Strayer Education, Inc. Reports Fourth Quarter and Full Year 2013 Revenues and Earnings; Winter Term 2014 Enrollments …

HERNDON, Va.–(BUSINESS WIRE)–Strayer Education, Inc. (Nasdaq: STRA) today announced financial results
for the three months and year ended December 31, 2013. Financial
highlights are as follows:

Three Months Ended December 31

  • Revenues for the three months ended December 31, 2013 decreased 13% to
    $124.1 million compared to $141.9 million for the same period in 2012,
    principally due to lower enrollment and partly offset by higher
    revenue per student.
  • Loss from operations was ($30.1) million for the three months ended
    December 31, 2013 compared to income from operations of $28.7 million
    for the same period in 2012. Loss from operations includes $54.7
    million in expense related to the Company’s previously announced
    restructuring. Excluding these charges, income from operations was
    $24.6 million for the three months ended December 31, 2013. Operating
    margin was -24.3% as reported, or 19.8% excluding the restructuring
    charges, compared to 20.2% in 2012.
  • Net loss was ($19.0) million for the three months ended December 31,
    2013 compared to net income of $16.6 million for the same period in
    2012. Net loss for the quarter includes approximately $33.0 million in
    after tax charges related to the previously announced restructuring.
    Excluding these charges, net income was $14.0 million.
  • Diluted loss per share was ($1.80) compared to diluted earnings per
    share of $1.47 for the same period in 2012. Diluted loss per share for
    the quarter includes $3.12 per share in after tax charges related to
    the previously announced restructuring. Excluding these charges,
    diluted earnings per share was $1.32. Diluted weighted average shares
    outstanding decreased 7% to 10,557,000 from 11,314,000 for the same
    period in 2012.

Year Ended December 31

  • Revenues for the year ended December 31, 2013 decreased 10% to $503.6
    million compared to $562.0 million for the same period in 2012,
    principally due to lower enrollment.
  • Income from operations was $32.7 million for the year ended December
    31, 2013 compared to $113.6 million for the same period in 2012, a
    decrease of 71%. Income from operations in 2013 includes $54.7 million
    in expense related to the Company’s previously announced
    restructuring. Excluding these charges, income from operations was
    $87.4 million. In 2013, operating income margin was 6.5% as reported,
    or 17.4% excluding the restructuring charges, compared to 20.2% in
    2012.
  • Net income was $16.4 million for the year ended December 31, 2013
    compared to $65.9 million for the same period in 2012, a decrease of
    75%. Net income for 2013 includes approximately $33.0 million in after
    tax charges related to the previously announced restructuring.
    Excluding these charges, net income was $49.3 million.
  • Diluted earnings per share was $1.55 compared to $5.76 for the same
    period in 2012, a decrease of 73%. Diluted earnings per share for the
    year includes $3.10 per share in after tax charges related to the
    previously announced restructuring. Excluding these charges, diluted
    earnings per share was $4.64. Diluted weighted average shares
    outstanding decreased 7% to 10,624,000 from 11,440,000 for the same
    period in 2012.

Balance Sheet and Cash Flow

At December 31, 2013, the Company had cash and cash equivalents of $94.8
million. The Company generated $84.1 million in cash from operating
activities in 2013 compared to $82.1 million during the same period in
2012. Capital expenditures in 2013 were $8.7 million compared to $24.7
million for the same period in 2012.

The Company is party to a revolving credit and term loan agreement. This
credit facility, which is secured by the assets of the Company, provides
for a $125.0 million term loan facility and $100.0 million revolving
credit facility with a maturity date of December 31, 2016. At December
31, 2013, the Company had $121.9 million outstanding under its term loan
and no outstanding balance under its revolving credit facility.

The company had $70.0 million of share repurchase authorization
remaining at December 31, 2013. No shares were purchased in the fourth
quarter of 2013.

For the fourth quarter of 2013, bad debt expense as a percentage of
revenues was 4.8% compared to 4.5% for the same period in 2012. Days
sales outstanding was 14 days at the end of the fourth quarter of 2013,
compared to 15 days at the end of the fourth quarter of 2012.

Student Enrollment

Total enrollment at Strayer University for the 2014 winter term
decreased 14% to 41,098 students compared to 47,926 students for the
same term in 2013. Across the Strayer University campus and online
system, new student enrollments decreased 2% while continuing student
enrollments decreased 17%.

Restructuring

As previously announced, Strayer University implemented a restructuring
during the fourth quarter of 2013. This restructuring, which resulted in
a charge of approximately $55 million in the fourth quarter, is expected
to reduce annual operating expenses by an estimated $50 million
beginning in 2014. Approximately $6 million of the charge reduced cash
flow from operating activities in the fourth quarter.

As part of this restructuring, Strayer University closed approximately
20 physical locations predominantly in the Midwest. As previously
announced, these closures affect approximately 5% of the University’s
enrollment or about 2,300 students in the fall term. Affected students,
a majority of whom were already taking 100% of their classes online,
have been offered support to continue their education online.

Of the $55 million fourth quarter charge, approximately $48 million was
for lease and related facility closure expenses and $7 million for
personnel-related expenses.

2014 Annual Meeting of Stockholders

The Company announced today that its 2014 Annual Meeting of Stockholders
will take place on Tuesday, May 6, 2014 at the Company’s office located
at 2303 Dulles Station Blvd., Herndon, Virginia 20171. The record date
for this annual meeting will be March 10, 2014.

Common Stock and Common Stock Equivalents

At December 31, 2013, the company had 10,797,464 common shares issued
and outstanding, including 287,773 shares of restricted stock. The
Company also had 200,000 restricted stock units outstanding, and 100,000
unvested stock options outstanding.

Conference Call with Management

Strayer Education, Inc. will host a conference call to discuss its
fourth quarter 2013 earnings at 10:00 a.m. (ET) today. To participate in
the live call, investors should dial (877) 303-9047 10 minutes prior to
the start time. In addition, the call will be available via live
webcast. 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. Following
the call, the webcast will be archived and available at www.strayereducation.com.

About Strayer Education, Inc.

Strayer Education, Inc. (Nasdaq: STRA) is an education services holding
company that owns Strayer University. Strayer’s mission is to make
higher education achievable 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,
health services administration, public administration, and criminal
justice to working adult students. Strayer University also offers an
executive MBA online and corporate training programs through its Jack
Welch Management Institute. 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 based in Washington, D.C. and 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.

Forward-Looking Statements

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 (the “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. The statements are based on the Company’s current
expectations and are subject to a number of assumptions, 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 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 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 Company’s Annual Report on Form 10-K
for the fiscal year ended December 31, 2012 and in its subsequent
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.

Use of Non-GAAP Financial Information

This press release contains non-GAAP financial measures, which are
intended to supplement, but not be a substitute for, comparable GAAP
measures. Management uses, and chooses to disclose to investors, these
non-GAAP financial measures because (i) such measures provide an
additional analytical tool to clarify the Company’s results from
operations and help to identify underlying trends in its results of
operations, (ii) as to the non-GAAP earnings measures, such measures
help compare the Company’s performance on a consistent basis across time
periods, and (iii) these non-GAAP measures are employed by the Company’s
management in its own evaluation of performance and are utilized in
financial and operational decision-making processes, such as budgeting
and forecasting. Exclusion of items in the non-GAAP presentation should
not be construed as an inference that these items are unusual,
infrequent or non-recurring. Other companies, including other companies
in the education industry, may calculate non-GAAP financial measures
differently, limiting their usefulness as a comparative measure across
companies.

 

STRAYER EDUCATION, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Amounts in thousands, except per share data)

 

 

 

 

For the three months ended

December 31,

 

 

For the year ended

December 31,

2012

 

 

2013

2012

 

 

2013

 

Revenues

$

141,933

$

124,084

 

$

561,979

$

503,600

Costs and expenses:

Instruction and educational support

77,685

102,041

300,098

310,446

Marketing

18,171

18,400

71,864

75,426

Admissions advisory

6,641

4,639

26,374

20,390

General and administration

 

10,711

 

29,099

 

 

50,056

 

64,637

Total costs and expenses

 

113,208

 

154,179

 

 

448,392

 

470,899

Income (loss) from operations

28,725

(30,095

)

113,587

32,701

Investment income

1

1

4

2

Interest expense

 

1,244

 

1,396

 

 

4,616

 

5,419

Income (loss) before income taxes

27,482

(31,490

)

108,975

27,284

Provision (benefit) for income taxes

 

10,855

 

(12,533

)

 

43,045

 

10,859

Net income (loss)

$

16,627

$

(18,957

)

$

65,930

$

16,425

 

Earnings (loss) per share:

Basic

$

1.47

$

(1.80

)

$

5.79

$

1.55

Diluted

$

1.47

$

(1.80

)

$

5.76

$

1.55

 

Weighted average shares outstanding:

Basic

11,276

10,510

11,390

10,584

Diluted

11,314

10,557

11,440

10,624

 

 

STRAYER EDUCATION, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share and per share data)

 

 

 

 

 

December 31,

December 31,

2012

2013

ASSETS

Current assets:

Cash and cash equivalents

$

47,517

$

94,760

Tuition receivable, net

23,262

15,842

Income taxes receivable

4,454

Other current assets

 

14,422

 

 

16,738

Total current assets

89,655

127,340

Property and equipment, net

121,520

94,421

Deferred income taxes

3,279

17,129

Goodwill

6,800

6,800

Other assets

 

6,538

 

 

8,576

Total assets

$

227,792

 

$

254,266

 

LIABILITIES STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable and accrued expenses

$

39,124

$

38,527

Income taxes payable

2,569

Unearned tuition

494

656

Other current liabilities

281

281

Current portion of term loan

 

3,125

 

 

3,125

Total current liabilities

43,024

45,158

Term loan, less current portion

121,875

118,750

Other long-term liabilities

 

21,905

 

 

51,456

Total liabilities

 

186,804

 

 

215,364

Commitments and contingencies

Stockholders’ equity:

Common stock, par value $0.01; 20,000,000 shares authorized;
11,387,299 and 10,797,464 shares issued and outstanding at
December 31, 2012 and December 31, 2013, respectively

114

108

Additional paid-in capital

299

7,137

Retained earnings

41,311

31,629

Accumulated other comprehensive income (loss)

 

(736

)

 

28

Total stockholders’ equity

 

40,988

 

 

38,902

Total liabilities and stockholders’ equity

$

227,792

 

$

254,266

 

 

STRAYER EDUCATION, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

 

 

 

 

For the year ended December 31,

2012

 

 

2013

Cash flows from operating activities:

Net income

$

65,930

$

16,425

Adjustments to reconcile net income to net cash provided by
operating activities:

Amortization of gain on sale of assets

(281

)

(281

)

Amortization of deferred rent

323

(462

)

Amortization of deferred financing costs

795

780

Depreciation and amortization

23,973

35,563

Deferred income taxes

(38

)

(23,435

)

Stock-based compensation

5,464

9,291

Changes in assets and liabilities:

Tuition receivable, net

1,744

4,024

Other current assets

(2,130

)

2,434

Other assets

(135

)

494

Accounts payable and accrued expenses

5,673

(116

)

Income taxes payable and income taxes receivable

(4,306

)

7,799

Unearned tuition

(14,870

)

2,059

Other long-term liabilities

 

(80

)

 

29,518

 

Net cash provided by operating activities

 

82,062

 

 

84,093

 

 

Cash flows from investing activities:

Purchases of property and equipment

 

(24,733

)

 

(8,726

)

Net cash used in investing activities

 

(24,733

)

 

(8,726

)

 

Cash flows from financing activities:

Repurchase of common stock

(25,001

)

(24,999

)

Payments on term loan

(20,000

)

(3,125

)

Proceeds from term loan

47,500

Payments on revolving credit facility

(83,000

)

Proceeds from revolving credit facility

63,000

Common dividends paid

(47,328

)

Payment of deferred financing costs

 

(2,120

)

 

 

Net cash used in financing activities

 

(66,949

)

 

(28,124

)

Net (decrease) increase in cash and cash equivalents

(9,620

)

47,243

Cash and cash equivalents – beginning of period

 

57,137

 

 

47,517

 

Cash and cash equivalents – end of period

$

47,517

 

$

94,760

 

 

Non-cash transactions:

Purchases of property and equipment included in accounts payable

$

529

 

$

47

 

 

 

STRAYER EDUCATION, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION

(unaudited)

(Amounts in thousands, except per share data)

 

 

 

 

For the three months ended December 31, 2013

As Reported

 

 

Charges for

Restructuring

 

 

Adjusted to Exclude

Charges for

Restructuring

 

Revenues

$

124,084

 

$

 

$

124,084

Costs and expenses:

Instruction and educational support

102,041

(36,160

)

65,881

Marketing

18,400

(120

)

18,280

Admissions advisory

4,639

(248

)

4,391

General and administration

 

29,099

 

 

(18,162

)

 

10,937

Total costs and expenses

 

154,179

 

 

(54,690

)

 

99,489

Income (loss) from operations

(30,095

)

54,690

24,595

Investment income

1

1

Interest expense

 

1,396

 

 

 

 

1,396

Income (loss) before income taxes

(31,490

)

54,690

23,200

Provision (benefit) for income taxes

 

(12,533

)

 

21,767

 

 

9,234

Net income (loss)

$

(18,957

)

$

32,923

 

$

13,966

Earnings (loss) per share:

Basic

$

(1.80

)

$

3.13

$

1.33

Diluted

$

(1.80

)

$

3.12

$

1.32

 

 

For the year ended December 31, 2013

As Reported

Charges for

Restructuring

Adjusted to Exclude

Charges for

Restructuring

 

Revenues

$

503,600

 

$

 

$

503,600

Costs and expenses:

Instruction and educational support

310,446

(36,160

)

274,286

Marketing

75,426

(120

)

75,306

Admissions advisory

20,390

(248

)

20,142

General and administration

 

64,637

 

 

(18,162

)

 

46,475

Total costs and expenses

 

470,899

 

 

(54,690

)

 

416,209

Income from operations

32,701

54,690

87,391

Investment income

2

2

Interest expense

 

5,419

 

 

 

 

5,419

Income before income taxes

27,284

54,690

81,974

Provision for income taxes

 

10,859

 

 

21,767

 

 

32,626

Net income

$

16,425

 

$

32,923

 

$

49,348

Earnings per share:

Basic

$

1.55

$

3.11

$

4.66

Diluted

$

1.55

$

3.10

$

4.64

 

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