Sylvan reports record revenue, earnings Big 3rd quarter led by growth in contract education unit


October 30, 1998|By Kristine Henry | Kristine Henry,SUN STAFF

Buoyed by growth in its contract education services division, Sylvan Learning Systems Inc. reported yesterday record revenue and earnings for its third quarter.

The Baltimore-based education company's net income for the three months that ended Sept. 30 was $12.9 million, or 26 cents per diluted share, up 74 percent from $7.4 million, or 16 cents a share, in the third quarter of 1997.

Although each of Sylvan's business divisions grew substantially, contract education services led the way.

Revenue climbed 61 percent to $15.9 million. Sylvan credited the growth to its first-quarter acquisition of the Canter Group, a provider of training and development programs for teachers, and a 35 percent increase in revenue from school contracts.

Overall revenue for the quarter increased 54 percent to $109.7 million. Excluding businesses acquired since last year's third quarter, revenue increased 38 percent.

Sylvan shares closed yesterday at $30.50, up $1.8125.

Sylvan also said yesterday that it will purchase Schulerhilfe, gmbH, a tutoring business based in Gelsenkirchen, Germany, for $31 million.

Schulerhilfe, which has 700 franchise locations and 178 company-owned centers, will be acquired for $16 million in cash and $3 million in restricted stock at closing and an additional $12 million in restricted stock or cash after one year. The deal is expected to close within a month.

Schulerhilfe will be Sylvan's second purchase overseas; it acquired Barcelona-based Wall Street Institute International (WSI) for $26 million in early 1997. WSI, a franchiser and operator of learning centers that teach English through computer-based and live instruction, operates throughout Europe and Latin America.

The Schulerhilfe purchase is "beautifully synergistic," said Scott L. Soffen, an analyst at Legg Mason Inc. in Baltimore.

"They're buying a German company that does the same thing in Germany as what they do in North America. It's the safest way for them to learn how well their model works overseas," Soffen said.

"My guess is that after they're done with Germany they will move into the U.K. next. I think that for this company to sustain growth, international markets are a natural way to go."

Soffen rates Sylvan an "outperform," one notch down from a buy.

"This is just a spectacular quarter for the company," he said. "They have a very unique product that no one else is copying. They have a near monopoly on computer-based testing, with more sites than anyone else has. It's tough to rationalize why you would use anyone else. They have growing markets and a dominant share of those markets."

In the nine months that ended Sept. 30, Sylvan's revenue increased 47 percent to $295.4 million, or 30 percent excluding acquisitions after Sept. 30, 1997.

Net income in the nine months was $15.7 million, or 31 cents a share, compared with $16.7 million in the first nine months of 1997. Excluding costs associated with Sylvan's purchase of ASPECT Inc. in April, net income in the first nine months of 1998 would have been $24.6 million.

Pub Date: 10/30/98

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