-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, M1KFF38309w4ZYa2voaZ2dNqSWJOnMEKziTghKrA0eV08lLj29vSF4Eeg2roHS7H DIrpjnhVymehvDApRaUTxA== 0001157523-03-003266.txt : 20030724 0001157523-03-003266.hdr.sgml : 20030724 20030724091804 ACCESSION NUMBER: 0001157523-03-003266 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20030724 ITEM INFORMATION: Financial statements and exhibits ITEM INFORMATION: Regulation FD Disclosure FILED AS OF DATE: 20030724 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SYLVAN LEARNING SYSTEMS INC CENTRAL INDEX KEY: 0000912766 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EDUCATIONAL SERVICES [8200] IRS NUMBER: 521492296 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-22844 FILM NUMBER: 03799522 BUSINESS ADDRESS: STREET 1: 1001 FLEET STREET CITY: BALTIMORE STATE: MD ZIP: 21202 BUSINESS PHONE: 4108438000 MAIL ADDRESS: STREET 1: 1001 FLEET STREET CITY: BALTIMORE STATE: MD ZIP: 21202 8-K 1 a4440949.txt SYLVAN LEARNING 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 ----------------------- FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): July 24, 2003 Sylvan Learning Systems, Inc. (Exact Name of Registrant as Specified in Charter) Maryland 0-22844 52-1492296 (State or Other Jurisdiction of (Commission File Number) (IRS Employer Incorporation) Identification No.) 1001 Fleet Street, Baltimore, Maryland 21202 (Address of Principal Executive Offices) (ZIP Code) Registrant's telephone number, including area code: (410) 843-8000 Item 7. Financial Statements and Exhibits. (c) Exhibits Exhibit Description - ------- ----------- 99.01 Press Release issued July 24, 2003. Item 9. Regulation FD Disclosure This information, furnished under this "Item 9. Regulation FD Disclosure," is intended to be furnished under "Item 12. Disclosure of Results of Operations and Financial Condition" in accordance with SEC Release No. 33-8216. Attached as Exhibit 99.01 hereto is the Registrant's Earnings Results for the 2003 Second Quarter. This information is not being filed but rather is being furnished under Regulation FD. The Registrant has posted this Current Report on Form 8-K on its internet website at www.sylvan.net. SIGNATURE 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 hereunto duly authorized. SYLVAN LEARNING SYSTEMS, INC. /s/Sean R. Creamer --------------------------------- Name: Sean R. Creamer Title: Senior Vice President and Chief Financial Officer Date: July 24, 2003 Exhibit Index Exhibit Description - ------- ----------- 99.01 Press Release issued July 24, 2003. EX-99 3 a4440949_ex99.txt SYLVAN LEARNING EXHIBIT 99.01 Exhibit 99.01 Sylvan Learning Systems, Inc. Reports Revenue Growth of 36% for Second Quarter 2003; Strong Operating Results Highlight Power of Company's Post-Secondary Focus BALTIMORE--(BUSINESS WIRE)--July 24, 2003--Sylvan Learning Systems, Inc. (NASDAQ: SLVN), a global leader in higher education, today announced financial results and strong online student enrollment growth for the quarter ended June 30, 2003. Second quarter operational and financial highlights include: -- Sylvan Learning Systems reported pro forma income from continuing operations of $0.21 per share for second quarter 2003, driven by a 36% increase in revenue from continuing operations. GAAP net income for the second quarter 2003 was $0.75 per share. (See Reconciliation - 2003 GAAP to Pro Forma Results for details). -- The previously announced acquisition of an 80% interest in the entity that controls the operations of Universidad Nacional Andres Bello (UNAB) and its technical/vocational affiliate AIEP was finalized according to plan. These two institutions combined have more than 20,000 students. This alliance significantly broadens the Company's presence in Chile, which enjoys strong growth in higher education enrollments. -- Online degree enrollment at June 30, 2003 increased 17% to 15,163 students compared to 12,968 students at June 30, 2002. Online degree enrollment includes students at Walden University, National Technological University, and students enrolled in Canter's distance learning master's program. -- On June 30, 2003, Sylvan Learning Systems completed the previously announced transaction to divest its K-12 business units, disband Sylvan Ventures, and focus exclusively on post-secondary education. -- Sylvan Learning Systems announced its plan to divest its English language instruction business, the Wall Street Institute (WSI). The disposition of WSI will complete Sylvan's transformation into a company focused exclusively on post-secondary education. Sylvan expects to complete the sale of WSI within a year. "While the market for English language instruction remains attractive, we made the decision to divest WSI to ensure our total focus on the expanding market for degree-seeking students pursuing multi-year programs," stated Douglas Becker, Chairman and Chief Executive Officer of Sylvan Learning Systems. "Our focus enables us to achieve our objective of expanding global access to higher education and preparing our students for exciting new career opportunities." Financial Results The following financial discussion reflects GAAP results from continuing operations, including non-strategic assets held for sale, as well as the operating results and realized gain and anticipated losses on the disposal of certain discontinued operations. The financial tables included in this release reconcile GAAP results to pro forma results as if the completed sale of Sylvan's K-12 assets had closed January 1, 2003. Given the transformational nature of these transactions, the pro forma presentation is included to provide investors meaningful information regarding the operations of Sylvan Learning Systems' post-secondary business units excluding the one-time gain and various charges associated with the completed transactions and the pending sale of WSI. Continuing Operations Total revenues from continuing operations for the second quarter of 2003 were $116.2 million, an increase of 36% compared to total revenues of $85.2 million in the second quarter of 2002. Total loss from continuing operations for the second quarter of 2003 was $13.2 million, compared to income of $3.7 million in the second quarter of 2002. Net income for the second quarter was $30.9 million, or $0.75 per share on shares outstanding of 41.2 million. This compares to a net loss of $5.1 million, or a loss of $0.13 per share on shares outstanding of 40.1 million for the same period in 2002. Pro forma after-tax income from continuing operations for the quarter, assuming the sale of Sylvan's K-12 assets had closed on January 1, 2003, and excluding previously announced gains and charges resulting from such transactions, would have been $9.2 million or $0.21 per share (See Reconciliation - 2003 GAAP to Pro Forma Results for details). For the six-month period ended June 30, 2003, total revenues from continuing were $211.6 million, compared to total revenues of $155.8 million in the same period of 2002. Total operating loss from continuing operations for the six-month period was $26.3 million, compared to income of $1.7 million in the same period of 2002. Net income for the six-month period was $14.9 million, or $0.36 per share on shares outstanding of 40.8 million. This compares to a net loss of $84.1 million, or a loss of $2.12 per share on shares outstanding of 39.8 million for the same period in 2002. Pro forma after-tax income from continuing operations for the six-month period ended June 30, 2003, assuming the sale of Sylvan's K-12 assets had closed on January 1, 2003, and excluding previously announced gains and charges resulting from such transactions, would have been $10.8 million or $0.25 per share (See Reconciliation - 2003 GAAP to Pro Forma Results for details). Discontinued Operations & Assets Held for Sale Results from discontinued operations include the operations of Sylvan Learning Center, Sylvan Education Solutions, Schulerhilfe, eSylvan, and Connections Academy. These K-12 businesses were sold as part of the previously announced transaction, and currently operate under their existing brand names as part of a private entity. Sylvan UK, Sylvan France, and WSI are also included in results from discontinued operations. These assets are expected to be sold within the next twelve months. During the second quarter, certain previously announced gains and charges were recorded in connection with the completed and pending transaction outlined above: -- The Company recorded a pre-tax gain of $110.4 million from the sale of its K-12 businesses. In addition, the exercise period for options in the Company held by employees of the disposed K-12 businesses was extended for a two-year period following the closing. This extension resulted in a non-cash discontinued operation charge of $4.6 million. -- The Company recorded $22.2 million of the previously estimated $25.0 million non-cash compensation charge as a result of the conversion of options to purchase common stock of a subsidiary currently held by certain employees of Sylvan International Universities into options in Sylvan Learning Systems. An additional $6.2 million will be recorded over the remaining vesting period ending in 2008, of which $2.8 will be recorded in 2004. -- In connection with the planned disposition of WSI, the Company recorded a $25.5 million pre-tax charge to write down the carrying value of WSI to its net realizable value. This charge included a $10.4 million loss related to the reversal of the accumulated foreign currency translation adjustment. This charge and the year to date operating results of WSI are reflected as part of the Company's results from discontinued operations. Supplemental Financial Data Total cash and marketable securities at the end of the second quarter were approximately $189.4 million, while total corporate debt was approximately $91.8 million, excluding the $44.4 million convertible debenture remaining after the K-12 transaction. The following statements are based on current expectations. These statements are forward-looking and actual results may differ materially. The pro forma guidance assumes the sale of Sylvan's K-12 assets had closed January 1, 2003. The Company reiterates full year pro forma EPS guidance of $0.85 to $0.88. Third Quarter 2003 Outlook The third quarter is the seasonally weakest quarter for the company's campus-base business, because all of its universities, with the exception of those in Chile, are closed for some portion of the quarter for summer break. -- Company anticipates total revenue to be between $100 and $105 million for the third quarter 2003, an increase of at least 39% over the prior year. -- Company anticipates its campus-based revenue to be between $75 and $80 million for the third quarter 2003, with operating margins of between 10% and 11%. -- Company anticipates its online revenue to be between $24 and $25 million for the third quarter 2003, with operating margins of between 16% and 17% for third quarter 2003. -- General and administrative expenses are expected to be approximately $2.5 million for the third quarter 2003. -- Diluted earnings per share from continuing operations are anticipated to be between $0.14 and $0.15 for the third quarter 2003. Reconciliation - 2003 GAAP to Pro Forma Results Three Six (in millions, except per share) Months Months Ended Ended 6/30/03 6/30/03 Pretax (Loss) Income from Continuing Operations $(16.5) $(37.5) Adjustments (Pretax): Non-Strategic Ventures Losses 1.3 18.7 Non-Cash Compensation Charges 22.2 22.3 Pro forma Results from Core Operations $7.0 $3.5 G&A Attributable to Discontinued Operations 3.5 6.9 Net Interest Income 2.3 4.5 Pro Forma Pretax Results - 1/1/03 Transaction Close $12.8 $14.9 Interest on Convertible Debentures (Pretax) $0.5 $1.1 Tax Rate for Continuing Operations 28% 28% Pro Forma Weighted Avg. Shares Outstanding - Diluted 45.8 45.6 Pro Forma EPS $0.21 $0.25 About Sylvan Learning Systems Sylvan Learning Systems, Inc. (NASDAQ: SLVN) is focused exclusively on providing a superior university experience to nearly 100,000 students through the leading global network of accredited campus-based and online universities. Addressing the rapidly growing global demand for higher education, Sylvan offers a broad range of career-oriented undergraduate and graduate programs through seven universities located in Europe and Latin America. Through two U.S. based and accredited universities, Sylvan offers the growing population of non-traditional, working-adult students the convenience and flexibility of distance learning to pursue undergraduate, master's and doctorate degree programs in major career fields including engineering, education, business, and healthcare. Note: As a result of the completed sale of the Company's K-12 assets, the publicly traded Sylvan Learning Systems is expected to change its corporate name and NASDAQ ticker by June 2004. Forward Looking Statements This release includes information that could constitute forward-looking statements made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. Any such forward-looking statements may involve risk and uncertainties. Although the Company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, the Company's actual results could differ materially from those described in the forward-looking statements: The following factors might cause such a difference: - -- The Company's operations can be materially affected by competition in its target markets and by overall market conditions, among other factors. - -- The Company's foreign operations, in particular, are subject to political, economic, legal, regulatory and currency-related risks. Additional information regarding these risk factors and uncertainties is detailed from time to time in the Company's filings with the Securities and Exchange Commission, including but not limited to our most recent Forms 10-K and 10-Q, available for viewing on our website. (To access this information on our website, please click on "Investor Relations," "SEC Filings") Sylvan Learning Systems, Inc. & Subsidiaries Consolidated Statement of Operations (Amounts in Thousands, except per share data) Three Months Ended June 30, ---------------------------------------- $ % 2003 2002 Variance Variance --------- ---------- --------- --------- (Restated) (d) Revenues Spain $23,296 $18,305 $4,991 27% Hospitality/Switzerland (a) 11,415 5,256 6,159 117% Chile 20,173 10,974 9,199 84% Mexico 31,086 27,601 3,485 13% France 2,011 1,546 465 30% --------- ---------- --------- --------- Campus Based total 87,981 63,682 24,299 38% --------- ---------- --------- --------- Online 27,793 21,450 6,343 30% Sylvan Ventures (greater 468 26 442 than)200% --------- ---------- --------- --------- Total Revenues 116,242 85,158 31,084 36% --------- ---------- --------- --------- Core Operating Expenses 97,869 72,008 25,861 36% Ventures Operating Expenses 654 494 160 32% Non-Cash Compensation Expense 22,158 - 22,158 N/A Core General & Administrative Expenses 5,900 5,712 188 3% Ventures General & Administrative Expenses 780 965 (185) -19% --------- ---------- --------- --------- Total Operating Expenses 127,361 79,179 48,182 61% --------- ---------- --------- --------- Operating Income (Loss) (11,119) 5,979 (17,098) N/A Non-Operating Items Interest & Other Income 260 1,262 (1,002) -79% Interest Expense (3,155) (1,972) (1,183) -60% Equity in Net Income of Affiliates 65 61 4 7% Minority Interest (2,507) (1,884) (623) -33% Exchange Gain 305 359 (54) -15% Sylvan Ventures non- operating (303) (1,264) 961 76% --------- ---------- --------- --------- Total Non-Operating items (5,335) (3,438) (1,897) -55% --------- ---------- --------- --------- Income (Loss) from continuing operations before income taxes and cumulative effect of change in accounting principle (16,454) 2,541 (18,995) N/A Income tax benefit (b) 3,222 1,153 2,069 179% --------- ---------- --------- --------- Income (Loss) from continuing operations before cumulative effect of change in accounting principle (13,232) 3,694 (16,926) N/A Income (Loss) from discontinued operations, net of income tax (557) 2,432 (2,989) N/A Gain (Loss) on disposal of discontinued operations, net of income tax 44,640 (11,209) 55,849 N/A --------- ---------- --------- --------- Income (Loss) before cumulative effect of change in accounting principle 30,851 (5,083) 35,934 N/A Cumulative effect of change in accounting principle, net of tax benefit of $7,700 - - - N/A --------- ---------- --------- --------- Net Income (Loss) $30,851 $(5,083) $35,934 N/A ========= ========== ========= ========= Weighted average shares - Basic 41,164 40,110 Weighted average shares - Diluted 48,963 47,605 EPS-Net Income (Loss) Basic $0.75 $(0.13) EPS (Basic)-Income (Loss) from continuing operations before cumulative effect of change in accounting principle $(0.32) $0.09 EPS (Diluted)-Income (Loss) from continuing operations $(0.32) $0.08 before cumulative effect of change in accounting principle Reconciliation - Pro Forma Income from Continuing Operations Income (Loss) from continuing operations before income taxes and cumulative effect of change in accounting principle $(16,454) $2,541 Non-Strategic Ventures Losses 1,269 2,697 Non-Cash Compensation Expense 22,158 - G&A Attributable to Discontinued Operations 3,557 N/A Core operations - non operating 2,282 N/A --------- Subtotal $12,812 Tax Impact at 28% (3,587) --------- Pro Forma income from continuing operations (c) $9,225 Weighted average shares - Pro Forma 45,847 EPS - As if transaction happened January 1, 2003 $0.21 Segment Operating Profit (Loss): Campus Based $12,681 $9,025 $3,656 41% Online 5,224 4,099 1,125 27% Sylvan Ventures (966) (1,433) 467 33% a) Hospitality includes the operating results of Les Roches, Marbella and Glion. b) Represents blended tax rate excluding Sylvan Ventures of 20% and a tax rate for Sylvan Ventures of 40% c) Reconciling items represent adjustments as if the sale of the K-12 business units and decision to dispose of the non-Strategic venture assets occurred January 1, 2003. d) The 2002 operating results have been restated to present the K-12 and WSI business units as discontinued operations. Sylvan Learning Systems, Inc. & Subsidiaries Consolidated Statement of Operations (Amounts in Thousands, except per share data) Six Months Ended June 30, ---------------------------------------- $ % 2003 2002 Variance Variance --------- ---------- --------- --------- (Restated) (d) Revenues Spain $45,283 $34,979 $10,304 29% Hospitality/Switzerland (a) 22,980 9,042 13,938 154% Chile 24,904 14,651 10,253 70% Mexico 68,298 63,674 4,624 7% France 3,909 2,968 941 32% --------- ---------- --------- --------- Campus Based total 165,374 125,314 40,060 32% --------- ---------- --------- --------- Online 45,289 30,460 14,829 49% Sylvan Ventures (greater 903 26 877 than)200% --------- ---------- --------- --------- Total Revenues 211,566 155,800 55,766 36% --------- ---------- --------- --------- Core Operating Expenses 186,670 137,366 49,304 36% Ventures Operating Expenses (greater 2,122 494 1,628 than)200% Non-Cash Compensation Expense 22,333 - 22,333 N/A Core General & Administrative Expenses 11,694 10,821 873 8% Ventures General & Administrative Expenses 1,756 2,270 (514) -23% --------- ---------- --------- --------- Total Operating Expenses 224,575 150,951 73,624 49% --------- ---------- --------- --------- Operating Income (Loss) (13,009) 4,849 (17,858) N/A Non-Operating Items Interest & Other Income 630 2,345 (1,715) -73% Interest Expense (5,529) (3,938) (1,591) -40% Equity in Net Income of Affiliates 131 48 83 173% Minority Interest (4,256) (3,227) (1,029) -32% Exchange Gain 236 312 (76) -24% Sylvan Ventures non- (less operating than)- (15,702) (2,640) (13,062) 200% --------- ---------- --------- --------- Total Non-Operating items (less than)- (24,490) (7,100) (17,390) 200% --------- ---------- --------- --------- Income (Loss) from continuing operations before income taxes and cumulative effect of change in accounting principle (less than)- (37,499) (2,251) (35,248) 200% Income tax benefit (b) 11,235 3,953 7,282 184% --------- ---------- --------- --------- Income (Loss) from continuing operations before cumulative effect of change in accounting principle (26,264) 1,702 (27,966) N/A Income (Loss) from discontinued operations, net of income tax 1,726 4,007 (2,281) -57% Gain (Loss) on disposal of discontinued operations, net of income tax 39,423 (11,209) 50,632 N/A --------- ---------- --------- --------- Income (Loss) before cumulative effect of change in accounting principle 14,885 (5,500) 20,385 N/A Cumulative effect of change in accounting principle, net of tax benefit of $7,700 - (78,634) 78,634 N/A --------- ---------- --------- --------- Net Income (Loss) $14,885 $(84,134) $99,019 N/A ========= ========== ========= ========= Weighted average shares - Basic 40,825 39,767 Weighted average shares - Diluted 47,974 47,284 EPS-Net Income (Loss) Basic $0.36 $(2.12) EPS (Basic)-Income (Loss) from continuing operations before cumulative effect of change in accounting principle $(0.64) $0.04 EPS (Diluted)-Income (Loss) from continuing operations $(0.64) $0.04 before cumulative effect of change in accounting principle Reconciliation - Pro Forma Income from Continuing Operations Income (Loss) from continuing operations before income taxes and cumulative effect of change in accounting principle $(37,499) $(2,251) Non-Strategic Ventures Losses 18,677 5,378 Non-Cash Compensation Expense 22,333 - G&A Attributable to Discontinued Operations 6,855 N/A Core operations - non operating 4,564 N/A --------- Subtotal $14,930 Tax Impact at 28% (4,180) --------- Pro Forma income from continuing operations (c) $10,750 Weighted average shares - Pro Forma 45,576 EPS - As if transaction happened January 1, 2003 $0.25 Segment Operating Profit (Loss): Campus Based $21,234 $16,101 $5,133 32% Online 2,759 2,307 452 20% Sylvan Ventures (2,975) (2,738) (237) -9% a) Hospitality includes the operating results of Les Roches, Marbella and Glion. b) Represents blended tax rate excluding Sylvan Ventures of 20% and a tax rate for Sylvan Ventures of 40% c) Reconciling items represent adjustments as if the sale of the K-12 business units and decision to dispose of the non-Strategic venture assets occurred January 1, 2003. d) The 2002 operating results have been restated to present the K-12 and WSI business units as discontinued operations. CONTACT: Sylvan Learning Systems, Inc. Sean Creamer, 410-843-8991 Chris Symanoskie, 410-843-6394 -----END PRIVACY-ENHANCED MESSAGE-----