PITTSBURGH, May 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 March 31, 2008.
Net revenues rose 25.8% to $461.2 million from $366.7 million in the third
quarter of fiscal 2007 with enrollment for the April academic quarter of
95,600 students, up 18.3% from the same period in the prior year.
Todd S. Nelson, President and Chief Executive Officer of Education
Management, commented, "We are pleased with the strong enrollment growth
and financial results that we are reporting this quarter. We believe the
robust demand we see across each of our education systems is evidence of
the high quality of our academic programs and the commitment that our
faculty and instructors share in the success of our students and
graduates."
Financial Highlights
-- Net revenues for the three months ended March 31, 2008 increased 25.8%
to $461.2 million, compared to $366.7 million for the same period a
year ago. This increase was impacted by a 19.1% increase in total
student enrollment and an approximate 5% increase in tuition rates over
the prior year period.
-- For the third quarter of fiscal 2008, our net income increased 75.9% to
$31.0 million from $17.6 million in the prior year period. EBITDA
increased 18.8% to $115.5 million from $97.2 million for the same
period a year ago primarily due to higher student enrollment and the
increase in tuition rates.
-- At March 31, 2008, cash and cash equivalents were $326.0 million. There
were no outstanding borrowings under the revolving credit facility at
March 31, 2008.
-- Cash flow from operations for the nine month period ended March 31,
2008 was $297.7 million compared to $264.1 million in the prior year
period. Increased operating cash flows as compared to the prior year
period were primarily due to higher net income resulting from revenue
growth.
-- On a cash-basis, capital expenditures were $91.0 million, or 7.2% of
net revenues, for the nine months ended March 31, 2008 compared to
$75.7 million, or 7.5% of net revenues, in the prior year. For fiscal
2008, we anticipate capital expenditures to be approximately 9% 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 April 2008 academic quarter, total enrollment at
our schools was over 95,600 students, an 18.3% increase from the same time
last year. Same-school enrollment (schools owned for one year or more)
increased 16.7% to over 94,300 students. Students enrolled in fully online
programs increased 72.4% to over 15,800 students.
April April Percentage
2008 2007 Change
Total enrollment 95,600 80,800 18.3%
Same-school enrollment (owned
for 1 year or more) 94,300 80,800 16.7%
Students enrolled in fully
online programs 15,800 9,200 72.4%
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.
Student Loan Update
We have continued our efforts to ensure that our students have access
to adequate student loans in light of recent changes in the private loan
market. We do not expect that changes in the private loan market will have
a material impact on fiscal 2008 net revenues or earnings before interest,
taxes, depreciation and amortization. We will provide an update on our
student lending initiatives during the conference call to discuss the
fiscal 2008 third quarter to be held tomorrow at 10:30 a.m. (Eastern Time).
Conference Call and Webcast
Education Management will host a conference call to discuss its fiscal
2008 third quarter on Tuesday, May 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 approximately 96,000
students as of Fall 2007, is among the largest providers of post-secondary
education in North America, based on student enrollment and revenue, with a
total of 83 locations in 26 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.
COMPANY CONTACTS:
James Sober, CFA
Vice President, Finance
(412) 995-7684
- Tables to Follow -
EDUCATION MANAGEMENT LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS - FISCAL THIRD QUARTER
(Dollars in millions) (Unaudited)
For the three months ended For the nine months ended
March 31, March 31,
2008 2007 2008 2007
Net revenues $ 461.2 $ 366.7 $ 1,267.8 $ 1,016.0
Costs and expenses:
Educational services 253.4 207.4 724.3 588.7
General and
administrative 111.6 80.1 310.6 225.6
Amortization of
intangible assets 4.6 4.9 15.0 14.9
Total costs and
expenses 369.6 292.4 1,049.9 829.2
Income before interest
and income taxes 91.6 74.3 217.9 186.8
Net interest expense 39.5 41.5 120.0 128.6
Income before income
taxes 52.1 32.8 97.9 58.2
Provision for income
taxes 21.1 15.2 38.9 25.0
Net income $ 31.0 $ 17.6 $ 59.0 $ 33.2
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 THIRD QUARTER
(Dollars in millions) (Unaudited)
For the nine months ended
March 31,
2008 2007
Net cash flows provided by operations $ 297.7 $ 264.1
Depreciation and amortization of
property, equipment and intangible
assets (1) 75.7 67.7
Capital expenditures (2) (91.0) (75.7)
(1) Includes non-cash charges related to fixed asset impairments of $5.5
million in the 2008 nine-month period.
(2) Represents cash paid for long-lived assets
EDUCATION MANAGEMENT LLC AND SUBSIDIARIES
SELECTED BALANCE SHEET DATA - FISCAL THIRD QUARTER
(Dollars in millions) (Unaudited)
As of March 31,
2008 2007
Cash and cash equivalents $ 326.0 $ 282.6
Current assets 561.6 395.5
Total assets 4,145.7 3,933.4
Current liabilities 551.7 402.7
Long-term debt (including current portion) 1,904.9 1,943.4
Member's equity 1,330.6 1,304.6
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 For the nine months ended
March 31, March 31,
2008 2007 2008 2007
Net income $ 31.0 $ 17.6 $ 59.0 $ 33.2
Net interest expense 39.5 41.5 120.0 128.6
Income tax expense 21.1 15.2 38.9 25.0
Depreciation and
amortization of
property, equipment
and intangible
assets (1) 23.9 22.9 75.7 67.7
EBITDA $ 115.5 $ 97.2 $ 293.6 $ 254.5
(1) Includes non-cash charges related to fixed asset impairments of
$0.7 million and $5.5 million in the 2008 three-month and nine-month
periods, respectively.
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
March 31,
2008
Net income $ 58.0
Interest expense, net 160.5
Provision for income taxes 41.0
Depreciation and amortization of property,
equipment and intangible assets (1) 98.6
EBITDA 358.1
Reversal of impact of unfavorable leases (2) (1.4)
Advisory fees (3) 5.0
Severance and relocation 3.6
Other 2.2
Adjusted EBITDA - Covenant Compliance $367.5
(1) Includes non-cash charges related to fixed asset impairments of
$5.5 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 on June 1, 2006 in which Education Management Corporation
was acquired by a consortium of private investors through a merger of
an acquisition company into Education Management Corporation, with
Education Management Corporation surviving the merger (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.
SOURCE Education Management LLC
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Related links:
http://www.edmc.com
CONTACT:
James Sober, CFA, Vice President, Finance of
Education Management LLC, +1-412-995-7684
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