EX-99.1 2 file2.htm PRESS RELEASE

EXHIBIT 99.01

FOR IMMEDIATE RELEASE

FOR MORE INFORMATION CONTACT:

Mark C. Brown, Senior Vice President and
Chief Financial Officer
(703) 247-2514

Sonya Udler, Vice President,
Corporate Communications
(703) 247-2517
sonya.udler@strayer.edu

STRAYER EDUCATION, INC. REPORTS
THIRD QUARTER 2006 ENROLLMENT, REVENUES AND EARNINGS

-- STRAYER THIRD QUARTER REVENUES UP 20% --
-- STRAYER THIRD QUARTER DILUTED EPS $0.44 / $0.53 EXCLUDING
STOCK-BASED COMPENSATION --
-- STRAYER FALL 2006 TOTAL ENROLLMENTS UP 15%/ONLINE UP 21% --
-- STRAYER TO OPEN EIGHT NEW CAMPUSES IN 2007 --
-- STRAYER INCREASING ANNUAL DIVIDEND FROM $1.00 TO $1.25 --

ARLINGTON, Va., October 26, 2006 - Strayer Education, Inc. (Nasdaq: STRA) today
announced financial results for the three months ended September 30, 2006.
Financial highlights are as follows:

THREE MONTHS ENDED SEPTEMBER 30

o Revenues for the three months ended September 30, 2006 increased 20% to $56.7
million, compared to $47.1 million for the same period in 2005, due to
increased enrollment and a 5% tuition increase which commenced in January
2006.

o Income from operations was $9.0 million compared to $9.6 million for the same
period in 2005, a decrease of 6%. In 2006, the Company began recording
stock-based compensation expense which amounted to $2.2 million before tax
for the three months ended September 30, 2006. Excluding stock-based
compensation expense, income from operations was $11.2 million, an increase
of 17% compared to 2005.

o Net income was $6.3 million compared to $6.4 million for the same period in
2005, a decrease of 2%. Net income for the three months ended September 30,
2006 includes the effect of a $1.4 million after tax expense related to
stock-based compensation. Excluding stock-based compensation expense, net
income was $7.7 million, an increase of 20%

compared to 2005. Diluted earnings per share was $0.44, the same as for the
comparable period of 2005. Diluted earnings per share for the three months
ended September 30, 2006 includes the effect of a $0.09 per share after tax
expense related to stock-based compensation. Excluding stock-based
compensation expense, diluted earnings per share was $0.53, an increase of
20% compared to 2005. Diluted weighted average shares outstanding decreased
to 14,462,000 from 14,637,000 for the same period in 2005.

NINE MONTHS ENDED SEPTEMBER 30

o Revenues for the nine months ended September 30, 2006 increased 19% to $189.3
million, compared to $158.5 million for the same period in 2005, due to
increased enrollment and a 5% tuition increase which commenced in January
2006.

o Income from operations was $55.5 million compared to $51.6 million for the
same period in 2005, an increase of 8%. In 2006, the Company began recording
stock-based compensation expense which amounted to $5.5 million before tax
for the nine months ended September 30, 2006. Excluding stock-based
compensation expense, income from operations was $61.0 million, an increase
of 18% compared to 2005.

o Net income was $36.3 million compared to $33.1 million for the same period in
2005, an increase of 10%. Net income for the nine months ended September 30,
2006 includes the effect of a $3.4 million after tax expense related to
stock-based compensation. Excluding stock-based compensation expense, net
income was $39.7 million, an increase of 20% compared to 2005. Diluted
earnings per share was $2.50 compared to $2.23 for the same period in 2005,
an increase of 12%. Diluted earnings per share for the nine months ended
September 30, 2006 includes the effect of a $0.24 per share after tax expense
related to stock-based compensation. Excluding stock-based compensation
expense, diluted earnings per share was $2.74, an increase of 23% compared to
2005. Diluted weighted average shares outstanding decreased to 14,506,000
from 14,792,000 for the same period in 2005.

Income from operations, net income and diluted earnings per share for the three
and nine months ended September 30, 2006 excluding stock-based compensation (as
presented above) are considered non-GAAP financial measures. The Company
believes these non-GAAP financial measures provide investors, potential
investors, securities analysts and others with useful information to evaluate
the performance of the business, because they exclude stock-based compensation
expense which had not been included in the prior years. Additional information
is contained in the attached financial statements including a reconciliation of
GAAP to the non-GAAP measures.

"We are pleased both with our solid financial performance in the third quarter
and our strong enrollment for the fall term," said Robert Silberman, the
Company's Chairman and Chief Executive Officer. "Our successful opening of eight
new campuses in 2006 is a testament to the hard work of our faculty and staff
and the value we provide to our working adult students. We look forward to the
addition of another eight new campuses in 2007, as we continue to expand the
Strayer University footprint."

BALANCE SHEET AND CASH FLOW

At September 30, 2006, the Company had cash, cash equivalents and marketable
securities (a diversified, no load, short-term, tax exempt bond fund) of $123
million and no debt. The

Company generated $39 million from operating activities in the first nine months
of 2006. Capital expenditures were $9 million for the same period.

During the three months ended September 30, 2006, the Company repurchased 52,514
shares of common stock at an average price of $103.05 per share and a cost of
$5.4 million, as part of a previously announced common stock repurchase
authorization.

For the third quarter 2006, bad debt expense as a percentage of revenue was 3.2%
compared to 2.5% for the same period in 2005. Days sales outstanding, adjusted
to exclude tuition receivable related to future quarters, was 10 days at the end
of the third quarter of 2006, compared to eight days at the end of the same
period in 2005.

STUDENT ENROLLMENT

Enrollment at Strayer University for the 2006 fall term increased 15% to 31,372
students from 27,305 for the same term in 2005. For the 2006 fall term, Strayer
University's rate of growth of continuing students was 17%, and its rate of
growth of new students was 10%. Out-of-area online students increased 21%, while
students taking 100% of their classes at Strayer University Online (including
campus based students) increased 20%. The total number of students taking any
courses online (including students at brick and mortar campuses taking at least
one online course) in the 2006 fall term increased 20% to 21,705.

STUDENT ENROLLMENT
------------------

Fall Fall %
2005 2006 Change
---------- ----------- -----------

Campus Based Students:
New Campuses (18 in operation 3 years or less)
Classroom 1,012 2,175 115%
Online 1,316 2,589 97%
------- -------
Total New Campus Students 2,328 4,764 105%
------- -------

Mature Campuses (25 in operation more than 3 years)
Classroom 11,263 11,130 -1%
Online 10,838 12,006 11%
------- -------
Total Mature Campus Students 22,101 23,136 5%
------- -------

Total Campus Based Students 24,429 27,900 14%

Out-of-area Online Students 2,876 3,472 21%
------- -------

Total Students 27,305 31,372 15%
======= =======

Total Students Taking 100% of Courses Online 15,030 18,067 20%

Total Students Taking at Least 1 Course Online 18,087 21,705 20%

NEW CAMPUS OPENINGS

The Company announced today that it intends to open eight new campuses in 2007.
Subject to the completion of regulatory approvals, the first two campuses,
Louisville and Lexington, Kentucky, are currently slated for a winter term 2007
start of classes. Kentucky will be a new state for the University.

2006 BUSINESS OUTLOOK

Based on the strong enrollment growth announced for the 2006 fall term and the
planned investments in opening new campuses, the Company estimates fourth
quarter 2006 diluted earnings per share will be in the range of $1.06-1.08, or
$1.17-$1.19 excluding the impact of FAS 123(R). The Company estimates that it
will incur stock-based compensation expense of approximately $0.11 per share
after tax in the fourth quarter of 2006 and approximately $0.35 per share after
tax for the full year 2006. Based on its fourth quarter 2006 estimates, the
Company expects its full year 2006 diluted earnings per share will be in the
range of $3.56 to $3.58, or $3.90 to $3.92 excluding the impact of FAS 123(R).

2007 BUSINESS MODEL

The Company announced today that it intends to open eight new campuses in 2007
and implement a 5% tuition increase effective January 2007. Assuming a 15%
increase in annual enrollment in 2007, the Company would expect an 18-19%
increase in revenue in 2007, and roughly stable operating margins, leading to
diluted earnings per share in 2007 in the range of $4.10 to $4.25. Included in
this range is the Company's estimate of $0.44-$0.48 per share after tax of
stock-based compensation expense.

COMMON STOCK CASH DIVIDEND

The Company announced today that its Board of Directors is increasing the
Company's annual common stock dividend to $1.25 per share from $1.00 per share.
This annual dividend will be paid quarterly in the amount of $0.3125 per share.
Accordingly, the Company's Board of Directors has declared that the Company will
pay a dividend of $0.3125 per share on December 11, 2006 to shareholders of
record as of November 24, 2006.

SHARE REPURCHASE PLAN

The Company announced today that the Company's Board of Directors amended the
share repurchase program to authorize the repurchase of an additional $35
million in value of the Company's common stock over the next 14 months. As a
result, the total remaining amount authorized for share repurchases under this
program is now $40 million. These share repurchases, if made, will be in the
form of open market purchases from time to time at the discretion of the
Company's management, depending on market conditions and other corporate
considerations. The Company intends to effect such purchases, if any, in
compliance with Rule 10b-18 under the Securities Exchange Act of 1934, as
amended. This share repurchase program may be modified, suspended or terminated
at any time by the Company without notice.

S&P MIDCAP 400 INDEX

Standard & Poor's, a division of the McGraw-Hill Companies, announced on October
24, 2006 that Strayer Education, Inc. will be added to its S&P MidCap 400 Index
after the market closes on Tuesday, October 31, 2006.

CONFERENCE CALL WITH MANAGEMENT

Strayer Education, Inc. will host a conference call to discuss its third quarter
2006 earnings at 10:00 a.m. (ET) today. To participate on the live call,
investors should dial (800) 289-0468, 10 minutes prior to the start time. In
addition, the call will be available via live Webcast over the Internet. To
access the live Webcast of the conference call, please go to
www.strayereducation.com 15 minutes prior to the start time of the call to
register. An archived replay of the conference call will be available at (888)
203-1112 (pass code 8642933) starting at 1:00 p.m. (ET) today and will be
available through Tuesday, October 31, and archived at www.strayereducation.com
for 90 days.

Strayer Education, Inc. (Nasdaq: STRA) is an education services holding company
that owns Strayer University and certain other assets. Strayer's mission is to
make higher education achievable and convenient for working adults in today's
economy. Strayer University is a proprietary institution of higher learning that
offers undergraduate and graduate degree programs in business administration,
accounting, information technology, education, and public administration to more
than 31,000 working adult students at 43 campuses in 10 states and Washington,
D.C., in the eastern United States and worldwide via the Internet through
Strayer University Online. Strayer University is committed to providing an
education that prepares working adult students for advancement in their careers
and professional lives. Founded in 1892, Strayer University is accredited by the
Middle States Commission on Higher Education.

For more information on Strayer Education, Inc. visit www.strayereducation.com
and for Strayer University visit www.strayer.edu.

This press release contains statements that are forward looking and are made
pursuant to the "safe-harbor" provisions of the Private Securities Litigation
Reform Act of 1995 ("Reform Act"). The statements are based on the Company's
current expectations and are subject to a number of uncertainties and risks. In
connection with the Safe Harbor provisions of the Reform Act, the Company has
identified important factors that could cause the Company's actual results to
differ materially from those expressed in or implied by such statements. The
uncertainties and risks include the pace of growth of student enrollment, our
continued compliance with Title IV of the Higher Education Act, and the
regulations thereunder, as well as regional accreditation standards and state
and regional regulatory requirements, competitive factors, our ability to
implement our growth strategy, risks associated with the opening of new
campuses, risks associated with the offering of new educational programs and
adapting to other changes, risks associated with the acquisition of existing
educational institutions, risks relating to the timing of regulatory approvals,
and general economic and market conditions. Further information about these and
other relevant risks and uncertainties may be found in the Company's annual
report on Form 10-K and its other filings with the Securities and Exchange
Commission, all of which are incorporated herein by reference and which are
available from the Commission. We undertake no obligation to update or revise
forward looking statements.

STRAYER EDUCATION, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

For the three months For the nine months
ended September 30, ended September 30,
-------------------- -------------------
2005 2006 2005 2006
-------- -------- --------- ---------

Revenues.............................. $47,087 $56,693 $ 158,489 $189,341
------- ------- --------- --------
Costs and expenses:
Instruction and educational support 18,084 21,613 56,575 66,370
Selling and promotion.............. 13,009 16,164 30,325 38,011
General and administration......... 6,422 9,918 20,037 29,503
------- ------- --------- --------
Total costs and expenses.............. 37,515 47,695 106,937 133,884
------- ------- --------- --------
Income from operations............ 9,572 8,998 51,552 55,457
Investment and other income........... 686 1,160 2,091 3,277
------- ------- --------- --------
Income before income taxes........ 10,258 10,158 53,643 58,734
Provision for income taxes............ 3,820 3,822 20,589 22,423
------- ------- --------- --------
Net income........................ $6,438 $6,336 $ 33,054 $36,311
======= ======= ========= ========
Net income per share:
Basic ............................. $0.45 $0.45 $2.28 $2.56
Diluted ........................... $0.44 $0.44 $2.23 $2.50
Weighted average shares outstanding:
Basic............................. 14,374 14,157 14,521 14,204
Diluted........................... 14,637 14,462 14,792 14,506

--------------------------------------------------------------------------------
In 2006, the Company adopted FAS 123(R) and began recording stock-based
compensation expense for stock options. Prior to the adoption of FAS 123(R), the
Company recorded expense for other forms of stock-based compensation. For the
three months ended September 30, 2006, stock-based compensation expense was $2.2
million, or $1.4 million net of tax, and reduced EPS by $0.09. For the nine
months ended September 30, 2006, stock-based compensation expense was $5.5
million, or $3.4 million net of tax, and reduced EPS by $0.24. The table below
sets forth the amount of various forms of stock-based compensation expense
recorded in each of the expense line items.

For the three months For the nine months
ended September 30, ended September 30,
-------------------- -------------------
2005 2006 2005 2006
---- ---- ---- ----
Instruction and educational support.. $ -- $149 $ -- $488
Selling and promotion................ -- 136 -- 409
General and administration........... 19 1,899 19 4,634

The pro forma impact of recording stock-based compensation expense for the three
and nine months ended September 30, 2005 was disclosed in Note 5 to the
Company's Condensed Consolidated Financial Statements included in its Form 10-Q
for the three months ended September 30, 2005. As disclosed in such note,
including $0.9 million in stock-based compensation expense net of tax, the
Company would have reported net income of approximately $5.5 million and diluted
EPS of $0.37 for the three months ended September 30, 2005. For the nine months
ended September 30, 2005, including $2.1 million in stock-based compensation
expense net of tax, the Company would have reported net income of approximately
$31.0 million and diluted EPS of $2.08.
--------------------------------------------------------------------------------

STRAYER EDUCATION, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

December 31, September 30,
2005 2006

ASSETS
Current assets:
Cash and cash equivalents ................................................... $74,212 $46,854
Marketable securities available for sale, at fair value ..................... 45,594 75,763
Income taxes receivable...................................................... -- 4,557
Tuition receivable, net of allowances for doubtful accounts of $1,927 and
$2,201 at December 31, 2005 and September 30, 2006, respectively ......... 55,935 75,884
Other current assets ........................................................ 2,581 5,243
-------- --------
Total current assets ..................................................... 178,322 208,301
Property and equipment, net .................................................... 46,684 50,407
Deferred income taxes .......................................................... -- 2,331
Restricted cash ................................................................ 500 500
Other assets ................................................................... 339 813
-------- --------
Total assets ............................................................ $225,845 $262,352
======== ========

LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ............................................................ $6,402 $10,438
Accrued expenses ............................................................ 1,483 1,954
Income taxes payable ........................................................ 3,773 --
Unearned tuition ............................................................ 55,778 77,287
-------- --------
Total current liabilities ................................................ 67,436 89,679
Deferred income taxes .......................................................... 205 --
Long-term liabilities .......................................................... 6,364 7,138
-------- --------
Total liabilities ........................................................ 74,005 96,817
-------- --------
Commitments and contingencies
Stockholders' equity:
Common stock, par value $.01; 20,000,000 shares authorized; 14,292,249 and
14,363,884 shares issued and outstanding as of
December 31, 2005 and September 30, 2006, respectively..................... 143 142
Additional paid-in capital ................................................... 104,923 93,001
Retained earnings ............................................................ 47,020 72,536
Accumulated other comprehensive income (loss) ................................ (246) (144)
-------- --------
Total stockholders' equity ............................................... 151,840 165,535
-------- --------
Total liabilities and stockholders' equity ............................... $225,845 $262,352
======== ========

STRAYER EDUCATION, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)

For the nine months
ended September 30,
----------------------------
2005 2006
---------- -----------

Cash flows from operating activities:
Net income.................................................................... $33,054 $36,311
Adjustments to reconcile net income to net cash provided by
operating activities:
activities
Amortization of deferred rent............................................ 127 136
Depreciation and amortization............................................ 4,944 5,165
Provision for student loan losses........................................ (98) (95)
Deferred income taxes.................................................... (45) (2,641)
Stock-based compensation................................................. 19 5,072
Changes in assets and liabilities:
Tuition receivable, net.................................................. (16,554) (19,949)
Other current assets..................................................... 133 (1,911)
Other assets............................................................. 6 (474)
Accounts payable......................................................... 1,935 4,081
Accrued expenses......................................................... (1,168) 471
Income taxes payable..................................................... (9,773) (4,790)
Excess tax benefits from stock-based payment arrangements................ -- (3,540)
Unearned tuition......................................................... 20,723 21,509
Deferred lease incentives................................................ 1,531 --
Student loans originated...................................................... (673) (3)
Collections on student loans receivable and held for sale..................... 709 23
-------- --------
Net cash provided by operating activities............................ 34,870 39,365
-------- --------
Cash flows from investing activities:
Purchases of property and equipment.......................................... (9,739) (8,933)
Purchases of marketable securities........................................... -- (30,000)
-------- --------
Net cash used in investing activities................................ (9,739) (38,933)
-------- --------
Cash flows from financing activities:
Common dividends paid........................................................ (5,444) (10,795)
Proceeds from exercise of stock options...................................... -- 6,504
Excess tax benefits from stock-based payment arrangements.................... -- 3,540
Repurchase of common stock................................................... (29,993) (27,039)
-------- --------
Net cash used in financing activities................................ (35,437) (27,790)
-------- --------
Net decrease in cash and cash equivalents............................ (10,306) (27,358)
Cash and cash equivalents - beginning of period................................. 97,004 74,212
-------- --------
Cash and cash equivalents - end of period....................................... 86,698 $46,854
========== ======
Non-cash transactions:
Purchases of property and equipment included in accounts payable............ $ 234 $ 516

STRAYER EDUCATION, INC.
RECONCILIATION OF UNAUDITED NON-GAAP FINANCIAL MEASURES TO
GAAP FINANCIAL MEASURES (a)
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

For the three months ended For the nine months ended
September 30, 2006 September 30, 2006
--------------------------------------- ----------------------------------------
Stock-based Stock-based
GAAP Compensation Non-GAAP GAAP Compensation Non-GAAP
Results Expense Results Results Expense Results
---------- -------------- ----------- ---------- -------------- -----------

Revenues............................... $56,693 $ -- $56,693 $189,341 $ -- $189,341
------- ------- ------- ------- ------ -------
Costs and expenses:
Instruction & educational support.. 21,613 (149) 21,464 66,370 (488) 65,882
Selling & promotion ............... 16,164 (136) 16,028 38,011 (409) 37,602
General & administration .......... 9,918 (1,899) 8,019 29,503 (4,634) 24,869
------- ------- ------- ------- ------ -------

Total costs and expenses .............. 47,695 (2,184) 45,511 133,884 (5,531) 128,353
------- ------- ------- ------- ------ -------

Income from operations ................ 8,998 2,184 11,182 55,457 5,531 60,988

Investment and other income ........... 1,160 -- 1,160 3,277 -- 3,277
------- ------- ------- ------- ------ -------

Income before income taxes ............ 10,158 2,184 12,342 58,734 5,531 64,265

Provision for income taxes ............ 3,822 822 4,644 22,423 2,111 24,534
------- ------- ------- ------- ------ -------
Net income ............................ $ 6,336 $ 1,362 $ 7,698 $36,311 $3,420 $39,731
======= ======= ======= ======= ====== =======
Net income per share:
Basic ............................. $0.45 $0.10 $0.54 $2.56 $0.24 $2.80
Diluted ........................... $0.44 $0.09 $0.53 $2.50 $0.24 $2.74
Weighted average shares outstanding:
Basic ............................. 14,157 14,157 14,157 14,204 14,204 14,204
Diluted ........................... 14,462 14,462 14,462 14,506 14,506 14,506

--------------------
(a) These unaudited non-GAAP financial measures are for informational purposes
only and are not presented in accordance with GAAP. The Company believes these
non-GAAP financial measures provide investors, potential investors, securities
analysts and others with useful information to evaluate the performance of the
business, because they exclude stock-based compensation expense which had not
been included in the prior years. The presentation of this additional
information is not meant to be considered in isolation or as a substitute for
the Company's condensed consolidated statements of income.