Sylvan posts earnings gain of 36 percent in quarter All three divisions performed well, says Baltimore company

Education services

July 24, 1998|By Lorraine Mirabella | Lorraine Mirabella,SUN STAFF

Ending a quarter marked by a major acquisition and strong performances in all three of its divisions, Sylvan Learning Systems Inc. yesterday reported earnings growth of 36 percent from continuing operations.

Sylvan's earnings per share rose to 15 cents for the second quarter that ended June 30, up from 11 cents in the same period a year ago.

The figure for this year's second quarter excludes $9 million in costs related to its acquisition of San Francisco-based ASPECT Inc., which tutors foreign students in English. The figure for the year-earlier quarter excludes a $30 million termination fee from National Education Corp., which Sylvan tried unsuccessfully to acquire.

Excluding those costs brings Sylvan's net income to $7.4 million for the quarter, compared with $4.7 million a year earlier, the Baltimore-based educational services company said.

Sylvan's balance sheet showed a net loss of $1.5 million, or 3 cents per share, if the $9 million in acquisition costs is included.

Sylvan bought ASPECT -- which has centers in the United States, the United Kingdom, Australia and Canada -- for $65 million in stock in April.

"We are extremely pleased with all of our divisions' growth and improvement in revenue and profit," particularly in the revenue growth of the learning centers, said Douglas L. Becker, Sylvan's co-chief executive officer.

"We had a very strong quarter and a very strong six months, among the best in the company's history," said Vickie Glazar, spokeswoman.

Sylvan reported net income of $2.8 million, or 6 cents per share, for the first six months of 1998, compared with net income of $9.3 million or 22 cents per share in the same period last year.

Gross revenue jumped 44 percent, to $99.3 million, from $68.9 million in the second quarter of 1997.

Net income would have grown 57 percent for the quarter, excluding the acquisition costs.

For the six months ended that June 30, revenue rose 43 percent to $185.7 million.

Analysts, who said they had ex- pected a net loss and anticipated earnings per share of 15 cents from continuing operations, were impressed by the company's second-quarter results.

"This is a company that appears to be able to do no wrong," said Scott Soffen, an analyst with Legg Mason Wood Walker Inc. He called the 36 percent earnings increase "very impressive growth, particularly in an economy that, while doing well, wasn't robust in the last quarter."

Soffen noted that each of Sylvan's segments grew by more than 20 percent. The Learning Center division's revenue rose by $4.7 million, to $15.5 million, and the Contract Education Services division's revenue jumped to $25.6 million, a $7.3 million increase. Revenue from Sylvan's Prometric computer-based testing division rose by $18.4 million, to $58.2 million.

"They've clearly hit a nerve with the American public," Soffen said. "More and more parents are willing to pay for tutoring that they think will give their children an edge in this highly competitive environment. Their contract-service business has hit a nerve with teachers who have embraced the idea of Sylvan coming in and taking care of their most difficult students."

In addition, Soffen said, "the idea of using No. 2 pencils on tests used four times a year is going to be passe very soon," he said. "The new model is to take a computer-based test at your convenience."

Sylvan's shares closed yesterday at $34.56, down $2.31.

Pub Date: 7/24/98

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