Operating income for the University Group
improved for the current quarter as compared to the prior year
quarter
Career Education Corporation (NASDAQ: CECO) today reported
operating and financial results for the third quarter and year to
date ended September 30, 2016.
Third Quarter Consolidated Results:
- Revenue of $167.6 million for the
quarter as compared to $203.5 million in the prior year quarter,
with the decline driven by teach-out campuses
- Net loss of $0.7 million compared to
prior year quarter net loss of $45.2 million
- Consolidated adjusted EBITDA of $4.8
million compared to $2.7 million in the prior year quarter (see
reconciliation of GAAP to non-GAAP items attached to this press
release)
Year to Date Consolidated Results:
- Net income improved to $14.2 million as
compared to the prior year net loss of $90.8 million
- Operating expenses decreased by $210.0
million as compared to the prior year driven by continued execution
on strategic initiatives
- Consolidated adjusted EBITDA improved
to $43.6 million as compared to negative $13.4 million in the prior
year (see reconciliation of GAAP to non-GAAP items attached to this
press release)
- As of September 30, 2016, cash, cash
equivalents, restricted cash and available-for-sale short-term
investments, net of borrowings, was $217.8 million
University Group Highlights:
- Total student enrollment growth of 1.6
percent as compared to the prior year
- Revenue increased by 2.5 percent versus
the prior year quarter
- Operating income increased by 7.2
percent to $21.8 million compared to the prior year quarter,
primarily driven by increased revenue at CTU
- Student retention continues to improve
as investments in various student-serving operations help enhance
overall student retention and outcomes
“Increased student retention at our University Group and
responsible execution of our teach-out campuses marked another
quarter of improved operating performance. We are encouraged by the
modest total enrollment growth at the University Group and are
making meaningful progress towards our goal of responsible growth,
sustained profitability and cash generation,” said Todd Nelson,
President and Chief Executive Officer. “We will continue to make
investments in various student serving areas of our operations to
further enhance student retention and outcomes and focus on
improving operating efficiencies across all our businesses. As a
result of the positive trends we have been experiencing, we are
updating our year end cash and adjusted EBITDA outlook we provided
last quarter.”
REVENUE
For the quarter and year to date ended September 30, 2016, total
revenue was $167.6 million and $549.1 million, respectively,
representing a decrease of 17.6 percent and 15.2 percent,
respectively, compared to total revenue of $203.5 million and
$647.3 million for the quarter and year to date ended September 30,
2015, respectively. The decrease was driven by declining revenues
within the teach-out segments. Total revenue for the University
Group was $139.5 million and $426.7 million for the quarter and
year to date ended September 30, 2016, respectively, representing
an increase of 2.5 percent and 3.5 percent, respectively, driven by
total enrollment growth within CTU.
For the Quarter Ended
September 30,
For the Year to Date Ended
September 30,
Revenue ($ in
thousands)
2016 2015
Increase
(Decrease)
2016 2015
Increase
(Decrease)
CTU $ 90,921 $ 85,433 6.4 % $ 274,623 $ 256,734 7.0 %
AIU 48,542 50,688 -4.2 % 152,123
155,778 -2.3 % Total University Group 139,463 136,121 2.5 % 426,746
412,512 3.5 % Corporate and Other — 39 NM —
117 NM Subtotal 139,463 136,160 2.4 % 426,746 412,629 3.4 %
Culinary Arts (1) 21,369 41,410 -48.4 % 89,990 128,170 -29.8 %
Transitional Group (1) 6,793 25,914 -73.8 %
32,401 106,527 -69.6 % Total $ 167,625 $ 203,484 -17.6 % $
549,137 $ 647,326 -15.2 % (1) Teach-out campuses included in
the Transitional Group no longer enroll new students. The Culinary
Arts campuses were announced for teach-out during December 2015 and
ceased enrolling new students in January 2016.
TOTAL AND NEW STUDENT ENROLLMENTS
As of the end of the third quarter of 2016, total student
enrollments for the University Group were 31,900, compared to
31,400 as of the prior year quarter end, primarily driven by
improved student retention at CTU and new enrollment growth at AIU.
New student enrollments for the University Group were 8,580 and
25,840 for the quarter and year to date ended September 30, 2016,
respectively, compared to new enrollments of 8,450 and 26,530 for
the quarter and year to date ended September 30, 2015,
respectively.
As of September 30,
Total Student
Enrollments
2016 2015
Increase
(Decrease)
CTU 21,400 20,600 3.9 % AIU 10,500
10,800 -2.8 % Total University Group 31,900
31,400 1.6 % Culinary Arts 3,500 9,200 -62.0 % Transitional Group
1,100 5,200 -78.8 % Total 36,500 45,800
-20.3 %
For the Quarter Ended
September 30,
For the Year to Date Ended
September 30,
New Student
Enrollments
2016 2015
Increase
(Decrease)
2016 2015
Increase
(Decrease)
CTU (1) 5,390 5,470 -1.5 % 15,240
16,180 -5.8 % AIU (1) 3,190 2,980 7.0 %
10,600 10,350 2.4 % Total University Group (1)
8,580 8,450 1.5 % 25,840 26,530 -2.6 %
Culinary Arts (2) — 3,290 NM 990 6,780 NM Transitional Group (2)
10 510 NM 90 3,170 NM Total
8,590 12,250 -29.9 % 26,920 36,480 -26.2 % (1)
New student enrollments were positively impacted by a change
to how the Company records certain cancelled students. Excluding
the impact of this change new student enrollments would have
decreased 4.8 percent for CTU, increased 2.3 percent for AIU and
decreased 2.2 percent for the University Group for the quarter
ended September 30, 2016 as compared to the prior year quarter. For
the year to date September 30, 2016, new student enrollments would
have decreased 6.9 percent for CTU, increased 1.1 percent for AIU
and decreased 3.8 percent for the University Group, as compared to
the prior year to date. (2) Teach-out campuses within the
Transitional Group and Culinary Arts no longer enroll new students,
effective upon their teach-out announcement; students who re-enter
after 365 days are reported as new student enrollments. For
Culinary Arts, teach-outs announced in December 2015 were effective
beginning after the January 2016 new enrollment.
OPERATING INCOME (LOSS)
For the quarter and year to date ended September 30, 2016, the
Company recorded an operating loss of $0.7 million and operating
income of $23.6 million, respectively, representing an improvement
of 98.4 percent and 126.7 percent compared to operating losses of
$44.0 million and $88.2 million for the quarter and year to date
ended September 30, 2015, respectively. This improvement was driven
by $33.4 million of impairment charges recorded in the prior year
quarter, completion of teach-out campuses and increased revenue
within CTU. Total University Group operating income increased to
$21.8 million and $79.7 million for the quarter and year to date
ended September 30, 2016, respectively, representing an increase of
7.2 percent and 29.7 percent, respectively.
For the Quarter Ended
September 30,
For the Year to Date Ended
September 30,
Operating Income
(Loss) ($ in thousands)
2016 2015
Increase
(Decrease)
2016 2015
Increase
(Decrease)
CTU $ 21,486 $ 18,616 15.4 % $ 70,693 $ 57,495 23.0 %
AIU 291 1,695 -82.8 % 9,036 3,982 126.9
% Total University Group 21,777 20,311 7.2 % 79,729 61,477 29.7 %
Corporate and Other (5,587 ) (8,040 ) 30.5 %
(17,160 ) (20,936 ) 18.0 % Subtotal 16,190 12,271 31.9 %
62,569 40,541 54.3 % Culinary Arts (1) (1,801 ) (33,195 ) 94.6 %
1,666 (43,512 ) 103.8 % Transitional Group (2) (15,095 )
(23,065 ) 34.6 % (40,672 ) (85,268 ) 52.3 %
Total $ (706 ) $ (43,989 ) 98.4 % $ 23,563 $ (88,239 ) 126.7 % (1)
Asset impairment charges of $43.1 million were recorded
during the year to date 2015, $33.4 million of which was recorded
during the third quarter of 2015. (2) Asset impairment charges of
$7.7 million were recorded during the year to date 2015.
NET INCOME (LOSS)
Net loss of $0.7 million was recorded for the quarter ended
September 30, 2016 as compared to a net loss of $45.2 million in
the prior year quarter, an improvement of 98.5 percent. For the
year to date ended September 30, 2016, net income was $14.2 million
representing an improvement of 115.6 percent as compared to net
loss of $90.8 million for the prior year to date. The prior year
quarter and year to date included $33.4 million and $50.8 million,
respectively, of asset impairment charges.
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 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 EBITDA for the University
Group and Corporate was $19.3 million and $73.8 million for the
quarter and year to date ended September 30, 2016, respectively,
representing an increase of 18.6 percent, or $3.0 million, and 36.3
percent, or $19.7 million, respectively, as compared to the prior
year periods. Adjusted EBITDA for the Transitional Group, Culinary
Arts and discontinued operations worsened to negative $14.6 million
and improved to negative $30.2 million for the quarter and year to
date ended September 30, 2016, respectively, representing a
worsening of 7.1 percent and an improvement of 55.3 percent,
respectively, as compared to the prior year periods.
For the Quarter Ended
September 30,
For the Year to Date Ended
September 30,
Adjusted EBITDA
($ in thousands)
2016 2015 2016 2015
University Group
and Corporate:
(Loss) income from continuing operations (1) $ (500 ) $ (44,691 ) $
15,214 $ (89,223 ) Provision for (benefit from) income taxes 21 35
8,776 (923 ) Transitional Group pre-tax loss 14,869 23,724 40,199
86,818 Culinary Arts pre-tax loss (income) 1,709 33,171 (1,760 )
43,453 Interest (income) expense, net (2) (215 ) 7 (427 ) (43 )
Depreciation and amortization (2) 2,594 3,454 8,474 11,771
Stock-based compensation (2) 860 983 2,251 2,453 Asset impairments
(2) — — 237 — Unused space charges (2) (3) (16 ) (385
) 839 (177 )
Adjusted EBITDA--University Group
and
Corporate
$ 19,322 $ 16,298 $
73,803 $ 54,129 Memo: Advertising
Expenses (2) $ 45,301 $
46,194 $ 121,852 $ 131,039
Transitional
Group, Culinary Arts and Discontinued Operations:
Loss from discontinued operations (1) $ (186 ) $ (544 ) $ (1,050 )
$ (1,616 ) Benefit from income taxes from discontinued operations
(109 ) — (626 ) — Transitional Group pre-tax loss (14,869 ) (23,724
) (40,199 ) (86,818 ) Culinary Arts pre-tax (loss) income (1,709 )
(33,171 ) 1,760 (43,453 ) Interest income, net (4) (2 ) — (4 ) —
Loss on sale of business (4) — 715 — 1,632 Depreciation and
amortization (4) 2,621 2,508 8,512 8,090 Legal settlements (4) — —
— 1,319 Asset impairments (4) — 33,446 — 50,837 Unused space
charges (3) (4) (308 ) 7,174 1,386
2,445
Adjusted EBITDA--Transitional, Culinary Arts and
Discontinued Operations $ (14,562 )
$ (13,596 ) $ (30,221 )
$ (67,564 ) Consolidated Adjusted
EBITDA $ 4,760 $ 2,702 $
43,582 $ (13,435 ) (1) (Loss)
income from continuing operations and loss from discontinued
operations make up the components of net income (loss) as reflected
on the Company’s condensed consolidated statements of income (loss)
and comprehensive income (loss). (2) Amounts relate to the
University Group and Corporate. (3) Unused space charges represent
the net present value of remaining lease obligations for vacated
space less an estimated amount for sublease income as well as the
subsequent accretion of these charges. (4) Amounts relate to
Transitional Group, Culinary Arts and discontinued operations.
BALANCE SHEET AND CASH FLOW
Net cash provided by operating activities for the quarter and
year to date ended September 30, 2016 was $9.7 million and $15.7
million, respectively, representing an improvement from cash
provided of $5.6 million and cash usage of $21.0 million for the
quarter and year to date ended September 30, 2015, respectively.
The Company’s continued focus on improving operating efficiencies
within the University Group and the discontinuation of marketing
and advertising costs related to our teach-outs contributed to the
improvement in cash flow from operations.
As of September 30, 2016 and December 31, 2015, cash,
cash equivalents, restricted cash and available-for-sale short-term
and long-term investments, net of borrowings, totaled $217.8
million and $201.0 million, respectively.
Consolidated Cash
($ in thousands)
As of September 30,
2016
As of December 31,
2015
Increase
(Decrease)
Consolidated Cash, Cash Equivalents, Restricted Cash and
Available-For-Sale Short-Term
Investments
$ 217,784 $ 231,641 -6.0 % Available-For-Sale Long-Term
Investments (1) — 7,374 -100.0 % Short-term Borrowings (2) —
38,000 -100.0 % Consolidated Cash, Cash Equivalents,
Restricted Cash
and Available-For-Sale Short-Term and
Long-Term
Investments, net of Borrowings (1)
$ 217,784 $ 201,015 8.3 % (1) Available-for-sale long-term
investment balances are included within non-current other assets on
the Company’s condensed consolidated balance sheets. (2) Cash, cash
equivalents, restricted cash and available-for-sale short-term
investment balances as of December 31, 2015 include $38.0 million
of restricted cash related to cash-collateralized borrowings under
the Credit Agreement.
OUTLOOK
Career Education Corporation revised its outlook for 2016 and
2017 consolidated adjusted EBITDA and year end cash, cash
equivalents, restricted cash and short-term investments, net of
borrowings, in order to incorporate recent stronger than expected
performance and working capital trends. The Company now expects the
following results, subject to the updated key assumptions
identified below:
- Consolidated adjusted EBITDA will
significantly improve in 2016 versus 2015. In 2017, consolidated
adjusted EBITDA will again significantly improve as compared to
2015 but will trend below 2016 due to expenses associated with the
completion of the teach-out campuses and then will increase in 2018
as these expenses are eliminated.
- 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 $180 million to $190 million for the year ending
December 31, 2016, and approximately $160 million to $170 million
for the year ending December 31, 2017.
Forward looking adjusted EBITDA expectations are estimated on a
basis consistent with adjusted EBITDA calculations presented in the
reconciliation of GAAP to non-GAAP items attached to this press
release. Net income, which is the most directly comparable GAAP
measure to consolidated adjusted EBITDA, may not follow the same
trends as discussed in our outlook above because of adjustments
made for unused space charges that represent the present value of
future remaining lease obligations of vacated space less an
estimated amount for sublease income as well as income taxes,
depreciation, amortization, asset impairment charges, interest
income, interest expense and stock compensation. The cash and
adjusted EBITDA outlook provided above for 2016 and beyond are
based on the following key assumptions and factors, among others:
(i) flat-to-modest total enrollment growth within the University
Group while achieving the intended University Group efficiencies,
(ii) teach-outs to progress as expected and performance consistent
with current trends, (iii) 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, (iv) right-sizing of the Company’s corporate expense
structure to serve primarily online institutions, (v) no material
changes in the legal or regulatory environment and excludes legal
and regulatory liabilities and any impact of new or proposed
regulations, including the “defense to repayment” regulations
issued in November 2016 and the gainful employment regulation, 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.
CONFERENCE CALL INFORMATION
Career Education Corporation will host a conference call on
Thursday, November 3, 2016 at 5:30 p.m. Eastern time to discuss its
third quarter and year to date 2016 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 hybrid 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,” “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; 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;
rulemaking by the U.S. Department of Education or any state or
accreditor and increased focus by Congress, the President 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; 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. 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, 2015 and its subsequent filings with the
Securities and Exchange Commission.
CAREER EDUCATION CORPORATION AND
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In thousands)
September 30,
2016
December 31,
2015
(unaudited) ASSETS CURRENT ASSETS: Cash
and cash equivalents, unrestricted $ 55,659 $ 66,919 Restricted
cash 1,375 49,821 Restricted short-term investments 9,597 -
Short-term investments 151,153 114,901 Total cash and
cash equivalents, restricted cash and short-term investments
217,784 231,641 Student receivables, net 25,457 31,618
Receivables, other, net 876 5,194 Prepaid expenses 12,695 14,380
Inventories 1,829 3,353 Other current assets 954 2,523 Assets of
discontinued operations 176 254 Total current assets
259,771 288,963
NON-CURRENT ASSETS:
Property and equipment, net 45,213 58,249 Goodwill 87,356 87,356
Intangible assets, net 8,700 9,300 Student receivables, net 3,128
3,958 Deferred income tax assets, net 130,343 137,716 Other assets
8,328 16,562 Assets of discontinued operations 8,634
8,811
TOTAL ASSETS $ 551,473 $
610,915 LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES: Short-term borrowings $ - $ 38,000
Accounts payable 16,000 25,906 Accrued expenses: Payroll and
related benefits 33,075 38,789 Advertising and production costs
17,041 11,788 Income taxes 1,730 1,061 Other 25,599 24,082 Deferred
tuition revenue 30,342 40,112 Liabilities of discontinued
operations 7,004 13,067 Total current liabilities
130,791 192,805
NON-CURRENT
LIABILITIES: Deferred rent obligations 35,664 45,927 Other
liabilities 24,133 25,197 Liabilities of discontinued operations
5,862 9,376 Total non-current liabilities
65,659 80,500
STOCKHOLDERS' EQUITY: Preferred
stock - - Common stock 835 830 Additional paid-in capital 613,611
610,784 Accumulated other comprehensive income (loss) 87 (880 )
Accumulated deficit (43,354 ) (57,518 ) Cost of shares in treasury
(216,156 ) (215,606 ) Total stockholders' equity
355,023 337,610
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 551,473 $
610,915
CAREER EDUCATION CORPORATION AND
SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED
STATEMENTS OF LOSS AND
COMPREHENSIVE LOSS
(In thousands, except per share amounts
and percentages)
For the Quarter Ended September 30,
2016 % of
Total
Revenue
2015 % of
Total
Revenue
REVENUE: Tuition and registration fees $
166,819 99.5 % $ 202,179 99.4 % Other 806 0.5 % 1,305
0.6 % Total revenue 167,625 203,484
OPERATING
EXPENSES: Educational services and facilities 51,393 30.7 %
74,888 36.8 % General and administrative 111,723 66.7 % 133,177
65.4 % Depreciation and amortization 5,215 3.1 % 5,962 2.9 % Asset
impairment — 0.0 % 33,446 16.4 % Total operating
expenses 168,331 100.4 % 247,473 121.6 % Operating
loss (706 ) -0.4 % (43,989 ) -21.6 %
OTHER INCOME
(EXPENSE): Interest income 334 0.2 % 164 0.1 % Interest expense
(117 ) -0.1 % (170 ) -0.1 % Loss on sale of business — 0.0 % (715 )
-0.4 % Miscellaneous income 10 0.0 % 54 0.0 % Total
other income (expense) 227 0.1 % (667 ) -0.3 %
PRETAX LOSS (479 ) -0.3 % (44,656 ) -21.9 % Provision for
income taxes 21 0.0 % 35 0.0 %
LOSS FROM
CONTINUING OPERATIONS (500 ) -0.3 % (44,691 ) -22.0 % Loss from
discontinued operations, net of tax (186 ) -0.1 %
(544 ) -0.3 %
NET LOSS (686 ) -0.4 % (45,235 )
-22.2 %
OTHER COMPREHENSIVE INCOME, net of tax:
Foreign currency translation adjustments 47 — Unrealized gain on
investments 370 81 Total other comprehensive income
417 81
COMPREHENSIVE LOSS $ (269 ) $ (45,154 )
NET LOSS PER SHARE - BASIC and DILUTED: Loss from
continuing operations $ (0.01 ) $ (0.66 ) Loss from discontinued
operations — (0.01 ) Net loss per share $ (0.01 ) $
(0.67 )
WEIGHTED AVERAGE SHARES OUTSTANDING: Basic
and Diluted 68,460 67,961
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 Year to Date Ended September 30, 2016
% of
Total
Revenue
2015 % of
Total
Revenue
REVENUE: Tuition and registration fees $
546,036 99.4 % $ 643,617 99.4 % Other 3,101 0.6 %
3,709 0.6 % Total revenue 549,137 647,326
OPERATING EXPENSES: Educational services and facilities
170,993 31.1 % 222,846 34.4 % General and administrative 337,358
61.4 % 442,021 68.3 % Depreciation and amortization 16,986 3.1 %
19,861 3.1 % Asset impairment 237 0.0 % 50,837 7.9 %
Total operating expenses 525,574 95.7 % 735,565 113.6
% Operating income (loss) 23,563 4.3 % (88,239 )
-13.6 %
OTHER INCOME (EXPENSE): Interest income 900 0.2 %
548 0.1 % Interest expense (469 ) -0.1 % (502 ) -0.1 % Loss on sale
of business — 0.0 % (1,632 ) -0.3 % Miscellaneous expense
(4
) 0.0 % (321 ) 0.0 % Total other income (expense) 427
0.1 % (1,907 ) -0.3 %
PRETAX INCOME (LOSS) 23,990 4.4
% (90,146 ) -13.9 % Provision for (benefit from) income taxes
8,776 1.6 % (923 ) -0.1 %
INCOME (LOSS)
FROM CONTINUING OPERATIONS 15,214 2.8 % (89,223 ) -13.8 % Loss
from discontinued operations, net of tax (1,050 ) -0.2 %
(1,616 ) -0.2 %
NET INCOME (LOSS) 14,164 2.6 %
(90,839 ) -14.0 %
OTHER COMPREHENSIVE INCOME, net
of tax: Foreign currency translation adjustments 143 —
Unrealized gain on investments 824 233 Total other
comprehensive income 967 233
COMPREHENSIVE INCOME
(LOSS) $ 15,131 $ (90,606 )
NET INCOME (LOSS) PER
SHARE - BASIC and DILUTED: Income (loss) from continuing
operations $ 0.22 $ (1.32 ) Loss from discontinued operations
(0.01 ) (0.02 ) Net income (loss) per share $ 0.21 $
(1.34 )
WEIGHTED AVERAGE SHARES OUTSTANDING: Basic
68,328 67,798 Diluted 68,889 67,798
CAREER EDUCATION CORPORATION AND
SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In thousands)
For the Year to Date
Ended September 30,
2016 2015 CASH FLOWS FROM OPERATING
ACTIVITIES: Net income (loss) $ 14,164 $ (90,839 ) Adjustments
to reconcile net income (loss) to net cash provided by (used in)
operating activities: Asset impairment 237 50,837 Depreciation and
amortization expense 16,986 19,861 Bad debt expense 23,201 15,526
Compensation expense related to share-based awards 2,251 2,453 Loss
on sale of business, net — 1,632 Gain on disposition of property
and equipment (438 ) (10 ) Deferred income taxes 7,373 — Changes in
operating assets and liabilities: (48,060 ) (20,463 )
Net cash provided by (used in) operating activities 15,714
(21,003 )
CASH FLOWS FROM INVESTING
ACTIVITIES: Purchases of available-for-sale investments
(137,755 ) (64,056 ) Sales of available-for-sale investments 99,718
69,436 Purchases of property and equipment (3,352 ) (7,926 )
Proceeds on the sale of assets 3,600 2,272 Payments of cash upon
sale of businesses (62 ) (4,125 ) Net cash used in
investing activities (37,851 ) (4,399 )
CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of common
stock 581 1,082 Payment on borrowings (38,000 ) (10,000 ) Change in
restricted cash 48,446 9,250 Net cash provided by
financing activities 11,027 332
EFFECT OF
FOREIGN CURRENCY EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS:
(150 ) 178
NET DECREASE IN CASH AND CASH
EQUIVALENTS (11,260 ) (24,892 )
CASH AND CASH EQUIVALENTS,
beginning of the period 66,919 93,832
CASH AND
CASH EQUIVALENTS, end of the period $ 55,659 $ 68,940
CAREER EDUCATION CORPORATION AND
SUBSIDIARIES
UNAUDITED SELECTED SEGMENT
INFORMATION
(In thousands, except percentages)
For the Quarter Ended September 30,
2016 2015 REVENUE: CTU $ 90,921 $
85,433 AIU 48,542 50,688 Total University Group
139,463 136,121 Corporate and Other — 39 Subtotal
139,463 136,160 Culinary Arts 21,369 41,410 Transitional Group
6,793 25,914 Total $ 167,625 $ 203,484
OPERATING INCOME (LOSS): CTU $ 21,486 $ 18,616 AIU
291 1,695 Total University Group 21,777 20,311 Corporate and
Other (5,587 ) (8,040 ) Subtotal 16,190 12,271
Culinary Arts (1,801 ) (33,195 ) Transitional Group (15,095
) (23,065 ) Total $ (706 ) $ (43,989 )
OPERATING
MARGIN (LOSS): CTU 23.6 % 21.8 % AIU 0.6 % 3.3 %
Total University Group 15.6 % 14.9 % Corporate and Other NM NM
Subtotal 11.6 % 9.0 % Culinary Arts -8.4 % -80.2 % Transitional
Group -222.2 % -89.0 % Total -0.4 %
-21.6 %
CAREER EDUCATION CORPORATION AND
SUBSIDIARIES
UNAUDITED SELECTED SEGMENT
INFORMATION
(In thousands, except percentages)
For the Year to Date Ended September 30,
2016 2015 REVENUE: CTU $ 274,623
$ 256,734 AIU 152,123 155,778 Total University Group
426,746 412,512 Corporate and Other — 117 Subtotal
426,746 412,629 Culinary Arts 89,990 128,170 Transitional Group
32,401 106,527 Total $ 549,137 $ 647,326
OPERATING INCOME (LOSS): CTU $ 70,693 $ 57,495 AIU
9,036 3,982 Total University Group 79,729 61,477 Corporate
and Other (17,160 ) (20,936 ) Subtotal 62,569 40,541
Culinary Arts 1,666 (43,512 ) Transitional Group (40,672 )
(85,268 ) Total $ 23,563 $ (88,239 )
OPERATING
MARGIN (LOSS): CTU 25.7 % 22.4 % AIU 5.9 % 2.6 %
Total University Group 18.7 % 14.9 % Corporate and Other NM NM
Subtotal 14.7 % 9.8 % Culinary Arts 1.9 % -33.9 % Transitional
Group -125.5 % -80.0 % Total 4.3 %
-13.6 %
CAREER EDUCATION CORPORATION AND
SUBSIDIARIES
UNAUDITED RECONCILIATION OF GAAP TO
NON-GAAP ITEMS (1)
(In thousands)
For the Quarter Ended
September 30,
For the Year to Date Ended
September 30,
Adjusted
EBITDA
2016 2015 2016 2015
University Group
and Corporate:
(Loss) income from continuing operations (2) $ (500 ) $ (44,691 ) $
15,214 $ (89,223 ) Provision for (benefit from) income taxes 21 35
8,776 (923 ) Transitional Group pre-tax loss 14,869 23,724 40,199
86,818 Culinary Arts pre-tax loss (income) 1,709 33,171 (1,760 )
43,453 Interest (income) expense, net (3) (215 ) 7 (427 ) (43 )
Depreciation and amortization (3) 2,594 3,454 8,474 11,771
Stock-based compensation (3) 860 983 2,251 2,453 Asset impairments
(3) — — 237 — Unused space charges (3) (5) (16 ) (385
) 839 (177 )
Adjusted EBITDA--University Group
and
Corporate (6)
$ 19,322 $ 16,298 $
73,803 $ 54,129 Memo: Advertising
Expenses (3) $ 45,301 $
46,194 $ 121,852 $ 131,039
Transitional
Group, Culinary Arts and Discontinued Operations:
Loss from discontinued operations (2) $ (186 ) $ (544 ) $ (1,050 )
$ (1,616 ) Benefit from income taxes from discontinued operations
(109 ) — (626 ) — Transitional Group pre-tax loss (14,869 ) (23,724
) (40,199 ) (86,818 ) Culinary Arts pre-tax (loss) income (1,709 )
(33,171 ) 1,760 (43,453 ) Interest income, net (7) (2 ) — (4 ) —
Loss on sale of business (7) — 715 — 1,632 Depreciation and
amortization (7) 2,621 2,508 8,512 8,090 Legal settlements (4) (7)
— — — 1,319 Asset impairments (7) — 33,446 — 50,837 Unused space
charges (5) (7) (308 ) 7,174 1,386
2,445
Adjusted EBITDA--Transitional, Culinary Arts and
Discontinued Operations (6) (8) $ (14,562
) $ (13,596 ) $ (30,221
) $ (67,564 ) Consolidated Adjusted
EBITDA $ 4,760 $ 2,702 $
43,582 $ (13,435 ) (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 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 EBITDA allows it to compare current operating
results with corresponding historical periods and 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 teach-out campuses. In evaluating adjusted EBITDA,
investors should be aware that in the future the Company may incur
expenses similar to the adjustments presented above. The
presentation of adjusted EBITDA 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
EBITDA 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) (Loss) income from
continuing operations and loss from discontinued operations make up
the components of net (loss) income. A reconciliation of these
components for the quarters and years to date ended September 30,
2016 and September 30, 2015 is presented below:
For the
Quarter Ended
September 30,
For the Year to Date Ended
September 30,
2016 2015 2016 2015
(Loss) income from continuing operations $ (500 ) $ (44,691 ) $
15,214 $ (89,223 ) Loss from discontinued operations (186 )
(544 ) (1,050 ) (1,616 )
Net (loss)
income $ (686 ) $ (45,235
) $ 14,164 $ (90,839 )
(3) Amounts relate to the University Group and Corporate.
(4) Legal settlement amounts are net of insurance recoveries. (5)
Unused space charges represent the net present value of remaining
lease obligations for vacated space less an estimated amount for
sublease income as well as the subsequent accretion of these
charges. 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. (6) 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 have been announced for
teach-out, management views these operations as not reflective of
the ongoing business. As a result, management views adjusted EBITDA
from the University Group and Corporate separately from the
remainder of the organization, to assess results and make
decisions. Accordingly, the Transitional Group and Culinary Arts
pre-tax income (losses) are added back to income (loss) from
continuing operations and subtracted from loss from discontinued
operations. (7) Amounts relate to the Transitional Group, Culinary
Arts and discontinued operations. (8) Adjusted EBITDA amounts for
Culinary Arts separate from the Transitional Group and discontinued
operations include:
For the Quarter Ended
September 30,
For the Year to Date Ended
September 30,
2016 2015 2016
2015 Pre-tax (loss) income $ (1,709 ) $ (33,171 ) $ 1,760 $
(43,453 ) Depreciation and amortization 1,232 — 4,458 — Legal
settlements — — — 775 Asset impairments — 33,446 — 43,133 Unused
space charges (793 ) 209 3,710 (1,150 )
Adjusted EBITDA for Culinary Arts $ (1,270
) $ 484 $ 9,928 $
(695 )
View source
version on businesswire.com: http://www.businesswire.com/news/home/20161103006656/en/
Investors:Alpha IR GroupSam Gibbons or Chris Hodges(312)
445-2870CECO@alpha-ir.comOrMedia:Career Education
Corporation(847) 585-2600media@careered.com
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