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)) |
99.1 | Press Release dated April 30, 2014 |
![]() | Investor Contact: |
John Iannone | |
Director of Investor Relations | |
(412) 995-7727 | |
Media Contact: | |
Chris Hardman | |
VP of Communications | |
(412) 995-7187 |
• | Total new students were approximately 22,140, a decrease of 9.8 percent from approximately 24,540 new students in the prior year quarter. |
• | For the three months ended March 31, 2014, average enrolled student body was approximately 119,500, a 6.9 percent decline from 128,330 in the prior year quarter. Net revenues were $595.2 million, a decrease of 6.8 percent from $638.9 million recorded in the third quarter of fiscal 2013. The revenue decrease was primarily due to the decline in average enrolled student body. |
• | The company recorded a net loss of $467.6 million, or $3.71 per diluted share, compared to a net loss of $260.4 million, or $2.09 per diluted share, for the prior year quarter. Earnings before interest, taxes and depreciation and amortization ("EBITDA") was a loss of $431.7 million in the current quarter compared to a loss of $183.3 million in the prior year quarter. |
• | After adjusting for certain expenses described below, net income would have been $20.4 million, or $0.16 per diluted share, in the current quarter compared to $30.5 million, or $0.24 per diluted share, in the prior year quarter and EBITDA would have been $95.0 million in the current quarter compared to $122.0 million in the prior year quarter. |
(dollars in millions except per share data) | For the Three Months Ended March 31, | ||||||
2014 | 2013 | ||||||
EBITDA | $ | (431.7 | ) | $ | (183.3 | ) | |
Long-lived asset impairments | 509.2 | 300.1 | |||||
Lease abandonment charge | 6.3 | — | |||||
Restructuring | 5.8 | — | |||||
Loss on sale-leaseback transactions | 3.5 | — | |||||
Settlement-related costs | 1.9 | — | |||||
Loss on debt refinancing | — | 5.2 | |||||
EBITDA excluding certain expenses | $ | 95.0 | $ | 122.0 | |||
Net loss | $ | (467.6 | ) | $ | (260.4 | ) | |
Long-lived asset impairments and certain other expenses presented above, net of tax | 491.0 | 291.6 | |||||
Reversal of uncertain tax position liability | (3.0 | ) | (0.7 | ) | |||
Net income, excluding certain expenses | $ | 20.4 | $ | 30.5 | |||
Diluted loss per share | $ | (3.71 | ) | $ | (2.09 | ) | |
Diluted earnings per share, excluding certain expenses | $ | 0.16 | $ | 0.24 |
• | Cash flows provided by operating activities for the nine months ended March 31, 2014 were $172.2 million compared to $286.2 million for the nine months ended March 31, 2013. The decrease in cash flow from operations in the current quarter compared to the prior year quarter was primarily due to lower operating results. At March 31, 2014, cash and cash equivalents were $177.5 million, compared to $183.6 million at March 31, 2013. |
• | On a cash basis, capital expenditures were $52.8 million, or 3.0 percent of net revenues, for the nine months ended March 31, 2014 compared to $64.6 million, or 3.4 percent of net revenues, for the nine months ended March 31, 2013. |
• | During the quarter ended March 31, 2014, the company completed a sale-leaseback transaction with an unrelated third party for net cash proceeds of $9.6 million. The company recorded a net loss of $3.5 million in connection with the transaction during the quarter ended March 31, 2014. |
Fiscal 2014 Outlook – 4th Quarter: | For the Three Months Ending June 30, 2014 | |||||||
Low | High | |||||||
Loss per diluted share | $ | (0.17 | ) | $ | (0.14 | ) | ||
Net loss | $ | (21 | ) | $ | (18 | ) | ||
Income tax benefit | (13 | ) | (11 | ) | ||||
Net interest expense | 33 | 33 | ||||||
Depreciation and amortization | 37 | 37 | ||||||
EBITDA | $ | 36 | $ | 41 |
Fiscal 2014 Outlook – Annual: | For the Twelve Months Ending June 30, 2014 | |||||||
Low | High | |||||||
Loss per diluted share | $ | (3.96 | ) | $ | (3.94 | ) | ||
Earnings per diluted share excluding long-lived asset impairments and certain other expenses | $ | 0.03 | $ | 0.05 | ||||
Net loss | $ | (497 | ) | $ | (494 | ) | ||
Expenses related to long-lived asset impairments and certain other expenses, net of tax | 501 | 501 | ||||||
Net income excluding long-lived asset impairments and certain other expenses | $ | 4 | $ | 7 | ||||
Income tax benefit | $ | (14 | ) | $ | (12 | ) | ||
Net interest expense | 128 | 128 | ||||||
Depreciation and amortization | 152 | 152 | ||||||
EBITDA excluding long-lived asset impairments and certain other expenses | $ | 270 | $ | 275 |
For the Three Months Ended March 31, | For the Nine Months Ended March 31, | ||||||||||||||||||||
2014 | 2013 | % Change | 2014 | 2013 | % Change | ||||||||||||||||
Net revenues | $ | 595,202 | $ | 638,903 | (6.8 | )% | $ | 1,769,255 | $ | 1,903,363 | (7.0 | )% | |||||||||
Costs and expenses: | |||||||||||||||||||||
Educational services (1) | 356,858 | 350,134 | 1.9 | % | 1,060,074 | 1,091,808 | (2.9 | )% | |||||||||||||
General and administrative (2) | 160,837 | 166,814 | (3.6 | )% | 509,480 | 512,496 | (0.6 | )% | |||||||||||||
Depreciation and amortization | 37,109 | 40,266 | (7.8 | )% | 114,307 | 123,667 | (7.6 | )% | |||||||||||||
Long-lived asset impairments | 509,248 | 300,104 | 69.7 | % | 513,095 | 300,104 | 71.0 | % | |||||||||||||
Total costs and expenses | 1,064,052 | 857,318 | 24.1 | % | 2,196,956 | 2,028,075 | 8.3 | % | |||||||||||||
Loss before interest and income taxes | (468,850 | ) | (218,415 | ) | 114.7 | % | (427,701 | ) | (124,712 | ) | 243.0 | % | |||||||||
Interest expense, net | 31,076 | 30,464 | 2.0 | % | 94,557 | 92,924 | 1.8 | % | |||||||||||||
Loss on debt refinancing | — | 5,232 | N/M | — | 5,232 | N/M | |||||||||||||||
Loss before income taxes | (499,926 | ) | (254,111 | ) | 96.7 | % | (522,258 | ) | (222,868 | ) | 134.3 | % | |||||||||
Income tax (benefit) expense | (32,280 | ) | 6,297 | N/M | (46,186 | ) | 19,489 | N/M | |||||||||||||
Net loss | $ | (467,646 | ) | $ | (260,408 | ) | 79.6 | % | $ | (476,072 | ) | $ | (242,357 | ) | 96.4 | % | |||||
Loss per share: | |||||||||||||||||||||
Basic | $ | (3.71 | ) | $ | (2.09 | ) | $ | (3.80 | ) | $ | (1.95 | ) | |||||||||
Diluted | $ | (3.71 | ) | $ | (2.09 | ) | $ | (3.80 | ) | $ | (1.95 | ) | |||||||||
Weighted average number of shares outstanding: | |||||||||||||||||||||
Basic | 125,933 | 124,602 | 125,347 | 124,546 | |||||||||||||||||
Diluted | 125,933 | 124,602 | 125,347 | 124,546 |
(1) | Includes the following charges: |
• | a lease abandonment charge of $6.3 million in the current quarter; |
• | restructuring charges of $4.3 million in the three months ended March 31, 2014 and $9.0 million and $8.2 million in the nine months ended March 31, 2014 and 2013, respectively; and |
• | losses on sale-leaseback transactions of $3.5 million in the current quarter and $3.9 million in the nine months ended March 31, 2013. |
(2) | Includes restructuring costs of $1.5 million in the three months ended March 31, 2014 and $7.9 million and $0.9 million in the nine months ended March 31, 2014 and 2013, respectively. Also includes settlement-related costs of $1.9 million and $7.9 million in the three and nine months ended March 31, 2014, respectively. |
March 31, 2014 | June 30, 2013 | March 31, 2013 | |||||||||
(Unaudited) | (Unaudited) | ||||||||||
Assets | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | $ | 177,468 | $ | 130,695 | $ | 183,614 | |||||
Restricted cash | 272,090 | 271,340 | 272,029 | ||||||||
Total cash, cash equivalents and restricted cash | 449,558 | 402,035 | 455,643 | ||||||||
Student receivables, net of allowances of $176,039, $174,760 and $177,802 | 176,847 | 206,406 | 153,069 | ||||||||
Notes, advances and other receivables | 43,176 | 32,547 | 27,509 | ||||||||
Deferred income taxes | 76,813 | 76,927 | 102,793 | ||||||||
Prepaid income taxes | 29,147 | 20,854 | — | ||||||||
Other current assets | 36,983 | 32,850 | 40,547 | ||||||||
Total current assets | 812,524 | 771,619 | 779,561 | ||||||||
Property and equipment, net | 442,902 | 525,625 | 543,731 | ||||||||
Goodwill | 343,406 | 777,153 | 777,153 | ||||||||
Intangible assets, net | 223,282 | 300,435 | 301,039 | ||||||||
Other long-term assets | 55,236 | 48,524 | 55,878 | ||||||||
Total assets | $ | 1,877,350 | $ | 2,423,356 | $ | 2,457,362 | |||||
Liabilities and shareholders’ (deficit) equity | |||||||||||
Current liabilities: | |||||||||||
Current portion of long-term debt | $ | 11,875 | $ | 12,076 | $ | 12,076 | |||||
Revolving credit facility | — | 75,000 | — | ||||||||
Accounts payable | 31,594 | 32,559 | 20,955 | ||||||||
Accrued liabilities | 171,248 | 157,417 | 148,782 | ||||||||
Accrued income taxes | — | — | 3,174 | ||||||||
Unearned tuition | 74,051 | 113,371 | 78,473 | ||||||||
Advance payments | 165,253 | 95,675 | 222,942 | ||||||||
Total current liabilities | 454,021 | 486,098 | 486,402 | ||||||||
Long-term debt, less current portion | 1,271,986 | 1,273,164 | 1,283,344 | ||||||||
Deferred rent | 187,739 | 201,202 | 206,847 | ||||||||
Deferred income taxes | 40,487 | 72,622 | 90,522 | ||||||||
Other long-term liabilities | 24,090 | 34,414 | 39,250 | ||||||||
Shareholders’ (deficit) equity: | |||||||||||
Common stock, at par | 1,451 | 1,435 | 1,435 | ||||||||
Additional paid-in capital | 1,813,308 | 1,794,846 | 1,789,672 | ||||||||
Treasury stock, at cost | (331,812 | ) | (328,605 | ) | (328,605 | ) | |||||
Accumulated deficit | (1,574,251 | ) | (1,098,179 | ) | (1,096,146 | ) | |||||
Accumulated other comprehensive loss | (9,669 | ) | (13,641 | ) | (15,359 | ) | |||||
Total shareholders’ (deficit) equity | (100,973 | ) | 355,856 | 350,997 | |||||||
Total liabilities and shareholders’ (deficit) equity | $ | 1,877,350 | $ | 2,423,356 | $ | 2,457,362 |
For the Nine Months Ended March 31, | |||||||
2014 | 2013 | ||||||
Cash flows from operating activities: | |||||||
Net loss | $ | (476,072 | ) | $ | (242,357 | ) | |
Adjustments to reconcile net loss to net cash flows from operating activities: | |||||||
Depreciation and amortization of property and equipment | 109,647 | 118,814 | |||||
Amortization of intangible assets | 4,660 | 4,853 | |||||
Bad debt expense | 124,979 | 129,659 | |||||
Long-lived asset impairments | 513,095 | 300,104 | |||||
Amortization of debt issuance costs | 10,694 | 5,032 | |||||
Loss on debt refinancing | — | 5,232 | |||||
Share-based compensation | 13,536 | 11,938 | |||||
Non cash adjustments related to deferred rent | (13,886 | ) | (12,610 | ) | |||
Amortization of deferred gains on sale-leaseback transactions | (1,689 | ) | (1,012 | ) | |||
Changes in assets and liabilities: | |||||||
Restricted cash | (750 | ) | (4,149 | ) | |||
Receivables | (106,255 | ) | (91,473 | ) | |||
Reimbursements for tenant improvements | 1,168 | 7,102 | |||||
Inventory | (674 | ) | 1,383 | ||||
Other assets | 5,170 | 3,635 | |||||
Accounts payable | 1,483 | (29,792 | ) | ||||
Accrued liabilities, including income taxes | (43,355 | ) | (3,096 | ) | |||
Unearned tuition | (39,320 | ) | (37,804 | ) | |||
Advance payments | 69,744 | 120,743 | |||||
Total adjustments | 648,247 | 528,559 | |||||
Net cash flows provided by operating activities | 172,175 | 286,202 | |||||
Cash flows from investing activities: | |||||||
Expenditures for long-lived assets | (52,766 | ) | (64,586 | ) | |||
Proceeds from sale of fixed assets | 9,565 | 65,065 | |||||
Reimbursements for tenant improvements | (1,168 | ) | (7,102 | ) | |||
Net cash flows used in investing activities | (44,369 | ) | (6,623 | ) | |||
Cash flows from financing activities: | |||||||
Payments under revolving credit facility | (75,000 | ) | (111,300 | ) | |||
Repayment of senior notes | — | (162,246 | ) | ||||
Issuance of common stock as a result of stock-option exercises | 2,958 | 3 | |||||
Gross excess tax benefit from share-based compensation | 3,417 | — | |||||
Minimum tax withholding requirements upon restricted stock unit vesting | (3,207 | ) | — | ||||
Principal payments on long-term debt | (9,082 | ) | (9,117 | ) | |||
Debt issuance costs | — | (4,436 | ) | ||||
Net cash flows used in financing activities | (80,914 | ) | (287,096 | ) | |||
Effect of exchange rate changes on cash and cash equivalents | (119 | ) | 123 | ||||
Net change in cash and cash equivalents | 46,773 | (7,394 | ) | ||||
Cash and cash equivalents, beginning of period | 130,695 | 191,008 | |||||
Cash and cash equivalents, end of period | $ | 177,468 | $ | 183,614 | |||
Cash paid (received) during the period for: | |||||||
Interest (including swap settlement) | $ | 94,442 | $ | 89,705 | |||
Income taxes, net of refunds | (2,048 | ) | 34,960 | ||||
As of March 31, | |||||||
Noncash investing activities: | 2014 | 2013 | |||||
Capital expenditures in current liabilities | $ | 7,497 | $ | 7,756 |
For the Three Months Ended March 31, | For the Nine Months Ended March 31, | ||||||||||||||||||||
2014 | 2013 | % Change | 2014 | 2013 | % Change | ||||||||||||||||
Net revenues: | |||||||||||||||||||||
The Art Institutes | $ | 358,624 | $ | 393,560 | (8.9 | )% | $ | 1,086,613 | $ | 1,185,232 | (8.3 | )% | |||||||||
Argosy University | 91,729 | 94,430 | (2.9 | )% | 251,518 | 268,663 | (6.4 | )% | |||||||||||||
Brown Mackie Colleges | 65,858 | 73,876 | (10.9 | )% | 205,507 | 226,122 | (9.1 | )% | |||||||||||||
South University | 78,991 | 77,037 | 2.5 | % | 225,617 | 223,346 | 1.0 | % | |||||||||||||
Total EDMC | 595,202 | 638,903 | (6.8 | )% | 1,769,255 | 1,903,363 | (7.0 | )% | |||||||||||||
EBITDA excluding certain expenses: | |||||||||||||||||||||
The Art Institutes | 78,988 | 101,081 | (21.9 | )% | 226,077 | 288,250 | (21.6 | )% | |||||||||||||
Argosy University | 19,176 | 16,250 | 18.0 | % | 25,108 | 31,269 | (19.7 | )% | |||||||||||||
Brown Mackie Colleges | 4,560 | 7,638 | (40.3 | )% | 17,967 | 25,824 | (30.4 | )% | |||||||||||||
South University | 13,178 | 15,777 | (16.5 | )% | 30,727 | 32,140 | (4.4 | )% | |||||||||||||
Corporate and other | (20,877 | ) | (18,791 | ) | (11.1 | )% | (65,603 | ) | (65,341 | ) | (0.4 | )% | |||||||||
Total EDMC | 95,025 | 121,955 | (22.1 | )% | 234,276 | 312,142 | (24.9 | )% | |||||||||||||
Reconciliation to EBITDA: | |||||||||||||||||||||
Long-lived asset impairments | 509,248 | 300,104 | 69.7 | % | 513,095 | 300,104 | 71.0 | % | |||||||||||||
Lease abandonment charge | 6,367 | — | N/M | 6,367 | — | N/M | |||||||||||||||
Restructuring | 5,760 | — | N/M | 16,858 | 9,145 | 84.3 | % | ||||||||||||||
Loss on sale-leaseback transactions | 3,491 | — | N/M | 3,491 | 3,938 | (11.4 | )% | ||||||||||||||
Settlement-related costs | 1,900 | — | N/M | 7,859 | — | N/M | |||||||||||||||
Loss on debt refinancing | — | 5,232 | N/M | — | 5,232 | N/M | |||||||||||||||
EBITDA | (431,741 | ) | (183,381 | ) | N/M | (313,394 | ) | (6,277 | ) | N/M | |||||||||||
Reconciliation to net loss: | |||||||||||||||||||||
Depreciation and amortization | 37,109 | 40,266 | (7.8 | )% | 114,307 | 123,667 | (7.6 | )% | |||||||||||||
Net interest expense | 31,076 | 30,464 | 2.0 | % | 94,557 | 92,924 | 1.8 | % | |||||||||||||
Income tax expense (benefit) | (32,280 | ) | 6,297 | N/M | (46,186 | ) | 19,489 | N/M | |||||||||||||
Net loss | $ | (467,646 | ) | $ | (260,408 | ) | 79.6 | % | $ | (476,072 | ) | $ | (242,357 | ) | 96.4 | % | |||||
Long-lived asset impairments, net of tax | $ | 480,558 | $ | 288,412 | 66.6 | % | $ | 482,866 | $ | 288,412 | 67.4 | % | |||||||||
Lease abandonment charge, net of tax | 3,820 | — | N/M | 3,820 | — | N/M | |||||||||||||||
Restructuring, net of tax | 3,456 | — | N/M | 10,115 | 5,488 | 84.3 | % | ||||||||||||||
Loss on sale-leaseback transactions, net of tax | 2,095 | — | N/M | 2,095 | 2,363 | (11.3 | )% | ||||||||||||||
Settlement-related costs, net of tax | 1,140 | — | N/M | 4,715 | — | N/M | |||||||||||||||
Loss on debt refinancing, net of tax | — | 3,139 | N/M | — | 3,139 | N/M | |||||||||||||||
Loss on disposal of asset, net of tax | — | — | N/M | — | 2,753 | N/M | |||||||||||||||
Reversal of uncertain tax position liability | (2,976 | ) | (691 | ) | N/M | (2,976 | ) | (691 | ) | N/M | |||||||||||
Net income, excluding certain expenses | $ | 20,447 | $ | 30,452 | (32.9 | )% | $ | 24,563 | $ | 59,107 | (58.4 | )% | |||||||||
Diluted loss per share | $ | (3.71 | ) | $ | (2.09 | ) | $ | (3.80 | ) | $ | (1.95 | ) | |||||||||
Diluted earnings per share, excluding certain expenses | $ | 0.16 | $ | 0.24 | $ | 0.19 | $ | 0.47 | |||||||||||||
Weighted average number of diluted shares outstanding, excluding certain expenses | 129,283 | 125,167 | 129,697 | 124,802 |
For the Three Months Ended March 31, | ||||||||
2014 | 2013 | % Change | ||||||
The Art Institutes | 9,450 | 11,210 | (15.7 | )% | ||||
Argosy University | 4,500 | 5,130 | (12.3 | )% | ||||
Brown Mackie Colleges | 3,590 | 4,110 | (12.7 | )% | ||||
South University | 4,600 | 4,090 | 12.5 | % | ||||
Total EDMC | 22,140 | 24,540 | (9.8 | )% |
For the Three Months Ended March 31, | ||||||||
2014 | 2013 | % Change | ||||||
The Art Institutes | 62,070 | 67,070 | (7.5 | )% | ||||
Argosy University | 23,480 | 25,260 | (7.0 | )% | ||||
Brown Mackie Colleges | 15,380 | 17,040 | (9.7 | )% | ||||
South University | 18,570 | 18,960 | (2.1 | )% | ||||
Total EDMC | 119,500 | 128,330 | (6.9 | )% |
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