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John Jenson
Vice President, Corporate Controller
Universal Technical Institute, Inc.
(623) 445-0821

Universal Technical Institute Reports Fiscal Year 2013 First Quarter Results

SCOTTSDALE, ARIZ. – January 31, 2013 – Universal Technical Institute, Inc. (NYSE: UTI), the leading provider of automotive technician training, today reported revenues for the first quarter ended Dec. 31, 2012 of $98.4 million, a 7.5 percent decrease from $106.4 million for the first quarter of the prior year. Net income for the first quarter ended Dec. 31, 2012 was $3.6 million, or 14 cents per diluted share, compared to $4.5 million, or 18 cents per diluted share, for the first quarter ended Dec. 31, 2011.

Return on equity for the trailing four quarters ended Dec. 31, 2012 was 5.5 percent compared to 6.2 percent for the trailing four quarters ended Sept. 30, 2012.

“For the past several quarters, we, like the rest of the industry, have faced real challenges in attracting new students, and in having them start school. While we expect those trends to continue through much of 2013, our fundamental business is strong,” said Kim McWaters, chief executive officer. “We have a plan in place to better reach our students in a confusing and competitive marketplace, to strengthen key processes, and to continue to make investments to generate profitable growth. As this plan takes hold, we hope to see improved student starts in the fourth quarter of this year.”

Student Metrics

                         
    Three Months Ended
            December 31,
            2012   2011
            (Rounded to hundreds)
Total starts
            2,700       3,300  
Average undergraduate full-time student enrollment
            16,500       18,300  
End of period undergraduate full-time student enrollment
            15,200       17,300  

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First Quarter Operating Performance

For the first quarter of 2013, revenues were $98.4 million, a 7.5 percent decrease from $106.4 million for last year’s first quarter. The decrease in revenues primarily related to a decrease in average undergraduate full-time student enrollment of 9.8 percent. The decrease was partially offset by an increase in tuition rates. During the first quarter of 2013 and 2012, tuition excluded $5.8 million and $2.6 million, respectively, related to students participating in the Company’s proprietary loan program which will be recognized as revenues when payments are received.

Operating income and margin for the first quarter of 2012 were $6.0 million and 6.1 percent, respectively, compared to operating income and margin of $7.3 million and 6.9 percent, respectively, in the same period last year. The decrease in operating income was primarily attributable to the decrease in revenues and was partially offset by decreases in compensation and advertising expense.

Earnings before interest, taxes, depreciation and amortization (EBITDA) for the first quarter of 2013 was $12.1 million compared to $14.0 million in the same period last year. See “Use of Non-GAAP Financial Information” below.

Liquidity

Cash, cash equivalents and investments totaled $89.3 million at Dec. 31, 2012, compared to $101.7 million at Sept. 30, 2012. At Dec. 31, 2012, shareholders’ equity totaled $143.4 million as compared to $146.1 million at Sept. 30, 2012. On Dec. 21, 2012, we paid a cash dividend of $0.10 per share to common stockholders of record as of Dec. 7, 2012. The aggregate payment was approximately $2.5 million. At the discretion of our Board of Directors, we intend to pay a dividend quarterly in future periods.

Pursuant to the previously announced share repurchase plan, we purchased 556,100 shares of stock during the quarter ended Dec. 31, 2012 at an average price of $9.61 for a total cost of approximately $5.4 million.

Cash flow used in operating activities was $1.6 million for the three months ended Dec. 31, 2012, compared with cash provided by operating activities of $5.6 million for the three months ended Dec. 31, 2011.

2013 Outlook

With slightly worsening macroeconomic pressure, the time required for new initiatives to take hold and the lag between students applying for school and starting school increasing, we expect new student starts to be down for much of 2013, before possibly showing year over year improvement in the fourth quarter. While that trend would prove positive for 2014, we do anticipate full year new student starts for 2013 to be down mid to high single digits resulting in a lower average student population this year. These lower levels of enrollment will most likely result in a high single digit decline in revenue in 2013 and an overall decline in operating margin and net income compared to 2012.

Conference Call

Management will hold a conference call to discuss the 2013 first quarter results today at 2:30 p.m. MST (4:30 p.m. EST). This call can be accessed by dialing 412-858-4600 or 800-860-2442. Investors are invited to listen to the call live at http://uti.investorroom.com/. Please access the website at least 15 minutes early to register, download and install any necessary audio software. A replay of the call will be available on the Investor Relations section of UTI’s website for 60 days or the replay can be accessed through February 8th, 2013 by dialing 412-317-0088 or 877-344-7529 and entering pass code 10023737.

Safe Harbor Statement

All statements contained herein, other than statements of historical fact, are “forward-looking” statements within the meaning of Section 21E of the Securities Exchange Act of 1934 and Section 27A of the Securities Act of 1933, as amended. Such statements are based upon management’s current expectations and are subject to a number of uncertainties that could cause actual performance and results to differ materially from the results discussed in the forward-looking statements. Factors that could affect the Company’s actual results include, among other things, changes to federal and state educational funding, changes to regulations or agency interpretation of such regulations affecting the for-profit education industry, possible failure or inability to obtain regulatory consents and certifications for new or expanding campuses, potential increased competition, changes in demand for the programs offered by UTI, increased investment in management and capital resources, the effectiveness of the recruiting, advertising and promotional efforts, changes to interest rates and unemployment, general economic conditions of the Company and other risks that are described from time to time in the Company’s public filings. Further information on these and other potential factors that could affect the financial results or condition may be found in the Company’s filings with the Securities and Exchange Commission. The forward-looking statements speak only as of the date of this press release. Except as required by law, the Company expressly disclaims any obligation to publicly update any forward-looking statements whether as a result of new information, future events, changes in expectations, any changes in events, conditions or circumstances, or otherwise.

Use of Non-GAAP Financial Information

This press release and the related conference call contains non-GAAP (Generally Accepted Accounting Principles) financial measures, which are intended to supplement, but not substitute for, the most directly comparable GAAP measures. Management chooses to disclose to investors, these non-GAAP financial measures because they provide an additional analytical tool to clarify the results from operations and helps to identify underlying trends. Additionally, such measures help compare the Company’s performance on a consistent basis across time periods. To obtain a complete understanding of the Company’s performance these measures should be examined in connection with net income, determined in accordance with GAAP, as presented in the financial statements and notes thereto included in the annual and quarterly filings with the Securities and Exchange Commission. Since the items excluded from these measures are significant components in understanding and assessing financial performance under GAAP, these measures should not be considered to be an alternative to net income as a measure of the Company’s operating performance or profitability. Exclusion of items in the non-GAAP presentation should not be construed as an inference that these items are unusual, infrequent or non-recurring. Other companies, including other companies in the education industry, may calculate non-GAAP financial measures differently than UTI does, limiting their usefulness as a comparative measure across companies. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures are included below.

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About Universal Technical Institute, Inc.

Headquartered in Scottsdale, Arizona, Universal Technical Institute, Inc. (NYSE: UTI) is the leading provider of post-secondary education for students seeking careers as professional automotive, diesel, collision repair, motorcycle and marine technicians. With more than 160,000 graduates in its 47-year history, UTI offers undergraduate degree, diploma and certificate programs at 11 campuses across the United States, as well as manufacturer-specific training programs at dedicated training centers. Through its campus-based school system, UTI provides specialized post-secondary education programs under the banner of several well-known brands, including Universal Technical Institute (UTI), Motorcycle Mechanics Institute and Marine Mechanics Institute (MMI) and NASCAR Technical Institute (NASCAR Tech). To learn more about UTI and its training services, log on to www.uti.edu.

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UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED INCOME STATEMENTS
(UNAUDITED)

                                                                 
                                    Three Months Ended
                                    December 31,
                            2012   2011
                                    (In thousands, except per share amounts)
Revenues
                                          $ 98,441           $ 106,427
Operating expenses:
                                                       
   Educational services and facilities
                          49,692           51,732
   Selling, general and administrative
                          42,743           47,368
 
                                                               
      Total operating expenses
                          92,435           99,100
 
                                                               
Income from operations
                                  6,006           7,327
 
                                                               
Other income:
                                                               
   Interest income, net
                                  47           92
   Other income
                                  119           153
 
                                                               
      Total other income
                          166           245
 
                                                               
Income before income taxes
                                  6,172           7,572
Income tax expense
                                          2,610           3,093
 
                                                               
Net income
                                          $ 3,562           $ 4,479
 
                                                               
Earnings per share:
                                                       
Net income per share – basic
                                  $ 0.14           $ 0.18
 
                                                               
Net income per share – diluted
                                  $ 0.14           $ 0.18
 
                                                               
Weighted average number of shares outstanding:
                                               
      Basic
                          24,761           24,693
 
                                                               
      Diluted
                          24,814           24,802
 
                                                               
Cash dividend declared per common share
                                  $ 0.10           -
 
                                                               

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UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

                                 
                    Dec. 31,   Sept. 30,
                    2012   2012
                    (In thousands)
Assets
Current assets:
       
Cash and cash equivalents
          $ 30,197     $ 45,665  
       
Investments, current portion
            52,092       51,455  
       
Receivables, net
            10,900       14,910  
       
Deferred tax assets, net
            6,424       7,977  
        Prepaid expenses and other current assets
    15,815       14,977  
       
 
                       
       
 
  Total current assets     115,428       134,984  
Investments, less current portion             7,040       4,533  
Property and equipment, net             92,459       91,939  
Goodwill  
 
            20,579       20,579  
Deferred tax assets, net             4,570       5,576  
Other assets  
 
            11,065       10,547  
       
 
                       
Total assets           $ 251,141     $ 268,158  
       
 
                       
Liabilities and Shareholders’ Equity                        
Current liabilities:                        
        Accounts payable and accrued expenses
  $ 31,186     $ 40,865  
       
Deferred revenue
            43,249       52,564  
       
Accrued tool sets
            4,381       4,264  
       
Income tax payable
                  744  
       
Other current liabilities
            1,472       1,003  
       
 
                       
       
 
  Total current liabilities     80,288       99,440  
       
Deferred rent liability
            12,598       12,946  
       
Construction liability
            7,354       2,421  
       
Other liabilities
            7,530       7,266  
       
 
                       
       
 
  Total liabilities     107,770       122,073  
       
 
                       
Commitments and contingencies                        
Shareholders’ equity:                        
        Common stock, $0.0001 par value, 100,000,000 shares authorized,
               
       
 
  30,250,370 shares issued and 24,363,343                
       
 
  shares outstanding at December 31, 2012 and                
       
 
  30,322,132 shares issued and 24,891,205                
       
 
  shares outstanding at September 30, 2012     3       3  
        Preferred stock, $0.0001 par value, 10,000,000 shares authorized,
               
       
 
  0 shares issued and outstanding            
       
Paid-in capital
            168,528       166,970  
        Treasury stock, at cost, 5,887,027 shares at December 31, 2012 and
               
       
 
  5,330,927 shares at September 30, 2012     (89,288 )     (83,924 )
       
Retained earnings
            64,128       63,036  
       
 
                       
       
 
  Total shareholders’ equity     143,371       146,085  
       
 
                       
Total liabilities and shareholders’ equity           $ 251,141     $ 268,158  
       
 
                       

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UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

                                 
                    Three Months Ended
                    Dec. 31,
                    2012   2011
                    (In thousands)
Cash flows from operating activities:                        
Net income  
 
          $ 3,562     $ 4,479  
Adjustments to reconcile net income to net cash provided by operating activities:                
       
Depreciation and amortization
            5,722       6,293  
        Amortization of held-to-maturity investments
    412       537  
       
Bad debt expense
            1,544       1,733  
       
Stock-based compensation
            1,445       1,682  
       
Deferred income taxes
            2,427       77  
       
Training equipment credits earned
            (445 )     (478 )
        Loss on disposal of property and equipment
    -       23  
Changes in assets and liabilities:                        
       
Receivables
            2,587       (1,172 )
        Prepaid expenses and other current assets
    (443 )     (1,643 )
       
Other assets
            (520 )     (332 )
       
Accounts payable and accrued expenses
            (8,361 )     1,375  
       
Deferred revenue
            (9,315 )     (7,302 )
       
Income tax payable/receivable
            (866 )     (120 )
        Accrued tool sets and other current liabilities
    586       (96 )
       
Deferred rent liability
            (348 )     363  
       
Other liabilities
            422       152  
       
 
                       
       
 
  Net cash (used in) provided by operating activities     (1,591 )     5,571  
       
 
                       
Cash flows from investing activities:                        
       
Purchase of property and equipment
            (2,756 )     (1,498 )
        Proceeds from disposal of property and equipment
    24       -  
       
Purchase of investments
            (21,975 )     (16,770 )
        Proceeds received upon maturity of investments
    18,419       10,148  
       
 
  Net cash used in investing activities     (6,288 )     (8,120 )
       
 
                       
Cash flows from financing activities:                        
       
Payment of cash dividends
            (2,470 )      
        Payment of payroll taxes on stock-based compensation through shares withheld
    (17 )     (54 )
        Proceeds from issuance of common stock under employee plans
    262       -  
       
Purchase of treasury stock
            (5,364 )      
       
 
  Net cash used in financing activities     (7,589 )     (54 )
       
 
                       
Net decrease in cash and cash equivalents             (15,468 )     (2,603 )
Cash and cash equivalents, beginning of period             45,665       53,670  
       
 
                       
Cash and cash equivalents, end of period           $ 30,197     $ 51,067  
       
 
                       

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UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP FINANCIAL INFORMATION TO NON-GAAP FINANCIAL INFORMATION
(UNAUDITED)

Reconciliation of Net Income to EBITDA

                                                 
            Three Months Ended
            December 31,
            2012   2011
                    (In thousands)                
Net income
                          $ 3,562             $ 4,479  
Interest income, net
                            (47 )             (92 )
Income tax expense
                            2,610               3,093  
Depreciation and amortization
                            5,985               6,523  
 
                                               
EBITDA
                          $ 12,110             $ 14,003  
 
                                               

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UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES
SELECTED SUPPLEMENTAL FINANCIAL INFORMATION
(UNAUDITED)

                         
            Three Months Ended
            December 31,
            2012   2011
            (In thousands)
Salaries expense
          $ 39,728     $ 40,212  
Employee benefits and tax
            7,177       8,342  
Bonus expense
            2,154       3,687  
Stock-based compensation
            1,445       1,682  
Total compensation and related costs
          $ 50,504     $ 53,923  
 
                       
Occupancy expense
            9,834       9,777  
Bad debt expense
            1,544       1,733  
Depreciation expense
            5,985       6,523  
Legal services expense
            319       617  

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