University Group total enrollments, revenue and
operating income show growth versus 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, 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.”
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
$427.2 million representing an increase of 1.4 percent and 0.1
percent, respectively, for the quarter and year to date ended
September 30, 2017 as compared to the respective prior year
periods.
For the Quarter Ended September 30, For the
Year to Date Ended September 30,
Increase Increase
Revenue ($ in
thousands)
2017 2016 (Decrease) 2017 2016
(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.
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,
Increase
Total Student
Enrollments
2017 2016 (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, Increase
Increase
New Student
Enrollments
2017 2016 (Decrease) 2017 2016
(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.
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 $70.0 million
for the quarter and year to date ended September 30, 2017,
respectively, increased 45.9 percent and 11.9 percent as compared
to the respective prior year periods.
For the Quarter Ended September 30, For the
Year to Date Ended September 30, Increase
Increase
Operating Income
($ in thousands)
2017 2016 (Decrease) 2017 2016
(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 %
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.
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,
Increase Increase
Selected Cash
Flow Items
2017 2016 (Decrease) 2017 2016
(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.
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.
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,
% of % of Total Total
2017 Revenue 2016 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,
% of % of Total
Total 2017 Revenue 2016 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.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20171102006340/en/
Investors:Alpha IR GroupChris Hodges or Sam Gibbons(312)
445-2870CECO@alpha-ir.comorMedia:Career Education
Corporation(847) 585-2600media@careered.com
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