Laureate Education Inc (LAUR) 2002 Q1 法說會逐字稿

Welcome to the Sylvan Learning Systems first quarter 2002 earnings results conference call. This call is being recorded. At this time for opening remarks and introductions I would like to turn the call over to the Manager of Investor Relations, Mr. Chris Symanoskie. Please go ahead sir.

Good morning and again welcome to Sylvan Learning Systems first quarter 2002 earnings release conference call and webcast. An audio replay of today's webcast and a copy of this morning's press release can be accessed through the investor relations section of our website at sylvan.net. Before I introduce management, please be advised that today's press release and conference call may include information that could constitute forward-looking statements made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Any such forward-looking statements may involve risks and uncertainties, political, economic, currency tax, regulatory, technological, competitive and other factors could cause actual results to differ materially from those anticipated in the forward-looking statements. Additional information regarding these risk factors and uncertainties is detailed from time to time in the company's filings with the Securities and Exchange Commission, including but not limited to our most recent forms, 10-K and 10-Q available for viewing on our website.

This morning our speakers will be Doug Becker, Chairman and CEO of Sylvan Learning Systems. Sean Creamer, CFO of Sylvan Learning Systems. Peter Cohen, President and Chief Operating Officer of Sylvan Learning Systems. Chris Hoehn-Saric, Chairman and CEO of Sylvan Ventures and Bill Dennis, CFO and Chief Operating Officer of Sylvan International Universities. Also on the call is Raph Appadoo, President of Sylvan International Universities, who will be answering questions during the Q&A session.

Now at this time Sean Creamer will discus Sylvan's first quarter performance. Sean?

Thanks Chris. Good morning and welcome. We're very pleased to report the company's solid results for the quarter. As you know the first quarter's one of the seasonally weakest for us because it's a down quarter for two of our fastest growing assets. UDLA, our university in Chile is for all intents and purposes closed for its summer break and Canter ships the majority of its products for the winter semester in December and therefore reports very little revenue in the first quarter. We obviously continue to invest in these high growth businesses during this off quarter for them, in anticipation of their strong contribution during the remainder of the year.

For the quarter, total revenues from continuing operations excluding certain revenues attributable to some Sylvan Ventures companies, were $134.4 million, an increase of 16 percent compared to revenues of 116.2 million in the first quarter of 2001. Total operating income for the quarter, again excluding Sylvan Ventures was 10.1 million, compared to 6.2 million in the first quarter of 2001. As we noted in our earnings release, our results benefited from the elimination of goodwill amortization in accordance with FAS 142. Excluding the impact of this required change in accounting, our operating income increased approximately eight percent, keying us up for the back half of the year which has become so seasonally important for us.

Income from continuing operations after tax for the first quarter, again excluding Sylvan Ventures was $5.2 million, or $0.13 per share on diluted shares outstanding of 47 million. This compares to $3.9 million or $0.10 per share on shares outstanding at 38.7 million for the same period in 2001. Continued strong enrollment growth at SIU and OHE, as evidenced by our Chilean universities announced total enrollment increase at 50 percent and Canter's previously announced 19 percent increase in enrollment for their distance learning masters program winter term, provide a strong invisible tailwind heading into the second quarter. In addition, signs of economic recovery are bolstering the results of our domestic learning centers as we see continued inquiry growth and extended length of stay.

Sylvan reported a loss from continuing operations including the impact of Sylvan Ventures, of $416,000. This loss includes approximately 5.6 million of after tax losses associated with Sylvan Ventures and its portfolio company which represent significant reduction from the $15.5 million of Ventures losses in the first quarter of 2001. This reduction is a result of a slower cash burn rate within our portfolio as we transition from a heavy investment phase to a harvesting mode. In addition the FAS 142 after tax benefit on Ventures results was $1.8 million. EBITDA excluding Sylvan Ventures was $14.8 million for the quarter ended March 31st.

Quickly moving onto some balance sheet information. Total cash in marketable securities at the end of the first quarter stood at approximately 162 million while the total corporate debt was approximately 45 million, excluding a $95 million convertible to Venture. Just a point of note there was a $5 million conversion, previously $100 million convertible to Ventures, so that leaves that balance at 95. As of the end of the quarter Sylvan Ventures had made funding commitments of 261 million of which approximately $246 million has been invested today.

That concludes my remarks on the quarter. At the end of the call, prior to the Q&A I will give some comments on our guidance, but at this point I'll turn it over to Doug for his thoughts on the quarter.

Good morning, it's Doug Becker. We're very pleased with this quarter. It really keys up our expected financial performance and really with one notable exception, which I'll discuss, every one of our divisions really delivered at or above our expectations, so we're very pleased. Obviously there continues to be a transition period at Sylvan as we move from the complexity of the past to the simplicity that we envision for the future and in some ways with more clarity than we've ever had before. SIU for example this time last year was just assimilating its many acquisitions and you really couldn't see an apples to apples year over year comparison. Well this year on a year over year comparison with revenues up 26 percent and operating income up 70 percent, SIU's clearly gone from the lack of clarity of Sylvan to an absolute clear success and win for us and we're extremely pleased with how we SIU going. Another example of where we have more clarity was the significant reduction in Ventures losses. Venture's losses this year are expected to be roughly half of what they were last year. I think we expect that we could probably reduce those in half again next year at which point we'd be well on our way towards little or no Ventures losses after that period. So that's another point of great progress towards clarity.

On the other hand there are some -- still areas where we are in transition and where clarity is a little harder for investors to see although as management we think we see things very well internally. As an example, the Q1 and Q2 still contain investment activities that obscure the strong underlying performance that we expect in the second half of 2002 and very strong prospects for 2003 and this was again all as planned. Examples of where we have investment activities or issues where there's still less clarity for the outside world, our SES, Sylvan Education Solutions division which we had expected to show flat or even modest declines this year, of course is doing that. But we now see the clarity internally of a very strong proven team run by Jeff Cohen, who's a long-term protege of mine. And we see the immense momentum of the No Child Left Behind Act. Jeff and his team are now investing, which is costing us money, to be ready to get their share of the hundreds of millions of dollars of new funds that will be available as of 2003 and beyond because of the new legislation. Sylvan Learning Centers, strong Q1 performance and even better leading indicators that we see internally, things like inquiry growth and length of stay. But they're still investing in European expansion, in France and the U.K. and as well as they've done they're actually doing even better if you were to take out the up front investment costs of just opening those two new markets. We now still only have two centers in France and one in the U.K. and while they're doing well, clearly there's a need to have a lot more centers to justify the overhead in the investment. So as the year moves ahead in Sylvan Learning Centers this year and next year we will see less of the losses associated with the expansion into Europe and strong domestic performance. And again you'll see more clarity there.

Online higher education is obviously performing very well. We announced a 19 percent increase in Canter's enrollments as of the end of the fourth quarter. And while Canter is mostly dark in the first quarter, they don't really do that much business in the first quarter, very strong indicators for their performance. But what needs to be clarified with OHE is that we have some assets like Canter that are in Sylvan Learning Systems. Some assets like Walden and NTU that are in Ventures and that also have external investors and it's our job over the next year or two to meld all that together into one clear OHE enterprise that can report separately. And we think one day be positioned to be its own separate public company. And we're again, internally see great clarity and look forward to showing you that clarity over the next several quarters and year.

I think probably the biggest thing that is obscuring performance in our company, and again the good news is it really did not keep us from achieving guidance, has been the Wall Street Spain Organization. And Wall Street Spain, many of you know the story, this is really where Wall Street was essentially founded, the modern Wall Street Institute was founded in Spain. And we really didn't at that time know how high was up, how many centers that market could support. We have opened 160 centers, well our predecessors before we bought it opened about 80 and we approximately doubled that in the five years that we've owned that business. At the same time there was a lot of copycat competition and the net result is that Spain, unlike any other country that Wall Street is in, out of the 25 countries that they're in in the world, has now just become completely saturated with multi-media English learning centers. And we really do not at this point see the Wall Street Spain as in a position to help us achieve our financial objectives and we're looking at very dramatic solutions. Just as an example, Wall Street Spain lost over a million dollars in the first quarter and is expected to do about the same in the second quarter. And obviously the rest of Wall Street and the rest of Sylvan is very profitable. And we have been able to compensate for that loss with out performance in the rest of our company, so I'm very happy about that. But I would rather not obscure the out performance with the poor performance of Spain. We will move ahead very aggressively with an immediate plan to end the losses, if at all possible with Q2 so that after Q2 there should be no further losses from Wall Street Spain if we're successful in our plan. That plan will involve closing some centers and could involve the actual sale of the Wall Street Spain Master franchise altogether.

We have about $15 million in assets in our books, excluding goodwill associated with Wall Street Spain. And when we sale it it's not at all clear how much we will recover and certainly it's possible or even expected that some or all of these assets will need to be written off. But obviously we think that would be more than compensated for, by the ending of the losses and the ability to bring greater clarity to the financial performance of Wall Street Institute. The shame is that Wall Street Institute's actually doing extremely well. Their expansion which has been very strong, especially in Asia recently, drove a growth outside of Spain of 42 percent in revenues and 43 percent EBITDA. And so we really want to get Spain out of obscuring that financial performance. So the good news is after Q2 I would expect that clarity to be better for investors.

The last point of transition really pertains, and this is good news, really pertains to how Sylvan is going to take our complicated company and make it even simpler for investors. And many of you know that we have been leaning heavily towards the possibility of an IPO of what we call our International Higher Education business. This would be Sylvan International Universities and Wall Street Institute. We have been, in fact at this point the IPO is really the only transition element left for SIU. Their business itself is fully transitioned with a strong team, you'll hear more about that and we're very pleased with how things are going with SIU. At this point we have worked very hard to be ready for an IPO for SIU and Wall Street, excluding Spain. And we've decided that we would rather wait until the fall enrollments in order to be able to market this in as strong a fashion as possible. This IPO does also require the final approval of the Sylvan board, so it's not something that we can say at this point is guaranteed, but clearly we're strongly recommending it and we've gotten great investor feedback of interest in that kind of unusual and very successful business of SIU. In order to be ready for an IPO after we're ready with our fall enrollments, that would imply a filing in the late summer and the deal being brought at sometime towards the end of the year in the late fall or early winter. But we still anticipate that being in 2002. So if you take all of these issues together, up front investments in SES and SLC, obviously that begins to clarify and get better, even over the remainder of this year. SIU where it's more function of new seasonality, but we think in the back half of this year we'll be extremely strong. Spain, which we think we can come to a very short term resolution for and the possibility of the IPO and even possible subsequent spin of the international higher education business, we really see Sylvan very much on a track to clarify our business and to show the strong fundamentals. We consider ourselves to be completely on plan or ahead of plan to do this. It's our job to demystify all these transition issues for you, we do that through guidance. Sean will at the end of this call reiterate our guidance, we're very confident in our expectations for the year and also through this long-term plan which contemplates the eventual separation of Sylvan into SIU and international higher education as one company. Online higher education, which based on the strength of companies like University of Phoenix online, would be, we think well received by investors. And that would leave us with a K-12 business whose growth this year is masked, but whose growth next year we think could be extremely strong. And with that I'd like to turn this over to the person who's responsible for our K-12 group of companies, Peter Cohen. Peter?

Thanks Doug and I'll add my good since I'm in Germany today, to everybody. Let me remind you the K-12 businesses of Sylvan consist of our Sylvan Learning Center business, which is our site based consumer business and our Sylvan Education Solutions business, our institutional in-school government contracting business. The combined revenues for the quarter were 53 million, which is seven percent over last year. And K-12 services operating profits were 9.7 million, which is 11 percent over last year's same quarter. Let me address each of these business units individually first.

The Learning Center business under the leadership of Mary Foster, showed strong gains in the first quarter with overall revenue increases of 16 percent. Franchised services revenues for the quarter increased by nine percent over last year, supported by a return to double-digit royalty growth, the opening of seven new centers and an increase in franchise development fees. In first quarter we completed our largest ever acquisition of franchised learning centers, acquiring 30 centers in Atlanta, Boston and Pittsburgh, bringing our total to 120 corporate centers and fulfilling our center acquisition goal for this year. Total corporate center revenues were up 29 percent and same store revenues showed positive gains over last year, which reflected the impact of our new marketing program begun in January. Same store domestic growth for the quarter was 10 percent and I should note that that's a pretty nice read down from the fourth quarter of 2001 given the state of the U.S. economy at that time.

International revenues increased slightly by three percent, attributable to a soft German economy, but I believe that the outlook is much better for the rest of Europe. We opened our second center in France in the city of Angouleme of the Bordeaux region. And we continue to see solid growth in our Spanish Sylvan Learning Center joint venture which has 120 centers delivering over 30 percent system revenue growth for the quarter.

As I noted in our year-end call in February, we introduced our new learning center marketing campaign and the feedback from parents just remains outstanding. A strong response for our marketing campaign and the successful repositioning of our student loan program have combined to deliver a solid first quarter performance in the learning center business. I think the outlook for 2000, for Q2 of 2002 remains very encouraging with no expected change in these trends.

Our Education Solutions division under the leadership as Doug mentioned, of Jeff Cohen had eight percent lower revenues as we had expected. Jeff took over a division which had no strong sales force and consequently had no sales pipeline. He's now hired a VP of sales who ironically is also named Jeff Cohen, has built a regional sales team. The investments we're making today in this team will yield new contracts in the latter part of this year. During the first quarter we focused on building an appropriate management team to leverage the opportunities identified in the No Child Left Behind Act. That team, including their financial controller is now complete and has been implementing our business plan to access the parentally directed funding program for failing schools. In addition to targeting the parentally directed funds, we're also targeting those markets who will benefit from the general 18 percent increase in regular title one funds. Now we don't expect much impact in 2002, but we do plan to be well positioned to take advantage of this new funding as it begins to flow into local districts in 2003. Progress on the writing of the regulations that determine how this money is distributed has been a little bit slow as it's the subject of extensive political debate in Capitol Hill. We do remain confident that the funds will begin to flow towards the end of this calendar year, positioning this division for a return to its historically strong growth rates in 2003 and beyond.

Our operating income for the quarter was $9.7 million, which is 11 percent above last year. The learning centers had great growth and produced a 19 percent profit improvement with excellent controls in franchise services, on planned performance in company centers and of course the planned investments in international operations that Doug mentioned. We will continue to invest in the United Kingdom and France operations through 2002 as we prepare to begin franchising centers in those countries.

Education Solutions profits were lower as we expected, based on their lower revenues for the quarter.

In summary then K-12 services is being supported by a continued emphasis on accountability in schools, the success of our marketing strategies and the development of our corporate center network. The investments that we're making in international development and the investments in our E-Sylvan business today as well as the potential offered by the reauthorization of the No Child Left Behind Act, bode well for our future growth. we see the rest of 2002 as a year driven by strong learning center growth and a flat outlook in education solutions in what we see as an important transitional year. I'd like to now turn the call over to Bill Dennis, our Chief Financial Officer for Sylvan International Universities. Thank you.

Okay thanks Peter. Doug and Sean both have already spoken a little bit about Sylvan International Universities and the very fine and very solid financial results that we experienced in the first quarter and including the fact that Doug mentioned that this is the first time that we really had comparative data. That is to say that we now have two quarters this year and last year where our universities were fully operational and we can now begin to see that this is not just no longer an acquisition story, but rather an under Sylvan management story. With respect to the first quarter our universities revenue reached $62 million, or an increase of about 26 percent over last year. The operating income was even better, you can see that from the press release, where we in our operating income we had an increase of about 70 percent over 2001. This improvement was primarily due to higher enrollments, but also due to our ability to increase prices in our marketplaces over and above inflation experienced in those markets. We were able to do that in all of our markets year over year. The trend in primary cycle enrollments has continued in Chile where we have just completed those enrollments for the new year. They begin at about mid-March, towards the end of March, that's when they begin their new year studies. The total enrollments in Chile are now about 12,000 students, an increase of 50 percent versus last year. Very impressive increase due to some very sophisticated marketing. You may recall that we also talked a little bit and have successfully launched two new campuses prior to March in Chile. One was in down town Santiago and another in , which is a suburb of Santiago. This enrollment achievement will move our Chilean University from being the fourth largest to the second largest private university there And in terms of total enrollment and number one in new enrollment. I should point out here that with only about 10 percent of the primary, of the private market share, or with only 10 percent share of the private market and much, even much smaller percentage of the total market share, we believe we still have plenty of room to grow in Chile. Our experience there, which has been very, very successful in opening these new campuses in and around Santiago should also serve us very well in other countries in opening new campuses, but particularly in Mexico, where our previous years growth, year over year growth was mainly coming from existing campuses and where this year we will be adding new campuses in Mexico. So we're learning from our experience there and we know it's going to make a difference in Mexico, not only in opening those new campuses, but also in some of the marketing techniques; some of the best practices that we've seen in Chile.

As we move towards the possibility of becoming a separate public company this year, as Doug pointed out, it's been very important to us to strengthen our management team and also to begin the steps that are necessary to have a very smooth transition of the Wall Street International combination with ourselves. And we've been working very hard on that. Raph Appadoo, our CEO who's going to be available for the part of the Q&A, he and I both have been working very, very hard too, on this WSI transition as well as building a very, very strong management team that will aid us in becoming a very solid independent public company. I'd like to before I close, mention just some of the more senior hires that we've made recently. First, Eugene , we've just hired him as our VP of financial operations. Gene has over 20 years of very, very strong international and financial controls experience. He served as the control Aetna's international operations. He was Aetna's CFO in Argentina, based in Argentina, and also has previously worked with Raph Appadoo, our CEO when Raph was at Aetna. In Mexico we've recently hired a very, very strong guy, , is our new CFO there. is originally from Chile, although working in Mexico and he's been the, recently been the financial director of in Mexico City and he has more than 20 years experience in financial operations. We're very excited to have him on board because that is our largest university in the network. Third, has recently been named CFO, reporting directly to our chairman and CEO in Chile. was previously with Exxon and also Bank of Boston. At Bank of Boston that included an assignment in Boston with the bank and so he's got both the U.S. and obviously the foreign; very strong international and foreign currency experience. Lastly, we have just, and we're very pleased with this, John Hoey has joined us as Senior Vice President of Corporate Operations. John joins us from Sylvan Learning Systems, where he was the Senior Vice President of Corporate Services there. We're very excited about having John working with us. He will be overseeing our Greenfields projects and our network development efforts. So we've had, we've made a lot of progress in the last three months and since we last spoke with you about building this team and also about continuing to demonstrate very, very strong financial performance. So that's it for us, Doug.

Thank you very much. I'm very pleased about the strengthening of the team. It's already a team with great breadth and depth in management and now especially in the area of financial management, I think we're really ready for the growth through new campuses, through Greenfields, through acquisitions, that's in our five year plan. John Hoey's appointment to SIU is also very important. John has been one of the most senior executives at Sylvan now for many years and I think our willingness to send him over to SIU is a real testament to the importance of SIU. With that I'd like to turn over to Chris Hoehn to talk about Sylvan Ventures and then back to Sean on guidance. Chris?

hoehn-saric: Great, thanks Doug. I'll just make my comments, make them brief. Let me just focus on a few highlights. E-Sylvan, which is our at-home online tutoring service, that was mentioned in Peter's comments has continued to make very strong progress. Overall, our fall marketing program, which had been very strong at the time has continued this spring. We're currently serving well over a thousand active students, which is approximately three times the number of students that we began the year with. So we've seen continued strong growth there. As I discussed last time, we had been seeing very strong and affordable lead growth, coupled with a strong closure rate on business and in order to fully scale the E-Sylvan business, the essential business metric involved the affordable customer acquisition. We've continued during this past quarter to deliver very affordable customer acquisition cost, at an increase in scale, so we're quite pleased with the continued progress. It gives us confidence that the business model really is working well here. In addition, we rolled out through our remote teaching model and we're allowing us to source teachers throughout the country and have them actually teach at home over the internet as opposed to out of a facility based model. This provides with access to a broad array of labor in different markets and this has worked actually extremely well. We're currently employing approximately 150 teachers from around the country and continue to see strong success in recruiting and retaining them. As we enter the summer months which historically has been a period where we deliver service but where marketing slows down, we really will be preparing for our Q4 enrollment period and see both Q4 and Q1 next year as the defining moments for the company as we really see expanding marketing and operations as we've now been able to internally determine that the business model is working well and profitably and are seeing the right kind of business metrics there. In our online higher-Ed area we focus much of our efforts on creating a leading brand and a leading company in the online higher education business. Our online higher-Ed access includes, as Doug mentioned, our Sylvan's Canter business, which specializes in teaching degrees, teaching masters degrees programs. Our 51 percent interest in Walden and now assuming a regulatory approval, our 100 percent ownership interest in National Technological University, NTU. As we mentioned in previous calls, we've been following a strategy of building the finest distance-based educational professional schools in education, psychology, business, health, engineering and IT and significant progress continues to be made there. Our year over year growth for instance in Walden, in our spring 2000 term spans 89 percent higher than our spring term in 2001. This reflects the success of our joint Walden-Canter masters degrees programs, which have been launched in the past year and across the board growth in all other degree program areas.

Overall inquiries at Walden are now running double over what they were last year, reflecting a continued strength of our marketing programs and as we brought new marketing programs into the organization, we continue to see the trend in a very positive way going forward.

On April 9th, Walden's first bachelors degree program passed through accreditation review and we were recommended for approval by the NCA site team. Final approval for our bachelor's degree is expected to be granted at the next NCA board meeting, which is scheduled in August of this year. This would allow us to immediately enter into a broad and new category of online higher education, away from masters and Ph.D. programs which have been historically our area, but now into the four-year bachelors degrees programs, which we believe is a significant opportunity of growth for us. In the past quarter we've also assumed the management responsibilities for NTU. NTU which focuses in on engineering and IT programs and has about 15 different masters degrees programs is a company we see a substantial amount of value of building there. We've now introduced new marketing and sales functions, which we think will become active for the fall enrollment period, in addition new programs are being launched in this period as well. We would expect to start seeing really direct impact on student enrollment and retention activities at NTU, starting really in Q4 and Q1 of next year, as the new people come in place.

In the past we've eluded to the potential of our higher online, higher-Ed access and it's been our intention, as Doug has mentioned, that over time we will end up formally consolidating our Canter and Sylvan Venture assets into a single formal organization that can really create the definitive market leader in this online higher-education space. We've already done this at a senior management level, both in terms of oversight and direct management responsibilities with Paula Singer, one of our most seasoned executives at Sylvan, taking overall responsibility for these assets. So we are already finding the synergies as it relates to marketing. operations, finance and so on. But the actual consolidation of these enterprises will take place someplace over the next year or so. Overall we're pleased with our continued growth and our online higher-Ed assets and we'll be able to report further next quarter on new program starts and our consolidation plans. Sean?

Thanks Chris. Before opening up for Q&A I just want to quickly review our second quarter guidance. For Q2, 2002, the company anticipates total revenues of $244 to $150 million. This represents an increase of 14 to 19 percent over the second quarter of 2001. Second quarter operating incomes, excluding Ventures, expected to be $20 to $22 million, an increase of 11 to 22 percent over last year. And the company currently believes it will achieve earnings per share in the range of $0.26 to $0.29 per share for the second quarter, again excluding Sylvan Ventures. As I mentioned on our last call, the seasonality of our business has changed as a result of the growth of SIU. W we continue to project that the second and fourth quarters will account for roughly 70 percent of our earnings per share for the year. While we've not previously issued guidance for the second quarter, I've noticed that consensus EPS estimates for the second quarter is $0.31, which is slightly different from our guidance. I think it's important to bear in mind that the fourth quarter is the one quarter during the year that all of our universities are in session for the entire quarter. As such, it's our seasonally strongest from a bottom line contribution standpoint. In addition, as was previously noted, we continue to make investments, both domestically and internationally in the first half of the year that are not expected to drive bottom line improvement until the latter part of the year. This may require modifications through the quarterization of our earnings to appropriately reflect seasonality of our business. We do reiterate our full year guidance of $0.93 to $0.95 per share. And consistent with our past practice we will provide quarterly guidance in advance of each quarter in subsequent earnings releases.

Finally, as part of the adoption of FAS 142, we are currently in the process of performing the required transitional impairment test. Given that Sylvan has over $300 million of goodwill on our balance sheet, excluding Sylvan Ventures, any impairment due to the change in accounting for goodwill could result in a large one-time write-down. In addition, as Doug mentioned, that there may also be a one-time write-off relating to our WSI Spain business as we move to end the losses which are obscuring the otherwise strong performance of our business. We expect to complete the analysis of both these issues during the second quarter and we'll be in a position to report the result and write-downs of charges, in conjunction with our second quarter earnings release. But to be clear, any write-downs or charges are not included in the guidance that I've just gone over. That concludes the company's comments at this point. So, at this time I'd like to ask the operator to get things started with the Q&A. Operator?

Thank you, gentlemen. Today's question and answer session will be conducted electronically. If you would like to ask a question, please press the star key followed by the digit one on your touch-tone telephone. Again, that's star one on your touch-tone telephone. We'll take as many questions as time permits and in the order that you signal us. We'll pause for just one moment to assemble the roster. And our first question comes from Peter Appert of Deutsche Banc.

Hi, good morning. Doug I was hoping maybe you could give us some guidance on the relative profitability of the various universities. And also, I see that specifically Mexico had a particularly strong revenue performance. Maybe you could just give us some insight, in terms of specific things that are happening in that market.

Peter, I don't see that we've given any guidance down at the university level, so either you've been rooting around in my desk drawer or you're trying to fool me.

Today's the day, Doug.

No, we clearly have seen strong performance across the board with the universities. I think the profitability really relates on the -- really relates to the maturity of the campus. Obviously, newest campuses are less profitable than more established campuses. But I should say given the expectation for a filing of some kind for an IPO for this business, we want to be a little careful about specifically breaking out that kind of information for you at this time.

Okay. How about the growth dynamics, then, in Mexico, which is performing particularly well from a revenue standpoint, it looks like?

Well Mexico last year enjoyed strong growth, not just in enrollments, but also in price. I know last year we announced price increases of approximately 15 percent, with an inflation rate in that country of about six percent. So, that's I think a good example of the pricing power that we have. We also increased enrollments in Mexico, I believe it was in the nine or 10 percent range. Bill, do you want to make any comments on that?

Well no, I think you've covered it. Obviously, Peter, Mexico represents a large portion. I mean it's the largest university we have and so it -- it is accounting for a large portion of the increase that we've had year over year. I would just say that in the first quarter also we've talked a lot about Chile today. We really didn't have much but expense in the first quarter for Chile because they didn't get started until March. So this enrollment that we've spoken a lot about today, and I know you know that, is really gonna affect the rest of the year. And our quarters, our subsequent quarters will be much stronger as a result of the achievements there. But it's a combination of a very solid-- and I think we announced this last year at the end of the third quarter, or for the third quarter results, we talked about the fact that overall we've been able to get about an eight percent overall price increase. And we've announced again this year that this 15 percent enrollment increases from the primary cycles are going to drive very strongly the financial results of the business and Mexico's going to be a big part of that.

Great. And how about in terms of the acquisition pipeline. Is there much we should be looking for in the near term basis?

Again, given the of a filing I think we want to be pretty cautious about commenting on that. I would say that many people that follow us know that we've invested very heavily in having the industries biggest and I think best mechanism for sourcing international deals and evaluating them. We've taken our time in diligence and in negotiations, we've been extremely disciplined in the prices that we've paid. I'm very pleased with the pipeline that we have. But all of the guidance that we've furnished is predicated upon no further acquisitions at this point. So, if there are any acquisitions that occur, they really would constitute upside for us.

Okay. So I'll quit asking you about the . On the, this is the last item, on non-operating items, should we just basically annualize the first quarter results to get a sense of where those numbers come in for the year.

Peter, it's Sean. It's another area that last year we gave guidance, as a percentage of revenues. I think the thing that makes that difficult this year is that the minority interest adjustment is such a large part of the non-operating now.

Right.

Clearly in the first quarter, the cash balances were significantly lower than the first quarter of last year. The interest rates we're-- earning on that money are also lower at this point. So,here's roughly a $2-plus million dollar decrease in interest income year over year, which I think contributes significantly to the earnings per share. The non-operating decline offsets, I think, very strong operating income performance. But at this point we've not issued guidance. I think it's reasonable from a cash balance perspective to take what we're looking at, at the end of the quarter, about $162 million and project out year-end balances in the $134 million range, which is our current expectation. And then obviously to the extent SUI outperforms, that does have an effect down below in the non-operating. I think you just need to keep, keep in mind.

Peter, it's Doug. I would just say it's obviously a lot easier to annualize things like interest expense.

Right, yes.

interest is going to run so similarly to SIU revenues that you want to really take the seasonality of that business into account.

Right, got it. Thank you.

Thank you. Next question please.

Thank you, next we'll hear from Brandon Dobell of CS First Boston.

Hi Brandon.

Congratulations.

Thank you.

I wonder if I could focus on two areas. First on Education Solutions. Maybe you can give a little better idea of what kind of investments you're making, if you see any opportunities because of the bill that are markedly different from what you've been doing? and really just focusing on you know, bigger sales force, bigger marketing, those kinds of things?

Sure, let me address a little bit of that. This is Peter Cohen. There are obviously two sides to that bill. First the 18 percent increase in the normal funding provides I think about $1.7 billion in additional opportunity, in what's traditionally been the core business of SES, which is typical during school remediation. The second part of that of course, which is the after school parentally directed funding program, which is somewhere between $500 million and $1 billion, and does require and additional investment. There hasn't yet been a determination as to whether or not we'll need to open up specific short-term sites in order to provide services for those parents, or whether we'll be able to do that on school grounds, or whether we'll do it within our current learning centers, which tend to be more suburban. I suspect there'll be a combination of all three. So, in advance of actually getting some of those funds, we're investing in a management team that will be able to handle the build-out of some centers. The process we'll need to go through by state in order to make sure that we're on the list for each state of approved venders. And putting together the program that actually needs to be a slightly lower cost program than we've traditionally offered because the amount of money each parent gets is somewhere in the neighborhood of a thousand dollars. And we want to make sure that we can provide an outstanding service for that money.

So we're going to be doing some modifications in our program development. We'll be building up a little bit of a force in order to make sure that we're on the list in each state. And we'll be building out a bit of a management team to handle the operations that conceivably could cross many states towards the end of this year. On that side of the business I think those are the two largest opportunity areas. I think there's also opportunities in the professional development area with additional funding that will allow us to go after the teaching of reading and writing skills in schools to school teachers as an additional opportunity. Doug, is there anything you think I've missed on there that you'd like to add?

No, I think, I think our expectation for the bill should produce-- hasn't really changed. I think what we've been doing is just business planning, building up a sales force and getting ready to be in the business of, in essence, receiving these thousand dollar vouchers that are going to be showered upon, you know, hundreds of thousands of people. And it's our job to be ready for them and to make sure that they bring them to us. It's a little oversimplified, but that's, that's basically, that's basically the opportunity.

Okay. Who would make the determination about where those locations are? Is that part of how the bill is going to be structured, or is that part of what you guys are thinking relative to you know, or kind of a geographic opportunities?

The answer, again, is not quite so simple as we'd like it to be, which is some of the above. In each market the states have the authorization to select vendors, or approve vendors to give out these supplemental services. We think that in all states we'll be chosen as one of the vendors in those states. We hope in some states to actually partner with the schools themselves, in order to offer services through the school district. In those cases, we think we may be able to offer those services on the school grounds. In other cases we may partner with a local community, such as a church, or a YMCA or some similar non-profit organization, in order to use their facilities near the school. The biggest challenge of course for delivering to these mostly urban school kids, is going to be finding a location they can get to very easily. And so, in each case it'll be a by-market decision. What we've done is to striate the markets based on where we think the highest potential is, in terms of number of dollars available, at a price point that we can deliver services at. And we're focusing our efforts on going after those cities and those districts first.

I just would add, I don't -- you mentioned , Brandon, and I don't see this as a particularly -intensive business. We're not going to actually build out through permanent sites of our own, were much more likely to partner-up with other community-based organizations and I would anticipate this being much more of a sales and marketing investment, than a investment.

Okay. And I appreciate that. Switching over to WSI, back at the investor day last fall, you gave out some metrics for kind of, you know, corporate versus franchise centers, in terms of you know, levels of business as well, some kind of insight into what was happening in Asia. Wonder if you could give us a little bit of an update on, you know, what those businesses look like, if you've sense any market changes in the kind of percent of revenue figure we saw last fall?

Yeah, it's Doug. And Peter, you may have seen, even though this is not directly your area, I know you're very close to these numbers, you may have some comments to add for me here. But basically, outside of Spain Corporate Centers, I think our average center revenue was running in the roughly six to $700,000 range and our corporate centers are averaging operating income in the 20 to 25 percent range, so this is a very profitable business. Other than the sort of train wreck that we've been dealing with in Spain. And the great news is that there is just not a glimmer of that issue recreating itself in any of the other countries that we're in around the world, including countries that we've been in nearly as long as Spain. So, we didn't make the same mistakes that set ourselves up that way elsewhere. So I don't really see any changes in the trends. I can tell you that the management team is of course consumed with sort of dealing with Spain issues and I think that if we can really reduce the attention focus on the Spain issues that we can really see substantial growth elsewhere in that business. Asia, you asked about, is very interesting. We have seen continued growth there, in particular in China and the Chinas; Hong Kong, Taiwan and the Peoples Republic are the only markets that we're in today in Asia. We are working on and we think are very close to partnership agreements that would allow us to enter Japan and Korea, which are two huge and very important markets. But the market that we give the most attention to is the Peoples Republic. This is a franchise market for us, but we do have the right to own it and we're very close to the franchise operator there and are watching that market very carefully because we think that is a market we're gonna want to own. The opportunity to be the leading provider of English language training in a country with as little supply as China has today is extremely exciting. So, we're keeping a close eye on that and are expecting great things in China.

Doug, I might add, first a few numbers on the corporate centers are correct and those are the right margins for the corporate centers. The only area which is not very significant to us today because it's more or less a start-up country for us is Argentina has a fairly soft economy, obviously. But we built those numbers into our forecast and we don't anticipate at having anymore of an impact than we've already projected.

Peter, only somebody that is doing as little business in Argentina as Steve could have ever used the term a fairly soft economy in Argentina.

It's not significant for us in WSI today fortunately.

OK. Thanks a lot.

Thanks Brandon.

Thank you. And next we'll hear from Trace Irvin of Think Equity Partners.

Hi Trace.

Hi there, good morning. Just a quick question to follow up on Spain. Why not simply close the poor performing centers? Why is it necessary to sort of deal with it on that?

Well, that's a real possibility and we're in deep evaluation and implementation right now. There's no question we can close some poor performing centers. Part of the problem is, and this is something again that we don't have anywhere else in the world and don't have a lot of, and you can, thank goodness, experience with this. It's not really just a function of us closing our centers, we have a direct competitor that opened over a hundred centers that were within, in most cases, a few hundred meters of our centers. And so, it's not just a function of us closing the centers, it's a function of where they choose to close centers. And to some extent it's a game as to who decides to close their centers first. The other guy can potentially benefit. And I'd say given all the other great opportunities that we have, the amount of time that it would take to sort of optimize performance in Spain, as opposed to a more sweeping change such as selling the business, that's a trade-off we're watching very carefully. I can tell you from my pride's sake, I'd like to go in there, close just the non-performing centers, fix the business and see it return to the kind of profitability that we've had in the past. But my brain says to me that the investment of time and energy into that may not be as good as it would be if we focused on other markets. Because we're not in total control of what happens there. Or,a lot depends on what our competitors do in that market. The one thing I would say is if we did sell it, and we've had some people approach us, we would likely sale it in some sort of earn-out type structure, to our favor, so that if the business recovered its profitability, we would either end up getting either a share of the business or getting some money back. So even if we end up having to take a write-off on the front end when we sell it, I do think Spain can be fixed. And frankly, I would only, if we sold it at all, I would only sell it to somebody that I thought could really fix it. We feel a deep sense of responsibility to the centers, the franchisees and the employees there. So at this moment we're keeping all of our options open.

Great. Moving onto the Education Solutions business. If it was, I guess sort of, something of a surprise to me to hear that you're still recruiting salespeople there. It looks like you must have gone through a fair amount of transition. I'm wondering, sort of, you know, where you stand in terms of salespeople relative to what you feel you need. And then I guess the follow-on question from that is, you know, aren't we in the selling season right now for the next school year? And you know, is that a concern at any level?

Trace, let me try to address that. First off the strategy that we'd had in prior years was to actually combine our sales and our operations force. And so we didn't really feel a strong need to have a sales force outside of some external consultants who worked with the company. And what we've identified is that people who are great operators and make sure that our labor costs stay inline and we provide a great service to the schools, are not necessarily so strong at going out and getting new business. And given the opportunity to do one of the other, they typically focused on their current business. So we identified, when Jeff came on board, that this was an opportunity in the business and we began a search then for a VP of Sales, as well at the same time ass looking for some strategic regional sales people in order to handle four regions of the country. What we've been able to do, literally ending up about three weeks ago, is complete that sales team. And we don't need a lot of people in order to execute against our strategy. Really, it doesn't take that many people for us to build up the kind of revenue projections that we expect to have for next year. And I'm happy to say at this point that the people we've brought on are all experienced in the education space. So they don't have a long curve, a learning curve in order to understand how to get ahold of superintendents and how to sell our product in the districts. So those people are now in place. We have somebody for the south, we have somebody for the west, we have somebody for the northeast and we had a person already in the central United States and we also have our VP of sales. Most of those people came out, well actually all of those people came out, of the education industry and were selling either products or services for other companies. So I think we're in good shape now. In terms of the timing, I would have preferred to have had this completed by January in all candor. I--we're a few months behind where I would like to be, so the sales force has a little bit of work in order to make sure that we're geared up for next year. Given that there's lots of additional funding that's going to take place after September, I think we're also OK in preparing for next year. So I'm pretty confident that we'll meet our goals both this year and next year even though we're just a slight bit behind where I would've liked to have been in building up the sales force.

Yeah Trace, it's Doug. I don't also would just add that the irony is that this business which has always been a direct institutional sales business and today extends, sort of sticks out from the rest of Sylvan's consumer businesses. This business is about to become much more of a consumer business too. So while everything Peter just said is absolutely right and intended to drive the institutional, institutional purchase of SES solutions. In fact this new No Child Left Behind Act and these sort of voucherization of supplemental services means that there will also be a substantial consumer component to this business and so we're really not just staffing up sales, but we're staffing up marketing too.

Understood. Last question, for you again Peter and then I'll let you move on. Just a question about the franchise sales and maybe, you know, sort of how you think about making those franchise sells. We went from zero last quarter to seven this quarter. Is it the situation where you have sort of an inexhaustible pipe to choose from? Does it track the economy? And then you know looking at long-term you know, how do you think about when do you get to a place where you sort of you know, reach maximum penetration on that?

Well Peter, before you answer that I just want to say, in our statement we said we opened seven new franchises. That doesn't mean we sold seven. Trace we actually, what's the recognition policy on that Sean?

training.

So once we sell them, it can be months before we actually recognize it as revenue. You have to go through training before we even recognize the sell. So you've got when we really sell them, when we recognize it and then when the center opens. So I just want to start with that clarification. But Peter, maybe you can get to the inexhaustible supply.

Yes. It's a word that life for as such that it was an inexhaustible supply. First, a couple of quick comments. We took the entire country and mapped it out about a year and a half ago to identify how many viable territories we thought were left in the United States and Canada. And that number came up to somewhere in the range of 250 territories that we thought were still viable and were available for people who would want to franchise. So we have those territories in our pool. What we've done, fairly traditionally, and I'll talk about the last quarter in a second. But fairly traditionally we've sold between 40 and 60 franchises a year. It seems to be about the number that we can handle in terms of training, new center openings, staff support costs and just our entire system. So we've kind of set ourselves up and we have a sales team who's capable of bringing on in the range of four to five new franchisees a month although it doesn't quite come out that way.

In the fourth quarter of 2001, there clearly was a fear on the part of many people, just about the instability in the economy and the post-traumatic effects of September 11th and nobody was willing to jump in and invest $150,000, not knowing where things were headed. So our sales in the fourth quarter were well below the expectations that we would have currently or traditionally had for the fourth quarter. What we've found is at the end of the year and going into January that consumer confidence had picked back up enough and people were wanting to be in charge of their own destiny enough that they were either downsized or willing to leave their corporate jobs and take on a franchise opportunity control over their life. And it was really back to a more traditional pipeline of potential franchisees. Right now I don't see anything changing that, so I would put us back on track for our traditional number of franchisees for 2002. But the supply is not inexhaustible. Although I think based on those numbers we have probably you know, four years left before we have to think of a new kind of business to franchise in order to keep that franchise development team occupied.

Or more realistically I think we'll just see a lot of franchising outside of the United States. We've seen the Sylvan Spain business, which is doing very well as distinct from the Wall Street Spain business where we have over a hundred units and they're doing very well. And we're just starting in France and the U.K. where we think we can have a lot of units. We have 900 units in Germany. So I think international's really intended to give us closer to the inexhaustible supply, but for the next you know, four years at least, the U.S. should continue at its current pace.

OK. Thanks gentlemen.

Thanks Trace. Next question please operator?

And next we'll be hearing from Jeff Silber of Gerard Klauber.

Good morning. Sean, I guess the first couple are for you. This might be somewhat difficult, but I was wondering if you could give us your organic revenue in operating income growth, I mean operating income line, taking out the impact of the new FASB rules?

For the first quarter?

Yes.

Well, in terms of the release, I think, we actually included in that. I think taking out the effect in the first quarter operating income was up around eight percent.

And on the revenue line, taking out any acquisitions?

I'm trying to think.

It'd be very little.

What significance if any, top line revenue would be non-organic in the first quarter.

Might have been a million dollars.

I take that back in that there was corporate, 30 new corporate owned centers that were acquired.

Right.

And so I would guess that represents for the quarter --

It makes up two and a half to three million I think, Sean.

It might have been 3 million. And maybe a million for the EFCE, the French business school that we didn't own in the previous year.

OK. Great, that's helpful. Peter, probably this one is for you. I guess there was some testimony earlier this week in congress where I believe it would be the Under Secretary of Education identified potentially more failing schools than had initially been talked about that might be eligible for all of these supplemental services revenues. One, I'm wondering if you've seen that out there as well? And two, if that potentially means that you know, maybe we get closer to the billion dollars available as opposed to the $500 million level?

Yeah, it's a great question. I think the Under Secretary actually has identified one of the issues today, which is that the states have not yet completely complied with the requests to identify their failing schools. The initial 3,000 number that was bandied about literally for the past year, came from only about, I think, half the states having reported what their failing schools were. And some of the largest states had not been included. Numbers that I've heard bandied about and I have no basis and fact for, you know, range from 3,000 to 9,000. So clearly the number is going to be larger, I suspect, from the 3,000 number, but there really is still no good number out there and until all of the states have reported as they were asked to do so, we won't know what that number is. To the other side of your point, obviously the more schools that are affected, the more potential there is for that number to go to the high end of the range.

OK. Great. Just one more quick one. This is regarding Wall Street Institute. Can you tell us roughly from a top line perspective what Spain's contribution to that unit is?

I think it's about, I think last year Spain's revenues were probably about 40 percent of the total Wall Street business, in that range, and obviously this year we'll be considerably less. But it was profitable even last year, so not only do we have the losses this year, but the swing is worse than just the losses would imply.

Doug, I think that number might be a touch high. I don't know if Sean has that available. I thought it was closer to maybe 25 percent, but I--

Yeah. My recollection is in the mid to high 30's, but--

OK. We have three separate numbers.

We got another range. OK, great thanks.

Jeff, just to clarify on your earlier question. Clearly the learning center acquisition had an effect on the top line. But just keep in mind from a bottom line standpoint, at least in the first quarter, what happens when you convert a learning center from a franchise to a company owned, you forego the royalties that you would have otherwise had. So from the bottom line standpoint, given sort of the time that we bought them, sort of at the precipice of them converting to a much higher margin business, the bottom line impact in the first quarter was nominal.

Next we'll hear from Gerry Odening of JP Morgan.

Thank you. Just a quick question, maybe for Chris, what are the new marketing programs at Walden NTU that you put in place and how would you characterize the old programs that needed revamping?

hoehn-saric: I think the biggest changes there were that Walden and NTU were both institutions that are unique. There are really a small handful of exclusively online fully accredited institutions in the country. Both of these organizations have been around better than 20 years, had had successful business models, but ones that relied on relatively low growth and low marketing spin. They primarily relied on, you know, limited marketing in the case of NTU, toward corporations as sponsors of individual students in the case of Walden, a direct response program aimed primarily at their historic base of some teaching, but psychology and a couple of other degreed program areas.

The real process change that we put in place focused around really revamping and organizing the marketing and product development functions to focus initially on researching the market. Determine where, what students we were going to target, what were the audiences, what was the competitive landscape and putting in place more formal market research programs that had been put in place in the past.

Complimenting those with really an expertise that we've enjoyed at Sylvan over the years, which is really direct response to consumers. The ability to target mixed consumer groups. In this case with combinations of internet advertising, direct mail and so on. And so really those programs were fundamentally not in place prior to this. So I -- I don't think it's anything other than sort of basic blocking and tackling, except with well developed processes that we've had here.

And what we're seeing is even in a very short period of time, substantial impact on new enrollments and really at this stage a belief that we have sort of the right products, the right brands and a pretty open market to continue to expand both of those businesses.

It clearly plays to your strengths. That's it. Thanks.

Thank you. We have time for two more questions. And before we do that, I do want to just clarify the question Jeff Silber asked a very reasonable question, what percentage of Wall Street's total revenues came from Spain? And my guess was 40 percent and Peter Cohen's guess was 25 percent and our CFO Sean Creamer's guess was in the mid 30's and the winner is Sean Creamer at 33 percent and certainly the CFO needs to be right. So Sean don't pat yourself too hard on the back.

It's good to know that I'm pragmatic, you're optimistic and Sean's right on.

Yeah, that's pretty much the way it goes. OK, operator next question please.

Fred Marostica from Piper Jaffray.

Hi it's Mark Marostica with Piper. Congratulations on the quarter. And congratulations Sean on your guess. That's very, very right on.

It certainly wasn't a guess Mark.

Touché, touché. Back to Wall Street Institute, I was wondering what markets in particular if you want to highlight a couple in relation to Asia are driving the strong EBITDA kind of growth that we're seeing? And what other markets in addition to those perhaps should turn profitable this year?

Well just to review to where we make our money with Wall Street. We have countries where the entire country is franchised, where we get a high margin royalty stream. And we have countries where we own the master franchise for that country, so we get an even higher percentage of the revenues, but we have expenses. And then we have, within countries that we own, corporate owned centers where we have in essence the highest absolute dollar profits and the lowest absolute margins because we have real expenses. So that's sort of the tiering.

Italy is the strongest profit driver for us. We own centers in primarily Rome and Milan, which are very profitable and we are franchising other towns and cities throughout the rest of Italy.

We also are very strong and profitable in Portugal. Then the other company owned markets are Germany, Brazil and Argentina. We mentioned Argentina earlier, the good news is it's not a big, well it's not a big business to begin with of course. It's been damaged by the economy, but we expect it's not much of an impact and we expect it to recover eventually. And actually it's recovering better than I think I would have expected given the bad state of that economy and that government there.

And those are the company owned masters and then we have a lot of franchise masters where we've seen a lot of growth. Last year we saw tremendous in just all over the world, including in the middle east, which was very surprising to me, given all the problems in the middle east. So we've really seen growth just about everywhere, but I think our prediction is that you will see the strongest growth moving forward in Asia. Germany is the one country that I would say in particular that's going to turn from a loss to a profit this year, that should be a nice swing for us as well.

Great. On to the learning center business. Question in regards to the impact of the SallieMae program. Certainly the economy seems to be rebounding and I'm wondering if you've done any studies or have any insight as to whether the rebound in enrollments and revenue growth in the same store basis is the responsibility of an improving economy, or the SallieMae program being the key driver there?

That's a fair question. I don't think that there's one specific factor that accounts for all the growth. It's actually very positive. But right now we seem to be hitting on all of our cylinders. Our inquiry growth I think is a combination of both of the continued increased interest by consumers in taking care of their children, as well as a very effective marketing strategy that we just saw turn on effectively in January and continue to get even stronger, all the way through April. But driving initial enrollment opportunities up fairly dramatically.

We then found that with the SallieMae program, people were able to buy as much service as they actually needed instead of having to decide between, for example, a reading or a math program, because they couldn't afford to buy both.

Our SallieMae students tend to have twice the average program sale that we have on a traditional student. And that is typically because they're able to stretch out the payments long enough that the cost on a monthly basis of buying the entire program they need instead of just one of the two, is about the same or lesser priced than what they would have normally had to just buy one program.

So I don't think that the economy is--the improving economy isn't going to change the SallieMae opportunity. The SallieMae opportunity is presented to people as a methodology for buying all the services they want and a way to stretch out the payments, not something that would be a factor of the economy being worse in prior months.

Peter, I would just say, put another way, increases in inquiries would have nothing to do with SallieMae. That's really a function of advertising and a recovering economy. Increasing conversion rates of inquiry to enrollment would be a combination of a recovering economy and SallieMae. And increasing average program sale would probably be a function of SallieMae. In all, we've seen all three of those areas of improvement. I also should mention that while SallieMae is sort of a flagship program for us, we do have another tuition financing program today. And have literally had our doors beaten down now by other financing companies that would like to share in what has become a very successful program for SallieMae. So we're seriously evaluating whether we want to involve additional partners. Because that's become a very big program. Very lucrative I'm sure, not just for us, but also for the financing companies.

Great. I'll ask one wrap up question on UTLA, great total student enrollment growth in the quarter. I was wondering if you could break that out on a same store basis for us, given that you did open, I think you just mentioned two campuses in Chile in March.

Yeah, it's going to be a little bit hard to give you the perfect answer because we were so over capacity in our main campus that we ended up having to shut some students to some of the new campuses, which would blunt same store. But the net result, numbers that we have here would be about 26 percent of the growth came from same store and about 24 percent of the growth came from new campuses and that adds up to the 50 percent of total growth in total students.

But in terms of new students, we did actually move some students from the biggest campus out just from the other campuses in order to make it a little bit more comfortable for the students. So same store was probably a little stronger than what I just told you.

Great. Thank you.

I think we have time for one final question, operator.

And our final question will come from Bob of

Good morning everybody. I wonder if you could give us some idea as to the timing and potential locations of any of the new campuses of SIU and what you may have budgeted for '02 in terms of new campus opening expenses and or losses?

Bill would you like to comment on that?

Well I think Raph ought to, you know he's been very quiet there for quiet a while. He should talk about these new campuses a little bit and then I'll fill in behind you Raph.

Raph, don't identify what country you're in or people will start guessing about what we're buying.

Yeah, I won't say nothing.

And don't tell them where I am.

That's right. As befits an international organization we're all over the world and chasing, creating the pipeline as Doug has mentioned before. Let me get back to the question. Clearly this year a big push is in Mexico in terms of opening new campuses. So we started some last year in Chile, one last year in Chile, two this year. Mexico we'll see two of them starting this year. We have, we don't expect them to be a drag, a big drag on our earnings this year because they start in August so it's in the, essentially those two campuses are in our guidance if you will. It was part of the old guidance that Sean has given you.

OK. Great. Thank you.

Any other questions? Nope. Well great, with that we want to thank everyone for participating. I know it was a long call but we hope you got a lot of good information and we thank you for your interest in Sylvan. Thanks.

That does conclude today's teleconference. We thank you for your participation.