Exhibit 99.1
EDUCATION MANAGEMENT CORPORATION REPORTS FISCAL 2005 THIRD QUARTER RESULTS
PITTSBURGH, May 4 /PRNewswire-FirstCall/ -- Education Management Corporation
(Nasdaq: EDMC) today reported its financial results for the third quarter ended
March 31, 2005. For the quarter, net revenues increased 16.8% over the prior
year period to $274.6 million and net income grew 34.5% to $34.2 million, or
$0.45 cents per diluted share.
John R. McKernan, Jr., EDMC's Vice Chairman and Chief Executive Officer,
commented, "We are reporting better than expected financial results for the
third fiscal quarter. In addition, the adjustments made to marketing and
admissions over the last six months are having a positive impact on our
enrollment trends, with student enrollment up 12.3% at the start of the fourth
quarter. We remain confident in our ability to deliver double digit enrollment
growth long-term and we are raising our fiscal 2005 EPS guidance to $1.33 per
share."
Financial highlights:
- Net revenues for the three months ended March 31, 2005 increased 16.8%
to $274.6 million, compared to $235.2 million for the same period a
year ago, primarily resulting from a 12.1% increase in total student
enrollment and an approximate 6% increase in average tuition rates.
Total enrollment at the start of the third quarter of fiscal 2005 was
66,103 students compared to 58,950 students for the same period last
year.
- Income before interest and taxes (operating income) for the third
quarter rose 24.2% to $55.5 million from $44.7 million for the same
period a year ago. The Company's consolidated operating income margin
increased 120 basis points year over year in the third quarter due in
part to greater operating leverage and the timing of certain
advertising expenses. For the third quarter, the impact on marketing
and admissions expense due to a change in the Company's prior interim
accounting policy was negligible.
- The effective tax rate for the 2005 fiscal third quarter was 38.6%,
down from 42.3% in the comparable prior year period. The decrease in
the rate over the prior period was primarily due to our improved
operating results in Canada and a favorable return-to-provision
for the fiscal year 2004 tax returns filed during the fiscal 2005 third
quarter.
- During the third quarter of fiscal 2005, the Company initiated a review
of all of its current real estate operating leases and determined that
its previous method of accounting for landlord incentives or allowances
was not in accordance with recent guidance issued by the Securities and
Exchange Commission. As a result, in the fiscal third quarter the
Company recorded additional leasehold improvements (net of accumulated
amortization) and deferred rent in its balance sheet of $35.7 million
and recorded a pre-tax non-cash cumulative increase to expense of $3.8
million related to the incremental amortization of these landlord
incentives. This charge is reflected in operating income for the third
quarter of fiscal 2005.
- The Company recorded an impairment charge of $738,000 against certain
fixed assets in Canada during the third quarter of fiscal 2005.
- At March 31, 2005, the Company had cash and cash equivalents of $177.1
million and no borrowings on its revolving credit facility. Cash flow
from operations for the nine-month period ended March 31, 2005 was
$256.6 million compared to $204.5 million in the prior year period.
Days sales outstanding (DSO) in receivables based on quarterly revenues
decreased from 18.8 to 17.9 days at March 31, 2005 as compared to the
same period last year.
- Capital expenditures for the three- and nine- month periods ended March
31, 2005 totaled $27.6 million and $68.1 million, respectively,
compared to $20.0 million and $65.7 million in last year's comparable
periods. Capital expenditures for the third quarter of fiscal 2005
include $14.6 million of landlord reimbursements for tenant
improvements due to the Company's revised lease-related accounting.
Student Enrollment
At the start of the current spring quarter (fourth quarter of fiscal 2005),
total enrollment at EDMC's schools was 64,179 students, a 12.3% increase from
the same time last year. Same-school enrollment (schools owned for one year or
more) increased 11.8% to 63,872 students. Students taking 100% of their
coursework online increased 85.7% to 3,082 students.
2005 2004 %
Spring Spring Change
------ ------ ------
Total enrollment 64,179 57,141 12.3%
Same-school enrollment
(owned for 1 year or more) 63,872 57,141 11.8%
Students taking 100% of
their coursework online 3,082 1,660 85.7%
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.
Business Outlook
For the fourth quarter the Company estimates revenue growth of over 18% from
the prior year period and diluted EPS of $0.24. For the fourth quarter, the
Company anticipates an effective tax rate of 40.5%. Fiscal 2005 capital spending
is projected at approximately 9.0% of annual revenues, excluding the impact of
the $14.6 million cumulative adjustment for lease accounting discussed above.
Conference Call with Management
Education Management will host a conference call to discuss its fiscal 2005
third quarter results on Thursday, May 5, 2005 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 www.edmc.com .
Education Management Corporation ( www.edmc.com ) is among the largest
providers of private post-secondary education in North America, based on student
enrollment and revenue. EDMC has 70 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.
EDUCATION MANAGEMENT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts)
For the three months For the nine months
ended March 31, ended March 31,
-------------------- --------------------
(unaudited) (unaudited)
2005 2004 2005 2004
--------- --------- --------- ---------
Net revenues $ 274,599 $ 235,150 $ 764,001 $ 637,106
Costs and expenses:
Educational services* 166,605 142,112 474,842 401,413
General and administrative 50,880 46,439 149,041 123,295
Amortization of
intangible assets 1,647 1,931 5,070 5,193
219,132 190,482 628,953 529,901
Income before interest and taxes 55,467 44,668 135,048 107,205
Interest expense, net (276) 583 707 2,093
Income before income taxes 55,743 44,085 134,341 105,112
Provision for income taxes 21,517 18,638 52,382 43,007
Net income $ 34,226 $ 25,447 $ 81,959 $ 62,105
Diluted earnings per share $ 0.45 $ 0.34 $ 1.09 $ 0.83
Weighted average number of diluted
shares outstanding (000's): 75,718 75,493 75,237 74,549
Selected Cash Flow Data*:
For the three months For the nine months
ended March 31, ended March 31,
-------------------- --------------------
(unaudited) (unaudited)
2005 2004 2005 2004
--------- --------- --------- ---------
Net cash flows from
operations $ 176,031 $ 137,374 $ 256,576 $ 204,486
Capital expenditures (27,564) (19,971) (68,139) (65,692)
Depreciation and amortization 36,137 14,596 64,888 40,321
Selected Consolidated Balance Sheet Data:
As of March 31,
--------------------
(unaudited)
2005 2004
--------- --------
Cash and cash equivalents $ 177,094 $ 44,112
Receivables, net 54,533 49,251
Current assets 269,102 132,664
Total assets* 945,363 749,627
Current liabilities 259,543 236,957
Long-term debt (including current portion) 5,412 3,482
Shareholders' investment 627,485 501,158
*Includes the effect of lease accounting adjustments for the current
periods.
Certain amounts from prior periods have been reclassified to conform with
the current presentation.
COMPANY CONTACTS:
Robert McDowell
Executive Vice President and Chief Financial Officer
(412) 562-0900
James Sober, CFA
Vice President, Finance
(412) 995-7684
SOURCE Education Management Corporation
-0- 05/04/2005
/CONTACT: Robert McDowell, Executive Vice President and Chief Financial
Officer, +1-412-562-0900, or James Sober, CFA, Vice President, Finance,
+1-412-995-7684, both of Education Management Corporation/
/Web site: http://www.edmc.com /