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EXHIBIT 99.01
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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 THIRD QUARTER 2003
ENROLLMENT, REVENUES AND EARNINGS
-- STRAYER THIRD QUARTER REVENUES UP 30% --
-- STRAYER THIRD QUARTER DILUTED EPS OF $0.25 (BEFORE GAIN OF
$0.07 FROM ASSET SALE), UP 32% --
-- STRAYER UNIVERSITY FALL 2003 TOTAL ENROLLMENTS UP 22%/NEW STUDENTS
UP 23%/ONLINE UP 65% --
-- TWO PHILADELPHIA CAMPUSES OPENED FOR A TOTAL OF 5 NEW CAMPUSES IN 2003 --
-- STRAYER UNIVERSITY APPROVED BY STATE OF GEORGIA FOR
TWO NEW CAMPUSES IN 2004 --
-- STRAYER FULL YEAR EPS ESTIMATE RAISED TO $2.14 TO $2.16
(EXCLUDING GAINS FROM ASSET SALES) --
ARLINGTON, Va., November 3, 2003 - Strayer Education, Inc. (Nasdaq: STRA) today
announced financial results for the three and nine months ended September 30,
2003. Financial highlights are as follows:
THREE MONTHS ENDED SEPTEMBER 30
o Revenues for the three months ended September 30, 2003 increased 30% to
$30.0 million, compared to $23.0 million for the same period in 2002, due
to increased enrollment and a 5% tuition increase which commenced in
January 2003.
o Operating income (EBIT) (excluding the gain from the sale of the
Washington, D.C. campus building) rose 41% to $5.6 million from $4.0
million for the same period in 2002. Excluding the gain from the sale of
the building, operating income margin was 18.6%, compared to 17.2% for the
same period in 2002. The increase in operating margin was primarily due to
strong revenue growth more than offsetting the increased expense associated
with opening five new campuses in 2003 compared to three new campuses in
2002.
o Net income (excluding the gain from the sale of the Washington, D.C. campus
building) rose 40% to $3.8 million compared to $2.7 million for the same
period in 2002. Including the gain from the sale
5
of the Washington, D.C. campus building, net income rose 79% to $4.9
million. Earnings per diluted share (excluding the gain from the sale of
the Washington, D.C. campus building) rose 32% to $0.25 compared to $0.19
for the same period in 2002. Including the gain from the sale of the
Washington, D.C. campus building, earnings per diluted share was $0.32, an
increase of 68%. Diluted weighted average shares outstanding increased to
14,969,000 from 14,556,000 for the same period in 2002.
NINE MONTHS ENDED SEPTEMBER 30
o Revenues for the nine months ended September 30, 2003 increased 26% to
$103.7 million, compared to $82.5 million for the same period in 2002, due
to increased enrollment and a 5% tuition increase effective for 2003.
o Operating income (EBIT) (excluding the gain from the sale of the
Washington, D.C. campus building) rose 23% to $33.7 million from $27.5
million for the same period in 2002. Operating income margin was 32.5%
compared to 33.3% for the same period in 2002. The decrease in operating
income margin is primarily attributable to the earlier timing of two new
campus openings in 2003 as compared to 2002, as well as the increase of the
total new campus openings to five in 2003 compared to three in 2002.
o Net income (excluding the gain from the sale of the Washington, D.C. campus
building) rose 23% to $21.5 million compared to $17.5 million for the same
period in 2002. Including the gain from the sale of the Washington, D.C.
campus building, net income rose 29% to $22.6 million. Earnings per diluted
share (excluding the gain from the sale of the Washington, D.C. campus
building) rose 20% to $1.45 compared to $1.21 for the same period in 2002.
Including the gain from the sale of the Washington, D.C. campus building,
earnings per diluted share was $1.53, an increase of 26%. Diluted weighted
average shares outstanding increased to 14,796,000 from 14,485,000 for the
same period in 2002.
"We are pleased with our financial results for the third quarter as our strong
summer term enrollment and efficient cost control allowed us to expand operating
margins even as we increased our new campus openings from three to five," said
Robert Silberman, Chairman and Chief Executive Officer of Strayer Education,
Inc. "The 22% enrollment growth for the fall term and the strong openings of our
two Philadelphia campuses attest to the quality and convenience of our working
adult focused undergraduate and graduate programs. We are particularly pleased
with the action of the State of Georgia, bringing the number of states in which
Strayer University is approved to award degrees to eight, as we continue
executing our geographic and online expansion strategy."
BALANCE SHEET AND CASH FLOW
At September 30, 2003, the Company had cash, cash equivalents and marketable
securities of $90.0 million and no debt. In the third quarter, as part of its
cash management activities, the Company liquidated its $26.1 million investment
in a short-term corporate bond fund and re-invested most of the proceeds in a
short-term tax exempt bond fund. This transaction resulted in a gain of $0.1
million before tax.
The Company generated $23.6 million from operating activities in the first nine
months of 2003. Capital expenditures were $4.3 million for the same period.
In the third quarter 2003, bad debt expense as a percentage of revenue was 1.7%
compared to 1.3% for the same period in 2002. Days sales outstanding, adjusted
to exclude tuition receivable related to future
6
quarters, was seven days at the end of the third quarter 2003, compared to seven
days for the same period in 2002.
STUDENT ENROLLMENT
Total enrollment at Strayer University for the 2003 fall term increased 22% to
20,138 students compared to 16,532 for the same term in 2002. Across the Strayer
University campus network, new student enrollments increased 23% and continuing
student enrollments increased 22%. Students taking 100% of their classes at
Strayer University Online increased 58% to 8,550 students from 5,401. The total
number of students taking any courses online (including students at brick and
mortar campuses taking at least one online course) in the fall 2003 quarter was
10,615.
STUDENT ENROLLMENT
Fall Fall %
2002 2003 Change
------------ ------------ ----------
New Campuses (11 in operation 3 or less years)
Campus Based Students 864 1,926 123%
Online Based Students 662 1,774 168%
------------ ------------
Total New Campus Students 1,526 3,700 142%
------------ ------------
Mature Campuses (14 in operation 4 or more years)
Campus Based Students 10,267 9,662 -6%
Online Based Students 3,661 4,994 36%
------------ ------------
Total Mature Campus Students 13,928 14,656 5%
------------ ------------
Out of Area Online Students 1,078 1,782 65%
------------ ------------
Total University Enrollment 16,532 20,138 22%
============ ============
Total Students Taking 100% Courses Online 5,401 8,550 58%
Total Students Taking At Least 1 Course Online 6,822 10,615 56%
NEW CAMPUS/NEW STATE OPENINGS
Philadelphia, Pennsylvania
Strayer University successfully opened its two campuses in the Philadelphia area
for the fall 2003 term, completing its goal of opening five new campuses in
2003.
Georgia
Strayer University has obtained approval from Georgia's Nonpublic Postsecondary
Education Commission to open two campuses in the Atlanta area in 2004.
7
EXPANDED ONLINE COURSE OFFERINGS
Strayer University Online is offering 621 online classes in the fall 2003 term,
with all academic programs available synchronously and asynchronously.
PBS JOINT VENTURE
Strayer University has entered into an agreement with the Public Broadcasting
Service (PBS) to offer certain PBS courses in the form of continuing education
units (CEUs), not for college credit, through Strayer University Online. Strayer
University Online will be marketed by PBS through its various media and on its
web site. Strayer University will offer the PBS courses starting in January
2004.
REAL ESTATE TRANSACTION
The Company also reported today the closing of the previously announced sale of
its Washington, D.C. campus building which took place during the third quarter
for $5.2 million. This building was purchased in the first quarter of 2002 for a
total of $3.0 million from an entity affiliated with the Company's former CEO
and majority stockholder. The Company will be relocating its Washington, D.C.
campus to a larger and newly refurbished, leased facility nearby. This
transaction resulted in a gain of $1.8 million before tax or $0.07 per diluted
share.
SALE OF STUDENT LOAN PORTFOLIO
The Company today announced that it had sold its student loan portfolio. The
Company sold a total of $9.1 million in loans for a price of $9.7 million to a
national student loan marketing organization. Under the arrangement, Strayer
will continue to originate student loans but will periodically divest these at
various prices based on market conditions. As a result of the loan portfolio
sale, Strayer will recognize an estimated gain of $0.5 million before tax in the
fourth quarter, or $0.02 per share.
FISCAL YEAR 2001 COHORT DEFAULT RATE
During the third quarter of 2003, the Company was notified by the U.S.
Department of Education that its Cohort Default Rate for fiscal year 2001 (the
most recent annual period for which data is available) declined to 4.3% from
4.7% for the fiscal year 2000.
2003 BUSINESS OUTLOOK
Based on the strong enrollment growth announced for the fall 2003 term, the
Company estimates fourth quarter 2003 diluted EPS will be in the range of $0.69
- - $0.71 excluding the gain on sale of the student loan portfolio. Based on its
fourth quarter estimates, the Company therefore is increasing its estimate of
full year 2003 diluted EPS (before the effect of gains from asset sales of
approximately $0.09) to $2.14 - $2.16 from $2.04 - $2.08.
8
2004 BUSINESS OUTLOOK
The Company announced that it intends to open five new campuses in 2004, and
that based on the expected 2004 new campus opening schedule, the Company is
providing the following full year 2004 estimates:
Enrollment: 15% - 18% growth
Revenue: 20% - 23% growth
Operating Margin: 34.5% - 35.0%
Diluted EPS: $2.60 - $2.65
Diluted Shares Outstanding: 15,000,000
SHARE REPURCHASE PLAN
Strayer today announced that the Company's Board of Directors has authorized the
Company to repurchase up to an aggregate of $15 million in value of the Common
Stock over the next 14 months in open market purchases from time to time at the
discretion of the Company's management, depending on market conditions and other
corporate considerations. The Company intends to effect such purchases, if any,
in compliance with Rule 10b-18 under the Securities Exchange Act of 1934, as
amended. This share Repurchase Plan may be modified, suspended or terminated at
any time by the Company without notice.
STOCK OPTION ACTIVITY AND CALCULATION OF TOTAL POTENTIAL SHARE ISSUANCE
The Company uses the intrinsic-value-based method of accounting for its stock
option plan. Under this method, compensation expense is the excess, if any, of
the quoted market price of the stock at grant date over the amount an employee
must pay to acquire the stock. Had compensation expense been determined based on
the fair 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 $4.0 million and $0.27 per share, respectively, for the three
months ended September 30, 2003, and $19.6 million and $1.32 per share,
respectively, for the nine months ended September 30, 2003.
The following assumptions were used to estimate fair value as of the date of
grant using The Black-Scholes option pricing model:
2002 2003
---- ----
Dividend yield....................................................... 0.5% 0.5%
Risk-free interest rates............................................. 4.8% 3.0%
Volatility........................................................... 43% 40%
Expected option term (years)......................................... 5.9 5.2
Weighted average fair value of options granted during the year....... $23.65 $21.88
Shares used to compute diluted earnings per share include common shares issued
and outstanding, the assumed conversion of Series A Convertible Redeemable
Preferred Stock outstanding, and the assumed exercise of issued stock options
using the Treasury Stock Method. Our total current and potential common shares
outstanding are as follows:
9
Shares
----------------
(in thousands)
Current
-------
Weighted average common shares outstanding for the three months ended 9/30/03........ 10,727
Convertible Series A Preferred Stock, convertible on a
1:1 basis (outstanding or recorded) at 9/30/03 .................................. 3,864
Issued stock options using Treasury Stock Method..................................... 378
------------
Total current.................................................................. 14,969
------------
Potential
---------
Accrual of required PIK dividends on Convertible Series A
Preferred Stock through May 2006................................................. 458 (a)
Total issued stock options, less options accounted for using
the Treasury Stock Method above.................................................. 763
Authorized but unissued options...................................................... 334
------------
Total potential................................................................ 1,555
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Total current and potential common shares...................................... 16,524
============
(a) This number may be smaller as it does not reflect that the
Company has the right to cause 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. Of the 458,000 shares, 130,000
would potentially accrue through May 15, 2004.
CONFERENCE CALL WITH MANAGEMENT
Strayer Education, Inc. will host a conference call to discuss its third quarter
2003 earnings on November 3 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 Web cast over the Internet. To
access the live Web cast of the conference call, please go to
www.strayereducation.com 15 minutes prior to the start time of the call to
register.
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, and information technology to more than 20,000 working adult
students at 25 campuses in Maryland, North Carolina, Pennsylvania, Tennessee,
Virginia and Washington, D.C. 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
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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.
11
STRAYER EDUCATION, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
For the three months For the nine months
ended September 30, ended September 30,
---------------------------------------- -----------------------------------------
% %
2002 2003 Change 2002 2003 Change
----------- ----------- ------------ ------------ ----------- -----------
Revenues................................. $23,026 $29,993 30.3% $82,547 $103,652 25.6%
----------- ----------- ------------ -----------
Costs and expenses:
Instructional and educational support.... 9,770 12,236 25.2% 29,768 38,324 28.7%
Selling and promotion.................... 5,044 7,104 40.8% 12,537 16,940 35.1%
General and administration............... 4,254 5,085 19.5% 12,757 14,687 15.1%
----------- ----------- ------------ -----------
Total expenses........................... 19,068 24,425 28.1% 55,062 69,951 27.0%
----------- ----------- ------------ -----------
Income from operations, before gain on
sale of asset............................ 3,958 5,568 40.7% 27,485 33,701 22.6%
Operating income margin, before gain on
sale of asset............................ 17.2% 18.6% 33.3% 32.5%
Gain on sale of asset.................... -- 1,772 NM -- 1,772 NM
----------- ----------- ------------ -----------
Income from operations................... 3,958 7,340 85.4% 27,485 35,473 29.1%
Operating income margin.................. 17.2% 24.5% 33.3% 34.2%
Investment and other income.............. 484 688 42.1% 1,242 1,850 49.0%
----------- ----------- ------------ -----------
Income before income taxes............... 4,442 8,028 80.7% 28,727 37,323 29.9%
Provision for income taxes............... 1,732 3,174 83.3% 11,203 14,753 31.7%
----------- ----------- ------------ -----------
Net income............................... 2,710 4,854 79.1% 17,524 22,570 28.8%
Net income, before gain on sale of
asset.................................... 2,710 3,784 39.6% 17,524 21,496 22.7%
Preferred stock dividends and
accretion................................ 2,035 1,287 (36.8%) 6,076 3,843 (36.8%)
----------- ----------- ------------ -----------
Net income available to common
stockholders............................. $ 675 $3,567 428.4% $11,448 $18,727 63.6%
=========== =========== ============ ===========
Basic net income per share............... $0.08 $0.33 312.5% $ 1.37 $ 1.75 27.7%
=========== =========== ============ ===========
Diluted net income per share............. $0.19 $0.32 68.4% $ 1.21 $ 1.53 26.4%
=========== =========== ============ ===========
Diluted net income per share, before gain
on sale of asset......................... $0.19 $0.25 31.6% $ 1.21 $ 1.45 19.8%
=========== =========== ============ ===========
Common dividend per share................ $0.065 $0.065 - $0.195 $0.195 -
Weighted average shares outstanding
Basic........................... 8,352 10,727 28.4% 8,352 10,682 27.9%
Diluted......................... 14,556 14,969 2.8% 14,485 14,796 2.1%
12
STRAYER EDUCATION, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS)
December 31, September 30,
2002 2003
----------------- -----------------
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents.............................................. $49,135 $63,935
Marketable securities available for sale, at fair value................ 18,121 26,033
Income taxes receivable................................................ -- 2,210
Tuition receivable, net of allowances for doubtful accounts............ 25,759 36,772
Student loans receivable, net of allowances for losses - held for sale. -- 9,672
Other current assets................................................... 773 1,338
------------ ------------
Total current assets............................................... 93,788 139,960
Student loans receivable, net of allowances for losses.................... 9,453 --
Property and equipment, net............................................... 36,571 34,307
Restricted cash........................................................... -- 500
Other assets.............................................................. 312 369
------------ ------------
Total assets....................................................... $140,124 $175,136
============ ============
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable....................................................... $ 3,534 $ 4,392
Accrued expenses....................................................... 1,181 1,582
Income taxes payable................................................... 1,812 --
Dividends payable...................................................... 1,507 1,512
Unearned tuition....................................................... 29,853 42,939
------------ ------------
Total current liabilities......................................... 37,887 50,425
Deferred income taxes..................................................... 70 158
Long-term liabilities..................................................... 1,985 2,194
------------ ------------
Total liabilities................................................. 39,942 52,777
============ ============
Commitments and contingencies
Mandatorily redeemable convertible Series A preferred stock,
par value $.01; 6,000,000 shares authorized; 3,758,456 and
3,863,644 shares issued and outstanding at December 31, 2002
and September 30, 2003, respectively................................ 93,807 95,207
Stockholders' equity:
Common stock, par value $.01; 20,000,000 shares
authorized; 10,652,412 and 10,735,745 shares issued and outstanding
at December 31, 2002 and September 30, 2003 107 107
Additional paid-in capital............................................. 58,868 63,059
Retained earnings (accumulated deficit)................................ (52,674) (36,034)
Accumulated other comprehensive income................................. 74 20
------------ ------------
Total stockholders' equity....................................... 6,375 27,152
------------ ------------
Total liabilities and stockholders' equity....................... $140,124 $175,136
============ ============
13
STRAYER EDUCATION, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(AMOUNTS IN THOUSANDS)
For the nine months ended September 30,
----------------------------------------------
2002 2003
--------------------- -------------------
Cash flow from operating activities:
Net income............................................................. $ 17,524 $ 22,570
Adjustments to reconcile net income to net cash
provided by operating activities:
Gain on sale of marketable securities............................. -- (135)
Gain on sale of property and equipment............................ -- (1,772)
Amortization of deferred rent..................................... (165) 198
Depreciation and amortization..................................... 2,652 3,235
Provision for student loan losses................................. 163 141
Deferred income taxes............................................. 76 1
Changes in assets and liabilities:
Tuition receivable, net........................................... (8,623) (11,013)
Other current assets.............................................. (956) (444)
Restricted cash................................................... -- (500)
Other assets...................................................... (74) (57)
Accounts payable.................................................. 1,891 858
Accrued expenses.................................................. 357 401
Income taxes payable.............................................. (3,741) (2,638)
Unearned tuition.................................................. 11,324 13,086
Student loans originated............................................... (6,433) (6,460)
Collections on student loans receivable................................ 5,411 6,100
------------ ------------
Net cash provided by operating activities..................... 19,406 23,571
------------ ------------
Cash flows from investing activities:
Proceeds from sale of property and equipment.......................... -- 5,150
Proceeds from sale of marketable securities........................... -- 26,135
Purchases of property and equipment................................... (16,082) (4,349)
Purchases of marketable securities.................................... (12,000) (34,000)
------------ ------------
Net cash used in investing activities......................... (28,082) (7,064)
------------ ------------
Cash flows from financing activities:
Deferred lease incentives............................................. 1,313 11
Common dividends paid................................................. (1,628) (2,080)
Preferred dividends paid.............................................. (3,937) (2,445)
Proceeds from exercise of stock options............................... -- 2,807
Issuance cost of preferred stock...................................... (29) --
------------ ------------
Net cash used in financing activities......................... (4,281) (1,707)
------------ ------------
Net increase (decrease) in cash and cash equivalents.......... (12,957) 14,800
Cash and cash equivalents - beginning of period.......................... 58,705 49,135
------------ ------------
Cash and cash equivalents - end of period................................ $ 45,748 $ 63,935
============ ============