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| 8-K - 8-K - UNIVERSAL TECHNICAL INSTITUTE INC | q42013earningsrelease8-k.htm |
Contact:
John Jenson
Vice President, Corporate Controller
Universal Technical Institute, Inc.
(623) 445-0821
Universal Technical Institute Reports Fiscal Year 2013 Fourth Quarter and Year-End Results
SCOTTSDALE, ARIZ. - December 3, 2013 - Universal Technical Institute, Inc. (NYSE: UTI), the leading provider of automotive technician training, today reported revenues for the fourth quarter ended September 30, 2013 of $95.8 million, a 5.4 percent decrease from $101.3 million for the fourth quarter of the prior year. Net income for the fourth quarter ended September 30, 2013 was $0.9 million, or 4 cents per diluted share, compared to $1.6 million, or 6 cents per diluted share, for the fourth quarter ended September 30, 2012. Severance costs of $1.6 million (pre-tax), primarily related to the announced retirement of our Chairman of the Board, impacted diluted earnings per share by approximately 3 cents for the quarter.
Revenues for the year ended September 30, 2013 were $380.3 million, an 8 percent decrease from $413.6 million for the year ended September 30, 2012. Net income for the year ended September 30, 2013 was $3.8 million, or 15 cents per diluted share, compared to $9.0 million, or 36 cents per diluted share, for the year ended September 30, 2012.
Return on equity for the trailing four quarters ended September 30, 2013 was 2.7 percent compared to 6.2 percent for the trailing four quarters ended Sept. 30, 2012.
“We were pleased to see new student start growth in the fourth quarter in excess of 9%,” said Kim McWaters, chief executive officer. “Despite the economic headwinds throughout the year, we successfully generated more quality inquiries at a lower cost, grew applications across all student segments and improved our consolidated graduate employment rate by 300 basis points to 85%. We expanded training programs with Mercedes Benz and Porsche and added two new manufacturer partners with GM and Peterbilt. As we look to 2014, our focus is on rebuilding our student population, continuing to improve our student outcomes and delivering enhanced operating results.”
Student Metrics
Three Months Ended Sept. 30, | Twelve Months Ended Sept. 30, | ||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||
(Rounded to hundreds) | |||||||||||
Total starts | 6,900 | 6,300 | 15,000 | 15,700 | |||||||
Average undergraduate full-time student enrollment | 14,600 | 15,600 | 15,000 | 16,500 | |||||||
End of period undergraduate full-time student enrollment | 16,300 | 17,000 | 16,300 | 17,000 | |||||||
New student starts increased by approximately 9.5% for the fourth quarter ended September 30, 2013 compared with the same quarter last year, due to an increase in the number of students
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scheduled to start and one additional start date during the quarter. We anticipate new student starts to be up slightly for the six months ending December 31, 2013.
Fourth Quarter Operating Performance
For the fourth quarter of 2013, revenues were $95.8 million, a 5.4 percent decrease from $101.3 million for last year's fourth quarter. The decrease in revenues primarily related to a decrease of 6.4 percent in average undergraduate full-time student enrollment. The decrease was partially offset by an increase in revenue per student. During the fourth quarter of 2013 and 2012, tuition excluded $4.1 million and $4.0 million, respectively, related to students participating in the Company's proprietary loan program which will be recognized as revenues when payments are received.
Operating income and margin for the fourth quarter of 2013 were $1.4 million and 1.5 percent, respectively, compared to operating income and margin of $2.3 million and 2.2 percent, respectively, in the same period last year. The decreases were primarily attributable to the decrease in revenues and were partially offset by decreases in compensation and advertising expense.
Earnings before interest, taxes, depreciation and amortization (EBITDA) for the fourth quarter of 2013 was $7.1 million compared to $8.4 million in the same period last year. See “Use of Non-GAAP Financial Information” below.
Year Operating Performance
Revenues for the year ended September 30, 2013 were $380.3 million, an 8 percent decrease from $413.6 million for the year ended September 30, 2012.
Operating income and margin for the year ended September 30, 2013 were $5.9 million and 1.6 percent, respectively, compared to $14.1 million and 3.4 percent, respectively, for the year ended September 30, 2012. The decreases in operating income and margin were related to the decrease in revenues, partially offset by decreases in compensation and advertising expense. The severance costs related to the retirement of the Chairman of the Board of Directors impacted diluted earnings per share by approximately 4 cents for the year.
Earnings before interest, taxes, depreciation and amortization (EBITDA) for the year ended September 30, 2013 was $29.8 million compared to $39.5 million for the year ended September 30, 2012. See “Use of Non-GAAP Financial Information” below.
Liquidity
Cash, cash equivalents and investments totaled $97.4 million at September 30, 2013, compared to $101.7 million at Sept. 30, 2012. At September 30, 2013, shareholders' equity totaled $138.8 million as compared to $146.1 million at Sept. 30, 2012. We paid cash dividends of $0.10 per common share quarterly for an aggregate payment of approximately $9.8 million.
We purchased 561,400 shares of stock during the year ended September 30, 2013 at an average price per share of $9.62 for a total cost of approximately $5.4 million pursuant to the previously announced share repurchase plan. During the three months ended September 30, 2013, we purchased an immaterial number of shares.
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Cash flow provided by operating activities was $21.4 million for the three months ended September 30, 2013, compared to $9.3 million for the three months ended September 30, 2012. Cash provided by operating activities was $26.7 million for the year ended September 30, 2013 compared to $18.5 million for the year ended September 30, 2012.
2014 Outlook
In line with our previous guidance, we expect new student start growth over the six month period ending December 31, 2013. The growth we experienced in new student starts during the fourth quarter of 2013 should offset the decline we now anticipate for the first quarter of 2014, due primarily to one less start date. For the year ending September 30, 2014, we expect high single digit growth in applications and yet with the time lag for conversions, we expect relatively flat new student starts. With a focus on persistence and helping students overcome macro-economic headwinds with increased use of scholarships and smaller tuition increases, we expect a low single digit level of revenue growth. Despite these challenges, with a continuation of our focus on efficiencies and student outcomes, we believe we will be able to achieve meaningful growth in operating results.
Conference Call
Management will hold a conference call to discuss the 2013 fourth quarter results today at 2:30 p.m. MST (4:30 p.m. EST). This call can be accessed by dialing 412-858-4600 or 800-860-2442. Investors are invited to listen to the call live at http://uti.investorroom.com/. Please access the website at least 15 minutes early to register, download and install any necessary audio software. A replay of the call will be available on the Investor Relations section of UTI's website for 60 days or the replay can be accessed through December 14, 2013 by dialing 412-317-0088 or 877-344-7529 and entering pass code 10037253.
Use of Non-GAAP Financial Information
This press release and the related conference call contains non-GAAP (Generally Accepted Accounting Principles) financial measures, which are intended to supplement, but not substitute for, the most directly comparable GAAP measures. Management chooses to disclose to investors, these non-GAAP financial measures because they provide an additional analytical tool to clarify the results from operations and helps to identify underlying trends. Additionally, such measures help compare the Company's performance on a consistent basis across time periods. To obtain a complete understanding of the Company's performance these measures should be examined in connection with net income, determined in accordance with GAAP, as presented in the financial statements and notes thereto included in the annual and quarterly filings with the Securities and Exchange Commission. Since the items excluded from these measures are significant components in understanding and assessing financial performance under GAAP, these measures should not be considered to be an alternative to net income as a measure of the Company's operating performance or profitability. Exclusion of items in the non-GAAP presentation should not be construed as an inference that these items are unusual, infrequent or non-recurring. Other companies, including other companies in the education industry, may calculate non-GAAP financial measures differently than UTI does, limiting their usefulness as a comparative measure across companies. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures are included below.
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Safe Harbor Statement
All statements contained herein, other than statements of historical fact, are “forward-looking” statements within the meaning of Section 21E of the Securities Exchange Act of 1934 and Section 27A of the Securities Act of 1933, as amended. Such statements are based upon management's current expectations and are subject to a number of uncertainties that could cause actual performance and results to differ materially from the results discussed in the forward-looking statements. Factors that could affect the Company's actual results include, among other things, changes to federal and state educational funding, changes to regulations or agency interpretation of such regulations affecting the for-profit education industry, possible failure or inability to obtain regulatory consents and certifications for new or expanding campuses, potential increased competition, changes in demand for the programs offered by UTI, increased investment in management and capital resources, the effectiveness of the recruiting, advertising and promotional efforts, changes to interest rates and unemployment, general economic conditions of the Company and other risks that are described from time to time in the Company's public filings. Further information on these and other potential factors that could affect the financial results or condition may be found in the Company's filings with the Securities and Exchange Commission. The forward-looking statements speak only as of the date of this press release. Except as required by law, the Company expressly disclaims any obligation to publicly update any forward-looking statements whether as a result of new information, future events, changes in expectations, any changes in events, conditions or circumstances, or otherwise.
About Universal Technical Institute, Inc.
Headquartered in Scottsdale, Arizona, Universal Technical Institute, Inc. (NYSE: UTI) is the leading provider of post-secondary education for students seeking careers as professional automotive, diesel, collision repair, motorcycle and marine technicians. With more than 170,000 graduates in its 48-year history, UTI offers undergraduate degree, diploma and certificate programs at 11 campuses across the United States, as well as manufacturer-specific training programs at dedicated training centers. Through its campus-based school system, UTI provides specialized post-secondary education programs under the banner of several well-known brands, including Universal Technical Institute (UTI), Motorcycle Mechanics Institute and Marine Mechanics Institute (MMI) and NASCAR Technical Institute (NASCAR Tech). For more information visit www.uti.edu.
(Tables Follow)
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UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED INCOME STATEMENTS
(UNAUDITED)
Three Months Ended Sept. 30, | Twelve Months Ended Sept. 30, | |||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
(In thousands, except per share amounts) | ||||||||||||||||
Revenues | $ | 95,798 | $ | 101,284 | $ | 380,268 | $ | 413,552 | ||||||||
Operating expenses: | ||||||||||||||||
Educational services and facilities | 50,252 | 54,204 | 199,540 | 211,979 | ||||||||||||
Selling, general and administrative | 44,142 | 44,825 | 174,799 | 187,458 | ||||||||||||
Total operating expenses | 94,394 | 99,029 | 374,339 | 399,437 | ||||||||||||
Income from operations | 1,404 | 2,255 | 5,929 | 14,115 | ||||||||||||
Other income: | ||||||||||||||||
Interest income, net | 54 | 89 | 234 | 302 | ||||||||||||
Other income | 194 | 173 | 655 | 545 | ||||||||||||
Total other income, net | 248 | 262 | 889 | 847 | ||||||||||||
Income before income taxes | 1,652 | 2,517 | 6,818 | 14,962 | ||||||||||||
Income tax expense | 780 | 909 | 3,008 | 5,930 | ||||||||||||
Net income | $ | 872 | $ | 1,608 | $ | 3,810 | $ | 9,032 | ||||||||
Earnings per share: | ||||||||||||||||
Net income per share - basic | $ | 0.04 | $ | 0.06 | $ | 0.16 | $ | 0.37 | ||||||||
Net income per share - diluted | $ | 0.04 | $ | 0.06 | $ | 0.15 | $ | 0.36 | ||||||||
Weighted average number of shares outstanding: | ||||||||||||||||
Basic | 24,479 | 24,764 | 24,515 | 24,711 | ||||||||||||
Diluted | 24,746 | 25,014 | 24,704 | 24,937 | ||||||||||||
Cash dividends declared per common share | $ | 0.10 | $ | 0.10 | $ | 0.40 | $ | 0.30 | ||||||||
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UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
Sept. 30, 2013 | Sept. 30, 2012 | |||||||
Assets | (In thousands) | |||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 35,657 | $ | 45,665 | ||||
Restricted cash | 5,748 | 104 | ||||||
Investments, current portion | 57,531 | 51,455 | ||||||
Receivables, net | 11,406 | 14,910 | ||||||
Deferred tax assets, net | 7,452 | 7,977 | ||||||
Prepaid expenses and other current assets | 15,553 | 14,873 | ||||||
Total current assets | 133,347 | 134,984 | ||||||
Investments, less current portion | 4,188 | 4,533 | ||||||
Property and equipment, net | 103,070 | 91,939 | ||||||
Goodwill | 20,579 | 20,579 | ||||||
Deferred tax assets, net | 8,835 | 5,576 | ||||||
Other assets | 9,444 | 10,547 | ||||||
Total assets | $ | 279,463 | $ | 268,158 | ||||
Liabilities and Shareholders’ Equity | ||||||||
Current liabilities: | ||||||||
Accounts payable and accrued expenses | $ | 39,229 | $ | 40,865 | ||||
Deferred revenue | 46,890 | 52,564 | ||||||
Accrued tool sets | 3,971 | 4,264 | ||||||
Income tax payable | 79 | 744 | ||||||
Other current liabilities | 2,192 | 1,003 | ||||||
Total current liabilities | 92,361 | 99,440 | ||||||
Deferred rent liability | 11,932 | 12,946 | ||||||
Construction liability | 27,632 | 2,421 | ||||||
Other liabilities | 8,768 | 7,266 | ||||||
Total liabilities | 140,693 | 122,073 | ||||||
Commitments and contingencies | ||||||||
Shareholders’ equity: | ||||||||
Common stock, $0.0001 par value, 100,000,000 shares authorized, 30,535,847 shares issued and 24,643,520 shares outstanding as of September 30, 2013 and 30,222,132 shares issued and 24,891,205 shares outstanding as of September 30, 2012 | 3 | 3 | ||||||
Preferred stock, $0.0001 par value, 10,000,000 shares authorized; 0 shares issued and outstanding | — | — | ||||||
Paid-in capital | 171,087 | 166,970 | ||||||
Treasury stock, at cost, 5,892,327 shares as of September 30, 2013 and 5,330,927 as of September 30, 2012 | (89,346 | ) | (83,924 | ) | ||||
Retained earnings | 57,026 | 63,036 | ||||||
Total shareholders’ equity | 138,770 | 146,085 | ||||||
Total liabilities and shareholders’ equity | $ | 279,463 | $ | 268,158 | ||||
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UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Twelve Months Ended Sept. 30, | ||||||||
2013 | 2012 | |||||||
(In thousands) | ||||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 3,810 | $ | 9,032 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 22,156 | 23,819 | ||||||
Amortization of held-to-maturity investments | 2,023 | 1,757 | ||||||
Bad debt expense | 4,762 | 5,790 | ||||||
Stock-based compensation | 6,224 | 6,492 | ||||||
Excess tax benefit from stock-based compensation | — | (159 | ) | |||||
Deferred income taxes | (3,793 | ) | (8,490 | ) | ||||
Training equipment credits earned, net | (1,926 | ) | (1,127 | ) | ||||
Loss on disposal of property and equipment | 184 | 203 | ||||||
Changes in assets and liabilities: | ||||||||
Receivables | (1,258 | ) | (10,109 | ) | ||||
Prepaid expenses and other current assets | 1,486 | (3,520 | ) | |||||
Other assets | (1,223 | ) | (1,227 | ) | ||||
Accounts payable and accrued expenses | (700 | ) | 3,037 | |||||
Deferred revenue | (5,674 | ) | (8,830 | ) | ||||
Income tax payable/receivable | (665 | ) | (1,288 | ) | ||||
Accrued tool sets and other current liabilities | 896 | (96 | ) | |||||
Deferred rent liability | (1,014 | ) | 1,147 | |||||
Other liabilities | 1,445 | 2,078 | ||||||
Net cash provided by operating activities | 26,733 | 18,509 | ||||||
Cash flows from investing activities: | ||||||||
Purchase of property and equipment | (9,352 | ) | (11,342 | ) | ||||
Proceeds from disposal of property and equipment | 54 | 6 | ||||||
Purchase of investments | (111,848 | ) | (92,503 | ) | ||||
Proceeds received upon maturity of investments | 104,094 | 90,640 | ||||||
Proceeds from note receivable | — | 615 | ||||||
Investment in joint venture | — | (4,000 | ) | |||||
Restricted cash | (3,709 | ) | — | |||||
Net cash used in investing activities | (20,761 | ) | (16,584 | ) | ||||
Cash flows from financing activities: | ||||||||
Payment of cash dividends | (9,820 | ) | (7,425 | ) | ||||
Payment of payroll taxes on stock-based compensation through shares withheld | (1,263 | ) | (1,365 | ) | ||||
Proceeds from issuance of common stock under employee plans | 525 | 550 | ||||||
Excess tax benefit from stock-based compensation | — | 159 | ||||||
Purchase of treasury stock | (5,422 | ) | (1,849 | ) | ||||
Net cash used in financing activities | (15,980 | ) | (9,930 | ) | ||||
Net decrease in cash and cash equivalents | (10,008 | ) | (8,005 | ) | ||||
Cash and cash equivalents, beginning of period | 45,665 | 53,670 | ||||||
Cash and cash equivalents, end of period | $ | 35,657 | $ | 45,665 | ||||
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UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP FINANCIAL INFORMATION TO NON-GAAP FINANCIAL INFORMATION
(UNAUDITED)
Reconciliation of Net Income to EBITDA
Three Months Ended Sept. 30, | Twelve Months Ended Sept. 30, | |||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
(In thousands) | ||||||||||||||||
Net income | $ | 872 | $ | 1,608 | $ | 3,810 | $ | 9,032 | ||||||||
Interest income, net | (54 | ) | (89 | ) | (234 | ) | (302 | ) | ||||||||
Income tax expense | 780 | 909 | 3,008 | 5,930 | ||||||||||||
Depreciation and amortization | 5,499 | 6,021 | 23,251 | 24,831 | ||||||||||||
EBITDA | $ | 7,097 | $ | 8,449 | $ | 29,835 | $ | 39,491 | ||||||||
Reconciliation of Earnings Per Share Impact of Severance Costs
Three Months Ended Sept. 30, | Twelve Months Ended Sept. 30, | |||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
(In thousands) | ||||||||||||||||
Net income , as reported | $ | 872 | $ | 1,608 | $ | 3,810 | $ | 9,032 | ||||||||
Severance costs | 1,558 | 1,905 | 1,558 | 1,905 | ||||||||||||
Less: tax effects of severance costs | (608 | ) | (743 | ) | (608 | ) | (743 | ) | ||||||||
Net income, adjusted for severance costs | $ | 1,822 | $ | 2,770 | $ | 4,760 | $ | 10,194 | ||||||||
Diluted earnings per share, as reported | $ | 0.04 | $ | 0.06 | $ | 0.15 | $ | 0.36 | ||||||||
Diluted earnings per share, adjusted for severance costs | $ | 0.07 | $ | 0.11 | $ | 0.19 | $ | 0.41 | ||||||||
Diluted weighted average shares outstanding | 24,746 | 25,014 | 24,704 | 24,937 | ||||||||||||
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UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES
SELECTED SUPPLEMENTAL INFORMATION
(UNAUDITED)
Selected Supplemental Financial Information
Three Months Ended Sept. 30, | Twelve Months Ended Sept. 30, | |||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
(In thousands) | ||||||||||||||||
Salaries expense | $ | 41,729 | $ | 42,480 | $ | 160,272 | $ | 166,027 | ||||||||
Employee benefits and tax | 7,295 | 8,187 | 32,152 | 34,414 | ||||||||||||
Bonus expense | 761 | 463 | 3,725 | 7,839 | ||||||||||||
Stock-based compensation | 1,788 | 1,104 | 6,224 | 6,492 | ||||||||||||
Total compensation and related costs | $ | 51,573 | $ | 52,234 | $ | 202,373 | $ | 214,772 | ||||||||
Occupancy expense | $ | 10,135 | $ | 10,063 | $ | 39,690 | $ | 39,227 | ||||||||
Bad debt expense | $ | 1,083 | $ | 729 | $ | 4,762 | $ | 5,175 | ||||||||
Depreciation and amortization expense | $ | 5,499 | $ | 6,021 | $ | 23,251 | $ | 24,831 | ||||||||
Legal expense | $ | 1,028 | $ | 718 | $ | 2,431 | $ | 2,639 | ||||||||
Graduate Employment Rate
Twelve Months Ended Sept. 30, | ||||||
2012 | 2011 | |||||
Graduate employment rate | 85 | % | 82 | % | ||
Graduates | 12,200 | 13,600 | ||||
Graduates available for employment | 11,400 | 12,800 | ||||
Graduates employed | 9,600 | 10,500 | ||||
The employment calculation is based on all graduates, including those that completed manufacturer specific advanced training programs, from October 1, 2011 to September 30, 2012 and October 1, 2010 to September 30, 2011, respectively, excluding graduates not available for employment because of continuing education, military service, health, incarceration, death or international student status.
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