PC Connection Inc. Annual Report 2012

← All annual reports

FY2012 Annual Report · PC Connection Inc.

Loading PDF…

STRAYER EDUCATION INC.

2 0 1 1 A N N U A L R E P O R T

O U R R E S U LT S

Student Enrollment: Fall Term

Revenues*

0
0
0
2
1

0
0
0
4
1

0
0
5
6
1

0
0
1
0
2

0
0
5
3
2

0
0
3
7
2

0
0
4
1
3

0
0
1
6
3

0
0
6
4
4

0
0
3
4
5

0
0
7
0
6

0
0
2
4
5

’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11

600

500

400

300

200

100

2
.
8
7
$

9
2
9
$

7
6
1
1
$

0
7
4
1
$

2
3
8
1
$

5
0
2
2
$

6
3
6
2
$

0
8
1
3
$

3
6
9
3
$

9
1
1
5
$

7
6
3
6
$

4
7
2
6
$

’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11

Operating Income*

Net Income*

200

150

100

9
0
3
$

5
3
3
$

2
1
4
$

9
2
5
$

5
5
6
$

9
4
7
$

5
9
7
$

6
7
9
$

9
6
2
1
$

4
2
7
1
$

8
5
1
2
$

1
9
7
1
$

’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11

Earnings Per Share (diluted)

150

120

7
1
2
$

8
2
2
$

8
5
2
$

7
3
3
$

2
1
4
$

1
8
4
$

3
2
5
$

9
4
6
$

8
0
8
$

1
5
0
1
$

3
1
3
1
$

0
6
0
1
$

’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11

5
5
.
1
$

1
4
.
1
$
’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11

7
6
.
5
$

0
6
.
7
$

7
4
.
4
$

0
7
.
9
$

6
2
.
3
$

7
2
.
2
$

4
7
.
2
$

8
7
.
1
$

1
6
.
3
$

8
8
.
8
$

*Dollar amounts are in millions

O U R B U S I N E S S M O D E L

Reprinted from the Strayer Education, Inc.
2001 Letter to Shareholders

equal to our depreciation expenses. The investment capital
required to fund our growth initiatives is not major. This invest-
ment capital includes traditional GAAP defined capitalized
expenses, as well as increased spending which runs through our
income statement. We are therefore in the enviable position of
generating almost our entire net income as distributable free cash
flow, even after investing in our growth. Some of this cash we do
distribute back to our shareholders as dividends. The rest of the
cash we intend to maintain as liquidity to either fund new oppor-
tunities, or ultimately return to our shareholders in a tax efficient
manner. We understand that the redeployment of this cash is cru-
cial to creating shareholder value.

As both shareholders and management, we are excited by this
business model because we believe that the value of a college
degree is rising with the transition to a knowledge economy,
and that working adult students in search of an accredited col-
lege degree are underserved. We know that Strayer’s academic
quality and convenience make it ideally suited to meet this
growing demand. We have the right product, at the right time
for a growing market. Our product, a quality college degree, is
valued highly both by students and employers.

In 2001, we developed and committed to a new strategic plan,
geared to expanding beyond our current regional focus to serve
unmet nationwide demand for working adult post-secondary
education. This plan consists of five elements:

— Maintaining enrollment in our mature campuses.

— Accelerating the addition of new campuses, particularly

beyond our current geographic scope.

— Investing in our online university.

— Maintaining strong alliances and outreach to the major

employers of our students.

— Carefully screening opportunities to redeploy capital back

into the business or return it to owners.

Strayer Education, Inc. is an education services holding com-

pany whose primary asset is Strayer University, a 120 year
old institution of higher learning focused on educating working
adults. In this letter, when I use the term “Strayer”, I am refer-
ring to the company, as opposed to the University. Strayer
University, founded in 1892, offers associate, bachelor’s, and
master’s level degree programs in Business Administration,
Accounting, and Computer Information Systems. Strayer serves
students at 94 campuses. In addition, Strayer serves students in
all 50 states and more than 60 foreign countries worldwide on
the Internet through Strayer University Online.

Strayer’s revenue comes from tuition payments and fees paid
by, or on behalf of, Strayer University students. That revenue
comes in essentially three forms. Roughly 70% is paid through
federally insured student loans by banks, approximately 20% is
paid directly to Strayer by corporations or institutions on behalf
of their employees who attend Strayer, and the remainder is
paid by students through their own sources of credit.

Strayer’s expenses include salaries paid to the faculty at the
University who perform the teaching duties, salaries paid to the
administrative and admissions staff who manage the campuses
and enroll the students, and salaries paid to the corporate staff
who manage the company’s affairs. Expenses also include lease
payments for the campus buildings we lease and depreciation for
the campus buildings we own, as well as advertising and market-
ing costs which serve to attract prospective students to Strayer.
Finally, our expenses include supplies; such as books, desks, chairs
and computers necessary to support the educational process.
Some of the furniture and electronic equipment is capitalized on
our balance sheet and the expense is recorded as amortization
over the period we expect the equipment to last, in accordance
with generally accepted accounting principles.

The difference between the revenue we take in and the expenses
we pay out is used to first pay taxes and is then added to the
after-tax income generated by our financial assets (cash and mar-
ketable securities on our balance sheet) to make up our reported
net income on a fully diluted basis.

Two of the attractive attributes of our business are that it gener-
ates significant after-tax free cash flow from operations, and that
it has a high return on invested capital. The required capital
expenditures to keep our existing assets functioning are roughly

Note: Numbers that appear in italics are updated to reflect current information.

L E T T E R T O S H A R E H O L D E R S

R O B E R T S. S I L B E R M A N
C H A I R M A N A N D C H I E F E X E C U T I V E O F F I C E R

S T R AY E R E D U C AT I O N, I N C .

Dear Fellow Shareholder:

In 2011 our company’s main operating asset, Strayer
University, enrolled fewer students than it had in 2010.
Consequently, for the first time in the eleven years of
current management’s stewardship, Strayer Education
generated less revenue, less operating profit, less net
income, and less earnings per share than it had in the
previous year. As an equity investor, you generally want
the enterprises in which you own shares to grow. In
2011, our enterprise shrank. I suppose all companies
experience such periods at some point in their
lifecycle, it’s just never happened to us. Accordingly, in
this letter I intend to explore the causes of our
2011 student enrollment decline, its effect on our
understanding of Strayer Education’s business model,
and most importantly, what we, as stewards of the
financial capital you have entrusted to us, intend to do
about it in 2012.

First, however, reprinted on the facing page is an
excerpt from my original letter to shareholders, written
in 2001. This excerpt describes what our company
does, how our business model generates both reported
net income and owner’s distributable cash flow, and
our strategy to increase the intrinsic value of your
investment in Strayer Education. We have reprinted
this excerpt in each of our annual reports since 2001,
as we believe it is helpful to compare our annual
results against these first principles.

2011 Results

Strayer University’s average annual student enrollment
in 2011 was 53,901 students, down 4% from 2010.
Average annual student enrollment is important for
understanding our business model because our
academic calendar consists of four distinct 12 week
terms (i.e. winter, spring, summer, and fall). Our
working adult students may initially enroll in any of
the four terms, and indeed may take up to two terms

off and still be considered
enrolled in the University.
In addition, our summer
term
traditionally has
significantly lower enroll -
ment, so for analysis
purposes average annual
student enrollment is the
most relevant statistic for
owners.

The worst news about our
average annual student
enrollment in 2011 is that it will almost certainly be
even lower in 2012. This is so because while our total
student enrollment was only down 4% in 2011, our new
student enrollment dropped a precipitous 20%. Since our
students stay enrolled for approximately ten academic
terms, this 20% drop in 2011 new students will
continue to hurt our total enrollment in 2012, even
after our new student enrollments start to grow again.

To put our new student decline in context, in the last
eleven years there have only been two academic terms
(spring 2005 and fall 2010) when Strayer University’s
new student enrollment was even flat with the prior
year. Furthermore, during 2011 we successfully added
eight new campuses, and still our new student
enrollment declined. The obvious question is, why?

In answering this question I must first note that we
were not alone. Financial analysts estimate that the
eleven largest publicly traded education institutions
enrolled approximately one million new students in
2010, and that those same institutions enrolled
760,000 new students in 2011, for a decline of 24%.
Interestingly, every one of those institutions saw their
first significant declines in new student growth rates at
the same time, during the fall of 2010. Those new

student declines intensified and endured throughout
all four quarters of 2011. Nine institutions, including
Strayer University, posted actual declines in new
students in 2011, and two showed modest, but
significantly decelerated growth.

Commentators have proposed several potential causes
for the decline in new student enrollments across the
entire investor-funded education sector in 2011. These
include negative publicity; changes in management
behavior due to the new Department of Education
(DOE) regulations (i.e. less aggressive marketing and
the elimination of bonuses for admission personnel
based on the number of students recruited); increased
competition for the “high-quality” students which
Strayer University has traditionally sought to attract;
price; and finally the extended downturn in the
economy. Undoubtedly a combination of some or all of
these factors contributed to the sector wide decline in
new student enrollments in 2011. However, in this
letter I would like to explore more deeply each factor’s
relative influence on Strayer University’s specific results.

There admittedly was a concerted and well publicized
effort in the latter half of 2010 by some political,
regulatory, and financial actors to question whether
profit-seeking investor capital was an appropriate
funding source for education. Furthermore, that
intense scrutiny surely had an initial impact on some
students’ willingness to enroll in for-profit educational
institutions, including Strayer University. But I doubt
that negative publicity itself could have been the sole
cause of a yearlong decline in new student enrollments

at Strayer University, mainly because that negative
publicity subsided in the latter half of 2011, while our
enrollment declines intensified. Additionally, in late
2010 our survey results of students who did not enroll
at Strayer University showed some mention of negative
publicity, but by 2011 that reason had subsided and
was overtaken in our surveys by other causal factors
which I will describe later in this letter. In any case, as
owners of educational assets we must get comfortable
with an increased level of scrutiny, because it is not
going to go away, nor should it. In the last decade,
Strayer University has become one of the 20 largest
academic institutions in the country. Indeed, three of
the top ten American universities in terms of student
enrollment are now for-profit institutions. In some
ways, all this attention is merely the tangible evidence
of our success as a sector.

At Strayer University we can also safely discount
changes in management behavior due to the new DOE
regulations as a cause of our decline in new students in
2011. Quite simply, we did not change our manage -
ment behavior in 2011. Our marketing methods have
always been relatively conservative (we prefer the
strength and conviction of our alumni to drive our
student enrollment), and we have never paid financial
bonuses to our admission officers (nor indeed to any
personnel at the campus level). I would, however,
concede that there were two other negative impacts in
2011 associated with the promulgation of the new
DOE regulations. First, at Strayer we definitely suffered
from a diversion of management time and attention
away from our core academic mission in order to

understand and comment on the proposed regulation,
and second, we incurred (and I am afraid will continue
to incur) significant costs of data collection to ensure
compliance. However, in my judgment neither of these
impacts can explain Strayer University’s 20% decline in
new student enrollment in 2011.

There is at least some logical consistency to the
argument for competition as a causal factor behind
our declines in new student enrollment. If, because of
regulatory change and public skepticism more
like Strayer
institutions are driven to behave
University, doesn’t that mean that there are fewer
potential students for Strayer? Perhaps, at the margin,
but one must remember that the size of the potential
market we are addressing is enormous, tens of millions
of working adults who would benefit from post-
secondary education, and the capacity and market
penetration of the entire universe of investor-funded
institutions is still relatively low. And while there were
admittedly some institutions which did report growth
of new students in 2011, even they grew at
significantly lower rates than they had in 2010, so it is
unlikely that any meaningful shift in relative market
share occurred.

The fourth oft-mentioned causal factor for declines in
new student enrollment is price, and I believe it has
more relevance. The importance of education as a
factor of production in the economy has grown

significantly over the last 40 years, and that does create
real pricing power. However, high relative tuition, and
tuition increases well in excess of the rate of inflation,
could negatively effect enrollment growth, particularly
during an extended period of economic distress and
high unemployment. Yet it is unlikely that Strayer
University’s tuition levels in 2011 were the singular, or
even primary, cause of our 20% drop in new student
enrollment in 2011. The data reveals that some
institutions with higher tuition levels had less severe
enrollment declines than ours, and some with lower
tuition levels shrank more precipitously.

After reviewing all the data, I believe that the most
significant factor behind Strayer University’s extended
decline in new student enrollments during 2011 must
have been the sustained level of distress across the
economy, and specifically the markedly higher level of
unemployment in our target student population. Real
unemployment in this country among 25 – 50 year olds
without a college degree was a devastating 22% in
2011, up from 6% in 2008.* It is even higher in some
of our newer geographic markets in the industrial
Midwest. We know from surveying our students that
the large commitments of time and finances necessary
to succeed in our undergraduate academic programs
are often too daunting for those adults who have no
steady means of income (particularly those with
dependents). We also know from our surveys that most
of our undergraduate students have contemplated

*Headline unemployment released by the U.S. Bureau of Labor Statistics curiously excludes those individuals who are so discouraged that they have stopped
looking for work. That data is available, however, on sites such as American Business Analytics & Research.

returning to college for upwards of two years before
making the final commitment. They have had to truly
“screw their courage to the sticking point” before
actually enrolling. Therefore, in many ways, there is a
lag factor to the effect of serious economic disruptions on
our new student enrollments. As I have written in this
letter in the past, while some level of economic
insecurity does indeed drive working adults back to
college, sustained unemploy ment does not, at least not
to Strayer University.

Interestingly, in 2011 Strayer University actually grew
new student enrollments from two demographics with
low relative unemployment rates. First, master’s degree
students (who already have a bachelor’s degree, and
therefore enjoy better employment results), and second,
students employed by our corporate partners, (who are,
by definition, all employed). The growth in new students
from these two populations is probably the best
evidence that sustained high unemployment was the
largest cause of Strayer University’s overall decline in
new students in 2011.

So what do our enrollment results from last year tell us
about the assumptions underpinning our business
model? First, we appear to to have hit the upper
tolerance of acyclicality in 2011, where economic
distress is hurting, as opposed to mildly helping,
students’ propensity to enroll. Second, and more
importantly, even at this depressed level of new
student enrollment, the underlying profitability of this
enterprise remains quite strong, so long as we remain
focused on student learning outcomes and consequent
strong academic results. Indeed, it should not be
forgotten that in 2011 we did enroll thousands of new
students. As I will make clear later in this letter, we
believe in this business, and our plans for 2012 reflect
this belief.

On a positive note, we did successfully open eight new
campuses in 2011. These campuses continued to
expand our geographic footprint, with new presence in
the Dayton, Indianapolis, Milwaukee, and Chicago
markets, as well as increasing our investment in the
Cincinnati and Dallas metropolitan areas. In addition,
in 2011 we also made significant progress across all of
our academic initiatives. We graduated over 8,000
students during the year. I have included in this annual
report on pages 12–13 brief descriptions of some of

these graduates. Their experiences as students and
alumni continue to motivate us as educators, and indeed
define our success as a University. Our Writing Across
the Curriculum initiative, which I described in last
year’s letter to shareholders, is now up and running in
all of our programs and courses. Based on the learning
outcomes assessments of both our Business
Administration and Computer Science curricula in
2011, we added a new upper level undergraduate
English class to our catalog, ENG 315–Professional
Communications. This course is focused on the skills
necessary to make effective oral business presentations.
Any of you who have had to sit through too many
boring PowerPoint presentations will appreciate the
requirement for ENG 315, and while it is only an
elective, it is already well attended. In 2011, we also
continued
the efficacy of our
developmental English and Math courses (English 090
and Math 090 in our course catalog), as our research
confirms that English and Math competencies are the
two most important predicates to success at the
University level.

improve

Probably the most exciting academic development at
Strayer University during 2011 was our expansion into
an Executive MBA curricula with our acquisition of the
Jack Welch Management Institute. The Institute had
been founded by Jack Welch, the legendary former
CEO of the General Electric Company, in order to
transform the management principles he developed and
championed at GE into both an academically sound
MBA curricula, as well as shorter term executive
education courses. The Institute was originally funded
by a different university, but in 2011 Jack decided that
it needed a new academic home. At the same time, in
2011 Strayer University had independently begun
developing a new online Executive MBA curriculum
focused on more senior corporate managers, as well as
expanding our limited set of non-credit corporate
training and executive education courses.

I was therefore intrigued by the potential synergies
when Jack contacted Strayer to discuss a transaction.
Like the rest of the world, I knew him as an icon of
business. What I did not know, but in the process of
negotiating a deal quickly ascertained, is that at his
core Dr. John F. Welch (Ph.D., University of Illinois) is
an educator. He is our true partner in the transaction,
providing not just 40% of the financial capital to

acquire the Institute from its original owners, but more
importantly, providing much of the academic vision
and managerial direction to guide the Institute in the
future. While currently only a small part of our
University, we have high hopes for the Jack Welch
Management Institute, and are very proud to call its
namesake a distinguished professor of Business
Administration at Strayer University.

During 2011 the DOE issued in final form its “Gainful
Employment” regulation. (Please see my 2010 letter to
shareholders, available on our website, www.strayer
education.com, for an extended discussion of the
background, process, and substance of this regulation.)
The final regulation as adopted by the DOE is
moderately less severe than the prior draft, but retains
its essential element: a complicated test to determine if
an investor-funded, taxpaying university (but not
traditional, not-for-profit institutions) meets the
definition of providing its students with instruction
leading to “gainful employment”, and thus remains
eligible to receive the proceeds of federal loans as
student tuition. This test, which is neither included in
the Congressional legislation which authorizes federal
loans to students, nor has ever been used by the DOE
before, consists of two parts and is applied to specific
academic programs. Either part of the test (but not
both) must be passed in order for the particular
academic program to remain eligible. The first part of
the test is a median debt service to average income
ratio for graduates of an academic program which
cannot exceed 12%. The second part is a “repayment

rate” of all student loans from an academic program
which must be at least 35%, with repayment rate
calculated as the percentage of student loans in a
specific measurement period for which at least one
dollar of principal has been reduced.

While the “Gainful Employment” regulation has been
finalized, it is still somewhat unnerving to operate an
institution under such a complex and opaque set of
requirements. For all the reasons I enumerated in my
2010 letter to shareholders, we remain comfortable
with our ability to comply with this regulation.
However, it must be noted that the information
necessary to confirm our compliance may not be
available until the DOE releases “illustrative” data,
scheduled for some time in the second quarter of
2012. The first actual measurement year under the
regulation is 2012, with results to be released in 2013.

And yet, notwithstanding all the “sound and fury”
which attended this rulemaking, I would have to
concede two benefits to Strayer University from the
process. First, if competition does become an emerging
risk to our institution, established and larger players
(like ourselves) are always comparatively advantaged
by complex regulations.

While limiting new investment in education will hurt
national prosperity in the long run, and is therefore a
negative development for our country as a whole, it is
paradoxically a positive development for stakeholders
of existing educational institutions. The second

benefit is that I believe that some investor-funded
educational institutions, which had previously been
focused primarily on student enrollment and revenue
growth, have in response to this rulemaking begun to
focus more on academic student outcomes. To the
degree this is true, that shift in emphasis is a positive
develop ment for stakeholders of the entire sector.

2011 Capital Allocation

In 2011, Strayer Education earned $106 million in net
income. This was down 19% from 2010. Our operating
margin declined 530 basis points, from 33.9% to 28.6%,
as our increased expenses associated with new campus
openings were not offset by increased revenues due to
our enrollment decline. On a positive note, with
effective working capital management in 2011 our
company was able to generate $154 million in cash from
operations, down only 5% from the prior year. We used
that $154 million to invest $34 million in opening new
campuses, refurbishing existing campuses, upgrading our
classroom technologies, developing new academic
products, and funding our share of the purchase price of
the Jack Welch Management Institute. That left
approximately $120 million of owners’ distributable
cash flow in 2011, which was actually an increase to the
amount we generated in 2010.

Given the availability of historically inexpensive debt,
and, in our judgment, the significant disparity between
the market price of our stock and its intrinsic value, we
chose in 2011 to encumber our balance sheet with a
$100 million three year term loan (fixed at 3.6%), and

increase our revolving line of credit from $15 million
to $100 million. In 2011, we used that additional
liquidity, along with our owners’ distributable cash
flow of $120 million, to repurchase approximately
$200 million worth of our common stock (1.58 million
shares, or roughly 12% of the outstanding) at an
average price of $128.15 per share. As always, we
believe we bought our shares at a discount to their
intrinsic value. We know we bought them in a cash
accretive manner, as the after-tax cost of the debt we
issued was significantly below the dividend yield of the
shares we repurchased. In 2011, we also paid out
approximately $50 million in common dividends
during the year. (Please see my 2007 letter to
shareholders for a more expanded discussion of both
our views on capital allocation, and the calculation of
the intrinsic value of our equity.) This allocation of
capital left us at year end with 11.8 million shares
outstanding, $117 million of debt, and $57 million of
cash on our balance sheet. We also had $80 million
worth of undrawn credit on our revolver.

2012 Plans

While 2011 was admittedly present management’s
most challenging year at Strayer Education, we have
ambitious plans for 2012. We believe we can continue
to deploy your financial capital in high return
investments expanding our University. Our investment
assumption is quite simple. While the current
sustained high level of unemployment in our target
student population has curtailed demand for post-
secondary education, that underlying demand remains

quite strong. The average number of new students we
enroll per campus at Strayer University bottomed in
the summer term of 2011, and has remained relatively
flat since. However, we are still enrolling a significant
number of new students. If we continue to open new
campuses, and if the continuation rate and graduation
rate of students at those new campuses remains high,
our new campuses need only operate at these reduced
2011 rates of new student enrollment in order to
generate growth for the institution as a whole, as well
as satisfactory returns on our invested capital.
Obviously, if unemployment declines in our 25–50
year old target market, and the overall economy
strengthens, we would expect even higher returns. But
the key point is the returns on our investments in expanding
Strayer University are acceptable, indeed attractive, even
at this depressed level of new student enrollment.

In order to take advantage of this opportunity, our
plan in 2012 is to open eight new Strayer University
campuses. These will include expansion into the
Minneapolis, St. Louis, Kansas City, and San Antonio
markets, as well as further investment in the Chicago
and Houston markets. We have the academic and
operational personnel to support this growth of Strayer
University, and to ensure that each of the incremental
Strayer University students who enroll through these
campuses (and we hope there will be many) receive
the same high quality academic experience as our
current 50,000 students. With this investment plan,
our University will total 100 campuses at year end.

When we open a campus in a new geographic area, we
assign to that new campus existing Strayer University
students living in that geography who had previously
been served by our global online unit. Therefore, since
we expect to continue to open new campuses in the
future, we also expect our global online students to be
a smaller percentage of our total student population
going forward. Of course, this fact in no way lessens
our commitment to (or investments in) online
academics, as we will continue to encourage our
campus based students to take as many classes online
as they desire. Indeed, we expect that slightly over half
of our campus based students in 2012 will take all of
their courses online each term, and that some 15% of
them will take their entire programs online. However,
we believe it is important to their academic success
that those online students also have a physical campus,

with faculty advisors, tutors, and an entire academic
and administrative support structure, to rely upon.

In 2012 we are instituting only a 3% tuition increase,
rather than our historical 5%. Given the severity of our
new student decline in 2011, combined with the
extended economic downturn which our students are
facing, we felt it prudent to be more conservative in
the area of pricing.

We will focus significant time, attention, and resources
in 2012 on our corporate and community college
partners. Along with our campus expansion strategy,
these relationships are key to our continued success.
Particularly for the corporate partners, we are excited
about our investment in the Jack Welch Management
Institute as an accelerant for growth in those relationships.

In 2012 we are welcoming a number of new faces to
our senior management ranks. At the end of 2011, Dr.
Sondra Stallard fulfilled her five year term as President
of Strayer University and was succeeded by our
extremely effective Provost and Chief Academic
Officer, Dr. Michael Plater. Michael holds his MBA
from the Wharton School at the University of
Pennsylvania, and a Ph.D. in American Studies from
the College of William and Mary. Before joining
Strayer University he held senior academic posts at
North Carolina A&T University, The University of
Florida, and Brown University. Replacing Michael as
Provost is our Senior Vice Provost for Academic
Administration, Dr. Randi Reich Cosentino. Randi,
who has been with Strayer University for over ten
years, earned her Doctorate in Education from the
University of Pennsylvania and her MBA from Harvard
University. As President Emerita, Dr. Stallard will
remain a full time member of the Strayer University
faculty, and will manage our accrediting and licensing
affairs. We are extremely grateful for her leadership
and look forward to her continued contributions.

We were also delighted at the end of 2011 to promote
Kelly Bozarth to Executive Vice President and Chief
Administrative Officer. Kelly, who came to us after
extensive operational and financial experience at The
Walt Disney Company, previously served as Strayer
University’s Chief Business Officer, and before that as
our corporate controller. I know Kelly will be a great
addition to our corporate leadership team of Karl

McDonnell, COO; Mark Brown, CFO; Viet Dinh,
General Counsel; and Sonya Udler, who runs our
corporate communications and investor relations. We
are extremely fortunate as shareholders to have such a
talented, dedicated, and
long-serving group of
academics and executives shepherding our institution.

I look forward to seeing all of you at our 2012 Annual
Meeting to be held on April 24th at 8:30 a.m. at Strayer
Education’s corporate headquarters, 2303 Dulles
Station Boulevard, Herndon, Virginia, 20171. Of course,
a more efficient means of due diligence on your
investment is to attend classes at one of our campuses.
The addresses of all 100 campuses can be found on our
website, or just call Sonya at (703) 561-1600, who can
arrange a visit. An even more effective (or at least more
efficient) means of doing diligence on your investment
is to attend one of our Strayer University graduation
ceremonies. In 2012, we will hold six commencement
exercises: Philadelphia, Baltimore, Washington, D.C.,
Norfolk, Atlanta, and Orlando. Because of a conflict
with the Democratic National Convention (we were
outbid by the DNC for the Charlotte Arena) we will
not hold a ceremony in Charlotte, NC this year, but
instead combine it with our Atlanta Ceremony in the
Georgia Dome. The date and address of each
commencement exercise is available on our website or
through Sonya. Please join us at any of these ceremonies,
and share with us our immense pride in the success of
Strayer University’s graduates.

Finally, on behalf of Strayer Education’s Board of
Directors and entire management team, I would like to
sincerely thank you for the opportunity to have been
the stewards of your financial capital over the last year.
We deeply appreciate the trust you placed in us during
a period of regulatory uncertainty and operational
volatility. On the facing page is an excerpt from Strayer
University’s student catalog of 1912. I have reprinted
this excerpt, written on the 20th anniversary of the
founding of Strayer University, because its description
of our institution is just as accurate and relevant today,
as we celebrate our 120th anniversary. The trends
which hurt our financial and operational performance
last year will no doubt continue to buffet us in 2012,
but you may rest assured that our response to those
trends will be consistent with the principles described
in Strayer’s 1912 student catalog. History has shown
that the true measure of an institution is not found
when things are going well, but instead when that
institution is faced with adversity. We have much to
accomplish this year, we are excited by the challenge,
and we intend to prove ourselves worthy of our
institution’s heritage.

Sincerely,

Robert S. Silberman
Chairman and Chief Executive Officer
Strayer Education, Inc.

O U R H E R I TAG E

Reprinted from the Strayer Business College
1912 student catalog

This catalog was written with a view of setting before the men and women of this community some of the
advantages of a business education, and of acquainting them with the superior facilities of this school for giving
high-grade business training.

The courses have been designed and presented to meet the needs of the business office of today. The teachers
are men and women who are specialists in their respective subjects. The school rooms have been chosen and
equipped with special reference to light, comfort and sanitation, so as to make it an ideal place for study.

We ask that the public, in determining which school it shall attend, to consider the facts in connection with
this school, as are outlined in this catalog and supplementary literature. It is twenty years old. It has grown
steadily since the beginning. It attributes its growth to correct ideals, careful management and successful,
enthusiastic, and rapidly increasing alumni.

While it is essential to its success that a school should give thorough instruction in the subjects that comprise
its courses, yet the school that does only this, falls short of its full mission. The development of those traits of
character which make for reliability in business and good citizenship are the peculiar province of the school as
well as the home. This school, then, has nothing in common, can have nothing in common, with those so-called
business schools offering cheap and superficial courses. Such courses, while inexpensive, and possibly of short
duration, cannot result in anything but disappointment in the end.

This school, then, stands for high ideals, it courts investigation, welcomes comparison, and stands
by its promises. It is a school to which you may attend with the knowledge that you will be in pleasant
surroundings, will be accorded fair treatment, and will be given thorough and painstaking instruction.

Finally, in presenting this catalog, we want to thank a discerning public for its support, and assure it that

we shall endeavor to continue to merit the bountiful confidence it has heretofore placed in us.

Strayer Business College
circa 1912

O U R A L U M N I

K E N M C K E N Z I E
Senior Vice President, Customer Service, Airbus Americas, Inc.
(cid:0) Master of Business Administration 2011

“When I decided to go back to school I already knew a lot about business, but I wanted the credibility
that comes with having those three letters behind my name. Earning my MBA online at Strayer
University was the capstone to my professional experience. The course material was relevant, the case
studies were drawn from stories in the news, and the interactions with my professors and classmates
were deeply valuable.”

C H R I S T O P H E R L A N G H O R N
Math Teacher, Hampton High School
(cid:0) Master of Education 2006

“Earning a master’s degree from Strayer University was an intensive academic experience. As a teacher
myself, I appreciated the challenge. But, as a mathematician, I was nervous about all the writing that
was required. My academic advisor encouraged me to stick with the program. Today, I feel like having
a well-rounded graduate education is an asset in everything I strive to accomplish.”

C Y N T H I A H A R R I S
Physician Recruiter, HealthTech LLC
(cid:0) Master of Health Services Administration 2010

“Working with senior executives in the medical community means I need both credentials and expertise to
be taken seriously. Earning a master’s degree from a well-known university helped me achieve both. At
Strayer University, my professors helped me relate what I was learning in the classroom to what I was
doing in the workplace. My degree has boosted my career and made me much more competitive.”

J A N E T C H I H O C K Y
Chief Executive Officer, JANSON Communications
(cid:0) Bachelor of Business Administration 1996

“I found early success in my career and recognized that a degree from a university with solid academics
would propel me even further. I began my education at Strayer University while working full time
for a large aerospace company. A year after graduating, I started my own business, JANSON
Communications. I’m proud to say that today my company serves clients worldwide within the defense
and aerospace markets.”

J E S S E S T AY
Author, “Google+ for Dummies” and “Facebook Application Development for Dummies”
(cid:0) Bachelor of Science in Information Systems 2005

“I started programming computers at the age of 10, and after high school I became part of the dot-com
boom. At the start of my career I had been thrown into a lot of different tasks and roles, so I decided to
go back to school to cement my skills as an application developer. Strayer University helped prepare me
for my goal of becoming a thought leader at the intersection of technology and marketing. Today, I’m
exactly where I always wanted to be.”

O U R A L U M N I

S A S H A M I R C H A N D A N I
Managing Partner, Kae Capital, India
(cid:0) Bachelor of Business Administration 2000

“I never thought I needed a degree to get ahead, but over time I realized that being a university graduate
also brings a sense of personal fulfillment. I chose Strayer University because I wanted to learn from
professors with diverse professional experiences and be exposed to different ways of looking at business
problems. What I gained there will stay with me the rest of my life. It’s something I plan to teach my
daughter someday—education is something that can never be taken away from you.”

R AY R E U L B AC H
Vice President, Customer Solutions, UPS
(cid:0) Bachelor of Business Administration 1998

“I began my career with UPS as a package deliverer with big dreams. I worked my way up through the
company, but eventually I needed a college degree to continue advancing. At that point, I looked
around for a school that would understand my goals and what I wanted to achieve in life. Strayer
University was that school. My experience there was extremely rewarding, and I cannot overstate how
valuable my degree has been in enhancing my knowledge, credibility and career.”

C O M M A N D E R L AU R A T H O M P S O N
Executive Officer, Helicopter Interdiction Tactical Squadron, U.S. Coast Guard
(cid:0) Master of Business Administration 2003

“Strayer University provided a level of accessibility I couldn’t find at another school. I was attending
classes in Virginia when September 11 happened. As a result of the attacks, the Coast Guard transferred
me to Los Angeles. I thought I would have to drop out of school, but Strayer University helped me
seamlessly transition from campus classes to the online program. That level of flexibility was invalu-
able—I don’t think I would have finished my degree if I had been enrolled somewhere else.”

M A R Y L U B I N D A
Course Director and Senior Consultant, National Institute of Public Administration, Zambia
(cid:0) Bachelor of Business Administration 2005
(cid:0) Master of Business Administration 2007

“Growing up in Zambia, I dreamed of earning a college degree from a respected American university.
Strayer University helped me make that dream a reality not just once, but twice. The faculty and staff
created a supportive learning environment that was key to my ability to succeed in a new culture. After
graduating, I returned home with two degrees in hand and was offered a high-level job.”

Salt Lake City

UTAH

Dallas

TEXAS

Austin

S T R AY E R
U N I V E R S I T Y
CA M P U S
L O CAT I O N S

Strayer University Campuses

New campuses/markets in 2011

New state for 2012

1414

MINNESOTA

WISCONSIN

Milwaukee

Chicago

ILLINOIS

INDIANA

Cleveland

Akron

OHIO

Dayton

Columbus

Indianapolis

Cincinnati

WEST
VIRGINIA

PENNSYLVANIA

Philadelphia

Lawrenceville

New Brunswick

Pittsburgh

Baltimore

NEW JERSEY

DELAWARE
MARYLAND

Louisville

Charleston

Richmond

Lexington

VIRGINIA

Washington, D.C.

Norfolk

ARKANSAS

Little Rock

Memphis

KENTUCKY

Raleigh-Durham

Nashville

TENNESSEE

Knoxville

Greensboro

NORTH CAROLINA

Charlotte

Huntsville

Atlanta

Greenville

Columbia

SOUTH
CAROLINA

Augusta

Charleston

MISSISSIPPI

Birmingham

Columbus

LOUISIANA

Jackson

ALABAMA

GEORGIA

Savannah

Houston

New Orleans

Jacksonville

FLORIDA

Orlando

Tampa

Palm Beach

Fort Lauderdale

Miami

1515

C O R P O R AT E I N F O R M AT I O N

LEFT TO RIGHT: MICHAEL PLATER, PH.D., KELLY BOZARTH, KARL MCDONNELL, ROBERT SILBERMAN, MARK BROWN, SONYA UDLER, VIET DINH,
AND RANDI REICH COSENTINO, ED.D.

Executive Officers

Board of Directors

Robert S. Silberman
Chairman and Chief
Executive Officer

Karl McDonnell
President and Chief
Operating Officer

Mark C. Brown
Executive Vice President and
Chief Financial Officer

Kelly J. Bozarth
Executive Vice President and
Chief Administrative Officer

Viet Dinh
General Counsel

Sonya G. Udler
Senior Vice President, Corporate
Communications

Strayer University Leaders

Michael Plater, Ph.D.
President, Strayer University

Randi Reich Cosentino, Ed.D.
Provost and Chief Academic
Officer

Robert S. Silberman
Chairman and Chief
Executive Officer
Former President and COO,
CalEnergy Company, Inc.
Former U.S. Assistant Secretary
of the Army

Charlotte F. Beason, Ed.D.
Chairwoman, Board of Trustees
Executive Director of the
Kentucky Board of Nursing
Former Chairwoman,
Commission on Collegiate
Nursing Education

William E. Brock
Founder and Chairman,
Brock Offices
Former U.S. Secretary of Labor
Former U.S. Special Trade
Representative
Former U.S. Senator,
State of Tennessee

John T. Casteen, III, Ph.D.
President Emeritus,
University of Virginia
Former President,
University of Connecticut

David A. Coulter
Vice Chairman,
Warburg Pincus, LLC
Former Chairman and CEO,
BankAmerica Corporation
Former Vice Chairman, JP
Morgan Chase & Co.

Robert R. Grusky
Founder and Managing Member,
Hope Capital Management, LLC
Former President, RSL
Investments Corporation
Former Vice President, Goldman
Sachs & Co.

Robert L. Johnson
Founder and Chairman,
RLJ Companies
Founder, Black Entertainment
Television

Karl McDonnell
President and Chief Operating
Officer
Former COO, InteliStaf
Healthcare, Inc.
Former Vice President,
Goldman, Sachs & Co.

Todd A. Milano
President and CEO, Central
Pennsylvania College

G. Thomas Waite, III
Treasurer and CFO, Humane
Society of the United States

J. David Wargo
President, Wargo and
Company, Inc.
Principal, New Mountain
Capital, LLC
Former Managing Director,
The Putnam Companies

Corporate Office: 2303 Dulles Station Boulevard, Herndon, VA 20171 Web Sites: Strayer Education, Inc. (www.strayereducation.com),
Strayer University (www.strayer.edu) Annual Meeting: The Annual Meeting of Shareholders will be held on Tuesday, April 24, 2012 at 8:30 a.m.
at the Strayer Education Corporate Office

Transfer Agent: American Stock Transfer & Trust Company, LLC, 6201 15th Avenue, Brooklyn, NY 11219 Stock Listing: Strayer Education,
Inc.’s common stock is traded on The NASDAQ Stock Market® under the symbol “STRA” Independent Registered Public Accounting Firm:
PricewaterhouseCoopers LLP, 1800 Tysons Boulevard, McLean, VA, 22102 Investor Relations: Information may be obtained by contacting
the Investor Relations Department at 703-561-1600

Strayer Education Inc.
2303 Dulles Station Boulevard
Herndon, VA 20171
703-561-1600
www.strayereducation.com