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8-K - CURRENT REPORT - National American University Holdings, Inc. | nauh_8k.htm |
Exhibit
99.1
NATIONAL
AMERICAN UNIVERSITY HOLDINGS, INC. REPORTS
FISCAL 2018 SECOND QUARTER AND SIX MONTHS RESULTS
Company to host conference call on January 4, 2018, at 11:00 a.m.
ET
Financial and Operational Highlights
*
Combined enrollment
in graduate and doctoral programs increased 11.7% to 524 students
during the FY 2018 second quarter (fall 2017 term) from the
prior-year quarter.
*
Primary focus
remains on stabilizing and increasing enrollment; credit hours
enrolled for the fall 2017 term came in above previously provided
expectations due to switch to monthly starts and improved marketing
efforts.
*
Students enrolled
in 59,081 credit hours in the FY 2018
second quarter, a 3.9% decrease from 61,451 credit hours
during the prior fall term. Enrollment
by total headcount decreased 13.8% from the prior-year period, to
6,241 students as of November 30, 2017, as a result of a decrease
in continuing education and undergraduate & diploma
students.
*
The Company filed
its FY 2017 annual Title IV Compliance Report with the U.S.
Department of Education during the FY 2018 second quarter and is
pleased to report that its independent auditors identified no
findings of noncompliance.
*
NAU signed a
transfer agreement with Zenith Education Group to provide degree
completion opportunities for approximately 800
students.
*
The Company expects
to close the Henley-Putnam University asset purchase transaction in
early 2018.
*
FY 2018 second
quarter total revenue was $20.0 million, compared to $22.0 million
in the prior-year period. The Company’s total academic
segment revenue was $19.4 million in the FY 2018 second quarter,
compared to $21.7 million in the prior-year period.
*
FY 2018 second
quarter net loss attributable to the Company was $(3.8) million,
compared to $(0.8) million in the prior-year period, primarily as a
result of decreased revenue on lower enrollment, investments in
strategic growth initiatives, and $1.0 million in asset impairment
charges primarily related to leasehold improvements at certain
locations, as well as increased operating expenses related to
condominium sales.
*
Balance sheet at
November 30, 2017, included cash and cash equivalents and
investments of $8.7 million, taxes receivable of $2.3 million,
working capital of $4.4 million; no outstanding lending debt; and
stockholders’ equity of $21.4 million.
Rapid City, South Dakota, January 3, 2018 — National American
University Holdings, Inc. (the “Company”) (NASDAQ:
NAUH), which through its wholly owned subsidiary operates
National American University (“NAU” or the “University”), a
regionally accredited, proprietary, multi-campus institution of
higher learning, today reported unaudited financial results for its
fiscal 2018 second quarter and six months ended November 30,
2017.
Management Commentary
Enrollment
Ronald
L. Shape, Ed.D., President and Chief Executive Officer of the
Company, stated, “In the fall 2017 term, we began accepting
students on a monthly basis, versus our previous practice of
quarterly starts. The monthly starts had a positive impact on
enrollment during the period, and we were pleased to see the
year-over-year growth in our graduate and doctoral enrollments. We
welcomed a new cohort of doctoral candidates in Texas during the
fall term and are looking to launch an additional cohort in Ohio in
the spring 2018 term. As a result of the monthly starts and
students continuing to take advantage of the NAU Tuition Advantage
plan, credit hours enrolled during the fall term came out to over
59,000, exceeding our previously provided projections. These
factors had a positive impact on our top line, which helped to
offset the effect of lower overall enrollment
headcount.”
Opportunities with Other Institutions
Dr.
Shape continued, “We are in active discussions with
institutions that are looking to transfer or teach out students
that could provide us with opportunities to leverage our existing
infrastructure and brand recognition to assist students in their
educational goals. In this regard, we recently signed a transfer
agreement with Zenith Education Group whereby NAU is working to
provide approximately 800 students with degree completion
opportunities. We believe this will have a positive impact on our
enrollments in the current winter term.
1
“Following
a successful visit from the Higher Learning Commission
(‘HLC’) in early November with regards to our planned
acquisition of the assets of Henley-Putnam University, we maintain
our expectation to close the transaction in early 2018, pending
final approval from the HLC and other regulatory and accrediting
bodies.”
Recent Operating Initiatives Expected to Generate $1.5 Million in
Savings
Dr.
Shape concluded, “As we mentioned in our last earnings
report, we have observed that our working adult student population
has increasingly shown a propensity for NAU’s online course
delivery format. Given this trend, we are identifying ways in which
we can build up and better support our students through our
Distance Learning division. To support this effort, we have fully
launched a second online enrollment center in Kansas City,
Missouri, to expand upon our existing online operations in Rapid
City, South Dakota. At the same time, we continue to look to
optimize our ground operations. We have made efforts to cut costs
over the past several quarters to bring our expenses in line with
our revenues and current enrollment levels. In December, we made
leadership and oversight consolidations that will result in
approximately $1.5 million in savings. Taken all together, we
expect the decisions made over the past few months to help the
Company move toward generating positive cash flow while positioning
NAU for long-term growth in a rapidly changing educational
environment. Throughout this process, we remain committed to our
students and their needs, making sure our academic programs and
support systems adhere to the quality standard they have come to
expect from NAU.”
Operating Review
Enrollment Update
Total
NAU student enrollment for the fall 2017 term was 6,241 students,
compared to 7,240 during the prior fall term. Students enrolled in
59,081 credit hours, compared to 61,451 credit hours during the
prior fall term. The current average
age of NAU’s students continues to be in the mid-30s, with
those seeking undergraduate degrees remaining the highest portion
of NAU’s student population.
The following is a summary of student enrollment at November 30,
2017, and November 30, 2016, by degree level and by instructional
delivery method:
|
November 30, 2017
(Fall ’17 Term)
|
November 30, 2016
(Fall ’16 Term)
|
||
|
No. of Students
|
% of Total
|
No. of Students
|
% of Total
|
Continuing
Ed
|
15
|
0.2%
|
300
|
4.1%
|
Doctoral
|
101
|
1.6%
|
110
|
1.5%
|
Graduate
|
423
|
6.8%
|
359
|
5.0%
|
Undergraduate
& Diploma
|
5,702
|
91.4%
|
6,471
|
89.4%
|
|
|
|
|
|
Total
|
6,241
|
100.0%
|
7,240
|
100.0%
|
|
No. of Credits
|
% of Total
|
No. of Credits
|
% of Total
|
On-Campus
|
8,180
|
13.8%
|
8,254
|
13.4%
|
Online
|
45,124
|
76.4%
|
48,478
|
78.9%
|
Hybrid
|
5,777
|
9.8%
|
4,719
|
7.7%
|
|
|
|
|
|
Total
|
59,081
|
100.0%
|
61,451
|
100.0%
|
Financial Review
The
Company, through its wholly owned subsidiary, operates in two
business segments: academics, which consists of NAU’s
undergraduate, graduate, and doctoral education programs and
contributes the primary portion of the Company’s revenue; and
ownership in and development of multiple apartments and condominium
complexes from which it derives sales and rental income. The real
estate operations generated approximately 3.0% of the
Company’s revenue for the quarter ended November 30,
2017.
2
Fiscal 2018 Second Quarter Financial Results
●
Total revenue for
the FY 2018 second quarter was $20.0 million, compared to $22.0
million in the same period last year. Academic tuition revenue was
$18.5 million, compared to $20.3 million in the prior-year period.
Auxiliary (bookstore) revenue was $0.9 million for the FY 2018
second quarter, compared to $1.4 million in the prior-year period.
This decrease in academic revenue was primarily a result of a
decrease in enrollment, which was partially offset by the new NAU
Tuition Advantage plan that was approved by NAU’s board of
governors in November 2016 and became effective in March
2017.
●
For the FY 2018
second quarter, educational services expense was $6.4 million, or
33.0% of total academic segment revenue, compared to $6.5 million,
or 30.0%, for the FY 2017 second quarter. Educational services
expense specifically relates to academics, and includes salaries
and benefits of faculty and academic administrators, costs of
educational supplies, faculty reference and support material and
related academic costs.
●
During the FY 2018
second quarter, SG&A expenses decreased to $15.3 million, or
76.5% of total revenue, from $15.4 million, or 70.2%, in the
prior-year period. This percentage increase was primarily a result
of fixed costs on a decreasing revenue base and additional expense
to launch new programs and transfer programs for closing
institutions. Expenses related to growth initiatives such as the
College of Military Studies, Canada enrollments, and the new online
enrollment center totaled $1.3 million in the FY 2018 second
quarter, compared to $0.4 million for the same initiatives in the
prior-year quarter.
●
Loss before income
taxes and non-controlling interest for the FY 2018 second quarter
was $(3.7) million, compared to $(1.1) million in the same period
last year, primarily as a result of decreased revenue on lower
enrollment, as well as increased operating expenses related to
condominium sales and $1.0 million in asset impairment charges
primarily related to leasehold improvements at certain
locations.
●
Net loss
attributable to the Company for the FY 2018 second quarter was
$(3.8) million, or ($0.16) per diluted share based on 24.2 million
shares outstanding, compared to net loss attributable to the
Company of $(0.8) million, or ($0.03) per diluted share based on
24.1 million shares outstanding, in the prior-year period, as a
result of the reasons mentioned above and a $0.5 million reduction
in benefit from income taxes.
●
Losses before
interest, tax, and depreciation and amortization
(“LBITDA”) for the FY 2018 second quarter were ($2.3)
million, compared to EBITDA of $0.3 million in the prior-year
period. A table reconciling EBITDA/LBITDA to net loss can be found
at the end of this release.
Fiscal 2018 Six Months Financial Results
●
Total revenues for
the first six months of FY 2018 were $39.8 million, compared to
$43.1 million in the prior-year period. The total academic segment
revenue was $38.7 million, compared to $42.5 million in the
prior-year period, as a result of the decrease in enrollment. The
Company continues to execute on its strategic plan, which includes
growing enrollments at its current existing locations by investing
in new program development and expansion, academic advisor support,
and student retention initiatives, while right-sizing operations to
be in line with the needs of its student population.
●
NAU’s
educational services expense for the first six months of FY 2018
was $13.3 million, or 34.4% of the total academic segment revenue,
compared to $13.0 million, or 30.5%, in the prior-year
period.
●
During the first
six months of FY 2018, SG&A expenses decreased to $30.8
million, or 77.4% of total revenues, compared to $31.9 million, or
74.0%, in the prior-year period.
●
Loss before income
taxes and non-controlling interest for the first six months of FY
2018 was $(7.8) million, compared to loss before income taxes and
non-controlling interest of $(4.2) million in the prior-year
period, primarily as a result of decreased revenues offset by lower
SG&A expenses.
●
Net loss
attributable to the Company during the first six months of FY 2018
was $(7.6) million, or $(0.31) per diluted share based on 24.2
million shares outstanding, compared to net loss attributable to
the Company of $(2.8) million, or $(0.12) per diluted share based
on 24.1 million shares outstanding, in the prior-year
period.
●
LBITDA for the
first six months of FY 2018 were $(5.0) million, compared to LBITDA
of $(1.2) million in the prior-year period. A table reconciling
EBITDA/LBITDA to net loss can be found at the end of this
release.
3
Balance Sheet Highlights
(in millions except for percentages)
|
11/30/2017
|
5/31/2017
|
% Change
|
Cash
and Cash Equivalents/Investments $
|
$8.7*
|
16.2
|
(46.2)%
|
Working
Capital
|
4.4
|
11.2
|
(61.3)%
|
Other
Long-term Liabilities
|
3.1
|
4.0
|
(23.2)%
|
Stockholders’
Equity
|
21.4
|
29.9
|
(28.6)%
|
*Decrease
in cash was primarily the result of expenditures related to lease
terminations, operating loss, the dividends, and the construction
of Arrowhead Apartments.
Conference Call Information
Management
will discuss these results in a conference call (with accompanying
presentation) on Thursday, January 4, 2018, at 11:00 a.m.
ET.
The
dial-in numbers are:
(877)
407-9078 (U.S.)
(201)
493-6745 (International)
Accompanying Slide Presentation and Webcast
The
Company will have an accompanying slide presentation available in
PDF format at the “Investor Relations” section of the
NAU website at http://investors.national.edu.
The presentation will be made available 30 minutes prior to the
conference call. In addition, the call will be simultaneously
webcast over the Internet via the “Investor Relations”
section of the NAU website or by clicking on the conference call
link: http://national.equisolvewebcast.com/q2-2018.
About National American University Holdings, Inc.
National American University Holdings, Inc., through its wholly
owned subsidiary, operates National American University, a
regionally accredited, proprietary, multi-campus institution of
higher learning offering associate, bachelor’s,
master’s, and doctoral degree programs in technical and
professional disciplines. Accredited by the Higher Learning
Commission, NAU has been providing technical and professional
career education since 1941. NAU opened its first campus in Rapid
City, South Dakota, and has since grown to multiple locations in
several U.S. states. In 1998, NAU began offering online courses.
Today, NAU offers degree programs in traditional, online, and
hybrid formats, which provide students increased flexibility to
take courses at times and places convenient to their busy
lifestyles.
Forward Looking Statements
This press release may contain forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995
regarding the Company's business. Statements made in this release,
other than those concerning historical financial information, may
be considered forward-looking statements, which speak only as of
the date of this release and are based on current beliefs and
expectations and involve a number of assumptions. These
forward-looking statements include outlooks or expectations for
earnings, revenue, expenses or other future financial or business
performance, strategies or expectations, or the impact of legal or
regulatory matters on business, results of operations or financial
condition. Specifically, forward-looking statements may include
statements relating to the future financial performance of the
Company; the ability to continue to receive Title IV funds; the
growth of the market for the Company’s services; expansion
plans and opportunities; consolidation in the market for the
Company’s services generally; and other statements preceded
by, followed by or that include the words “estimate,”
“plan,” “project,” “forecast,”
“intend,” “expect,”
“anticipate,” “believe,”
“seek,” “target” or similar expressions.
These forward-looking statements involve a number of known and
unknown risks and uncertainties or other assumptions that may cause
actual results or performance to be materially different from those
expressed or implied by those forward-looking statements. Other
factors that could cause the Company’s results to differ
materially from those contained in its forward-looking statements
are included under, among others, the heading “Risk
Factors” in the Company’s Annual Report on Form 10-K,
which the Company filed on August 4, 2017, and in its other filings
with the Securities and Exchange Commission. The Company assumes no
obligation to update the information contained in this
release.
4
Contact
Information:
National American University Holdings, Inc.
Dr.
Ronald Shape
605-721-5220
rshape@national.edu
Investor
Relations Counsel
The Equity Group Inc.
415-568-2255
csohn@equityny.com
Adam
Prior
212-836-9606
aprior@equityny.com
5
NATIONAL AMERICAN UNIVERSITY HOLDINGS, INC. AND
SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME
FOR THE THREE MONTHS AND SIX MONTHS ENDED NOVEMBER 30, 2017 AND
2016
(In thousands, except share and per share amounts)
|
Three Months Ended
|
Six Months Ended
|
||
|
November 30,
|
November 30,
|
||
|
2017
|
2016
|
2017
|
2016
|
REVENUE:
|
|
|
|
|
Academic revenue
|
$18,494
|
$20,276
|
$36,684
|
$39,714
|
Auxiliary revenue
|
931
|
1,414
|
1,975
|
2,808
|
Rental income — apartments
|
358
|
293
|
700
|
591
|
Condominium sales
|
235
|
-
|
455
|
-
|
|
|
|
|
|
Total revenue
|
20,018
|
21,983
|
39,814
|
43,113
|
|
|
|
|
|
OPERATING
EXPENSES:
|
|
|
|
|
Cost of educational services
|
6,411
|
6,497
|
13,311
|
12,965
|
Selling, general and administrative
|
15,308
|
15,425
|
30,816
|
31,907
|
Auxiliary expense
|
652
|
1,054
|
1,393
|
2,103
|
Cost of condominium sales
|
191
|
-
|
427
|
-
|
Loss on lease termination
|
-
|
-
|
362
|
-
|
Loss on disposition of property
|
1,036
|
-
|
995
|
6
|
|
|
|
|
|
Total operating expenses
|
23,598
|
22,976
|
47,304
|
46,981
|
|
|
|
|
|
OPERATING
LOSS
|
(3,580)
|
(993)
|
(7,490)
|
(3,868)
|
|
|
|
|
|
OTHER
INCOME (EXPENSE):
|
|
|
|
|
Interest income
|
29
|
27
|
49
|
49
|
Interest expense
|
(208)
|
(214)
|
(417)
|
(428)
|
Other income — net
|
43
|
32
|
87
|
69
|
|
|
|
|
|
Total other expense
|
(136)
|
(155)
|
(281)
|
(310)
|
|
|
|
|
|
LOSS
BEFORE INCOME TAXES
|
(3,716)
|
(1,148)
|
(7,771)
|
(4,178)
|
|
|
|
|
|
INCOME
TAX BENEFIT (EXPENSE)
|
(56)
|
406
|
185
|
1,397
|
|
|
|
|
|
NET
LOSS
|
(3,772)
|
(742)
|
(7,586)
|
(2,781)
|
|
|
|
|
|
NET
INCOME ATTRIBUTABLE TO NON-CONTROLLING
|
(5)
|
(10)
|
(19)
|
(27)
|
INTEREST
|
|
|
|
|
|
|
|
|
|
NET
LOSS ATTRIBUTABLE TO NATIONAL AMERICAN
|
|
|
|
|
UNIVERSITY HOLDINGS, INC. AND SUBSIDIARIES
|
(3,777)
|
(752)
|
(7,605)
|
(2,808)
|
|
|
|
|
|
OTHER
COMPREHENSIVE (LOSS) INCOME, NET OF TAX
|
|
|
|
|
Unrealized (losses) gains on investments, net of tax benefit
(expense)
|
1
|
(9)
|
(5)
|
(5)
|
Income
tax benefit related to items of other comprehensive
loss
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE
LOSS ATTRIBUTABLE TO
|
|
|
|
|
NATIONAL AMERICAN UNIVERSITY HOLDINGS, INC.
|
$(3,776)
|
$(761)
|
$(7,610)
|
$(2,813)
|
|
|
|
|
|
|
|
|
|
|
Basic
net loss attributable to National American University
|
$(0.16)
|
$(0.03)
|
$(0.31)
|
$(0.12)
|
Holdings, Inc.
|
|
|
|
|
Diluted
net loss attributable to National American University
|
$(0.16)
|
$(0.03)
|
$(0.31)
|
$(0.12)
|
Holdings, Inc.
|
|
|
|
|
Basic
weighted average shares outstanding
|
24,219,884
|
24,148,355
|
24,200,096
|
24,131,231
|
Diluted
weighted average shares outstanding
|
24,219,884
|
24,148,355
|
24,200,096
|
24,131,231
|
6
NATIONAL AMERICAN UNIVERSITY HOLDINGS, INC. AND
SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
AS OF NOVEMBER 30, 2017 AND CONDENSED
CONSOLIDATED BALANCE SHEET AS OF MAY 31, 2017
(In thousands, except share and per share amounts)
|
November 30,
|
May 31,
|
|
2017
|
2017
|
ASSETS
|
|
|
CURRENT
ASSETS:
|
|
|
Cash and cash equivalents
|
$5,123
|
$11,974
|
Available for sale investments
|
$3,566
|
$4,183
|
Student receivables — net of allowance of $843 and $1,195 at
November 30, 2017
|
|
|
and May 31, 2017, respectively
|
$2,934
|
$2,895
|
Other receivables
|
$253
|
$458
|
Income taxes receivable
|
$2,303
|
$2,301
|
Prepaid and other current assets
|
$1,298
|
$1,649
|
Total current assets
|
$15,477
|
$23,460
|
Total
property and equipment - net
|
$28,929
|
$31,318
|
OTHER
ASSETS:
|
|
|
Condominium inventory
|
$190
|
$621
|
Land held for future development
|
$229
|
$229
|
Course development — net of accumulated amortization of
$3,454 and $3,322 at
|
|
|
November 30, 2017 and May 31, 2017, respectively
|
$1,086
|
$1,111
|
Deferred income taxes
|
$9
|
$-
|
Other
|
$730
|
$853
|
Total other assets
|
$2,244
|
$2,814
|
TOTAL
|
$46,650
|
$57,592
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
CURRENT
LIABILITIES:
|
|
|
Current portion of capital lease payable
|
$355
|
$331
|
Accounts payable
|
$3,305
|
$3,076
|
Dividends payable
|
$-
|
$1,094
|
Income taxes payable
|
$131
|
$113
|
Deferred income
|
$1,975
|
$1,691
|
Accrued and other liabilities
|
$5,355
|
$5,906
|
Total current liabilities
|
$11,121
|
$12,211
|
DEFERRED
INCOME TAXES
|
$-
|
$194
|
OTHER
LONG-TERM LIABILITIES
|
$3,081
|
$4,010
|
CAPITAL
LEASE PAYABLE, NET OF CURRENT PORTION
|
$11,056
|
$11,237
|
COMMITMENTS
AND CONTINGENCIES
|
|
|
STOCKHOLDERS'
EQUITY:
|
|
|
Common stock, $0.0001 par value (50,000,000 authorized; 28,649,663
issued and
|
|
|
24,310,482 outstanding as of November 30, 2017; 28,557,968 issued
and 24,224,924
|
|
|
outstanding as of May 31, 2017)
|
$3
|
$3
|
Additional paid-in capital
|
$59,206
|
$59,060
|
Accumulated deficit
|
$(15,317)
|
$(6,622)
|
Treasury stock, at cost
(4,339,181 shares
at November 30, 2017 and 4,333,044
|
|
|
shares at May 31, 2017)
|
$(22,494)
|
$(22,481)
|
Accumulated other comprehensive loss, net of taxes - unrealized
loss
|
|
|
on available for sale securities
|
$(9)
|
$(4)
|
Total
National American University Holdings, Inc. stockholders'
equity
|
$21,389
|
$29,956
|
Non-controlling
interest
|
$3
|
$(16)
|
Total
stockholders' equity
|
$21,392
|
$29,940
|
TOTAL
|
$46,650
|
$57,592
|
The accompanying notes are an integral part of these condensed
consolidated financial statements.
7
The following table provides a reconciliation of net loss
attributable to the Company to EBITDA/LBITDA:
|
Three Months Ended
November 30,
|
Six Months Ended
November 30,
|
||
|
2017
|
2016
|
2017
|
2016
|
|
(dollars in thousands)
|
|||
Net
Loss attributable to the Company
|
$(3,777)
|
$(752)
|
$(7,605)
|
$(2,808)
|
Income
attributable to non-controlling interest
|
5
|
10
|
19
|
27
|
Interest
Income
|
(29)
|
(27)
|
(49)
|
(49)
|
Interest
Expense
|
208
|
214
|
417
|
428
|
Income
Tax Benefit (Expense)
|
56
|
(406)
|
(185)
|
(1,397)
|
Depreciation
and Amortization
|
1,234
|
1,291
|
2,440
|
2,597
|
|
|
|
|
|
EBITDA
(LBITDA)
|
$(2,303)
|
$330
|
$(4,963)
|
$(1,202)
|
EBITDA/LBITDA consists of income attributable to the Company, less
income from non-controlling interest, plus loss from
non-controlling interest, minus interest income, plus interest
expense (which is not related to any debt but to the accounting
required for the capital lease), plus income taxes, plus
depreciation and amortization. The Company uses EBITDA/LBITDA as a
measure of operating performance. However, EBITDA/LBITDA is not a
recognized measurement under U.S. generally accepted accounting
principles, or GAAP, and when analyzing its operating performance,
investors should use EBITDA/LBITDA in addition to, and not as an
alternative for, income as determined in accordance with GAAP.
Because not all companies use identical calculations, the
Company’s presentation of EBITDA/LBITDA may not be comparable
to similarly titled measures of other companies and is therefore
limited as a comparative measure. Furthermore, as an analytical
tool, EBITDA/LBITDA has additional limitations, including that (a)
it is not intended to be a measure of free cash flow, as it does
not consider certain cash requirements such as tax payments; (b) it
does not reflect changes in, or cash requirements for, its working
capital needs; and (c) although depreciation and amortization are
non-cash charges, the assets being depreciated and amortized often
will have to be replaced in the future, and EBITDA/LBITDA does not
reflect any cash requirements for such replacements, or future
requirements for capital expenditures or contractual commitments.
To compensate for these limitations, the Company evaluates its
profitability by considering the economic effect of the excluded
expense items independently as well as in connection with its
analysis of cash flows from operations and through the use of other
financial measures.
The Company believes EBITDA/LBITDA is useful to an investor in
evaluating its operating performance because it is widely used to
measure a company’s operating performance without regard to
certain non-cash expenses (such as depreciation and amortization)
and expenses that are not reflective of its core operating results
over time. The Company believes EBITDA/LBITDA presents a meaningful
measure of corporate performance exclusive of its capital
structure, the method by which assets were acquired and non-cash
charges, and provides us with additional useful information to
measure its performance on a consistent basis, particularly with
respect to changes in performance from period to
period.
8