriers; difficulty in staffing foreign offices, and in training and retaining foreign instructors; adverse tax consequences; and potential costs associated with expansion into new territories. There can be no
assurance that such factors will not have a material adverse effect on Learning Tree in the future. See Exhibit 99, “Risk Factors.”
On an ongoing basis, Learning Tree evaluates expanding its operations both within existing education center cities and in new cities or countries. During fiscal 2002, Learning Tree opened a second
education center with 12 classrooms in Paris, bringing the total number of classrooms in both Paris Education Centers to 27. Learning Tree must continue to overcome the challenges of managing new education centers. See Exhibit 99, “Risk
Factors.” There can be no assurance that Learning Tree will open additional education centers in the future or that such additional education centers will be successful.
Long-Term Relationships with Global Customer Base. Learning Tree has built long-standing relationships with its customer base. Learning Tree
focuses on training the employees of Fortune 1000-level companies, their international equivalents and government organizations around the world, and seeks to build continuing relationships both with its individual course participants and its
corporate customers. Learning Tree’s customers generally operate in the computer, communications, electronics, systems integration, finance, aerospace, government and military, manufacturing and energy sectors, among others. In fiscal 2002,
Learning Tree provided training to over 111,000 course participants and had over 200 customers worldwide that each purchased more than $100,000 of Learning Tree training. Generally, each customer purchased this training throughout the year in
individual purchase decisions ranging from $2,000 to $20,000 rather than through a single contract. No customer accounted for 10% or more of Learning Tree’s fiscal 2002 revenues.
Sophisticated Multi-Tiered Sales and Marketing Organization. Learning Tree employs a sophisticated multi-tiered marketing organization that
integrates direct mail, telemarketing and field sales to market its course offerings to existing customers and to attract new customers. Since its inception 28 years ago, Learning Tree has created and built a strong brand image for providing high
quality training for IT professionals through the frequent and prominent use of its trademarks in direct marketing and course materials. Learning Tree markets its courses primarily through direct mail marketing to its proprietary database of over
2,100,000 IT professionals and managers who have attended, inquired about, or sent a staff member to Learning Tree courses, and also uses direct mail to reach additional IT professionals on rented mailing lists. Learning Tree also utilizes targeted,
personalized e-mails through its automated e-mail marketing system to advise prospective course participants of upcoming events. Learning Tree also markets its products and services over the Internet on its Web site
(http://www.learningtree.com). (Information contained on Learning Tree’s Web site is not part of this Annual Report on Form 10-K.) Learning Tree also advertises in industry trade magazines and periodicals.
6
Learning Tree has built a telemarketing sales team which was comprised of
approximately 139 telemarketers and related support staff at September 30, 2002. Learning Tree’s telemarketers are responsible for responding to leads generated from direct mailings, Web site inquiries and other Learning Tree sales and
marketing programs. In addition, Learning Tree’s sales team follows up on inquiries from customers and potential clients, as well as key personnel at clients with the potential to become major Learning Tree customers. Learning Tree employs a
proprietary automated system which provides its telemarketers with online information that facilitates rapid response to inbound callers, provides targeted lists for outbound calling, records the results of calls and automates the sales follow-up
process.
At September 30, 2002, Learning Tree also employed a field sales team of approximately 42 direct field
sales representatives and related support staff. The direct sales force primarily focuses on selling training programs which will be delivered at Learning Tree’s larger customers’ sites.
To remain successful, Learning Tree must continue to expand its business with both existing and new customers. See Exhibit 99, “Risk
Factors.” Learning Tree offers two different multiple-course discount programs—“Training Passports” and “Training Vouchers”—and also provides Learning Tree Professional Certification Programs to encourage
individual IT professionals and their employers to purchase multiple courses. Learning Tree believes that, in addition to increasing revenues directly, these programs foster long-term relationships with participants and encourage participants to
recommend Learning Tree’s courses to their colleagues.
Training Passports permit an individual Passport
holder to attend up to a specified number of courses during a 12-month period. The Passports are generally sold as either four-course or eight-course Passports. The list price for a four-course Passport is approximately equivalent to two individual
four-day courses and the list price for an eight-course Passport is approximately equivalent to the list price of three four-day courses.
The Training Voucher program allows customers to buy blocks of five or more Vouchers, at a fixed discounted price, for future Learning Tree courses to be taken by any person in the client company over a 12-month period.
Under the Learning Tree Professional Certification Program, Learning Tree certifies IT professionals in a variety
of functions within the areas of Learning Tree’s focus. The Learning Tree Professional Certification Program is designed to teach all of the skills necessary to master a specific job function rather than to just teach the features of a
particular product. A participant who successfully completes the courses and passes the free at-course examinations required for a particular Certification Program receives Learning Tree Professional Certification in that topic at no additional
charge. Since the inception of the Learning Tree Professional Certification Program in fiscal 1993, over 243,000 participants have completed one or more certification examinations.
Markets and Competition
Instructor-Led Training. The IT training market includes outside third-party providers of IT training as well as in-house training conducted by the IT departments of organizations. Outside providers of
IT training can be further segmented into “vendor-dependent providers,” which deliver courses developed by the vendors of software and hardware technologies and which depend heavily on those vendors to market their courses, and
“vendor-independent providers,” which independently develop, market and deliver proprietary courses. Some competitors offer course titles and programs similar to those of Learning Tree at lower prices. In addition, some competitors have
greater financial and other resources than Learning Tree. See Exhibit 99, “Risk Factors.”
Learning
Tree’s main competitors are vendor-dependent and include the IT hardware and software vendors themselves. Many hardware and software vendors supply training, sometimes bundled in the prices of their product. Other vendor-dependent providers are
“ATEC’s” and “CTEC’s” that deliver these vendors’ proprietary
7
courses. In addition, vendor-dependent providers may have or claim greater knowledge of upcoming developments in their products and their certifications are widely recognized. Learning Tree
differentiates itself from vendor-dependent providers by maintaining a vendor-independent posture and providing cross-platform training solutions. By being vendor-independent, Learning Tree can address both the strengths and the weaknesses of a
product and teach IT professionals how to integrate a product with that of other vendors in a multi-vendor network configuration.
Learning Tree believes that the majority of independent training providers are smaller organizations, which often provide training as one of several services or product lines. Learning Tree differentiates itself from these providers
based on the breadth and quality of its proprietary course library, its worldwide delivery capability, and the size, quality and experience of its instructor force.
Internal IT training departments generally provide companies with the most control over the method and content of training, enabling them to tailor the training to their
specific needs. However, Learning Tree believes that since internal trainers find it difficult to keep pace with new technologies, lack the hands-on experience needed to teach the latest technological developments and lack the capacity to meet
demand, organizations must supplement their internal IT training resources with externally supplied training.
e-learning and CBT. IT training is primarily delivered by classroom instructors; video; technology-based training, including Internet-based e-learning and CD-ROM; and printed means. Learning Tree
believes that instructor-led training will continue to be the largest portion of the market because course participants value the personalized interaction and problem solving with their instructor and fellow participants concerning their specific
projects and applications. Further, instructor-led classroom training insulates course participants from workplace interruptions and thus accelerates their learning of new technologies. The use of technology-based IT education and training formats,
such as Internet-based e-learning, appears to have gained some acceptance in the IT training market. However, surveys published in 2001 by Training Magazine and the American Society for Training and Development report that the industry-wide total
percentage of e-learning has declined in recent years, while that of instructor-led training had increased.
Learning Tree has engaged in limited development and testing of the content, packaging and delivery methodology for Internet-based e-learning courses. Learning Tree has yet to find what it believes could be a profitable and
sustainable e-learning business model and may or may not be successful developing an e-learning product line. As a result, Learning Tree expects to limit its e-learning investment. See Exhibit 99, “Risk Factors.”
Employees
Learning Tree’s personnel are critical to its success. See Exhibit 99, “Risk Factors.” The Learning Tree management team has extensive experience in IT training with an average of 20 years of experience with Learning
Tree and 24 years of relevant industry experience.
On September 30, 2002, Learning Tree had a total of 530
full-time equivalent employees, of whom 239 were employed outside the United States. Learning Tree also utilized the services of 974 expert instructors to teach its courses on an “as-needed” basis. Learning Tree considers its relations
with its employees and its instructors to be good.
Intellectual Property Rights
Learning Tree relies primarily on a combination of statutory and common law copyright, trademark and trade
secret laws, customer licensing agreements, employee and third-party nondisclosure agreements and other methods to protect its proprietary rights. Learning Tree’s course materials generally do not include any mechanisms to prohibit or prevent
unauthorized use. As a result, a third party or parties could copy or otherwise obtain and use Learning Tree’s course materials without authorization, either for educational use or to develop
8
competing courses. In addition, Learning Tree operates in countries that do not provide protection of proprietary rights to the same extent as the United States. If substantial unauthorized use
of Learning Tree’s products were to occur, Learning Tree’s business and results of operations could be materially adversely impacted. Learning Tree cannot be certain that its means of protecting its proprietary rights will be adequate or
that Learning Tree’s competitors will not independently develop similar course titles or delivery methods.
Learning Tree may also have to defend against claims that its current or future courses infringe on the proprietary rights of others. If such a claim succeeded, Learning Tree might have to change or eliminate courses, and could be
required to pay damages or royalties. In addition, litigation over intellectual property rights, whether brought by Learning Tree or by someone else, could be time-consuming and expensive, even if Learning Tree were ultimately to succeed.
Accordingly, defending and prosecuting these claims could have a material adverse effect on Learning Tree’s operating results. See Exhibit 99, “Risk Factors.”
“Learning Tree,” the Learning Tree and Professional Certification logos, “EDUCATION IS OUR BUSINESS,” “EDUCATION YOU CAN TRUST,” “WE
BRING EDUCATION TO LIFE,” “PRODUCTIVITY THROUGH EDUCATION,” “FROM THE LEARNING TREE,” “Training Passport,” “Training Advantage,” “Alumni Gold,” “TRAINING YOU CAN TRUST,” “WE BRING
LEARNING TO LIFE,” “WE BRING IT TRAINING TO YOU,” “learningtree.com,” and “800-THE-TREE” are among the trademarks and service marks of Learning Tree. In addition to the trademarks and service marks of Learning
Tree, this Annual Report on Form 10-K also contains trademarks and trade names of other companies.
Regulatory Environment
Learning Tree is paid directly by the employers of its course
participants and does not receive funding from any government aid or loan programs. As a result, Learning Tree does not depend on government appropriations for those programs and is generally exempt from the governmental regulation of public
education providers. In contrast, providers of education to the public must comply with many laws and regulations of Federal, state and international governments. However, Learning Tree’s operations could be affected by current or future
licensing or regulatory requirements. See Exhibit 99, “Risk Factors.”
Web Site Access to Learning
Tree Reports
Learning Tree makes available, free of charge, on its Web site
(http://www.learningtree.com) its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports as soon as reasonably practicable after such material is electronically filed with
the Securities and Exchange Commission. (Information contained on Learning Tree’s Web site is not part of this Annual Report on Form 10-K.)
Learning Tree’s headquarters is located at 6053 West Century
Boulevard, Los Angeles, California 90045. Learning Tree owns a 38,500 square foot office facility which is occupied by the sales, administrative and operations groups of its U.S. subsidiary.
Learning Tree leases all of its other offices and education center classroom facilities. The leases expire at various dates over the next 16 years. Learning Tree may lease
additional facilities in the foreseeable future. Learning Tree also presents its courses at rented hotel and conference facilities and customer sites. Learning Tree typically provides all of the software, hardware and networking systems required for
use in these courses.
Learning Tree presents its classroom courses at Learning Tree Education Centers in Atlanta;
Boston; Chicago; Los Angeles; New York City; the Washington, D.C. area; Ottawa; Toronto; London; Paris; and Stockholm, as well as in rented hotel or conference centers in those and other cities worldwide. During fiscal 2002, Learning Tree opened a
second education center with 12 classrooms in Paris.
9
Learning Tree Education Center classrooms have been custom-designed to
accommodate the technical demands of its computer-based courses, including electronic projection of computer screens, local area networks within the classroom and multimedia presentation capability.
The following table contains certain information regarding Learning Tree’s education centers and offices at September 30, 2002:
| Location (Metropolitan
Area)
|
|
No. of Classrooms
|
|
Total Area in Square
Feet
|
|
| Atlanta, GA |
|
9 |
|
16,903 |
|
| Boston, MA |
|
6 |
|
13,717 |
|
| Chicago, IL |
|
9 |
|
15,779 |
|
| Los Angeles, CA |
|
6 |
|
57,229 |
|
| New York, NY |
|
21 |
|
44,380 |
(a) |
| Washington, DC metropolitan area (4 sites) |
|
36 |
|
119,817 |
|
| Paris, France (2 sites) |
|
27 |
|
58,276 |
|
| London, England (2 sites) |
|
41 |
|
106,394 |
(b) |
| Ottawa, Canada |
|
6 |
|
19,965 |
|
| Toronto, Canada |
|
10 |
|
17,207 |
|
| Stockholm, Sweden |
|
17 |
|
32,130 |
|
| Tokyo, Japan |
|
N/A |
|
1,311 |
|
| Hong Kong |
|
N/A |
|
574 |
|
| |
|
|
|
|
|
| Total |
|
188 |
|
503,682 |
|
| |
|
|
|
|
|
(a) |
|
Excludes 11,600 square feet which Learning Tree subleases to other tenants. |
(b) |
|
Excludes 36,117 square feet which Learning Tree subleases to other tenants. |
Learning Tree is not involved in any pending or threatened legal
proceedings that it believes could reasonably be expected to have a material adverse effect on the financial condition or results of operations of Learning Tree.
| ITEM 4. |
|
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS |
No matters were submitted to a vote of security holders during the
fourth quarter of fiscal 2002 through the solicitation of proxies or otherwise.
10
PART II
| |
|
MARKET FOR REGISTRANT’S COMMON STOCK AND RELATED STOCKHOLDER MATTERS |
Price Range of Common Stock
Learning Tree’s Common Stock trades on the Nasdaq Stock Market under the symbol LTRE. The following table sets forth, for the periods
indicated, the range of high and low sales prices for the Common Stock on the Nasdaq Stock Market:
| |
|
High
|
|
Low
|
| Fiscal 2001 |
|
|
|
|
|
|
| First Quarter |
|
$ |
53.875 |
|
$ |
28.50 |
| Second Quarter |
|
|
59.75 |
|
|
14.50 |
| Third Quarter |
|
|
27.12 |
|
|
19.20 |
| Fourth Quarter |
|
|
25.84 |
|
|
19.75 |
| Fiscal 2002 |
|
|
|
|
|
|
| First Quarter |
|
|
29.49 |
|
|
19.16 |
| Second Quarter |
|
|
28.20 |
|
|
19.74 |
| Third Quarter |
|
|
24.94 |
|
|
17.40 |
| Fourth Quarter |
|
|
18.77 |
|
|
13.55 |
As of December 6, 2002, there were approximately 2,100 holders of
record of the Common Stock.
Volatility of Stock Price
The price of Learning Tree’s Common Stock has fluctuated significantly and may continue to do so in the future. Learning Tree
believes that some of the reasons for past fluctuations in the price of its stock have included: announcements of developments related to Learning Tree’s business; announcements concerning new products or enhancements by Learning Tree or its
competitors; developments in relationships with its customers; market perceptions of new means of delivering training, such as CD-ROMs or the Internet; variations in revenues, gross margins, earnings or other financial results from investors’
expectations; fluctuations in results of operations and general conditions in the economy, the market, and the markets served by Learning Tree’s customers; and delays in introducing new technologies by both Learning Tree’s customers and
technology vendors. In addition, prices in the stock market, particularly for technology-related stocks, have been volatile in recent years. In many cases, the fluctuations have been unrelated to the operating performance of affected companies.
Sales of the Common Stock by officers, directors and employees, especially Learning Tree’s founders could also adversely and unpredictably affect the price of the Common Stock. Additionally, the price could be affected even by the potential for
sales by these persons. There can be no assurance that the market price of the Common Stock will not continue to experience significant fluctuations in the future, including fluctuations that are unrelated to Learning Tree’s performance. See
Exhibit 99, “Risk Factors.”
Dividends
To date, Learning Tree has not paid any cash dividends on its Common Stock and does not anticipate doing so in the foreseeable future. The declaration and payment of
dividends by Learning Tree are subject to the discretion of its Board of Directors and to compliance with applicable laws. Any determination as to the payment of dividends in the future will depend upon, among other things, general business
conditions, the effect such payment would have on Learning Tree’s financial condition and other factors Learning Tree’s Board of Directors may in the future consider to be relevant.
11
| |
|
SELECTED CONSOLIDATED FINANCIAL DATA |
The following selected consolidated financial data of Learning Tree
is qualified in its entirety by reference to, and should be read in conjunction with, the audited consolidated financial statements and notes thereto and other financial data included elsewhere in this Annual Report on Form 10-K. The statement of
operations data set forth below for each of the three years in the period ended September 30, 2002, and the balance sheet data as of September 30, 2001 and 2002, are derived from Learning Tree’s consolidated financial statements which are
included elsewhere herein. The statement of operations data for each of the two years in the period ended September 30, 1999, and the balance sheet data at September 30, 1998, 1999 and 2000, are derived from audited financial statements of Learning
Tree not included herein. The consolidated financial statements for fiscal 2002 have been audited by Ernst & Young LLP, Learning Tree’s independent public accountants, and their report thereon is included elsewhere herein. The consolidated
statements of operations for each of the two years in the period ended September 30, 2001, and the consolidated balance sheets as of September 30, 2001, were audited by Arthur Andersen LLP, Learning Tree’s independent public accountants in
those periods. These historical results are not necessarily indicative of the results to be expected in the future. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
| |
|
Fiscal Year Ended September 30,
|
| |
|
1998
|
|
1999
|
|
2000
|
|
2001
|
|
2002
|
| |
|
(In thousands, except per share data) |
| Statement of Operations Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Revenues |
|
$ |
187,174 |
|
$ |
189,321 |
|
$ |
224,008 |
|
$ |
227,220 |
|
$ |
174,161 |
| Cost of revenues |
|
|
80,016 |
|
|
76,598 |
|
|
80,839 |
|
|
92,805 |
|
|
79,392 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gross profit |
|
|
107,158 |
|
|
112,723 |
|
|
143,169 |
|
|
134,415 |
|
|
94,769 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Course development |
|
|
11,942 |
|
|
19,267 |
|
|
10,294 |
|
|
11,323 |
|
|
9,319 |
| Sales and marketing |
|
|
59,422 |
|
|
54,996 |
|
|
56,603 |
|
|
63,957 |
|
|
50,251 |
| General and administrative |
|
|
22,509 |
|
|
23,720 |
|
|
25,913 |
|
|
26,676 |
|
|
25,426 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total operating expenses |
|
|
93,873 |
|
|
97,983 |
|
|
92,810 |
|
|
101,956 |
|
|
84,996 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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