[January 02, 2013] |
|
National American University Holdings, Inc. Reports Fiscal 2013 Second Quarter and Six Months Results
RAPID CITY, S.D. --(Business Wire)--
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 FY 2013 second quarter and six
months ended November 30, 2012.
Ronald L. Shape, Ed.D., Chief Executive Officer of the Company,
commented, "Because of our efforts and investment in geographic and
programmatic expansion over the past two years, we have continued to
achieve consistent enrollment growth during a challenging time for our
industry. We have remained committed to providing academic quality and
achieving positive student outcomes, and were pleased that NAU's
enrollment increased 7.2% from the previous fall term to a record 11,685
students. For the second half of fiscal 2013, we will continue to focus
on improving economies of scale by striving to grow enrollments at our
current sites. During the fiscal 2013 second quarter, we continued to
realize the benefits of our expansion and development initiatives with
margin improvement on our educational services expense and SG&A line
items, which is in line with the strategic goals we set out for this
fiscal year. We anticipate this improvement will continue over the next
several quarters as newer locations further contribute to the Company's
top line growth."
Operating Review
NAU currently owns one property and leases 37 physical properties in the
states of Colorado, Indiana, Kansas, Minnesota, Missouri, Nebraska, New
Mexico, Oklahoma, Oregon, South Dakota and Texas. Several sites operate
as hybrid learning centers in strategic geographic locations. These
centers utilize small physical facilities through which the university
provides face-to-face support services as students participate in
select, traditional classroom courses while completing their remaining
coursework online.
Of NAU's 37 locations, the following sites are pending regulatory
approvals:
-
Tigard, OR
-
Indianapolis, IN
-
Roueche Graduate Center in Austin, TX
-
Houston, TX
7.2% Enrollment Increase
Total NAU student enrollment for the fall term of 2012 increased 7.2% to
a record 11,685 students, up from 10,898 during the prior fall term.
Students enrolled in 102,727 credit hours compared to 95,792 credit
hours during the prior fall term. The current average age of NAU's
students continues to be in the mid-30s, with those seeking
undergraduate degrees remaining the highest portion of NAU's student
population.
The following is a summary of student enrollment at November 30, 2012,
and November 30, 2011, by degree level and by instructional delivery
method:
|
|
|
|
November 30, 2012
|
|
|
November 30, 2011
|
|
|
|
|
|
No. of Students
|
|
% of Total
|
|
|
No. of Students
|
|
% of Total
|
|
Graduate
|
|
|
|
393
|
|
3.4
|
%
|
|
385
|
|
3.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Undergraduate and Diploma
|
|
|
|
11,292
|
|
96.6
|
%
|
|
10,513
|
|
96.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
11,685
|
|
100.0
|
%
|
|
10,898
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
November 30, 2012
|
|
|
November 30, 2011
|
|
|
|
|
|
No. of Students
|
|
% of Total
|
|
|
No. of Students
|
|
% of Total
|
|
Online
|
|
|
|
6,892
|
|
59.0
|
%
|
|
5,329
|
|
48.9
|
%
|
On-Campus
|
|
|
|
2,704
|
|
23.1
|
%
|
|
3,771
|
|
34.6
|
%
|
Hybrid
|
|
|
|
2,089
|
|
17.9
|
%
|
|
1,798
|
|
16.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
11,685
|
|
100.0
|
%
|
|
10,898
|
|
100.0
|
%
|
Financial Review
The Company, through its wholly owned subsidiary, operates in two
business segments: the 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. The real estate operations generated approximately 0.8%
of revenues for the quarter ended November 30, 2012.
Fiscal 2013 Second Quarter Financial Results
--
|
|
Total revenues for the FY 2013 second quarter increased 13.3% to
$34.5 million from $30.4 million for the same period last year.
Primarily as a result of NAU's enrollment growth, the academic
segment's total revenue increased 13.5% to $34.2 million from $30.2
million for the prior-year period.
|
|
|
|
--
|
|
For the FY 2013 second quarter, educational services expense was
$7.5 million, or 21.9% of the academic segment's total revenue,
compared to $6.9 million, or 22.9%, for the FY 2012 second quarter.
|
|
|
|
|
|
Educational services expense specifically relates to the academic
segment, and includes salaries and benefits of faculty and academic
administrators, costs of educational supplies, facility costs,
faculty reference and support material and related academic costs.
|
|
|
|
--
|
|
During the FY 2013 second quarter, SG&A expenses were $20.4
million, or 59.1% of total revenues, compared to $19.4 million, or
63.7%, in the prior-year period. The dollar increase was primarily
due to increased spending on the development of new programming
and the hiring of additional staff at new campus locations. SG&A
as a percentage of total revenues decreased significantly quarter
over quarter, from 69.3% in the fiscal 2013 first quarter to 59.1%
in the fiscal 2013 second quarter.
|
|
|
|
--
|
|
Income before income taxes and non-controlling interest for the FY
2013 second quarter increased 44.3% to $4.7 million from $3.2
million for the same period last year.
|
|
|
|
--
|
|
Net income attributable to the Company for the FY 2013 second
quarter increased 47.5% to $2.9 million, or $0.11 per diluted share
based on 25.6 million shares outstanding, from $1.9 million, or
$0.07 per diluted share based on 27.0 million shares outstanding, in
the prior-year period.
|
|
|
|
--
|
|
EBITDA for the FY 2013 second quarter increased 43.9% to $6.3
million from $4.4 million in the prior-year period. A table
reconciling EBITDA to net income can be found at the end of this
release.
|
Fiscal 2013 Six Months Financial Results
--
|
|
Total revenues for the first six months of FY 2013 increased 14.5%
to $64.0 million from $55.8 million for the same period last year.
Primarily as a result of the continued increases in enrollment,
the academic segment's total revenue increased 14.7% to $63.4
million from $55.3 million for the prior-year period. The Company
attributes the enrollment growth to its investment in new program
development, program expansion, and retention initiatives with
current student enrollments over the prior year. The increase in
the academic segment's revenues was also the result of increased
book sales driven by enrollment growth and an average tuition
increase of 5.4% that was approved by NAU's Board of Governors in
January 2012 and became effective September 2012.
|
|
|
|
--
|
|
NAU's educational services expense for the first six months of FY
2013 was $14.7 million, or 23.1% of the academic segment's total
revenue, compared to $13.3 million, or 24.0%, in the prior-year
period. The decrease as a percentage of academic segment revenues
was the result of economies of scale and efficiencies gained from
geographic expansion and ensuing enrollment growth.
|
|
|
|
--
|
|
During the first six months of FY 2013, SG&A expenses were $40.8
million, or 63.8% of total revenues, compared to $36.2 million, or
64.8%, in the prior-year period. The dollar increase was primarily
due to a $3.8 million increase in spending related to ramping up
operations at NAU's new physical locations, including hiring
additional staff to provide the support services necessary for NAU's
growing student population. During the period, the Company also
incurred $0.6 million in increased expenses for unplanned
health-related insurance claims.
|
|
|
|
--
|
|
Income before income taxes and non-controlling interest for the
first six months of FY 2013, was $4.5 million, compared to $5.1
million for the same period last year. This decrease was primarily
due to higher educational service expense and SG&A expenses related
to growth and expansion.
|
|
|
|
--
|
|
Net income attributable to the Company during the first six months
of FY 2013 was $2.7 million, or $0.11 per diluted share based on
25.6 million shares outstanding, compared to $3.0 million, or $0.11
per diluted share based on 27.0 million shares outstanding, in the
prior-year period.
|
|
|
|
--
|
|
The Company's EBITDA for the first six months of FY 2013 increased
8.6% to $7.6 million from $7.0 million in the prior-year period. A
table reconciling EBITDA to net income can be found at the end of
this release.
|
Balance Sheet Highlights
|
|
(in millions except for percentages)
|
|
|
11/30/2012
|
|
|
5/31/2012
|
|
% Change
|
Cash and Cash Equivalents
|
|
$
|
13.1
|
|
$
|
15.7
|
|
-16.6%
|
Available for Sale Investments
|
|
|
15.2
|
|
|
14.9
|
|
1.6%
|
Working Capital
|
|
|
22.4
|
|
|
24.6
|
|
-9.0%
|
Total Long-term Debt
|
|
|
0
|
|
|
0
|
|
N/A
|
Stockholders' Equity
|
|
|
51.6
|
|
|
50.7
|
|
1.7%
|
Quarterly Dividend
The Board of Directors declared a cash dividend in the amount of $0.04
per share on all shares of the Company's common stock outstanding and of
record as of the close of business on December 14, 2012, which was paid
on or about December 28, 2012.
Conference Call Information
Management will discuss these results in a conference call (with
accompanying presentation) on January 3, 2013, at 11:00 a.m. EDT.
The dial-in numbers are:
|
(877) 407-0668 (U.S.)
|
(201) 689-8558 (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://mp163422.cdn.mediaplatform.com/163422/wc/mp/4000/15208/15212/21598/Lobby/default.htm.
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
provide 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, filed on August 3, 2012, 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
|
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
|
FOR THE THREE MONTHS AND SIX MONTHS ENDED NOVEMBER 30, 2012 AND
NOVEMBER 30, 2011
|
(In thousands except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
|
November 30,
|
|
November 30,
|
|
|
|
2012
|
|
2011
|
|
2012
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
REVENUE:
|
|
|
|
|
|
|
|
|
|
Academic revenue
|
|
|
$
|
31,518
|
|
$
|
28,603
|
|
$
|
57,995
|
|
$
|
52,303
|
Auxiliary revenue
|
|
|
|
2,721
|
|
|
1,575
|
|
|
5,420
|
|
|
3,002
|
Rental income - apartments
|
|
|
|
270
|
|
|
267
|
|
|
544
|
|
|
537
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
|
|
34,509
|
|
|
30,445
|
|
|
63,959
|
|
|
55,842
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
|
Cost of educational services
|
|
|
|
7,515
|
|
|
6,918
|
|
|
14,650
|
|
|
13,270
|
Selling, general and administrative
|
|
|
|
20,386
|
|
|
19,387
|
|
|
40,807
|
|
|
36,162
|
Auxiliary expense
|
|
|
|
1,749
|
|
|
881
|
|
|
3,592
|
|
|
1,521
|
(Gain) loss on disposition of property
|
|
|
|
(13)
|
|
|
1
|
|
|
60
|
|
|
(131)
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
|
29,637
|
|
|
27,187
|
|
|
59,109
|
|
|
50,822
|
|
|
|
|
|
|
|
|
|
|
OPERATING INCOME
|
|
|
|
4,872
|
|
|
3,258
|
|
|
4,850
|
|
|
5,020
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE):
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
|
33
|
|
|
33
|
|
|
64
|
|
|
74
|
Interest expense
|
|
|
|
(252)
|
|
|
(81)
|
|
|
(505)
|
|
|
(81)
|
Other income - net
|
|
|
|
20
|
|
|
29
|
|
|
55
|
|
|
60
|
|
|
|
|
|
|
|
|
|
|
Total other income (expense)
|
|
|
|
(199)
|
|
|
(19)
|
|
|
(386)
|
|
|
53
|
|
|
|
|
|
|
|
|
|
|
INCOME BEFORE INCOME TAXES
|
|
|
|
4,673
|
|
|
3,239
|
|
|
4,464
|
|
|
5,073
|
|
|
|
|
|
|
|
|
|
|
INCOME TAX EXPENSE
|
|
|
|
(1,808)
|
|
|
(1,281)
|
|
|
(1,750)
|
|
|
(2,009)
|
|
|
|
|
|
|
|
|
|
|
NET INCOME
|
|
|
|
2,865
|
|
|
1,958
|
|
|
2,714
|
|
|
3,064
|
|
|
|
|
|
|
|
|
|
|
NET INCOME ATTRIBUTABLE TO NON-CONTROLLING INTEREST
|
|
|
|
0
|
|
|
(15)
|
|
|
(13)
|
|
|
(98)
|
|
|
|
|
|
|
|
|
|
|
NET INCOME ATTRIBUTABLE TO NATIONAL
|
|
|
|
|
|
|
|
|
|
AMERICAN UNIVERSITY HOLDINGS, INC. AND
|
|
|
|
|
|
|
|
|
|
SUBSIDIARIES
|
|
|
|
2,865
|
|
|
1,943
|
|
|
2,701
|
|
|
2,966
|
|
|
|
|
|
|
|
|
|
|
OTHER COMPREHENSIVE INCOME (LOSS) -
|
|
|
|
|
|
|
|
|
|
Unrealized losses on investments
|
|
|
|
(13)
|
|
|
(21)
|
|
|
(35)
|
|
|
(33)
|
Reclassification to earnings of realized losses
|
|
|
|
10
|
|
|
0
|
|
|
10
|
|
|
0
|
Income tax benefit related to items of other comprehensive loss
|
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
OTHER COMPREHENSIVE LOSS, NET OF TAX
|
|
|
|
(3)
|
|
|
(21)
|
|
|
(25)
|
|
|
(33)
|
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE INCOME ATTRIBUTABLE TO NATIONAL
|
|
|
|
|
|
|
|
|
|
AMERICAN UNIVERSITY HOLDINGS, INC.
|
|
|
$
|
2,862
|
|
$
|
1,922
|
|
$
|
2,676
|
|
$
|
2,933
|
|
|
|
|
|
|
|
|
|
|
Basic net earnings attributable to National American University Holdings,
Inc.
|
|
|
$
|
0.11
|
|
$
|
0.07
|
|
$
|
0.11
|
|
$
|
0.11
|
Diluted net earnings attributable to National American University
Holdings, Inc.
|
|
|
$
|
0.11
|
|
$
|
0.07
|
|
$
|
0.11
|
|
$
|
0.11
|
Basic weighted average shares outstanding
|
|
|
|
25,576,902
|
|
|
26,884,087
|
|
|
25,575,683
|
|
|
26,797,010
|
Diluted weighted average shares outstanding
|
|
|
|
25,586,155
|
|
|
27,009,979
|
|
|
25,579,582
|
|
|
27,045,457
|
NATIONAL AMERICAN UNIVERSITY HOLDINGS, INC. AND SUBSIDIARIES
|
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
|
AS OF NOVEMBER 30, 2012 AND AUDITED CONDENSED
|
CONSOLIDATED BALANCE SHEET AS OF MAY 31, 2012
|
(In thousands except share data)
|
|
|
|
November 30,
|
|
May 31,
|
|
|
2012
|
|
2012
|
ASSETS
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS:
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
13,060
|
|
|
$
|
15,658
|
|
Available for sale investments
|
|
|
15,163
|
|
|
|
14,917
|
|
Student receivables - net of allowance of $956 and $759 at
November 30, 2012 and May 31, 2012, respectively
|
|
|
4,203
|
|
|
|
2,804
|
|
Other receivables
|
|
|
810
|
|
|
|
366
|
|
Bookstore inventory
|
|
|
0
|
|
|
|
6
|
|
Income tax receivable
|
|
|
0
|
|
|
|
974
|
|
Deferred income taxes
|
|
|
1,193
|
|
|
|
1,914
|
|
Prepaid and other current assets
|
|
|
491
|
|
|
|
613
|
|
Total current assets
|
|
|
34,920
|
|
|
|
37,252
|
|
|
|
|
|
|
Total Property and Equipment - Net
|
|
|
43,792
|
|
|
|
40,496
|
|
|
|
|
|
|
OTHER ASSETS:
|
|
|
|
|
Condominium inventory
|
|
|
2,671
|
|
|
|
2,667
|
|
Land held for future development
|
|
|
312
|
|
|
|
312
|
|
Course development - net of accumulated amortization of $1,186 and
$1,715 at November 30, 2012 and May 31, 2012, respectively
|
|
|
1,194
|
|
|
|
1,241
|
|
Other
|
|
|
1,216
|
|
|
|
1,130
|
|
|
|
|
5,393
|
|
|
|
5,350
|
|
|
|
|
|
|
TOTAL
|
|
$
|
84,105
|
|
|
$
|
83,098
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES:
|
|
|
|
|
Current portion of capital lease payable
|
|
$
|
53
|
|
|
$
|
40
|
|
Accounts payable
|
|
|
4,040
|
|
|
|
4,175
|
|
Dividends payable
|
|
|
1,025
|
|
|
|
840
|
|
Student accounts payable
|
|
|
808
|
|
|
|
659
|
|
Income tax payable
|
|
|
10
|
|
|
|
0
|
|
Deferred income
|
|
|
253
|
|
|
|
236
|
|
Accrued and other liabilities
|
|
|
6,361
|
|
|
|
6,717
|
|
Total current liabilities
|
|
|
12,550
|
|
|
|
12,667
|
|
|
|
|
|
|
DEFERRED INCOME TAXES
|
|
|
5,098
|
|
|
|
5,098
|
|
|
|
|
|
|
OTHER LONG-TERM LIABILITIES
|
|
|
4,431
|
|
|
|
4,161
|
|
|
|
|
|
|
CAPITAL LEASE PAYABLE, NET OF CURRENT PORTION
|
|
|
10,432
|
|
|
|
10,460
|
|
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS' EQUITY:
|
|
|
|
|
Common stock, $0.0001 par value (50,000,000 authorized; 28,065,112
issued and 25,579,809 outstanding as of November 30, 2012;
28,057,891 issued and 25,574,124 outstanding as of May 31,
2012
|
|
|
3
|
|
|
|
3
|
|
Additional paid-in capital
|
|
|
57,451
|
|
|
|
57,203
|
|
Retained earnings
|
|
|
11,892
|
|
|
|
11,239
|
|
Treasury stock, at cost (2,485,303 shares at November 30, 2012 and
2,483,767 at May 31, 2012)
|
|
|
(17,596
|
)
|
|
|
(17,589
|
)
|
Accumulated other comprehensive income, net of taxes - unrealized
gain on available for sale securities
|
|
|
0
|
|
|
|
25
|
|
Total National American University Holdings, Inc. stockholders'
equity
|
|
|
51,750
|
|
|
|
50,881
|
|
Net income attributable to non-controlling interest
|
|
|
(156
|
)
|
|
|
(169
|
)
|
Total equity
|
|
|
51,594
|
|
|
|
50,712
|
|
|
|
|
|
|
TOTAL
|
|
$
|
84,105
|
|
|
$
|
83,098
|
|
|
|
|
|
|
The following table provides a reconciliation of net income
attributable to the Company to EBITDA:
|
|
|
|
|
|
|
|
|
Three Months Ended November 30,
|
|
|
Six Months Ended November 30,
|
|
|
2012
|
|
|
2011
|
|
|
2012
|
|
|
2011
|
|
|
(dollars in thousands)
|
Net Income attributable to the Company
|
|
$
|
2,865
|
|
|
|
$
|
1,943
|
|
|
|
$
|
2,701
|
|
|
$
|
2,966
|
|
Income (Loss) attributable to non-controlling interest
|
|
|
0
|
|
|
|
|
15
|
|
|
|
|
13
|
|
|
|
98
|
|
Interest Income
|
|
|
(33
|
)
|
|
|
|
(33
|
)
|
|
|
|
(64)
|
|
|
|
(74
|
)
|
Interest Expense
|
|
|
252
|
|
|
|
|
81
|
|
|
|
|
505
|
|
|
|
81
|
|
Income Taxes
|
|
|
1,808
|
|
|
|
|
1,281
|
|
|
|
|
1,750
|
|
|
|
2,009
|
|
Depreciation and Amortization
|
|
|
1,378
|
|
|
|
|
1,070
|
|
|
|
|
2,729
|
|
|
|
1,949
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA
|
|
$
|
6,270
|
|
|
|
$
|
4,357
|
|
|
|
$
|
7,634
|
|
|
$
|
7,029
|
|
EBITDA 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 (which is not related to any debt
but to the accounting required for the capital lease), 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, the Company's 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.
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