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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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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): March 6, 2000
Sylvan Learning Systems, Inc.
(Exact Name of Registrant as Specified in Charter)
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<S> <C> <C>
Maryland 0-22844 52-1492296
(State or Other Jurisdiction of Incorporation) (Commission File Number) (IRS Employer Identification No.)
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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)
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Item 2. Acquisition or Disposition of Assets.
On March 6, 2000, Sylvan Learning Systems, Inc. ("Sylvan") announced
the consummation of the sale of its computer-based testing division, known as
Sylvan Prometric. On January 26, 2000, (i) Sylvan entered into a Stock
Purchase Agreement with Prometric, Inc., a Maryland corporation and a wholly-
owned subsidiary of Sylvan ("Prometric"), The Thomson Corporation, a
corporation formed under the laws of Ontario, Canada ("Thomson"), and
Prometric Acquisition Corporation, a Delaware corporation and wholly-owned
subsidiary of Thomson (the "Stock Purchase Agreement"), and (ii) Sylvan I
B.V., a wholly-owned Dutch subsidiary of Sylvan, entered into an Acquisition
Agreement with Dodd Street Holdings B.V., a wholly-owned Dutch subsidiary of
Thomson (the "Acquisition Agreement" and, together with the Stock Purchase
Agreement, the "Agreements"). Pursuant to the Agreements, Sylvan agreed to
sell Prometric for an aggregate purchase price of approximately $775,000,000.
The purchase price remains subject to adjustment upon certain events described
in the Agreements.
The foregoing description of the Agreements and the transactions
contemplated thereby, does not purport to be complete and is qualified in its
entirety by reference to the Agreements, each filed as exhibits to Sylvan's
Form 8-K filed on February 2, 2000. A press release issued by Sylvan on March
6, 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 Prometric as if had occurred on
December 31, 1999.
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The unaudited pro forma consolidated statement of operations data are
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.
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December 31, 1999
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(2) (3)
Consolidated Prometric Pro Forma
Actual Sale Adjustments Pro Forma
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(Amounts in thousands)
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Condensed Balance Sheet :
Cash and cash equivalents $ 20,410 $ - $ - $ 20,410
Available-for-sale securities 10,890 600,000 (122,991) 487,899
Receivables 127,163 (51,696) - 75,467
Other current assets 33,435 (8,752) - 24,683
Property and equipment, net 213,462 (85,742) - 127,720
Intangible assets, net 326,735 (134,563) - 192,172
Other assets 106,097 (49,600) - 56,497
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Total assets $838,192 $ 269,647 $(122,991) $984,848
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Accounts payable and accrued expenses $ 93,249 $ (41,332) $ - $ 51,917
Due to shareholders of acquired companies 22,474 - - 22,474
Long-term debt 151,204 - (122,991) 28,213
Other liabilities 85,087 (8,734) - 76,353
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Total liabilities 352,014 (50,066) (122,991) 178,957
Minority interest 12,085 - - 12,085
Stockholders' equity 474,093 319,713 - 793,806
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Total liabilities and stockholders equity $838,192 $ 269,647 $(122,991) $984,848
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Year Ended December 31, 1999
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(1) (2) (3)
Consolidated Prometric Pro Forma
Actual Sale Adjustments Pro Forma
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(Amounts in thousands, except per share data)
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Condensed Statement of Operations:
Revenues $558,309 $(219,813) $ - $338,496
Direct costs 479,644 (193,677) - 285,967
Other expenses 32,138 (156) - 31,982
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Operating income 46,527 (25,980) - 20,547
Non-operating income (21,081) 479 28,282 7,680
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Income from continuing operations before
income taxes and cumulative effect of
change in accounting principle 25,446 (25,501) 28,282 28,227
Tax benefit (expense) (11,113) 12,169 (11,596) (10,540)
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Income from continuing operations before
cumulative effect of change in accounting
principle $ 14,333 $ (13,332) $ 16,686 $ 17,687
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Earning per common share from continuing
operations:
Basic $ 0.28 $ 0.34
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Diluted $ 0.27 $ 0.33
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Notes to Pro Forma Financial Information (amounts in thousands):
(1) During the year ended December 31, 1999, Sylvan recognized restructuring
costs of $5,127. Additionally, Sylvan recognized significant non-recurring
operating charges, which totaled $10,300. These charges principally related
to asset impairment charges, which resulted from management's focus on
simplification of the business model and a return to the core business
strengths. Losses recorded on disposal of investments also resulted in
$13,400 of non-recurring charges during the year. The cumulative effect of
these significant, unusual charges was to reduce income from continuing
operations before income taxes and cumulative effect of change in
accounting principle by $28,800 in 1999.
(2) The balance sheet has been adjusted to remove the assets and liabilities of
Sylvan Prometric at December 31, 1999 and reflect the receipt of $775,000
of cash from the sale, net of income taxes of $143,000 and transaction
related costs offset by estimated working capital settlements of $32,000.
The final gain from sale after the analysis is complete is not expected to
vary significantly from the pro forma amount. Sylvan has estimated the
domestic and foreign income taxes resulting from the sale based on the
expected allocation of proceeds to subsidiaries that are a party to the
transaction and the tax laws of the jurisdictions in which these
subsidiaries operate.
Available-for-sale securities has been adjusted to reflect the $600,000 of
net cash. Stockholders' equity has been adjusted to reflect the estimated
gain on disposition of $319,713. The statement of operations has been
adjusted to remove the actual results of operations of Sylvan Prometric for
the year ended December 31, 1999.
(3) The balance sheet has been adjusted to reflect the repayment of $122,991 of
outstanding debt on Sylvan's line of credit with the proceeds from the
sale of Sylvan Prometric. The statement of operations has been adjusted to
remove interest expense of $9,202 as a result of the debt repayment at an
assumed average rate of 7.48% and to reflect interest income of $19,080
from investing the excess proceeds from the sale at an assumed rate of 4%.
Taxes were assumed at a rate of 41% for the year.
(c) Exhibits. The following exhibits are filed with this report:
99.01 Press Release, dated March 6, 2000 of Sylvan Learning Systems,
Inc., filed herewith.
[Signature on following page.]
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SIGNATURES
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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/ B. Lee McGee
______________________________________
Name: B. Lee McGee
Title: Executive Vice President and
Chief Financial Officer
Date: March 21, 2000
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EXHIBIT INDEX
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Exhibit Description Page No.
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99.01 Press Release, dated March 6, 2000 of
Sylvan Learning Systems, Inc.,
filed herewith.
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Exhibit 99.01
Monday March 6, 8:01 am Eastern Time
Company Press Release
Sylvan Learning Systems Completes Sale of Prometric Testing Division
BALTIMORE--(BUSINESS WIRE)--March 6, 2000--Sylvan Learning System (NASDAQ:SLVN -
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news) a leading provider of education services, announced today that it has
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completed the sale of its computer-based testing division, Prometric, Inc., to
The Thomson Corporation (TSE:TOC - news) for $775 million in cash, or over $600
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million net of tax and transaction costs.
As previously announced, Sylvan plans to use the proceeds from the sale of
Prometric as follows: approximately $130 million to be used to repay the
company's revolving credit facility; $100 million committed for expansion of the
international university initiative; and additional funds to repurchase the
company's shares at amounts and times the Board determines are appropriate.
The company also plans to commit $220 million in cash to launch an internet
incubator that will focus on bringing emerging internet technology solutions to
the education and training marketplace.
The sale of its testing division is a part of Sylvan's new business strategy.
Announced last week, the new strategy focuses the company's operating business
on providing consumer-oriented education services, while launching an internet
incubator that will concentrate on investing in and starting companies that have
strong potential for market leadership in the education internet space.
"We are very excited as we move forward with our new strategy that we believe
allows for growth and profitability of Sylvan's operating companies while
establishing the leadership position in the internet market for education and
training," said Douglas Becker, the Chairman and CEO of Sylvan Learning
Systems. "Our goal is to become the true 'clicks-and-mortar' leader in the
education industry."
About Sylvan Learning Systems
Sylvan Learning Systems, Inc. (www.sylvan.net) is the leading provider of
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educational services to families, schools and industry. The Sylvan Learning
Centers and Contract Education Services divisions provides personalized
instruction services to K-12 students through direct consumer relationships and
under contract to school systems.
Sylvan provides courses to adult students throughout the world in the areas of
English language, Teacher Training and accredited University offerings through
the Wall Street Institute/ ASPECT, Canter and Sylvan International Universities
subsidiaries.
Through its affiliate, Caliber Learning Network, Inc., Sylvan also has the
ability to distribute world-class adult professional education and training
programs.
This release may include information that could constitute forward-looking
statements made pursuant to the safe harbor provision of the Private Securities
Litigation Reform Act of 1995. Any such forward-looking statements may involve
risk and uncertainties that could cause actual results to differ materially from
any future results encompassed within the forward-looking statements.
Factors that could cause or contribute to such differences include those matters
disclosed in the Company's Security and Exchange Commission filings.
Contact:
Sylvan Learning Systems
Christine Mohrmann, Vice President, Investor Relations
410/843-8732
