<PAGE>
EXHIBIT 99
RISK FACTORS
You should carefully consider the following discussion of various risks and
uncertainties, keeping in mind that they are not the only ones that affect us.
Additional risks which we do not presently consider material, or of which we are
not currently aware, may also have an adverse impact on us.
Among other things, this exhibit contains forward-looking statements that
are based on certain assumptions about future risks and uncertainties. We
believe that our assumptions are reasonable. Nonetheless, it is likely that at
least some of these assumptions will not come true. Accordingly, our actual
results will probably differ from the outcomes contained in any forward-looking
statement, and those differences could be material. Factors that could cause or
contribute to those differences include the ones discussed below, as well as
those discussed elsewhere in this exhibit and in our filings with the Securities
and Exchange Commission.
Common Stock Price Fluctuations
Learning Tree's common stock price has fluctuated significantly since our
initial public offering and may continue to do so in the future.
General Factors. We believe some of the reasons for past fluctuations in
----------------
the price of our stock have included:
. announcements of developments related to our business;
. announcements concerning new products or enhancements by Learning Tree
or our competitors;
. developments in our relationships with our customers;
. market perceptions of new means of delivering training, such as CD-
ROMs or the Internet;
. variations in Learning Tree's revenues, gross margins, earnings or
other financial results from investors' expectations;
. fluctuations in results of our operations and general conditions in
the economy, our market, and the markets served by our customers; and
. the market reaction to the "Y2K" problem, including delays in
introducing new technologies by both our 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 the affected
companies. As a result, the price of our common stock could fluctuate in the
future without regard to our operating performance.
Future Sales of Learning Tree Common Stock. Sales of Learning Tree's
------------------------------------------
common stock by our officers, directors and employees, especially our founders,
could adversely and unpredictably affect the price of our shares. Additionally,
the price could be affected even by the potential for
<PAGE>
sales by these persons. In addition to the approximately 21,748,427 shares
outstanding as of December 7, 2000, we have registered a total of 3,246,780
shares of common stock for issuance under our Stock Option Plans. We cannot
predict the effect which any future sales of our common stock, or the potential
for those sales, will have on our share price.
Fluctuations in Operating Results
Historically, Learning Tree's operating results have fluctuated, and we
expect that fluctuations could continue in the future.
The fluctuations in our past results have resulted from many factors, some
of which are beyond our control. In the future, these or other factors could
have a material adverse impact on Learning Tree's operating results and cause
our stock price to decrease. For example:
Timing of Course Development, and Sales and Marketing Expenditures. We try
-------------------------------------------------------------------
to base expenditures for course development, sales and marketing and other items
on our expectations of future customer demand. If our assumptions prove to be
wrong, and our revenues fall short of our expectations, we may not be able to
adjust our expenditures quickly enough to compensate for a lower revenue base.
This could compound the impact of any revenue shortfall and further affect our
operating results and the price of our stock.
Course Scheduling and Marketing Activities. The timing and content of our
------------------------------------------
courses and our marketing activities can affect the number of participants who
attend our courses. Some of the activities that can contribute to fluctuations
in our operating results include:
. the frequency and availability of our course events;
. the number of weeks in a quarter during which courses can be
conducted;
. the timing, frequency and size of, and the response to, our direct
mail marketing and advertising campaigns;
. the timing of introduction of new course titles; and
. the mix between course events held at customer-sites and course events
held in our education centers and hotels.
Seasonal Factors. Our quarterly revenues and income typically reflect
----------------
seasonal patterns. Generally, our revenue and operating income are greater in
the second half of our fiscal year (April through September) than in the first
half (October through March). This is due in large part to the seasonal spending
patterns of our customers, which are affected by factors such as:
. their budgetary considerations;
. factors specific to their business or industry; and
. weather, holiday and vacation considerations.
We cannot predict whether these seasonal factors or their effects will
change in the future.
Use of Accounting Estimates. The preparation of our financial statements
---------------------------
in conformity with "Generally Accepted Accounting Principles" requires us to
make estimates and assumptions in calculating our financial results. For
example, we currently offer our customers a sales
<PAGE>
discount program called the "Passport Program." After purchasing a Passport, a
customer may attend up to a specified number of courses over a one-year period
at a discounted price. Under the Passport Program, we recognize revenue for each
attendance in one of our courses based upon the selling price of the Passport
and our estimate of the average number of courses a Passport holder will
actually attend. When a Passport expires, we record any difference between the
revenue previously recognized and the Passport selling price. For example, if a
Passport holder attends more courses than we had estimated, we make a negative
adjustment to revenues. We base our estimate of the average number of course
events that a Passport holder will attend on historical trends that may change
in the future. If average passport attendance rates were to increase, we would
have to make negative adjustments to our revenue, which could be significant.
Introductions and Adoption of New Technology. Our customers tend to
--------------------------------------------
increase their training at times when new technology is being introduced. During
periods when no important new technologies are being introduced, demand for our
training courses may decrease, and it could have a material adverse effect on
our operating results and stock price. For example, during 1998 and 1999 many of
our customers deferred new technology installations and training of
professionals because of concerns over the potential "Y2K" issue.
Other Factors. Other factors that may affect our operating results
--------------
include:
. competitive forces within our current and anticipated future markets;
. our ability to attract customers and meet their expectations;
. currency fluctuations and other risks of international operations;
. general economic conditions; and
. differences in the timing of our spending on development and marketing
of courses and receiving revenues from our customers.
All or any of these and similar factors could result in our operating
results differing substantially from the expectations of public market analysts
and investors, which would likely have a material adverse impact on our stock
price.
Risks Associated with Technology Changes
If we do not adequately anticipate or respond to changes in technology, it
could have a material adverse effect on our operating results and stock price.
Changes in technology can affect our business in at least two principal
ways. First, we must anticipate and keep pace with the introduction of new
hardware, software and networking technologies and develop courses that
effectively train customers in the technologies which they will be using.
Second, we must adapt to changes in the technologies by which we can deliver
training to our customers' employees. As a result of technology developments, we
may have to make substantial and unanticipated expenditures to develop new
course titles, or buy new equipment or invest in further course development
software and processes to deliver them. Further, we may not adequately
anticipate or respond successfully to technological changes for many reasons,
including misjudging the impact of technological changes, as well as financial,
technological or other constraints. If we do not adequately anticipate or
respond to changes in
<PAGE>
computer platforms, customer preferences or software technology, it would likely
have a material adverse impact on our operating results and stock price.
Risks Associated with the Introduction of Distance Learning
If we are unsuccessful in developing and implementing a distance learning
strategy, it could have a material adverse effect on our operating results and
stock price.
Although the worldwide market for IT education and training is now
dominated by instructor-led classroom training, the use of technology-based
training, such as Internet-based distance learning, appears to be growing. Many
customers and training providers are exploring distance learning methodologies
using the Internet ("e-learning"). The market for e-learning for IT
professionals is highly fragmented, and we do not know of any established
industry model for growth and profitability. A number of e-learning providers
offer text or computer based training content over the Internet at low cost or
even for free. In contrast, our commitment and investment in the quality and
effectiveness of our training programs means that we would likely market any
Learning Tree e-learning at a significantly higher price. In order for such a
distance learning program to be successful we would need to attract enough
customers who would be willing to pay that price. If we cannot successfully
implement our current or any other distance learning strategy, our operating
results and stock price could be adversely affected.
Accordingly, our future results of operations may depend upon, among other
factors:
. the extent to which the market accepts the Internet as a method of
delivery for IT training;
. our ability to develop or acquire Internet e-learning technologies and
Internet enabled courses for delivery to customers; and
. our ability to market and implement e-learning training and education
that compete effectively against the technology-based training offered
by our competitors.
Competition
If our customers decide that they prefer training offered by new or
existing competitors, it could have a material adverse effect on our operating
results and stock price.
The IT education and training market is highly fragmented, with low
barriers to entry. No single competitor holds a dominant market share. We face
intensifying competition from both established entities and new entries in the
market. Our primary competitors include:
. internal training departments within our current and potential
corporate clients;
. computer hardware and software vendors and their Authorized Training
and Education Center partners;
. independent education and training companies; and
. software systems integrators.
Some of our competitors offer similar course titles and programs at lower
prices. In addition, some competitors have greater financial and other resources
than Learning Tree.
<PAGE>
Recently, we have faced increased competition from companies that offer courses
using materials prepared by computer hardware and software vendors. Some of
these companies, known as Authorized Training and Education Centers, have been
growing in size and expanding the scope of their operations. Additionally,
hardware and software vendors, as well as software systems integrators, may
combine IT education and training with sales of their products or other
services, which could allow them to offer training at lower prices than we do.
Although instructor-led classroom training continues to dominate the
worldwide IT education and training market, technology-based IT education and
training formats, such as Internet-based distance learning, seem to be gaining
acceptance. Accordingly, our future results may also depend on the extent to
which the market will continue to accept instructor-led IT training and on our
ability to develop and market instructor-led courses that compete effectively
against technology-based courses offered by our competitors.
Risks Associated with International Operations
If we do not adequately anticipate and respond to the risks inherent in
international operations, it could have a material adverse effect on our
operating results and stock price.
Significant portions of our revenues are generated by courses conducted
outside the United States.
Foreign Currency Fluctuations. Our consolidated financial statements are
-----------------------------
prepared in U.S. dollars, while the operations of our foreign subsidiaries are
conducted in their respective local currencies. Consequently, changes in
exchange rates can unpredictably and adversely affect our consolidated operating
results, and could result in exchange losses. We do not hedge against the risks
associated with fluctuations in exchange rates. Although we may use hedging
techniques in the future, we may not be able to eliminate or reduce the effects
of currency fluctuations. Thus, exchange rate fluctuations could have a material
adverse impact on our operating results and stock price.
Other Risks Associated with International Operations. Additionally, our
----------------------------------------------------
financial results may be adversely affected by other international risks, such
as:
. difficulties in translating our courses into foreign languages;
. international political and economic conditions;
. changes in government regulation in various countries;
. trade barriers;
. difficulty in staffing our foreign offices, and in training and
retaining foreign instructors;
. adverse tax consequences; and
. costs associated with expansion into new territories.
We expect that international revenues will continue to be a significant
portion of our total revenues. If we do not anticipate and respond to the risks
associated with international operations, it could have a material adverse
effect on our operating results and stock price.
<PAGE>
Dependence on Key Personnel
If we are unable to recruit and retain qualified personnel, it could have a
material adverse effect on our operating results and stock price.
Our success depends in large part on the continued services of our
executive officers, our senior managers and other key personnel. The loss of
these people, especially without advance notice, could have a material adverse
impact on our results of operations. It is also very important that we attract
and retain highly skilled personnel, including course instructors, to
accommodate growth, new course titles and to replace personnel who leave.
Competition for qualified personnel is intense, especially in information
technology industries, and there are a limited number of people with the
requisite knowledge and experience. Under these conditions, we could be unable
to recruit, train, and retain instructors and employees. If we cannot attract
and retain qualified personnel, it could have a material adverse impact on our
operating results and stock price.
Risks Associated with Intellectual Property
If substantial unauthorized use of Learning Tree's products occurs or if we
must defend against infringement claims, it could have a material adverse effect
on our operating results and stock price.
Our success depends in part on our ability to protect our intellectual
property and confidential information. Our course development process and course
titles are proprietary and we rely 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 those proprietary rights. Our course materials generally do not
include any mechanisms to prohibit or prevent unauthorized use. As a result,
someone could copy or otherwise obtain and use our course materials without
authorization, either for educational use or to develop competing courses. In
addition, we operate in countries that do not provide protection of proprietary
rights to the same extent as the United States. Finally, our intellectual
property rights will not prevent competitors from independently developing
similar course titles or delivery methods. If substantial unauthorized use of
Learning Tree's products were to occur, our business and results of operations
could be materially adversely impacted.
We may also have to defend against claims that our current or future
courses infringe on the proprietary rights of others. If such a claim succeeded,
we 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 us or by someone else, could be time-consuming and expensive,
even if we were ultimately to succeed. Accordingly, defending and prosecuting
these claims could have a material adverse effect on our operating results and
stock price.
Risks Associated with Laws and Regulations
Laws and regulations can affect Learning Tree's operations and may limit
our ability to operate in certain states.
<PAGE>
Providers of educational programs to the public must comply with many laws
and regulations of federal, state and international governments. Generally,
Learning Tree is exempt from that type of regulation because we contract with
the employer of the participants in our courses, and we do not participate in
any federal or state student aid or loan programs. However, state laws and
regulations targeting educational providers could affect Learning Tree's
operations and may limit our ability to obtain authorization to operate in
certain states. If Learning Tree had to comply with, or was found in violation
of, a state's current or future licensing or regulatory requirements, we could
be subject to civil or criminal sanctions, including monetary penalties, we
could also be barred from providing educational services in that state. In
addition, laws and regulatory decisions in many areas other than education could
also adversely affect our operations. Complying with current or future legal
requirements could have a material adverse effect on our operating results and
stock price.
Control by Management
Senior management has significant influence over Learning Tree's policies
and affairs and may be in a position to determine the outcome of corporate
actions.
Learning Tree's executive officers and directors collectively own
approximately 39% of its outstanding shares of common stock. Dr. Collins,
Learning Tree's Chairman and Chief Executive Officer, beneficially owns
approximately 20% of Learning Tree's outstanding shares of common stock. Mr.
Garen, our President, beneficially owns approximately 17% of Learning Tree's
outstanding shares of common stock. Consequently, senior management, and Dr.
Collins and Mr. Garen in particular, have significant influence over Learning
Tree's policies and affairs and may be in a position to determine the outcome of
corporate actions requiring stockholder approval. These may include, for
example, the election of directors, the adoption of amendments to our corporate
documents and the approval of mergers and sales of our assets.
Risks Associated with Possible Acquisitions and New Business Ventures
If we cannot successfully implement any future acquisitions or new business
ventures, it could have a material adverse effect on our operating results and
stock price.
On occasion we evaluate business opportunities that appear to fit within
our overall business strategy. We could decide to pursue one or more of these
opportunities by acquisition or internal development. Acquisitions and new
business ventures involve many risks, including:
. the difficulty of integrating acquired technologies, operations and
personnel with our existing operations;
. the difficulty of developing and marketing new products and services;
. the diversion of our management's attention as a result of evaluating,
negotiating and integrating acquisitions or new business ventures;
. our exposure to unforeseen liabilities of acquired companies; and
. the loss of key employees of an acquired operation.
In addition, an acquisition or new business venture could adversely impact
cash flows and/or operating results, and dilute shareholder interests, for many
reasons, including:
<PAGE>
. charges to our income to reflect the amortization of acquired
intangible assets, including goodwill;
. interest costs and debt service requirements for any debt incurred in
connection with an acquisition or new business venture; and
. any issuance of securities in connection with an acquisition or new
business venture which dilutes or lessens the rights of current
Learning Tree common stockholders.
We have had no significant experience in executing and implementing
acquisitions. Although we have implemented new business ventures, those ventures
have not always been successful, and we may not succeed in the future. The risks
associated with acquisitions and new business ventures could have a material
adverse impact on our operating results and stock price.
Risks Associated with Changing Economic Conditions
General domestic and international economic conditions could have a
material adverse effect on our operating results and stock price.
Domestic and/or International Economic Downturns. A significant part of
------------------------------------------------
our revenues comes from Fortune 1000-level companies, and their international
equivalents, and government organizations. Historically, these customers have
reduced their expenditures for external IT training during economic downturns.
If the domestic and/or international economy weakens, demand for our services
may not increase as we planned or could even decline. This could have a material
adverse effect on our operating results and stock price.
Industry-Specific Slowdowns. Our customers generally operate in the
---------------------------
computer, communications, electronics, systems integration, finance, aerospace,
military, manufacturing and energy sectors. If one or more of these industries
experiences a slowdown, it could have a material adverse effect on our operating
results and stock price.
Anti-Takeover Provisions
Certain provisions of Learning Tree's Restated Certificate of
Incorporation, our Bylaws and Delaware law could adversely impact the interests
of Learning Tree's stockholders.
Certain provisions of Learning Tree's Restated Certificate of
Incorporation, our Bylaws and Delaware law could, together or separately,
discourage, delay or prevent a third party from acquiring Learning Tree, even if
doing so might benefit our stockholders. These provisions may also affect the
price investors would receive for their shares of Learning Tree's common stock.
Some examples of these provisions in Learning Tree's Restated Certificate of
Incorporation and Bylaws are:
. the division of our board of directors into three classes;
. the right of our board of directors to issue preferred stock with
rights and privileges which are senior to the common stock, without
prior stockholder approval;
. certain limitations of the rights of stockholders to call a special
meeting of stockholders; and
. the prohibition of stockholder actions by written consent.
<PAGE>
Natural Disasters, External Strikes, and Other External Events
Over the past 26 years, various natural disasters, external labor
disruptions and other adverse external factors have impaired our ability to
conduct our business, resulted in the loss of revenue or otherwise affected our
operating results. When these or other external events occur in the future, they
could have a material adverse effect on our operating results and stock price.
Natural Disasters. Natural disasters can affect our business. For
-----------------
example, severe winter weather has at times prevented our course participants
from traveling to our courses. In these situations, we try to transfer the
course participants to later courses, but we may still lose some potential
revenue. Similarly, both weather and floods have also disrupted the printing and
transportation of the catalogs we use in our direct mail campaigns. The
resulting delays in our mailings may reduce or delay the revenue we realize from
courses listed in those catalogs.
External Strikes. We have had to react to postal, transportation and
------------------
other strikes in the countries where we operate. Postal strikes delay or reduce
the delivery of our direct mail marketing materials, which may result in reduced
enrollments in upcoming course events. Transportation strikes can make it
difficult for our course participants or our instructors to reach course
facilities. Although we try to employ strategies to mitigate the impact of
external strikes, these alternative means are rarely completely effective and
generally increase our costs.
Other External Factors. Other factors outside our control can affect our
-----------------------
operations, including those related to our suppliers and service providers. For
example, disruptions of telephone networks can prevent customers from enrolling
in our courses; disruptions in transportation services can prevent customers
from reaching our facilities, and power outages can prevent us from delivering
courses. Similarly, if commodities (for example, the paper used in the printing
of our catalogs) that we or our customers need become scarce or more expensive,
our operations may be adversely affected.
