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EXHIBIT 99.01
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FOR IMMEDIATE RELEASE
FOR MORE INFORMATION CONTACT:
Xxxx X. Xxxxx, Senior Vice President and
Chief Financial Officer
(000) 000-0000
Xxxxx Xxxxx, Vice President,
Corporate Communications
(000) 000-0000
xxxxx.xxxxx@xxxxxxx.xxx
XXXXXXX EDUCATION, INC. REPORTS RECORD
THIRD QUARTER 2002 ENROLLMENT, REVENUES, AND EARNINGS
-- STRAYER THIRD QUARTER REVENUES UP 26% --
-- STRAYER THIRD QUARTER DILUTED EPS OF $0.19, UP 36% --
-- STRAYER FALL 2002 TOTAL ENROLLMENTS UP 18% --
-- STRAYER FALL 2002 ONLINE ENROLLMENTS UP 90% --
ARLINGTON, Va., November 1, 2002 - Xxxxxxx Education, Inc. (Nasdaq: STRA) today
announced financial results for the three and nine months ended September 30,
2002. Financial highlights are as follows:
THREE MONTHS ENDED SEPTEMBER 30
o Revenues for the three months ended September 30, 2002 increased 26% to
$23.0 million, compared to $18.2 million for the same period in 2001, due
to increased enrollment and a 5% tuition increase which commenced in
January 2002.
o Operating income (EBIT) rose 44% to $4.0 million from $2.7 million for the
same period in 2001. Operating income margin was 17.2%, compared to 15.1%
for the same period in 2001. The increase in operating margin was due to
the three new campuses which were opened in 2001 reaching profitability, as
well as the continued high rate of growth of Xxxxxxx University Online.
o Net income rose 35% to $2.7 million compared to $2.0 million for the same
period in 2001. Earnings per diluted share rose 36% to $0.19 compared to
$0.14 for the same period in 2001, as diluted weighted average shares
outstanding increased to 14,556,000 from 14,276,000 for the same period in
2001.
NINE MONTHS ENDED SEPTEMBER 30
o Revenues for the nine months ended September 30, 2002 increased 26% to
$82.5 million, compared to $65.7 million for the same period in 2001, due
to increased enrollment and a 5% tuition increase effective for 2002.
o Operating income (EBIT) rose 17% to $27.5 million from $23.5 million for
the same period in 2001. Operating income margin was 33.3%, compared to
35.7% for the same period in 2001. The decrease in operating income margin
is primarily attributable to the impact on the first quarter 2002 operating
income of opening three new campuses in 2001.
o Net income rose 7% to $17.5 million compared to $16.4 million for the same
period in 2001. Earnings per diluted share rose to $1.21 compared to $1.10
for the same period in 2001, as diluted weighted average shares outstanding
decreased to 14,485,000 from 14,847,000 for the same period in 2001.
"We are pleased with Xxxxxxx'x revenue, operating profit and EPS performance for
the third quarter and our enrollment results for the fall term, as we continue
to implement our strategic plan and business model," said Xxxxxx Xxxxxxxxx,
President and Chief Executive Officer of Xxxxxxx Education, Inc.
BALANCE SHEET AND CASH FLOW
At September 30, 2002, the Company had cash, cash equivalents and marketable
securities of $56.8 million and no debt. In the third quarter, as part of its
cash management activities, the Company invested an additional $6 million in a
diversified, no load, short-term investment grade (Aa3) corporate bond fund. As
of September 30, 2002, the Company had $12.1 million invested in this fund.
The Company generated $19.4 million from operating activities in the first nine
months of 2002. Capital expenditures for the nine months were $16.1 million, of
which $12 million was in the first quarter for the purchase of three existing
campus facilities.
In the third quarter 2002, bad debt expense remained at the same level as in the
second quarter of 2002 at 1.3%, which was up slightly from 0.9% for the third
quarter in 2001. Days sales outstanding, adjusted to exclude tuition receivable
related to future quarters, was seven days in the third quarter of 2002,
unchanged compared to the same period in 2001.
STUDENT ENROLLMENT
Enrollment at Xxxxxxx University for the 2002 fall term increased 18% to 16,532
students compared to 14,009 for the same term in 2001. Across the Xxxxxxx
University campus network, new student enrollments increased 15% and continuing
student enrollments increased 20%. Xxxxxxx University Online enrollments
increased 90% to 5,401 students from 2,836. The total number of students taking
courses online (including students at brick and mortar campuses taking at least
one online course) in the fall 2002 quarter was 6,822.
STUDENT ENROLLMENT
Fall Fall %
2001 2002 Change
----------- ----------- ------------
New Campuses (7 in operation 3 or less years)
Campus Students 515 1,141 122%
Online Students 296 988 234%
----------- -----------
Total New Campus Students 811 2,129 163%
----------- -----------
Mature Campuses (13 in operation 4 or more years)
Campus Students 10,658 9,990 - 6%
Online Students 1,819 3,335 83%
----------- -----------
Total Mature Campus Students 12,477 13,325 7%
----------- -----------
Out of Area Online Students 721 1,078 50%
----------- -----------
Total University Enrollment 14,009 16,532 18%
=========== ===========
Total Students Taking 100% Courses Online 2,836 5,401 90%
Total Students Taking At Least 1 Course Online 3,672 6,822 86%
NEW CAMPUS / STATE OPENINGS
Due to strong demand at its Raleigh-Durham, N.C. campus, the company announced
its intention to open a second campus in the Raleigh-Durham area by fall 2003.
The Company also announced that in the third quarter Xxxxxxx University received
approval from the South Carolina Commission on Higher Education to offer its
academic programs at up to three campuses in the State of South Carolina. The
Company also announced that in October the Committee on Post-Secondary
Educational Institutions of the Tennessee Higher Education Commission voted
unanimously to recommend authorization of Xxxxxxx University to operate two new
campuses in the State of Tennessee. This recommendation is subject to review and
final approval by the full Commission. The Company also announced that Xxxxxxx
University had made applications to operate in the states of Pennsylvania and
Delaware and will pursue approval in these states as part of a multiyear
expansion plan. The Company reiterated its intention to open two to three new
campuses by the fall term 2003.
EXPANDED ONLINE COURSE OFFERINGS
Xxxxxxx University began an asynchronous course pilot program in 2001, which
featured five classes in the initial summer 2001 quarter rollout. Xxxxxxx
University Online is currently offering 295 asynchronous classes in the fall
2002 quarter, and all academic programs are now available asynchronously.
CORPORATE/GOVERNMENT SPONSORSHIPS
Also during the third quarter, Xxxxxxx University continued to expand the scope
of its existing corporate and governmental sponsorship arrangements and added
new sponsorship agreements with Meridian KSI, Inc. and the U.S. Department of
Defense Acquisition University. The Company's total number of
corporate/government sponsorship arrangements is now 87.
STATUS OF SECONDARY OFFERING
On October 8, 2002, the Company filed a registration statement with the SEC for
a proposed offering of up to 2.3 million shares of common stock. The Company
will not receive any of the proceeds of the offering. The common shares proposed
to be offered for sale will be issued upon the conversion of Series A
convertible preferred stock currently held by New Mountain Partners, L.P., a
private equity firm, and DB Capital Partners, Inc., an affiliate of Deutsche
Bank.
This filing is being made pursuant to the exercise of existing registration
rights held by New Mountain and DB Capital. After giving effect to the offering,
New Mountain will beneficially own in excess of 25% of Xxxxxxx'x equity
securities.
A registration statement relating to the proposed common stock offering has been
filed with the Securities and Exchange Commission but has not yet become
effective. These securities may not be sold nor may offers to buy be accepted
prior to the time the registration statement becomes effective. This press
release shall not constitute an offer to sell or the solicitation of an offer to
buy nor shall there be any sale of these securities in any state in which such
offer, solicitation or sales would be unlawful prior to registration or
qualification under the securities laws of any such state.
BUSINESS OUTLOOK
Based on the strong enrollment growth announced for the fall term, the Company
estimates fourth quarter diluted EPS will be in the range of $0.57 - $0.59,
before the effect of expenses associated with the Company's announced Secondary
Offering, currently estimated to be approximately $.02 per diluted share. Based
on its fourth quarter estimates, the Company expects to be at the high end of
its previously announced full year 2002 diluted EPS estimates of $1.76 - $1.80,
before the effect of expenses associated with the Company's announced Secondary
Offering, currently estimated to be approximately $.02 per diluted share. Based
on the strong enrollment results for the fall 2002 term, the Company is
providing the following full year 2003 estimates:
Enrollment: 14% - 16% increase
Revenue: $138 - $142 million
Operating Margin: 34.5% - 35.5%
Diluted EPS: $2.12 - $2.16
Diluted Shares Outstanding: 14,775,000
STOCK OPTION ACTIVITY AND CALCULATION OF TOTAL POTENTIAL SHARE ISSUANCE
In the third quarter of 2002, no additional stock options were granted by the
Company. Under the 1996 Stock Option Plan, an additional 579,405 stock options
have been authorized but remain unissued.
The Company accounts for the fair value of its stock options in accordance with
APB Opinion No. 25. Had compensation expense been determined based on the value
of the options at grant dates computed by the Black-Scholes methodology, the
Company's net income and diluted net income per share would have been $2.1
million and $0.14 per share, respectively, for the three months ended September
30, 2002 and $15.7 million and $1.08 per share, respectively, for the nine
months ended September 30, 2002. The fair value of each option granted in 2001
was estimated on the date of grant using the Black-Scholes option-pricing model
using the following assumptions: dividend yield of .7%; expected volatility of
47%; risk-free interest rate of 4.75% and an expected term of 5.3 years. The
weighted average fair value for the 2001 grants was $16.68. The fair value of
each option granted in 2002 was estimated using the Black-Scholes option-pricing
model using the following assumptions: dividend yield of .7%; expected
volatility of 43%; risk-free interest rate of 4.81%; and an expected term of 5.9
years. The weighted average fair value for the 2002 grants was $23.65.
Shares used to compute diluted earnings per share include common shares issued
and outstanding, the assumed conversion of Series A Convertible Preferred Shares
outstanding, and the assumed exercise of issued stock options using the Treasury
Stock Method. Our total current and potential common shares outstanding is as
follows:
Current
-------
Common shares issued and outstanding at 9/30/02 8,352,412
Convertible Series A Preferred Stock, convertible on a
1:1 basis (outstanding or recorded) at 9/30/02 6,003,869
Issued stock options using Treasury Stock Method 200,250
------------
Subtotal 14,556,531
Potential
---------
Accrual of required PIK dividends on Convertible Series A
Preferred Stock through May 2006 962,924 (a)
Total issued stock options, less options accounted for using
the Treasury Stock Method above 769,750
Authorized but unissued options 579,405
------------
Subtotal 2,312,079
------------
Total current and potential common shares 16,868,610
============
(a) This number may be smaller as it does not reflect the possible
reduction of Series A PIK dividends that would be associated with the
consummation of the proposed 2.3 million common share Secondary
Offering which the Company currently expects to close in the fourth
quarter of 2002. In addition, these potential numbers do not reflect
that the Company has the right to force conversion of all remaining
Series A preferred shares into common shares after May 15, 2004 if the
Company's common stock price trades above $52.00 per share for twenty
consecutive trading days.
CONFERENCE CALL WITH MANAGEMENT
Xxxxxxx Education, Inc. will host a conference call to discuss its third quarter
2002 earnings on November 1 at 10:00 a.m. EST. To participate on the live call,
investors should dial (000) 000-0000 10 minutes prior to the start time. In
addition, the call will be available via live webcast over the Internet. To
access the live webcast of the conference call, please go to
xxx.xxxxxxxxxxxxxxxx.xxx 15 minutes prior to the start time of the call to
register. An archived replay of the conference call will be available at (888)
203-1112 (pass code 682011) starting at 3 p.m. EDT on Friday, November 1 and
will be available through Tuesday, November 5 and archived at
xxx.xxxxxxxxxxxxxxxx.xxx for 90 days.
Xxxxxxx Education, Inc. (Nasdaq: STRA) is an education services holding company
which owns Xxxxxxx University and certain other assets. Xxxxxxx'x mission is to
make higher education achievable and convenient for working adults in today's
economy.
Xxxxxxx University is a proprietary institution of higher learning that offers
undergraduate and graduate degree programs in business administration,
accounting, and information technology. The University has more than 16,500
working adult students at 20 campuses in Maryland, Washington, D.C., Virginia,
and North Carolina and worldwide via the Internet through Xxxxxxx University
Online. Xxxxxxx University is committed to providing high quality education that
prepares working adult students for advancement in their careers and
professional lives. By adapting to the latest techniques and technologies used
in business, Strayer provides our graduates with practical skills and a
competitive edge in the changing marketplace.
Xxxxxxx University is accredited by the Middle States Commission on Higher
Education. Founded in 1892, Strayer attracts students from around the country
and throughout the world.
For more information on Xxxxxxx Education, Inc. visit xxx.xxxxxxxxxxxxxxxx.xxx
and for Xxxxxxx University visit xxx.xxxxxxx.xxx.
This press release contains statements that are forward looking and are made
pursuant to the "safe-harbor" provisions of the Private Securities Litigation
Reform Act of 1995 "(Reform Act"). The statements are based on the Company's
current expectations and are subject to a number of uncertainties and risks. In
connection with the Safe Harbor provisions of the Reform Act, the Company has
identified important factors that could cause the Company's actual results to
differ materially. The uncertainties and risks include the pace of growth of
student enrollment, our continued compliance with Title IV of the Higher
Education Act, and the regulations thereunder, as well as state and regional
regulatory requirements, competitive factors, risks associated with the opening
of new campuses, risks associated with the offering of new educational programs
and adapting to other changes, risks associated with the acquisition of existing
educational institutions, risks relating to the timing of regulatory approvals,
our ability to implement our growth strategy, and general economic and market
conditions. Further information about these and other relevant risks and
uncertainties may be found in the Company's annual report on Form 10-K and its
other filings with the Securities and Exchange Commission, all of which are
incorporated herein by reference and which are available from the Commission. We
undertake no obligation to update or revise forward looking statements.
XXXXXXX EDUCATION, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
For the three months ended For the nine months ended
September 30, September 30,
----------------------------------- ----------------------------------
% %
2001 2002 Change 2001 2002 Change
------- ------- ------ ------- ------- ------
Revenues $18,222 $23,026 26% $65,692 $82,547 26%
------- ------- ------- -------
Costs and expenses:
Instruction and educational support 8,057 9,770 21% 24,119 29,768 23%
Selling and promotion 3,890 5,044 30% 8,727 12,537 44%
General and administration 3,531 4,254 20% 9,381 12,757 36%
------- ------- ------- -------
15,478 19,068 23% 42,227 55,062 30%
------- ------- ------- -------
Income from operations 2,744 3,958 44% 23,465 27,485 17%
Operating Income Margin 15.1% 17.2% 35.7% 33.3%
Investment and other income 548 484 -12% 3,407 1,242 -64%
------- ------- ------- -------
Income before income taxes 3,292 4,442 35% 26,872 28,727 7%
Provision for income taxes 1,284 1,732 10,479 11,203
------- ------- ------- -------
Net income 2,008 2,710 35% 16,393 17,524 7%
Preferred stock dividends
and accretion 1,997 2,035 2% 2,952 6,076 106%
------- ------- ------- -------
Net income available to
common stockholders $11 $675 $13,441 $11,448 -15%
======= ======= ======= =======
Basic net income per share $0.00 $0.08 $1.13 $1.37 21%
======= ======= ======= =======
Diluted net income per share $0.14 $0.19 36% $1.10 $1.21 10%
======= ======= ======= =======
Common dividend per share $0.065 $0.065 -- $0.195 $0.195 --
Weighted average shares outstanding
Basic 8,342 8,352 11,851 8,352
Diluted 14,276 14,556 14,847 14,485
XXXXXXX EDUCATION, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
ASSETS
At December 31, At September 30,
2001 2002
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Current assets:
Cash and cash equivalents ....................................... $ 57,659 $ 44,695
Short-term investments - restricted ............................. 1,046 1,053
Marketable securities (short-term bond fund)
available for sale, at fair value ............................ -- 12,075
Tuition receivable - net ........................................ 19,012 27,635
Income taxes receivable ......................................... -- 2,494
Other current assets ............................................ 879 1,759
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Total current assets ............................................ 78,596 89,711
Student loan receivable - net ........................................ 8,392 9,251
Property and equipment - net ......................................... 23,100 36,530
Other assets ......................................................... 400 414
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Total assets ......................................................... $ 110,488 $ 135,906
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LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable ................................................ $ 1,882 $ 3,744
Accrued expenses ................................................ 562 919
Dividends payable ............................................... 1,855 1,855
Unearned tuition ................................................ 23,204 34,528
Income taxes payable ............................................ 1,247 --
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Total current liabilities ............................................ 28,750 41,046
--------- ---------
Deferred lease incentives ............................................ 763 1,911
Mandatorily redeemable convertible Series A
preferred stock ................................................... 148,347 150,485
Stockholders' equity (deficit):
Common stock .................................................... 83 83
Additional paid-in-capital ...................................... 1,759 1,759
Retained earnings (accumulated deficit) ......................... (69,214) (59,423)
Accumulated other comprehensive income (loss) ................... -- 45
--------- ---------
Total stockholders' equity (deficit) ................................. (67,372) (57,536)
--------- ---------
Total liabilities and stockholders' equity (deficit) ................. $ 110,488 $ 135,906
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XXXXXXX EDUCATION, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
For the nine months ended
September 30,
------------------------------
2001 2002
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Cash flows from operating activities:
Net income ................................................................ $ 16,393 $ 17,524
Adjustments to reconcile net income to net cash:
Depreciation and amortization .......................................... 1,944 2,652
Gain on sale of marketable securities .................................. (887) --
Amortization of deferred lease incentives .............................. -- (165)
Changes in assets and liabilities:
Short-term investments - restricted .................................... (32) (7)
Tuition receivable, net ................................................ (6,063) (8,623)
Other current assets ................................................... (548) (880)
Other assets ........................................................... (91) (74)
Accounts payable ....................................................... 99 1,891
Accrued expenses ....................................................... 143 357
Income taxes payable / receivable ...................................... 1,212 (3,741)
Unearned tuition ....................................................... 9,598 11,324
Student loans originated .................................................. (5,551) (6,270)
Collections on student loans receivable ................................... 4,627 5,411
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Net cash provided by operating activities ............................ 20,844 19,399
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Cash flows from investing activities:
Purchases of property and equipment ....................................... (5,074) (16,082)
Purchase of marketable securities (short-term bond fund) .................. -- (12,000)
Maturities of and proceeds from marketable securities ..................... 50,384 --
--------- ---------
Net cash provided by (used in) investing activities .................. 45,310 (28,082)
--------- ---------
Cash flows from financing activities:
Exercise of stock options ................................................. 1,434 --
Deferred lease incentives ................................................. -- 1,313
Repurchase of common stock ................................................ (179,375) --
Common dividends paid ..................................................... (2,539) (1,628)
Preferred dividends paid .................................................. (663) (3,937)
Issuance of convertible preferred stock ................................... 150,000 --
Payments of costs of tender offer and issuance of preferred stock ......... (5,788) (29)
--------- ---------
Net cash used in financing activities ................................ (36,931) (4,281)
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Net increase in cash and cash equivalents ............................ 29,223 (12,964)
Cash and cash equivalents -- beginning of period ............................... 25,190 57,659
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Cash and cash equivalents -- end of period ..................................... $ 54,413 $ 44,695
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