<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): October 9, 2000
Sylvan Learning Systems, Inc.
(Exact Name of Registrant as Specified in Charter)
<TABLE>
<S> <C> <C>
Maryland 0-22844 52-1492296
(State or Other Jurisdiction of Incorporation) (Commission File Number) (IRS Employer Identification No.)
</TABLE>
1000 Lancaster Street, Baltimore, Maryland 21202
(Address of Principal Executive Offices) (ZIP Code)
Registrant's telephone number, including area code (410) 843-8000
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
Item 2. Acquisition or Disposition of Assets.
On October 9, 2000, Sylvan Learning Systems, Inc. ("Sylvan") announced
the consummation of the sale of its Aspect English language instruction
business to a management group backed by Warburg Pincus. On September 7,
2000, Sylvan entered into a Stock Purchase Agreement with Sylvan Learning
Systems International, Ltd. ("SLI") and Aspect International Language Schools,
B.V. ("ASPECT"), on one hand, and on the other hand, Optagon Holdings Limited
("Optagon") (the "Agreement"). In connection with the sale, ASPECT
contributed all of its assets and liabilities to Aspect International Language
Schools II, B.V. ("ASPECT II"). Pursuant to the Agreement, Sylvan agreed to
(i) cause ASPECT to sell to Optagon all of the issued and outstanding shares
of capital stock of ASPECT II and (ii) sell all of the issued and outstanding
shares of capital stock of Pacific Language Associates, Inc. for an aggregate
purchase price of approximately $22,000,000 in cash. The purchase price
remains subject to adjustment upon certain events described in the Agreement.
The foregoing description of the Agreement and the transactions
contemplated thereby, does not purport to be complete and is qualified in its
entirety by reference to the Agreement, attached as an exhibit hereto. A
press release issued by Sylvan on October 9, 2000 announcing the consummation
of the sale is attached hereto as Exhibit 99.01 and incorporated by reference
herein.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Not Applicable.
(b) Pro Forma Financial Information. The following unaudited pro
forma consolidated balance sheet data gives effect to the disposition of
Sylvan's Aspect business ("Aspect") as if had occurred on June 30, 2000.
The unaudited pro forma consolidated statement of operations data is not
necessarily indicative of the operating results that would have been achieved
had the transaction actually occurred on January 1, 1999, nor are they
necessarily indicative of future operations. The pro forma adjustments and
the assumptions on which they are based are described in the accompanying
notes to the unaudited pro forma consolidated financial information.
<PAGE>
<TABLE>
<CAPTION>
June 30, 2000
--------------------------------------------------------------------------
(1) (2)
Consolidated Aspect Pro Forma
Actual Sale Adjustments Pro Forma
--------------------------------------------------------------------------
(Amounts in thousands)
<S> <C> <C> <C> <C>
Condensed Balance Sheet :
Cash and cash equivalents $ 421,241 $ (3,450) $ - $ 417,791
Available-for-sale securities 61,774 20,073 81,847
Receivables 83,875 (4,566) - 79,309
Other current assets 29,888 (1,291) - 28,579
Property and equipment, net 123,088 (10,906) - 112,182
Intangible assets, net 211,565 (714) - 210,851
Other assets 75,709 (266) - 75,443
---------- -------- ---------- ----------
Total assets $1,007,140 $ (1,120) $ - $1,006,020
========== ======== ========== ==========
Accounts payable and accrued expenses $ 43,312 $ (4,306) $ - $ 39,006
Due to shareholders of acquired companies 16,194 - - 16,194
Long-term debt 123,999 (4,601) 119,398
Other liabilities 190,577 (14,612) - 175,965
---------- -------- ---------- ----------
Total liabilities 374,082 (23,519) 350,563
Minority interest 21,849 - - 21,849
Stockholders' equity (3) 611,209 22,399 - 633,608
---------- -------- ---------- ----------
Total liabilities and stockholders equity $1,007,140 $ (1,120) $ - $1,006,020
========== ======== ========== ==========
<CAPTION>
Six Months Ended June 30, 2000
--------------------------------------------------------------------------
(1) (2)
Consolidated Aspect Pro Forma
Actual Sale Adjustments Pro Forma
--------------------------------------------------------------------------
(Amounts in thousands, except per share data)
<S> <C> <C> <C> <C>
Condensed Statement of Operations:
Revenues $ 177,773 $(20,007) $ - $ 157,766
Direct costs 157,085 (23,263) - 133,822
Other expenses 13,956 - - 13,956
---------- -------- ---------- ----------
Operating income 6,732 3,256 - 9,988
Non-operating income 3,031 890 502 4,423
---------- -------- ---------- ----------
Income from continuing operations before income
taxes and cumulative effect of change in
accounting principle 9,763 4,146 502 14,411
Tax benefit (expense) (3,905) 32 (201) (4,074)
---------- -------- ---------- ----------
Income from continuing operations before
cumulative effect of change in accounting
principle $ 5,858 $ 4,178 $ 301 $ 10,337
========== ======== ========== ==========
Earning per common share from continuing
operations before cumulative effect of change
in accounting principle:
Basic $0.12 $0.22
Diluted $0.12 $0.21
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31, 1999
--------------------------------------------------------------------------
(1) (2)
Consolidated Aspect Pro Forma
Actual Sale Adjustments Pro Forma
--------------------------------------------------------------------------
(Amounts in thousands, except per share data)
<S> <C> <C> <C> <C>
Condensed Statement of Operations:
Revenues $ 338,496 $(61,446) $ - $ 277,050
Direct costs 285,967 (65,061) - 220,906
Other expenses 31,982 (1,857) - 30,125
---------- -------- ---------- ----------
Operating income 20,547 5,472 - 26,019
Non-operating income (20,602) 1,637 1,004 (17,961)
---------- -------- ---------- ----------
Income from continuing operations before income
taxes and cumulative effect of change in
accounting principle (55) 7,109 1,004 8,058
Tax benefit (expense) 1056 228 (411) 873
---------- -------- ---------- ----------
Income from continuing operations before
cumulative effect of change in accounting
principle $ 1,001 $ 7,337 $ 593 $ 8,931
========== ======== ========== ==========
Earning per common share from continuing
operations before cumulative effect of change
in accounting principle:
Basic $0.02 $0.17
Diluted $0.02 $0.17
</TABLE>
Notes to Pro Forma Financial Information:
(1) Effective January 1, 2000, Sylvan changed the year-end of Aspect, from
September 30 to December 31 to produce a consistent reporting period for the
consolidated entity. As a result of this change in year-end, Aspect's net
results of operations for the three month period ended December 31, 1999 are
reflected as an adjustment to retained earnings on the consolidated balance
sheet as of January 1, 2000. The impact of this change resulted in a decrease
in retained earnings of approximately $5,752. The results of Aspect's
operations for the period October 1, 1999 to December 31, 1999 are summarized
as follows:
Three months ended
December 31, 1999
------------------
Revenues $ 10,709
Direct costs (16,350)
--------
Operating loss (5,641)
Other expense (111)
--------
Loss before income taxes (5,752)
Income tax benefit -
Net loss $ (5,752)
========
<PAGE>
Direct costs for the three months ended December 31, 1999 included
$1,300 of advertising costs, which had been treated as prepaid prior to the
October 1 start of the program term, $1,500 of salaries, travel and other
costs for the relocation of the corporate management offices, which occurred
in the three months ended December 31, 1999, and $400 of goodwill impairment
write-offs related to the closing of two schools, which were announced in the
three months ended December 31, 1999.
(2) The balance sheet has been adjusted to remove the assets and liabilities
of Aspect at June 30, 2000 and reflect the receipt of $22,000 of cash from the
sale, net of transaction related costs of $1,927. The final gain from sale is
not expected to vary significantly from the pro forma amount.
Available for sale securities at June 30, 2000 have been adjusted to
reflect the $20,073 of net cash. Stockholders' equity has been adjusted to
reflect the estimated gain on disposition of $22,399. The statements of
operations have been adjusted to remove the actual results of operations of
Aspect for the year ended December 31, 1999 and the six months ended June 30,
2000.
(3) The statements of operations for the year ended December 31, 1999 and for
the six months ended June 30, 2000 have been adjusted to reflect interest
income of $1,004 and $502, respectively, from investing the excess proceeds
from the sale at an assumed rate of 5%. For the year ended December 31, 1999
and the six months ended June 30, 2000, taxes were assumed at a rate of 41%
and 40%, respectively.
(c) Exhibits. The following exhibits are filed with this report:
2.01 Stock Purchase Agreement, dated as of September 7, 2000, by and
among Sylvan Learning Systems, Inc., Sylvan Learning Systems
International, Ltd., Aspect International Language Schools, B.V.
and Optagon Holdings Limited (schedules and exhibits omitted).
99.01 Press Release, dated October 9, 2000 of Sylvan Learning
Systems, Inc.
[Signature on following page.]
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SYLVAN LEARNING SYSTEMS, INC.
/s/ Robert W. Zentz
------------------------
Name: Robert W. Zentz
Title: Senior Vice President and General Counsel
Date: November 8, 2000
<PAGE>
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Exhibit Description Page No.
------- ----------- --------
<S> <C> <C>
2.01 Stock Purchase Agreement, dated as of September 7, 2000, by
and among Sylvan Learning Systems, Inc., Sylvan Learning
Systems International, Ltd., Aspect International Language
Schools, B.V. and Optagon Holdings Limited (schedules and
exhibits omitted).
99.01 Press Release, dated October 9, 2000 of Sylvan Learning
Systems, Inc.
</TABLE>
