UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 3, 2009
Grand Canyon Education, Inc.
(Exact name of registrant as specified in its charter)
Delaware | 001-34211 | 20-3356009 | ||
(State or other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
3300 W. Camelback Road Phoenix, Arizona |
85017 | |
(Address of Principal Executive Offices) | (Zip Code) |
Registrants telephone number, including area code: (602) 639-7500
(Former name or former address if changed since last report.) |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
99.1
|
Press Release dated November 3, 2009 |
GRAND CANYON EDUCATION, INC. |
||||
Date: November 3, 2009 | By: | /s/ Daniel E. Bachus | ||
Daniel E. Bachus | ||||
Chief Financial Officer (Principal Financial and Principal Accounting Officer) | ||||
Exhibit | ||||
No. | Description | |||
99.1 | Press Release dated November 3, 2009 |
| Net revenues increased 67.9% to $66.1 million for the third quarter of 2009, compared to
$39.3 million for the third quarter of 2008. |
|
| At September 30, 2009 our enrollment was approximately 34,200, an increase of 55.8% from our
enrollment of approximately 22,000 at September 30, 2008. |
|
| Operating income for the third quarter of 2009 was $6.7 million, as compared to $2.7 million
for the same period in 2008. The operating margin for the third quarter 2009 was 10.1%,
compared to 6.8% for the same period in 2008 and excluding the estimated litigation loss,
operating margin for the third quarter was $11.9 million or 18.0% for the three months ended
September 30, 2009. |
|
| During the third quarter of 2009, an estimated litigation loss was recorded for $5.2 million
for the settlement of the qui tam lawsuit that has been reached in principle but is
conditioned upon obtaining governmental approval and finalizing settlement terms. |
|
| Adjusted EBITDA increased 254% to $15.1 million for the third quarter of 2009, compared to
$4.3 million for the same period in 2008. |
|
| The tax rate in the third quarter of 2009 was 46.0% compared to 40.2% in the third quarter of
2008. The increase in the effective tax rate is primarily attributable to the potential
impact of the estimated litigation loss for the qui tam settlement, which may not be fully
deductible. |
|
| Net income was $3.5 million for the third quarter of 2009, compared to a net income of $1.3
million for the same period in 2008. |
|
| Diluted net income per share was $0.08 for the third quarter of 2009, compared to diluted net
income per share of $0.03 for the same period in 2008. Excluding the estimated litigation
loss of $5.2 million, net of taxes of $1.7 million, diluted net income per share was $0.15 for
the third quarter of 2009. |
| Net revenues increased 68.3% to $184.5 million, compared to $109.6 million for the same
period in 2008. |
|
| Operating income for the nine months ended September 30, 2009 was $28.7 million, an increase
of 219% as compared to $9.0 million for the same period in 2008. The operating margin for the
nine months ended September 30, 2009 was 15.6%, compared to 8.2% for the same period in 2008.
Excluding the estimated litigation loss, operating income was $33.9 million and operating
margin was 18.4% for the nine months ended September 30, 2009. |
|
| During the nine months ended September 30, 2009, an estimated litigation loss was recorded
for $5.2 million for the settlement of the qui tam lawsuit that has been reached in principle
but is conditioned upon obtaining governmental approval and finalizing settlement terms. |
|
| Adjusted EBITDA increased 189% to $42.1 million for the nine months ended September 30, 2009,
compared to $14.6 million for the same period in 2008. |
|
| The tax rate in 2009 was 41.3% compared to 39.1% for the same period in 2008. |
|
| Net income increased 262% to $16.2 million for the nine months ended September 30, 2009,
compared to $4.5 million for the same period in 2008. |
|
| Diluted net income per share was $0.36 for the nine months ended September 30, 2009, compared
to $0.11 for the same period in 2008. Excluding the estimated litigation loss, net of taxes,
diluted net income per share was $0.43 for the nine months ended September 30, 2009. |
* | Grand Canyon Education, Inc. is regionally accredited by The Higher Learning Commission of
the North Central Association of Colleges and Schools (NCA), http://www.ncahlc.org. Grand
Canyon University, 3300 W. Camelback Road, Phoenix, AZ 85017, www.gcu.edu. |
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
(In thousands, except per share amounts) | 2009 | 2008 | 2009 | 2008 | ||||||||||||
Unaudited | ||||||||||||||||
Net revenue |
$ | 66,084 | $ | 39,351 | $ | 184,448 | $ | 109,626 | ||||||||
Costs and expenses: |
||||||||||||||||
Instructional costs and services |
23,466 | 12,967 | 61,845 | 36,995 | ||||||||||||
Selling and promotional, including $1,928 and $1,398
for the three months ended September 30, 2009 and
2008, respectively, and $5,319 and $4,323 for the
nine months ended September 30, 2009 and 2008,
respectively, to related parties |
22,095 | 18,562 | 62,396 | 46,035 | ||||||||||||
General and administrative |
8,556 | 5,032 | 26,077 | 15,992 | ||||||||||||
Estimated litigation loss |
5,200 | | 5,200 | | ||||||||||||
Royalty to former owner |
74 | 124 | 222 | 1,612 | ||||||||||||
Total costs and expenses |
59,391 | 36,685 | 155,740 | 100,634 | ||||||||||||
Operating income |
6,693 | 2,666 | 28,708 | 8,992 | ||||||||||||
Interest expense |
(276 | ) | (649 | ) | (1,363 | ) | (2,156 | ) | ||||||||
Interest income |
43 | 76 | 272 | 508 | ||||||||||||
Income before income taxes |
6,460 | 2,093 | 27,617 | 7,344 | ||||||||||||
Income tax expense |
2,969 | 841 | 11,408 | 2,868 | ||||||||||||
Net income |
3,491 | 1,252 | 16,209 | 4,476 | ||||||||||||
Preferred dividends |
| (270 | ) | | (791 | ) | ||||||||||
Net income available to common stockholders |
$ | 3,491 | $ | 982 | $ | 16,209 | $ | 3,685 | ||||||||
Net income per common share: |
||||||||||||||||
Basic |
$ | 0.08 | $ | 0.05 | $ | 0.36 | $ | 0.19 | ||||||||
Diluted |
$ | 0.08 | $ | 0.03 | $ | 0.36 | $ | 0.11 | ||||||||
Shares used in computing net income per common share: |
||||||||||||||||
Basic |
44,783 | 19,219 | 45,032 | 19,133 | ||||||||||||
Diluted |
45,099 | 30,970 | 45,322 | 32,097 | ||||||||||||
| in developing our internal budgets and strategic plan; |
||
| as a measurement of operating performance; |
||
| as a factor in evaluating the performance of our management for compensation purposes;
and |
||
| in presentations to the members of our board of directors to enable our board to have the
same measurement basis of operating performance as are used by management to compare our
current operating results with corresponding prior periods and with the results of other
companies in our industry. |
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(Unaudited, in thousands) | ||||||||||||||||
Net income |
$ | 3,491 | $ | 1,252 | $ | 16,209 | $ | 4,476 | ||||||||
Plus: interest expense net of interest income |
233 | 573 | 1,091 | 1,648 | ||||||||||||
Plus: income tax expense |
2,969 | 841 | 11,408 | 2,868 | ||||||||||||
Plus: depreciation and amortization |
2,322 | 1,407 | 5,560 | 3,676 | ||||||||||||
EBITDA |
9,005 | 4,073 | 34,268 | 12,668 | ||||||||||||
Plus: royalty to former owner |
74 | 124 | 222 | 1,612 | ||||||||||||
Plus: management fees and expenses |
| 77 | | 288 | ||||||||||||
Plus: estimated litigation loss |
5,200 | | 5,200 | | ||||||||||||
Plus: share-based compensation |
862 | | 2,439 | | ||||||||||||
Adjusted EBITDA |
$ | 15,141 | $ | 4,274 | $ | 42,129 | $ | 14,568 | ||||||||
September 30, | December 31, | |||||||
(In thousands, except share data) | 2009 | 2008 | ||||||
(Unaudited) | ||||||||
ASSETS: |
||||||||
Current assets |
||||||||
Cash and cash equivalents |
$ | 73,670 | $ | 35,152 | ||||
Restricted
cash and cash equivalents and investments (of which $171 is
unrestricted at September 30, 2009) |
3,844 | 2,197 | ||||||
Accounts receivable, net of allowance for doubtful accounts of $5,232 and
$6,356 at September 30, 2009 and December 31, 2008, respectively |
15,577 | 9,442 | ||||||
Income taxes receivable |
414 | 1,576 | ||||||
Deferred income taxes |
4,952 | 2,603 | ||||||
Other current assets |
2,623 | 2,629 | ||||||
Total current assets |
101,080 | 53,599 | ||||||
Property and equipment, net |
63,425 | 41,399 | ||||||
Restricted cash and investments (of which $2,928 is restricted December 31, 2008) |
360 | 3,403 | ||||||
Prepaid royalties |
7,494 | 8,043 | ||||||
Goodwill |
2,941 | 2,941 | ||||||
Deferred income taxes |
7,752 | 7,404 | ||||||
Other assets |
556 | 201 | ||||||
Total assets |
$ | 183,608 | $ | 116,990 | ||||
LIABILITIES AND STOCKHOLDERS EQUITY: |
||||||||
Current liabilities |
||||||||
Accounts payable |
$ | 10,512 | $ | 5,770 | ||||
Accrued liabilities |
18,358 | 9,674 | ||||||
Accrued
estimated litigation loss |
5,200 | | ||||||
Income taxes payable |
386 | 172 | ||||||
Deferred revenue and student deposits |
42,595 | 14,262 | ||||||
Due to related parties |
3,110 | 1,197 | ||||||
Current portion of capital lease obligations |
776 | 1,125 | ||||||
Current portion of notes payable |
2,101 | 357 | ||||||
Total current liabilities |
83,038 | 32,557 | ||||||
Capital lease obligations, less current portion |
1,041 | 29,384 | ||||||
Notes payable, less current portion and other |
26,040 | 1,459 | ||||||
Total liabilities |
110,119 | 63,400 | ||||||
Commitments and contingencies |
||||||||
Stockholders equity |
||||||||
Preferred stock, $0.01 par value, 10,000,000 shares authorized; 0 shares issued
and outstanding at September 30, 2009 and December 31, 2008 |
| | ||||||
Common stock, $0.01 par value, 100,000,000 shares authorized; 45,613,794 and
45,465,160 shares issued and outstanding at September 30, 2009 and December 31,
2008, respectively |
456 | 455 | ||||||
Additional paid-in capital |
68,670 | 64,808 | ||||||
Accumulated other comprehensive income |
(157 | ) | 16 | |||||
Accumulated earnings (deficit) |
4,520 | (11,689 | ) | |||||
Total stockholders equity |
73,489 | 53,590 | ||||||
Total liabilities and stockholders equity |
$ | 183,608 | $ | 116,990 | ||||
Nine Months Ended September 30, | ||||||||
(In thousands) | 2009 | 2008 | ||||||
(Unaudited) | ||||||||
Cash flows provided by operating activities: |
||||||||
Net income |
$ | 16,209 | $ | 4,476 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
Share-based compensation |
2,439 | | ||||||
Excess tax benefits from share-based compensation |
(64 | ) | | |||||
Amortization of debt issuance costs |
36 | | ||||||
Provision for bad debts |
9,931 | 5,301 | ||||||
Depreciation and amortization |
5,782 | 3,676 | ||||||
Estimated litigation loss |
5,200 | | ||||||
Deferred income taxes |
(2,575 | ) | (3,227 | ) | ||||
Other |
(14 | ) | (106 | ) | ||||
Changes in assets and liabilities: |
||||||||
Accounts receivable |
(16,066 | ) | (8,284 | ) | ||||
Prepaid expenses and other |
827 | (316 | ) | |||||
Due to/from related parties |
1,913 | 1,650 | ||||||
Accounts payable |
4,240 | 105 | ||||||
Accrued liabilities |
8,909 | 6,000 | ||||||
Income taxes receivable/payable |
1,711 | 3,805 | ||||||
Deposit with former owner |
| 3,000 | ||||||
Royalty payable to former owner |
| (5,920 | ) | |||||
Prepaid royalties to former owner |
| (7,428 | ) | |||||
Deferred revenue and student deposits |
28,333 | 15,214 | ||||||
Net cash provided by operating activities |
66,811 | 17,946 | ||||||
Cash flows used in investing activities: |
||||||||
Capital expenditures |
(18,881 | ) | (5,821 | ) | ||||
Purchase of campus land and buildings |
(35,505 | ) | | |||||
Change in restricted cash and cash equivalents |
1,403 | 1,083 | ||||||
Purchases of investments |
| (2,620 | ) | |||||
Proceeds from sale or maturity of investments |
| 2,570 | ||||||
Net cash used in investing activities |
(52,983 | ) | (4,788 | ) | ||||
Cash flows provided by (used in) financing activities: |
||||||||
Principal payments on notes payable and capital lease obligations |
(1,693 | ) | (1,165 | ) | ||||
Proceeds from debt |
25,547 | | ||||||
Debt issuance costs |
(317 | ) | | |||||
Repurchase of common shares |
(14,495 | ) | | |||||
Repayment on line of credit |
| (6,000 | ) | |||||
Proceeds from related party payable on preferred stock |
| 5,725 | ||||||
Repurchase of Institute Warrant |
| (6,000 | ) | |||||
Repurchase of Institute Note Payable |
| (1,250 | ) | |||||
Amount paid related to initial public offering |
| (4,368 | ) | |||||
Net proceeds from issuance of common stock |
14,888 | | ||||||
Excess tax benefits from share-based compensation |
64 | | ||||||
Net proceeds from exercise of stock options |
696 | | ||||||
Net cash provided by (used in) financing activities |
24,690 | (13,058 | ) | |||||
Net increase in cash and cash equivalents |
38,518 | 100 | ||||||
Cash and cash equivalents, beginning of period |
35,152 | 18,930 | ||||||
Cash and cash equivalents, end of period |
$ | 73,670 | $ | 19,030 | ||||
Supplemental disclosure of cash flow information |
||||||||
Cash paid for interest |
$ | 1,546 | $ | 3,019 | ||||
Cash paid for income taxes |
$ | 11,980 | $ | 2,169 | ||||
Supplemental disclosure of non-cash investing and financing activities |
||||||||
Purchase of equipment through notes payable and capital lease obligations |
$ | 2,116 | $ | 2,481 | ||||
Purchases of property and equipment included in accounts payable and deferred rent |
$ | 763 | $ | 194 | ||||
Settlement of capital lease obligation |
$ | 30,020 | $ | | ||||
Tax benefit of Spirit warrant intangible |
$ | 271 | $ | | ||||
Deferred tax on repurchase of institute warrant |
$ | | $ | 2,316 | ||||
Value assigned to Blanchard shares |
$ | | $ | 2,996 | ||||
Assumption of future obligations under gift annuities |
$ | | $ | 887 | ||||
Accretion of dividends on Series C convertible preferred stock |
$ | | $ | 791 |
September 30, 2009 | September 30, 2008 | |||||||||||||||
# of Students | % of Total | # of Students | % of Total | |||||||||||||
Masters or doctoral degree (1) |
15,202 | 44.4 | % | 12,286 | 56.0 | % | ||||||||||
Bachelors degree |
19,016 | 55.6 | % | 9,671 | 44.0 | % | ||||||||||
Total |
34,218 | 100.0 | % | 21,957 | 100.0 | % | ||||||||||
September 30, 2009 | September 30, 2008 | |||||||||||||||
# of Students | % of Total | # of Students | % of Total | |||||||||||||
Online |
31,160 | 91.1 | % | 19,287 | 87.8 | % | ||||||||||
Ground(2) |
3,058 | 8.9 | % | 2,670 | 12.2 | % | ||||||||||
Total |
34,218 | 100.0 | % | 21,957 | 100.0 | % | ||||||||||
(1) | Includes 315 students pursuing doctoral degrees at September 30, 2009. |
|
(2) | Includes both our traditional on-campus students, as well as our professional studies students. |