Education Management Corp. has a market cap of $3.13 billion; its shares were traded at around $21.92 .
Highlight of Business Operations:General and administrative expense was $491.6 million for the current period, an increase of 32.9% from $370.0 million in the prior year period. As a percentage of net revenues, general and administrative expense increased 166 basis points compared to the prior year period. During the current period, we incurred non-cash equity-based compensation expense of $13.1 million in connection with the initial public offering. This expense was previously deferred due to the existence of certain conditions associated with the options which were removed upon the completion of the initial public offering. We also incurred $1.0 million of legal costs and other fees associated with the repurchases of $337.4 million of Senior Subordinated Notes. Further, in March 2010 we implemented a corporate services restructuring plan that was designed to improve operational efficiencies and to support the growth of our education systems. As a result of the restructuring plan, we recorded a non-recurring charge of $5.7 million.
During the nine months ended March 31, 2010, we purchased Senior Subordinated Notes with a face value of approximately $337.4 million through two tender offer transactions. We recorded a loss of $47.2 million during this period on the early retirement of these notes, which was comprised of a premium of $41.6 million over face value to repurchase debt and accelerated amortization on the prorated portion of deferred financing costs related to these notes of $5.6 million.
Cash flow from operations for the nine month period ended March 31, 2010 was $340.2 million, including the effect of a non-recurring $29.6 million cash payment to terminate the Sponsor management agreement in connection with the initial public offering, compared to $314.9 million in the prior year period. The increase in operating cash flows as compared to the prior year period was primarily related to improved operating performance compared to the prior year period and a reduction of $11.2 million in the amount of interest paid on our debt compared to the prior year period as a result of debt repurchases and lower interest rates.
In October 2009, we consummated an initial public offering of 23.0 million shares of our common stock for net proceeds of approximately $387.3 million. The proceeds were primarily used to purchase a face value of $316.0 million of the Senior Subordinated Notes in a tender offer for $355.5 million and to pay $29.6 million to terminate a management agreement entered into with the Sponsors in connection with the Transaction. In addition, we purchased Senior Subordinated Notes with a face value of approximately $21.4 million through a tender offer during the quarter ended March 31, 2010.
We may issue up to $375.0 million of letters of credit under the revolving credit facility. We have outstanding letters of credit of $210.7 million at March 31, 2010. We are required to maintain a letter of credit with the U.S. Department of Education due to our failure to satisfy certain regulatory financial ratios after giving effect to the Transaction. The amount of the letter of credit, which was $173.2 million at March 31, 2010, is set at 10% of the Title IV aid received by students attending our schools. The majority of the remainder of the outstanding letters of credit at March 31, 2010 relate to obligations to purchase loans under the Education Finance Loan program. On May 7, 2010, the U.S. Department of Education requested us to increase our letter of credit to $259.8 million by June 4, 2010 based on projected Title IV aid to be received by students attending our institutions during fiscal 2011. Immediately following this increase, we will have $145.2 million of additional borrowings available under the revolving credit facility.
With the enactment of the Ensuring Continued Access to Student Loans Act of 2008, the U.S. government has made additional financial aid available to students in order to meet rising post-secondary education costs and decreased availability of private loans. Effective July 1, 2008, the annual unsubsidized Stafford loans made available to all undergraduate students under the FFEL and Direct Loan program increased by $2,000. On July 1, 2009, the maximum amount of availability of a Pell grant increased to $5,350 per year from a maximum of $4,731 per year in fiscal 2009. In addition, with the enactment of the Higher Education Opportunity Act of 2008, effective July 1, 2009 students are eligible for up to two annual scheduled Pell Grant awards, which should encourage students to accelerate their programs. The maximum Pell grant available to eligible students is scheduled to increase to $5,550 per award year effective July 1, 2010.
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