Sylvan Learning Systems, Inc. Reports Significant Increase in Year Over Year Fourth Quarter Earnings
BALTIMORE — Sylvan Learning
Systems, Inc. (NASDAQ: SLVN – news) today announced financial results for the
fourth quarter and year ended December 31, 2000.
Recent Financial and Business Highlights
— Fourth quarter 2000 EPS, excluding Sylvan Ventures, was $0.18
per share, in-line with Company guidance, compared to a loss of $0.34
per share for the same quarter in 1999. We understand that the analyst
consensus estimate for earnings per share for the fourth quarter of
2000 was $0.16 per share excluding the impact of Sylvan Ventures.
— Full year 2000 EPS from continuing operations, excluding Sylvan
Ventures, was $0.53 per share, compared to $0.16 per share in 1999.
— Fourth quarter and full year 2000 EPS from continuing
operations, including Sylvan Ventures, was a loss of $0.22 per share
and $0.04 per share, respectively.
Post-Secondary – Sylvan accelerates activity in the post-secondary
market
— Sylvan International Universities in December 2000 completed
its acquisition of an initial 60 percent interest in Universidad de
Las Americas (UDLA), one of Chile’s leading autonomous and fully
accredited universities. UDLA, which is currently in the midst of its
annual enrollment drive, reports that new student enrollments have
increased by 1,300 students or 57% over last year’s levels. This
enrollment success follows Sylvan’s previous announcement of a 24% new
student enrollment increase at Universidad Europea de Madrid.
— Sylvan International Universities now owns and operates the
largest global network of international universities with full local
accreditation through four institutions (located in Chile, Mexico,
Spain and Switzerland), with total enrollment of nearly 55,000
students, and expected 2001 revenues of approximately $200 million.
— Sylvan Learning Systems’ total adult education business
(including Sylvan International Universities, Canter, and Wall Street
Institute) is expected to generate approximately $300 million of
revenue in 2001, making Sylvan one of the largest companies in
private, post-secondary education.
— Canter Master’s program enrollments increased 23% for the year.
Canter now has more than 8,800 teachers enrolled in its distance
Master’s degree programs in Education. Canter recently introduced a
nation-wide distance learning Master’s degrees in Education with a
specialization in Elementary Reading and Literacy in conjunction with
Walden University.
— A second Wall Street Institute (WSI) center was opened in
Beijing, China, which is performing at a revenue level comparable to
the first center in Beijing – now the largest WSI center worldwide.
K-12 – Sylvan’s K-12 businesses show continued strong growth
— Sylvan Learning Centers reported that it now has 853 locations;
766 franchised centers, an increase of 56 from 1999, and 87
company-owned centers, an increase of 5 from 1999.
— Sylvan Learning Centers reported 10% same-center sales growth
for the year 2000, marking the ninth consecutive year of double-digit
sales growth.
— Sylvan Learning Centers announced the appointment of Mary
Foster as President, Sylvan Learning Centers Division, the position
formerly held by Peter Cohen. This appointment will allow Mr. Cohen to
focus fully on his current role as President and Chief Operating
Officer of Sylvan Learning Systems, Inc.
— Sylvan Education Solutions signed five new contracts with
public school districts in 2000, bringing the total number of schools
served to 117. The division anticipates growing interest in
supplemental education with the increased national focus and political
activity surrounding education.
Sylvan Ventures – Implements investment strategy and expands its
e-Learning portfolio
— In February 2001, Sylvan Ventures committed approximately $32.8
million for a 41% interest in Walden University, a pioneer in the
fast-growing distance and online learning market for adults, offering
Ph.D. and other graduate-level, regionally accredited degree programs
to nearly 2,000 students nationwide.
— Sylvan Ventures’ portfolio now includes 10 investments in
companies focused on bringing Internet technology solutions to the
K-12, post-secondary and corporate education and training
marketplaces.
Financial Results
Income from continuing operations for the fourth quarter,
excluding Sylvan Ventures’ results, was $7.0 million, or $0.18 per
share on diluted shares outstanding of 44.4 million. This compares to
a loss from continuing operations of $17.2 million, or $0.34 per share
on diluted shares outstanding of 50.9 million for the same period in
1999.
Total revenues from continuing operations for the fourth quarter
of 2000 were $98.9 million, an increase of 30% compared to total
revenues of $76.2 million in the fourth quarter of 1999. Total
operating income for the quarter, excluding Sylvan Ventures, was $9.0
million in the fourth quarter of 2000 compared to income of $4.3
million prior to non-recurring and restructuring costs in the fourth
quarter of 1999. The increase in operating income was primarily due to
growth at Sylvan Learning Centers and acquisitions at Sylvan
International Universities.
For the quarter ended December 31, 2000, Sylvan reported a loss
from continuing operations of $8.3 million (including $15.3 million of
losses associated with Sylvan Ventures and its portfolio companies).
Results for the previously announced dispositions of Prometric, PACE
and ASPECT are classified as discontinued operations in the financial
table that follows.
Income from continuing operations for 2000, excluding Sylvan
Ventures’ results, was $23.6 million, or $0.53 per share on diluted
shares outstanding of 47.4 million. This compares to income from
continuing operations of $8.3 million, or $0.16 per share on diluted
shares outstanding of 53.2 million for the same period in 1999. Sylvan
reported losses from continuing operations (which included $25.2
million of losses associated with Sylvan Ventures and its portfolio
companies) of $1.6 million in 2000.
Total revenues from continuing operations for the year were $316.7
million, an increase of 14%, compared to total revenues of $277.1
million in 1999. Total operating income for 2000, excluding Sylvan
Ventures, was $25.7 million compared to $26.0 million for 1999. The
increase in operating income was primarily due to growth at Sylvan
Learning Centers and Sylvan Education Solutions, acquisitions by
Sylvan International Universities, and restructuring and non-recurring
expenses incurred in 1999.
Total cash and marketable securities at the end of the quarter
stood at $317.2 million, while total corporate debt stood at $57.2
million, excluding the $100 million convertible debenture. A
significant tax payment will be made in March 2001 relating to the
gain on the sale of Prometric.
Douglas Becker, Chairman and CEO, commented, “Fiscal year 2000
marks the conclusion of a transition period for our Company. This
transition, which included substantial divestitures, was designed to
improve our earnings visibility and allow us to generate greater
returns on our invested capital. Sylvan enters 2001 as the leader in
the international post-secondary education market. This will be a year
of expansion for Sylvan, as we continue to build out our learning
networks in supplemental education, teacher education, English
language instruction and university offerings.”
Christopher Hoehn-Saric, Chairman and CEO, Sylvan Ventures,
stated, “We have positioned Ventures to take advantage of current
market conditions, where we see investment opportunities at very
attractive valuations. We have made virtually all of our investments
at post-April 2000 valuation levels. At the same time, we are seeing
opportunities to invest in later-stage growth businesses, such as
Walden University, with proven financial models that are synergistic
with Sylvan operating companies and divisions. The business
partnership between Walden and Sylvan’s Canter and SIU divisions will
produce one of the most comprehensive distance learning initiatives in
the post-secondary market.”
2001 Outlook
The following statements are based on current expectations. These
statements are forward-looking, and actual results may differ
materially.
— The Company currently believes that it will achieve EPS in the
range of $0.63 to $0.65 per share for 2001 (excluding Sylvan
Ventures), representing 19% to 23% EPS growth.
— The Company anticipates total revenues of $475 to $490 million
for 2001, an increase of 50% or more over 2000.
— Operating income for 2001 is expected to be $46 to $48 million,
an increase of 78% or more over 2000.
— EBITDA in 2001 is expected to be $70-75 million, an increase of
54% or more over 2000.
— General and administrative expenses are forecast to be flat
year-over-year.
— Non-operating items for the year are expected to result in
expense of approximately 2% of revenue.
— Fully diluted shares outstanding for 2001 are projected to be
approximately 44.8 million.
Sylvan Learning Group – Expects $285 to $295 million in revenue
with approximately 16% operating margins
— Sylvan Learning Centers expects revenue growth of 16% to 19%
with operating margins of approximately 21%.
— Sylvan Education Solutions anticipates revenue growth of 16% to
19% with operating margins of approximately 12%. Included within
Sylvan Education Solutions is Canter, which expects approximately 21%
operating margins and revenue growth between 25% and 30%.
— English Language Instruction revenue growth should range from
7% to 10%, with operating margins of approximately 6%.
Sylvan International Universities (SIU) – Anticipates $195-$200
million in revenue, with operating margins of approximately 11%, after
the impact of SIU overhead
— SIU also anticipates one university acquisition and plans to
begin building one new university (or greenfield development) in 2001.
— Further additions to our network of international universities
will increase the impact of seasonality on our operating results.
Sylvan Ventures (Ventures) – Expects losses for 2001 of $50-55
million after-tax, primarily reflecting its share of flow-through
accounting losses generated by the portfolio companies
— Ventures anticipates that it will invest approximately $60-80
million of cash in 2001 in portfolio companies (including the 2001
portion of its Walden commitment).
— At the present time, Ventures has made funding commitments of
$245 million, including multi-year commitments, and has invested
approximately $170 million of the total $400 million available.
Forward Looking Statements
This release may include 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
Security and Exchange Commission, including but not limited to our
most recent Form 10-Q, available for viewing on our Web site. (To
access this information, please click on “Investor Relations,” “SEC
Filings”).
Sylvan Learning Systems, Inc. (www.sylvan.net) builds profitable,
market-leading, learning networks on a global scale. Sylvan provides
courses to adult students throughout the world in the areas of English
language, teacher training and accredited university offerings through
the Wall Street Institute, Canter and Associates, and Sylvan
International Universities subsidiaries. The Sylvan Learning Centers
and Sylvan Education Services divisions provides personalized
instruction services to K-12 students through direct consumer
relationships and under contract to school systems.
TABLE FOLLOWS
Sylvan Learning Systems, Inc. and Subsidiaries
Consolidated Income Statements
(Millions, except per share data)
Three Months Ended December 31,
2000 1999 %Variance
-------- --------- --------
Revenues
Franchise Services $10,599 $7,064 50%
Company-owned Learning
Center 10,411 9,753 7%
Schulerhilfe 3,232 3,465 -7%
-------- --------- --------
Learning Centers total 24,242 20,282 20%
-------- --------- --------
Sylvan At School 19,387 17,871 8%
Career Starters 1,249 784 59%
Canter 10,225 12,614 -19%
-------- --------- --------
Education Solutions total 30,861 31,269 -1%
-------- --------- --------
English Language Instruction
total 13,836 8,597 61%
-------- --------- --------
Universidad Europea de
Madrid 15,578 16,096 -3%
Les Roche 3,358 - NA
Chile 915 - NA
UVM 10,123 - NA
-------- --------- --------
International Universities
total 29,974 16,096 86%
-------- --------- --------
Total Revenues 98,913 76,244 30%
-------- --------- --------
Operating Expense
Divisional Operating Expenses - 83,571 63,326 32%
Restructuring costs - 3,569 -100%
Non-recurring expenses - 9,978 -100%
General & Administrative 6,319 8,619 -27%
-------- --------- --------
Total Operating Expenses 89,890 85,492 5%
Operating Income 9,023 (9,248) -198%
Non-Operating items
Interest & Other Income 5,708 637 796%
Loss on Investment - (13,370) -100%
Interest Expense (2,595) (1,449) -79%
Equity in Affiliates of Sylvan - (80) 100%
Minority Interest (1,539) 332 464%
Exchange Gain/(Loss) 54 224 -76%
-------- --------- --------
Total Non-Operating items 1,628 (13,706) 112%
Pretax Income (Loss) before
Sylvan Ventures 10,651 (22,954) 146%
Income Tax (Expense) Benefit (3,622) 5,793 -162%
Sylvan's Interest in Sylvan
Ventures (1) (15,343) - NA
-------- --------- --------
Income (Loss) from Continuing
Operations (8,314) (17,161) 52%
-------- --------- --------
Discontinued Operations:
Income (loss) from operations
of discontinued
operations, net of tax (46) (3,658) 99%
Gain (loss) on disposal of
discontinued operations, after
tax 22,353 (1,886) 1285%
-------- --------- --------
Net Income (Loss)
before Cumulative Effect
of Change in Accounting
Principle 13,993 (22,705) 162%
-------- --------- --------
Cumulative Effect of Change
in Accounting Principle,
net of tax - - 0%
-------- --------- --------
Net Income (Loss) $13,993 ($22,705) 162%
-------- --------- --------
Earnings per share
Weighted Average Shares
Outstanding - Basic 37,274 50,907
Weighted Average Shares
Outstanding - Diluted 44,403 50,907
EPS - Net Income (Loss)
- Diluted $0.38 ($0.45)
EPS - Continuing Operations ($0.22) ($0.34)
EPS - Operations prior to Sylvan
Ventures - Diluted $0.18 ($0.34)
Operating Profit:
Learning Centers $4,119 $2,942 40%
Education Solutions $4,934 $6,923 -29%
English Language $530 ($41) 1393%
International Universities $5,759 $3,094 86%
(1) Ventures loss is presented net of tax benefit ($13,409) and
minority interest allocations ($6,203).
Year Ended December 31,
2000 1999 % Variance
-------- --------- --------
Revenues
Franchise Services $37,312 $34,160 9%
Company-owned Learning
Center 47,732 42,153 13%
Schulerhilfe 13,899 14,351 -3%
-------- --------- --------
Learning Centers total 98,943 90,664 9%
-------- --------- --------
Sylvan At School 64,502 63,179 2%
Career Starters 3,860 2,562 51%
Canter 36,814 35,522 4%
-------- --------- --------
Education Solutions total 105,176 101,263 4%
-------- --------- --------
English Language Instruction
total 49,949 52,848 -5%
-------- --------- --------
Universidad Europea de Madrid 45,240 32,275 40%
Les Roche 6,304 - NA
Chile 915 - NA
UVM 10,123 - NA
-------- --------- --------
International Universities
total 62,582 32,275 94%
-------- --------- --------
Total Revenues 316,650 277,050 14%
-------- --------- --------
Operating Expense
Divisional Operating Expenses
- total 270,619 213,581 27%
Restructuring costs - 3,569 -100%
Non-recurring expenses - 9,978 -100%
General & Administrative 20,306 23,903 -15%
-------- --------- --------
Total Operating Expenses 290,925 251,031 16%
Operating Income 25,725 26,019 -1%
Non-Operating items
Interest & Other Income 22,068 1,170 1786%
Loss on investment - (13,370) -100%
Interest Expense (7,322) (4,041) -81%
Equity in Affiliates of Sylvan (981) (2,356) 58%
Minority Interest (1,673) (319) -424%
Exchange Gain/(Loss) (2,029) (48) -4127%
-------- --------- --------
Total Non-Operating items 10,063 (18,964) -153%
Pretax Income (Loss) before
Sylvan Ventures 35,788 7,055 407%
Income Tax (Expense) Benefit (12,168) 1,284 -1048%
Sylvan's Interest in Sylvan
Ventures (1) (25,237) - NA
-------- --------- --------
Income (Loss) from
Continuing Operations (1,617) 8,339 -119%
-------- --------- --------
Discontinued Operations:
Income (loss) from operations
of discontinued
operations, net of tax (3,967) 4,964 -180%
Gain (loss) on disposal of
discontinued operations,
after tax 310,807 (26,968) 1253%
-------- --------- --------
Net Income (Loss) before
Cumulative Effect
of Change in Accounting Principle 305,223 (13,665) 2334%
-------- --------- --------
Cumulative Effect of Change in
Accounting Principle,
net of tax - (1,323) 100%
-------- --------- --------
Net Income (Loss) $305,223 ($14,988) 2136%
-------- --------- --------
Earnings per share
Weighted Average Shares Outstand
- Basic 43,501 51,642
Weighted Average Shares
Outstanding - Diluted 47,406 53,157
EPS - Net Income (Loss)
- Diluted $7.02 ($0.28)
EPS - Continuing Operations ($0.04) $0.16
EPS - Operations prior to
Sylvan Ventures - Diluted $0.53 $0.16
Operating Profit:
Learning Centers $22,105 $25,364 13%
Education Solutions $16,131 $20,308 21%
English Language $2,818 $14,942 81%
International Universities $4,977 $2,855 74%
(1) Ventures loss is presented net of tax benefit ($16,475) and
minority interest ($9,133).
Contact:
Sylvan Learning Systems, Inc.
Sean Creamer
Vice President, Corporate Finance
(410) 843-8991
OR
Steve Drake
Vice President, Public Relations
(410) 843-6295
OR
Chris Symanoskie
Manager, Investor Relations
(410) 843-6394
