0000950123-11-042989.txt : 20110502
0000950123-11-042989.hdr.sgml : 20110502
20110502164329
ACCESSION NUMBER: 0000950123-11-042989
CONFORMED SUBMISSION TYPE: 10-Q
PUBLIC DOCUMENT COUNT: 12
CONFORMED PERIOD OF REPORT: 20110331
FILED AS OF DATE: 20110502
DATE AS OF CHANGE: 20110502
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: STRAYER EDUCATION INC
CENTRAL INDEX KEY: 0001013934
STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EDUCATIONAL SERVICES [8200]
IRS NUMBER: 521975978
STATE OF INCORPORATION: MD
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-Q
SEC ACT: 1934 Act
SEC FILE NUMBER: 000-21039
FILM NUMBER: 11801349
BUSINESS ADDRESS:
STREET 1: 2303 DULLES STATION BOULEVARD
CITY: HERNDON
STATE: VA
ZIP: 20171
BUSINESS PHONE: 703-561-1600
MAIL ADDRESS:
STREET 1: 2303 DULLES STATION BOULEVARD
CITY: HERNDON
STATE: VA
ZIP: 20171
10-Q
1
w82126e10vq.htm
FORM 10-Q
e10vq
Quarterly Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 2011
Commission File No. 0-21039
Strayer Education, Inc.
(Exact name of registrant as specified in this charter)
Maryland
52-1975978
(State or other jurisdiction of incorporation or
organization)
(I.R.S. Employer Identification
No.)
2303 Dulles Station Boulevard
Herndon, VA
20171
(Address of principal executive offices)
(Zip Code)
Registrants telephone
number, including area code: (703) 561-1600
Indicate by check mark whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and
(2) has been subject to such filing requirements for the past 90 days.
Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files). Yes
þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer,
a non-accelerated filer or a smaller reporting company. See definitions of large accelerated
filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
(check one)
Large accelerated filer þ
Accelerated filer o
Non-accelerated filer o
Smaller reporting company o
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act). Yes o No þ
As of April 15, 2011, there were outstanding 12,242,406 shares of Common Stock, par value $0.01
per share, of the Registrant.
Marketable securities available for sale, at fair value
12,386
Tuition receivable, net of allowances for doubtful accounts of $7,935
and $6,783 at December 31, 2010 and March 31, 2011, respectively
22,011
25,711
Other current assets
10,231
11,415
Total current assets
108,735
108,220
Property and equipment, net
116,063
118,957
Deferred income taxes
8,374
7,768
Restricted cash
500
500
Other assets
1,506
2,172
Total assets
$
235,178
$
237,617
LIABILITIES & STOCKHOLDERS EQUITY
Current liabilities:
Accounts payable
$
31,280
$
27,107
Accrued expenses
10,512
5,732
Income taxes payable
934
22,715
Unearned tuition
3,523
15,331
Other current liabilities
281
281
Total current liabilities
46,530
71,166
Revolving credit facility
80,000
Long-term liabilities
12,644
13,148
Total liabilities
59,174
164,314
Commitments and contingencies
Stockholders equity:
Common stock, par value $0.01; 20,000,000 shares authorized;
13,316,822 and 12,446,489 shares issued and outstanding as of
December 31, 2010 and March 31, 2011, respectively
133
124
Additional paid-in capital
1,206
Retained earnings
174,625
73,179
Accumulated other comprehensive income
40
Total stockholders equity
176,004
73,303
Total liabilities and stockholders equity
$
235,178
$
237,617
The accompanying notes are an integral part of these condensed consolidated financial statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Information as of March 31, 2010 and 2011 is unaudited.
1. Nature of Operations
Strayer Education, Inc. (the Company), a Maryland corporation, conducts its operations through
its wholly owned subsidiary, Strayer University (the University). The University is an accredited
institution of higher education that provides undergraduate and graduate degrees in various fields
of study through 89 campuses (including three campuses opened for the 2011 winter term and two
opened for the 2011 spring term) in Alabama, Arkansas, Delaware, Florida, Georgia, Indiana,
Kentucky, Louisiana, Maryland, Mississippi, New Jersey, North Carolina, Ohio, Pennsylvania, South
Carolina, Tennessee, Texas, Utah, Virginia, West Virginia, Wisconsin and Washington, D.C., and
online. With the Companys focus on the student, regardless of whether he or she chooses to take
classes at a physical campus or online, it has only one reporting segment.
2. Significant Accounting Policies
The consolidated financial statements include the accounts of the Company and its subsidiaries, the
University and Education Loan Processing, Inc. The University is the only subsidiary that is
currently active. All inter-company accounts and transactions have been eliminated in the
consolidated financial statements.
All information as of December 31, 2010 and March 31, 2010 and 2011, and for the three months ended
March 31, 2010 and 2011 is unaudited but, in the opinion of management, contains all adjustments,
consisting only of normal recurring adjustments, necessary to present fairly the condensed
consolidated financial position, results of operations and cash flows of the Company. Certain
information and footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or omitted. These
condensed consolidated financial statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the Companys Annual Report on Form 10-K for the
fiscal year ended December 31, 2010. The results of operations for the three months ended March
31, 2011 are not necessarily indicative of the results to be expected for the full fiscal year.
The Companys educational programs are offered on a quarterly basis. Approximately 98% of the
Companys revenues during the three months ended March 31, 2011 consisted of tuition revenue.
Tuition revenue is recognized in the quarter of instruction. Tuition revenue is shown net of any
refunds, withdrawals, corporate discounts, scholarships and employee tuition discounts. At the
start of each academic term, a liability (unearned tuition) is recorded for academic services to be
provided and a tuition receivable is recorded for the portion of the tuition not paid upfront in
cash. Any cash received prior to the start of an academic term is also recorded as unearned
tuition. Revenues also include application fees, placement test fees, withdrawal fees,
textbook-related income and other income, which are recognized when incurred.
Effective during the first quarter of 2011, the Company made changes in its presentation of
operating expenses and reclassified prior periods to conform to the current presentation. The
Company determined that these changes would provide more meaningful information and increased
transparency of its operations. There were no changes to total operating expenses or operating
income as a result of these reclassifications. Below is a description of the nature of the costs
included in the Companys operating expense categories.
Instruction and educational support expenses generally contain items of expense directly
attributable to educational activities of the University. This expense category includes salaries
and benefits of faculty and academic administrators, as well as administrative personnel who
support and serve student interests. Instruction and educational support expenses also include
costs of educational supplies and facilities, including rent for campus facilities, certain costs
of establishing and maintaining computer laboratories and all other physical plant and occupancy
costs, with the exception of costs attributable to the corporate offices. Bad debt expense
incurred on delinquent student account balances is also included in instruction and educational
support expenses.
Marketing expenses include the costs of advertising and production of marketing materials, and
related personnel costs.
Admissions advisory expenses include salaries, benefits, and related costs of personnel engaged in
admissions.
General and administration expenses include salaries and benefits of management and employees
engaged in accounting, human resources, legal, regulatory compliance, and other corporate
functions, along with the occupancy and other related costs attributable to such functions.
The
following table presents the Companys operating expenses as previously reported and as reclassified on
its unaudited condensed consolidated statements of income for the three months ended:
March 31, 2010
June 30, 2010
September 30, 2010
December 31, 2010
As
As
As
As
As
As
As
As
Reported
Reclassified
Reported
Reclassified
Reported
Reclassified
Reported
Reclassified
Instruction and
educational support
$
48,977
$
63,384
$
50,101
$
66,261
$
49,023
$
65,759
$
57,111
$
74,153
Marketing (1)
24,745
13,851
24,882
14,461
34,735
23,621
29,802
18,337
Admissions advisory
6,049
6,061
6,583
6,584
General and
administrative
24,253
14,691
25,609
13,809
25,590
13,385
26,133
13,972
$
97,975
$
97,975
$
100,592
$
100,592
$
109,348
$
109,348
$
113,046
$
113,046
(1)
This line item was labeled Marketing and admissions expense on an as reported basis in 2010. Marketing and admissions expenses related to student
support services were reclassified to Instruction and educational support expense, those related to admissions
were reclassified to Admissions advisory expense, and those related
to corporate overhead were reclassified to General and administrative
expense.
Change in accounting principle
Effective during the first quarter of 2011, the Company changed its presentation of tuition
receivable and unearned tuition in its consolidated balance sheets. The Company believes that this
change is preferable because it improves the comparability of results with others in the
educational services industry and provides more transparency of its operations. Prior to the
change, the Company recorded tuition receivable and unearned tuition upon a students registration.
Effective with this change, the Company records tuition receivable and unearned
tuition for its students upon the start of the academic term. Therefore, at the end of the quarter
(and academic term), tuition receivable represents amounts due from students for educational
services already provided and unearned tuition represents advance payments from students for
academic services to be provided in the future. This change has been reported retrospectively for
all periods presented and had no impact on income from operations, net income, earnings per share,
working capital, retained earnings, stockholders equity or on net cash provided by operating
activities. This change did not affect the Companys revenue
recognition policies.
All prior period amounts have been reclassified to conform to the current period presentation.
3. Earnings Per Share
Basic earnings per share is computed by dividing net income by the weighted average number of
shares of common stock outstanding during the periods. Diluted earnings per share reflects the
potential dilution that could occur assuming vesting, conversion or exercise of all dilutive
unexercised stock options and restricted stock. The dilutive effect of stock options was
determined using the treasury stock method. Stock options are not included in the computation of
diluted earnings per share when the stock option exercise price of an individual grant exceeds the
average market price for the period. At March 31, 2010 and 2011, all issued and outstanding stock
options were included in the calculation.
Set forth below is a reconciliation of shares used to compute earnings per share (in thousands):
For the three months
ended March 31,
2010
2011
Weighted average shares outstanding used to compute basic
earnings per share
13,596
12,744
Incremental shares issuable upon the assumed exercise of stock
options
41
18
Unvested restricted stock
92
32
Shares used to compute diluted earnings per share
13,729
12,794
4. Revolving Credit Facility
The Company is party to a Revolving Credit Agreement dated as of January 3, 2011. The maximum
amount of borrowings available under the Revolving Credit Facility is $100 million, including a
letter of credit subfacility of $50 million. The Revolving Credit Facility matures in three years.
Borrowings under the Revolving Credit Facility bear interest at LIBOR or a base rate plus 1.75%,
although higher margins up to 2.25% may apply based on the Companys then ratio of consolidated
total debt to EBITDA (earnings before interest, taxes, depreciation and amortization, and other
non-cash charges). Unused portions of the Revolving Credit Facility carry an annual availability
fee of 0.30%, which may increase to 0.40% based on the Companys then ratio of consolidated total
debt to EBITDA. The Revolving Credit Facility contains customary affirmative, negative and
financial maintenance covenants, representations, warranties, events of default and remedies upon
default including acceleration, and borrowing
conditions. Management believes the Company was in
compliance with these covenants at March 31, 2011. As of March 31, 2011, the Company had
outstanding debt of $80 million. On April 4, 2011, the Company entered into an Amended and
Restated Revolving Credit and Term Loan Agreement with maximum amount of borrowings of $200 million
(see Note 9 below).
5. Stockholders Equity
Authorized stock
The Company has authorized 20,000,000 shares of common stock, par value $0.01, of which 13,316,822
and 12,446,489 shares were issued and outstanding as of December 31, 2010 and March 31, 2011,
respectively. The Company also has authorized 8,000,000 shares of preferred stock, none of which
has been issued or outstanding since 2004. Commencing in the fourth quarter of 2010, the Company
increased the annual cash dividend from $3.00 to $4.00 per share, or from $0.75 to $1.00 per share
quarterly.
Stock-based compensation
As required by the Stock Compensation Topic, ASC 718, the Company measures and recognizes
compensation expense for all share-based payment awards made to employees and directors, including
employee stock options and employee stock purchases related to the Companys Employee Stock
Purchase Plan, based on estimated fair values. Stock-based compensation expense recognized in the
Condensed Consolidated Statements of Income for the three months ended March 31, 2010 and 2011 is
based on awards ultimately expected to vest and, therefore, has been adjusted for estimated
forfeitures. The Company is required to estimate forfeitures at the time of grant and revise, if
necessary, the estimate in subsequent periods if actual forfeitures differ from those estimates.
The forfeiture rate used is based on historical experience.
Stock-based compensation plans
A total of 3,000,000 shares have been approved by the Companys stockholders for grants under the
Companys 1996 equity compensation plan (the Plan). The Plan provides for the granting of stock
options intended to qualify as incentive stock options and also provides for the grant of
non-qualifying options and restricted stock to employees, officers and directors of the Company at
the discretion of the Board of Directors. Vesting provisions are at the discretion of the Board of
Directors. Options may be granted at option prices based at or above the fair market value of the
shares at the date of grant. The maximum term of the options granted under the Plan is ten years.
On April 26, 2011, the Companys stockholders approved the
adoption of the Companys 2011 Equity Compensation
Plan (See Note 9 below).
In February 2011, the Companys Board of Directors approved grants of 67,798 shares of restricted
stock to officers and other certain employees pursuant to the Companys existing annual equity
compensation program. These shares vest over a three year period. The Companys stock price
closed at $132.23 on the date of these restricted stock grants.
In April 2011, the Company awarded a total of 7,070 shares of restricted stock to various
non-employee members of the Companys Board of Directors, as part of the Companys annual
director
compensation program. The Companys stock price closed at
$118.80 on the date of these restricted
stock grants.
The table below sets forth the restricted stock activity for the three months ended March 31, 2011:
Weighted-
Number of
shares
average grant
price
Balance, December 31, 2010
341,440
$
204.89
Grants
67,798
$
132.23
Vested shares
(14,630
)
$
162.10
Forfeitures
(1,946
)
$
209.98
Balance, March 31, 2011
392,662
$
193.84
At March 31, 2011, total stock-based compensation cost which has not yet been recognized was
$54.3 million, all for unvested restricted stock. This cost is expected to be recognized over the
next 68 months on a weighted-average basis. Excluding the February 2009 grant of 183,680 shares to
the Companys Chief Executive Officer, which vest on February 10, 2019, the remaining costs are
expected to be recognized over the next 32 months on a weighted-average basis.
The table below sets forth the stock option activity for the three months ended March 31, 2011 and
other stock option information at March 31, 2011:
Weighted-
Number of
Weighted-
average
shares
average
remaining
Aggregate intrinsic
underlying
exercise
contractual life
value(1) (in
options
price
(yrs.)
thousands)
Balance, December 31, 2010
100,000
$
107.28
2.1
$
4,494
Grants
Exercises
Forfeitures
Balance, March 31, 2011
100,000
$
107.28
1.8
$
2,321
Vested, March 31, 2011
100,000
1.8
$
2,321
Exercisable, March 31, 2011
100,000
1.8
$
2,321
(1)
The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value
(the difference between the Companys closing stock price on the respective trading day and
the exercise price, multiplied by the number of in-the-money options) that would have been
received by the option holders had all option holders exercised their options on the
respective trading day. The amount of aggregate intrinsic value will change based on the fair
market value of the Companys common stock.
The following table summarizes information regarding all share-based payment arrangements for
the three months ended March 31, 2010 and 2011 (in thousands):
For the three months ended
March 31,
2010
2011
Proceeds from stock options exercised
$
452
$
Excess tax benefits (shortfall) related to exercise of stock
options and vesting of restricted stock
$
1,581
$
(933
)
Intrinsic value of stock options exercised (1)
$
1,184
$
(1)
Intrinsic value of stock options exercised is estimated by taking the difference between the
Companys closing stock price on the date of exercise and the exercise price, multiplied by
the number of options exercised for each option holder and then aggregated.
Valuation and Expense Information Under Stock Compensation Topic ASC 718
The following table summarizes the stock-based compensation expense recorded for the three months
ended March 31, 2010 and 2011 by expense line item (in thousands):
For the three months
ended March 31,
2010
2011
Instruction and educational support
$
615
$
852
Marketing
22
16
Admissions advisory
General and administration
2,422
2,024
Stock-based compensation expense included in operating expense
3,059
2,892
Tax benefit
1,209
1,142
Stock-based compensation expense, net of tax
$
1,850
$
1,750
6. Long-Term Liabilities
Lease Incentives
In conjunction with the opening of new campuses and the renovating of existing ones, the Company,
in some instances, was reimbursed by the lessors for improvements made to the leased properties. In
accordance with the Operating Leases Subtopic, ASC 840-20, these improvements were capitalized as
leasehold improvements and a long-term liability was established for the reimbursements. The
leasehold improvements and the long-term liability are amortized on a straight-line basis over the
corresponding lease terms, which range from five to ten years. As of December 31, 2010 and March
31, 2011, the Company had deferred lease incentives of $3.2 million and $3.1 million, respectively.
Deferred Rent
In accordance with ASC 840-20, the Company records rent expense on a straight-line basis over the
initial term of a lease. The difference between the rent payment and the straight-line rent
expense is recorded as a long-term liability. As of December 31, 2010 and March 31, 2011, the
Company had deferred rent associated with its lease obligations of $7.9 million and $8.6 million,
respectively.
Sale of Campus Building and Deferred Gain
In conjunction with the sale and lease back of its Loudoun, Virginia campus building in June 2007,
the Company realized a gain of $2.8 million before tax, which is deferred and recognized over the
10-year lease term. The non-current portion of this gain, which is recorded as a long-term
liability, was $1.5 million and $1.4 million, at December 31, 2010 and March 31, 2011,
respectively.
The Fair Value Measurements and Disclosures Topic, ASC 740, requires the Company to determine
whether uncertain tax positions should be recognized within the Companys financial statements. As
a result of the implementation of ASC 740, no material adjustment in the liability for unrecognized
income tax benefits was recognized. The amount of unrecognized tax benefits at the adoption date
of January 1, 2007 and at March 31, 2011 is immaterial. The Company recognizes interest and
penalties related to uncertain tax positions in income tax expense. As of March 31, 2011, the
amount of accrued interest related to uncertain tax positions was immaterial. The tax years
2008-2010 remain open to examination by the major taxing jurisdictions in which the Company is
subject.
8. Litigation
From time to time, the Company is involved in litigation and other legal proceedings arising out of
the ordinary course of its business. On October 15, 2010, a putative securities class action was
filed in the United States District Court for the Middle District of Florida. On April 19, 2011,
the Company filed a motion to dismiss the complaint. On January 3, 2011, a shareholder derivative
complaint was filed in Florida state court in Hillsborough County, Florida. On or about March 29,
2011, the plaintiff and Strayer jointly submitted to the Florida state court a stipulation
recognizing that Fairfax, Virginia is a more appropriate forum for this litigation. On April 4,
2011, plaintiff filed a complaint in the Circuit Court of Fairfax County. The Company believes
these lawsuits are without merit and will contest them vigorously. While the outcome of any legal
proceeding cannot be predicted with certainty, the Company does not expect these matters will have
a material effect on its financial condition or results of operations.
9. Subsequent Events
Revolving Credit Facility and Term Loan Agreement
On April 4, 2011, the Company entered into an Amended and Restated Revolving Credit and Term Loan
Agreement (the Credit Facility) providing for a $100.0 million revolving credit facility and a
$100.0 million term loan facility. The revolving portion of the Credit Facility, which includes a
letter of credit subfacility of $50.0 million, matures on March 31, 2014, and amends and subsumes
(as part of the new facility) the Companys existing $100.0 million revolving credit agreement. The
term loan portion of the Credit Facility matures on March 31, 2014, and, commencing December 31,
2011, includes required quarterly amortization payments in the amount of $2.5 million on December
31, 2011, $5.0 million on March 31, 2012, and $7.5 million on June 30, 2012, and at the end of each
quarter thereafter prior to the final maturity date.
Borrowings under the Credit Facility bear interest at LIBOR or a base rate plus a margin ranging
from 2.25% to 2.75%, depending on the Companys leverage ratio. For the $100.0 million term loan
facility, the Company entered into an interest rate swap arrangement that fixes its interest rate
on the term loan facility at approximately 3.6% rather than being subject to fluctuations in the
LIBOR rate. In addition, an unused commitment fee ranging from 0.30% to 0.40%, depending on the
Companys leverage ratio, accrues on unused amounts under the revolving credit facility. The Credit
Facility contains customary affirmative, negative and
financial maintenance covenants,
representations, warranties, events of default and remedies
upon default, including acceleration and rights to foreclose on the collateral securing the Credit
Facility.
The Credit Facility is secured by substantially all of the personal property assets of the Company
and its subsidiaries.
2011 Equity Compensation Plan
On April 26, 2011, the Companys stockholders approved the Strayer Education, Inc. 2011 Equity
Compensation Plan which increased the number of shares available for issuance as equity
compensation by 300,000 shares.
Certain of the statements included in this Managements Discussion and Analysis of Financial
Condition and Results of Operations as well as elsewhere in this report on Form 10-Q are
forward-looking statements made pursuant to the Private Securities Litigation Reform Act of 1995
(Reform Act). Such statements may be identified by the use of words such as expect,
estimate, assume, believe, anticipate, will, forecast, plan, project, or similar
words. These statements are based on the Companys current expectations and are subject to a
number of assumptions, risks and uncertainties. In accordance with the safe harbor provisions of
the Reform Act, the Company has identified important factors that could cause the actual results to
differ materially from those expressed in or implied by such statements. The assumptions,
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 regional
accreditation standards and state regulatory requirements, rulemaking by the Department of
Education and increased focus by the U. S. Congress on for-profit education institutions,
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 relating to the timing of
regulatory approvals, our ability to continue to implement our growth strategy, risks associated
with the ability of our students to finance their education in a timely manner, and general
economic and market conditions. Further information about these and other relevant risks and
uncertainties may be found in the Companys annual report on Form 10-K and its other filings with
the Securities and Exchange Commission. The Company undertakes no obligation to update or revise
forward looking statements, except as may be required by law.
Additional Information
We maintain a website at http://www.strayereducation.com. The information on our website is not
incorporated by reference in this Quarterly Report on Form 10-Q and our web address is included as
an inactive textual reference only. We make available, free of charge through our website, our
Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and
amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange
Act as soon as reasonably practicable after we electronically file such material with, or furnish
it to, the SEC.
Results of Operations
In the first quarter of 2011, we generated $172.0 million in revenue, an increase of 9% compared to
the same period in 2010, as a result of enrollment growth of 4% and a 5% tuition increase at the
beginning of 2011. Income from operations was $59.2 million for the first quarter of 2011, a
decrease of 1% compared to the same period in 2010. Net income was $35.8 million in the first
quarter of 2011, a decrease of 2% compared to the same period in 2010. Diluted earnings per share
was $2.80 in the first quarter of 2011 compared to $2.65 in the same period in 2010, an increase of
6%, reflecting a lower share count due to share repurchases.
Three Months Ended March 31, 2011 Compared to Three Months Ended March 31, 2010
Enrollment. Enrollment at Strayer University for the 2011 winter term, which began January 11,
2011 and ended March 29, 2011, increased 4% to 57,608 students compared to 55,106 students for the
same term in 2010. Across the Strayer University campus and online system, new student enrollments
decreased approximately 20% and continuing student enrollments increased approximately 10%. Global
online enrollments increased 10%, while students taking 100% of their classes online (including
campus based students) was essentially unchanged.
Revenues. Revenues increased 9% to $172.0 million in the first quarter of 2011 from $157.9 million
in the first quarter of 2010, principally due to a 4% increase in enrollment and a 5% tuition
increase at the beginning of 2011.
Instruction and educational support expenses. Instruction and educational support expenses
increased $11.6 million, or 18%, to $75.0 million in the first quarter of 2011 from $63.4 million
in the first quarter of 2010. This increase was principally due to direct costs necessary to
support the increase in student enrollments and new campuses, including faculty and related
academic staff compensation, campus facility costs, and bad debt expense, which increased $6.5
million, $1.7 million, and $1.0 million, respectively. Instruction and educational support
expenses as a percentage of revenues increased to 43.6% in the first quarter of 2011 from 40.1% in
the first quarter of 2010, largely due to faculty and facility costs growing at a higher rate than
tuition revenue.
Marketing expenses. Marketing expenses increased $2.1 million, or 16%, to $16.0 million in the
first quarter of 2011 from $13.9 million in the first quarter of 2010. This increase was
principally due to the direct costs required to build the Strayer University brand and attract
prospective students. Marketing expenses as a percentage of revenues increased to 9.3% in the
first quarter of 2011 from 8.8% in the first quarter of 2010.
Admissions advisory expenses. Admissions advisory expenses increased $1.2 million, or 19% to $7.2
million in the first quarter of 2011 from $6.0 million in the first quarter of 2010. This increase
was principally due to the addition of admissions personnel, particularly at new campuses.
Admissions advisory expenses as a percentage of revenues increased to 4.2% in the first quarter of
2011 from 3.8% in the first quarter of 2010.
General and administration expenses. General and administration expenses decreased $0.2 million, or
1%, to $14.5 million in the first quarter of 2011 from $14.7 million in the first quarter of 2010.
General and administration expenses as a percentage of revenues decreased to 8.4% in the first
quarter of 2011 from 9.3% in the first quarter of 2010 as employee compensation grew at a slower
rate than revenues.
Income from operations. Income from operations decreased $0.7 million, or 1%, to $59.2 million in
the first quarter of 2011 from $59.9 million in the first quarter of 2010, due to the
aforementioned factors.
Investment income. Investment income decreased $0.1 million to $0.1 million in the first quarter of
2011 from $0.2 million in the first quarter of 2010. The decrease was principally due to a lower
average cash balance and lower investment yields, partly offset by a gain on sale of marketable
securities.
Interest expense. Interest expense increased to $0.2 million due to borrowings against the new
revolving credit facility. There were no borrowings in the first quarter of 2010.
Provision for income taxes. Income tax expense decreased $0.4 million, or 2%, to $23.4 million in
the first quarter of 2011 from $23.8 million in the first quarter of 2010, primarily due to the
decrease in income before taxes attributable to the factors discussed above. Our effective tax
rate was 39.5% for each of the first quarters of 2010 and 2011.
Net income. Net income decreased $0.6 million, or 2%, to $35.8 million in the first quarter of 2011
from $36.4 million in the first quarter of 2010, because of the factors discussed above.
Liquidity and Capital Resources
At March 31, 2011, we had cash and cash equivalents of $71.1 million compared to $76.5 million at
December 31, 2010, and $144.0 million at March 31, 2010. At March 31, 2011, most of our excess
cash was invested in both taxable and tax-exempt money market funds.
On January 3, 2011, we entered into an unsecured new revolving credit facility with
maximum amount of borrowings available of $100 million and a three year term. At March 31, 2011,
we had $80 million outstanding under this facility. On April 4, 2011, we entered
into an amended and restated revolving credit and term loan agreement. This credit facility, which
is secured by our assets, provides for a $100 million revolving credit facility
and $100 million term loan facility with a maturity date of March 31, 2014. Proceeds from the term loan
were used to pay off the $80 million outstanding at March 31, 2011 under the original revolving
credit facility.
For the three months ended March 31, 2011, we reported $67.2 million net cash from operating
activities compared to $63.1 million for the same period in 2010. Capital expenditures were
$11.4 million for the quarter ended March 31, 2011 compared to $12.2 million for the same period in
2010. During the quarter ended March 31, 2011, we paid a regular, quarterly common stock dividend
of $13.2 million ($1.00 per share). During the three months ended March 31, 2011, we invested
$127.2 million to repurchase approximately 936,000 shares of common stock at an average price of
$135.91 per share as part of a previously announced common stock repurchase authorization. Our
remaining authorization for common stock repurchases was approximately $80.5 million at March 31,
2011.
In the first quarter of 2011, bad debt expense as a percentage of revenues was 3.5% compared to
3.2% for the same period in 2010. Days sales outstanding was 13 days at the end of the first
quarter of 2011 compared to 12 days at the end of the first quarter of 2010.
Currently, we invest our cash in bank overnight deposits and money market funds. In addition,
effective April 4, 2011, we have available a $100 million revolving credit facility. We believe that existing cash and cash equivalents, cash generated from
operating activities, and if necessary, cash borrowed under the revolving credit facility, will be
sufficient to meet our requirements for at least the next 12 months.
The table below sets forth our contractual commitments, including our revolving credit facility, as
of March 31, 2011. Although they have historically been paid, dividends are not a contractual
commitment and, therefore, have been excluded from this table.
We have a total of 89 campuses (including three new campuses opened for the 2011 winter term and
two new campuses opened for the 2011 spring term) in Alabama, Arkansas, Delaware, Florida, Georgia,
Indiana, Kentucky, Louisiana, Maryland, Mississippi, New Jersey, North Carolina, Ohio,
Pennsylvania, South Carolina, Tennessee, Texas, Utah, Virginia, West Virginia, Wisconsin, and
Washington, D.C. We plan to open a total of eight new campuses in 2011, including the five that
have already been opened.
Program Review Update
On March 25, 2011, the Company received a preliminary program review report from the Department of
Education indicating its position that Strayer Universitys Associate in Arts in General Studies
program is not an eligible program under Title IV of the Higher Education Act of 1965. The Company
disagrees with this preliminary finding and is communicating with the Department to resolve the
matter.
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
The Company is subject to the impact of interest rate changes. The Company invests its excess cash
in bank overnight deposits and money market funds. Earnings from investments in bank overnight
deposits and money market mutual funds may be adversely affected in the future should interest
rates change. The Companys future investment income may fall short of expectations due to changes
in interest rates or the Company may suffer losses in principal if forced to sell securities that
have declined in market value due to changes in interest rates. As of March 31, 2011, a 1%
increase or decrease in interest rates would not have a material impact on the Companys future
earnings, fair values, or cash flows related to investments in cash equivalents or interest earning
marketable securities.
Changing interest rates could also have a negative impact on the amount of interest expense the
Company incurs. On April 4, 2011, the Company entered into a three year Amended and Restated
Revolving Credit and Term Loan Agreement providing for $100 million revolving credit facility and
$100 million term loan facility, of which the Company has
borrowed $100 million. Borrowings under the $100 million credit facility bear interest
at LIBOR or a base rate plus a margin ranging from 2.25% to 2.75%, depending on the Companys
leverage ratio. Also on April 4, 2011, the Company entered into an interest rate swap arrangement
for the $100 million term loan facility that fixes its interest rate on the term loan facility at
approximately 3.6% for the duration of the term loan. Although an increase in LIBOR would not
affect interest expense on the term loan, it would affect interest expense on any outstanding
balance of the revolving credit facility. For every 100 basis points increase in LIBOR, the
Company would incur an incremental $1.0 million in interest expense per year assuming the entire
$100 million revolving credit facility were utilized.
Disclosure Controls and Procedures. The Companys Chief Executive Officer and Chief Financial
Officer have evaluated the effectiveness of the Companys disclosure controls and procedures
as of March 31, 2011. Based upon such review, the Chief Executive Officer and Chief Financial
Officer have concluded that the Company has in place, as of March 31, 2011, effective controls
and procedures designed to ensure that information required to be disclosed by the Company
(including consolidated subsidiaries) in the reports it files or submits under the Securities
Exchange Act of 1934, as amended, and the rules thereunder, is recorded, processed, summarized
and reported within the time periods specified in the Commissions rules and forms.
Disclosure controls and procedures include, without limitation, controls and procedures
designed to ensure that information required to be disclosed by an issuer in reports it files
or submits under the Securities Exchange Act is accumulated and communicated to the Companys
management, including its principal executive officer or officers and principal financial
officer or officers, or persons performing similar functions, as appropriate to allow timely
decisions regarding required disclosure.
b)
Internal Control Over Financial Reporting. There have not been any changes in the Companys
internal control over financial reporting during the quarter ended March 31, 2011 that have
materially affected, or are reasonably likely to materially affect, the Companys internal
control over financial reporting.
PART II OTHER INFORMATION
Item 1.
Legal Proceedings.
From time to time, the Company is involved in litigation and other legal proceedings
arising out of the ordinary course of its business. On October 15, 2010, a putative
securities class action styled Kinnett v. Strayer Education, Inc., et al., was filed in
the United States District Court for the Middle District of Florida. On April 19, 2011,
the Company filed a motion to dismiss the complaint. On January 3, 2011, a shareholder
derivative complaint styled Vakharloskaya v. Silberman et al., was filed in Florida
state court in Hillsborough County, Florida. On or about March 29, 2011, the plaintiff
and Strayer jointly submitted to the Florida state court a stipulation recognizing that
Fairfax, Virginia is a more appropriate forum for this litigation. On April 4, 2011,
plaintiff filed a complaint in the Circuit Court of Fairfax County. The Company
believes these lawsuits to be without merit and will contest them vigorously. While the
outcome of any legal proceedings cannot be predicted with certainty, the Company does
not presently expect that this matter will have a material effect on its financial
condition or results of operations.
Item 1A.
Risk Factors
You should carefully consider the factors discussed in Part I, Item 1A. Risk Factors
in our Annual Report on Form 10-K for the year ended December 31, 2010, which could
materially affect our business. There have been no material changes to the risk factors
previously described in Part I, Item 1A included in the
Companys Annual Report on Form
10-K for the year ended December 31, 2010.
Those risks are incorporated herein by this reference. The risks described in our Annual
Report on Form 10-K are not the only risks facing our Company. Additional risks and
uncertainties not currently known to us or that we currently deem to be immaterial also
may materially adversely affect our business.
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds.
During the three months ended March 31, 2011, the Company invested $127.2 million to
repurchase shares of common stock under its repurchase program.(1) The
Companys remaining authorization for common stock repurchases was $80.5 million at
March 31, 2011 for use during the remainder of 2011. A summary of the Companys share
repurchases during the quarter is set forth below:
Approximate
dollar value of
shares that
Total number of
may yet be
Total
shares purchased
purchased
number of
Average
as part of publicly
under the plans
shares
price paid
announced plans
or programs
purchased
per share
or programs
($ mil)
Beginning Balance (at 12/31/10)
$
107.7
January
38,057
$
118.76
38,057
$
100.2
February
123,175
129.86
123,175
$
187.2
March
774,953
137.71
774,953
$
80.5
Total (at 3/31/11)
936,185
$
135.91
936,185
$
80.5
(1)
The Companys repurchase program was announced on November 3, 2003 for repurchases up to an
aggregate amount of $15 million in value of common stock through December 31, 2004. The Board of
Directors amended the program on various dates increasing the amount authorized and extending the
expiration date, including on February 15, 2011 when the Board of Directors increased the amount
authorized by an additional $100.0 million for 2011.
Item 3.
Defaults Upon Senior Securities.
None
Item 4.
[Removed and Reserved]
Item 5.
Other Information.
None
Item 6.
Exhibits.
10.1
Amended and Restated Revolving Credit and Term Loan Agreement, dated April 4, 2011, among
the Company, SunTrust Bank, as Administrative Agent, and the other lenders and agents party
thereto (incorporated by reference to Exhibit 10.1 of the Companys Current Report on Form 8-K
filed with the Commission on April 5, 2011).
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized.
Amended and Restated Revolving Credit and Term Loan Agreement, dated April 4, 2011, among the
Company, SunTrust Bank, as Administrative Agent, and the other lenders and agents party
thereto (incorporated by reference to Exhibit 10.1 of the Companys Current Report on Form 8-K
filed with the Commission on April 5, 2011).
18.1
Preferability Letter from Independent Registered Public Accounting Firm.
31.1
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Act.
31.2
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Act.
32.1
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS
XBRL Instance Document
101.SCH
XBRL Schema Document
101.CAL
XBRL Calculation Linkbase Document
101.LAB
XBRL Labels Linkbase Document
101.PRE
XBRL Presentation Linkbase Document
101.DEF
XBRL Definition Linkbase Document
24
EX-18.1
2
w82126exv18w1.htm
EX-18.1
exv18w1
Exhibit 18.1
April 29, 2011
Board of Directors
Strayer Education, Inc.
2303 Dulles Station Blvd, 6A
Herndon, VA 20171
Dear Directors:
We are providing this letter to you for inclusion as an exhibit to your Form 10-Q filing pursuant
to Item 601 of Regulation S-K.
We have been provided a copy of the Companys Quarterly Report on Form 10-Q for the period ended
March 31, 2011. Note 2 therein describes a change in accounting principle for the presentation of
tuition receivable and the associated unearned tuition. It should be understood that the
preferability of one acceptable method of accounting over another for tuition receivable and
unearned tuition has not been addressed in any authoritative accounting literature, and in
expressing our concurrence below we have relied on managements determination that this change in
accounting principle is preferable. Based on our reading of managements stated reasons and
justification for this change in accounting principle in the Form 10-Q, and our discussions with
management as to their judgment about the relevant business planning factors relating to the
change, we concur with management that such change represents, in the Companys circumstances, the
adoption of a preferable accounting principle in conformity with Accounting Standards Codification
250, Accounting Changes and Error Corrections.
We have not audited any financial statements of the Company as of any date or for any period
subsequent to December 31, 2010. Accordingly, our comments are subject to change upon completion
of an audit of the financial statements covering the period of the accounting change.
Very truly yours,
PricewaterhouseCoopers LLP
EX-31.1
3
w82126exv31w1.htm
EX-31.1
exv31w1
Exhibit 31.1
CERTIFICATIONS
I, Robert S. Silberman, certify that:
1.
I have reviewed this quarterly report on Form 10-Q of Strayer Education, Inc. (the
registrant);
2.
Based on my knowledge, this report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not misleading with respect to the
period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
4.
The registrants other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the period in
which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;
(c)
Evaluated the effectiveness of the registrants disclosure controls and
procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report
based on such evaluation; and
(d)
Disclosed in this report any change in the registrants internal control over
financial reporting that occurred during the registrants most recent fiscal quarter
(the registrants fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrants
internal control over financial reporting; and
5.
The registrants other certifying officer and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to the registrants
auditors and the audit committee of the registrants board of directors (or persons
performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation
of internal control over financial reporting which are reasonably likely to adversely
affect the registrants ability to record, process, summarize and report financial
information; and
(b)
Any fraud, whether or not material, that involves management or other employees
who have a significant role in the registrants internal control over financial
reporting.
Date: May 2, 2011
/s/ Robert S. Silberman
Robert S. Silberman
Chairman and Chief Executive Officer
EX-31.2
4
w82126exv31w2.htm
EX-31.2
exv31w2
Exhibit 31.2
CERTIFICATIONS
I, Mark C. Brown, certify that:
1.
I have reviewed this quarterly report on Form 10-Q of Strayer Education, Inc. (the
registrant);
2.
Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
4.
The registrants other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the period in
which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;
(c)
Evaluated the effectiveness of the registrants disclosure controls and
procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report
based on such evaluation; and
(d)
Disclosed in this report any change in the registrants internal control over
financial reporting that occurred during the registrants most recent fiscal quarter
(the registrants fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrants
internal control over financial reporting; and
5.
The registrants other certifying officer and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to the registrants
auditors and the audit committee of the registrants board of directors (or persons
performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably likely to
adversely affect the registrants ability to record, process, summarize and report
financial information; and
(b)
Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal control over
financial reporting.
Date: May 2, 2011
/s/ Mark C. Brown
Mark C. Brown
Executive Vice President and
Chief Financial Officer
EX-32.1
5
w82126exv32w1.htm
EX-32.1
exv32w1
Exhibit 32.1
CERTIFICATION PURSUANT TO RULE 13b 14(b) OF THE SECURITIES
EXCHANGE ACT AND 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES OXLEY ACT OF 2002
In connection with the Quarterly Report of Strayer Education, Inc. (the Company) on Form
10-Q for the period ended March 31, 2011 as filed with the Securities and Exchange Commission on
the date hereof (the Report), I, Robert S. Silberman, Chairman and Chief Executive Officer of the
Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley
Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the
Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the
financial condition and results of operations of the Company.
/s/ Robert S. Silberman
Robert S. Silberman
Chairman and Chief Executive
Officer
May 2, 2011
EX-32.2
6
w82126exv32w2.htm
EX-32.2
exv32w2
Exhibit 32.2
CERTIFICATION PURSUANT TO RULE 13b 14(b) OF THE SECURITIES
EXCHANGE ACT AND 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES OXLEY ACT OF 2002
In connection with the Quarterly Report of Strayer Education, Inc. (the Company) on Form
10-Q for the period ended March 31, 2011 as filed with the Securities and Exchange Commission on
the date hereof (the Report), I, Mark C. Brown, Executive Vice President and Chief Financial
Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the
Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the
Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the
financial condition and results of operations of the Company.
/s/ Mark C. Brown
Mark C. Brown
Executive Vice President and
Chief Financial Officer
May 2, 2011
EX-101.INS
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<!-- xbrl,ns -->
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<div style="font-family: 'Times New Roman',Times,serif">
<div align="center" style="font-size: 10pt; margin-top: 0pt"><b></b>
</div>
<div align="left">
</div>
<div align="center" style="font-size: 10pt; margin-top: 0pt"><b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>1. Nature of Operations</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Strayer Education, Inc. (the “Company”), a Maryland corporation, conducts its operations through
its wholly owned subsidiary, Strayer University (the “University”). The University is an accredited
institution of higher education that provides undergraduate and graduate degrees in various fields
of study through 89 campuses (including three campuses opened for the 2011 winter term and two
opened for the 2011 spring term) in Alabama, Arkansas, Delaware, Florida, Georgia, Indiana,
Kentucky, Louisiana, Maryland, Mississippi, New Jersey, North Carolina, Ohio, Pennsylvania, South
Carolina, Tennessee, Texas, Utah, Virginia, West Virginia, Wisconsin and Washington, D.C., and
online. With the Company’s focus on the student, regardless of whether he or she chooses to take
classes at a physical campus or online, it has only one reporting segment.
</div>
</div>
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<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>2. Significant Accounting Policies</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The consolidated financial statements include the accounts of the Company and its subsidiaries, the
University and Education Loan Processing, Inc. The University is the only subsidiary that is
currently active. All inter-company accounts and transactions have been eliminated in the
consolidated financial statements.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">All information as of December 31, 2010 and March 31, 2010 and 2011, and for the three months ended
March 31, 2010 and 2011 is unaudited but, in the opinion of management, contains all adjustments,
consisting only of normal recurring adjustments, necessary to present fairly the condensed
consolidated financial position, results of operations and cash flows of the Company. Certain
information and footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or omitted. These
condensed consolidated financial statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the
fiscal year ended December 31, 2010. The results of operations for the three months ended March
31, 2011 are not necessarily indicative of the results to be expected for the full fiscal year.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The Company’s educational programs are offered on a quarterly basis. Approximately 98% of the
Company’s revenues during the three months ended March 31, 2011 consisted of tuition revenue.
Tuition revenue is recognized in the quarter of instruction. Tuition revenue is shown net of any
refunds, withdrawals, corporate discounts, scholarships and employee tuition discounts. At the
start of each academic term, a liability (unearned tuition) is recorded for academic services to be
provided and a tuition receivable is recorded for the portion of the tuition not paid upfront in
cash. Any cash received prior to the start of an academic term is also recorded as unearned
tuition. Revenues also include application fees, placement test fees, withdrawal fees,
textbook-related income and other income, which are recognized when incurred.
</div>
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<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 2%"><i>Financial statement presentation</i>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Effective during the first quarter of 2011, the Company made changes in its presentation of
operating expenses and reclassified prior periods to conform to the current presentation. The
Company determined that these changes would provide more meaningful information and increased
transparency of its operations. There were no changes to total operating expenses or operating
income as a result of these reclassifications. Below is a description of the nature of the costs
included in the Company’s operating expense categories.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Instruction and educational support expenses generally contain items of expense directly
attributable to educational activities of the University. This expense category includes salaries
and benefits of faculty and academic administrators, as well as administrative personnel who
support and serve student interests. Instruction and educational support expenses also include
costs of educational supplies and facilities, including rent for campus facilities, certain costs
of establishing and maintaining computer laboratories and all other physical plant and occupancy
costs, with the exception of costs attributable to the corporate offices. Bad debt expense
incurred on delinquent student account balances is also included in instruction and educational
support expenses.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Marketing expenses include the costs of advertising and production of marketing materials, and
related personnel costs.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Admissions advisory expenses include salaries, benefits, and related costs of personnel engaged in
admissions.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">General and administration expenses include salaries and benefits of management and employees
engaged in accounting, human resources, legal, regulatory compliance, and other corporate
functions, along with the occupancy and other related costs attributable to such functions.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The
following table presents the Company’s operating expenses as previously reported and as reclassified on
its unaudited condensed consolidated statements of income for the three months ended:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="20%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 0px solid #000000">March 31, 2010</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 0px solid #000000">June 30, 2010</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 0px solid #000000">September 30, 2010</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 0px solid #000000">December 31, 2010</td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" style="border-bottom: 0px solid #000000" align="center" colspan="2">As</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" style="border-bottom: 0px solid #000000" align="center" colspan="2">As</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" style="border-bottom: 0px solid #000000" align="center" colspan="2">As</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" style="border-bottom: 0px solid #000000" align="center" colspan="2">As</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" style="border-bottom: 0px solid #000000" align="center" colspan="2">As</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" style="border-bottom: 0px solid #000000" align="center" colspan="2">As</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" style="border-bottom: 0px solid #000000" align="center" colspan="2">As</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" style="border-bottom: 0px solid #000000" align="center" colspan="2">As</td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Reported</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Reclassified</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Reported</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Reclassified</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Reported</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Reclassified</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Reported</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Reclassified</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Instruction and
educational support
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">48,977</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">63,384</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">50,101</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">66,261</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">49,023</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">65,759</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">57,111</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">74,153</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Marketing <sup style="font-size: 85%; vertical-align: text-top">(1)</sup>
</div></td>
<td> </td>
<td> </td>
<td align="right">24,745</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">13,851</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">24,882</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">14,461</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">34,735</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">23,621</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">29,802</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">18,337</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Admissions advisory
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">6,049</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">6,061</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">6,583</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">6,584</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">General and
administrative
</div></td>
<td> </td>
<td> </td>
<td align="right">24,253</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">14,691</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">25,609</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">13,809</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">25,590</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">13,385</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">26,133</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">13,972</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">97,975</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">97,975</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">100,592</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">100,592</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">109,348</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">109,348</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">113,046</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">113,046</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left">
<div style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000"> 
</div>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td width="3%"></td>
<td width="1%"></td>
<td width="96%"></td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(1)</td>
<td> </td>
<td>This line item was labeled Marketing and admissions expense on an “as reported” basis in 2010. Marketing and admissions expenses related to student
support services were reclassified to Instruction and educational support expense, those related to admissions
were reclassified to Admissions advisory expense, and those related
to corporate overhead were reclassified to General and administrative
expense.</td>
</tr>
</table>
<div align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 2%"><i>Change in accounting principle</i>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Effective during the first quarter of 2011, the Company changed its presentation of tuition
receivable and unearned tuition in its consolidated balance sheets. The Company believes that this
change is preferable because it improves the comparability of results with others in the
educational services industry and provides more transparency of its operations. Prior to the
change, the Company recorded tuition receivable and unearned tuition upon a student’s registration.
Effective with this change, the Company records tuition receivable and unearned
tuition for its students upon the start of the academic term. Therefore, at the end of the quarter
(and academic term), tuition receivable represents amounts due from students for educational
services already provided and unearned tuition represents advance payments from students for
academic services to be provided in the future. This change has been reported retrospectively for
all periods presented and had no impact on income from operations, net income, earnings per share,
working capital, retained earnings, stockholders’ equity or on net cash provided by operating
activities. This change did not affect the Company’s revenue
recognition policies.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">All prior period amounts have been reclassified to conform to the current period presentation.
</div>
</div>
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<!-- Begin Block Tagged Note 3 - us-gaap:EarningsPerShareTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>3. Earnings Per Share</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Basic earnings per share is computed by dividing net income by the weighted average number of
shares of common stock outstanding during the periods. Diluted earnings per share reflects the
potential dilution that could occur assuming vesting, conversion or exercise of all dilutive
unexercised stock options and restricted stock. The dilutive effect of stock options was
determined using the treasury stock method. Stock options are not included in the computation of
diluted earnings per share when the stock option exercise price of an individual grant exceeds the
average market price for the period. At March 31, 2010 and 2011, all issued and outstanding stock
options were included in the calculation.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Set forth below is a reconciliation of shares used to compute earnings per share (in thousands):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="76%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6">For the three months</td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">ended March 31,</td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2010</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2011</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Weighted average shares outstanding used to compute basic
earnings per share
</div></td>
<td> </td>
<td> </td>
<td align="right">13,596</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">12,744</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Incremental shares issuable upon the assumed exercise of stock
options
</div></td>
<td> </td>
<td> </td>
<td align="right">41</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">18</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Unvested restricted stock
</div></td>
<td> </td>
<td> </td>
<td align="right">92</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">32</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Shares used to compute diluted earnings per share
</div></td>
<td> </td>
<td> </td>
<td align="right">13,729</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">12,794</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
</div>
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<!-- Begin Block Tagged Note 4 - us-gaap:ScheduleOfLineOfCreditFacilitiesTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>4. Revolving Credit Facility</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The Company is party to a Revolving Credit Agreement dated as of January 3, 2011. The maximum
amount of borrowings available under the Revolving Credit Facility is $100 million, including a
letter of credit subfacility of $50 million. The Revolving Credit Facility matures in three years.
Borrowings under the Revolving Credit Facility bear interest at LIBOR or a base rate plus 1.75%,
although higher margins up to 2.25% may apply based on the Company’s then ratio of consolidated
total debt to EBITDA (earnings before interest, taxes, depreciation and amortization, and other
non-cash charges). Unused portions of the Revolving Credit Facility carry an annual availability
fee of 0.30%, which may increase to 0.40% based on the Company’s then ratio of consolidated total
debt to EBITDA. The Revolving Credit Facility contains customary affirmative, negative and
financial maintenance covenants, representations, warranties, events of default and remedies upon
default including acceleration, and borrowing
conditions. Management believes the Company was in
compliance with these covenants at March 31, 2011. As of March 31, 2011, the Company had
outstanding debt of $80 million. On April 4, 2011, the Company entered into an Amended and
Restated Revolving Credit and Term Loan Agreement with maximum amount of borrowings of $200 million
(see Note 9 below).
</div>
</div>
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<!-- Begin Block Tagged Note 5 - us-gaap:StockholdersEquityNoteDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>5. Stockholders’ Equity</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><i>Authorized stock</i>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The Company has authorized 20,000,000 shares of common stock, par value $0.01, of which 13,316,822
and 12,446,489 shares were issued and outstanding as of December 31, 2010 and March 31, 2011,
respectively. The Company also has authorized 8,000,000 shares of preferred stock, none of which
has been issued or outstanding since 2004. Commencing in the fourth quarter of 2010, the Company
increased the annual cash dividend from $3.00 to $4.00 per share, or from $0.75 to $1.00 per share
quarterly.
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Stock-based compensation</i>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">As required by the Stock Compensation Topic, ASC 718, the Company measures and recognizes
compensation expense for all share-based payment awards made to employees and directors, including
employee stock options and employee stock purchases related to the Company’s Employee Stock
Purchase Plan, based on estimated fair values. Stock-based compensation expense recognized in the
Condensed Consolidated Statements of Income for the three months ended March 31, 2010 and 2011 is
based on awards ultimately expected to vest and, therefore, has been adjusted for estimated
forfeitures. The Company is required to estimate forfeitures at the time of grant and revise, if
necessary, the estimate in subsequent periods if actual forfeitures differ from those estimates.
The forfeiture rate used is based on historical experience.
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Stock-based compensation plans</i>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">A total of 3,000,000 shares have been approved by the Company’s stockholders for grants under the
Company’s 1996 equity compensation plan (the “Plan”). The Plan provides for the granting of stock
options intended to qualify as incentive stock options and also provides for the grant of
non-qualifying options and restricted stock to employees, officers and directors of the Company at
the discretion of the Board of Directors. Vesting provisions are at the discretion of the Board of
Directors. Options may be granted at option prices based at or above the fair market value of the
shares at the date of grant. The maximum term of the options granted under the Plan is ten years.
On April 26, 2011, the Company’s stockholders approved the
adoption of the Company’s 2011 Equity Compensation
Plan (See Note 9 below).
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In February 2011, the Company’s Board of Directors approved grants of 67,798 shares of restricted
stock to officers and other certain employees pursuant to the Company’s existing annual equity
compensation program. These shares vest over a three year period. The Company’s stock price
closed at $132.23 on the date of these restricted stock grants.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In April 2011, the Company awarded a total of 7,070 shares of restricted stock to various
non-employee members of the Company’s Board of Directors, as part of the Company’s annual
director
compensation program. The Company’s stock price closed at
$118.80 on the date of these restricted
stock grants.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The table below sets forth the restricted stock activity for the three months ended March 31, 2011:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="76%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Weighted-</td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Number of<br />
shares</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">average grant <br />
price</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance, December 31, 2010
</div></td>
<td> </td>
<td> </td>
<td align="right">341,440</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">204.89</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Grants
</div></td>
<td> </td>
<td> </td>
<td align="right">67,798</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">132.23</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Vested shares
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(14,630</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td align="left">$</td>
<td align="right">162.10</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Forfeitures
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(1,946</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td align="left">$</td>
<td align="right">209.98</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance, March 31, 2011
</div></td>
<td> </td>
<td> </td>
<td align="right">392,662</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">193.84</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">At March 31, 2011, total stock-based compensation cost which has not yet been recognized was
$54.3 million, all for unvested restricted stock. This cost is expected to be recognized over the
next 68 months on a weighted-average basis. Excluding the February 2009 grant of 183,680 shares to
the Company’s Chief Executive Officer, which vest on February 10, 2019, the remaining costs are
expected to be recognized over the next 32 months on a weighted-average basis.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The table below sets forth the stock option activity for the three months ended March 31, 2011 and
other stock option information at March 31, 2011:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Weighted-</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Number of</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Weighted-</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">average</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">shares</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">average</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">remaining</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Aggregate intrinsic</td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">underlying</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">exercise</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">contractual life</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">value<sup style="font-size: 85%; vertical-align: text-top">(1)</sup> (in</td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">options</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">price</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">(yrs.)</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">thousands)</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance, December 31, 2010
</div></td>
<td> </td>
<td> </td>
<td align="right">100,000</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">107.28</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2.1</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">4,494</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Grants
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Exercises
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Forfeitures
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 0px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance, March 31, 2011
</div></td>
<td> </td>
<td> </td>
<td align="right">100,000</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">107.28</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1.8</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">2,321</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 0px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Vested, March 31, 2011
</div></td>
<td> </td>
<td> </td>
<td align="right">100,000</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1.8</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">2,321</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Exercisable, March 31, 2011
</div></td>
<td> </td>
<td> </td>
<td align="right">100,000</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1.8</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">2,321</td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left">
<div style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000"> 
</div>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td width="3%"></td>
<td width="1%"></td>
<td width="96%"></td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(1)</td>
<td> </td>
<td>The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value
(the difference between the Company’s closing stock price on the respective trading day and
the exercise price, multiplied by the number of in-the-money options) that would have been
received by the option holders had all option holders exercised their options on the
respective trading day. The amount of aggregate intrinsic value will change based on the fair
market value of the Company’s common stock.</td>
</tr>
</table>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following table summarizes information regarding all share-based payment arrangements for
the three months ended March 31, 2010 and 2011 (in thousands):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="76%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7">For the three months ended</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">March 31,</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000">2010</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000">2011</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Proceeds from stock options exercised
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">452</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Excess tax benefits (shortfall) related to exercise of stock
options and vesting of restricted stock
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">1,581</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(933</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Intrinsic value of stock options exercised<sup style="font-size: 85%; vertical-align: text-top"> (1)</sup>
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">1,184</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left">
<div style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000"> 
</div>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td width="3%"></td>
<td width="1%"></td>
<td width="96%"></td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(1)</td>
<td> </td>
<td>Intrinsic value of stock options exercised is estimated by taking the difference between the
Company’s closing stock price on the date of exercise and the exercise price, multiplied by
the number of options exercised for each option holder and then aggregated.</td>
</tr>
</table>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Valuation and Expense Information Under Stock Compensation Topic ASC 718</i>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following table summarizes the stock-based compensation expense recorded for the three months
ended March 31, 2010 and 2011 by expense line item (in thousands):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="76%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6">For the three months</td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">ended March 31,</td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2010</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2011</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Instruction and educational support
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">615</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">852</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Marketing
</div></td>
<td> </td>
<td> </td>
<td align="right">22</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">16</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Admissions advisory
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">General and administration
</div></td>
<td> </td>
<td> </td>
<td align="right">2,422</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,024</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Stock-based compensation expense included in operating expense
</div></td>
<td> </td>
<td> </td>
<td align="right">3,059</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,892</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Tax benefit
</div></td>
<td> </td>
<td> </td>
<td align="right">1,209</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,142</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Stock-based compensation expense, net of tax
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">1,850</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1,750</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 6 - us-gaap:OtherLiabilitiesDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>6. Long-Term Liabilities</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><i>Lease Incentives</i>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In conjunction with the opening of new campuses and the renovating of existing ones, the Company,
in some instances, was reimbursed by the lessors for improvements made to the leased properties. In
accordance with the Operating Leases Subtopic, ASC 840-20, these improvements were capitalized as
leasehold improvements and a long-term liability was established for the reimbursements. The
leasehold improvements and the long-term liability are amortized on a straight-line basis over the
corresponding lease terms, which range from five to ten years. As of December 31, 2010 and March
31, 2011, the Company had deferred lease incentives of $3.2 million and $3.1 million, respectively.
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Deferred Rent</i>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In accordance with ASC 840-20<i>, </i>the Company records rent expense on a straight-line basis over the
initial term of a lease. The difference between the rent payment and the straight-line rent
expense is recorded as a long-term liability. As of December 31, 2010 and March 31, 2011, the
Company had deferred rent associated with its lease obligations of $7.9 million and $8.6 million,
respectively.
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Sale of Campus Building and Deferred Gain</i>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In conjunction with the sale and lease back of its Loudoun, Virginia campus building in June 2007,
the Company realized a gain of $2.8 million before tax, which is deferred and recognized over the
10-year lease term. The non-current portion of this gain, which is recorded as a long-term
liability, was $1.5 million and $1.4 million, at December 31, 2010 and March 31, 2011,
respectively.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 7 - us-gaap:IncomeTaxDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>7. Income Taxes</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The Fair Value Measurements and Disclosures Topic, ASC 740, requires the Company to determine
whether uncertain tax positions should be recognized within the Company’s financial statements. As
a result of the implementation of ASC 740, no material adjustment in the liability for unrecognized
income tax benefits was recognized. The amount of unrecognized tax benefits at the adoption date
of January 1, 2007 and at March 31, 2011 is immaterial. The Company recognizes interest and
penalties related to uncertain tax positions in income tax expense. As of March 31, 2011, the
amount of accrued interest related to uncertain tax positions was immaterial. The tax years
2008-2010 remain open to examination by the major taxing jurisdictions in which the Company is
subject.
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 8 - us-gaap:CommitmentsAndContingenciesDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>8. Litigation</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">From time to time, the Company is involved in litigation and other legal proceedings arising out of
the ordinary course of its business. On October 15, 2010, a putative securities class action was
filed in the United States District Court for the Middle District of Florida. On April 19, 2011,
the Company filed a motion to dismiss the complaint. On January 3, 2011, a shareholder derivative
complaint was filed in Florida state court in Hillsborough County, Florida. On or about March 29,
2011, the plaintiff and Strayer jointly submitted to the Florida state court a stipulation
recognizing that Fairfax, Virginia is a more appropriate forum for this litigation. On April 4,
2011, plaintiff filed a complaint in the Circuit Court of Fairfax County. The Company believes
these lawsuits are without merit and will contest them vigorously. While the outcome of any legal
proceeding cannot be predicted with certainty, the Company does not expect these matters will have
a material effect on its financial condition or results of operations.
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 9 - us-gaap:ScheduleOfSubsequentEventsTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>9. Subsequent Events</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><i>Revolving Credit Facility and Term Loan Agreement</i>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">On April 4, 2011, the Company entered into an Amended and Restated Revolving Credit and Term Loan
Agreement (the “Credit Facility”) providing for a $100.0 million revolving credit facility and a
$100.0 million term loan facility. The revolving portion of the Credit Facility, which includes a
letter of credit subfacility of $50.0 million, matures on March 31, 2014, and amends and subsumes
(as part of the new facility) the Company’s existing $100.0 million revolving credit agreement. The
term loan portion of the Credit Facility matures on March 31, 2014, and, commencing December 31,
2011, includes required quarterly amortization payments in the amount of $2.5 million on December
31, 2011, $5.0 million on March 31, 2012, and $7.5 million on June 30, 2012, and at the end of each
quarter thereafter prior to the final maturity date.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Borrowings under the Credit Facility bear interest at LIBOR or a base rate plus a margin ranging
from 2.25% to 2.75%, depending on the Company’s leverage ratio. For the $100.0 million term loan
facility, the Company entered into an interest rate swap arrangement that fixes its interest rate
on the term loan facility at approximately 3.6% rather than being subject to fluctuations in the
LIBOR rate. In addition, an unused commitment fee ranging from 0.30% to 0.40%, depending on the
Company’s leverage ratio, accrues on unused amounts under the revolving credit facility. The Credit
Facility contains customary affirmative, negative and
financial maintenance covenants,
representations, warranties, events of default and remedies
upon default, including acceleration and rights to foreclose on the collateral securing the Credit
Facility.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The Credit Facility is secured by substantially all of the personal property assets of the Company
and its subsidiaries.
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><i>2011 Equity Compensation Plan</i>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">On April 26, 2011, the Company’s stockholders approved the Strayer Education, Inc. 2011 Equity
Compensation Plan which increased the number of shares available for issuance as equity
compensation by 300,000 shares.
</div>
</div>
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EX-101 PRESENTATION LINKBASE DOCUMENT
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R11.xml
IDEA: Revolving Credit Facility
2.2.0.25falsefalse0204 - Disclosure - Revolving Credit Facilitytruefalsefalse1falsefalseUSDfalsefalse1/1/2011 - 3/31/2011
USD ($)
USD ($) / shares
$Jan-01-2011_Mar-31-2011http://www.sec.gov/CIK0001013934duration2011-01-01T00:00:002011-03-31T00:00:00USDStandardhttp://www.xbrl.org/2003/iso4217USDiso42170USDEPSDividehttp://www.xbrl.org/2003/iso4217USDiso4217http://www.xbrl.org/2003/instancesharesxbrli0SharesStandardhttp://www.xbrl.org/2003/instancesharesxbrli0USDUSD$2true0us-gaap_LineOfCreditFacilityAbstractus-gaaptruenadurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalse1falsefalsefalse00falsefalsefalsefalsefalseOtherxbrli:stringItemTypestringNo definition available.falsefalse3false0us-gaap_ScheduleOfLineOfCreditFacilitiesTextBlockus-gaaptruenadurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1falsefalsefalse00<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 4 - us-gaap:ScheduleOfLineOfCreditFacilitiesTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>4. Revolving Credit Facility</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The Company is party to a Revolving Credit Agreement dated as of January 3, 2011. The maximum
amount of borrowings available under the Revolving Credit Facility is $100 million, including a
letter of credit subfacility of $50 million. The Revolving Credit Facility matures in three years.
Borrowings under the Revolving Credit Facility bear interest at LIBOR or a base rate plus 1.75%,
although higher margins up to 2.25% may apply based on the Company’s then ratio of consolidated
total debt to EBITDA (earnings before interest, taxes, depreciation and amortization, and other
non-cash charges). Unused portions of the Revolving Credit Facility carry an annual availability
fee of 0.30%, which may increase to 0.40% based on the Company’s then ratio of consolidated total
debt to EBITDA. The Revolving Credit Facility contains customary affirmative, negative and
financial maintenance covenants, representations, warranties, events of default and remedies upon
default including acceleration, and borrowing
conditions. Management believes the Company was in
compliance with these covenants at March 31, 2011. As of March 31, 2011, the Company had
outstanding debt of $80 million. On April 4, 2011, the Company entered into an Amended and
Restated Revolving Credit and Term Loan Agreement with maximum amount of borrowings of $200 million
(see Note 9 below).
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged NotefalsefalsefalsefalsefalseOtherus-types:textBlockItemTypestringThis element may be used to capture the complete disclosure pertaining to short-term or long-term contractual arrangements with lenders, including letters of credit, standby letters of credit, and revolving credit arrangements, under which borrowings can be made up to maximum amount as of any point in time conditional on satisfaction of specified terms before, as of and after the date of drawdowns on the line.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 08
-Paragraph f
-Article 4
Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 02
-Paragraph 19, 22
-Article 5
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14
R10.xml
IDEA: Earnings Per Share
2.2.0.25falsefalse0203 - Disclosure - Earnings Per Sharetruefalsefalse1falsefalseUSDfalsefalse1/1/2011 - 3/31/2011
USD ($)
USD ($) / shares
$Jan-01-2011_Mar-31-2011http://www.sec.gov/CIK0001013934duration2011-01-01T00:00:002011-03-31T00:00:00USDStandardhttp://www.xbrl.org/2003/iso4217USDiso42170USDEPSDividehttp://www.xbrl.org/2003/iso4217USDiso4217http://www.xbrl.org/2003/instancesharesxbrli0SharesStandardhttp://www.xbrl.org/2003/instancesharesxbrli0USDUSD$2true0us-gaap_EarningsPerShareAbstractus-gaaptruenadurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalse1falsefalsefalse00falsefalsefalsefalsefalseOtherxbrli:stringItemTypestringNo definition available.falsefalse3false0us-gaap_EarningsPerShareTextBlockus-gaaptruenadurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1falsefalsefalse00<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 3 - us-gaap:EarningsPerShareTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>3. Earnings Per Share</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Basic earnings per share is computed by dividing net income by the weighted average number of
shares of common stock outstanding during the periods. Diluted earnings per share reflects the
potential dilution that could occur assuming vesting, conversion or exercise of all dilutive
unexercised stock options and restricted stock. The dilutive effect of stock options was
determined using the treasury stock method. Stock options are not included in the computation of
diluted earnings per share when the stock option exercise price of an individual grant exceeds the
average market price for the period. At March 31, 2010 and 2011, all issued and outstanding stock
options were included in the calculation.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Set forth below is a reconciliation of shares used to compute earnings per share (in thousands):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="76%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6">For the three months</td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">ended March 31,</td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2010</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2011</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Weighted average shares outstanding used to compute basic
earnings per share
</div></td>
<td> </td>
<td> </td>
<td align="right">13,596</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">12,744</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Incremental shares issuable upon the assumed exercise of stock
options
</div></td>
<td> </td>
<td> </td>
<td align="right">41</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">18</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Unvested restricted stock
</div></td>
<td> </td>
<td> </td>
<td align="right">92</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">32</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Shares used to compute diluted earnings per share
</div></td>
<td> </td>
<td> </td>
<td align="right">13,729</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">12,794</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged NotefalsefalsefalsefalsefalseOtherus-types:textBlockItemTypestringThis element may be used to capture the complete disclosure pertaining to an entity's earnings per share.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 128
-Paragraph 40
falsefalse12Earnings Per ShareUnKnownUnKnownUnKnownUnKnownfalsetrueXML
15
R8.xml
IDEA: Nature of Operations
2.2.0.25falsefalse0201 - Disclosure - Nature of Operationstruefalsefalse1falsefalseUSDfalsefalse1/1/2011 - 3/31/2011
USD ($)
USD ($) / shares
$Jan-01-2011_Mar-31-2011http://www.sec.gov/CIK0001013934duration2011-01-01T00:00:002011-03-31T00:00:00USDStandardhttp://www.xbrl.org/2003/iso4217USDiso42170USDEPSDividehttp://www.xbrl.org/2003/iso4217USDiso4217http://www.xbrl.org/2003/instancesharesxbrli0SharesStandardhttp://www.xbrl.org/2003/instancesharesxbrli0USDUSD$2true0stra_NatureOfOperationsAbstractstrafalsenadurationNature of operations.falsefalsefalsefalsefalsefalsefalsefalsefalsefalse1falsefalsefalse00falsefalsefalsefalsefalseOtherxbrli:stringItemTypestringNature of operations.falsefalse3false0us-gaap_NatureOfOperationsus-gaaptruenadurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1falsefalsefalse00<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
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<div style="font-family: 'Times New Roman',Times,serif">
<div align="center" style="font-size: 10pt; margin-top: 0pt"><b></b>
</div>
<div align="left">
</div>
<div align="center" style="font-size: 10pt; margin-top: 0pt"><b>
</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>1. Nature of Operations</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Strayer Education, Inc. (the “Company”), a Maryland corporation, conducts its operations through
its wholly owned subsidiary, Strayer University (the “University”). The University is an accredited
institution of higher education that provides undergraduate and graduate degrees in various fields
of study through 89 campuses (including three campuses opened for the 2011 winter term and two
opened for the 2011 spring term) in Alabama, Arkansas, Delaware, Florida, Georgia, Indiana,
Kentucky, Louisiana, Maryland, Mississippi, New Jersey, North Carolina, Ohio, Pennsylvania, South
Carolina, Tennessee, Texas, Utah, Virginia, West Virginia, Wisconsin and Washington, D.C., and
online. With the Company’s focus on the student, regardless of whether he or she chooses to take
classes at a physical campus or online, it has only one reporting segment.
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged NotefalsefalsefalsefalsefalseOtherus-types:textBlockItemTypestringDescribes the nature of an entity's business, the major products or services it sells or provides and its principal markets, including the locations of those markets. If the entity operates in more than one business, the disclosure also indicates the relative importance of its operations in each business and the basis for the determination (for example, assets, revenues, or earnings). Disclosures about the nature of operations need not be quantified; relative importance could be conveyed by use of terms such as "predominately", "about equally", or "major and other". This element is also referred to as "Business Description".Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher AICPA
-Name Statement of Position (SOP)
-Number 94-6
-Paragraph 10
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16
R12.xml
IDEA: Stockholders' Equity
2.2.0.25falsefalse0205 - Disclosure - Stockholders' Equitytruefalsefalse1falsefalseUSDfalsefalse1/1/2011 - 3/31/2011
USD ($)
USD ($) / shares
$Jan-01-2011_Mar-31-2011http://www.sec.gov/CIK0001013934duration2011-01-01T00:00:002011-03-31T00:00:00USDStandardhttp://www.xbrl.org/2003/iso4217USDiso42170USDEPSDividehttp://www.xbrl.org/2003/iso4217USDiso4217http://www.xbrl.org/2003/instancesharesxbrli0SharesStandardhttp://www.xbrl.org/2003/instancesharesxbrli0USDUSD$2true0us-gaap_StockholdersEquityNoteAbstractus-gaaptruenadurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalse1falsefalsefalse00falsefalsefalsefalsefalseOtherxbrli:stringItemTypestringNo definition available.falsefalse3false0us-gaap_StockholdersEquityNoteDisclosureTextBlockus-gaaptruenadurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1falsefalsefalse00<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 5 - us-gaap:StockholdersEquityNoteDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>5. Stockholders’ Equity</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt"><i>Authorized stock</i>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The Company has authorized 20,000,000 shares of common stock, par value $0.01, of which 13,316,822
and 12,446,489 shares were issued and outstanding as of December 31, 2010 and March 31, 2011,
respectively. The Company also has authorized 8,000,000 shares of preferred stock, none of which
has been issued or outstanding since 2004. Commencing in the fourth quarter of 2010, the Company
increased the annual cash dividend from $3.00 to $4.00 per share, or from $0.75 to $1.00 per share
quarterly.
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Stock-based compensation</i>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">As required by the Stock Compensation Topic, ASC 718, the Company measures and recognizes
compensation expense for all share-based payment awards made to employees and directors, including
employee stock options and employee stock purchases related to the Company’s Employee Stock
Purchase Plan, based on estimated fair values. Stock-based compensation expense recognized in the
Condensed Consolidated Statements of Income for the three months ended March 31, 2010 and 2011 is
based on awards ultimately expected to vest and, therefore, has been adjusted for estimated
forfeitures. The Company is required to estimate forfeitures at the time of grant and revise, if
necessary, the estimate in subsequent periods if actual forfeitures differ from those estimates.
The forfeiture rate used is based on historical experience.
</div>
<div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Stock-based compensation plans</i>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">A total of 3,000,000 shares have been approved by the Company’s stockholders for grants under the
Company’s 1996 equity compensation plan (the “Plan”). The Plan provides for the granting of stock
options intended to qualify as incentive stock options and also provides for the grant of
non-qualifying options and restricted stock to employees, officers and directors of the Company at
the discretion of the Board of Directors. Vesting provisions are at the discretion of the Board of
Directors. Options may be granted at option prices based at or above the fair market value of the
shares at the date of grant. The maximum term of the options granted under the Plan is ten years.
On April 26, 2011, the Company’s stockholders approved the
adoption of the Company’s 2011 Equity Compensation
Plan (See Note 9 below).
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In February 2011, the Company’s Board of Directors approved grants of 67,798 shares of restricted
stock to officers and other certain employees pursuant to the Company’s existing annual equity
compensation program. These shares vest over a three year period. The Company’s stock price
closed at $132.23 on the date of these restricted stock grants.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">In April 2011, the Company awarded a total of 7,070 shares of restricted stock to various
non-employee members of the Company’s Board of Directors, as part of the Company’s annual
director
compensation program. The Company’s stock price closed at
$118.80 on the date of these restricted
stock grants.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The table below sets forth the restricted stock activity for the three months ended March 31, 2011:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="76%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Weighted-</td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Number of<br />
shares</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">average grant <br />
price</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance, December 31, 2010
</div></td>
<td> </td>
<td> </td>
<td align="right">341,440</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">204.89</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Grants
</div></td>
<td> </td>
<td> </td>
<td align="right">67,798</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">132.23</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Vested shares
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(14,630</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td align="left">$</td>
<td align="right">162.10</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Forfeitures
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(1,946</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td align="left">$</td>
<td align="right">209.98</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance, March 31, 2011
</div></td>
<td> </td>
<td> </td>
<td align="right">392,662</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">193.84</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">At March 31, 2011, total stock-based compensation cost which has not yet been recognized was
$54.3 million, all for unvested restricted stock. This cost is expected to be recognized over the
next 68 months on a weighted-average basis. Excluding the February 2009 grant of 183,680 shares to
the Company’s Chief Executive Officer, which vest on February 10, 2019, the remaining costs are
expected to be recognized over the next 32 months on a weighted-average basis.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The table below sets forth the stock option activity for the three months ended March 31, 2011 and
other stock option information at March 31, 2011:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="52%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Weighted-</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Number of</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Weighted-</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">average</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">shares</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">average</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">remaining</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Aggregate intrinsic</td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">underlying</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">exercise</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">contractual life</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">value<sup style="font-size: 85%; vertical-align: text-top">(1)</sup> (in</td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">options</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">price</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">(yrs.)</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">thousands)</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance, December 31, 2010
</div></td>
<td> </td>
<td> </td>
<td align="right">100,000</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">107.28</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2.1</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">4,494</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Grants
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Exercises
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Forfeitures
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 0px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance, March 31, 2011
</div></td>
<td> </td>
<td> </td>
<td align="right">100,000</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">107.28</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1.8</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">2,321</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 0px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Vested, March 31, 2011
</div></td>
<td> </td>
<td> </td>
<td align="right">100,000</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1.8</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">2,321</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Exercisable, March 31, 2011
</div></td>
<td> </td>
<td> </td>
<td align="right">100,000</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1.8</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">2,321</td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left">
<div style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000"> 
</div>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td width="3%"></td>
<td width="1%"></td>
<td width="96%"></td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(1)</td>
<td> </td>
<td>The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value
(the difference between the Company’s closing stock price on the respective trading day and
the exercise price, multiplied by the number of in-the-money options) that would have been
received by the option holders had all option holders exercised their options on the
respective trading day. The amount of aggregate intrinsic value will change based on the fair
market value of the Company’s common stock.</td>
</tr>
</table>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following table summarizes information regarding all share-based payment arrangements for
the three months ended March 31, 2010 and 2011 (in thousands):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="76%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="5%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7">For the three months ended</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000">March 31,</td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000">2010</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000">2011</td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Proceeds from stock options exercised
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">452</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Excess tax benefits (shortfall) related to exercise of stock
options and vesting of restricted stock
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">1,581</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">$</td>
<td align="right">(933</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Intrinsic value of stock options exercised<sup style="font-size: 85%; vertical-align: text-top"> (1)</sup>
</div></td>
<td> </td>
<td align="right">$</td>
<td align="right">1,184</td>
<td> </td>
<td> </td>
<td align="right">$</td>
<td align="right">—</td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left">
<div style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000"> 
</div>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr>
<td width="3%"></td>
<td width="1%"></td>
<td width="96%"></td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(1)</td>
<td> </td>
<td>Intrinsic value of stock options exercised is estimated by taking the difference between the
Company’s closing stock price on the date of exercise and the exercise price, multiplied by
the number of options exercised for each option holder and then aggregated.</td>
</tr>
</table>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Valuation and Expense Information Under Stock Compensation Topic ASC 718</i>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The following table summarizes the stock-based compensation expense recorded for the three months
ended March 31, 2010 and 2011 by expense line item (in thousands):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="76%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
<td width="5%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6">For the three months</td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">ended March 31,</td>
<td> </td>
</tr>
<tr style="font-size: 8pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2010</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2011</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Instruction and educational support
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">615</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">852</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Marketing
</div></td>
<td> </td>
<td> </td>
<td align="right">22</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">16</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Admissions advisory
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">General and administration
</div></td>
<td> </td>
<td> </td>
<td align="right">2,422</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,024</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Stock-based compensation expense included in operating expense
</div></td>
<td> </td>
<td> </td>
<td align="right">3,059</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,892</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Tax benefit
</div></td>
<td> </td>
<td> </td>
<td align="right">1,209</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,142</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Stock-based compensation expense, net of tax
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">1,850</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1,750</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
</div>
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IDEA: Income Taxes
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<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>7. Income Taxes</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The Fair Value Measurements and Disclosures Topic, ASC 740, requires the Company to determine
whether uncertain tax positions should be recognized within the Company’s financial statements. As
a result of the implementation of ASC 740, no material adjustment in the liability for unrecognized
income tax benefits was recognized. The amount of unrecognized tax benefits at the adoption date
of January 1, 2007 and at March 31, 2011 is immaterial. The Company recognizes interest and
penalties related to uncertain tax positions in income tax expense. As of March 31, 2011, the
amount of accrued interest related to uncertain tax positions was immaterial. The tax years
2008-2010 remain open to examination by the major taxing jurisdictions in which the Company is
subject.
</div>
</div>
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<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>8. Litigation</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">From time to time, the Company is involved in litigation and other legal proceedings arising out of
the ordinary course of its business. On October 15, 2010, a putative securities class action was
filed in the United States District Court for the Middle District of Florida. On April 19, 2011,
the Company filed a motion to dismiss the complaint. On January 3, 2011, a shareholder derivative
complaint was filed in Florida state court in Hillsborough County, Florida. On or about March 29,
2011, the plaintiff and Strayer jointly submitted to the Florida state court a stipulation
recognizing that Fairfax, Virginia is a more appropriate forum for this litigation. On April 4,
2011, plaintiff filed a complaint in the Circuit Court of Fairfax County. The Company believes
these lawsuits are without merit and will contest them vigorously. While the outcome of any legal
proceeding cannot be predicted with certainty, the Company does not expect these matters will have
a material effect on its financial condition or results of operations.
</div>
</div>
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