Exhibit 99.01
Sylvan Learning Systems, Inc. Reports Revenue Growth of 36%
for Second Quarter 2003;
Strong Operating Results Highlight Power of
Company's Post-Secondary Focus
BALTIMORE--(BUSINESS WIRE)--July 24, 2003--Sylvan Learning
Systems, Inc. (NASDAQ: SLVN), a global leader in higher education,
today announced financial results and strong online student enrollment
growth for the quarter ended June 30, 2003.
Second quarter operational and financial highlights include:
-- Sylvan Learning Systems reported pro forma income from
continuing operations of $0.21 per share for second quarter
2003, driven by a 36% increase in revenue from continuing
operations. GAAP net income for the second quarter 2003 was
$0.75 per share. (See Reconciliation - 2003 GAAP to Pro Forma
Results for details).
-- The previously announced acquisition of an 80% interest in the
entity that controls the operations of Universidad Nacional
Andres Bello (UNAB) and its technical/vocational affiliate
AIEP was finalized according to plan. These two institutions
combined have more than 20,000 students. This alliance
significantly broadens the Company's presence in Chile, which
enjoys strong growth in higher education enrollments.
-- Online degree enrollment at June 30, 2003 increased 17% to
15,163 students compared to 12,968 students at June 30, 2002.
Online degree enrollment includes students at Walden
University, National Technological University, and students
enrolled in Canter's distance learning master's program.
-- On June 30, 2003, Sylvan Learning Systems completed the
previously announced transaction to divest its K-12 business
units, disband Sylvan Ventures, and focus exclusively on
post-secondary education.
-- Sylvan Learning Systems announced its plan to divest its
English language instruction business, the Wall Street
Institute (WSI). The disposition of WSI will complete Sylvan's
transformation into a company focused exclusively on
post-secondary education. Sylvan expects to complete the sale
of WSI within a year.
"While the market for English language instruction remains
attractive, we made the decision to divest WSI to ensure our total
focus on the expanding market for degree-seeking students pursuing
multi-year programs," stated Douglas Becker, Chairman and Chief
Executive Officer of Sylvan Learning Systems. "Our focus enables us to
achieve our objective of expanding global access to higher education
and preparing our students for exciting new career opportunities."
Financial Results
The following financial discussion reflects GAAP results from
continuing operations, including non-strategic assets held for sale,
as well as the operating results and realized gain and anticipated
losses on the disposal of certain discontinued operations. The
financial tables included in this release reconcile GAAP results to
pro forma results as if the completed sale of Sylvan's K-12 assets had
closed January 1, 2003.
Given the transformational nature of these transactions, the pro
forma presentation is included to provide investors meaningful
information regarding the operations of Sylvan Learning Systems'
post-secondary business units excluding the one-time gain and various
charges associated with the completed transactions and the pending
sale of WSI.
Continuing Operations
Total revenues from continuing operations for the second quarter
of 2003 were $116.2 million, an increase of 36% compared to total
revenues of $85.2 million in the second quarter of 2002. Total loss
from continuing operations for the second quarter of 2003 was $13.2
million, compared to income of $3.7 million in the second quarter of
2002. Net income for the second quarter was $30.9 million, or $0.75
per share on shares outstanding of 41.2 million. This compares to a
net loss of $5.1 million, or a loss of $0.13 per share on shares
outstanding of 40.1 million for the same period in 2002.
Pro forma after-tax income from continuing operations for the
quarter, assuming the sale of Sylvan's K-12 assets had closed on
January 1, 2003, and excluding previously announced gains and charges
resulting from such transactions, would have been $9.2 million or
$0.21 per share (See Reconciliation - 2003 GAAP to Pro Forma Results
for details).
For the six-month period ended June 30, 2003, total revenues from
continuing were $211.6 million, compared to total revenues of $155.8
million in the same period of 2002. Total operating loss from
continuing operations for the six-month period was $26.3 million,
compared to income of $1.7 million in the same period of 2002. Net
income for the six-month period was $14.9 million, or $0.36 per share
on shares outstanding of 40.8 million. This compares to a net loss of
$84.1 million, or a loss of $2.12 per share on shares outstanding of
39.8 million for the same period in 2002.
Pro forma after-tax income from continuing operations for the
six-month period ended June 30, 2003, assuming the sale of Sylvan's
K-12 assets had closed on January 1, 2003, and excluding previously
announced gains and charges resulting from such transactions, would
have been $10.8 million or $0.25 per share (See Reconciliation - 2003
GAAP to Pro Forma Results for details).
Discontinued Operations & Assets Held for Sale
Results from discontinued operations include the operations of
Sylvan Learning Center, Sylvan Education Solutions, Schulerhilfe,
eSylvan, and Connections Academy. These K-12 businesses were sold as
part of the previously announced transaction, and currently operate
under their existing brand names as part of a private entity. Sylvan
UK, Sylvan France, and WSI are also included in results from
discontinued operations. These assets are expected to be sold within
the next twelve months.
During the second quarter, certain previously announced gains and
charges were recorded in connection with the completed and pending
transaction outlined above:
-- The Company recorded a pre-tax gain of $110.4 million from the
sale of its K-12 businesses. In addition, the exercise period
for options in the Company held by employees of the disposed
K-12 businesses was extended for a two-year period following
the closing. This extension resulted in a non-cash
discontinued operation charge of $4.6 million.
-- The Company recorded $22.2 million of the previously estimated
$25.0 million non-cash compensation charge as a result of the
conversion of options to purchase common stock of a subsidiary
currently held by certain employees of Sylvan International
Universities into options in Sylvan Learning Systems. An
additional $6.2 million will be recorded over the remaining
vesting period ending in 2008, of which $2.8 will be recorded
in 2004.
-- In connection with the planned disposition of WSI, the Company
recorded a $25.5 million pre-tax charge to write down the
carrying value of WSI to its net realizable value. This charge
included a $10.4 million loss related to the reversal of the
accumulated foreign currency translation adjustment. This
charge and the year to date operating results of WSI are
reflected as part of the Company's results from discontinued
operations.
Supplemental Financial Data
Total cash and marketable securities at the end of the second
quarter were approximately $189.4 million, while total corporate debt
was approximately $91.8 million, excluding the $44.4 million
convertible debenture remaining after the K-12 transaction.
The following statements are based on current expectations. These
statements are forward-looking and actual results may differ
materially. The pro forma guidance assumes the sale of Sylvan's K-12
assets had closed January 1, 2003. The Company reiterates full year
pro forma EPS guidance of $0.85 to $0.88.
Third Quarter 2003 Outlook
The third quarter is the seasonally weakest quarter for the
company's campus-base business, because all of its universities, with
the exception of those in Chile, are closed for some portion of the
quarter for summer break.
-- Company anticipates total revenue to be between $100 and $105
million for the third quarter 2003, an increase of at least
39% over the prior year.
-- Company anticipates its campus-based revenue to be between $75
and $80 million for the third quarter 2003, with operating
margins of between 10% and 11%.
-- Company anticipates its online revenue to be between $24 and
$25 million for the third quarter 2003, with operating margins
of between 16% and 17% for third quarter 2003.
-- General and administrative expenses are expected to be
approximately $2.5 million for the third quarter 2003.
-- Diluted earnings per share from continuing operations are
anticipated to be between $0.14 and $0.15 for the third
quarter 2003.
Reconciliation - 2003 GAAP to Pro Forma Results Three Six
(in millions, except per share) Months Months
Ended Ended
6/30/03 6/30/03
Pretax (Loss) Income from Continuing Operations $(16.5) $(37.5)
Adjustments (Pretax):
Non-Strategic Ventures Losses 1.3 18.7
Non-Cash Compensation Charges 22.2 22.3
Pro forma Results from Core Operations $7.0 $3.5
G&A Attributable to Discontinued Operations 3.5 6.9
Net Interest Income 2.3 4.5
Pro Forma Pretax Results - 1/1/03 Transaction Close $12.8 $14.9
Interest on Convertible Debentures (Pretax) $0.5 $1.1
Tax Rate for Continuing Operations 28% 28%
Pro Forma Weighted Avg. Shares Outstanding - Diluted 45.8 45.6
Pro Forma EPS $0.21 $0.25
About Sylvan Learning Systems
Sylvan Learning Systems, Inc. (NASDAQ: SLVN) is focused
exclusively on providing a superior university experience to nearly
100,000 students through the leading global network of accredited
campus-based and online universities. Addressing the rapidly growing
global demand for higher education, Sylvan offers a broad range of
career-oriented undergraduate and graduate programs through seven
universities located in Europe and Latin America. Through two U.S.
based and accredited universities, Sylvan offers the growing
population of non-traditional, working-adult students the convenience
and flexibility of distance learning to pursue undergraduate, master's
and doctorate degree programs in major career fields including
engineering, education, business, and healthcare.
Note: As a result of the completed sale of the Company's K-12 assets,
the publicly traded Sylvan Learning Systems is expected to change its
corporate name and NASDAQ ticker by June 2004.
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.
Although the Company believes that the expectations reflected in such
forward-looking statements are based upon reasonable assumptions, the
Company's actual results could differ materially from those described
in the forward-looking statements:
The following factors might cause such a difference:
- -- The Company's operations can be materially affected by competition
in its target markets and by overall market conditions, among
other factors.
- -- The Company's foreign operations, in particular, are subject to
political, economic, legal, regulatory and currency-related risks.
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. & Subsidiaries
Consolidated Statement of Operations
(Amounts in Thousands, except per share data)
Three Months Ended June 30,
----------------------------------------
$ %
2003 2002 Variance Variance
--------- ---------- --------- ---------
(Restated)
(d)
Revenues
Spain $23,296 $18,305 $4,991 27%
Hospitality/Switzerland
(a) 11,415 5,256 6,159 117%
Chile 20,173 10,974 9,199 84%
Mexico 31,086 27,601 3,485 13%
France 2,011 1,546 465 30%
--------- ---------- --------- ---------
Campus Based total 87,981 63,682 24,299 38%
--------- ---------- --------- ---------
Online 27,793 21,450 6,343 30%
Sylvan Ventures (greater
468 26 442 than)200%
--------- ---------- --------- ---------
Total Revenues 116,242 85,158 31,084 36%
--------- ---------- --------- ---------
Core Operating Expenses 97,869 72,008 25,861 36%
Ventures Operating Expenses 654 494 160 32%
Non-Cash Compensation
Expense 22,158 - 22,158 N/A
Core General &
Administrative Expenses 5,900 5,712 188 3%
Ventures General &
Administrative Expenses 780 965 (185) -19%
--------- ---------- --------- ---------
Total Operating Expenses 127,361 79,179 48,182 61%
--------- ---------- --------- ---------
Operating Income (Loss) (11,119) 5,979 (17,098) N/A
Non-Operating Items
Interest & Other Income 260 1,262 (1,002) -79%
Interest Expense (3,155) (1,972) (1,183) -60%
Equity in Net Income of
Affiliates 65 61 4 7%
Minority Interest (2,507) (1,884) (623) -33%
Exchange Gain 305 359 (54) -15%
Sylvan Ventures non-
operating (303) (1,264) 961 76%
--------- ---------- --------- ---------
Total Non-Operating items (5,335) (3,438) (1,897) -55%
--------- ---------- --------- ---------
Income (Loss) from continuing
operations before
income taxes and cumulative
effect of change
in accounting principle (16,454) 2,541 (18,995) N/A
Income tax benefit (b) 3,222 1,153 2,069 179%
--------- ---------- --------- ---------
Income (Loss) from continuing
operations before
cumulative effect of change
in accounting principle (13,232) 3,694 (16,926) N/A
Income (Loss) from
discontinued operations, net
of income tax (557) 2,432 (2,989) N/A
Gain (Loss) on disposal of
discontinued operations, net
of income
tax 44,640 (11,209) 55,849 N/A
--------- ---------- --------- ---------
Income (Loss) before
cumulative effect of change
in accounting principle 30,851 (5,083) 35,934 N/A
Cumulative effect of change in
accounting principle, net of
tax benefit of $7,700 - - - N/A
--------- ---------- --------- ---------
Net Income (Loss) $30,851 $(5,083) $35,934 N/A
========= ========== ========= =========
Weighted average shares -
Basic 41,164 40,110
Weighted average shares -
Diluted 48,963 47,605
EPS-Net Income (Loss) Basic $0.75 $(0.13)
EPS (Basic)-Income (Loss)
from continuing operations
before cumulative effect
of change in accounting
principle $(0.32) $0.09
EPS (Diluted)-Income (Loss)
from continuing operations $(0.32) $0.08
before cumulative effect
of change in accounting
principle
Reconciliation - Pro Forma
Income from Continuing
Operations
Income (Loss) from continuing
operations before
income taxes and cumulative
effect of change
in accounting principle $(16,454) $2,541
Non-Strategic Ventures
Losses 1,269 2,697
Non-Cash Compensation
Expense 22,158 -
G&A Attributable to
Discontinued Operations 3,557 N/A
Core operations - non
operating 2,282 N/A
---------
Subtotal $12,812
Tax Impact at 28% (3,587)
---------
Pro Forma income from
continuing operations (c) $9,225
Weighted average shares -
Pro Forma 45,847
EPS - As if transaction
happened January 1, 2003 $0.21
Segment Operating Profit
(Loss):
Campus Based $12,681 $9,025 $3,656 41%
Online 5,224 4,099 1,125 27%
Sylvan Ventures (966) (1,433) 467 33%
a) Hospitality includes the operating results of Les Roches, Marbella
and Glion.
b) Represents blended tax rate excluding Sylvan Ventures of 20% and a
tax rate for Sylvan Ventures of 40%
c) Reconciling items represent adjustments as if the sale of the K-12
business units and decision to dispose of the non-Strategic
venture assets occurred January 1, 2003.
d) The 2002 operating results have been restated to present the K-12
and WSI business units as discontinued operations.
Sylvan Learning Systems, Inc. & Subsidiaries
Consolidated Statement of Operations
(Amounts in Thousands, except per share data)
Six Months Ended June 30,
----------------------------------------
$ %
2003 2002 Variance Variance
--------- ---------- --------- ---------
(Restated)
(d)
Revenues
Spain $45,283 $34,979 $10,304 29%
Hospitality/Switzerland
(a) 22,980 9,042 13,938 154%
Chile 24,904 14,651 10,253 70%
Mexico 68,298 63,674 4,624 7%
France 3,909 2,968 941 32%
--------- ---------- --------- ---------
Campus Based total 165,374 125,314 40,060 32%
--------- ---------- --------- ---------
Online 45,289 30,460 14,829 49%
Sylvan Ventures (greater
903 26 877 than)200%
--------- ---------- --------- ---------
Total Revenues 211,566 155,800 55,766 36%
--------- ---------- --------- ---------
Core Operating Expenses 186,670 137,366 49,304 36%
Ventures Operating Expenses (greater
2,122 494 1,628 than)200%
Non-Cash Compensation
Expense 22,333 - 22,333 N/A
Core General &
Administrative Expenses 11,694 10,821 873 8%
Ventures General &
Administrative Expenses 1,756 2,270 (514) -23%
--------- ---------- --------- ---------
Total Operating Expenses 224,575 150,951 73,624 49%
--------- ---------- --------- ---------
Operating Income (Loss) (13,009) 4,849 (17,858) N/A
Non-Operating Items
Interest & Other Income 630 2,345 (1,715) -73%
Interest Expense (5,529) (3,938) (1,591) -40%
Equity in Net Income of
Affiliates 131 48 83 173%
Minority Interest (4,256) (3,227) (1,029) -32%
Exchange Gain 236 312 (76) -24%
Sylvan Ventures non- (less
operating than)-
(15,702) (2,640) (13,062) 200%
--------- ---------- --------- ---------
Total Non-Operating items (less
than)-
(24,490) (7,100) (17,390) 200%
--------- ---------- --------- ---------
Income (Loss) from continuing
operations before
income taxes and cumulative
effect of change
in accounting principle (less
than)-
(37,499) (2,251) (35,248) 200%
Income tax benefit (b) 11,235 3,953 7,282 184%
--------- ---------- --------- ---------
Income (Loss) from continuing
operations before
cumulative effect of change
in accounting principle (26,264) 1,702 (27,966) N/A
Income (Loss) from
discontinued operations, net
of income tax 1,726 4,007 (2,281) -57%
Gain (Loss) on disposal of
discontinued operations, net
of income
tax 39,423 (11,209) 50,632 N/A
--------- ---------- --------- ---------
Income (Loss) before
cumulative effect of change
in accounting principle 14,885 (5,500) 20,385 N/A
Cumulative effect of change in
accounting principle, net of
tax benefit of $7,700 - (78,634) 78,634 N/A
--------- ---------- --------- ---------
Net Income (Loss) $14,885 $(84,134) $99,019 N/A
========= ========== ========= =========
Weighted average shares -
Basic 40,825 39,767
Weighted average shares -
Diluted 47,974 47,284
EPS-Net Income (Loss) Basic $0.36 $(2.12)
EPS (Basic)-Income (Loss)
from continuing operations
before cumulative effect
of change in accounting
principle $(0.64) $0.04
EPS (Diluted)-Income (Loss)
from continuing operations $(0.64) $0.04
before cumulative effect
of change in accounting
principle
Reconciliation - Pro Forma
Income from Continuing
Operations
Income (Loss) from continuing
operations before
income taxes and cumulative
effect of change
in accounting principle $(37,499) $(2,251)
Non-Strategic Ventures
Losses 18,677 5,378
Non-Cash Compensation
Expense 22,333 -
G&A Attributable to
Discontinued Operations 6,855 N/A
Core operations - non
operating 4,564 N/A
---------
Subtotal $14,930
Tax Impact at 28% (4,180)
---------
Pro Forma income from
continuing operations (c) $10,750
Weighted average shares -
Pro Forma 45,576
EPS - As if transaction
happened January 1, 2003 $0.25
Segment Operating Profit
(Loss):
Campus Based $21,234 $16,101 $5,133 32%
Online 2,759 2,307 452 20%
Sylvan Ventures (2,975) (2,738) (237) -9%
a) Hospitality includes the operating results of Les Roches, Marbella
and Glion.
b) Represents blended tax rate excluding Sylvan Ventures of 20% and a
tax rate for Sylvan Ventures of 40%
c) Reconciling items represent adjustments as if the sale of the K-12
business units and decision to dispose of the non-Strategic
venture assets occurred January 1, 2003.
d) The 2002 operating results have been restated to present the K-12
and WSI business units as discontinued operations.
CONTACT: Sylvan Learning Systems, Inc.
Sean Creamer, 410-843-8991
Chris Symanoskie, 410-843-6394