Universal Technical Institute, Inc. reported an increase in net revenue but a drop in net income after a year that included facility expansion but also a layoff of nearly 3 percent of its workforce.
The provider of technical education training for several industries, including powersports, reported a 15-percent drop in net income for its year that ended Sept. 30. Net income was $30.4 million in 2006 compared to $35.8 million a year ago. Net income margin also was lower, at 8.7 percent for 2006 compared to 11.5 percent the previous year.
The company said the decrease in income comes from higher operating costs and lower capacity utilization that occurred because of capacity added during the 2006 fiscal year.
Net revenues, however, increased nearly 12 percent from a year ago to $347 million. And early signs indicate a prosperous first quarter for the company.
“After months of steady decline in year-over-year contract growth, we were pleased to see the trend reverse in October driving 3.3-percent growth in contracts for the first two months of our new fiscal year,” Kimberly McWaters, president and CEO of Universal Technical Institute, said in a press release.
“Although this represents progress, we believe there is more to be gained from our increased investment in marketing. As we’ve broadened our advertising reach beyond our traditional enthusiast students, we have discovered different needs and motivations for this population. This has made conversion of student interest into contracts and starts more challenging than expected. We are addressing these issues as we believe this new pool of potential students is key to our future growth.”
Universal Technical Institute is reporting a slight gain in its student population. At the end of its fiscal fourth quarter, the company had 17,523 students, compared with 17,368 a year ago.
Increased demand led Universal Technical Institute to expand its facilities. In October, the company moved away from a temporary location in Sacramento to a permanent campus. The new facility has 115,000 square feet of classroom and lab space and will accommodate up to 2,100 students and 175 faculty and staff members.
UTI said the new Sacramento campus, located one mile from its temporary facility, was built in response to a strong demand from the automotive industry for UTI graduates in northern California and the Pacific Northwest.
UTI also in the 2006 fiscal year invested in its Norwood, Mass., facility, which it bought in 2004 for about $12.4 million. That expansion was the second step in the company’s growth in the Northeast as UTI opened a campus in the Philadelphia area in 2004.
The company, however, did reduce its workforce in the 2006 fiscal year. Seventy employees nationwide, or nearly 3 percent of its workforce, were laid off in September.
Net revenue was $88.7 million, a 5.8 percent increase that can be attributed to tuition increases and higher average student enrollment, the company said.
Net income was $5.3 million compared to $9.2 million in the same quarter in fiscal 2005. Operating margin, excluding equity based compensation, was 8.8 percent compared to 17.2 percent for the same period last year. The company also reported it had $41.4 million in cash and cash equivalents compared with $52 million at the end of fiscal 2005. psb
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