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Last updated on April 16, 2014 at 12:14 EDT

Universal Technical Institute Reports Fiscal Year 2013 Second Quarter Results

April 30, 2013

SCOTTSDALE, Ariz., April 30, 2013 /PRNewswire/ – Universal Technical Institute, Inc. (NYSE: UTI), the leading provider of automotive technician training, today reported revenues for the second quarter ended March 31, 2013 of $95.1 million, a 10.5 percent decrease from $106.2 million for the second quarter of the prior year. Net loss for the second quarter ended March 31, 2013 was $0.9 million, or a loss of 4 cents per diluted share, compared to net income of $1.9 million, or 8 cents per diluted share, for the second quarter ended March 31, 2012.

Revenues for the six months ended March 31, 2013 were $193.5 million, a 9.0 percent decrease from $212.7 million for the six months ended March 31, 2012. Net income for the six months ended March 31, 2013 was $2.6 million, or 11 cents per diluted share, compared to $6.4 million, or 26 cents per diluted share, for the six months ended March 31, 2012.

Return on equity for the trailing four quarters ended March 31, 2013 was 3.6 percent compared to 6.2 percent for the trailing four quarters ended Sept. 30, 2012.

“Due to current conditions, we have made choices that balance cost containment with ‘return to growth’ initiatives which negatively impacted second quarter financial results,” said Kim McWaters, chief executive officer. “While the next few quarters will continue to be challenging, I am encouraged that we have seen some early indications of improved student interest and internal efficiencies. Our manufacturer partners continue to increase their demand for graduates and as their demand increases, supply of students should follow.”

    Student
     Metrics

                   Three Months Ended     Six Months Ended

                                              March 31,

                       March 31,
                       ---------

                                  2013                    2012   2013   2012
                                  ----                    ----   ----   ----

                    (Rounded to hundreds)

    Total starts                 2,900                   3,400  5,600  6,700

    Average
     undergraduate
     full-time
     student
     enrollment                 15,000                  16,700 15,700 17,400

    End of period
     undergraduate
     full-time
     student
     enrollment                 14,400                  16,300 14,400 16,300

Second Quarter Operating Performance

For the second quarter of 2013, revenues were $95.1 million, a 10.5 percent decrease from $106.2 million for last year’s second quarter. The decrease in revenues primarily related to a decrease in average undergraduate full-time student enrollment of 10.2 percent. The decrease was partially offset by an increase in tuition rates. During the second quarter of 2013 and 2012, tuition excluded $5.2 million and $3.7 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 second quarter of 2013 were $1.9 million and (2.0) percent, respectively, compared to operating income and margin of $3.0 million and 2.8 percent, respectively, in the same period last year. The operating loss was primarily attributable to the decrease in revenues and was partially offset by decreases in compensation and advertising expense.

Earnings before interest, taxes, depreciation and amortization (EBITDA) for the second quarter of 2013 was $4.2 million compared to $9.5 million in the same period last year. See “Use of Non-GAAP Financial Information” below.

Six Month Operating Performance

Revenues for the six months ended March 31, 2013 were $193.5 million, a 9.0 percent decrease from $212.7 million for the six months ended March 31, 2012.

Operating income and margin for the six months ended March 31, 2013 were $4.1 million and 2.1 percent, respectively, compared to $10.3 million and 4.9 percent, respectively, for the six months ended March 31, 2012. The decreases in operating income and margin were related to the decrease in revenues, partially offset by decreases in compensation and advertising expense.

Earnings before interest, taxes, depreciation and amortization (EBITDA) for the six months ended March 31, 2013 was $16.3 million compared to $23.5 million for the six months ended March 31, 2012. See “Use of Non-GAAP Financial Information” below.

Liquidity

Cash, cash equivalents and investments totaled $94.3 million at March 31, 2013, compared to $101.7 million at Sept. 30, 2012. At March 31, 2013, shareholders’ equity totaled $141.4 million as compared to $146.1 million at Sept. 30, 2012. On Dec. 21, 2012, and March 29, 2013, we paid cash dividends of $0.10 per share to common stockholders of record as of Dec. 7, 2012 and March 15, 2013, respectively. The aggregate payment was approximately $4.9 million. Our Board of Directors evaluates dividends quarterly.

Pursuant to the previously announced share repurchase plan, we purchased 556,100 shares of stock during the six months ended March 31, 2013 at an average price of $9.61 for a total cost of approximately $5.4 million. We did not make any purchases during the three months ended March 31, 2013.

Cash flow provided by operating activities was $9.2 million and $7.6 million for the three months and six months ended March 31, 2013, respectively, compared with cash provided by operating activities of $10.0 million and $15.6 million for the three months and six months ended March 31, 2012, respectively.

2013 Outlook

Given the time required for new initiatives to take hold and the increasing lag between students applying for school and starting school, we expect new student starts to be down in the third quarter of 2013, before possibly showing year over year improvement in the fourth quarter. We anticipate full year new student starts for 2013 to be down by the mid to high single digits, resulting in a lower average student population for the year. These lower levels of enrollment will most likely result in a high single digit decline in revenue in 2013. While we expect significantly lower expenses in the second half of the year, we still believe we will record an overall decline in operating margin and net income compared to 2012.

Conference Call

Management will hold a conference call to discuss the 2013 second 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 May 14(th), 2013 by dialing 412-317-0088 or 877-344-7529 and entering pass code 10027834.

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.

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 160,000 graduates in its 47-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). To learn more about UTI and its training services, log on to www.uti.edu.

                                                                               UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES

                                                                                     CONDENSED CONSOLIDATED INCOME STATEMENTS

                                                                                                    (UNAUDITED)

                                                                                                                                                                                                                   Three Months Ended        Six Months Ended

                                                                                                                                                                                                                        March 31,                March 31,
                                                                                                                                                                                                                        ---------                ---------

                                                                                                                                                                                                                                    2013                 2012         2013         2012
                                                                                                                                                                                                                                    ----                 ----         ----         ----

                                                                                                                                                                                                                                       (In thousands, except per share amounts)

    Revenues                                                                                                                                                                                                                     $95,075             $106,240     $193,516     $212,667

    Operating expenses:

                                                                                                                                                                                                                 Educational
                                                                                                                                                                                                                 services and
                                                                                                                                                                                                                 facilities                            50,456       53,422      100,148     105,154

                                                                                                                                                                                                                 Selling,
                                                                                                                                                                                                                 general and
                                                                                                                                                                                                                 administrative                        46,558       49,803       89,301      97,171

                                                                                                                                                                                                                Total operating expenses               97,014      103,225      189,449     202,325
                                                                                                                                                                                                                                                       ------      -------      -------     -------

    Income (loss) from operations                                                                                                                                                                                                 (1,939)               3,015        4,067       10,342
                                                                                                                                                                                                                                  ------                -----        -----       ------

    Other income:

                                                                                                                                                                                                                 Interest
                                                                                                                                                                                                                 income, net                               72           58          119         150

                                                                                                                                                                                                                Other income                              245          213          364         366

                                                                                                                                                                                                                Total other income                        317          271          483         516
                                                                                                                                                                                                                                                          ---          ---          ---         ---

    Income (loss) before income taxes                                                                                                                                                                                             (1,622)               3,286        4,550       10,858

    Income tax expense (benefit)                                                                                                                                                                                                    (702)               1,354        1,908        4,447
                                                                                                                                                                                                                                    ----                -----        -----        -----

    Net income (loss)                                                                                                                                                                                                              $(920)              $1,932       $2,642       $6,411
                                                                                                                                                                                                                                   =====               ======       ======       ======

    Earnings per share:

    Net income (loss) per share - basic                                                                                                                                                                                           $(0.04)               $0.08        $0.11        $0.26
                                                                                                                                                                                                                                  ======                =====        =====        =====

    Net income (loss) per share - diluted                                                                                                                                                                                         $(0.04)               $0.08        $0.11        $0.26
                                                                                                                                                                                                                                  ======                =====        =====        =====

    Weighted average number of shares outstanding:

                                                                                                                                                                                                                Basic                                  24,396       24,692       24,581      24,692
                                                                                                                                                                                                                                                       ======       ======       ======      ======

                                                                                                                                                                                                                Diluted                                24,396       24,845       24,651      24,826
                                                                                                                                                                                                                                                       ======       ======       ======      ======

    Cash dividends declared per common share                                                                                                                                                                                       $0.10                $0.10        $0.20        $0.10
                                                                                                                                                                                                                                   =====                =====        =====        =====
                                              UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES

                                                      CONDENSED CONSOLIDATED BALANCE SHEETS

                                                                   (UNAUDITED)

                                                                             March 31,                                 Sept. 30,

                                                                                             2013                                      2012
                                                                                             ----                                      ----

                                                                           (In thousands)

    Assets

    Current assets:

                      Cash and cash
                      equivalents                                                         $28,536                                   $45,665

                     Restricted cash                                                        2,107                                       104

                      Investments,
                      current portion                                                      50,794                                    51,455

                     Receivables, net                                                      12,040                                    14,910

                      Deferred tax
                      assets, net                                                           5,751                                     7,977

                      Prepaid expenses
                      and other
                      current assets                                                       14,354                                    14,873

                     Total current assets                                                 113,582                                   134,984

    Investments, less current portion                                                      14,959                                     4,533

    Property and equipment, net                                                            92,133                                    91,939

    Goodwill                                                                               20,579                                    20,579

    Deferred tax assets, net                                                                6,910                                     5,576

    Other assets                                                                            8,932                                    10,547
                                                                                            -----                                    ------

                    Total assets                                                         $257,095                                  $268,158
                                                                                         ========                                  ========

    Liabilities and Shareholders' Equity

    Current liabilities:

                      Accounts payable
                      and accrued
                      expenses                                                            $31,530                                   $40,865

                     Deferred revenue                                                      46,725                                    52,564

                      Accrued tool
                      sets                                                                  4,224                                     4,264

                      Income tax
                      payable                                                                   -                                       744

                      Other current
                      liabilities                                                           1,848                                     1,003

                     Total current liabilities                                             84,327                                    99,440

                      Deferred rent
                      liability                                                            12,484                                    12,946

                      Construction
                      liability                                                            10,747                                     2,421

                      Other
                      liabilities                                                           8,119                                     7,266

                     Total liabilities                                                    115,677                                   122,073
                                                                                          -------                                   -------

    Commitments and contingencies

    Shareholders' equity:

                      Common stock,
                      $0.0001 par
                      value,
                      100,000,000
                      shares
                      authorized,

                      30,301,316 shares issued and
                      24,414,289

                      shares outstanding at March 31,
                      2013 and

                      30,222,132 shares issued and
                      24,891,205

                      shares outstanding at September
                      30, 2012                                                                  3                                         3

                      Preferred stock,
                      $0.0001 par
                      value,
                      10,000,000
                      shares
                      authorized,

                     0 shares issued and outstanding                                            -                                         -

                     Paid-in capital                                                      169,937                                   166,970

                      Treasury stock,
                      at cost,
                      5,887,027
                      shares at March
                      31, 2013 and

                      5,330,927 shares at September 30,
                      2012                                                                (89,288)                                  (83,924)

                      Retained
                      earnings                                                             60,766                                    63,036

                     Total shareholders' equity                                           141,418                                   146,085
                                                                                          -------                                   -------

    Total liabilities and shareholders' equity                                           $257,095                                  $268,158
                                                                                         ========                                  ========


                                                                                                          UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES

                                                                                                             CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                                                                               (UNAUDITED)

                                                                                                                                                                                                                                              Six Months Ended

                                                                                                                                                                                                                                                  March 31,
                                                                                                                                                                                                                                                ---------

                                                                                                                                                                                                                                                  2013                  2012
                                                                                                                                                                                                                                                  ----                  ----

                                                                                                                                                                                                                                             (In thousands)

    Cash flows from operating activities:

    Net income                                                                                              $2,642                                                    $6,411

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

                                                                                       Depreciation and amortization                                                 11,349                                                       12,276

                                                                                       Amortization of held-to-maturity investments                                     919                                                        1,025

                                                                                       Bad debt expense                                                               2,620                                                        3,144

                                                                                       Stock-based compensation                                                       3,005                                                        3,781

                                                                                       Excess tax benefit from stock-based compensation                                   -                                                         (159)

                                                                                       Deferred income taxes                                                            521                                                       (2,338)

                                                                                       Net training equipment credits earned                                           (881)                                                        (941)

                                                                                       Loss on disposal of property and equipment                                        62                                                           70

    Changes in assets and liabilities:

                                                                                       Receivables                                                                      940                                                       (3,204)

                                                                                       Prepaid expenses and other current assets                                      1,511                                                       (1,065)

                                                                                       Other assets                                                                    (707)                                                        (711)

                                                                                       Accounts payable and accrued expenses                                         (8,112)                                                       3,667

                                                                                       Deferred revenue                                                              (5,839)                                                      (6,358)

                                                                                       Income tax payable/receivable                                                 (1,291)                                                      (1,627)

                                                                                       Accrued tool sets and other current liabilities                                  805                                                          (29)

                                                                                       Deferred rent liability                                                         (462)                                                       1,152

                                                                                       Other liabilities                                                                534                                                          473

                                                                                       Net cash provided by operating activities                                      7,616                                                       15,567
                                                                                                                                                                      -----                                                       ------

    Cash flows from investing activities:

                                                                                       Purchase of property and equipment                                            (4,160)                                                      (3,515)

                                                                                       Proceeds from disposal of property and equipment                                  42                                                            -

                                                                                       Purchase of investments                                                      (44,046)                                                     (41,297)

                                                                                       Proceeds received upon maturity of investments                                33,362                                                       37,502

                                                                                       Net cash used in investing activities                                        (14,802)                                                      (7,310)
                                                                                                                                                                    -------                                                       ------

    Cash flows from financing activities:

                                                                                       Payment of cash dividends                                                     (4,912)                                                      (2,463)

                                                                                        Payment of payroll taxes on stock-based compensation through
                                                                                        shares withheld                                                                 (62)                                                        (103)

                                                                                       Proceeds from issuance of common stock under employee plans                          395                                                          399

                                                                                       Excess tax benefit from stock-based compensation                                   -                                                          159

                                                                                       Purchase of treasury stock                                                    (5,364)                                                      (1,638)

                                                                                       Net cash used in financing activities                                         (9,943)                                                      (3,646)
                                                                                                                                                                     ------                                                       ------

    Net (decrease) increase in cash and cash equivalents                                                                                                                                                                                       (17,129)                4,611

    Cash and cash equivalents, beginning of period                                                                                                                                                                                              45,665                53,670
                                                                                                                                                                                                                                                ------                ------

    Cash and cash equivalents, end of period                                                               $28,536                                                   $58,281
                                                                                                           =======                                                   =======
                                                                              UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES

                                                                 RECONCILIATION OF GAAP FINANCIAL INFORMATION TO NON-GAAP FINANCIAL INFORMATION

                                                                                                   (UNAUDITED)

    Reconciliation of Net Income (Loss) to EBITDA

                                                                                                                                                                                                                         Three Months Ended     Six Months Ended

                                                                                                                                                                                                                              March 31,             March 31,
                                                                                                                                                                                                                              ---------             ---------

                                                                                                                                                                                                                2013                   2012                 2013        2012
                                                                                                                                                                                                                ----                   ----                 ----        ----

    (In thousands)

    Net income (loss)                                                                                                                                                                                          $(920)                $1,932               $2,642      $6,411

    Interest income, net                                                                                                                                                                                         (72)                   (58)                (119)       (150)

    Income tax expense (benefit)                                                                                                                                                                                (702)                 1,354                1,908       4,447

    Depreciation and amortization                                                                                                                                                                              5,909                  6,244               11,894      12,767
                                                                                                                                                                                                               -----                  -----               ------      ------

                      EBITDA                                                                                                                                                                                  $4,215                 $9,472              $16,325     $23,475
                                                                                                                                                                                                              ======                 ======              =======     =======
                                                                                                           UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES

                                                                                                               SELECTED SUPPLEMENTAL FINANCIAL INFORMATION

                                                                                                                               (UNAUDITED)

                                                                                                                                                                                                                                                                       Three Months Ended     Six Months Ended

                                                                                                                                                                                                                                                                            March 31,             March 31,

                                                                                                                                                                                                                                                                                     2013                 2012         2013         2012
                                                                                                                                                                                                                                                                                     ----                 ----         ----         ----

                                                                                                                                                                                                                                                                                                   (In thousands)

    Salaries expense                                                                                                                                                                                                                                                              $39,858              $41,916      $79,586      $82,128

    Employee benefits and tax                                                                                                                                                                                                                                                       9,459                9,564       16,636       17,906

    Bonus expense                                                                                                                                                                                                                                                                     381                1,992        2,535        5,679

    Stock-based compensation                                                                                                                                                                                                                                                        1,560                2,099        3,005        3,781

    Total compensation and related costs                                                                                                                                                                                                                                          $51,258              $55,571     $101,762     $109,494
                                                                                                                                                                                                                                                                                  -------              -------     --------     --------

    Occupancy expense                                                                                                                                                                                                                                                              $9,830               $9,680      $19,664      $19,457

    Bad debt expense                                                                                                                                                                                                                                                               $1,076               $1,411       $2,620       $3,144

    Depreciation and amortization expense                                                                                                                                                                                                                                          $5,909               $6,244      $11,894      $12,767

    Legal services expense                                                                                                                                                                                                                                                           $465                 $386         $784       $1,003

SOURCE Universal Technical Institute, Inc.


Source: PR Newswire