Pennsylvania | 001-34466 | 25-1119571 | ||
_____________________ | ____________ | __________________ | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||
210 Sixth Avenue, Pittsburgh, Pennsylvania | 15222 | |||
___________________________________ | _______ | |||
(Address of principal executive offices) | (Zip code) |
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a−12 under the Exchange Act (17 CFR 240.14a−12) |
o | Pre-commencement communications pursuant to Rule 14d−2(b) under the Exchange Act (17 CFR 240.14d−2(b)) |
o | Pre-commencement communications pursuant to Rule 13e−4(c) under the Exchange Act (17 CFR 240.13e−4(c)) |
Education Management Corporation |
COMPANY CONTACT: |
John Iannone |
Director of Investor Relations |
(412) 995-7727 |
• | For the fourth quarter of fiscal 2012, the Company recorded: |
◦ | Net revenues of $639.2 million, compared to $695.4 million for the prior year quarter. The decrease in net revenues from the fourth quarter of fiscal 2011 was primarily driven by a 9.3% decline in April 2012 student enrollment as compared to April 2011. |
◦ | A net loss of $1.19 billion, or a $9.51 loss per diluted share, compared to net income of $34.8 million, or $0.26 per diluted share, for the prior year quarter, with a loss before interest, taxes and depreciation and amortization ("EBITDA") of $1.16 billion in the current quarter, compared to EBITDA of $130.2 million in the prior year quarter. |
◦ | EBITDA was $89.6 million when excluding $1.6 million ($0.9 million net of tax) of expenses related to restructuring and the aforementioned impairment charges of $1.25 billion, while net income excluding these expenses was $12.7 million, or $0.10 per diluted share. |
• | For fiscal 2012, the Company recorded: |
◦ | Net revenues of $2.76 billion, compared to $2.89 billion in fiscal 2011. The decrease in net revenues from fiscal 2011 was primarily driven by a 5.7% year-over-year decline in average student enrollment. |
◦ | A net loss of $1.52 billion, or a $11.97 loss per diluted share, compared to net income of $229.5 million, or $1.66 per diluted share, for the prior fiscal year, with an EBITDA loss of $1.26 billion in fiscal 2012, compared to EBITDA of $636.4 million in the prior fiscal year. |
◦ | EBITDA of $509.9 million when excluding $23.6 million ($14.3 million net of tax) of expenses related to restructurings, the termination of lease agreements and a loss on the extinguishment of debt as well as the aforementioned non-cash impairment charges of $1.75 billion, which includes $0.50 billion recorded in the third fiscal quarter, while net income excluding these expenses was $148.4 million, or $1.16 per diluted share. |
• | Cash flow (used in) provided by operations for the fiscal year ended June 30, 2012 was $(10.9) million, compared to $399.7 million in the prior fiscal year. The decrease in operating cash flows was due in part to the transfer in March 2012 of $210.0 million to restricted cash in connection with the issuance of letters of credit under the Company's cash secured letter of credit facilities. These facilities are being used to help satisfy the Company's previously disclosed letter of credit requirement with the U.S. Department of Education. In addition, reduced operating performance also negatively impacted cash flow from operations as compared to the prior fiscal year. |
• | At June 30, 2012, cash and cash equivalents were $191.0 million, compared to $403.2 million at June 30, 2011. Borrowings under the revolving credit facility at June 30, 2012 were $111.3 million compared to $79.0 million at June 30, 2011. The revolving credit facility was repaid in full on July 1 of each subsequent fiscal year. |
• | On a cash basis, capital expenditures were $93.5 million, or 3.4% of net revenues, in fiscal 2012 compared to $138.1 million, or 4.8% of net revenues, in fiscal 2011. |
July | July | % | ||||||
2012 | 2011 | Change | ||||||
The Art Institutes | 65,400 | 73,500 | (11.0 | )% | ||||
Argosy University | 23,200 | 27,100 | (14.5 | )% | ||||
Brown Mackie Colleges | 17,200 | 19,700 | (12.7 | )% | ||||
South University | 18,800 | 19,500 | (3.3 | )% | ||||
Total student enrollment | 124,600 | 139,800 | (10.8 | )% |
For the Three Months Ended June 30, | ||||||||
2012 | 2011 | % Change | ||||||
The Art Institutes | 8,900 | 11,000 | (18.3 | )% | ||||
Argosy University | 3,300 | 4,500 | (26.7 | )% | ||||
Brown Mackie Colleges | 3,600 | 4,200 | (15.9 | )% | ||||
South University | 5,600 | 7,100 | (21.2 | )% | ||||
Total new student enrollment | 21,400 | 26,800 | (20.1 | )% |
For the three months ending September 30, 2012 | ||||||
Loss per diluted share | $(0.08) | |||||
Net loss | $(10) | |||||
Net interest expense | $32 | |||||
Income tax benefit | (7 | ) | ||||
Depreciation and amortization | 40 | |||||
EBITDA | $55 |
For the twelve months ending June 30, 2013 | |||||
Earnings per diluted share | $0.54 | ||||
Net income | $68 | ||||
Net interest expense | $125 | ||||
Income tax expense | 45 | ||||
Depreciation and amortization | 162 | ||||
EBITDA | $400 |
For the Three Months Ended June 30, | For the Fiscal Year Ended June 30, | |||||||||||||
2012 | 2011 | % change | 2012 | 2011 | % change | |||||||||
Net revenues | $639.2 | $695.4 | (8.1 | )% | $2,761.0 | $2,887.6 | (4.4 | )% | ||||||
Costs and expenses: | ||||||||||||||
Educational services (1)(2) | 370.5 | 367.4 | 0.9 | % | 1,504.4 | 1,480.8 | 1.6 | % | ||||||
General and administrative (3) | 180.7 | 194.8 | (7.2 | )% | 760.8 | 759.0 | 0.2 | % | ||||||
Depreciation and amortization | 40.0 | 38.9 | 2.7 | % | 158.6 | 146.5 | 8.3 | % | ||||||
Goodwill and indefinite-lived intangible asset impairment (4) | 1,251.4 | — | n/m | 1,746.8 | — | n/m | ||||||||
Total costs and expenses | 1,842.6 | 601.1 | 206.5 | % | 4,170.6 | 2,386.3 | 74.8 | % | ||||||
Income (loss) before interest, loss on extinguishment of debt and income taxes | (1,203.4 | ) | 94.3 | n/m | (1,409.6 | ) | 501.3 | n/m | ||||||
Interest expense, net | 31.1 | 33.2 | (6.0 | )% | 110.3 | 120.7 | (8.6 | )% | ||||||
Loss on extinguishment of debt (5) | — | 3.0 | n/m | 9.5 | 11.4 | (16.7 | )% | |||||||
Income (loss) before income taxes | (1,234.5 | ) | 58.1 | n/m | (1,529.4 | ) | 369.2 | n/m | ||||||
Provision for (benefit from) income taxes (6) | (45.8 | ) | 23.3 | n/m | (13.7 | ) | 139.7 | n/m | ||||||
Net income (loss) | $(1,188.7) | $34.8 | n/m | $(1,515.7) | $229.5 | n/m | ||||||||
Diluted earnings (loss) per share | $(9.51) | $0.26 | n/m | $(11.97) | $1.66 | n/m | ||||||||
Weighted average number of diluted shares outstanding (000’s) | 124,963 | 133,188 | 126,659 | 138,316 |
(1) | Includes bad debt expense of $46.2 million and $28.8 million in the three month periods presented, respectively, and $163.9 million and $134.6 million in the fiscal years presented, respectively. |
(2) | Includes $2.7 million of restructuring expense in the fiscal year ended June 30, 2012, of which $0.8 million was incurred in the current fiscal quarter. Also includes $2.5 million of lease termination fees in fiscal 2012. The fiscal year ended June 30, 2011 includes fair value adjustments for the Education Finance Loan portfolio of $21.5 million. |
(3) | Includes $8.9 million of restructuring expense in the fiscal year ended June 30, 2012, of which $0.8 million occurred in the current fiscal quarter. |
(4) | Includes impairments of $1,250.1 million, $157.2 million, $254.6 million and $84.9 million at The Art Institutes, Argosy University, Brown Mackie Colleges and South University reporting units, respectively, in the fiscal year ended June 30, 2012, of which $1,251.4 million was recorded in the current fiscal quarter. |
(5) | Fiscal 2012 includes $2.0 million of previously deferred financing fees and $7.5 million paid to lenders as part of a debt refinancing in March 2012. Fiscal 2011 includes $5.7 million of previously deferred financing fees and $5.7 million of debt extinguishment costs and premiums paid, of which $3.0 million was recorded in the three months ended June 30, 2011. |
(6) | Includes the reversal of $0.7 million and $3.5 million of uncertain tax position liabilities in fiscal years ended June 30, 2012 and 2011, respectively. |
For the Fiscal Year Ended June 30, | ||||||||
2012 | 2011 | |||||||
Cash flows from operating activities: | ||||||||
Net income (loss) | ($1,515.7 | ) | $229.5 | |||||
Adjustments to reconcile net income to net cash flow from operating activities: | ||||||||
Depreciation and amortization | 158.6 | 146.5 | ||||||
Bad debt expense | 163.9 | 134.6 | ||||||
Goodwill and indefinite-lived intangible asset impairment | 1,746.8 | — | ||||||
Fair value adjustment to loans held for sale | — | 21.5 | ||||||
Loss on the extinguishment of debt | 9.5 | 11.4 | ||||||
Share-based compensation | 13.3 | 11.1 | ||||||
Deferred income taxes | (132.5 | ) | 24.0 | |||||
Other | (11.9 | ) | 2.6 | |||||
Changes in assets and liabilities: | ||||||||
Restricted cash | (220.4 | ) | (34.7 | ) | ||||
Receivables | (211.6 | ) | (115.5 | ) | ||||
Other changes in assets and liabilities | (10.9 | ) | (31.3 | ) | ||||
Net cash flows provided by (used in) operating activities | (10.9 | ) | 399.7 | |||||
Cash flows from investing activities: | ||||||||
Expenditures for long-lived assets | (93.5 | ) | (138.1 | ) | ||||
Reimbursements for tenant improvements | (15.3 | ) | (23.1 | ) | ||||
Net cash flows used in investing activities | (108.8 | ) | (161.2 | ) | ||||
Cash flows from financing activities: | ||||||||
Borrowings under revolving credit facility | 111.3 | 79.0 | ||||||
Payments under revolving credit facility | (79.0 | ) | — | |||||
Retirement of senior subordinated notes | — | (50.1 | ) | |||||
Common stock repurchased for treasury | (104.1 | ) | (222.3 | ) | ||||
Other financing activities | (20.3 | ) | (15.7 | ) | ||||
Net cash flows used in financing activities | (92.1 | ) | (209.1 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents | (0.4 | ) | 0.3 | |||||
Net change in cash and cash equivalents | (212.2 | ) | 29.7 | |||||
Cash and cash equivalents, beginning of period | 403.2 | 373.5 | ||||||
Cash and cash equivalents, end of period | $191.0 | $403.2 |
As of June 30, | |||||||
2012 | 2011 | ||||||
Cash and cash equivalents | $191.0 | $403.2 | |||||
Restricted cash | 267.9 | 47.5 | |||||
Net student receivables, including long-term portion | 218.6 | 169.2 | |||||
Current assets | 837.7 | 769.5 | |||||
Goodwill | 963.6 | 2,582.0 | |||||
Total assets | 2,839.1 | 4,553.1 | |||||
Revolving credit facility (1) | 111.3 | 79.0 | |||||
Current liabilities | 534.0 | 536.9 | |||||
Long-term debt (including current portion) | 1,465.5 | 1,478.9 | |||||
Shareholders’ equity | 496.6 | 2,103.9 |
For the Three Months Ended June 30, | For the Fiscal Year Ended June 30, | |||||||||||||||||
2012 | 2011 | % Change | 2012 | 2011 | % Change | |||||||||||||
Revenue: | ||||||||||||||||||
The Art Institutes | $397.4 | $429.5 | (7.5 | )% | $1,738.5 | $1,791.2 | (2.9 | )% | ||||||||||
Argosy University | 88.4 | 103.5 | (14.6 | )% | 397.5 | 431.1 | (7.8 | )% | ||||||||||
Brown Mackie Colleges | 74.1 | 83.1 | (10.8 | )% | 314.8 | 348.1 | (9.6 | )% | ||||||||||
South University | 79.3 | 79.3 | 0.0 | % | 310.2 | 317.2 | (2.2 | )% | ||||||||||
Total EDMC | 639.2 | 695.4 | (8.1 | )% | 2,761.0 | 2,887.6 | (4.4 | )% | ||||||||||
EBITDA excluding certain expenses: | ||||||||||||||||||
The Art Institutes | 92.0 | 115.0 | (20.0 | )% | 477.5 | 544.4 | (12.3 | )% | ||||||||||
Argosy University | 6.6 | 17.0 | (61.2 | )% | 56.7 | 97.5 | (41.9 | )% | ||||||||||
Brown Mackie Colleges | 11.4 | 20.3 | (43.8 | )% | 62.0 | 96.7 | (35.9 | )% | ||||||||||
South University | 4.5 | 4.3 | 4.3 | % | 4.8 | 38.4 | (87.5 | )% | ||||||||||
Corporate and other | (24.9 | ) | (22.8 | ) | n/m | (91.1 | ) | (115.4 | ) | n/m | ||||||||
Total EDMC | 89.6 | 133.8 | (33.1 | )% | 509.9 | 661.6 | (22.9 | )% | ||||||||||
Reconciliation to EBITDA: | ||||||||||||||||||
Goodwill and intangible asset impairment | 1,251.4 | — | n/m | 1,746.8 | — | n/m | ||||||||||||
Loss on extinguishment of debt | — | 3.0 | n/m | 9.5 | 11.4 | n/m | ||||||||||||
Restructuring | 1.6 | 0.6 | n/m | 11.6 | 0.6 | n/m | ||||||||||||
Lease termination | — | — | n/m | 2.5 | — | n/m | ||||||||||||
Loss on EFL program loans | — | — | n/m | — | 13.2 | n/m | ||||||||||||
EBITDA | (1,163.4 | ) | 130.2 | n/m | (1,260.5 | ) | 636.4 | n/m | ||||||||||
Reconciliation to operating income (loss): | ||||||||||||||||||
Depreciation and amortization | 40.0 | 38.9 | 2.7 | % | 158.6 | 146.5 | 8.3 | % | ||||||||||
Operating income (loss) | (1,203.4 | ) | 91.3 | n/m | (1,419.1 | ) | 489.9 | n/m | ||||||||||
Reconciliation to net income (loss): | ||||||||||||||||||
Net interest expense | 31.1 | 33.2 | (6.0 | )% | 110.3 | 120.7 | (8.6 | )% | ||||||||||
Income tax expense (benefit) | (45.8 | ) | 23.3 | n/m | (13.7 | ) | 139.7 | n/m | ||||||||||
Net income (loss) | ($1,188.7 | ) | $34.8 | n/m | ($1,515.7 | ) | $229.5 | n/m |
For the Three Months Ended June 30, | For the Fiscal Year Ended June 30, | |||||||||||||
2012 | 2011 | % Change | 2012 | 2011 | % Change | |||||||||
Net income (loss) | $(1,188.7) | $34.8 | n/m | $(1,515.7) | $229.5 | n/m | ||||||||
Goodwill and intangible asset impairment, net of tax | 1,200.5 | — | n/m | 1,650.5 | — | n/m | ||||||||
Loss on extinguishment of debt, net of tax | — | 1.8 | n/m | 5.8 | 7.0 | n/m | ||||||||
Restructuring charge, net of tax | 0.9 | 0.3 | n/m | 7.0 | 0.3 | n/m | ||||||||
Lease termination fees, net of tax | — | 0.5 | n/m | 1.5 | 0.5 | n/m | ||||||||
Fair market value loss on EFL portfolio, net of tax | — | — | n/m | — | 8.1 | n/m | ||||||||
Reversal of uncertain tax position liabilities | — | — | n/m | (0.7 | ) | (3.5 | ) | n/m | ||||||
Net income, excluding certain expenses | $12.7 | $37.4 | (66.0 | )% | $148.4 | $241.9 | (38.7 | )% |
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