Form 8-K CAREER EDUCATION CORP For: Nov 03

 

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): November 3, 2016

 

Career Education Corporation

(Exact Name of Registrant as Specified in Charter)

 

 

 

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):

 

 

 

 

 

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On November 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 September 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 September 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.

(d) Exhibits.

 

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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.

 

 

Date: November 3, 2016

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Exhibit Index

 

 

 

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CEC ANNOUNCES 3Q16 RESULTS …PG 1

 

Exhibit 99.1

CAREER EDUCATION CORPORATION REPORTS RESULTS FOR THIRD QUARTER 2016

Operating income for the University Group improved

for the current quarter as compared to the prior year quarter

 

Schaumburg, Ill. (November 3, 2016) – Career Education Corporation (NASDAQ: CECO) today reported operating and financial results for the third quarter and year to date ended September 30, 2016.

Third Quarter Consolidated Results:

Year to Date Consolidated Results:

University Group Highlights:

 

“Increased student retention at our University Group and responsible execution of our teach-out campuses marked another quarter of improved operating performance. We are encouraged by the modest total enrollment growth at the University Group and are making meaningful progress towards our goal of responsible growth, sustained profitability and cash generation,” said Todd Nelson, President and Chief Executive Officer. “We will continue to make investments in various student serving areas of our operations to further enhance student retention and outcomes and focus on improving operating efficiencies across all our businesses. 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.”

 

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CEC ANNOUNCES 3Q16 RESULTS …PG 2

 

REVENUE

For the quarter and year to date ended September 30, 2016, total revenue was $167.6 million and $549.1 million, respectively, representing a decrease of 17.6 percent and 15.2 percent, respectively, compared to total revenue of $203.5 million and $647.3 million for the quarter and year to date ended September 30, 2015, respectively. The decrease was driven by declining revenues within the teach-out segments. Total revenue for the University Group was $139.5 million and $426.7 million for the quarter and year to date ended September 30, 2016, respectively, representing an increase of 2.5 percent and 3.5 percent, respectively, driven by total enrollment growth within CTU.

 

 

 

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CEC ANNOUNCES 3Q16 RESULTS …PG 3

 

TOTAL AND NEW STUDENT ENROLLMENTS

As of the end of the third quarter of 2016, total student enrollments for the University Group were 31,900, compared to 31,400 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 8,580 and 25,840 for the quarter and year to date ended September 30, 2016, respectively, compared to new enrollments of 8,450 and 26,530 for the quarter and year to date ended September 30, 2015, respectively.  

 

 

 

 

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CEC ANNOUNCES 3Q16 RESULTS …PG 4

 

OPERATING INCOME (LOSS)

For the quarter and year to date ended September 30, 2016, the Company recorded an operating loss of $0.7 million and operating income of $23.6 million, respectively, representing an improvement of 98.4 percent and 126.7 percent compared to operating losses of $44.0 million and $88.2 million for the quarter and year to date ended September 30, 2015, respectively. This improvement was driven by $33.4 million of impairment charges recorded in the prior year quarter, completion of teach-out campuses and increased revenue within CTU. Total University Group operating income increased to $21.8 million and $79.7 million for the quarter and year to date ended September 30, 2016, respectively, representing an increase of 7.2 percent and 29.7 percent, respectively.

 

 

NET INCOME (LOSS)

Net loss of $0.7 million was recorded for the quarter ended September 30, 2016 as compared to a net loss of $45.2 million in the prior year quarter, an improvement of 98.5 percent. For the year to date ended September 30, 2016, net income was $14.2 million representing an improvement of 115.6 percent as compared to net loss of $90.8 million for the prior year to date. The prior year quarter and year to date included $33.4 million and $50.8 million, respectively, of asset impairment charges.

 

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CEC ANNOUNCES 3Q16 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 $19.3 million and $73.8 million for the quarter and year to date ended September 30, 2016, respectively, representing an increase of 18.6 percent, or $3.0 million, and 36.3 percent, or $19.7 million, respectively, as compared to the prior year periods. Adjusted EBITDA for the Transitional Group, Culinary Arts and discontinued operations worsened to negative $14.6 million and improved to negative $30.2 million for the quarter and year to date ended September 30, 2016, respectively, representing a worsening of 7.1 percent and an improvement of 55.3 percent, respectively, as compared to the prior year periods.

 

 

 

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CEC ANNOUNCES 3Q16 RESULTS …PG 6

 

BALANCE SHEET AND CASH FLOW

Net cash provided by operating activities for the quarter and year to date ended September 30, 2016 was $9.7 million and $15.7 million, respectively, representing an improvement from cash provided of $5.6 million and cash usage of $21.0 million for the quarter and year to date ended September 30, 2015, respectively. The Company’s continued focus on improving operating efficiencies within the University Group and the discontinuation of marketing and advertising costs related to our teach-outs contributed to the improvement in cash flow from operations.

As of September 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 $217.8 million and $201.0 million, respectively.

 

 

OUTLOOK

Career Education Corporation revised its outlook for 2016 and 2017 consolidated adjusted EBITDA and year end cash, cash equivalents, restricted cash and short-term investments, net of borrowings, in order to incorporate recent stronger than expected performance and working capital trends. The Company now expects the following results, subject to the updated key assumptions identified below:

 

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 cash and adjusted EBITDA 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 and regulatory liabilities and any impact of new or proposed regulations, including the “defense to repayment” regulations issued in November 2016 and the gainful employment regulation, 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.

 

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CEC ANNOUNCES 3Q16 RESULTS …PG 7

 

CONFERENCE CALL INFORMATION

Career Education Corporation will host a conference call on Thursday, November 3, 2016 at 5:30 p.m. Eastern time to discuss its third 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. 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,” “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; 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; 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 ability to successfully defend litigation and other claims brought against us; 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. 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.

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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]

 

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CAREER EDUCATION CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

 

 

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CAREER EDUCATION CORPORATION AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF LOSS AND

COMPREHENSIVE LOSS

(In thousands, except per share amounts and percentages)

 

 

 

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CAREER EDUCATION CORPORATION AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND

COMPREHENSIVE INCOME (LOSS)

(In thousands, except per share amounts and percentages)

 

 

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CAREER EDUCATION CORPORATION AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

 

 

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CAREER EDUCATION CORPORATION AND SUBSIDIARIES

UNAUDITED SELECTED SEGMENT INFORMATION

(In thousands, except percentages)

 

 

 

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CAREER EDUCATION CORPORATION AND SUBSIDIARIES

UNAUDITED SELECTED SEGMENT INFORMATION

(In thousands, except percentages)

 

 

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CAREER EDUCATION CORPORATION AND SUBSIDIARIES

UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ITEMS ⁽¹⁾

(In thousands)

 

 

 

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

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. 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

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

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.

Financial Results – University Group New student enrollments were positively impacted by a change to how the Company records certain cancelled students. Excluding the impact of this change new student enrollments would have decreased 4.8% for CTU, increased 2.3% for AIU and decreased 2.2% for the University Group for the quarter ended September 30, 2016 as compared to the prior year quarter. For the year to date September 30, 2016, new student enrollments would have decreased 6.9% for CTU, increased 1.1% for AIU and decreased 3.8% for the University Group, as compared to the prior year to date. Total enrollments are disclosed as of the end of each period presented.

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.

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 significantly in 2016, but as expected, worsen in 2017 due to expenses associated with the completion of the LCB teach-outs, and then improve in 2018 (1) (2) Driven by: Better than estimated total enrollments at our teach-out campuses Earlier than estimated realization of operating efficiencies across our institutions Improved retention trends across most of our institutions Better than estimated working capital trends Update to our Outlook vs Prior Quarter Business Group - Adjusted EBITDA Trends

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 and regulatory liabilities and any impact of new or proposed regulations, including the new “defense to repayment” regulations and the gainful employment regulation 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.

Reconciliation of GAAP to Non-GAAP Items

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

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