EX-99.1 2 ceco-ex991_6.htm EX-99.1 ceco-ex991_6.htm

CEC ANNOUNCES 3Q17 RESULTS …PG 1

 

 

Exhibit 99.1

CAREER EDUCATION CORPORATION REPORTS RESULTS FOR THIRD QUARTER ENDED SEPTEMBER 30, 2017

 

 

University Group total enrollments, revenue and operating income show growth versus the prior year quarter

 

 

Schaumburg, Ill. (November 2, 2017) – Career Education Corporation (NASDAQ: CECO) today reported operating and financial results for the third quarter and year to date ended September 30, 2017.

 

University Group and Corporate (Ongoing Operations) Third Quarter Highlights:

 

•

Total enrollments increased 2.5 percent as compared to the prior year partially driven by an increase in new enrollments of 5.8 percent for the current quarter as compared to the prior year quarter

 

•

Operating income of $23.6 million for the current quarter as compared to the prior year quarter operating income of $16.2 million, a 45.9 percent increase primarily driven by operating efficiencies within the University Group as well as improving enrollment trends

 

•

Revenue of $141.5 million for the current quarter as compared to revenue of  $139.5 million in the prior year quarter, with the increase partially driven by growth in total and new enrollments

3rd Quarter Consolidated Results:

 

•

Operating income of $4.5 million for the current quarter as compared to an operating loss of $0.7 million for the prior year quarter

 

•

Revenue of $145.0 million for the current quarter as compared to revenue of $167.6 million for the prior year quarter, with the decline expected and driven by the continued progress toward teach-out completion of the Transitional Group and Culinary Arts campuses

 

•

Ended the quarter with $175.9 million in cash, cash equivalents, restricted cash and available-for-sale short-term investments, which represents a $3.9 million increase as compared to the second quarter of 2017

 

 

 

“We continued to experience better than expected enrollment trends and operating efficiencies during the third quarter, and are on track to close 2017 ahead of our initial expectations for the year,” said Todd Nelson, President and Chief Executive Officer. “Much of the momentum we are experiencing in the quarter is related to the success of initiatives we implemented throughout the year to pursue sustainable and responsible growth, including investments in technology and student support processes. We remain encouraged by the level of student engagement, retention and outcomes we are experiencing, and we expect to see continued enrollment growth in the fourth quarter of 2017.”

CEC ANNOUNCES 3Q17 RESULTS …PG 2

 

 

REVENUE

For the quarter and year to date ended September 30, 2017, total revenue was $145.0 million and $453.3 million representing a decrease of 13.5 percent and 17.4 percent, respectively, compared to total revenue of $167.6 million and $549.1 million for the quarter and year to date ended September 30, 2016, respectively. The decrease was primarily driven by declining revenues within the Transitional Group and Culinary Arts segments. The Culinary Arts segment completed its teach-out as of September 30, 2017 and the remaining eight Transitional Group campuses will complete their teach-outs through 2018.

Total revenue for the University Group was $141.5 million and $427.2 million representing an increase of 1.4 percent and 0.1 percent, respectively, for the quarter and year to date ended September 30, 2017 as compared to the respective prior year periods.

 

 

 

 

For the Quarter Ended September 30,

 

 

For the Year to Date Ended September 30,

 

Revenue ($ in thousands)

 

2017

 

 

2016

 

 

Increase (Decrease)

 

 

2017

 

 

2016

 

 

Increase (Decrease)

 

CTU

 

$

91,319

 

 

$

90,921

 

 

 

0.4

%

 

$

276,558

 

 

$

274,623

 

 

 

0.7

%

AIU

 

 

50,150

 

 

 

48,542

 

 

 

3.3

%

 

 

150,618

 

 

 

152,123

 

 

 

-1.0

%

Total University Group

 

 

141,469

 

 

 

139,463

 

 

 

1.4

%

 

 

427,176

 

 

 

426,746

 

 

 

0.1

%

Corporate and Other

 

 

—

 

 

 

—

 

 

NM

 

 

 

—

 

 

 

—

 

 

NM

 

Subtotal

 

 

141,469

 

 

 

139,463

 

 

 

1.4

%

 

 

427,176

 

 

 

426,746

 

 

 

0.1

%

Culinary Arts (1)

 

 

2,367

 

 

 

21,369

 

 

 

-88.9

%

 

 

19,302

 

 

 

89,990

 

 

 

-78.6

%

Transitional Group (1)

 

 

1,150

 

 

 

6,793

 

 

 

-83.1

%

 

 

6,839

 

 

 

32,401

 

 

 

-78.9

%

Total

 

$

144,986

 

 

$

167,625

 

 

 

-13.5

%

 

$

453,317

 

 

$

549,137

 

 

 

-17.4

%

 

(1)

Teach-out campuses included in the Transitional Group no longer enroll new students. The Culinary Arts campuses completed their teach-outs as of September 30, 2017.


CEC ANNOUNCES 3Q17 RESULTS …PG 3

 

 

TOTAL AND NEW STUDENT ENROLLMENTS

As of the end of the third quarter of 2017, total student enrollments for the University Group were 32,700, compared to 31,900 as of the prior year quarter end representing a 2.5 percent increase.

 

 

 

As of September 30,

 

Total Student Enrollments

 

2017

 

 

2016

 

 

Increase (Decrease)

 

CTU

 

 

21,600

 

 

 

21,400

 

 

 

0.9

%

AIU

 

 

11,100

 

 

 

10,500

 

 

 

5.7

%

Total University Group

 

 

32,700

 

 

 

31,900

 

 

 

2.5

%

Culinary Arts (1)

 

 

—

 

 

 

3,500

 

 

NM

 

Transitional Group

 

 

200

 

 

 

1,100

 

 

NM

 

Total

 

 

32,900

 

 

 

36,500

 

 

 

-9.9

%

 

 

 

For the Quarter Ended September 30,

 

 

For the Year to Date Ended September 30,

 

New Student Enrollments

 

2017

 

 

2016

 

 

Increase (Decrease)

 

 

2017

 

 

2016

 

 

Increase (Decrease)

 

CTU (2)

 

 

5,980

 

 

 

5,390

 

 

 

10.9

%

 

 

16,170

 

 

 

15,240

 

 

 

6.1

%

AIU (2)

 

 

3,100

 

 

 

3,190

 

 

 

-2.8

%

 

 

11,020

 

 

 

10,600

 

 

 

4.0

%

Total University Group (2)

 

 

9,080

 

 

 

8,580

 

 

 

5.8

%

 

 

27,190

 

 

 

25,840

 

 

 

5.2

%

Culinary Arts (1)

 

 

—

 

 

 

—

 

 

NM

 

 

 

—

 

 

 

990

 

 

NM

 

Transitional Group (3)

 

 

—

 

 

 

10

 

 

NM

 

 

 

—

 

 

 

90

 

 

NM

 

Total

 

 

9,080

 

 

 

8,590

 

 

 

5.7

%

 

 

27,190

 

 

 

26,920

 

 

 

1.0

%

 

(1)

Culinary Arts campuses completed their teach-outs as of September 30, 2017.

(2)

New student enrollments were impacted by a change to how the Company records certain cancelled students which began in the third quarter of 2016. There is no impact to the third quarter of 2017 as both the current year quarter and the prior year quarter are calculated on the same basis. However, excluding the impact of this change, new student enrollments for the year to date ended September 30, 2017 as compared to the prior year to date would have increased 4.0 percent for CTU, decreased 0.9 percent for AIU and increased 2.0 percent for the University Group.

(3)

Teach-out campuses within the Transitional Group no longer enroll new students; students who re-enter after 365 days are reported as new student enrollments.


CEC ANNOUNCES 3Q17 RESULTS …PG 4

 

 

OPERATING INCOME (LOSS)

For the quarter and year to date ended September 30, 2017, the Company recorded operating income of $4.5 million and $23.4 million, respectively, compared to operating loss of $0.7 million and operating income of $23.6 million for the quarter and year to date ended September 30, 2016, respectively. Total University Group and Corporate operating income of $23.6 million and $70.0 million for the quarter and year to date ended September 30, 2017, respectively, increased 45.9 percent and 11.9 percent as compared to the respective prior year periods.

 

 

 

 

For the Quarter Ended September 30,

 

 

For the Year to Date Ended September 30,

 

Operating Income ($ in thousands)

 

2017

 

 

2016

 

 

Increase (Decrease)

 

 

2017

 

 

2016

 

 

Increase (Decrease)

 

CTU

 

$

27,565

 

 

$

21,486

 

 

 

28.3

%

 

$

78,649

 

 

$

70,693

 

 

 

11.3

%

AIU

 

 

2,256

 

 

 

291

 

 

 

675.3

%

 

 

7,987

 

 

 

9,036

 

 

 

-11.6

%

Total University Group

 

 

29,821

 

 

 

21,777

 

 

 

36.9

%

 

 

86,636

 

 

 

79,729

 

 

 

8.7

%

Corporate and Other

 

 

(6,199

)

 

 

(5,587

)

 

 

-11.0

%

 

 

(16,595

)

 

 

(17,160

)

 

 

3.3

%

Subtotal

 

 

23,622

 

 

 

16,190

 

 

 

45.9

%

 

 

70,041

 

 

 

62,569

 

 

 

11.9

%

Culinary Arts

 

 

(14,027

)

 

 

(1,801

)

 

NM

 

 

 

(25,039

)

 

 

1,666

 

 

NM

 

Transitional Group

 

 

(5,056

)

 

 

(15,095

)

 

 

66.5

%

 

 

(21,578

)

 

 

(40,672

)

 

 

46.9

%

Total

 

$

4,539

 

 

$

(706

)

 

 

742.9

%

 

$

23,424

 

 

$

23,563

 

 

 

-0.6

%

 

 


CEC ANNOUNCES 3Q17 RESULTS …PG 5

 

 

ADJUSTED OPERATING INCOME (LOSS)

The Company believes it is useful to present non-GAAP financial measures, which exclude certain significant and non-cash items, as a means to understand the performance of its operations. (See tables below and the GAAP to non-GAAP reconciliation attached to this press release for further details.)

As shown in the table below, adjusted operating income for the University Group and Corporate was $26.2 million and $77.7 million for the quarter and year to date ended September 30, 2017, respectively. Adjusted operating loss for the Transitional Group and Culinary Arts was $10.8 million and $31.8 million for the quarter and year to date ended September 30, 2017, respectively.

 

 

 

 

 

 

 

 

For the Quarter Ended September 30,

 

 

For the Year to Date Ended September 30,

 

Adjusted Operating Income (Loss)

 

2017

 

 

2016

 

 

2017

 

 

2016

 

University Group and Corporate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income (1)

 

$

23,622

 

 

$

16,190

 

 

$

70,041

 

 

$

62,569

 

Depreciation and amortization (1)

 

 

2,605

 

 

 

2,594

 

 

 

7,695

 

 

 

8,474

 

Asset impairments (1)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

237

 

Unused space charges (1) (2)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1,118

 

Adjusted Operating Income --

University Group and Corporate (1)

 

$

26,227

 

 

$

18,784

 

 

$

77,736

 

 

$

72,398

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Increase (Decrease)

 

 

39.6

%

 

 

 

 

 

 

7.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Transitional Group and Culinary Arts:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating loss (3)

 

$

(19,083

)

 

$

(16,896

)

 

$

(46,617

)

 

$

(39,006

)

Depreciation and amortization (3)

 

 

977

 

 

 

2,621

 

 

 

3,673

 

 

 

8,512

 

Unused space charges (2) (3)

 

 

7,347

 

 

 

4,983

 

 

 

11,158

 

 

 

14,123

 

Adjusted Operating Loss --

Transitional and Culinary Arts (3)

 

$

(10,759

)

 

$

(9,292

)

 

$

(31,786

)

 

$

(16,371

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Increase (Decrease)

 

 

-15.8

%

 

 

 

 

 

 

-94.2

%

 

 

 

 

 

 

(1)

Amounts relate to the University Group and Corporate.

 

(2)

Unused space charges represent the net present value of remaining lease obligations for vacated space less an estimated amount for sublease income.

 

(3)

Amounts relate to the Transitional Group and Culinary Arts.

 


CEC ANNOUNCES 3Q17 RESULTS …PG 6

 

 

 

BALANCE SHEET AND CASH FLOW

Net cash provided by operating activities was $5.1 million compared to net cash provided by operating activities of $9.7 million for the quarters ended September 30, 2017 and 2016, respectively. For the year to date ended September 30, 2017, net cash flows used in operations was $29.1 million as compared to net cash provided of $16.3 million for the year to date ended 2016.  

 

 

 

For the Quarter Ended September 30,

 

 

For the Year to Date Ended September 30,

 

Selected Cash Flow Items

 

2017

 

 

2016

 

 

Increase (Decrease)

 

 

2017

 

 

2016

 

 

Increase (Decrease)

 

Net cash provided by (used in) operating activities

 

$

5,139

 

 

$

9,697

 

 

 

-47.0

%

 

$

(29,107

)

 

$

16,264

 

 

 

-279.0

%

Capital expenditures

 

$

1,280

 

 

$

1,382

 

 

 

-7.4

%

 

$

3,426

 

 

$

3,352

 

 

 

2.2

%

As of September 30, 2017 and December 31, 2016, cash, cash equivalents, restricted cash and available-for-sale short-term investments totaled $175.9 million and $207.2 million, respectively.

 

OUTLOOK

The substantial completion of the teach-outs and continued execution against its strategy has provided the Company further visibility related to its 2017 operating results. As a result, the Company is providing an update to its previous outlook for adjusted operating losses related to its teach-out operations and for ending cash balances for 2017. The Company currently expects the following results, subject to the updated key assumptions identified below (see the GAAP to non-GAAP reconciliation for adjusted operating income (loss) attached to this press release for further details):

 

•

University Group and Corporate adjusted operating income in the range of $100 to $105 million for the full year 2017, compared to $89 million in 2016.

 

•

New and total student enrollment growth at both Universities in the fourth quarter of 2017, primarily driven by our ongoing initiatives and investments in student support operations, including our Phoenix admissions and advising centers as well as the academic calendar redesign at AIU.

 

•

Adjusted operating loss for the Transitional Group and Culinary Arts segments in the range of $40 million to $45 million in 2017, compared to adjusted operating loss of $30 million in 2016, and in the range of $10 million to $15 million in 2018 as the Company winds down the remaining eight teach-out campuses.

 

•

End of year cash, cash equivalents, restricted cash and available-for-sale short-term investments, net of any borrowings, as reported on the consolidated balance sheets of approximately $160 million to $165 million for the year ending December 31, 2017, and expected to increase in 2018.

 

Operating income (loss), which is the most directly comparable GAAP measure to adjusted operating income (loss), may not follow the same trends as discussed in the outlook above because of adjustments made for unused space charges that represent the present value of future remaining lease obligations for vacated space less an estimated amount for sublease income as well as depreciation, amortization, asset impairment charges and significant legal settlements. The operating income (loss) and adjusted operating income (loss) and cash outlook provided above for 2017 and 2018 are based on the following updated key assumptions and factors, among others: (i) prospective student interest in the Company’s programs continues to trend in line with recent experiences, (ii) modest total enrollment growth within the University Group, (iii) availability and retention of qualified personnel for ongoing investments in our student support operations, (iv) achievement of recovery rates for the Company’s real estate obligations and timing of any associated lease termination payments consistent with the Company’s historical experiences, (v) no material changes in the legal or regulatory environment and excludes legal and regulatory liabilities which are not probable and estimable at this time, and any impact of new or proposed regulations, including the “borrower defense to repayment” regulations and the gainful employment regulation and any modifications thereto, and (vi) consistent working capital movements in line with historical operating trends and potential impacts of teach-out campuses on working capital in line with expectations. Although these estimates and assumptions are based upon management’s good faith beliefs regarding current events and actions that may be undertaken in the future, actual results could differ materially from these estimates.

 

 

CEC ANNOUNCES 3Q17 RESULTS …PG 7

 

 

CONFERENCE CALL INFORMATION

 

Career Education Corporation will host a conference call on Thursday, November 2, 2017 at 5:30 p.m. Eastern time to discuss its third quarter and year to date 2017 results. 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 844-378-6484 (domestic) or 412-542-4179 (international). 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.

ABOUT CAREER EDUCATION CORPORATION

Career Education’s academic institutions offer a quality education to a diverse student population in a variety of disciplines through online, campus-based and blended learning programs. The Company’s two universities – American InterContinental University (“AIU”) and Colorado Technical University (“CTU”) – provide degree programs through the master’s or doctoral level as well as associate and bachelor’s levels. Both universities predominantly serve students online with career-focused degree programs that are designed to meet the educational demands of today’s busy adults. AIU and CTU continue to show innovation in higher education, advancing new personalized learning technologies like their intellipath™ adaptive learning platform. Career Education is committed to providing quality education that closes the gap between learners who seek to advance their careers and employers needing a qualified workforce.

A listing of individual campus locations and web links to Career Education’s institutions 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 “believe,” “will,” “expect,” “estimate,” “continue,” “on track,” “outlook,” “trend” 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 or interest in our programs; 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, 90-10, financial responsibility and administrative capability standards prescribed by the U.S. Department of Education), as well as applicable accreditation standards and state regulatory requirements; the impact of recently issued “defense to repayment” regulations and any modifications thereto; rulemaking by the U.S. Department of Education or any state or accreditor and increased focus by Congress and governmental agencies on, or increased negative publicity about, for-profit education institutions; our ability to successfully defend litigation and other claims brought against us; the success of our initiatives to improve student experiences, retention and outcomes; the ability of our new student admissions and advising centers in Phoenix, Arizona, to achieve anticipated operating performance; negative trends in the real estate market which could impact the costs related to teaching out campuses and the success of our initiatives to reduce our real estate obligations; our ability to achieve anticipated cost savings and business efficiencies; increased competition; the impact of management changes; and changes in the overall U.S. 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 year ended December 31, 2016 and its subsequent filings with the Securities and Exchange Commission.

###

 

 

 


CEC ANNOUNCES 3Q17 RESULTS …PG 8

 

 

 

CONTACT

 

Investors:

Alpha IR Group

Chris Hodges or Sam Gibbons

(312) 445-2870

CECO@alpha-ir.com

Or

 

Media:

Career Education Corporation

(847) 585-2600

media@careered.com

 

 

CAREER EDUCATION CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

 

 

 

September 30,

 

 

December 31,

 

 

 

2017

 

 

2016

 

 

 

(unaudited)

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

 

 

Cash and cash equivalents, unrestricted

 

$

16,276

 

 

$

49,507

 

Restricted cash

 

 

789

 

 

 

1,375

 

Restricted short-term investments

 

 

7,070

 

 

 

8,597

 

Short-term investments

 

 

151,803

 

 

 

147,681

 

Total cash and cash equivalents, restricted cash and short-term investments

 

 

175,938

 

 

 

207,160

 

 

 

 

 

 

 

 

 

 

Student receivables, net

 

 

21,134

 

 

 

22,825

 

Receivables, other, net

 

 

996

 

 

 

929

 

Prepaid expenses

 

 

8,769

 

 

 

14,446

 

Inventories

 

 

991

 

 

 

1,868

 

Other current assets

 

 

1,112

 

 

 

817

 

Assets of discontinued operations

 

 

171

 

 

 

148

 

Total current assets

 

 

209,111

 

 

 

248,193

 

 

 

 

 

 

 

 

 

 

NON-CURRENT ASSETS:

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

33,278

 

 

 

40,512

 

Goodwill

 

 

87,356

 

 

 

87,356

 

Intangible assets, net

 

 

7,900

 

 

 

8,500

 

Student receivables, net

 

 

2,622

 

 

 

3,055

 

Deferred income tax assets, net

 

 

147,990

 

 

 

158,272

 

Other assets

 

 

7,018

 

 

 

7,608

 

Assets of discontinued operations

 

 

5,922

 

 

 

6,105

 

TOTAL ASSETS

 

$

501,197

 

 

$

559,601

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

Accounts payable

 

$

11,780

 

 

$

10,099

 

Accrued expenses:

 

 

 

 

 

 

 

 

Payroll and related benefits

 

 

31,646

 

 

 

41,203

 

Advertising and production costs

 

 

10,732

 

 

 

10,253

 

Income taxes

 

 

1,898

 

 

 

1,830

 

Other

 

 

35,127

 

 

 

69,244

 

Deferred tuition revenue

 

 

22,401

 

 

 

28,364

 

Liabilities of discontinued operations

 

 

6,434

 

 

 

8,219

 

Total current liabilities

 

 

120,018

 

 

 

169,212

 

 

 

 

 

 

 

 

 

 

NON-CURRENT  LIABILITIES:

 

 

 

 

 

 

 

 

Deferred rent obligations

 

 

16,253

 

 

 

30,713

 

Other liabilities

 

 

23,384

 

 

 

31,751

 

Liabilities of discontinued operations

 

 

2,156

 

 

 

6,422

 

Total non-current liabilities

 

 

41,793

 

 

 

68,886

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS' EQUITY:

 

 

 

 

 

 

 

 

Preferred stock

 

 

-

 

 

 

-

 

Common stock

 

 

843

 

 

 

835

 

Additional paid-in capital

 

 

619,483

 

 

 

613,325

 

Accumulated other comprehensive income (loss)

 

 

144

 

 

 

(258

)

Accumulated deficit

 

 

(63,745

)

 

 

(76,230

)

Cost of shares in treasury

 

 

(217,339

)

 

 

(216,169

)

Total stockholders' equity

 

 

339,386

 

 

 

321,503

 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

 

$

501,197

 

 

$

559,601

 

 

CAREER EDUCATION CORPORATION AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND

COMPREHENSIVE INCOME (LOSS)

(In thousands, except per share amounts and percentages)

 

 

 

For the Quarter Ended September 30,

 

 

 

2017

 

 

% of

Total

Revenue

 

 

2016

 

 

% of

Total

Revenue

 

REVENUE:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tuition and fees

 

$

144,408

 

 

 

99.6

%

 

$

166,819

 

 

 

99.5

%

Other

 

 

578

 

 

 

0.4

%

 

 

806

 

 

 

0.5

%

Total revenue

 

 

144,986

 

 

 

 

 

 

 

167,625

 

 

 

 

 

OPERATING EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Educational services and facilities

 

 

37,788

 

 

 

26.1

%

 

 

51,393

 

 

 

30.7

%

General and administrative

 

 

99,077

 

 

 

68.3

%

 

 

111,723

 

 

 

66.7

%

Depreciation and amortization

 

 

3,582

 

 

 

2.5

%

 

 

5,215

 

 

 

3.1

%

Total operating expenses

 

 

140,447

 

 

 

96.9

%

 

 

168,331

 

 

 

100.4

%

Operating income (loss)

 

 

4,539

 

 

 

3.1

%

 

 

(706

)

 

 

-0.4

%

OTHER INCOME (EXPENSE):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

474

 

 

 

0.3

%

 

 

334

 

 

 

0.2

%

Interest expense

 

 

(114

)

 

 

-0.1

%

 

 

(117

)

 

 

-0.1

%

Miscellaneous income

 

 

196

 

 

 

0.1

%

 

 

10

 

 

 

0.0

%

Total other income

 

 

556

 

 

 

0.4

%

 

 

227

 

 

 

0.1

%

PRETAX INCOME (LOSS)

 

 

5,095

 

 

 

3.5

%

 

 

(479

)

 

 

-0.3

%

Provision for income taxes

 

 

1,597

 

 

 

1.1

%

 

 

21

 

 

 

0.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME (LOSS) FROM CONTINUING OPERATIONS

 

 

3,498

 

 

 

2.4

%

 

 

(500

)

 

 

-0.3

%

Loss from discontinued operations, net of tax

 

 

(476

)

 

 

-0.3

%

 

 

(186

)

 

 

-0.1

%

NET INCOME (LOSS)

 

 

3,022

 

 

 

2.1

%

 

 

(686

)

 

 

-0.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OTHER COMPREHENSIVE INCOME, net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

105

 

 

 

 

 

 

 

47

 

 

 

 

 

Unrealized gain on investments

 

 

—

 

 

 

 

 

 

 

370

 

 

 

 

 

Total other comprehensive income

 

 

105

 

 

 

 

 

 

 

417

 

 

 

 

 

COMPREHENSIVE INCOME (LOSS)

 

$

3,127

 

 

 

 

 

 

$

(269

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS) PER SHARE - BASIC and DILUTED:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations

 

$

0.05

 

 

 

 

 

 

$

(0.01

)

 

 

 

 

Loss from discontinued operations

 

 

(0.01

)

 

 

 

 

 

 

—

 

 

 

 

 

Net income (loss) per share

 

$

0.04

 

 

 

 

 

 

$

(0.01

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE SHARES OUTSTANDING:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

69,082

 

 

 

 

 

 

 

68,460

 

 

 

 

 

Diluted

 

 

70,865

 

 

 

 

 

 

 

68,460

 

 

 

 

 

 


 

CAREER EDUCATION CORPORATION AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND

COMPREHENSIVE INCOME

(In thousands, except per share amounts and percentages)

 

 

 

For the Year to Date Ended September 30,

 

 

 

2017

 

 

% of

Total

Revenue

 

 

2016

 

 

% of

Total

Revenue

 

REVENUE:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tuition and fees

 

$

451,292

 

 

 

99.6

%

 

$

546,036

 

 

 

99.4

%

Other

 

 

2,025

 

 

 

0.4

%

 

 

3,101

 

 

 

0.6

%

Total revenue

 

 

453,317

 

 

 

 

 

 

 

549,137

 

 

 

 

 

OPERATING EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Educational services and facilities

 

 

114,367

 

 

 

25.2

%

 

 

170,993

 

 

 

31.1

%

General and administrative

 

 

304,158

 

 

 

67.1

%

 

 

337,358

 

 

 

61.4

%

Depreciation and amortization

 

 

11,368

 

 

 

2.5

%

 

 

16,986

 

 

 

3.1

%

Asset impairment

 

 

—

 

 

 

0.0

%

 

 

237

 

 

 

0.0

%

Total operating expenses

 

 

429,893

 

 

 

94.8

%

 

 

525,574

 

 

 

95.7

%

Operating income

 

 

23,424

 

 

 

5.2

%

 

 

23,563

 

 

 

4.3

%

OTHER INCOME:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

1,328

 

 

 

0.3

%

 

 

900

 

 

 

0.2

%

Interest expense

 

 

(340

)

 

 

-0.1

%

 

 

(469

)

 

 

-0.1

%

Miscellaneous income (expense)

 

 

489

 

 

 

0.1

%

 

 

(4

)

 

 

0.0

%

Total other income

 

 

1,477

 

 

 

0.3

%

 

 

427

 

 

 

0.1

%

PRETAX INCOME

 

 

24,901

 

 

 

5.5

%

 

 

23,990

 

 

 

4.4

%

Provision for income taxes

 

 

11,143

 

 

 

2.5

%

 

 

8,776

 

 

 

1.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME FROM CONTINUING OPERATIONS

 

 

13,758

 

 

 

3.0

%

 

 

15,214

 

 

 

2.8

%

Loss from discontinued operations, net of tax

 

 

(1,273

)

 

 

-0.3

%

 

 

(1,050

)

 

 

-0.2

%

NET INCOME

 

 

12,485

 

 

 

2.8

%

 

 

14,164

 

 

 

2.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OTHER COMPREHENSIVE INCOME, net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

368

 

 

 

 

 

 

 

143

 

 

 

 

 

Unrealized gain on investments

 

 

34

 

 

 

 

 

 

 

824

 

 

 

 

 

Total other comprehensive income

 

 

402

 

 

 

 

 

 

 

967

 

 

 

 

 

COMPREHENSIVE INCOME

 

$

12,887

 

 

 

 

 

 

$

15,131

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME PER SHARE - BASIC and DILUTED:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

0.20

 

 

 

 

 

 

$

0.22

 

 

 

 

 

Loss from discontinued operations

 

 

(0.02

)

 

 

 

 

 

 

(0.01

)

 

 

 

 

Net income per share

 

$

0.18

 

 

 

 

 

 

$

0.21

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE SHARES OUTSTANDING:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

68,897

 

 

 

 

 

 

 

68,328

 

 

 

 

 

Diluted

 

 

70,660

 

 

 

 

 

 

 

68,889

 

 

 

 

 

 

CAREER EDUCATION CORPORATION AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

 

 

 

For the Year to Date Ended September 30,

 

 

 

2017

 

 

2016

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net income

 

$

12,485

 

 

$

14,164

 

Adjustments to reconcile net income to net cash (used in) provided by operating activities:

 

 

 

 

 

 

 

 

Asset impairment

 

 

—

 

 

 

237

 

Depreciation and amortization expense

 

 

11,368

 

 

 

16,986

 

Bad debt expense

 

 

21,516

 

 

 

23,201

 

Compensation expense related to share-based awards

 

 

3,616

 

 

 

2,251

 

Deferred income taxes

 

 

10,282

 

 

 

7,373

 

Gain on disposition of property and equipment

 

 

—

 

 

 

(438

)

Changes in operating assets and liabilities:

 

 

(88,374

)

 

 

(47,510

)

Net cash (used in) provided by operating activities

 

 

(29,107

)

 

 

16,264

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Purchases of available-for-sale investments

 

 

(202,050

)

 

 

(137,755

)

Sales of available-for-sale investments

 

 

199,340

 

 

 

99,718

 

Purchases of property and equipment

 

 

(3,426

)

 

 

(3,352

)

Proceeds on the sale of assets

 

 

—

 

 

 

3,600

 

Payments of cash upon sale of businesses

 

 

—

 

 

 

(62

)

Net cash used in investing activities

 

 

(6,136

)

 

 

(37,851

)

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Issuance of common stock

 

 

2,548

 

 

 

581

 

Payment on borrowings

 

 

—

 

 

 

(38,000

)

Payments of employee tax associated with stock compensation

 

 

(1,170

)

 

 

(550

)

Net cash provided by (used in) financing activities

 

 

1,378

 

 

 

(37,969

)

 

 

 

 

 

 

 

 

 

EFFECT OF FOREIGN CURRENCY EXCHANGE RATE CHANGES ON CASH

   AND CASH EQUIVALENTS:

 

 

48

 

 

 

(150

)

 

 

 

 

 

 

 

 

 

NET DECREASE IN CASH AND CASH EQUIVALENTS

 

 

(33,817

)

 

 

(59,706

)

CASH AND CASH EQUIVALENTS, beginning of the period

 

 

50,882

 

 

 

116,740

 

CASH AND CASH EQUIVALENTS, end of the period

 

$

17,065

 

 

$

57,034

 

 

CAREER EDUCATION CORPORATION AND SUBSIDIARIES

UNAUDITED SELECTED SEGMENT INFORMATION

(In thousands, except percentages)

 

 

 

For the Quarter Ended September 30,

 

 

 

2017

 

 

2016

 

REVENUE:

 

 

 

 

 

 

 

 

CTU

 

$

91,319

 

 

$

90,921

 

AIU

 

 

50,150

 

 

 

48,542

 

Total University Group

 

 

141,469

 

 

 

139,463

 

Corporate and Other

 

 

—

 

 

 

—

 

Subtotal

 

 

141,469

 

 

 

139,463

 

Culinary Arts

 

 

2,367

 

 

 

21,369

 

Transitional Group

 

 

1,150

 

 

 

6,793

 

Total

 

$

144,986

 

 

$

167,625

 

 

 

 

 

 

 

 

 

 

OPERATING INCOME (LOSS):

 

 

 

 

 

 

 

 

CTU

 

$

27,565

 

 

$

21,486

 

AIU

 

 

2,256

 

 

 

291

 

Total University Group

 

 

29,821

 

 

 

21,777

 

Corporate and Other

 

 

(6,199

)

 

 

(5,587

)

Subtotal

 

 

23,622

 

 

 

16,190

 

Culinary Arts

 

 

(14,027

)

 

 

(1,801

)

Transitional Group

 

 

(5,056

)

 

 

(15,095

)

Total

 

$

4,539

 

 

$

(706

)

 

 

 

 

 

 

 

 

 

OPERATING MARGIN (LOSS):

 

 

 

 

 

 

 

 

CTU

 

 

30.2

%

 

 

23.6

%

AIU

 

 

4.5

%

 

 

0.6

%

Total University Group

 

 

21.1

%

 

 

15.6

%

Corporate and Other

 

NM

 

 

NM

 

Subtotal

 

 

16.7

%

 

 

11.6

%

Culinary Arts

 

NM

 

 

 

-8.4

%

Transitional Group

 

NM

 

 

NM

 

Total

 

 

3.1

%

 

 

-0.4

%

 


 

CAREER EDUCATION CORPORATION AND SUBSIDIARIES

UNAUDITED SELECTED SEGMENT INFORMATION

(In thousands, except percentages)

 

 

 

For the Year to Date Ended September 30,

 

 

 

2017

 

 

2016

 

REVENUE:

 

 

 

 

 

 

 

 

CTU

 

$

276,558

 

 

$

274,623

 

AIU

 

 

150,618

 

 

 

152,123

 

Total University Group

 

 

427,176

 

 

 

426,746

 

Corporate and Other

 

 

—

 

 

 

—

 

Subtotal

 

 

427,176

 

 

 

426,746

 

Culinary Arts

 

 

19,302

 

 

 

89,990

 

Transitional Group

 

 

6,839

 

 

 

32,401

 

Total

 

$

453,317

 

 

$

549,137

 

 

 

 

 

 

 

 

 

 

OPERATING INCOME (LOSS):

 

 

 

 

 

 

 

 

CTU

 

$

78,649

 

 

$

70,693

 

AIU

 

 

7,987

 

 

 

9,036

 

Total University Group

 

 

86,636

 

 

 

79,729

 

Corporate and Other

 

 

(16,595

)

 

 

(17,160

)

Subtotal

 

 

70,041

 

 

 

62,569

 

Culinary Arts

 

 

(25,039

)

 

 

1,666

 

Transitional Group

 

 

(21,578

)

 

 

(40,672

)

Total

 

$

23,424

 

 

$

23,563

 

 

 

 

 

 

 

 

 

 

OPERATING MARGIN (LOSS):

 

 

 

 

 

 

 

 

CTU

 

 

28.4

%

 

 

25.7

%

AIU

 

 

5.3

%

 

 

5.9

%

Total University Group

 

 

20.3

%

 

 

18.7

%

Corporate and Other

 

NM

 

 

NM

 

Subtotal

 

 

16.4

%

 

 

14.7

%

Culinary Arts

 

NM

 

 

 

1.9

%

Transitional Group

 

NM

 

 

NM

 

Total

 

 

5.2

%

 

 

4.3

%

 

CAREER EDUCATION CORPORATION AND SUBSIDIARIES

UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ITEMS (1)

(In thousands, unless otherwise noted)

 

 

 

 

 

For the Quarter Ended September 30,

 

 

 

For the Year to Date Ended September 30,

 

 

 

 

ACTUAL

 

 

 

ACTUAL

 

 

Adjusted Operating Income (Loss)

 

2017

 

 

2016

 

 

 

2017

 

 

2016

 

 

University Group and Corporate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income (2) (3)

 

$

23,622

 

 

$

16,190

 

 

 

$

70,041

 

 

$

62,569

 

 

Depreciation and amortization (3)

 

 

2,605

 

 

 

2,594

 

 

 

 

7,695

 

 

 

8,474

 

 

Asset impairments (3)

 

 

—

 

 

 

—

 

 

 

 

—

 

 

 

237

 

 

Unused space charges (3) (4)

 

 

—

 

 

 

—

 

 

 

 

—

 

 

 

1,118

 

 

Adjusted Operating Income --

University Group and Corporate (5)

 

$

26,227

 

 

$

18,784

 

 

 

$

77,736

 

 

$

72,398

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Transitional Group and Culinary Arts:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating loss (2) (6)

 

$

(19,083

)

 

$

(16,896

)

 

 

$

(46,617

)

 

$

(39,006

)

 

Depreciation and amortization (6)

 

 

977

 

 

 

2,621

 

 

 

 

3,673

 

 

 

8,512

 

 

Unused space charges (4) (6)

 

 

7,347

 

 

 

4,983

 

 

 

 

11,158

 

 

 

14,123

 

 

Adjusted Operating Loss --

Transitional and Culinary Arts (5)

 

$

(10,759

)

 

$

(9,292

)

 

 

$

(31,786

)

 

$

(16,371

)

 

 

 

For the Second Half July-December 31,

 

For the Year Ended December 31,

 

 

ACTUAL

 

 

OUTLOOK

 

ACTUAL

 

 

OUTLOOK

 

Adjusted Operating Income (Loss)

2016

 

 

2017

 

2016

 

 

2017

 

2018

 

University Group and Corporate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income (2) (3)

$

(1,662

)

 

$43 - $48M

 

$

44,717

 

 

$90 - $95M

 

Growth vs 2017

 

Depreciation and amortization (3)

 

5,284

 

 

~5M

 

 

11,164

 

 

~10M

 

2017 levels

 

Asset impairments (3)

 

—

 

 

None Assumed

 

 

237

 

 

None Assumed

 

Unused space charges (3) (4)

 

16

 

 

None Assumed

 

 

1,134

 

 

None Assumed

 

Significant legal settlements (3)

 

32,000

 

 

None Assumed

 

 

32,000

 

 

None Assumed

 

Adjusted Operating Income --

University Group and Corporate (5)

$

35,638

 

 

$48 - $53M

 

$

89,252

 

 

$100 - $105M

 

Growth vs 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Transitional Group and Culinary Arts:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating loss (2) (6)

$

(54,951

)

 

($31 - $36M)

 

$

(77,061

)

 

($59 - $64M)

 

($15 - $20M)

 

Depreciation and amortization (6)

 

5,692

 

 

~1M

 

 

11,583

 

 

~4M

 

-

 

Asset impairments (6)

 

927

 

 

None Assumed

 

 

927

 

 

None Assumed

 

Unused space charges (4) (6)

 

25,579

 

 

~11M

 

 

34,719

 

 

~15M

 

~5M

 

Adjusted Operating Loss --

Transitional and Culinary Arts (5)

$

(22,753

)

 

($19 - $24M)

 

$

(29,832

)

 

($40 - $45M)

 

($10 - $15M)

 

 

 

(1)

The Company believes it is useful to present non-GAAP financial measures which exclude certain significant and non-cash items as a means to understand the performance of its 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 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.

The Company believes adjusted operating income (loss) allows it to analyze and assess its ongoing operations and compare current operating results with the operational performance of other companies in its industry because it does not give effect to potential differences caused by items it does not consider reflective of underlying operating performance, such as unused space charges and significant legal reserves. In evaluating adjusted operating income (loss), investors should be aware that in the future the Company may incur expenses similar to the adjustments presented above. The presentation of adjusted operating income (loss) should not be construed as an inference that the Company's future results will be unaffected by expenses that are unusual, non-routine or non-recurring. Adjusted operating income (loss) has limitations as an analytical tool, and it should not be considered 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 liquidity.

Non-GAAP financial measures, when viewed in a reconciliation to corresponding GAAP financial measures, provide 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)

Operating income for the University Group and Corporate and operating loss for the Transitional Group and Culinary Arts make up the components of operating income (loss). A reconciliation of these components for the quarters and years to date ended September 30, 2017 and 2016 is presented below:

 

 

 

For the Quarter Ended September 30,

 

 

 

For the Year to Date Ended September 30,

 

 

 

ACTUAL

 

 

 

ACTUAL

 

 

 

2017

 

 

2016

 

 

 

2017

 

 

2016

 

Operating income for University Group and Corporate

 

$

23,622

 

 

$

16,190

 

 

 

$

70,041

 

 

$

62,569

 

Operating loss for Culinary Arts and Transitional

 

 

(19,083

)

 

 

(16,896

)

 

 

 

(46,617

)

 

 

(39,006

)

Operating income (loss)

 

$

4,539

 

 

$

(706

)

 

 

$

23,424

 

 

$

23,563

 

(3)

Amounts relate to the University Group and Corporate.

(4)

Unused space charges represent the net present value of remaining lease obligations for vacated space less an estimated amount for sublease income. These charges relate to exiting leased space as the Company continues to right-size the organization and therefore are not considered representative of ongoing operations.

(5)

Management assesses results of operations for the University Group and Corporate separately from the Transitional Group and Culinary Arts. As the Transitional Group and Culinary Arts campuses have been announced for teach-out or have been taught out, management views these operations as not reflective of the ongoing business. As a result, management views adjusted operating income from the University Group and Corporate separately from the remainder of the organization, to assess results and make decisions.

(6)

Amounts relate to the Transitional Group and Culinary Arts.