National American University Holdings, Inc. Reports Fiscal 2014 Third Quarter and Nine Months Results

National American University Holdings, Inc. Reports Fiscal 2014 Third Quarter 
and Nine Months Results 
Company to Host Conference Call on April 3, 2014, at 11:00 a.m. EDT 
RAPID CITY, SD -- (Marketwired) -- 04/02/14 --  National American
University Holdings, Inc. (NASDAQ: NAUH) 
Financial and Operational Highlights 


 
--  Enrollment by headcount decreased 3.6% over the prior-year period to
    11,081 students as of February 28, 2014.
    
    
--  FY 2014 third quarter total revenue was $31.7 million, compared to
    $32.1 million in the prior-year period. The Company's academic
    segment's revenue was $31.2 million in the FY 2014 third quarter,
    compared to $31.8 million in the prior-year period, as a result of
    decreased enrollment, which was primarily driven by weaker market
    demand among National American University's targeted student
    demographic, and was partially offset by the 3.5% tuition increase
    that went into effect during the fall 2013 quarter.
    
    
--  FY 2014 third quarter net income attributable to the Company was $1.1
    million, compared to $1.6 million in the prior-year period. FY 2014
    third quarter EBITDA was $3.5 million, compared to $4.4 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 March 28,
    2014, which will be paid on or about April 11, 2014.
    
    
--  Balance sheet at February 28, 2014, included cash and cash equivalents
    and investments of $31.9 million; working capital of $25.6 million; no
    outstanding lending debt; and stockholders' equity of $50.7 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 third quarter and nine months ended
February 28, 2014. 
Ronald L. Shape, Ed.D., Chief Executive Officer of the Company,
commented, "During the FY 2014 third quarter, we began the process of
renegotiating contrac
ts with our lead generators and are pleased to
report that we were able to reduce the cost of lead generation by
15%-20%. Enrollment for the winter 2014 term declined 3.6% to 11,081
students, which was a result of weaker student retention and
persistence. We are working on measures to improve student retention,
such as joining the Higher Learning Commission's Persistence and
Completion Academy, and continue to develop the capabilities of our
enrollment counselors. With these efforts, we expect enrollments will
return to the positive growth rates we have seen over recent years in
the second half of FY 2015. The enrollment decrease for the winter
2014 term affected revenues for the FY 2014 third quarter, while
increased educational services and SG&A expenses associated with our
admissions efforts and addition of our doctoral programs impacted our
bottom line for the period. We have continued to monitor our revenue
projections and cost structure, and recently completed a second round
of salary reductions resulting in cost savings of an additional $1.7
million annually. While we remain mindful of our financial position
and move forward with our strategic initiatives, our students and the
quality of our academic programming and support will always be our
first priority." 
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 winter term of 2014 decreased
3.6% to 11,081 students from 11,489 during the prior winter term.
Students enrolled in 95,377 credit hours compared to 99,694 credit
hours during the prior winter 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 February 28,
2014, and February 28, 2013, by degree level and by instructional
delivery method:  


 
                                                                            
                                       February 28, 2014  February 28, 2013 
                                       -----------------  ----------------- 
                                        No. of    % of     No. of    % of   
                                       Students   Total   Students   Total  
                                       -------- --------  -------- -------- 
Graduate                                    397      3.6%      414      3.6%
                                                                            
Undergraduate and Diploma                10,684     96.4%   11,075     96.4%
                                       -------- --------  -------- -------- 
                                                                            
Total                                    11,081    100.0%   11,489    100.0%
                                                                            
                                       February 28, 2014  February 28, 2013 
                                       -----------------  ----------------- 
                                        No. of    % of     No. of    % of   
                                       Students   Total   Students   Total  
                                       -------- --------  -------- -------- 
Online                                    6,767     61.1%    6,946     60.5%
On-Campus                                 2,504     22.6%    2,610     22.7%
Hybrid                                    1,810     16.3%    1,933     16.8%
                                       -------- --------  -------- -------- 
                                      
                                      
Total                                    11,081    100.0%   11,489    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 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 1.6% of revenues for the quarter ended
February 28, 2014.  
Fiscal 2014 Third Quarter Financial Results 


 
--  Total revenues for the FY 2014 third quarter were $31.7 million,
    compared to $32.1 million in the same period last year. The academic
    segment's total revenue was $31.2 million, compared to $31.8 million
    in the prior-year period. This decrease in academic segment revenues
    was primarily a result of a decrease in enrollment, which impacted the
    number of credit hours and book sales during the period, and was
    driven by weaker market demand among NAU's targeted student
    demographic. The decrease in academic segment revenues was partially
    offset by the 3.5% tuition increase that became effective in September
    2013.
    
    
--  For the FY 2014 third quarter, educational services expense was $7.2
    million, or 23.2% of the academic segment's total revenue, compared to
    $7.0 million, or 22.2%, for the FY 2013 third quarter, primarily due
    to increased expenses associated with the addition of NAU's doctoral
    programs. 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 third quarter, SG&A expenses were $21.3
    million, or 67.3% of total revenues, compared to $20.7 million, or
    64.4%, in the prior-year period. The increase was primarily a result
    of higher admissions and marketing expenses related to hiring new
    admissions advisors and implementing new software tools to maximize
    productivity. The Company also incurred additional costs related to
    the new doctoral programs, as well as increased rent and depreciation
    expenses for the new locations.
    
    
--  Income before income taxes and non-controlling interest for the FY
    2014 third quarter was $1.8 million, compared to $2.7 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 third quarter
    was $1.1 million, or $0.04 per diluted share based on 25.1 million
    shares outstanding, compared to $1.6 million, or $0.06 per diluted
    share based on 25.6 million shares outstanding, in the prior-year
    period. EBITDA for the FY 2014 third quarter was $3.5 million,
    compared to $4.4 million in the prior-year period. A table reconciling
    EBITDA to net income can be found at the end of this release.

  
FY 2014 Nine Months Financial Results 


 
--  Total revenues for the first nine months of FY 2014 were $95.8
    million, compared to $96.0 million in the prior-year period. The
    academic segment's total revenue was $94.5 million, compared to $95.2
    million in the prior-year period as a result of decreased enrollment
    during the fall 2013 and winter 2014 terms, 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 nine months of FY
    2014 remained relatively flat at $21.8 million, or 23.1% of the
    academic segment's total revenue, compared to $21.7 million, or 22.8%,
    in the prior-year period.
    
    
--  During the first nine months of FY 2014, SG&A expenses were $65.1
    million, or 68.0% of total revenues, compared to $61.5 million, or
    64.0%, 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 nine months of FY 2014 was also
    impacted by one-time expenses related to the Company's ongoing efforts
    to streamline operations.
    
    
--  Income before income taxes and non-controll
ing interest for the first
    nine months of FY 2014 was $3.5 million, compared to $7.1 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 nine months of
    FY 2014 was $2.2 million, or $0.09 per diluted share based on 25.1
    million shares outstanding, compared to $4.3 million, or $0.17 per
    diluted share based on 25.6 million shares outstanding, in the
    prior-year period.
    
    
--  The Company's EBITDA for the first nine months of FY 2014 was $8.7
    million, compared to $12.0 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)       2/28/2014   5/31/2013   % Change 
                                           ---------   ---------   -------- 
Cash and Cash Equivalents/Investments      $    31.9   $    31.9        0.0%
Working Capital                                 25.6        23.8        7.2%
Total Long-term Debt                               0           0        N/A 
Stockholders' Equity                            50.7        50.8       -0.3%

 
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 March 28,
2014, to be paid on or about April 11, 2014. 
Conference Call Information 
Management will discuss these results in a conference call (with
accompanying presentation) on April 3, 2014, at 11:00 a.m. EDT. 
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/q3-2014.  
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 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,
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 NINE MONTHS ENDED FEBRUARY 28, 2014 AND FEBRUARY 28, 2013 
(In thousands except per share data)                                        
                                                                            
                            Three Months Ended         Nine Months Ended    
                               February 28,              February 28,       
                         ------------------------  ------------------------ 
                             2014         2013         2014         2013    
                         -----------  -----------  -----------  ----------- 
                                                                            
REVENUE:                                                                    
  Academic revenue       $    29,469  $    29,546  $    87,702  $    87,541 
  
Auxiliary revenue            1,702        2,229        6,792        7,649 
  Rental income -                                                           
   apartments                    283          280          851          824 
  Condominium sales              220            0          440            0 
                         -----------  -----------  -----------  ----------- 
                                                                            
    Total revenue             31,674       32,055       95,785       96,014 
                         -----------  -----------  -----------  ----------- 
                                                                            
OPERATING EXPENSES:                                                         
  Cost of educational                                                       
   services                    7,234        7,045       21,835       21,695 
  Selling, general and                                                      
   administrative             21,325       20,658       65,090       61,465 
  Auxiliary expense            1,028        1,443        4,696        5,035 
  Cost of condominium                                                       
   sales                         192            0          386            0 
  (Gain) loss on                                                            
   disposition of                                                           
   property                       (3)           3          (73)          63 
                         -----------  -----------  -----------  ----------- 
                                                                            
    Total operating                                                         
     expenses                 29,776       29,149       91,934       88,258 
                         -----------  -----------  -----------  ----------- 
                                                                            
OPERATING INCOME               1,898        2,906        3,851        7,756 
                         -----------  -----------  -----------  ----------- 
                                                                            
OTHER INCOME (EXPENSE):                                                     
  Interest income                 72           25          122           89 
  Interest expense              (168)        (287)        (567)        (792)
  Other income - net              35           21          115           76 
                         -----------  -----------  -----------  ----------- 
                                                                            
    Total other expense          (61)        (241)        (330)        (627)
                         -----------  -----------  -----------  ----------- 
                                                                            
INCOME BEFORE INCOME                                                        
 TAXES                         1,837        2,665        3,521        7,129 
                                                                            
INCOME TAX EXPENSE              (710)      (1,048)      (1,397)      (2,798)
                         -----------  -----------  -----------  ----------- 
                                                                            
NET INCOME                     1,127        1,617        2,124        4,331 
                                                                            
NET INCOME (LOSS)                                                           
 ATTRIBUTABLE TO NON-                                                       
 CONTROLLING INTEREST            (10)         (18)          26          (31)
                         -----------  -----------  -----------  ----------- 
                                                                            
NET INCOME ATTRIBUTABLE                                                     
 TO NATIONAL AMERICAN                                                       
 UNIVERSITY HOLDINGS,                                                       
 INC. AND SUBSIDIARIES         1,117        1,599        2,150        4,300 
                                                                            
OTHER COMPREHENSIVE                                                         
 (LOSS) INCOME -                                                            
  Unrealized losses on                                                      
   investments, before                                                      
   tax                            (9)          (9)         (16)         (44)
  Reclassification to                                                       
   earnings of realized                                                     
   losses                          0           11            0           21 
                         -----------  -----------  -----------  ----------- 
OTHER COMPREHENSIVE                                                         
 (LOSS) INCOME, NET OF                                                      
 TAX                              (9)           2          (16)         (23)
                         -----------  -----------  -----------  ----------- 
                                                                            
COMPREHENSIVE INCOME                                                        
 ATTRIBUTABLE TO                                                            
 NATIONAL AMERICAN                                                          
 UNIVERSITY HOLDINGS,                                                       
 INC.                    $     1,108  $     1,601  $     2,134  $     4,277 
                         ===========  ===========  ===========  =========== 
                                                                            
Basic net earnings                                                          
 attributable to                                                            
 National American                                                          
 University Holdings,                                                       
 Inc.                    $      0.04  $      0.06  $      0.09  $      0.17 
                                                                            
Diluted net earnings                                                        
 attributable to                                                            
 National American                                                          
 University Holdings,                                                       
 Inc.                    $      0.04  $      0.06  $      0.09  $      0.17 
                                                                            
Basic weighted average                                                      
 shares outstanding       25,108,559   25,582,842   25,086,144   25,578,043 
Diluted weighted average                                                    
 shares outstanding       25,114,875   25,592,903   25,088,575   25,582,767 
                                                                            
                                                                            
                                                                            
NATIONAL AMERICAN UNIVERSITY HOLDINGS, INC. AND SUBSIDIARIES                
                                                                            
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET                              
AS OF FEBRUARY 28, 2014 AND CONDENSED                                       
CONSOLIDATED BALANCE SHEET AS OF MAY 31, 2013                               
(In thousands except share data)                                            
                                                 
                           
                                                 February 28,     May 31,   
                                                     2014          2013     
                                                 ------------  ------------ 
ASSETS                                                                      
CURRENT ASSETS:                                                             
  Cash and cash equivalents                      $     16,740  $     11,130 
  Available for sale investments                       15,133        20,748 
  Student receivables - net of allowance of $507                            
   and $870 at February 28, 2014 and May 31,                                
   2013, respectively                                   2,495         3,628 
  Other receivables                                       296           722 
  Income tax receivable                                     0           122 
  Deferred income taxes                                 1,264         1,353 
  Prepaid and other current assets                      2,373           841 
                                                 ------------  ------------ 
    Total current assets                               38,301        38,544 
                                                 ------------  ------------ 
Total property and equipment - net                     43,882        44,944 
                                                 ------------  ------------ 
OTHER ASSETS:                                                               
  Condominium inventory                                   927         1,778 
  Land held for future development                        312           312 
  Course development - net of accumulated                                   
   amortization of $2,329 and $2,066 at February                            
   28, 2014 and May 31, 2013, respectively              1,053         1,107 
  Note receivable - tenant improvements                 1,329             0 
  Deposit on property and equipment                       150             0 
  Other                                                 1,347         1,397 
                                                 ------------  ------------ 
    Total other assets                                  5,118         4,594 
                                                 ------------  ------------ 
TOTAL                                            $     87,301  $     88,082 
                                                 ============  ============ 
                                                                            
LIABILITIES AND STOCKHOLDERS' EQUITY                                        
CURRENT LIABILITIES:                                                        
  Current portion of capital lease payable       $        197  $         66 
  Accounts payable                                      3,622         5,403 
  Dividends payable                                     1,133         1,004 
  Student accounts payable                              1,201         1,067 
  Income taxes payable                                    120             0 
  Deferred income                                         406           195 
  Accrued and other liabilities                         6,068         6,966 
                                                 ------------  ------------ 
    Total current liabilities                          12,747        14,701 
                                                 ------------  ------------ 
DEFERRED INCOME TAXES                                   5,224         5,720 
                                                 ------------  ------------ 
OTHER LONG-TERM LIABILITIES                             6,527         6,479 
                                                 ------------  ------------ 
CAPITAL LEASE PAYABLE, NET OF CURRENT PORTION          12,152        10,394 
                                                 ------------  ------------ 
COMMITMENTS AND CONTINGENCIES (Note 7)                                      
STOCKHOLDERS' EQUITY:                                                       
  Common stock, $0.0001 par value (50,000,000                               
   authorized; 28,170,286 issued and 25,111,908                             
   outstanding as of February 28, 2014;                                     
   28,090,269 issued and 25,047,086 outstanding                             
   at May 31, 2013)                                         3             3 
  Additional paid-in capital                           58,859        57,656 
  Retained earnings                                    11,369        12,610 
  Treasury stock, at cost (3,058,378 shares at                              
   February 28, 2014 and 3,043,183 at May 31,                               
   2013)                                              (19,416)      (19,359)
  Accumulated other comprehensive income (loss),                            
   net of taxes - unrealized gain (loss) on                                 
   available for sale securities                           (9)            7 
                                                 ------------  ------------ 
Total National American University Holdings,                                
 Inc. stockholders' equity                             50,806        50,917 
                                                 ------------  ------------ 
Non-controlling interest                                 (155)         (129)
Total equity                                           50,651        50,788 
                                                 ------------  ------------ 
TOTAL                                            $     87,301  $     88,082 
                                                 ============  ============ 

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


 
                                                                            
                                  Three Months Ended     Nine Months Ended  
                                     February 28,          February 28,     
                                    2014       2013       2014       2013   
                                 ---------  ---------  ---------  --------- 
                                           (dollars in thousands)           
Net Income attributable to the                                              
 Company                         $   1,117  $   1,599  $   2,150  $   4,300 
(Income) Loss attributable to                                               
 non-controlling interest               10         18       
 (26)        31 
Interest Income                        (72)       (25)      (122)       (89)
Interest Expense                       168        287        567        792 
Income Taxes                           710      1,048      1,397      2,798 
Depreciation and Amortization        1,611      1,436      4,734      4,165 
                                 ---------  ---------  ---------  --------- 
                                                                            
EBITDA                           $   3,544  $   4,363  $   8,700  $  11,997 

 
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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