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EXHIBIT 99.01
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FOR IMMEDIATE RELEASE
FOR MORE INFORMATION CONTACT:
Xxxx X. Xxxxx, Senior Vice President and
Chief Financial Officer
(000) 000-0000
Xxxxx Xxxxx, Vice President,
Corporate Communications
(000) 000-0000
xxxxx.xxxxx@xxxxxxx.xxx
XXXXXXX EDUCATION, INC. REPORTS RECORD
THIRD QUARTER 2004 ENROLLMENT, REVENUES AND EARNINGS
-STRAYER THIRD QUARTER REVENUES UP 27%-
-STRAYER THIRD QUARTER DILUTED EPS OF $0.34-
-STRAYER FALL 2004 TOTAL ENROLLMENTS UP 17%, ONLINE ENROLLMENTS UP 53%-
-XXXXXXX UNIVERSITY APPROVED BY STATE OF FLORIDA FOR TWO NEW CAMPUSES IN 2005-
-STRAYER FULL YEAR 2004 EPS ESTIMATE RAISED FROM $2.60 - $2.65 TO $2.69 - $2.71-
ARLINGTON, Va., October 28, 2004 - Xxxxxxx Education, Inc. (Nasdaq: STRA) today
announced financial results for the three months ended September 30, 2004.
Financial highlights are as follows:
THREE MONTHS ENDED SEPTEMBER 30
o Revenues for the three months ended September 30, 2004 increased 27% to
$38.0 million, compared to $30.0 million for the same period in 2003, due
primarily to increased enrollment and a 5% tuition increase which commenced
in January 2004.
o Income from operations increased 7% to $7.8 million from $7.3 million for
the same period in 2003. Income from operations in 2003 included a $1.8
million gain from the sale of the Washington, D.C. campus building.
Excluding the 2003 gain from the sale of the Washington, D.C. campus
building, income from operations rose 41%. Management believes that
excluding this asset sale provides a useful indicator of the Company's
underlying operating performance.
o Net income rose 5% to $5.1 million compared to $4.9 million for the same
period in 2003. Excluding the 2003 gain from the sale of the Washington,
D.C. campus building, net income rose 34%. Earnings per diluted share rose
6% to $0.34 compared to $0.32 for the same period in 2003. Excluding the
2003 sale of the Washington, D.C. campus building, earnings per
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diluted share rose 36%. Diluted weighted average shares outstanding
increased to 15,021,000 from 14,969,000 for the same period in 2003.
NINE MONTHS ENDED SEPTEMBER 30
o Revenues for the nine months ended September 30, 2004 increased 26% to
$130.9 million, compared to $103.7 million for the same period in 2003, due
primarily to increased enrollment and a 5% tuition increase effective for
2004.
o Income from operations rose 26% to $44.7 million from $35.5 million for the
same period in 2003. Excluding the 2003 gain from the sale of the
Washington, D.C. campus building, income from operations rose 33%.
o Net income rose 24% to $28.0 million compared to $22.6 million for the same
period in 2003. Excluding the 2003 gain from the sale of the Washington,
D.C. campus building, net income rose 30%. Earnings per diluted share rose
21% to $1.85 compared to $1.53 for the same period in 2003. Excluding the
2003 gain from the sale of the Washington, D.C. campus building, earnings
per diluted share rose 28%. Diluted weighted average shares outstanding
increased to 15,092,000 from 14,796,000 for the same period in 2003.
"We are pleased with our solid financial and student enrollment results for the
third quarter," said Xxxxxx X. Xxxxxxxxx, Chairman and Chief Executive Officer
of Xxxxxxx Education, Inc. "The 17% enrollment growth for the fall term and the
strong opening of our five new campuses, including our first two in the Atlanta,
Georgia market and our first campus in South Carolina, reflects our ongoing
commitment to high-quality, accessible adult education. As planned, we have
successfully opened five campuses this year and look forward to five new
campuses in 2005. We are particularly pleased with our approval from the Florida
Department of Education to open two campuses in Tampa, Florida next year as we
continue to execute our geographic and online expansion strategy."
BALANCE SHEET AND CASH FLOW
At September 30, 2004, the Company had cash, cash equivalents and marketable
securities (a diversified, no load, short-term, tax exempt bond fund) of $111.7
million and no debt. The Company generated $40.2 million from operating
activities in the first nine months of 2004. Capital expenditures were $8.0
million for the same period.
During the three months ended September 30, 2004, the Company spent $15.6
million for the repurchase of 165,900 shares of common stock at an average price
of $94 per share as part of a previously announced common stock repurchase
authorization. During the nine months ended September 30, 2004, the Company
spent $36.8 million for the repurchase of 346,500 shares of common stock at an
average price of $106 per share.
In the third quarter 2004, bad debt expense as a percentage of revenue was 2.5%
compared to 1.7% for the same period in 2003. Days sales outstanding, adjusted
to exclude tuition receivable related to future quarters, was nine days at the
end of the third quarter 2004 compared to seven days for the same period in
2003.
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STUDENT ENROLLMENT
Enrollment at Xxxxxxx University for the 2004 fall term increased 17% to 23,539
students compared to 20,138 for the same term in 2003. Across the Xxxxxxx
University campus network, new student enrollments increased 16% and continuing
student enrollments increased 18%. Out-of-area online students increased 53%,
while students taking 100% of their classes online (including campus-based
students) increased 36%.
STUDENT ENROLLMENT
------------------
Fall Fall %
2003 2004 Change
------ ------- -------
Campus Based Students:
New Campuses (13 in operation 3 or less years)
Classroom 942 1,843 96%
Online 1,005 2,201 119%
------ -------
Total New Campus Students 1,947 4,044 108%
------ -------
Mature Campuses (17 in operation 4 or more years)
Classroom 10,646 10,027 -6%
Online 5,907 6,968 18%
------ -------
Total Mature Campus Students 16,553 16,995 3%
------ -------
Total Campus Based Students 18,500 21,039 14%
Online Based Students (out-of-area) 1,638 2,500 53%
------ -------
Total Students 20,138 23,539 17%
====== =======
Total Students Taking 100% of Courses Online 8,550 11,669 36%
Total Students Taking at Least 1 Course Online 10,615 14,347 35%
NEW CAMPUS/NEW STATE OPENINGS
Philadelphia, Pennsylvania
The Company reported today that in the fall term it successfully opened its
third new campus in the Philadelphia, Pennsylvania area. This new Pennsylvania
campus, together with two new campuses opened in Atlanta in the summer term and
one new campus opened in each of Memphis, Tennessee and Greenville, South
Carolina, completed the Company's goal of five new campuses in 2004. Xxxxxxx
University now has a total of 30 campuses.
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Florida
Xxxxxxx University has obtained approval from the State of Florida to open two
campuses in the Tampa area in 2005.
EXPANDED ONLINE COURSE OFFERINGS
Xxxxxxx University Online is offering 852 online classes in the 2004 fall term,
compared to 621 online classes offered in the 2003 fall term, with all academic
programs available asynchronously.
FISCAL YEAR 2002 COHORT DEFAULT RATE
During the third quarter of 2004, the Company was notified by the U.S.
Department of Education that its Cohort Default Rate for fiscal year 2002 (the
most recent annual period for which data is available) declined to 3.7% from
4.3% for the fiscal year 2001.
COMMON STOCK CASH DIVIDEND
As previously announced, the Company is increasing its annual common stock
dividend to $0.50 per share from $0.26 per share. This increase in annual
dividend will result in a quarterly dividend payment of $0.125 per share. The
Company also previously reported that it is changing the timing of its dividend
announcements and subsequent payment dates to correspond with its quarterly
earnings releases. As a result, the third quarter dividend, which was declared
on October 26, 2004, will now be paid on December 10 instead of in October. The
Company intends to make subsequent dividend payments on a quarterly basis on
March 10, June 10, September 10, and December 10 of each year. The dividend
record date will be announced in the quarterly earnings release and will precede
the dividend payment date by approximately two weeks.
With the rescheduling this year of the third quarter dividend payment from
October to December, the $0.50 annual dividend will be prorated over a five
month period instead of three, resulting in a dividend payment of $0.21 per
share on December 10, 2004 to shareholders of record as of November 26, 2004.
SHARE REPURCHASE PLAN
During the third quarter of 2004, the Company fully utilized its remaining
authorization under the Company's $40 million common share repurchase program.
The Company announced that the Company's Board of Directors has amended the
Company's previously disclosed $40 million share repurchase program to authorize
the repurchase of an additional $25 million in value of the Company's 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.
8
2004 BUSINESS OUTLOOK
Based on the strong enrollment growth announced for the 2004 fall term, the
Company estimates fourth quarter 2004 diluted EPS will be in the range of $0.84
- $0.86. Based on its fourth quarter estimates, the Company therefore is
increasing its estimate of full year 2004 diluted EPS to $2.69 - $2.71 from
$2.60 - $2.65.
2005 BUSINESS OUTLOOK
The Company announced that it intends to open five new campuses in 2005, and
that under the following enrollment growth assumptions, the Company would expect
the following full year 2005 results:
Enrollment: 15% - 18% growth
Revenue: 19% - 22% growth
Operating Margin: 35.0% - 35.5%
Diluted EPS: $3.20 - $3.30
Diluted Shares Outstanding: 15,000,000
STOCK OPTION ACTIVITY
In the third quarter 2004, the Company granted 20,000 additional employee stock
options. These options had an exercise price of $95.19 per share (the fair
market value on the date of the grant), vest in four years, and expire eight
years from the date of grant.
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 $4.6 million and $0.31 per share, respectively, for the three
months ended September 30, 2004, and $26.2 million and $1.74 per share,
respectively, for the nine months ended September 30, 2004.
The following assumptions were used to estimate fair value as of the date of
grant using the Black-Scholes option pricing model:
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2003 2004
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Dividend yield .......................................................... 0.5% 0.24%
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Risk-free interest rates ................................................ 3.0% 3.8%
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Volatility .............................................................. 40% 34%
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Expected option term (years) ............................................ 5.2 6.1
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Weighted average fair value of options granted during the year .......... $21.88 $45.23
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CALCULATION OF TOTAL POTENTIAL SHARE ISSUANCE
The table below sets forth the Company's total current and potential common
shares outstanding (in thousands):
Current
-------
Xxxxxx shares issued and outstanding at 9/30/04 ................. 14,669
Issued stock options using Treasury Stock Method ................ 278
------
Total current .............................................. 14,947
------
Potential
---------
Total issued stock options, less options accounted for using
the Treasury Stock Method above ............................. 587
Authorized but unissued options ................................. 266
------
Total potential ............................................. 853
------
Total current and potential common shares ................... 15,800
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CONFERENCE CALL WITH MANAGEMENT
Xxxxxxx Education, Inc. will host a conference call to discuss its third quarter
2004 earnings on October 28, 2004 at 10:00 a.m. ET. To participate on the live
call, investors should dial (000) 000-0000 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
xxx.xxxxxxxxxxxxxxxx.xxx 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 197271) starting at 3:00 p.m. (ET) today and will be
available through Friday, November 5, and archived at xxx.xxxxxxxxxxxxxxxx.xxx
for 90 days.
Xxxxxxx Education, Inc. (Nasdaq: STRA) is an education services holding company
that owns Xxxxxxx University and certain other assets. Xxxxxxx'x mission is to
make higher education achievable and convenient for working adults in today's
economy. Xxxxxxx 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 23,000 working adult students at 30 campuses in eight states in the eastern
United States and worldwide via the Internet through Xxxxxxx University Online.
Xxxxxxx University is committed to providing an education that prepares working
adult students for advancement in their careers and professional lives. Founded
in 1892, Xxxxxxx University is accredited by the Middle States Commission on
Higher Education.
For more information on Xxxxxxx Education, Inc. visit xxx.xxxxxxxxxxxxxxxx.xxx
and for Xxxxxxx University visit xxx.xxxxxxx.xxx.
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 state
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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.
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XXXXXXX 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,
-------------------- --------------------
2003 2004 2003 2004
-------- -------- -------- --------
Revenues ................................ $ 29,993 $ 38,009 $103,652 $130,926
Costs and expenses:
Instruction and educational support . 12,236 14,889 38,324 46,613
Selling and promotion ............... 7,104 9,159 16,940 21,564
General and administration .......... 5,085 6,124 14,687 18,041
Gain on sale of asset ................... 1,772 -- 1,772 --
-------- -------- -------- --------
Income from operations .................. 7,340 7,837 35,473 44,708
Investment and other income ............. 688 376 1,850 1,058
-------- -------- -------- --------
Income before income taxes .............. 8,028 8,213 37,323 45,766
Provision for income taxes .............. 3,174 3,123 14,753 17,808
-------- -------- -------- --------
Net income .............................. 4,854 5,090 22,570 27,958
Preferred stock dividends and
accretion ............................... 1,287 -- 3,843 1,389
-------- -------- -------- --------
Net income available to common
stockholders ............................ $ 3,567 $ 5,090 $ 18,727 $ 26,569
======== ======== ======== ========
Basic net income per share .............. $ 0.33 $ 0.35 $ 1.75 $ 1.99
======== ======== ======== ========
Diluted net income per share ............ $ 0.32 $ 0.34 $ 1.53 $ 1.85
======== ======== ======== ========
Weighted average shares outstanding
Basic ............................... 10,727 14,743 10,682 13,340
Diluted ............................. 14,969 15,021 14,796 15,092
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XXXXXXX EDUCATION, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS)
At December 31, At September 30,
2003 2004
--------------- ----------------
ASSETS
Current assets:
Cash and cash equivalents ................................................... $ 82,089 $ 85,823
Marketable securities available for sale, at fair value ..................... 25,951 25,835
Income taxes receivable ..................................................... -- 1,259
Tuition receivable, net of allowances for doubtful accounts ................. 35,997 47,315
Student loans receivable - held for sale .................................... 65 22
Other current assets ........................................................ 1,656 3,671
--------- ---------
Total current assets .................................................... 145,758 163,925
Property and equipment, net .................................................... 35,930 39,957
Restricted cash ................................................................ 500 500
Other assets ................................................................... 368 343
--------- ---------
Total assets ............................................................ $ 182,556 $ 204,725
========= =========
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ............................................................ $ 5,127 $ 6,402
Accrued expenses ............................................................ 2,329 1,985
Income taxes payable ........................................................ 2,898 --
Dividends payable ........................................................... 1,510 --
Unearned tuition ............................................................ 39,134 51,941
--------- ---------
Total current liabilities .............................................. 50,998 60,328
Deferred income taxes .......................................................... 228 959
Long-term liabilities .......................................................... 2,666 4,575
--------- ---------
Total liabilities ...................................................... 53,892 65,862
--------- ---------
Series A convertible redeemable preferred stock ................................ 95,686 --
Stockholders' equity:
Common stock ................................................................ 107 147
Additional paid-in capital .................................................. 59,838 141,035
Retained earnings (accumulated deficit) ..................................... (26,918) (2,218)
Accumulated other comprehensive income (loss) ............................... (49) (101)
--------- ---------
Total stockholders' equity ............................................ 32,978 138,863
--------- ---------
Total liabilities and stockholders' equity ............................ $ 182,556 $ 204,725
========= =========
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XXXXXXX EDUCATION, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(AMOUNTS IN THOUSANDS)
For the nine months ended September 30,
---------------------------------------
2003 2004
-------- --------
Cash flows from operating activities:
Net income ................................................................... $ 22,570 $ 27,958
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization of deferred rent ........................................... 198 442
Gain on sale of marketable securities ................................... (135) --
Gain on sale of property and equipment .................................. (1,772) --
Depreciation and amortization ........................................... 3,235 3,971
Provision for student loan losses and indemnification ................... 141 (182)
Deferred income taxes ................................................... 1 (69)
Changes in assets and liabilities:
Tuition receivable, net ................................................. (11,013) (11,318)
Other current assets .................................................... (444) (762)
Restricted cash ......................................................... (500) --
Other assets ............................................................ (57) 25
Accounts payable ........................................................ 858 1,275
Accrued expenses ........................................................ 401 (344)
Income taxes payable .................................................... (2,638) 6,271
Unearned tuition ........................................................ 13,086 12,807
Student loans originated ..................................................... (6,460) (1,088)
Collections on student loans receivable and held for sale .................... 6,100 1,235
-------- --------
Net cash provided by operating activities ........................... 23,571 40,221
-------- --------
Cash flows from investing activities:
Proceeds from sale of property and equipment ................................ 5,150 --
Proceeds from sale of marketable equipment .................................. 26,135 --
Purchases of property and equipment ......................................... (4,349) (7,998)
Purchases of marketable securities .......................................... (34,000) --
-------- --------
Net cash used in investing activities ............................... (7,064) (7,998)
-------- --------
Cash flows from financing activities:
Deferred lease incentives ................................................... 11 582
Common stock dividends paid ................................................. (2,080) (2,564)
Preferred stock dividends paid .............................................. (2,445) (1,684)
Repurchase of Common Stock .................................................. -- (36,772)
Proceeds from exercise of stock options ..................................... 2,807 11,949
-------- --------
Net cash used in financing activities ............................... (1,707) (28,489)
-------- --------
Net increase in cash and cash equivalents ........................... 14,800 3,734
Cash and cash equivalents - beginning of period ................................ 49,135 82,089
-------- --------
Cash and cash equivalents - end of period ...................................... $ 63,935 $ 85,823
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