University Group total enrollments increase
3.3% driven by new enrollment growth of 15.4% for the quarter as
well as improving retention trends
Career Education Corporation (NASDAQ: CECO) today reported
operating and financial results for the fourth quarter and year
ended December 31, 2017.
FOURTH QUARTER 2017 RESULTS
Total Company • Revenue of $143.1
million as compared to $155.3 million for the prior year quarter,
with the decline primarily driven by substantial completion of the
teach-out of our All Other Campuses segment • Operating income of
$10.7 million as compared to an operating loss of $55.9 million in
the prior year • Ended the quarter with $180.1 million in cash,
cash equivalents, restricted cash and available-for-sale short-term
investments
University
GroupandCorporate
• Revenue of $142.4 million as compared to $135.6 million in the
prior year quarter • Operating income of $25.5 million as compared
to an operating loss of $17.9 million in the prior year quarter •
Adjusted operating income of $28.1 million as compared to $16.9
million in the prior year quarter (See GAAP to non-GAAP
reconciliation attached to this press release for further details)
University GroupKey
Metrics
• New student enrollments grew 15.4 percent as compared to the
prior year quarter primarily driven by our investments in student
serving processes and operations that support growth • Total
student enrollments grew 3.3 percent driven by growth in new
student enrollments as well as improving retention trends
Teach-Outs
• Operating loss of $14.8 million as compared to $38.1 million in
the prior year quarter, with the improvement primarily driven by
substantial completion of the teach-out of our All Other Campuses
segment • Approximately 100 students remain as of December
31, 2017 within our teach-out campuses, who are expected to
complete their programs of study by the end of 2018
FULL YEAR 2017 HIGHLIGHTS – UNIVERSITY GROUP
AND CORPORATE
- Revenue increased 1.3 percent to $569.6
million as compared to the prior year
- Operating income increased by 113.6
percent to $95.5 million as compared to the prior year
- Adjusted operating income increased by
18.6 percent to $105.9 million as compared to the prior year
“We finished the year with strong momentum in our key operating
metrics, as investments continued to improve student onboarding and
learning experiences,” said Todd Nelson, President and Chief
Executive Officer. “Total enrollments at our University Group
reached the highest level in the last four years and new student
enrollments grew for the second consecutive quarter. Much of this
momentum is a result of our focus on and execution within our
student-serving processes and initiatives. Our cash balances are
expected to grow in 2018 and allow us to continue investing in our
students and employees. Overall, we remain committed to improving
student experiences, retention and academic outcomes and are
executing well against our objective of sustainable and responsible
growth.”
REVENUE
For the quarter and year ended December 31, 2017, total revenue
was $143.1 million and $596.4 million, respectively, representing a
decrease of 7.8 percent and 15.3 percent, respectively, compared to
total revenue of $155.3 million and $704.4 million for the quarter
and year ended December 31, 2016, respectively. The decrease was
primarily driven by declining revenues within our teach-out
campuses. There are seven campuses remaining to complete their
teach-outs during 2018.
Total revenue for the University Group was $142.4 million and
$569.6 million representing an increase of 5.0 percent and 1.3
percent, respectively, for the quarter and year ended December 31,
2017 as compared to the respective prior year periods.
For the Quarter Ended
December 31, For the Year Ended December 31,
Increase
Increase
Revenue ($ in
thousands)
2017 2016 (Decrease) 2017 2016
(Decrease) CTU $ 94,767 $ 94,696 0.1 % $ 371,325 $
369,319 0.5 % AIU 47,633 40,909 16.4 %
198,251 193,032 2.7 %
Total University Group
142,400 135,605 5.0 % 569,576 562,351 1.3 % Corporate and Other
— — NM — — NM Subtotal 142,400 135,605
5.0 % 569,576 562,351 1.3 % All Other Campuses (1) 718
19,650 -96.3 % 26,859 142,041 -81.1 % Total $
143,118 $ 155,255 -7.8 % $ 596,435 $ 704,392 -15.3 %
(1)
Campuses included in All Other Campuses
are in the process of being taught out or have completed their
teach-out as of December 31, 2017. Previously, these campuses were
reported within two segments, the former Transitional Group and
Culinary Arts segments.
TOTAL AND NEW STUDENT ENROLLMENTS
As of the end of 2017, total student enrollments for the
University Group were 34,700 compared to 33,600 as of the prior
year end representing a 3.3 percent increase. The increase
in new and total student enrollments is primarily driven by our
investments in student serving processes and operations that
support growth.
As of December 31,
Increase Total Student Enrollments 2017
2016 (Decrease) CTU 22,100 21,900
0.9 % AIU 12,600 11,700 7.7 % Total University
Group 34,700 33,600 3.3 % All Other Campuses (1)
100 3,000 NM Total 34,800 36,600 -4.9 %
For the Quarter Ended
December 31, For the Year Ended December 31,
Increase
Increase
New Student
Enrollments
2017 2016 (Decrease) 2017 2016
(Decrease) CTU (2) 5,940 5,530 7.4 %
22,110 20,770 6.5 % AIU (2) 4,770
3,750 27.2 % 15,790 14,350 10.0 % Total
University Group (2) 10,710 9,280 15.4 %
37,900 35,120 7.9 % All Other Campuses (1) — —
NM — 1,080 NM Total 10,710 9,280 15.4 %
37,900 36,200 4.7 %
(1)
All Other Campuses no longer enroll new
students; students who re-enter after 365 days are reported as new
student enrollments.
(2)
For the first half of 2017, 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 increased 6.2% for CTU,
increased 8.3% for AIU and increased 7.1% for the University Group
for the year ended December 31, 2017 as compared to the prior
year.
OPERATING INCOME (LOSS)
For the quarter and year ended December 31, 2017, the Company
recorded operating income of $10.7 million and $34.1 million,
respectively, compared to operating loss of $55.9 million and $32.3
million for the quarter and year ended December 31, 2016,
respectively. Total University Group and Corporate recorded
operating income of $25.5 million and $95.5 million for the quarter
and year ended December 31, 2017, respectively, compared to
operating loss of $17.9 million and operating income of $44.7
million for the quarter and year ended December 31, 2016,
respectively.
The operating income reported for the current year improved by
$66.5 million primarily driven by reduced operating expenses
associated with the substantial completion of the teach-out of our
All Other Campuses segment, as well as continued optimization of
our marketing and advertising spend. Additionally, the prior year
included legal settlement charges of $32.0 million as compared to
$6.5 million in the current year.
For the Quarter Ended December
31, For the Year Ended December 31,
Increase Increase
Operating Income
($ in thousands)
2017 2016 (Decrease) 2017 2016
(Decrease) CTU $ 30,553 $ 28,719 6.4 % $ 109,202 $
99,412 9.8 % AIU 414 (38,634 ) 101.1 %
8,401 (29,598 ) 128.4 % Total University Group 30,967 (9,915
) 412.3 % 117,603 69,814 68.5 % Corporate and Other (5,472 )
(7,937 ) 31.1 % (22,067 ) (25,097 ) 12.1 %
Subtotal 25,495 (17,852 ) 242.8 % 95,536 44,717 113.6 % All Other
Campuses (14,783 ) (38,055 ) 61.2 % (61,400 )
(77,061 ) 20.3 % Total $ 10,712 $ (55,907 ) 119.2 % $ 34,136
$ (32,344 ) 205.5 %
NET LOSS
For the quarter and year ended December 31, 2017, the Company
recorded net loss of $44.4 million and $31.9 million, respectively,
as compared to $32.9 million and $18.7 million in the respective
prior year periods. The net loss for the current quarter and year
were driven by a $52.7 million charge recorded as a result of the
enactment of the Tax Cuts and Jobs Act in the fourth quarter of
2017, which resulted in a revaluation of our deferred tax assets
and net state unrecognized tax positions at the new corporate
federal income tax rate of 21%. The prior year quarter and year net
loss was driven by $32.0 million of legal settlement charges.
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 $28.1 million and $105.9 million
for the quarter and year ended December 31, 2017, respectively.
Adjusted operating loss for All Other Campuses was $7.2 million and
$39.0 million for the quarter and year ended December 31, 2017,
respectively.
For the Quarter Ended
December 31, For the Year Ended December
31,
Adjusted
Operating Income (Loss)
2017 2016 2017
2016
University Group
and Corporate:
Operating income (loss) (1) $ 25,495
$ (17,852 ) $ 95,536 $
44,717 Depreciation and amortization (1) 2,631 2,690 10,326
11,164 Asset impairments (1) — — — 237 Unused space charges (1) (2)
(7 ) 16 (7 ) 1,134 Significant legal settlements (1) —
32,000 — 32,000
Adjusted Operating Income
--
University Group and Corporate
(1)
$ 28,119 $ 16,854 $
105,855 $ 89,252 Increase (Decrease)
66.8 % 18.6 %
All Other
Campuses
Operating loss (3) $ (14,783 )
$ (38,055 ) $ (61,400 )
$ (77,061 ) Depreciation and amortization (3)
(9 ) 3,071 3,664 11,583 Asset impairments (3) — 927 — 927 Unused
space charges (2) (3) 1,016 20,596 12,174 34,719 Significant legal
settlements (3) 6,543 — 6,543 —
Adjusted Operating Loss --
All Other Campuses (3)
$ (7,233 ) $ (13,461 )
$ (39,019 ) $ (29,832 )
Increase (Decrease)
46.3 % -30.8
%
(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 All Other Campuses.
BALANCE SHEET AND CASH FLOW
Net cash provided by operating activities was $7.3 million
compared to net cash used in operating activities of $9.8 million
for the quarters ended December 31, 2017 and 2016, respectively.
For the year ended December 31, 2017, net cash used in operations
was $21.8 million as compared to net cash provided of $6.5 million
for the year ended December 31, 2016. The increase in cash usage
for the current year was primarily driven by $32.0 million of legal
settlement payments made during the first quarter of 2017.
For the Quarter Ended December
31, For the Year Ended December 31,
Increase
Increase
Selected Cash
Flow Items
2017 2016 (Decrease) 2017
2016 (Decrease) Net cash provided by (used in)
operating activities $ 7,308 $ (9,789 ) 174.7 % $ (21,789 )
$ 6,475 -436.5 % Capital expenditures $ 2,906 $ 777 274.0 %
$ 6,332 $ 4,129 53.4 %
As of December 31, 2017 and December 31, 2016, cash, cash
equivalents, restricted cash and available-for-sale short-term
investments totaled $180.1 million and $207.2 million,
respectively.
OUTLOOK
The Company is executing well against its objective of
sustainable and responsible growth with student initiatives and
investments in our University Group showing positive results and
the teach-out of our All Other Campuses segment substantially
complete. As a result, consistent with the objective of sustainable
and responsible growth the Company is providing an outlook to its
adjusted operating income and ending cash balance for 2018 and
2019. The Company currently expects the following results, subject
to the key assumptions identified below (see the GAAP to non-GAAP
reconciliation for adjusted operating income (loss) attached to
this press release for further details):
Financial Outlook:
For the 1st Quarter Ending
March 31, For the Year Ending December 31, 2017
2018 2017 2018
Adjusted
Operating Income
Total Company $15.8M $22M - $24M $66.8M $99M - $106M
University Group and Corporate $25.7M $26M - $27M $105.9M $110M -
$115M All Other Campuses ($9.8M) ($3M) - ($4M) ($39.0M)
($9M) - ($11M)
Cash, cash
equivalents, restricted cash and short term
investments
$180.1M $220M - $225M
We expect adjusted operating income for the total company to
grow in 2019 as compared to 2018 and our ending cash balance for
2019 to increase as compared to 2018.
University Group Enrollment Outlook:
- CTU
- New student enrollments for the first
quarter of 2018 are expected to increase as compared to the prior
year quarter.
- AIU:
- The academic calendar redesign has
caused significant variability in quarterly new enrollment trends
due to the varying number of enrollment days in any given
quarter.
- As a result, we expect new student
enrollments to decrease approximately 40 percent in the first
quarter of 2018 as compared to the prior year quarter.
- However, we expect this decrease to be
more than offset by growth in new student enrollments in the second
and third quarters of 2018, such that on a rolling three quarter
basis we expect new student enrollments to reflect growth.
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 2018 and 2019 are based on the following key assumptions and
factors, among others: (i) prospective student interest in the
Company’s programs continues to trend in line with recent
experiences, (ii) initiatives and investments in student-serving
processes and operations continue to positively impact enrollment
trends within the University Group, (iii) achievement of
anticipated recovery rates for the Company’s real estate
obligations and timing of any associated lease termination payments
in line with our current expectations, (iv) no material changes in
the legal or regulatory environment, and excludes legal and
regulatory liabilities and other related impacts which are not
probable and estimable at this time, and any impact of new or
proposed regulations, including the “borrower defense to repayment”
and gainful employment regulations and any modifications thereto,
and (v) no material changes in the estimated amount of compensation
expense that could be impacted by changes in the Company’s stock
price. 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
Wednesday, February 21, 2018 at 5:30 p.m. Eastern time to discuss
its fourth quarter and full year 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™ 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,” “remain” 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
academic 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, 2017 and its subsequent
filings with the Securities and Exchange Commission.
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
December 31, December 31,
2017 2016 ASSETS CURRENT
ASSETS: Cash and cash equivalents, unrestricted $ 18,110 $
49,507 Restricted cash 789 1,375 Restricted short-term investments
5,070 8,597 Short-term investments 156,178 147,681
Total cash and cash equivalents, restricted cash and short-term
investments 180,147 207,160 Student receivables, net 18,875
22,825 Receivables, other, net 1,163 929 Prepaid expenses 7,722
14,446 Inventories 1,112 1,868 Other current assets 1,319 817
Assets of discontinued operations 382 148 Total
current assets 210,720 248,193
NON-CURRENT
ASSETS: Property and equipment, net 33,230 40,512 Goodwill
87,356 87,356 Intangible assets, net 7,900 8,500 Student
receivables, net 2,548 3,055 Deferred income tax assets, net 98,084
158,272 Other assets 5,673 7,608 Assets of discontinued operations
1,585 6,105
TOTAL ASSETS $
447,096 $ 559,601 LIABILITIES AND
STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts
payable $ 8,515 $ 10,099 Accrued expenses: Payroll and related
benefits 32,910 41,203 Advertising and production costs 9,245
10,253 Income taxes 2,185 1,830 Other 31,233 69,244 Deferred
tuition revenue 22,897 28,364 Liabilities of discontinued
operations 5,701 8,219 Total current liabilities
112,686 169,212
NON-CURRENT
LIABILITIES: Deferred rent obligations 15,277 30,713 Other
liabilities 22,143 31,751 Liabilities of discontinued operations
785 6,422 Total non-current liabilities 38,205
68,886
STOCKHOLDERS' EQUITY: Preferred stock -
- Common stock 843 835 Additional paid-in capital 621,008 613,325
Accumulated other comprehensive loss (164 ) (258 ) Accumulated
deficit (108,127 ) (76,230 ) Cost of shares in treasury
(217,355 ) (216,169 ) Total stockholders' equity
296,205 321,503
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 447,096 $ 559,601
CAREER EDUCATION CORPORATION AND SUBSIDIARIES UNAUDITED
CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
(In thousands, except per share amounts
and percentages)
For the Quarter Ended December 31, % of
% of Total Total 2017
Revenue 2016 Revenue REVENUE:
Tuition and fees $ 142,557 99.6 % $ 154,489 99.5 % Other
561 0.4 % 766 0.5 % Total revenue 143,118
155,255
OPERATING EXPENSES: Educational services and
facilities 28,977 20.2 % 64,107 41.3 % General and administrative
100,807 70.4 % 140,367 90.4 % Depreciation and amortization 2,622
1.8 % 5,761 3.7 % Asset impairment — 0.0 % 927 0.6 %
Total operating expenses 132,406 92.5 % 211,162 136.0
% Operating income (loss) 10,712 7.5 % (55,907 )
-36.0 %
OTHER INCOME (EXPENSE): Interest income 572 0.4 %
362 0.2 % Interest expense (111 ) -0.1 % (115 ) -0.1 %
Miscellaneous income 176 0.1 % 304 0.2 % Total other
income 637 0.4 % 551 0.4 %
PRETAX INCOME
(LOSS) 11,349 7.9 % (55,356 ) -35.7 % Provision for (benefit
from) income taxes 55,982 39.1 % (25,326 ) -16.3 %
LOSS FROM CONTINUING OPERATIONS (44,633 ) -31.2 %
(30,030 ) -19.3 % Income (loss) from discontinued operations, net
of tax 251 0.2 % (2,846 ) -1.8 %
NET LOSS
(44,382 ) -31.0 % (32,876 ) -21.2 %
OTHER
COMPREHENSIVE LOSS, net of tax: Foreign currency translation
adjustments (80 ) (220 ) Unrealized loss on investments (228
) (125 ) Total other comprehensive loss (308 )
(345 )
COMPREHENSIVE LOSS $ (44,690 ) $ (33,221 )
NET LOSS PER SHARE - BASIC and DILUTED: Loss from continuing
operations $ (0.64 ) $ (0.44 ) Income (loss) from discontinued
operations 0.00 (0.04 ) Net loss per share $ (0.64 )
$ (0.48 )
WEIGHTED AVERAGE SHARES OUTSTANDING: Basic
and Diluted 69,105 68,505
CAREER
EDUCATION CORPORATION AND SUBSIDIARIES CONSOLIDATED
STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
(In thousands, except per share amounts
and percentages)
For the Year Ended December 31, %
of % of Total Total
2017 Revenue 2016 Revenue
REVENUE: Tuition and fees $ 593,849 99.6 % $
700,525 99.5 % Other 2,586 0.4 % 3,867 0.5 % Total
revenue 596,435 704,392
OPERATING EXPENSES:
Educational services and facilities 143,344 24.0 % 235,100 33.4 %
General and administrative 404,965 67.9 % 477,725 67.8 %
Depreciation and amortization 13,990 2.3 % 22,747 3.2 % Asset
impairment — 0.0 % 1,164 0.2 % Total operating
expenses 562,299 94.3 % 736,736 104.6 % Operating
income (loss) 34,136 5.7 % (32,344 ) -4.6 %
OTHER
INCOME: Interest income 1,900 0.3 % 1,262 0.2 % Interest
expense (451 ) -0.1 % (584 ) -0.1 % Miscellaneous income 665
0.1 % 300 0.0 % Total other income 2,114 0.4 %
978 0.1 %
PRETAX INCOME (LOSS) 36,250 6.1 % (31,366 ) -4.5 %
Provision for (benefit from) income taxes 67,125 11.3 %
(16,550 ) -2.3 %
LOSS FROM CONTINUING
OPERATIONS (30,875 ) -5.2 % (14,816 ) -2.1 % Loss from
discontinued operations, net of tax (1,022 ) -0.2 %
(3,896 ) -0.6 %
NET LOSS (31,897 ) -5.3 %
(18,712 ) -2.7 %
OTHER COMPREHENSIVE INCOME, net of
tax: Foreign currency translation adjustments 288 (77 )
Unrealized (loss) gain on investments (194 ) 699
Total other comprehensive income 94 622
COMPREHENSIVE LOSS $ (31,803 ) $ (18,090 )
NET
LOSS PER SHARE - BASIC and DILUTED: Loss from continuing
operations $ (0.45 ) $ (0.22 ) Loss from discontinued operations
(0.01 ) (0.05 ) Net loss per share $ (0.46 ) $ (0.27
)
WEIGHTED AVERAGE SHARES OUTSTANDING: Basic and
Diluted 68,949 68,373
CAREER
EDUCATION CORPORATION AND SUBSIDIARIES CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In thousands)
For the Year Ended December 31, 2017
2016 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $
(31,897 ) $ (18,712 ) Adjustments to reconcile net loss to net cash
(used in) provided by operating activities: Asset impairment —
1,164 Depreciation and amortization expense 13,990 22,747 Bad debt
expense 27,436 31,885 Compensation expense related to share-based
awards 4,970 3,237 Deferred income taxes 64,225 (18,087 ) Gain on
disposition of property and equipment — (438 ) Changes in operating
assets and liabilities: Student receivables, gross 5,129 6,925
Allowance for doubtful accounts (28,075 ) (29,033 ) Other
receivables, net (257 ) 1,127 Inventories, prepaid expenses, and
other current assets 8,742 2,783 Deposits and other non-current
assets 1,706 1,634 Accounts payable (1,588 ) (16,264 ) Accrued
expenses and deferred rent obligations (80,703 ) 29,254 Deferred
tuition revenue (5,467 ) (11,747 ) Net cash (used in)
provided by operating activities (21,789 ) 6,475
CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of
available-for-sale investments (256,243 ) (160,590 ) Sales of
available-for-sale investments 250,928 126,830 Purchases of
property and equipment (6,332 ) (4,129 ) Proceeds on the sale of
assets — 3,600 Payments of cash upon sale of businesses —
(62 ) Net cash used in investing activities (11,647 )
(34,351 )
CASH FLOWS FROM FINANCING
ACTIVITIES: Issuance of common stock 2,722 773 Payment on
borrowings — (38,000 ) Payments of employee tax associated with
stock compensation (1,187 ) (563 ) Net cash provided
by (used in) financing activities 1,535 (37,790 )
EFFECT OF FOREIGN CURRENCY EXCHANGE RATE CHANGES ON
CASH AND CASH EQUIVALENTS: (82 ) (192 )
NET DECREASE IN CASH AND CASH EQUIVALENTS (31,983 )
(65,858 )
CASH AND CASH EQUIVALENTS, beginning of the period
50,882 116,740
CASH AND CASH EQUIVALENTS, end of
the period $ 18,899 $ 50,882
CAREER
EDUCATION CORPORATION AND SUBSIDIARIES UNAUDITED SELECTED
SEGMENT INFORMATION
(In thousands, except percentages)
For the Quarter Ended December
31,
2017 2016 REVENUE: CTU $ 94,767 $
94,696 AIU 47,633 40,909 Total University Group
142,400 135,605 Corporate and Other — — Subtotal
142,400 135,605 All Other Campuses 718 19,650 Total $
143,118 $ 155,255
OPERATING INCOME (LOSS): CTU $
30,553 $ 28,719 AIU 414 (38,634 ) Total University
Group 30,967 (9,915 ) Corporate and Other (5,472 )
(7,937 ) Subtotal 25,495 (17,852 ) All Other Campuses
(14,783 ) (38,055 ) Total $ 10,712 $ (55,907 )
OPERATING MARGIN (LOSS): CTU 32.2 % 30.3 % AIU 0.9 %
-94.4 % Total University Group 21.7 % -7.3 % Corporate and
Other NM NM Subtotal 17.9 % -13.2 % All Other Campuses NM NM Total
7.5 % -36.0 %
CAREER EDUCATION
CORPORATION AND SUBSIDIARIES UNAUDITED SELECTED SEGMENT
INFORMATION
(In thousands, except percentages)
For the Year Ended December 31, 2017
2016 REVENUE: CTU $ 371,325 $ 369,319 AIU
198,251 193,032 Total University Group 569,576
562,351 Corporate and Other — — Subtotal 569,576
562,351 All Other Campuses 26,859 142,041 Total $
596,435 $ 704,392
OPERATING INCOME (LOSS): CTU $
109,202 $ 99,412 AIU 8,401 (29,598 ) Total University
Group 117,603 69,814 Corporate and Other (22,067 )
(25,097 ) Subtotal 95,536 44,717 All Other Campuses (61,400
) (77,061 ) Total $ 34,136 $ (32,344 )
OPERATING
MARGIN (LOSS): CTU 29.4 % 26.9 % AIU 4.2 % -15.3
% Total University Group 20.6 % 12.4 % Corporate and Other NM NM
Subtotal 16.8 % 8.0 % All Other Campuses -228.6 %
-54.3 % Total 5.7 % -4.6 %
CAREER
EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED RECONCILIATION OF GAAP TO
NON-GAAP ITEMS (1)
(In thousands, unless otherwise noted)
For the Quarter Ended December 31,
For the Year Ended December 31, ACTUAL ACTUAL
Adjusted
Operating Income (Loss)
2017 2016 2017 2016
University Group
and Corporate:
Operating income (loss) (2) (3) $
25,495 $ (17,852 ) $
95,536 $ 44,717 Depreciation and amortization
(3) 2,631 2,690 10,326 11,164 Asset impairments (3) — — — 237
Unused space charges (3) (4) (7 ) 16 (7 ) 1,134 Significant legal
settlements (3) — 32,000 — 32,000
Adjusted Operating Income --
University Group and Corporate
(5)
$ 28,119 $ 16,854 $
105,855 $ 89,252
All Other
Campuses:
Operating loss (2) (6) $ (14,783
) $ (38,055 ) $ (61,400
) $ (77,061 ) Depreciation and
amortization (6) (9 ) 3,071 3,664 11,583 Asset impairments (6) —
927 — 927 Unused space charges (4) (6) 1,016 20,596 12,174 34,719
Significant legal settlements (6) 6,543 —
6,543 —
Adjusted Operating Loss --
All Other Campuses (5)
$ (7,233 ) $ (13,461 )
$ (39,019 ) $ (29,832 )
For the 1st Quarter
Ending March 31, For the Year Ending December 31,
ACTUAL OUTLOOK ACTUAL
OUTLOOK 2017 2018
2017 2018
Total
Company
Operating income (2)
$9.8M $20M - $22M $34.1M $84M - $91M
Depreciation and amortization 3.9M ~2 14.0M ~10 Asset impairments —
— — — Unused space charges (4) 2.1M — 12.2M ~5 Significant legal
settlements — — 6.5M —
Adjusted Operating
Income $15.8M $22M - $24M $66.8M $99M -
$106M
University Group
and Corporate
Operating income (2) (3) $23.1M $24M -
$25M $95.5M $100M - $105M Depreciation and
amortization (3) 2.6M ~2 10.4M ~10 Asset impairments (3) — — — —
Unused space charges (3) (4) — — — — Significant legal settlements
(3) — — — —
Adjusted Operating
Income (5) $25.7M $26M - $27M
$105.9M $110M - $115M
All Other
Campuses
Operating loss (2) (6) ($13.3M) ($3M) -
($4M) ($61.4M) ($14M) - ($16M) Depreciation and
amortization (6) 1.4M — 3.7M — Asset impairments (6) — — — — Unused
space charges (4) (6) 2.1M — 12.2M ~5 Significant legal settlements
(6) — — 6.5M —
Adjusted Operating Loss
(5) ($9.8M) ($3M) - ($4M) ($39.0M)
($9M) - ($11M) (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 liquid
ity. 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 (loss) for the University Group and Corporate and operating
loss for All Other Campuses make up the components of operating
income (loss). A reconciliation of these components for the
quarters and years ended December 31, 2017 and 2016 is presented
below:
For the Quarter Ended December
31, For the Year Ended December 31, ACTUAL
ACTUAL 2017 2016 2017
2016 Operating income (loss) for University Group and
Corporate $ 25,495 $ (17,852 ) $ 95,536 $ 44,717 Operating loss for
All Other Campuses (14,783 ) (38,055 ) (61,400
) (77,061 )
Operating income (loss) $
10,712 $ (55,907 ) $
34,136 $ (32,344 ) (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 All Other Campuses. As All Other
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 All Other Campuses.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20180221006353/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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