University Group total enrollments increased
3.2% versus the prior year
Career Education Corporation (NASDAQ: CECO) today reported
operating and financial results for the second quarter and year to
date ended June 30, 2017.
University Group Key Highlights:
- Total enrollment increased 3.2 percent
as compared to the prior year
- University Group and Corporate
operating income for the second quarter of 2017 higher than our
projected outlook range
- Revenue of $285.7 million for the
current year to date as compared to $287.3 million in the prior
year, with the decline primarily driven by the academic calendar
redesign at AIU
2nd Quarter Consolidated Results:
- Revenue of $146.2 million for the
current quarter as compared to revenue of $182.6 million for the
prior year quarter, with the decline driven by the continued
progress toward teach-out completion of our Transitional Group and
Culinary Arts campuses
- Operating income of $9.1 million for
the quarter as compared to $17.3 million for the prior year
quarter, with the decline primarily driven by the academic calendar
redesign at AIU
Year to Date Consolidated Results:
- Revenue of $308.3 million for the
current year to date as compared to revenue of $381.5 million for
the prior year, with the decline driven by the continued progress
toward teach-out completion of our Transitional Group and Culinary
Arts campuses
- Operating income of $18.9 million for
the current year to date as compared to $24.3 million for the prior
year, with the decline primarily driven by the continued progress
toward teach-out completion of our Transitional Group and Culinary
Arts campuses
- Ended the quarter with $172.1 million
in cash, cash equivalents, restricted cash and available-for-sale
short-term investments
“Second quarter results came in ahead of our expectations and we
continue to execute on our strategy to pursue sustainable and
responsible growth opportunities,” said Todd Nelson, President and
Chief Executive Officer. “Our Universities have continued to
redesign their operations to further enhance student retention and
outcomes. We are investing in and improving execution across our
student-facing and student support operations. Total enrollments
within the University Group increased 3.2 percent versus the prior
year and we expect positive new enrollments for the second half of
2017. We are confident in our full year outlook and are encouraged
by the improving student retention and engagement we are
experiencing.”
REVENUE
For the quarter and year to date ended June 30, 2017, total
revenue was $146.2 million and $308.3 million representing a
decrease of 19.9 percent and 19.2 percent, respectively, compared
to total revenue of $182.6 million and $381.5 million for the
quarter and year to date ended June 30, 2016, respectively. The
decrease was primarily driven by declining revenues within the
Transitional Group and Culinary Arts segments which are in
teach-out.
Total revenue for the University Group was $137.4 million and
$285.7 million representing a decrease of 3.5 percent and 0.5
percent, respectively, for the quarter and year to date ended June
30, 2017. The decrease for the current quarter is primarily driven
by the academic calendar redesign at AIU.
For The Quarter Ended June 30,
For The Year to Date Ended June 30,
Increase Increase
Revenue ($ in
thousands)
2017 2016 (Decrease) 2017 2016
(Decrease) CTU $ 91,204 $ 91,736 -0.6 % $ 185,239 $
183,702 0.8 % AIU (1) 46,215 50,608 -8.7 %
100,468 103,581 -3.0 % Total University Group 137,419
142,344 -3.5 % 285,707 287,283 -0.5 % Corporate and Other —
— NM — — NM Subtotal 137,419 142,344 -3.5 %
285,707 287,283 -0.5 % Culinary Arts (2) 6,646 29,998 -77.8 %
16,935 68,621 -75.3 % Transitional Group (2) 2,157
10,284 -79.0 % 5,689 25,608 -77.8 % Total $ 146,222 $
182,626 -19.9 % $ 308,331 $ 381,512 -19.2 % (1) The decline
in revenue for the second quarter of 2017 was driven by 7 less
earnings days or 77 earnings days as compared to 84 earnings days
in the prior year quarter. (2) Teach-out campuses included
in the Transitional Group and Culinary Arts segments no longer
enroll new students.
TOTAL AND NEW STUDENT ENROLLMENTS
As of the end of the second quarter of 2017, total student
enrollments for the University Group were 32,600, compared to
31,600 as of the prior year quarter end.
As of June 30,
Increase
Total Student
Enrollments
2017 2016 (Decrease) CTU 21,000
21,200 -0.9 % AIU 11,600 10,400 11.5 % Total
University Group 32,600 31,600 3.2 % Culinary Arts
700 5,000 NM Transitional Group 300 1,600 NM Total
33,600 38,200 -12.0 %
For The
Quarter Ended June 30, For The Year to Date
Ended June 30, Increase
Increase
New Student
Enrollments
2017 2016 (Decrease) 2017 2016
(Decrease) CTU (1) 5,160 5,080 1.6 %
10,190 9,850 3.5 % AIU (1) 2,990
2,550 17.3 % 7,920 7,410 6.9 % Total University Group
(1) 8,150 7,630 6.8 % 18,110 17,260 4.9
% Culinary Arts (2) — 60 NM — 990 NM Transitional Group (2)
— 20 NM — 80 NM Total 8,150
7,710 5.7 % 18,110 18,330 -1.2 % (1) New
student enrollments were impacted by a change to how the Company
records certain cancelled students. Excluding the impact of this
change new student enrollments would have decreased 3.9 percent for
CTU, increased 5.1 percent for AIU and decreased 0.9 percent for
the University Group for the quarter ended June 30, 2017 as
compared to the prior year quarter and for the current year to date
CTU would have decreased 1.7 percent, AIU would have decreased 1.9
percent and the University Group in total would have decreased 1.8
percent as compared to the prior year to date. (2) Teach-out
campuses within the Transitional Group and Culinary Arts 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 June 30, 2017, the
Company recorded operating income of $9.1 million and $18.9
million, respectively, compared to operating income of $17.3
million and $24.3 million for the quarter and year to date ended
June 30, 2016, respectively. Total University Group operating
income of $29.1 million and $56.8 million for the quarter and year
to date ended June 30, 2017, respectively, decreased 20.8 percent
and 2.0 percent as compared to the respective prior year
periods.
For The Quarter Ended June 30,
For The Year to Date Ended June 30,
Increase Increase
Operating Income
($ in thousands)
2017 2016 (Decrease) 2017 2016
(Decrease) CTU $ 28,064 $ 29,970 -6.4 % $ 51,084 $
49,207 3.8 % AIU 1,075 6,838 -84.3 %
5,731 8,745 -34.5 % Total University Group 29,139 36,808
-20.8 % 56,815 57,952 -2.0 % Corporate and Other (5,847 )
(5,761 ) -1.5 % (10,396 ) (11,573 ) 10.2 %
Subtotal 23,292 31,047 -25.0 % 46,419 46,379 0.1 % Culinary Arts
(6,753 ) 361 NM (11,012 ) 3,467 NM Transitional Group (7,435
) (14,118 ) 47.3 % (16,522 ) (25,577 ) 35.4 %
Total $ 9,104 $ 17,290 -47.3 % $ 18,885 $ 24,269 -22.2 %
ADJUSTED OPERATING INCOME (LOSS)
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 operating income for the
University Group and Corporate was $25.9 million and $51.5 million
for the quarter and year to date ended June 30, 2017, respectively.
Adjusted operating loss for the Transitional Group and Culinary
Arts was $11.2 million and $21.0 million for the quarter and year
to date ended June 30, 2017, respectively.
For The Quarter Ended June 30,
For The Year to Date Ended June 30,
Adjusted
Operating Income (Loss)
2017 2016 2017 2016
University Group
and Corporate:
Operating income (1) $ 23,292 $
31,047 $ 46,419 $ 46,379
Depreciation and amortization (1) 2,559 2,777 5,090 5,880 Asset
impairments (1) — — — 237 Unused space charges (1) (2) —
— — 1,118
Adjusted Operating Income --
University Group and Corporate
(1)
$ 25,851 $ 33,824 $
51,509 $ 53,614
Transitional
Group and Culinary Arts:
Operating loss (3) $ (14,188 )
$ (13,757 ) $ (27,534 )
$ (22,110 ) Depreciation and amortization (3)
1,317 2,425 2,696 5,891 Unused space charges (2) (3) 1,654
7,128 3,811 9,140
Adjusted Operating Loss
--
Transitional and Culinary Arts
(3)
$ (11,217 ) $ (4,204 )
$ (21,027 ) $ (7,079 )
(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 $4.8 million
compared to net cash provided by operating activities of $16.8
million for the quarters ended June 30, 2017 and 2016,
respectively. For the year to date ended June 30, 2017, net cash
flows used in operations was $34.2 million as compared to net cash
provided of $6.6 million for the year to date ended 2016.
For The Quarter Ended June 30,
For The Year to Date Ended June 30,
Increase Increase
Selected Cash
Flow Items
2017 2016 (Decrease) 2017 2016
(Decrease) Net cash provided by (used in) operating
activities $ 4,807 $ 16,759 -71.3 % $ (34,246 ) $ 6,567 NM
Capital expenditures $ 1,411 $ 1,094 29.0 % $ 2,146 $ 1,970
8.9 %
As of June 30, 2017 and December 31, 2016, cash, cash
equivalents, restricted cash and available-for-sale short-term
investments totaled $172.1 million and $207.2 million,
respectively.
OUTLOOK
Second quarter results came in ahead of our previously provided
outlook and continued execution against our strategy has provided
us further visibility into our anticipated operating results. As a
result, the Company is providing an update to its previous outlook
for adjusted operating losses related to our teach-out operations
and for ending cash balances for 2017 as well as a third quarter
outlook for the University Group and Corporate. 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):
- University Group and Corporate adjusted
operating income in the range of $22 to $24 million for the third
quarter of 2017, compared to $19 million in 2016.
- 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 student enrollment expected to grow
at CTU during the third quarter of 2017. Although new student
enrollments are expected to decline for AIU in the third quarter of
2017 primarily due to the academic calendar redesign, AIU’s third
quarter decline is expected to be more than offset with new
enrollment growth during the fourth quarter of 2017.
- Adjusted operating loss for our
Transitional Group and Culinary Arts segments in the range of $45
million to $55 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 we wind-down the remainder of our 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 $155 million to $160 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 our 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 key assumptions and
factors, among others: (i) prospective student interest in our
programs continues to trend in line with recent experiences, (ii)
modest total enrollment growth within the University Group while
achieving the intended University Group efficiencies, (iii)
teach-outs to progress as expected and performance consistent with
current trends, (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) continued right-sizing of the Company’s corporate
expense structure to serve primarily online institutions, (vi) 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 (vii) 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
Wednesday, August 9, 2017 at 9:00 a.m. Eastern time to discuss its
second 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,” “anticipate,” “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)
June 30, December
31, 2017 2016 (unaudited)
ASSETS CURRENT ASSETS: Cash and cash equivalents,
unrestricted $ 38,898 $ 49,507 Restricted cash 1,375 1,375
Restricted short-term investments 7,097 8,597 Short-term
investments 124,702 147,681 Total cash and cash
equivalents, restricted cash and short-term investments 172,072
207,160 Student receivables, net 21,389 22,825 Receivables,
other, net 1,163 929 Prepaid expenses 13,335 14,446 Inventories 877
1,868 Other current assets 791 817 Assets of discontinued
operations 100 148 Total current assets
209,727 248,193
NON-CURRENT ASSETS: Property
and equipment, net 35,434 40,512 Goodwill 87,356 87,356 Intangible
assets, net 8,100 8,500 Student receivables, net 2,780 3,055
Deferred income tax assets, net 149,528 158,272 Other assets 7,563
7,608 Assets of discontinued operations 5,987 6,105
TOTAL ASSETS $ 506,475 $ 559,601
LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT
LIABILITIES: Accounts payable $ 10,414 $ 10,099 Accrued
expenses: Payroll and related benefits 31,485 41,203 Advertising
and production costs 10,196 10,253 Income taxes 2,098 1,830 Other
32,923 69,244 Deferred tuition revenue 27,230 28,364 Liabilities of
discontinued operations 6,667 8,219 Total current
liabilities 121,013 169,212
NON-CURRENT
LIABILITIES: Deferred rent obligations 23,879 30,713 Other
liabilities 23,421 31,751 Liabilities of discontinued operations
3,214 6,422 Total non-current liabilities
50,514 68,886
STOCKHOLDERS' EQUITY: Preferred
stock - - Common stock 842 835 Additional paid-in capital 618,105
613,325 Accumulated other comprehensive income (loss) 39 (258 )
Accumulated deficit (66,767 ) (76,230 ) Cost of shares in treasury
(217,271 ) (216,169 ) Total stockholders' equity
334,948 321,503
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 506,475 $
559,601 CAREER EDUCATION CORPORATION AND
SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF
INCOME AND COMPREHENSIVE INCOME
(In thousands, except per share amounts
and percentages)
For The Quarter Ended June 30,
% of % of Total
Total 2017 Revenue 2016 Revenue
REVENUE: Tuition and fees $ 145,507 99.5 % $
181,432 99.3 % Other 715 0.5 % 1,194 0.7 % Total
revenue 146,222 182,626
OPERATING EXPENSES:
Educational services and facilities 36,406 24.9 % 58,062 31.8 %
General and administrative 96,836 66.2 % 102,072 55.9 %
Depreciation and amortization 3,876 2.7 % 5,202 2.8 % Asset
impairment — 0.0 % — 0.0 % Total operating expenses
137,118 93.8 % 165,336 90.5 % Operating income 9,104
6.2 % 17,290 9.5 %
OTHER INCOME (EXPENSE): Interest
income 464 0.3 % 301 0.2 % Interest expense (113 ) -0.1 % (116 )
-0.1 % Miscellaneous income (expense) 253 0.2 % (231
) -0.1 % Total other income (expense) 604 0.4 % (46 )
0.0 %
PRETAX INCOME 9,708 6.6 % 17,244 9.4 % Provision for
income taxes 5,045 3.5 % 4,620 2.5 %
INCOME
FROM CONTINUING OPERATIONS 4,663 3.2 % 12,624 6.9 % Loss from
discontinued operations, net of tax (377 ) -0.3 %
(785 ) -0.4 %
NET INCOME 4,286 2.9 % 11,839
6.5 %
OTHER COMPREHENSIVE INCOME, net of tax: Foreign
currency translation adjustments 222 (97 ) Unrealized gain on
investments 11 131 Total other comprehensive income
233 34
COMPREHENSIVE INCOME $ 4,519 $ 11,873
NET INCOME PER SHARE - BASIC and DILUTED: Income from
continuing operations $ 0.07 $ 0.18 Loss from discontinued
operations (0.01 ) (0.01 ) Net income per share $
0.06 $ 0.17
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic 69,025 68,368 Diluted 70,884
69,015
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 June 30,
% of % of Total
Total 2017 Revenue 2016 Revenue
REVENUE: Tuition and fees $ 306,884 99.5 % $
379,217 99.4 % Other 1,447 0.5 % 2,295 0.6 % Total
revenue 308,331 381,512
OPERATING EXPENSES:
Educational services and facilities 76,579 24.8 % 119,600 31.3 %
General and administrative 205,081 66.5 % 225,635 59.1 %
Depreciation and amortization 7,786 2.5 % 11,771 3.1 % Asset
impairment — 0.0 % 237 0.1 % Total operating expenses
289,446 93.9 % 357,243 93.6 % Operating income
18,885 6.1 % 24,269 6.4 %
OTHER INCOME: Interest
income 854 0.3 % 566 0.1 % Interest expense (226 ) -0.1 % (352 )
-0.1 % Miscellaneous income (expense) 293 0.1 % (14 )
0.0 % Total other income 921 0.3 % 200 0.1 %
PRETAX INCOME 19,806 6.4 % 24,469 6.4 % Provision for income
taxes 9,546 3.1 % 8,755 2.3 %
INCOME FROM
CONTINUING OPERATIONS 10,260 3.3 % 15,714 4.1 % Loss from
discontinued operations, net of tax (797 ) -0.3 %
(864 ) -0.2 %
NET INCOME 9,463 3.1 % 14,850
3.9 %
OTHER COMPREHENSIVE INCOME, net of tax: Foreign
currency translation adjustments 263 96 Unrealized gain on
investments 34 454 Total other comprehensive income
297 550
COMPREHENSIVE INCOME $ 9,760 $ 15,400
NET INCOME PER SHARE - BASIC: Income from continuing
operations $ 0.15 $ 0.23 Loss from discontinued operations
(0.01 ) (0.01 ) Net income per share $ 0.14 $ 0.22
NET INCOME PER SHARE - DILUTED: Income from continuing
operations $ 0.14 $ 0.23 Loss from discontinued operations
(0.01 ) (0.01 ) Net income per share $ 0.13 $ 0.22
WEIGHTED AVERAGE SHARES OUTSTANDING: Basic 68,803
68,261 Diluted 70,590 68,627
CAREER
EDUCATION CORPORATION AND SUBSIDIARIES UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
For The Year to Date Ended June 30,
2017 2016 CASH FLOWS FROM OPERATING
ACTIVITIES: Net income $ 9,463 $ 14,850 Adjustments to
reconcile net income to net cash (used in) provided by operating
activities: Asset impairment — 237 Depreciation and amortization
expense 7,786 11,771 Bad debt expense 15,112 14,769 Compensation
expense related to share-based awards 2,326 1,391 Deferred income
taxes 8,743 — Gain on disposition of property and equipment — (238
) Changes in operating assets and liabilities: (77,676 )
(36,213 ) Net cash (used in) provided by operating
activities (34,246 ) 6,567
CASH FLOWS FROM
INVESTING ACTIVITIES: Purchases of available-for-sale
investments (145,088 ) (93,689 ) Sales of available-for-sale
investments 169,480 58,330 Purchases of property and equipment
(2,146 ) (1,970 ) Proceeds on the sale of assets — 3,400 Payments
of cash upon sale of businesses — (62 ) Net cash
provided by (used in) investing activities 22,246
(33,991 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 2,459 278 Payment on borrowings — (38,000
) Payments of employee tax associated with stock compensation
(1,101 ) (520 ) Net cash provided by (used in)
financing activities 1,358 (38,242 )
EFFECT
OF FOREIGN CURRENCY EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS:
33 (36 )
NET DECREASE IN CASH AND CASH
EQUIVALENTS (10,609 ) (65,702 )
CASH AND CASH EQUIVALENTS,
beginning of the period 50,882 116,740
CASH
AND CASH EQUIVALENTS, end of the period $ 40,273 $ 51,038
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED SELECTED SEGMENT INFORMATION
(In thousands, except percentages)
For The Quarter Ended June 30,
2017 2016 REVENUE: CTU $ 91,204
$ 91,736 AIU 46,215 50,608 Total University Group
137,419 142,344 Corporate and Other — — Subtotal
137,419 142,344 Culinary Arts 6,646 29,998 Transitional Group
2,157 10,284 Total $ 146,222 $ 182,626
OPERATING INCOME (LOSS): CTU $ 28,064 $ 29,970 AIU
1,075 6,838 Total University Group 29,139 36,808 Corporate
and Other (5,847 ) (5,761 ) Subtotal 23,292 31,047
Culinary Arts (6,753 ) 361 Transitional Group (7,435 )
(14,118 ) Total $ 9,104 $ 17,290
OPERATING MARGIN
(LOSS): CTU 30.8 % 32.7 % AIU 2.3 % 13.5 % Total
University Group 21.2 % 25.9 % Corporate and Other NM NM Subtotal
16.9 % 21.8 % Culinary Arts NM 1.2 % Transitional Group NM NM Total
6.2 % 9.5 %
CAREER EDUCATION CORPORATION
AND SUBSIDIARIES UNAUDITED SELECTED SEGMENT INFORMATION
(In thousands, except percentages)
For The Year to Date Ended June 30,
2017 2016 REVENUE: CTU $ 185,239
$ 183,702 AIU 100,468 103,581 Total University Group
285,707 287,283 Corporate and Other — — Subtotal
285,707 287,283 Culinary Arts 16,935 68,621 Transitional Group
5,689 25,608 Total $ 308,331 $ 381,512
OPERATING INCOME (LOSS): CTU $ 51,084 $ 49,207 AIU
5,731 8,745 Total University Group 56,815 57,952 Corporate
and Other (10,396 ) (11,573 ) Subtotal 46,419 46,379
Culinary Arts (11,012 ) 3,467 Transitional Group (16,522 )
(25,577 ) Total $ 18,885 $ 24,269
OPERATING MARGIN
(LOSS): CTU 27.6 % 26.8 % AIU 5.7 % 8.4 % Total
University Group 19.9 % 20.2 % Corporate and Other NM NM Subtotal
16.2 % 16.1 % Culinary Arts NM 5.1 % Transitional Group NM NM Total
6.1 % 6.4 %
CAREER EDUCATION CORPORATION
AND SUBSIDIARIES
UNAUDITED RECONCILIATION OF GAAP TO
NON-GAAP ITEMS (1)
(In thousands)
For The Quarter Ended June 30,
For The Year to Date Ended June 30, ACTUAL
ACTUAL
Adjusted
Operating Income (Loss)
2017 2016 2017 2016
University Group
and Corporate:
Operating income (2) (3) $ 23,292
$ 31,047 $ 46,419 $
46,379 Depreciation and amortization (3) 2,559 2,777 5,090
5,880 Asset impairments (3) — — — 237 Unused space charges (3) (4)
— — — 1,118
Adjusted Operating
Income --
University Group and Corporate
(5)
$ 25,851 $ 33,824 $
51,509 $ 53,614
Transitional
Group and Culinary Arts:
Operating loss (2) (6) $ (14,188
) $ (13,757 ) $ (27,534
) $ (22,110 ) Depreciation and
amortization (6) 1,317 2,425 2,696 5,891 Unused space charges (4)
(6) 1,654 7,128 3,811 9,140
Adjusted
Operating Loss --
Transitional and Culinary Arts
(5)
$ (11,217 ) $ (4,204 )
$ (21,027 ) $ (7,079 )
For the Year to Date Ended December 31,
For the Quarter Ended September 30,
ACTUAL OUTLOOK ACTUAL
OUTLOOK
Adjusted
Operating Income (Loss)
2016 2017 2018
2016 2017
University Group
and Corporate:
Operating income (2) (3)
$ 44,717 $89 - $94M Growth vs 2017
$ 16,190 $19 - $21M Depreciation and
amortization (3) 11,164 ~11 2017 levels 2,594 ~3 Asset impairments
(3) 237 None Assumed - None Assumed Unused space charges (3) (4)
1,134 None Assumed - None Assumed Significant legal settlements (3)
32,000 None Assumed - None Assumed
Adjusted
Operating Income --
University Group and Corporate
(5)
$ 89,252 $100 - $105M
Growth vs 2017 $ 18,784 $22 - $24M
Transitional
Group and Culinary Arts:
Operating loss (2) (6) $ (77,061
) ($67 - $77M) ($15 - $20M) $
(16,896 ) Depreciation and amortization (6) 11,583 ~5
- 2,621 Asset impairments (6) 927 None Assumed - Unused space
charges (4) (6) 34,719 ~17 ~5
4,983
Adjusted Operating Loss --
Transitional and Culinary Arts
(5)
$ (29,832 ) ($45 - $55M)
($10 - $15M) $ (9,292 ) (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 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 June 30, 2017 and 2016 is
presented below:
For The Quarter Ended June
30, For The Year to Date Ended June 30,
ACTUAL ACTUAL 2017 2016
2017 2016 Operating income for University
Group and Corporate $ 23,292 $ 31,047 $ 46,419 $ 46,379 Operating
loss for Culinary Arts and Transitional (14,188 )
(13,757 ) (27,534 ) (22,110 )
Operating income
$ 9,104 $ 17,290 $ 18,885
$ 24,269 (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 have been announced for teach-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/20170809005248/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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