Edgar Filing: STRAYER EDUCATION INC

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 8-K
CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported) FEBRUARY 16, 2006
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0-21039 52-1975978
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(Commission File Number) (IRS Employer Identification No.)

1100 WILSON BOULEVARD, #2500, ARLINGTON, VA 22209
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(Address of principal executive offices) (Zip Code)

(703) 247-2500
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(Registrant's telephone number, including area code)

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(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):

[ ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)

[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)

[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))

[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
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Item 2.02. Results of Operations and Financial Condition.

On February 16, 2006, Strayer Education, Inc. announced 2005 fourth quarter and
full year enrollment, revenues and earnings. The February 16, 2006 press release
is attached hereto as an exhibit and incorporated herein by reference. The
information contained in the February 16, 2006 press release is deemed furnished
under this Item; and should not be deemed "filed" for purposes of Section 18 of
the Securities Exchange Act, as amended (the "Exchange Act"), or otherwise
subject to that section, nor shall it be deemed incorporated by reference in any
filing under the Securities Act of 1933, as amended, or the Exchange Act.

Item 9.01. Financial Statements and Exhibits.

Exhibit 99.01 Press Release dated February 16, 2006. (The information
contained in the February 16, 2006 press release is deemed
furnished under Item 2.02.)

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SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.

Strayer Education, Inc.
Date:
February 16, 2006 By: /s/ Mark C. Brown
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Mark C. Brown
Senior Vice President and
Chief Financial Officer

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EXHIBIT INDEX

EXHIBIT DESCRIPTION
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99.01 Press Release dated February 16, 2006

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EXHIBIT 99.01
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FOR IMMEDIATE RELEASE

FOR MORE INFORMATION CONTACT:

Mark C. Brown, Senior Vice President and
Chief Financial Officer
(703) 247-2514

Sonya Udler, Vice President,
Corporate Communications
(703) 247-2517
sonya.udler@strayer.edu

STRAYER EDUCATION, INC. REPORTS RECORD
FOURTH QUARTER 2005 AND FULL YEAR ENROLLMENT, REVENUES AND EARNINGS

-- STRAYER FOURTH QUARTER DILUTED EPS OF $1.03 --
-- STRAYER FULL YEAR DILUTED EPS OF $3.26 --
-- STRAYER WINTER 2006 TOTAL ENROLLMENTS UP 16%/NEW STUDENTS UP
17%/ONLINE UP 41% --
-- TWO PITTSBURGH, PA CAMPUSES OPENED FOR 2006 SPRING TERM --

ARLINGTON, Va., February 16, 2006 - Strayer Education, Inc. (Nasdaq: STRA) today
announced financial results for the three months and year ended December 31,
2005. Financial highlights are as follows:

THREE MONTHS ENDED DECEMBER 31

o Revenues for the three months ended December 31, 2005 increased 19% to
$62.0 million, compared to $52.3 million for the same period in 2004, due
to increased enrollment and a 5% tuition increase which commenced in
January 2005.

o Income from operations rose 12% to $23.3 million from $20.8 million for the
same period in 2004. Operating income margin for the three months ended
December 31, 2005 was 37.6% compared to 39.7% for the same period in 2004.

o Net income rose 13% to $15.0 million compared to $13.3 million for the same
period in 2004. Earnings per diluted share rose 16% to $1.03 compared to
$0.89 for the same period in 2004. Diluted weighted average shares
outstanding decreased to 14,590,000 from 14,953,000 for the same period in
2004.

YEAR ENDED DECEMBER 31

o Revenues for the year ended December 31, 2005 increased 20% to $220.5
million, compared to $183.2 million for the same period in 2004, due to
increased enrollment and a 5% tuition increase effective for 2005.

o Income from operations rose 14% to $74.9 million from $65.5 million for the
same period in 2004. Operating income margin for the year ended December
31, 2005 was 34.0% compared to 35.7% for the same period in 2004.

o Net income rose 17% to $48.1 million compared to $41.2 million for the same
period in 2004. Earnings per diluted share rose 19% to $3.26 compared to
$2.74 for the same period in 2004. Diluted weighted average shares
outstanding decreased to 14,741,000 from 15,057,000 for the same period in
2004.

"We are pleased with Strayer's financial performance for the fourth quarter and
year-end, as well as our enrollment for the winter term," said Robert Silberman,
Chairman and Chief Executive Officer of Strayer Education, Inc. "Our yearly
results reflect the positive contribution of 2005's five new campuses, including
the impact of successfully opening three new markets in North Carolina, South
Carolina, and Florida, as well as the continued growth of Strayer University
Online. We look forward to the start of classes in our newest market of
Pittsburgh, Pennsylvania, with two campuses opening for the spring term. In
2006, we intend to continue to execute on our expansion strategy by opening a
total of eight new campuses, including four already opened for the winter and
spring terms."

BALANCE SHEET AND CASH FLOW

At December 31, 2005, the Company had cash, cash equivalents and marketable
securities (a diversified, no load, short-term, tax-exempt bond fund) of $119.8
million and no debt. The Company generated $55.1 million from operating
activities in 2005. Capital expenditures were $12.3 million for the same period.

During the fourth quarter 2005, the Company repurchased 80,910 shares of common
stock at an average price of $98.56 under a previously announced common stock
repurchase authorization. During 2005, the Company repurchased 410,071 shares of
common stock at an average price of $92.59. As of December 31, 2005, the Company
had a $32 million authorization remaining under this plan.

In the fourth quarter 2005, bad debt expense as a percentage of revenue was 2.8%
compared to 2.9% for the same period in 2004. Days sales outstanding, adjusted
to exclude tuition receivable related to future quarters, was 10 days at the end
of the fourth quarter 2005, compared to 11 days at the end of the same period in
2004.

STUDENT ENROLLMENT

Total enrollment at Strayer University for the 2006 winter term increased 16% to
27,621 students compared to 23,815 students for the same term in 2005. Across
the Strayer University campus network, new student enrollments increased 17% and
continuing student enrollments increased 16%. Out-of-area online students
increased 41%, while students taking 100% of their classes at Strayer University
Online (including campus based students) increased 27%. The total number of
students taking any courses online (including students at brick and mortar
campuses taking at least one online course) in the 2006 winter term increased to
18,877.

STUDENT ENROLLMENT
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Winter Winter %
2005 2006 Change
--------- ------ ------
New Campuses (17 in operation 3 or less years)
Campus Based Students 1,365 2,420 77%
Online Based Students 1,776 3,102 75%
--------- --------
Total New Campus Students 3,141 5,522 76%
--------- --------

Mature Campuses (20 in operation more than 3 years)
Campus Based Students 10,174 9,584 -6%
Online Based Students 8,260 9,355 13%
--------- --------
Total Mature Campus Students 18,434 18,939 3%
--------- --------
Total Campus Based Students 21,575 24,461 13%
Out of Area Online Students 2,240 3,160 41%
--------- --------
Total University Enrollment 23,815 27,621 16%
========= ========

Total Students Taking 100% Courses Online 12,276 15,617 27%
Total Students Taking At Least 1 Course Online 14,891 18,877 27%

NEW CAMPUS OPENINGS

The Company announced today that it has opened two new campuses in Pittsburgh,
Pennsylvania for the 2006 spring term. Including the two new campuses
successfully opened for the 2006 winter quarter in Wilmington, Delaware and
Philadelphia, Pennsylvania, the Company has now opened four of the eight new
campuses planned for 2006.

ACADEMIC LEADERSHIP SUCCESSION

The Company announced today that the President of Strayer University, Dr. J.
Chris Toe, will step down from his post on March 31, 2006 to assume the position
of Minister of Agriculture in the new democratically elected government of the
Republic of Liberia. Dr. Toe will remain a member of Strayer University's
adjunct faculty, and continue to serve as a member of the University's Board of
Trustees. The University has designated Dr. Joel Nwagbaraocha, its current Dean
of Graduate Studies, to serve as Interim University President as of April 1,
2006, and announced it will conduct

a formal search for a permanent successor. In addition to serving as Dean of
Graduate Studies, Dr. Nwagbaraocha has been a campus dean, and a full time
faculty member at Strayer University since 1994. Prior to joining Strayer, Dr.
Nwagbaraocha served as the President of Barber-Scotia College, a regionally
accredited, historically black college in Concord, North Carolina. Dr.
Nwagbaraocha holds a doctoral degree in education administration from Harvard
University. Mr. Silberman stated, "We are very proud of Dr. Toe's decision to
lend his many talents to the government in his native Liberia and we wish him
every success. We are also very pleased to have Dr. Nwagbaraocha agree to step
in as Interim University President, as his long history and familiarity with
Strayer University will allow a smooth and seamless transition in academic
leadership."

COMMON STOCK CASH DIVIDEND

The Company announced today that its Board of Directors has declared a quarterly
common stock cash dividend of $0.25 per share. This dividend will be paid on
March 10, 2006 to shareholders of record as of February 28, 2006.

STOCK-BASED COMPENSATION ACTIVITY

In February 2006, the Company's Board of Directors approved a grant of
approximately 151,000 shares of restricted stock.

The Company uses the intrinsic-value-based method of accounting for its stock
option plan. Under this method, compensation expense is the excess, if any, of
the quoted market price of the stock at grant date over the amount an employee
must pay to acquire the stock. Had compensation expense been determined based on
the fair value of the options at grant dates computed by the Black-Scholes
methodology, the Company estimates net income and diluted net income per share
would have been $13.7 million and $0.94 per share, respectively, for the three
months ended December 31, 2005, and $44.7 million and $3.02 per share,
respectively, for the year ended December 31, 2005.

Beginning in the first quarter of 2006, the Company will adopt on a prospective
basis Financial Accounting Standards No. 123(R), Share-based Payment ("SFAS
123(R)"), which requires the compensation cost related to share-based payments,
such as stock options, be recognized in the financial statements. The Company
will continue to evaluate the impact of SFAS 123(R) on its financial condition
and results of operations.

The following assumptions were used to estimate fair value as of the date of
grant using the Black-Scholes option pricing model:

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FOR THE TWELVE MONTHS
ENDED DECEMBER 31,
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2004 2005
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Dividend yield ....................................... 0.24% 0.48%
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Risk-free interest rate .............................. 3.8% 3.9%
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Volatility ........................................... 34% 34%
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Expected option term (years) ......................... 6.1 6.1
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Weighted average fair value of options granted
during the year ...................................... $45.27 $39.61
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BUSINESS OUTLOOK

Based on the strong enrollment growth announced for the 2006 winter term, the
Company estimates first quarter 2006 diluted EPS will be in the range of $1.10
to $1.12 before the impact of SFAS 123(R). Based on the impact of new restricted
share grants approved by the Company's Board of Directors in February 2006, the
Company now estimates that it will incur SFAS 123(R) stock-based compensation
expense for the first quarter of 2006 of approximately $2.0 million before tax
or $0.08 per share after tax, and for the full year 2006 of approximately
$9.0-$9.5 million before tax or $0.36-0.38 per share after tax.

CONFERENCE CALL WITH MANAGEMENT

Strayer Education, Inc. will host a conference call to discuss its fourth
quarter earnings and year-end results on Thursday, February 16, 2006 at 10:00
a.m. (ET). To participate on the live call, investors should dial (800) 289-0468
10 minutes prior to the start time. In addition, the call will be available via
live Webcast over the Internet. To access the live Webcast of the conference
call, please go to www.strayereducation.com 15 minutes prior to the start time
of the call to register.

Strayer Education, Inc. (Nasdaq: STRA) is an education services holding company
that owns Strayer University and certain other assets. Strayer's mission is to
make higher education achievable and convenient for working adults in today's
economy. Strayer University is a proprietary institution of higher learning that
offers undergraduate and graduate degree programs in business administration,
accounting, information technology, education, and public administration to more
than 27,000 working adult students at 39 campuses in 9 states in the Eastern
United States and Washington, D.C. and worldwide via the Internet through
Strayer University Online. Strayer University is committed to providing an
education that prepares working adult students for advancement in their careers
and professional lives. Founded in 1892, Strayer University is accredited by the
Middle States Commission on Higher Education.

For more information on Strayer Education, Inc. visit www.strayereducation.com
and for Strayer University visit www.strayer.edu.

This press release contains statements that are forward looking and are made
pursuant to the "safe-harbor" provisions of the Private Securities Litigation
Reform Act of 1995 "(Reform Act)". The statements are based on the Company's
current expectations and are subject to a number of uncertainties and risks. In
connection with the Safe Harbor provisions of the Reform Act, the Company has
identified important factors that could cause the Company's actual results to
differ materially. The uncertainties and risks include the pace of growth of
student enrollment, our continued compliance with Title IV of the Higher
Education Act, and the regulations thereunder, as well as state and regional
regulatory requirements, competitive factors, risks associated with the opening
of new campuses, risks associated with the offering of new educational programs
and adapting to other changes, risks associated with the acquisition of existing
educational institutions, risks relating to the timing of regulatory approvals,
our ability to implement our growth strategy, and general economic and market
conditions. Further information about these and other relevant risks and
uncertainties may be found in the Company's annual report on Form 10-K and its
other filings with the Securities and Exchange Commission, all of which are
incorporated herein by reference and which are available from the Commission. We
undertake no obligation to update or revise forward looking statements.

STRAYER EDUCATION, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

For the three months For the year
ended December 31, ended December 31,
------------------------ ---------------------------
2004 2005 2004 2005
--------- -------- -------- --------

Revenues ........................................ $52,268 $62,018 $183,194 $220,507
Costs and expenses:
Instruction and educational support .......... 17,247 20,402 63,860 76,977
Selling and promotion ........................ 7,872 10,765 29,435 41,090
General and administration ................... 6,377 7,539 24,416 27,576
------- ------- -------- ---------
Income from operations ................... 20,772 23,312 65,483 74,864
Investment and other income ..................... 537 891 1,595 2,982
------- ------- -------- ---------
Income before income taxes ............... 21,309 24,203 67,078 77,846
Provision for income taxes ...................... 8,030 9,192 25,838 29,781
------- - ------ -------- ---------
Net income ............................... 13,279 15,011 41,240 48,065
Preferred stock dividends and accretion ......... -- -- 1,389 --
------- ------- -------- ---------
Net income available to common
stockholders ............................. $13,279 $15,011 $39,851 $48,065
======= ======= ======== =========
Net income per share:
Basic ........................................ $0.91 $1.05 $2.91 $3.32
Diluted ...................................... $0.89 $1.03 $2.74 $3.26
Weighted average shares outstanding:
Basic ........................................ 14,669 14,328 13,674 14,472
Diluted ...................................... 14,953 14,590 15,057 14,741

STRAYER EDUCATION, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

December 31, December 31,
2004 2005
ASSETS ------------ ------------

Current assets:
Cash and cash equivalents .................................... $97,004 $74,212
Marketable securities available for sale, at
fair value ................................................. 25,753 45,594
Tuition receivable, net of allowances for doubtful
accounts of $1,301 and $1,927 in 2004 and 2005,
respectively ............................................... 41,669 55,935
Student loans receivable - held for sale ..................... 29 --
Other current assets ......................................... 3,679 2,581
--------- -------
Total current assets .......... ............................. 168,134 178,322
Property and equipment, net ...................................... 41,137 46,684
Restricted cash. ................................................. 500 500
Other assets ..................................................... 343 339
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Total assets ................................................ $210,114 $225,845
========= =======

LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ............................................... $4,971 $6,402
Accrued expenses ............................................... 2,318 1,483
Income taxes payable ........................................... 6,060 3,773
Unearned tuition ............................................... 42,059 55,778
--------- -------
Total current liabilities ................................. 55,408 67,436
Deferred income taxes ............................................. 1,077 205
Long-term liabilities ............................................. 4,707 6,364
--------- -------
Total liabilities ......................................... 61,192 74,005
--------- -------
Commitments and contingencies
Stockholders' equity:
Common stock, par value $01; 20,000,000 shares authorized;
14,669,487 and 14,292,249 shares issued and outstanding,
as of December 31, 2004 and 2005, respectively ................ 147 143
Additional paid-in capital ...................................... 140,943 105,328
Unearned compensation - restricted stock ........................ -- (405)
Retained earnings ............................................... 7,983 47,020
Accumulated other comprehensive income (loss) ................... (151) (246)
--------- -------
Total stockholders' equity ................................ 148,922 151,840
--------- -------
Total liabilities and stockholders' equity ................ $210,114 $225,845
========= =======

STRAYER EDUCATION, INC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)

For the year ended December 31,
-------------------------------
2004 2005
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Cash flow from operating activities:
Net income ................................................................... $ 41,240 $ 48,065
Adjustments to reconcile net income to net cash
provided by operating activities:
Loss on disposal of assets .............................................. 30 37
Amortization of deferred rent ........................................... 614 230
Depreciation and amortization ........................................... 5,375 6,619
Provision for student loan losses ....................................... (227) (162)
Deferred income taxes ................................................... (101) (63)
Stock-based compensation ................................................ -- 48
Changes in assets and liabilities:
Tuition receivable, net ................................................. (5,672) (14,266)
Other current assets .................................................... (899) 630
Other assets ............................................................ 25 4
Accounts payable ........................................................ 287 1,503
Accrued expenses ........................................................ (11) (835)
Income taxes payable .................................................... 13,650 (2,804)
Unearned tuition ........................................................ 2,925 13,719
Deferred lease incentives ............................................... 745 2,342
Student loans originated ..................................................... (1,361) (686)
Collections on student loans receivable ...................................... 1,506 762
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Net cash provided by operating activities 58,126 55,143
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Cash flows from investing activities:
Purchases of property and equipment ......................................... (11,063) (12,275)
Purchases of marketable securities .......................................... -- (20,000)
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Net cash used in investing activities ............................... (11,063) (32,275)
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Cash flows from financing activities:
Common dividends paid ....................................................... (5,645) (9,028)
Preferred dividends paid .................................................... (1,684) --
Proceeds from exercise of stock options ..................................... 11,948 1,336
Repurchase of common stock .................................................. (36,767) (37,968)
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Net cash used in financing activities ............................... (32,148) (45,660)
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Net increase in cash and cash equivalents ........................... 14,915 (22,792)
Cash and cash equivalents - beginning of period ................................ 82,089 97,004
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Cash and cash equivalents - end of period ...................................... $97,004 $74,212
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Non-cash transactions:
Purchases of property and equipment included in accounts payable ........... $ 633 $ 561