Sylvan Learning Systems, Inc. Reports Strong Second Quarter 2001 Results
Sylvan Learning
Systems, Inc. (NASDAQ:SLVN) today announced financial results for the quarter
and six months e expected opening of one new campus at
Universidad del Valle de Mexico (UVM) in Mexico. The campuses
are expected to be open for the 2002 academic year.
— Sylvan International Universities is increasing its ownership
in Universidad Europea CEES (UEM) in Spain from 54% to
approximately 78% as a result of a soon-to-be completed
capital increase.
— Sylvan created an Online Higher Education division to broaden
its leading presence in the fast-growing sector of
post-secondary and adult continuing education delivered
through distance learning.
— Paula Singer, a senior Sylvan executive since 1993 who has
been serving as president of Sylvan’s Education Solutions
division, has been named president and CEO of the Online
Higher Education division. Her management responsibilities for
the new division include Canter, Sylvan Teachers Institute,
OnlineLearning.net, and Sylvan Ventures’ 41% interest in
Walden University.
— Summer enrollments in Canter’s distance learning master’s
degree program increased 29% over the same period last year,
fueling revenue growth of 28%.
— Wall Street Institute (WSI) reported that it has 400 center
locations worldwide. Now operating in 23 countries, Wall
Street Institute expects to open as many as 10 new center
locations by the end of 2001.
K-12
— Sylvan Learning Centers added 11 new franchise locations and
two new company-owned locations, bringing the total number of
North American franchise and company-owned locations to 784
and 89, respectively.
— Sylvan Learning Centers, through master franchisees, opened
its first center locations in the United Kingdom and France.
— Sylvan Education Solutions named Jeffrey H. Cohen president,
with management responsibilities for Sylvan At School and
Career Starters. Previously a Sylvan executive, and most
recently senior vice president of Business Unit Management at
Thomson Prometric, Mr. Cohen will take over duties previously
handled by Ms. Singer.
Sylvan Ventures
— Sylvan Ventures committed $2.5 million for approximately 30%
ownership in EdVerify, an educational credential verification
service. Sylvan Ventures also holds the option to increase its
total ownership to 50% for an additional investment of $2.5
million.
— As of June 30, 2001, Sylvan Ventures has made funding
commitments of $252 million, of which $209 million has been
invested.
Financial Results
Total revenues
from continuing operations for the second quarter of 2001 were $130.4 million,
an increase of 59% compared to total revenues of $82.2 million in the second
quarter of 2000. Total operating income for the quarter, excluding Sylvan Ventures
and previously announced Caliber charges, was $18.2 million in the second quarter
of 2001 compared to $8.3 million in the second quarter of 2000.
Income from continuing
operations after tax for the second quarter, excluding Sylvan Ventures and previously
announced Caliber charges, was $9.7 million, or $0.23 per share on diluted shares
outstanding of 45.5 million. This compares to $9.0 million (on a full-year tax
rate basis), or $0.20 per share on diluted shares outstanding of 45.8 million
for the same period in 2000.
Growth at Sylvan
Learning Centers, Sylvan Education Solutions and acquisitions at Sylvan International
Universities drove operating results in the second quarter of 2001.
For the quarter
ended June 30, 2001, Sylvan reported a loss from continuing operations of $13.4
million (including $13.8 million of after tax losses associated with Sylvan
Ventures and its portfolio companies and $9.4 million of after tax losses associated
with the write-off of Caliber related receivables and guarantee commitments).
For the six month
period ended June 30, 2001, total revenues from continuing operations were $250.8
million, an increase of 59% compared to total revenues of $157.8 million in
the same period of 2000. Total operating income for the six month period, excluding
Sylvan Ventures and previously announced Caliber charges, was $24.5 million
compared to $14.6 million in the same period of 2000.
For the six month
period ended June 30, 2001, income from continuing operations after tax, excluding
Sylvan Ventures and previously announced Caliber charges, was $13.6 million,
or $0.34 per share on diluted shares outstanding of 45.3 million. This compares
to $13.5 million, or $0.28 per share on diluted shares outstanding of 48.7 million
for the same six month period in 2000.
For the six month
period ended June 30, 2001, Sylvan reported a loss from continuing operations
(which includes $29.3 million of after tax losses associated with Sylvan Ventures
and its portfolio companies and $9.4 million of after tax losses associated
with the write-off of Caliber related receivables and guarantee commitments)
of $25.0 million.
Total cash and
marketable securities at the end of the second quarter 2001 stood at approximately
$182 million, while total corporate debt stood at approximately $41 million,
excluding the $100 million convertible debenture.
Douglas Becker,
Chairman and CEO, commented, “We are proud to report on another quarter of outstanding
growth, fueled by rapid expansion of our post-secondary businesses, and bolstered
by our thriving K-12 operations. In post-secondary, we are very excited about
the direction of enrollments and financial performance across the institutions
that comprise Sylvan International Universities. At the same time, we are aggressively
expanding our leadership position in adult continuing education delivered through
distance learning by bringing together our existing online, post-secondary businesses
to form the new Online Higher Education division.”
Mr. Becker continued,
“In K-12, our Sylvan Learning Center and Sylvan Education Solutions divisions
are benefiting from strong consumer demand and continued emphasis on school
accountability by political leaders at the federal and state levels, who view
supplemental education as an important component in raising the academic achievement
of our children.”
Mr. Becker also
stated, “This quarter’s performance gives us confidence in achieving our 2001
goals. Therefore, we are raising our year-end 2001 EPS guidance to $0.66 – $0.68
per share, from $0.63 – $0.65 per share, excluding Sylvan Ventures and previously
announced Caliber charges.”
Third Quarter 2001 Outlook
The following
statements are based on current expectations. These statements are forward-looking
and actual results may differ materially.
-- The Company anticipates total revenues of $98 to $105 million
for the third quarter 2001.
-- Third quarter 2001 operating income excluding Sylvan Ventures
is expected to be $6.4 to $6.9 million.
-- General and administrative expenses are expected to be
approximately $6 million.
-- The Company currently believes that it will achieve an EPS of
$0.09 per share for third quarter of 2001 (excluding Sylvan
Ventures).
Sylvan Learning
Group – Expects $61 to $66 million in revenue with approximately 16% operating
margins
-- Sylvan Learning Centers expects revenues of $28 to $30 million
with operating margins of approximately 22%.
-- Sylvan Education Solutions anticipates revenues of $21 to $23
million with operating margins of approximately 20%. Included
within Sylvan Education Solutions is Canter, which expects
approximately 25% operating margins and revenues between $13
and $14 million.
-- English Language Instruction revenues should range from $12 to
$13 million with a break-even operating margin in the
seasonally slow summer period.
Sylvan International
Universities (SIU) – Anticipates $37 to $39 million in revenue, with operating
margins of approximately 4%, in the seasonally slow summer period.
Note on Presentation
of Sylvan Learning Systems, Inc. Financial Results
For purposes of
this and all earnings announcements, Sylvan Learning Systems, Inc. reports on
the financial results of its operating businesses (including its Sylvan Learning
Center, Sylvan Education Solutions, Wall Street Institute and Sylvan International
Universities units).
Additionally, the
Company reports on the impact of operating costs and flow-through losses from
its investment arm, Sylvan Ventures, and Sylvan Ventures’ portfolio companies.
Sylvan Learning
Systems, Inc. and Apollo Management, LLP committed a total of $400 million to
form Sylvan Ventures, with the express purpose of investing in start-up and
early-stage companies that offer emerging technology and Internet-based solutions
to the education and training marketplace. It is characteristic of these early-stage
companies to generate losses.
Sylvan Learning
Systems, Inc. is required to include its proportionate share of these losses
in its financial results.
Forward Looking Statements
This release includes
information that could constitute forward-looking statements made pursuant to
the safe harbor provision of the Private Securities Litigation Reform Act of
1995. Any such forward-looking statements may involve risk and uncertainties.
Political, economic,
currency, tax, regulatory, technological, competitive and other factors could
cause actual results to differ materially from those anticipated in the forward-looking
statements.
Additional information
regarding these risk factors and uncertainties is detailed from time to time
in the Company’s filings with the Securities and Exchange Commission, including
but not limited to our most recent Forms 10-K and 10-Q, available for viewing
on our website. (To access this information on our website, please click on
“Investor Relations,” “SEC Filings”).
Sylvan Learning
Systems, Inc. (www.sylvan.net) is the leading
provider of education services to families and schools worldwide. The Sylvan
Learning Centers and Sylvan Education Solutions divisions provide personalized
instruction services to K-12 students through direct consumer relationships
and under contract to school systems.
Sylvan provides
courses to adult students throughout the world in the areas of teacher training,
accredited university offerings, and English language, through the Online Higher
Education, Sylvan International Universities and Wall Street Institute businesses.
Sylvan International Universities is pioneering the largest and most ambitious
network of post-secondary education institutions worldwide.
Sylvan Ventures,
Sylvan’s e-learning investment vehicle, focuses on bringing emerging Internet
technology solutions to the education and training marketplace.
TABLE FOLLOWS
Sylvan Learning
Systems, Inc. & Subsidiaries Consolidated Income Statements Actual to Prior
Period Actual Comparison 3 and 6 Months Ended June 30, 2001 (Amounts in Thousands)
Three Months Ended June 30,
2001 2000 % Variance --------- --------- --------- Revenues Franchise Services $ 9,993 $ 9,019 11% Company-owned Learning Centers 16,726 12,994 29% International 4,199 4,071 3% --------- --------- --------- Learning Centers total 30,918 26,084 19% --------- --------- --------- Sylvan At School 19,215 18,114 6% Career Starters 1,733 792 119% Canter 13,281 11,202 19% --------- --------- --------- Education Solutions total 34,229 30,108 14% --------- --------- --------- English Language Instruction total 12,492 12,129 3% --------- --------- --------- Universidad Europea de Madrid 15,136 13,905 9% Les Roche 3,240 0 NA Chile 7,522 0 NA UVM 26,858 0 NA --------- --------- --------- International Universities total 52,756 13,905 (GT)200% --------- --------- --------- Total Revenues 130,395 82,226 59% Operating Expenses Divisional Operating Expenses 106,334 69,395 53% General & Administrative 5,901 4,566 29% --------- --------- --------- Total Operating Expenses 112,235 73,961 52% Operating Income 18,160 8,265 120% Non-Operating items Interest & Other Income 1,409 6,508 -78% Loss on investment in Caliber (14,231) 0 NA Interest Expense (4,663) (2,670) -75% Equity losses in Affiliates of Sylvan (263) (878) 70% Minority Interest (4,017) (1,066) (LT)-200% Exchange Gain/(Loss) 520 415 25% --------- --------- --------- Total Non-Operating items (18,113) 5,030 (LT)-200% --------- --------- --------- Pretax Income (Loss) before Sylvan Ventures 6,432 19,606 -67% Income Tax (2,187) (6,155) 64% Sylvan's Interest in Sylvan Ventures (29,264) (3,416) (LT)-200% --------- --------- --------- Income (loss) from Continuing Operations (25,019) 10,035 (LT)-200% --------- --------- ---------
Discontinued Operations: Income/(loss) from operations of discontinued operations,
net of tax 0 (5,824) 100%
Gain (loss) on disposal of
discontinued operations,
after tax 0 288,454 -100%
--------- --------- ---------
Net Income (loss) $ (25,019) $ 292,665 -109%
========= ========= =========
Earnings Per Share
Weighted Average
Shares - Basic 37,665 47,955
Weighted Average
Shares - Diluted 37,665 47,955
EPS -Net Income (loss) $ (0.66) $ 6.10
EPS-Continuing
Operations $ (0.66) $ 0.21
EPS-Operations Prior to
Sylvan Ventures &
Caliber loss $ 0.34 $ 0.28
Weighted Average Shares
Used in Calculation 45,289 48,697
Operating Profit:
Learning Centers $ 14,657 $ 11,431 28%
Education Solutions $ 9,422 $ 7,780 21%
English Language $ 1,061 $ 1,943 -45%
Interational Universities $ 11,292 $ 2,789 (GT)200%
(GT) = Greater Than
(LT) = Less Than
