Universal Technical Institute Reports Fiscal Year 2011 Third Quarter Results

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Universal Technical Institute Reports Fiscal Year 2011 Third Quarter Results

Universal Technical Institute Reports Fiscal Year 2011 Third Quarter Results

PR Newswire

SCOTTSDALE, Ariz., July 27, 2011 /PRNewswire/ -- Universal Technical Institute, Inc. (NYSE: UTI), the leading provider of automotive technician training, today reported net revenues for the third quarter ended June 30, 2011 of $108.9 million, a 1.3 percent increase from $107.5 million for the third quarter of the prior year.  Net income for the third quarter ended June 30, 2011 was $4.0 million, a decrease of 35.8 percent from $6.3 million for the third quarter of the prior year.  Earnings per share for the third quarter ended June 30, 2011 was 16 cents per diluted share as compared to 25 cents per diluted share for the third quarter ended June 30, 2010.  The reduction in workforce announced on June 30, 2011, which resulted in severance costs of $4.3 million (pre-tax) impacted earnings per share by approximately 11 cents for the third quarter ended June 30, 2011. See "Use of Non-GAAP Financial Information" below.

Net revenues for the nine months ended June 30, 2011 were $340.5 million, a 7.5 percent increase from $316.7 million for the nine months ended June 30, 2010.  Net income for the nine months ended June 30, 2011 was $21.3 million, a decrease of 1.5 percent as compared to net income of $21.6 million for the nine months ended June 30, 2010. Earnings per share for the nine months ended June 30, 2011 was 86 cents per diluted share as compared to 88 cents per diluted share for the nine months ended June 30, 2010.

Return on equity(1) for the trailing four quarters ended June 30, 2011 was 24.0 percent compared to 25.6 percent for the trailing four quarters ended Sept. 30, 2010.

"During the third quarter, we implemented several initiatives to align our cost structure with current and anticipated revenues," said Kim McWaters, chief executive officer. "Given the pressures from a challenging economic and regulatory environment, new student trends and our inherent business cycle, we continue to believe it difficult to grow our student population and associated revenues in the near term.  Therefore, we are simultaneously focused on reversing the trends, running the business as cost efficiently as possible while ensuring quality educational outcomes for our students."  

(1) Return on equity is calculated as the sum of net income for the last four quarters divided by the average of total shareholders' equity balances at the end of each of the last five quarters.

Student Metrics


Three Months Ended


Nine Months Ended

June 30,


June 30,



2011


2010




2011


2010



(Rounded to hundreds)


Total starts

2,700


4,000




9,600


12,000


Average undergraduate full-time student enrollment

17,200


17,900




18,800


18,300


End of period undergraduate full-time student enrollment

16,200


17,600




16,200


17,600





Third Quarter Operating Performance

For the third quarter of fiscal 2011, revenues were $108.9 million, a 1.3 percent increase from $107.5 million for last year's third quarter.  The increase in revenues primarily relates to an increase in tuition rates partially offset by a decrease in average undergraduate full-time student enrollment of 3.8 percent.  During the third quarter of fiscal 2011 and 2010, tuition revenue excluded $1.7 million and $2.4 million, respectively, related to students participating in the Company's proprietary loan program which will be recognized as revenue when payments are received.

Operating income and margin for the third quarter of fiscal 2011 was $6.7 million and 6.2 percent, respectively, compared to operating income and margin of $9.9 million and 9.2 percent, respectively, in the same period last year.  The decrease in operating income is primarily attributable to the $4.3 million of severance costs associated with the reduction in our workforce as well as increases in compensation and benefits and depreciation expense, partially offset by a decrease in bonus expense as a result of modifications to our compensation plans made in response to the final regulations issued by the Department of Education in October 2010 which became effective July 1, 2011.  

For the three months ended June 30, 2011, the Dallas/Ft. Worth campus, which opened in June 2010, had revenues of $3.1 million and incurred $3.6 million in operating expenses, which includes $1.5 million in corporate allocations.  For the three months ended June 30, 2010, the Dallas/Ft. Worth campus had revenues of $0.1 million and incurred $2.5 million in operating expenses, which includes $1.0 million in corporate allocations.  

Earnings before interest, taxes, depreciation and amortization (EBITDA) for the third quarter of fiscal 2011 was $13.2 million compared to $14.9 million in the same period last year.  See "Use of Non-GAAP Financial Information" below.

Nine Month Operating Performance

Revenues for the nine months ended June 30, 2011 were $340.5 million, a 7.5 percent increase from $316.7 million for the nine months ended June 30, 2010.  

Operating income and margin for the nine months ended June 30, 2011 were $34.9 million and 10.3 percent, respectively, compared to $34.8 million and 11.0 percent, respectively, for the nine months ended June 30, 2010.  The increase in operating income and margin are related to the increase in revenues, offset by increases in compensation and benefits, depreciation expense, occupancy expense and advertising expense.  The nine months ended June 30, 2011 included approximately $4.3 million of severance costs associated with the reduction in our workforce.

For the nine months ended June 30, 2011, the Dallas/Ft. Worth campus had revenues of $7.4 million and incurred $10.5 million in operating expenses, which includes $4.6 million in corporate allocations.  For the nine months ended June 30, 2010, the Dallas/Ft. Worth campus had revenues of $0.1 million and incurred $4.0 million in operating expenses, which includes $2.0 million in corporate allocations.

Net income for the nine months ended June 30, 2011 was $21.3 million, or 86 cents per diluted share, as compared to net income of $21.6 million, or 88 cents per diluted share, for the nine months ended June 30, 2010.

Earnings before interest, taxes, depreciation and amortization (EBITDA) for the nine months ended June 30, 2011 was $54.4 million compared to $49.4 million for the nine months ended June 30, 2010.  See "Use of Non-GAAP Financial Information" below.

Liquidity

Cash, cash equivalents and investments totaled $86.5 million at June 30, 2011, compared to $81.1 million at Sept. 30, 2010.  At June 30, 2011, shareholders' equity totaled $135.0 million as compared to $108.4 million at Sept. 30, 2010.  

Cash flow provided by operating activities was $2.7 million and $31.6 million for the three months and nine months ended June 30, 2011, respectively, compared with $12.4 million and $37.6 million for the three months and nine months ended June 30, 2010.

2011 Outlook

Given challenges presented by the economic and regulatory environment, we anticipate new students for the fourth quarter and full year will be below fiscal 2010 levels producing low single-digit revenue growth for the year.  With a heightened focus on improving efficiencies and cost containment we still expect operating margins for the year in the range of 11 percent to 13 percent, excluding the $4.3 million in severance charges. This guidance excludes any additional impact from new regulations which we cannot estimate at this time.

Conference Call

Management will hold a conference call to discuss the fiscal 2011 third quarter results today at 1:30 p.m. PDT (4:30 p.m. EDT). 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 August 8, 2011 by dialing 412-317-0088 or 877-344-7529 and entering pass code 451826.

Safe Harbor Statement

All statements contained herein, other than statements of historical fact, are "forward-looking" statements as defined in the Private Securities Litigation Reform Act of 1995.  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 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.

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.  

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 150,000 graduates in its 46-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 (NTI). To learn more about UTI and its training services, log on to www.uti.edu.

(Tables Follow)

UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED INCOME STATEMENTS

(UNAUDITED)





Three Months Ended


Nine Months Ended





June 30,


June 30,





2011


2010


2011


2010





(In thousands, except per share amounts)

Revenues


$    108,934


$ 107,525


$ 340,542


$ 316,678












Operating expenses:










Educational services and facilities


57,990


53,712


169,518


154,232


Selling, general and administrative


44,238


43,956


136,075


127,649



Total operating expenses


102,228


97,668


305,593


281,881

Income from operations


6,706


9,857


34,949


34,797












Other income:










Interest income, net


56


77


199


195


Other income


90


105


345


356



Total other income


146


182


544


551












Income before income taxes


6,852


10,039


35,493


35,348

Income tax expense


2,816


3,753


14,206


13,736

Net income


$       4,036


$    6,286


$   21,287


$   21,612












Earnings per share:









Net income per share – basic


$         0.16


$      0.26


$      0.87


$       0.90

Net income per share – diluted


$         0.16


$      0.25


$      0.86


$       0.88












Weighted average number of shares outstanding:











Basic


24,462


24,146


24,370


23,976



Diluted


24,765


24,730


24,688


24,511












Special cash dividend declared per common share


-


$1.50


-


$1.50




UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)





June 30,


September 30,





2011


2010





($'s in thousands)

Assets





Current assets:






Cash and cash equivalents


$             37,141


$            48,974


Investments, current portion


40,391


28,528


Receivables, net


16,620


19,253


Deferred tax assets


6,348


8,840


Prepaid expenses and other current assets


10,867


9,836



Total current assets


111,367


115,431

Investments, less current portion


8,954


3,596

Property and equipment, net


103,472


99,040

Goodwill


20,579


20,579

Other assets


5,241


3,853

               Total assets


$           249,613


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