TRO Learning, Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: TUTR)") else Response.Write("(NASDAQ: TUTR)") end if %>
4660 West 77th Street
Edina, Minnesota 55435
800-869-2000

ALEXANDRIA, VA, September 16, 1996 /FOOLWIRE/-- TRO Learning, Inc. (TRO) reported September 10 that its PLATO(R) Education revenues in the third quarter ended July 31, 1996, were up $3,175,000 or 41%, for a total of $10,917,000, in comparison to the same period for fiscal 1995. On an overall company basis, total revenues of $11,401,000 for the third quarter of fiscal 1996 increased $2,490,000 or 28%, compared to $8,911,000 for the third quarter of fiscal 1995. Net income of $725,000 or $.11 per share for the third quarter of fiscal 1996 was reported, as compared to net income of $546,000 or $.09 per share in the comparable quarter of the prior year.

For the nine months ended July 31, 1996, PLATO Education revenues were $21,483,000, an increase of 32%, while Aviation Training revenues were $3,068,000, a decrease of 28%, when compared to the same period for fiscal 1995. Aviation courseware revenues were up with operating results similar with last year. The net loss for the nine months ended July 31, 1996, was $(1,312,000) or $(.21) per share, as compared to a net loss of $(696,000) or $(.11) per share in the comparable period of the prior year.

William R. Roach, Chairman of the Board, President and Chief Executive Officer, commented on the results by stating, "I am pleased to report growth in revenues and earnings in the third quarter. PLATO Education courseware license and support revenues for the third quarter and first nine months of fiscal 1996 increased by 47% and 40%, respectively." With respect to TRO's Aviation Training business, Mr. Roach stated, "Although Aviation Training revenues were down in the third quarter and the first nine months of fiscal 1996, the operating results of Aviation Training for the first nine months of fiscal 1996 were comparable to the prior year." Mr. Roach went on to say, "The impact of increased courseware revenues on gross margins in fiscal 1996 has been very positive. The overall gross margin for the nine months ended July 31, 1996, increased to 84%, compared to 77% in the first nine months of fiscal 1995."

In commenting on the future outlook, Mr. Roach said, "The trend of education and business addressing skills deficiencies through the use of computer-based education and training continues to be very positive. Some of the factors driving TRO's growth include recognition of the need to meet education and training issues with cost effective solutions, accountability for learning gains and improvement in test scores in schools, productivity issues in business, and the School-to-Work movement. TRO is uniquely positioned to provide those cost effective education and training solutions that meet the growing needs of both education and business." Mr. Roach concluded by saying, "TRO's delivery of PLATO Education courseware over the Internet has been very well received and provides a significant new opportunity for growth in the future."

New orders signed in the third quarter for Plato Courseware increased by an even greater percentage than the 47% revenue growth. "As we enter the fourth quarter, the Plato Courseware pipeline of opportunities was at a record high of $142 million+, which compares to $126 million in May of 1996." That reflects significant growth in the quarter but is also a great sign of health considering the amount of business that was done in the quarter. That number excludes some opportunities that the company is pursuing with the Department of Defense. The pilot program for delivering Plato over the internet in Tennessee continues to go well -- they have nine or ten companies that are participating in the program, with 300+ employees receiving Plato instruction over the internet. In August, the company announced a partnership with ACT, American College Testing, using ACT's Work Key system, a skills assessment and development software system. The company believes that the Tennessee Skills Net program and Plato are on-track.

The company is highly interested in the inter/intranet as delivery mechanisms and platforms for their products; several Fortune 500 companies have expressed interest in TRO's plans here. The company will initiate a six city road-show in October to introduce customers and potential customers to these plans.

Q&A

In September of 1995, the US/Canada/some int'l pipeline was about $86 million.

The gross amount of pipeline growth in the quarter was approximately $30 million -- with the amount of business actually signed, net increase in the pipeline was around $16 million. As sales territories have grown, so have identified prospects. The new sales personnel added earlier in the year have now started to add to sales and pipeline figures. There are now 70 account managers with the company in the US and Canada, most of whom the company now considers experienced. If the company's close ratio remains level with past rates, then Plato revenues should be above analysts' estimates, though the company will only say that it is looks like revenues will be in the range of estimates.

Depreciation for the quarter equaled $400,000; $100,000 in capital expenditures; and $500 -- 600,000 in capitalized product development expenses.

Gross margin has grown from 77% to 84% for the first nine months of fiscal 1996. A decrease in their-party software expenses has driven the gross margin increase, as how lower hardware expense. This trend should continue. Customers now generally have hardware and networking software in place, which frees up TRO to concentrate on its own software sales and sales of third-party courseware, which carries higher margins. A gross margin run-rate of 90% is a possibility at some point next year.

Two years ago, the corporate pipeline was somewhere around $1 million; it is now $20 million. This is their second-largest market. The company's strategic objectives have been pretty well set. Tactically, TRO will continue to sell into their core markets, which are secondary and post-secondary schools, secondary community colleges, workplace environments, literacy/job training, and to a lesser degree, the corrections market. Inter-/intranet delivery is potentially the "big-time growth" segment for the company. TRO's software can handle a corporation's entire training curriculum. Short-term, this strategy should happen on the intranet, and long-term, the internet. R&D will continue to be devoted to the applied workskills product with American College Testing. Working with ACT, as well as other customers, allows TRO to identify what products are demanded -- what should be developed.

Being the largest adult-based courseware developer and having the largest marketing/distribution organization in the industry, TRO will take a more pro-active approach to creating sales and products with third-party developers. The company will also continue to drive architectural standards in the industry, which would effectively farm out R&D expense to other companies. Right now, though, the company doesn't see any major development needs over the next couple of years, though that can change. From an intranet standpoint, there will be more and more account managers dedicated to workplace accounts. The company plans to identify a marketing partner for the internet strategy. At the moment, discussions (on quasi-proprietary products) continue with telecommunications companies as well as cable companies.

The year's $4 million sales target for Plato corporate products should be exceeded in the coming fourth quarter. The corporate pipeline for the year was $20 million. The people at Tennessee SkillsNet commented that they are looking for something with a fancier-looking, almost edutainment look to it while the learners did not offer such commentary on the product. All the comments from the learners were positive. The people at Tennessee also commented that they'd like to see audio on the product, which the company is now developing. The audio will be on a CR-ROM while the graphics/text/animation come off the internet. 3-40 companies have reserved spots for the coming six-city road show (Minneapolis, Chicago, New York, San Francisco, Houston, and Atlanta). Both the training and information technology sides of the business will be profiled in these presentations.

The Windows Courseware manager is finished and is a month into beta testing in 12 companies, but will not be rolled out in the fourth quarter, so the company has time to train its sales force and education consultants. The roll-out should take place by November.

The company still intends to list on the New York Stock Exchange, primarily as a marketing tool because of the higher-quality connotations of such a move. In addition, TRO believes that an auction-style exchange is more efficient. Net book value is the only NYSE requirement that is currently holding back TRO's listing. Until the stock price appreciates some more, the company is also holding back on the stock split, which has been discussed in past conference calls.

The company recently hosted a dinner for aviation customers at a London airshow . The fourth quarter looks "OK" for that business -- comparable to last year's Q4, Pre-tax profit on that line isn't significant. There's nothing exciting in the pipeline to discuss. The company will continue with this line as long as it's profitable and there are no significant opportunity costs.

The company is looking at welfare reforms as an opportunity. The program in Tennessee has resulted in inquiries from other states.

The company has contemplated but not yet addressed addressing their Plato courseware at individuals (as opposed to institutional channels). At the secondary school level, those opportunities exist in remedial learning and advanced placement levels. Students at the community college level, who are looking to improve basic math or language skills, also represent an opportunity. Parents of such students also represent those markets. The company believes that some edutainment titles in the market contain inferior quality education components and sees those market failings as a doorway for TRO. To get to the consumer takes significant marketing efforts, though. The strategy of going through telecommunications and cable companies lets the company get to the consumer through the strength of their marketing and distribution systems.

There are some large, low margin proposals outstanding with the US Department of Defense that the company does not count in the pipeline. They'll know more about those at the end of the government's fiscal year in September/October.

Operating profit for FY96 should be comparable with FY95 -- around "a few hundred thousand dollars."

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