For-profit information-technology teacher Learning Tree (NASDAQ:LTRE) looks to be just about the last company in the education sphere to issue earnings this season. Or is it the first of next season? They all blend together after a while. Either way, the company reports its fiscal Q4 and full-year 2006 numbers tomorrow.

What analysts say:

  • Buy, sell, or waffle? The only analyst following Learning Tree gives it a "hold" rating.
  • Revenues. This analyst projects 6% quarterly sales growth, to $38.6 million.
  • Earnings. We'll be looking for $0.03 per share, versus breakeven results last year.

What management says:
Last month, Learning Tree announced that it will restate its earnings for this fiscal year and last. But it's not what you think -- no stock options are being backdated here. We're just getting "the correction of the accounting for changes in accrued leasing liabilities related to exited facilities in the United Kingdom." This will have no effect on "reported revenues, cost of revenues, deferred revenue, net cash flows, or its aggregate cash and investments." What will be affected: about $1.5 million in pre-tax income, which should be shaved from the seven quarters in question.

What management does:
Judging from those comments, I'd expect to see the gross margin improvement, reflected in the table below, remain intact. Operating profitability will probably take a hit, however, and the net looks likely to turn negative as well.

Margins %




























All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
One of the two bright spots I highlighted at Learning Tree back in May has since dimmed, with free cash flow turning distinctly negative -- to the tune of $2.1 million over the past four quarters. So while it's nice to hear that the restatement won't worsen that situation, it's still not looking good. The cash burn has, predictably, also dimmed the other bright light -- Learning Tree's balance sheet. Still rock-solid with nearly $71 million in cash and equivalents, the cash stash has nonetheless been falling for three straight quarters, and it's been trending downward for longer still.

In tomorrow's news, therefore, I wouldn't just look for more details on the restatement. (Actually, given the laconic nature of past earnings releases, I wouldn't look for much detail there in any case.) In addition, I'd look first at the balance sheet, to determine where the cash levels seem to be headed, and a day later check the 10-Q filing -- assuming the company gets its accounting in order and is able to file one -- for details on cash flow. Learning Tree habitually refuses to include a cash flow statement in its earnings releases; why, I can't fathom, since it almost always includes a statement in a 10-Q filing filed less than a day after the earnings are released.


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For more on Learning Tree, read "Foolish Forecast: Blooms on Learning Tree."

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Fool contributorRich Smithdoes not own shares of any company named above.