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Universal Technical Institute Reports Fiscal Year 2013 Third Quarter Results

July 26, 2013

SCOTTSDALE, Ariz., July 26, 2013 /PRNewswire/ – Universal Technical Institute, Inc. (NYSE: UTI), the leading provider of automotive technician training, today reported revenues for the third quarter ended June 30, 2013 of $91.0 million, an 8.7 percent decrease from $99.6 million for the third quarter of the prior year. Net income for the third quarter ended June 30, 2013 was $0.3 million, or 1 cent per diluted share, compared to $1.0 million, or 4 cents per diluted share, for the third quarter ended June 30, 2012.

Revenues for the nine months ended June 30, 2013 were $284.5 million, an 8.9 percent decrease from $312.3 million for the nine months ended June 30, 2012. Net income for the nine months ended June 30, 2013 was $2.9 million, or 12 cents per diluted share, compared to $7.4 million, or 30 cents per diluted share, for the nine months ended June 30, 2012.

Return on equity for the trailing four quarters ended June 30, 2013 was 3.2 percent compared to 6.2 percent for the trailing four quarters ended Sept. 30, 2012.

“The renewed health of the transportation industry has increased demand for our graduates and made the value of a UTI education clear to potential students and their families. Our new partnership with GM and the recent expansion of our Mercedes-Benz and Porsche programs are strong indicators of rising demand, and our third-quarter increase in applications tells us students are taking note,” said Kim McWaters, chief executive officer. “UTI continues to be the industry’s choice for providing highly trained technicians, and our focus remains on efficiently and cost-effectively making a UTI education accessible and affordable for more students.”

    Student Metrics

                      Three Months Ended               Nine Months
                           June 30,                     Ended June
                                                              30,
                        -------------------              -----------

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

                              (Rounded to hundreds)

    Total starts     2,500            2,700         8,100         9,400

    Average
     undergraduate
     full-time
     student
     enrollment     13,800           15,300        15,100        16,800

    End of period
     undergraduate
     full-time
     student
     enrollment     13,000           14,500        13,000        14,500

Third Quarter Operating Performance

For the third quarter of 2013, revenues were $91.0 million, an 8.7 percent decrease from $99.6 million for last year’s third quarter. The decrease in revenues primarily related to a decrease in average undergraduate full-time student enrollment of 9.8 percent. The decrease was partially offset by an increase in revenue per student. During the third quarter of 2013 and 2012, tuition excluded $4.4 million and $3.8 million, respectively, related to students participating in the Company’s proprietary loan program which will be recognized as revenues when payments are received.

Operating income and margin for the third quarter of 2013 were $0.5 million and 0.5 percent, respectively, compared to operating income and margin of $1.5 million and 1.5 percent, respectively, in the same period last year. The decreases were 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 third quarter of 2013 was $6.4 million compared to $7.6 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, 2013 were $284.5 million, an 8.9 percent decrease from $312.3 million for the nine months ended June 30, 2012.

Operating income and margin for the nine months ended June 30, 2013 were $4.5 million and 1.6 percent, respectively, compared to $11.9 million and 3.8 percent, respectively, for the nine months ended June 30, 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 nine months ended June 30, 2013 was $22.7 million compared to $31.0 million for the nine months ended June 30, 2012. See “Use of Non-GAAP Financial Information” below.

Liquidity

Cash, cash equivalents and investments totaled $87.4 million at June 30, 2013, compared to $101.7 million at Sept. 30, 2012. At June 30, 2013, shareholders’ equity totaled $140.4 million as compared to $146.1 million at Sept. 30, 2012. We paid cash dividends of $0.10 per common share in December 2012, March 2013 and June 2013. The aggregate payment was approximately $7.4 million.

Pursuant to the previously announced share repurchase plan, we purchased 556,900 shares of stock during the nine months ended June 30, 2013 at an average price of $9.61 for a total cost of approximately $5.4 million. During the three months ended June 30, 2013, we purchased an immaterial number of shares.

Cash flow used in operating activities was $2.2 million for the three months ended June 30, 2013, compared to $6.3 million for the three months ended June 30, 2012. Cash provided by operating activities was $5.4 million for the nine months ended June 30, 2013 compared to $9.2 million for the nine months ended June 30, 2012.

2013 Outlook

While we expect new student starts to be up in the fourth quarter of 2013, we anticipate full year new student starts for 2013 to be down by mid single digits compared to the prior year, 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 2013, we still believe we will record an overall decline in operating margin and net income compared to 2012. Due to the timing and number of student start dates in each of the next two quarters, we expect meaningful new student start growth during the fourth quarter and relatively flat year over year start growth in the first quarter of fiscal 2014 leading to positive start growth over the next six months.

Conference Call

Management will hold a conference call to discuss the 2013 third quarter results today at 8:00 a.m. PDT (11 a.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 5th, 2013 by dialing 412-317-0088 or 877-344-7529 and entering pass code 10031199.

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 170,000 graduates in its 48-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). For more information visit 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,
                          -------------------                  ------------------

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

                               (In thousands, except per share amounts)

    Revenues                     $90,954                $99,601            $284,470          $312,268

    Operating
     expenses:

    Educational
     services
     and
     facilities        49,140                 52,621                149,288             157,775

    Selling,
     general and
     administrative    41,356                 45,462                130,657             142,633
                       ------                 ------                -------             -------

    Total
     operating
     expenses          90,496                 98,083                279,945             300,408
                       ------                 ------                -------             -------

    Income from
     operations           458                  1,518                4,525             11,860

    Other
     income:

    Interest
     income, net           61                     63                  180               213

    Other income           97                      6                  461               372
                          ---                    ---                  ---               ---

    Total other
     income               158                     69                  641               585
                          ---                    ---                  ---               ---

    Income
     before
     income
     taxes                616                  1,587                5,166             12,445

    Income tax
     expense              320                    574                2,228             5,021
                          ---                    ---                -----             -----

    Net income                      $296                 $1,013              $2,938            $7,424
                                    ====                 ======              ======            ======

    Earnings per
     share:

    Net income
     per share -
     basic                         $0.01                  $0.04               $0.12             $0.30
                                   =====                  =====               =====             =====

    Net income
     per share -
     diluted                       $0.01                  $0.04               $0.12             $0.30
                                   =====                  =====               =====             =====

    Weighted
     average
     number of
     shares
     outstanding:

    Basic              24,420                 24,694                24,527             24,693
                       ======                 ======                ======             ======

    Diluted            24,580                 24,835                24,620             24,825
                       ======                 ======                ======             ======

    Cash
     dividends
     declared
     per common
     share                         $0.10                  $0.10               $0.30             $0.20
                                   =====                  =====               =====             =====

               UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES

                       CONDENSED CONSOLIDATED BALANCE SHEETS

                                    (UNAUDITED)

                                         June
                                          30,              September 30,
                                           2013                  2012
                                           ----                  ----

    Assets                                   (In thousands)

    Current assets:

    Cash and cash
     equivalents                                  $23,916                 $45,665

    Restricted cash                       1,156                   104

    Investments, current
     portion                             49,417                51,455

    Receivables, net                     10,584                14,910

    Deferred tax assets, net              5,936                 7,977

    Prepaid expenses and
     other current assets                14,683                14,873
                                         ------                ------

    Total current assets                105,692               134,984

    Investments, less
     current portion                     14,112                 4,533

    Property and equipment,
     net                                101,325                91,939

    Goodwill                             20,579                20,579

    Deferred tax assets, net              8,805                 5,576

    Other assets                          9,158                10,547

    Total assets                                 $259,671                $268,158
                                                   ======                ========

    Liabilities and
     Shareholders' Equity

    Current liabilities:

    Accounts payable and
     accrued expenses                             $31,373                 $40,865

    Deferred revenue                     38,114                52,564

    Accrued tool sets                     4,171                 4,264

    Income tax payable                      178                   744

    Other current
     liabilities                          2,013                 1,003
                                          -----                 -----

    Total current
     liabilities                         75,849                99,440

    Deferred rent liability              12,080                12,946

    Construction liability               23,747                 2,421

    Other liabilities                     7,607                 7,266

    Total liabilities                   119,283               122,073
                                        -------               -------

    Commitments and
     contingencies

    Shareholders' equity:

    Common stock, $0.0001
     par value, 100,000,000
     shares authorized,
     30,328,244 shares
     issued and 24,440,417
     shares outstanding at
     June 30, 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                     171,064               166,970

    Treasury stock, at cost,
     5,887,827 shares at
     June 30, 2013 and
     5,330,927 at September
     30, 2012                           (89,297)              (83,924)

    Retained earnings                    58,618                63,036
                                         ------                ------

    Total shareholders'
     equity                             140,388               146,085

    Total liabilities and
     shareholders' equity                        $259,671                $268,158
                                                   ======                ========

               UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                   (UNAUDITED)

                                                   Nine Months
                                                      Ended
                                                    June 30,
                                                    --------

                                                2013                2012
                                                ----                ----

                                                 (In thousands)

    Cash flows from operating
     activities:

    Net income                                          $2,938              $7,424

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

    Depreciation and
     amortization                             16,917               18,064

    Amortization of held-to-
     maturity investments                      1,462               1,415

    Bad debt expense                           3,679               4,446

    Stock-based compensation                   4,436               5,388

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

    Deferred income taxes                     (1,727)              (5,202)

    Net training equipment
     credits earned                           (1,348)              (1,257)

    Loss on disposal of
     property and equipment                       84                 101

    Changes in assets and
     liabilities:

    Receivables                                  647               (6,611)

    Prepaid expenses and other
     current assets                            1,716               (993)

    Other assets                                (935)              (910)

    Accounts payable and
     accrued expenses                         (7,810)              2,595

    Deferred revenue                         (14,450)               (16,900)

    Income tax payable/
     receivable                                 (566)               (11)

    Accrued tool sets and
     other current liabilities                   917                  42

    Deferred rent liability                     (866)              1,176

    Other liabilities                            284                 621
                                                 ---                 ---

      Net cash provided by
       operating activities                    5,378               9,229
                                               -----               -----

    Cash flows from investing
     activities:

    Purchase of property and
     equipment                                (6,646)              (6,952)

    Proceeds from disposal of
     property and equipment                       54                  -

    Purchase of investments                  (60,138)               (49,312)

    Proceeds received upon
     maturity of investments                  51,135               58,317

    Decrease in restricted
     cash                                      1,000                  -
                                               -----                ---

      Net cash (used in)
       provided by investing
       activities                            (14,595)              2,053
                                             -------               -----

    Cash flows from financing
     activities:

    Payment of cash dividends                 (7,356)              (4,936)

    Payment of payroll taxes
     on stock-based
     compensation through
     shares withheld                            (198)              (412)

    Proceeds from issuance of
     common stock under
     employee plans                              395                 399

    Excess tax benefit from
     stock-based compensation                      -                 159

    Purchase of treasury stock                (5,373)              (1,638)
                                              ------               ------

      Net cash used in financing
       activities                            (12,532)              (6,428)
                                             -------               ------

    Net (decrease) increase in
     cash and cash equivalents               (21,749)              4,854

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

    Cash and cash equivalents,
     end of period                                     $23,916             $58,524
                                                       =======             =======

                   UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES

                 RECONCILIATION OF GAAP FINANCIAL INFORMATION TO NON-GAAP
                                   FINANCIAL INFORMATION

                                       (UNAUDITED)

    Reconciliation of Net Income to EBITDA

                                       Three                      Nine Months
                                      Months                      Ended June
                                    Ended June                              30,
                                            30,
                                       -----------                       ------------

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

                                               (In thousands)

     Net
     income                             $296            $1,013             $2,938             $7,424

     Interest
     income,
     net                         (61)             (63)             (180)              (213)

     Income
     tax
     expense                     320               574             2,228              5,021

     Depreciation
     and
     amortization              5,858             6,043             17,752              18,810
                               -----             -----             ------              ------

    EBITDA                            $6,413            $7,567            $22,738            $31,042
                                        ====              ====              =====              =====

                  UNIVERSAL TECHNICAL INSTITUTE, INC. AND SUBSIDIARIES

                      SELECTED SUPPLEMENTAL FINANCIAL INFORMATION

                                      (UNAUDITED)

                                 Three Months                      Nine Months
                                  Ended June                      Ended June 30,
                                           30,
                                     -------------                     ---------------

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

                                                (In thousands)

     Salaries
     expense                        $38,957            $41,421            $118,543            $123,547

     Employee
     benefits
     and
     tax                     8,221              8,320              24,857               26,227

     Bonus
     expense                   429              1,697              2,964               7,376

     Stock-
     based
     compensation            1,431              1,607              4,436               5,388

     Total
     compensation
     and
     related
     costs                          $49,038            $53,045            $150,800            $162,538
                                      -----              -----              ------              ------

     Occupancy
     expense                         $9,890             $9,707             $29,555             $29,164

     Bad
     debt
     expense                         $1,059             $1,302              $3,679              $4,446

     Depreciation
     and
     amortization
     expense                         $5,858             $6,043             $17,752             $18,810

     Legal
     Services
     expense                           $630               $846              $1,414              $1,849

SOURCE Universal Technical Institute, Inc.


Source: PR Newswire