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Career Education (CECO) Sees $33M - $41M in non-Cash Charged Tied to Campus Closures

December 10, 2012 5:10 PM EST Send to a Friend
As disclosed in its Quarterly Report on Form 10-Q for the quarter ended September 30, 2012, Career Education Corporation (Nasdaq: CECO) made the decision on November 5, 2012 to teach out – meaning gradually close through an orderly process – 23 domestic campuses. These campuses are identified below. Consistent with its commitment to students, the Company will work with each of these campuses to ensure that existing students are afforded the ability to complete their course of study. The Company anticipates that a majority of these campus closures will be completed by the second quarter of 2014.

ART & DESIGN:

Collins College, Phoenix, AZ

International Academy of Design & Technology (“IADT”):

IADT-Nashville, Nashville, TN

COLORADO TECHNICAL UNIVERSITY (“CTU”):

CTU Pueblo, Pueblo, CO

CTU Sioux Falls, Sioux Falls, SD

HEALTH EDUCATION:

Sanford-Brown College (“SBC”):

SBC-Austin, Austin, TX

SBC-Boston, Boston, MA

SBC-Columbus, Columbus, OH

SBC-Dearborn, Dearborn, MI

SBC-Farmington, Farmington, CT

SBC-Fenton, Fenton, MO

SBC-Grand Rapids, Grand Rapids, MI

SBC-Hillside, Hillside, IL

SBC-Houston North Loop, Houston, TX

SBC-Indianapolis, Indianapolis, IN

SBC-Portland, Portland, OR

SBC-Skokie, Skokie, IL

SBC-St. Peters, St. Peters, MO

SBC-Tinley Park, Tinley Park, IL

SBC-Tysons Corner, McLean, VA

Sanford-Brown Institute (“SBI”):

SBI-Cranston, Cranston, RI

SBI-Orlando, Orlando, FL

SBI-Trevose, Trevose, PA

SBI-Wilkens Township, Pittsburgh, PA

In connection with these campus closures, as of December 7, 2012, the Company anticipates it will incur charges, including non-cash expenses, of approximately $33 million—$41 million, of which the majority is expected to be recorded in the fourth quarter of 2012. These charges consist of approximately $25 million—$30 million of non-cash asset impairments to reduce the carrying value of long-lived assets to their respective fair value and $5 million—$7 million for cash severance and related costs, both of which will be recorded during the fourth quarter of 2012. Approximately $3 million—$4 million related to cash retention bonuses offered to certain employees will be recorded ratably over the period the employees are retained. The Company expects that the majority of the cash payments associated with both the severance and related costs and the retention bonuses will be paid out by December 2014.

In addition to the charges detailed above, a number of these campuses will have remaining lease obligations following the eventual campus closure, with the longest lease term being through 2021. The total gross remaining lease obligations for these campuses once they complete the close process is expected to be approximately $75 million. At the time each campus completes the close process, a charge will be recorded representing the net present value of the remaining lease obligation reduced by an estimated amount for sublease income. The final amount related to each campus will be finalized at the campus closure date.




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