PITTSBURGH, Nov. 12 /PRNewswire/ -- Education Management LLC, one of the
largest providers of post-secondary education in North America, today reported
its financial results for the three months ended September 30, 2008. Net
revenues rose 20.2% to $434.2 million from the first quarter of fiscal 2008
with October enrollment of over 110,800 students, up 15.6% from the same
period in the prior year.
Todd S. Nelson, President and Chief Executive Officer of Education
Management, commented, "We continue to see strong demand for our academic
programs across all of our education systems. During October, our enrollment
crossed the 100,000 student milestone. Our ability to attract and serve a
record number of students speaks highly to the strength of our academic
offerings as well as the recognition of our commitment to student and graduate
success."
Financial Highlights
-- Net revenues for the three months ended September 30, 2008 increased
20.2% to $434.2 million, compared to $361.3 million for the same period a year
ago. This increase was impacted by a 16.6% increase in student enrollment and
an approximate 5% increase in tuition rates.
-- For the first quarter of fiscal 2009, the Company recorded a net loss
of $3.4 million as compared to a net loss of $5.8 million in the prior year
period. Earnings before interest, taxes, depreciation and amortization
(EBITDA) decreased slightly from $59.6 million in the first quarter of fiscal
2007 to $59.4 million for the quarter ended September 30, 2008. The Company's
long-term investments in marketing and admissions and new campus locations, as
well as higher bad debt expenses, impacted EBITDA for the first quarter of
fiscal 2009.
-- At September 30, 2008, cash and cash equivalents were $349.0 million as
compared to $236.0 million at June 30, 2008. There were outstanding borrowings
of $180.0 million under the revolving credit facility at September 30, 2008 as
compared to $120.0 million at June 30, 2008. The Company borrows against the
revolving credit facility at each fiscal year-end for regulatory purposes and
repays outstanding amounts at the beginning of the next fiscal year. The
Company also borrowed against the revolving credit facility in September 2008
as a pre-cautionary measure due to the current state of the capital markets.
-- Cash flow from operations for the three month period ended September
30, 2008 was $108.5 million compared to $185.0 million in the prior year
period. The decrease in operating cash flows as compared to the prior year
period was primarily due to the timing of receipts of federally guaranteed
student loans and grants along with an increase in tax payments from the prior
year.
-- On a cash-basis, capital expenditures were $50.8 million, or 11.7% of
net revenues, for the three months ended September 30, 2008 compared to
$32.8 million, or 9.1% of net revenues, in the prior year. The Company is
lowering previous guidance on capital expenditures for fiscal 2009 and now
projects capital expenditures to be approximately 6% to 8% of net revenues.
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
2009), total enrollment at our schools was over 110,800 students, a 15.6%
increase from the same time last year. Same-school enrollment (schools with
enrollment for one year or more) increased 13.4% to over 108,700 students.
Students enrolled in fully online programs increased 50.1% to approximately
19,500 students.
2008 2007 Percentage
October October Change
Total enrollment 110,800 95,900 15.6%
Same-school enrollment(1) 108,700 95,900 13.4%
Students enrolled in fully online programs 19,500 13,000 50.1%
(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
2009 first quarter on Thursday, November 13, 2008 at 10:30 a.m. (Eastern
Time). Those wishing to participate in this call should dial 303-262-2125
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
http://www.edmc.com.
About Education Management
Education Management (http://www.edmc.com), with over 110,800 students as
of October 2008, is among the largest providers of post-secondary education in
North America, based on student enrollment and revenue, with a total of 88
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. 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.
EDUCATION MANAGEMENT LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FISCAL FIRST QUARTER
(Dollars in millions) (Unaudited)
For the three months ended
September 30,
2008 2007
Net revenues $434.2 $361.3
Costs and expenses:
Educational services 253.5 205.6
General and administrative 121.3 96.1
Depreciation and amortization 26.6 28.3
Total costs and expenses 401.4 330.0
Income before interest and income taxes 32.8 31.3
Net interest expense 38.3 40.7
Loss before income taxes (5.5) (9.4)
Provision for income taxes (2.1) (3.6)
Net loss $(3.4) $(5.8)
Note: Certain prior year amounts have been reclassified to conform to the
current year's presentation
EDUCATION MANAGEMENT LLC AND SUBSIDIARIES
SELECTED CASH FLOW DATA - FISCAL FIRST QUARTER
(Dollars in millions) (Unaudited)
For the three months ended
September 30,
2008 2007
Net cash flows provided by operations $108.5 $185.0
Depreciation and amortization(1) 26.6 28.3
Capital expenditures(2) (50.8) (32.8)
(1) Includes non-cash charges related to fixed asset impairments of
$4.8 million in the 2007 period.
(2) Represents cash paid for long-lived assets
EDUCATION MANAGEMENT LLC AND SUBSIDIARIES
SELECTED BALANCE SHEET DATA - FISCAL FIRST QUARTER
(Dollars in millions) (Unaudited)
As of September 30,
2008 2007
Cash and cash equivalents $349.0 $308.4
Current assets 579.8 460.2
Total assets 4,227.0 4,035.2
Current liabilities 639.2 504.0
Revolving credit facility 180.0 -
Long-term debt (including current portion) 1,898.2 1,936.8
Members' equity 1,347.0 1,293.1
EDUCATION MANAGEMENT LLC 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. In addition, management believes
that EBITDA provides more comparability between our historical results and
results that reflect purchase accounting and the new capital structure.
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.
For the three months ended
September 30,
2008 2007
Net loss $(3.4) $(5.8)
Net interest expense 38.3 40.7
Income tax benefit (2.1) (3.6)
Depreciation and amortization(1) 26.6 28.3
EBITDA $59.4 $59.6
(1) Includes non-cash charges related to fixed asset impairments of
$4.8 million in the 2007 three-month period.
EDUCATION MANAGEMENT LLC AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP MEASURES
Reconciliation of Net Income to Adjusted EBITDA for Covenant Compliance
(Dollars in millions) (Unaudited)
Adjusted earnings before interest, taxes, depreciation and amortization
("Adjusted EBITDA") is a non-GAAP measure used to determine our compliance
with certain covenants contained in the indentures governing our outstanding
senior notes and senior subordinated notes and in our senior secured credit
facilities. Adjusted EBITDA is defined as EBITDA further adjusted to exclude
unusual items and other adjustments permitted in calculating covenant
compliance under the indentures governing the notes and our senior secured
credit facilities. We believe that the inclusion of supplementary adjustments
to EBITDA applied in presenting Adjusted EBITDA is appropriate to provide
additional information to investors to demonstrate compliance with our
financial covenants.
For the twelve months ended
September 30, 2008
Net income $67.1
Interest expense, net 155.3
Provision for income taxes 42.7
Depreciation and amortization(1) 98.6
EBITDA 363.7
Reversal of impact of unfavorable leases(2) (1.5)
Advisory fees(3) 5.0
Severance and relocation 3.4
Capital taxes 1.3
Other 1.7
Adjusted EBITDA - Covenant Compliance $373.6
(1) Includes non-cash charges related to fixed asset impairments of
$0.7 million.
(2) Represents non-cash reduction to rent expense due to the amortization
on $7.3 million of unfavorable lease liabilities resulting from fair value
adjustments required under SFAS No. 141 as part of the Transaction.
(3) Represents advisory fees incurred under a management advisory
agreement with affiliates of certain of our shareholders in connection with
the Transaction as of June 1, 2006.
COMPANY CONTACTS:
James Sober, CFA
Vice President, Finance
(412) 995-7684
