Sylvan Learning reports record earnings

Profit for quarter soars by 58% to $6.8 million

revenue also sets mark


April 22, 1999|By Shanon D. Murray | Shanon D. Murray,SUN STAFF

Sylvan Learning Systems Inc. reported record earnings and revenue for the first quarter yesterday as profit jumped 58 percent to $6.8 million.

The earnings, equivalent to 13 cents per diluted share excluding a one-time charge, met the consensus estimate of six analysts surveyed by Zacks Investment Research.

Earnings in the year-ago period were $4.3 million, or 9 cents per diluted share.

Wall Street welcomed the news, sending Sylvan's stock up $4.9375, closing at $26.

"We are extremely comfortable with the way things are going," Lee McGee, Sylvan's chief financial officer, said during a conference call yesterday with analysts. "Given the seasonality of the business, we are confident in the indicators for the second quarter and for the year."

Revenue for the quarter that ended March 31 increased 43 percent -- including the Schulerhilfe German tutorial business Sylvan acquired for $31 million in October 1998 -- to $123.8 million this year from $86.3 million last year.

After the previously disclosed one-time charge of $1.3 million for an accounting change, net income was $5.5 million, or 10 cents a share.

Each of Sylvan's business divisions contributed to the revenue growth for the first quarter, with the Baltimore company's learning-center division leading the pack.

Its revenue increased 64 percent to $19.8 million, from $12.1 million in the first quarter of 1998.

The increase was 30 percent, excluding the Schulerhilfe German tutorial business.

Douglas L. Becker, Sylvan's co-chief executive, said the learning-center division is ripe for more growth.

"We are seven times the size of our nearest competitor, but we still only service one-half of 1 percent of the kids in the U.S. who can afford our services," Becker said.

"We're the dominant leader with a very small percentage penetration," he said.

"As more families realize tutoring is the way to help their children in school, we'll see more growth."

Arthur K. Weise, analyst with Warburg Dillon Read LLC in New York, who upgraded his stock rating for the company yesterday from "buy" to "strong buy," said Sylvan performed better than he expected.

"It's most impressive that the company is able to expand margins, considering its complex business model compared to other education companies," Weise said.

"It reflects Sylvan's ability to execute."

Pub Date: 4/22/99

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