Universal Technical Institute, Inc. (NYSE: UTI) announced a Financial Improvement Plan with the goal of generating operating income and improved levels of EBITDA in 2017.
The Company expects the Plan to better align its corporate structure with its current student population, while better positioning UTI for success and future growth. As a part of the Plan, the Company will flatten the organization, streamline its business processes and implement cost-saving initiatives, without compromising the quality of education and service it provides to students and industry customers. UTI expects the Plan to deliver $25 to $30 million in annualized cost savings coming from a reduction in our workforce consisting primarily of corporate positions, changes to our marketing strategy and admissions structure as previously disclosed and a number of process improvement initiatives. In addition, it expects to record a severance charge of approximately $4 million in the fiscal quarter ending September 30, 2016.
"Ultimately, this Plan is about enabling investment in UTI's strengths - our students, our industry partners that hire them, and our dedicated employees who serve them. Continued challenges in the operating environment have prompted us to reevaluate how we maintain high quality education and strong student outcomes, while returning UTI to profitability and growth. This Plan is intended to drive value for all of the stakeholders in UTI, and in combination with our recently announced financing, we have the financial stability and organizational alignment to be opportunistic in the current environment and position UTI for success," said Kim McWaters, UTI's chairman and CEO.
As part of the Plan, Eugene Putnam, UTI's president and CFO will leave UTI, effective November 30, 2016. To ensure a seamless transition, Mr. Putnam will continue to support the company through the 2016 fiscal year-end financial reporting cycle. Bryce Peterson, UTI's senior vice president of Information Technology, has been promoted to CFO, effective immediately. Mr. Peterson has served the company in a senior leadership capacity since 2011 and was previously identified as a successor for the company's CFO. Mr. Peterson is a certified public accountant and brings valuable experience as an auditor at KPMG and as the former vice president of Internal Audit at UTI. Kim McWaters, UTI's chairman and CEO, will assume the president's role and title.
In addition, Chad Freed, the company's executive vice president and general counsel, is returning to private practice with a law firm in Phoenix where he will continue to manage the company's legal needs as its outside general counsel. Mr. Freed's direct employment with UTI will end November 30, 2016.
"I want to thank those leaving the Company for their significant contributions to UTI," said McWaters. "In particular, I want to recognize Eugene and Chad, not only for their dedication and service to UTI, but also for their willingness to assist the Company as we move through this transition to become a leaner organization. They are true professionals and I greatly appreciate their important contributions to UTI."
UTI also confirmed the guidance it provided as part of its third quarter earnings announcement. For the year ending September 30, 2016, it expects new student starts and average student population to be down in the low double digits as a percentage compared to the prior year. It expects revenue to decline by 6-7 percent leading to minimal levels of EBITDA excluding severance charges. Capital expenditures for the full year are expected to be in the range of $8.0 to $9.0 million.