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)