SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 1, 2012 (February 1, 2012)
Education Management Corporation |
(Exact name of registrant as specified in its charter) |
Pennsylvania | 001-34466 | 25-1119571 | ||
(State or other jurisdiction | (Commission | (IRS Employer | ||
of incorporation) | File Number) | Identification No.) |
210 Sixth Avenue, Pittsburgh, Pennsylvania | 15222 | |
(Address of principal executive offices) | (Zip code) |
Registrant's telephone number, including area code: (412) 562-0900
Check the appropriate box below if the Form 8−K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2.):
£ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
£ | Soliciting material pursuant to Rule 14a−12 under the Exchange Act (17 CFR 240.14a−12) |
£ | Pre-commencement communications pursuant to Rule 14d−2(b) under the Exchange Act (17 CFR 240.14d−2(b) |
£ | Pre-commencement communications pursuant to Rule 13e−4(c) under the Exchange Act (17 CFR 240.13e−4(c)) |
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Item 2.02. --Results of Operations and Financial Condition.
On February 1, 2012, Education Management Corporation issued a press release announcing its financial results for the fiscal quarter ended December 31, 2011. A copy of the February 1, 2012 press release is attached hereto as an exhibit and incorporated herein by reference.
The information included in this Form 8-K, including the exhibit, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), nor shall it be deemed to be incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
Item 9.01 – Financial Statements and Exhibits
(a) None.
(b) None.
(c ) None.
(d) Exhibits
Exhibit 99.1 Press release dated February 1, 2012
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
EDUCATION MANAGEMENT CORPPORATION | ||
By: | /s/ Edward H. West | |
Edward H. West | ||
President and Chief Financial Officer | ||
Dated: February 1, 2012 |
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EXHIBIT INDEX
Exhibit No. | Description |
99.1 | Press release dated February 1, 2012 |
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Education Management Corporation Reports Fiscal 2012 Second Quarter Results
PITTSBURGH, Feb. 2, 2012 /PRNewswire/ -- Education Management Corporation (NASDAQ: EDMC), one of the largest providers of post-secondary education in North America, today reported its financial results for the three months ended December 31, 2011. Net revenues were $737.2 million, and net income was $63.1 million, or $0.49 per diluted share.
Financial Highlights
Student Enrollment
At the start of the current January quarter, total enrollment at our schools was approximately 142,600 students, a 9.3% decrease from the same time last year. Same-school enrollment (schools with enrollment for one year or more) decreased 9.8% to approximately 141,800 students. The number of students enrolled in fully online programs declined 18.5% to approximately 35,800 students.
2012 | 2011 | Percentage | ||||
January | January | Change | ||||
Total enrollment(1) | 142,600 | 157,200 | (9.3%) | |||
Same-school enrollment(2) | 141,800 | 157,200 | (9.8%) | |||
Students enrolled in fully online programs(1) | 35,800 | 43,900 | (18.5%) | |||
(1) | As a result of the transition to a non-term academic calendar, beginning in July 2011 the number of students enrolled in fully online programs is determined based on the number of students meeting attendance requirements over a two-week period near the start of the fiscal quarter. For the January 2011 enrollment, the number of fully online students was determined based on the number of students enrolled at a specific date at the start of a fiscal quarter. | |
(2) | Schools with enrollment for one year or more. | |
Our quarterly revenues and income fluctuate as a result of the pattern of student enrollments, and our first fiscal quarter is typically the lowest revenue quarter of the fiscal year due to student vacations. However, the seasonality of our business has decreased over the last several years, primarily due to an increase in the percentage of students enrolling in online programs, which generally experience less seasonal fluctuation than campus-based programs.
Fiscal 2012 Guidance
The following guidance for fiscal 2012 excludes the impact of restructuring and non-operating expenses that may be incurred during fiscal 2012, including approximately $5 million to $7 million of restructuring expenses anticipated to be recorded in the third quarter of fiscal 2012.
3rd Quarter – 3 months ending March 31, 2012
For the three months ending March 31, 2012, net income, EBITDA and diluted earnings per share are expected to be between $34 million and $36 million, $123 million and $127 million, and $0.27 and $0.28, respectively.
Annual – 12 months ending June 30, 2012
For the twelve months ending June 30, 2012, net income and diluted earnings per share are expected to be between $139 million and $144 million and $1.08 and $1.12, respectively. Excluding the expenses incurred during the first quarter of fiscal 2012 related to restructuring and a lease termination, net income, EBITDA and diluted earnings per share are expected to be between $143 million and $148 million, $500 million and $510 million, and $1.11 and $1.15, respectively.
For fiscal year 2012, capital expenditures are projected to be between 4.0% and 4.5% of net revenues, compared to 4.8% of net revenues in fiscal 2011.
The presentation of EBITDA, as well as the presentations excluding certain expenses, do not comply with U.S. generally accepted accounting principles (GAAP). For an explanation of EBITDA and EBITDA excluding restructuring and lease termination expenses, together with a reconciliation to net income, which is the most directly comparable GAAP financial measure, see the Non-GAAP Financial Measures disclosure in the financial tables section below.
Conference Call and Webcast
Education Management will host a conference call to discuss its fiscal 2012 second quarter on Thursday, February 2, 2012 at 9:00 a.m. (Eastern Time). Those wishing to participate in this call should dial 412-317-6789 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 www.edmc.edu. A replay of the conference call will be available at www.edmc.edu for up to one year.
About Education Management
Education Management (www.edmc.edu), with approximately 151,200 students as of October 2011, is among the largest providers of post-secondary education in North America, based on student enrollment and revenue, with a total of 107 locations in 32 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 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 media arts, health sciences, design, psychology and behavioral sciences, culinary, business, fashion, legal, education and information technology.
Cautionary Statement
This press release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements typically contain words such as "anticipates," "believes," "estimates," "expects," "intends" or similar words indicating that future outcomes are not known with certainty and are subject to risk factors that could cause these outcomes to differ significantly from those projected. Forward-looking statements include, but are not limited to, statements related to the Company's future operating and financial performance, including the third quarter and annual guidance for fiscal 2012, and include statements regarding expected enrollment, revenue, expense levels, capital expenditures and earnings. Any such forward-looking statements involve risk and uncertainties that could cause actual results to differ materially from any future results encompassed within the forward-looking statements. Some of the factors that could cause actual results to differ materially include, but are not limited to: changes in the overall U.S. or global economy; changes in enrollment or student mix; changes in average registered credits taken by students; our ability to maintain eligibility to participate in Title IV programs; increased or unanticipated legal and regulatory costs; the results of program reviews and audits; changes in accreditation standards; the implementation of new operating procedures for our fully online programs; the implementation of program initiatives in response to the U.S. Department of Education's new gainful employment regulation; adjustments to our programmatic offerings to comply with the 90/10 rule; and other factors discussed in our filings with the Securities and Exchange Commission, including those identified in the "Risk Factors" section of our Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q. 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.
FOR: | Education Management Corporation | |
COMPANY CONTACT: | ||
John Iannone | ||
Director of Investor Relations | ||
(412) 995-7727 | ||
EDUCATION MANAGEMENT CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS – FISCAL SECOND QUARTER (Dollars in millions, except earnings per share) (Unaudited) | |||||||||
For the three months ended December 31, | For the six months ended December 31, | ||||||||
2011 | 2010 | % change | 2011 | 2010 | % change | ||||
Net revenues | $ 737.2 | $ 771.9 | (4.5%) | $ 1,419.3 | $ 1,437.9 | (1.3%) | |||
Costs and expenses: | |||||||||
Educational services (1)(2) | 376.4 | 374.2 | 0.6% | 751.5 | 731.7 | 2.7% | |||
General and administrative | 191.5 | 187.0 | 2.4% | 388.6 | 373.7 | 4.0% | |||
Depreciation and amortization | 39.2 | 35.3 | 10.9% | 78.1 | 70.4 | 10.9% | |||
Total costs and expenses | 607.1 | 596.5 | 1.8% | 1,218.2 | 1,175.8 | 3.6% | |||
Income before interest, loss on extinguishment of debt and income taxes | 130.1 | 175.4 | (25.8%) | 201.1 | 262.1 | (23.3%) | |||
Interest expense, net | 26.8 | 28.6 | (6.1%) | 53.7 | 56.1 | (4.2%) | |||
Loss on extinguishment of debt (3) | --- | 8.4 | n/m | --- | 8.4 | n/m | |||
Income before income taxes | 103.3 | 138.4 | (25.4%) | 147.4 | 197.6 | (25.4%) | |||
Provision for income taxes | 40.2 | 53.1 | (24.4%) | 57.3 | 75.9 | (24.5%) | |||
Net income | $ 63.1 | $ 85.3 | (26.0%) | $ 90.1 | $ 121.7 | (26.0)% | |||
Diluted earnings per share | $ 0.49 | $ 0.61 | n/m | $ 0.70 | $ 0.86 | n/m | |||
Weighted average number of diluted shares outstanding (000's) | 128,764 | 140,256 | 129,240 | 141,597 | |||||
(1) | Includes bad debt expense of $41.3 million and $37.1 million in the three month periods presented, respectively, and $76.5 million and $73.6 million in the six month periods presented, respectively. | |
(2) | In the 2010 periods, includes the impact of a $7.5 million adjustment to the carrying value of the Company's Education Finance Loan portfolio recorded due to a change in accounting methodology. The fair value adjustment due to the reclassification of these loans as held for sale includes $1.5 million that would have been recorded in bad debt expense if the loans had not been reclassified. | |
(3) | Includes the acceleration of deferred financing fees of $5.1 million and debt extinguishment costs of $3.3 million in the quarter ended December 31, 2010. | |
EDUCATION MANAGEMENT CORPORATION AND SUBSIDIARIES SELECTED CASH FLOW DATA – FISCAL SECOND QUARTER (Dollars in millions) (Unaudited) | |||||
For the six months ended December 31, | |||||
2011 | 2010 | % Change | |||
Net cash flows provided by operations | $ 97.0 | $ 174.4 | (44.4%) | ||
Capital expenditures (1) | (36.1) | (69.7) | (48.2%) | ||
Common stock repurchases | (70.4) | (59.6) | 18.1% | ||
(1) Represents cash paid for long-lived assets | |||||
EDUCATION MANAGEMENT CORPORATION AND SUBSIDIARIES SELECTED BALANCE SHEET DATA – FISCAL SECOND QUARTER (Dollars in millions) (Unaudited) | ||||
As of December 31, | ||||
2011 | 2010 | |||
Cash and cash equivalents | $ 299.9 | $ 393.4 | ||
Current assets | 683.6 | 640.5 | ||
Total assets | 4,437.0 | 4,476.8 | ||
Current liabilities | 391.7 | 414.9 | ||
Long-term debt (including current portion) | 1,472.8 | 1,532.6 | ||
Shareholders' equity | 2,126.4 | 2,151.3 | ||
EDUCATION MANAGEMENT CORPORATION 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 interest expense, net, provision for income taxes and depreciation and amortization. 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. We also present earnings per share, net income and EBITDA after adjusting for certain expenses, which also are non-GAAP financial measures. Management believes this presentation is also helpful in highlighting trends in our business because it excludes certain expenses. 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 December 31, | For the six months ended December 31, | |||||||||
2011 | 2010 | % change | 2011 | 2010 | % change | |||||
Net income | $63.1 | $85.3 | (26.0%) | $90.1 | $121.7 | (26.0%) | ||||
Net interest expense | 26.8 | 28.6 | (6.1%) | 53.7 | 56.1 | (4.2%) | ||||
Loss on extinguishment of debt | -- | 8.4 | n/m | -- | 8.4 | n/m | ||||
Income tax expense | 40.2 | 53.1 | (24.4%) | 57.3 | 75.9 | (24.5%) | ||||
Depreciation and amortization | 39.2 | 35.3 | 10.9% | 78.1 | 70.4 | 10.9% | ||||
EBITDA | $169.3 | $210.7 | (19.7%) | $279.2 | $332.5 | (16.0%) | ||||
EDUCATION MANAGEMENT CORPORATION AND SUBSIDIARIES GUIDANCE – FISCAL 2012 The following guidance for fiscal 2012 excludes the impact of restructuring and non-operating expenses that may be incurred during fiscal 2012, including approximately $5 million to $7 million of restructuring expenses anticipated to be recorded in the third quarter of fiscal 2012. Reconciliation of Fiscal 2012 Third Quarter Guidance of Net Income to EBITDA (Dollars in millions, except earnings per share) (Unaudited) Fiscal 2012 Guidance – 3rd Quarter | |||||
For the three months ending March 31, 2012 | |||||
Low End | High End | ||||
Earnings per diluted share | $0.27 | $0.28 | |||
Net income | $34 | $36 | |||
Net interest expense | $27 | $27 | |||
Income tax expense | 22 | 23 | |||
Depreciation and amortization | 40 | 41 | |||
EBITDA | $123 | $127 | |||
Reconciliation of Fiscal Year 2012 Annual Guidance of Net Income to EBITDA (Dollars in millions, except earnings per share) (Unaudited) Fiscal Year 2012 Guidance – Annual | |||||
For the twelve months ending June 30, 2012 | |||||
Low End | High End | ||||
Earnings per diluted share | $1.08 | $1.12 | |||
Earnings per diluted share excluding restructurings and lease termination | $1.11 | $1.15 | |||
Net income | $139 | $144 | |||
Expenses related to restructuring and lease termination, net of tax, recognized during the first quarter of fiscal 2012 | 4 | 4 | |||
Net income excluding expenses related to restructurings and lease termination | $143 | $148 | |||
Net interest expense | $107 | $107 | |||
Income tax expense | 92 | 95 | |||
Depreciation and amortization | 158 | 160 | |||
EBITDA excluding expenses related to restructurings and lease termination | $500 | $510 | |||