Sylvan Learning Systems, Inc. Reports Third Quarter 2002 Financial Results; Sylvan International Universities Reports 29% New Student Enrollment Growth.Business Editors BALTIMORE--(BUSINESS WIRE)--Oct. 24, 2002 Sylvan Learning Sylvan Learning (formerly Sylvan Learning Center) is a chain of franchised tutoring centers which provide personalized tutoring in reading, writing, mathematics, study skills and test-prep for college entrance and state exams. Systems, Inc. (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on : SLVN) today announced strong financial results and enrollment increases for the quarter ended September September: see month. 30, 2002, and announced it is evaluating alternatives to simplify its corporate structure. "We continue to witness exceptional performance from our K-12 and post-secondary operating divisions, with strong growth in revenues and student enrollments across the board," said Douglas Becker Douglas Becker is a choreographer and teacher working in many idioms, including contemporary ballet and improvisation throughout Europe and the United States. A founding member and principal dancer of the Frankfurt Ballet, where he performed with distinction for over 10 years under , Chairman and Chief Executive Officer of Sylvan Learning Systems, Inc. "Given the four- to five-year length of stay by students in our universities and graduate programs, the impressive enrollment increases reported by Sylvan sylvan emanating from or pertaining to woods. See also sylvatic. International Universities and Online Higher Education higher education Study beyond the level of secondary education. Institutions of higher education include not only colleges and universities but also professional schools in such fields as law, theology, medicine, business, music, and art. signal strong growth for the next several years." "While we are very pleased with the strong results reported today by all of our operating units operating unit A type of operating company that engages in transactions with outsiders and that is owned by another business. For example, in 1995 the stockholders of Capital Cities/ABC approved a $19 billion merger with the Walt Disney Company, whereupon , we understand that losses associated with Sylvan Ventures complicate com·pli·cate tr. & intr.v. com·pli·cat·ed, com·pli·cat·ing, com·pli·cates 1. To make or become complex or perplexing. 2. To twist or become twisted together. adj. 1. our financial reporting," Mr. Becker Beck´er n. 1. (Zool.) A European fish (Pagellus centrodontus); the sea bream or braise. continued. "In order to offer investors greater clarity Clarity is the property of being clear or transparent. Clarity can refer to one's ability to clearly visualize an object or concept, as in thought, understanding, and the "mind's eye", as well as the traditional notion of visual perception, that is, with the , we are taking steps to scale back the activities and reduce the losses associated with Sylvan Ventures. At the same time, we are providing more detailed disclosure of those losses, and how they influence Sylvan's financial results." Recent Financial and Business Highlights - The Company anticipates total revenues, excluding Sylvan Ventures, of $149 to $160 million for the fourth quarter 2002, an increase of 12% to 20% over last year. - Fourth quarter 2002 operating income, excluding Sylvan Ventures, is expected to be $26 to $28 million, an increase of at least 18% over last year - after adding back goodwill amortization for 2001. - General and administrative expenses are expected to be approximately $5 million. - The Company currently believes that it will achieve EPS of $0.33 to $0.35 per share for the fourth quarter of 2002, excluding Sylvan Ventures. K-12 Education Services - The continued success of national advertising programs and increased length of stay generated 19% same-store sales Same-store sales is a business term which refers to the revenue generated by one of a retail chain's specific outlets during a certain period of time (often a fiscal quarter or a particular shopping season), compared to an identical period in the past, usually in the previous year. growth at Sylvan Learning Center locations. - Sylvan Learning Center reported a net increase of eight franchised locations and five company-owned locations in the third quarter of 2002, bringing the number of franchised and company-owned locations in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. to 807 and 127, respectively. - Under the provisions of the "No Child Left Behind Act The No Child Left Behind Act of 2001 (Public Law 107-110), commonly known as NCLB (IPA: /ˈnɪkəlbiː/), is a United States federal law that was passed in the House of Representatives on May 23, 2001 ," Sylvan Education Solutions has received approval to provide supplemental tutoring services in 10 states and expects to begin pilot programs in several cities starting in the fourth quarter 2002. Post-Secondary Education Services - Sylvan International Universities (SIU SIU Southern Illinois University SIU Seafarers International Union SIU Special Investigations Unit SIU Schiller International University SIU Special Investigative Unit SIU Salem International University SIU Societá Italiana di Urologia ) announced that new student enrollments increased 29% year over year across all six network universities. These new student enrollments helped fuel an increase in consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: degree enrollments at all six network universities of 17% to 60,454 students, compared with 51,578 students at all six network universities during the same period last year. Tuition For tuition fees in the United Kingdom, see . Tuition means instruction, teaching or a fee charged for educational instruction especially at a formal institution of learning or by a private tutor usually in the form of one-to-one tuition. increases implemented throughout the year generated weighted average price improvement of 10%. - Online Higher Education attained at·tain v. at·tained, at·tain·ing, at·tains v.tr. 1. To gain as an objective; achieve: attain a diploma by hard work. 2. total fall 2002 enrollment in Canter canter a gallop at an easy pace. The rhythm is three-time, first one hind, then the opposite hind with the diagonal fore, then the opposite fore, the leading limb. collected canter distance learning Master's degree master's degree n. An academic degree conferred by a college or university upon those who complete at least one year of prescribed study beyond the bachelor's degree. Noun 1. programs of 12,100 students, an increase of 22% compared to 9,909 students in fall 2001. Sylvan Ventures - Sylvan Ventures' after-tax af·ter-tax also af·ter·tax adj. Relating to or being that which remains after payment, especially of income taxes: after-tax profits. losses decreased 29% to $17.5 million for the nine-month period ended September 30, 2002. For the full year 2003, Sylvan Ventures' losses are expected to decrease further, as portfolio companies continue to mature and as Sylvan Ventures focuses future capital exclusively toward existing portfolio companies. - Excluding students participating in Canter programs, Walden Walden Thoreau’s classic; advocates a return to nature. [Am. Lit.: Van Doren, 208] See : Pastoralism University attained new student enrollment of 196%, which fueled a 22% increase in total fall 2002 enrollment of 1,978 students, compared to 1,627 students in fall 2001.
Financial Results
Reconciliation - 2002 GAAP to Pro Forma Results
(in millions, except per share) Three Months Nine Months
--------------- -----------------
$ EPS $ EPS
------ ------- -------- --------
GAAP Basis Consolidated Results $(5.7) $(0.14) $ (89.8) $ (2.25)
Adjustments (after tax):
eSylvan Losses 3.1 0.08 9.4 0.24
Walden Losses 0.4 0.01 1.4 0.04
Other Ventures Losses 1.9 0.05 6.6 0.17
WSI - Spain Operating Losses 0.0 0.00 1.6 0.04
WSI - Spain Loss on Assets Sold 2.0 0.05 13.0 0.33
Frontline Investment Impairment 4.9 0.12 4.9 0.12
SFAS 142 Asset Impairment Loss 0.0 0.00 78.6 1.97
Effect of Common Stock Equivalents 0.7 (0.01) 2.4 (0.06)
------- ------ ------- -------
Pro Forma Results $ 7.3 $ 0.16 $ 28.1 $ 0.60
Weighted Avg. Shares
Outstanding - Basic 40.3 39.9
Weighted Avg. Shares
Outstanding - Fully Diluted 46.8 47.1
Total revenues for the third quarter of 2002, excluding Sylvan Ventures revenue of $6.9 million, were $124.5 million, an increase of 19% compared to total revenues of $104.9 million in the third quarter of 2001. Total operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. for the third quarter, excluding Sylvan Ventures and losses related to the disposed dis·pose v. dis·posed, dis·pos·ing, dis·pos·es v.tr. 1. To place or set in a particular order; arrange. 2. Wall Street Institute franchise business in Spain Spain, Span. España (āspä`nyä), officially Kingdom of Spain, constitutional monarchy (2005 est. pop. 40,341,000), 194,884 sq mi (504,750 sq km), including the Balearic and Canary islands, SW Europe. , increased 23% to $11.1 million, versus $9.0 million in the third quarter of 2001, on a comparable basis after adding back goodwill amortization. Pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma net income for the third quarter of 2002 was $7.3 million, or $0.16 per share on shares outstanding of 46.8 million. This compares to pro forma net income of $6.1 million, or $0.13 per share on shares outstanding of 46.6 million for the same period in 2001. Strong enrollment growth at Sylvan International Universities and Online Higher Education, as well as continued strong sales at Sylvan Learning Center drove results in the third quarter of 2002. For the nine-month period ended September 30, 2002, total revenues, excluding Sylvan Ventures revenues of $16.4 million, were $412.9 million, an increase of 19% compared to total revenues of $347.4 million in the same period of 2001. Total operating income for the nine-month period, excluding Sylvan Ventures and losses related to the disposed business, increased 25% to $45.7 million versus $36.6 million in the same period of 2001, on a comparable basis after adding back goodwill amortization. For the nine-month period ended September 30, 2002, pro forma net income was $28.1 million, or $0.60 per share on diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. shares outstanding of 47.1 million. This compares to pro forma net income of $23.6 million, or $0.52 per share on diluted shares outstanding of 45.7 million for the same nine-month period in 2001. Total cash and marketable securities Marketable Securities Very liquid securities that can be converted into cash quickly at a reasonable price. Notes: Marketable securities are very liquid as they tend to have maturities less than one year, and the rate at which these securities can be bought or sold has at the end of the quarter were approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $144 million, while total corporate debt was approximately $67 million, excluding the $95 million convertible debenture Convertible Debenture Any type of debenture that can be converted into some other security. Notes: For example, a convertible bond can be converted into stock. . As of September 30, 2002, Sylvan Ventures had made funding commitments of $280 million, of which $263 million has been invested. Sylvan Ventures does not intend to make new investments, other than additional investments related to existing companies and the pending acquisition of National Technological University. Fourth Quarter 2002 Guidance The following statements are based on current expectations. These statements are forward-looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. , and actual results may differ materially. - The Company anticipates total revenues, excluding Sylvan Ventures, of $149 to $160 million for the fourth quarter 2002, an increase of 12% to 20% over last year. - Fourth quarter 2002 operating income, excluding Sylvan Ventures, is expected to be $26 to $28 million, an increase of at least 18% over last year - after adding back goodwill amortization for 2001. - General and administrative expenses are expected to be approximately $5 million. - The Company currently believes that it will achieve EPS of $0.33 to $0.35 per share for the fourth quarter of 2002, excluding Sylvan Ventures. About Sylvan Learning Systems Sylvan Learning Systems, Inc. (www.sylvan.net) is the leading provider of education services to families and schools worldwide. The Sylvan Learning Center business provides personalized per·son·al·ize tr.v. per·son·al·ized, per·son·al·iz·ing, per·son·al·iz·es 1. To take (a general remark or characterization) in a personal manner. 2. To attribute human or personal qualities to; personify. instruction services to K-12 students through direct consumer relationships. Sylvan Education Solutions provides tutoring and related services under contract to school systems. Sylvan provides courses to adult students throughout the world in the areas of teacher training, and accredited accredited recognition by an appropriate authority that the performance of a particular institution has satisfied a prestated set of criteria. accredited herds cattle herds which have achieved a low level of reactors to, e.g. university offerings through Online Higher Education and Sylvan International Universities. Sylvan International Universities is pioneering the largest and most ambitious network of post-secondary education institutions worldwide. Sylvan Ventures, Sylvan's research and investment vehicle, focuses on bringing emerging technology solutions to the education and training marketplace. Forward Looking Statements This release includes information that could constitute forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. made pursuant to the safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. provision of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. Any such forward-looking statements may involve risk and uncertainties. Political, economic, currency, tax, regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. , technological, competitive and other factors could cause actual results to differ materially from those anticipated in the forward-looking statements. Additional information regarding these risk factors and uncertainties is detailed from time to time in the Company's filings with the 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 Investor relations The process by which the corporation communicates with its investors. ," "SEC Filings").
Sylvan Learning Systems, Inc. & Subsidiaries
Consolidated Statement of Operations
(Amounts in Thousands, except per share data)
Three Months Ended September 30,
---------------------------------------
$ %
2002 2001 Variance Variance
--------- --------- --------- ---------
Line
Revenues
1 Franchise Services $10,200 $9,036 $1,164 13%
Company-owned Learning
2 Centers 26,442 17,391 9,051 52%
3 International 3,786 3,248 538 17%
4 Education Solutions 7,860 8,468 (608) -7%
--------- --------- --------- ---------
Total K-12 Education
Services 48,288 38,143 10,145 27%
--------- --------- --------- ---------
5 Total Online Higher
Education 15,520 12,756 2,764 22%
6 English Language
Instruction-Spain - 4,373 (4,373) N/A
7 UEM (Spain) 788 991 (203) -20%
8 Hospitality (a) 9,172 3,847 5,325 138%
9 UDLA (Chile) 10,361 6,917 3,444 50%
10 UVM (Mexico) 29,146 27,915 1,231 4%
11 ESCE (France) 1,104 - 1,104 N/A
12 Wall Street Institute 10,136 9,976 160 2%
--------- --------- --------- ---------
International
Universities total 60,707 49,646 11,061 22%
--------- --------- --------- ---------
Total Revenues 124,515 104,918 19,597 19%
--------- --------- --------- ---------
13 Divisional Operating
Expenses 111,223 92,901 18,322 20%
14 General & Administrative
Expenses 5,207 5,643 (436) -8%
--------- --------- --------- ---------
Total Operating Expenses 116,430 98,544 17,886 18%
--------- --------- --------- ---------
Operating Income 8,085 6,374 1,711 27%
Non-Operating Items
15 Interest & Other Income 1,570 2,495 (925) -37%
16 Loss on Investment (7,359) - (7,359) N/A
17 Interest Expense (1,991) (2,203) 212 10%
18 Equity in Net Income
(Loss) of Affiliates 72 - 72 N/A
19 Minority Interest (762) (1,021) 259 25%
20 Exchange Gain/(Loss) (90) (253) 163 64%
--------- --------- --------- ---------
Total Non-Operating items (8,560) (982) (7,578) LT-200%
--------- --------- --------- ---------
Pretax Income (Loss) before
21 Sylvan Ventures (475) 5,392 (5,867) -109%
Income Taxes 142 (1,831) 1,973 108%
--------- --------- --------- ---------
Income (Loss) Before Sylvan
Ventures (333) 3,561 (3,894) -109%
22 Sylvan's Interest in Sylvan LT-200%
Ventures (b) (5,358) 4,808 (10,166)
--------- --------- --------- ---------
Net Income (Loss) (5,691) 8,369 (14,060) -168%
23 Elimination of goodwill
amortization, net of tax
effect of $1,709 (c) (d) 3,255
--------- --------- --------- ---------
Adjusted Net Income (Loss) $(5,691) $11,624 $(17,315) -149%
========= ========= ========= =========
Weighted Average Shares
- Basic 40,331 38,472
EPS-Net Income (Loss)
Basic $(0.14) $0.22
Less reconciling items,
net of tax:
eSylvan Losses (shown
after-tax in line 22) 0.08 0.06
Walden University
Losses (shown after-
tax in line 22) 0.01 -
Other Ventures Results
(shown after-tax in
line 22) 0.05 (0.18)
WSI-Spain Loss on
Assets Sold (shown
pre-tax in line 13) 0.05 -
Frontline Investment
Impairment (shown pre-
tax in line 16) 0.12 -
Goodwill Amortization
(shown after-tax in
line 23) - 0.04
Effect of Common Stock
Equivalents (e) (0.01) (0.01)
--------- ---------
Pro-Forma Results $0.16 $0.13
--------- ---------
Shares used in adjusted
share earnings
calculations 46,796 46,553
Segment Operating Profit
(Loss):
K-12 Education Services $9,790 $7,083 $2,707 38%
Online Higher Education 5,017 3,286 1,731 53%
English Language LT-200%
Instruction-Spain (f) (3,000) (192) (2,808)
International
Universities 1,485 1,840 (355) -19%
a) Hospitality includes the operating results of Les Roches, Marbella
and Glion.
b) Includes Sylvan Ventures revenues of $6,948 for the three month
period ended September 30, 2002. Adjusted net loss and adjusted
diluted net loss per share
c) assumes adoption of SFAS 142 on January 1, 2001.
d) Includes Sylvan Ventures and WSI-Spain amortization of $1,624 net
of tax effect of $869.
e) Reflects dilutive effect of options and convertible preferred
debt.
f) Includes losses from operations and losses on asset disposition
related to WSI-Spain.
LT=less than
GT=greater than
Sylvan Learning Systems, Inc. & Subsidiaries
Consolidated Statement of Operations
(Amounts in Thousands, except per share data)
Nine Months Ended September 30,
---------------------------------------
$ %
2002 2001 Variance Variance
--------- --------- --------- ---------
Line
Revenues
1 Franchise Services $31,750 $28,054 $3,696 13%
Company-owned Learning
2 Centers 69,289 48,832 20,457 42%
3 International 12,884 11,549 1,335 12%
4 Education Solutions 47,908 51,029 (3,121) -6%
--------- --------- --------- ---------
Total K-12 Education
Services 161,831 139,464 22,367 16%
--------- --------- --------- ---------
5 Total Online Higher
Education 37,810 31,194 6,616 21%
6 English Language
Instruction-Spain 6,964 14,710 (7,746) -53%
7 UEM (Spain) 35,767 31,406 4,361 14%
8 Hospitality (a) 18,214 10,432 7,782 75%
9 UDLA (Chile) 25,012 17,168 7,844 46%
10 UVM (Mexico) 92,820 78,152 14,668 19%
11 ESCE (France) 4,072 - 4,072 N/A
12 Wall Street Institute 30,373 24,857 5,516 22%
--------- --------- --------- ---------
International
Universities total 206,258 162,015 44,243 27%
--------- --------- --------- ---------
Total Revenues 412,863 347,383 65,480 19%
--------- --------- --------- ---------
13 Divisional Operating
Expenses 373,724 299,256 74,468 25%
14 General & Administrative
Expenses 16,028 17,530 (1,502) -9%
--------- --------- --------- ---------
Total Operating Expenses 389,752 316,786 72,966 23%
--------- --------- --------- ---------
Operating Income 23,111 30,597 (7,486) -24%
Non-Operating Items
15 Interest & Other Income 3,855 7,036 (3,181) -45%
16 Loss on Investment (7,359) (14,231) 6,872 48%
17 Interest Expense (6,030) (6,544) 514 8%
18 Equity in Net Income
(Loss) of Affiliates 35 (263) 298 113%
19 Minority Interest (4,228) (5,038) 810 16%
20 Exchange Gain/(Loss) (389) 267 (656) LT-200%
--------- --------- --------- ---------
Total Non-Operating items (14,116) (18,773) 4,657 25%
--------- --------- --------- ---------
Pretax Income before Sylvan
Ventures 8,995 11,824 (2,829) -24%
21 Income Taxes (2,699) (4,018) 1,319 33%
--------- --------- --------- ---------
Income Before Sylvan
Ventures 6,296 7,806 (1,510) -19%
22 Sylvan's Interest in Sylvan
Ventures (b) (17,486) (24,456) 6,970 29%
--------- --------- --------- ---------
Loss before cumulative
effect of change
in accounting principle (11,190) (16,650) 5,460 33%
23 Cumulative effect of change
in accounting principle
net of tax benefit
of $7,700 (78,634) - (78,634) N/A
--------- --------- --------- ---------
Net Loss (89,824) (16,650) (73,174) LT-200%
24 Elimination of goodwill
amortization, net of tax
effect of $5,454 (c) (d) 10,242
--------- --------- --------- ---------
Adjusted Net Loss $(89,824) $(6,408) $(83,416) LT-200%
========= ========= ========= =========
Weighted Average Shares
- Basic 39,960 37,937
EPS-Net Loss Basic $(2.25) $(0.44)
Less reconciling items,
net of tax:
eSylvan Losses (shown
after-tax in line 22) 0.24 0.24
Walden University
Losses (shown after-
tax in line 22) 0.04 -
Other Ventures Results
(shown after-tax in
line 22) 0.17 0.40
WSI-Spain Operating
Losses (shown pre-tax
in line 6 and 13) 0.04 (0.03)
WSI-Spain Loss on
Assets Sold (shown
pre-tax in line 13) 0.33 -
Frontline Investment
Impairment (shown pre-
tax in line 16) 0.12 -
SFAS 142 Asset
Impairment Loss (shown
after-tax in line 23) 1.97 -
Caliber Losses (shown
pre-tax in line 16) - 0.25
Goodwill Amortization
(shown after-tax in
line 24) - 0.13
Effect of Common Stock
Equivalents (e) (0.06) (0.03)
--------- ---------
Pro-Forma Results $0.60 $0.52
--------- ---------
Shares used in adjusted
share earnings
calculations 47,126 45,714
Segment Operating Profit
(Loss):
K-12 Education Services $34,387 $28,160 $6,227 22%
Online Higher Education 9,502 6,288 3,214 51%
English Language
Instruction-Spain (f) (22,597) 1,539 (24,136) LT -200%
International
Universities 17,847 12,140 5,707 47%
a) Hospitality includes the operating results of Les Roches, Marbella
and Glion.
b) Includes Sylvan Ventures revenues of $16,390 for the nine month
period ended September 30, 2002. Adjusted net loss and adjusted
diluted net loss per share
c) assumes adoption of SFAS 142 on January 1, 2001.
d) Includes Sylvan Ventures and WSI-Spain amortization of $5,293 net
of tax effect of $2,905.
e) Reflects dilutive effect of options and convertible preferred
debt.
f) Includes losses from operations and losses on asset disposition
related to WSI-Spain.
LT=less than
GT=greater than
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