PITTSBURGH, Feb. 4, 2003 (PRIMEZONE) -- Education Management Corporation (Nasdaq:EDMC) today reported its financial results for the second quarter ended December 31, 2002. For the quarter, net revenues increased 35.3% to $175.1 million and net income grew 33.8% to $25.8 million, or 70 cents per diluted share. Robert Knutson, EDMC's Chairman and Chief Executive Officer, commented, "We're pleased to report our second quarter results, which were in line with our plans. Enrollment growth as of the start of the third quarter leads us to project continued strong operating results for the balance of the fiscal year."
Financial highlights:
-- Revenues for the three months ended December 31, 2002 increased
35.3% to $175.1 million, compared to $129.5 million for the same
period a year ago. Revenue growth in the second quarter resulted
from a 36.1% increase in student enrollment and an approximate 7%
increase in average tuition rates. In the prior-year period, the
consolidated statement of income included only 11 days of
financial results of Argosy Education Group. Total enrollment at
the start of the second quarter of fiscal 2003 was 43,784 students
as compared to 32,180 students last year. Argosy's enrollment was
7,301 students as of the start of the second quarter of fiscal
2003.
-- Second quarter operating income (EBIT) rose 31.3% to $42.0 million
from $32.0 million for the same period a year ago. The
consolidated EBIT margin was 24.0%, compared to 24.7% in the prior
period. The operating margin would have been flat for the quarter
except for the inclusion of Argosy's results in our consolidated
financial statements. Argosy tends to have stronger profitability
in the second half of the fiscal year.
-- Net income for the quarter grew 33.8% to $25.8 million, or $0.70
per diluted share, compared to $19.3 million, or $0.58 per diluted
share, in the second quarter last year.
-- At December 31, 2002, the Company had cash and cash equivalents of
$8.0 million. Cash flow from operations for the second quarter was
negative $11.5 million compared to $37.6 million of positive cash
flow in the second quarter last year. This year-over-year swing in
quarterly cash flow was a timing issue, resulting from The Art
Institutes' current winter academic quarter starting six days
later in January this year. Student loan proceeds normally
received by electronic transfer in the last week of December were
received in early January, because federal regulations provide for
the payment of these funds only within 10 days of the start of
classes. Total loan proceeds received by The Art Institutes within
10 days of the start of the winter quarter increased to $67
million this year from $53 million last year, and all of these
funds were received in January. In the previous fiscal year,
approximately $51 million of these funds were received in
December.
-- Capital expenditures during the quarter were approximately $26
million. Argosy University started construction of its new Twin
Cities, Minnesota facility and The Art Institutes' school in
Miami, recently renamed Miami International University of Art &
Design, completed the first phase of its move to a new facility.
We continue to project approximately $79 million in capital
expenditures for fiscal year 2003.
Student Enrollment
At the start of the current winter quarter (third quarter of fiscal 2003), total enrollment at EDMC's schools was 43,461, a 15.4% increase from the same time last year. The Art Institutes' enrollment increased 14.2% to 35,906 from 31,442 as of the comparable period last year. Argosy's enrollment at the beginning of the current fiscal quarter was 7,555, a 21.5% increase as compared to 6,216 students in the prior year. Last year's Argosy enrollment included 94 students attending the ITI school in Halifax. The teach-out of all programs at that location announced in August 2002, has been completed.
2003 2002 Change
Winter Winter %
Total Enrollment
The Art Institutes 35,906 31,442 14.2%
Argosy Education Group 7,555 6,216 21.5%
------ ------ -----
Total Enrollment 43,461 37,658 15.4%
Same-School Enrollment (schools owned for 2 years or more)
The Art Institute 33,179 29,848 11.2%
Argosy Education Group 7,487 6,122 22.3%
------ ------ -----
Total Same-School Enrollment 40,666 35,970 13.1%
Total Students Taking 100%
Courses Online 601 215 179.5%
Total Online Enrollment 2,586 904 186.1%
The Company's quarterly revenues and income fluctuate with student enrollment patterns. Student enrollment has typically peaked in the fall (fiscal year second quarter), when the largest number of new high school graduates traditionally begins post-secondary education. The Company's quarterly costs and expenses, however, do not fluctuate as significantly as revenues.
Business Outlook
Based on the January enrollment, the Company expects third quarter year-over-year revenue growth of 18%. For the fourth quarter of fiscal 2003, year-over-year total enrollment growth for the Company is expected to remain approximately 15%, with The Art Institutes achieving total enrollment growth above 13%. For fiscal year 2003, the Company estimates revenue growth of 27% with operating margins improving by approximately 100 basis points over the prior year. Diluted EPS of $0.50 and $1.53 are expected for the third quarter and fiscal year, respectively.
Conference Call with Management
Education Management will host a conference call to discuss its second fiscal quarter 2003 earnings today at 10:30 a.m. (Eastern Time). Those wishing to participate in this call should dial 303-262-2050 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.edumgt.com. (The audio will be available for 60 days on this Web site.)
Education Management Corporation (www.edumgt.com) is among the largest providers of private post-secondary education in North America, based on student enrollment and revenue, with approximately 44,000 students as of fall 2002 at 43 primary campus locations in 26 major cities. EDMC's Art Institutes (www.artinstitutes.edu) offer master's, bachelor's, associate's and non-degree programs in the areas of design, media arts, fashion and culinary arts. EDMC's Argosy Education Group provides graduate and undergraduate degree programs in various fields including psychology, education, business, law and the health sciences. EDMC has provided career-oriented education for 40 years, and its education institutions have more than 150,000 alumni.
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 (unaudited)
(Dollars in thousands, except per share amounts)
For the three months For the six months
ended December 31, ended December 31,
2001 2002 2001 2002
--------- --------- --------- ---------
Net revenues $ 129,490 $ 175,136 $ 221,364 $ 303,279
Costs and expenses:
Educational services 74,326 100,753 141,458 194,883
General and
administrative 22,679 31,322 43,403 59,482
Amortization of
intangible assets 530 1,095 839 2,060
--------- --------- --------- ---------
97,535 133,170 185,700 256,425
--------- --------- --------- ---------
Income before
interest and taxes 31,955 41,966 35,664 46,854
Interest expense, net 548 332 1,027 642
--------- --------- --------- ---------
Income before income
taxes 31,407 41,634 34,637 46,212
Provision for
income taxes 12,123 15,823 13,370 17,563
--------- --------- --------- ---------
Net income $ 19,284 $ 25,811 $ 21,267 $ 28,649
========= ========= ========= =========
Diluted earnings
per share $ .58 $ .70 $ .65 $ .78
Weighted average
number of diluted
shares Outstanding
(000s): 33,363 36,685 32,626 36,650
Other selected data (unaudited):
For the three months For the six months
ended December 31, ended December 31,
2001 2002 2001 2002
--------- --------- --------- ---------
Cash flows from
operations 37,641 (11,490) 66,525 21,418
Capital expenditures 8,760 26,253 28,892 55,648
Depreciation and
amortization 7,196 9,301 14,049 18,551
Selected Consolidated Balance Sheet Data (unaudited):
As of December 31,
2001 2002
----------- -----------
Cash and cash equivalents $ 45,452 $ 8,047
Receivables, net 33,318 35,509
Current assets 98,331 67,682
Total assets 439,285 474,431
Current liabilities 117,755 87,818
Long-term debt (including current
portion) 4,049 3,778
Shareholders' investment 312,247 379,625