Universal Technical Institute Reports Fiscal Year 2015 Fourth Quarter and Year-End Results

Dec 01, 2015, 16:05 ET from Universal Technical Institute, Inc.

SCOTTSDALE, Ariz., Dec. 1, 2015 /PRNewswire/ -- Universal Technical Institute, Inc. (NYSE: UTI), the leading provider of automotive technician training, today reported revenues for the fourth quarter ended September 30, 2015 of $90.7 million, a 4.9% percent decrease from $95.3 million for the fourth quarter of the prior year.  Including the impact of a $12.4 million goodwill impairment charge, net loss for the fourth quarter ended September 30, 2015 was $9.8 million, or a loss of 41 cents per diluted share, compared to net income of $1.6 million, or 6 cents per diluted share, for the fourth quarter ended September 30, 2014.

Revenues for the year ended September 30, 2015 were $362.7 million, a 4.2% percent decrease from $378.4 million for the year ended September 30, 2014. Net loss for the year ended September 30, 2015 was $9.1 million, or a loss of 38 cents per diluted share, compared to net income of $2.0 million, or 8 cents per diluted share, for the year ended September 30, 2014.

Goodwill impairment expense of $12.4 million (pre-tax) impacted diluted loss per share by approximately 32 cents for the quarter and year ended September 30, 2015. Our new campus in Long Beach, which opened during the fourth quarter, impacted earnings by $2.8 million (pre-tax) or 8 cents per diluted share for the quarter and $4.6 million (pre-tax) or 12 cents per diluted share for the year ended September 30, 2015.

"Our performance in the fourth quarter reflected the economic, regulatory and reputational headwinds our industry faces, but also our continued confidence in our business and our willingness to invest for the long term," said Kim McWaters, UTI's chairman and CEO. "The strong launch at our Long Beach campus continues to reinforce our new campus strategy and we remain committed to investing in rebuilding our student population and delivering quality education and strong student outcomes. We are confident that these investments can help us counteract the challenges of today and deliver growth for the future."

Student Metrics

Three Months Ended Sept. 30,

Twelve Months Ended Sept. 30,

2015

2014

2015

2014

(Rounded to hundreds)

Total starts

6,000

6,400

12,400

13,600

Average undergraduate full-time student enrollment

12,800

13,900

13,200

14,400

End of period undergraduate full-time student enrollment

14,200

15,500

14,200

15,500

Fourth Quarter Operating Performance For the fourth quarter of 2015, revenues were $90.7 million, a 4.9% percent decrease from $95.3 million for last year's fourth quarter.  The decrease in revenues primarily related to a decrease of 7.9 percent in average undergraduate full-time student enrollment.  The decrease was partially offset by an increase in tuition rates.  During the fourth quarter of 2015 and 2014, tuition excluded $4.6 million and $4.8 million, respectively, related to students participating in the Company's proprietary loan program which will be recognized as revenues when payments are received.

Operating loss and margin for the fourth quarter of 2015 were $13.2 million and 14.6 percent, respectively, compared to operating income and margin of $3.9 million and 4.1 percent, respectively, in the same period last year.  The decreases were primarily attributable to the decline in revenues, goodwill impairment expense and an increase in advertising expense, partially offset by a decrease in compensation expense. Excluding the impact of goodwill impairment expense and the Long Beach campus opening, operating income and margin were $1.8 million and 2.0% for the fourth quarter of 2015.

Earnings before interest, taxes, depreciation and amortization and goodwill impairment (adjusted EBITDA) for the fourth quarter of 2015 was $4.0 million compared to $9.2 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, 2015 were $362.7 million, a 4.2% percent decrease from $378.4 million for the year ended September 30, 2014. Tuition excluded $21.1 million and $23.2 million, respectively, related to students participating in the Company's proprietary loan program which will be recognized as revenues when payments are received.

Operating loss and margin for the year ended September 30, 2015 were $9.2 million and 2.5 percent, respectively, compared to operating income and margin $6.3 million and 1.7 percent, respectively, for the year ended September 30, 2014. The decreases in operating income and margin were primarily attributable to the decline in revenues, goodwill impairment expense and an increase in advertising expense, partially offset by decreases in compensation costs, bad debt expense and contract services expense. Excluding the impact of goodwill impairment expense and the Long Beach campus opening, operating income and margin were $7.6 million and 2.1% for the year ended September 30, 2015.

Adjusted EBITDA for the year ended September 30, 2015 was $24.1 million compared to $29.1 million for the year ended September 30, 2014. See "Use of Non-GAAP Financial Information" below.

Liquidity Cash, cash equivalents and investments totaled $59.2 million at September 30, 2015, compared to $96.1 million at September 30, 2014.  At September 30, 2015, shareholders' equity totaled $113.5 million as compared to $133.2 million at September 30, 2014.  We paid cash dividends of $0.10 per common share in December 2014 and March and June 2015 for an aggregate payment of approximately $7.3 million.  Additionally, we declared a dividend of $0.02 per common share in September 2015, payable in October 2015, totaling $0.5 million.

We purchased 104,318 shares of stock during the three months ended September 30, 2015 at an average price per share of $4.75 for a total cost of approximately $0.5 million pursuant to the previously announced share repurchase plan. We purchased 852,318 shares of stock during the year ended September 30, 2015 at an average price per share of $7.73 for a total cost of approximately $6.6 million.

Cash flow provided by operating activities was $8.4 million for the three months ended September 30, 2015, compared to $17.2 million for the three months ended September 30, 2014.  Cash provided by operating activities was $8.2 million for the year ended September 30, 2015 compared to $27.1 million for the year ended September 30, 2014.

2016 Outlook For the year ending September 30, 2016, we expect new student starts to be up in the low single digits, however, given the number of students currently in school and the timing of the anticipated start growth, we expect our average student population to be down in the mid to high single digits as a percentage compared with the year ended September 30, 2015.  While annual tuition increases will slightly offset the decline in average students, we expect revenue to decline approximately two percent. To support new student growth for this year and next, we will continue to invest in growth opportunities during the year which will result in lower operating income and minimal levels of EBITDA. Capital expenditures are expected to be approximately $19.5 million to $20.5 million for the year ending September 30, 2016. Due to the seasonality of our business and normal fluctuations in student populations, we would expect volatility in our quarterly results.

Conference Call Management will hold a conference call to discuss the 2015 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 10, 2015 by dialing 412-317-0088 or 877-344-7529 and entering pass code 10076058.

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.

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 190,000 graduates in its 50-year history, UTI offers undergraduate degree and diploma programs at 12 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)

 

UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED INCOME STATEMENTS

(UNAUDITED)

Three Months Ended Sept. 30,

Twelve Months Ended Sept. 30,

2015

2014

2015

2014

(In thousands, except per share amounts)

Revenues

$

90,653

$

95,313

$

362,674

$

378,393

Operating expenses:

Educational services and facilities

50,753

49,440

194,416

200,054

Selling, general and administrative

40,772

41,993

165,124

172,002

Goodwill impairment

12,357

12,357

Total operating expenses

103,882

91,433

371,897

372,056

Income (loss) from operations

(13,229)

3,880

(9,223)

6,337

Other income:

Interest expense, net

(661)

(507)

(2,125)

(1,624)

Equity in earnings of unconsolidated affiliate

134

128

527

471

Other income (expense)

(159)

(9)

140

563

Total other expense, net

(686)

(388)

(1,458)

(590)

Income (loss) before income taxes

(13,915)

3,492

(10,681)

5,747

Income tax expense (benefit)

(4,092)

1,908

(1,532)

3,710

Net income (loss)

$

(9,823)

$

1,584

$

(9,149)

$

2,037

Other comprehensive income (net of tax):

Equity interest in investee's unrealized gains on hedging derivatives, net of taxes

1

20

Comprehensive income (loss)

(9,822)

1,584

(9,129)

2,037

Earnings (loss) per share:

Net income (loss) per share - basic

$

(0.41)

$

0.06

$

(0.38)

$

0.08

Net income (loss) per share - diluted

$

(0.41)

$

0.06

$

(0.38)

$

0.08

Weighted average number of shares outstanding:

Basic

24,134

24,638

24,391

24,640

Diluted

24,134

24,965

24,391

24,920

Cash dividends declared per common share

$

0.02

$

0.10

$

0.32

$

0.40

 

UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

Sept. 30, 2015

Sept. 30, 2014

Assets

(In thousands)

Current assets:

Cash and cash equivalents

$

29,438

$

38,985

Restricted cash

5,824

6,544

Investments, current portion

28,086

45,906

Receivables, net

22,409

12,118

Deferred tax assets, net

4,539

7,470

Prepaid expenses and other current assets

17,761

16,509

Total current assets

108,057

127,532

Investments, less current portion

1,719

11,257

Property and equipment, net

124,144

106,927

Goodwill

8,222

20,579

Deferred tax assets, net

20,248

11,923

Other assets

11,912

9,851

Total assets

$

274,302

$

288,069

Liabilities and Shareholders' Equity

Current liabilities:

Accounts payable and accrued expenses

$

42,620

$

38,827

Dividends payable

485

Deferred revenue

44,693

46,365

Accrued tool sets

3,624

3,806

Construction liability

1,252

Financing obligation, current

737

5,234

Income tax payable

1,187

4,336

Other current liabilities

3,148

2,515

Total current liabilities

96,494

102,335

Deferred rent liability

10,822

10,323

Financing obligation

44,053

32,478

Other liabilities

9,458

9,741

Total liabilities

160,827

154,877

Commitments and contingencies

Shareholders' equity:

Common stock, $0.0001 par value, 100,000,000 shares authorized, 31,098,193 shares issued and 24,233,296 shares outstanding as of September 30, 2015 and 30,838,460 shares issued and 24,825,881 shares outstanding as of September 30, 2014

3

3

Preferred stock, $0.0001 par value, 10,000,000 shares authorized; 0 shares issued and outstanding

Paid-in capital

178,202

174,376

Treasury stock, at cost, 6,864,897 shares as of September 30, 2015 and 6,012,579 as of September 30, 2014

(97,388)

(90,769)

Retained earnings

32,638

49,582

Accumulated other comprehensive income

20

Total shareholders' equity

113,475

133,192

Total liabilities and shareholders' equity

$

274,302

$

288,069

 

UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

Twelve Months Ended Sept. 30,

2015

2014

(In thousands)

Cash flows from operating activities:

Net income (loss)

$

(9,149)

$

2,037

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

17,294

18,923

Amortization of assets subject to financing obligation

1,861

1,551

Amortization of held-to-maturity investments

1,627

2,393

Goodwill impairment

12,357

Bad debt expense

1,589

3,972

Stock-based compensation

4,265

5,721

Excess tax benefit from stock-based compensation

(85)

Deferred income taxes

(5,394)

(4,050)

Equity in earnings of unconsolidated affiliate

(527)

(471)

Training equipment credits earned, net

(899)

(1,002)

Loss on disposal of property and equipment

24

402

Changes in assets and liabilities:

Restricted cash: Title IV credit balances

60

230

Receivables

(11,443)

(2,701)

Prepaid expenses and other current assets

(1,065)

(767)

Other assets

(677)

(514)

Accounts payable and accrued expenses

2,705

(1,859)

Deferred revenue

(1,672)

(660)

Income tax payable/receivable

(3,149)

4,053

Accrued tool sets and other current liabilities

1,678

530

Deferred rent liability

(753)

(1,610)

Other liabilities

(490)

963

Net cash provided by operating activities

8,242

27,056

Cash flows from investing activities:

Purchase of property and equipment

(29,030)

(12,024)

Proceeds from disposal of property and equipment

3

42

Purchase of investments

(26,061)

(61,729)

Proceeds received upon maturity of investments

51,792

63,892

Capitalized costs for intangible assets

(453)

Return of capital contribution from unconsolidated affiliate

464

568

Restricted cash: proprietary loan program

607

49

Net cash used in investing activities

(2,678)

(9,202)

Cash flows from financing activities:

Payment of cash dividends

(7,310)

(9,875)

Repayment of financing obligation

(663)

(613)

Payment of payroll taxes on stock-based compensation through shares withheld

(519)

(1,639)

Excess tax benefit from stock-based compensation

85

Purchase of treasury stock

(6,619)

(1,423)

Net cash used in financing activities

(15,111)

(13,465)

Net (decrease) increase in cash and cash equivalents

(9,547)

4,389

Cash and cash equivalents, beginning of period

38,985

34,596

Cash and cash equivalents, end of period

$

29,438

$

38,985

 

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,

2015

2014

2015

2014

(In thousands)

Net income (loss)

$

(9,823)

$

1,584

$

(9,149)

$

2,037

Interest expense, net

661

507

2,125

1,624

Income tax expense (benefit)

(4,092)

1,908

(1,532)

3,710

Depreciation and amortization

4,872

5,247

20,323

21,689

Goodwill impairment expense

12,357

12,357

Adjusted EBITDA

$

3,975

$

9,246

$

24,124

$

29,060

 

Reconciliation of Income (Loss) from Operations Impact of Goodwill Impairment and Long Beach Campus Opening

Three Months Ended Sept. 30,

Twelve Months Ended Sept. 30,

2015

2014

2015

2014

(In thousands)

Income (loss) from operations, as reported

$

(13,229)

$

3,880

$

(9,223)

$

6,337

Goodwill impairment expense

12,357

12,357

Long Beach loss from operations

2,666

4,433

Income from operations, adjusted for goodwill impairment and Long Beach campus opening

$

1,794

$

3,880

$

7,567

$

6,337

Operating margin, adjusted for goodwill impairment and Long Beach campus opening

2.0

%

4.1

%

2.1

%

1.7

%

 

UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP FINANCIAL INFORMATION TO NON-GAAP FINANCIAL INFORMATION

(UNAUDITED)

Reconciliation of Earnings Per Share Impact of Goodwill Impairment Expense

Three Months Ended Sept. 30,

Twelve Months Ended Sept. 30,

2015

2014

2015

2014

(In thousands)

Net income (loss), as reported

$

(9,823)

$

1,584

$

(9,149)

$

2,037

Goodwill impairment expense

12,357

12,357

Less:  tax effects of goodwill impairment

(4,720)

(4,720)

Net income (loss), adjusted for goodwill impairment

$

(2,186)

$

1,584

$

(1,512)

$

2,037

Diluted earnings (loss) per share, as reported

$

(0.41)

$

0.06

$

(0.38)

$

0.08

Diluted earnings (loss) per share, adjusted for goodwill impairment

$

(0.09)

$

0.06

$

(0.06)

$

0.08

Diluted weighted average shares outstanding

24,134

24,965

24,391

24,920

 

Reconciliation of Earnings Per Share Impact of Long Beach Campus Opening

Three Months Ended Sept. 30,

Twelve Months Ended Sept. 30,

2015

2014

2015

2014

(In thousands)

Net income (loss), as reported

$

(9,823)

$

1,584

$

(9,149)

$

2,037

Long Beach loss before income taxes

2,829

4,597

Less:  tax effects of Long Beach loss before income taxes

(1,081)

(1,756)

Net income (loss), adjusted for Long Beach campus opening

$

(8,075)

$

1,584

$

(6,308)

$

2,037

Diluted earnings (loss) per share, as reported

$

(0.41)

$

0.06

$

(0.38)

$

0.08

Diluted earnings (loss) per share, adjusted for Long Beach campus opening

$

(0.33)

$

0.06

$

(0.26)

$

0.08

Diluted weighted average shares outstanding

24,134

24,965

24,391

24,920

 

UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES

SELECTED SUPPLEMENTAL INFORMATION

(UNAUDITED)

Selected Supplemental Financial Information

Three Months Ended Sept. 30,

Twelve Months Ended Sept. 30,

2015

2014

2015

2014

(In thousands)

Salaries expense

$

38,810

$

39,918

$

152,595

$

160,244

Employee benefits and tax

6,810

7,764

28,864

31,452

Bonus expense

5

1,632

5,241

3,575

Stock-based compensation

1,291

1,400

4,265

5,721

Total compensation and related costs

$

46,916

$

50,714

$

190,965

$

200,992

Occupancy expense

$

9,965

$

9,547

$

38,540

$

38,720

Depreciation and amortization expense

$

4,872

$

5,246

$

20,323

$

21,689

Bad debt expense

$

840

$

1,103

$

1,589

$

3,972

 

Graduate Employment Rate

Twelve Months Ended Sept. 30,

2014

2013

Graduate employment rate

88

%

88

%

Graduates

9,900

10,600

Graduates available for employment

9,200

9,900

Graduates employed

8,100

8,700

The employment calculation is based on all graduates, including those that completed manufacturer specific advanced training programs, from October 1, 2013 to September 30, 2014 and October 1, 2012 to September 30, 2013, respectively, excluding graduates not available for employment because of continuing education, military service, health, incarceration, death or international student status.

 

SOURCE Universal Technical Institute, Inc.



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