National American University Holdings, Inc. Reports Fiscal 2014 Second Quarter and Six Months Results

National American University Holdings, Inc. Reports Fiscal 2014 Second Quarter 
and Six Months Results 
Company to Host Conference Call on January 9, 2014, at 11:00 a.m. EST 
RAPID CITY, SD -- (Marketwired) -- 01/08/14 --   National American
University Holdings, Inc. (NASDAQ: NAUH) 
Financial and Operational Highlights 


 
--  Enrollment by headcount decreased 2.6% over the prior-year period to
    11,386 students as of November 30, 2013.
    
    
--  FY 2014 second quarter total revenue was $33.2 million, compared to
    $34.5 million in the prior-year period. The Company's academic
    segment's revenue was $32.9 million in the FY 2014 second quarter,
    compared to $34.2 million in the prior-year period, as a result of the
    decrease in enrollment, which was primarily driven by weaker market
    demand among National American University's targeted student
    demographic, and was partially offset by a 3.5% tuition increase.
    
    
--  FY 2014 second quarter net income attributable to the Company was $1.4
    million, compared to $2.9 million in the prior-year period, primarily
    due to increased selling, general and administrative (SG&A)
    expenses associated with admissions and marketing, as well as
    increased depreciation expense. FY 2014 second quarter EBITDA was $3.9
    million, compared to $6.3 million in the prior-year period.
    
    
--  The Board of Directors declared a cash dividend in the amount of
    $0.045 per share on all shares of the Company's common stock
    outstanding and of record as of the close of business on December 30,
    2013, which will be paid on or about January 10, 2014.
    
    
--  Balance sheet at November 30, 2013, included cash and cash equivalents
    and investments of $32.0 million; working capital of $24.3 million; no
    outstanding lending debt; and stockholders' equity of $50.4 million.

  
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 2014 second quarter and six months ended
November 30, 2013. 
Ronald L. Shape, Ed.D.,
 Chief Executive Officer of the Company,
commented, "We continued to make progress on our new and expanded
development initiatives during the FY 2014 second quarter. In that
regard, we are very excited about the full approval of our doctoral
program and the initial cohort of students scheduled to start this
spring term. In addition, we are pleased to have been one of the
institutions accepted into the Higher Learning Commission's initial
Persistence and Completion Academy. Our enrollment numbers for the
fall 2013 term declined 2.6% to 11,386 students but were in line with
our expectations. The decline was largely due to weaker overall
market demand among our targeted student population and the shift of
several of our more experienced admissions advisors transitioning
into management roles at our newer campuses. We expect this shift
will continue to have some impact on our enrollment figures in the
upcoming terms as the more recently employed advisors complete their
training and contribute to our enrollment efforts. The enrollment
decrease for the fall 2013 term impacted revenues for the FY 2014
second quarter, and increased SG&A expenses associated with our
development efforts, increased admissions advisor count, and one-time
costs related to our efforts to streamline operations impacted our
bottom line for the period. We anticipate the Company will begin
realizing the benefits of our cost-saving measures taken in the FY
2014 second quarter in the FY 2014 third and fourth quarters, and we
will continue monitoring our revenue projections and cost structure
accordingly to better align our expenditures with our current
footprint. As we continue to execute on initiatives for strategic
growth, we remain dedicated and focused on providing our students
with the quality programming and level of support they need to be
successful at NAU and beyond." 
Operating Review  
NAU currently 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 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: 


 
--  Roueche Graduate Center in Austin, TX
--  Houston, TX

  
Enrollment Update 
Total NAU student enrollment for the fall term of 2013 decreased 2.6%
to 11,386 students from 11,685 during the prior fall term. Students
enrolled in 98,167 credit hours compared to 102,727 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,
2013, and November 30, 2012, by degree level and by instructional
delivery method:  


 
                                    November 30, 2013     November 30, 2012 
                                   ------------------    ------------------ 
                                     No. of     % of       No. of     % of  
                                    Students    Total     Students    Total 
                                   ---------   ------    ---------   ------ 
Graduate                                 371      3.3%         393      3.4%
                                                                            
Undergraduate and Diploma             11,015     96.7%      11,292     96.6%
                                   ---------   ------    ---------   ------ 
                                                                            
Total                                 11,386    100.0%      11,685    100.0%
                                                                            
                                    November 30, 2013     November 30, 2012 
                                   ------------------    ------------------ 
                                     No. of     % of       No. of     % of  
                                    Students    Total     Students    Total 
                                   ---------   ------    ---------   ------ 
Online                                 6,853     60.2%       6,892     59.0%
On-Campus                              2,625     23.1%       2,704     23.1%
Hybrid                                 1,908     16.8%       2,089     17.9%
                                   ---------   ------    ---------   ------ 
                                                                            
Total                                 11,386    100.0%      11,685    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, graduate, and doctoral education programs and
contributes the primary port
ion 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, 2013.  
Fiscal 2014 Second Quarter Financial Results 


 
--  Total revenues for the FY 2014 second quarter were $33.2 million,
    compared to $34.5 million in the same period last year. The academic
    segment's total revenue was $32.9 million, compared to $34.2 million
    in the prior-year period. This decrease in academic segment revenues
    was primarily a result of a decrease in enrollment, which was driven
    by weaker market demand among NAU's targeted student demographic, but
    was partially offset by a Board of Governors-approved tuition increase
    of 3.5% that became effective in September 2013.
    
    
--  For the FY 2014 second quarter, educational services expense was $7.6
    million, or 23.1% of the academic segment's total revenue, compared to
    $7.5 million, or 21.9%, for the FY 2013 second quarter. The increase
    in cost of educational services as a percentage of total revenue was
    the result of fixed facility costs on lower revenues.
    
    
    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 2014 second quarter, SG&A expenses were $21.5
    million, or 64.9% of total revenues, compared to $20.4 million, or
    59.1%, in the prior-year period. The increase was primarily a result
    of increased spending on admissions and marketing, as well as
    increased depreciation expense for the new locations.
    
    
--  Income before income taxes and non-controlling interest for the FY
    2014 second quarter was $2.2 million, compared to $4.7 million for the
    same period last year. This decrease was largely due to the reasons
    mentioned above.
    
    
--  Net income attributable to the Company for the FY 2014 second quarter
    was $1.4 million, or $0.05 per diluted share based on 25.1 million
    shares outstanding, compared to $2.9 million, or $0.11 per diluted
    share based on 25.6 million shares outstanding, in the prior-year
    period.
    
    
--  EBITDA for the FY 2014 second quarter was $3.9 million, compared to
    $6.3 million in the prior-year period. A table reconciling EBITDA to
    net income can be found at the end of this release.

  
FY 2014 Six Months Financial Results 


 
--  Total revenues for the first six months of FY 2014 remained relatively
    flat at $64.1 million, compared to $64.0 million in the prior-year
    period. The academic segment's total revenue decreased slightly to
    $63.3 million from $63.4 million in the prior-year period as a result
    of the 2.6% decrease in enrollment, which was partially offset by the
    previously mentioned tuition increase of 3.5%. The Company believes it
    will achieve increased revenue growth as it continues to execute on
    its strategic plan, which includes growing enrollments at its current
    existing locations by investing in new program development and
    expansion, academic advisor support, and student retention
    initiatives.
    
    
--  NAU's educational services expense for the first six months of FY 2014
    remained relatively flat at $14.6 million, or 23.1% of the academic
    segment's total revenue, compared to $14.7 million, also 23.1%, in the
    prior-year period.
    
    
--  During the first six months of FY 2014, SG&A expenses were $43.8
    million, or 68.3% of total revenues, compared to $40.8 million, or
    63.8%, in the prior-year period. The increase was primarily due to
    increased expenses related to the hiring of additional admissions and
    support staff to maintain the quality of academic programs at newer
    locations. SG&A for the first six months of FY 2014 was also
    impacted by one-time expenses related to the Company's efforts to
    streamline operations.
    
    
--  Income before income taxes and non-controlling interest for the first
    six months of FY 2014 was $1.7 million, compared to $4.5 million in
    the prior-year period. This decrease was largely due to higher
    SG&A expenses.
    
    
--  Net income attributable to the Company during the first six months of
    FY 2014 was $1.0 million, or $0.04 per diluted share based on 25.1
    million shares outstanding, compared to $2.7 million, or $0.11 per
    diluted share based on 25.6 million shares outstanding, in the
    prior-year period.
    
    
--  The Company's EBITDA for the first six months of FY 2014 was $5.2
    million, compared to $7.6 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)      11/30/2013    5/31/2013  % Change 
                                          ----------   ----------  -------- 
Cash and Cash Equivalents/Investments    $      32.0  $      31.9       0.3%
Working Capital                                 24.3         23.8       1.9%
Total Long-term Debt                               0            0       N/A 
Stockholders' Equity                            50.4         50.8      -0.8%

 
Quarterly Dividend  
The Board of Directors declared a cash dividend in the amount of
$0.045 per share on all shares of the Company's common stock
outstanding and of record as of the close of business on December 30,
2013, to be paid on or about January 10, 2014. 
Conference Call Information 
Management will discuss these results in a conference call (with
accompanying presentation) on January 9, 2014, at 11:00 a.m. EST. 
The dial-in numbers are:
 (877) 407-9078 (U.S.)
 (201) 493-6745
(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://national.equisolvewebcast.com/q2-2014. 
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, master's, and
doctoral degree programs in technical and professional 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 form
ats, 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,
which was filed on August 2, 2013, 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 AND SIX MONTHS ENDED NOVEMBER 30, 2013 AND NOVEMBER 30, 2012  
(In thousands except per share data)                                        
                                                                            
                               Three Months Ended       Six Months Ended    
                                  November 30,            November 30,      
                            ----------------------- ----------------------- 
                                2013        2012        2013        2012    
                            ----------- ----------- ----------- ----------- 
                                                                            
REVENUE:                                                                    
  Academic revenue          $    30,583 $    31,518 $    58,233 $    57,995 
  Auxiliary revenue               2,318       2,721       5,090       5,420 
  Rental income -                                                           
   apartments                       281         270         568         544 
  Condominium sales                   0           0         220           0 
                            ----------- ----------- ----------- ----------- 
                                                                            
    Total revenue                33,182      34,509      64,111      63,959 
                            ----------- ----------- ----------- ----------- 
                                                                            
OPERATING EXPENSES:                                                         
  Cost of educational                                                       
   services                       7,596       7,515      14,601      14,650 
  Selling, general and                                                      
   administrative                21,543      20,386      43,765      40,807 
  Auxiliary expense               1,698       1,749       3,668       3,592 
  Cost of condominium sales           3           0         194           0 
  Loss (gain) on                                                            
   disposition of property           27         (13)        (70)         60 
                            ----------- ----------- ----------- ----------- 
                                                                            
    Total operating                                                         
     expenses                    30,867      29,637      62,158      59,109 
                            ----------- ----------- ----------- ----------- 
                                                                            
OPERATING INCOME                  2,315       4,872       1,953       4,850 
                            ----------- ----------- ----------- ----------- 
                                                                            
OTHER INCOME (EXPENSE):                                                     
  Interest income                    24          33          50          64 
  Interest expense                 (147)       (252)       (399)       (505)
  Other income - net                 36          20          80          55 
                            ----------- ----------- ----------- ----------- 
                                                                            
    Total other expense             (87)       (199)       (269)       (386)
                            ----------- ----------- ----------- ----------- 
                                                                            
INCOME BEFORE INCOME TAXES        2,228       4,673       1,684       4,464 
                                                                            
INCOME TAX EXPENSE                 (865)     (1,808)       (687)     (1,750)
                            ----------- ----------- ----------- ----------- 
                                                                            
NET INCOME                        1,363       2,865         997       2,714 
                                                                            
NET (INCOME) LOSS                                                           
 ATTRIBUTABLE TO NON-                                                       
 CONTROLLING INTEREST                (1)          0          36         (13)
                            ----------- ----------- ----------- ----------- 
                                                                            
NET INCOME ATTRIBUTABLE TO                                                  
 NATIONAL AMERICAN                                                          
 UNIVERSITY HOLDINGS, INC.                                                  
 AND SUBSIDIARIES                 1,362       2,865       1,033       2,701 
                                                                            
OTHER COMPREHENSIVE INCOME                                                  
 (LOSS) -                                                                   
  Unrealized losses on                                                      
   investments, before tax           (2)        (13)         (7)        (35)
  Reclassification to                                                       
   earnings of realized                                                     
   losses                             0          10           0          10 
                            ----------- ----------- ----------- ----------- 
OTHER COMPREHENSIVE LOSS,                                                   
 NET OF TAX                          (2)         (3)         (7)        (25)
                            ----------- --------
--- ----------- ----------- 
                                                                            
COMPREHENSIVE INCOME                                                        
 ATTRIBUTABLE TO NATIONAL                                                   
AMERICAN UNIVERSITY                                                         
 HOLDINGS, INC.             $     1,360 $     2,862 $     1,026 $     2,676 
                            =========== =========== =========== =========== 
                                                                            
Basic net earnings                                                          
 attributable to National                                                   
 American University                                                        
 Holdings, Inc.             $      0.05 $      0.11 $      0.04 $      0.11 
Diluted net earnings                                                        
 attributable to National                                                   
 American University                                                        
 Holdings, Inc.             $      0.05 $      0.11 $      0.04 $      0.11 
Basic weighted average                                                      
 shares outstanding          25,094,063  25,576,902  25,075,120  25,575,683 
Diluted weighted average                                                    
 shares outstanding          25,096,152  25,586,155  25,079,741  25,579,582 
                                                                            
                                                                            
                                                                            
NATIONAL AMERICAN UNIVERSITY HOLDINGS, INC. AND SUBSIDIARIES                
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET                              
AS OF NOVEMBER 30, 2013 AND CONDENSED                                       
CONSOLIDATED BALANCE SHEET AS OF MAY 31, 2013                               
(In thousands except share data)                                            
                                                 November 30,     May 31,   
                                                     2013          2013     
                                                 ------------  ------------ 
ASSETS                                                                      
CURRENT ASSETS:                                                             
  Cash and cash equivalents                      $     13,730  $     11,130 
  Available for sale investments                       18,236        20,748 
  Student receivables - net of allowance of $649                            
   and $870 at November 30, 2013 and May 31,                                
   2013, respectively                                   3,071         3,628 
  Other receivables                                       680           722 
  Income tax receivable                                     0           122 
  Deferred income taxes                                 1,275         1,353 
  Prepaid and other current assets                      2,138           841 
                                                 ------------  ------------ 
    Total current assets                               39,130        38,544 
                                                 ------------  ------------ 
Total property and equipment - net                     43,117        44,944 
                                                 ------------  ------------ 
OTHER ASSETS:                                                               
  Condominium inventory                                 1,257         1,778 
  Land held for future development                        312           312 
  Course development - net of accumulated                                   
   amortization of $2,243 and $2,066 at November                            
   30, 2013 and May 31, 2013, respectively              1,113         1,107 
  Note receivable - tenant improvements                 1,766             0 
  Deposit on property and equipment                     1,556             0 
  Other                                                 1,337         1,397 
                                                 ------------  ------------ 
                                                        7,341         4,594 
                                                 ------------  ------------ 
TOTAL                                            $     89,588  $     88,082 
                                                 ============  ============ 
                                                                            
LIABILITIES AND STOCKHOLDERS' EQUITY                                        
CURRENT LIABILITIES:                                                        
  Current portion of capital lease payable       $        188  $         66 
  Accounts payable                                      4,776         5,403 
  Dividends payable                                     1,134         1,004 
  Student accounts payable                              1,128         1,067 
  Income taxes payable                                    190             0 
  Deferred income                                         255           195 
  Accrued and other liabilities                         7,154         6,966 
                                                 ------------  ------------ 
    Total current liabilities                          14,825        14,701 
                                                 ------------  ------------ 
DEFERRED INCOME TAXES                                   5,600         5,720 
                                                 ------------  ------------ 
OTHER LONG-TERM LIABILITIES                             6,579         6,479 
                                                 ------------  ------------ 
CAPITAL LEASE PAYABLE, NET OF CURRENT PORTION          12,206        10,394 
                                                 ------------  ------------ 
COMMITMENTS AND CONTINGENCIES (Note 7)                                      
STOCKHOLDERS' EQUITY:                                                       
  Common stock, $0.0001 par value (50,000,000                               
   authorized; 28,162,735 issued and 25,106,822                             
   outstanding as of November 30, 2013;                                     
   28,090,269 issued and 25,047,086 outstanding                             
   at May 31, 2013)                                         3             3 
  Additional paid-in capital                           58,564        57,656 
  Retained earnings                                    11,383        12,610 
  Treasury stock, at cost (3,055,913 shares at                              
   November 30, 2013 and 3,043,183 at May 31,                               
   2013)                                              (19,407)      (19,359)
  Accumulated other comprehensive income, net of                            
   taxes - unrealized gain on available for sale                            
   securities                                               0             7 
                                                 ------------  ------------ 
Total National American University Holdings,                                
 Inc. stockholders' equity                             50,543        50,917 
                                                 ------------  ------------ 
Non-controlling interest                                 (165)         (129)
Total equity                                           50,378        50,788 
                                                 ------------  ------------ 
TOTAL                                            $     89,588  $     88,082 
                                                 ============  ============ 

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


 
                                       Three Months Ended  Six Months Ended 
                                          November 30,       November 30,   
                                          2013     2012      2013     2012  
                                       --------- -------- --------- --------
                                               (dollars in thousands)       
Net Income attributable to the Company $   1,362 $  2,865 $   1,033 $  2,701
Income (Loss) attributable to non-                                          
 controlling interest                          1        0      (36)       13
Interest Income                             (24)     (33)      (50)     (64)
Interest Expense                             147      252       399      505
Income Taxes                                 865    1,808       687    1,750
Depreciation and Amortization              1,572    1,378     3,123    2,729
                       
                --------- -------- --------- --------
                                                                            
EBITDA                                 $   3,923 $  6,270 $   5,156 $  7,634

 
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. 
Contact Information: 
National American University Holdings, Inc.
Dr. Ronald Shape
605-721-5220
rshape@national.edu 
Investor Relations Counsel
The Equity Group Inc.
Carolyne Y. Sohn
415-568-2255
csohn@equityny.com 
Adam Prior
212-836-9606
aprior@equityny.com 
 
 
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