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Sylvan Learning Systems, Inc. Reports Strong Fourth Quarter and Year End 2003 Results; Revenues Increase 41% and Operating Income More Than Doubles in 2003
Business Editors
BALTIMORE--(BUSINESS WIRE)--Feb. 19, 2004--Sylvan Learning Systems, Inc. (NASDAQ:SLVN), the world's leading international provider of higher education, announced strong financial results for the quarter and year ended December 31, 2003.
-- Full year 2003 revenues increased 41% to $472.8 million, compared to $336.0 million in 2002. Fourth quarter 2003 revenues increased 43% to $154.9 million, compared to $108.2 million in 2002.
-- Total operating income for 2003 increased 135% to $33.6 million, compared to $14.3 million in 2003. Total operating income for the fourth quarter 2003 increased 231% to $35.7 million, compared to $10.8 million in 2003.
-- Pro forma after-tax income for 2003, assuming the sale of Sylvan's K-12 assets closed on January 1, 2003 and a normalized full-year tax rate of 25%, would have been $40.3 million or $0.89 per diluted share. On a GAAP basis, after-tax income from continuing operations for 2003 was $8.1 million or $0.18 per diluted share, compared to $3.3 million or $0.08 per diluted share in 2002. (See Reconciliation - 2003 GAAP to Pro Forma Results for details.)
-- Pro forma after-tax income in the fourth quarter of 2003, assuming the sale of Sylvan's K-12 assets closed on January 1, 2003 and a normalized full-year tax rate of 25%, would have been $22.1 million or $0.47 per diluted share. On a GAAP basis, after-tax income from continuing operations for the fourth quarter 2003 was $28.6 million or $0.60 per diluted share, compared to $5.4 million or $0.13 per diluted share in 2002. (See Reconciliation - 2003 GAAP to Pro Forma Results for details.)
-- Company issues 2004 earnings outlook of $1.22 to $1.24 per diluted share.
-- Student enrollment at the Company's campus-based universities reached 101,000 students immediately following its primary enrollment intake in October, an increase of 63% compared to the same period last year.
-- Walden University reported an 82% year-over-year increase in total degree enrollments and an 84% increase in new student enrollments at December 31, 2003.
Douglas Becker, Chairman and Chief Executive Officer of Sylvan Learning Systems, stated, "Sylvan is entering 2004 with tremendous momentum as a result of our enrollment successes in 2003. Growth at existing campuses, combined with new and acquired campuses produced a 63% increase in total enrollment, which drove enviable revenue growth and margin expansion. Most of our students enroll for three years or more - so momentum in new student enrollments carries forward to future years, giving us great confidence of continued success in 2004 and 2005."
"This year, we will follow our simple formula of opening a few new campuses in key markets and increasing new student enrollments at our 33 campuses and in our online institutions. Our growth in earnings is derived largely from these actions."
"Additionally, we hope to enter at least one new country and bolster our presence in existing countries with select acquisitions. We also expect to show continued progress in our newer working-adult and technical/vocational market segments. This will enable us to grow at a high rate for many years to come."
Mr. Becker added, "Sylvan's success is based on the success of our students. I have great confidence in our management team, employees, and faculty members around the world, all deeply committed to producing great results for our students and our company."
Financial Results
The following financial discussion reflects results from continuing operations 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 sale of Sylvan's K-12 assets 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 System's post-secondary business units excluding the one-time gain and various charges associated with the completed transactions and the pending sale of WSI.
Total revenues for the fourth quarter of 2003 were $154.9 million, an increase of 43% compared to total revenues of $108.2 million in the fourth quarter of 2002. Total operating income for the fourth quarter increased 231% to $35.7 million, versus $10.8 million in the fourth quarter of 2002. After-tax income from continuing operations for the quarter was $28.6 million or $0.60 per share on diluted shares outstanding of 47.1 million.
For the year ended December 31, 2003, total revenues from continuing operations were $472.8 million, an increase of 41% compared to total revenues of $336.0 million in 2002. Total operating income for the year was $33.6 million compared to $14.3 million in 2002, an increase of 135%. After-tax income from continuing operations for the year was $8.1 million, or $0.18 per share on diluted shares outstanding of 43.8 million. This compares to $3.3 million, or $0.08 per diluted share on shares outstanding of 40.1 million in 2002.
Pro forma after-tax income from continuing operations for the three-month and twelve-month periods ended December 31, 2003, assuming the sale of Sylvan's K-12 assets closed on January 1, 2003 and a normalized full-year tax rate of 25%, and excluding previously announced gains and charges resulting from such transactions, would have been $0.47 and $0.89 per diluted share, respectively. (See Reconciliation - 2003 GAAP to Pro Forma Results for details.)
Total cash and marketable securities at the end of 2003 were approximately $109 million, while total corporate debt was approximately $97 million.
Results from discontinued operations for the fourth quarter 2003 include the operations of Sylvan UK, Sylvan France, and WSI. These assets are expected to be sold within a year.
Online Higher Education Enrollment
The company's online division reported total degree enrollments increased 6% to 15,768 students at December 31, 2003, compared to 14,851 students for the same period in 2002. As previously disclosed, total enrollment growth is temporarily impacted by Canter's discontinuation of certain third-party university partnerships. Focusing on strategic partnerships, such as Walden University, will significantly enhance future revenue growth and operating margins. At December 31, 2003, Walden University reported an 82% year-over-year increase in total degree enrollments and an 84% increase in new student enrollments.
First Quarter And Full Year 2004 Outlook
The following statements are based on current expectations. These statements are forward-looking and actual results may differ materially.
Full Year 2004 Outlook:
-- Sylvan Learning Systems anticipates total revenues of between $590 and $625 million for 2004, an increase of 25% or more over 2003.
-- The Company anticipates campus-based revenue to be between $465 and $495 million for 2004, with operating margins between 19% and 20%.
-- The Company anticipates online revenue to be between $125 and $130 million for 2004, with operating margins between 14% and 15%.
-- General and administrative expenses are expected to be $20 to $21 million in 2004.
-- The Company currently believes that it will achieve EPS of $1.22 to $1.24 per diluted share for the year ending December 31, 2004.
-- Fully diluted shares outstanding for 2004 are projected to be approximately 47.7 million.
-- Total enrollment at Sylvan's network of campus-based and online universities is expected to grow at 18% to 20% in 2004.
First Quarter 2004 Outlook:
-- Sylvan Learning Systems anticipates total revenue of $120 to $130 million for the first quarter 2004.
-- The Company anticipates campus-based revenue of $96 to $105 million for the first quarter 2004, with operating margins between 7% and 8%.
-- The Company anticipates online revenue of $24 to $25 million for the first quarter 2004, with operating margin of (3%).
-- General and administrative expenses are expected to be approximately $5 million in the first quarter 2004.
-- The Company currently believes that it will achieve EPS of $0.00 to $0.01 per diluted share for the quarter ending March 31, 2004, the Company's seasonally weakest quarter.
-- Fully diluted shares outstanding for the first quarter 2004 are projected to be approximately 47.4 million. -0-
Reconciliation - 2003 GAAP
to Pro Forma Results
(in millions, except per share)
Three Months Twelve Months
Ended 12/31/03 Ended 12/31/03
Pretax (Loss) Income from
Continuing Operations $29.5 $1.5
Adjustments (Pretax):
Non-Strategic Ventures Losses - 18.7
Non-Cash Compensation Charges - 22.2
Pro forma Results from
Core Operations $29.5 $42.4
G&A Attributable to
Discontinued Operations - 6.8
Net Interest Income - 4.5
Pro Forma Pretax Results -
1/1/03 Transaction Close $29.5 $53.7
Interest on Convertible
Debentures (Pretax) - $1.3
Tax Rate 25% 25%
Pro Forma Weighted Avg.
Shares Outstanding - Diluted 47.1 46.2
Pro Forma EPS $0.47 $0.89
About Sylvan Learning Systems
Sylvan Learning Systems, Inc. (NASDAQ: SLVN) is focused exclusively on providing a superior university experience to over 117,000 students through the leading international 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 eight universities located in Latin America and Europe. Through two U.S. based and accredited universities, Sylvan offers the growing population of working professionals 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") -0-
Sylvan Learning Systems, Inc. & Subsidiaries
Consolidated Statement of Operations
(Amounts in Thousands, except per share data)
Three Months Ended December 31,
------------------------------------------
2003 2002 $ Variance % Variance
------------------------------------------
(Restated)
(c)
Revenues
Spain $23,759 $20,421 $3,338 16%
Hospitality/Switzerland(a) 12,885 11,593 1,292 11%
Chile Region 41,003 10,822 30,181 GT200%
Mexico Region 48,339 40,757 7,582 19%
France 2,572 1,787 785 44%
------------------------------------------
Campus Based total 128,558 85,380 43,178 51%
------------------------------------------
Online Higher Education 26,355 22,505 3,850 17%
Sylvan Ventures - 297 (297) N/A
------------------------------------------
Total Revenues 154,913 108,182 46,731 43%
------------------------------------------
Core Operating Expenses 115,368 89,570 25,798 29%
Ventures Operating
Expenses - 1,196 (1,196) N/A
Non-Cash Compensation
Expense 362 166 196 118%
Core General &
Administrative Expenses 3,488 5,290 (1,802) -34%
Ventures General &
Administrative Expenses - 1,190 (1,190) N/A
------------------------------------------
Total Operating Expenses 119,218 97,412 21,806 22%
------------------------------------------
Operating Income 35,695 10,770 24,925 GT200%
Non-Operating Items
Interest & Other Income 3,111 2,889 222 8%
Loss on Assets Held For
Sale - (894) 894 N/A
Interest Expense (1,450) (2,237) 787 35%
Equity in Net Income of
Affiliates 28 258 (230) -89%
Minority Interest (7,938) (3,272) (4,666) -143%
Exchange Gain 48 81 (33) 41%
Sylvan Ventures non-
operating - (2,999) 2,999 N/A
------------------------------------------
Total Non-Operating items (6,201) (6,174) (27) 0%
------------------------------------------
Income from continuing
operations before
income taxes and
cumulative effect of
change
in accounting principle 29,494 4,596 24,898 GT200%
Income tax (expense) benefit (913) 824 (1,737) N/A
------------------------------------------
Income from continuing
operations before
cumulative effect of
change in accounting
principle 28,581 5,420 23,161 GT200%
Loss from discontinued
operations, net of income
tax (5,263) (9,105) 3,842 42%
Gain (Loss) on disposal of
discontinued operations,
net of income
tax 2,507 (2,434) 4,941 N/A
------------------------------------------
Income (Loss) before
cumulative effect of change
in accounting principle 25,825 (6,119) 31,944 N/A
Cumulative effect of change
in accounting principle,
net of
tax benefit of $7,700 - - - N/A
------------------------------------------
Net Income (Loss) $25,825 $(6,119) $31,944 N/A
==========================================
Weighted average shares -
Basic 43,785 40,329
Weighted average shares -
Diluted 47,130 40,329
EPS-Net Income (Loss)
Basic $0.59 $(0.15)
EPS-Net Income (Loss)
Diluted $0.54 $(0.15)
EPS (Basic)-Income (Loss)
from continuing
operations
before cumulative effect
of change in accounting
principle $0.65 $0.13
EPS (Diluted)-Income
(Loss) from continuing
operations
before cumulative effect
of change in accounting
principle $0.60 $0.13
Reconciliation - Pro Forma
Income from Continuing
Operations
----------------------------
Income from continuing
operations before
income taxes and
cumulative effect of
change
in accounting principle $29,494
Non-Strategic
Ventures Losses -
Non-Cash
Compensation
Expense -
G&A Attributable to
Discontinued
Operations -
Core operations -
non operating -
-----------
Subtotal $29,494
Tax Impact at 25% (7,374)
-----------
Pro Forma income from
continuing operations (b) $22,120
Weighted average shares -
Pro Forma 47,130
EPS - As if transaction
happened January 1, 2003 $0.47
Segment Operating Profit
(Loss):
Campus Based $33,157 $15,502 $17,655 114%
Online Higher Education 6,388 2,813 3,575 127%
Sylvan Ventures - (2,089) 2,089 N/A
a) Hospitality includes the operating results of Les Roches,
Marbella and Glion.
b) 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.
c) The 2002 operating results have been restated to present the
K-12 and WSI business units as discontinued operations.
GT = Greater Than
Year Ended December 31,
------------------------------------------
2003 2002 $ Variance % Variance
------------------------------------------
(Restated)
(c)
Revenues
Spain $70,588 $56,188 $14,400 26%
Hospitality/Switzerland
(a) 48,046 29,807 18,239 61%
Chile Region 97,586 35,834 61,752 172%
Mexico Region 151,947 133,577 18,370 14%
France 7,921 5,859 2,062 35%
------------------------------------------
Campus Based total 376,088 261,265 114,823 44%
------------------------------------------
Online Higher Education 95,815 74,343 21,472 29%
Sylvan Ventures 903 395 508 129%
------------------------------------------
Total Revenues 472,806 336,003 136,803 41%
------------------------------------------
Core Operating Expenses 394,512 291,921 102,591 35%
Ventures Operating
Expenses 2,122 2,592 (470) -18%
Non-Cash Compensation
Expense 23,050 1,046 22,004 GT200%
Core General &
Administrative Expenses 17,774 21,318 (3,544) -17%
Ventures General &
Administrative Expenses 1,756 4,804 (3,048) -63%
------------------------------------------
Total Operating Expenses 439,214 321,681 117,533 37%
------------------------------------------
Operating Income 33,592 14,322 19,270 135%
Non-Operating Items
Interest & Other Income 6,903 6,932 (29) 0%
Loss on Assets Held For
Sale - (8,253) 8,253 N/A
Interest Expense (8,837) (8,158) (679) -8%
Equity in Net Income of
Affiliates 197 379 (182) -48%
Minority Interest (14,947) (6,880) (8,067) -117%
Exchange Gain 257 641 (384) -60%
Sylvan Ventures non-
operating (15,702) (5,970) (9,732) -163%
------------------------------------------
Total Non-Operating items (32,129) (21,309) (10,820) -51%
------------------------------------------
Income (Loss) from
continuing operations
before
income taxes and
cumulative effect of
change
in accounting principle 1,463 (6,987) 8,450 N/A
Income tax benefit 6,624 10,285 (3,661) -36%
------------------------------------------
Income from continuing
operations before
cumulative effect of
change in accounting
principle 8,087 3,298 4,789 145%
Loss from discontinued
operations, net of income
tax (3,882) (3,964) 82 2%
Gain (Loss) on disposal of
discontinued operations,
net of income
tax 41,930 (16,643) 58,573 N/A
------------------------------------------
Income (Loss) before
cumulative effect of change
in accounting principle 46,135 (17,309) 63,444 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) $46,135 $(95,943) $142,078 N/A
==========================================
Weighted average shares -
Basic 41,980 40,053
Weighted average shares -
Diluted 43,778 40,053
EPS-Net Income (Loss)
Basic $1.10 $(2.40)
EPS-Net Income (Loss)
Diluted $1.05 $(2.40)
EPS (Basic)-Income (Loss)
from continuing
operations
before cumulative effect
of change in accounting
principle $0.19 $0.08
EPS (Diluted)-Income
(Loss) from continuing
operations
before cumulative effect
of change in accounting
principle $0.18 $0.08
Reconciliation - Pro Forma
Income from Continuing
Operations
----------------------------
Income (Loss) from
continuing operations
before
income taxes and cumulative
effect of change
in accounting principle $1,463 $(6,987)
Non-Strategic
Ventures Losses 18,677 12,971
Non-Cash
Compensation
Expense 22,158 N/A
G&A Attributable to
Discontinued
Operations 6,855 N/A
Core operations -
non operating 4,564 N/A
-----------
Subtotal $53,717
Tax Impact at 25% (13,429)
-----------
Pro Forma income from
continuing operations (b) $40,288
Weighted average shares -
Pro Forma 46,229
EPS - As if transaction
happened January 1, 2003
(d) $0.89
Segment Operating Profit
(Loss):
Campus Based $64,103 $34,634 $29,469 85%
Online Higher Education 13,288 9,053 4,235 47%
Sylvan Ventures (2,975) (7,001) 4,026 58%
a) Hospitality includes the operating results of Les Roches,
Marbella and Glion.
b) 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.
c) The 2002 operating results have been restated to present the
K-12 and WSI business units as discontinued operations.
d) In calculating EPS, interest related to the convertible
debentures must be added back to numerator.
GT = Greater Than
CONTACT: Sylvan Learning Systems, Inc.
Sean Creamer,
Chris Symanoskie,
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