<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
[X] Annual Report pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934 for the fiscal year ended DECEMBER 31, 1997
-----------------
or
[_] 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 (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
1000 LANCASTER STREET, BALTIMORE, MARYLAND 21202
- ------------------------------------------ -----
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (410)843-8000
------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
------------------- -----------------
COMMON STOCK, PAR VALUE $.01 NASDAQ
SECURITIES REGISTERED PURSUANT TO THE SECTION 12(g) OF THE ACT: NONE
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. [_]
The aggregate market value of voting Common Stock held by non-affiliates of the
registrant was approximately $1.2 billion as of March 17, 1998.
The registrant had 29,670,910 shares of Common Stock outstanding as of March 17,
1998.
1
<PAGE>
ITEM 14(a)(1) OF THE REGISTRANT'S FORM 10-K IS HEREBY AMENDED TO READ AS
FOLLOWS:
ITEM 14(a)(1)
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE REFERENCE
FROM FORM 10-K
--------------
<S> <C>
THE COMPANY:
Report of Independent Auditors 29
Consolidated Balance Sheets as of December 31, 1996 and December 31, 1997 30
Consolidated Statements of Operations for the years ended December 31, 1995, 1996 and
1997 32
Consolidated Statements of Stockholders' Equity for the years ended December 31, 1995,
1996 and 1997 33
Consolidated Statements of Cash Flows for the years ended December 31, 1995, 1996
and 1997 34
Notes to Consolidated Financial Statements 35
Audited Financial Statements of Sylvan Learning Systems, Inc. 401(k) Retirement Savings Plan
for the years ended December 31, 1996 and 1997 56
</TABLE>
2
<PAGE>
Report of Independent Auditors
Sylvan Learning Systems, Inc. 401(k) Retirement Savings Plan
Baltimore, Maryland
We have audited the accompanying statements of net assets available for benefits
of the Sylvan Learning Systems, Inc. 401(k) Retirement Savings Plan as of
December 31, 1997 and 1996, and the related statements of changes in net assets
available for benefits for the years then ended. These financial statements are
the responsibility of the Plan's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Sylvan
Learning Systems, Inc. 401(k) Retirement Savings Plan as of December 31, 1997
and 1996, and the changes in its net assets available for benefits for the years
then ended, in conformity with generally accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying supplemental schedules
of assets held for investment purposes as of December 31, 1997 and reportable
transactions for the year then ended, are presented for purposes of complying
with the Department of Labor's Rules and Regulations for Reporting and
Disclosure under the Employee Retirement Income Security Act of 1974, and are
not a required part of the basic financial statements. The supplemental
schedules have been subjected to the auditing procedures applied in our audit of
the basic financial statements and, in our opinion, are fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.
/s/ Ernst & Young LLP
Ernst & Young LLP
June 15, 1998
3
<PAGE>
Sylvan Learning Systems, Inc. 401(k) Retirement Savings Plan
Statements of Net Assets Available for Benefits
<TABLE>
<CAPTION>
DECEMBER 31
1997 1996
--------------------------------
<S> <C> <C>
ASSETS
Investments, at fair value:
Sylvan Learning Systems, Inc. common stock $ 2,367,764 $1,165,770
Mutual funds:
Putnam Growth and Income Fund 3,026,732 714,295
Putnam Income Fund 502,654 212,707
Putnam Vista Fund 1,422,560 649,587
Putnam OTC and Emerging Growth Fund 1,451,242 781,279
Putnam International Growth Fund 1,093,749 562,922
Putnam Stable Value Fund 821,854 622,222
Participant loans 132,026 43,708
--------------------------------
Total investments 10,818,581 4,752,490
Receivables:
Employer's contribution 315,022 247,953
Participants' contributions 233,990 168,185
--------------------------------
Total receivables 549,012 416,138
--------------------------------
Net assets available for benefits $11,367,593 $5,168,628
================================
</TABLE>
See accompanying notes.
4
<PAGE>
Sylvan Learning Systems, Inc. 401(k) Retirement Savings Plan
Statements of Changes in Net Assets Available for Benefits
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996
-------------------------------
<S> <C> <C>
Investment income:
Interest $ 5,158 $ 15,088
Dividends 618,831 244,033
-------------------------------
623,989 259,121
Transfers from merged plans 1,728,244 804,381
Employee salary deferral contributions 2,708,641 2,059,745
Employer contribution 315,022 247,953
Employee rollover contributions 414,717 262,750
-------------------------------
Total additions 5,790,613 3,633,950
Participant withdrawals (384,206) (237,393)
Net realized and unrealized appreciation in fair value
of investments 792,558 191,134
-------------------------------
Net increase 6,198,965 3,587,691
Net assets available for benefits at beginning of year 5,168,628 1,580,937
-------------------------------
Net assets available for benefits at end of year $11,367,593 $5,168,628
===============================
</TABLE>
See accompanying notes.
5
<PAGE>
Sylvan Learning Systems, Inc. 401(k) Retirement Savings Plan
Notes to Financial Statements
1. ASSET TRANSFER
Effective July 1, 1996, Sylvan Learning Systems, Inc. (the "Company") appointed
a new trustee, Putnam Investments, to hold all plan assets. The net assets of
Sylvan Learning Systems, Inc. 401(k) Retirement Savings Plan (the "Plan") held
by ATR, Inc., the previous trustee, totaling $3,641,426, were transferred to
Putnam Investments as of July 1, 1996. Certain plan provisions were amended and
restated in accordance with this transfer.
2. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The financial statements of the Company's Plan are prepared using the accrual
method of accounting.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of increases and decreases in net assets during the period.
Actual results could differ from those estimates.
INVESTMENT VALUATION
Investments are stated at fair value. Sylvan Learning Systems, Inc. common
stock is valued at the last reported sales price on the last business day of the
plan year. Mutual funds are reported at current redemption value. Participant
loans are carried at their unpaid principal balance which represents fair value.
Realized gains or losses on the sale of investments are computed as the
difference between the proceeds received and the average cost of investments
held. The change in the difference between cost and fair value, including
realized gains and losses, is included in the statements of changes in net
assets available for benefits as net appreciation or depreciation in the fair
value of investments.
6
<PAGE>
Sylvan Learning Systems, Inc. 401(k) Retirement Savings Plan
Notes to Financial Statements (continued)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ADMINISTRATION EXPENSES
All costs and expenses incurred in connection with the administration of the
Plan are paid by the Company.
3. PLAN DESCRIPTION
The following description of the Plan provides only general information.
Participants should refer to the Summary Plan Description for a more complete
------------------------
description of the Plan's provisions. Copies of this summary are available from
the Company's Human Resources Department.
GENERAL
The Plan is a defined contribution plan covering substantially all employees of
the Company and, effective November 1, 1996, of Caliber Learning Network, Inc.
(a corporate joint venture 10% owned by the Company) who are age twenty-one or
older and have completed one year of service. It is subject to the provisions
of the Employee Retirement Income Security Act of 1974 (ERISA).
PLAN MERGERS
In connection with the Company's acquisitions of Inroads, Inc. and Carter
Holdings, The ICST Savings & Investment Plan (the "ICST Plan") and the Carter
Holdings 401(k) Plan (the "Carter Plan") were merged into the Plan effective
November 1, 1997 and October 1, 1997, respectively. The ICST Plan's net assets
of $1,628,807 and the Carter Plan's net assets of $99,437 were transferred into
the Plan on November 5, 1997 and October 2, 1997, respectively.
In connection with the Company's acquisition of Remedial Education Diagnostic
Corporation, Inc., the Remedial Education Diagnostic Corporation Retirement Plan
(the "READS Plan") was merged into the Plan effective October 1, 1995. The
READS Plan's net assets of $804,381 were transferred into the Plan on February
1, 1996.
7
<PAGE>
Sylvan Learning Systems, Inc. 401(k) Retirement Savings Plan
Notes to Financial Statements (continued)
3. PLAN DESCRIPTION (CONTINUED)
CONTRIBUTIONS
Participants may contribute up to 15% of their pretax annual compensation,
subject to certain annual limitations imposed by the Internal Revenue Code. In
addition, employees may rollover distributions received from other plans. The
Company makes a discretionary matching contribution equal to a percentage of the
amount of the compensation that the participant elected to contribute up to a
maximum of 6% of the participant's compensation. Additional discretionary
contributions may be made at the option of the Company. The matching
contribution percentage for 1997 and 1996 was 25% of the participant
contribution.
Each participant account is credited with the participant's contribution and an
allocation of (a) the Company's contribution, (b) Plan earnings, and (c)
forfeitures of terminated participants' nonvested accounts. Allocations are
based on participant earnings or account balances, as defined.
VESTING
Participants are immediately vested in their contributions plus earnings
thereon. Vesting in the Company's discretionary contributions, if any, plus
earnings thereon is based on years of continuous service at a rate of 25 percent
per year in years two through five. A participant is 100 percent vested after
five years of credited service.
INVESTMENTS
Upon enrollment in the Plan, a participant may direct employee contributions in
any of the available investment options. At December 31, 1997, the following
investment options were available: Sylvan Learning Systems, Inc. common stock
and the following Putnam Funds: Growth and Income Fund, Income Fund, Vista Fund,
OTC and Emerging Growth Fund, International Growth Fund, and Stable Value Fund.
Participants have the opportunity to change their investment options daily.
PARTICIPANT LOANS
Participants may borrow from their account balances a minimum of $1,000 up to a
maximum of $50,000 or 50% of their vested account balance. Principal and
interest are repaid ratably through payroll deductions over loan terms which
generally do not exceed five years. Hardship distributions are also permitted
from a participant's account.
8
<PAGE>
Sylvan Learning Systems, Inc. 401(k) Retirement Savings Plan
Notes to Financial Statements (continued)
3. PLAN DESCRIPTION (CONTINUED)
PAYMENT OF BENEFITS
On termination of service, a participant may receive a lump sum amount equal to
the vested value of his or her account, or upon death, disability, or
retirement, elect to receive periodic installments in accordance with plan
provisions.
PLAN TERMINATION
Although it has not expressed any intent to do so, the Company has the right to
discontinue its contributions at any time and to terminate the Plan subject to
the provisions of ERISA. In the event of plan termination, participants will
become 100 percent vested in their accounts.
4. INVESTMENTS
During 1997 and 1996 the Plan's investments (including investments bought, sold
and held during the year) appreciated in fair value by $792,558 and $191,134
respectively, as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
------------------------------------
NET APPRECIATION
(DEPRECIATION) IN FAIR VALUE
FAIR VALUE AT
DURING YEAR END OF YEAR
------------------------------------
<S> <C> <C>
Fair value as determined by quoted market price:
Sylvan Learning Systems, Inc. common stock $ 610,263 $ 2,367,764
Mutual funds:
Putnam Growth and Income Fund (102,191) 3,026,732
Putnam Income Fund 4,735 502,654
Putnam Vista Fund 100,861 1,422,560
Putnam OTC and Emerging Growth Fund 127,075 1,451,242
Putnam International Growth Fund 51,815 1,093,749
Putnam Stable Value Fund - 821,854
Fair value as estimated by Plan Administrator:
Participant loans - 132,026
------------------------------------
$ 792,558 $10,818,581
====================================
</TABLE>
9
<PAGE>
Sylvan Learning Systems, Inc. 401(k) Retirement Savings Plan
Notes to Financial Statements (continued)
4. INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
------------------------------------
NET APPRECIATION
(DEPRECIATION) IN FAIR VALUE
FAIR VALUE OF
DURING YEAR END OF YEAR
------------------------------------
<S> <C> <C>
Fair value as determined by quoted market price:
Sylvan Learning Systems, Inc. common stock $103,896 $1,165,770
Mutual funds:
Putnam Growth and Income Fund (25,752) 714,295
Putnam Income Fund (1,686) 212,707
Putnam Vista Fund (31,676) 649,587
Putnam OTC and Emerging Growth Fund (66,898) 781,279
Putnam International Growth Fund 11,655 562,922
Putnam Stable Value Fund - 622,222
Net appreciation of assets through date of transfer 201,595
Fair value as estimated by Plan Administrator:
Participant loans - 43,708
------------------------------------
$191,134 $4,752,490
====================================
</TABLE>
5. TAX STATUS
The Internal Revenue Service has determined and informed the Plan by a letter
dated June 2, 1997 that the Plan and related trust are designed in accordance
with applicable sections of the Internal Revenue Code (IRC), and are therefore
not subject to tax under present income tax laws. The Plan management believes
that the Plan continues to qualify and to operate as designed.
6. RECONCILIATION OF FORM 5500
The financial statements at December 31, 1997 and 1996 differ from Form 5500
filed with the IRS in that net realized gains (losses) and unrealized
appreciation (depreciation) in fair value of investments have been summarized in
the financial statements rather than shown as several categories of net
investment gain (loss) per line 32b of the Form 5500.
10
<PAGE>
Sylvan Learning Systems, Inc. 401(k) Retirement Savings Plan
Notes to Financial Statements (continued)
7. TRANSACTIONS WITH PARTIES-IN-INTEREST
For the years ended December 31, 1997 and 1996, the Plan earned investment
income of $618,831 and $244,033, respectively, on its investments administered
by trustees.
8. YEAR 2000 ISSUE (UNAUDITED)
The Plan Sponsor has developed a plan to be ready for the year 2000 and has
begun determining whether third party service providers have reasonable plans in
place to become year 2000 compliant. The Plan Sponsor currently expects the
project to be substantially complete by early 1999. The Plan Sponsor does not
expect this project to have a significant effect on Plan operations.
11
<PAGE>
Sylvan Learning Systems, Inc. 401(k) Retirement Savings Plan
Notes to Financial Statements (continued)
9. ALLOCATION OF NET ASSETS AVAILABLE FOR BENEFITS TO INVESTMENT PROGRAMS
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-------------------------------------------------------------------------------
SYLVAN
LEARNING PUTNAM PUTNAM PUTNAM
SYSTEMS, INC. FUND FOR PUTNAM PUTNAM OTC AND INTERNATIONAL
COMMON GROWTH INCOME VISTA EMERGING GROWTH
STOCK AND INCOME FUND FUND GROWTH FUND FUND
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets
Investments, at fair value $2,367,764 $3,026,732 $502,654 $1,422,560 $1,451,242 $1,093,749
Employer's contributions receivable 315,022 -- -- -- -- --
Participants' contributions receivable 38,248 47,361 10,993 41,492 50,629 32,066
-------------------------------------------------------------------------------
Net assets available for benefits $2,721,034 $3,074,093 $513,647 $1,464,052 $1,501,871 $1,125,815
===============================================================================
<CAPTION>
PUTNAM
STABLE
VALUE PARTICIPANT
FUND LOANS TOTAL
--------------------------------------------
<S> <C> <C> <C>
Assets
Investments, at fair value $821,854 $132,026 $10,818,581
Employer's contributions receivable - - 315,022
Participants' contributions receivable 13,201 - 233,990
--------------------------------------------
Net assets available for benefits $835,055 $132,026 $11,367,593
============================================
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-------------------------------------------------------------------------------
SYLVAN
LEARNING PUTNAM PUTNAM PUTNAM
SYSTEMS, INC. FUND FOR PUTNAM PUTNAM OTC AND INTERNATIONAL
COMMON GROWTH INCOME VISTA EMERGING GROWTH
STOCK AND INCOME FUND FUND GROWTH FUND FUND
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets
Investments, at fair value $1,165,770 $714,295 $212,707 $649,587 $781,279 $562,922
Employer's contributions receivable 247,953 -- -- -- -- --
Participants' contributions receivable 28,609 31,497 7,000 29,085 37,546 22,551
-------------------------------------------------------------------------------
Net assets available for benefits $1,442,332 $745,792 $219,707 $678,672 $818,825 $585,473
===============================================================================
<CAPTION>
PUTNAM
STABLE
VALUE PARTICIPANT
FUND LOANS TOTAL
--------------------------------------------
<S> <C> <C> <C>
Assets
Investments, at fair value $622,222 $43,708 $4,752,490
Employer's contributions receivable -- -- 247,953
Participants' contributions receivable 11,897 -- 168,185
--------------------------------------------
Net assets available for benefits $634,119 $43,708 $5,168,628
============================================
</TABLE>
12
<PAGE>
Sylvan Learning Systems, Inc. 401(k) Retirement Savings Plan
Notes to Financial Statements (continued)
10. ALLOCATION OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS TO INVESTMENT
PROGRAMS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
----------------------------------------------------------------------------------------------
SYLVAN PUTNAM
LEARNING PUTNAM OTC AND PUTNAM PUTNAM
SYSTEMS, INC. FUND FOR PUTNAM PUTNAM EMERGING INTERNATIONAL STABLE
COMMON GROWTH INCOME VISTA GROWTH GROWTH VALUE
STOCK AND INCOME FUND FUND FUND FUND FUND
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Interest $ -- $ -- $ -- $ -- $ -- $ -- $ --
Dividends -- 391,330 22,024 106,770 36 63,648 35,023
----------------------------------------------------------------------------------------------
-- 391,330 22,024 106,770 36 63,648 35,023
Transfers from merged plans -- 1,367,648 173,932 71,417 -- 13,646 101,601
Employee salary deferral
contributions 442,756 548,246 127,252 480,311 586,072 371,193 152,811
Employer contribution 315,022 -- -- -- -- -- --
Employee rollover contributions 21,625 136,619 12,715 73,579 87,360 82,569 250
----------------------------------------------------------------------------------------------
Total additions 779,403 2,443,843 335,923 732,077 673,468 531,056 289,685
Participant withdrawals (65,715) (57,490) (15,414) (62,561) (73,735) (47,419) (61,872)
Net realized and unrealized
appreciation/ (depreciation) in
fair value of investments 610,263 (102,191) 4,735 100,861 127,075 51,815 --
Interfund transfers (45,249) 44,139 (31,304) 15,003 (43,762) 4,890 (26,877)
----------------------------------------------------------------------------------------------
Net increase 1,278,702 2,328,301 293,940 785,380 683,046 540,342 200,936
Net assets available for benefits
at beginning of year 1,442,332 745,792 219,707 678,672 818,825 585,473 634,119
----------------------------------------------------------------------------------------------
Net assets available for benefits
at end of the year $2,721,034 $3,074,093 $513,647 $1,464,052 $1,501,871 $1,125,815 $835,055
==============================================================================================
<CAPTION>
--------------------------
PARTICIPANT
LOANS TOTAL
--------------------------
<S> <C> <C>
Investment income:
Interest $ 5,158 $ 5,158
Dividends -- 618,831
--------------------------
5,158 623,989
Transfers from merged plans -- 1,728,244
Employee salary deferral
contributions -- 2,708,641
Employer contribution -- 315,022
Employee rollover contributions -- 414,717
--------------------------
Total additions 5,158 5,790,613
Participant withdrawals -- (384,206)
Net realized and unrealized
appreciation/ (depreciation) in
fair value of investments -- 792,558
Interfund transfers 83,160 --
--------------------------
Net increase 88,318 6,198,965
Net assets available for benefits
at beginning of year 43,708 5,168,628
--------------------------
Net assets available for benefits
at end of the year $132,026 $11,367,593
==========================
</TABLE>
13
<PAGE>
Sylvan Learning Systems, Inc. 401(k) Retirement Savings Plan
Notes to Financial Statements (continued)
10. ALLOCATION OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS TO INVESTMENT
PROGRAMS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
----------------------------------------------------------------------------------
SYLVAN FIDELITY FIDELITY
LEARNING MFS ADVISOR ADVISOR
SYSTEMS, INC. EMERGING EURO PACIFIC EQUITY GROWTH AMERICAN
COMMON GROWTH GROWTH PORTFOLIO OPPORTUNITIES BALANCED
STOCK FUND FUND GROWTH FUND PORTFOLIO FUND
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Interest $ 1,752 $ -- $ -- $ 2,030 $ -- $ 1,178
Dividends 1,624 -- 5,735 -- -- 6,687
-----------------------------------------------------------------------------------
3,376 -- 5,735 2,030 -- 7,865
Employee salary deferral
contributions 339,758 173,683 96,528 181,952 173,934 107,823
Employer contribution 247,953 -- -- -- -- --
Employee rollover contributions 22,770 9,458 584 3,654 810 853
-----------------------------------------------------------------------------------
Total additions 613,857 183,141 102,847 187,636 174,744 116,541
Withdrawals (16,197) (4,651) (3,426) (2,912) (1,952) (4,400)
Net appreciation/(depreciation) in
fair value of investments 196,730 41,767 9,207 29,525 22,648 5,614
READS Transfer 29,379 110,981 39,315 135,278 131,017 153,808
Interfund transfers 258,089 26,299 (1,347) (687) (361) (5,373)
-----------------------------------------------------------------------------------
Net increase (decrease) 1,081,858 357,537 146,596 348,840 326,096 266,190
Net assets available for benefits at
beginning of year 360,474 220,979 123,339 229,503 236,967 174,202
-----------------------------------------------------------------------------------
Net assets available for benefits 1,442,332 578,516 269,935 578,343 563,063 440,392
Transfer from ATR to Putnam -- (578,516) (269,935) (578,343) (563,063) (440,392)
-----------------------------------------------------------------------------------
Net assets available for benefits at
end of the year $1,442,332 $ -- $ -- $ -- $ -- $ --
===================================================================================
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
-------------------------------------------------------------------------------------
SHORT
ALEX BROWN FIRST COLONY TERM PUTNAM
CASH GROUP DEPOSIT MONEY FUND FOR PUTNAM PUTNAM
RESERVE ADMINISTRATION MARKET GROWTH INCOME VISTA
FUND CONTRACT ACCOUNT AND INCOME FUND FUND
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Interest $ 920 $ 6,307 $ -- $ -- $ -- $ --
Dividends 3,379 -- 73,849 48,658 2,580 37,384
-------------------------------------------------------------------------------------
4,299 6,307 73,849 48,658 2,580 37,384
Employee salary deferral
contributions 54,185 49,803 -- 183,871 42,763 181,257
Employer contribution -- -- -- -- -- --
Employee rollover contributions -- 584 -- 44,492 7,022 45,962
-------------------------------------------------------------------------------------
Total additions 58,484 56,694 73,849 277,021 52,365 264,603
Withdrawals (2,606) (1,666) -- (14,143) (5,795) (4,049)
Net appreciation/(depreciation) in
fair value of investments -- -- -- (25,752) (1,686) (31,676)
READS Transfer 148,705 55,898 -- -- -- --
Interfund transfers (22,594) (2,123) (3,002,048) 508,666 174,823 449,794
-------------------------------------------------------------------------------------
Net increase (decrease) 181,989 108,803 (2,928,199) 745,792 219,707 678,672
Net assets available for benefits at
beginning of year 61,470 145,688 -- -- -- --
-------------------------------------------------------------------------------------
Net assets available for benefits 243,459 254,491 (2,928,199) 745,792 219,707 678,672
Transfer from ATR to Putnam (243,459) (254,491) 2,928,199 -- -- --
-------------------------------------------------------------------------------------
Net assets available for benefits at
end of the year $ -- $ -- $ -- $745,792 $219,707 $678,672
=====================================================================================
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
----------------------------------------------------------------------
PUTNAM PUTNAM PUTNAM
OTC AND INTERNATIONAL STABLE
EMERGING GROWTH VALUE PARTICIPANT
GROWTH FUND FUND FUND LOANS TOTAL
----------------------------------------------------------------------
<S> <C> <C> <S> <C> <C>
Investment income:
Interest $ -- $ -- $ -- $ 2,901 $ 15,088
Dividends 51,277 7,632 5,228 -- 244,033
----------------------------------------------------------------------
51,277 7,632 5,228 2,901 259,121
Employee salary deferral
contributions 249,660 138,123 86,405 -- 2,059,745
Employer contribution -- -- -- -- 247,953
Employee rollover contributions 67,682 53,948 4,931 -- 262,750
----------------------------------------------------------------------
Total additions 368,619 199,703 96,564 2,901 2,829,569
Withdrawals (14,051) (8,662) (152,883) -- (237,393)
Net appreciation/(depreciation) in
fair value of investments (66,898) 11,655 -- -- 191,134
READS Transfer -- -- -- -- 804,381
Interfund transfers 531,155 382,777 690,438 12,492 --
----------------------------------------------------------------------
Net increase (decrease) 818,825 585,473 634,119 15,393 3,587,691
Net assets available for benefits at
beginning of year -- -- -- 28,315 1,580,937
----------------------------------------------------------------------
Net assets available for benefits 818,825 585,473 634,119 43,708 5,168,628
Transfer from ATR to Putnam -- -- -- -- --
----------------------------------------------------------------------
Net assets available for benefits at
end of the year $ 818,825 $ 585,473 $ 634,119 $43,708 $5,168,628
======================================================================
</TABLE>
14
<PAGE>
Supplemental Schedules
<PAGE>
Sylvan Learning Systems, Inc. 401(k) Retirement Savings Plan
EIN: 52-1492296
Plan # 001
Line 27a--Schedule of Assets Held for Investment Purposes
December 31, 1997
<TABLE>
<CAPTION>
DESCRIPTION OF INVESTMENT INCLUDING
MATURITY DATE,
IDENTITY OF ISSUE, BORROWER, RATE OF INTEREST, PAR OR MATURITY CURRENT
LESSOR OR SIMILAR PARTY VALUE COST VALUE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sylvan Learning Systems, Inc.** 60,712 shares of Common Stock $1,494,214 $ 2,367,764
Mutual Funds:**
Putnam Growth and Income Fund 154,899 shares 3,159,522 3,026,732
Putnam Income Fund 70,697 shares 500,109 502,654
Putnam Vista Fund 119,845 shares 1,359,513 1,422,560
Putnam OTC and Emerging
Growth Fund 90,083 shares 1,377,817 1,451,242
Putnam International Growth
Fund 65,612 shares 1,038,804 1,093,749
Putnam Stable Value Fund 821,854 shares 821,854 821,854
Participant loans $132,026 principal balance, various
rates and maturities -- 132,026
---------------------------------------
Total investments $9,751,833 $10,818,581
=======================================
</TABLE>
** Party-in-interest
15
<PAGE>
Sylvan Learning Systems, Inc. 401(k) Retirement Savings Plan
EIN: 52-1492296
Plan # 001
Line 27d--Schedule of Reportable Transactions
Year ended December 31, 1997
<TABLE>
<CAPTION>
(H) CURRENT
VALUE OF ASSET
ON
(A) IDENTITY OF PARTY (C) PURCHASE (D) SELLING (G) COST OF TRANSACTION (I) NET GAIN
INVOLVED (B) DESCRIPTION OF ASSETS PRICE PRICE ASSET DATE OR (LOSS)
- ---------------------------------------------------------------------------------------------------------------------------------
Category (i)--series of transactions in excess of 5% of plan assets
- -------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Putnam** Growth & Income $1,221,276 $ -- $1,221,276 $1,221,276 $ --
Putnam** Growth & Income -- 171,760 166,500 171,760 5,260
Putnam** Income 199,197 -- 199,197 199,197 --
Putnam** Income -- 87,101 86,572 87,101 529
Putnam** Vista 715,380 -- 715,380 715,380 --
Putnam** Vista -- 113,768 107,388 113,768 6,380
Putnam** OTC & Emerging Growth 713,065 -- 713,065 713,065 --
Putnam** OTC & Emerging Growth -- 170,177 181,974 170,177 (11,797)
Putnam** International Growth 572,436 -- 572,436 572,436 --
Putnam** International Growth -- 107,069 98,439 107,069 8,630
Putnam** Stable Value 413,065 -- 413,065 413,065 --
Putnam** Stable Value -- 309,019 309,019 309,019 --
* Sylvan Learning Systems
common stock 801,372 -- 801,372 801,372 --
* Sylvan Learning Systems
common stock -- 209,637 141,998 209,637 67,639
</TABLE>
* Transactions made on the market.
There were no category (i), (ii), or (iv) reportable transactions during 1997.
Columns (e) and (f) are not applicable.
** Party-in-interest
16
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Sylvan Learning Systems, Inc.
By /s/ B. Lee McGee
-------------------------------------.
B. Lee McGee, Chief Financial Officer
Date June 29, 1998
-------------
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ----------- -------------------------------
23.01 Consent of Independent Auditors
<PAGE>
EXHIBIT 23.01
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the following Registration
Statements of our report dated June 15, 1998, with respect to the financial
statements of Sylvan Learning Systems, Inc. 401(k) Retirement Savings Plan
included in this Annual Report (Form 10-K/A), as amended, for the year ended
December 31, 1997.
REGISTRATION STATEMENTS ON FORM S-3
Registration Number Date Filed
- ------------------- ----------
33-92014 May 8, 1995
33-92852 May 30, 1995
333-1674 February 26, 1996
333-16111 November 14, 1996
333-21261 February 6, 1997
333-26633 May 7, 1997
333-31273 July 15, 1997
333-39535 November 5, 1997
333-43355 December 29, 1997
333-46747 February 23, 1998
333-48997 March 31, 1998
333-50993 April 24, 1998
REGISTRATION STATEMENTS ON FORM S-8
Name Registration Number Date Filed
- ---- ------------------- ----------
1987 - 1991 Employee Stock
Option Plan 33-77384 April 6, 1994
1993 Director Stock Option
Plan 33-77386 April 6, 1994
1993 Employee Stock
Option Plan 33-77390 April 6, 1994
1993 Management Stock
Option Plan 33-77388 April 6, 1994
1997 Employee Stock
Purchase Plan 333-21963 February 18, 1997
/s/ Ernst & Young LLP
- ---------------------
Ernst & Young LLP
Baltimore, Maryland
June 29, 1998
