National American University Holdings, Inc. Reports Fiscal 2011 Fourth Quarter And Year-End Results

National American University Holdings, Inc. (the “Company”) (NASDAQ: NAUH), which through its wholly owned subsidiary operates National American University (“ NAU”), a regionally accredited, proprietary, multi-campus institution of higher learning, today reported unaudited financial results for its fiscal year 2011 fourth quarter and audited results for its fiscal year ended May 31, 2011.

The Company, through its wholly owned subsidiary, operates in two business segments: academic segment, which consists of NAU’s undergraduate and graduate education programs and contributes the primary portion of the Company’s revenue; and ownership in multiple apartments and condominium complexes from which it derives sales and rental income.

Ronald L. Shape, Ed.D., Chief Executive Officer of the Company, commented, “We reported a solid fourth quarter and a very strong year. We achieved year-over-year enrollment growth of 14% to a record 10,000 students in the fourth quarter, marking another milestone in our Company’s history. While the enrollment percentage has declined from the tremendous growth over the course of 2010, it continues to exceed our historical growth rate. During the year, there were a number of industry headwinds from outside influences that we believe are finally beginning to abate, and throughout it all, we have remained committed to our core values. These include our focus on serving our students, our highly adaptable hybrid learning centers, our academically respected nursing and allied health programs, our growing educational affiliations that provide opportunity for revenue diversification, and our ongoing commitment to high demand, career-oriented programs and flexible options for a growing and changing student base.”

Facility Expansion

The Company’s wholly owned subsidiary currently owns one property and leases 31 locations for educational sites in the states of Colorado, Kansas, Minnesota, Missouri, Nebraska, New Mexico, Oklahoma, Oregon, South Dakota and Texas. The following sites are pending regulatory approvals:
  • Mesquite, TX
  • Weldon Spring, MO
  • Richardson, TX
  • Tigard, OR
  • Bellevue, NE (only pending final state approval – has received conditional approval)

NAU has continued to expand its academic and degree programs online. In addition, NAU continues to operate hybrid learning centers, which utilize small physical facilities in strategic geographic areas, allowing its students to meet face-to-face with staff for assistance on their educational choices and related services while completing the majority of the coursework online.

During fiscal year 2011, the Company has continued to progress on its campus expansion plans. The Company continues to closely track the expenditures associated with these new educational sites, new program development and program expansion within the selling, general and administrative expense category. For the year ended May 31, 2011, the total business expansion and development expenditures were $14.3 million as compared to $6.5 million in the same period in fiscal year 2010.

Upon receiving regulatory approval, NAU’s hybrid learning centers have historically become profitable within 12 to 18 months and, on average, achieve enrollment of approximately 150 students.

Student Enrollment

Total NAU student enrollment for the spring term of 2011 increased 14.4% to a record 10,015 students, up from 8,758 in the last spring term. Students enrolled in 88,725 credit hours compared to 78,739 credit hours in the spring term of last year. The current average age of NAU’s students is 34 years, with those seeking undergraduate degrees remaining the highest portion of NAU’s student population (virtually unchanged from the prior year).

The following is a summary of student enrollment at May 31, 2011, and May 31, 2010, by degree type and by instructional delivery method:
            May 31, 2011       May 31, 2010
No. of Students     % of Total No. of Students   % of Total
Graduate 385 3.8 % 335 3.8 %
 
Undergraduate and Diploma 9,630 96.2 % 8,423 96.2 %
 
Total 10,015 100.0 % 8,758 100.0 %
 
May 31, 2011 May 31, 2010
No. of Students % of Total No. of Students % of Total
Online 4,624 46.2 % 3,565 40.7 %
On-Campus 3,751 37.4 % 3,742 42.7 %
Hybrid 1,640 16.4 % 1,451 16.6 %
 
Total 10,015 100.0 % 8,758 100.0 %
 

FY 2011 Fourth Quarter Financial Results
  • The Company’s total revenues for the three months ended May 31, 2011 increased 10.1% to $28.1 million from $25.5 million for the same period last year. As a result of the increase in enrollment, the academic segment’s total revenue increased 10.2% to $27.6 million from $25.0 million for the prior-year period.
  • Educational services expense specifically relates to the academic segment, and includes salaries and benefits of faculty and academic administrators, costs of educational supplies, faculty reference and support material and related academic costs, and facility costs. For the three months ended May 31, 2011, this expense was $6.2 million, or 22.4% of the academic segment’s total revenue, compared to $5.2 million, or 20.9%, for the three months ended May 31, 2010. This increase was primarily a result of additional expenses incurred due to the opening of new locations.
  • During the fiscal year 2011 fourth quarter, the Company’s selling, general and administrative (SG&A) expenses were $17.4 million, or 63.1% of NAU’s revenues, compared to $16.1 million, or 64.2%, in the prior-year period. This $1.3 million dollar increase was primarily due to increased spending in business expansion and development, which includes the opening of new locations. In addition, there was an expense of $0.4 million for the potential liability from the U.S. Department of Education program review.
  • The Company’s income before income taxes and non-controlling interest for the three months ended May 31, 2011, increased 6.8% to $3.6 million from $3.3 million for the same period last year.
  • Net income attributable to the Company for the fiscal year 2011 fourth quarter was $2.3 million, or $0.09 per diluted share based on 26.7 million shares outstanding, compared to $2.1 million, or a loss of $0.26 per diluted share of common stock, in the prior-year period. The Company’s earnings per share in the fiscal year 2010 fourth quarter were impacted by a one-time special cash dividend paid after the completion of its follow-on public offering on June 1, 2010, to its Class A common stockholders and common stockholders of record on May 20, 2010. The aggregate amount of the special dividend paid was approximately $11.1 million.
  • The Company’s EBITDA for the fourth quarter of FY 2011 increased 7.8% to $4.3 million from $4.0 million in the prior-year period. A table reconciling EBITDA to net income can be found at the end of this release.

FY 2011 Financial Results
  • The Company’s revenues for the year ended May 31, 2011, increased 18.9% to $106.8 million from $89.8 million for last year.
  • The academic segment’s total revenue for the period increased 19.8% to $105.4 million from $87.9 million for the year ended May 31, 2010. The increase was primarily due to the enrollment increase of approximately 14%, which was consistent with NAU’s investment in new program development, program expansion, development of new educational sites and student retention initiatives, over the prior year. In addition, the increase is due to an average tuition increase of 4.3% that was approved by NAU’s board of governors in April 2010 and became effective September 2010.
  • NAU’s educational services expense for the year ended May 31, 2011, was $22.6 million, or 21.4% of the academic segment’s total revenue, compared to $20.4 million, or 23.2%, for the prior year. The decrease as a percentage of revenues was primarily a result of continued economies of scale being realized through enrollment growth and an increasing base of students choosing to take coursework online.
  • The Company also incurred higher SG&A expenses as a result of increases in spending for admissions staffing and marketing, additional accrual for a new employment contract with the Company’s CEO, and additional corporate overhead resulting from operating as a public company. The Company also paid $2.2 million in legal fees related to its continued cooperation with the U.S. Senate Committee on Health, Education, Labor and Pensions regarding the Committee’s hearings relating to proprietary colleges receiving Title IV student financial aid. SG&A expenses for the fiscal year ended May 31, 2011, totaled $64.5 million, an increase of 29.2% from SG&A expenses of $49.9 million for the fiscal year ended May 31, 2010.
  • The Company’s income before income taxes and non-controlling interest was $16.7 million or 15.6% of total revenue for the year ended May 31, 2011, an increase of 0.9% compared to the same period in 2010.
  • Net income attributable to the Company in fiscal year 2011 increased 2.3% to $10.3 million, or 9.6% of total revenue, compared to $10.0 million for the year ended May 31, 2010. On a per diluted share basis, the Company reported $0.38 for fiscal year 2011 compared to a loss of $0.04 for the year ended May 31, 2010, on common stock. The Company’s earnings per share for fiscal year 2010 were impacted by the $11.1 million one-time special cash dividend described in the fourth quarter financial summary above.
  • The Company’s EBITDA for fiscal 2011 was $19.4 million, compared to $19.2 million in the prior year. A table reconciling EBITDA to net income can be found at the end of this release.
 

Balance Sheet Highlights
 

(in millions except for percentages)
       

5/31/2011
   

5/31/2010
   

% Increase
Cash and Cash Equivalents $ 25.7 $ 8.7 195.8%
Short Term Investments 19.1 11.1 71.8%
Working Capital 39.5 4.4 790.3%
Total Long-term Debt 0 0 N/A
Stockholders’ Equity 58.5 21.4 173.9%
 

Dividend and Stock Repurchase Plan
  • The Company’s Board of Directors declared a cash dividend in the amount of $0.03 per share on all shares of the Company’s common stock outstanding and of record as of the close of business on June 30, 2011, paid on or about July 8, 2011.
  • On February 3, 2011, the Company announced that its Board of Directors had authorized the establishment of a stock repurchase program for the Company to purchase up to 1,000,000 shares of common stock in both open market and privately negotiated transactions. By the end of the third quarter, the Company had repurchased 1,000,000 shares of common stock at an average stock price of $7.51. Having reached the 1,000,000-share limit approved by the Board, the program has effectively expired.

Outlook for 2011

Dr. Shape concluded, “We continue to gain traction in our newly opened hybrid learning centers, and expect to move forward on our campus and programmatic expansion initiatives. We believe our on-site programs not only offer students, faculty and staff an opportunity to participate in a more traditional college experience, but also provide online students, faculty and staff with a sense of connection to the university. Additionally, on-site facilities play an important role in integrating online faculty into the academic programs and ensuring the overall consistency and quality of the student learning experience. We believe the mix of a growing online program, anchored by on-site programs with a 70-year history, differentiates the university from most other for-profit post-secondary education institutions. During FY 2011 we generated $25.7 million in free cash flow, which included $15.8 million in cash from operations. We plan to leverage the Company’s strong financial position and academic standards with continued investment in NAU’s existing programs and locations, in addition to expanding to new markets and growing its affiliate relationships.”

Conference Call Information

The Company will discuss these results in a conference call (with accompanying presentation) on August 4, 2011, at 11:00 a.m. ET.
The dial-in numbers are:
(877) 407-8033 (U.S.)
(201) 689-8033 (International)
 

Accompanying Slide Presentation and Webcast

The Company will also have an accompanying slide presentation available in PDF format at the “Investor Relations” section of the NAU website at http://www.national.edu/InvestorRelations. The presentation will be made available 30 minutes prior to the conference call. In addition, the call will be simultaneously webcast over the Internet via the “Investor Relations” section of the NAU website or by clicking on the conference call link: http://www.investorcalendar.com/IC/CEPage.asp?ID=165172.

About National American University Holdings, Inc.

National American University Holdings, Inc., through its wholly owned subsidiary, operates National American University (“NAU”), a regionally accredited, proprietary, multi-campus institution of higher learning offering Associate, Bachelor’s, and Master’s degree programs in health care and business-related disciplines. Accredited by The Higher Learning Commission and a member of the North Central Association of Colleges and Schools, NAU has been providing technical and professional career education since 1941. NAU opened its first campus in Rapid City, South Dakota, and has since grown to multiple locations throughout the central United States. In 1998, NAU began offering online courses. Today, NAU offers degree programs in traditional, online, and hybrid formats, which provides students increased flexibility to take courses at times and places convenient to their busy lifestyles.

Forward Looking Statements

This press release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 regarding the Company's business. Statements made in this release, other than those concerning historical financial information, may be considered forward-looking statements, which speak only as of the date of this release and are based on current beliefs and expectations and involve a number of assumptions. These forward-looking statements include outlooks or expectations for earnings, revenues, expenses or other future financial or business performance, strategies or expectations, or the impact of legal or regulatory matters on business, results of operations or financial condition. Specifically, forward-looking statements may include statements relating to the future financial performance of the Company; the ability to continue to receive Title IV funds; the growth of the market for the Company’s services; expansion plans and opportunities; consolidation in the market for the Company’s services generally; and other statements preceded by, followed by or that include the words “estimate,” “plan,” “project,” “forecast,” “intend,” “expect,” “anticipate,” “believe,” “seek,” “target” or similar expressions. These forward-looking statements involve a number of known and unknown risks and uncertainties or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by those forward-looking statements. Other factors that could cause the Company’s results to differ materially from those contained in its forward-looking statements are included under, among others, the heading “Risk Factors” in the Company’s Annual Report on Form 10-K to be filed on August 5, 2011, and in its other filings with the Securities and Exchange Commission. The Company assumes no obligation to update the information contained in this release.
 
 
NATIONAL AMERICAN UNIVERSITY HOLDINGS, INC. AND SUBSIDIARIES
                 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS AND YEAR ENDED MAY 31, 2011 AND MAY 31, 2010
 
(In thousands except per share data)
 
Three Months Ended Year Ended
May 31, May 31,

2011

2010

2011

2010
 
REVENUE:
Academic revenue $ 26,017 $ 23,397 $ 99,216 $ 82,418
Auxiliary revenue 1,570 1,635 6,153 5,528
Rental income — apartments 251 215 990 918
Condominium sales   225     238     449     932  
 
Total revenue   28,063     25,485     106,808     89,796  
 
OPERATING EXPENSES:
Cost of educational services 6,184 5,239 22,575 20,419
Selling, general and administrative 17,412 16,067 64,474 49,886
Auxiliary expense 769 622 2,888 2,076
Cost of condominium sales 188 197 381 761
Loss on disposition of property   12     29     82     29  
 
Total operating expenses   24,565     22,154     90,400     73,171  
 
OPERATING INCOME   3,498     3,331     16,408     16,625  
 
OTHER INCOME (EXPENSE):
Interest income 36 46 148 206
Interest expense 0 (85 ) 0 (525 )
Other income — net   27     42     123     218  
 
Total other income (expense)   63     3     271     (101 )
 
INCOME BEFORE INCOME TAXES 3,561 3,334 16,679 16,524
 
INCOME TAX EXPENSE   (1,241 )   (1,244 )   (6,375 )   (6,485 )
 
NET INCOME 2,320 2,090 10,304 10,039
 
NET (INCOME) LOSS ATTRIBUTABLE TO
NON-CONTROLLING INTEREST   (7 )   10     (38 )   (4 )
 
NET INCOME ATTRIBUTABLE TO NATIONAL
AMERICAN UNIVERSITY HOLDINGS, INC. AND
SUBSIDIARIES 2,313 2,100 10,266 10,035
 
OTHER COMPREHENSIVE INCOME —
Unrealized gains (losses) on investments   5     1     (24 )   (13 )
 
COMPREHENSIVE INCOME
ATTRIBUTABLE TO NATIONAL AMERICAN
UNIVERSITY HOLDINGS, INC. $ 2,318   $ 2,101   $ 10,242   $ 10,022  
 
 
NATIONAL AMERICAN UNIVERSITY HOLDINGS, INC. AND SUBSIDIARIES
                       
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS AND YEAR ENDED MAY 31, 2011 AND MAY 31, 2010
 
(In thousands except share and per share data)
 
Three Months Ended Year Ended
May 31,       May 31,

2011

2010

2011

2010
 
Basic EPS
Class A
Distributed earnings $ - $ 101.28 $ - $ 135.89
Undistributed earnings $ - $ (65.32 )   -   (40.64 )
Total $ - $ 35.96 $ - $ 95.25
 
Common
Distributed earnings $ 0.03 $ 0.16 $ 0.12 $ 0.22
Undistributed earnings $ 0.06 $ (0.42 )   0.27   (0.26 )
Total $ 0.09 $ (0.26 ) $ 0.39 $ (0.04 )
 
 
Diluted EPS
Class A
Distributed earnings $ - $ 101.28 $ - $ 135.89
Undistributed earnings $ - $ (65.32 )   -   (40.64 )
Total $ - $ 35.96 $ - $ 95.25
 
Common
Distributed earnings $ 0.03 $ 0.16 $ 0.12 $ 0.22
Undistributed earnings $ 0.06 $ (0.42 )   0.26   (0.26 )
Total $ 0.09 $ (0.26 ) $ 0.38 $ (0.04 )
 
Weighted Average Shares outstanding
Basic EPS
Class A - 100,000 - 100,000
Common 26,337,348 5,962,653 26,236,783 3,103,847
 
Diluted EPS
Class A - 100,000 - 100,000
Common 26,721,711 7,212,013 26,836,039 3,103,959
 
 
NATIONAL AMERICAN UNIVERSITY HOLDINGS, INC. AND SUBSIDIARIES
               
CONSOLIDATED BALANCE SHEETS AS OF MAY 31, 2011 AND 2010
(In thousands except per share data)
 

May 31, 2011

May 31, 2010
ASSETS
 
CURRENT ASSETS:
Cash and cash equivalents $ 25,716 $ 8,695
Short term investments 19,085 11,109
Student receivables — net of allowance of $223 and $203
at May 31, 2011 and 2010, respectively 2,010 1,823
Other receivables 425 952
Bookstore inventory 1,057 920
Income tax receivable 1,260 0
Deferred income taxes 1,723 1,574
Prepaid and other current assets   559     1,759  
Total current assets   51,835     26,832  
 
Total Property and Equipment - Net   21,265     15,881  
 
OTHER ASSETS:
Condominium inventory 2,664 3,046
Land held for future development 312 312
Course development — net of accumulated amortization
of $1,415 and $1,149 at May 31, 2011 and 2010, respectively 956 768
Other   906     447  
  4,838     4,573  
 
TOTAL $ 77,938   $ 47,286  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
CURRENT LIABILITIES:
Accounts payable 4,430 4,315
Dividends payable 831 11,116
Student accounts payable 400 322
Deferred income 294 305
Income tax payable 0 231
Accrued and other liabilities   6,403     6,109  
Total current liabilities   12,358     22,398  
 
DEFERRED INCOME TAXES   2,827     1,151  
 
OTHER LONG-TERM LIABILITIES   4,248     2,380  
 
COMMITMENTS AND CONTINGENCIES
 
STOCKHOLDERS' EQUITY:
Common stock, $0.0001 par value (50,000,000 authorized; 27,558,052 issued
and 26,558,052 outstanding as of May 31, 2011;
21,819,653 issued and outstanding as of May 31, 2010) 3 2
Additional paid-in capital 56,643 19,165
Retained earnings 9,549 2,389
Treasury stock, at cost (1,000,000 shares at May 31, 2011) (7,505 ) 0
Accumulated other comprehensive income   72     96  
Total National American University Holdings, Inc. stockholders' equity   58,762     21,652  
Non-controlling interest (257 ) (295 )
Total equity   58,505     21,357  
 
TOTAL $ 77,938   $ 47,286  
 
 

The following table provides a reconciliation of net income attributable to the Company to EBITDA:
                 
Three Months Ended

May 31,
Year Ended

May 31,
2011     2010 2011     2010
(dollars in thousands)
Net income attributable to the Company $ 2,313 $ 2,100 $ 10,266 $ 10,035
Loss (Income) attributable to non-controlling interest 7 (10 ) 38 4
Interest Income (36 ) (46 ) (148 ) (206 )
Interest Expense 0 85 0 525
Income Taxes 1,241 1,244 6,375 6,485
Depreciation and Amortization   794     635     2,861     2,320  
 
EBITDA $ 4,319 $ 4,008 $ 19,392 $ 19,163
 
Senate HELP Expenses 0 0 2,247 0
DOE Program Review Expenses   375     0     375     0  
 
Adjusted EBITDA $ 4,694 $ 4,008 $ 22,014 $ 19,163
 

Consists of income attributable to the Company, less income from non-controlling interest, plus loss from non-controlling interest, minus interest income, plus interest expense, plus income taxes, plus depreciation and amortization. The Company uses EBITDA as a measure of operating performance. However, EBITDA is not a recognized measurement under U.S. generally accepted accounting principles, or GAAP, and when analyzing its operating performance, investors should use EBITDA in addition to, and not as an alternative for, income as determined in accordance with GAAP. Because not all companies use identical calculations, its presentation of EBITDA may not be comparable to similarly titled measures of other companies and is therefore limited as a comparative measure. Furthermore, as an analytical tool, EBITDA has additional limitations, including that (a) it is not intended to be a measure of free cash flow, as it does not consider certain cash requirements such as tax payments; (b) it does not reflect changes in, or cash requirements for, its working capital needs; and (c) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized often will have to be replaced in the future, and EBITDA does not reflect any cash requirements for such replacements, or future requirements for capital expenditures or contractual commitments. To compensate for these limitations, the Company evaluates its profitability by considering the economic effect of the excluded expense items independently as well as in connection with its analysis of cash flows from operations and through the use of other financial measures.

The Company believes EBITDA is useful to an investor in evaluating its operating performance because it is widely used to measure a company’s operating performance without regard to certain non-cash expenses (such as depreciation and amortization) and expenses that are not reflective of its core operating results over time. The Company believes EBITDA presents a meaningful measure of corporate performance exclusive of its capital structure, the method by which assets were acquired and non-cash charges, and provides us with additional useful information to measure its performance on a consistent basis, particularly with respect to changes in performance from period to period.

Copyright Business Wire 2010

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