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Executives

Nancy McKinley – Vice President, Human Resources and Administration

Nicholas R. Schacht – President and Chief Executive Officer

Charles R. Waldron – Chief Financial Officer

Analysts

Jerry Herman – Stifel Nicolaus

Nick Genova – B. Riley & Co. LLC

Lisa Rapuano – Lane Five Capital Management

Learning Tree International, Inc. (LTRE) F2Q09 Earnings Call May 12, 2009 4:30 PM ET

Operator

Welcome to the Learning Tree second quarter 2009 earnings conference call. (Operator Instructions) I would now like to turn the call over to Ms. Nancy McKinley, Vice President for Human Resources and Administration. Please proceed, ma’am.

Nancy McKinley

Good afternoon. Joining us today from management are Nick Schacht, our President and Chief Executive Officer and Bob Waldron, Chief Financial Officer. As a reminder, except for historical statements, the matters addressed in this conference call are forward-looking statements. Please do no put undue reliance on these forward-looking statements since they are based on key assumptions about future risks and uncertainties.

Although we believe that our assumptions are reasonable, inevitably some will prove to be incorrect. As a result, our actual future results can be expected to differ from those discussed in this call and those differences may be material. We are not undertaking any obligation to update forward-looking statements.

To help you assess the major risks in our business, we have identified many but not all of them in Item 1A of our form 10K. Please read those risk factors carefully. Some of the factors discussed in Item 1A that could effect us include risks associated with the timely development, introduction and customer acceptance of our courses, competition, international operations including currency fluctuations, changing economic and market conditions, technology development and new technology introduction, efficient delivery and scheduling of our courses, adverse weather conditions, strikes, acts of war or terrorism and other external events and attracting and retaining qualified personal.

Now I would like to turn the call over to Nick Schacht.

Nicholas Schacht

Thank you. Good afternoon. I will begin today’s presentation by commenting on some of the actions we have taken and are taking in response to current economic conditions after which, I will cover our performance in our second quarter fiscal 2009 which ended April 3, 2009. I will then provide some forward-looking information about our third quarter fiscal 2009.

Following my presentation, we will open the floor for questions and discussion. Bob Waldron, our Chief Financial Officer, will join me in the Q&A section of this conference call. For your convenience, we have posted the text of these prepared remarks in the Investor Relations section of our website. Go to www.learningtree.com/investor.

As I commented in our conference call last quarter, the current business environment is the most challenging we have faced in our 34-year history as our current and prospective customers carefully manage their spending in response to the global economic crisis. We have continued to reconfigure our business to meet these challenges. During our first and second quarters of fiscal 2009 we reduced our staffing levels by a total of 97 people across a wide range of levels, functions and locations representing approximately 18% of our workforce at the start of our fiscal year.

We began realizing cost savings from these actions in our second quarter and will realize increased cost savings over the remainder of our fiscal year. Effective April 1, 2009, we reduced the salaries of our staff in our corporate headquarters and our United States subsidiary and payments to directors by an annualized total amount of approximately $780,000 and also eliminated corporate management incentive compensation for corporate executives for fiscal 2009. We made certain other changes to reduce the costs of employee compensation and benefits representing an annualized amount of approximately $725,000.

Although in the short-term it is difficult to reduce certain of our fixed costs such as the cost of our education centers, by focusing on controlling our variable costs we were able to minimize the effect that the significant reduction in our revenues had on our gross profit. As a result, we achieved a gross profit percentage of 52.8% during our second quarter of fiscal 2009 compared to 54.9% during our second quarter of fiscal 2008.

Our gross profit for our first six months of fiscal 2009 decreased to 55.2% as compared to 57.8% for the same period in fiscal 2008. While we have scaled back our initiative to develop and offer increased numbers of new course titles, we have continued to develop and introduce new course titles in response to market demand. Because at the start of fiscal 2009 many new titles were already well into the development pipeline we expect the number of titles introduced this fiscal year to exceed the annual numbers we introduced between 2006 and 2008.

We have continued to refine the focus of our sales and marketing investment, emphasizing those activities which we expect to provide a rapid positive return. We have also focused on reducing and controlling our general and administrative expenses in order to maintain an infrastructure matched to our current revenues. We are continuing to evaluate all aspects of our business to identify additional opportunities to grow revenues, cut costs, operate more efficiently and refine our processes and business model consistent with current market conditions.

Our goal is to ensure that Learning Tree is optimally positioned to meet the challenges of today’s economy and to capitalize on opportunities to gain market share in these turbulent times. Before we get into the details of operating results, I would first like to summarize some key line items for our second quarter of fiscal 2009.

Revenues in our second quarter of fiscal 2009 were $30.5 million compared to revenues of $39.2 million in our second quarter of fiscal 2008, a decline of 22.2%. These results are somewhat better than we anticipated at the time of our prior conference call due to slightly higher than expected sales volumes late in the quarter. Our gross profit percentage in our second quarter was higher than we previously anticipated at 52.8% of revenues compared to 54.9% in the same quarter of fiscal 2008. We reduced our operating expenses to $18.6 million during the second quarter of fiscal 2009 from $20.8 million in the same quarter of fiscal 2008.

However because of the reduction in our revenues, operating expenses represented 60.9% of revenues compared to 53.1% of revenues for the same quarter of fiscal 2008. As a result of these factors, we had a loss from operations of $2.5 million compared to income from operations of $0.7 million in the second quarter of fiscal 2008 and our loss per share on a fully diluted basis in our second quarter of fiscal 2009 was $0.09 compared to earnings per share of $0.08 in our second quarter of fiscal 2008.

For our first six months of fiscal 2009, revenues were $68.5 million compared to $90.1 million for the same period in fiscal 2008, a decrease of 24%. Gross profit was 55.2% of revenues compared to 57.8% for the first six months of our prior fiscal year. Operating expenses decreased to $37.6 million compared to $42.9 million for the first six months of our prior fiscal year. Income from operations decreased to $0.2 million from $9.2 million. Net income was $0.5 million compared to $7.2 million in our first six months of fiscal 2008 and earnings per share on a diluted basis were $0.03 compared to $0.44 in the same period of fiscal 2008.

As I noted earlier, the 22.2% decline in our revenues for our second quarter of fiscal 2009 compared to the same quarter of fiscal 2008 resulted from several factors. During our second quarter of fiscal 2009 we trained an average of approximately 18.5% fewer course participants per available week. Our reported revenues were adversely affected by 11.6% as a result of changes in foreign exchange rates.

These factors were partly offset by a small impact of price increases and by an approximately 7% effect of having one additional week of training in our second quarter this year compared to our second quarter in fiscal 2008, as well as the lack of a second quarter “Easter Effect” since Easter falls in our third quarter this year but fell in our second quarter last year.

Overall, during our second quarter of fiscal 2009 we trained a total of 17,958 course participants, an 11.6% decrease from the 20,309 participants we trained in the same quarter last year. During our second quarter of fiscal 2009, attendee-days of management course training increased 4.3% to 23,571 compared to 22,596 in the same quarter of our prior fiscal year. Attendee-days of IT course training decreased 20.9% to 40,430 compared to 51,091 in our second quarter of fiscal 2008. Total attendee-days of training in the quarter decreased 13.1% to 64,001 compared to 73,687 in our second quarter of fiscal 2008.

In our second quarter of fiscal 2009 average revenue per participant was 13.0% lower than in the same quarter of fiscal 2008. This decrease was principally due to the 11.6% impact from changes in foreign exchange rates discussed above as well as an increase in the relative proportion of participants in management course events and events held at customer locations which have a lower average revenue per participant than IT course events and events held in our own education centers. These decreases were partly offset by the effects of price increases.

Let’s now turn to our operations in our second quarter of fiscal 2009 and how they compare with the same quarter of fiscal 2008. Cost of revenues was 47.2% of revenues in our second quarter of fiscal 2009 compared to 45.1% in our second quarter of fiscal 2008 and our gross profit percentage accordingly was 52.8% compared to 54.9% in the prior year. As I mentioned previously, our gross profit percentage for our second quarter exceeded our expectations at the time of our last conference call. This was principally due to three factors. Sales strengthened and enrollee cancellation rates declined somewhat toward the end of the quarter compared with what we had anticipated so that we achieved a higher than expected number of participants per event.

Our fixed costs were distributed over a larger number of events than we had previously expected and we were able to realize some of the results of our cost-saving initiatives more quickly than we had anticipated. Changes in foreign exchange rates do not materially affect our gross profit percentage since exchange rate changes decrease our cost of revenues by approximately the same percentage as they decrease our revenues. The change in cost of revenues as a percentage of revenues in our second quarter of fiscal 2009 reflects a 19.4% decrease in average revenue per event partly offset by a 14.9% decrease in average cost per event.

The decrease in our average revenue per event was the result of the 13.0% decrease in average revenue per participant I discussed earlier and a 7.4% decrease in average participants per event. The decrease in average cost per event principally resulted from the effect of changes in foreign exchange rates in addition to decreases in certain costs of sales compared to our second quarter in fiscal 2008. During our second quarter of fiscal 2009, we presented 1,503 events, a 4.5% decrease from the 1,574 events conducted during the same period in fiscal 2008.

We spent $2.0 million on course development during our second quarter of fiscal 2009, $0.6 million less than in the same quarter of our prior year. The reduction in course development expense was principally due to our decision to scale back our new course initiative as I discussed earlier. Course development expense was 6.5% of revenues in our second quarter of fiscal 2009 compared to 6.6% in the same quarter of fiscal 2008. In our second quarter of fiscal 2009, we introduced six new IT course titles and retired two IT course titles and we introduced nine new management course titles and retired none.

As I noted earlier, we had begun the development of many of these course titles prior to scaling back our course development growth initiative in response to current economic conditions. Our library of instructor-led courses numbered 206 titles at the end of our second quarter of fiscal 2009 compared with 163 titles at the same point a year earlier. At the end of our second quarter of fiscal 2009 we had 68 management titles in our course library, compared with 46 management titles at the end of our second quarter of fiscal 2008. Our library included 138 IT titles at the end of our second quarter of fiscal 2009, compared to 117 a year earlier.

In our second quarter of this fiscal year we reduced our sales and marketing expense to $8.8 million compared to $10.5 million in the same quarter last year. Approximately $0.9 million of that reduction was due to fewer catalogs and reductions in other marketing activities, as well a reduction in sales commissions due to lower revenues. Also included in the overall reduction in sales and marketing expense was a 9% effect of changes in foreign exchange rates. Sales and marketing expense was 29% of revenues, compared with 26.8% of revenues for the same quarter of our prior fiscal year.

G&A expense during our second quarter of fiscal 2009 was $7.8 million compared to $7.7 million in our second quarter of fiscal 2008. G&A expense in our second quarter of fiscal 2009 included $0.8 million of restructuring costs incurred as a result of our March staff reductions and the final $0.3 million for costs associated with our now-discontinued efforts to explore a potential sale of the company, including non-contingent transaction contribution bonuses for certain employees, principally in our finance and accounting department, as well as legal fees and special committee fees.

G&A expense for our second quarter of fiscal 2009 reflected a decrease of approximately 7.8% due to changes in foreign exchange rates, compared to our second quarter of fiscal 2008. Principally due to the reduction in our revenues, G&A expense in our second quarter was 25.4% of revenues compared with 19.7% in the same quarter of our prior year.

As a result of these factors, in our second quarter of fiscal 2009 we incurred a loss from operations of $2.5 million, or 8.1% of revenues, compared to income from operations of $0.7 million or 1.8% of revenues in the same quarter of our prior fiscal year. In our second quarter of fiscal 2009, other income net was $0.3 million compared with $1.5 million in the same quarter of fiscal 2008. The difference primarily resulted from a decrease of $0.7 million in interest income due to lower interest rates and lower cash balances and a $38,000 foreign currency transaction loss as opposed to a gain of $327,000 in the same quarter in fiscal 2008.

As a result of the preceding factors, our pre-tax loss in the second quarter of fiscal 2009 was $2.1 million compared to pre-tax income of $2.2 million in our second quarter of fiscal 2008. In our second quarter of fiscal 2009 we recorded tax benefit of $0.8 million based on an effective tax rate of 35.7%. This compares to tax expense of $0.9 million and an effective tax rate of 39.6% in our second quarter of fiscal 2008.

Our net loss for the second quarter of fiscal 2009 was $1.4 million, or 4.5% of revenues compared to net income of $1.3 million or 3.4%, in our second quarter of fiscal 2008. During our first six months of fiscal 2009, the total of our cash and available for sale securities decreased by $18.4 million to $75.8 million at April 3, 2009 from $94.2 million at October 3, 2008. This decrease included the effects of $13.3 million used in repurchasing our stock, $4.3 million due to changes in foreign exchange rates and $2.6 million due to a non-cash charge for additional temporary impairment of our auction rate securities. These decreases were slightly offset by $2.4 million in net cash provided by operations during our first six months of fiscal 2009.

In addition, most of our working capital accounts declined as a result of the overall decline in our revenues. During our second quarter of fiscal 2009, we repurchased 1,140,388 shares of our common stock at an average price of $8.46. From the end of our second quarter through May 7, we repurchased an additional 122,607 shares of our common stock at an average price of $9.30.

In summary, since reinitiating our repurchase program on October 15, 2008 through May 7, 2009 we have repurchased a total of 1,616,190 shares at an average price of $8.94. This brings our total outstanding shares to 14,968,946 as of May 7, 2009. We may make additional purchases of common stock through open market transactions but we have no commitments to do so. Our cash and available for sale securities at April 3, 2009 includes $20.9 million of auction rate securities stated at fair value after a $5.2 million temporary impairment based on a valuation by an independent expert. Because we do not believe that the value of these securities is permanently affected, impairments to these assets do not affect our reported net income.

One of the effects of the recent economic turmoil has been the strengthening of the U.S. dollar compared to a year earlier. Approximately half of our business annually is conducted in currencies other than U.S. dollars and fluctuations in exchange rates will affect future revenues and expenses when translated into dollars. If the exchange rates of May 5, 2009 remain constant for the remainder of our third quarter of fiscal 2009 we would expect to report an unfavorable effect of approximately 11% on our revenues during our third quarter of fiscal 2009 compared to the same quarter of fiscal 2008.

Of course, we would also see a favorable, though lesser, effect on our overall expenses. The effect of changes in foreign exchange rates is somewhat less pronounced on operating expenses than on revenues and cost of sales, primarily since our operating expenses are more heavily dollar-denominated, largely because of corporate management and our centralized IT, marketing and course development activities which are located here in the United States and which support our worldwide operations.

We currently expect revenues for our third quarter of fiscal 2009 to be between $31-33 million, which represents a reduction of between 30% and 34% compared to revenues of $46.9 million in our third quarter of fiscal 2008. This includes the 11% effect of changes in foreign exchange rates I just discussed. Some of our forecasted reduction in third quarter revenues compared to our prior year is due to the “Easter effect.” Easter this year occurs in our third fiscal quarter rather than in our second fiscal quarter as it did last year. Easter typically reduces revenues in the quarter in which it occurs by about 2% compared to a corresponding quarter in which Easter does not occur.

While it would appear at first glance that we expect a greater reduction in revenues in our third quarter than in our second quarter this year, that difference primarily reflects the changes in available training weeks as a result of the timing of year-end holidays and Easter. Excluding calendar effects, year-over-year revenue changes should be fairly consistent in our second and third fiscal quarters. We expect our revenues per training week in our third quarter, like those in our second quarter, to be approximately 30% lower than in the equivalent period of fiscal 2008. Approximately 11% of this expected reduction is due to changes in foreign exchange rates with the remainder due to the combined net effect of reduced sales volumes, price increases and changes in product mix.

We expect a gross profit percentage in our third quarter of fiscal 2009 of between 52% and 54 % compared to 58.2% in our third quarter of fiscal 2008 largely because the fixed costs of our education centers and classroom equipment will be allocated to fewer expected events this year compared to the same quarter of our prior year and to a lesser extent because we expect to have somewhat fewer participants per event in our third quarter of this fiscal year than in our third quarter last year.

We expect overall operating expenses for our third quarter of fiscal 2009 to be between $15-15.5 million, a reduction of between 30% and 32% compared to $22 million in the same quarter a year earlier. We expect approximately 6% of that reduction to be due to the expected effect of changes in foreign exchange rates and the remainder to our efforts to manage our costs.

As a result of the above factors, we expect to report third quarter operating income of between $1-2.5 million compared with operating income of $5.4 million in our third quarter of fiscal 2008. We expect third quarter interest income to be approximately $0.2 million. Overall, we expect to report pre-tax income for our third quarter of fiscal 2009 of between $1.2-2.7 million, compared with pre-tax income of $6.1 million in the third quarter of our prior year. We project an effective tax rate for our third quarter of fiscal 2009 of approximately 41%.

In summary, we expect that today’s challenging business climate will continue for an indeterminate period. We believe that the improvements we have made in our business over the past several years have built a strong, effective position from which to address the challenges that lie ahead. We have already significantly adjusted our business model in response to current conditions and we will continue to make further adjustments as needed in response to the exigencies of the current environment.

We are continuing to work hard to generate more sales and to capitalize on our infrastructure and on our financial strength in order to take advantage of what we foresee as a period of enhanced opportunity to capture increased market share. We are confident in our long-term ability to grow our revenues and profits when economic conditions improve and we remain enthusiastic about the future opportunities for Learning Tree.

Now, I would like to open the floor for questions.

Question-and-Answer Session

Operator

(Operator Instructions) The first question comes from the line of Jerry Herman – Stifel Nicolaus.

Jerry Herman – Stifel Nicolaus

Nick, my first question is about the cost savings. I think that number was expected to be $5 million based on the eliminations. Could you give us a feel for how much has actually been achieved thus far given the timing of that program?

Nicholas Schacht

Let me ask you a question first. When you are quoting a $5 million figure is that from something we said in the prior quarter?

Jerry Herman – Stifel Nicolaus

Yes.

Nicholas Schacht

We don’t have it broken down by quarter such that I can report it to you. As we indicated in the last quarter and continuing in this quarter we would be expecting to see that phasing in given that the $5 million was roughly an annualized impact. So it is going to be spread out over the different operating units and so we saw some effect of that in Q2. We will continue to see increased impact in that in Q3 and beyond. You can see, for example, in our projection of operating expenses for Q3 substantially increased difference compared to the prior year than when compared to what we just reported for Q2.

Jerry Herman – Stifel Nicolaus

So in the third quarter will you see the full quarterly effect of that program or will it still not yet be realized until say the fourth quarter?

Nicholas Schacht

We should see the vast majority of the impact in the third quarter. There may be a couple of elements that phase in over the third quarter but for the most part we should be seeing the full impact in the third quarter.

Jerry Herman – Stifel Nicolaus

Just to be clear, the additional 725 you referenced in your opening comments, that is incremental to this previously announced program?

Nicholas Schacht

That is correct. It is incremental to what we announced last quarter.

Jerry Herman – Stifel Nicolaus

We are hearing a lot of companies talk about promotional activity and price reductions and all those kinds of things to incentivize volume. How do you think about pricing and promotions in this environment? Considering anything even if it means passports and vouchers? Those kinds of things.

Nicholas Schacht

As you know, we have got a number of cost saving programs and different promotions that we can traditionally offer to our clients. One of the advantages that we enjoy given our market position is that we are recognized as a high value, high quality product and therefore we can charge higher prices compared to competitors that are offering to monetize products. What we are seeing in this environment is that we are largely able to hold to that strategy of charging higher prices in part because of the significant differentiation between the quality of our products and other commoditized products.

Our overall philosophy is that our customers will continue to pay this differential for a product that provides them better results and accordingly although we are very carefully looking at the impact of our pricing on the market place we see no reason to part from that strategy at this time.

Jerry Herman – Stifel Nicolaus

That is true on both sides of the business, meaning both IT and management?

Nicholas Schacht

That is true on both sides of the business.

Jerry Herman – Stifel Nicolaus

Could you talk a little bit about the marketing efficiencies and investments that you are making? You also made reference to a reduction in spending for catalog mailings. Maybe clarify what you mean by the marketing investment and is there a way to quantify what the actual reduction in catalog mailings was?

Nicholas Schacht

Yes, I can clarify it although I am going to have to deny you on the second question since we don’t report any numbers publicly about the number of catalogs we mail. In terms of discussing the impact, as you will recall from going back several quarters now maybe even going back as far as a year and a half, we have been discussing a number of growth initiatives and one of the initiatives we had been focusing on was improving our capabilities in marketing analysis which have through those efforts we have developed a number of analytic techniques which help us more effectively assess the returns that we see from different segments of our marketing database. Therefore we are much better able to select those segments of our database which we believe will provide the best possible return.

We continue fine tuning and adjusting those models as we go forward. That offers us additional opportunities for saving. We are always looking for alternative marketing vehicles and additional ways to save money or to invest in marketing in ways that provide a positive return. So we continue using those tools that we have been talking about. It fundamentally comes down to ensuring that when we spend money to market to given market segments we expect to get a positive return from that investment.

Jerry Herman – Stifel Nicolaus

You have done a lot to enhance the efficiency and certainly have looked at the cost structure. Today where do you think the greatest opportunities still, maybe that is a relative term, but the greatest opportunities still lay in terms of making the organization more efficient and profitable without the benefit of demand let’s say?

Nicholas Schacht

Clearly the biggest opportunity as you somewhat alluded to is for us to look for opportunities to grow revenue. The more revenue we can grow the greater our efficiencies will be. That said, we will continue looking at other opportunities to increase our efficiencies across all aspects of our business but at the same time we want to ensure that the business continues to remain strong and support the quality of what we provide to our customers and also to allow us to take advantage of those opportunities that we believe will be emerging in the market to gain market share which then gets us back to the first point of looking for opportunities to grow our revenues.

Operator

The next question comes from Nick Genova – B. Riley & Co. LLC.

Nick Genova – B. Riley & Co. LLC

A couple of housekeeping items. Can you give us what the share count was? Maybe both the average share count for the quarter and then what it ended up at?

Nicholas Schacht

While Bob is looking that up, I will point you back to what we said in our prepared remarks. As of May 7 we had a share count of 14,968,946 shares remaining on the market.

Nick Genova – B. Riley & Co. LLC

On the tax rate, that came in a little bit higher. Should we be modeling around that level of 41% or so going forward? Can you give us a little bit of color what drove that?

Charles Waldron

What drives that is the source of the income from what countries you get it from. There is obviously a variation in the countries’ basic tax rates. The other effects are the effect of the permanent differences on the tax rate; things such as changes in tax free interest, some of the permanent differences associated with FAS 123R, stuff like that. The problem is, as your pre-tax income gets smaller and closer to zero that percentage tends to get magnified by relatively small changes in those components. So 40%, right now that is our best guess.

Nick Genova – B. Riley & Co. LLC

Kind of a general question on the overall business. A lot of people out there are talking about the green shoots, so to speak, of economic recovery. I wanted to get your sense from a corporate budget perspective and just in talking to some of your customers, do you feel pretty comfortable you are at least have already seen the bottom of the cycle and do you get a sense there is starting to be an increase in sense of optimism or confidence in the market place?

Nicholas Schacht

I don’t know that I want to be put out there as the oracle who predicts the bottoming of the cycle. But at the same time I think it is fair to say that given the breadth and the range of customers that we have, because as you know last year we trained employees from more than 11,500 organizations around the world, the effect on our customer base is fairly representative of what we see around the world. Generally what our customers report to us is pretty much the same as what we see in the nightly news. We have no reason to believe that our customer base is going to behave substantially differently from the overall market at large.

Operator

The next question comes from Lisa Rapuano – Lane Five Capital Management.

Lisa Rapuano – Lane Five Capital Management

I was just wondering if you could tell us the break down of revenue between international and the U.S.?

Nicholas Schacht

I’m asking Bob to get that for you from the 10Q.

Charles Waldron

We just filed the Q so that is available. Let me get to that page and I will read it to you.

Lisa Rapuano – Lane Five Capital Management

You are talking about the impact of foreign exchange. There is a significant difference in the British Pound versus some of the other European currencies and the Pound being much worse off than everything else. I was wondering if you could give us some sense of how much of your international exposure is British Pound related?

Charles Waldron

First of all let me give you the revenue figures and then we will break that down by what is in the K. Total quarterly revenues were $30.5 million. $14.5 million of that came from the U.S. The second largest group would be the U.K. at $7.7 million. This is by far the largest foreign exchange impact.

Lisa Rapuano – Lane Five Capital Management

The mix of international is the mix of courses internationally very similar to the U.S. or is there anything going on between management and IT over there versus the U.S. uptake of those management titles?

Nicholas Schacht

The mix of course internationally is fundamentally the same as in the U.S. although we do see some variations from country to country and even between on site and public course offerings in different countries. On a broad brush perspective, we offer exactly the same range of titles and the customer purchasing patterns are very similar internationally as compared to the U.S.

Lisa Rapuano – Lane Five Capital Management

The management versus IT mix that we saw in the quarter and through the better performance in the management titles versus the IT titles, is there any characteristics of that mix that would explain the differential there that you went through?

Nicholas Schacht

Obviously, we look for all the data we can to support it but we also make some speculative statements about it. We think there are a number of factors that contributed to the performance of our management course titles in the second quarter. The most significant one is likely to be the fact that we have got a large increase in the number of course titles compared to the prior year. We went from, if I refer to my notes briefly, we went from 46 management titles at the end of our second quarter last year to 68 management titles at the end of our second quarter this year. That is an increase of almost 50% in the number of titles available and while those new titles are still ramping up we believe that we got some appreciable amount of contribution from those.

We also believe that our customers do believe that management skills are critical contributors to their ability to maintain and leverage their competitive strength maybe even more so in today’s market. We see that many of our customers are continuing to invest in the development of those skills in their employees.

Lisa Rapuano – Lane Five Capital Management

So the new management titles are there from the previously espoused growth plan that we have? So just the fact there is more of them you are having sort of an event per title effect?

Nicholas Schacht

We believe that there is some of that going on, yes. That is consistent with the statements that we made and the data that we used to underpin our growth model when we announced that initiative about a year and a half ago.

Lisa Rapuano – Lane Five Capital Management

This quarter if I am doing my math right, which I might not as I had to do it quickly, it looks like while your number of course events exceeded expectations you did have some degradation in the number of attendees per event. Is that correct?

Nicholas Schacht

We had degradation compared to last year. Yes that is correct. However, the participants per event that we recorded for the quarter were actually somewhat higher than we anticipated at the time of our last earnings release call and that contributed to the higher than expected level of gross profit that we enjoyed.

Lisa Rapuano – Lane Five Capital Management

If I recall correctly, on last quarter’s call you did tell us you thought that number would start to decline and it is much more flat than you had anticipated?

Nicholas Schacht

I wouldn’t say it is flat but the decline was less than we had expected.

Operator

At this time we have no more questions. I would like to turn the call back over to Mr. Nicholas Schacht for any closing remarks.

Nicholas Schacht

Thank you. Over our 34-year history, Learning Tree has weathered repeated financial downturns and capitalized on numerous periods of economic expansion. In that time we have established a preeminent position as the world’s leading vendor-independent provider of training for managers and IT professionals and we have built a strong financial base.

During the present financial crisis we have taken and are continuing to take the actions necessary to maintain our financial strength. Meanwhile, we intend to capitalize on our market position, competitive advantages and financial strength to increase our market share. We remain committed to the proposition that the long-term success of our customers depends in part on their investment in technology and in the training of their personnel to leverage that investment.

We look forward to continuing to help our customers maximize the productivity and the effectiveness of their employees, and the competitive capabilities of their organizations. Thank you very much.

Operator

Thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect.

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Source: Learning Tree International, Inc. F2Q09 (Qtr End 04/03/09) Earnings Call Transcript
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