SYLVAN LEARNING SYSTEMS INC - 10-Q Quarterly Report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

ý		Quarterly Report pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934 for the quarter ended June 30, 2003

or

o		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 0-22844

SYLVAN LEARNING SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

Maryland		52-1492296
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1001 Fleet Street, Baltimore, Maryland		21202
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (410) 843-8000

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 ý. No o.

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes ý. No o.

The registrant had 43,097,301 shares of Common Stock outstanding as of August 4, 2003.

SYLVAN LEARNING SYSTEMS, INC.

INDEX

PART I. - FINANCIAL INFORMATION

	Item 1.	Financial Statements (Unaudited)

		Consolidated Balance Sheets – June 30, 2003 and December 31, 2002

		Consolidated Statements of Operations - Three months ended June 30, 2003 and June 30, 2002

		Consolidated Statements of Operations – Six months ended June 30, 2003 and June 30, 2002

		Consolidated Statements of Cash Flows - Six months ended June 30, 2003 and June 30, 2002

		Notes to Consolidated Financial Statements – June 30, 2003

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

	Item 3.	Quantitative and Qualitative Disclosure of Market Risk

	Item 4.	Controls and Procedures

PART II. - OTHER INFORMATION

	Item 4.	Submission of Matters to a Vote of Security Holders

	Item 6.	Exhibits and Reports on Form 8-K

	SIGNATURE

SYLVAN LEARNING SYSTEMS, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(Dollar and share amounts in thousands)

	June 30, 2003			December 31, 2002
	(Unaudited)			(Restated, see note 4)
Assets
Current assets:
Cash and cash equivalents	$	180,569		$	94,068
Available-for-sale securities	9,957			22,282

Receivables:
Accounts receivable	55,425			42,965
Notes receivable	37,225			11,342
Other receivables	1,909			2,862
	94,559			57,169
Allowance for doubtful accounts	(13,706		)	(5,939		)
	80,853			51,230

Inventory	3,503			2,475
Deferred income taxes	1,563			1,363
Prepaid expenses and other current assets	16,822			21,186
Current assets of discontinued operations	74,733			173,929
Total current assets	368,000			366,533

Notes receivable, less current portion, net of unamortized discount of $13,448	50,127			7,941

Property and equipment:
Land	41,839			38,028
Buildings	172,615			157,834
Construction-in-progress	23,068			14,496
Furniture, computer equipment and software	85,367			76,133
Leasehold improvements	33,875			28,747
	356,764			315,238
Accumulated depreciation	(49,282		)	(42,002		)
	307,482			273,236
Intangible assets:
Goodwill	215,412			176,190
Other intangible assets, net of accumulated amortization of $2,812 and $2,480 at June 30, 2003 and December 31, 2002, respectively	66,885			36,457
	282,297			212,647

Investments in and advances to affiliates	1,147			8,730
Other investments	3,288			10,885
Deferred income taxes	33,791			9,857
Deferred costs, net of accumulated amortization of $5,537 and $4,417 at June 30, 2003 and December 31, 2002, respectively	9,190			6,600
Other assets	13,844			13,946
Long-term assets of discontinued operations	—			55,000
Total assets	$	1,069,166		$	965,375

See accompanying notes to consolidated financial statements.

SYLVAN LEARNING SYSTEMS, INC. AND SUBSIDIARIES

Consolidated Balance Sheets (continued)

(Dollar and share amounts in thousands)

	June 30, 2003		December 31, 2002
	(Unaudited)		(Restated, see note 4)
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	33,857	$	28,310
Accrued expenses	79,287		55,176
Income taxes payable	64,368		12,680
Current portion of long-term debt	18,608		11,194
Due to shareholders of acquired companies	7,103		8,802
Deferred revenue	105,590		76,773
Other current liabilities	2,311		1,672
Net current liabilities of discontinued operations	—		30,648
Total current liabilities	311,124		225,255

Long-term debt, less current portion	117,572		153,543
Due to shareholders of acquired companies, less current portion	31,745		9,538
Other long-term liabilities	17,698		17,098
Total liabilities	478,139		405,434

Commitments and contingent liabilities	—		—

Minority interest	33,907