- -------------------------------------------------------------------------------- EXHIBIT 99.01 - -------------------------------------------------------------------------------- FOR IMMEDIATE RELEASE FOR MORE INFORMATION CONTACT: Mark C. Brown, Senior Vice President and Chief Financial Officer (703) 247-2514 Sonya Udler, Vice President, Corporate Communications (703) 247-2517 sonya.udler@strayer.edu STRAYER EDUCATION, INC. REPORTS RECORD SECOND QUARTER 2006 ENROLLMENT, REVENUES AND EARNINGS -- STRAYER SECOND QUARTER REVENUES UP 19% -- -- STRAYER SECOND QUARTER DILUTED EPS $0.97 / $1.05 EXCLUDING STOCK-BASED COMPENSATION -- -- STRAYER SUMMER 2006 TOTAL ENROLLMENTS UP 15 %/ NEW STUDENTS UP 15%/ONLINE UP 24% -- -- TWO NEW CAMPUSES WILL OPEN FOR FALL TERM -- ARLINGTON, Va., July 27, 2006 - Strayer Education, Inc. (Nasdaq: STRA) today announced financial results for the three months ended June 30, 2006. Financial highlights are as follows: THREE MONTHS ENDED JUNE 30 o Revenues for the three months ended June 30, 2006 increased 19% to $65.6 million, compared to $55.2 million for the same period in 2005, due to increased enrollment and a 5% tuition increase which commenced in January 2006. o Income from operations was $21.5 million compared to $19.5 million for the same period in 2005, an increase of 10%. In 2006, the Company began recording stock-based compensation expense which amounted to $2.0 million before tax for the three months ended June 30, 2006. Excluding stock-based compensation expense, income from operations was $23.5 million, an increase of 21% compared to 2005. o Net income was $14.0 million compared to $12.5 million for the same period in 2005, an increase of 12%. Net income for the three months ended June 30, 2006 includes the effect of a $1.3 million after tax expense related to stock-based compensation. Excluding stock-based compensation expense, net income was $15.3 million, an increase of 22% compared to 2005. Diluted earnings per share was $0.97 compared to $0.85 for the same period in 2005, an increase of 14%. Diluted earnings per share for the three months ended June 30, 2006 includes the effect of an $0.08 per share after tax expense related to stock-based compensation. Excluding stock-based compensation expense, diluted earnings per share was $1.05, an increase of 24% compared to 2005. Diluted weighted average shares outstanding decreased to 14,497,000 from 14,791,000 for the same period in 2005. SIX MONTHS ENDED JUNE 30 o Revenues for the six months ended June 30, 2006 increased 19% to $132.6 million, compared to $111.4 million for the same period in 2005, due to increased enrollment and a 5% tuition increase which commenced in January 2006. o Income from operations was $46.5 million compared to $42.0 million for the same period in 2005, an increase of 11%. In 2006, the Company began recording stock-based compensation expense which amounted to $3.3 million before tax for the six months ended June 30, 2006. Excluding stock-based compensation expense, income from operations was $49.8 million, an increase of 19% compared to 2005. o Net income was $30.0 million compared to $26.6 million for the same period in 2005, an increase of 13%. Net income for the six months ended June 30, 2006 includes the effect of a $2.0 million after tax expense related to stock-based compensation. Excluding stock-based compensation expense, net income was $32.0 million, an increase of 20% compared to 2005. Diluted earnings per share was $2.06 compared to $1.79 for the same period in 2005, an increase of 15%. Diluted earnings per share for the six months ended June 30, 2006 includes the effect of a $0.14 per share after tax expense related to stock-based compensation. Excluding stock-based compensation expense, diluted earnings per share was $2.20, an increase of 23% compared to 2005. Diluted weighted average shares outstanding decreased to 14,528,000 from 14,870,000 for the same period in 2005. Income from operations, net income and diluted earnings per share for the three and six months ended June 30, 2006 excluding stock-based compensation (as presented above) are considered non-GAAP financial measures. The Company believes these non-GAAP financial measures provide investors, potential investors, securities analysts and others with useful information to evaluate the performance of the business, because they exclude stock-based compensation expense which had not been included in the prior years. Additional information is contained in the attached financial statements including a reconciliation of GAAP to the non-GAAP measures. BALANCE SHEET AND CASH FLOW At June 30, 2006, the Company had cash, cash equivalents and marketable securities (a diversified, no load, short-term, tax exempt bond fund) of $122.6 million and no debt. The Company generated $30.7 million from operating activities in the first six months of 2006. Capital expenditures were $6.1 million for the same period. During the three months ended June 30, 2006, the Company repurchased 80,452 shares of common stock at an average price of $95.15 per share and a cost of $7.7 million, as part of a previously announced common stock repurchase authorization. The Company's remaining authorization for common stock repurchases was $10.3 million at June 30, 2006. For the second quarter 2006, bad debt expense as a percentage of revenue was 2.6% compared to 2.5% for the same period in 2005. Days sales outstanding, adjusted to exclude tuition receivable related to future quarters, was 10 days at the end of the second quarter of 2006, compared to eight days at the end of the same period in 2005. STUDENT ENROLLMENT Enrollment at Strayer University for the 2006 summer term increased 15% to 23,932 students compared to 20,757 for the same term in 2005. For the 2006 summer term, Strayer University's rate of growth of new students was 15%, and its rate of growth of continuing students was also 15%. Out-of-area online students increased 24% while students taking 100% of their classes at Strayer University Online (including campus based students) increased 21%. The total number of students taking any courses online (including students at brick and mortar campuses taking at least one online course) in the 2006 summer term increased 20% to 17,015. STUDENT ENROLLMENT ------------------ Summer Summer % 2005 2006 Change ------------ ------------- ------------ Campus Based Students: New Campuses (18 in operation 3 years or less) Classroom 970 1,789 84% Online 1,231 2,404 95% ------ ------ Total New Campus Students 2,201 4,193 91% ------ ------ Mature Campuses (23 in operation more than 3 years) Classroom 7,893 7,777 -1% Online 8,470 9,249 9% ------ ------ Total Mature Campus Students 16,363 17,026 4% ------ ------ Total Campus Based Students 18,564 21,219 14% Out-of-area Online Students 2,193 2,713 24% ------ ------ Total Students 20,757 23,932 15% ====== ====== Total Students Taking 100% of Courses Online 11,894 14,366 21% Total Students Taking at Least 1 Course Online 14,137 17,015 20% NEW CAMPUS OPENINGS The Company reported today that it will open two new campuses for the 2006 fall term - one in Birmingham, Alabama, its first campus in that state, and the other in Charleston, South Carolina, its third campus in that state. These new campuses increase the total number of Strayer University campuses to 43, and complete the announced eight new campus openings for 2006. NEW PROGRAMS For the 2006 fall term, Strayer University has introduced a new academic concentration in Hospitality and Tourism Management in its undergraduate and graduate level Business Administration programs. The University has also introduced a Retail Management concentration in its MBA program. SENIOR MANAGEMENT ADDITION The Company announced today it has appointed Karl McDonnell as its President and Chief Operating Officer reporting to Robert Silberman, the Company's Chairman and Chief Executive Officer. Prior to joining Strayer, Mr. McDonnell was Chief Operating Officer of Intelistaf, a healthcare staffing company, and held senior management positions at the investment bank of Goldman, Sachs & Co. and The Walt Disney Company. Mr. McDonnell, 40, holds an undergraduate degree from Virginia Wesleyan College and an MBA from Duke University. "We were pleased both with our solid financial performance in the second quarter and our strong enrollment for the summer term," said Robert Silberman. "We also look forward to the addition of two more new campuses for the fall term including one in Alabama, a new state for Strayer. We are also very pleased to welcome Karl McDonnell to Strayer's senior management team." COMMON STOCK CASH DIVIDEND The Company announced today that its Board of Directors has declared its regular, quarterly common stock cash dividend of $0.25 per share. This dividend will be paid on September 11, 2006 to shareholders of record as of August 25, 2006. BUSINESS OUTLOOK Based on the strong enrollment growth announced for the 2006 summer term and the planned investments in opening new campuses, the Company estimates third quarter 2006 diluted EPS will be in the range of $0.39-$0.41, or $0.50-$0.52 excluding the impact of FAS 123(R). The Company estimates that it will incur stock-based compensation expense of approximately $0.11 per share after tax in the third quarter of 2006 and approximately $0.36 per share after tax for the full year 2006. STOCK OPTION AND RESTRICTED STOCK ACTIVITY In the second quarter, the Company granted 37,397 shares of restricted stock to certain employees and directors. Included in this amount are 32,765 shares of restricted stock granted to employees in exchange for 105,000 stock options pursuant to a one-time exchange offer approved by the shareholders on May 3, 2006. The Company's stock price closed at $103.60 on the date that the exchange offer was approved by the shareholders and priced. In July 2006, the Company's Board of Directors approved a grant of 20,192 shares of restricted stock to Mr. McDonnell. These shares vest 100% on July 25, 2010 based on the achievement of certain performance criteria. The Company's stock price closed at $99.05 on the date of the restricted stock grant. CONFERENCE CALL WITH MANAGEMENT Strayer Education, Inc. will host a conference call to discuss its second quarter 2006 earnings on July 27, 2006 at 10:00 a.m. (ET). To participate on the live call, investors should dial (800) 289-0468, 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 www.strayereducation.com 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 4312214) starting at 1:00 p.m. (ET) today and will be available through Tuesday, August 1, and archived at www.strayereducation.com for 90 days. Strayer Education, Inc. (Nasdaq: STRA) is an education services holding company that owns Strayer University and certain other assets. Strayer's mission is to make higher education achievable and convenient for working adults in today's economy. Strayer University is a proprietary institution of higher learning that offers undergraduate and graduate degree programs in business administration, accounting, information technology, education, and public administration to more than 27,000 working adult students at 43 campuses in 10 states and Washington, D.C., in the eastern United States and worldwide via the Internet through Strayer University Online. Strayer University is committed to providing an education that prepares working adult students for advancement in their careers and professional lives. Founded in 1892, Strayer University is accredited by the Middle States Commission on Higher Education. For more information on Strayer Education, Inc. visit www.strayereducation.com and for Strayer University visit www.strayer.edu. 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 regional accreditation standards and 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. STRAYER EDUCATION, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) For the three months For the six months ended June 30, ended June 30, --------------------------- --------------------------- 2005 2006 2005 2006 ---------- ---------- ---------- ---------- Revenue ....................................... $ 55,249 $ 65,558 $ 111,402 $ 132,648 ---------- ---------- ---------- ---------- Costs and expenses: Instructional and educational support ...... 20,032 22,719 38,491 44,757 Selling and promotion ...................... 8,653 11,175 17,316 21,847 General and administrative ................. 7,072 10,191 13,615 19,585 ---------- ---------- ---------- ---------- Total costs and expenses ...................... 35,757 44,085 69,422 86,189 ---------- ---------- ---------- ---------- Income from operations ........................ 19,492 21,473 41,980 46,459 Investment and other income ................... 795 1,162 1,405 2,117 ---------- ---------- ---------- ---------- Income before income taxes .................... 20,287 22,635 43,385 48,576 Provision for income taxes .................... 7,762 8,617 16,769 18,602 ---------- ---------- ---------- ---------- Net income .................................... $ 12,525 $ 14,018 $ 26,616 $ 29,974 ========== ========== ========== ========== Net income per share: Basic ...................................... $ 0.86 $ 0.99 $ 1.82 $ 2.11 Diluted .................................... $ 0.85 $ 0.97 $ 1.79 $ 2.06 Weighted average shares outstanding: Basic ...................................... 14,531 14,200 14,596 14,229 Diluted .................................... 14,791 14,497 14,870 14,528 - -------------------------------------------------------------------------------- In 2006, the Company adopted FAS 123(R) and began recording stock-based compensation expense for stock options. Prior to the adoption of FAS 123(R), the Company recorded expense for other forms of stock-based compensation. For the three months ended June 30, 2006, stock-based compensation expense was $2.0 million, or $1.3 million net of tax, and reduced EPS by $0.08. For the six months ended June 30, 2006, stock-based compensation expense was $3.3 million, or $2.0 million net of tax, and reduced EPS by $0.14. The table below sets forth the amount of various forms of stock-based compensation expense recorded in each of the expense line items. There was no stock-based compensation expense recorded for the three months ended June 30, 2005 because the Company had not adopted the recognition provisions of FAS 123(R) for stock options until the beginning of 2006 and there was no other stock-based compensation activity. For the three months For the six months ended June 30, ended June 30, ------------------------ ------------------------- 2005 2006 2005 2006 ---------- ---------- ---------- ----------- Instruction and educational support......... $ -- $ 125 $ -- $ 339 Selling and promotion....................... -- 141 -- 273 General and administration.................. -- 1,761 -- 2,735 ---------- ---------- ---------- ----------- Total stock-based compensation expense.... $ -- $ 2,027 $ -- $ 3,347 The pro forma impact of recording stock-based compensation expense for the three and six months ended June 30, 2005 was disclosed in Note 5 to the Company's Condensed Consolidated Financial Statements included in its Form 10-Q for the three months ended June 30, 2005. As disclosed in such note, including $0.6 million in stock-based compensation expense net of tax, the Company would have reported net income of approximately $11.9 million and diluted EPS of $0.80 for the three months ended June 30, 2005. For the six months ended June 30, 2005, including $1.2 million in stock-based compensation expense net of tax, the Company would have reported net income of approximately $25.4 million and diluted EPS of $1.71. - -------------------------------------------------------------------------------- STRAYER EDUCATION, INC. UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) At December 31, At June 30, 2005 2006 ------------ ------------ ASSETS Current assets: Cash and cash equivalents ............................................................. $ 74,212 $ 47,163 Marketable securities available for sale, at fair value ............................... 45,594 75,423 Tuition receivable, net of allowances for doubtful accounts of $1,927 and $2,219 at December 31, 2005 and June 30, 2006, respectively ................................... 55,935 61,021 Other current assets .................................................................. 2,581 6,979 ------------ ------------ Total current assets ................................................................ 178,322 190,586 Property and equipment, net ............................................................. 46,684 49,935 Deferred income taxes ................................................................... -- 1,286 Restricted cash ......................................................................... 500 500 Other assets ............................................................................ 339 342 ------------ ------------ Total assets ........................................................................ $ 225,845 $ 242,649 ============ ============ LIABILITIES & STOCKHOLDERS' EQUITY Current liabilities: Accounts payable ...................................................................... $ 6,402 $ 14,217 Accrued expenses ...................................................................... 1,483 1,784 Income taxes payable .................................................................. 3,773 170 Unearned tuition ...................................................................... 55,778 59,136 ------------ ------------ Total current liabilities ........................................................... 67,436 75,307 Deferred income taxes ................................................................... 205 -- Long-term liabilities ................................................................... 6,364 6,398 ------------ ------------ Total liabilities ................................................................... 74,005 81,705 ------------ ------------ Commitments and contingencies Stockholders' equity: Common stock, par value $.01; 20,000,000 shares authorized; 14,292,249 and 14,323,872 shares issued and outstanding at December 31, 2005 and June 30, 2006, respectively ................................... 143 142 Additional paid-in capital ............................................................ 104,923 91,361 Retained earnings ..................................................................... 47,020 69,791 Accumulated other comprehensive income (loss) ......................................... (246) (350) ------------ ------------ Total stockholders' equity .......................................................... 151,840 160,944 ------------ ------------ Total liabilities and stockholders' equity .......................................... $ 225,845 $ 242,649 ============ ============ STRAYER EDUCATION, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (AMOUNTS IN THOUSANDS) For the six months ended June 30, --------------------------------- 2005 2006 ------------ ------------ Cash flow from operating activities: Net income ............................................................... $ 26,616 $ 29,974 Adjustments to reconcile net income to net cash provided by operating activities: Amortization of deferred rent .......................................... 74 84 Depreciation and amortization .......................................... 3,197 3,369 Provision for student loan losses ...................................... (63) (70) Deferred income taxes .................................................. (33) (1,605) Stock-based compensation ............................................... -- 3,028 Changes in assets and liabilities: Tuition receivable, net ................................................ (4,894) (5,086) Other current assets ................................................... (751) (4,217) Other assets ........................................................... -- (3) Accounts payable ....................................................... 1,618 5,197 Accrued expenses ....................................................... (956) 301 Income taxes payable ................................................... (6,906) (1,816) Excess tax benefits from stock-based payment arrangements .............. -- (1,787) Unearned tuition ....................................................... 5,572 3,358 Deferred lease incentives .............................................. 1,531 -- Student loans originated ................................................. (571) (3) Collections on student loans receivable and held for sale ................ 601 23 ------------ ------------ Net cash provided by operating activities .............................. 25,035 30,747 ------------ ------------ Cash flows from investing activities: Purchases of property and equipment ...................................... (7,793) (6,074) Purchases of marketable securities ....................................... -- (30,000) ------------ ------------ Net cash used in investing activities .................................. (7,793) (36,074) ------------ ------------ Cash flows from financing activities: Common dividends paid .................................................... (3,647) (7,203) Proceeds from exercise of stock options .................................. -- 3,249 Excess tax benefits from stock-based payment arrangements ................ -- 1,787 Repurchase of common stock ............................................... (24,998) (19,555) ------------ ------------ Net cash used in financing activities .................................. (28,645) (21,722) ------------ ------------ Net increase (decrease) in cash and cash equivalents ................... (11,403) (27,049) Cash and cash equivalents - beginning of period ............................ 97,004 74,212 ------------ ------------ Cash and cash equivalents - end of period .................................. $ 85,601 $ 47,163 ============ ============ Non-cash transactions: Purchases of property and equipment included in accounts payable ......... $ 181 $ 1,107 Repurchase of common stock included in accounts payable .................. -- $ 2,072 STRAYER EDUCATION, INC. RECONCILIATION OF UNAUDITED NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES (A) (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) For the three months ended June 30, 2006 For the six months ended June 30, 2006 ---------------------------------------- ----------------------------------------- Stock-based Stock-based GAAP Compensation Non-GAAP GAAP Compensation Non-GAAP Results Expense Results Results Expense Results ----------- ----------- ----------- ----------- ----------- ----------- Revenues $ 65,558 $ -- $ 65,558 $ 132,648 $ -- $ 132,648 ----------- ----------- ----------- ----------- ----------- ----------- Costs and expenses: Instruction & educational support 22,719 (125) 22,594 44,757 (339) 44,418 Selling & promotion 11,175 (141) 11,034 21,847 (273) 21,574 General & administration 10,191 (1,761) 8,430 19,585 (2,735) 16,850 ----------- ----------- ----------- ----------- ----------- ----------- Total costs and expenses 44,085 (2,027) 42,058 86,189 (3,347) 82,842 ----------- ----------- ----------- ----------- ----------- ----------- Income from operations 21,473 2,027 23,500 46,459 3,347 49,806 Investment and other income 1,162 -- 1,162 2,117 -- 2,117 ----------- ----------- ----------- ----------- ----------- ----------- Income before income taxes 22,635 2,027 24,662 48,576 3,347 51,923 Provision for income taxes 8,617 780 9,397 18,602 1,289 19,891 ----------- ----------- ----------- ----------- ----------- ----------- Net income $ 14,018 $ 1,247 $ 15,265 $ 29,974 $ 2,058 $ 32,032 =========== =========== =========== =========== =========== =========== Net income per share: Basic $ 0.99 $ 0.09 $ 1.08 $ 2.11 $ 0.14 $ 2.25 Diluted $ 0.97 $ 0.08 $ 1.05 $ 2.06 $ 0.14 $ 2.20 Weighted average shares outstanding: Basic 14,200 14,200 14,200 14,229 14,229 14,229 Diluted 14,497 14,497 14,497 14,528 14,528 14,528 (a) These unaudited non-GAAP financial measures are for informational purposes only and are not presented in accordance with GAAP. The Company believes these non-GAAP financial measures provide investors, potential investors, securities analysts and others with useful information to evaluate the performance of the business, because they exclude stock-based compensation expense which had not been included in the prior years. The presentation of this additional information is not meant to be considered in isolation or as a substitute for the Company's condensed consolidated statements of income.
Strategic Education (STRA)
Filed: 27 Jul 06, 12:00am