Edison Schools Reports 31% Rise in 3rd Quarter Revenues to $121.9 Million While Gross Site Contribution Climbs to $21.7 Million Tuesday, May 14, 2002 Edison Schools Inc. (NASDAQ: EDSN), the nations leading private manager of public schools, reported net revenues for the quarter ending March 31, 2002 of $121.9 million compared to $92.8 million1 a year ago, an increase of 31%. Gross site contribution for the quarter increased to $21.7 million from $18.1 million2 for the same period last year. The company posted EBITDA, net of non-cash charges, of $103,000, compared to $3.1 million2 in the same period last year. The companys net loss for the period was $16.9 million, compared to $6.0 million2 for the same period last year. The results for the quarter include a non-cash charge for the reduction in the carrying value of Edisons investment in Apex Learning Inc. by $6.8 million due to an other than temporary impairment. The companys net loss would have been $10.1 million and 19 cents per share if this charge were excluded. Edison also reported its year-to-date progress on other critical indicators. Gross site contribution as a percent of net revenues was 15.5% for the first three quarters compared to 15.4% for the prior year period. Net site contribution margin, an important new measure introduced last quarter, increased to 7.4% for the first three quarters of this year from 4.8% for the same period last year. The percent of revenue that Edison spends on headquarters and start-up functions (net of non-cash charges) increased to 18.0% year-to-date from 17.7% for the same period last year. This quarters headquarters costs were unusually and unfavorably impacted for three reasons: development and legal costs in Philadelphia, accounting and legal costs regarding the informal SEC inquiry, and launch costs associated with the companys new Affiliates Division. The company also announced its revised guidance for the current and upcoming year to reflect changes in business prospects as well as the adoption of recent accounting literature. For the current year, the Companys revised guidance is for gross student funding of between $520 million and $525 million and for net revenues of between $475 million and $480 million; EBITDA from $0 to negative $5 million; and a loss per share of 90 cents to 92 cents. Net of a one-time charge related to Apex, Edisons full year earnings per share is expected to be in line with current analysts expectations. For the upcoming year, the company provided guidance assuming that it wins no further contracts than those previously announced or already signed. Calculated in this manner, the companys guidance is for total student funding of approximately $665 million, an increase of 27%. It anticipates net revenues of approximately $618 million; EBITDA of approximately $20 million; and a net loss of approximately $32 million. This guidance assumes the successful completion of the 20-school arrangement in Philadelphia, as well as the contract regarding Edisons role as lead advisor to the district. The company announced that its total cash and undrawn credit lines as of March 31 were $60 million, of which $45 million was in cash and $15 million in undrawn credit lines. In addition, Edison said it was in serious discussions with an investor regarding $30 to $50 million of additional capital. The company said it was hopeful of putting new financing in place within several weeks, the closing of which is likely to be subject to closing conditions. Edison also noted that there can be no assurances that this financing will ultimately be consummated. (1) 2001 revenues reflect the reclassification of approximately $6.8 million (2) Prior year 3rd Quarter amounts have been restated to reduce the loss from operations by $0.6 million for losses, primarily related to two school contracts, that should have been recorded in the first quarter of 2001
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