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Form 8-K CAREER EDUCATION CORP For: Aug 03

August 3, 2016 4:08 PM EDT

 

Pnovemb

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): August 3, 2016

 

Career Education Corporation

(Exact Name of Registrant as Specified in Charter)

 

 

 

 

 

 

Delaware

 

0-23245

 

36-3932190

(State or Other Jurisdiction

of Incorporation)

 

(Commission File Number)

 

(IRS Employer

Identification No.)

 

 

 

 

231 N. Martingale Rd., Schaumburg, IL

 

60173

(Address of Principal Executive Offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code: (847) 781-3600

Not applicable

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

 

 


 

Item 2.02.

Results of Operations and Financial Condition. 

On August 3, 2016, Career Education Corporation (the “Company”) issued a press release describing the Company’s financial results for the quarter and year to date ended June 30, 2016. A copy of the press release is being furnished as Exhibit 99.1, and the information contained therein is incorporated herein by reference. Following the issuance of the press release, the Company will host a conference call and webcast on which its financial results for the quarter and year to date ended June 30, 2016 will be discussed. The presentation materials that will be used for the call and webcast have been posted on the Company’s website and are attached as Exhibit 99.2.

The information contained in Item 2.02 of this Form 8-K, including Exhibits 99.1 and 99.2, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall the information be deemed incorporated by reference into any filing under the Securities Act of 1933 or Securities Exchange Act of 1934, each as amended, except as shall be expressly set forth by specific reference in such a filing.

Item 9.01.

Financial Statements and Exhibits.

(d) Exhibits.

 

Exhibit

Number

  

Description of Exhibits

 

 

 

99.1

  

Press release of the Company dated August 3, 2016 reporting the Company’s financial results for the quarter and year to date ended June 30, 2016

 

 

 

99.2

  

Presentation materials used by the Company in connection with its August 3, 2016 earnings conference call and webcast

2


 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

 

CAREER EDUCATION CORPORATION

 

 

By:

 

/s/ Andrew J. Cederoth

 

 

Andrew J. Cederoth

 

 

Senior Vice President and Chief Financial Officer

 

Date: August 3, 2016

3


 

Exhibit Index

 

Exhibit

Number

 

Description of Exhibits

 

 

 

99.1

 

Press release of the Company dated August 3, 2016 reporting the Company’s financial results for the quarter and year to date ended June 30, 2016

 

 

 

99.2

 

Presentation materials used by the Company in connection with its August 3, 2016 earnings conference call and webcast

 

 

4

CEC ANNOUNCES 2Q16 RESULTS …PG 1

 

Exhibit 99.1

CAREER EDUCATION CORPORATION REPORTS RESULTS FOR SECOND QUARTER 2016

Operating income of $17.3 million versus prior quarter operating loss of $19.9 million,

driven by better than expected execution of strategic initiatives

 

Schaumburg, Ill. (August 3, 2016) – Career Education Corporation (NASDAQ: CECO) today reported operating and financial results for the second quarter and year to date ended June 30, 2016. The Company also updated its 2016 year end cash and consolidated adjusted EBITDA outlook.

Second Quarter Consolidated Results:

 

·

Revenue of $182.6 million for the quarter as compared to $216.8 million in the prior year quarter, with the decline driven by teach-out campuses

 

·

Net income improved to $11.8 million as compared to the prior year quarter net loss of $20.7 million

 

·

Consolidated adjusted EBITDA of $25.6 million compared to negative $4.3 million in the prior year quarter (see reconciliation of GAAP to non-GAAP items attached to this press release)

 

·

Cash flow generated from operations was $16.7 million, compared to cash usage of $6.4 million in the prior year quarter

Year to Date Consolidated Results:

 

·

Net income improved to $14.9 million as compared to the prior year net loss of $45.6 million

 

·

Operating expenses decreased by $130.8 million as compared to the prior year driven by continued execution on strategic initiatives

 

·

Consolidated adjusted EBITDA improved to $38.8 million as compared to negative $16.1 million in the prior year (see reconciliation of GAAP to non-GAAP items attached to this press release)

 

·

As of June 30, 2016, cash, cash equivalents, restricted cash and available-for-sale short-term and long-term investments, net of borrowings, was $208.8 million

Key Business Highlights:

 

·

University Group revenue increased by 3.0 percent versus the prior year quarter

 

·

University Group operating income increased by 25.0 percent to $36.8 million compared to the prior year quarter, primarily driven by increased revenue and improved efficiency of operations

 

·

University Group total enrollments increased by 1.0 percent as compared to the prior year

 

·

Organization has committed incremental investments to various student-serving operations to further its goal of improving student retention and outcomes

 

·

Total student enrollment at our Transitional and Culinary Arts campuses is trending better than estimated

 

“Strong student retention across most of our institutions, better than estimated total student enrollment at our teach-out campuses, and continued efficiency and stability at our University Group, resulted in another quarter of improvement in year-over-year operating performance,” said Todd Nelson, President and Chief Executive Officer. “This improvement in our operating performance has enabled us to make incremental investments in various student-serving areas of operations, which we believe will positively impact student experiences in the future. For the remainder of this year, we are focused on optimizing our operating processes with the goal of further enhancing student retention and outcomes. As a result of the positive trends we have been experiencing, we are updating our year end cash and adjusted EBITDA outlook we provided last quarter, and are committed to continue executing against our ongoing initiatives.”

 

 


CEC ANNOUNCES 2Q16 RESULTS …PG 2

 

REVENUE

For the quarter and year to date ended June 30, 2016, total revenue was $182.6 million and $381.5 million, respectively, representing a decrease of 15.8 percent and 14.0 percent, respectively, compared to total revenue of $216.8 million and $443.8 million for the quarter and year to date ended June 30, 2015, respectively. Total revenue for the University Group was $142.3 million and $287.3 million for the quarter and year to date ended June 30, 2016, respectively, representing an increase of 3.0 percent and 3.9 percent, respectively.

 

 

 

For the Quarter Ended

June 30,

 

 

For the Year to Date Ended

June 30,

 

Revenue ($ in thousands)

 

2016

 

 

2015

 

 

Increase (Decrease)

 

 

2016

 

 

2015

 

 

Increase (Decrease)

 

CTU

 

$

91,736

 

 

$

86,174

 

 

 

6.5

%

 

$

183,702

 

 

$

171,301

 

 

 

7.2

%

AIU

 

 

50,608

 

 

 

52,024

 

 

 

-2.7

%

 

 

103,581

 

 

 

105,090

 

 

 

-1.4

%

Total University Group

 

 

142,344

 

 

 

138,198

 

 

 

3.0

%

 

 

287,283

 

 

 

276,391

 

 

 

3.9

%

Corporate and Other

 

 

 

 

 

39

 

 

 

-100.0

%

 

 

 

 

 

78

 

 

 

-100.0

%

Subtotal

 

 

142,344

 

 

 

138,237

 

 

 

3.0

%

 

 

287,283

 

 

 

276,469

 

 

 

3.9

%

Culinary Arts (1)

 

 

29,998

 

 

 

42,048

 

 

 

-28.7

%

 

 

68,621

 

 

 

86,760

 

 

 

-20.9

%

Transitional Group (1)

 

 

10,284

 

 

 

36,543

 

 

 

-71.9

%

 

 

25,608

 

 

 

80,613

 

 

 

-68.2

%

Total

 

$

182,626

 

 

$

216,828

 

 

 

-15.8

%

 

$

381,512

 

 

$

443,842

 

 

 

-14.0

%

 

(1)

Teach-out campuses included in the Transitional Group no longer enroll new students. The Culinary Arts campuses were announced for teach-out during December 2015 and ceased enrolling new students in January 2016.


 


CEC ANNOUNCES 2Q16 RESULTS …PG 3

 

TOTAL AND NEW STUDENT ENROLLMENTS

As of the end of the second quarter of 2016, total student enrollments for the University Group were 31,600, compared to 31,300 as of the prior year quarter end, primarily driven by improved student retention at CTU and new enrollment growth at AIU. New student enrollments for the University Group were 7,630 and 17,260 for the quarter and year to date ended June 30, 2016, respectively, compared to new enrollments of 7,950 and 18,080 for the quarter and year to date ended June 30, 2015, respectively.  

 

 

 

As of June 30,

 

Total Student Enrollment

 

2016

 

 

2015

 

 

Increase (Decrease)

 

CTU

 

 

21,200

 

 

 

20,600

 

 

 

2.9

%

AIU

 

 

10,400

 

 

 

10,700

 

 

 

-2.8

%

Total University Group

 

 

31,600

 

 

 

31,300

 

 

 

1.0

%

Culinary Arts

 

 

5,000

 

 

 

7,800

 

 

 

-35.9

%

Transitional Group

 

 

1,600

 

 

 

7,000

 

 

 

-77.1

%

Total

 

 

38,200

 

 

 

46,100

 

 

 

-17.1

%

 

 

 

For the Quarter Ended

June 30,

 

 

For the Year to Date Ended

June 30,

 

New Student Enrollments

 

2016

 

 

2015

 

 

Increase (Decrease)

 

 

2016

 

 

2015

 

 

Increase (Decrease)

 

CTU

 

 

5,080

 

 

 

5,670

 

 

 

-10.4

%

 

 

9,850

 

 

 

10,710

 

 

 

-8.0

%

AIU

 

 

2,550

 

 

 

2,280

 

 

 

11.8

%

 

 

7,410

 

 

 

7,370

 

 

 

0.5

%

Total University Group

 

 

7,630

 

 

 

7,950

 

 

 

-4.0

%

 

 

17,260

 

 

 

18,080

 

 

 

-4.5

%

Culinary Arts (1)

 

 

60

 

 

 

1,450

 

 

 

-95.9

%

 

 

990

 

 

 

3,490

 

 

 

-71.6

%

Transitional Group (1)

 

 

20

 

 

 

830

 

 

 

-97.6

%

 

 

80

 

 

 

2,660

 

 

 

-97.0

%

Total

 

 

7,710

 

 

 

10,230

 

 

 

-24.6

%

 

 

18,330

 

 

 

24,230

 

 

 

-24.3

%

 

(1)

Teach-out campuses within the Transitional Group and Culinary Arts no longer enroll new students, effective upon their teach-out announcement; students who re-enter after 365 days are reported as new student enrollments. For Culinary Arts, teach-outs announced in December 2015 were effective beginning after the January 2016 new enrollment.


 


CEC ANNOUNCES 2Q16 RESULTS …PG 4

 

OPERATING INCOME (LOSS)

For the quarter and year to date ended June 30, 2016, operating income was $17.3 million and $24.3 million, respectively, representing an improvement of 186.9 percent and 154.8 percent compared to an operating loss of $19.9 million and $44.3 million for the quarter and year to date ended June 30, 2015, respectively. Total University Group operating income increased to $36.8 million and $58.0 million for the quarter and year to date ended June 30, 2016, respectively, representing an increase of 25.0 percent and 40.8 percent, respectively.

 

 

 

For the Quarter Ended

June 30,

 

 

For the Year to Date Ended

June 30,

 

Operating Income (Loss) ($ in thousands)

 

2016

 

 

2015

 

 

Increase (Decrease)

 

 

2016

 

 

2015

 

 

Increase (Decrease)

 

CTU

 

$

29,970

 

 

$

24,263

 

 

 

23.5

%

 

$

49,207

 

 

$

38,879

 

 

 

26.6

%

AIU

 

 

6,838

 

 

 

5,174

 

 

 

32.2

%

 

 

8,745

 

 

 

2,287

 

 

 

282.4

%

Total University Group

 

 

36,808

 

 

 

29,437

 

 

 

25.0

%

 

 

57,952

 

 

 

41,166

 

 

 

40.8

%

Corporate and Other

 

 

(5,761

)

 

 

(7,036

)

 

 

18.1

%

 

 

(11,573

)

 

 

(12,896

)

 

 

10.3

%

Subtotal

 

 

31,047

 

 

 

22,401

 

 

 

38.6

%

 

 

46,379

 

 

 

28,270

 

 

 

64.1

%

Culinary Arts (1)

 

 

361

 

 

 

(10,560

)

 

 

103.4

%

 

 

3,467

 

 

 

(10,317

)

 

 

133.6

%

Transitional Group (2)

 

 

(14,118

)

 

 

(31,733

)

 

 

55.5

%

 

 

(25,577

)

 

 

(62,203

)

 

 

58.9

%

Total

 

$

17,290

 

 

$

(19,892

)

 

 

186.9

%

 

$

24,269

 

 

$

(44,250

)

 

 

154.8

%

 

(1)

Asset impairment charges of $9.7 million were recorded during the second quarter of 2015.

(2)

Asset impairment charges of $7.7 million were recorded during the year to date 2015, $1.7 million of which was recorded during the second quarter of 2015.

NET INCOME (LOSS)

Net income was $11.8 million for the quarter ended June 30, 2016 as compared to a net loss of $20.7 million in the prior year quarter, an improvement of 157.1 percent. For the year to date ended June 30, 2016, net income was $14.9 million representing an improvement of 132.6 percent as compared to net loss of $45.6 million for the prior year to date.


 


CEC ANNOUNCES 2Q16 RESULTS …PG 5

 

ADJUSTED EBITDA

The Company believes it is useful to present non-GAAP financial measures, which exclude certain significant items, as a means to understand the performance of its operations. (See tables below and the GAAP to non-GAAP reconciliation attached to this press release for further details.)

As shown in the table below, adjusted EBITDA for the University Group and Corporate was $34.3 million and $54.5 million for the quarter and year to date ended June 30, 2016, respectively, representing an increase of 29.4 percent, or 7.8 million, and 44.0 percent, or $16.7 million, respectively, as compared to the prior year periods. Adjusted EBITDA for the Transitional Group, Culinary Arts and discontinued operations improved to negative $8.7 million and negative $15.7 million for the quarter and year to date ended June 30, 2016, respectively, representing an improvement of 71.8 percent and 71.0 percent, respectively, as compared to the prior year periods.

 

 

 

For the Quarter Ended

June 30,

 

 

 

For the Year to Date Ended

June 30,

 

 

Adjusted EBITDA ($ in thousands)

 

2016

 

 

2015

 

 

 

2016

 

 

2015

 

 

University Group and Corporate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations (1)

 

$

12,624

 

 

$

(20,003

)

 

 

$

15,714

 

 

$

(44,532

)

 

Provision for (benefit from) income taxes

 

 

4,620

 

 

 

(747

)

 

 

 

8,755

 

 

 

(958

)

 

Transitional Group pre-tax loss

 

 

14,014

 

 

 

32,624

 

 

 

 

25,330

 

 

 

63,094

 

 

Culinary Arts pre-tax (income) loss

 

 

(362

)

 

 

10,532

 

 

 

 

(3,469

)

 

 

10,282

 

 

Interest income, net (2)

 

 

(184

)

 

 

(52

)

 

 

 

(212

)

 

 

(50

)

 

Depreciation and amortization (2)

 

 

2,777

 

 

 

3,956

 

 

 

 

5,880

 

 

 

8,317

 

 

Stock-based compensation (2)

 

 

847

 

 

 

530

 

 

 

 

1,391

 

 

 

1,470

 

 

Asset impairments (2)

 

 

 

 

 

 

 

 

 

237

 

 

 

 

 

Unused space charges (2) (3)

 

 

(54

)

 

 

(348

)

 

 

 

855

 

 

 

208

 

 

Adjusted EBITDA--University Group and

   Corporate

 

$

34,282

 

 

$

26,492

 

 

 

$

54,481

 

 

$

37,831

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Memo: Advertising Expenses (2)

 

$

32,585

 

 

$

34,258

 

 

 

$

76,551

 

 

$

84,845

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Transitional Group, Culinary Arts and Discontinued Operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from discontinued operations (1)

 

$

(785

)

 

$

(720

)

 

 

$

(864

)

 

$

(1,072

)

 

Benefit from income taxes from discontinued operations

 

 

(470

)

 

 

 

 

 

 

(517

)

 

 

 

 

Transitional Group pre-tax loss

 

 

(14,014

)

 

 

(32,624

)

 

 

 

(25,330

)

 

 

(63,094

)

 

Culinary Arts pre-tax income (loss)

 

 

362

 

 

 

(10,532

)

 

 

 

3,469

 

 

 

(10,282

)

 

Interest income, net (4)

 

 

(1

)

 

 

 

 

 

 

(2

)

 

 

 

 

Loss on sale of business (4)

 

 

 

 

 

917

 

 

 

 

 

 

 

917

 

 

Depreciation and amortization (4)

 

 

2,425

 

 

 

3,231

 

 

 

 

5,891

 

 

 

5,582

 

 

Legal settlements (4)

 

 

 

 

 

(166

)

 

 

 

 

 

 

1,319

 

 

Asset impairments (4)

 

 

 

 

 

11,372

 

 

 

 

 

 

 

17,391

 

 

Unused space charges (3) (4)

 

 

3,802

 

 

 

(2,305

)

 

 

 

1,694

 

 

 

(4,729

)

 

Adjusted EBITDA--Transitional, Culinary Arts and Discontinued Operations

 

$

(8,681

)

 

$

(30,827

)

 

 

$

(15,659

)

 

$

(53,968

)

 

Consolidated Adjusted EBITDA

 

$

25,601

 

 

$

(4,335

)

 

 

$

38,822

 

 

$

(16,137

)

 

 

(1)

Income (loss) from continuing operations and loss from discontinued operations make up the components of net income (loss) as reflected on the Company’s condensed consolidated statements of income (loss) and comprehensive income (loss).

(2)

Amounts relate to the University Group and Corporate.

(3)

Unused space charges represent the net present value of remaining lease obligations for vacated space less an estimated amount for sublease income as well as the subsequent accretion of these charges.

(4)

Amounts relate to Transitional Group, Culinary Arts and discontinued operations.


 


CEC ANNOUNCES 2Q16 RESULTS …PG 6

 

BALANCE SHEET AND CASH FLOW

Net cash provided by operating activities for the quarter and year to date ended June 30, 2016 was $16.7 million and $6.0 million, respectively, representing an improvement from cash usage of $6.4 million and $26.6 million for the quarter and year to date ended June 30, 2015, respectively. The Company’s continued focus on improving operating efficiencies within the University Group and the inherent economics at the onset of a teach-out associated with the LCB campuses resulted in an improvement in cash usage.

As of June 30, 2016 and December 31, 2015, cash, cash equivalents, restricted cash and available-for-sale short-term and long-term investments, net of borrowings totaled $208.8 million and $201.0 million, respectively.

 

Consolidated Cash ($ in thousands)

 

As of June 30, 2016

 

 

As of December 31, 2015

 

 

Increase (Decrease)

 

Consolidated Cash, Cash Equivalents,  Restricted Cash and

   Available-For-Sale Short-Term Investments

 

$

201,460

 

 

$

231,641

 

 

 

-13.0

%

Available-For-Sale Long-Term Investments (1)

 

 

7,374

 

 

 

7,374

 

 

 

0.0

%

Short-term borrowings (2)

 

 

 

 

 

38,000

 

 

 

-100.0

%

Consolidated Cash, Cash Equivalents,  Restricted Cash

   and Available-For-Sale Short-Term and Long-Term

   Investments, net of Borrowings (1)

 

$

208,834

 

 

$

201,015

 

 

 

3.9

%

 

 

(1)

Available-for-sale long-term investment balances are included within non-current other assets on the Company’s condensed consolidated balance sheets.

 

(2)

Cash, cash equivalents, restricted cash and available-for-sale short-term investment balances as of December 31, 2015 include $38.0 million of restricted cash related to cash-collateralized borrowings under the Credit Agreement.

OUTLOOK

Career Education Corporation revised its consolidated adjusted EBITDA and year end cash outlook, in order to incorporate recent trends of improved student retention across most of its institutions, better than estimated total enrollments at its teach-out campuses and continued efficiency in University operations. The Company now expects the following results, subject to the updated key assumptions identified below:

 

·

Consolidated adjusted EBITDA to improve in 2016 as compared to 2015 and to be positive, to remain flat in 2017 as compared to 2016, and to increase in 2018 as compared to 2017

 

·

End of year cash, cash equivalents, restricted cash and available-for-sale short-term and long-term investments, net of any borrowings, as reported on the consolidated balance sheets of approximately $160 million to $170 million for the year ending December 31, 2016, approximately $140 million to $155 million for the year ending December 31, 2017, and then to increase for the year ended December 31, 2018

 

Forward looking adjusted EBITDA expectations are estimated on a basis consistent with adjusted EBITDA calculations presented in the reconciliation of GAAP to non-GAAP items attached to this press release. Net income, which is the most directly comparable GAAP measure to consolidated adjusted EBITDA, may not follow the same trends as discussed in our outlook above because of adjustments made for unused space charges that represent the present value of future remaining lease obligations of vacated space less an estimated amount for sublease income as well as income taxes, depreciation, amortization, asset impairment charges, interest income, interest expense and stock compensation. The adjusted EBITDA and cash outlook provided above for 2016 and beyond are based on the following key assumptions and factors, among others: (i) flat-to-modest total enrollment growth within the University Group while achieving the intended University Group efficiencies, (ii) teach-outs to progress as expected and performance consistent with current trends, (iii) achievement of recovery rates for the Company’s real estate obligations and timing of any associated lease termination payments consistent with the Company’s historical experiences, (iv) right-sizing of the Company’s corporate expense structure to serve primarily online institutions, (v) no material changes in the legal or regulatory environment and excludes legal settlements, regulatory settlements and any impact of new or proposed regulations, 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.

 


CEC ANNOUNCES 2Q16 RESULTS …PG 7

 

CONFERENCE CALL INFORMATION

Career Education Corporation will host a conference call on Wednesday, August 3, 2016 at 5:30 p.m. Eastern time to discuss its second quarter and year to date 2016 results. Interested parties can access the live webcast of the conference call and the related presentation materials at www.careered.com in the Investor Relations section of the website. Participants can also listen to the conference call by dialing 844-378-6484 (domestic) or 412-542-4179 (international). Please log-in or dial-in at least 10 minutes prior to the start time to ensure a connection. An archived version of the webcast will be accessible for 90 days at www.careered.com in the Investor Relations section of the website.

ABOUT CAREER EDUCATION CORPORATION

Career Education’s academic institutions offer a quality education to a diverse student population in a variety of disciplines through online, campus-based and hybrid learning programs. Our 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 that allow students to more efficiently pursue earning a degree by receiving course credit for knowledge they can already demonstrate. Career Education is committed to providing quality education that closes the gap between learners who seek to advance their careers and employers needing a qualified workforce.

A listing of individual campus locations and web links to Career Education’s institutions can be found at www.careered.com.

Except for the historical and present factual information contained herein, the matters set forth in this release, including statements identified by words such as “believe,” “will,” “expect,” “estimate,” “continue,” “trend” and similar expressions, are forward-looking statements as defined in Section 21E of the Securities Exchange Act of 1934, as amended. These statements are based on information currently available to us and are subject to various assumptions, risks, uncertainties and other factors that could cause our results of operations, financial condition, cash flows, performance, business prospects and opportunities to differ materially from those expressed in, or implied by, these statements. Except as expressly required by the federal securities laws, we undertake no obligation to update or revise such factors or any of the forward-looking statements contained herein to reflect future events, developments or changed circumstances, or for any other reason. These risks and uncertainties, the outcomes of which could materially and adversely affect our financial condition and operations, include, but are not limited to, the following: declines in enrollment; increased competition; 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; rulemaking by the U.S. Department of Education or any state or accreditor and increased focus by Congress, the President and governmental agencies on, or increased negative publicity about, for-profit education institutions; our 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 management changes; our ability to successfully defend litigation and other claims brought against us; and changes in the overall U.S. or global economy. Further information about these and other relevant risks and uncertainties may be found in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015 and its subsequent filings with the Securities and Exchange Commission.

###

CONTACT

Investors:

Alpha IR Group

Sam Gibbons or Chris Hodges

(312) 445-2870

[email protected]

Or

Media:

Career Education Corporation

(847) 585-2600

[email protected]

 


 

CAREER EDUCATION CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

 

 

 

June 30,

2016

 

 

December 31,

2015

 

 

 

(unaudited)

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

 

 

Cash and cash equivalents, unrestricted

 

$

49,663

 

 

$

66,919

 

Restricted cash

 

 

1,375

 

 

 

49,821

 

Restricted short-term investments

 

 

9,610

 

 

 

-

 

Short-term investments

 

 

140,812

 

 

 

114,901

 

Total cash and cash equivalents, restricted cash and short-term investments

 

 

201,460

 

 

 

231,641

 

 

 

 

 

 

 

 

 

 

Student receivables, net

 

 

27,502

 

 

 

31,618

 

Receivables, other, net

 

 

781

 

 

 

5,194

 

Prepaid expenses

 

 

16,160

 

 

 

14,380

 

Inventories

 

 

2,107

 

 

 

3,353

 

Other current assets

 

 

1,537

 

 

 

2,523

 

Assets of discontinued operations

 

 

159

 

 

 

254

 

Total current assets

 

 

249,706

 

 

 

288,963

 

 

 

 

 

 

 

 

 

 

NON-CURRENT ASSETS:

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

48,574

 

 

 

58,249

 

Goodwill

 

 

87,356

 

 

 

87,356

 

Intangible assets, net

 

 

8,900

 

 

 

9,300

 

Student receivables, net

 

 

3,333

 

 

 

3,958

 

Deferred income tax assets, net

 

 

130,188

 

 

 

137,716

 

Other assets

 

 

16,043

 

 

 

16,562

 

Assets of discontinued operations

 

 

8,694

 

 

 

8,811

 

TOTAL ASSETS

 

$

552,794

 

 

$

610,915

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

Short-term borrowings

 

$

-

 

 

$

38,000

 

Accounts payable

 

 

13,831

 

 

 

25,906

 

Accrued expenses:

 

 

 

 

 

 

 

 

Payroll and related benefits

 

 

32,120

 

 

 

38,789

 

Advertising and production costs

 

 

10,325

 

 

 

11,788

 

Income taxes

 

 

1,600

 

 

 

1,061

 

Other

 

 

24,701

 

 

 

24,082

 

Deferred tuition revenue

 

 

37,398

 

 

 

40,112

 

Liabilities of discontinued operations

 

 

9,376

 

 

 

13,067

 

Total current liabilities

 

 

129,351

 

 

 

192,805

 

 

 

 

 

 

 

 

 

 

NON-CURRENT  LIABILITIES:

 

 

 

 

 

 

 

 

Deferred rent obligations

 

 

39,152

 

 

 

45,927

 

Other liabilities

 

 

23,192

 

 

 

25,197

 

Liabilities of discontinued operations

 

 

6,940

 

 

 

9,376

 

Total non-current liabilities

 

 

69,284

 

 

 

80,500

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS' EQUITY:

 

 

 

 

 

 

 

 

Preferred stock

 

 

-

 

 

 

-

 

Common stock

 

 

834

 

 

 

830

 

Additional paid-in capital

 

 

612,449

 

 

 

610,784

 

Accumulated other comprehensive loss

 

 

(330

)

 

 

(880

)

Accumulated deficit

 

 

(42,668

)

 

 

(57,518

)

Cost of shares in treasury

 

 

(216,126

)

 

 

(215,606

)

Total stockholders' equity

 

 

354,159

 

 

 

337,610

 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

 

$

552,794

 

 

$

610,915

 

 


 

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 June 30,

 

 

 

2016

 

 

% of

Total

Revenue

 

 

2015

 

 

% of

Total

Revenue

 

REVENUE:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tuition and registration fees

 

$

181,432

 

 

 

99.3

%

 

$

215,747

 

 

 

99.5

%

Other

 

 

1,194

 

 

 

0.7

%

 

 

1,081

 

 

 

0.5

%

Total revenue

 

 

182,626

 

 

 

 

 

 

 

216,828

 

 

 

 

 

OPERATING EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Educational services and facilities

 

 

58,062

 

 

 

31.8

%

 

 

73,064

 

 

 

33.7

%

General and administrative

 

 

102,072

 

 

 

55.9

%

 

 

145,171

 

 

 

67.0

%

Depreciation and amortization

 

 

5,202

 

 

 

2.8

%

 

 

7,113

 

 

 

3.3

%

Asset impairment

 

 

 

 

 

0.0

%

 

 

11,372

 

 

 

5.2

%

Total operating expenses

 

 

165,336

 

 

 

90.5

%

 

 

236,720

 

 

 

109.2

%

Operating income (loss)

 

 

17,290

 

 

 

9.5

%

 

 

(19,892

)

 

 

-9.2

%

OTHER INCOME (EXPENSE):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

301

 

 

 

0.2

%

 

 

224

 

 

 

0.1

%

Interest expense

 

 

(116

)

 

 

-0.1

%

 

 

(170

)

 

 

-0.1

%

Loss on sale of business

 

 

 

 

 

0.0

%

 

 

(917

)

 

 

-0.4

%

Miscellaneous (expense) income

 

 

(231

)

 

 

-0.1

%

 

 

5

 

 

 

0.0

%

Total other expense

 

 

(46

)

 

 

0.0

%

 

 

(858

)

 

 

-0.4

%

PRETAX INCOME (LOSS)

 

 

17,244

 

 

 

9.4

%

 

 

(20,750

)

 

 

-9.6

%

Provision for (benefit from) income taxes

 

 

4,620

 

 

 

2.5

%

 

 

(747

)

 

 

-0.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME (LOSS) FROM CONTINUING OPERATIONS

 

 

12,624

 

 

 

6.9

%

 

 

(20,003

)

 

 

-9.2

%

Loss from discontinued operations, net of tax

 

 

(785

)

 

 

-0.4

%

 

 

(720

)

 

 

-0.3

%

NET INCOME (LOSS)

 

 

11,839

 

 

 

6.5

%

 

 

(20,723

)

 

 

-9.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OTHER COMPREHENSIVE INCOME (LOSS), net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

(97

)

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain (loss) on investments

 

 

131

 

 

 

 

 

 

 

(43

)

 

 

 

 

Total other comprehensive income (loss)

 

 

34

 

 

 

 

 

 

 

(43

)

 

 

 

 

COMPREHENSIVE INCOME (LOSS)

 

$

11,873

 

 

 

 

 

 

$

(20,766

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS) PER SHARE - BASIC and DILUTED:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations

 

$

0.18

 

 

 

 

 

 

$

(0.29

)

 

 

 

 

Loss from discontinued operations

 

 

(0.01

)

 

 

 

 

 

 

(0.02

)

 

 

 

 

Net income (loss) per share

 

$

0.17

 

 

 

 

 

 

$

(0.31

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE SHARES OUTSTANDING:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

68,368

 

 

 

 

 

 

 

67,893

 

 

 

 

 

Diluted

 

 

69,015

 

 

 

 

 

 

 

67,893

 

 

 

 

 

 


 


 

CAREER EDUCATION CORPORATION AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND

COMPREHENSIVE INCOME (LOSS)

(In thousands, except per share amounts and percentages)

 

 

 

For the Year to Date Ended June 30,

 

 

 

2016

 

 

% of

Total

Revenue

 

 

2015

 

 

% of

Total

Revenue

 

REVENUE:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tuition and registration fees

 

$

379,217

 

 

 

99.4

%

 

$

441,438

 

 

 

99.5

%

Other

 

 

2,295

 

 

 

0.6

%

 

 

2,404

 

 

 

0.5

%

Total revenue

 

 

381,512

 

 

 

 

 

 

 

443,842

 

 

 

 

 

OPERATING EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Educational services and facilities

 

 

119,600

 

 

 

31.3

%

 

 

147,958

 

 

 

33.3

%

General and administrative

 

 

225,635

 

 

 

59.1

%

 

 

308,844

 

 

 

69.6

%

Depreciation and amortization

 

 

11,771

 

 

 

3.1

%

 

 

13,899

 

 

 

3.1

%

Asset impairment

 

 

237

 

 

 

0.1

%

 

 

17,391

 

 

 

3.9

%

Total operating expenses

 

 

357,243

 

 

 

93.6

%

 

 

488,092

 

 

 

110.0

%

Operating income (loss)

 

 

24,269

 

 

 

6.4

%

 

 

(44,250

)

 

 

-10.0

%

OTHER INCOME (EXPENSE):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

566

 

 

 

0.1

%

 

 

384

 

 

 

0.1

%

Interest expense

 

 

(352

)

 

 

-0.1

%

 

 

(332

)

 

 

-0.1

%

Loss on sale of business

 

 

 

 

 

0.0

%

 

 

(917

)

 

 

-0.2

%

Miscellaneous expense

 

 

(14

)

 

 

0.0

%

 

 

(375

)

 

 

-0.1

%

Total other income (expense)

 

 

200

 

 

 

0.1

%

 

 

(1,240

)

 

 

-0.3

%

PRETAX INCOME (LOSS)

 

 

24,469

 

 

 

6.4

%

 

 

(45,490

)

 

 

-10.2

%

Provision for (benefit from) income taxes

 

 

8,755

 

 

 

2.3

%

 

 

(958

)

 

 

-0.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME (LOSS) FROM CONTINUING OPERATIONS

 

 

15,714

 

 

 

4.1

%

 

 

(44,532

)

 

 

-10.0

%

Loss from discontinued operations, net of tax

 

 

(864

)

 

 

-0.2

%

 

 

(1,072

)

 

 

-0.2

%

NET INCOME (LOSS)

 

 

14,850

 

 

 

3.9

%

 

 

(45,604

)

 

 

-10.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OTHER COMPREHENSIVE INCOME (LOSS), net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

96

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain on investments

 

 

454

 

 

 

 

 

 

 

152

 

 

 

 

 

Total other comprehensive income

 

 

550

 

 

 

 

 

 

 

152

 

 

 

 

 

COMPREHENSIVE INCOME (LOSS)

 

$

15,400

 

 

 

 

 

 

$

(45,452

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS) PER SHARE - BASIC and DILUTED:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations

 

$

0.23

 

 

 

 

 

 

$

(0.66

)

 

 

 

 

Loss from discontinued operations

 

 

(0.01

)

 

 

 

 

 

 

(0.01

)

 

 

 

 

Net income (loss) per share

 

$

0.22

 

 

 

 

 

 

$

(0.67

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE SHARES OUTSTANDING:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

68,261

 

 

 

 

 

 

 

67,714

 

 

 

 

 

Diluted

 

 

68,627

 

 

 

 

 

 

 

67,714

 

 

 

 

 

 


 

CAREER EDUCATION CORPORATION AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

 

 

 

For the Year to Date

Ended June 30,

 

 

 

2016

 

 

2015

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net income (loss)

 

$

14,850

 

 

$

(45,604

)

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

 

 

 

 

 

 

 

 

Asset impairment

 

 

237

 

 

 

17,391

 

Depreciation and amortization expense

 

 

11,771

 

 

 

13,899

 

Bad debt expense

 

 

14,769

 

 

 

9,138

 

Compensation expense related to share-based awards

 

 

1,391

 

 

 

1,470

 

Loss on sale of business, net

 

 

 

 

 

917

 

(Gain) loss on disposition of property and equipment

 

 

(238

)

 

 

3

 

Changes in operating assets and liabilities:

 

 

(36,733

)

 

 

(23,809

)

Net cash provided by (used in) operating activities

 

 

6,047

 

 

 

(26,595

)

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Purchases of available-for-sale investments

 

 

(93,689

)

 

 

(33,707

)

Sales of available-for-sale investments

 

 

58,330

 

 

 

36,051

 

Purchases of property and equipment

 

 

(1,970

)

 

 

(4,994

)

Proceeds on the sale of assets

 

 

3,400

 

 

 

 

Payments of cash upon sale of businesses

 

 

(62

)

 

 

(2,018

)

Net cash used in investing activities

 

 

(33,991

)

 

 

(4,668

)

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Issuance of common stock

 

 

278

 

 

 

939

 

Payment on borrowings

 

 

(38,000

)

 

 

(10,000

)

Change in restricted cash

 

 

48,446

 

 

 

9,500

 

Net cash provided by financing activities

 

 

10,724

 

 

 

439

 

 

 

 

 

 

 

 

 

 

EFFECT OF FOREIGN CURRENCY EXCHANGE RATE CHANGES ON CASH

   AND CASH EQUIVALENTS:

 

 

(36

)

 

 

258

 

 

 

 

 

 

 

 

 

 

NET DECREASE IN CASH AND CASH EQUIVALENTS

 

 

(17,256

)

 

 

(30,566

)

CASH AND CASH EQUIVALENTS, beginning of the period

 

 

66,919

 

 

 

93,832

 

CASH AND CASH EQUIVALENTS, end of the period

 

$

49,663

 

 

$

63,266

 

 


 

CAREER EDUCATION CORPORATION AND SUBSIDIARIES

UNAUDITED SELECTED SEGMENT INFORMATION

(In thousands, except percentages)

 

 

 

For the Quarter Ended June 30,

 

 

 

2016

 

 

2015

 

REVENUE:

 

 

 

 

 

 

 

 

CTU

 

$

91,736

 

 

$

86,174

 

AIU

 

 

50,608

 

 

 

52,024

 

Total University Group

 

 

142,344

 

 

 

138,198

 

Corporate and Other

 

 

 

 

 

39

 

Subtotal

 

 

142,344

 

 

 

138,237

 

Culinary Arts

 

 

29,998

 

 

 

42,048

 

Transitional Group

 

 

10,284

 

 

 

36,543

 

Total

 

$

182,626

 

 

$

216,828

 

 

 

 

 

 

 

 

 

 

OPERATING INCOME (LOSS):

 

 

 

 

 

 

 

 

CTU

 

$

29,970

 

 

$

24,263

 

AIU

 

 

6,838

 

 

 

5,174

 

Total University Group

 

 

36,808

 

 

 

29,437

 

Corporate and Other

 

 

(5,761

)

 

 

(7,036

)

Subtotal

 

 

31,047

 

 

 

22,401

 

Culinary Arts

 

 

361

 

 

 

(10,560

)

Transitional Group

 

 

(14,118

)

 

 

(31,733

)

Total

 

$

17,290

 

 

$

(19,892

)

 

 

 

 

 

 

 

 

 

OPERATING MARGIN (LOSS):

 

 

 

 

 

 

 

 

CTU

 

 

32.7

%

 

 

28.2

%

AIU

 

 

13.5

%

 

 

9.9

%

Total University Group

 

 

25.9

%

 

 

21.3

%

Corporate and Other

 

NM

 

 

NM

 

Subtotal

 

 

21.8

%

 

 

16.2

%

Culinary Arts

 

 

1.2

%

 

 

-25.1

%

Transitional Group

 

 

-137.3

%

 

 

-86.8

%

Total

 

 

9.5

%

 

 

-9.2

%

 


 


 

CAREER EDUCATION CORPORATION AND SUBSIDIARIES

UNAUDITED SELECTED SEGMENT INFORMATION

(In thousands, except percentages)

 

 

 

For the Year to Date Ended June 30,

 

 

 

2016

 

 

2015

 

REVENUE:

 

 

 

 

 

 

 

 

CTU

 

$

183,702

 

 

$

171,301

 

AIU

 

 

103,581

 

 

 

105,090

 

Total University Group

 

 

287,283

 

 

 

276,391

 

Corporate and Other

 

 

 

 

 

78

 

Subtotal

 

 

287,283

 

 

 

276,469

 

Culinary Arts

 

 

68,621

 

 

 

86,760

 

Transitional Group

 

 

25,608

 

 

 

80,613

 

Total

 

$

381,512

 

 

$

443,842

 

 

 

 

 

 

 

 

 

 

OPERATING INCOME (LOSS):

 

 

 

 

 

 

 

 

CTU

 

$

49,207

 

 

$

38,879

 

AIU

 

 

8,745

 

 

 

2,287

 

Total University Group

 

 

57,952

 

 

 

41,166

 

Corporate and Other

 

 

(11,573

)

 

 

(12,896

)

Subtotal

 

 

46,379

 

 

 

28,270

 

Culinary Arts

 

 

3,467

 

 

 

(10,317

)

Transitional Group

 

 

(25,577

)

 

 

(62,203

)

Total

 

$

24,269

 

 

$

(44,250

)

 

 

 

 

 

 

 

 

 

OPERATING MARGIN (LOSS):

 

 

 

 

 

 

 

 

CTU

 

 

26.8

%

 

 

22.7

%

AIU

 

 

8.4

%

 

 

2.2

%

Total University Group

 

 

20.2

%

 

 

14.9

%

Corporate and Other

 

NM

 

 

NM

 

Subtotal

 

 

16.1

%

 

 

10.2

%

Culinary Arts

 

 

5.1

%

 

 

-11.9

%

Transitional Group

 

 

-99.9

%

 

 

-77.2

%

Total

 

 

6.4

%

 

 

-10.0

%

 


 

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,

 

Adjusted EBITDA

 

2016

 

 

2015

 

 

 

2016

 

 

2015

 

University Group and Corporate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations (2)

 

$

12,624

 

 

$

(20,003

)

 

 

$

15,714

 

 

$

(44,532

)

Provision for (benefit from) income taxes

 

 

4,620

 

 

 

(747

)

 

 

 

8,755

 

 

 

(958

)

Transitional Group pre-tax loss

 

 

14,014

 

 

 

32,624

 

 

 

 

25,330

 

 

 

63,094

 

Culinary Arts pre-tax (income) loss

 

 

(362

)

 

 

10,532

 

 

 

 

(3,469

)

 

 

10,282

 

Interest income, net (3)

 

 

(184

)

 

 

(52

)

 

 

 

(212

)

 

 

(50

)

Depreciation and amortization (3)

 

 

2,777

 

 

 

3,956

 

 

 

 

5,880

 

 

 

8,317

 

Stock-based compensation (3)

 

 

847

 

 

 

530

 

 

 

 

1,391

 

 

 

1,470

 

Asset impairments (3)

 

 

 

 

 

 

 

 

 

237

 

 

 

 

Unused space charges (3) (5)

 

 

(54

)

 

 

(348

)

 

 

 

855

 

 

 

208

 

Adjusted EBITDA--University Group and

   Corporate (6)

 

$

34,282

 

 

$

26,492

 

 

 

$

54,481

 

 

$

37,831

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Memo: Advertising Expenses (3)

 

$

32,585

 

 

$

34,258

 

 

 

$

76,551

 

 

$

84,845

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Transitional Group, Culinary Arts and Discontinued Operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from discontinued operations (2)

 

$

(785

)

 

$

(720

)

 

 

$

(864

)

 

$

(1,072

)

Benefit from income taxes from discontinued operations

 

 

(470

)

 

 

 

 

 

 

(517

)

 

 

 

Transitional Group pre-tax loss

 

 

(14,014

)

 

 

(32,624

)

 

 

 

(25,330

)

 

 

(63,094

)

Culinary Arts pre-tax income (loss)

 

 

362

 

 

 

(10,532

)

 

 

 

3,469

 

 

 

(10,282

)

Interest income, net (7)

 

 

(1

)

 

 

 

 

 

 

(2

)

 

 

 

Loss on sale of business (7)

 

 

 

 

 

917

 

 

 

 

 

 

 

917

 

Depreciation and amortization (7)

 

 

2,425

 

 

 

3,231

 

 

 

 

5,891

 

 

 

5,582

 

Legal settlements (4) (7)

 

 

 

 

 

(166

)

 

 

 

 

 

 

1,319

 

Asset impairments (7)

 

 

 

 

 

11,372

 

 

 

 

 

 

 

17,391

 

Unused space charges (5) (7)

 

 

3,802

 

 

 

(2,305

)

 

 

 

1,694

 

 

 

(4,729

)

Adjusted EBITDA--Transitional, Culinary Arts and Discontinued Operations (6) (8)

 

$

(8,681

)

 

$

(30,827

)

 

 

$

(15,659

)

 

$

(53,968

)

Consolidated Adjusted EBITDA

 

$

25,601

 

 

$

(4,335

)

 

 

$

38,822

 

 

$

(16,137

)

 

(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 and that failure to report non-GAAP measures could result in a misplaced perception that the Company’s results have underperformed or exceeded expectations.

We believe adjusted EBITDA allows us to compare our current operating results with corresponding historical periods and with the operational performance of other companies in our industry because it does not give effect to potential differences caused by items we do not consider reflective of underlying operating performance. We also present adjusted EBITDA because we believe it is frequently used by securities analysts, investors and other interested parties as a measure of performance. In evaluating adjusted EBITDA, investors should be aware that in the future we may incur expenses similar to the adjustments presented above. Our presentation of adjusted EBITDA should not be construed as an inference that our future results will be unaffected by expenses that are unusual, non-routine or non-recurring. Adjusted EBITDA has limitations as an analytical tool, and you should not consider it 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 our 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)

Income (loss) from continuing operations and loss from discontinued operations make up the components of net income (loss). A reconciliation of these components for the quarters and years to date ended June 30, 2016 and June 30, 2015 is presented below:

 

 

 

For the Quarter Ended

June 30,

 

 

 

For the Year to Date Ended

June 30,

 

 

 

2016

 

 

2015

 

 

 

2016

 

 

2015

 

Income (loss) from continuing operations

 

$

12,624

 

 

$

(20,003

)

 

 

$

15,714

 

 

$

(44,532

)

Loss from discontinued operations

 

 

(785

)

 

 

(720

)

 

 

 

(864

)

 

 

(1,072

)

Net income (loss)

 

$

11,839

 

 

$

(20,723

)

 

 

$

14,850

 

 

$

(45,604

)

(3)

Amounts relate to the University Group and Corporate.

(4)

Legal settlement amounts are net of insurance recoveries.

(5)

Unused space charges represent the net present value of remaining lease obligations for vacated space less an estimated amount for sublease income as well as the subsequent accretion of these charges. These charges relate to exiting leased space as the Company continues to right-size the organization and therefore are not considered representative of ongoing operations.

(6)

Management assesses results of operations for the University Group and Corporate separately from the Transitional Group and Culinary Arts. As the Transitional Group and Culinary Arts have been announced for teach-out, management views these operations as not reflective of the ongoing business. As a result, management views adjusted EBITDA from the University Group and Corporate separately from the remainder of the organization, to assess results and make decisions. Accordingly, the Transitional Group and Culinary Arts pre-tax income (losses) are added back to income (loss) from continuing operations and subtracted from loss from discontinued operations.

(7)

Amounts relate to the Transitional Group, Culinary Arts and discontinued operations.

(8)

Adjusted EBITDA amounts for Culinary Arts separate from the Transitional Group and discontinued operations include:

 

 

 

For the Quarter Ended

June 30,

 

 

 

For the Year to Date Ended

June 30,

 

 

 

2016

 

 

2015

 

 

 

2016

 

 

2015

 

Pre-tax income (loss)

 

$

362

 

 

$

(10,532

)

 

 

$

3,469

 

 

$

(10,282

)

Depreciation and amortization

 

 

1,265

 

 

 

 

 

 

 

3,226

 

 

 

 

Legal settlements

 

 

 

 

 

 

 

 

 

 

 

 

775

 

Asset impairments

 

 

 

 

 

9,687

 

 

 

 

 

 

 

9,687

 

Unused space charges

 

 

2,960

 

 

 

(982

)

 

 

 

4,503

 

 

 

(1,359

)

Adjusted EBITDA for Culinary Arts

 

$

4,587

 

 

$

(1,827

)

 

 

$

11,198

 

 

$

(1,179

)

 

 

Slide 1

CAREER EDUCATION CORPORATION SECOND quarter 2016 investor conference call AUGUST 3, 2016 A.J. Cederoth Chief Financial Officer Ashish Ghia Vice President, Finance Todd Nelson President & Chief Executive Officer Exhibit 99.2

Slide 2

This presentation contains “forward-looking statements,” as defined in Section 21E of the Securities Exchange Act of 1934, as amended, that reflect our current expectations regarding our future growth, results of operations, cash flows, performance and business prospects and opportunities, as well as updated assumptions made by (see, for example, slide 8), and information currently available to, our management. We have tried to identify forward-looking statements by using words such as “believe,” “should,” “will,” “expect,” “estimate,” “continue to,” “outlook,” “trend” and similar expressions, but these words are not the exclusive means of identifying forward-looking statements. These statements are based on information currently available to us and are subject to various risks, uncertainties, and other factors, including, but not limited to, those discussed in Item 1A,“Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2015 and our subsequent filings with the Securities and Exchange Commission that could cause our actual growth, results of operations, financial condition, cash flows, performance and 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 such factors or any of the forward-looking statements to reflect future events, developments, or changed circumstances or for any other reason. Certain financial information is presented on a non-GAAP basis.   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 core business, 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 and that failure to report non-GAAP measures could result in a misplaced perception that the Company's results have underperformed  or exceeded expectations.  The most directly comparable GAAP information and a reconciliation between the non-GAAP and GAAP figures are provided at the end of this presentation, and this presentation (including the reconciliation) has been posted to our website. Cautionary Statements & Disclosures

Slide 3

Strategic Transformation: Future State Strong institutions with focus on student retention & outcomes Investing in technology and student services Operating efficiencies Teach - outs Keeping our commitments to students while transforming the Company Today Future

Slide 4

Financial Results – Consolidated CEC Please refer to slides 9 - 11 at the end of this presentation for a reconciliation of GAAP to non-GAAP amounts. Cash includes cash, cash equivalents, restricted cash and available-for-sale short-term and long-term investments, net of borrowings.

Slide 5

Financial Results – University Group Total enrollments are disclosed as of the end of each period presented.

Slide 6

Financial Results - Culinary Arts & Transitional PHASE DOWN OF CAMPUSES IN TEACH-OUT Total enrollments are disclosed as of the end of each period presented. Teach-out dates are estimated based on current student enrollment and are subject to change.

Slide 7

Transformation Impact & Outlook Update Estimates are based on updated assumptions listed on slide 8. Forward-looking adjusted EBITDA expectations are estimated on a basis consistent with slides 9 - 11. Net income, which is the most directly comparable GAAP measure to consolidated adjusted EBITDA, may not follow the same trends as highlighted above. Please refer to slides 9 - 11 for a GAAP to non-GAAP reconciliation for 2015 consolidated adjusted EBITDA. University Group and Corporate is expected to show flat to modest adjusted EBITDA growth each year through 2018 (1) (2) Negative adjusted EBITDA from Transitional Group, Culinary Arts and discontinued operations will improve in 2016, worsen in 2017 due to the completion of the LCB teach-outs, and improve in 2018 (1) (2) Primarily driven by better than estimated: Total enrollments at our teach-out campuses Retention trends across most of our institutions Continued efficiency in operations at our University segments Update to our Outlook vs Prior Quarter Business Group - Adjusted EBITDA Trends

Slide 8

Outlook Assumptions Achievement of the strategic direction and its estimated results included within these slides are based on the following updated key assumptions and factors, among others: Flat-to-modest total enrollment growth within the University Group while achieving the intended University Group efficiencies Teach-outs to progress as expected and performance consistent with current trends Achievement of recovery rates for our real estate obligations and timing of any associated lease termination payments consistent with our historical experiences Right-sizing of our Corporate expense structure to serve primarily online institutions No material changes in the current legal or regulatory environment and excludes legal settlements, regulatory settlements and any impact of new or proposed regulations Consistent working capital movements in line with historical operating trends and potential impact 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 we may undertake in the future, actual results could differ materially from estimates.

Slide 9

Reconciliation of GAAP to Non-GAAP Items

Slide 10

Reconciliation of GAAP to Non-GAAP Items – con’t

Slide 11

Reconciliation of GAAP to Non-GAAP Items – con’t



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