Form 8-K UNIVERSAL TECHNICAL INST For: Mar 16
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): | March 16, 2018 | |
Universal Technical Institute, Inc.
__________________________________________
(Exact name of registrant as specified in its charter)
Delaware | 1-31923 | 86-0226984 |
_____________________ (State or other jurisdiction | _____________ (Commission | ______________ (I.R.S. Employer |
of incorporation) | File Number) | Identification No.) |
16220 North Scottsdale Road, Suite 100, Scottsdale, Arizona | 85254 | |
_________________________________ (Address of principal executive offices) | ___________ (Zip Code) | |
Registrant’s telephone number, including area code: | 623-445-9500 | |
Not Applicable
______________________________________________
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:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Item 1.01 Entry into a Material Definitive Agreement.
On March 16, 2018, we entered into a consulting agreement with McKinsey & Company, Inc. ("McKinsey"), pursuant to which McKinsey will provide consulting services related to a strategic transformation plan. The consulting services cover marketing, admissions, future student processing, retention and cost savings initiatives. The agreement commences immediately and is effective through September 30, 2020 unless terminated earlier in accordance with contract terms. Under the terms of the agreement, we will pay an aggregate of $9.3 million over a 16 month period beginning in March 2018. Additionally, McKinsey is eligible to earn an additional fee of up to approximately $4.7 million based on revenue sharing and cost savings sharing as defined in a mutually-agreeable statement of work.
The foregoing is a summary only and does not purport to be a complete description of all the terms, provisions, covenants and agreements contained in the consulting agreement, and is subject to and qualified in its entirety by reference to the full text of such agreement, which is filed as Exhibit 10.1 and is hereby incorporated by reference into this Item 1.01.
Item 7.01 Regulation FD Disclosure.
On March 22, 2018, we issued a press release announcing our strategic transformation plan and updated guidance for the year ending September 30, 2018. A copy of the press release is included herewith as Exhibit 99.1.
The information in this Item 7.01 (including Exhibit 99.1) is furnished pursuant to Item 7.01 and shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section. The information in this Item 7.01 (including Exhibit 99.1) will not be deemed an admission as to the materiality of any information that is required to be disclosed solely by Regulation FD.
We do not have, and expressly disclaim, any obligation to release publicly any updates or any changes in our expectations or any change in events, conditions, or circumstances on which any forward-looking statement is based.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Universal Technical Institute, Inc. | ||||
March 22, 2018 | By: | /s/ Bryce H. Peterson | ||
Name: Bryce H. Peterson | ||||
Title: Chief Financial Officer | ||||
CONSULTING AGREEMENT
This “Consulting Agreement” (“Agreement”) with an effective date of March 16, 2018 (the “Effective Date”), sets forth the terms and conditions whereby McKinsey & Company, Inc. United States, with offices at, among other locations, 1200 Nineteenth Street NW, Suite 1000, Washington, D.C. 20036 (“McKinsey”) agrees to provide certain services to Universal Technical Institute, Inc. (“UTI”) with its headquarters located at 16220 N. Scottsdale Road, Suite 100, Scottsdale, Arizona 85254.
1.SERVICES.
1.1UTI hereby engages McKinsey, and McKinsey hereby accepts such engagement, as an independent contractor to provide certain services to UTI on the terms and conditions set forth in this Agreement.
1.2McKinsey shall provide to UTI the following consulting services: transformation office development, performance infrastructure, and change management relating to marketing, admissions, future student processing, retention and completion, and cost savings initiatives (collectively, the “Services”). The Services will be more fully-described in one or more mutually-agreeable statements of work (collectively, “SOW”) that will define the scope of work, project specific activities, deliverables, and benchmarks. In the event that the SOW and Agreement are in conflict, the Parties will attempt to harmonize the SOW and Agreement. If that is not accomplished, this Agreement shall take control. McKinsey shall provide to UTI the variety of bundled services set forth above and detailed in the SOW. In order to perform the Services, McKinsey will deploy a set of full-time teams and part-time senior experts to establish the transformation infrastructure and to support the UTI team in planning and implementing the initiatives as set forth in the SOW.
1.3It is expressly acknowledged and agreed that the role of McKinsey is to be advisory in nature and under no circumstances will any member(s) of the McKinsey team serving UTI be considered to be an officer, director, or employee of UTI, or have the power or authority to bind or commit UTI including, without limitation, the power or authority to enter into any agreement or undertaking on behalf of UTI, nor will McKinsey engage in any student recruiting activity constituting securing enrollments or the award of financial aid under Title IV of the Higher Education Act of 1965, as amended, and the rules and regulations thereunder (the “HEA”). McKinsey is not UTI’s agent or fiduciary.
1.4To the extent McKinsey performs any Services on UTI’s premises or using UTI’s equipment, McKinsey shall comply with all applicable policies of UTI relating to business and office conduct, health and safety, and use of UTI’s facilities, supplies, information technology, equipment, networks, and other resources.
1.5Unless otherwise set forth in the SOW, McKinsey shall furnish, at McKinsey’s own expense, the equipment, supplies, and other materials used to perform the Services. UTI shall provide
McKinsey with access to its premises, data, and equipment to the extent necessary for the performance of the Services.
2.TERM. The term of this Agreement shall commence on the Effective Date and shall continue from the Effective Date to September 30, 2020, unless earlier terminated in accordance with Section 10 below (the “Term”) or by mutual agreement of the parties. Any extension of the Term will be subject to a mutual written agreement between the parties.
3.FEES AND EXPENSES.
3.1The compensation to McKinsey for the combined collective Services in this Agreement shall be comprised of the following package: UTI shall pay McKinsey a fee of $9,300,000.00, which shall be reduced by the $330,000.00 in fees incurred prior to execution of this Agreement (the “Fee”). To the extent those incurred fees are invoiced prior to the first invoice issued under the SOW, then the total Fee shall be reduced accordingly to $8.97M. UTI shall pay the fee in sixteen (16) equal monthly installments commencing thirty (30) days after the Effective Date, with all subsequent payments to be due on the same day of each month after that. If any payment falls due on a Saturday, Sunday, or federal holiday, the payment shall be due on the next business day. McKinsey shall be eligible for an additional fee of up to $4,660,000.00 (the “Revenue Sharing Fee and Cost Savings Sharing”) pursuant to the SOW. This combined fee package shall constitute consideration for the complete collective scope of Services to be rendered by McKinsey pursuant to the SOW. McKinsey acknowledges that McKinsey will receive an IRS Form 1099-MISC from UTI, and that McKinsey shall be solely responsible for all federal, state, and local taxes, as set out in Section 4.2 below.
3.2McKinsey is solely responsible for any travel or other costs or expenses incurred by McKinsey in connection with the performance of the Services, and in no event shall UTI reimburse McKinsey for any such costs or expenses. Without limiting the foregoing, the Fee and Revenue Sharing Fee are inclusive of all costs and expenses.
4.RELATIONSHIP OF THE PARTIES.
4.1McKinsey is an independent contractor of UTI, and this Agreement shall not be construed to create any association, partnership, joint venture, employee, or agency relationship between McKinsey and UTI for any purpose. McKinsey has no authority (and shall not hold itself out as having authority) to bind UTI and McKinsey shall not make any agreements or representations on UTI’s behalf without UTI’s prior written consent.
4.2Without limiting Section 4.1, McKinsey will not be eligible to participate in any vacation, group medical or life insurance, disability, profit sharing or retirement benefits, or any other fringe benefits or benefit plans offered by UTI to its employees, and UTI will not be responsible for withholding or paying any income, payroll, Social Security, or other federal, state, or local taxes, making any insurance contributions, including for unemployment or disability, or obtaining workers’ compensation insurance on McKinsey’s behalf. McKinsey shall be responsible for, and shall indemnify UTI against, all such taxes or contributions, including penalties and interest. Any persons employed or engaged by McKinsey in connection with the performance of the Services shall be
McKinsey’s employees or contractors and McKinsey shall be fully responsible for them and indemnify UTI against any claims made by or on behalf of any such employee or contractor.
5.INTELLECTUAL PROPERTY RIGHTS.
5.1UTI is and shall be the sole and exclusive owner of all right, title, and interest throughout the world in and to all the results and proceeds of the Services furnished under this Agreement, including but not limited to the deliverables set out on SOW (collectively, the “Deliverables”), including all patents, copyrights, trademarks, trade secrets, and other intellectual property rights (collectively “Intellectual Property Rights”) therein. McKinsey agrees that the Deliverables are hereby deemed a “work made for hire” as defined in 17 U.S.C. § 101 for UTI. If, for any reason, any of the Deliverables do not constitute a “work made for hire,” McKinsey hereby irrevocably assigns to UTI, in each case without additional consideration, all right, title, and interest throughout the world in and to the Deliverables, including all Intellectual Property Rights therein.
5.2Any assignment of copyrights under this Agreement includes all rights of paternity, integrity, disclosure, and withdrawal and any other rights that may be known as “moral rights” (collectively, “Moral Rights”). McKinsey hereby irrevocably waives, to the extent permitted by applicable law, any and all claims McKinsey may now or hereafter have in any jurisdiction to any Moral Rights with respect to the Deliverables.
5.3Except as provided herein or required by applicable law and/or regulation, UTI agrees that it will not use McKinsey’s name, refer to McKinsey’s work, or make the Deliverables or the existence or terms of this Agreement available outside UTI without McKinsey’s prior written permission.
5.4Notwithstanding Section 5.1, McKinsey shall retain ownership of all concepts, know-how, tools, frameworks, models, and industry perspectives developed or enhanced outside of or in connection with the Services (the “McKinsey Tools”), it being understood that none of the McKinsey Tools will contain the UTI’s Confidential Information. To the extent the Deliverables include any McKinsey Tools, McKinsey hereby grants UTI a non-exclusive, non-transferable, non-sublicenseable, worldwide, royalty-free license to use and copy the McKinsey Tools solely as part of the Deliverables and subject to the conditions set forth in Section 5.3.
6.CONFIDENTIALITY.
6.1McKinsey acknowledges that McKinsey will have access to information that is treated as confidential and proprietary by UTI including without limitation the existence and terms of this Agreement, trade secrets, technology, and information pertaining to business operations and strategies, customers, pricing, marketing, and finances, in each case whether spoken, written, printed, electronic, or in any other form or medium; such information may also include student “education records” containing “personally identifiable information” about students and/or prospective students of UTI that is or could become protected by the Family Educational Rights and Privacy Act, 20 U.S.C. 1232g and 34 CFR Part 99 (“FERPA”) (collectively, the “Confidential Information”). (All terms in quotation marks in this paragraph shall have the meaning ascribed under FERPA.) The parties accordingly agree that for the purpose of this Agreement only, McKinsey
shall be a “school official” with “legitimate educational interests” in student data, and as such McKinsey agrees to abide by the requirements imposed by 34 CFR 99.33(a) and McKinsey will not re-disclose education records containing student data to third parties without the prior written consent of UTI. McKinsey further acknowledges and agrees that it shall use student data solely on a need-to-know basis in pursuit of the commitments and undertakings of this Agreement, and shall limit disclosure to those individuals within its organization that have a “legitimate educational interest”.
6.2Any Confidential Information that McKinsey develops in connection with the Services, including but not limited to any Deliverables (excluding the McKinsey Tools), shall be subject to the terms and conditions of this clause. McKinsey agrees to treat all Confidential Information as strictly confidential, not to disclose Confidential Information or permit it to be disclosed, in whole or part, to any third party without the prior written consent of UTI in each instance, and not to use any Confidential Information for any purpose except as required in the performance of the Services. McKinsey shall notify UTI immediately in the event McKinsey becomes aware of any loss or disclosure of any Confidential Information.
6.3Confidential Information shall not include information that:
(a)is or becomes generally available to the public other than through McKinsey’s breach of this Agreement; or
(b)is communicated to McKinsey by a third party that had no confidentiality obligations with respect to such information.
6.4UTI agrees that it will not use McKinsey’s name in publicly filed documents without prior written consent unless otherwise required by law or NYSE listing requirements. Nothing herein shall be construed to prevent disclosure of Confidential Information as may be required by applicable law or regulation, or pursuant to the valid order of a court of competent jurisdiction or an authorized government agency, provided that the disclosure does not exceed the extent of disclosure required by such law, regulation, or order. McKinsey agrees to provide written notice of any such order to an authorized officer of UTI within seven (7) days of receiving such order, but in any event sufficiently in advance of making any disclosure to permit UTI to contest the order or seek confidentiality protections, as determined in UTI’s sole discretion.
7.REPRESENTATIONS AND WARRANTIES; COVENANTS.
7.1McKinsey represents and warrants to UTI, as of the Effective Date and throughout the entire Term of the Agreement, as follows:
(a)McKinsey has the right to enter into this Agreement, to grant the rights granted herein and to perform fully all of McKinsey’s obligations in this Agreement;
(b)McKinsey is not affiliated with UTI and is not affiliated with any other institution that provides educational services, as the concept of affiliation is defined in provisions including, but not limited to, 2 C.F.R. § 180.905;
(c)McKinsey’s entering into this Agreement with UTI and McKinsey’s performance of the Services do not and will not conflict with or result in any breach or default under any other agreement to which McKinsey is subject;
(d)McKinsey has the required skill, experience, and qualifications to perform the Services. McKinsey shall perform the Services in a professional and workmanlike manner in accordance with industry standards for similar services and McKinsey shall devote sufficient resources to ensure that the Services are performed in a timely and reliable manner;
(e)McKinsey shall perform the Services in compliance with all applicable federal, state, and local laws and regulations;
(f)UTI will receive good and valid title to all Deliverables, free and clear of all encumbrances and liens of any kind; and
(g)all Deliverables are and shall be McKinsey’s original work (except for material in the public domain or provided by UTI) and do not and will not violate or infringe upon the intellectual property right or any other right whatsoever of any person, firm, corporation, or other entity.
7.2McKinsey further covenants and agrees that, during the entire Term of this Agreement, it shall not:
(a)engage in any student recruiting activity, or secure any enrollments or the award of any federal financial aid, as defined at 34 CFR 668.14(b)(22)(iii), or provide any commission, bonus, or other incentive payment based in any part, directly or indirectly, upon success in securing enrollments or the award of financial aid, to any McKinsey employee, independent contractor, consultant, subcontractor, or other person or entity engaged in any student recruitment or admission activity, or such McKinsey employee, independent contractor, consultant, subcontractor, or other person or entity with responsibility for recruitment or admission of students;
(b)determine the number of students accepted for admission or enrollment at UTI
(c)undertake any actions involving the administration of federal financial aid under Title IV of the HEA or that could cause McKinney to become a “third party servicer” as defined at 34 CFR 668.25.
7.3McKinsey covenants and agrees that, during the entire Term of this Agreement, it shall provide the full bundled array of Services pursuant to Section 1.2 above and as is more fully described in the SOW.
7.4UTI represents and warrants to McKinsey that:
(a)it has the full right, power, and authority to enter into this Agreement and to perform its obligations hereunder; and
(b)the execution of this Agreement by its representative whose signature is set forth at the end hereof has been duly authorized by all necessary corporate action.
7.5Many situations may arise that are not fully or clearly covered by the terms set forth in this Agreement. The parties represent to each other that they will work in good faith to resolve such situations in the spirit of this Agreement.
8.INDEMNIFICATION & LIABILITY.
8.1McKinsey shall defend, indemnify, and hold harmless UTI and its affiliates and their officers, directors, employees, agents, successors, and assigns from and against all losses, damages, liabilities, deficiencies, actions, judgments, interests, awards, penalties, fines, costs, or expenses of whatever kind (including reasonable attorneys’ fees) to the extent arising out of or resulting from McKinsey’s breach of any express representation, covenant or warranty under this Agreement.
8.2UTI may satisfy such indemnity (in whole or in part) by way of deduction from any payment due to McKinsey.
8.3The Services shall not be deemed investment, legal, tax, accounting or other regulated advice. McKinsey does not supplant UTI’s management or other decision-making bodies and does not guarantee results. UTI remains solely responsible for its decisions, actions, use of the Deliverables and compliance with applicable laws, rules and regulations. UTI agrees to pay for reasonable costs McKinsey incurs as a result of its required participation as a non-party in any legal, regulatory, or administrative proceeding relating to the Services. In no event shall McKinsey’s liability to UTI in connection with the Services exceed the fees received by McKinsey in connection with the Services, plus reasonable attorneys’ fees and costs. Neither party will be liable for any lost profits or other indirect, consequential, incidental, punitive or special damages.
9.INSURANCE. During the Term, McKinsey shall maintain in force adequate workers’ compensation, commercial general liability, errors and omissions, and other forms of insurance, in each case with insurers reasonably acceptable to UTI, with policy limits sufficient to protect and indemnify UTI and its affiliates, and each of their officers, directors, agents, employees, subsidiaries, partners, members, controlling persons, and successors and assigns, from any losses resulting from McKinsey’s conduct, acts, or omissions or the conduct, acts, or omissions of McKinsey’s agents, contractors, servants, or employees. UTI shall be listed as an additional insured under such policy, and McKinsey shall forward a certificate of insurance verifying such insurance upon UTI’s written request, which certificate will indicate that such insurance policies may not be canceled before the expiration of a 30-day notification period and that UTI will be immediately notified in writing of any such notice of termination.
10.TERMINATION.
10.1Either McKinsey or UTI may terminate this Agreement, effective immediately upon written notice to the other party to this Agreement, if the other party breaches this Agreement, and such breach is incapable of cure, or with respect to a breach capable of cure, the other party does not cure such breach within thirty (30) days after receipt of written notice of such breach.
10.2Either party may, upon written notice to the other party, terminate the Agreement for cause if any of the following conditions arise:
(a)The change or announcement of an impending change in actual or de facto control of either party;
(b)Neither the current UTI C.E.O. or C.O.O. are directly responsible for the management of the consulting arrangement with McKinsey such that successful execution of the Agreement is no longer a key business priority for UTI;
(c)A material change in the business portfolio, e.g., programs and campuses, of UTI that was not previously disclosed to McKinsey;
10.3 In the event any of the conditions occur in 10.3(a) or 10.3(b), as set forth below, the parties pledge to work in good faith to modify this Agreement in a manner consistent with objectives of this agreement as the preferred alternative to termination. In the event such modification is not possible, the parties will work in good faith to effectuate an organized wind-down of the Services.
(a)A change in regulation or laws which makes it unlikely that the SOW can be achieved; or
(b)A force majeure event, including, without limitation, labor disputes, strikes, walk-outs, delays relating to supply of services, disruption in supply chain, damage to or breakdown of UTI’s headquarters, hurricanes, earthquakes, floods, snow storms, ice storms, electrical failure or any other natural disasters or acts of God, war, sabotage, military actions (or the escalation thereof), terrorist attack, or epidemic, occurs which materially impacts the Fee or the Revenue Sharing Fee.
10.4UTI may terminate this Agreement without cause upon thirty (30) days' written notice to McKinsey. The effective date of termination shall be thirty (30) days after the date of written notice.
10.5In the event McKinsey terminates for UTI’s breach under Section 10.1, or McKinsey terminates for cause under Section 10.2, or UTI terminates without cause pursuant to Section 10.4, UTI shall pay McKinsey amounts as set forth on the following table in accordance with the timing of the termination as set forth below:
Termination Timing | Amount |
after April 30, 2018 | 2,900,000 |
after May 31, 2018 | 3,900,000 |
after June 30, 2018 | 4,800,000 |
after July 31, 2018 | 5,650,000 |
after August 31, 2018 | 6,350,000 |
after September 30, 2018 | 7,050,000 |
after October 31, 2018 | 7,700,000 |
after November 30, 2018 | 8,350,000 |
after December 31, 2018 | 8,970,000 |
Additionally, UTI shall pay McKinsey the greater of (a) the Revenue Sharing Fee and/or Cost Savings Sharing already earned or (b) Revenue Sharing Fee and/or Cost Savings Sharing of $1M if terminated on or before December 31, 2018, or $2M if terminated after December 31, 2018 and on or before December 31, 2019, or $3M if terminated after December 31, 2019 and on or before September 30, 2020.
10.6In the event UTI terminates for McKinsey’s incurable breach under Section 10.1, McKinsey shall retain any fees paid regardless of whether from the Fee, Revenue Sharing Fee, and/or Cost Savings Sharing and shall not be entitled to any other fees whatsoever.
10.7In the event any of the conditions in Section 10.2 occur, the parties pledge to work in good faith to modify this Agreement in a manner consistent with objectives of this Agreement as the preferred alternative to termination. In the event such modification is not possible, the parties will work in good faith to effectuate an organized wind-down of the Services.
10.8Upon expiration or termination of this Agreement for any reason, or at any other time upon UTI’s written request, McKinsey shall, within fifteen (15) days after such expiration or termination:
(a)deliver to UTI all Deliverables (whether complete or incomplete) and all data, information, finances, hardware, software, tools, equipment, or other materials provided for McKinsey’s use by UTI;
(b)deliver to UTI all tangible documents and materials (and any copies) containing, reflecting, incorporating, or based on the Confidential Information;
(c)permanently erase all of the Confidential Information from McKinsey’s computer systems; and
(d)certify in writing to UTI that McKinsey has complied with the requirements of this clause.
10.9The terms and conditions of this clause and Sections 4, 5, 6, 7, 8, 11, 12, 13, and 14 shall survive the expiration or termination of this Agreement.
11.NON-SOLICITATION. McKinsey agrees that during the Term of this Agreement and for a period of 12 months following the termination or expiration of this Agreement, it shall not make any solicitation to employ UTI’s personnel without written consent of UTI to be given or withheld in UTI’s sole discretion.
12.ASSIGNMENT. Neither party may assign any rights, or delegate or subcontract any obligations, under this Agreement without the other party’s prior written consent. Any assignment in violation of the foregoing shall be deemed null and void. Subject to the limits on assignment
stated above, this Agreement will inure to the benefit of, be binding upon, and be enforceable against each of the parties hereto and their respective successors and assigns.
13.MISCELLANEOUS.
13.1All notices, requests, consents, claims, demands, waivers, and other communications hereunder (each, a “Notice”) shall be in writing and addressed to the parties at the addresses set forth on the first page of this Agreement (or to such other address that may be designated by the receiving party from time to time in accordance with this Section). All Notices shall be delivered by personal delivery, nationally recognized overnight courier (with all fees prepaid), facsimile, email (with confirmation of transmission), or certified or registered mail (in each case, return receipt requested, postage prepaid). Except as otherwise provided in this Agreement, a Notice is effective only if (a) the receiving party has received the Notice and (b) the party giving the Notice has complied with the requirements of this Section.
13.2This Agreement, together with any other documents incorporated herein by reference, and the SOW constitutes the sole and entire agreement of the parties to this Agreement with respect to the subject matter contained herein, and supersedes all prior and contemporaneous understandings, agreements, drafts, representations, and warranties, both written and oral, with respect to such subject matter.
13.3This Agreement may only be amended, modified, or supplemented by an agreement in writing signed by each party hereto, and any of the terms thereof may be waived, only by a written document signed by each party to this Agreement or, in the case of waiver, by the party or parties waiving compliance.
13.4The failure of any party to insist in any one or more instances upon the performance of any of the provisions of this Agreement or to pursue its rights hereunder shall not be construed as a waiver of any such provisions or the relinquishment of any such rights.
13.5This Agreement is the result of negotiations between the parties, and no party shall be deemed to be the drafter of this Agreement. The language of all parts of this Agreement shall in all cases be construed as a whole, according to its fair meaning and not strictly for or against any party.
13.6This Agreement shall be interpreted without any presumption or inference based upon or against the party causing this Agreement to be drafted. UTI acknowledges that McKinsey is not a registered lobbyist and agrees that McKinsey will not be performing lobbying services under this Agreement.
13.7If any term of this Agreement is to any extent illegal, otherwise invalid, or incapable of being enforced, such term shall be excluded to the extent of such invalidity or unenforceability; all other terms hereof shall remain in full force and effect.
13.8In the event that the parties working in good faith are unable to resolve any dispute arising under the Agreement within thirty (30) days, or such earlier time period as mutually agreed
by the parties, such dispute (other than a dispute related to a breach of confidentiality) shall then be decided exclusively by confidential, binding, non-appealable arbitration in the County of New York, New York under the Commercial Arbitration Rules then in effect (the “Rules”) of the American Arbitration Association (the “AAA”), before a sole arbitrator who shall be a retired or former judge or attorney with at least ten (10) years of experience and be mutually acceptable to the parties. If the parties cannot agree upon an arbitrator within thirty (30) days after the initiation of arbitration then the appointment of the sole arbitrator shall be made by the AAA in accordance with the Rules, except as they may be modified by the mutual agreement of the parties. The award of any arbitration shall be final, conclusive and binding on the parties, and judgment on the award may be entered in any court of competent jurisdiction. The arbitrator shall be limited, in granting any relief, to comply with the provisions of this Agreement, including with respect to the award of damages or the limitation thereof. Either party may seek interim measures of protection concerning any subject matter of the dispute subject to arbitration, including but not limited to interim injunctive relief, in a court of competent jurisdiction located in the County of New York, New York.
13.9With respect to either party, the term “affiliates” means any entities that directly or indirectly control or are controlled by, or under the same control as, such party or any other entities affiliated with such party or entities. Unless noted otherwise, any reference to McKinsey and/or UTI shall include affiliates.
13.10This Agreement may be executed in multiple counterparts and by facsimile signature, each of which shall be deemed an original and all of which together shall constitute one instrument.
If this Agreement accurately sets forth the understandings by and between UTI and McKinsey, execute the enclosed copy of this Agreement and return it to UTI.
UNIVERSAL TECHNICAL INSTITUTE, INC.
BY:________________________________
Name:______________________________
Title:_______________________________
Date:_______________________________
MCKINSEY & COMPANY, INC. UNITED STATES
BY:________________________________
Name:______________________________
Title:_______________________________
Date:_______________________________
Federal Tax Id. No.:
Universal Technical Institute Announces Strategic Transformation Plan
Education industry leader to implement comprehensive initiatives across Marketing, Admissions, and Student Services to accelerate growth and enhance student experience
SCOTTSDALE, ARIZ. - March 22, 2018 - Universal Technical Institute, Inc. (NYSE: UTI), the leading provider of transportation technician training, today announced a multi-year transformation plan designed to generate approximately $30 million of incremental operating income in fiscal 2020. Developed to drive new student starts, completions and enhance student success, the Plan is expected to be implemented over 12 to 18 months, with significant benefits to UTI’s financial performance starting in fiscal 2019.
Kim McWaters, UTI’s President and Chief Executive Officer, said, “In November 2017, following the successful completion of our Financial Improvement Plan that reduced costs by $40 million, we launched a comprehensive evaluation of our business, with a focus on growing new student starts and rebuilding our student population. The analysis, driven by a team of external education industry experts, validated the strong demand for our graduates, our student value proposition and the strength of our differentiated brand. The process also identified significant opportunities for growth with selective tactical investments in marketing, admissions and student service strategies.”
“Our Transformation Plan will build upon the traction we are already seeing in core areas of our business and be incremental to current growth initiatives, including new, smaller campuses and program expansions. We believe the Plan will maximize UTI’s market leadership position, differentiating us from existing and emerging sources of vocational education and better serve prospective students who are pursuing increasingly valuable technician trades.”
To help UTI realize its market opportunity, the company engaged a consulting organization with a strong track record of partnering with education sector clients to deliver short- and long-term value, as well as sustainable growth. UTI structured the engagement so that a portion of the consultant’s compensation is linked to UTI reaching its transformation targets. The terms of the consulting agreement, including the associated fees, are described in a Form 8-K filed by UTI on March 22, 2018.
“Our Board has approved the Transformation Plan and management will leverage our consulting partner’s industry expertise, breadth of top-tier talent and history of successful business transformations to act quickly and capitalize on the opportunity in front of us,” McWaters said.
The Transformation Plan will also include an incremental internal net investment of approximately $4 million for additional marketing campaigns and new resources in marketing, admissions and support services in fiscal 2018. The incremental costs associated with the Transformation Plan are not anticipated to negatively impact UTI’s compliance with the composite score requirements imposed by the Department of Education.
Based upon the Transformation Plan investments during this year of transition, UTI is updating its 2018 outlook:
• | Student starts are still expected to grow in the low-single digits. |
• | Average student population is still expected to be down in the mid-single digits. |
• | Revenue is still expected to range between $310 million and $320 million. |
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• | Operating expenses are now expected to range between $348 million and $353 million, including roughly $4 million in consulting fees and approximately $4 million for incremental marketing and internal resources. This compares to previous guidance of between $340 million and $345 million. |
• | An operating loss is now expected between $28 million and $33 million, versus the company’s previous expected loss of between $20 million and $25 million. |
• | EBITDA is still expected to be negative. |
• | Capital expenditures are still expected to be between $24 million and $25 million. |
Use of Non-GAAP Financial Information
This press release contains non-GAAP (Generally Accepted Accounting Principles) financial measures, which are intended to supplement, but not substitute for, the most directly comparable GAAP measures. Management chooses to disclose to investors these non-GAAP financial measures because they provide an additional analytical tool to clarify the results from operations and helps to identify underlying trends. Additionally, such measures help compare the Company's performance on a consistent basis across time periods. Management also utilizes EBITDA as a performance measure internally. To obtain a complete understanding of the Company's performance these measures should be examined in connection with net income (loss), determined in accordance with GAAP, as presented in the financial statements and notes thereto included in the annual and quarterly filings with the Securities and Exchange Commission. Since the items excluded from these measures are significant components in understanding and assessing financial performance under GAAP, these measures should not be considered an alternative to net income as a measure of the Company's operating performance or profitability. Exclusion of items in the non-GAAP presentation should not be construed as an inference that these items are unusual, infrequent or non-recurring. Other companies, including other companies in the education industry, may calculate non-GAAP financial measures differently than UTI does, limiting their usefulness as a comparative measure across companies.
Safe Harbor Statement
All statements contained herein, other than statements of historical fact, are “forward-looking” statements within the meaning of Section 21E of the Securities Exchange Act of 1934 and Section 27A of the Securities Act of 1933, as amended. Such statements, including those regarding the intended effects of investments in our transformational efforts, are based upon management's current judgments. Those statements are subject to a number of uncertainties that could cause actual performance and results to differ materially from the results discussed in the forward-looking statements. There is no assurance that the efforts described herein will produce the performance improvements we are seeking. None of the statements regarding our potential future financial performance are intended as guidance, and they should not be viewed as such. Factors that could affect the Company's actual results include, among other things, changes to federal and state educational funding, changes to regulations or agency interpretation of such regulations affecting the for-profit education industry, possible failure or inability to obtain regulatory consents and certifications for new or expanding campuses, potential increased competition, changes in demand for the programs offered by UTI, increased investment in management and capital resources, the effectiveness of the recruiting, advertising and promotional efforts, changes to interest rates and unemployment, general economic conditions of the Company and other risks that are described from time to time in the Company's public filings. Further information on these and other potential factors that could affect the financial results or condition may be found in the Company's filings with the Securities and Exchange Commission. The forward-looking statements speak only as of the date of this press release. Except as required by law, the Company expressly disclaims any obligation to publicly update any forward-looking statements whether as a result of new information, future events, changes in expectations, any changes in events, conditions or circumstances, or otherwise.
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About Universal Technical Institute, Inc.
With more than 200,000 graduates in its 52-year history, Universal Technical Institute, Inc. (NYSE: UTI) is the nation’s leading provider of technical training for automotive, diesel, collision repair, motorcycle and marine technicians, and offers welding technology and computer numerical control (CNC) machining programs. The company has built partnerships with industry leaders, outfits its state-of-the-industry facilities with current technology, and delivers training that is aligned with employer needs. Through its network of 12 campuses nationwide, UTI offers post-secondary programs under the banner of several well-known brands, including Universal Technical Institute (UTI), Motorcycle Mechanics Institute and Marine Mechanics Institute (MMI) and NASCAR Technical Institute (NASCAR Tech). The company is headquartered in Scottsdale, Arizona. For more information, visit uti.edu.
Company Contact:
Bryce Peterson
Chief Financial Officer
Universal Technical Institute, Inc.
(623) 445-0993
Investor Relations Contact:
Kirsten Chapman
LHA Investor Relations
(415) 433-3777
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