-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Jw3Xi8ACTX9mGjMLKbqEdMPGa17IlZQqJ8okvOPDebDUPv6qSWTZmLHY1QQRGXFZ RuBLogRzvdICYEjKzQI1ow== 0001275287-05-004531.txt : 20051109 0001275287-05-004531.hdr.sgml : 20051109 20051109093522 ACCESSION NUMBER: 0001275287-05-004531 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20051109 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20051109 DATE AS OF CHANGE: 20051109 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EDUCATION MANAGEMENT CORPORATION CENTRAL INDEX KEY: 0000880059 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EDUCATIONAL SERVICES [8200] IRS NUMBER: 251119571 FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-21363 FILM NUMBER: 051188061 BUSINESS ADDRESS: STREET 1: 300 SIXTH AVENUE CITY: PITTSBURGH STATE: PA ZIP: 15222 BUSINESS PHONE: 4125620900 MAIL ADDRESS: STREET 1: 300 SIXTH AVE CITY: PITTSBURGH STATE: PA ZIP: 15222 8-K 1 ec4077.txt FORM 8-K ================================================================================ UNITED STATES 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): November 9, 2005 ---------- EDUCATION MANAGEMENT CORPORATION (Exact Name of Registrant as Specified in Charter) Pennsylvania 000-21363 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. below): [ ] 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)) ================================================================================ ITEM 2.02.--RESULTS OF OPERATIONS AND FINANCIAL CONDITION. On November 9, 2005, Education Management Corporation issued a press release announcing its financial results for the quarter ended September 30, 2005. A copy of the November 9, 2005 press release is attached hereto as an exhibit and incorporated herein by reference. The information included 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) Exhibits Exhibit 99.1 Press release dated November 9, 2005 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 CORPORATION By: /s/ ROBERT T. MCDOWELL ------------------------------ Robert T. McDowell Executive Vice President and Chief Financial Officer Dated: November 9, 2005 EXHIBIT INDEX Exhibit No. Description - ----------- ------------------------------------ 99.1 Press release dated November 9, 2005 EX-99.1 2 ec4077ex991.txt EXHIBIT 99.1 Exhibit 99.1 EDUCATION MANAGEMENT CORPORATION REPORTS FISCAL 2006 FIRST QUARTER EPS OF $0.18ter EPS of $0.18 PITTSBURGH, Nov. 9 /PRNewswire-FirstCall/ -- Education Management Corporation (Nasdaq: EDMC) today reported its financial results for the first quarter ended September 30, 2005. For the quarter, net revenues increased 18.4% to $253.0 million and net income grew 71.1% to $14.0 million, or $0.18 cents per diluted share. Effective July 1, 2005, the Company adopted the fair value recognition provisions of FASB Statement No. 123(R) ("SFAS 123(R)"), "Share-Based Payment," using the modified-prospective transition method, under which no restatement of prior periods is made for the fair value recognition of compensation cost. The adoption of this standard has a significant impact on the comparability of the results of operations for the Company. If the Company had adopted SFAS 123(R) using the retrospective method and restated the first quarter of fiscal 2005, net income for the first quarter of fiscal 2006 would have increased 240.1% over the prior year period. John R. McKernan, Jr., EDMC's Vice Chairman and Chief Executive Officer, commented, "We are pleased with our strong financial and operating results in the first quarter. Though our enrollment growth in the fall quarter came in lower than we expected, we're increasing our diluted earnings per share guidance for the year to $1.46 as well as taking advantage of the first quarter's out-performance to invest in certain growth initiatives." Financial Highlights * Revenues for the three months ended September 30, 2005 increased 18.4% to $253.0 million, compared to $213.6 million for the same period a year ago. Revenue growth in the first quarter of fiscal 2006 resulted from a 12.6% increase in total student enrollment and an approximate 5% increase in average revenue per student. Total enrollment at the start of the quarter was 59,739 students compared to 53,073 students for the same period last year. * First quarter income before interest and taxes (operating income) rose 42.7% to $20.7 million from $14.5 million for the same period a year ago. The consolidated operating margin improved 139 basis points to 8.2%. The improvement in consolidated operating margin was due in part to lower rent and salary expense as a percentage of revenue. On a proforma basis after giving effect to stock compensation expense under SFAS 123(R) for the quarter ended September 30, 2004, income before interest and taxes (operating income) increased 170.4% to $20.7 million from $7.6 million, resulting in consolidated operating margin improvement of 459 basis points to 8.2% from 3.6% (see table below labeled "Reconciliation of Non-GAAP Financial Measures"). * The Company's effective tax rate was 34.7% for the first quarter of fiscal 2006, as compared to 40.7% recorded in the comparable quarter of the prior year. This decrease in the effective tax rate was primarily due to the reversal of deferred state tax liabilities that resulted from Ohio's adoption of a gross receipts based tax in place of its corporate income tax as well as the recording of a benefit related to refunds claimed for tax credits in certain states. The effective rate was also impacted by the disproportionate growth of taxable income in states with lower tax rates. * Net income for the quarter grew 71.1% to $14.0 million, or $0.18 per diluted share, compared to $8.2 million, or $0.11 per diluted share, in the year ago period. On a proforma basis after giving effect to stock compensation expense under SFAS 123(R) for the quarter ended September 30, 2004, net income would have been $4.1 million, or $0.05 per diluted share and would have increased 240.1% in the first quarter of fiscal 2006 (see table below labeled "Reconciliation of Non-GAAP Financial Measures"). * At September 30, 2005, the Company had cash and cash equivalents of $267.5 million as compared to $88.2 million at September 30, 2004. Cash flow from operations for the three-month period ended September 30, 2005 was $171.2 million compared to $123.0 million last fiscal year. Higher cash flow compared to the same quarter in the prior year was primarily due to growth in net income and non-cash charges, greater growth in advanced payments and a smaller increase in receivables. * Capital expenditures were $15.6 million, or 6.2% of revenue for the quarter, compared to $18.1 million, or 8.5% of revenue, last year. The Company is providing a tabular reconciliation of GAAP net income for the first quarter of fiscal 2005 to the proforma net income adjusted for the impact of stock compensation expenses. Student Enrollment At the start of the current fall quarter (second quarter of fiscal 2006), total enrollment at EDMC's schools was 72,471 students, a 9.5% increase from the same time last year. Same-school enrollment (schools owned for one year or more) increased 8.9% to 72,097 students. Campus-based enrollment includes students at Brown Mackie Colleges in Dallas and Fort Worth, Texas that discontinued accepting new enrollments in August 2005. There were a total of 167 students at these two schools during the current fall quarter compared to 458 in the prior year period. At the start of the current fall quarter, excluding students at Brown Mackie Colleges in Dallas and Fort Worth, total enrollment and same-school enrollment at EDMC's schools increased 10.0% and 9.4%, respectively. Students taking 100% of their coursework online increased 62.5% to 4,076 students. 2006 2005 % Fall Fall Change ---------- ---------- ---------- Total enrollment 72,471 66,179 9.5% Same-school enrollment (owned for 1 year or more) 72,097 66,179 8.9% Students taking 100% of their coursework online 4,076 2,508 62.5% The Company's quarterly revenues and income fluctuate primarily as a result of the pattern of student enrollments. Student enrollment at the Art Institute schools has typically peaked in the fall (fiscal year second quarter), when the largest number of recent high school and college graduates traditionally begin post-secondary education programs. The first quarter is typically the lowest revenue recognition quarter due to student vacations. The seasonality of the Company's business has decreased over the last several years due to an increased percentage of students at the Company's schools enrolling in bachelor's and graduate degree programs. Share-based Payment Effective July 1, 2005, the Company adopted the fair value recognition provisions of SFAS 123(R), "Share-Based Payment," using the modified-prospective transition method. Under that transition method, compensation cost recognized during the first quarter of fiscal 2006 includes (a) compensation cost for all share-based payments granted to, but not yet vested as of July 1, 2005, based on the grant date fair value estimated in accordance with the original provisions of FASB Statement No. 123, and (b) compensation cost for all share-based payments granted subsequent to July 1, 2005, based on the grant-date fair value estimated in accordance with the provisions of SFAS 123(R). The adoption of SFAS 123(R) in the quarter ended September 30, 2005, resulted in an additional $6.0 million of pre-tax share- based compensation expense. Results for prior periods have not been restated affecting the comparability of results. Business Outlook The Company estimates that enrollment growth will be in the high single digit range for the remainder of fiscal 2006. For both the second quarter and 2006 fiscal year, the Company projects revenue growth of approximately 13 to 14%. Reflecting the impact of SFAS 123(R), the Company estimates diluted EPS of $0.55 and $1.46 for the second quarter and fiscal year, respectively. For the full fiscal year ending June 30, 2006, the Company anticipates an effective tax rate of 39.4% and capital spending of approximately 8.0 to 8.5% of revenue. Conference Call with Management Education Management will host a conference call to discuss its fiscal 2006 first quarter results on Wednesday, November 9, 2006 at 10:30 a.m. (Eastern Time). Those wishing to participate in this call should dial 303-262-2194 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. Education Management Corporation (http://www.edmc.com) is among the largest providers of private post-secondary education in North America, based on student enrollment and revenue. EDMC has 71 primary campus locations in 24 states and two Canadian provinces. EDMC's education institutions offer a broad range of academic programs concentrated in the media arts, design, fashion, culinary arts, behavioral sciences, health sciences, education, information technology, legal studies and business fields, culminating in the award of associate's through doctoral degrees. EDMC has provided career-oriented education for over 40 years. This press release may include information that could constitute forward-looking statements made pursuant to the safe harbor provision 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 EDMC are not necessarily indicative of its future results. EDMC does not undertake any obligation to update any forward-looking statements. --Table to Follow-- EDUCATION MANAGEMENT CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Dollars in thousands, except per share amounts) (unaudited) For the three months ended September 30, ---------------------------- 2005 2004 ------------ ------------ Net revenues $ 252,985 $ 213,594 Costs and expenses: Educational services 171,401 150,825 General and administrative 59,442 46,532 Amortization of intangible assets 1,487 1,766 232,330 199,123 Income before interest and taxes 20,655 14,471 Interest (income) expense, net (704) 723 Income before income taxes 21,359 13,748 Provision for income taxes 7,407 5,595 Net income $ 13,952 $ 8,153 Diluted earnings per share $ 0.18 $ 0.11 Weighted average number of diluted shares outstanding (000's): 76,520 75,167 Selected Cash Flow Data: (unaudited) For the three months ended September 30, ---------------------------- 2005 2004 ------------ ------------ Net cash flows provided by operations $ 171,166 $ 122,700 Depreciation and amortization 16,889 14,495 Capital expenditures 15,582 18,137 Selected Consolidated Balance Sheet Data: (unaudited) As of September 30, ---------------------------- 2005 2004 ------------ ------------ Cash and cash equivalents $ 267,493 $ 88,228 Receivables, net 58,611 62,964 Current assets 377,750 197,262 Total assets 1,058,907 827,291 Current liabilities 308,432 266,586 Long-term debt (including current portion) 8,853 5,609 Shareholders' investment 691,607 541,341 Reconciliation of Non-GAAP Financial Measures (Unaudited) (Dollars in thousands, except per share amounts) EDMC makes use of certain non-GAAP financial measures in evaluating the Company's results. The non-GAAP measure, "net income, including the impact of stock compensation expense", is reconciled with GAAP net income for the three month period ended September 30, 2004, in the table below.
For the three month period ended September 30, --------------------------- 2005 (a) 2004 ------------ ------------ GAAP Net Income $ 13,952 $ 8,153 Add: Share-based employee compensation expense included in reported net income, net of tax, for the 3 month period ended September 30, 2004 - 152 Deduct: Total share-based employee compensation expense determined under SFAS 123(R), net of tax, for the 3 month period ended September 30, 2004 - (4,203) Net income, including the impact of share-based compensation expenses $ 13,952 $ 4,102 Earnings per share: Basic--as reported $ 0.19 $ 0.11 Basic-- including the impact of share-based compensation expense $ 0.19 $ 0.05 Diluted--as reported $ 0.18 $ 0.11 Diluted-- including the impact of share-based compensation expense $ 0.18 $ 0.05
(a) Results for the period ended September 30, 2005 include an additional $6.0 million, pre-tax ($4.5 million, after-tax) of share-based compensation expense due to the adoption of SFAS 123 (R) The Company adopted SFAS 123(R) on July 1, 2005 using the modified prospective method, which resulted in the recognition of stock compensation expense in the statement of income during the quarter ended September 30, 2005 without corresponding charges in the prior year first quarter. The Company believes that presenting diluted earnings per share, including the impact of stock compensation expense for the three month period ended September 30, 2004, is an additional measure of performance that investors can use to compare operating results between reporting periods. Management of the Company uses this information in evaluating the Company's results of operations and believes that this information may also provide investors better insight in evaluating the Company's earnings performance in comparison to the prior year first quarter. FOR: Education Management Corporation COMPANY CONTACTS: James Sober, CFA Vice President, Finance (412) 995-7684 SOURCE Education Management Corporation -0- 11/09/2005 /CONTACT: James Sober, CFA, Vice President, Finance of Education Management Corporation, +1-412-995-7684/ /Web site: http://www.edmc.com/ (EDMC) -----END PRIVACY-ENHANCED MESSAGE-----