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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES ACT OF 1934
For the quarterly period ended APRIL 30, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
For the transition period from to
----------- ------------
Commission file number 0-26040
COMPUTER LEARNING CENTERS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 36-3501869
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
11350 RANDOM HILLS ROAD, SUITE 240
FAIRFAX, VIRGINIA 22030
(Address of principal executive offices) (Zip Code)
(703) 359-9333
(Registrant's telephone number, including area code)
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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at May 31, 1996
----- ---------------------------
Common Stock, $.01 par value 4,329,515
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COMPUTER LEARNING CENTERS, INC.
INDEX
PAGE
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements. 3
Consolidated Balance Sheets. 3
Consolidated Statements of Operations. 4
Consolidated Statements of Cash Flows. 5
Notes to Consolidated Financial Statements. 6
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. 8
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings. 15
ITEM 2. Changes in Securities. 15
ITEM 3. Defaults Upon Senior Securities. 15
ITEM 4. Submission of Matters to a Vote of Security 15
Holders.
ITEM 5. Other Information. 15
ITEM 6. Exhibits and Reports on Form 8-K. 15
SIGNATURES 16
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PART I -- FINANCIAL INFORMATION
ITEM 1. Financial Statements.
COMPUTER LEARNING CENTERS, INC.
Consolidated Balance Sheets
(dollar amounts in thousands, except per share amounts)
<TABLE>
<CAPTION>
APRIL 30, 1996 JANUARY 31, 1996
-------------- ----------------
(unaudited)
ASSETS:
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 8,425 $ 8,260
Accounts receivable, net of allowance for doubtful accounts
of $1,680 and $1,507, respectively 18,736 19,095
Prepaid expenses and other current assets 2,630 2,280
-------- -------
Total current assets 29,791 29,635
-------- -------
Fixed assets, net 5,330 4,434
Intangible assets, net of amortization 3,320 3,410
Other long-term assets 4,004 2,329
-------- -------
Total assets $42,445 $39,808
-------- -------
-------- -------
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY:
<S> <C> <C>
Current liabilities:
Trade accounts payable $ 483 $ 958
Accrued employee expenses 1,164 1,333
Accrued other expenses 2,699 1,968
Deferred revenues 18,015 16,834
-------- -------
Total current liabilities 22,361 21,093
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Other long-term liabilities 1,726 1,559
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Total liabilities 24,087 22,652
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Stockholder's equity:
Common stock, $.01 par value, 10,000,000 authorized
shares, 4,329,515 shares issued and outstanding 43 43
Additional paid-in capital 15,749 15,749
Less - Subscription note receivable for 70,649 common shares
at $9.43 per share (666) (666)
Net unrealized gain on securities available for sale 206 211
Retained earnings 3,026 1,819
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Total stockholders' equity 18,358 17,156
-------- -------
Total liabilities and stockholders' equity $42,445 $39,808
-------- -------
-------- -------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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COMPUTER LEARNING CENTERS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(dollar amounts in thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
FOR THE THREE-MONTH PERIOD ENDED APRIL 30,
------------------------------------------
1996 1995
---- -----
<S> <C> <C>
Revenues $14,006 $ 10,885
Costs and expenses:
Cost of instruction and services 7,539 6,301
Selling and promotional 2,485 1,885
General and administrative 1,185 933
Provision for doubtful accounts 748 796
Amortization of intangibles 90 90
--------- -----------
12,047 10,005
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Income before interest 1,959 880
Interest (income) expense, net (104) 189
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Income before income taxes and
discontinued operations 2,063 691
Provision for income taxes 856 337
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Income from continuing operations before
discontinued operations 1,207 354
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Loss from discontinued operations, net of
applicable income taxes -- (1,264)
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Net income (loss) $1,207 $ (910)
--------- -----------
--------- -----------
Earnings per share:
Income per share from continuing operations, actual-1996;
pro forma-1995 $0.27 $0.13
Pro forma loss per share from discontinued operations-1995 -- ($0.46)
--------- -----------
Net income (loss) per share, actual-1996; pro forma-1995 $0.27 ($0.33)
--------- -----------
--------- -----------
Weighted average number of shares outstanding, actual-1996;
pro forma-1995 4,409,222 2,740,405
--------- -----------
--------- -----------
Supplemental pro forma income
per share from continuing operations-1995 $0.11
-----------
Supplemental pro forma weighted
average number of shares outstanding-1995 4,165,275
-----------
-----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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COMPUTER LEARNING CENTERS, INC.
Consolidated Statements of Cash Flows
(dollar amounts in thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
FOR THE THREE-MONTH PERIOD ENDED APRIL 30,
------------------------------------------
1996 1995
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 1,207 $ (910)
Adjustments to reconcile net income (loss) to
cash provided by operating activities:
Provision for doubtful accounts 748 796
Depreciation 407 311
Amortization of intangible and other assets 90 90
Changes in net assets and liabilities:
Accounts receivable (389) (752)
Prepaid expenses and other current assets (325) (669)
Net assets of discontinued operations -- 2,564
Other long-term assets (1,675) 229
Trade accounts payable (475) 498
Accrued employee expenses (169) (50)
Accrued other expenses 731 (147)
Deferred revenues 1,181 660
Other long-term liabilities 167 (30)
-------- --------
Cash provided by operating activities 1,498 2,590
-------- --------
Cash flows from investing activities:
Capital expenditures (1,303) (424)
Increase in restricted cash -- (1,100)
Perkins matching contributions -- (17)
Product development (30) --
-------- --------
Cash used for investing activities (1,333) (1,541)
-------- --------
Cash flows from financing activities:
Borrowings from long-term debt -- 6,225
Repayments of long-term debt -- (10,883)
-------- --------
Cash used for financing activities -- (4,658)
-------- --------
Net increase (decrease) in cash and cash equivalents 165 (3,609)
Cash and cash equivalents, beginning of year 8,260 5,453
-------- --------
Cash and cash equivalents, end of year $8,425 $1,844
-------- --------
-------- --------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
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COMPUTER LEARNING CENTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. The interim consolidated financial statements include the accounts of
Computer Learning Centers, Inc., formerly Comprehensive Learning Concepts, Inc.
(the "Company"), and, for the quarter ended April 30, 1995 the discontinued
operations of Blessing/White Inc. and Comprehensive Learning Concepts (UK)
Limited, which were spun off to stockholders at the public offering date (see
Note 3). This financial information reflects all adjustments, consisting only
of normal recurring adjustments, that are, in the opinion of management,
necessary for a fair statement of the results for the interim periods presented.
2. In conjunction with the Company's initial public offering (see Note 3), the
Company effected the repurchase of certain shares of its Class B Preferred
Stock, all shares of its Class C Preferred Stock and all of the Common Stock
Warrants. Shares of Class B and Class C Preferred Stock were repurchased at
their book value and the Common Stock Warrants were purchased for an aggregate
price of $986,000, or approximately $5.24 per share purchasable thereunder. The
Company issued subordinated notes aggregating $4,111,400 in consideration of
these repurchases, which amounts were repaid from the proceeds of the offering.
In conjunction with the Company's initial public offering, the Company
transferred $500,000 cash and its shares of UK Ltd and Mohr to Blessing/White,
cancelled a related note receivable from Blessing/White, distributed pro rata
the outstanding common stock of Blessing/White to the holders of common stock of
the Company and distributed pro rata the outstanding preferred stock of
Blessing/White to the holders of the preferred stock of the Company.
3. On June 7, 1995, the Company completed an initial public offering of
2,200,000 shares of the Company's Common Stock at a price of $8.00 per share.
An additional 90,000 shares were sold on July 6, 1995 pursuant to the exercise
of the underwriters' over allotment at a price of $8.00 per share. The Company
received total net proceeds, after deduction of expenses and underwriting
discounts and commissions payable by the Company, of approximately $14.8 million
from the sale of the 2,290,000 shares. After repayment of Company debt, net
proceeds to the Company from the sale of such 2,290,000 shares were $1.3
million.
In conjunction with the initial public offering, a .3139959 reverse stock
split became effective on May 31, 1995. The accompanying financial statements
have been restated to reflect the reverse stock split. In addition, upon the
completion of the initial public offering, all outstanding shares of Preferred
Stock were converted into 1,826,205 shares of Common Stock.
4. Earnings (loss) per common and common equivalent share (pro forma for the
quarter ended April 30, 1995) is computed using the weighted average number of
common stock and common equivalent shares outstanding during the period. Common
equivalent shares consist of stock options issued under various benefit plans.
The treasury stock method was used to measure the dilutive effect and common
equivalent shares were determined using the weighted average market price.
5. Supplemental pro forma income per share from continuing operations is equal
to supplemental pro forma income from continuing operations divided by the
supplemental pro forma weighted
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average number of shares outstanding. Supplemental pro forma income from
continuing operations is derived by adjusting historical income from continuing
operations to give effect to the reduction of interest expense ($96,000 net of
applicable tax for the quarter ended April 30, 1995) relating to the repayment
as of February 1, 1995 of long-term indebtedness totalling $9.5 million. The
number of shares used in the computation of supplemental pro forma income per
share from continuing operations is based upon the number of shares of common
stock and common stock equivalents, using the treasury stock method, after
giving effect to (i) the repurchase transactions referred to in Note 2, (ii) the
recapitalization referred to in Note 2 and 3 above, and (iii) the conversion of
the Company's outstanding preferred stock referred to in Note 3, increased by
the estimated amount of additional shares required to be sold at the initial
public offering price to repay such indebtedness and the subordinated notes
payable to affiliates of two of the Company's preferred stockholders.
7
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ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
This report on Form 10-Q contains forward-looking statements. For this
purpose, any statements contained herein that are not statements of historical
fact may be deemed to be forward-looking statements. Without limiting the
foregoing, the words "believes", "anticipates", "plans", "excepts" and similar
expressions are intended to identify forward-looking statements. There are a
number of important factors that could cause the Company's actual results to
differ materially from those indicated by such forward-looking statements.
These factors include, without limitation, those set forth below under the
caption "Certain Factors That May Affect Future Results."
RESULTS OF OPERATIONS
The following table sets forth consolidated statement of operations data of
the Company expressed as a percentage of net revenues for the periods indicated:
THREE MONTHS ENDED APRIL 30,
-----------------------------
1996 1995
---- ----
Revenues 100.0% 100.0%
Costs and expenses:
Cost of instruction and services 53.8 57.9
Selling and promotional 17.7 17.3
General and administration 8.5 8.6
Provision for doubtful accounts 5.3 7.3
Amortization of intangibles 0.7 0.8
---- -----
Total costs and expenses 86.0 91.9
---- -----
Income before interest expense 14.0 8.1
Interest (income) expense, net (0.7) 1.7
----- -----
Income from continuing operations before
income taxes and discontinued operations 14.7 6.4
Provision for income taxes 6.1 3.1
---- -----
Income from continuing operations 8.6% 3.3%
---- -----
THREE MONTHS ENDED APRIL 30, 1996 ("1996") COMPARED WITH THE THREE MONTHS
ENDED APRIL 30, 1995 ("1995")
Revenues increased by 28.4% to $14.0 million in 1996 from $10.9 million in 1995
due primarily to an increase in enrollments from 1995 to 1996 and the growing
popularity of the Company's longer programs, including Associate Degree
programs. Revenues from Professional Development Services ("PDS") increased
21.0% to $369,000 in 1996 from $305,000 in 1995 due primarily to an increase in
the number of students trained and students being trained in higher tuition
value programs.
Student enrollment for the three months ended April 30, 1996 was 1,964, a 17.5%
increase from the prior period. Student enrollment at all of the Company's
Learning Centers which have been open for more than one year increased 4.2%,
yielding an increase in same Center student population of 9.8%. Ending student
population at April 30, 1996 and 1995 was 5,062 and 4,416 respectively, an
increase of 14.6%.
8
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Instruction costs and services increased by 19.0% to $7.5 million in 1996 from
$6.3 million in 1995 primarily due to the direct costs necessary to support the
increase in the student population and the opening of three new Learning
Centers. These direct costs consist primarily of faculty and staff compensation
and related benefits necessary to support the growth of the business.
Instruction costs and services as a percentage of revenues decreased to 53.8% in
1996 from 57.9% in 1995 due to greater revenues being spread over the fixed
costs related to instructional services.
Selling and promotional expenses increased by 31.6% to $2.5 million in 1996 from
$1.9 million in 1995 due primarily to increased marketing and advertising to
support the growth in enrollments. This increase relates primarily to the
three new Learning Centers operating during the first quarter of fiscal 1997
which accounted for $547,000 or 91.0% of the increase in selling and promotional
expenses. Selling and promotional expenses as a percentage of revenues
increased to 17.7% in 1996 from 17.3% in 1995.
General and administrative expenses increased $252,000 or 27.0% for the quarter
ended April 30, 1996 as compared to the quarter ended April 30, 1995. The
expense increase was due primarily to increased salaries and related benefits
associated with supporting the growth of the business. General and
administrative expense as a percentage of revenues equalled 8.5% in 1996
compared to 8.6% in 1995.
Provision for doubtful accounts decreased by $48,000 to $748,000 in 1996 from
$796,000 in 1995. Primary factors relating to this decrease are continued
improvements in student financial aid processing and collection activities and
an increase in the student body retention rate. Additionally, a change in the
July 1, 1994 federal refund policy and its effect on accounts receivable due
from withdrawn students also contributes to this decrease.
Under a regulation that became effective July 1, 1994, the Learning Centers
were unable to retain any Title IV Program funds awarded to a student
withdrawing prior to reaching the midpoint of his or her program or of the
first academic year of his or her program and such student was individually
responsible for the cost of training owed to the institution after application
of the relevant refund calculation. This change in U. S. Department of
Education ("Department") refund requirements significantly increased the
accounts receivable from withdrawn students, which also increased the risk of
collection and resulted in increases in the provision for doubtful accounts
in 1995.
The Department issued guidance effective April 1, 1995 modifying of the July 1,
1994 regulation and enabling the Company to retain portions of the federal
financial aid of students who withdraw prior to the program or academic year
midpoint. The improvements discussed above as well as this modification
resulted in the decrease in the provision for doubtful accounts in 1996.
Provision for doubtful accounts as a percentage of revenues equalled 5.3% in
1996 compared to 7.3% in 1995.
Amortization of intangibles equalled $90,000 in 1996 and 1995 as there has been
no change in the gross amount of the Company's only remaining intangible asset.
The asset consists of the Department of Education certification, which has a
remaining life of approximately nine years.
9
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The Company realized net interest income of $104,000 in 1996, compared to net
interest expense of $189,000 in 1995 primarily as a result of the repayment of
debt from the proceeds of the initial public offering and the interest generated
by invested cash balances.
Income from continuing operations increased to $1.2 million in 1996 from
$354,000 in 1995 primarily due to increased enrollments and student population
and improved utilization of fixed instructional costs.
Net income increased to $1.2 million in the first quarter of 1996 from a loss of
$910,000 due primarily to the spin off of the discontinued operations effective
with the initial public offering. Discontinued operations is represented by
operations that were spun off to stockholders immediately prior to the
completion of the initial public offering.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents increased by $165,000 for the three-
month period ended April 30, 1996. Cash generated from operations in the first
three months of the fiscal year as compared to the prior year period decreased
by approximately $1.1 million due primarily to the transfer of net assets of
discontinued operations effective with the initial public offering. Excluding
cash flow provided by discontinued operations, cash provided from continuing
operations would have increased by approximately $208,000 in 1996 versus 1995.
Capital expenditures increased to $1.3 million in 1996 from $424,000 in 1995
primarily as a result of purchasing the necessary capital equipment for three
new Learning Centers operating during the first quarter of fiscal 1997. As of
April 30, 1996, the Company had outstanding approximately $500,000 of fixed
asset purchase orders.
The Company believes that current balances of cash and cash equivalents and cash
provided from operations is sufficient to fund its operating needs and capital
spending for the foreseeable future.
STUDENT LOAN DEFAULTS
The Chicago Learning Center's published federal fiscal year ("FY") 1993
student loan cohort default rate ("cohort default rate") exceeds 25% which,
if accurate, would result in three consecutive years of default rates that
exceed the Department's 25% threshold. Management believes the published
rates, calculated by the Department, are likely to contain errors. The
Company has submitted an appeal of the FY 1992 rate pursuant to the
Department's procedures and the Company plans to exercise its additional
appeal rights to challenge the accuracy of all three relevant cohort default
rates.
Depending on the ultimate resolution of those appeals, the Chicago
Learning Center's eligibility to participate in the Federal Family Education
Loan programs ("FFEL") could be subject to termination. The Chicago Learning
Center will remain eligible to participate in all Title IV Programs pending
the resolution of such cohort default rate appeals. The Company cannot
predict when the Department might decide the Chicago Learning Center's
appeals or the outcome of any such appeals.
On May 6, 1996, the Company received the FY 1994 preliminary cohort default
rates for the Chicago and Philadelphia Learning Centers; the preliminary
figures were 19.9% and 27.2%, respectively. The Department issues preliminary
default rates to allow institutions the opportunity to review and, if necessary,
challenge the student loan default data to ensure its accuracy before the final
rates are published. These FY 1994 preliminary default rates are still subject
to final determination by the Department and the Company cannot predict either
the outcome or timing of the final determination by the Department. However,
the Company believes that final cohort default rates for FY 1994 will be issued
in late 1996.
10
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Based upon recent Department decisions, as well as certain litigation, the
Company believes that FY 1994 will be considered the most recent fiscal year for
which data are available. As a result of the Chicago Learning Center's
preliminary cohort default rate for FY 1994 being below 25%, the Company
believes that such preliminary FY 1994 rate may be sufficient for the Chicago
Learning Center to retain its eligibility regardless of the outcome of its prior
year appeals. The Company cannot predict when the Department might determine
the Chicago Learning Center's appeals or the outcome of any such appeals.
The Company's Philadelphia Learning Center's preliminary cohort default rate for
FY 1994, if accurate, would result in three consecutive years of default rates
that exceed the 25% threshold. The Company has appealed or plans to appeal, if
necessary, the accuracy of all three relevant cohort default rates and the
Philadelphia Learning Center will remain eligible to participate in Title IV
programs pending the resolution of all such appeals. In June 1995, the
Department changed its methodology used to calculate when certain loans default.
This change in methodology, which was retroactively applied to the FY 1993
cohort default rate, has been challenged on several grounds in a lawsuit filed
in the District Court of New York by a coalition of New York proprietary
schools. Based upon its internal records, the Company believes that the FY 1994
cohort default rate would be less than 25% if such rate were calculated under
the old methodology. The Company cannot predict when the department might
determine the Philadelphia Learning Center's appeals or the eventual outcome of
the aforementioned litigation.
SUBSEQUENT EVENT
The Company has a $5.0 million secured line of credit with a bank to be used for
working capital purposes. The interest rate is the bank's prime rate plus 1.0%
with a .25% annual fee paid on the unused portion of the line. Up to $2.0
million of the line can be used for expenses associated with new Learning Center
openings. The line of credit had expired on May 15, 1996 but was subsequently
extended through July 15, 1996 to allow the Company to negotiate a new credit
facility.
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
The following factors, among others, could cause actual results to differ
materially from those contained in forward looking statements made in this
Report on Form 10-Q and presented elsewhere by management from time to time.
POTENTIAL ADVERSE EFFECTS OF REGULATION
As educational institutions that participate in various federal and state
financial aid programs, the Company and the Learning Centers are subject to
extensive governmental regulation. In particular, the Higher Education Act of
1965, as amended (the "HEA"), and the regulations promulgated thereunder,
subject the Company, the Learning Centers and all other higher education
institutions eligible to participate in the various Title IV Programs to
significant regulatory scrutiny. The termination or material limitation of the
ability of the Company or any of the Learning Centers to participate in the
Title IV Programs would have a material adverse effect on the Company.
Because certain statutory and regulatory provisions impose significant
requirements on the Company and the Learning Centers and because the agency
administering these regulations, the United States Department of Education, has
not fully developed administrative interpretations of certain of the statutory
and regulatory provisions, it is not clear how the requirements imposed by
11
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statute and regulations will be applied and interpreted. In addition, changes in
or new interpretations of the HEA, its implementing regulations or other
applicable laws, rules or regulations could have a material adverse effect on
the accreditation, authorization to operate in various states, permissible
activities or costs of doing business of the Company or one or more of the
Learning Centers. The failure to maintain or renew any required regulatory
approvals, accreditations or authorizations by the Company or any of the
Learning Centers would have a material adverse effect on the Company.
The violation of federal requirements governing participation in the Title
IV Programs or of state or accrediting agency requirements governing the
provision of educational services by the Company or any Learning Center could
result in the restriction or loss by the Company or a Learning Center of its
ability to participate in government funding programs or to offer education and
training programs. Any such loss or restriction would have a material adverse
effect on the Company. Furthermore, current statutes or regulations or statutory
or regulatory standards that become effective in the future may be applied or
interpreted by the government in ways that will delay or change the Company's
expansion plans or otherwise adversely affect the operation of the Learning
Centers and their participation in the Title IV Programs. In addition, all
government-provided student financial aid programs, including the Title IV
Programs, are subject to the effects of federal and state budgetary processes
and the possible elimination or consolidation of the Department of Education,
and there can be no assurance that government funding for the financial aid
programs in which the Company's students participate will continue to be
available or be maintained at current levels. The loss of funding or a reduction
in funding levels for the Title IV Programs would have a material adverse effect
on the Company.
CONTROL BY GENERAL ATLANTIC ENTITIES; POTENTIAL ADVERSE REGULATORY EFFECTS OF
CHANGE OF CONTROL
General Atlantic Corporation and certain of its affiliates (the "General
Atlantic Entities") currently own approximately 39% of the Company's Common
Stock. Consequently, the General Atlantic Entities have significant influence
over the policies and affairs of the Company and are in a position to determine
the outcome of corporate actions requiring stockholder approval, including the
election of directors, the adoption of amendments to the Company's Amended and
Restated Certificate of Incorporation and the approval of mergers and sales of
the Company's assets. Because of the control position of the General Atlantic
Entities, any disposition of Common Stock by the General Atlantic Entities or
issuance of stock by the Company that results in a loss of control by the
General Atlantic Entities may have material adverse consequences for the Company
under applicable federal and state regulations and accrediting agency
requirements, including potential loss of eligibility to participate in the
Title IV Programs. Upon a change in ownership resulting in a change of control
of the Company, as defined in the HEA and the Department of Education's
regulations, each Learning Center would lose its eligibility to participate in
the Title IV Programs for an indeterminate period of time while it applies to
regain eligibility, with the likely loss of a portion of its Title IV funding
during the re-approval period. A change of control also would have significant
regulatory consequences for the Company at the state level and could affect the
accreditation of the Learning Centers.
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COMPETITION
The postsecondary adult education and training market is highly fragmented,
with no single institution or company holding a dominant market share. The
Company competes for students with vocational and technical training schools,
degree-granting colleges and universities, continuing education programs and
commercial training programs, some of whom have significantly greater financial
resources than the Company. Certain public and private colleges may offer
programs similar to those of the Learning Centers at a lower tuition cost due in
part to government subsidies, foundation grants, tax-deductible contributions or
other financial resources not available to proprietary institutions.
DEPENDENCE ON NEW PROGRAMS; RISKS ASSOCIATED WITH CHANGES IN TECHNOLOGY AND
GROWTH
The market for the Company's programs and services is characterized by
rapidly-changing requirements and characteristics, and the Company's ability to
develop and offer new programs and services and to open new locations is subject
to extensive state and federal regulation and accrediting agency requirements.
If the Company is unable, for financial, regulatory or other reasons, to develop
and offer new programs and services in a timely manner in response to changes in
the industry, or if programs and services offered by the Company fail to gain or
maintain widespread commercial acceptance, the Company's business may be
materially and adversely affected.
The Company offers training programs and services for rapidly-changing
information technology. The introduction of information products embodying new
technologies and the emergence of new information system standards or services
may adversely affect the Company's ability to market its programs and services.
This may require the Company to make substantial expenditures to develop new
programs and services and to acquire new faculty, equipment and facilities. If
the Company is unable, for financial, regulatory or other reasons, to make those
expenditures or acquisitions, the Company's business may be materially and
adversely affected.
The Company's ability to meet its future operating and financial goals will
depend upon the Company's ability to successfully implement its growth strategy,
which will include the introduction of new locations as well as the potential
acquisition of assets and programs complementary to the Company's operations.
The Company's success in this area will depend on its ability to successfully
integrate such new locations, assets and businesses. There can be no assurance
that the Company will be able to effectively implement or manage expansion, and
any failure to manage growth effectively or any delays in expansion would have a
material adverse effect on the Company's business and results of operations.
DEPENDENCE UPON KEY EMPLOYEES
The Company's success depends to a significant extent upon the continued
service of its executive officers and other key personnel. None of the Company's
executive officers or key employees is subject to an employment or non-
competition agreement. The loss of the services of any of its executive officers
or other key employees could have a material adverse effect on the Company. The
Company's future success will depend in part upon its continuing ability to
attract and retain highly qualified personnel. There can be no assurance that
the Company will be successful in attracting and retaining such personnel.
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GENERAL
Because of these and other factors, past financial performance should not
be considered an indicator of future performance. Investors should not use
historical trends to anticipate future results and should be aware that the
trading price of the Company's common stock may be subject to wide fluctuations
in response to quarter-to-quarter variations in operating results, general
conditions in the education and training industry, changes in earnings estimates
and recommendations by analysts or other events.
14
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PART II -- OTHER INFORMATION
ITEM 1. Legal Proceedings.
Not applicable.
ITEM 2. Changes in Securities.
Not applicable.
ITEM 3. Defaults Upon Senior Securities.
Not applicable.
ITEM 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
ITEM 5. Other Information.
Not applicable.
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
A list of exhibits required to be filed as part of this report
is set forth in the Index to Exhibits, which immediately
precedes such exhibits and is incorporated herein by reference.
(b) Reports on Form 8-K
None.
15
<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, thereunto duly authorized.
COMPUTER LEARNING CENTERS, INC.
BY:
-----------------------------
CHARLES L. COSGROVE
VICE PRESIDENT AND CHIEF FINANCIAL
OFFICER (PRINCIPAL FINANCIAL
OFFICER)
Date: June 13, 1996
16
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. FILING DESCRIPTION PAGE NO. IN THIS FILING
- - ------------------ ----------- -------------------------
<C> <S> <C>
3.1 Second Amended and Restated Certificate of Incorporated by reference to
Incorporation of the Registrant. Exhibit 3.3 of the Registrant's
Report on Form 10-Q filed July 14,
1995 (the "Form 10-Q")
3.2 Amended and Restated Bylaws of the Registrant. Incorporated by reference to
Exhibit 3.4 of the Registrant's
Form S-1 Registration Statement as
amended, filed March 29, 1995
(No. 33-90716)(the "Form S-1")
4.1 Form of Certificate for Shares of the Incorporated by reference to Exhibit
Registrant's Common Stock. 4.1 of the Form S-1
10.1 1995 Stock Incentive Plan, as amended
by the Board of Directors on March 23, 1996. Page 18
11.1 Statement re Computation of Per Share Earnings Page 28
27 Financial Data Schedule Page 29
</TABLE>
17
<PAGE>
EXHIBIT 10.1
COMPUTER LEARNING CENTERS, INC.
1995 Stock Incentive Plan as amended by the Board of Directors on March 23, 1996
Section 1. PURPOSE
The purpose of this 1995 Stock Incentive Plan (the "Plan") is to advance
the interests of Computer Learning Centers, Inc. by enhancing its ability to
attract and retain key employees, consultants and others who are in a position
to contribute to the Company's future growth and success.
Section 2. DEFINITIONS
"Award" means any Option, Stock Appreciation Right, Performance Share,
Restricted Stock or Unrestricted Stock awarded under the Plan.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Committee" means a committee of not less than two members of the Board
appointed by the Board to administer the Plan, provided that if and when the
Common Stock is registered under Section 12 of the Securities Exchange Act of
1934, each member of the Committee shall be a "disinterested person" within the
meaning of Rule 16b-3 under the Securities Exchange Act of 1934 ("Rule 16b-3").
"Common Stock" or "Stock" means the Common Stock, $.01 par value per
share, of the Company.
"Company" means Computer Learning Centers, Inc. and, except where the
context otherwise requires, all present and future subsidiaries of the Company
as defined in Sections 424(f) of the Code.
"Designated Beneficiary" means the beneficiary designated by a
Participant, in a manner determined by the Board, to receive amounts due or
exercise rights of the Participant in the event of the Participant's death. In
the absence of an effective designation by a Participant, Designated Beneficiary
shall mean the Participant's estate.
"Fair Market Value" means, with respect to Common Stock or any other
property, the fair market value of such property as determined by the Board in
good faith or in the manner established by the Board from time to time.
"Incentive Stock Option" means an option to purchase shares of Common
Stock awarded to a Participant under Section 6 which is intended to meet the
requirements of Section 422 of the Code or any successor provision.
"Nonstatutory Stock Option" means an option to purchase shares of Common
Stock awarded to a Participant under Section 6 which is not intended to be an
Incentive Stock Option.
18
<PAGE>
"Option" means an Incentive Stock Option or a Nonstatutory Stock Option.
"Participant" means a person selected by the Board to receive an Award
under the Plan.
"Performance Shares" mean shares of Common Stock which may be earned by
the achievement of performance goals awarded to a Participant under Section 8.
"Reporting Person" means a person subject to Section 16 of the
Securities Exchange Act of 1934 or any successor provision.
"Restricted Period" means the period of time selected by the Board
during which shares subject to a Restricted Stock Award may be repurchased by or
forfeited to the Company.
"Restricted Stock" means shares of Common Stock awarded to a Participant
under Section 9.
"Stock Appreciation Right" or "SAR" means a right to receive any excess
in Fair Market Value of shares of Common Stock over the exercise price awarded
to a Participant under Section 7.
"Unrestricted Stock" means shares of Common Stock awarded to a
Participant under Section 9(c).
Section 3. ADMINISTRATION
The Plan will be administered by the Board. The Board shall have
authority to make Awards and to adopt, amend and repeal such administrative
rules, guidelines and practices relating to the Plan as it shall deem advisable
from time to time, and to interpret the provisions of the Plan. The Board's
decisions shall be final and binding. No member of the Board shall be liable
for any action or determination relating to the Plan made in good faith. To the
extent permitted by applicable law, the Board may delegate to one or more
executive officers of the Company the power to make Awards to Participants who
are not Reporting Persons and all determinations under the Plan with respect
thereto, provided that the Board shall fix the maximum amount of such Awards to
be made by such executive officers and a maximum amount for any one Participant.
To the extent permitted by applicable law, the Board may appoint a Committee to
administer the Plan and, in such event, all references to the Board in the Plan
shall mean such Committee or the Board. All decisions by the Board or the
Committee pursuant to the Plan shall be final and binding on all persons having
or claiming any interest in the Plan or in any Award.
Section 4. ELIGIBILITY
All of the Company's employees, officers, directors, consultants and
advisors who are expected to contribute to the Company's future growth and
success, other than persons who have irrevocably elected not to be eligible, are
eligible to be Participants in the Plan. Incentive Stock Options may be awarded
only to persons eligible to receive Incentive Stock Options under the Code.
Subject to adjustment as provided in Section 5(b) below, the maximum number of
shares with respect to which awards may be granted to any employee under the
Plan shall not exceed 100,000 shares of Common Stock during any calendar year.
For the purpose of calculating such maximum number, (a) an option shall continue
to be treated as outstanding notwithstanding its repricing, cancellation or
expiration and (b) the repricing of an outstanding option or the issuance of a
new option in
19
<PAGE>
substitution for a cancelled option shall be deemed to constitute the grant of a
new additional option separate from original grant of the option that is
repriced or cancelled.
Section 5. STOCK AVAILABLE FOR AWARDS
(a) Subject to adjustment under subsection (b) below, Awards may be
made under the Plan for up to 486,820 shares of Common Stock. If any Award in
respect of shares of Common Stock expires or is terminated unexercised or is
forfeited for any reason or settled in a manner that results in fewer shares
outstanding than were initially awarded, the shares subject to such Award or so
surrendered, as the case may be, to the extent of such expiration, termination,
forfeiture or decrease, shall again be available for award under the Plan,
subject, however, in the case of Incentive Stock Options, to any limitation
required under the Code. Shares issued under the Plan may consist in whole or
in part of authorized but unissued shares or treasury shares.
(b) In the event that the Board, in its sole discretion, determines
that any stock dividend, extraordinary cash dividend, recapitalization,
reorganization, merger, consolidation, split-up, spin-off, combination or other
similar transaction affects the Common Stock such that an adjustment is required
in order to preserve the benefits or potential benefits intended to be made
available under the Plan, then the Board, subject, in the case of Incentive
Stock Options, to any limitation required under the Code, shall equitably adjust
any or all of (i) the number and kind of shares in respect of which Awards may
be made under the Plan, (ii) the number and kind of shares subject to
outstanding Awards, and (iii) the award, exercise or conversion price with
respect to any of the foregoing, and if considered appropriate, the Board may
make provision for a cash payment with respect to an outstanding Award, provided
that the number of shares subject to any Award shall always be a whole number.
(c) The Board may grant Awards under the Plan in substitution for stock
and stock based awards held by employees of another corporation who concurrently
become employees of the Company as a result of a merger or consolidation of the
employing corporation with the Company or a Subsidiary or the acquisition by the
Company or a subsidiary of property or stock of the employing corporation. The
substitute Awards shall be granted on such terms and conditions as the Board
considers appropriate in the circumstances. The shares which may be delivered
under such substitute Awards shall be in addition to the maximum number of
shares provided for in Section 5(a) only to the extent that the substitute
Awards are both (i) granted to persons whose relationship to the Company does
not make (and is not expected to make) them Reporting Persons; and (ii) granted
in substitution for awards issued under a plan approved, to the extent then
required under Rule 16b-3, by the stockholders of the entity which issued such
predecessor awards.
Section 6. STOCK OPTIONS
(a) GENERAL.
(i) Subject to the provisions of the Plan, the Board may award Incentive
Stock Options and Nonstatutory Stock Options, and determine the number of shares
to be covered by each Option, the option price therefor and the conditions and
limitations applicable to the exercise of the Option. The terms and conditions
of Incentive Stock Options shall be subject to and comply with Section 422 of
the Code, or any successor provision, and any regulations thereunder.
(ii) The Board shall establish the exercise price at the time each Option
is awarded. In the case
20
<PAGE>
of Incentive Stock Options, such price shall not be less than 100% of the Fair
Market Value of the Common Stock on the date of award.
(iii) Each Option shall be exercisable at such times and subject to such
terms and conditions as the Board may specify in the applicable Award or
thereafter. The Board may impose such conditions with respect to the exercise
of Options, including conditions relating to applicable federal or state
securities laws, as it considers necessary or advisable.
(iv) Options granted under the Plan may provide for the payment of the
exercise price by delivery of cash or check in an amount equal to the exercise
price of such Options or, to the extent permitted by the Board at or after the
award of the Option, by (A) delivery of shares of Common Stock of the Company
owned by the optionee for at least six months (or such shorter period as is
approved by the Board), valued at their Fair Market Value, (B) delivery of a
promissory note of the optionee to the Company on terms determined by the Board,
(C) delivery of an irrevocable undertaking by a broker to deliver promptly to
the Company sufficient funds to pay the exercise price or delivery of
irrevocable instructions to a broker to deliver promptly to the Company cash or
a check sufficient to pay the exercise price, (D) payment of such other lawful
consideration as the Board may determine, or (E) any combination of the
foregoing.
(v) The Board may provide for the automatic award of an Option upon the
delivery of shares to the Company in payment of the exercise price of an Option
for up to the number of shares so delivered.
(vi) The Board may at any time accelerate the time at which all or any part
of an Option may be exercised.
(b) INCENTIVE STOCK OPTIONS.
Options granted under the Plan which are intended to be Incentive
Stock Options shall be subject to the following additional terms and conditions:
(i) All Incentive Stock Options granted under the Plan shall, at the time
of grant, be specifically designated as such in the option agreement covering
such Incentive Stock Options. The Option exercise period shall not exceed ten
years from the date of grant.
(ii) If any employee to whom an Incentive Stock Option is to be granted
under the Plan is, at the time of the grant of such option, the owner of stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company (after taking into account the attribution of stock
ownership rule of Section 424(b) and of the Code), then the following special
provisions shall be applicable to the Incentive Stock Option granted to such
individual:
(x) The purchase price per share of the Common Stock
subject to such Incentive Stock Option shall not be less than 110% of the Fair
Market Value of one share of Common Stock at the time of grant; and
(y) The option exercise period shall not exceed five years
from the date of grant.
21
<PAGE>
(iii) For so long as the Code shall so provide, options granted to any
employee under the Plan (and any other incentive stock option plans of the
Company) which are intended to constitute Incentive Stock Options shall not
constitute Incentive Stock Options to the extent that such options, in the
aggregate, become exercisable for the first time in any one calendar year for
shares of Common Stock with an aggregate Fair Market Value (determined as of
the respective date or dates of grant) of more than $100,000.
(iv) No Incentive Stock Option may be exercised unless, at the time of such
exercise, the Participant is, and has been continuously since the date of grant
of his or her Option, employed by the Company, except that:
(x) an Incentive Stock Option may be exercised within the
period of three months after the date the Participant ceases to be an
employee of the Company (or within such lesser period as may be
specified in the applicable option agreement), PROVIDED, that the
agreement with respect to such Option may designate a longer exercise
period and that the exercise after such three-month period shall be
treated as the exercise of a Nonstatutory Stock Option under the Plan;
(y) if the Participant dies while in the employ of the
Company, or within three months after the Participant ceases to be
such an employee, the Incentive Stock Option may be exercised by the
Participant's Designated Beneficiary within the period of one year
after the date of death (or within such lesser period as may be
specified in the applicable Option agreement); and
(z) if the Participant becomes disabled (within the meaning
of Section 22(e)(3) of the Code or any successor provision thereto)
while in the employ of the Company, the Incentive Stock Option may be
exercised within the period of one year after the date of death (or
within such lesser period as may be specified in the Option
agreement).
For all purposes of the Plan and any Option granted hereunder, "employment"
shall be defined in accordance with the provisions of Section 1.421-7(h) of the
Income Tax Regulations (or any successor regulations). Notwithstanding the
foregoing provisions, no Incentive Stock Option may be exercised after its
expiration date.
Section 7. STOCK APPRECIATION RIGHTS
(a) The Board may grant Stock Appreciation Rights entitling
recipients on exercise of the SAR to receive an amount, in cash or Stock or a
combination thereof (such form to be determined by the Board), determined in
whole or in part by reference to appreciation in the Fair Market Value of the
Stock between the date of the Award and the exercise of the Award. A Stock
Appreciation Right shall entitle the Participant to receive, with respect to
each share of Stock as to which the SAR is exercised, the excess of the share's
Fair Market Value on the date of exercise over its Fair Market Value on the date
the SAR was granted. The Board may also grant Stock Appreciation Rights that
provide that, following a change in control of the Company (as defined by the
Board at the time of the Award), the holder of such SAR will be entitled to
receive, with respect to each share of Stock subject to the SAR, an amount equal
to the excess of a specified value (which may include an average of values) for
a share of Stock during a period preceding such change in control over the Fair
Market Value of a share of Stock on the date the SAR was granted.
(b) Stock Appreciation Rights may be granted in tandem with, or
independently of,
22
<PAGE>
Options granted under the Plan. A Stock Appreciation Right granted in tandem
with an Option which is not an Incentive Stock Option may be granted either at
or after the time the Option is granted. A Stock Appreciation Right granted
in tandem with an Incentive Stock Option may be granted only at the time the
Option is granted.
(c) When Stock Appreciation Rights are granted in tandem with
Options, the following provisions will apply:
(i) The Stock Appreciation Right will be exercisable only at such time or
times, and to the extent, that the related Option is exercisable and will be
exercisable in accordance with the procedure required for exercise of the
related Option.
(ii) The Stock Appreciation Right will terminate and no longer be
exercisable upon the termination or exercise of the related Option, except that
a Stock Appreciation Right granted with respect to less than the full number of
shares covered by an Option will not be reduced until the number of shares as to
which the related Option has been exercised or has terminated exceeds the number
of shares not covered by the Stock Appreciation Right.
(iii) The Option will terminate and no longer be exercisable upon the
exercise of the related Stock Appreciation Right.
(iv) The Stock Appreciation Right will be transferable only with the
related Option.
(v) A Stock Appreciation Right granted in tandem with an Incentive Stock
Option may be exercised only when the market price of the Stock subject to the
Option exceeds the exercise price of such option.
(d) A Stock Appreciation Right not granted in tandem with an Option
will become exercisable at such time or times, and on such conditions, as the
Board may specify.
(e) The Board may at any time accelerate the time at which all or any
part of the SAR may be exercised.
Section 8. PERFORMANCE SHARES
(a) The Board may make Performance Share Awards entitling recipients
to acquire shares of Stock upon the attainment of specified performance goals.
The Board may make Performance Share Awards independent of or in connection with
the granting of any other Award under the Plan. The Board in its sole
discretion shall determine the performance goals applicable under each such
Award, the periods during which performance is to be measured, and all other
limitations and conditions applicable to the awarded Performance Shares;
provided, however, that the Board may rely on the performance goals and other
standards applicable to other performance plans of the Company in setting the
standards for Performance Share Awards under the Plan.
(b) Performance Share Awards and all rights with respect to such
Awards may not be sold, assigned, transferred, pledged or otherwise encumbered.
23
<PAGE>
(c) A Participant receiving a Performance Share Award shall have the
rights of a stockholder only as to shares actually received by the Participant
under the Plan and not with respect to shares subject to an Award but not
actually received by the Participant. A Participant shall be entitled to
receive a stock certificate evidencing the acquisition of shares of Stock under
a Performance Share Award only upon satisfaction of all conditions specified in
the agreement evidencing the Performance Share Award.
(d) The Board may at any time accelerate or waive any or all of the
goals, restrictions or conditions imposed under any Performance Share Award.
Section 9. RESTRICTED AND UNRESTRICTED STOCK
(a) The Board may grant Restricted Stock Awards entitling recipients
to acquire shares of Stock, subject to the right of the Company to repurchase
all or part of such shares at their purchase price (or to require forfeiture of
such shares if purchased at no cost) from the recipient in the event that
conditions specified by the Board in the applicable Award are not satisfied
prior to the end of the applicable Restricted Period or Restricted Periods
established by the Board for such Award. Conditions for repurchase (or
forfeiture) may be based on continuing employment or service or achievement of
pre-established performance or other goals and objectives.
(b) Shares of Restricted Stock may not be sold, assigned,
transferred, pledged or otherwise encumbered, except as permitted by the Board,
during the applicable Restricted Period. Shares of Restricted Stock shall be
evidenced in such manner as the Board may determine. Any certificates issued in
respect of shares of Restricted Stock shall be registered in the name of the
Participant and, unless otherwise determined by the Board, deposited by the
Participant, together with a stock power endorsed in blank, with the Company (or
its designee). At the expiration of the Restricted Period, the Company (or such
designee) shall deliver such certificates to the Participant or if the
Participant has died, to the Participant's Designated Beneficiary.
(c) The Board may, in its sole discretion, grant (or sell at a
purchase price determined by the Board, which shall not be lower than 85% of
Fair Market Value on the date of sale) to Participants shares of Stock free of
any restrictions under the Plan ("Unrestricted Stock").
(d) The purchase price for each share of Restricted Stock and
Unrestricted Stock shall be determined by the Board of Directors and may not be
less than the par value of the Common Stock. Such purchase price may be paid in
the form of past services or such other lawful consideration as is determined by
the Board.
(e) The Board may at any time accelerate the expiration of the
Restricted Period applicable to all, or any particular, outstanding shares of
Restricted Stock.
Section 10. GENERAL PROVISIONS APPLICABLE TO AWARDS
(a) APPLICABILITY OF RULE 16B-3. Those provisions of the Plan which
make an express reference to Rule 16b-3 shall apply to the Company only at such
time as the Company's Common Stock is registered under the Securities Exchange
Act of 1934, or any successor provision, and then only to Reporting Persons.
(b) REPORTING PERSON LIMITATIONS. Notwithstanding any other
provision of the Plan, to
24
<PAGE>
the extent required to qualify for the exemption provided by Rule 16b-3, (i) any
Option, SAR, Performance Share Award or other similar right related to an equity
security issued under the Plan to a Reporting Person shall not be transferable
other than by will or the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined by the Code or Title I of the
Employee Retirement Income Security Act ("ERISA"), or the rules thereunder, and
shall be exercisable during the Participant's lifetime only by the Participant
or the Participant's guardian or legal representative, and (ii) the selection of
a Reporting Person as a Participant and the terms of his or her Award shall be
determined only in accordance with the applicable provisions of Rule 16b-3.
(c) DOCUMENTATION. Each Award under the Plan shall be evidenced by
an instrument delivered to the Participant specifying the terms and conditions
thereof and containing such other terms and conditions not inconsistent with the
provisions of the Plan as the Board considers necessary or advisable. Such
instruments may be in the form of agreements to be executed by both the Company
and the Participant, or certificates, letters or similar documents, acceptance
of which will evidence agreement to the terms thereof and of this Plan.
(d) BOARD DISCRETION. Each type of Award may be made alone, in
addition to or in relation to any other type of Award. The terms of each type
of Award need not be identical, and the Board need not treat Participants
uniformly. Except as otherwise provided by the Plan or a particular Award, any
determination with respect to an Award may be made by the Board at the time of
award or at any time thereafter.
(e) TERMINATION OF STATUS. Subject to the provisions of
Section 6(b)(iv), the Committee shall determine the effect on an Award of the
disability, death, retirement, authorized leave of absence or other termination
of employment or other status of a Participant and the extent to which, and the
period during which, the Participant's legal representative, guardian or
Designated Beneficiary may exercise rights under such Award.
(f) MERGERS, ETC. In the event of a consolidation, merger or other
reorganization in which all of the outstanding shares of Common Stock are
exchanged for securities, cash or other property of any other corporation or
business entity (as "Acquisition") or in the event of a liquidation of the
Company, the Board of Directors of the Company, or the board of directors of
any corporation assuming the obligations of the Company, may, in its
discretion, take any one or more of the following actions as to outstanding
Awards: (i) provide that such Awards shall be assumed, or substantially
equivalent Awards shall be substituted, by the acquiring or succeeding
corporation (or an affiliate thereof) on such terms as the Board determines
to be appropriate, (ii) upon written notice to Participants, provide that all
unexercised Options or SARs will terminate immediately prior to the
consummation of such transaction unless exercised by the Participant within a
specified period following the date of such notice, (iii) in the event of an
Acquisition under the terms of which holders of the Common Stock of the
Company will receive upon consummation thereof a cash payment for each share
surrendered in the Acquisition (the "Acquisition Price"), make or provide for
a cash payment to Participants equal to the amount by which (A) the
Acquisition Price times the number of shares of Common Stock subject to
outstanding Options or SARs (to the extent such Options or SARs are then
exercisable or would become exercisable on the date 18 months after the
effective date of such Acquisition) exceeds (B) the aggregate exercise price
of all such outstanding Options or SARs, in exchange for the termination of
such Options and SARs, and (iv) provide that all or any outstanding Awards
shall become exercisable or realizable in full prior to the effective date of
such Acquisition.
25
<PAGE>
(g) WITHHOLDING. The Participant shall pay to the Company, or make
provision satisfactory to the Board for payment of, any taxes required by law to
be withheld in respect of Awards under the Plan no later than the date of the
event creating the tax liability. In the Board's discretion, and subject to
such conditions as the Board may establish, such tax obligations may be paid in
whole or in part in shares of Common Stock, including shares retained from the
Award creating the tax obligation, valued at their Fair Market Value. The
Company may, to the extent permitted by law, deduct any such tax obligations
from any payment of any kind otherwise due to the Participant.
(h) FOREIGN NATIONALS. Awards may be made to Participants who are
foreign nationals or employed outside the United States on such terms and
conditions different from those specified in the Plan as the Board considers
necessary or advisable to achieve the purposes of the Plan or comply with
applicable laws.
(i) AMENDMENT OF AWARD. The Board may amend, modify or terminate any
outstanding Award, including substituting therefor another Award of the same or
a different type, changing the date of exercise or realization and converting an
Incentive Stock Option to a Nonstatutory Stock Option, provided that the
Participant's consent to such action shall be required unless the Board
determines that the action, taking into account any related action, would not
materially and adversely affect the Participant.
(j) CANCELLATION AND NEW GRANT OF OPTIONS. The Board of Directors
shall have the authority to effect, at any time and from time to time, with the
consent of the affected optionees, (i) the cancellation of any or all
outstanding Options under the Plan and the grant in substitution therefor of new
Options under the Plan covering the same or different numbers of shares of
Common Stock and having an option exercise price per share which may be lower or
higher than the exercise price per share of the cancelled Options or (ii) the
amendment of the terms of any and all outstanding Options under the Plan to
provide an option exercise price per share which is higher or lower than the
then current exercise price per share of such outstanding Options.
(k) CONDITIONS ON DELIVERY OF STOCK. The Company will not be
obligated to deliver any shares of Stock pursuant to the Plan or to remove
restrictions from shares previously delivered under the Plan (i) until all
conditions of the Award have been satisfied or removed, (ii) until, in the
opinion of the Company's counsel, all applicable federal and state laws and
regulations have been complied with, (iii) if the outstanding Stock is at the
time listed on any stock exchange, until the shares to be delivered have been
listed or authorized to be listed on such exchange upon official notice of
notice of issuance, and (iv) until all other legal matters in connection with
the issuance and delivery of such shares have been approved by the Company's
counsel. If the sale of Stock has not been registered under the Securities Act
of 1933, as amended, the Company may require, as a condition to exercise of the
Award, such representations or agreements as the Company may consider
appropriate to avoid violation of such Act and may require that the certificates
evidencing such Stock bear an appropriate legend restricting transfer.
Section 11. MISCELLANEOUS
(a) NO RIGHT TO EMPLOYMENT OR OTHER STATUS. No person shall have any
claim or right to be granted an Award, and the grant of an Award shall not be
construed as giving a Participant the right to continued employment or service
for the Company. The Company expressly reserves the right at any time to
dismiss a Participant free from any liability or claim under the Plan, except as
expressly provided in the applicable Award.
26
<PAGE>
(b) NO RIGHTS AS STOCKHOLDER. Subject to the provisions of the
applicable Award, no Participant or Designated Beneficiary shall have any rights
as a stockholder with respect to any shares of Common Stock to be distributed
under the Plan until he or she becomes the record holder thereof.
(c) EXCLUSION FROM BENEFIT COMPUTATIONS. No amounts payable upon
exercise of Awards granted under the Plan shall be considered salary, wages or
compensation to Participants for purposes of determining the amount or nature of
benefits that Participants are entitled to under any insurance, retirement or
other benefit plans or programs of the Company.
(d) EFFECTIVE DATE AND TERM. Subject to the approval of the
stockholders of the Company, the Plan shall be effective on March 14, 1995.
Prior to such approval, Awards may be made under the Plan expressly subject to
such approval. No Award may be made under the Plan after March 13, 2005, but
Awards previously granted may extend beyond that date.
(e) AMENDMENT OF PLAN. The Board may amend, suspend or terminate the
Plan or any portion thereof at any time, provided that no amendment shall be
made without stockholder approval if such approval is necessary to comply with
any applicable tax or regulatory requirement, including any requirements for
compliance with Rule 16b-3. Prior to any such approval, Awards may be made
under the Plan expressly subject to such approval.
(f) GOVERNING LAW. The provisions of the Plan shall be governed by
and interpreted in accordance with the laws of the State of Delaware.
Adopted by the Board of Directors
March 14, 1995
Approved by the Stockholders
May 31, 1995
Amended by the Board of Directors
March 23, 1996
27
<PAGE>
EXHIBIT 11.1
COMPUTER LEARNING CENTERS, INC.
Computation of Pro Forma and Supplemental Pro Forma Earnings Per Share
(dollar amounts in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
FOR THE THREE MONTH PERIOD
ENDED APRIL 30,
1995 1995 SUPPLEMENTAL
1996 ACTUAL PRO FORMA (1) PRO FORMA (1)
----------- ------------- -------------------
<S> <C> <C> <C>
Income from continuing operations 1,207 $ 354 $450
Loss from discontinued operations -- (1,264)
------ -------
Net income (loss) $1,207 ($ 910)
----- -------
----- -------
Weighted average number of common shares outstanding:
Preferred shares converted to common stock -- 1,826,205 1,826,205
Common stock 4,258,867 21,195 21,195
Common stock equivalents:
Employee stock options 140,473 268,886 268,886
Nonqualified stock options 7,514 7,465 7,465
Directors stock options 2,368 -- --
Number of shares to be sold to retire the following (2)
Bank debt of $5,500,000 -- -- 824,925
Convertible subordinated debt of $4,000,000 -- -- 599,945
Subordinated notes to certain preferred stockholders of
$4,111,400 -- 616,654 616,654
--------- --------- ---------
Weighted average common shares outstanding 4,409,222 2,740,405 4,165,275
--------- --------- ---------
--------- --------- ---------
Earnings per share:
Income per share from continuing operations $.27 $.13 $.11
----
----
Loss per share from discontinued operations -- (.46)
---- -----
Net income (loss) per share $.27 ($.33)
---- ------
---- ------
</TABLE>
(1) After giving pro forma effect for the conversion of Class D Convertible
Preferred Stock, Class B Convertible Preferred Stock and Class A
Convertible Preferred into Common Stock at 1:.408, 1:.369 and 1:.314,
respectively, and the subsequent reverse stock split.
(2) Based upon the initial public offering price of $8.00 per share.
28
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE CONSOLIDATED
STATEMENT OF OPERATIONS AND THE CONSOLIDATED BALANCE SHEET AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINACIAL STATMENTS.
</LEGEND>
<CIK> 0000943206
<NAME> COMPUTER LEARNING CENTERS, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-END> APR-30-1996
<CASH> 8425
<SECURITIES> 0
<RECEIVABLES> 20416
<ALLOWANCES> (1680)
<INVENTORY> 326
<CURRENT-ASSETS> 29791
<PP&E> 11810
<DEPRECIATION> (6480)
<TOTAL-ASSETS> 42445
<CURRENT-LIABILITIES> 22361
<BONDS> 0
43
0
<COMMON> 0
<OTHER-SE> 18315
<TOTAL-LIABILITY-AND-EQUITY> 42445
<SALES> 521
<TOTAL-REVENUES> 14006
<CGS> 569
<TOTAL-COSTS> 11299
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 748
<INTEREST-EXPENSE> (104)
<INCOME-PRETAX> 2063
<INCOME-TAX> 856
<INCOME-CONTINUING> 1207
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1207
<EPS-PRIMARY> 0.27
<EPS-DILUTED> 0.27
</TABLE>
