Sylvan faces loss in 2001

Latest figures show 51 cents-a-share loss from venture capital unit

May 31, 2001|By Gus G. Sentementes | Gus G. Sentementes,SUN STAFF

Officials for Sylvan Learning Systems Inc. said yesterday that the company expects to increase its revenue this year by roughly 50 percent, but its investment arm will continue to drag down results.

Douglas L. Becker, chairman and chief executive, told the company's annual meeting yesterday that the company projects 2001 revenue to be $475 million to $490 million in an estimated $2 trillion worldwide market in educational services.

Projected earnings per diluted share will be 63 cents to 65 cents on net income of roughly $27 million, before subsidiary Sylvan Ventures' projected $50 million after-tax loss is factored in, said Sean Creamer, Sylvan Learning's interim chief financial officer.

After taking account of the loss, Sylvan would face a loss of $23 million, or 51 cents per share, based on numbers provided by the company.

In 2000, Sylvan's net loss was $1.6 million, or 4 cents per share, on revenue of $316.7 million. The company posted an $8.3 million profit in 1999 on revenue of $277 million.

"I think the expectation is that [the losses] were to be expected," said Creamer. "We guided analysts to a $50 million after-tax loss estimate in 2001 for Sylvan Ventures. They recognize that we're investing in start-up businesses and that we'll expect losses. It's no surprise."

In the first quarter that ended March 31, the Baltimore company, one of the largest providers of contract educational services in the world, reported an $11.6 million net loss from continuing operations while revenues soared nearly 60 percent to $120.4 million. For the same quarter last year, Sylvan posted a $3.4 million profit on revenues of $75.5 million.

Company officials have attributed most of the loss to Sylvan Ventures - a $400 million fund that has had limited success so far in investing $190 million in education-related start-up companies, such as Caliber Learning Network Inc.

Today, Becker said, Sylvan is focused on tapping the post-secondary education market, particularly overseas. "I think being in the post-secondary market and getting your revenues spread over 20 countries is a very, very safe harbor for a company to be in," Becker said.

Sylvan has targeted the K-12 and post-secondary and adult-education market ever since it sold off divisions that focused more on corporate training and standardized testing.

Becker told investors that Sylvan's strategy today is to attract individuals to its universities and learning centers, cultivate its international division and support new ventures through Sylvan Ventures, its investment arm.

"It's hard to be good at everything," Becker said. "We decided that ... [educating individuals] would weather a bad economy better and was a bigger opportunity."

Trace Urdan, an analyst who covers e-learning companies for W. R. Hambrecht + Co. in San Francisco, said Sylvan has to "do something with the venture fund."

"I think that they're aware of that," Urdan said. "The first opportunity they'll have to gain credibility is in the second half of the year, if they can persuade a couple of outside investors to come in on their lead investments and gain outside validation."

That's what Sylvan will be looking to do with Caliber, Becker said.

Sylvan is prepared to make more investments in Caliber, Becker said, but is looking to bring in other investors.

Last week, Caliber announced the resignation of its CEO, Chris L. Nguyen, and the firing of 63 of its 182 employees.

Also, the Nasdaq stock market has threatened to delist Caliber's stock for being below $1 per share for too long.

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