UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 8-K/A

(Amendment No. 1)

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported):  May 30, 2003

 

Sylvan Learning Systems, Inc.

(Exact Name of Registrant as Specified in Charter)

 

Maryland

 

0-22844

 

52-1492296

(State or Other Jurisdiction of Incorporation)

 

(Commission File Number)

 

(IRS Employer Identification No.)

 

 

 

 

 

 

 

 

 

 

1001 Fleet Street, Baltimore, Maryland      21202

(Address of Principal Executive Offices)      (ZIP Code)

 

 

 

 

 

 

 

 

 

 

Registrant’s telephone number, including area code: (410) 843-8000

 

 

 

 

Explanatory Note

The Registrant's Current Report on Form 8-K filed on June 4, 2003, is hereby amended solely for the purpose of adding the pro forma financial statements required by Item 7(b) of Form 8-K.

Item 7.  Financial Statements, Pro Forma Financial Information and Exhibits.

(a)          Financial Statements of Business Acquired

Per Regulation S-X 3-05(b)(i), the financial statements of UNAB are not required.

(b)         Pro Forma Financial Information

On May 30, 2003, a subsidiary of Sylvan Learning Systems, Inc. (the “Company”) announced the acquisition of an 80% interest in the entity which controls the operations of Universidad Nacional Andres Bello (“UNAB”), a comprehensive university located in Chile, and Academia de Idiomas y Estudios Profesionales (“AIEP”), a technical/vocational institute located in Chile, from local Chilean investors, (collectively, “UNAB”). The purchase price, which was determined by negotiation by the parties, was $85.2 million, of which the Company paid 80%, or $68.2 million, which includes cash payments of $34.1 million, plus the Company’s estimated transaction costs between $3.0 and $4.0 million.  The remainder of the purchase price was financed by a seller’s note of $21.3 million and assumed bank debt of $21.3 million, of which the Company incurred 80%, or 34.1 million, collectively.  The transaction is part of a broader strategic alliance through which the local investors and founders will maintain a financial interest and participate in senior management positions in the university and the institute.

The pro forma financial information is presented for the year ended December 31, 2002 and for the six months ended June 30, 2003.  The unaudited pro forma condensed consolidated statements of operations data gives effect to the acquisition of UNAB as if the transaction had occurred on January 1, 2002 and January 1, 2003, respectively.

The pro forma adjustments are based upon currently available information and upon certain assumptions that the Company’s management believes are reasonable.  The adjustments in the unaudited pro forma condensed financial statements represent the Company’s preliminary determination of these adjustments based upon available information.  There can be no assurance that the actual adjustments will not differ from certain of the pro forma adjustments reflected in the pro forma financial information.

The unaudited financial information set forth below is not necessarily indicative of the operating results that would have been achieved had the transaction actually occurred on January 1, 2002, 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.

 

(c)          Exhibits

99.1*      Acquisition agreement dated May 30, 2003 between Desarrollo de la Educación Superior S.A., and Inversiones la Caleta, S.A., Invesiones Tuste S.A. Cupra S.A., Inversiones Huepil Limitada, and Edin Development Ltd.

* Previously filed.

 

2

 

Pro Forma Consolidated Statement of Operations (Unaudited)

(Dollar and share amounts in thousands, except per share data)

 

 

 

Year Ended December 31, 2002

 

 

 

Sylvan Learning Systems, Inc.

 

UNAB

 

Pro Forma Adjustments

 

Sylvan/UNAB Pro Forma Consolidated

 

Revenues

 

$

385,386

 

$

43,743

 

$

—

 

$

429,129

 

Direct costs

 

348,216

 

33,752

 

1,538

(d)

383,506

 

General and administrative expenses

 

26,122

 

—

 

—

 

26,122

 

Loss on assets sold

 

20,244

 

—

 

—

 

20,244

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss)

 

(9,196

)

9,991

 

(1,538

)

(743

)

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

Investment and other income

 

6,574

 

11

 

(697

) (a)

5,888

 

Interest and other expense

 

(8,382

)

(871

)

(2,695

) (b)

(11,948

)

Gain (loss) on Ventures investment held for sale

 

(2,308

)

—

 

—

 

(2,308

)

Gain (loss) on investments

 

(8,343

)

—

 

—

 

(8,343

)

Gain (loss) on sale of assets

 

—

 

(4,546

)

—

 

(4,546

)

Equity in net income (loss) of affiliates

 

(5,464

)

—

 

—

 

(5,464

)

Minority interest in consolidated subsidiaries

 

(4,824

)

—

 

(323

) (c)

(5,147

)

Foreign currency exchange gain

 

—

 

32

 

—

 

32

 

 

 

(22,747

)

(5,374

)

(3,715

)

(31,836

)

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing
operations before income taxes and
cumulative effect of change in
accounting principle

 

(31,943

)

4,617

 

(5,253

)

(32,579

)

Income tax benefit (expense)

 

15,040

 

253

 

(449

) (e)

14,844

 

Income (loss) from continuing
operations before cumulative effect
of change in accounting principle (1)

 

$

(16,903

)

$

4,870

 

$

(5,702

)

$

(17,735

)

 

 

 

 

 

 

 

 

 

 

Earnings (loss) per common share, basic and diluted:

 

 

 

 

 

 

 

 

 

Loss from continuing operations
before cumulative effect of
change in accounting principle (1)

 

$

(0.42

)

 

 

 

 

$

(0.44

)

Weighted average number of common shares outstanding

 

40,053

 

 

 

 

 

40,053

 

 

See notes to unaudited pro forma consolidated financial statements.

(1) Income (loss) from continuing operations is presented before discontinued operations and cumulative effect of change in accounting principle.

 

3

 

Pro Forma Consolidated Statement of Operations (Unaudited)

(Dollar and share amounts in thousands, except per share data)

 

 

 

Six months ended June 30, 2003

 

 

 

Sylvan Learning Systems, Inc.

 

UNAB

 

Pro Forma Adjustments

 

Sylvan/UNAB Pro Forma Consolidated

 

Revenues

 

$

211,566

 

$

14,642

 

$

—

 

$

226,208

 

Direct costs

 

188,792

 

16,338

 

769

(d) 

205,899

 

General and administrative expenses

 

13,450

 

—

 

—

 

13,450

 

Non-cash compensation expense

 

22,333

 

—

 

—

 

22,333

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss)

 

(13,009

)

(1,696

)

(769

)

(15,474

)

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

Investment and other income

 

594

 

141

 

(244

) (a)

491

 

Interest expense

 

(5,536

)

106

 

(1,294

)(b)

(6,724

)

Gain (loss) on Ventures investments held for sale

 

(8,394

)

—

 

—

 

(8,394

)

Gain (loss) on investments

 

—

 

—

 

—

 

—

 

Gain (loss) on sale of assets

 

—

 

54

 

—

 

54

 

Equity in net income (loss) of affiliates

 

(7,621

)

—

 

—

 

(7,621

)

Minority interest in consolidated subsidiaries

 

(3,769

)

142

 

335

(c) 

(3,292

)

Foreign currency exchange gain

 

236

 

(165

)

—

 

71

 

 

 

(24,490

)

278

 

(1,203

)

(25,415

)

 

 

 

 

 

 

 

 

 

 

Loss from continuing operations before income taxes

 

(37,499

)

(1,418

)

(1,972

)

(40,889

)

Income tax benefit

 

11,235

 

204

 

307

(e)

11,746

 

Loss from continuing operations  (1)

 

$

(26,264

)

$

(1,214

)

$

(1,665

)

$

(28,143

)

 

 

 

 

 

 

 

 

 

 

Earnings (loss) per common share, basic and diluted:

 

 

 

 

 

 

 

 

 

Loss from continuing operations (1)

 

$

(0.64

)

 

 

 

 

$

(0.71

)

Weighted average number of common shares outstanding

 

40,825

 

 

 

 

 

40,825

 

 

See notes to unaudited pro forma consolidated financial statements.

 

(1) Loss from continuing operations is presented before discontinued operations.

 

 

4

 

Notes to Pro Forma Financial Information (Unaudited)

(Dollar and share amounts in thousands, except per share data)

Note 1 — Basis of Presentation

On May 30, 2003, a subsidiary of Sylvan Learning Systems, Inc. (the “Company”) announced the acquisition of an 80% interest in the entity which controls the operations of Universidad Nacional Andres Bello (“UNAB”), a comprehensive university located in Chile, and Academia de Idiomas y Estudios Profesionales (“AIEP”), a technical/vocational institute located in Chile, from local Chilean investors, (collectively, “UNAB”). The purchase price, which was determined by negotiation by the parties, was $85.2 million, of which the Company paid 80%, or $68.2 million, which includes cash payments of $34.1 million, plus the Company’s estimated transaction costs between $3.0 and $4.0 million.  The remainder of the purchase price was financed by a seller’s note of $21.3 million and assumed bank debt of $21.3 million, of which the Company incurred 80%, or $34.1 million, collectively.  The purchase price was allocated to acquired assets totaling $120.5 million and assumed liabilities of $88.5million.  The preliminary allocation of the purchase price included in the current period is subject to revision based on the final determination of fair values.  The final purchase price may differ from this preliminary amount due to adjustment to acquisition-related costs.  The transaction is part of a broader strategic alliance through which the local investors and founders will maintain a financial interest and participate in senior management positions in the university and the institute.

The pro forma financial information is presented for the year ended December 31, 2002 and for the six months ended June 30, 2003.  The unaudited pro forma condensed consolidated statements of operations data gives effect to the acquisition of UNAB as if the transaction had occurred on January 1, 2002 and January 1, 2003, respectively.

The pro forma adjustments are based upon currently available information and upon certain assumptions that the Company’s management believes are reasonable.  The adjustments in the unaudited pro forma condensed financial statements represent the Company’s preliminary determination of these adjustments based upon available information.  There can be no assurance that the actual adjustments will not differ from certain of the pro forma adjustments reflected in the pro forma financial information.

The unaudited financial information set forth below is not necessarily indicative of the operating results that would have been achieved had the transaction actually occurred on January 1, 2002, 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.

 

Note 2 — Pro Forma Adjustments

 

Certain reclassifications have been made to conform UNAB’s historical and pro forma amounts to the Company’s financial statement presentation.

 

The accompanying unaudited pro forma combined consolidated financial statements have been prepared as if the merger was completed on December 31, 2002 for balance sheet purposes and as of January 1, 2002 for statements of operations purposes and reflect the following pro forma adjustments:

 

(a)          To reflect the cash paid for the acquisition of UNAB, resulting in a decrease in interest income.

 

(b)         To record interest expense related to the debt assumed as a result of the UNAB acquisition.  As a result of the UNAB acquisition, the Company entered into agreements for additional cash amounts due to shareholders of acquired companies to finance a portion of the initial purchase price of UNAB.  The note bears interest at 6.5% Chiliean Inflation-Indexed (UF).  In addition, the Company entered into a notes payable agreement with a bank to finance a portion of the initial purchase price of UNAB. The note bears interest at 6.0% Chilean Inflation-Indexed (UF).  Total debt assumed was approximately $42.6 million, of which the Company incurred 80%, or $34.1 million.

 

(c)          To record 20% minority interest related to net income and interest expense.

 

(d)         To record amortization for intangible assets on a straight-line basis resulting from the proposed merger. The weighted average life of the amortizable intangible assets is approximately 4 years.

 

(e)          To adjust the provision (benefit) for taxes to reflect the impact of the pro forma adjustments using the statutory tax rates.

 

 

5

 

SIGNATURE

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/ Sean R. Creamer

 

Name:  Sean R. Creamer

 

Title:  Senior Vice President and

 

Chief Financial Officer

 

 

Date:  August 13, 2003