-----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, LubQ/Dhv9OlsDbqnbkc9Jf/JSkgmBfsuR3n+/jGHUvZWkQP0mgnjHBjEb03c7ZkB 0OkPMhVcDZXZSirEBr8ZvQ== 0001157523-04-001609.txt : 20040219 0001157523-04-001609.hdr.sgml : 20040219 20040219080148 ACCESSION NUMBER: 0001157523-04-001609 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20040218 ITEM INFORMATION: ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20040219 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: 04614577 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 a4576223.txt SYLVAN 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): February 19, 2004 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 February 19, 2004. Item 12. Disclosure of Results of Operations and Financial Condition On February 19, 2004 the Company issued a press release announcing its financial results for the fourth quarter and year ended December 31, 2003. A copy of the release is furnished as Exhibit 99.01 to this Current Report on Form 8-K. The Registrant has posted this Current Report on Form 8-K on its internet website at www.sylvan.net. The information in this Form 8-K and the Exhibit attached hereto shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Exchange Act of 1933, except as shall be expressly set forth by specific reference in such filing. 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: February 19, 2004 Exhibit Index Exhibit Description 99.01 Press Release issued February 19, 2004. EX-99.01 3 a4576223ex99.txt EXHIBIT 99.1 PRESS RELEASE Exhibit 99.01 Sylvan Learning Systems, Inc. Reports Strong Fourth Quarter and Year End 2003 Results; Revenues Increase 41% and Operating Income More Than Doubles in Fiscal 2003 BALTIMORE--(BUSINESS WIRE)--Feb. 19, 2004--Sylvan Learning Systems, Inc. (NASDAQ: SLVN), the world's leading international provider of higher education, announced strong financial results for the quarter and year ended December 31, 2003. -- Fiscal year 2003 revenues increased 41% to $472.8 million, compared to $336.0 million in 2002. Fourth quarter 2003 revenues increased 43% to $154.9 million, compared to $108.2 million in 2002. -- Total operating income for 2003 increased 135% to $33.6 million, compared to $14.3 million in 2003. Total operating income for the fourth quarter 2003 increased 231% to $35.7 million, compared to $10.8 million in 2003. -- Pro forma after-tax income for 2003, assuming the sale of Sylvan's K-12 assets closed on January 1, 2003 and a normalized full-year tax rate of 25%, would have been $40.3 million or $0.89 per diluted share. On a GAAP basis, after-tax income from continuing operations for 2003 was $8.1 million or $0.18 per diluted share, compared to $3.3 million or $0.08 per diluted share in 2002. (See Reconciliation - 2003 GAAP to Pro Forma Results for details.) -- Pro forma after-tax income in the fourth quarter of 2003, assuming the sale of Sylvan's K-12 assets closed on January 1, 2003 and a normalized full-year tax rate of 25%, would have been $22.1 million or $0.47 per diluted share. On a GAAP basis, after-tax income from continuing operations for the fourth quarter 2003 was $28.6 million or $0.60 per diluted share, compared to $5.4 million or $0.13 per diluted share in 2002. (See Reconciliation - 2003 GAAP to Pro Forma Results for details.) -- Company issues 2004 earnings outlook of $1.22 to $1.24 per diluted share. -- Student enrollment at the Company's campus-based universities reached 101,000 students following its primary enrollment intake in October, an increase of 63% compared to the same period last year. -- Walden University reported an 82% year-over-year increase in total degree enrollments and an 84% increase in new student enrollments at December 31, 2003. Douglas Becker, Chairman and Chief Executive Officer of Sylvan Learning Systems, stated, "Sylvan is entering 2004 with tremendous momentum as a result of our enrollment successes in 2003. Growth at existing campuses, combined with new and acquired campuses produced a 63% increase in total enrollment, which drove enviable revenue growth and margin expansion. Most of our students enroll for three years or more - so momentum in new student enrollments carries forward to future years, giving us great confidence of continued success in 2004 and 2005." "This year, we will follow our simple formula of opening a few new campuses in key markets and increasing new student enrollments at our 33 campuses and in our online institutions. Our growth in earnings is derived largely from these actions." "Additionally, we hope to enter at least one new country and bolster our presence in existing countries with select acquisitions. We also expect to show continued progress in our newer working-adult and technical/vocational market segments. This will enable us to grow at a high rate for many years to come." Mr. Becker added, "Sylvan's success is based on the success of our students. I have great confidence in our management team, employees, and faculty members around the world, all deeply committed to producing great results for our students and our company." Financial Results The following financial discussion reflects results from continuing operations 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 sale of Sylvan's K-12 assets 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 System's post-secondary business units excluding the one-time gain and various charges associated with the completed transactions and the pending sale of WSI. Total revenues for the fourth quarter of 2003 were $154.9 million, an increase of 43% compared to total revenues of $108.2 million in the fourth quarter of 2002. Total operating income for the fourth quarter increased 231% to $35.7 million, versus $10.8 million in the fourth quarter of 2002. After-tax income from continuing operations for the quarter was $28.6 million or $0.60 per share on diluted shares outstanding of 47.1 million. For the year ended December 31, 2003, total revenues from continuing operations were $472.8 million, an increase of 41% compared to total revenues of $336.0 million in 2002. Total operating income for the year was $33.6 million compared to $14.3 million in 2002, an increase of 135%. After-tax income from continuing operations for the year was $8.1 million, or $0.18 per share on diluted shares outstanding of 43.8 million. This compares to $3.3 million, or $0.08 per diluted share on shares outstanding of 40.1 million in 2002. Pro forma after-tax income from continuing operations for the three-month and twelve-month periods ended December 31, 2003, assuming the sale of Sylvan's K-12 assets closed on January 1, 2003 and a normalized full-year tax rate of 25%, and excluding previously announced gains and charges resulting from such transactions, would have been $0.47 and $0.89 per diluted share, respectively. (See Reconciliation - 2003 GAAP to Pro Forma Results for details.) Total cash and marketable securities at the end of 2003 were approximately $109 million, while total corporate debt was approximately $97 million. Results from discontinued operations for the fourth quarter 2003 include the operations of Sylvan UK, Sylvan France, and WSI. These assets are expected to be sold within a year. Online Higher Education Enrollment The company's online division reported total degree enrollments increased 6% to 15,768 students at December 31, 2003, compared to 14,851 students for the same period in 2002. As previously disclosed, total enrollment growth is temporarily impacted by Canter's discontinuation of certain third-party university partnerships. Focusing on strategic partnerships, such as Walden University, will significantly enhance future revenue growth and operating margins. At December 31, 2003, Walden University reported an 82% year-over-year increase in total degree enrollments and an 84% increase in new student enrollments. First Quarter And Fiscal 2004 Outlook The following statements are based on current expectations. These statements are forward-looking and actual results may differ materially. Fiscal Year 2004 Outlook: -- Sylvan Learning Systems anticipates total revenues of between $590 and $625 million for 2004, an increase of 25% or more over 2003. -- The Company anticipates campus-based revenue to be between $465 and $495 million for 2004, with operating margins between 19% and 20%. -- The Company anticipates online revenue to be between $125 and $130 million for 2004, with operating margins between 14% and 15%. -- General and administrative expenses are expected to be $20 to $21 million in 2004. -- The Company currently believes that it will achieve EPS of $1.22 to $1.24 per diluted share for the year ending December 31, 2004. -- Fully diluted shares outstanding for 2004 are projected to be approximately 47.7 million. -- Total enrollment at Sylvan's network of campus-based and online universities is expected to grow at 18% to 20% in 2004. First Quarter 2004 Outlook: -- Sylvan Learning Systems anticipates total revenue of $120 to $130 million for the first quarter 2004. -- The Company anticipates campus-based revenue of $96 to $105 million for the first quarter 2004, with operating margins between 7% and 8%. -- The Company anticipates online revenue of $24 to $25 million for the first quarter 2004, with operating margin of (3%). -- General and administrative expenses are expected to be approximately $5 million in the first quarter 2004. -- The Company currently believes that it will achieve EPS of $0.00 to $0.01 per diluted share for the quarter ending March 31, 2004, the Company's seasonally weakest quarter. -- Fully diluted shares outstanding for the first quarter 2004 are projected to be approximately 47.4 million. Reconciliation - 2003 GAAP to Pro Forma Results (in millions, except per share) Three Months Twelve Months Ended 12/31/03 Ended 12/31/03 Pretax (Loss) Income from Continuing Operations $29.5 $1.5 Adjustments (Pretax): Non-Strategic Ventures Losses - 18.7 Non-Cash Compensation Charges - 22.2 Pro forma Results from Core Operations $29.5 $42.4 G&A Attributable to Discontinued Operations - 6.8 Net Interest Income - 4.5 Pro Forma Pretax Results - 1/1/03 Transaction Close $29.5 $53.7 Interest on Convertible Debentures (Pretax) - $1.3 Tax Rate 25% 25% Pro Forma Weighted Avg. Shares Outstanding - Diluted 47.1 46.2 Pro Forma EPS $0.47 $0.89 About Sylvan Learning Systems Sylvan Learning Systems, Inc. (NASDAQ: SLVN) is focused exclusively on providing a superior university experience to over 117,000 students through the leading international 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 eight universities located in Latin America and Europe. Through two U.S. based and accredited universities, Sylvan offers the growing population of working professionals 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 December 31, ------------------------------------------ 2003 2002 $ Variance % Variance ------------------------------------------ (Restated) (c) Revenues Spain $23,759 $20,421 $3,338 16% Hospitality/Switzerland(a) 12,885 11,593 1,292 11% Chile Region 41,003 10,822 30,181 GT200% Mexico Region 48,339 40,757 7,582 19% France 2,572 1,787 785 44% ------------------------------------------ Campus Based total 128,558 85,380 43,178 51% ------------------------------------------ Online Higher Education 26,355 22,505 3,850 17% Sylvan Ventures - 297 (297) N/A ------------------------------------------ Total Revenues 154,913 108,182 46,731 43% ------------------------------------------ Core Operating Expenses 115,368 89,570 25,798 29% Ventures Operating Expenses - 1,196 (1,196) N/A Non-Cash Compensation Expense 362 166 196 118% Core General & Administrative Expenses 3,488 5,290 (1,802) -34% Ventures General & Administrative Expenses - 1,190 (1,190) N/A ------------------------------------------ Total Operating Expenses 119,218 97,412 21,806 22% ------------------------------------------ Operating Income 35,695 10,770 24,925 GT200% Non-Operating Items Interest & Other Income 3,111 2,889 222 8% Loss on Assets Held For Sale - (894) 894 N/A Interest Expense (1,450) (2,237) 787 35% Equity in Net Income of Affiliates 28 258 (230) -89% Minority Interest (7,938) (3,272) (4,666) -143% Exchange Gain 48 81 (33) 41% Sylvan Ventures non- operating - (2,999) 2,999 N/A ------------------------------------------ Total Non-Operating items (6,201) (6,174) (27) 0% ------------------------------------------ Income from continuing operations before income taxes and cumulative effect of change in accounting principle 29,494 4,596 24,898 GT200% Income tax (expense) benefit (913) 824 (1,737) N/A ------------------------------------------ Income from continuing operations before cumulative effect of change in accounting principle 28,581 5,420 23,161 GT200% Loss from discontinued operations, net of income tax (5,263) (9,105) 3,842 42% Gain (Loss) on disposal of discontinued operations, net of income tax 2,507 (2,434) 4,941 N/A ------------------------------------------ Income (Loss) before cumulative effect of change in accounting principle 25,825 (6,119) 31,944 N/A Cumulative effect of change in accounting principle, net of tax benefit of $7,700 - - - N/A ------------------------------------------ Net Income (Loss) $25,825 $(6,119) $31,944 N/A ========================================== Weighted average shares - Basic 43,785 40,329 Weighted average shares - Diluted 47,130 40,329 EPS-Net Income (Loss) Basic $0.59 $(0.15) EPS-Net Income (Loss) Diluted $0.54 $(0.15) EPS (Basic)-Income (Loss) from continuing operations before cumulative effect of change in accounting principle $0.65 $0.13 EPS (Diluted)-Income (Loss) from continuing operations before cumulative effect of change in accounting principle $0.60 $0.13 Reconciliation - Pro Forma Income from Continuing Operations - ---------------------------- Income from continuing operations before income taxes and cumulative effect of change in accounting principle $29,494 Non-Strategic Ventures Losses - Non-Cash Compensation Expense - G&A Attributable to Discontinued Operations - Core operations - non operating - ----------- Subtotal $29,494 Tax Impact at 25% (7,374) ----------- Pro Forma income from continuing operations (b) $22,120 Weighted average shares - Pro Forma 47,130 EPS - As if transaction happened January 1, 2003 $0.47 Segment Operating Profit (Loss): Campus Based $33,157 $15,502 $17,655 114% Online Higher Education 6,388 2,813 3,575 127% Sylvan Ventures - (2,089) 2,089 N/A a) Hospitality includes the operating results of Les Roches, Marbella and Glion. b) 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. c) The 2002 operating results have been restated to present the K-12 and WSI business units as discontinued operations. GT = Greater Than Fiscal Year Ended December 31, ------------------------------------------ 2003 2002 $ Variance% Variance ------------------------------------------ (Restated) (c) Revenues Spain $70,588 $56,188 $14,400 26% Hospitality/Switzerland (a) 48,046 29,807 18,239 61% Chile Region 97,586 35,834 61,752 172% Mexico Region 151,947 133,577 18,370 14% France 7,921 5,859 2,062 35% ------------------------------------------ Campus Based total 376,088 261,265 114,823 44% ------------------------------------------ Online Higher Education 95,815 74,343 21,472 29% Sylvan Ventures 903 395 508 129% ------------------------------------------ Total Revenues 472,806 336,003 136,803 41% ------------------------------------------ Core Operating Expenses 394,512 291,921 102,591 35% Ventures Operating Expenses 2,122 2,592 (470) -18% Non-Cash Compensation Expense 23,050 1,046 22,004 GT200% Core General & Administrative Expenses 17,774 21,318 (3,544) -17% Ventures General & Administrative Expenses 1,756 4,804 (3,048) -63% ------------------------------------------ Total Operating Expenses 439,214 321,681 117,533 37% ------------------------------------------ Operating Income 33,592 14,322 19,270 135% Non-Operating Items Interest & Other Income 6,903 6,932 (29) 0% Loss on Assets Held For Sale - (8,253) 8,253 N/A Interest Expense (8,837) (8,158) (679) -8% Equity in Net Income of Affiliates 197 379 (182) -48% Minority Interest (14,947) (6,880) (8,067) -117% Exchange Gain 257 641 (384) -60% Sylvan Ventures non- operating (15,702) (5,970) (9,732) -163% ------------------------------------------ Total Non-Operating items (32,129) (21,309) (10,820) -51% ------------------------------------------ Income (Loss) from continuing operations before income taxes and cumulative effect of change in accounting principle 1,463 (6,987) 8,450 N/A Income tax benefit 6,624 10,285 (3,661) -36% ------------------------------------------ Income from continuing operations before cumulative effect of change in accounting principle 8,087 3,298 4,789 145% Loss from discontinued operations, net of income tax (3,882) (3,964) 82 2% Gain (Loss) on disposal of discontinued operations, net of income tax 41,930 (16,643) 58,573 N/A ------------------------------------------ Income (Loss) before cumulative effect of change in accounting principle 46,135 (17,309) 63,444 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) $46,135 $(95,943) $142,078 N/A ========================================== Weighted average shares - Basic 41,980 40,053 Weighted average shares - Diluted 43,778 40,053 EPS-Net Income (Loss) Basic $1.10 $(2.40) EPS-Net Income (Loss) Diluted $1.05 $(2.40) EPS (Basic)-Income (Loss) from continuing operations before cumulative effect of change in accounting principle $0.19 $0.08 EPS (Diluted)-Income (Loss) from continuing operations before cumulative effect of change in accounting principle $0.18 $0.08 Reconciliation - Pro Forma Income from Continuing Operations - ---------------------------- Income (Loss) from continuing operations before income taxes and cumulative effect of change in accounting principle $1,463 $(6,987) Non-Strategic Ventures Losses 18,677 12,971 Non-Cash Compensation Expense 22,158 N/A G&A Attributable to Discontinued Operations 6,855 N/A Core operations - non operating 4,564 N/A ----------- Subtotal $53,717 Tax Impact at 25% (13,429) ----------- Pro Forma income from continuing operations (b) $40,288 Weighted average shares - Pro Forma 46,229 EPS - As if transaction happened January 1, 2003 (d) $0.89 Segment Operating Profit (Loss): Campus Based $64,103 $34,634 $29,469 85% Online Higher Education 13,288 9,053 4,235 47% Sylvan Ventures (2,975) (7,001) 4,026 58% a) Hospitality includes the operating results of Les Roches, Marbella and Glion. b) 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. c) The 2002 operating results have been restated to present the K-12 and WSI business units as discontinued operations. d) In calculating EPS, interest related to the convertible debentures must be added back to numerator. GT = Greater Than CONTACT: Sylvan Learning Systems, Inc. Sean Creamer, 410/843-8991 Chris Symanoskie, 410/843-6394 -----END PRIVACY-ENHANCED MESSAGE-----