Sylvan pares 2nd-quarter loss to 13 cents a share

2002 outlook reaffirmed

stock spurts to $16.19

July 26, 2002|By Andrew Ratner | Andrew Ratner,SUN STAFF

Sylvan Learning Systems Inc., the Baltimore-based education services company, reaffirmed yesterday its financial guidance for the year and exceeded analysts' estimates for the second quarter, spurring a turnabout for a stock that had fallen for a month.

Sylvan reported a loss of $5 million, or 13 cents a share, for the quarter that ended June 30. For the comparable period a year ago, Sylvan reported a loss of $13.4 million, or 35 cents a share.

Excluding losses in venture investing, depreciation and other charges, Sylvan earned 30 cents a share in the quarter, better than the 26 cents of a year earlier. It also beat the 28-cent estimate of analysts polled by Thomson Financial/First Call.

Sylvan's stock rose $2.02 a share, or 14 percent, to $16.19 on the Nasdaq stock market. About 930,700 shares traded, an unusually busy day for the stock.

It was a rare upturn for Sylvan since June 5, when an investment newsletter floated concerns about accounting. Analysts discounted them, but they reverberated around trader chat rooms and triggered a sell-off.

"Everything was great," Jeffrey M. Silber, an investment analyst with Gerard Klauer Mattison in New York, said yesterday. "If you looked at the way the stock was performing, people were scared to death. But the company continues to do all the right things in a tough market."

Sylvan also reported that it is talking with potential buyers for centers it owns in Spain for its English-language tutoring chain Wall Street Institute.

Since buying the business in 1996, Sylvan has expanded it to 425 centers in 26 countries. But it became apparent this year that 135 centers in Spain were too many, especially because the operation there was competing head to head with a rival that also expanded rapidly.

Sylvan will take an $11 million after-tax charge as it tries to sell 35 centers it owns in Spain. The buyer would decide whether to close the 100 centers, which are owned by individual franchisees.

English tutoring in Spain lost $18.7 million in the quarter, compared with a $1 million operating profit in the 2001 quarter.

In a conference call after the earnings were released and before the opening of the U.S. stock markets, Douglas L. Becker, Sylvan's chairman and chief executive officer, told analysts that he doesn't fear similar problems outside Spain.

Becker also said Sylvan has delayed plans to float a separate stock for its higher education unit, Sylvan International Universities. Although the five colleges Sylvan owns in Europe and Latin America continue to increase profits, stock market turmoil has convinced Sylvan's board that it should wait before pursuing an initial public offering for the universities, he said.

The university division reported $8.5 million in operating profit for the quarter, up from $6.5 million a year earlier.

"We continue to feel it's the right strategy," Becker said of splitting off the universities. But "at this point, the stock market and the IPO market is so terrible, we're not putting any time into that. But everything that the company would need to do to pull the trigger has been done."

The company said it expects to meet its previously stated goals for the year of $568 million to $592 million in revenue.

Revenue in the second quarter was $153.9 million, up 22 percent from $126.2 million a year earlier.

Losses continue but have slowed at Sylvan Ventures, a subsidiary that invests in education-related businesses. The unit reported a loss of $6.6 million for the quarter, half of the $13.8 million loss in the comparable period a year earlier.

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