Educate, Inc. Releases 2005 Results and Outlines 2006 Growth Objective

BALTIMORE, Feb. 16  /PRNewswire-FirstCall/ -- Educate, Inc. (NASDAQ:EEEE), a leading pre-K-12 education company delivering supplemental education services and products to students and their families, today reported financial results for the quarter and year ended December 31, 2005.

  Business Highlights for the Quarter:
  - Eight additional company-owned territory acquisitions, bringing full
    year total acquisitions to 60.
  - Opening of ten new Sylvan Learning Center territories system wide,
    bringing the full year total of territory expansion to 47.
  - Successful introduction of an online tutoring program delivering remote
    NCLB services to more than 7,000 enrolled students in 24 markets.
  - Expansion of Hooked on Phonics' distribution channel and introduction of
    two new Hooked on Phonics branded educational programs.



Financial Highlights For The Year Ended December 31, 2005 (results from continuing operations, excluding other financing costs):

  - Revenues from continuing operations increased 21% to $330.4 million.
  - Learning Center same territory revenue growth was 3% for the year.
  - Operating income from continuing operations increased to $45.6 million.
  - Diluted earnings per share ("EPS") from continuing operations, as
    adjusted, was $0.52, as compared to $0.60 in 2004 (or $0.50 per share,
    as compared to $0.34 per share in 2004,  including certain non-cash
    stock compensation and other financing costs).  See Tables 1 and 2 for a
    reconciliation of continuing operations EPS and operating income, each
    as adjusted.  Management believes this non-GAAP financial measure allows
    for a better comparison of operating results because the 2005 period did
    not have similar expenses.



Financial Highlights For The Quarter Ended December 31, 2005 (results from continuing operations, excluding other financing costs):

  - Revenues from continuing operations increased 22% to $76.6 million.
  - Learning Center same territory revenue declined 4% during the fourth
    quarter.
  - EPS from continuing operations, as adjusted was a loss of ($0.04) as
    compared to earnings of $0.10 for the fourth quarter of 2004 (or ($0.04)
    per share, as compared to $0.09 per share in 2004, including other
    financing costs).  See Tables 1 and 2 for a reconciliation of continuing
    operations EPS and operating income, each as adjusted.



"We were disappointed by our fourth quarter operating performance.  The company could have and should have done better.  Parents continue to increase spending on educational programs and our services and products continue to demonstrate success.  The decline of Learning Center same territory revenues actually reflects the need for operational and management improvements to better leverage our leading position in this growing market" stated Chris Hoehn-Saric, Educate, Inc. Chairman and Chief Executive Officer.  "We have taken aggressive action to restore growth to the company and have already noted a change in the trajectory of the business in the first quarter of 2006."

Business Overview:

During the first half of 2005, the company experienced solid same territory revenue growth and strong growth in total revenues and operating income.  During the second half of the year overall revenue growth remained strong; however, the company experienced a slowdown in the learning center business and integration costs in company-owned centers that culminated in a weak fourth quarter.

Although the fourth quarter 4% same territory revenue decline impacted both franchise and company-owned operations, the decline was significantly greater in the company-owned territories.  The combination of fewer inquiries and operating challenges in the company-owned territories resulted in poor financial performance for the fourth quarter.  Additionally, integration problems experienced in recently acquired territories resulted in lower than expected enrollments and unanticipated operating expenses.

In response to these business conditions, management has developed a three-point strategy to restore growth, initially focused on revenues and subsequently on the income of the company.  The initiatives include -- (1) management changes, designed to add additional strength while eliminating unneeded layers in the key company-owned center portion of the team, (2) implementation of new inquiry and enrollment conversion tools, and (3) development of premium and value based programs.

Management -- In an effort to streamline the company's structure and upgrade key positions, the company has made management changes.  Peter Cohen has assumed the role of President of Sylvan Learning Centers, focusing on the responsibilities that he held from 1996 to 2001.  Mary Foster, who has done an excellent job in guiding the Learning Centers over the past four years, has now moved to the role of Senior Vice President of Strategy for Educate, Inc. The company has hired a new director of its contact center operation.  The contact center plays a critical role in responding to consumer inquiries and is the initial step in converting consumers to enrolled students. The combined leadership role overseeing both the franchise system and company-owned centers has been split between two seasoned executives in the roles of Vice President, Company-Owned Centers and Vice President, Franchise Services, each of whom will report directly to Peter Cohen.  The role of Vice President of Operations and Sales for company-owned centers has been eliminated so that the five company-owned center regional managers will report directly to the Vice President, Company-Owned Centers.  Additionally, the company has replaced two of these five regional managers.  The result of these changes is a more focused, streamlined management team that is now closer to the day-to-day operations of the profitable franchise and company-owned territory businesses.

  Inquiries and Enrollments -
  - Key to the success of the company is its ability to generate cost
    efficient inquiries while achieving high enrollment conversion rates.
    Historically, significant differences in enrollment and inquiry
    generation exist between best performing centers and average centers.
    The company implemented two key initiatives in the fourth quarter to
    empirically and statistically assess the impact of implementing a series
    of best practices in 2006.  There is strong evidence that a number of
    the techniques being tested can be effectively put into place during the
    latter half of 2006.
  - As an additional means of improving conversion of inquiries to
    enrollments, the company-owned territories have introduced expanded
    third-party backed consumer financing programs to address the current
    gap between parents interested in Sylvan programs and their ability to
    obtain affordable financing for this service.
  - Additionally, the company has seen a significant shift in its inquiries
    from purely phone inquiries to growth in internet inquiries.  The
    company has engaged in a project to enhance its process of handling
    internet inquiries.



During this period and while we are improving the processes in the operation of company-owned markets, the company intends to slow the acquisition of additional company-owned centers.

Program Development -- Rapid development efforts are in process to broaden the Sylvan Learning Center service offerings by introducing programs that are lower cost while also creating additional premium service offerings.  Today, approximately 1 out of 3 people that call Sylvan enroll in our traditional programs.  Management believes that it can significantly impact the long-term success of the business with the introduction of programs that meet the needs of the consumers who contact Sylvan but do not enroll in our programs, and to expand the base of Sylvan's potential customers.  New program introductions are expected in limited markets during the first half of the year, with more expansive roll-outs expected in the second half of 2006 and in 2007.

Examples of new programs that have been rolled out to the entire Learning Center network during 2005 and should impact 2006 are Ace it! and Sylvan Online.  The Ace it! program is designed to equip the Sylvan franchisees with the tools to serve NCLB supplemental service students in their respective territories.  Educate has supplemented the NCLB offering with an online option that broadened the product line.  Separately, Sylvan Online is now being offered in approximately 600 centers in North America and has seen steady month-to-month improvements in sessions served.

The objectives of these actions are to increase the growth rate of our business.  The company has an opportunity to achieve revenue growth in excess of 20% and management is taking action during the first half of 2006 to achieve these growth targets for the year.  In the first and second quarters, the above described actions, the impact of 2005 acquisitions, and the roll-out of the Ace it! program should enhance revenue growth.  Growth in operating income will be negatively impacted by investments in products, new inquiry and sales initiatives, as well as the loss of the New Orleans contracts and planned reductions in the number of public school contracts in the Catapult division.  The company is targeting 20 - 25% growth in revenues and 15% - 20% growth in EPS for calendar year 2006; however, management expects lower operating income and EPS in comparison to 2005 during the first six months of the year because of higher costs due to the items discussed.

Progress continued during the fourth quarter in the Hooked on Phonics product business, demonstrating the strength of this trusted education brand in the consumer marketplace.  The company saw continued strong consumer purchases of the core learning programs while new offerings were introduced for first quarter distribution.  During the first half of 2006, the company expects to release over 15 new SKUs and has seen positive order momentum in the early part of the year.  The company continues to see a strong demand for an integrated approach to its programs, where consumers will have choices between in center programs, products, and media delivered content.

The company is well positioned for long-term growth.  We believe that our leading tutoring network, recognized brand, pipeline of new programs, renewed and focused management team, and clear short-term action plan provide the growth opportunity for 2006 and beyond.

  Financial Overview:

  Full Year Results


Revenues from continuing operations for the year increased 21% over the same period in 2004 to $330.4 million, driven primarily by growth in the consumer (Learning Center) business segment.  Revenue growth during the year was fueled by the acquisition of 60 franchise territories, expanding the scope and distribution of Hooked on Phonics educational programs and expansion of the Learning Center network by 47 territories.  The benefits of this revenue growth were offset by short-term costs related to the integration and improvement of recently acquired company-owned territories and the expansion of distribution channels and programs for Hooked on Phonics as the Company focused on consumer education services and products.  The expense impact of territory acquisition and improvement was accentuated by the fact that acquisitions were strategically targeted toward under-penetrated territories to maximize long-term growth.  This strategy resulted in a short-term negative impact on company-owned center comparisons and performance.  Operating performance in the Catapult business was weakened by lost contracts in the Gulf Coast region resulting from disruption caused by the fall hurricane season.

Quarterly Results

Revenues from continuing operations for the fourth quarter were $76.6 million, an increase of 22% over the same period in 2004.  Consistent with the full year results, revenue increases were driven by growth in the consumer (Learning Center) business segment through territory acquisitions, expansion of the Hooked on Phonics business and expansion of the network of franchised territories.  The decrease in operating income from continuing operations was largely due to costs related to the rapid improvement of Learning Center acquisitions through the application of best practices, development of new programs to meet market needs for convenient educational services and products and operating losses related to Hurricane Katrina in the Gulf Coast area.

Learning Center segment revenues were $52.8 million for the quarter, up 34% from the fourth quarter of 2004.  This growth was the result of acquiring underdeveloped franchise territories and Hooked on Phonics together with expansion of the Learning Center network.  Same territory revenues declined 4% in the fourth quarter due to a combination of enrollment declines leading into the quarter, and declining initial enrollments in acquired territories. Management strategically targeted acquisition opportunities in underdeveloped territories which require greater spending on advertising and management to expand these territories to system average revenue performance.  It is common for revenues and operating profits of these acquired territories to decline during the integration period as the territories transition toward best practices in convenience and customer service.  The combination of these factors resulted in a decline in Learning Center operating income and operating margin since the transition occurred with a greater number of company-owned territories.

Catapult Learning revenues grew by 2% over the prior year but the mix of contracts combined with the loss of New Orleans contracts due to storm related school closings and Educate's decision to continue to compensate displaced employees through year-end caused a decline in Catapult operating margins from 19% to 14%.

Corporate expenses increased 13% to $4.5 million as compared to the same period in 2004 in response to requirements to support revenue expansion.  Non- operating expenses, excluding foreign exchange gains, were $1.9 million for the quarter, and consistent with the prior year.

Management began marketing the Education Station business for sale during the fourth quarter.  This discontinued operation provides site based No Child Left Behind services which has historically been negatively viewed by our franchisee partners.  Educate will continue to address market needs in this area with the Ace It! NCLB program made available to the franchise community as well as with the online tutoring program which addresses family needs for supplemental education services from the convenience and safety of the student's home.

Full Year 2006 Outlook:

Operating performance in the first half of 2006 will continue to be negatively impacted by the effects of territory acquisition integration and declines in fourth quarter enrollments.  Additional costs of expanding the products business and the continued closure of Gulf Coast schools will further reduce first half operating results.  Expectations are that first half 2006 operating income and EPS will decline from comparative periods in 2005.

On a full year basis, management expects revenue growth in the 20 - 25% range with consolidated operating margins ranging from 13-14%.  Earnings per share are expected to grow in the 15% - 20% range in 2006.  Over a multi-year period management remains optimistic that earnings growth will increase as the benefits of investments for future growth are realized.

Educate management will host a conference call to review these results and the business strategy for future growth at 10:00 AM (EST) today, February 16, 2006.  Interested parties may listen to the webcast by accessing http;//http://www.educate-inc.com/ and clicking on Investor Relations on the Internet or by dialing 1-800-811-8845 (International 1-913-981-4905) access code 2624948.  The call will also be available through replay on the Educate website through February 23, 2006.

About Educate, Inc.

Educate, Inc., (NASDAQ:EEEE) is a leading pre-K-12 education company delivering supplemental education services and products to students and their families.  Educate's consumer services business, Sylvan Learning Center, North America's best-known and most trusted tutoring brand, operates the largest network of tutoring centers, providing supplemental, remedial and enrichment instruction.  Its Educate Products business delivers educational products including the highly regarded Hooked on Phonics early reading, math and study skills programs.  Catapult Learning, its school partnership business unit, is a leading provider of educational services to public and non-public schools. In its 25-year history, Educate has provided trusted, personalized instruction to millions of students improving their academic achievement and helping them experience the joy of learning.  More information on Educate, Inc. can be found at http://www.educate-inc.com/.

Forward-looking Statements

This release includes information that could constitute forward-looking statements made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995.  Such forward-looking statements involve risks and uncertainties.  Although the Company believes that the expectations reflected in such forward-looking statements are based on reasonable assumptions, the Company's actual results could differ materially from those described in the forward-looking statements.  The following factors might cause such a difference:  the development and expansion of the Sylvan Learning Center franchise system; changes in the relationships among Sylvan Learning Center and its franchisees; the Company's ability to effectively manage business growth; increased competition from other educational service providers; changes in laws and government policies and programs; changes in the acceptance of the Company's services and products by institutional customers and consumers; changes in customer relationships; acceptance of new programs, services, and products by institutional customers and consumers; the seasonality of operating results; global economic conditions, including interest and currency rate fluctuations, and inflation rates.  Additional information regarding these and other risk factors and uncertainties are set forth from time to time in the Company's filings with the Securities and Exchange Commission, available for viewing on the Company's website http://www.educate-inc.com/.  (To access this information on the Company's website, click on "Investor Relations" and then "SEC Filings".)  All forward-looking statements are based on information available to the Company on the date of this Release.  The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

  Educate, Inc. & Subsidiaries
  Consolidated Statements of Operations
  Three and Twelve Months Ended December 31, 2005

                                           Three Months Ended December 31,
                                                            $         %
                                        2005     2004    Variance  Variance
 (Dollar amounts in thousands, except
   per share data)
  Revenues
     Franchise Services                 $9,269   $9,299      $(30)     0%
     Company-Owned centers              36,365   22,962    13,403     58%
     European                            7,133    7,135        (2)     0%
    Total Learning Center               52,767   39,396    13,371     34%

    Total Catapult Learning             23,877   23,382       495      2%

  Total Revenues                        76,644   62,778    13,866     22%

  Expenses
     Learning Centers                   50,927   31,869    19,058     60%
     Catapult Learning                  20,652   19,027     1,625      9%
    Total Segment Operating Costs       71,579   50,896    20,683     41%

    Corporate Expenses                   4,513    3,989       524     13%
    Non-cash stock compensation expense    115      136       (21)   -15%

  Operating Income                         437    7,757    (7,320)   -94%

  Non-Operating Items
    Interest expense, net               (1,866)  (1,374)     (492)    36%
    Other financing costs                    -     (303)      303   -100%
    Foreign exchange gains and other
     non-operating                         (59)     722      (781)  -108%
  Total Non-Operating Items             (1,925)    (955)     (970)   102%

  Income (Loss) Before Income Taxes     (1,488)   6,802    (8,290)  -122%
  Income Tax (Expense)                    (215)  (2,919)    2,704    -93%

  Income (Loss) from Continuing
   Operations                           (1,703)   3,883    (5,586)  -144%

    Loss from discontinued operations,
     net of tax                         (3,030)  (1,979)   (1,051)    53%
    Gain from disposal of discontinued
     operations, net of tax                  -        -         -     N/A
  Net Income (Loss)                    $(4,733)  $1,904   $(6,637)  -349%


  Weighted Average Shares - Diluted (1) 44,016   43,996        20      0%

  Diluted Earnings (Loss) Per Share (1) $(0.11)   $0.04    $(0.15)  -375%
  Diluted Earnings (Loss) Per Share
   from Continuing Operations (1)       $(0.04)   $0.09    $(0.13)  -144%
  Diluted Earnings (Loss) Per Share
   from Continuing Operations,
    as adjusted (1),(2)                 $(0.04)   $0.10    $(0.14)  -140%

  Segment Operating Margin
    Learning Center                          3%      19%      -16%
    Catapult Learning                       14%      19%       -5%


                                          Twelve Months Ended December 31,
                                                              $        %
                                        2005      2004    Variance  Variance
 (Dollar amounts in thousands, except
   per share data)
  Revenues
     Franchise Services                $46,613   $44,197   $2,416      5%
     Company-Owned centers             167,302   110,019   57,283     52%
     European                           30,340    27,502    2,838     10%
    Total Learning Center              244,255   181,718   62,537     34%

     School Services and Special Needs  86,159    91,406   (5,247)    -6%
     NCLB                                    -         -        -     N/A
    Total Catapult Learning             86,159    91,406   (5,247)    -6%

  Total Revenues                       330,414   273,124   57,290     21%

  Expenses
     Learning Centers                  197,036   136,245   60,791     45%
     Catapult Learning                  71,129    75,129   (4,000)    -5%
    Total Segment Operating Costs      268,165   211,374   56,791     27%

    Corporate Expenses                  16,141    14,707    1,434     10%
    Non-cash stock compensation expense    463     8,847   (8,384)   -95%

  Operating Income                      45,645    38,196    7,449     20%

  Non-Operating Items
    Interest expense, net               (7,521)   (9,398)   1,877    -20%
    Other financing costs               (1,506)   (5,420)   3,914    -72%
    Foreign exchange gains and other
     non-operating                         142     1,159   (1,017)   -88%
  Total Non-Operating Items             (8,885)  (13,659)   4,774    -35%

  Income (Loss) Before Income Taxes     36,760    24,537   12,223     50%
  Income Tax (Expense)                 (14,749)  (11,090)  (3,659)    33%

  Income (Loss) from Continuing
   Operations                           22,011    13,447    8,564     64%

    Loss from discontinued operations,
     net of tax                         (6,606)   (7,118)     512     -7%
    Gain from disposal of discontinued
     operations, net of tax                  -        83      (83)  -100%
  Net Income (Loss)                    $15,405    $6,412   $8,993    140%


  Weighted Average Shares - Diluted (1) 44,054    39,847    4,207     11%

  Diluted Earnings (Loss) Per Share (1)  $0.35     $0.16    $0.19    119%
  Diluted Earnings (Loss) Per Share
   from Continuing Operations (1)        $0.50     $0.34    $0.16     47%
  Diluted Earnings (Loss) Per Share
   from Continuing Operations,
    as adjusted (1),(2)                  $0.52     $0.60   $(0.08)   -13%

  Segment Operating Margin
    Learning Center                         19%       25%      -6%
    Catapult Learning                       17%       18%      -1%


  (1) All share and per share amounts have been adjusted to give retroactive
      effect to a 1.00 for 1.25 reverse stock split effected on
      September 20, 2004.

  (2) Diluted earnings per share from continuing operations, as adjusted,
      exclude the net of tax effect of special non-cash stock compensation
      expense and other financing costs for the three and twelve  month
      periods ended December 31, 2004 and 2005.  Management believes this
      non-GAAP financial measure allows for a better comparison of earnings
      per share (EPS) for the periods presented. See Table 2 for
      reconciliation of income from continuing operations, as reported, to
      income from continuing operations, as adjusted, and the diluted per
      share amounts.



                                      Three    Three     Twelve    Twelve
                                      Months   Months    Months    Months
                                      Ended    Ended     Ended     Ended
                                      December December  December  December
                                      31, 2005 31, 2004  31, 2005  31, 2004
  Business Metrics

    Learning Center Same Territory
     Revenue Growth (3)                  -4%        -2%       3%       2%


                                      December 31,   December 31,
                                         2005           2004
    Number of Territories
     Franchise                            725            738
     Company-owned                        171            111
    Total                                 896            849

                                      December 31,   December 31,
                                         2005           2004
    Number of Sylvan Learning Centers
     Franchise                            876            896
     Company-owned                        245            163
    Total                               1,121          1,059

                                      December 31,   December 31,
                                         2005           2004
  Balance Sheet Data:
    Cash and cash equivalents          $2,414        $14,592
    Working capital                     8,842         10,802
    Total assets                      452,911        381,382
    Long-term debt, less current
     portion                          160,076        120,411


  (3) "Same Territory" amounts include the results of territories for the
       identical months for each period presented in the comparison,
       commencing with the 13th full month the territory has been operating.
       Same territory growth is presented as the aggregate growth for
       franchised and company-owned territories during the period.  A
       territory reflects the geographically-specified area where an
       operator controls rights to provision of services under the Sylvan
       franchise agreement.



  Consolidated Summarized Statements of Operations

                                           Three Months Ended December 31,
                                                              $        %
                                         2005    2004     Variance  Variance
 (Dollar amounts in thousands)
  Revenues
     Company-Owned Centers             $42,143  $28,779    $13,364     46%
     Franchise Services                 10,624   10,617          7      0%
    Total Learning Center               52,767   39,396     13,371     34%

    Total Catapult Learning             23,877   23,382        495      2%

  Total Revenues                        76,644   62,778     13,866     22%

  Expenses
    Instructional and franchise
     operations costs                   62,930   44,635     18,295     41%
    Marketing and advertising            7,484    5,084      2,400     47%
    Depreciation and amortization        1,587    1,643        (56)    -3%
    General and administrative expenses  4,091    3,523        568     16%
    Non-cash stock compensation expense    115      136        (21)   -15%

    Total costs and expenses            76,207   55,021     21,186     39%

  Operating Income                         437    7,757     (7,320)   -94%

  Total Non-Operating Items             (1,925)    (955)      (970)   102%

  Income (Loss) Before Income Taxes     (1,488)   6,802     (8,290)  -122%
  Income Tax (Expense)                    (215)  (2,919)     2,704    -93%

  Income (Loss) from Continuing
   Operations                           (1,703)   3,883     (5,586)  -144%

    Loss from discontinued operations,
     net of tax                         (3,030)  (1,979)    (1,051)    53%
    Gain from disposal of discontinued
     operations, net of tax                  -        -          -     N/A
  Net Income (Loss)                    $(4,733)  $1,904    $(6,637)   -349%



  Table 1
                                          Three Months Ended December 31,
                                                             $         %
                                         2005    2004     Variance  Variance
 (Dollar amounts in thousands)
  Income (Loss) from Continuing
   Operations, as reported            $(1,703)  $3,883    $(5,586)  -144%
    Add: Income tax expense               215    2,919     (2,704)   -93%
    Add: total non-operating expense    1,925      955        970    102%

  Operating Income, as reported           437    7,757     (7,320)   -94%
    Add: Special non-cash stock
     compensation expense (4)               -        -          -    N/A

  Operating Income, as adjusted          $437   $7,757    $(7,320)   -94%


  Table 2
                                          Three Months Ended December 31,
                                                             $         %
                                         2005    2004     Variance  Variance
 (Dollar amounts in thousands, except
   per share data)

  Income (Loss) from Continuing
   Operations, as reported            $(1,703)  $3,883    $(5,586)   -144%
    Add: Other financing costs (5)          -      303       (303)   -100%
    Add: Special non-cash stock
     compensation expense (4)               -        -          -     N/A
    Tax impact of items added back
     above and adjustment to 38 %
     effective tax rate on income from
      continuing operations in 2004         -      219       (219)   -100%

  Income (Loss) from Continuing
   Operations, as adjusted            $(1,703)  $4,405    $(6,108)   -139%

  Weighted Average Shares -
   Diluted (1)                         44,016   43,996         20       0%

  Diluted Earnings (Loss) Per Share
   from Continuing Operations,                                  -
    as adjusted (1),(2)                $(0.04)   $0.10     $(0.14)   -140%



                                          Twelve Months Ended December 31,
                                                              $         %
                                        2005      2004    Variance  Variance
  (Dollar amounts in thousands)
  Revenues
      Company-Owned Centers           $192,160  $132,778   $59,382     45%
      Franchise Services                52,095    48,940     3,155      6%
    Total Learning Center              244,255   181,718    62,537     34%

    Total Catapult Learning             86,159    91,406    (5,247)    -6%

  Total Revenues                       330,414   273,124    57,290     21%

  Expenses
    Instructional and franchise
     operations costs                   232,942   183,798   49,144     27%
    Marketing and advertising            30,074    22,950    7,124     31%
    Depreciation and amortization         6,787     6,300      487      8%
    General and administrative expenses  14,503    13,033    1,470     11%
    Non-cash stock compensation expense     463     8,847   (8,384)   -95%

    Total costs and expenses            284,769   234,928   49,841     21%

  Operating Income                       45,645    38,196    7,449     20%

  Total Non-Operating Items              (8,885)  (13,659)   4,774    -35%

  Income (Loss) Before Income Taxes      36,760    24,537   12,223     50%
  Income Tax (Expense)                  (14,749)  (11,090)  (3,659)    33%

  Income (Loss) from Continuing
   Operations                            22,011    13,447    8,564     64%

    Loss from discontinued operations,
     net of tax                          (6,606)   (7,118)     512     -7%
    Gain from disposal of discontinued
     operations, net of tax                   -        83      (83)  -100%
  Net Income (Loss)                     $15,405    $6,412   $8,993    140%


  Table 1
                                          Twelve Months Ended December 31,
                                                             $         %
                                        2005      2004    Variance  Variance

  (Dollar amounts in thousands)

  Income (Loss) from Continuing
   Operations, as reported             $22,011   $13,447   $8,564      64%
    Add: Income tax expense             14,749    11,090    3,659      33%
    Add: total non-operating expense     8,885    13,659   (4,774)    -35%

  Operating Income, as reported         45,645    38,196    7,449      20%
    Add: Special non-cash stock
     compensation expense (4)                -     8,550   (8,550)   -100%

  Operating Income, as adjusted        $45,645   $46,746  $(1,101)     -2%


  Table 2
                                          Twelve Months Ended December 31,
                                                            $         %
                                         2005    2004    Variance  Variance
  (Dollar amounts in thousands, except
   per share data)

  Income (Loss) from Continuing
   Operations, as reported             $22,011  $13,447   $8,564      64%
    Add: Other financing costs (5)       1,506    5,420   (3,914)    -72%
    Add: Special non-cash stock
     compensation expense (4)                -    8,550   (8,550)   -100%
    Tax impact of items added back above
     and adjustment to 38 %
      effective tax rate on income from
       continuing operations in 2004      (604)  (3,543)   2,939     -83%

  Income (Loss) from Continuing
   Operations, as adjusted             $22,913   $23,874   $(961)     -4%

  Weighted Average Shares - Diluted (1) 44,054    39,847   4,207      11%

  Diluted Earnings (Loss) Per Share from
   Continuing Operations,
    as adjusted (1),(2)                  $0.52     $0.60  $(0.08)    -13%


  (4) The special non-cash stock compensation expense added back includes
      charges associated with stock compensation granted in 2004 that vested
      immediately.  Excluded from the add-back are recurring expenses that
      are recognized over a specified vesting period.

  (5) Other financing costs are debt issuance costs charged to earnings upon
      the refinancing of debt.


DATASOURCE: Educate, Inc.



CONTACT:  Kevin E. Shaffer of Educate, Inc., [phone] 



Web site:  http;//http://www.educate-inc.com/ 

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