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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
FOURTH QUARTER 2002 AND FULL YEAR ENROLLMENT,
REVENUES, AND EARNINGS
-- STRAYER FOURTH QUARTER REVENUES UP 26% --
-- STRAYER FOURTH QUARTER DILUTED EPS OF
$0.57, UP 27% (EPS UP 33% TO $0.60, EXCLUDING
ONE TIME SECONDARY OFFERING COST) --
-- STRAYER WINTER 2003 TOTAL ENROLLMENTS UP 18% / ONLINE ENROLLMENTS UP 80% --
-- STRAYER OBTAINS APPROVAL IN PA AND ANNOUNCES
ACCELERATION OF NEW CAMPUS OPENINGS -
-- XXXXXX X. XXXXXXXXX NAMED CHAIRMAN OF THE BOARD --
ARLINGTON, Va., February 13, 2003 - Xxxxxxx Education, Inc. (Nasdaq: STRA) today
announced financial results for the three and twelve months ended December 31,
2002. Financial highlights are as follows:
THREE MONTHS ENDED DECEMBER 31
o Revenues for the three months ended December 31, 2002 increased 26% to
$34.2 million, compared to $27.2 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 37% to $13.7 million from $10.0 million for
the same period in 2001. Operating income margin was 40.2%, compared to
36.9% 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 29% to $8.3 million compared to $6.4 million for the same
period in 2001. (Excluding one time secondary offering costs, net income
rose 36% to $8.7 million.) Earnings per diluted share rose 27% to $0.57
compared to $0.45 for the same period in 2001, (up 33% to $0.60, excluding
one time secondary offering cost) as diluted weighted average shares
outstanding increased to 14,609,000 from 14,323,000 for the same period in
2001.
YEAR ENDED DECEMBER 31
o Revenues for the year ended December 31, 2002 increased 26% to $116.7
million, compared to $92.9 million for the same period in 2001, due to
increased enrollment and a 5% tuition increase effective for 2002.
o Operating income (EBIT) rose 23% to $41.2 million from $33.5 million for
the same period in 2001. Operating income margin was 35.3%, compared to
36.1% 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 13% to $25.8 million compared to $22.8 million for the same
period in 2001 (up 15% to $26.2 million, excluding one time secondary
offering costs). Earnings per diluted share rose 15% to $1.78 compared to
$1.55 for the same period in 2001 (up 17% to $1.81, excluding one time
secondary offering costs), as diluted weighted average shares outstanding
decreased to 14,516,000 from 14,737,000 for the same period in 2001.
"We are pleased with Xxxxxxx'x financial performance for the fourth quarter as
well as our enrollment results for the winter term," said Xxxxxx Xxxxxxxxx,
Chairman and Chief Executive Officer of Xxxxxxx Education, Inc. "Our results for
the year reflect the positive contribution of our new campuses in Baltimore and
Norfolk (opened in 2001), as well as the strong start of our three new North
Carolina campuses and the continued growth of Xxxxxxx University Online."
BALANCE SHEET AND CASH FLOW
At December 31, 2002, the Company had cash, cash equivalents and marketable
securities of $67.3 million and no debt. In the fourth quarter, as part of its
cash management activities, the Company invested an additional $6 million in a
diversified, no load, short-term investment grade corporate bond fund. As of
December 31, 2002, the Company had $18.1 million invested in this fund.
The Company generated $31.7 million from operating activities in 2002. Capital
expenditures for the year were $17.1 million, of which $12 million was in the
first quarter for the purchase of three existing campus facilities.
For 2002, bad debt expense as a percentage of revenue was 1.5% compared to 1.7%
for the same period in 2001. Days sales outstanding, adjusted to exclude tuition
receivable related to future quarters, was seven days at the end of 2002,
unchanged compared to the same period in 2001.
STUDENT ENROLLMENT
Enrollment at Xxxxxxx University for the 2003 winter term increased 18% to
16,558 students compared to 14,067 for the same term in 2002. Across the Xxxxxxx
University campus network, new student enrollments increased 14% and continuing
student enrollments increased 19%. Xxxxxxx University Online enrollments
increased 80% to 5,810 students from 3,222. The total number of students taking
courses online (including students at brick and mortar campuses taking at least
one online course) in the winter 2003 quarter was 7,356.
STUDENT ENROLLMENT
Winter Winter %
2002 2003 Change
-------- -------- ----------
New Campuses (7 in operation 3 or less years)
Campus Based Students 605 1,272 110%
Online Based Students 375 1,167 211%
------ ------
Total New Campus Students 980 2,439 149%
------ ------
Mature Campuses (13 in operation 4 or more years)
Campus Based Students 10,240 9,476 -7%
Online Based Students 2,178 3,552 63%
------ ------
Total Mature Campus Students 12,418 13,028 5%
------ ------
Out of Area Online Students 669 1,091 63%
------ ------
Total University Enrollment 14,067 16,558 18%
====== ======
Total Students Taking 100% Courses Online 3,222 5,810 80%
Total Students Taking At Least 1 Course Online 4,260 7,356 73%
NEW CAMPUS/STATE OPENINGS (NORTH CAROLINA, PENNSYLVANIA AND TENNESSEE)
Due to earlier than expected favorable action by the Tennessee Higher Education
Commission, the Company announced its intention to accelerate the opening of
campuses in both the Memphis and Nashville markets to the spring 2003 term. The
campus facilities are completed and marketing and recruiting activities are
currently taking place in these areas.
The Company also reiterated its previously announced intention to open a second
campus in the Raleigh-Durham, NC area for the summer term 2003. In addition, the
Company announced it had received approval from the Pennsylvania State
Department of Education to open two campuses in the city of Philadelphia. Due to
this earlier than expected action, the Company announced its intention to
accelerate its opening of two campuses in the city of Philadelphia to fall term
2003 from summer term 2004.
Xx. Xxxxxxxxx, Chairman and Chief Executive Officer of Xxxxxxx Education,
stated, " In the last 60 days we received earlier than anticipated approval to
open new campuses in both Tennessee and Pennsylvania. Due to these approvals, we
are accelerating our long-term growth strategy by moving up our two new campus
openings in Tennessee by one quarter; and planning the opening of three
additional campuses in 2003, including two in Philadelphia. These five new
campuses in 2003 (vs. an originally planned three), will bring our total campus
network to 25. We are excited that we have the opportunity to make these
investments in 2003, as we continue on our national expansion."
NEW ACADEMIC PROGRAMS
The Company also announced it has applied for approval from the Middle States
Commission on Higher Education to offer three new master's degree programs:
Master of Education, Master of Public Administration and Master of Health
Services Administration. The Master of Education degree is designed for both
teachers and administrators. Xxxxxxx'x Master of Public Administration program
would apply competencies gained from the University's business programs to the
public sector. The Master of Health Services Administration degree would prepare
graduates with the business knowledge and skills necessary to assume managerial
positions in health services organizations.
Pending receipt of specific state approvals, the Company intends to offer all
three programs by winter term 2004.
EXPANDED ONLINE COURSE OFFERINGS
Xxxxxxx University Online is currently offering 346 asynchronous class sections
in the winter 2003 quarter, and all academic programs are now available
asynchronously. The Company is planning to make additional investments in 2003
in order to significantly expand Xxxxxxx University Online and keep pace with
the continuing strong demand for both asynchronous and synchronous course
offerings.
BOARD OF DIRECTORS
The Company is also pleased to announce the addition of Xxxxxx X. Xxxxxxx to the
Company's Board of Directors. Xx. Xxxxxxx is the founder and Chief Executive
Officer of Black Entertainment Television, a subsidiary of Viacom.
In addition, the Company announced that the Board of Directors had elected
Xxxxxx X. Xxxxxxxxx as Chairman of the Board, succeeding Xxxxxx X. Xxxxxxx who
remains on the Board as the representative of New Mountain Capital, LLC, the
Company's largest shareholder and who will also serve as the Board's lead
outside director going forward.
"Beginning in 2000, New Mountain gave Strayer a fresh growth strategy and a new
management team, led by Xxxxxx Xxxxxxxxx," said Xxxxx Xxxxxxx, "Xxx has earned
the confidence and appreciation of Xxxxxxx'x shareholders, and I am very pleased
to see him succeed me as Chairman. I accept with seriousness my new role as the
Board's lead outside director."
"Xxxxx Xxxxxxx and his colleagues at New Mountain have added tremendous value to
Strayer for the benefit of all shareholders," said Xxxxxx Xxxxxxxxx, "We thank
Xxxxx for his contributions as Chairman and look forward to his continued
service as Xxxxxxx'x lead outside director."
BUSINESS OUTLOOK
Based on the strong enrollment growth announced for the winter 2003 term, offset
by increased expenses associated with the acceleration by one quarter of the
Tennessee campus openings, the Company estimates first quarter 2003 diluted EPS
will be in the range of $0.57 - $0.59. In addition, due to the increase of new
campus openings for the year from three campuses to five campuses, as well as
the acceleration of the opening of the Tennessee campuses, the Company announced
that it expects 2003 revenue to increase to the range of $139 - $143 million and
it expects operating margins of 32.5% - 33.5%.
The Company also announced today it has signed agreements to sell its Washington
D.C. campus building and lease space in close proximity. The proceeds of the
transaction will create a one time gain of approximately $.08 - $0.10/share.
Because of the combined impact of the changes in revenue and operating margin
(and excluding the one-time gain), as well as a planned increase in the
Company's effective tax rate from 39.0% to 39.5%, the Company is adjusting its
full year guidance for earnings per share to a range of $2.00 - $2.04. However,
including the one-time gain from the building sale, full year 2003 EPS is
expected to be in the range of $2.08 - $2.14.
STOCK OPTION ACTIVITY AND CALCULATION OF TOTAL POTENTIAL SHARE ISSUANCE
In the fourth 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 estimates net income and diluted net income per share would have been
$23.2 million and $1.60 per share, respectively, for the year ended December 31,
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. In the fourth quarter, we completed a 2.3 million share common
stock secondary offering resulting from the
conversion into common stock of an equal number of Series A Preferred shares.
Our total current and potential common shares outstanding are as follows:
Current
Common shares issued and outstanding at 12/31/02 10,652,412
Convertible Series A Preferred Stock, convertible on a
1:1 basis (outstanding or recorded) at 12/31/02 3,758,456
Issued stock options using Treasury Stock Method 198,111
----------
Subtotal 14,608,979
Potential
Accrual of required PIK dividends on Convertible Series A
Preferred Stock through May 2006 563,501 (a)
Total issued stock options, less options accounted for using
the Treasury Stock Method above 771,889
Authorized but unissued options 579,405
----------
Subtotal 1,914,795
----------
Total current and potential common shares 16,523,774
==========
(a) This number may be smaller as it does 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 fourth
quarter 2002 earnings on February 13 at 10:00 a.m. ET. 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 web cast over the
Internet. To access the live web cast 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 418093) starting at 3 p.m. ET on Thursday, February 13 and
will be available through Tuesday, February 18 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 year ended
December 31, December 31,
----------------------------------- ------------------------------
% %
2001 2002 Change 2001 2002 Change
------- ------- ------ -------- ------- ------
Revenues $ 27,184 $ 34,163 25.7% $ 92,876 $116,710 25.7%
-------- -------- -------- --------
Costs and expenses:
Instructional and educational 9,580 11,834 23.5% 33,699 41,601 23.4%
Selling and promotion 3,849 4,236 10.1% 12,576 16,773 33.4%
General and administrative 3,713 4,349 17.1% 13,094 17,107 30.6%
-------- -------- -------- --------
17,142 20,419 19.1% 59,369 75,481 27.1%
-------- -------- -------- --------
Income from operations 10,042 13,744 36.9% 33,507 41,229 23.0%
Operating Income Margin 36.9% 40.2% 36.1% 35.3%
Investment and other income 384 533 38.8% 3,791 1,775 -53.2%
Secondary offering expenses -- (490) -- (490)
-------- -------- -------- --------
Income before income taxes 10,426 13,787 32.2% 37,298 42,514 14.0%
Provision for income taxes 4,010 5,527 37.8% 14,489 16,730 15.5%
-------- -------- -------- --------
Net income 6,416 8,260 28.7% 22,809 25,784 13.0%
Preferred stock dividends
and accretion 2,058 1,268 -38.4% 5,010 7,344 46.6%
-------- -------- -------- --------
Net income available to
common stockholders $ 4,358 $ 6,992 60.4% $ 17,799 $ 18,440 3.6%
======== ======== ======== ========
Basic net income per share $ 0.52 $ 0.74 42.3% $ 1.62 $ 2.14 32.1%
======== ======== ======== ========
Diluted net income per share $ 0.45 $ 0.57 26.7% $ 1.55 $ 1.78 14.8%
======== ======== ======== ========
XXXXXXX EDUCATION, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS)
ASSETS
At December 31,
----------------------
2001 2002
--------- ---------
Current assets:
Cash and cash equivalents $ 58,705 $ 49,135
Investment in marketable securities -- 18,121
Tuition receivable - net 19,012 25,759
Other current assets 879 773
--------- ---------
Total current assets 78,596 93,788
Student loan receivable - net 8,392 9,453
Property & equipment - net 23,100 36,571
Other assets 400 312
--------- ---------
Total assets $ 110,488 $ 140,124
========= =========
LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 1,882 $ 3,534
Accrued expenses 562 1,181
Dividends payable 1,855 1,507
Unearned tuition 23,204 29,853
Income taxes payable 1,247 1,812
--------- ---------
Total current liabilities 28,750 37,887
--------- ---------
Long-term liabilities 763 1,985
Deferred income taxes -- 70
Mandatorily redeemable preferred stock 148,347 93,807
Stockholders' equity (deficit):
Common stock 83 107
Additional paid-in-capital 1,759 58,868
Retained earnings (accumulated deficit) (69,214) (52,674)
Accumulated other comprehensive income -- 74
--------- ---------
Total stockholders' equity (deficit) (67,372) 6,375
--------- ---------
Total liabilities & stockholders' equity $ 110,488 $ 140,124
========= =========
XXXXXXX EDUCATION, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(AMOUNTS IN THOUSANDS)
For the year ended
December 31,
----------------------
2001 2002
--------- ---------
Cash flow from operating activities:
Net income $ 22,809 $ 25,784
Adjustments to reconcile net income to net cash:
Depreciation and amortization 2,643 3,642
Provision for student loan losses 196 243
Deferred income taxes 144 381
Amortization of deferred rent -- (91)
Gain on sale of marketable securities (887) --
Changes in assets and liabilities:
Tuition receivable, net (3,748) (6,747)
Other current assets (145) (67)
Other assets -- (50)
Accounts payable 23 1,652
Accrued expenses 327 619
Income taxes payable 2,600 970
Unearned tuition 5,221 6,649
Student loans originated (7,313) (8,475)
Collections on student loans receivable 6,013 7,171
--------- ---------
Net cash provided by operating activities 27,883 31,681
--------- ---------
Cash flows from investing activities:
Purchases of property and equipment (6,274) (17,113)
Purchases of marketable securities -- (18,000)
Maturities of and proceeds from marketable securities 50,126 --
--------- ---------
Net cash provided by (used in) investing activities 43,852 (35,113)
--------- ---------
Cash flows from financing activities:
Exercise of stock options 1,495 --
Deferred lease incentives 763 1,313
Repurchase of common stock (179,375) --
Common dividends paid (3,088) (2,172)
Preferred dividends paid (1,976) (5,250)
Issuance of convertible preferred stock 150,000 --
Payments of costs of tender offer and issuance of preferred stock (7,047) (29)
--------- ---------
Net cash used in financing activities (39,228) (6,138)
--------- ---------
Net increase (decrease) in cash and cash equivalents 32,507 (9,570)
Cash and cash equivalents -- beginning of year 26,198 58,705
--------- ---------
Cash and cash equivalents -- end of year $ 58,705 $ 49,135
========= =========
