[March 03, 2015] |
|
Career Education Corporation Reports Fourth Quarter and Fiscal Year 2014 Results
Career Education Corporation (NASDAQ: CECO) today reported operating and
financial results for the fourth quarter and fiscal year 2014.
Business Highlights
-
Achieved $15.6 million of positive adjusted EBITDA for ongoing
operations, which excludes campuses in teach-out or held for sale, in
the fourth quarter
-
Reduced operating losses by $6.6 million to $7.8 million for the
fourth quarter of 2014; lowered operating expenses by $31.8 million or
14.9 percent during the fourth quarter as compared to the prior year
-
Implemented expense reduction actions in 2014 that will drive $40
million of expense reductions in 2015
-
Achieved online total student enrollment growth of 1.0 percent versus
prior year within its University group; online student enrollments
account for approximately 90% of students within the University group
-
Completed 28 real estate transactions during 2014 reducing total lease
obligations by $39.0 million over the next six years
-
Sale process of Le Cordon Bleu asset continues as planned
"In the fourth quarter we continued to see evidence that our strategies
to strengthen our company are working," said Chairman and Interim CEO
Ron McCray. "Fiscal year 2014 was an important year of operating
stabilization for our business, and we're beginning to see clear
indications that our evolving portfolio of academic offerings is
beginning to align more closely with our students' needs, as evidenced
by online student enrollment growth in our University segments. We
managed to reduce costs across the Company by more than $100 million
throughout the course of the year, and our enhanced operating and
financial profile has positioned us for additional performance
improvements in fiscal year 2015."
As a reminder, the Company announced in mid-December 2014 that it was
pursuing the divestiture of its Le Cordon Bleu North America colleges of
culinary arts. As a result, all financial results reported within our
consolidated financial statements have been recast to include these
operations as an asset held for sale within discontinued operations.
The Company assesses results of operations for ongoing operations, which
excludes the Transitional Group, separately from the Transitional Group
and campuses that have closed or are held for sale.
REVENUE
For the fourth quarter of 2014, total revenue was $174.2 million, a 12.6
percent decrease from $199.4 million for the fourth quarter of 2013. For
ongoing operations, total revenue was $168.6 million for the fourth
quarter of 2014 compared to $186.6 million for the fourth quarter of
2013, a decrease of 9.6 percent.
For the full year 2014, total revenue was $741.4 million, an 11.7
percent decrease from $839.7 million for the full year 2013. Total
revenue from ongoing operations was $708.5 million for full year 2014
compared to $774.7 million for full year 2013, a decrease of 8.5 percent.
|
|
|
|
|
|
|
|
|
|
|
|
Revenue ($ in thousands)
|
|
Q4 2014 (3)
|
|
Q3 2014
|
|
Q2 2014
|
|
Q1 2014
|
|
Q4 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CTU
|
|
$
|
82,202
|
|
$
|
82,410
|
|
$
|
85,041
|
|
$
|
86,920
|
|
$
|
87,582
|
|
AIU
|
|
|
44,749
|
|
|
51,889
|
|
|
49,685
|
|
|
52,573
|
|
|
49,088
|
|
Total University Group
|
|
|
126,951
|
|
|
134,299
|
|
|
134,726
|
|
|
139,493
|
|
|
136,670
|
|
Career Colleges
|
|
|
41,613
|
|
|
40,799
|
|
|
42,589
|
|
|
47,832
|
|
|
49,925
|
|
Corporate and Other
|
|
|
40
|
|
|
52
|
|
|
38
|
|
|
100
|
|
|
-
|
|
Total Ongoing Operations
|
|
|
168,604
|
|
|
175,150
|
|
|
177,353
|
|
|
187,425
|
|
|
186,595
|
|
Transitional Group (1)
|
|
|
5,603
|
|
|
7,675
|
|
|
8,819
|
|
|
10,729
|
|
|
12,778
|
|
Total (2)
|
|
$
|
174,207
|
|
$
|
182,825
|
|
$
|
186,172
|
|
$
|
198,154
|
|
$
|
199,373
|
|
__________
(1)
|
|
Campuses included in Transitional Group segment are currently being
taught out and no longer enroll new students.
|
(2)
|
|
Excludes discontinued operations, which consists of the results of
operations for campuses that have ceased operations, are held for
sale or were sold and are considered distinct operations under
Financial Accounting Standards Board ("FASB") Accounting Standards
Codification ("ASC") Topic 205 - Presentation of Financial
Statements.
|
(3)
|
|
Total revenue was negatively impacted by approximately $9.4 million
due to the accounting for students who withdraw from one of our
institutions prior to completion of their programs. This cumulative
adjustment was recorded during the fourth quarter of 2014.
|
TOTAL AND NEW STUDENT ENROLLMENTS
For the fourth quarter of 2014, total student enrollments for ongoing
operations decreased 4.5 percent compared to the prior year quarter. New
student enrollments for ongoing operations increased 9.1 percent
compared to the prior year quarter. For the full year 2014, new student
enrollments for ongoing operations increased 9.2 percent compared to
full year 2013.
|
|
|
|
|
|
|
|
|
|
|
|
Total Student Enrollment
|
|
Q4 2014
|
|
Q3 2014
|
|
Q2 2014
|
|
Q1 2014
|
|
Q4 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CTU
|
|
20,400
|
|
19,800
|
|
19,800
|
|
20,600
|
|
20,800
|
|
AIU
|
|
11,600
|
|
11,500
|
|
10,800
|
|
13,300
|
|
11,600
|
|
Total University Group
|
|
32,000
|
|
31,300
|
|
30,600
|
|
33,900
|
|
32,400
|
|
Career Colleges
|
|
8,500
|
|
10,000
|
|
8,600
|
|
10,700
|
|
10,000
|
|
Total Ongoing Operations
|
|
40,500
|
|
41,300
|
|
39,200
|
|
44,600
|
|
42,400
|
|
Transitional Group
|
|
900
|
|
1,300
|
|
1,700
|
|
2,300
|
|
2,600
|
|
Total
|
|
41,400
|
|
42,600
|
|
40,900
|
|
46,900
|
|
45,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New Student Enrollments
|
|
Q4 2014
|
|
Q3 2014
|
|
Q2 2014
|
|
Q1 2014
|
|
Q4 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CTU (1)
|
|
5,670
|
|
5,460
|
|
5,280
|
|
4,820
|
|
5,260
|
|
AIU (1)
|
|
3,370
|
|
3,300
|
|
2,010
|
|
5,900
|
|
2,520
|
|
Total University Group
|
|
9,040
|
|
8,760
|
|
7,290
|
|
10,720
|
|
7,780
|
|
Career Colleges
|
|
1,140
|
|
3,150
|
|
1,580
|
|
2,780
|
|
1,550
|
|
Total Ongoing Operations
|
|
10,180
|
|
11,910
|
|
8,870
|
|
13,500
|
|
9,330
|
|
Transitional Group (2)
|
|
10
|
|
140
|
|
80
|
|
220
|
|
170
|
|
Total
|
|
10,190
|
|
12,050
|
|
8,950
|
|
13,720
|
|
9,500
|
|
__________
(1)
|
|
The increase in new student enrollments for the current quarter as
compared to the prior year quarter is driven by both underlying
positive performance trends and the implementation of a new student
orientation process in the first quarter of 2014, which replaced our
previously provided student readiness programs; this change impacts
the way we calculate new student enrollments. This internal policy
change had a positive impact on 2014 new student enrollments as
compared to 2013.
|
(2)
|
|
Campuses within the Transitional Group segment no longer enroll new
students; students who re-enter after 365 days are reported as new
student enrollments.
|
OPERATING (LOSS) INCOME
For the fourth quarter of 2014, operating losses of $7.8 million
decreased 46.1 percent compared to an operating loss of $14.4 million in
the prior year quarter. For ongoing operations, the Company reported
operating income of $2.4 million compared to an operating loss of $2.3
million in the prior year quarter.
For the full year 2014, operating losses of $72.7 million decreased 10.1
percent compared to an operating loss of $80.8 million in the prior
year. For ongoing operations for the full year 2014, the Company
reported an operating loss of $34.8 million compared to an operating
loss of $42.7 million for full year 2013.
|
|
|
|
|
|
|
|
|
|
|
|
Operating (Loss) Income
|
|
Q4 2014
|
|
Q3 2014
|
|
Q2 2014
|
|
Q1 2014
|
|
Q4 2013
|
|
($ in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CTU
|
|
$
|
23,356
|
|
|
$
|
10,698
|
|
|
$
|
20,957
|
|
|
$
|
14,481
|
|
|
$
|
22,146
|
|
|
AIU
|
|
|
(304
|
)
|
|
|
(4,194
|
)
|
|
|
(1,331
|
)
|
|
|
(3,583
|
)
|
|
|
(3,793
|
)
|
|
Total University Group
|
|
|
23,052
|
|
|
|
6,504
|
|
|
|
19,626
|
|
|
|
10,898
|
|
|
|
18,353
|
|
|
Career Colleges (1)
|
|
|
(13,650
|
)
|
|
|
(29,908
|
)
|
|
|
(16,273
|
)
|
|
|
(13,922
|
)
|
|
|
(12,035
|
)
|
|
Corporate and Other (2)
|
|
|
(7,048
|
)
|
|
|
2,528
|
|
|
|
(5,513
|
)
|
|
|
(11,136
|
)
|
|
|
(8,621
|
)
|
|
Total Ongoing Operations
|
|
|
2,354
|
|
|
|
(20,876
|
)
|
|
|
(2,160
|
)
|
|
|
(14,160
|
)
|
|
|
(2,303
|
)
|
|
Transitional Group
|
|
|
(10,138
|
)
|
|
|
(10,856
|
)
|
|
|
(9,091
|
)
|
|
|
(7,789
|
)
|
|
|
(12,126
|
)
|
|
Total (3)
|
|
$
|
(7,784
|
)
|
|
$
|
(31,732
|
)
|
|
$
|
(11,251
|
)
|
|
$
|
(21,949
|
)
|
|
$
|
(14,429
|
)
|
|
__________
(1)
|
|
Asset impairment charges of $3.9 million ($0.06 per diluted share),
$12.8 million ($0.19 per diluted share) and $2.9 million ($0.03 per
diluted share) were recorded during the fourth quarter of 2014,
third quarter of 2014 and fourth quarter of 2013, respectively.
|
(2)
|
|
Income related to a net insurance recovery of $8.6 million ($0.13
per diluted share) was recorded during the third quarter of 2014.
|
(3)
|
|
Excludes discontinued operations, which consists of the results of
operations for campuses that have ceased operations, are held for
sale or were sold and are considered distinct operations under
FASB ASC Topic 205 - Presentation of Financial Statements.
|
ADJUSTED EBITDA
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 ongoing operations, which excludes the
Transitional Group and campuses held for sale. (See tables below and the
GAAP to non-GAAP reconciliation attached to this press release for
further details.)
For the fourth quarter of 2014, adjusted EBITDA for ongoing operations
increased $5.4 million or 53.3 percent compared to the prior year
quarter. Excluding certain non-cash items and legal settlements,
adjusted EBITDA was $15.6 million or $0.23 per diluted share, compared
to $10.2 million or $0.15 per diluted share in the prior year quarter
primarily due to the declines in revenue being more than offset with
reduced operating expenses.
Adjusted EBITDA for the Transitional Group and discontinued operations
was -$13.0 million or -$0.19 per diluted share for the fourth quarter of
2014, compared to -$33.1 million or -$0.50 per diluted share in the
prior year quarter. This favorability is a result of the completion of
teach-out campus operations and continued focus on exiting lease
obligations once a teach-out is complete.
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
Q4 2014
|
|
Q3 2014
|
|
Q2 2014
|
|
Q1 2014
|
|
Q4 2013
|
|
($ in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ongoing Operations:
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax loss from continuing operations
|
|
$
|
(7,747
|
)
|
|
$
|
(31,651
|
)
|
|
$
|
(11,664
|
)
|
|
$
|
(21,442
|
)
|
|
$
|
(14,230
|
)
|
|
Transitional Group operating loss
|
|
|
10,138
|
|
|
|
10,856
|
|
|
|
9,091
|
|
|
|
7,789
|
|
|
|
12,126
|
|
|
Interest (income) expense, net
|
|
|
(38
|
)
|
|
|
(120
|
)
|
|
|
(177
|
)
|
|
|
(25
|
)
|
|
|
67
|
|
|
Loss (gain) on sale of business
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(68
|
)
|
|
Depreciation and amortization (1)
|
|
|
6,965
|
|
|
|
7,668
|
|
|
|
8,244
|
|
|
|
8,761
|
|
|
|
9,397
|
|
|
Stock-based compensation (1)
|
|
|
966
|
|
|
|
950
|
|
|
|
1,020
|
|
|
|
1,341
|
|
|
|
1,580
|
|
|
Legal settlements (1) (2)
|
|
|
-
|
|
|
|
-
|
|
|
|
(400
|
)
|
|
|
2,850
|
|
|
|
1,500
|
|
|
Asset impairments (1)
|
|
|
3,883
|
|
|
|
12,873
|
|
|
|
3
|
|
|
|
74
|
|
|
|
3,050
|
|
|
Unused space charges (1) (3)
|
|
|
(356
|
)
|
|
|
(439
|
)
|
|
|
(413
|
)
|
|
|
(428
|
)
|
|
|
(3,231
|
)
|
|
Insurance recovery
|
|
|
-
|
|
|
|
(8,588
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Cumulative adjustment related to revenue recognition (1)
|
|
|
1,815
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Adjusted EBITDA--Ongoing Operations
|
|
$
|
15,626
|
|
|
$
|
(8,451
|
)
|
|
$
|
5,704
|
|
|
$
|
(1,080
|
)
|
|
$
|
10,191
|
|
|
Adjusted EBITDA per diluted share
|
|
$
|
0.23
|
|
|
$
|
(0.13
|
)
|
|
$
|
0.08
|
|
|
$
|
(0.02
|
)
|
|
$
|
0.15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Memo: Advertising Expenses
|
|
$
|
45,033
|
|
|
$
|
60,031
|
|
|
$
|
46,893
|
|
|
$
|
57,058
|
|
|
$
|
45,865
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transitional Group and Discontinued
Operations:
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax (loss) income from discontinued operations
|
|
$
|
(17,195
|
)
|
|
$
|
(15,201
|
)
|
|
$
|
(33,046
|
)
|
|
$
|
(36,481
|
)
|
|
$
|
88,044
|
|
|
Transitional Group operating loss
|
|
|
(10,138
|
)
|
|
|
(10,856
|
)
|
|
|
(9,091
|
)
|
|
|
(7,789
|
)
|
|
|
(12,126
|
)
|
|
Interest expense (income), net
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(53
|
)
|
|
Loss (gain) on sale of business (4)
|
|
|
-
|
|
|
|
-
|
|
|
|
311
|
|
|
|
-
|
|
|
|
(130,109
|
)
|
|
International Schools operating income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(11,434
|
)
|
|
Depreciation and amortization (4)
|
|
|
5,524
|
|
|
|
5,473
|
|
|
|
6,150
|
|
|
|
6,670
|
|
|
|
7,029
|
|
|
Legal settlements (4)
|
|
|
-
|
|
|
|
225
|
|
|
|
2,000
|
|
|
|
3,000
|
|
|
|
15,500
|
|
|
Asset impairments (4)
|
|
|
10,320
|
|
|
|
1,612
|
|
|
|
7,451
|
|
|
|
(7
|
)
|
|
|
3,933
|
|
|
Unused space charges (3) (4)
|
|
|
(2,080
|
)
|
|
|
(3,272
|
)
|
|
|
970
|
|
|
|
2,921
|
|
|
|
6,073
|
|
|
Cumulative adjustment related to revenue recognition (4)
|
|
|
568
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Adjusted EBITDA--Transitional and Discontinued Operations
|
|
$
|
(13,001
|
)
|
|
$
|
(22,019
|
)
|
|
$
|
(25,255
|
)
|
|
$
|
(31,686
|
)
|
|
$
|
(33,143
|
)
|
|
Adjusted EBITDA per diluted share
|
|
$
|
(0.19
|
)
|
|
$
|
(0.33
|
)
|
|
$
|
(0.38
|
)
|
|
$
|
(0.47
|
)
|
|
$
|
(0.50
|
)
|
|
__________
(1)
|
|
Quarterly amounts relate to ongoing operations, excluding the
Transitional Group and assets held for sale
|
(2)
|
|
Legal settlement amounts are net of insurance recoveries
|
(3)
|
|
Unused space charges include initial charge and subsequent accretion
|
(4)
|
|
Quarterly amounts relate to the Transitional Group and discontinued
operations
|
BALANCE SHEET AND CASH FLOW
Net cash used in operating activities increased to $17.5 million for the
fourth quarter of 2014, compared to $8.0 million in the prior year
quarter as a result of the prior year quarter including the receipt of
approximately $9.1 million related to a tenant improvement allowance
received for our corporate headquarters lease.
For the full year 2014, net cash used in operating activities was $118.6
million, compared to $85.8 million for full year 2013. The increase in
the use of our operating cash for the full year 2014 was driven
primarily by the operating loss for the current year, legal settlement
payments and payments related to real estate lease buyouts. The
operating cash flow usage in the second half of 2014 was less than the
first half of 2014 as a result of legal settlement payments during the
first half of 2014 and improving business trends coupled with receipt of
$8.6 million related to an insurance recovery in the second half of 2014.
Capital expenditures decreased to $13.2 million during the year ended
December 31, 2014, from $19.6 million for the year ended December 31,
2013.
As of December 31, 2014 and December 31, 2013, cash and cash
equivalents, restricted cash and short-term investments totaled $239.6
million and $363.1 million, respectively. This decline is primarily a
result of the usage of cash related to our current year operating
losses, as well as legal settlement payments and payments related to
real estate lease buyouts.
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Flow from
|
|
Q4 2014
|
|
Q3 2014
|
|
Q2 2014
|
|
Q1 2014
|
|
Q4 2013
|
|
Operations ($ in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Cash, Cash Equivalents, Restricted Cash and Short-term
Investments (1)
|
|
$
|
239,628
|
|
|
$
|
250,900
|
|
|
$
|
274,617
|
|
|
$
|
315,661
|
|
|
$
|
363,099
|
|
|
Cash Flow from Operations (2)
|
|
$
|
(17,479
|
)
|
|
$
|
(19,860
|
)
|
|
$
|
(45,865
|
)
|
|
$
|
(35,420
|
)
|
|
$
|
(7,962
|
)
|
|
__________
(1)
|
|
Consolidated cash, cash equivalents, restricted cash and short-term
investment balances are quarter end balances and include both
continuing and discontinued operations.
|
(2)
|
|
Cash flow from operations includes payments of legal settlements of
$1.3 million, $21.6 million and $5.0 million during the fourth
quarter of 2014, second quarter of 2014 and fourth quarter of 2013,
respectively.
|
OUTLOOK
An update on the Company's expectations for performance and general
business outlook for full year 2015 include:
-
Modest growth in total student enrollments for the year within its
University group, with online being the primary contributor
-
Positive adjusted EBITDA for full year 2015 from ongoing operations,
which excludes the Transitional Group and campuses held for sale
-
Reduce operating expenses by an additional $40 million based on
actions that were taken in 2014
-
Continued progress on reductions of real estate obligations
-
End fiscal year 2015 with over $190 million in total cash, cash
equivalents, restricted cash and short-term investments
Chairman and Interim CEO Ron McCray concluded, "The progress we have
made to date puts us on target with the initial expectations we had for
engineering the successful turnaround of our Company and returning to
profitability. We believe our strong cash position and competitive
academic platforms position us well in our industry, and early
indicators in our business thus far in fiscal year 2015 support
continued positive momentum in each of the recent performance
improvements we have achieved."
CONFERENCE CALL INFORMATION
Career Education Corporation will host a conference call on Tuesday,
March 3, 2015 at 5:00 p.m. Eastern time. Interested parties can access
the live webcast of the conference call and the related presentation
materials 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 38913661. 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 38913661.
ABOUT CAREER EDUCATION CORPORATION
The colleges, institutions and universities that are part of the CEC
family offer high-quality education to a diverse student population in a
variety of career-oriented disciplines through online, on-ground and
hybrid learning program offerings. In addition to its online offerings,
Career Education serves students from campuses throughout the United
States, offering programs that lead to doctoral, master's, bachelor's
and associate degrees, as well as to diplomas and certificates.
Our institutions include both universities that provide degree programs
through the master or doctoral level and colleges that provide programs
through the associate and bachelor level. The University group includes
American InterContinental University ("AIU") and Colorado Technical
University ("CTU") - predominantly serving students online with
career-focused degree programs that meet the educational demands of
today's busy adults. Our Career Colleges offer career-centered education
primarily through ground-based campuses and includes Briarcliffe
College, Brooks Institute, Harrington College of Design, Missouri
College and Sanford-Brown Institutes and Colleges ("SBI" and "SBC,"
respectively). Through our colleges, institutions and universities, we
are committed to providing high-quality education, enabling students to
graduate and pursue rewarding career opportunities.
A detailed listing of individual campus locations and web links to
Career Education's colleges, institutions and universities can be found
at www.careered.com.
Except for the historical and present factual information contained
herein, the matters set forth in this release, including statements
identified by words such as "expect," "believe," "will," "beginning to,"
"position us," "continued" 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: declines in
enrollment; rulemaking by the U.S. Department of Education or any state
and increased focus by Congress, the President and governmental agencies
on for-profit education institutions; 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 gainful employment and financial responsibility standards
prescribed by the U.S. Department of Education), as well as national and
regional accreditation standards and state regulatory requirements; the
impact of management changes; negative trends in the real estate market
which could impact the success of our initiatives to reduce our real
estate obligations under discontinued operations; our ability to
successfully defend litigation and other claims brought against us; 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, 2014 and its subsequent filings with the Securities and
Exchange Commission.
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
|
UNAUDITED CONSOLIDATED BALANCE SHEETS
|
(In thousands)
|
|
|
|
|
|
|
|
As of December 31, (1)
|
|
|
2014
|
|
2013
|
|
|
|
|
|
ASSETS
|
|
|
|
|
CURRENT ASSETS:
|
|
|
|
|
Cash and cash equivalents, unrestricted
|
|
$
|
93,832
|
|
|
$
|
318,468
|
|
Restricted cash
|
|
|
22,938
|
|
|
|
12,564
|
|
Short-term investments
|
|
|
122,858
|
|
|
|
31,592
|
|
Total cash and cash equivalents, restricted cash and short-term
investments
|
|
|
239,628
|
|
|
|
362,624
|
|
|
|
|
|
|
Student receivables, net
|
|
|
24,564
|
|
|
|
27,995
|
|
Receivables, other, net
|
|
|
18,925
|
|
|
|
27,198
|
|
Prepaid expenses
|
|
|
14,679
|
|
|
|
16,723
|
|
Inventories
|
|
|
3,305
|
|
|
|
4,593
|
|
Deferred income tax assets, net
|
|
|
-
|
|
|
|
3,606
|
|
Other current assets
|
|
|
2,384
|
|
|
|
3,059
|
|
Assets of discontinued operations
|
|
|
77,319
|
|
|
|
14,219
|
|
Total current assets
|
|
|
380,804
|
|
|
|
460,017
|
|
|
|
|
|
|
NON-CURRENT ASSETS:
|
|
|
|
|
Property and equipment, net
|
|
|
73,083
|
|
|
|
112,095
|
|
Goodwill
|
|
|
87,356
|
|
|
|
87,356
|
|
Intangible assets, net
|
|
|
9,819
|
|
|
|
12,817
|
|
Student receivables, net
|
|
|
2,926
|
|
|
|
3,276
|
|
Deferred income tax assets, net
|
|
|
-
|
|
|
|
10,644
|
|
Other assets
|
|
|
18,571
|
|
|
|
17,132
|
|
Assets of discontinued operations
|
|
|
975
|
|
|
|
101,708
|
|
TOTAL ASSETS
|
|
$
|
573,534
|
|
|
$
|
805,045
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
CURRENT LIABILITIES:
|
|
|
|
|
Short-term borrowings
|
|
$
|
10,000
|
|
|
$
|
-
|
|
Accounts payable
|
|
|
21,968
|
|
|
|
22,826
|
|
Accrued expenses:
|
|
|
|
|
Payroll and related benefits
|
|
|
29,545
|
|
|
|
33,997
|
|
Advertising and production costs
|
|
|
13,162
|
|
|
|
17,166
|
|
Income taxes
|
|
|
1,633
|
|
|
|
14,994
|
|
Other
|
|
|
21,440
|
|
|
|
37,985
|
|
Deferred tuition revenue
|
|
|
37,572
|
|
|
|
44,769
|
|
Liabilities of discontinued operations
|
|
|
65,863
|
|
|
|
35,695
|
|
Total current liabilities
|
|
|
201,183
|
|
|
|
207,432
|
|
|
|
|
|
|
NON-CURRENT LIABILITIES:
|
|
|
|
|
Deferred rent obligations
|
|
|
48,381
|
|
|
|
54,236
|
|
Other liabilities
|
|
|
19,178
|
|
|
|
24,797
|
|
Liabilities of discontinued operations
|
|
|
22,859
|
|
|
|
63,196
|
|
Total non-current liabilities
|
|
|
90,418
|
|
|
|
142,229
|
|
|
|
|
|
|
STOCKHOLDERS' EQUITY:
|
|
|
|
|
Preferred stock
|
|
|
-
|
|
|
|
-
|
|
Common stock
|
|
|
823
|
|
|
|
819
|
|
Additional paid-in capital
|
|
|
606,531
|
|
|
|
600,904
|
|
Accumulated other comprehensive loss
|
|
|
(853
|
)
|
|
|
(503
|
)
|
Retained (deficit) earnings
|
|
|
(109,403
|
)
|
|
|
68,658
|
|
Cost of shares in treasury
|
|
|
(215,165
|
)
|
|
|
(214,494
|
)
|
Total stockholders' equity
|
|
|
281,933
|
|
|
|
455,384
|
|
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
$
|
573,534
|
|
|
$
|
805,045
|
|
__________
(1)
|
|
During the fourth quarter of 2014, the Company completed the
teach-out of one Transitional campus and announced the Culinary
Arts segment as held for sale. As a result all current and prior
periods reflect these campuses as components of discontinued
operations.
|
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
|
UNAUDITED CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
|
(In thousands, except per share amounts and percentages)
|
|
|
|
For the Quarter Ended December 31, (1)
|
|
|
2014
|
|
% of
Total
Revenue
|
|
2013
|
|
% of
Total
Revenue
|
|
|
|
|
|
|
|
|
|
REVENUE:
|
|
|
|
|
|
|
|
|
Tuition and registration fees
|
|
$
|
173,077
|
|
|
99.4%
|
|
$
|
198,265
|
|
|
99.4%
|
Other
|
|
|
1,130
|
|
|
0.6%
|
|
|
1,108
|
|
|
0.6%
|
Total revenue
|
|
|
174,207
|
|
|
|
|
|
199,373
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
Educational services and facilities
|
|
|
59,367
|
|
|
34.1%
|
|
|
64,687
|
|
|
32.4%
|
General and administrative
|
|
|
110,774
|
|
|
63.6%
|
|
|
132,358
|
|
|
66.4%
|
Depreciation and amortization
|
|
|
7,967
|
|
|
4.6%
|
|
|
10,778
|
|
|
5.4%
|
Goodwill and asset impairment
|
|
|
3,883
|
|
|
2.2%
|
|
|
5,979
|
|
|
3.0%
|
Total operating expenses
|
|
|
181,991
|
|
|
104.5%
|
|
|
213,802
|
|
|
107.2%
|
Operating loss
|
|
|
(7,784
|
)
|
|
-4.5%
|
|
|
(14,429
|
)
|
|
-7.2%
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE):
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
237
|
|
|
0.1%
|
|
|
161
|
|
|
0.1%
|
Interest expense
|
|
|
(199
|
)
|
|
-0.1%
|
|
|
(228
|
)
|
|
-0.1%
|
Loss on sale of business
|
|
|
-
|
|
|
0.0%
|
|
|
68
|
|
|
0.0%
|
Miscellaneous (expense) income
|
|
|
(1
|
)
|
|
0.0%
|
|
|
198
|
|
|
0.1%
|
Total other income
|
|
|
37
|
|
|
0.0%
|
|
|
199
|
|
|
0.1%
|
|
|
|
|
|
|
|
|
|
PRETAX LOSS
|
|
|
(7,747
|
)
|
|
-4.4%
|
|
|
(14,230
|
)
|
|
-7.1%
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
|
546
|
|
|
0.3%
|
|
|
68,137
|
|
|
34.2%
|
|
|
|
|
|
|
|
|
|
LOSS FROM CONTINUING OPERATIONS
|
|
|
(8,293
|
)
|
|
-4.8%
|
|
|
(82,367
|
)
|
|
-41.3%
|
|
|
|
|
|
|
|
|
|
(Loss) income from discontinued operations, net of tax
|
|
|
(17,195
|
)
|
|
-9.9%
|
|
|
51,761
|
|
|
26.0%
|
|
|
|
|
|
|
|
|
|
NET LOSS
|
|
|
(25,488
|
)
|
|
-14.6%
|
|
|
(30,606
|
)
|
|
-15.4%
|
|
|
|
|
|
|
|
|
|
OTHER COMPREHENSIVE LOSS, net of tax:
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
|
|
-
|
|
|
|
|
|
(3,247
|
)
|
|
|
Unrealized losses on investments
|
|
|
(107
|
)
|
|
|
|
|
(54
|
)
|
|
|
Total other comprehensive loss
|
|
|
(107
|
)
|
|
|
|
|
(3,301
|
)
|
|
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE LOSS
|
|
$
|
(25,595
|
)
|
|
|
|
$
|
(33,907
|
)
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS PER SHARE - DILUTED:
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
$
|
(0.12
|
)
|
|
|
|
$
|
(1.23
|
)
|
|
|
(Loss) income from discontinued operations
|
|
|
(0.26
|
)
|
|
|
|
|
0.77
|
|
|
|
Net loss per share
|
|
$
|
(0.38
|
)
|
|
|
|
$
|
(0.46
|
)
|
|
|
|
|
|
|
|
|
|
|
|
DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING
|
|
|
67,330
|
|
|
|
|
|
66,916
|
|
|
|
__________
(1)
|
|
During the fourth quarter of 2014, the Company completed the
teach-out of one Transitional campus and announced the Culinary
Arts segment as held for sale. As a result, all current and prior
periods reflect these campuses as components of discontinued
operations.
|
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
|
UNAUDITED CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
|
(In thousands, except per share amounts and percentages)
|
|
|
|
For the Year to Date Ended December 31, (1)
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
% of Total
Revenue
|
|
2013
|
|
% of Total
Revenue
|
|
|
|
|
|
|
|
|
|
REVENUE:
|
|
|
|
|
|
|
|
|
Tuition and registration fees
|
|
$
|
736,883
|
|
|
99.4
|
%
|
|
$
|
834,084
|
|
|
99.3
|
%
|
Other
|
|
|
4,475
|
|
|
0.6
|
%
|
|
|
5,597
|
|
|
0.7
|
%
|
Total revenue
|
|
|
741,358
|
|
|
|
|
|
839,681
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
Educational services and facilities
|
|
|
240,796
|
|
|
32.5
|
%
|
|
|
274,450
|
|
|
32.7
|
%
|
General and administrative
|
|
|
520,361
|
|
|
70.2
|
%
|
|
|
592,236
|
|
|
70.5
|
%
|
Depreciation and amortization
|
|
|
36,019
|
|
|
4.9
|
%
|
|
|
45,155
|
|
|
5.4
|
%
|
Goodwill and asset impairment
|
|
|
16,898
|
|
|
2.3
|
%
|
|
|
8,681
|
|
|
1.0
|
%
|
Total operating expenses
|
|
|
814,074
|
|
|
109.8
|
%
|
|
|
920,522
|
|
|
109.6
|
%
|
Operating loss
|
|
|
(72,716
|
)
|
|
-9.8
|
%
|
|
|
(80,841
|
)
|
|
-9.6
|
%
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE):
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
851
|
|
|
0.1
|
%
|
|
|
1,359
|
|
|
0.2
|
%
|
Interest expense
|
|
|
(491
|
)
|
|
-0.1
|
%
|
|
|
(1,328
|
)
|
|
-0.2
|
%
|
Loss on sale of business
|
|
|
-
|
|
|
0.0
|
%
|
|
|
(6,905
|
)
|
|
-0.8
|
%
|
Miscellaneous (expense) income
|
|
|
(148
|
)
|
|
0.0
|
%
|
|
|
134
|
|
|
0.0
|
%
|
Total other income (expense)
|
|
|
212
|
|
|
0.0
|
%
|
|
|
(6,740
|
)
|
|
-0.8
|
%
|
|
|
|
|
|
|
|
|
|
PRETAX LOSS
|
|
|
(72,504
|
)
|
|
-9.8
|
%
|
|
|
(87,581
|
)
|
|
-10.4
|
%
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
|
3,736
|
|
|
0.5
|
%
|
|
|
30,144
|
|
|
3.6
|
%
|
|
|
|
|
|
|
|
|
|
LOSS FROM CONTINUING OPERATIONS
|
|
|
(76,240
|
)
|
|
-10.3
|
%
|
|
|
(117,725
|
)
|
|
-14.0
|
%
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations, net of tax
|
|
|
(101,923
|
)
|
|
-13.7
|
%
|
|
|
(46,538
|
)
|
|
-5.5
|
%
|
|
|
|
|
|
|
|
|
|
NET LOSS
|
|
|
(178,163
|
)
|
|
-24.0
|
%
|
|
|
(164,263
|
)
|
|
-19.6
|
%
|
|
|
|
|
|
|
|
|
|
OTHER COMPREHENSIVE (LOSS) INCOME, net of tax:
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
|
|
-
|
|
|
|
|
|
4,295
|
|
|
|
Unrealized losses on investments
|
|
|
(350
|
)
|
|
|
|
|
(13
|
)
|
|
|
Total other comprehensive (loss) income
|
|
|
(350
|
)
|
|
|
|
|
4,282
|
|
|
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE LOSS
|
|
$
|
(178,513
|
)
|
|
|
|
$
|
(159,981
|
)
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS PER SHARE - DILUTED:
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
$
|
(1.13
|
)
|
|
|
|
$
|
(1.76
|
)
|
|
|
Loss from discontinued operations
|
|
|
(1.52
|
)
|
|
|
|
|
(0.70
|
)
|
|
|
Net loss per share
|
|
$
|
(2.65
|
)
|
|
|
|
$
|
(2.46
|
)
|
|
|
|
|
|
|
|
|
|
|
|
DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING:
|
|
|
67,173
|
|
|
|
|
|
66,738
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
During 2014, the Company completed the teach-out of twenty-one
campuses; one in the fourth quarter of 2014. In addition, the
Company sold two campuses and announced the Culinary Arts segment
as held for sale. As a result , all current and prior periods
reflect these campuses as components of discontinued operations.
|
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
|
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(In thousands)
|
|
|
|
For the Year to Date
Ended December 31,
|
|
|
2014
|
|
2013
|
|
|
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
Net loss
|
|
$
|
(178,163
|
)
|
|
$
|
(164,263
|
)
|
Adjustments to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
Goodwill and asset impairment
|
|
|
36,209
|
|
|
|
22,691
|
|
Depreciation and amortization expense
|
|
|
55,455
|
|
|
|
73,150
|
|
Bad debt expense
|
|
|
14,841
|
|
|
|
28,892
|
|
Compensation expense related to share-based awards
|
|
|
4,277
|
|
|
|
6,699
|
|
Loss (gain) on sale of businesses, net
|
|
|
311
|
|
|
|
(123,204
|
)
|
Loss on disposition of property and equipment
|
|
|
32
|
|
|
|
118
|
|
Deferred income taxes
|
|
|
14,250
|
|
|
|
58,087
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
Accrued expenses and deferred rent obligations
|
|
|
(52,972
|
)
|
|
|
(4,885
|
)
|
Deferred tuition revenue
|
|
|
(6,314
|
)
|
|
|
(13,907
|
)
|
Student receivables, net of allowance for doubtful accounts
|
|
|
(10,531
|
)
|
|
|
16,306
|
|
Other operating assets and liabilities
|
|
|
3,981
|
|
|
|
14,512
|
|
Net cash used in operating activities
|
|
|
(118,624
|
)
|
|
|
(85,804
|
)
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
Purchases of available-for-sale investments
|
|
|
(157,425
|
)
|
|
|
(40,842
|
)
|
Sales of available-for-sale investments
|
|
|
64,920
|
|
|
|
73,070
|
|
Purchases of property and equipment
|
|
|
(13,156
|
)
|
|
|
(19,636
|
)
|
Proceeds on the sale of business, net of cash divested
|
|
|
-
|
|
|
|
156,816
|
|
Payments of cash upon sale of asset
|
|
|
(387
|
)
|
|
|
(2,525
|
)
|
Purchase of equity method investment
|
|
|
(1,575
|
)
|
|
|
-
|
|
Other
|
|
|
-
|
|
|
|
(17
|
)
|
Net cash (used in) provided by investing activities
|
|
|
(107,623
|
)
|
|
|
166,866
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
Issuance of common stock
|
|
|
1,354
|
|
|
|
998
|
|
Tax benefit associated with stock option exercises
|
|
|
-
|
|
|
|
1
|
|
Borrowings from credit facility
|
|
|
10,000
|
|
|
|
-
|
|
Payment on borrowings
|
|
|
-
|
|
|
|
(80,000
|
)
|
Change in restricted cash
|
|
|
(10,374
|
)
|
|
|
85,314
|
|
Payments of capital lease obligations
|
|
|
-
|
|
|
|
(210
|
)
|
Net cash provided by financing activities
|
|
|
980
|
|
|
|
6,103
|
|
|
|
|
|
|
EFFECT OF FOREIGN CURRENCY EXCHANGE RATE
|
|
|
|
|
CHANGES ON CASH AND CASH EQUIVALENTS:
|
|
|
156
|
|
|
|
(8,844
|
)
|
|
|
|
|
|
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
|
|
|
(225,111
|
)
|
|
|
78,321
|
|
DISCONTINUED OPERATIONS CASH ACTIVITY INCLUDED ABOVE:
|
|
|
|
|
Add: Cash balance of discontinued operations, beginning of the period
|
|
|
475
|
|
|
|
127,104
|
|
Less: Cash balance of discontinued operations, end of the period
|
|
|
-
|
|
|
|
475
|
|
CASH AND CASH EQUIVALENTS, beginning of the period
|
|
|
318,468
|
|
|
|
113,518
|
|
CASH AND CASH EQUIVALENTS, end of the period
|
|
$
|
93,832
|
|
|
$
|
318,468
|
|
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
|
UNAUDITED SELECTED SEGMENT INFORMATION
|
(In thousands, except percentages)
|
|
|
|
|
|
|
|
For the Quarter Ended December 31,
|
|
|
2014
|
|
2013
|
|
|
|
|
|
REVENUE:
|
|
|
|
|
CTU
|
|
$
|
82,202
|
|
|
$
|
87,582
|
|
AIU
|
|
|
44,749
|
|
|
|
49,088
|
|
Total University Group
|
|
|
126,951
|
|
|
|
136,670
|
|
|
|
|
|
|
Career Colleges
|
|
|
41,613
|
|
|
|
49,925
|
|
Corporate and Other
|
|
|
40
|
|
|
|
-
|
|
Subtotal
|
|
|
168,604
|
|
|
|
186,595
|
|
|
|
|
|
|
Transitional Group (1)
|
|
|
5,603
|
|
|
|
12,778
|
|
Total
|
|
$
|
174,207
|
|
|
$
|
199,373
|
|
|
|
|
|
|
OPERATING (LOSS) INCOME:
|
|
|
|
|
CTU
|
|
$
|
23,356
|
|
|
$
|
22,146
|
|
AIU
|
|
|
(304
|
)
|
|
|
(3,793
|
)
|
Total University Group
|
|
|
23,052
|
|
|
|
18,353
|
|
|
|
|
|
|
Career Colleges (2)
|
|
|
(13,650
|
)
|
|
|
(12,035
|
)
|
Corporate and Other
|
|
|
(7,048
|
)
|
|
|
(8,621
|
)
|
Subtotal
|
|
|
2,354
|
|
|
|
(2,303
|
)
|
|
|
|
|
|
Transitional Group (1) (3)
|
|
|
(10,138
|
)
|
|
|
(12,126
|
)
|
Total
|
|
$
|
(7,784
|
)
|
|
$
|
(14,429
|
)
|
|
|
|
|
|
OPERATING (LOSS) MARGIN:
|
|
|
|
|
CTU
|
|
|
28.4
|
%
|
|
|
25.3
|
%
|
AIU
|
|
|
-0.7
|
%
|
|
|
-7.7
|
%
|
Total University Group
|
|
|
18.2
|
%
|
|
|
13.4
|
%
|
|
|
|
|
|
Career Colleges (2)
|
|
|
-32.8
|
%
|
|
|
-24.1
|
%
|
Corporate and Other
|
|
|
NM
|
|
|
|
NM
|
|
Subtotal
|
|
|
1.4
|
%
|
|
|
-1.2
|
%
|
|
|
|
|
|
Transitional Group (1) (3)
|
|
|
-180.9
|
%
|
|
|
-94.9
|
%
|
Total
|
|
|
-4.5
|
%
|
|
|
-7.2
|
%
|
__________
(1)
|
|
During the fourth quarter of 2014, the Company completed the
teach-out of one Transitional campus and announced the Culinary
Arts segment as held for sale. As a result all current and prior
periods reflect these campuses as components of discontinued
operations.
|
|
|
|
(2)
|
|
Fourth quarter 2014 expenses include $3.2 million and $0.7 million
of fixed asset and trade name impairment charges, respectively.
Fourth quarter 2013 expenses include $2.9 million in non-cash
asset impairment charges related to long-lived assets for ongoing
campuses.
|
|
|
|
(3)
|
|
Fourth quarter 2013 expenses include $3.0 million in non-cash
asset impairment charges related to long lived asset impairments.
|
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
|
UNAUDITED SELECTED SEGMENT INFORMATION
|
|
(In thousands, except percentages)
|
|
|
|
|
|
|
|
For the Year to Date Ended December 31,
|
|
|
2014
|
|
2013
|
|
|
|
|
|
REVENUE:
|
|
|
|
|
CTU (1)
|
|
$
|
336,573
|
|
|
$
|
346,086
|
|
AIU
|
|
|
198,896
|
|
|
|
231,606
|
|
Total University Group
|
|
|
535,469
|
|
|
|
577,692
|
|
Career Colleges (1)
|
|
|
172,833
|
|
|
|
196,990
|
|
Corporate and Other
|
|
|
230
|
|
|
|
-
|
|
Subtotal
|
|
|
708,532
|
|
|
|
774,682
|
|
Transitional Group(1)
|
|
|
32,826
|
|
|
|
64,999
|
|
Total
|
|
$
|
741,358
|
|
|
$
|
839,681
|
|
|
|
|
|
|
OPERATING (LOSS) INCOME:
|
|
|
|
|
CTU (1)
|
|
$
|
69,492
|
|
|
$
|
65,078
|
|
AIU
|
|
|
(9,412
|
)
|
|
|
(5,556
|
)
|
Total University Group
|
|
|
60,080
|
|
|
|
59,522
|
|
Career Colleges (1) (2)
|
|
|
(73,753
|
)
|
|
|
(68,652
|
)
|
Corporate and Other (3)
|
|
|
(21,169
|
)
|
|
|
(33,600
|
)
|
Subtotal
|
|
|
(34,842
|
)
|
|
|
(42,730
|
)
|
Transitional Group (1) (4)
|
|
|
(37,874
|
)
|
|
|
(38,111
|
)
|
Total
|
|
$
|
(72,716
|
)
|
|
$
|
(80,841
|
)
|
|
|
|
|
|
OPERATING (LOSS) MARGIN:
|
|
|
|
|
CTU (1)
|
|
|
20.6
|
%
|
|
|
18.8
|
%
|
AIU
|
|
|
-4.7
|
%
|
|
|
-2.4
|
%
|
Total University Group
|
|
|
11.2
|
%
|
|
|
10.3
|
%
|
Career Colleges (1) (2)
|
|
|
-42.7
|
%
|
|
|
-34.9
|
%
|
Corporate and Other (3)
|
|
|
NM
|
|
|
|
NM
|
|
Subtotal
|
|
|
-4.9
|
%
|
|
|
-5.5
|
%
|
Transitional Group (1) (4)
|
|
|
-115.4
|
%
|
|
|
-58.6
|
%
|
Total
|
|
|
-9.8
|
%
|
|
|
-9.6
|
%
|
|
|
|
|
|
(1)
|
|
During 2014, the Company completed the teach-out of twenty-one
campuses; one in the fourth quarter of 2014. In addition, the
Company sold Everblue Training Institute (Career Colleges segment)
and Sanford-Brown Pittsburgh (Transitional Group segment) and
announced the Culinary Arts segment as held for sale. As a result,
all current and prior periods reflect these campuses as components
of discontinued operations.
|
|
|
|
(2)
|
|
Year to date 2014 expenses include $14.5 million related to
long-lived asset impairment and $2.2 million of trade name
impairment charges. Year to date 2013 expenses include $4.7
million of trade name and asset impairment charges and $8.8
million related to the settlement of a legal matter.
|
|
|
|
(3)
|
|
Year to date 2014 expenses include $8.6 million of income related to
an insurance recovery.
|
|
|
|
(4)
|
|
Year to date 2013 expenses include $3.1 million in asset impairment
charges and $1.7 million related to the settlement of a legal matter.
|
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
|
|
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ITEMS (1)
|
|
(In thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
Q4 2014
|
|
Q3 2014
|
|
Q2 2014
|
|
Q1 2014
|
|
Q4 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ongoing Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax loss from continuing operations
|
|
$
|
(7,747
|
)
|
|
$
|
(31,651
|
)
|
|
$
|
(11,664
|
)
|
|
$
|
(21,442
|
)
|
|
$
|
(14,230
|
)
|
|
|
Transitional Group operating loss
|
|
|
10,138
|
|
|
|
10,856
|
|
|
|
9,091
|
|
|
|
7,789
|
|
|
|
12,126
|
|
|
|
Interest (income) expense, net
|
|
|
(38
|
)
|
|
|
(120
|
)
|
|
|
(177
|
)
|
|
|
(25
|
)
|
|
|
67
|
|
|
|
Loss (gain) on sale of business
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(68
|
)
|
|
|
Depreciation and amortization (3)
|
|
|
6,965
|
|
|
|
7,668
|
|
|
|
8,244
|
|
|
|
8,761
|
|
|
|
9,397
|
|
|
|
Stock-based compensation (3)
|
|
|
966
|
|
|
|
950
|
|
|
|
1,020
|
|
|
|
1,341
|
|
|
|
1,580
|
|
|
|
Legal settlements (3) (5)
|
|
|
-
|
|
|
|
-
|
|
|
|
(400
|
)
|
|
|
2,850
|
|
|
|
1,500
|
|
|
|
Asset impairments (3) (6)
|
|
|
3,883
|
|
|
|
12,873
|
|
|
|
3
|
|
|
|
74
|
|
|
|
3,050
|
|
|
|
Unused space charges (3) (7)
|
|
|
(356
|
)
|
|
|
(439
|
)
|
|
|
(413
|
)
|
|
|
(428
|
)
|
|
|
(3,231
|
)
|
|
|
Insurance recovery
|
|
|
-
|
|
|
|
(8,588
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
Cumulative adjustment related to revenue recognition (3) (8)
|
|
|
1,815
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
Adjusted EBITDA--Ongoing Operations (2)
|
|
$
|
15,626
|
|
|
$
|
(8,451
|
)
|
|
$
|
5,704
|
|
|
$
|
(1,080
|
)
|
|
$
|
10,191
|
|
|
|
Adjusted EBITDA per diluted share
|
|
$
|
0.23
|
|
|
$
|
(0.13
|
)
|
|
$
|
0.08
|
|
|
$
|
(0.02
|
)
|
|
$
|
0.15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Memo: Advertising Expenses (3)
|
|
$
|
45,033
|
|
|
$
|
60,031
|
|
|
$
|
46,893
|
|
|
$
|
57,058
|
|
|
$
|
45,865
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transitional Group and Discontinued
Operations (4):
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax (loss) income from discontinued operations
|
|
$
|
(17,195
|
)
|
|
$
|
(15,201
|
)
|
|
$
|
(33,046
|
)
|
|
$
|
(36,481
|
)
|
|
$
|
88,044
|
|
|
|
Transitional Group operating loss
|
|
|
(10,138
|
)
|
|
|
(10,856
|
)
|
|
|
(9,091
|
)
|
|
|
(7,789
|
)
|
|
|
(12,126
|
)
|
|
|
Interest (income) expense, net
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(53
|
)
|
|
|
Loss (gain) on sale of business (9)
|
|
|
-
|
|
|
|
-
|
|
|
|
311
|
|
|
|
-
|
|
|
|
(130,109
|
)
|
|
|
International Schools operating income (10)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(11,434
|
)
|
|
|
Depreciation and amortization (9)
|
|
|
5,524
|
|
|
|
5,473
|
|
|
|
6,150
|
|
|
|
6,670
|
|
|
|
7,029
|
|
|
|
Legal settlements (9)
|
|
|
-
|
|
|
|
225
|
|
|
|
2,000
|
|
|
|
3,000
|
|
|
|
15,500
|
|
|
|
Asset impairments (9)
|
|
|
10,320
|
|
|
|
1,612
|
|
|
|
7,451
|
|
|
|
(7
|
)
|
|
|
3,933
|
|
|
|
Unused space charges (7) (9)
|
|
|
(2,080
|
)
|
|
|
(3,272
|
)
|
|
|
970
|
|
|
|
2,921
|
|
|
|
6,073
|
|
|
|
Cumulative adjustment related to revenue recognition (8) (9)
|
|
|
568
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
Adjusted EBITDA--Transitional and Discontinued Operations (2)
|
|
$
|
(13,001
|
)
|
|
$
|
(22,019
|
)
|
|
$
|
(25,255
|
)
|
|
$
|
(31,686
|
)
|
|
$
|
(33,143
|
)
|
|
|
Adjusted EBITDA per diluted share
|
|
$
|
(0.19
|
)
|
|
$
|
(0.33
|
)
|
|
$
|
(0.38
|
)
|
|
$
|
(0.47
|
)
|
|
$
|
(0.50
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 ongoing operations. 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 ongoing operations, 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.
|
|
|
|
|
|
We believe adjusted EBITDA allows us to compare our current
operating results with corresponding historical periods and with the
operational performance of other companies in our industry because
it does not give effect to potential differences caused by items we
do not consider reflective of underlying operating performance. We
also present adjusted EBITDA because we believe it is frequently
used by securities analysts, investors and other interested parties
as a measure of performance. In evaluating adjusted EBITDA,
investors should be aware that in the future we may incur expenses
similar to the adjustments presented above. Our presentation of
adjusted EBITDA should not be construed as an inference that our
future results will be unaffected by expenses that are unusual,
non-routine or non-recurring. Adjusted EBITDA has limitations as an
analytical tool, and you should not consider it in isolation, or as
a substitute for net income (loss), operating income (loss), or any
other performance measure derived in accordance and reported under
GAAP or as an alternative to cash flow from operating activities or
as a measure of our liquidity.
|
|
|
|
|
|
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)
|
Management assesses results of operations for ongoing operations,
which excludes the Transitional Group, separately from the
Transitional Group. Campuses within our Transitional Group are
currently being taught out and no longer enroll new students. As a
result, management views adjusted EBITDA from ongoing operations
separately from the Transitional Group and discontinued
operations, including assets held for sale, to assess results and
make decisions. Accordingly, the Transitional Group operating loss
is added back to pre-tax loss from continuing operations and
subtracted from pre-tax loss from discontinued operations.
|
|
|
|
(3)
|
Quarterly amounts relate to ongoing operations, which excludes the
Transitional Group.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4)
|
The Company announced the Culinary Arts segment as held for sale
during the fourth quarter of 2014 and it is therefore now reported
within discontinued operations. Quarterly adjusted EBITDA amounts
for Culinary Arts include:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q4 2014
|
|
Q3 2014
|
|
Q2 2014
|
|
Q1 2014
|
|
Q4 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax loss
|
|
$
|
(15,927
|
)
|
|
$
|
(12,602
|
)
|
|
$
|
(19,771
|
)
|
|
$
|
(18,021
|
)
|
|
$
|
(28,408
|
)
|
|
|
Depreciation and amortization
|
|
|
4,504
|
|
|
|
4,282
|
|
|
|
4,310
|
|
|
|
4,268
|
|
|
|
4,263
|
|
|
|
Legal settlements
|
|
|
-
|
|
|
|
-
|
|
|
|
2,000
|
|
|
|
3,000
|
|
|
|
15,500
|
|
|
|
Asset impairments
|
|
|
10,320
|
|
|
|
1,523
|
|
|
|
7,400
|
|
|
|
-
|
|
|
|
-
|
|
|
|
Unused space charges
|
|
|
65
|
|
|
|
213
|
|
|
|
(467
|
)
|
|
|
(178
|
)
|
|
|
307
|
|
|
|
Cumulative adjustment related to revenue recognition
|
|
|
514
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
Total
|
|
$
|
(524
|
)
|
|
$
|
(6,584
|
)
|
|
$
|
(6,528
|
)
|
|
$
|
(10,931
|
)
|
|
$
|
(8,338
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5)
|
Legal settlement amounts are net of insurance recoveries and are
recorded within the following segments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q4 2014
|
|
Q3 2014
|
|
Q2 2014
|
|
Q1 2014
|
|
Q4 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CTU
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
(900
|
)
|
|
$
|
1,300
|
|
|
|
Career Colleges
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
200
|
|
|
|
Corporate & Other
|
|
|
-
|
|
|
|
-
|
|
|
|
(400
|
)
|
|
|
3,750
|
|
|
|
-
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
(400
|
)
|
|
$
|
2,850
|
|
|
$
|
1,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6)
|
Asset impairments primarily relate to impairment charges within
Career Colleges of $3.9 million, $12.8 million and $2.9 million
which were recorded during the fourth quarter of 2014, third
quarter of 2014 and fourth quarter of 2013, respectively.
|
|
|
|
|
(7)
|
Unused space charges represent the net present value of remaining
lease obligations less an estimated amount for sublease income as
well as the subsequent accretion of these charges.
|
|
|
|
|
(8)
|
Revenue recognition adjustment relates to the accounting for
students who withdraw from one of our institutions prior to
completion of their program. A $9.1 million decrease in revenue
for ongoing operations was offset with a $7.3 million decrease in
bad debt expense for ongoing operations for the amount we
previously had deemed uncollectable related to the revenue
earnings for these students. This cumulative adjustment was
recorded during the fourth quarter of 2014.
|
|
|
|
|
(9)
|
Quarterly amounts relate to the Transitional Group and
discontinued operations, excluding International.
|
|
|
|
|
(10)
|
The International Schools segment was sold during the fourth
quarter of 2013. As such, management excludes operations from the
International Schools when assessing results and trends of the
Transitional Group and discontinued operations.
|
|
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