Gross Site Contribution Increases 14% to $24.1 Million while EBITDA, Net of
One-Time and Specific Event Related Charges, Reaches $1.7 Million
$0.92 Loss Per Share Includes One-Time and Specific Event Related Charges
of $0.72
Company to Restate Certain Prior Quarters with Neutral Cumulative Effect
on Earnings
NEW YORK, Sept. 5 /PRNewswire-FirstCall/ --
Edison Schools Inc. (Nasdaq: EDSN), the nation's leading private manager of
public schools, reported revenues for the quarter ending June 30, 2002 of
$137.8 million compared to $101.9 million a year ago, an increase of 35%.
Gross site contribution for the quarter increased 14% to $24.1 million from
$21.1 million for the same period last year. Net of one-time and specific
event related charges, the company posted EBITDA of $1.7 million compared to
$187,000 in the same period last year.
Gross Student Funding for the full FY02 year rose 38% from $375.8mm to
$520.3mm. Net revenue for the full FY02 year climbed 33% from $350.5 to
$465.1mm. Gross Site Contribution for the full FY02 rose 26% from $59.3mm to
$74.9mm.
The company's net loss for the fourth quarter was $49.3 million, compared
to $11.5 million for the same period last year, but this loss includes
$38.5 million of one-time and specific event related charges. These charges
are largely comprised of one-time charges related to the reduction in the
company's share price triggering a requirement to write down goodwill
($33.3mm) and income from a non-cash stock compensation adjustment ($7.9mm).
In addition, the charges include a write down of certain notes receivable
relating to a discontinued new school project ($4.0mm); a reserve ($5.5mm)
against loans to charter schools which management deemed appropriate in light
of their intention to accelerate the refinancing of individual loans with
third party lenders; and a write down of the discontinued corporate
headquarters project ($3.6mm).
"Edison's entire organization is working to move the company rapidly to
profitability and many of the charges we took in this quarter represent tough
decisions in that regard," said Chris Whittle, the company's CEO. "We're
developing a leaner and highly focused organization and we're confident the
company will achieve its first net income in the 4th quarter of the current
year."
Edison also reported its year-to-year progress on other critical
indicators. Net site contribution margin increased to 8.4% for the year from
7.7% for last year. Gross site contribution declined slightly as a percent of
sales from 16.9% for FY01 to 16.1% for this year. The percent of net revenue
that Edison spends on headquarters and start up functions (net of one-time and
specific event charges) improved from 18.5% last year to 17.5% in this year.
The company reaffirmed its guidance for the current and coming fiscal
years. In the current fiscal year, the company expects to post an operating
profit (EBITDA net of non-cash and one-time charges) of at least $20 million
and to achieve its first quarter of net income in the 4th quarter of this
year.
On balance sheet matters, the company announced that its total cash as of
June 30 was $40.6 million. In addition, on August 1, the company announced
that it had closed on additional financing of $40mm. This is prior to the
company investing significant cash in the July through September period in the
opening of new schools.
Restatement of Audited Financial Statements
In connection with its annual review, the Company has determined the need
to restate the treatment of certain loans made to its CEO in late 1999, all of
which have been previously disclosed in public filings. This restatement has
no effect on the Company's cash position, and, on a cumulative basis, does not
have a material effect on the Company's earnings. One effect of this
restatement is to significantly increase the company's earnings for this
quarter while decreasing it in similar amounts for certain prior quarters.
As previously disclosed, the Company loaned approximately $7.9 million to
its CEO in late 1999 and early 2000 to enable the CEO to exercise 725,000
options of Edison common stock. These were documented in loan agreements
between the Company and the CEO. The loan documents specify that the loan is
recourse only to the purchased shares.
The Company has historically treated these loans as notes receivable on
its balance sheet, and has disclosed the existence of these loans in its
public filings. Edison and its auditors, PriceWaterhouseCoopers, recently
concluded that these loans should be treated, under rules governing employee
stock options, as a form of compensation, rather than a loan, to the CEO.
Accordingly, the Company and its auditors have concluded that these loans
should be recorded as a Company expense during the periods in which the funds
were actually provided and the options exercised.
In addition, due to certain features of the loan arrangement, specifically
a floating interest rate tied to market, the cashless exercise of the
underlying options, and the non-recourse nature of the notes to the executive,
the Company and its auditors have also concluded that the amount of the
expense to be recorded should be "marked to market". In other words, when
calculating this expense, the Company should employ variable accounting, and,
as a result, recalculate, on a quarterly basis, the amount of the expense
based on the Company's then current share price. If the loan were to have had
a fixed interest rate and was not prepayable, the company would not be
required to employ variable accounting for these options.
Accordingly, Edison's financial statements for fiscal 2001 and 2002 will
be restated as follows:
2000 2001
Net Loss as Reported ($36,589) ($38,081)
Net Loss after Restatement ($50,628) ($38,512)
The Company is not, by virtue of this restatement, altering or modifying
any of the obligations or terms under the loan agreement with Mr. Whittle.
Edison is the nation's largest private manager of public schools. It is
the 35th largest system of public schools in the nation out of approximately
15,000 systems of public schools. Edison educates approximately 115,000
students in 150 full year schools and 175 summer schools. Through contracts
with local school districts, states, and public charter school boards, Edison
assumes educational and operational responsibility for individual schools in
return for funding that is generally comparable to that spent on other public
schools in the area. Over the course of three years of intensive research,
Edison's team of leading educators and scholars developed an innovative
curriculum and school design. Edison opened its first four schools in August
1995, and has grown rapidly in every subsequent year.
Any statements in this press release about future expectations, plans and
prospects for Edison, including statements about Edison's future financial
results and other statements containing the words "believes," "anticipates,"
"plans," "expects," "will," and similar expressions, constitute forward-
looking statements within the meaning of The Private Securities Litigation
Reform Act of 1995. Actual results may differ materially from those indicated
by such forward-looking statements as a result of various important factors,
including that Edison could lose revenue if it is unable to enroll enough
students or to attract and retain enough principals and teachers, Edison's
management agreements involve financial risk and are terminable under
specified circumstances prior to their expiration, Edison could be come liable
for its charter schools' financial obligations and other factors discussed in
our most recent Quarterly Report on Form 10-Q filed with the SEC on May 17,
2002. In addition, the forward-looking statements included in this press
release represent Edison's estimates as of September 5, 2002. Edison
anticipates that subsequent events and developments will cause Edison's
estimates to change. However, while Edison may elect to update these forward-
looking statements at some point in the future, Edison specifically disclaims
any obligation to do so. These forward-looking statements should not be
relied upon as representing Edison's estimates or views as of any date
subsequent to September 5, 2002.
Edison Schools Inc.
Fiscal Year Ending June 30, 2002
(Dollars in 000's, except loss per share data)
Three Months Ended Year Ended
June, June, June, June,
2002 2001 2002 2001
Gross student funding $158,521 $109,128 $520,295 $375,818
Net revenue $137,772 $101,856 $465,058 $350,508
Education and operating
expenses:
Direct site expenses
Company paid 69,395 46,584 211,438 162,028
Client paid 44,307 34,214 178,702 129,172
Curriculum, administration and
development 34,992 19,217 88,197 56,233
Preopening expenses 544 1,654 6,152 8,641
Stock-based compensation (7,612) 2,298 (13,338) 1,617
Impairment of goodwill 33,250 -- 33,250 --
Depreciation and amortization 10,008 9,308 37,396 33,595
Total education and
operating expenses 184,884 113,275 541,797 391,286
Loss from operations (47,112) (11,419) (76,739) (40,778)
Other income (expense)
Interest income 1,950 2,253 9,435 9,658
Interest expense (1,786) (1,625) (6,200) (5,417)
Other (2,195) (979) (11,496) (1,371)
Total other (2,031) (351) (8,261) 2,870
Loss before provision for
state taxes (49,143) (11,770) (85,000) (37,908)
Provision for state taxes (205) 261 (1,040) (604)
Net loss $(49,348) $(11,509) $(86,040) $(38,512)
Per share data
Basic and diluted net loss per
share $(0.92) $(0.22) $(1.61) $(0.80)
Weighted average shares of
common stock 53,820 51,374 53,564 47,967
outstanding used in
computing basic and
diluted net loss per share
Operating information
Enrollment - students 74,000 57,000 74,000 57,000
Gross site contribution 24,070 21,058 74,918 59,308
Gross site contribution
margin 17.5% 20.7% 16.1% 16.9%
Net site contribution 13,825 13,046 38,846 27,012
Net site contribution margin 10.0% 12.8% 8.4% 7.7%
Curriculum, administration,
development 25.8% 20.5% 20.3% 18.5%
and preopening as % of
revenue
Stock-based non cash
charges (7,612) 2,298 (13,338) 1,617
EBITDA, net of stock-based
non cash charges (44,716) 187 (52,681) (5,566)
EBITDA, net of stock-based
non cash charges,
per student (604) 3 (712) (98)
SOURCE Edison Schools Inc.
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Related links:
http://www.edisonschools.com
CONTACT:
Chris Scarlata, Chief Financial Officer of
Edison Schools Inc., +1-212-419-1645
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