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| 8-K - EDUCATION MANAGEMENT CORPORATION | v164847_8k.htm |
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FOR:
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Education
Management Corporation
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COMPANY
CONTACTS:
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James
Sober, CFA
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Vice
President, Finance
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(412)
995-7684
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Education
Management Corporation Reports Fiscal 2010 First Quarter
Results
Pittsburgh,
PA, November 4, 2009 — Education Management Corporation (NASDAQ:EDMC), one of
the largest providers of post-secondary education in North America, today
reported its financial results for the three months ended September 30, 2009.
For the first quarter of fiscal 2010, net income was $15.8 million, or $0.13 per
diluted share, an increase of $19.1 million from the quarter ended September 30,
2008. Net revenues rose 23.1% to $534.4 million from the first
quarter of fiscal 2009.
Todd S.
Nelson, Chief Executive Officer of Education Management, commented, “We are
reporting record student, revenue and EBITDA results for our first fiscal
quarter. We are pleased with the successful completion in October 2009 of our
initial public offering where we raised proceeds, net of underwriting fees, of
$389.2 million and bond tender offer where we paid off $316.0 million of our 10
¼% Senior Subordinated Notes due 2016. We believe that the completion of these
transactions will increase our financial flexibility and provide a strong
foundation to support our long term growth plans.”
Financial
Highlights
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·
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Net
revenues for the three months ended September 30, 2009 increased 23.1% to
$534.4 million, compared to $434.2 million for the same period a year ago.
This increase was primarily driven by a 23.1% increase in July student
enrollment.
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·
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For
the first quarter of fiscal 2010, net income for the quarter grew to $15.8
million, or $0.13 per fully diluted share, compared to a net loss of
$(3.3) million, or $(0.03) per fully diluted share, for the same period a
year ago. Earnings before interest, taxes, depreciation and amortization
(EBITDA) increased 52.6% from $59.4 million in the first quarter of fiscal
2009 to $90.6 million in the first quarter of fiscal 2010 primarily due to
higher student enrollment.
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·
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At
September 30, 2009, cash and cash equivalents were $422.9 million as
compared to $363.3 million at June 30, 2009. There were no outstanding
borrowings under the revolving credit facility at September 30, 2009 as
compared to $100.0 million at June 30, 2009, which was repaid in full on
July 1, 2009.
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·
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Cash
flow from operations for the three month period ended September 30, 2009
was $200.6 million, compared to $108.7 million in the prior year period.
The increase in operating cash flows as compared to the prior year period
was primarily related to a $75.3 million increase in advanced payments,
which benefited from the timing of our October academic term start
occurring earlier than in the first quarter of fiscal 2009, and increased
net income.
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·
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On
a cash-basis, capital expenditures were $33.2 million, or 6.2% of net
revenues, for the three months ended September 30, 2009 compared to $50.8
million, or 11.7% of net revenues, in the same period in the prior year.
Capital expenditures for fiscal 2010 are projected to be approximately
6.5% to 7.5% of net revenues compared to 7.5% of net revenues in fiscal
2009.
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The
presentation of EBITDA does not comply with U.S. generally accepted accounting
principles (GAAP). For an explanation of EBITDA and Adjusted EBITDA
(used for covenant compliance), and a reconciliation to net income, the most
directly comparable GAAP financial measure, see the Non-GAAP Financial Measures
disclosure in the financial tables section below.
Student
Enrollment
At the
start of the current October quarter (second quarter of fiscal 2010), total
enrollment at our schools was over 136,000 students, a 22.7% increase from the
same time last year. Same-school enrollment (schools with enrollment for one
year or more) increased 22.1% to over 135,300 students. Students enrolled in
fully online programs increased 60.0% to approximately 31,200
students.
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2009
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2008
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Percentage
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October
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October
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Change
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Total
enrollment
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136,000 | 110,800 | 22.7 | % | ||||||||
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Same-school
enrollment(1)
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135,300 | 110,800 | 22.1 | % | ||||||||
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Students
enrolled in fully online programs
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31,200 | 19,500 | 60.0 | % | ||||||||
(1)
Schools with enrollment for one year or more.
Our
quarterly revenues and income fluctuate primarily as a result of the pattern of
student enrollments. The seasonality of our business has decreased over the last
several years due primarily to an increased percentage of students enrolling in
online programs, which generally experience less seasonal fluctuation than
campus-based programs. The first quarter is typically the lowest revenue
recognition quarter due to student vacations.
Conference
Call and Webcast
Education
Management will host a conference call to discuss its fiscal 2010 first quarter
on Wednesday, November 4, 2009 at 5:00 p.m. (Eastern Time). Those wishing to
participate in this call should dial 480-629-9643 approximately 10 minutes prior
to the start of the call. A listen-only audio of the conference call will also
be broadcast live over the Internet at www.edmc.com. A
replay of the conference call will be available at www.edmc.com until November
3, 2010.
About
Education Management
Education
Management (www.edmc.com), with
over 136,000 students as of October 2009, is among the largest providers of
post-secondary education in North America, based on student enrollment and
revenue, with a total of 93 locations in 28 U.S. states and Canada. We offer
academic programs to our students through campus-based and online instruction,
or through a combination of both. We are committed to offering quality academic
programs and continuously strive to improve the learning experience for our
students. Our educational institutions offer students the opportunity to earn
undergraduate and graduate degrees and certain specialized non-degree diplomas
in a broad range of disciplines, including design, media arts, health sciences,
psychology and behavioral sciences, culinary, fashion, business, education,
legal and information technology.
Cautionary
Statement
This
press release may include information that could constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. These statements typically contain words such as “anticipates,”
“believes,” “estimates,” “expects,” “intends” or similar words indicating that
future outcomes are not known with certainty and are subject to risk factors
that could cause these outcomes to differ significantly from those
projected. Forward-looking statements include, but are not limited to,
statements related to the Company’s future operating and financial performance,
and include statements regarding expected enrollment, revenue, expense levels,
and earnings. Any such forward-looking statements may involve risk
and uncertainties that could cause actual results to differ materially from any
future results encompassed within the forward-looking statements. Factors that
could cause or contribute to such differences include those matters disclosed in
the Company's Securities and Exchange Commission filings. Past results of
Education Management are not necessarily indicative of its future results.
Education Management does not undertake any obligation to update any
forward-looking statements.
— Tables
to Follow —
EDUCATION
MANAGEMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF OPERATIONS
FISCAL
FIRST QUARTER
(Dollars
in millions) (Unaudited)
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For the three months ended
September 30,
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2009
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2008
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%Change
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Net
revenues
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$ | 534.4 | $ | 434.2 | 23.1 | % | ||||||
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Costs
and expenses:
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Educational
services
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295.7 | 253.5 | 16.6 | % | ||||||||
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General
and administrative
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148.1 | 121.3 | 22.0 | % | ||||||||
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Depreciation
and amortization
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28.8 | 26.6 | 8.4 | % | ||||||||
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Total
costs and expenses
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472.6 | 401.4 | 17.7 | % | ||||||||
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Income
before interest and income taxes
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61.8 | 32.8 | 88.5 | % | ||||||||
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Interest
expense, net
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36.3 | 38.2 | (4.8 | )% | ||||||||
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Income
(loss) before income taxes
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25.5 | (5.4 | ) | n/m | ||||||||
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Provision
for (benefit from) income taxes
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9.7 | (2.1 | ) | n/m | ||||||||
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Net
Income (loss)
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$ | 15.8 | $ | (3.3 | ) | n/m | ||||||
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Diluted
earnings (loss) per share
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$ | 0.13 | $ | (0.03 | ) | n/m | ||||||
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Weighted
average number of diluted shares outstanding (000’s)
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119,770 | 119,769 | 0.0 | % | ||||||||
EDUCATION
MANAGEMENT CORPORATION AND SUBSIDIARIES
SELECTED
CASH FLOW DATA – FISCAL FIRST QUARTER
(Dollars
in millions) (Unaudited)
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For
the three months ended
September
30,
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2009
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2008
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% Change
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Net
cash flows provided by operations
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$ | 200.6 | $ | 108.7 | 84.5 | % | ||||||
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Depreciation
and amortization
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28.8 | 26.6 | 8.4 | % | ||||||||
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Capital
expenditures (1)
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(33.2 | ) | (50.8 | ) | (34.6 | )% | ||||||
(1)
Represents cash paid for long-lived assets
EDUCATION
MANAGEMENT CORPORATION AND SUBSIDIARIES
SELECTED
BALANCE SHEET DATA – FISCAL FIRST QUARTER
(Dollars
in millions) (Unaudited)
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As
of September 30,
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2009
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2008
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Cash
and cash equivalents
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$ | 422.9 | $ | 390.5 | ||||
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Current
assets
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691.6 | 621.2 | ||||||
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Total
assets
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4,399.7 | 4,268.0 | ||||||
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Revolving
credit facility
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0.0 | 180.0 | ||||||
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Other
current liabilities
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614.9 | 459.2 | ||||||
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Long-term
debt (including current portion)
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1,885.4 | 1,898.2 | ||||||
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Shareholders’
equity
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1,502.9 | 1,388.1 | ||||||
EDUCATION
MANAGEMENT CORPORATION AND SUBSIDIARIES
RECONCILIATION
OF NON-GAAP MEASURES
Reconciliation
of Net Income to EBITDA
(Dollars
in millions) (Unaudited)
Non-GAAP
Financial Measures
EBITDA, a
measure used by management to measure operating performance, is defined as net
income plus net interest expense, taxes and depreciation and amortization,
including amortization of intangible assets. EBITDA is not a
recognized term under GAAP and does not purport to be an alternative to net
income as a measure of operating performance or to cash flows from operating
activities as a measure of liquidity. Additionally, EBITDA is not
intended to be a measure of free cash flow available for management’s
discretionary use, as it does not consider certain cash requirements such as
interest payments, tax payments and debt service requirements. Management
believes EBITDA is helpful in highlighting trends because EBITDA excludes the
results of decisions that are outside the control of operating management and
can differ significantly from company to company depending on long-term
strategic decisions regarding capital structure, the tax jurisdictions in which
companies operate and capital investments. Management compensates for
the limitations of using non-GAAP financial measures by using them to supplement
GAAP results to provide a more complete understanding of the factors and trends
affecting the business than GAAP results alone. Because not all companies use
identical calculations, this presentation of EBITDA may not be comparable to
similarly titled measures of other companies.
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For
the three months ended September 30,
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2009
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2008
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%Change
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Net
income (loss)
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$ | 15.8 | $ | (3.3 | ) | n/m | ||||||
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Interest
expense, net
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36.3 | 38.2 | (4.8 | )% | ||||||||
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Provision
for (benefit from) income taxes
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9.7 | (2.1 | ) | n/m | ||||||||
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Depreciation
and amortization
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28.8 | 26.6 | 8.4 | % | ||||||||
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EBITDA
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$ | 90.6 | $ | 59.4 | 52.6 | % | ||||||