COCO » Topics » Three Months Ended March 31, 2009 Compared to Three Months Ended March 31, 2008

These excerpts taken from the COCO 10-Q filed May 4, 2009.

Three Months Ended March 31, 2009 Compared to Three Months Ended March 31, 2008

Net Revenues. Net revenues increased $66.5 million, or 23.8%, from $279.9 million in the third quarter of fiscal 2008 to $346.4 million in the third quarter of fiscal 2009. The increase was due to an approximate 14.9% increase in average student population and a 7.7% increase in average revenue per student during the period. At March 31, 2009, student population related to continuing operations was 84,722, compared with 71,924 at March 31, 2008, an increase of 17.8%. Total student starts related to continuing operations increased 19.8% to 31,755 for the third quarter of fiscal 2009 when compared to the third quarter of last year.

Educational Services. Educational services expenses include direct operating expenses of the schools consisting primarily of payroll and payroll related expenses, rents, occupancy costs, supply expenses, bad debt expense and other educational related expenses. Educational services expenses increased $34.4 million, or 21.5%, from $159.8 million in the third quarter of fiscal 2008 to $194.2 million in the third quarter of fiscal 2009. As a percentage of net revenues, educational services expenses decreased from 57.1% of revenues in the third quarter of fiscal 2008 to 56.1% of revenues in the third quarter of fiscal 2009. The decrease was primarily due to a reduction in facility and compensation costs as a percentage of revenue, partially offset by an increase in bad debt and bookstore expense. The reduction in facility and compensation costs as a percent of revenue is primarily due to the amounts being largely fixed in nature. Bad debt expense increased to $28.0 million or 8.1% of net revenues for the third quarter of fiscal 2009 compared to $16.3 million or 5.8% of net revenues for the third quarter of fiscal 2008. The increase in bad debt expense was primarily due to additional exposure the Company incurred to student receivables as a result of the contraction of liquidity in the credit markets for subprime borrowers.

General and Administrative. General and administrative expenses include corporate compensation expenses, headquarters office rents and occupancy expenses, professional fees and other support related expenses. General and administrative expenses increased $7.3 million, or 25.9%, from $28.2 million in the third quarter of fiscal 2008 to $35.5 million in the third quarter of fiscal 2009. As a percentage of net revenues, general and administrative expenses increased from 10.1% of revenues in the third quarter of fiscal 2008 to 10.2% of revenues in the third quarter of fiscal 2009.

Marketing and Admissions. Marketing and admissions expenses consist primarily of direct-response and other advertising expenses, payroll and payroll related expenses, promotional materials and other related marketing costs. Marketing and admissions expenses increased $0.4 million, or 0.5%, from $72.8 million in the third quarter of fiscal 2008 to $73.2 million in the third quarter of fiscal 2009. As a percentage of net revenues, marketing and admissions expenses decreased from 26.0% of revenues in the third quarter of fiscal 2008 to 21.1% of revenues for the third quarter of fiscal 2009. The decrease is primarily attributable to a decrease in advertising as a result of market conditions and increased efficiencies.

 

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Provision for Income Taxes. The effective rate in the third quarter of fiscal 2009 was 40.5% as compared to 29.1% in the third quarter of fiscal 2008. The increase in the effective rate in fiscal 2009 is due to a reduction in the liability for uncertain tax positions during the third quarter of fiscal 2008 following the completion of the IRS exam for fiscal years 2004 through 2006 and the filing of an application for a change in accounting method with the IRS.

Nine months Ended March 31, 2009 Compared to Nine months Ended March 31, 2008

Net Revenues. Net revenues increased $159.7 million, or 20.1%, from $794.6 million in the first nine months of fiscal 2008 to $954.3 million in the first nine months of fiscal 2009. The increase was due to an approximate 12.8% increase in average student population and a 6.5% increase in average revenue per student during the period. At March 31, 2009, student population related to continuing operations was 84,722, compared with 71,924 at March 31, 2008, an increase of 17.8%. Total student starts related to continuing operations increased 14.2% to 88,164 for the first nine months of fiscal 2009 when compared to the first nine months of last year.

Educational Services. Educational services expenses include direct operating expenses of the schools consisting primarily of payroll and payroll related expenses, rents, occupancy costs, supply expenses, bad debt expense and other educational related expenses. Educational services expenses increased $97.8 million, or 21.3%, from $458.1 million in the first nine months of fiscal 2008 to $555.9 million in the first nine months of fiscal 2009. As a percentage of net revenues, educational services expenses increased from 57.7% of revenues in the first nine months of fiscal 2008 to 58.2% of revenues in the first nine months of fiscal 2009. The increase was primarily attributable to an increase in bad debt expense partially offset by a reduction in facility and compensation costs as a percentage of revenue. Bad debt expense increased to $81.5 million or 8.5% of net revenues for the first nine months of fiscal 2009 compared to $47.9 million or 6.0% of net revenues for the first nine months of fiscal 2008. The increase in bad debt expense was primarily due to additional exposure the Company incurred to student receivables as a result of the contraction of liquidity in the credit markets for subprime borrowers. The reduction in facility costs as a percent of revenue is primarily attributable to the amounts being fixed in nature.

General and Administrative. General and administrative expenses include corporate compensation expenses, headquarters office rents and occupancy expenses, professional fees and other support related expenses. General and administrative expenses increased $13.9 million, or 16.7%, from $83.2 million in the first nine months of fiscal 2008 to $97.1 million in the first nine months of fiscal 2009. As a percentage of net revenues, general and administrative expenses decreased from 10.5% of revenues in the first nine months of fiscal 2008 to 10.2% of revenues in the first nine months of fiscal 2009.

Marketing and Admissions. Marketing and admissions expenses consist primarily of direct-response and other advertising expenses, payroll and payroll related expenses, promotional materials and other related marketing costs. Marketing and admissions expenses increased $7.6 million, or 3.6%, from $212.5 million in the first nine months of fiscal 2008 to $220.1 million in the first nine months of fiscal 2009. As a percentage of net revenues, marketing and admissions expenses decreased from 26.7% of revenues in the first nine months of fiscal 2008 to 23.1% of revenues for the first nine months of fiscal 2009. The decrease is primarily attributable to a decrease in the cost of advertising as a result of market conditions and increased efficiencies.

Provision for Income Taxes. The effective rate in the first nine months of fiscal 2009 was 40.5% as compared to 35.4% in the first nine months of fiscal 2008. The increase in the effective rate in fiscal 2009 is due to a reduction in the liability for uncertain tax positions during the third quarter of fiscal 2008 following the completion of the IRS exam for fiscal years 2004 through 2006 and the filing of an application for a change in accounting method with the IRS.

EXCERPTS ON THIS PAGE:

10-Q (2 sections)
May 4, 2009

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