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UNITED STATES
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, 1999.
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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
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SYLVAN LEARNING SYSTEMS, INC.
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(Exact name of registrant as specified in its charter)
Maryland 52-1492296
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1000 Lancaster Street, Baltimore, Maryland 21202
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (410) 843-8000
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
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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 $800 million as of March 7, 2000.
The registrant had 50,970,196 shares of Common Stock outstanding as of March
7, 2000.
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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
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<CAPTION>
PAGE REFERENCE
FROM FORM 10-K
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<S> <C>
THE COMPANY:
Report of Independent Auditors.................................................................. 32
Consolidated Balance Sheets as of December 31, 1999 and December 31, 1998....................... 33
Consolidated Statements of Operations for the years ended December 31, 1999, 1998 and
1997.......................................................................................... 35
Consolidated Statements of Stockholders' Equity for the years ended December 31, 1999,
1998 and 1997................................................................................. 36
Consolidated Statements of Cash Flows for the years ended December 31, 1999, 1998
and 1997...................................................................................... 37
Notes to Consolidated Financial Statements...................................................... 38
Audited Financial Statements of Sylvan Learning Systems, Inc. 401(k) Retirement Savings Plan
for the year ended December 31, 1999.......................................................... 65
</TABLE>
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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, 1999 and 1998, and the related statement of changes in net assets
available for benefits for the year ended December 31, 1999. 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 auditing standards generally accepted
in the United States. 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 Plan at
December 31, 1999 and 1998, and the changes in its net assets available for
benefits for the year ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States.
Our audits were performed for the purpose of forming an opinion on the financial
statements taken as a whole. The accompanying supplemental schedule of assets
held for investment purposes at end of year as of December 31, 1999 is presented
for the purpose of additional analysis and is not a required part of the
financial statements but is supplementary information required by the Department
of Labor's Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974. This supplemental schedule is the
responsibility of the Plan's management. The supplemental schedule has been
subjected to the auditing procedures applied in our audits of the financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the financial statements taken as a whole.
Baltimore, Maryland
May 25, 2000
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Sylvan Learning Systems, Inc. 401(k) Retirement Savings Plan
Statements of Net Assets Available for Benefits
December 31
1999 1998
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Assets
Investments $ 34,313,549 $ 18,125,353
Receivables:
Employer's contribution 1,217,818 481,692
Participants' contributions 453,004 352,867
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Total receivables 1,670,822 834,559
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Net assets available for benefits $ 35,984,371 $ 18,959,912
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See accompanying notes.
66
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Sylvan Learning Systems, Inc. 401(k) Retirement Savings Plan
Statement of Changes in Net Assets Available for Benefits
Year ended December 31, 1999
Investment income:
Interest $ 18,278
Dividends 2,156,802
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2,175,080
Transfers from merged plans 4,502,590
Employee salary deferral contributions 6,238,446
Employer contribution 1,217,818
Employee rollover contributions 673,802
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Total additions 14,807,736
Participant withdrawals (2,172,316)
Net realized and unrealized appreciation in
fair value of investments 4,389,039
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Net increase 17,024,459
Net assets available for benefits at beginning of year 18,959,912
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Net assets available for benefits at end of year $ 35,984,371
==============
See accompanying notes.
67
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Sylvan Learning Systems, Inc. 401(k) Retirement Savings Plan
Notes to Financial Statements
1. Significant Accounting Policies
Basis of Accounting
The financial statements of the Sylvan Learning Systems, Inc. (the "Company" or
"Plan Sponsor") Retirement Plan are prepared using the accrual method of
accounting.
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Investment Valuation and Income Recognition
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 approximates 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.
Purchases and sales of securities are recorded on a trade-date basis. Interest
income is recorded on the accrual basis. Dividends are recorded on the ex-
dividend date.
Administration Expenses
All costs and expenses incurred in connection with the administration of the
Plan are paid by the Company.
68
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Sylvan Learning Systems, Inc. 401(k) Retirement Savings Plan
Notes to Financial Statements (continued)
2. 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 of Caliber Learning Network, Inc. (a corporate joint venture 10%
owned by the Company) and effective January 1, 1999, of Experior, LLC (a
corporate joint venture) who have completed 90 days of service. It is subject
to the provisions of the Employee Retirement Income Security Act of 1974
(ERISA). All investment programs are fully participant-directed.
Plan Mergers
In connection with the Company's prior acquisitions of Canter and Associates,
Inc., Aspect, Inc., Pacific Language Associates, Inc., Block Testing Services
L.P., National Assessment Institute, Inc. and Berman, Peverley and Associates,
the 401(k) plans of these entities were merged into the Company's Plan at
various dates between April and September 1999. The combined net assets
transferred into the Plan was $4,502,590.
Contributions
Participants may contribute up to 20% and 15% of their pretax annual
compensation, subject to certain annual limitations imposed by the Internal
Revenue Code, in 1999 and 1998, respectively. 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. The matching contribution percentage for 1999
was 50% of the first 3% and 25% on the next 3% of the participant contribution
and for 1998 it was 25% of the first 6% of the participant contribution.
Additional discretionary contributions may be made at the option of the Company.
There were no additional discretionary contributions made by the Company in
1999.
69
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Sylvan Learning Systems, Inc. 401(k) Retirement Savings Plan
Notes to Financial Statements (continued)
2. Plan Description (continued)
Participant Accounts
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. The benefit to
which a participant is entitled is the benefit that can be provided from the
participant's account.
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 20 percent
per year, after the first year of service. A participant is 100 percent vested
after five years of service.
Investments
Upon enrollment in the Plan, a participant may direct employee contributions in
any of the available investment options. At December 31, 1999, the following
investment options were available: Sylvan Learning Systems, Inc. common stock,
Legg Mason Value Trust, 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 the lesser 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.
70
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Sylvan Learning Systems, Inc. 401(k) Retirement Savings Plan
Notes to Financial Statements (continued)
2. 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 a life annuity, joint and survivor annuity or
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.
3. Investments
During 1999 the Plan's investments (including investments bought, sold as well
as held during the year) appreciated in fair value by $4,389,039, as follows:
Year ended
December 31
1999
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Fair value as determined by quoted market price:
Sylvan Learning Systems, Inc. common stock $ (2,722,212)
Mutual funds 7,111,251
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$ 4,389,039
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71
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Sylvan Learning Systems, Inc. 401(k) Retirement Savings Plan
Notes to Financial Statements (continued)
3. Investments (continued)
Investments that represent 5% or more of fair value of the Plan's net assets are
as follows:
December 31
1999 1998
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Sylvan Learning Systems, Inc. common stock $ 2,306,308 $ 3,943,030
Putnam Growth and Income Fund 6,572,293 4,544,209
Putnam Vista Fund 5,642,123 2,631,343
Putnam OTC and Emerging Growth Fund 10,398,121 2,692,869
Putnam International Growth Fund 4,498,578 1,961,757
Putnam Stable Value Fund 2,149,926 1,363,532
4. Income Tax Status
The Plan has received a determination letter from the Internal Revenue Service
dated June 2, 1997, stating that the Plan is qualified under Section 401(a) of
the Internal Revenue Code (the "Code") and, therefore, the related trust is
exempt from taxation. Once qualified, the Plan is required to operate in
conformity with the Code to maintain its qualification. The Plan Sponsor has
indicated that it will take the necessary steps, if any, to maintain the Plan's
qualified status.
72
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Sylvan Learning Systems, Inc. 401(k) Retirement Savings Plan
EIN: 52-1492296
Plan # 001
Schedule H, Line 4i--
Schedule of Assets Held for Investment Purposes at End of Year
December 31, 1999
<TABLE>
<CAPTION>
Description of Investment
Including Maturity Date,
Identity of Issue, Borrower, Rate of Interest, Par or Current
Lessor or Similar Party Maturity Value Cost Value
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<S> <C> <C> <C>
*Sylvan Learning Systems, Inc. 177,407 shares of common
stock $ 3,826,221 $ 2,306,308
Mutual Funds:
Legg Mason Value Trust 18,204 shares 1,270,254 1,370,117
*Putnam Growth and Income Fund 350,522 shares 7,261,787 6,572,293
*Putnam Income Fund 178,255 shares 1,223,882 1,133,700
*Putnam Vista Fund 323,146 shares 4,268,862 5,642,123
*Putnam OTC and Emerging
Growth Fund 280,954 shares 5,233,621 10,398,121
*Putnam International Growth Fund 151,569 shares 2,910,053 4,498,578
*Putnam Stable Value Fund 2,149,926 shares 2,149,926 2,149,926
*Participant loans $242,383 principal balance,
various rates and maturities - 242,383
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Total investments $ 28,144,606 $ 34,313,549
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</TABLE>
* Party-in-interest
73
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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
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B. Lee McGee, Chief Financial Officer
Date: June 27, 2000
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
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23.01 Consent of Independent Auditors
