[November 08, 2012] |
|
Career Education Corporation Reports Results for Third Quarter 2012
SCHAUMBURG, Ill. --(Business Wire)--
Career Education Corporation (NASDAQ: CECO) today reported total revenue
of $332.8 million, and a net loss of $33.1 million, or -$0.50 per
diluted share, for the third quarter of 2012 compared to total revenue
of $428.4 million and net income of $10.6 million, or $0.14 per diluted
share, for the third quarter of 2011.
"We are taking the difficult step of closing campuses and reducing our
workforce because these measures are essential to advancing the
turnaround of Career Education," Chairman, President and Chief Executive
Officer Steven H. Lesnik said. "To move forward successfully, we must
align the organization to the new market realities in private
postsecondary education."
"As we rationally reduce the size and scope of the organization, we are
ultimately positioning the Company to execute and embark upon our
long-term strategic direction. Our strategy envisions a simplified and
more nimble organization, fewer ground campuses, more differentiated
brands serving distinct student populations and the leading
student-centric, personalized learning technology in higher education. I
am confident that this is the right strategic course for the Company and
will ensure a leaner, stronger Career Education that continues to
provide access to high-quality, career-focused postsecondary education
long into the future."
CONSOLIDATED RESULTS
Quarter Ended September 30, 2012
-
Total revenue was $332.8 million for the third quarter of 2012, a 22.3
percent decrease from $428.4 million for the third quarter of 2011.
-
An operating loss of $48.2 million was reported for the third quarter
of 2012, compared to operating income of $19.9 million for the third
quarter of 2011. The operating margin was -14.5 percent for the third
quarter of 2012 versus 4.6 percent for the third quarter of 2011.
-
The loss from continuing operations for the third quarter of 2012 was
$30.8 million, or -$0.47 per diluted share, versus income from
continuing operations of $14.1 million, or $0.19 per diluted share,
for the third quarter of 2011.
Year to Date Ended September 30, 2012
-
Total revenue was $1,135.9 million for the year to date ended
September 30, 2012, compared to $1,445.0 million for the year to date
ended September 30, 2011.
-
The operating loss for the year to date ended September 30, 2012 was
$109.7 million, versus operating income of $208.1 million for the year
to date ended September 30, 2011. The operating margin decreased to
-9.7 percent for the year to date ended September 30, 2012, from 14.4
percent for the year to date ended September 30, 2011.
-
The loss from continuing operations for the year to date ended
September 30, 2012, was $78.3 million, or -$1.18 per diluted share,
compared to income from continuing operations of $138.1 million, or
$1.83 per diluted share, for the year to date ended September 30, 2011.
The Company believes it is useful to present non-GAAP financial
measures, which exclude certain significant items, as a means to
understand the performance of its core business. There are no
significant items included for the third quarters ended 2012 or 2011.
For the year to date ended September 30, 2012, on a non-GAAP basis, loss
per diluted share from continuing operations was -$0.14, as compared to
earnings per diluted share of $1.79 for the year to date ended September
30, 2011. (See table below and the GAAP to non-GAAP reconciliation
attached to this press release for further details.)
The operating results for the years to date ended September 30, 2012 and
2011 include the following significant items:
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Significant Items (In Millions)
|
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(Loss) Earnings per Diluted Share Impact
|
Year to Date Ended September 30, 2012
|
|
|
|
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Goodwill and Intangible Asset Impairments
|
$
|
84.4
|
|
|
$
|
1.22
|
|
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Asset Impairments
|
|
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1.3
|
|
|
|
0.01
|
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Insurance Recoveries
|
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(19.0
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)
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(0.19
|
)
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TOTAL
|
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$
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66.7
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$
|
1.04
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Year to Date Ended September 30, 2011
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Goodwill and Intangible Asset Impairments
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$
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2.7
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$
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0.02
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Insurance Recoveries
|
|
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(7.0
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)
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(0.06
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)
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TOTAL
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$
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(4.3
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)
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$
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(0.04
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)
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-
During the year to date ended September 30, 2012, the Company recorded
non-cash goodwill and intangible asset impairment charges of $84.4
million, of which $42.9 million was reflected within Health Education
and $41.5 million within Art & Design. In addition, $1.2 million of
non-cash asset impairment charges were recorded resulting from the
decision made in the second quarter of 2012 to teach out four
campuses, primarily within Health Education. The operating results for
the year to date ended September 30, 2011 included $2.7 million of
non-cash goodwill and intangible asset impairment charges primarily
related to accreditation rights impairment.
-
During the year to date ended September 30, 2012, the Company recorded
a $19.0 million insurance recovery related to the settlement of claims
under certain insurance policies. During the year to date ended
September 30, 2011, the Company recorded a $7.0 million insurance
recovery related to previously settled legal matters.
-
Excluding the significant items in the table above, the operating loss
was $43.0 million for the year to date ended September 30, 2012 and
the operating income was $203.8 million for the year to date ended
September 30, 2011. Operating margin was -3.8 percent and 14.1 percent
for the years to date ended September 30, 2012 and 2011, respectively.
CAMPUS CLOSURES AND WORKFORCE REDUCTIONS
A key component to the Company's long-term strategy is to invest in a
smaller number of institutions that have the strongest likelihood of
delivering strong student outcomes, operational efficiency and strength
in their market. As a result, the decision was made to close
twenty-three campuses. These campuses are expected to contribute
approximately $124.3 million of revenue and approximately $62.0 million
of operating loss for the year ending December 31, 2012. The campuses
will remain open to offer current students the ability to complete their
course of study. The majority of these campuses are expected to cease
operations no later than the first quarter of 2014. Along with these
closures, the Company made the decision to eliminate approximately 900
positions across the organization as it reorganizes its campus and
corporate functions to better align with the current student population
and common operating structures across our ground campuses, most notably
within our Career Schools. The position eliminations are expected to be
completed by January 2013, with annual savings estimated at $45-$55
million. The fourth quarter operating results will include a pretax
severance charge of approximately $7.0 million as a result of this
decision.
CONSOLIDATED CASH FLOWS AND FINANCIAL POSITION
Cash Flows
Net cash flows provided by operating activities totaled $32.5 million
for the year to date ended September 30, 2012, compared to $209.4
million for the year to date ended September 30, 2011.
Capital expenditures decreased to $29.5 million during the year to date
ended September 30, 2012, from $67.4 million during the year to date
ended September 30, 2011. Capital expenditures represented 2.6 percent
and 4.6 percent of total revenue of continuing and discontinued
operations during the years to date ended September 30, 2012 and 2011,
respectively.
Financial Position
As of September 30, 2012 and December 31, 2011, cash and cash
equivalents and short-term investments totaled $373.3 million and $441.2
million, respectively.
U.S. Credit Agreement
The Company's $185 million U.S. Credit Agreement expired on October 31,
2012. The Company's discussions surrounding the level and terms of a
replacement facility are ongoing.
Stock Repurchase Program
During the third quarter of 2012, the Company did not repurchase any
shares of its common stock. Year to date through September 30, 2012, the
Company repurchased 6.1 million shares of its common stock for
approximately $56.4 million at an average price of $9.29 per share.
As of September 30, 2012, approximately $183.3 million was available
under the Company's authorized stock repurchase program to repurchase
outstanding shares of its common stock. Stock repurchases under this
program may be made on the open market or in privately negotiated
transactions from time to time, depending on various factors, including
market conditions and corporate and regulatory requirements.
Student Population
Total student population by reportable segment as of September 30, 2012
and 2011, was as follows:
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As of September 30,
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% Change
|
|
|
|
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2012
|
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2011
|
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2012 vs. 2011
|
Student Population
|
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CTU
|
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22,600
|
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25,100
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-10
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%
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AIU
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14,900
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17,100
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-13
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%
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Health Education
|
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16,700
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28,100
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-41
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%
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Culinary Arts
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11,200
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15,400
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-27
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%
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Art & Design
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7,400
|
|
10,300
|
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-28
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%
|
|
International
|
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|
8,800
|
|
8,400
|
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5
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%
|
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Total Student Population
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81,600
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|
104,400
|
|
-22
|
%
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|
|
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New Student Starts
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New student starts by reportable segment for the quarters ended
September 30, 2012 and 2011, were as follows:
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For the Quarters Ended September 30,
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% Change
|
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|
|
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|
|
2012
|
|
2011
|
|
2012 vs. 2011
|
New Student Starts
|
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CTU
|
|
|
|
5,250
|
|
6,510
|
|
-19
|
%
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|
AIU
|
|
|
|
3,700
|
|
4,590
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|
-19
|
%
|
|
Health Education (1)
|
|
|
4,820
|
|
7,710
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|
-37
|
%
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|
Culinary Arts (1)
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|
3,920
|
|
5,480
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|
-28
|
%
|
|
Art & Design
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|
1,200
|
|
1,870
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|
-36
|
%
|
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International
|
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|
4,750
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|
4,440
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|
7
|
%
|
|
|
Total New Student Starts
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23,640
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|
30,600
|
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-23
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%
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(1)
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The third quarter 2012 had one additional new student start as
compared to the previous year quarter.
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Excluding this timing impact, the change in new student starts for
Health Education and Culinary Arts
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would have been -53% and -36%, respectively.
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CONFERENCE CALL INFORMATION
Career Education Corporation will host a conference call on Friday,
November 9, 2012 at 10:00 a.m. Eastern time. Interested parties can
access the live webcast of the conference call at www.careered.com
in the Investor Relations section of the website. Participants can also
listen to the conference call by dialing 800-580-9478 (domestic) or
630-691-2769 (international) and citing code 33496355. Please log-in or
dial-in at least 10 minutes prior to the start time to ensure a
connection. An archived version of the webcast will be accessible for 90
days at www.careered.com
in the Investor Relations section of the website. A replay of the call
will also be available for seven days by calling 888-843-7419 (domestic)
or 630-652-3042 (international) and citing code 33496355.
ABOUT CAREER EDUCATION CORPORATION
The colleges, schools and universities that are part of the Career
Education Corporation ("CEC") family offer high-quality education to a
diverse student population of more than 80,000 students across the world
in a variety of career-oriented disciplines through online, on-ground
and hybrid learning program offerings. The more than 90 campuses that
serve these students are located throughout the United States and in
France, the United Kingdom and Monaco, and offer doctoral, master's,
bachelor's and associate degrees and diploma and certificate programs.
CEC is an industry leader whose institutions are recognized globally.
Those institutions include, among others, American InterContinental
University ("AIU"); Brooks Institute; Colorado Technical University
("CTU"); Harrington College of Design; INSEEC Group ("INSEEC") Schools;
International University of Monaco ("IUM"); International Academy of
Design & Technology ("IADT"); Le Cordon Bleu North America ("LCB"); and
Sanford-Brown Institutes and Colleges. Through its schools, CEC is
committed to providing high-quality education, enabling students to
graduate and pursue rewarding career opportunities.
For more information, see CEC's website at www.careered.com.
The website includes a detailed listing of individual campus locations
and web links to CEC's colleges, schools, and universities.
Except for the historical and present factual information contained
herein, the matters set forth in this release, including statements
identified by words such as "anticipate," "believe," "plan," "expect,"
"intend," "project," "will," "potential" and similar expressions, are
forward-looking statements as defined in Section 21E of the Securities
Exchange Act of 1934, as amended. These statements are based on
information currently available to us and are subject to various
assumptions, risks, uncertainties and other factors that could cause our
results of operations, financial condition, cash flows, performance,
business prospects and opportunities to differ materially from those
expressed in, or implied by, these statements. Except as expressly
required by the federal securities laws, we undertake no obligation to
update or revise such factors or any of the forward-looking statements
contained herein to reflect future events, developments or changed
circumstances, or for any other reason. These risks and uncertainties,
the outcomes of which could materially and adversely affect our
financial condition and operations, include, but are not limited to, the
following: changes in enrollment, student mix and average registered
credits taken by students; our ability to implement effective cost
reduction strategies; our ability to obtain a replacement credit
facility on acceptable terms; our continued compliance with and
eligibility to participate in Title IV Programs under the Higher
Education Act of 1965, as amended, and the regulations thereunder
(including the "90-10 Rule" and financial responsibility standards
prescribed by the U.S. Department of Education), as well as national and
regional accreditation standards and state regulatory requirements; our
ability to obtain accrediting agency approvals for existing, changed or
new programs and to successfully defend litigation and other claims
brought against us; rulemaking by the U.S. Department of Education and
increased focus by the U.S. Congress and governmental agencies on
for-profit education institutions; and changes in the overall U.S. or
global economy. Further information about these and other relevant risks
and uncertainties may be found in the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 2011 and its subsequent
filings with the Securities and Exchange Commission.
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CAREER EDUCATION CORPORATION AND SUBSIDIARIES
|
CONSOLIDATED BALANCE SHEETS
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
September 30,
2012
|
|
December 31, 2011
|
|
|
|
(Unaudited)
|
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|
ASSETS
|
|
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CURRENT ASSETS:
|
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Cash and cash equivalents
|
|
$
|
242,828
|
|
|
$
|
280,592
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|
|
Short-term investments
|
|
|
130,495
|
|
|
|
160,607
|
|
|
Total cash and cash equivalents and short-term investments
|
|
|
373,323
|
|
|
|
441,199
|
|
|
|
|
|
|
|
|
Student receivables, net
|
|
|
65,021
|
|
|
|
60,573
|
|
|
Student receivables held for sale
|
|
|
1,019
|
|
|
|
-
|
|
|
Receivables, other, net
|
|
|
1,672
|
|
|
|
2,914
|
|
|
Prepaid expenses
|
|
|
75,183
|
|
|
|
62,399
|
|
|
Inventories
|
|
|
9,157
|
|
|
|
11,356
|
|
|
Deferred income tax assets, net
|
|
|
10,940
|
|
|
|
10,940
|
|
|
Other current assets
|
|
|
5,214
|
|
|
|
17,769
|
|
|
Assets of discontinued operations
|
|
|
3,441
|
|
|
|
3,328
|
|
|
Total current assets
|
|
|
544,970
|
|
|
|
610,478
|
|
|
|
|
|
|
|
NON-CURRENT ASSETS:
|
|
|
|
|
|
Property and equipment, net
|
|
|
317,484
|
|
|
|
349,788
|
|
|
Goodwill
|
|
|
131,862
|
|
|
|
212,626
|
|
|
Intangible assets, net
|
|
|
74,032
|
|
|
|
77,186
|
|
|
Student receivables, net
|
|
|
8,016
|
|
|
|
9,297
|
|
|
Deferred income tax assets, net
|
|
|
9,452
|
|
|
|
9,522
|
|
|
Other assets, net
|
|
|
42,293
|
|
|
|
30,122
|
|
|
Assets of discontinued operations
|
|
|
16,920
|
|
|
|
17,101
|
|
TOTAL ASSETS
|
|
$
|
1,145,029
|
|
|
$
|
1,316,120
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
CURRENT LIABILITIES:
|
|
|
|
|
|
Current maturities of capital lease obligations
|
|
$
|
306
|
|
|
$
|
844
|
|
|
Accounts payable
|
|
|
53,237
|
|
|
|
48,408
|
|
|
Accrued expenses:
|
|
|
|
|
|
Payroll and related benefits
|
|
|
39,359
|
|
|
|
41,853
|
|
|
Advertising and production costs
|
|
|
20,993
|
|
|
|
17,717
|
|
|
Other
|
|
|
48,542
|
|
|
|
67,271
|
|
|
Deferred tuition revenue
|
|
|
135,483
|
|
|
|
144,947
|
|
|
Liabilities of discontinued operations
|
|
|
12,843
|
|
|
|
8,403
|
|
|
Total current liabilities
|
|
|
310,763
|
|
|
|
329,443
|
|
|
|
|
|
|
|
NON-CURRENT LIABILITIES:
|
|
|
|
|
|
Capital lease obligations, net of current maturities
|
|
|
-
|
|
|
|
207
|
|
|
Deferred rent obligations
|
|
|
97,766
|
|
|
|
102,079
|
|
|
Other liabilities
|
|
|
35,894
|
|
|
|
40,365
|
|
|
Liabilities of discontinued operations
|
|
|
28,842
|
|
|
|
37,935
|
|
|
Total non-current liabilities
|
|
|
162,502
|
|
|
|
180,586
|
|
|
|
|
|
|
|
SHARE-BASED AWARDS SUBJECT TO REDEMPTION
|
|
|
99
|
|
|
|
110
|
|
|
|
|
|
|
|
STOCKHOLDERS' EQUITY:
|
|
|
|
|
|
Preferred stock
|
|
|
-
|
|
|
|
-
|
|
|
Common stock
|
|
|
816
|
|
|
|
820
|
|
|
Additional paid-in capital
|
|
|
599,534
|
|
|
|
590,965
|
|
|
Accumulated other comprehensive loss
|
|
|
(9,015
|
)
|
|
|
(5,136
|
)
|
|
Retained earnings
|
|
|
294,315
|
|
|
|
375,607
|
|
|
Cost of shares in treasury
|
|
|
(213,985
|
)
|
|
|
(156,275
|
)
|
|
Total stockholders' equity
|
|
|
671,665
|
|
|
|
805,981
|
|
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
$
|
1,145,029
|
|
|
$
|
1,316,120
|
|
|
|
|
|
|
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
|
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE
INCOME
|
(In thousands, except per share amounts and percentages)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Quarters Ended September 30,
|
|
|
|
|
2012
|
|
% of Total Revenue
|
|
|
2011 (1)
|
|
|
% of Total Revenue
|
|
|
|
|
|
|
|
|
|
|
|
REVENUE:
|
|
|
|
|
|
|
|
|
|
Tuition and registration fees
|
|
$
|
326,464
|
|
|
98.1
|
%
|
|
$
|
417,420
|
|
|
97.4
|
%
|
|
Other
|
|
|
6,293
|
|
|
1.9
|
%
|
|
|
10,991
|
|
|
2.6
|
%
|
|
|
Total revenue
|
|
|
332,757
|
|
|
|
|
|
428,411
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
|
Educational services and facilities
|
|
|
133,206
|
|
|
40.0
|
%
|
|
|
152,727
|
|
|
35.6
|
%
|
|
General and administrative
|
|
|
227,369
|
|
|
68.3
|
%
|
|
|
233,647
|
|
|
54.5
|
%
|
|
Depreciation and amortization
|
|
|
20,429
|
|
|
6.1
|
%
|
|
|
22,156
|
|
|
5.2
|
%
|
|
Goodwill and asset impairment
|
|
|
-
|
|
|
0.0
|
%
|
|
|
-
|
|
|
0.0
|
%
|
|
|
Total operating expenses
|
|
|
381,004
|
|
|
114.5
|
%
|
|
|
408,530
|
|
|
95.4
|
%
|
Operating (loss) income
|
|
|
(48,247
|
)
|
|
-14.5
|
%
|
|
|
19,881
|
|
|
4.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE):
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
686
|
|
|
0.2
|
%
|
|
|
263
|
|
|
0.1
|
%
|
|
Interest expense
|
|
|
(22
|
)
|
|
0.0
|
%
|
|
|
(44
|
)
|
|
0.0
|
%
|
|
Miscellaneous income
|
|
|
77
|
|
|
0.0
|
%
|
|
|
183
|
|
|
0.0
|
%
|
|
|
Total other income
|
|
|
741
|
|
|
0.2
|
%
|
|
|
402
|
|
|
0.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
PRETAX (LOSS) INCOME
|
|
|
(47,506
|
)
|
|
-14.3
|
%
|
|
|
20,283
|
|
|
4.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
(Benefit from) provision for income taxes
|
|
|
(16,675
|
)
|
|
-5.0
|
%
|
|
|
6,215
|
|
|
1.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
(LOSS) INCOME FROM CONTINUING OPERATIONS
|
|
|
(30,831
|
)
|
|
-9.3
|
%
|
|
|
14,068
|
|
|
3.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations, net of tax
|
|
|
(2,315
|
)
|
|
-0.7
|
%
|
|
|
(3,434
|
)
|
|
-0.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
NET (LOSS) INCOME
|
|
|
(33,146
|
)
|
|
-10.0
|
%
|
|
|
10,634
|
|
|
2.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
OTHER COMPREHENSIVE INCOME (LOSS), net of tax:
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
|
|
743
|
|
|
|
|
|
(11,761
|
)
|
|
|
|
Unrealized losses on investments
|
|
|
(206
|
)
|
|
|
|
|
(6
|
)
|
|
|
|
|
Total other comprehensive income (loss)
|
|
|
537
|
|
|
|
|
|
(11,767
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE LOSS
|
|
$
|
(32,609
|
)
|
|
|
|
$
|
(1,133
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET (LOSS) INCOME PER SHARE - DILUTED:
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations
|
|
$
|
(0.47
|
)
|
|
|
|
$
|
0.19
|
|
|
|
|
Loss from discontinued operations
|
|
|
(0.03
|
)
|
|
|
|
|
(0.05
|
)
|
|
|
|
Net (loss) income per share
|
|
$
|
(0.50
|
)
|
|
|
|
$
|
0.14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING
|
|
|
66,100
|
|
|
|
|
|
74,058
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
In November 2011, the Company sold its ownership interest in
Istituto Marangoni. As a result, all prior period results
|
|
have been recast to include Istituto Marangoni as a component of
discontinued operations.
|
|
|
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
|
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE
INCOME
|
(In thousands, except per share amounts and percentages)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years to Date Ended September 30,
|
|
|
|
|
2012
|
|
% of Total Revenue
|
|
2011 (1)
|
|
% of Total Revenue
|
|
|
|
|
|
|
|
|
|
|
|
REVENUE:
|
|
|
|
|
|
|
|
|
|
Tuition and registration fees
|
|
$
|
1,112,950
|
|
|
98.0
|
%
|
|
$
|
1,396,557
|
|
|
96.6
|
%
|
|
Other
|
|
|
22,910
|
|
|
2.0
|
%
|
|
|
48,432
|
|
|
3.4
|
%
|
|
|
Total revenue
|
|
|
1,135,860
|
|
|
|
|
|
1,444,989
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
|
Educational services and facilities
|
|
|
431,739
|
|
|
38.0
|
%
|
|
|
476,370
|
|
|
33.0
|
%
|
|
General and administrative
|
|
|
667,618
|
|
|
58.8
|
%
|
|
|
695,313
|
|
|
48.1
|
%
|
|
Depreciation and amortization
|
|
|
60,555
|
|
|
5.3
|
%
|
|
|
62,563
|
|
|
4.3
|
%
|
|
Goodwill and asset impairment
|
|
|
85,661
|
|
|
7.5
|
%
|
|
|
2,676
|
|
|
0.2
|
%
|
|
|
Total operating expenses
|
|
|
1,245,573
|
|
|
109.7
|
%
|
|
|
1,236,922
|
|
|
85.6
|
%
|
Operating (loss) income
|
|
|
(109,713
|
)
|
|
-9.7
|
%
|
|
|
208,067
|
|
|
14.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE):
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
1,426
|
|
|
0.1
|
%
|
|
|
749
|
|
|
0.1
|
%
|
|
Interest expense
|
|
|
(87
|
)
|
|
0.0
|
%
|
|
|
(120
|
)
|
|
0.0
|
%
|
|
Miscellaneous income
|
|
|
-
|
|
|
0.0
|
%
|
|
|
1,968
|
|
|
0.1
|
%
|
|
|
Total other income
|
|
|
1,339
|
|
|
0.1
|
%
|
|
|
2,597
|
|
|
0.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
PRETAX (LOSS) INCOME
|
|
|
(108,374
|
)
|
|
-9.5
|
%
|
|
|
210,664
|
|
|
14.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
(Benefit from) provision for income taxes
|
|
|
(30,109
|
)
|
|
-2.7
|
%
|
|
|
72,582
|
|
|
5.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
(LOSS) INCOME FROM CONTINUING OPERATIONS
|
|
|
(78,265
|
)
|
|
-6.9
|
%
|
|
|
138,082
|
|
|
9.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from discontinued operations, net of tax
|
|
|
(3,039
|
)
|
|
-0.3
|
%
|
|
|
940
|
|
|
0.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
NET (LOSS) INCOME
|
|
|
(81,304
|
)
|
|
-7.2
|
%
|
|
|
139,022
|
|
|
9.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
OTHER COMPREHENSIVE (LOSS) INCOME, net of tax:
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
|
|
(3,553
|
)
|
|
|
|
|
(269
|
)
|
|
|
|
Unrealized (losses) gains on investments
|
|
|
(326
|
)
|
|
|
|
|
40
|
|
|
|
|
|
Total other comprehensive loss
|
|
|
(3,879
|
)
|
|
|
|
|
(229
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE (LOSS) INCOME
|
|
$
|
(85,183
|
)
|
|
|
|
$
|
138,793
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET (LOSS) INCOME PER SHARE - DILUTED:
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations
|
|
$
|
(1.18
|
)
|
|
|
|
$
|
1.83
|
|
|
|
|
(Loss) income from discontinued operations
|
|
|
(0.05
|
)
|
|
|
|
|
0.01
|
|
|
|
|
Net (loss) income per share
|
|
$
|
(1.23
|
)
|
|
|
|
$
|
1.84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING
|
|
|
66,325
|
|
|
|
|
|
75,518
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
In November 2011, the Company sold its ownership interest in
Istituto Marangoni. As a result, all prior period results
|
|
have been recast to include Istituto Marangoni as a component of
discontinued operations.
|
|
|
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
|
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
For the Years to Date Ended September 30,
|
|
|
|
|
2012
|
|
2011
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(81,304
|
)
|
|
$
|
139,022
|
|
|
Adjustments to reconcile net (loss) income to net cash provided by
operating activities:
|
|
|
|
|
|
Goodwill and asset impairment
|
|
|
85,661
|
|
|
|
2,676
|
|
|
Loss on pending sale of student receivables
|
|
|
930
|
|
|
|
-
|
|
|
Depreciation and amortization expense
|
|
|
60,555
|
|
|
|
63,319
|
|
|
Bad debt expense
|
|
|
28,967
|
|
|
|
40,909
|
|
|
Compensation expense related to share-based awards
|
|
|
7,302
|
|
|
|
11,884
|
|
|
Loss (gain) on disposition of property and equipment
|
|
|
293
|
|
|
|
(1,794
|
)
|
|
Changes in operating assets and liabilities
|
|
|
(69,910
|
)
|
|
|
(46,599
|
)
|
|
Net cash provided by operating activities
|
|
|
32,494
|
|
|
|
209,417
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
Purchases of available-for-sale investments
|
|
|
(117,188
|
)
|
|
|
(149,234
|
)
|
|
Sales of available-for-sale investments
|
|
|
146,873
|
|
|
|
148,934
|
|
|
Purchases of property and equipment
|
|
|
(29,496
|
)
|
|
|
(67,444
|
)
|
|
Proceeds on the sale of assets
|
|
|
-
|
|
|
|
6,259
|
|
|
Business acquisition, net of acquired cash
|
|
|
(3,094
|
)
|
|
|
-
|
|
|
Other
|
|
|
|
(1,533
|
)
|
|
|
40
|
|
|
Net cash used in investing activities
|
|
|
(4,438
|
)
|
|
|
(61,445
|
)
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
Purchase of treasury stock
|
|
|
(56,431
|
)
|
|
|
(137,033
|
)
|
|
Issuance of common stock
|
|
|
1,262
|
|
|
|
3,827
|
|
|
Tax benefit associated with stock option exercises
|
|
|
-
|
|
|
|
377
|
|
|
Payments of assumed loans upon business acquisition
|
|
|
(318
|
)
|
|
|
-
|
|
|
Payments of contingent consideration
|
|
|
(5,818
|
)
|
|
|
(12,589
|
)
|
|
Payments of capital lease obligations
|
|
|
(741
|
)
|
|
|
(855
|
)
|
|
Net cash used in financing activities
|
|
|
(62,046
|
)
|
|
|
(146,273
|
)
|
|
|
|
|
|
|
|
|
EFFECT OF FOREIGN CURRENCY EXCHANGE RATE
|
|
|
|
|
|
CHANGES ON CASH AND CASH EQUIVALENTS:
|
|
|
(3,774
|
)
|
|
|
(2,080
|
)
|
|
|
|
|
|
|
|
|
NET DECREASE IN CASH AND CASH EQUIVALENTS
|
|
|
(37,764
|
)
|
|
|
(381
|
)
|
|
DISCONTINUED OPERATIONS CASH ACTIVITY INCLUDED ABOVE:
|
|
|
|
|
|
Add: Cash balance of discontinued operations, beginning of the period
|
|
|
-
|
|
|
|
28,838
|
|
|
Less: Cash balance of discontinued operations, end of the period
|
|
|
-
|
|
|
|
36,428
|
|
|
CASH AND CASH EQUIVALENTS, beginning of the period
|
|
|
280,592
|
|
|
|
260,644
|
|
|
CASH AND CASH EQUIVALENTS, end of the period
|
|
$
|
242,828
|
|
|
$
|
252,673
|
|
|
|
|
|
|
|
|
|
|
|
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
|
UNAUDITED SELECTED SEGMENT INFORMATION
|
(In thousands, except percentages)
|
|
|
|
|
|
|
|
|
|
|
|
For the Quarters Ended September 30,
|
|
|
|
|
2012
|
|
2011 (1)
|
|
|
|
|
|
|
|
REVENUE:
|
|
|
|
|
|
CTU
|
|
$
|
88,976
|
|
|
$
|
100,477
|
|
|
AIU
|
|
|
|
71,204
|
|
|
|
85,787
|
|
|
Health Education
|
|
|
65,399
|
|
|
|
102,195
|
|
|
Culinary Arts
|
|
|
54,583
|
|
|
|
73,686
|
|
|
Art & Design
|
|
|
37,914
|
|
|
|
49,686
|
|
|
International
|
|
|
14,665
|
|
|
|
16,664
|
|
|
Corporate and Other
|
|
|
16
|
|
|
|
(84
|
)
|
|
|
Total
|
|
$
|
332,757
|
|
|
$
|
428,411
|
|
|
|
|
|
|
|
|
OPERATING (LOSS) INCOME:
|
|
|
|
|
|
CTU (2)
|
|
$
|
9,712
|
|
|
$
|
16,755
|
|
|
AIU
|
|
|
|
1,084
|
|
|
|
12,430
|
|
|
Health Education
|
|
|
(28,468
|
)
|
|
|
(3,632
|
)
|
|
Culinary Arts
|
|
|
(10,722
|
)
|
|
|
3,800
|
|
|
Art & Design
|
|
|
(7,963
|
)
|
|
|
2,557
|
|
|
International
|
|
|
(6,444
|
)
|
|
|
(3,064
|
)
|
|
Corporate and Other
|
|
|
(5,446
|
)
|
|
|
(8,965
|
)
|
|
|
Total
|
|
$
|
(48,247
|
)
|
|
$
|
19,881
|
|
|
|
|
|
|
|
|
OPERATING MARGIN (LOSS):
|
|
|
|
|
|
CTU
|
|
|
10.9
|
%
|
|
|
16.7
|
%
|
|
AIU
|
|
|
|
1.5
|
%
|
|
|
14.5
|
%
|
|
Health Education
|
|
|
-43.5
|
%
|
|
|
-3.6
|
%
|
|
Culinary Arts
|
|
|
-19.6
|
%
|
|
|
5.2
|
%
|
|
Art & Design
|
|
|
-21.0
|
%
|
|
|
5.1
|
%
|
|
International
|
|
|
-43.9
|
%
|
|
|
-18.4
|
%
|
|
|
Total
|
|
|
-14.5
|
%
|
|
|
4.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
In November 2011, the Company sold its ownership interest in
Istituto Marangoni. As a result, all prior period results
|
|
have been recast to include Istituto Marangoni as a component of
discontinued operations.
|
|
|
|
|
|
|
|
(2)
|
Third quarter 2011 included a $5.0 million accrual for an estimate
for potential reimbursement of government funds which
|
|
was subsequently settled in the third quarter of 2012 for
approximately $3.6 million.
|
|
|
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
|
UNAUDITED SELECTED SEGMENT INFORMATION
|
(In thousands, except percentages)
|
|
|
|
|
|
|
|
|
|
|
|
For the Years to Date Ended September 30,
|
|
|
|
|
2012
|
|
2011 (1)
|
|
|
|
|
|
|
|
REVENUE:
|
|
|
|
|
|
CTU
|
|
$
|
283,750
|
|
|
$
|
330,603
|
|
|
AIU
|
|
|
|
238,985
|
|
|
|
288,092
|
|
|
Health Education
|
|
|
232,375
|
|
|
|
328,329
|
|
|
Culinary Arts
|
|
|
176,430
|
|
|
|
248,718
|
|
|
Art & Design
|
|
|
125,636
|
|
|
|
170,962
|
|
|
International
|
|
|
78,634
|
|
|
|
78,630
|
|
|
Corporate and Other
|
|
|
50
|
|
|
|
(345
|
)
|
|
|
Total
|
|
$
|
1,135,860
|
|
|
$
|
1,444,989
|
|
|
|
|
|
|
|
|
OPERATING (LOSS) INCOME:
|
|
|
|
|
|
CTU (2)
|
|
$
|
40,272
|
|
|
$
|
87,016
|
|
|
AIU
|
|
|
|
22,623
|
|
|
|
66,384
|
|
|
Health Education (3)
|
|
|
(107,565
|
)
|
|
|
11,379
|
|
|
Culinary Arts
|
|
|
(15,171
|
)
|
|
|
30,741
|
|
|
Art & Design (4)
|
|
|
(55,823
|
)
|
|
|
20,627
|
|
|
International
|
|
|
4,275
|
|
|
|
8,729
|
|
|
Corporate and Other (5)
|
|
|
1,676
|
|
|
|
(16,809
|
)
|
|
|
Total
|
|
$
|
(109,713
|
)
|
|
$
|
208,067
|
|
|
|
|
|
|
|
|
OPERATING MARGIN (LOSS):
|
|
|
|
|
|
CTU
|
|
|
14.2
|
%
|
|
|
26.3
|
%
|
|
AIU
|
|
|
|
9.5
|
%
|
|
|
23.0
|
%
|
|
Health Education
|
|
|
-46.3
|
%
|
|
|
3.5
|
%
|
|
Culinary Arts
|
|
|
-8.6
|
%
|
|
|
12.4
|
%
|
|
Art & Design
|
|
|
-44.4
|
%
|
|
|
12.1
|
%
|
|
International
|
|
|
5.4
|
%
|
|
|
11.1
|
%
|
|
|
Total
|
|
|
-9.7
|
%
|
|
|
14.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
In November 2011, the Company sold its ownership interest in
Istituto Marangoni. As a result, all prior period results
|
|
have been recast to include Istituto Marangoni as a component of
discontinued operations.
|
|
|
|
|
|
|
|
(2)
|
Year to date 2011 included a $5.0 million accrual for an estimate
for potential reimbursement of government funds which
|
|
was subsequently settled in the third quarter of 2012 for
approximately $3.6 million.
|
|
|
|
|
|
|
|
(3)
|
Year to date 2012 includes a $41.9 million non-cash goodwill
impairment charge, a $1.1 million non-cash asset impairment
|
|
charge associated with the decision to teach out three campuses and
a $1.0 million non-cash trade name impairment charge.
|
|
2011 results include a $2.0 million non-cash charge related to the
impairment of certain accreditation rights.
|
|
|
|
|
|
|
|
(4)
|
Year to date 2012 includes a $41.5 million non-cash goodwill
impairment charge. 2011 results include a $0.5 million non-cash
|
|
charge related to the impairment of accreditation rights.
|
|
|
|
|
|
|
|
(5)
|
Year to date 2012 includes a $19.0 million insurance recovery
related to the settlement of claims under certain insurance
|
|
policies. Year to date 2011 includes a $7.0 million insurance
recovery related to previously settled legal matters.
|
|
|
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
|
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ITEMS (1)
|
(In millions, except share and per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years to Date Ended September 30,
|
|
|
|
|
|
|
2012
|
|
2011
|
|
|
|
|
|
|
Operating Loss
|
|
Loss per Diluted Share (2)
|
|
Operating Income
|
|
Earnings per Diluted Share (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As Reported
|
|
|
|
|
$
|
(109.7
|
)
|
|
$
|
(1.18
|
)
|
|
$
|
208.1
|
|
|
$
|
1.83
|
|
Reconciling Items:
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill and Intangible Asset Impairments (3)
|
|
|
|
|
84.4
|
|
|
|
1.22
|
|
|
|
2.7
|
|
|
|
0.02
|
|
|
Asset Impairments (4)
|
|
|
|
|
1.3
|
|
|
|
0.01
|
|
|
|
-
|
|
|
|
-
|
|
|
Insurance Recoveries (5)
|
|
|
|
|
(19.0
|
)
|
|
|
(0.19
|
)
|
|
|
(7.0
|
)
|
|
|
(0.06
|
)
|
Adjusted to Exclude Significant Items
|
|
|
|
$
|
(43.0
|
)
|
|
$
|
(0.14
|
)
|
|
$
|
203.8
|
|
|
$
|
1.79
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Weighted Average Shares Outstanding
|
|
|
|
|
|
|
66,325
|
|
|
|
|
|
75,518
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The Company believes it is useful to present non-GAAP financial
measures which exclude certain significant items as a means to
understand the performance of its core business. As a general
matter, the Company uses non-GAAP financial measures in conjunction
with results presented in accordance with GAAP to help analyze the
performance of its core business, assist with preparing the annual
operating plan, and measure performance for some forms of
compensation. In addition, the Company believes that non-GAAP
financial information is used by analysts and others in the
investment community to analyze the Company's historical results and
to provide estimates of future performance and that failure to
report non-GAAP measures could result in a misplaced perception that
the Company's results have underperformed or exceeded expectations.
|
|
Non-GAAP financial measures when viewed in a reconciliation to
corresponding GAAP financial measures, provides an additional way of
viewing the Company's results of operations and the factors and
trends affecting the Company's business. Non-GAAP financial measures
should be considered as a supplement to, and not as a substitute
for, or superior to, the corresponding financial results presented
in accordance with GAAP.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2)
|
(Loss) earnings per diluted share is based on (loss) income from
continuing operations and assumes a 35% tax rate for each deductible
item.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3)
|
Year to date ended September 30, 2012 includes non-cash goodwill and
intangible asset impairment charges totaling $84.4 million, of which
$74.5 million is
|
|
non-deductible for income tax purposes, applicable to Health
Education ($42.9) and Art & Design ($41.5). Year to date ended
September 30, 2011 includes a $2.7
|
|
million non-cash impairment charge primarily related to
accreditation rights.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4)
|
Year to date ended September 30, 2012 primarily includes non-cash
asset impairment charges of $1.2 million associated with the
decision to teach out three
|
|
Health Education campuses ($1.1) and one AIU campus ($0.1).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5)
|
Year to dated ended September 30, 2012 includes a $19.0 million
insurance recovery related to the settlement of claims under certain
insurance policies. Year to date
|
|
ended September 30, 2011 includes a $7.0 million insurance recovery
related to previously settled legal matters.
|
|
|
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|