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

HERNDON, Va.--(BUSINESS WIRE)--

Strayer Education, Inc. 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. 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