-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EBtEkcIOhclXJewiHky7clklI8qUlyRYtpwjMb2BL1NyGa5k+B1NBNV9SNRmg4qc QwSMOXZMM27JfYsbVjRWTw== 0000912057-96-012254.txt : 19960614 0000912057-96-012254.hdr.sgml : 19960614 ACCESSION NUMBER: 0000912057-96-012254 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960430 FILED AS OF DATE: 19960613 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRO LEARNING INC CENTRAL INDEX KEY: 0000893965 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS PUBLISHING [2741] IRS NUMBER: 363660532 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-20842 FILM NUMBER: 96580393 BUSINESS ADDRESS: STREET 1: POPLAR CREEK OFFICE PLAZA STREET 2: 1721 MOON LAKE BOULEVARD CITY: HOFFMAN ESTATES STATE: IL ZIP: 60194 BUSINESS PHONE: 7085175100 MAIL ADDRESS: STREET 1: 1721 MOON LAKE BLVD SUITE 555 CITY: HOOFMAN ESGTATES STATE: IL ZIP: 60194 10-Q 1 10-Q 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 EXCHANGE ACT OF 1934 For the quarterly period ended April 30, 1996 -------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ----- ----- Commission File Number 0-20842 ------- TRO LEARNING, INC. ------------------ (Exact name of registrant as specified in its charter) Delaware 36-3660532 - -------- ---------- (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 1721 Moon Lake Boulevard, Suite 555, Hoffman Estates, IL 60194 - -------------------------------------------------------- ----- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (847) 781-7800 -------------- Not Applicable -------------- (Former name, former address and former fiscal year, if changed since last report) 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. Common stock, $.01 par value 6,119,284 - ---------------------------- ------------------------------ Class Outstanding as of June 1, 1996 (This document contains 14 pages) 1 TRO LEARNING, INC. AND SUBSIDIARIES INDEX PAGE NUMBER ------ PART I. FINANCIAL INFORMATION Item 1. Consolidated Financial Statements (Unaudited): Consolidated Statements of Income for the Three and Six Months Ended April 30, 1996 and 1995. . 3 Consolidated Balance Sheets as of April 30, 1996 and October 31, 1995 . . . . . . . . . 4 Consolidated Statements of Cash Flows for the Six Months Ended April 30, 1996 and 1995. . . . . . . 5 Notes to Consolidated Financial Statements. . . . . . . 6-7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . 8-12 PART II. OTHER INFORMATION Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . 13 Item 2. Changes in Securities . . . . . . . . . . . . . . . . . 13 Item 3. Defaults Upon Senior Securities . . . . . . . . . . . . 13 Item 4. Submission of Matters to a Vote of Security Holders . . 13 Item 5. Other Information . . . . . . . . . . . . . . . . . . . 13 Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . 13 SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 2 PART I. FINANCIAL INFORMATION TRO LEARNING, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED SIX MONTHS ENDED APRIL 30, APRIL 30, ---------------------- ----------------------- 1996 1995 1996 1995 -------- -------- -------- -------- Revenues by product line: PLATO-Registered Trademark- Education. . . . . . $ 6,021 $ 5,038 $10,566 $ 8,557 Aviation Training. . . . . . . . . . . . . . . . 720 1,279 2,584 3,107 ------- ------- ------- ------- Total revenues . . . . . . . . . . . . . . . . 6,741 6,317 13,150 11,664 Cost of revenues . . . . . . . . . . . . . . . . . 632 1,655 1,846 2,954 ------- ------- ------- ------- Gross profit . . . . . . . . . . . . . . . . . 6,109 4,662 11,304 8,710 ------- ------- ------- ------- Operating expenses: Selling, general and administrative expense. . . 6,226 4,421 11,698 8,357 Product development and customer support . . . . 1,177 1,128 2,437 2,246 ------- ------- ------- ------- Total operating expenses . . . . . . . . . . . 7,403 5,549 14,135 10,603 ------- ------- ------- ------- Operating loss . . . . . . . . . . . . . . . (1,294) (887) (2,831) (1,893) Interest expense . . . . . . . . . . . . . . . . . (278) (78) (396) (109) Interest income and other expense, net . . . . . . (21) (21) (45) 15 ------- ------- ------- ------- Loss before income taxes . . . . . . . . . . (1,593) (986) (3,272) (1,987) Credit for income taxes. . . . . . . . . . . . . . (605) (370) (1,235) (745) ------- ------- ------- ------- Net loss . . . . . . . . . . . . . . . . . . $ (988) $ (616) $(2,037) $(1,242) ------- ------- ------- ------- ------- ------- ------- ------- Income (loss) per common and common equivalent share: Primary - Net loss . . . . . . . . . . . . . . . . . . . $ (0.16) $ (0.10) $ (0.33) $ (0.20) ------- ------- ------- ------- ------- ------- ------- ------- Weighted average common and common equivalent shares outstanding . . . . . . . . . . . . . 6,100 6,062 6,090 6,065 ------- ------- ------- ------- ------- ------- ------- -------
See Notes to Consolidated Financial Statements 3 TRO LEARNING, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE DATA)
APRIL 30, OCTOBER 31, 1996 1995 --------- ----------- ASSETS Current assets: Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . $ 378 $ 231 Accounts receivable, less allowances of $1,041 and $584, respectively. . 13,671 17,603 Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,353 1,045 Prepaid expenses and other current assets. . . . . . . . . . . . . . . . 1,792 934 ------- ------- Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . 17,194 19,813 Equipment and leasehold improvements, less accumulated depreciation of $2,829 and $2,479, respectively . . . . . . . . . . . . . . . . . . . 1,540 1,341 Product development costs, less accumulated amortization of $282 and $84, respectively. . . . . . . . . . . . . . . . . . . . . . . . . . 4,236 2,767 Deferred tax asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,810 5,575 Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,890 4,164 ------- ------- $33,670 $33,660 ------- ------- ------- ------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,162 $ 2,247 Accrued employee salaries and benefits . . . . . . . . . . . . . . . . . 1,927 2,469 Accrued liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . 3,052 3,281 Revolving loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,926 3,448 Deferred tax liability . . . . . . . . . . . . . . . . . . . . . . . . . 950 950 Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . 563 1,066 ------- ------- Total current liabilities. . . . . . . . . . . . . . . . . . . . . . . 15,580 13,461 Deferred revenue, less current portion . . . . . . . . . . . . . . . . . . 164 152 Other liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 512 545 Stockholders' equity: Common stock, $.01 par value; 25,000 shares authorized; 6,139 shares issued and 6,119 shares outstanding in 1996; 6,100 shares issued and 6,072 shares outstanding in 1995 . . . . . . . 61 61 Paid in capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,424 21,345 Accumulated deficit. . . . . . . . . . . . . . . . . . . . . . . . . . . (3,462) (1,425) Treasury stock at cost, 20 shares in 1996 and 28 shares in 1995. . . . . (133) (183) Foreign currency translation adjustment. . . . . . . . . . . . . . . . . (476) (296) ------- ------- Total stockholders' equity . . . . . . . . . . . . . . . . . . . . . . 17,414 19,502 ------- ------- $33,670 $33,660 ------- ------- ------- -------
See Notes to Consolidated Financial Statements 4 TRO LEARNING, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED, IN THOUSANDS)
SIX MONTHS ENDED APRIL 30, ----------------------- 1996 1995 -------- -------- Cash flows from operating activities: Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(2,037) $(1,242) ------- ------- Adjustments to reconcile net loss to net cash used in operating activities: Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,235) (745) Depreciation and amortization. . . . . . . . . . . . . . . . . . . . . . . . . . 607 335 Amortization of deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . --- (208) Disposal of fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 24 Changes in assets and liabilities: Decrease in accounts receivable. . . . . . . . . . . . . . . . . . . . . . . . 3,932 1,384 Increase in inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . (308) (165) Increase in prepaid expenses and other current and noncurrent assets . . . . . (609) (783) Increase in product development costs. . . . . . . . . . . . . . . . . . . . . (1,667) (1,348) Decrease in accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . (85) (463) Decrease in accrued liabilities, accrued employee salaries and benefits and other liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . (804) (1,105) Decrease in deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . (491) (270) ------- ------- Total adjustments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (652) (3,344) ------- ------- Net cash used in operating activities. . . . . . . . . . . . . . . . . . . (2,689) (4,586) ------- ------- Cash flows from investing activities: Decrease in marketable securities. . . . . . . . . . . . . . . . . . . . . . . . . --- 1,943 Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (601) (464) ------- ------- Net cash provided by (used in) investing activities. . . . . . . . . . . . . . (601) 1,479 ------- ------- Cash flows from financing activities: Net proceeds from short term borrowings. . . . . . . . . . . . . . . . . . . . . . 3,478 4,010 Issuance (purchase) of treasury stock. . . . . . . . . . . . . . . . . . . . . . . 50 (183) Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 32 ------- ------- Net cash provided by financing activities. . . . . . . . . . . . . . . . . . . . 3,607 3,859 ------- ------- Effect of foreign currency on cash . . . . . . . . . . . . . . . . . . . . . . . . . (170) (19) ------- ------- Net increase in cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . 147 733 Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . . . . . 231 200 ------- ------- Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . . . . $ 378 $ 933 ------- ------- ------- ------- Cash paid for interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 261 $ 94
5 TRO LEARNING, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: TRO Learning, Inc. and its subsidiaries (the Company) develops and markets microcomputer-based, interactive, self-paced instructional and educational systems. The Company markets such systems primarily to educational institutions and private industry. The Company performs evaluations of its customers' credit worthiness and generally requires no collateral from its customers. Although many of the Company's educational customers are dependent upon various government funding sources, the Company does not believe there is a concentration of risk associated with any specific governmental program or funding source. BASIS OF PRESENTATION: The accompanying unaudited consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. Accordingly, these quarterly consolidated financial statements should be read in conjunction with the financial statements and the notes thereto included in the Company's Form 10-K for the fiscal year ended October 31, 1995. The financial information furnished reflects, in the opinion of the Company, all adjustments of a normal, recurring nature necessary for a fair statement of the results for the interim periods presented. Because of cyclical and other factors, the results for the interim periods presented are not necessarily indicative of the results to be expected for the full fiscal year. REVENUE RECOGNITION: Revenue from the sale of education and training courseware licenses, support services, and related computer hardware is recognized when courseware, hardware, and related services are delivered at which time future service costs, if any, are accrued. Future service costs represent the Company's problem resolution and support "hotline" service for a one year period. Deferred revenue represents the portion of billings made or payments received in advance of services being performed or products being delivered. PRODUCT DEVELOPMENT, ENHANCEMENT, AND MAINTENANCE COSTS: The Company develops education and training products, referred to hereafter as courseware products. Costs incurred in the development of the Company's current generation courseware products and related enhancements and routine maintenance thereof are expensed as incurred. All costs incurred by the Company in establishing the marketability of its new courseware products to be sold, leased, 6 TRO LEARNING, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED PRODUCT DEVELOPMENT, ENHANCEMENT, AND MAINTENANCE Costs, Continued or otherwise marketed are expensed as incurred. Once marketability has been established, costs incurred in the development of new generation courseware products are capitalized. Amortization is provided over the estimated useful life of the new courseware products, generally three years, using the straight-line method. Amortization begins when the product is available for general release to customers. Unamortized capitalized costs determined to be in excess of the net realizable value of the product are expensed at the date of such determination. COMPUTATION OF INCOME (LOSS) PER SHARE: Primary income (loss) per share is based upon the weighted average number of shares of common stock outstanding and, where dilutive, common equivalent shares from stock options (using the treasury stock method). Fully diluted income (loss) per share is not presented since the results are equivalent to primary income (loss) per share. 2. ACCOUNTS RECEIVABLE: Accounts receivable include installment receivables of $7,153,000 and $7,987,000 at April 30, 1996 and October 31, 1995, respectively. Installment receivables with terms greater than one year were $2,784,000 and $3,024,000 at April 30, 1996 and October 31,1995, respectively, and are included in other assets on the consolidated balance sheets. During the quarter ended April 30, 1996, the Company sold certain installment receivables on a non-recourse basis to financial institutions. The receivables were sold at their discounted present value of approximately $599,000 at an effective rate of approximately 8.6%. The difference between the gross receivable amount of approximately $735,000 and the proceeds received has been recorded as interest expense in the consolidated statement of income. 3. DEBT: The Company's revolving loan agreement provides for a maximum $10 million line of credit. Borrowings under the line bear interest at the prime rate plus 1.5% or the LIBOR rate plus 3.25% as determined by the Company. At April 30, 1996, there were borrowings of $6,926,000 outstanding at a weighted average interest rate of 8.95% and the Company was in compliance with all financial covenants. 7 PART I. FINANCIAL INFORMATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - -------------------------------------------------------------------------------- RESULTS OF OPERATIONS SECOND QUARTER FISCAL 1996 COMPARED TO SECOND QUARTER FISCAL 1995 REVENUES: The following highlights the growth in courseware revenues (in 000's):
PLATO EDUCATION SECOND AVIATION TRAINING TOTAL SECOND QUARTER SECOND QUARTER QUARTER ---------------- ----------------- ---------------- 1996 1995 1996 1995 1996 1995 ------ ------ -------- ------ ------ ------ Courseware license and support $5,430 $3,949 $ 675 $ 949 $6,105 $4,898 Hardware, third party courseware and other 591 1,089 45 330 636 1,419 ------ ------ ------ ------ ------ ------ Total revenues $6,021 $5,038 $ 720 $1,279 $6,741 $6,317 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
As summarized in the above table, PLATO Education revenues of $6,021,000 for the second quarter of fiscal 1996 increased by $983,000 or 20% as compared to the second quarter of 1995. Courseware license and support revenues for PLATO Education for the second quarter of 1996 increased 38% over the comparable period in fiscal 1995. This increase can be attributed to increased market penetration resulting from the expansion of the PLATO Education sales force and new products. A decrease in low margin hardware revenue contributed to the decline in Aviation Training revenues. Overall, total revenues increased by $424,000 or 7% to $6,741,000 as compared to $6,317,000 in fiscal 1995. GROSS PROFIT: Gross profit for the second quarter of fiscal 1996 increased by $1,447,000 or 31% to $6,109,000 as compared to $4,662,000 for the second quarter of fiscal 1995. This increase was due principally to PLATO Education revenue growth and a favorable mix of courseware revenues. The Company's gross margin was 91% for the second quarter of fiscal 1996 as compared to 74% for the second quarter of fiscal 1995. Increased courseware revenues and declining low margin hardware revenues resulted in the significant improvement in gross margins for the second quarter of 1996. SELLING, GENERAL, AND ADMINISTRATIVE EXPENSE: Selling, general, and administrative expense for the second quarter of fiscal 1996 increased by $1,805,000 or 41% to $6,226,000 as compared to $4,421,000 for the second quarter of fiscal 1995. 8 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, Continued - -------------------------------------------------------------------------------- RESULTS OF OPERATIONS, CONTINUED SELLING, GENERAL, AND ADMINISTRATIVE EXPENSE, CONTINUED This increase was due primarily to higher PLATO Education sales and marketing expenses resulting from the growth in sales volume and the planned expansion of the sales and service organization. PRODUCT DEVELOPMENT AND CUSTOMER SUPPORT: Product development and customer support expense for the second quarter of fiscal 1996 increased by $49,000 or 4% to $1,177,000 as compared to $1,128,000 for the second quarter of fiscal 1995. This increase was due principally to increased PLATO Education customer support expense as a result of increased revenue levels and the broadening customer base. OPERATING LOSS: The operating loss was $1,294,000 for the second quarter of fiscal 1996 as compared to $887,000 for the second quarter of fiscal 1995. The second quarter loss reflects the impact of a traditionally lower level of revenue in the first half of the Company's fiscal year, as well as the absorption of an increased fixed base of sales and marketing costs related to PLATO Education's expansion. INTEREST EXPENSE: Interest expense for the second quarter of fiscal 1996 was $278,000 as compared to $78,000 for the second quarter of fiscal 1995. Interest expense increased due to a higher level of borrowings under the Company's revolving loan agreement during the second quarter of fiscal 1996. In addition, the sale of certain installment receivables at a discount resulted in the recognition of interest expense in the second quarter of fiscal 1996 (see Note 2 of Notes to Consolidated Financial Statements). 9 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, Continued RESULTS OF OPERATIONS FIRST SIX MONTHS FISCAL 1996 COMPARED TO FIRST SIX MONTHS FISCAL 1995 REVENUES: The following table highlights the growth in courseware revenues (in 000's):
PLATO Education Aviation Training Six Months Six Months Total Six Months --------------------------------------------------------- 1996 1995 1996 1995 1996 1995 -------- ------- ------- -------- ------- -------- Courseware license and support $ 9,044 $ 6,759 $ 2,452 $ 1,989 $11,496 $ 8,748 Hardware, third party courseware and other 1,522 1,798 132 1,118 1,654 2,916 ------- ------- ------- ------- ------- ------- Total revenues $10,566 $ 8,557 $ 2,584 $ 3,107 $13,150 $11,664 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
PLATO Education revenues of $10,566,000 for the first six months of fiscal 1996 increased by $2,009,000 or 23% as compared to revenues of $8,557,000 for the first six months of fiscal 1995. Courseware license and support revenues for PLATO Education for the first six months of fiscal 1996 increased 34% over the comparable period last year. This increase can be attributed to increased market penetration resulting from the expansion of the PLATO Education sales force and new products. Aviation Training courseware revenues for the first six months of fiscal 1996 of $2,452,000 increased 23% over the first six months of fiscal 1995. This increase was offset by a decrease in low margin hardware revenue for Aviation Training for the first six months of fiscal 1996 compared to the same period in fiscal 1995. Overall, total revenues increased by $1,486,000 or 13% to $13,150,000 as compared to $11,664,000 in 1995. GROSS PROFIT: Gross profit for the first six months of fiscal 1996 increased by $2,594,000 or 30% to $11,304,000 as compared to $8,710,000 for the first six months of fiscal 1995. This increase was due principally to PLATO Education revenue growth and a favorable mix of courseware revenue. The Company's gross margin was 86% for the first six months of fiscal 1996 as compared to 75% for the first six months of fiscal 1995. Increased courseware revenues and a decline in hardware revenues resulted in a significantly improved gross margin for the first half of fiscal 1996. PLATO Education gross margin for the first six months of fiscal 1996 was 87% compared to 81% for the first six months of fiscal 1995. Aviation Training gross margin was 83% for the first six months of fiscal 1996 compared to 58% for the same period in fiscal 1995. 10 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, Continued RESULTS OF OPERATIONS, CONTINUED SELLING, GENERAL, AND ADMINISTRATIVE EXPENSE: Selling, general, and administrative expense for the first six months of fiscal 1996 increased by $3,341,000 or 40% to $11,698,000 as compared to $8,357,000 for the first six months of fiscal 1995. This increase was due primarily to higher PLATO Education sales and marketing expenses resulting from the growth in sales volume and the planned expansion of the sales and service organization. PRODUCT DEVELOPMENT AND CUSTOMER SUPPORT: Product development and customer support expense for the first six months of fiscal 1996 increased by $191,000 or 9% to $2,437,000 as compared to $2,246,000 for the first six months of fiscal 1995. This increase was due principally to increased PLATO Education customer support expense of $272,000 or 31% due to increased revenue levels and the broadening customer base. OPERATING LOSS: The operating loss was $2,831,000 for the first six months of fiscal 1996 as compared to $1,893,000 for the first six months of fiscal 1995. The six month loss reflects the impact of a traditionally lower level of revenue in the first half of the Company's fiscal year, as well as the absorption of an increased fixed base of sales and marketing costs related to PLATO Education's expansion. INTEREST EXPENSE: Interest expense for the first six months of fiscal 1996 was $396,000 as compared to $109,000 for the first six months of fiscal 1995. Interest expense increased due to a higher level of borrowings under the Company's revolving loan agreement during the first six months of fiscal 1996. In addition, the sale of certain installment receivables at a discount resulted in the recognition of interest expense in the second quarter of fiscal 1996 (see Note 2 of Notes to Consolidated Financial Statements). LIQUIDITY AND CAPITAL RESOURCES As of April 30, 1996, the Company's principal sources of liquidity included cash and cash equivalents of $378,000, net accounts receivable of $13,671,000, and its line of credit. The Company has total installment receivables of $9,937,000 at April 30, 1996, of which $7,153,000 are due within one year and are included in net accounts receivable. During the quarter ended April 30, 1996, the Company sold certain installment receivables for net cash proceeds of approximately $599,000 (see Note 2 of Notes to Consolidated Financial Statements). Net cash used in the Company's operating activities was $2,689,000 in the first six months of fiscal 1996 as compared to $4,586,000 in the first six months of fiscal 1995. Cash flows from operations 11 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, Continued LIQUIDITY AND CAPITAL RESOURCES, CONTINUED were used principally to fund the Company's working capital requirements as it continues to grow by investing in new products and expanding its PLATO Education sales and service organization. In addition to cash flows from operations, the Company has resources available under its revolving loan agreement to provide borrowings up to a maximum of $10,000,000. At April 30, 1996, borrowings of $6,926,000 were outstanding at a weighted average interest rate of 8.95%. The Company's net cash used in investing activities in the first six months of fiscal 1996 was $601,000 for capital expenditures. Net cash provided by financing activities in the first six months of fiscal 1996 was $3,607,000 which primarily represents borrowings under the Company's line of credit. The Company maintains adequate cash reserves, short-term investments, and credit facilities to meet its anticipated working capital, capital expenditure, and business investment requirements. 12 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company is not a party to any litigation that is expected to have a material adverse effect on the Company or its business. 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 Exhibit No. Description of Exhibits 11 Statement Regarding Computation of Per Share Income (Loss) (b) Reports on Form 8-K: No reports on Form 8-K were filed for the quarter ended April 30, 1996. 13 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 on June 13, 1996 TRO LEARNING, INC. By /s/ William R. Roach --------------------------------- William R. Roach Chairman of the Board, President and Chief Executive Officer (principal executive officer) /s/ Sharon Fierro --------------------------------- Sharon Fierro Senior Vice President, Chief Financial Officer, Treasurer and Secretary (principal financial officer) /s/ Mary Jo Murphy --------------------------------- Mary Jo Murphy Vice President, Corporate Controller and Chief Accounting Officer (principal accounting officer) 14 EX-11 2 EXHIBIT 11 EXHIBIT 11 TRO LEARNING, INC. AND SUBSIDIARIES COMPUTATION OF INCOME (LOSS) PER SHARE AND EQUIVALENT SHARE OF COMMON STOCK (Unaudited, in thousands, except per share data)
Three Months Six Months Ended April 30, Ended April 30, ----------------------------- ------------------------ 1996 1995 1996 1995 ------------- -------------- ----------- ----------- AVERAGE SHARES OUTSTANDING: 1. Weighted average number of shares of common stock outstanding during the period. . . 6,100 6,062 6,090 6,065 2. Net additional shares assuming stock options exercised. . . . . . . . . . . . . . . . --- --- --- ---- --------- --------- --------- --------- 3. Weighted average number of shares and equivalent shares of common stock outstanding during the period . . . . . . . . . . . . . . . 6,100 6,062 6,090 6,065 --------- --------- --------- --------- --------- --------- --------- --------- INCOME (LOSS): 4. Net Loss. . . . . . . . . . . . . . . . . . . $ (988) $ (616) $ (2,037) $ (1,242) --------- --------- --------- --------- --------- --------- --------- --------- PER SHARE AMOUNTS: Net loss (line 4/line 3) . . . . . . . . . . . . . $ (0.16) $ (0.10) $ (0.33) $ (0.20) --------- --------- --------- --------- --------- --------- --------- ---------
EX-27 3 EXHIBIT 27 (FDS)
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF INCOME FOUND ON PAGES 3 AND 4 OF THE COMPANY'S FORM 10-Q FOR THE YEAR-TO-DATE, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS OCT-31-1996 APR-30-1996 378 0 13671 1041 1353 17194 1540 2829 33670 15580 0 0 0 61 17353 33670 13150 13150 1846 1846 0 0 396 (3272) (1235) (2037) 0 0 0 (2037) (0.33) (0.33)
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