Edgar Filing: STRAYER EDUCATION INC

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-Q

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

FOR THE PERIOD ENDED JUNE 30, 2006
COMMISSION FILE NO. 0-21039

STRAYER EDUCATION, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN THIS CHARTER)

Maryland 52-1975978
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)

1100 Wilson Blvd., Suite 2500
Arlington, VA 22209
(Address of principal executive offices) (Zip Code)

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

INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934
DURING THE PRECEDING 12 MONTHS, AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS. YES [X] NO [ ]

INDICATE BY CHECK MARK WHETHER THE REGISTRANT IS A LARGE ACCELERATED FILER, AN
ACCELERATED FILER, OR A NON-ACCELERATED FILER. SEE DEFINITION OF "ACCELERATED
FILER" AND "LARGE ACCELERATED FILER" IN RULE 12B-2 OF THE EXCHANGE ACT. (CHECK
ONE)

LARGE ACCELERATED FILER [X] ACCELERATED FILER [ ] NON-ACCELERATED FILER [ ]

INDICATE BY CHECK MARK WHETHER THE REGISTRANT IS A SHELL COMPANY (AS DEFINED IN
RULE 12B-2 OF THE EXCHANGE ACT). YES [ ] NO [X]

AS OF JULY 25, 2006, THERE WERE OUTSTANDING 14,344,064 SHARES OF COMMON STOCK,
PAR VALUE $.01 PER SHARE, OF THE REGISTRANT.

STRAYER EDUCATION, INC.
INDEX
FORM 10-Q

PART I -- FINANCIAL INFORMATION

Item 1. Financial Statements

Unaudited Condensed Consolidated Balance Sheets at December 31, 2005
and June 30, 2006 ........................................................... 3

Unaudited Condensed Consolidated Statements of Income for the three and
six month periods ended June 30, 2005 and 2006 .............................. 4

Unaudited Condensed Consolidated Statements of Comprehensive Income for
the three and six month periods ended June 30, 2005 and 2006 ................ 5

Unaudited Condensed Consolidated Statements of Stockholders' Equity for
the six month periods ended June 30, 2005 and 2006 .......................... 6

Unaudited Condensed Consolidated Statements of Cash Flows for the six
month periods ended June 30, 2005 and 2006 .................................. 7

Notes to Unaudited Condensed Consolidated Financial Statements .............. 8

Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations ............................................................... 17

Item 3. Quantitative and Qualitative Disclosures About Market Risk .................. 22

Item 4. Controls and Procedures ..................................................... 22

PART II -- OTHER INFORMATION

Item 1A. Risk Factors ................................................................ 24

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds ................. 24

Item 4. Submission of Matters to a Vote of Security Holders ......................... 25

Item 6. Exhibits .................................................................... 26

SIGNATURES .............................................................................. 27

CERTIFICATIONS

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

December June 30,
31, 2005 2006
--------- ---------

ASSETS
Current assets:
Cash and cash equivalents ...................................................... $ 74,212 $ 47,163
Marketable securities available for sale, at fair value ........................ 45,594 75,423
Tuition receivable, net allowances for doubtful accounts of $1,927 and $2,219 at
December 31, 2005 and June 30, 2006, respectively ............................ 55,935 61,021
Other current assets ........................................................... 2,581 6,979
-------- --------
Total current assets ......................................................... 178,322 190,586
Property and equipment, net ...................................................... 46,684 49,935
Deferred income taxes ............................................................ -- 1,286
Restricted cash .................................................................. 500 500
Other assets ..................................................................... 339 342
-------- --------
Total assets ................................................................. $225,845 $242,649
======== ========
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ............................................................... $ 6,402 $ 14,217
Accrued expenses ............................................................... 1,483 1,784
Income taxes payable ........................................................... 3,773 170
Unearned tuition ............................................................... 55,778 59,136
-------- --------
Total current liabilities .................................................... 67,436 75,307
Deferred income taxes ............................................................ 205 --
Long-term liabilities ............................................................ 6,364 6,398
-------- --------
Total liabilities ............................................................ 74,005 81,705
-------- --------
Commitments and contingencies
Stockholders' equity:
Common stock, par value $.01; 20,000,000 shares
authorized; 14,292,249 and 14,323,872 shares issued and outstanding
at December 31, 2005 and June 30, 2006, respectively ......................... 143 142
Additional paid-in capital ..................................................... 104,923 91,361
Retained earnings .............................................................. 47,020 69,791
Accumulated other comprehensive income (loss) .................................. (246) (350)
-------- --------
Total stockholders' equity ................................................... 151,840 160,944
-------- --------
Total liabilities and stockholders' equity ................................... $225,845 $242,649
======== ========

The accompanying notes are an integral part of these consolidated financial
statements.

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

For the three For the six
months ended months ended
June 30, June 30,
---------------- -------------------
2005 2006 2005 2006
------- ------- -------- --------
Revenues ................................ $55,249 $65,558 $111,402 $132,648
------- ------- -------- --------
Costs and expenses: (a)
Instruction and educational support .. 20,032 22,719 38,491 44,757
Selling and promotion ................ 8,653 11,175 17,316 21,847
General and administration ........... 7,072 10,191 13,615 19,585
------- ------- -------- --------
Total costs and expenses................. 35,757 44,085 69,422 86,189
------- ------- -------- --------
Income from operations ............ 19,492 21,473 41,980 46,459
Investment and other income ............. 795 1,162 1,405 2,117
------- ------- -------- --------
Income before income taxes ........ 20,287 22,635 43,385 48,576
Provision for income taxes .............. 7,762 8,617 16,769 18,602
------- ------- -------- --------
Net income ........................ $12,525 $14,018 $ 26,616 $ 29,974
======= ======= ======== ========
Net income per share:
Basic ............................. $ 0.86 $ 0.99 $ 1.82 $ 2.11
Diluted ........................... $ 0.85 $ 0.97 $ 1.79 $ 2.06
Weighted average shares outstanding:
Basic ............................. 14,531 14,200 14,596 14,229
Diluted ........................... 14,791 14,497 14,870 14,528

----------

(a) In 2006, the Company adopted FAS 123(R) and began recording stock-based
compensation expense. Prior to adoption of FAS 123(R), the Company recorded
expense for some forms of stock-based compensation such as restricted stock
and certain cash payments related to stock options. The table below sets
forth the amount of various forms of stock-based compensation expense
recorded both prior to and after the adoption of FAS 123(R) in each of the
expense line items. See Note 5 below for more information.

For the three For the six
months ended months ended
June 30, June 30,
------------- -------------
2005 2006 2005 2006
---- ----- ---- ------
Instruction and educational support ........ -- $ 125 -- $ 339
Selling and promotion ...................... -- 141 -- 273
General and administration ................. -- 1,761 -- 2,735

The accompanying notes are an integral part of these consolidated financial
statements.

STRAYER EDUCATION, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(IN THOUSANDS)

For the three For the six
months ended months ended
June 30, June 30,
----------------- ------------------
2005 2006 2005 2006
------- ------- -------- -------

Net income ................................... $12,525 $14,018 $26,616 $29,974
Other comprehensive income:
Unrealized gain (loss) on investment,
net of taxes ........................... 33 (29) (49) (104)
------- ------- ------- -------
Comprehensive income ......................... $12,558 $13,989 $26,567 $29,870
======= ======= ======= =======

The accompanying notes are an integral part of these consolidated financial
statements.

STRAYER EDUCATION, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)

Accumulated
Common Stock Additional Other
------------------- Paid-in Retained Comprehensive
Shares Amount Capital Earnings Income (Loss) Total
---------- ------ ---------- -------- ------------- --------

Balance at December 31, 2004 .................... 14,669,487 $ 147 $140,943 $ 7,983 $ (151) $148,922
Repurchase of common stock ...................... (278,770) (3) (24,995) -- -- (24,998)
Common stock dividends .......................... -- -- -- (3,647) -- (3,647)
Change in net unrealized gains (losses)
on marketable securities, net of income tax... -- -- -- -- (49) (49)
Net income ...................................... -- -- -- 26,616 -- 26,616
---------- ----- -------- ------- ------ --------
Balance at June 30, 2005 ........................ 14,390,717 $ 144 $115,948 $30,952 $ (200) $146,844
========== ===== ======== ======= ====== ========

Balance at December 31, 2005 .................... 14,292,249 $143 $104,923 $47,020 $ (246) $151,840
Exercise of stock options ....................... 75,000 1 3,248 -- -- 3,249
Tax benefit from exercise of stock options ...... -- -- 1,787 -- -- 1,787
Repurchase of common stock ...................... (224,252) (2) (21,625) -- -- (21,627)
Restricted stock grants ......................... 180,875 -- -- -- -- --
Stock-based compensation ........................ -- -- 3,028 -- -- 3,028
Common stock dividends .......................... -- -- -- (7,203) -- (7,203)
Change in net unrealized gains (losses)
on marketable securities, net of income tax .. -- -- -- -- (104) (104)
Net income ...................................... -- -- -- 29,974 -- 29,974
---------- ---- -------- ------- ------- --------
Balance at June 30, 2006 ........................ 14,323,872 $142 $ 91,361 $69,791 $ (350) $160,944
========== ==== ======== ======= ======= ========

The accompanying notes are an integral part of these consolidated financial
statements.

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

For the six months
ended June 30,
-------------------
2005 2006
-------- --------

Cash flows from operating activities:
Net income............................................................ $ 26,616 $ 29,974
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization of deferred rent...................................... 74 84
Depreciation and amortization...................................... 3,197 3,369
Provision for student loan losses.................................. (63) (70)
Deferred income taxes.............................................. (33) (1,605)
Stock-based compensation........................................... -- 3,028
Changes in assets and liabilities:
Tuition receivable, net............................................ (4,894) (5,086)
Other current assets............................................... (751) (4,217)
Other assets....................................................... -- (3)
Accounts payable................................................... 1,618 5,197
Accrued expenses................................................... (956) 301
Income taxes payable............................................... (6,906) (1,816)
Excess tax benefits from stock-based payment arrangements.......... -- (1,787)
Unearned tuition................................................... 5,572 3,358
Deferred lease incentives.......................................... 1,531 --
Student loans originated.............................................. (571) (3)
Collections on student loans receivable and held for sale............. 601 23
-------- --------
Net cash provided by operating activities....................... 25,035 30,747
-------- --------
Cash flows from investing activities:
Purchases of property and equipment................................... (7,793) (6,074)
Purchases of marketable securities.................................... -- (30,000)
-------- --------
Net cash used in investing activities........................... (7,793) (36,074)
-------- --------
Cash flows from financing activities:
Common dividends paid................................................. (3,647) (7,203)
Proceeds from exercise of stock options............................... -- 3,249
Excess tax benefits from stock-based payment arrangements............. -- 1,787
Repurchase of common stock............................................ (24,998) (19,555)
-------- --------
Net cash used in financing activities........................... (28,645) (21,722)
-------- --------
Net increase (decrease) in cash and equivalents................. (11,403) (27,049)
Cash and cash equivalents - beginning of period.......................... 97,004 74,212
-------- --------
Cash and cash equivalents - end of period................................ $ 85,601 $ 47,163
======== ========
Non-cash transactions:
Purchases of property and equipment included in accounts payable...... $ 181 $ 1,107
Repurchases of common stock included in accounts payable.............. $ -- $ 2,072

The accompanying notes are an integral part of these consolidated financial
statements.

STRAYER EDUCATION, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
INFORMATION AS OF JUNE 30, 2005 AND 2006 IS UNAUDITED.

1. BASIS OF PRESENTATION

The financial statements are presented on a consolidated basis. The accompanying
financial statements include the accounts of Strayer Education, Inc., Strayer
University, Inc. (the "University") and Education Loan Processing, Inc. ("ELP"),
collectively referred to herein as the "Company" or "Companies."

The results of operations for the three months and six months ended June 30,
2006 are not necessarily indicative of the results to be expected for the full
fiscal year. All information as of June 30, 2005 and 2006 and for the three and
six months ended June 30, 2005 and 2006 is unaudited but, in the opinion of
management, contains all adjustments, consisting only of normal recurring
adjustments, necessary to present fairly the condensed consolidated financial
position, results of operations and cash flows of the Company.

The Company's educational programs are offered on a quarterly basis.
Approximately 97% of the Company's revenues during the six months ended June 30,
2006 consisted of tuition revenue. Tuition revenue is recognized in the quarter
of instruction. Tuition revenue is shown net of any refunds, withdrawals,
corporate discounts, scholarships and employee tuition discounts. At the time of
registration, a liability (unearned tuition) is recorded for academic services
to be provided and a tuition receivable is recorded for the portion of the
tuition not paid upfront in cash. Revenues also include application fees,
commencement fees, placement test fees, withdrawal fees, loan service and
origination fees, textbook-related income and other income which are recognized
when incurred.

As of January 1, 2006, the Company adopted Statement of Financial Accounting
Standards No. 123(R), Share-based Payment ("FAS 123(R)") using the modified
prospective method, which requires measurement of compensation cost for all
stock-based awards at fair value on the date of grant and recognition of
compensation expense over the service period for awards expected to vest. Prior
to the adoption of FAS 123(R), the Company recorded expense for some forms of
stock-based compensation such as restricted stock and certain cash payments
related to stock options. With the adoption of the provisions of FAS 123(R), the
Company incurred stock-based compensation expenses for the three months ended
June 30, 2006 of $2.0 million (or $1.3 million net of taxes) which reduced
diluted earnings per share by $0.08 after tax. For the six months ended June 30,
2006, the Company incurred stock-based compensation expenses of $3.3 million (or
$2.0 million net of taxes) which reduced diluted earnings per share by $0.14
after tax. There was no stock-based compensation expense recorded for the three
and six months ended June 30, 2005 because the Company had not adopted the
recognition provisions of FAS 123(R) until January 1, 2006 and there was no
other stock-based compensation activity. See Note 5 below for more information.

Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. These condensed consolidated financial
statements should be read in conjunction

with the consolidated financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
2005.

2. NATURE OF OPERATIONS

Strayer Education, Inc., a Maryland corporation, conducts its operations through
its subsidiaries. The University is an accredited institution of higher
education that provides undergraduate and graduate degrees in various fields of
study through its 41 campuses (including two new campuses opened for the 2006
summer term in Virginia Beach, Va. and Atlanta, Ga.) in Pennsylvania, Maryland,
Washington, D.C., Virginia, North Carolina, South Carolina, Tennessee, Georgia,
and Florida and worldwide via the Internet through Strayer University Online.
ELP originates and administers student loans for the University's students.
These loans are held for sale.

3. EARNINGS PER SHARE

Basic earnings per share is computed by dividing net income by the weighted
average number of shares of common stock outstanding. Diluted earnings per share
is computed by dividing net income by the weighted average common and
potentially dilutive common equivalent shares outstanding. Stock options are not
included in the computation of diluted earnings per share when the stock option
exercise price of an individual grant exceeds the average market price for the
period. At June 30, 2006, the Company had 177,083 issued and outstanding stock
options that were excluded from the calculation. Set forth below is a
reconciliation of shares used to compute net income per share:

For the three For the six
months months
ended June 30, ended June 30,
--------------- ---------------
(in thousands) (in thousands)
2005 2006 2005 2006
------ ------ ------ ------

Weighted average shares outstanding
used to compute basic net income per
share .............................................. 14,531 14,200 14,596 14,229
Incremental shares issuable upon the
assumed exercise of stock options .................. 260 291 274 296
Unvested restricted stock ............................. -- 6 -- 3
------ ------ ------ ------
Shares used to compute diluted net income per share ... 14,791 14,497 14,870 14,528
====== ====== ====== ======

4. CREDIT FACILITIES

The Company maintains two credit facilities from two banks in the amount of
$10.0 million each. Interest on any borrowings under the facilities will accrue
at an annual rate of no more than 0.75% above the London Interbank Offered Rate.
There was no outstanding balance and there were no fees payable on either
facility as of June 30, 2006. An unsecured letter of credit in the amount of
$938,000, which expires in July 2007, was issued by Strayer University in favor
of regulators in connection with their periodic approval activities.

5. STOCKHOLDERS' EQUITY

Common Stock

A total of 20,000,000 shares of common stock, par value $0.01, have been
authorized. As of December 31, 2005 and June 30, 2006, the Company had
14,292,249 and 14,323,872 shares of common stock issued and outstanding,
respectively. Commencing in the fourth quarter of 2005, the Company increased
the annual common stock cash dividend from $0.50 to $1.00 per share or $0.25 per
share quarterly.

Stock-based compensation

On January 1, 2006, the Company adopted Statement of Financial Accounting
Standards No. 123(R), Share-based Payment ("FAS 123(R)"), which requires the
measurement and recognition of compensation expense for all share-based payment
awards made to employees and directors, including employee stock options and
employee stock purchases related to the Company's Employee Stock Purchase Plan
based on estimated fair values. FAS 123(R) supersedes the Company's previous
accounting under Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees ("APB 25") for periods beginning January 1, 2006. In
March 2005, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 107 ("SAB 107") relating to FAS 123(R). The Company has applied the
provisions of SAB 107 in its adoption of FAS 123(R).

The Company adopted FAS 123(R) using the modified prospective transition method
provided under the rule, which requires the application of the accounting
standard as of January 1, 2006. The Company's consolidated financial statements
as of and for the three and six months ended June 30, 2006 reflect the impact of
FAS 123(R). In accordance with the modified prospective transition method
provided under the rule, the Company's consolidated financial statements for
prior periods have not been restated to reflect, and do not include, the impact
of FAS 123(R). Stock-based compensation expense recognized under FAS 123(R) for
the three months ended June 30, 2006 was $2.0 million (or $1.3 million after
tax) and for the six months ended June 30, 2006 was $3.3 million (or $2.0
million after tax).

FAS 123(R) requires companies to estimate the fair value of share-based payment
awards on the date of grant using an option-pricing model. The Company has
elected to estimate fair value using the Black-Scholes option pricing valuation
model. The value of the portion of the award that is ultimately expected to vest
is recognized as expense over the requisite service periods in the Company's
Consolidated Statements of Income. Prior to the adoption of FAS 123(R), the
Company accounted for stock-based awards to employees and directors using the
intrinsic value method in accordance with APB 25 pursuant to Statement of
Financial Accounting Standards No. 123, Accounting for Stock-based Compensation
("FAS 123"). Under the intrinsic value method, no stock-based compensation
expense was recognized in the Company's Consolidated Statements of Income for
stock options because the exercise price of the Company's stock options granted
to employees and directors equaled the fair market value of the underlying stock
at the date of grant.

Stock-based compensation expense recognized in the Company's Consolidated
Statements of Income for the three and six months ended June 30, 2006 included
compensation expense for share-based payment awards granted prior to, but not
yet vested as of December 31, 2005,

based on the grant date fair value estimated in accordance with the pro forma
provisions of FAS 123 and compensation expense for the share-based payment
awards granted subsequent to December 31, 2005, based on the grant date fair
value estimated in accordance with the provisions of FAS 123(R). As stock-based
compensation expense recognized in the Consolidated Statements of Income for the
three and six months ended June 30, 2006 is based on awards ultimately expected
to vest, the amounts have been reduced for estimated forfeitures. FAS 123(R)
requires forfeitures to be estimated at the time of grant and revised, if
necessary, in subsequent periods if actual forfeitures differ from those
estimates.

The Company's determination of fair value of share-based payment awards on the
date of grant using an option-pricing model is affected by the Company's stock
price as well as assumptions regarding a number of highly complex and subjective
variables. These variables include, but are not limited to, the Company's
expected stock price volatility over the term of the awards, and actual and
projected employee stock option exercise behaviors.

Stock-based compensation plans

In July 1996, the Company's stockholders approved 1,500,000 shares of common
stock for grants under the Company's 1996 Stock Option Plan (as amended, the
"Plan"). This Plan was amended by the stockholders at the May 2001 Annual
Stockholders' Meeting and at the May 2005 Annual Stockholders' Meeting to
increase the number of shares authorized for issuance thereunder by 1,000,000
and 500,000, respectively. A total of 3,000,000 shares have therefore been
approved for grant under the Plan. The Plan was again amended at the May 2006
Annual Stockholders' Meeting to authorize a one-time exchange of stock options
for restricted stock by employees (excluding the five highest compensated
executive officers) and to permit restricted stock and cash awards to qualify
for favorable tax treatment under Section 162(m) of the Internal Revenue Code.
The Plan provides for the grant of options intended to qualify as incentive
stock options, and also provides for the grant of non-qualifying options and
restricted stock to employees, officers and directors of the Company. Options
and restricted stock may be granted to eligible employees, officers or directors
of the Company at the discretion of the Board of Directors. Vesting provisions
are also at the discretion of the Board of Directors. Options may be granted at
option prices based at or above the fair market value of the shares at the date
of grant. The maximum term of the options granted under the Plan is ten years.

In May 1998, the Company adopted the Strayer Education, Inc. Employee Stock
Purchase Plan ("ESPP"). Under the ESPP, eligible employees may purchase shares
of the Company's common stock, subject to certain limitations, at 90% of its
market value at the date of purchase. Purchases are limited to 10% of an
employee's eligible compensation. The aggregate number of shares of common stock
that may be made available for purchase by participating employees under the
ESPP is 2,500,000 shares.

In the second quarter, the Company granted 32,765 shares of restricted stock to
employees in exchange for 105,000 stock options pursuant to the one-time
exchange offer approved by the shareholders. Of the 11 eligible employees, 10
chose to participate in the offer. The incremental stock-based compensation
expense incurred by the Company as a result of this offer was immaterial. The
Company's stock price closed at $103.60 on the date that the exchange offer was
approved by the shareholders and priced.

In July 2006, the Company's Board of Directors approved a grant of 20,192 shares
of restricted stock to the Company's newly appointed President and Chief
Operating Officer, Karl McDonnell, who reports directly to Robert Silberman, the
Company's Chairman and Chief Executive Officer. These shares vest 100% on July
25, 2010 based on the achievement of certain performance criteria. The
performance criteria categories contained in the grant are covered by the May
2006 amendment to the Plan, so that this restricted stock grant is eligible for
favorable tax treatment by the Company under Section 162(m) of the Internal
Revenue Code. The Company's stock price closed at $99.05 on the date of the
restricted stock grant.

The table below sets forth the stock option activity for the six months ended
June 30, 2006 and other stock option information at June 30, 2006:

Weighted-
Weighted- average Aggregate
average remaining intrinsic
Number exercise contractual value
of shares price life (yrs.) (in thousands)
--------- --------- ------------ -------------

Balance, December 31, 2005 ... 1,103,334 $ 62.79
Grants ....................... -- --
Exercises .................... (75,000) 43.31
Forfeitures .................. (125,000) 109.55
--------- ------- --- -------
Balance, June 30, 2006 ....... 903,334 $ 65.13 2.9 $37,322
========= ======= === =======
Vested, June 30, 2006 ........ 636,251 $ 42.24 2.1 $34,917
Exercisable, June 30, 2006 ... 636,251 $ 42.24 2.1 $34,917

The aggregate intrinsic value in the table above represents the total pre-tax
intrinsic value (the difference between the Company's closing stock price on the
last trading day of the second quarter of 2006 and the exercise price,
multiplied by the number of in-the-money options) that would have been received
by the option holders had all option holders exercised their options on June 30,
2006. The amount of aggregate intrinsic value will change based on the fair
market value of our stock.

The following table summarizes information regarding stock option exercises for
the six months ended June 30, 2006 (in thousands):

For the six months
ended June 30,
------------------
2005 2006
---- -----
Proceeds from stock options exercised ............. -- 3,249
Tax benefits related to stock options exercised ... -- 1,805
Intrinsic value of stock options exercised(1) ..... -- 4,670

----------
(1) Intrinsic value of stock options exercised is estimated by taking the
difference between the Company's closing stock price on the date of
exercise and the exercise price, multiplied by the number of options
exercised for each option holder and then aggregated.

The following table summarizes information about the stock options to purchase
the Company's common stock at June 30, 2006:

Options Outstanding Options Exercisable
------------------------------------- -----------------------
Weighted-
average Weighted- Weighted-
Number remaining average Number average
Range of outstanding contractual exercise exercisable exercise
exercise prices at 6/30/06 life (yrs.) price at 6/30/06 price
--------------- ----------- ----------- --------- ----------- ---------
$33.69 - 47.44 461,250 1.8 $ 37.55 461,250 $37.55
$53.61 - 67.87 215,001 2.2 $ 54.43 175,001 $54.62
$83.80 -119.72 227,083 5.7 $102.66 -- --
-------------- ------- --- ------- ------- ------
$33.69- 119.72 903,334 2.9 $ 57.93 636,251 $42.24

The table below sets forth the restricted stock activity for the six months
ended June 30, 2006:

Weighted-
Number average
of shares grant price
--------- -----------
Balance, December 31, 2005 ... 4,500 $100.58
Grants ....................... 188,375 102.32
Vested shares ................ -- --
Forfeitures .................. (7,500) 91.27
------- -------
Balance, June 30, 2006 ....... 185,375 $102.73
======= =======

At June 30, 2006, total stock-based compensation cost which has not yet been
recognized was $22.8 million, representing $16.9 million for unvested restricted
stock and $5.9 million for unvested stock options. This cost is expected to be
recognized over the next 44 months on a weighted-average basis.

Valuation and Expense Information Under FAS 123(R) and Proforma Information
Under FAS 123 for Periods Prior to January 1, 2006

For the three and six months ended June 30, 2005, had compensation expense been
determined based on the fair value of the options at grant dates computed in
accordance with FAS 123, the pro forma amounts would be as follows (in thousands
except per share data):

For the three For the six
months ended months ended
June 30, 2005 June 30, 2005
------------- -------------
(Pro forma) (Pro forma)
Net income..................................... $12,525 $26,616
Stock-based compensation expense, net of tax... 637 1,176
------- -------
Pro forma net income........................... $11,888 $25,440
======= =======
Net income per share:
As reported:
Basic.................................... $ 0.86 $ 1.82
Diluted.................................. $ 0.85 $ 1.79
Pro forma
Basic.................................... $ 0.82 $ 1.74
Diluted.................................. $ 0.80 $ 1.71

The following table summarizes the pro forma stock-based compensation expense
related to employee stock options under FAS 123 for the three and six months
ended June 30, 2005. There was no other stock-based compensation activity in
these periods. The table also includes the actual stock-based compensation
expense recorded for the three and six months ended June 30, 2006 by expense
line item (in thousands):

For the three months For the six months
ended June 30, ended June 30,
-------------------- --------------------
2005 Actual 2005 Actual
(Pro forma) 2006 (Pro forma) 2006
----------- ------ ----------- -------
Instruction and educational support... $ 157 $ 125 $ 290 $ 339
Selling and promotion................. 104 141 194 273
General and administration............ 783 1,761 1,444 2,735
------ ------ ------ ------
Stock-based compensation expense
included in operating expense...... 1,044 2,027 1,928 3,347
Tax benefit........................... 407 780 752 1,289
------ ------ ------ ------
Stock-based compensation
expense, net of tax................ $ 637 $1,247 $1,176 $2,058
====== ====== ====== ======

For options granted during the three and six months ended June 30, 2005, the
fair value of each option grant was estimated on the date of grant using the
Black-Scholes method with the following weighted-average assumptions:

For the three For the six
months ended months ended
June 30, 2005 June 30, 2005
------------- -------------
Dividend yield (1).............................. 0.48% 0.48%
Expected volatility (2) ........................ 34.0% 34.0%
Risk-free interest rate (3)..................... 3.8% 3.8%
Expected option term (in years) (4)............. 6.1 6.1
Weighted average fair value of options granted.. $41.18 $41.18

----------

(1) The dividend yield assumption is based on the Company's history and
expectation of dividend payouts.

(2) The Company analyzed historical volatility of the Company's stock to
estimate the expected volatility.

(3) The risk-free interest rate assumption is based on observed interest rates
appropriate for the term of the Company's employee stock options.

(4) The expected option term was determined using the simplified method for
estimating expected option life.

As stock-based compensation expense recognized in the Consolidated Statements of
Income for the three and six months ended June 30, 2006 is based on awards
ultimately expected to vest, it has been reduced for estimated forfeitures. FAS
123(R) requires forfeitures to be estimated at the time of grant and revised, if
necessary, in subsequent periods if actual forfeitures differ from those
estimates. Forfeitures were estimated based on historical experience.

6. INVESTMENTS IN MARKETABLE SECURITIES

Most of the Company's excess cash is invested in tax-exempt money market funds
and a diversified, short-term, investment grade, tax-exempt bond fund to
minimize the Company's principal risk and to benefit from the tax efficiency of
the fund's underlying securities. As of June 30, 2006, the Company had a total
of $75.4 million invested in the short-term tax-exempt bond fund. The
investments are considered "available-for-sale" as they are not held for trading
and will not be held to maturity, in accordance with Statement of Financial
Accounting Standards No. 115, Accounting for Certain Investments in Debt and
Equity Securities. The Company records the net unrealized gains and losses for
changes in fair value as a component of accumulated other comprehensive income
in stockholders' equity. Realized gains and losses from the sale of marketable
securities are based on the specific identification method.

7. LONG-TERM LIABILITIES

Lease Incentives

In conjunction with campus lease agreements, the Company, in some instances, was
reimbursed by the lessors for improvements made to the leased properties. In
accordance with Financial Accounting Standards Board ("FASB") Technical Bulletin
No. 88-1, these improvements were capitalized as leasehold improvements and a
long-term liability was established for the reimbursements. The leasehold
improvements and the long-term liability

will be amortized on a straight-line basis over the corresponding lease terms,
which range from five to ten years. As of December 31, 2005 and June 30, 2006,
the Company had deferred lease incentives of $3,481,000 and $3,093,000,
respectively.

Lease Obligations

In accordance with the FASB Technical Bulletin No. 85-3, Accounting for
Operating Leases with Schedule Rent Increases, the Company records rent expense
on a straight-line basis over the initial term of a lease. The difference
between the rent payment and the straight-line rent expense is recorded as a
long-term liability. As of December 31, 2005 and June 30, 2006, the Company had
deferred lease obligations of $2,783,000 and $3,255,000, respectively.

Indemnification on the Sale of Student Loans

In 2003, the Company sold substantially all of its student loan portfolio to a
national student loan marketing organization. Under the terms of the
Indemnification Agreement, the Company has indemnified the purchaser of the
student loans for claims that may arise due to loan documentation, regulatory
compliance, and loan servicing for the student loans that were sold. As of
December 31, 2005 and June 30, 2006, the Company had recorded a liability of
$100,000 and $50,000, respectively, for the indemnification.

ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

CAUTIONARY NOTICE REGARDING FORWARD LOOKING STATEMENTS

Certain of the statements included in this "Management's Discussion and Analysis
of Financial Condition and Results of Operations" as well as elsewhere in this
report on Form 10-Q are forward-looking statements made pursuant to the Private
Securities Litigation Reform Act of 1995 ("Reform Act"). These statements are
based on the Company's current expectations and are subject to a number of
assumptions, risks and uncertainties. In accordance with the Safe Harbor
provisions of the Reform Act, the Company has identified important factors that
could cause the actual results to differ materially from those expressed in or
implied by such statements. The assumptions, uncertainties and risks include the
pace of growth of student enrollment, our continued compliance with Title IV of
the Higher Education Act, and the regulations thereunder, as well as regional
accreditation standards and state and regional regulatory requirements,
competitive factors, risks associated with the opening of new campuses, risks
associated with the offering of new educational programs and adapting to other
changes, risks associated with the acquisition of existing educational
institutions, risks relating to the timing of regulatory approvals, our ability
to continue to implement our growth strategy, and general economic and market
conditions. Further information about these and other relevant risks and
uncertainties may be found in the Company's annual report on Form 10-K and its
other filings with the Securities and Exchange Commission. The Company
undertakes no obligation to update or revise forward looking statements.

ADDITIONAL INFORMATION

We maintain a website at http://www.strayereducation.com. The information on our
website is not incorporated by reference in this Quarterly Report on Form 10-Q
and our web address is included as an inactive textual reference only. We make
available, free of charge through our website, our Annual Report on Form 10-K,
Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to
those reports filed or furnished pursuant to Section 13(a) or 15(d) of the
Exchange Act as soon as reasonably practicable after we electronically file such
material with, or furnish it to, the SEC.

RESULTS OF OPERATIONS

In the second quarter of 2006, the Company generated $65.6 million in revenue,
an increase of 19% compared to the same period in 2005, as a result of average
enrollment growth of 15% and a 5% tuition increase at the beginning of 2006.
Although tuition increased 5% in 2006, revenue per student increased 3% due in
part to a shift in mix to graduate students who, on average, take fewer classes
than undergraduate students. Income from operations was $21.5 million for the
second quarter of 2006, an increase of 10% compared to the same period in 2005.
In 2006, the Company began recording stock-based compensation expense which
amounted to $2.0 million before tax for the second quarter of 2006. Net income
was $14.0 million in the second quarter of 2006, an increase of 12% compared to
the same period in 2005. Diluted earnings per share was $0.97 in the second
quarter of 2006 compared to $0.85 in the same period in

2005. Stock-based compensation expense reduced diluted earnings per share by
$0.08 in the second quarter of 2006.

THREE MONTHS ENDED JUNE 30, 2006 COMPARED TO THREE MONTHS ENDED JUNE 30, 2005

Enrollment. Enrollment at Strayer University for the 2006 spring term, which
began April 3, 2006 and ended June 19, 2006, increased 15% to 27,289 students
compared to 23,733 for the same term in 2005. Across the Strayer University
campus network, new student enrollments increased 22% and continuing student
enrollments increased 14%. Campus-based students increased 14% with new campuses
(those in operation three years or less) growing at 90% and mature campuses
(those in operation more than three years) growing at 3%. Out of Area Online
enrollments increased 25%, while students taking 100% of their classes at
Strayer University Online (including campus-based students) increased 25%. The
total number of students taking any courses online (including students at brick
and mortar campuses taking at least one online course) in the 2006 spring term
increased to 18,662.

Revenues. Revenues increased 19% from $55.2 million in the second quarter of
2005 to $65.6 million in the second quarter of 2006, principally due to a 15%
increase in the average enrollment and a 5% tuition increase in 2006. Although
tuition increased 5% in 2006, revenue per student increased 3% due in part to a
shift in mix to graduate students who, on average, take fewer classes than
undergraduate students.

Instruction and educational support expenses. Instruction and educational
support expenses increased $2.7 million, or 13%, from $20.0 million in the
second quarter of 2005 to $22.7 million in the second quarter of 2006. This
increase was principally due to direct costs necessary to support the increase
in student enrollments, including faculty compensation, related academic staff
salaries, and campus facility costs, which increased $0.5 million, $0.7 million,
and $0.6 million, respectively. The increase is also partly attributable to $0.1
million of stock-based compensation expense which the Company began recording in
2006. Instruction and educational support expenses as a percentage of revenues
decreased to 34.7% in the second quarter of 2006 from 36.3% in the second
quarter of 2005, largely attributable to instructional costs growing at a lower
rate than tuition revenue.

Selling and promotion expenses. Selling and promotion expenses increased $2.5
million, or 29%, from $8.7 million in the second quarter of 2005 to $11.2
million in the second quarter of 2006. This increase was principally due to the
direct costs required to generate leads for enrollment growth, the addition of
admissions personnel, particularly at new campuses and at Strayer University
Online, and stock-based compensation expense which the Company began recording
in 2006. Selling and promotion expenses as a percentage of revenues increased
from 15.7% in the second quarter of 2005 to 17.0% in the second quarter of 2006,
largely attributable to both marketing costs and staffing costs growing faster
than tuition revenue as the Company continues to invest for growth.

General and administration expenses. General and administration expenses
increased $3.1 million, or 44%, from $7.1 million in the second quarter of 2005
to $10.2 million in the second quarter of 2006. The increase is principally
attributable to $1.8 million of stock-based compensation expense which the
Company began recording in 2006. This increase was also

due to increased employee compensation and related expenses, and higher bad debt
expense, which increased $0.5 million and $0.3 million, respectively. General
and administration expenses as a percentage of revenues increased to 15.5% in
the second quarter of 2006 from 12.8% in the second quarter of 2005 primarily
due to the above factors.

Income from operations. Income from operations increased $2.0 million, or 10%,
from $19.5 million in the second quarter of 2005 to $21.5 million in the second
quarter of 2006 due to the aforementioned factors. Income from operations
includes $2.0 million in stock-based compensation expense for the three months
ended June 30, 2006.

Investment and other income. Investment and other income increased $0.4 million,
or 46%, from $0.8 million in the second quarter of 2005 to $1.2 million in the
second quarter of 2006. The increase was mostly attributable to an increase in
investment yields and a higher average cash balance.

Provision for income taxes. Income tax expense increased $0.8 million, or 11%,
from $7.8 million in the second quarter of 2005 to $8.6 million in the second
quarter of 2006 primarily due to the increase in income before taxes
attributable to the factors discussed above. The Company's effective tax rate
was 38.1% for the second quarter of 2006, a decrease compared to 38.3% for the
second quarter of 2005, primarily attributable to an increase in the Company's
investment income from tax-exempt funds.

Net income. Net income increased $1.5 million, or 12%, from $12.5 million in the
second quarter of 2005 to $14.0 million in the second quarter of 2006 because of
the factors discussed above. Net income includes the effect of stock-based
compensation expense of $1.3 million after tax for the second quarter of 2006.

SIX MONTHS ENDED JUNE 30, 2006 COMPARED TO SIX MONTHS ENDED JUNE 30, 2005

Revenues. Revenues increased 19% from $111.4 million in the six months ended
June 30, 2005 to $132.6 million in the six months ended June 30, 2006,
principally due to a 15% average increase in student enrollments and a 5%
tuition increase effective for 2006. Although tuition increased 5% in 2006,
revenue per student increased 3% due in part to a shift in mix to graduate
students who, on average, take fewer classes than undergraduate students.

Instruction and educational support expenses. Instruction and educational
support expenses increased $6.3 million, or 16%, from $38.5 million in the six
months ended June 30, 2005 to $44.8 million in the six months ended June 30,
2006. This increase was principally due to direct costs necessary to support the
increase in student enrollments, including faculty compensation, related
academic staff salaries, and campus facility costs, which increased $1.9
million, $1.3 million, and $1.5 million, respectively. The increase is also
partly attributable to $0.3 million in stock-based compensation expense which
the Company began recording in 2006. These expenses as a percentage of revenues
decreased from 34.6% in the six months ended June 30, 2005 to 33.7% in the six
months ended June 30, 2006, largely attributable to instructional costs growing
at a lower rate than tuition revenue.

Selling and promotion expenses. Selling and promotion expenses increased $4.5
million, or 26%, from $17.3 million in the six months ended June 30, 2005 to
$21.8 million in the six

months ended June 30, 2006. This increase was principally due to the direct
costs required to generate leads for enrollment growth and the addition of
admissions personnel, particularly at new campuses and at Strayer University
Online, and stock-based compensation expense which the Company began recording
in 2006. These expenses as a percentage of revenues increased from 15.5% in the
six months ended June 30, 2005 to 16.5% in the six months ended June 30, 2006,
which was largely attributable to both marketing costs and staffing costs
growing faster than tuition revenue as the Company continues to invest for
growth.

General and administration expenses. General and administration expenses
increased $6.0 million, or 44%, from $13.6 million in the six months ended June
30, 2005 to $19.6 million in the six months ended June 30, 2006. The increase is
principally attributable to $2.7 million in stock-based compensation expense
which the Company began recording in 2006. This increase was also due to
increased employee compensation and related expenses, and higher bad debt
expense, which increased $1.5 million and $0.8 million, respectively. General
and administration expenses as a percentage of revenues increased to 14.8% in
the six months ended June 30, 2006 from 12.2% in the six months ended June 30,
2005 primarily due to stock-based compensation expense.

Income from operations. Income from operations increased $4.5 million, or 11%,
from $42.0 million in the six months ended June 30, 2005 to $46.5 million in the
six months ended June 30, 2006 due to the aforementioned factors. Income from
operations includes $3.3 million in stock-based compensation expense for the six
months ended June 30, 2006.

Investment and other income. Investment and other income increased $0.7 million,
or 51%, from $1.4 million in the six months ended June 30, 2005 to $2.1 million
in the six months ended June 30, 2006. The increase was primarily attributable
to an increase in investment yields and a higher average cash balance.

Provision for income taxes. Income tax expense increased $1.8 million, or 11%,
from $16.8 million in the six months ended June 30, 2005 to $18.6 million in the
six months ended June 30, 2006 primarily due to the increase in income before
taxes discussed above. The Company's effective tax rate was 38.3% for the six
months ended June 30, 2006 compared to 38.7% for the six months ended June 30,
2005. The decrease in the Company's effective tax rate is primarily attributable
to the increase in the Company's investment income from tax-exempt funds.

Net income. Net income increased $3.4 million, or 13%, from $26.6 million in the
six months ended June 30, 2005 to $30.0 million in the six months ended June 30,
2006 because of the factors discussed above. Net income includes the effect of
stock-based compensation expense of $2.0 million after tax for the six months
ended June 30, 2006.

LIQUIDITY AND CAPITAL RESOURCES

At June 30, 2006, the Company had cash, cash equivalents and marketable
securities of $122.6 million compared to $119.8 million at December 31, 2005 and
$111.3 million at June 30, 2005. Most of the Company's excess cash is invested
in tax-exempt money market funds and a diversified, short-term, investment
grade, tax-exempt bond fund to minimize the Company's principal risk and to
benefit from the tax efficiency of the funds' underlying securities. As of June
30, 2006, the Company had a total of $75.4 million invested in the

short-term tax-exempt bond fund, having added $30.0 million to it in the first
quarter of 2006. At June 30, 2006, the 437 issues in this fund had an average
credit rating of AA, an average maturity of 1.2 years and an average duration of
1.1 years, as well as an average yield to maturity of 4.0%. The Company had no
debt as of December 31, 2005 or June 30, 2006.

For the six months ended June 30, 2006, the Company generated $30.7 million net
cash from operating activities compared to $25.0 million for the same period in
2005. Capital expenditures were $6.1 million for the six months ended June 30,
2006 compared to $7.8 million for the same period in 2005. For the six months
ended June 30, 2006, the Company paid $7.2 million in cash dividends to its
common stockholders. During the six months ended June 30, 2006, the Company
repurchased 224,252 shares of common stock at a cost of $21.6 million and an
average price of $96.44 per share as part of a previously announced common stock
repurchase authorization. The Company's remaining authorization for common stock
repurchases was $10.3 million at June 30, 2006.

In the second quarter of 2006, bad debt expense as a percentage of revenue was
2.6% compared to 2.5% for the same period in 2005. Days sales outstanding,
adjusted to exclude tuition receivable related to future quarters, was 10 days
at the end of the second quarter of 2006, compared to eight days in the same
period in 2005.

Currently, the Company invests its cash in bank overnight deposits, money market
funds and a short-term tax-exempt bond fund. In addition, the Company has
available two $10.0 million credit facilities from two banks. There have been no
borrowings by the Company under these credit facilities. The Company believes
that existing cash, cash equivalents, and marketable securities, cash generated
from operating activities, and if necessary, cash borrowed under the credit
facilities, will be sufficient to meet the Company's requirements for at least
the next 12 months.

The table below sets forth our contractual commitments associated with operating
leases as of June 30, 2006. Although they have historically been paid by the
Company, common stock dividend payments are not a contractual commitment and,
therefore, have been excluded from this table.

Payments due by period (in thousands)
-----------------------------------------------------
2-3 4-5 After 5
Total Within 1 Year Years Years Years
------- ------------- ------- ------- -------
Operating leases $96,932 $12,382 $25,112 $23,850 $35,588

NEW CAMPUSES

The Company opened one new campus in Virginia Beach, Va. and another in Atlanta,
Ga. for the 2006 summer term. The Company will open two more new campuses for
the 2006 fall term - in Birmingham, Alabama, its first campus in that state, and
the other in Charleston, South Carolina, its third campus in that state. These
new campuses will increase the total number of Strayer University campuses to
43, with eight opened in 2006. The Company intends to continue to open new
campuses to the extent feasible subject to regulatory and staffing constraints
and consistent with maintaining high academic quality.

BUSINESS OUTLOOK

Based on enrollment growth for the 2006 summer term and the planned investments
in opening new campuses, the Company estimates third quarter 2006 diluted
earnings per share will be in the range of $0.39 - $0.41, or $0.50 - $0.52
excluding approximately $0.11 per share after tax of stock-based compensation
expense as a result of adopting FAS 123(R). The Company estimates that it will
incur stock-based compensation expense of approximately $0.36 per share after
tax for the full year 2006.

ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK

The Company is subject to the impact of interest rate changes and may be subject
to changes in the market values of its future investments. The Company invests
its excess cash in bank overnight deposits, money market funds and a short-term
tax-exempt bond fund. The Company has not used derivative financial instruments
in its investment portfolio.

Earnings from investments in bank overnight deposits, money market mutual funds,
and short-term tax-exempt bond funds may be adversely affected in the future
should interest rates change. The Company's future investment income may fall
short of expectations due to changes in interest rates or the Company may suffer
losses in principal if forced to sell securities that have declined in market
value due to changes in interest rates. As of June 30, 2006, a 10% increase or
decrease in interest rates would not have a material impact on the Company's
future earnings, fair values, or cash flows related to investments in cash
equivalents or interest earning marketable securities.

ITEM 4: CONTROLS AND PROCEDURES

a) Disclosure Controls and Procedures. The Company's Chief Executive Officer
and Chief Financial Officer have evaluated the effectiveness of the
Company's disclosure controls and procedures as of June 30, 2006. Based
upon such review, the Chief Executive Officer and Chief Financial Officer
have concluded that the Company has in place, as of June 30, 2006,
effective controls and procedures designed to ensure that information
required to be disclosed by the Company (including consolidated
subsidiaries) in the reports it files or submits under the Securities
Exchange Act of 1934, as amended, and the rules thereunder, is recorded,
processed, summarized and reported within the time periods specified in the
Commission's rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that
information required to be disclosed by an issuer in reports it files or
submits under the Securities Exchange Act is accumulated and communicated
to the Company's management, including its principal executive officer or
officers and principal financial officer or officers, or persons performing
similar functions, as appropriate to allow timely decisions regarding
required disclosure.

b) Internal Control Over Financial Reporting. There have not been any changes
in the Company's internal control over financial reporting during the
quarter ended June 30, 2006 that have materially affected, or are
reasonably likely to materially affect, the Company's internal control over
financial reporting.

PART II -- OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

None

ITEM 1A. RISK FACTORS

There have been no material changes to the risk factors previously
described in Part I, Item 1A included in the Company's Annual Report on
Form 10-K for the year ended December 31, 2005.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

During the three months ended June 30, 2006, the Company used $7.7 million
to repurchase shares of common stock under its repurchase program. The
Company's remaining authorization for common stock repurchases was $10.3
million at June 30, 2006. A summary of the Company's share repurchases
during the quarter is set forth below:

Total number of Approximate dollar
shares purchased value of shares that
Total number Average as part of publicly may yet be purchased
of shares price paid announced plans under the plans or
purchased per share or programs programs ($ mil)
------------ ---------- ------------------- --------------------

Beginning Balance (at
3/31/06) $18.0
April -- -- -- --
May -- -- -- --
June 80,452 $95.15 80,452 (7.7)
------ ------ ------ -----
Total (at 6/30/06) 80,452 $95.15 80,452 $10.3
====== ====== ====== =====

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None

ITEM 4. SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS.

At the Annual Meeting of the Stockholders held on May 3, 2006, the
following matters were submitted to a vote of our common stockholders:

Proposal

1. Election of Directors:

For Withheld
---------- --------
Robert S. Silberman 11,967,235 7,985
Dr. Charlotte F. Beason 11,971,567 3,653
William E. Brock 11,957,041 18,179
David A. Coulter 11,957,299 17,921
Gary Gensler 11,970,892 4,328
Robert R. Grusky 11,968,585 6,635
Robert L. Johnson 11,699,847 275,373
Todd A. Milano 11,699,833 275,387
G. Thomas Waite, III 11,970,868 4,352
J. David Wargo 11,686,290 288,930

2. Ratification of Appointment of PricewaterhouseCoopers LLP to serve as
the Company's independent registered public accounting firm for the
fiscal year ending December 31, 2006:

For Against Abstain
---------- ------- -------
11,961,662 9,089 4,468

3. Amendment to the Employee Stock Option Plan to authorize a one time
exchange of stock options by employees (excluding the five highest
compensated officers):

For Against Abstain
--------- --------- -------
9,659,305 1,115,990 12,253

4. Amendment to the Employee Stock Option Plan to permit restricted stock
and cash awards to qualify for favorable tax treatment under Section
162(m) of the Internal Revenue Code.

For Against Abstain
---------- ------- -------
10,708,153 66,907 12,487

ITEM 5. OTHER INFORMATION.

None

ITEM 6. EXHIBITS.

31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the
Securities Act.

31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the
Securities Act.

32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

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

STRAYER EDUCATION, INC.

By: /s/ Mark C. Brown
------------------------------------
Mark C. Brown
Senior Vice President and Chief
Financial Officer

Date: July 28, 2006

EXHIBIT INDEX

Exhibit Description
------ -----------
31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of
the Securities Act.

31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of
the Securities Act.

32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.

32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.