Career Education Corporation Reports Results for Third Quarter 2009
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- Career Education Corporation Reports Results for Third Quarter 2009
Revenue increased 17% and operating income increased 233% excluding Transitional Schools and other significant items
Company on track to exceed previously stated 2010 milestones
HOFFMAN ESTATES, Ill.--(BUSINESS WIRE)-- Career Education Corporation (NASDAQ: CECO) today reported total revenue of $459.9 million, and net income of $20.8 million, or $0.25 per diluted share, for the third quarter of 2009 compared to total revenue of $403.0 million and a net loss of $0.1 million, or $0.00 per diluted share, for the third quarter of 2008.
The financial and operating results for the third quarter 2009 and 2008 include revenue and operating losses associated with schools currently being taught out (Transitional Schools) as well as other significant items as itemized in the tables within this press release.
On a non-GAAP basis, which excludes the Transitional Schools and other significant items, revenue was $457.5 million in the third quarter, a 16.5 percent increase from $392.7 million in the third quarter of 2008 and earnings per diluted share were $0.47 in the third quarter as compared to $0.18 in the third quarter of 2008, an increase of over 160%. (See segment tables below and the GAAP to non-GAAP reconciliation attached to this press release.)
"We are pleased with our third-quarter results, as they reflect the progress we have made across the organization on our transformation initiatives," said Gary E. McCullough, President and Chief Executive Officer. "Revenue growth accelerated in the third quarter, as we achieved the highest levels of new student starts and student population in our company's history. We also delivered another meaningful increase in operating margins, positioning us well ahead of our 2009 internal plan."
Outlook
In March 2008, the company established milestone objectives for 2010 of between $225 and $270 million in operating income. Based upon the financial performance through the first nine months, and the record level of student population as of October 31, 2009, the company is on track to achieve operating income, excluding Transitional Schools and other significant items, within the low end of the 2010 milestone objective range in 2009, a year ahead of schedule.
Three Months Ended September 30, 2009
-- Total revenue from continuing operations was $459.9 million during the
third quarter of 2009, a 14.1 percent increase from $403.0 million
during the third quarter of 2008. Excluding the Transitional Schools,
revenue was $457.5 million in the third quarter, a 16.5 percent increase
from $392.7 million in the third quarter of 2008.
-- The financial and operating results for the third quarter 2009 and 2008
include operating losses associated with Transitional Schools as well as
other significant items as summarized below:
Diluted
Reconciling Items Earnings per
(In Millions) Share Impact
Three Months Ended September 30, 2009
Performance-based Compensation Related To Plan ($18.8) ($0.14)
Outperformance
Transitional Schools Operating Losses (7.4) (0.06)
Asset Impairment Charges (2.5) (0.02)
TOTAL ($28.7) ($0.22)
Three Months Ended September 30, 2008
Lease Exit Charges ($9.7) ($0.07)
Transitional Schools Operating Losses (8.0) (0.06)
Asset Impairment Charges (6.8) (0.05)
TOTAL ($24.5) ($0.18)
-- The company believes it is useful to present non-GAAP financial measures
excluding these impacts as a means to understand the performance of its
core business.
-- Operating income was $32.3 million during the third quarter of 2009,
versus an operating loss of $6.2 million during the third quarter of
2008. Operating margin was 7.0 percent during the third quarter of 2009,
as compared to an operating margin loss of 1.5 percent during the third
quarter of 2008.
-- Excluding the reconciling items listed in the table above, operating
income was $61.0 million in the third quarter of 2009, up 233.3 percent
from $18.3 million in the third quarter of 2008 and operating margin was
13.3 percent during the third quarter of 2009, an 8.6 percentage point
increase compared to an operating margin percentage of 4.7 percent
during the third quarter of 2008.
Nine Months Ended September 30, 2009
-- Total revenue from continuing operations was $1.34 billion during the
nine months ended September 30, 2009, a 5.7 percent increase from $1.27
billion during the nine months ended September 30, 2008. Excluding the
Transitional Schools, revenue was $1.33 billion during the nine months
ended September 30, 2009, an 8.4 percent increase from $1.22 billion
during the nine months ended September 30, 2008.
-- Operating income increased to $86.3 million during the nine months ended
September 30, 2009, from $37.1 million during the nine months ended
September 30, 2008. Operating margin increased to 6.5 percent during the
nine months ended September 30, 2009, from 2.9 percent during the nine
months ended September 30, 2008.
-- Income from continuing operations during the nine months ended September
30, 2009, was $57.9 million, or $0.66 per diluted share, relative to
$37.2 million, or $0.41 per diluted share, during the nine months ended
September 30, 2008.
-- The financial and operating results for the nine months ended September
30, 2009 and 2008 include operating losses associated with Transitional
Schools as well as other significant items as summarized below:
Diluted
Reconciling Items Earnings per
(In Millions) Share Impact
Nine Months Ended September 30, 2009
Transitional Schools Operating Losses ($44.5 ) ($0.33 )
Performance-based Compensation Related To (25.3 ) (0.19 )
Plan Outperformance
Asset Impairment Charges (2.5 ) (0.02 )
Severance and Stay Bonus Charges (1.5 ) (0.01 )
TOTAL ($73.8 ) ($0.55 )
Nine Months Ended September 30,
2008
Transitional Schools Operating Losses ($27.9 ) ($0.20 )
Lease Exit Charges (9.7 ) (0.07 )
Asset Impairment Charges (6.8 ) (0.05 )
Severance and Stay Bonus Charges (4.3 ) (0.03 )
Gain from Termination of Affiliate - 0.03
Relationship
TOTAL ($48.7 ) ($0.32 )
-- Excluding the reconciling items listed in the table above, operating
income was $160.1 million during the nine months ended September 30,
2009, up 86.6 percent from $85.8 million during the nine months ended
September 30, 2008 and operating margin was 12.0 percent during the nine
months ended September 30, 2009, a 5.0 percentage point increase
relative to an operating margin of 7.0 percent during the nine months
ended September 30, 2008.
CONSOLIDATED CASH FLOWS AND FINANCIAL POSITION
Cash Flows
-- Cash provided by operating activities was $217.4 million during the nine
months ended September 30, 2009, compared to cash provided by operating
activities of $158.9 million during the nine months ended September 30,
2008.
-- Capital expenditures increased to $50.3 million during the nine months
ended September 30, 2009, from $39.9 million during the nine months
ended September 30, 2008. Capital expenditures represented 3.8 percent
of total revenue during the nine months ended September 30, 2009.
Financial Position
-- As of September 30, 2009 and December 31, 2008, cash and cash
equivalents and investments totaled $473.8 million and $508.7 million,
respectively.
-- Days sales outstanding (DSO) were 14 days as of September 30, 2009,
compared to 13 days as of September 30, 2008.
Stock Repurchase Program
During the three months ended September 30, 2009, the company repurchased approximately 1.7 million shares of its common stock for approximately $40.0 million at an average price of $24.15 per share. During the nine months ended September 30, 2009, the company repurchased 8.2 million shares of its common stock for approximately $180.0 million at an average price of $21.84 per share.
As of September 30, 2009, approximately $215.5 million was available under the Company's previously authorized repurchase program. This amount includes an additional $200.0 million authorized by our Board of Directors on August 4, 2009. Stock repurchases under this program may be made on the open market or in privately negotiated transactions from time to time, depending on various factors, including market conditions and corporate and regulatory requirements. The stock repurchase program does not have an expiration date and may be suspended or discontinued at any time.
Revenue
For the three months ended
September 30, % Change
2009 2008 2009 vs. 2008
Revenue (in millions)
University $206.8 $172.8 20 %
Culinary Arts 91.6 86.0 7 %
Health Education 78.0 59.5 31 %
Art & Design 65.9 61.8 7 %
International 15.3 12.6 22 %
Corporate and other (0.1 ) (0.0 ) NM
Subtotal $457.5 $392.7 17 %
Transitional Schools 2.4 10.3 (77 %)
Total Revenue $459.9 $403.0 14 %
Operating Income
For the three months ended
September 30, % Change
2009 2008 2009 vs. 2008
Operating Income (in millions)
University $40.9 $27.3 50 %
Culinary Arts 7.4 (10.4 ) 171 %
Health Education 12.9 3.1 316 %
Art & Design 7.8 3.8 105 %
International (4.5 ) (5.2 ) 13 %
Corporate and other (24.8 ) (16.8 ) (48 %)
Subtotal $39.7 $1.8 NM
Transitional Schools (7.4 ) (8.0 ) 8 %
Total Operating Income $32.3 ($6.2 ) 621 %
Operating Margin
For the three months ended
September 30,
2009 2008
Operating Margin
University 19.8 % 15.8 %
Culinary Arts 8.0 % -12.1 %
Health Education 16.5 % 5.3 %
Art & Design 11.8 % 6.2 %
International -29.3 % -41.6 %
Corporate and other NM NM
Subtotal 8.7 % 0.4 %
Transitional Schools NM -77.7 %
Total 7.0 % -1.5 %
STUDENT POPULATION AND NEW STUDENT START DATA
Student Population
Total student population by reportable segment as of October 31, 2009 and 2008, were as follows:
As of October 31, % Change
2009 2008 2009 vs. 2008
STUDENT POPULATION
University 53,700 44,800 20 %
Culinary Arts 12,500 10,300 21 %
Health Education 22,900 17,400 32 %
Art & Design 13,900 14,000 (1 %)
International 10,900 9,700 12 %
Subtotal 113,900 96,200 18 %
Transitional Schools 300 2,200 (86 %)
Total Student Population 114,200 98,400 16 %
ONLINE STUDENT POPULATION
Culinary Arts 100 0 NM
Art & Design 1,400 800 75 %
University 42,300 34,400 23 %
Total Online Student Population 43,800 35,200 24 %
New Student Starts
New student starts by reportable segment during the third quarter of 2009 and 2008, were as follows:
For the three months ended
September 30, % Change
2009 2008 2009 vs. 2008
NEW STUDENT STARTS
University 16,010 14,130 13 %
Culinary Arts 7,110 4,710 51 %
Health Education 7,040 5,600 26 %
Art & Design 3,310 3,080 7 %
International 4,200 4,070 3 %
Subtotal 37,670 31,590 19 %
Transitional Schools 0 10 NM
Total New Student Starts 37,670 31,600 19 %
ONLINE NEW STUDENT STARTS
Culinary Arts 90 0 NM
Art & Design 370 320 16 %
University 13,090 11,480 14 %
Total Online Student Starts 13,550 11,800 15 %
CONFERENCE CALL INFORMATION
Career Education Corporation will host a conference call on November 5, 2009 at 10:00 AM (Eastern Time). Interested parties can access the live webcast of the conference call at www.careered.com. Participants can also listen to the conference call by dialing 800-471-6718 (domestic) or 630-691-2735 (international) and reference confirmation 25477681. 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. A replay of the call will also be available for seven days by calling 888-843-8996 (domestic) or 630-652-3044 (international) and reference confirmation 25477681.
About Career Education Corporation
The colleges, schools and universities that are part of the Career Education Corporation (CEC) family offer high-quality education to a diverse student population of over 110,000 students across the world in a variety of career-oriented disciplines. The more than 75 campuses that serve these students are located throughout the U.S. and in France, Italy, and the United Kingdom, and offer doctoral, master's, bachelor's and associate degrees, and diploma and certificate programs. Approximately one-third of CEC's students attend the web-based virtual campuses of American InterContinental University and Colorado Technical University.
CEC is an industry leader whose gold-standard brands are recognized globally. Those brands include, among others, American InterContinental University; Brooks Institute; Colorado Technical University; Harrington College of Design; INSEEC Schools; International Academy of Design & Technology; Istituto Marangoni; Le Cordon Bleu North America; and Sanford-Brown Institutes and Colleges. CEC is committed to providing quality education, enabling students to graduate and pursue rewarding careers.
For more information, see CEC's website at www.careered.com. The website includes a detailed listing of individual campus locations and web links to CEC's more than 75 colleges, schools, and universities.
Except for the historical and present factual information contained herein, the matters set forth in this release, including statements identified by words such as "anticipate," "believe," "plan," "expect," "intend," "project," "will," "potential" 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 risks, uncertainties and other factors that could cause our actual growth, results of operations, 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 to publicly announce the results of 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 outcome of which could materially and adversely affect our financial condition and operations, include, but are not limited to, the following: the adverse impact and potential impacts on the availability of Title IV and private student loans for our students of (1) the willingness or ability of private lenders to make private student loans in the current U.S. credit markets, (2) new student lending related reporting and disclosure obligations on institutions that participate in Title IV federal student financial aid programs under The Higher Education Opportunity Act ("HEOA"), signed into law on August 14, 2008, in the first full reauthorization of the Higher Education Act of 1965, as amended (together with HEOA, "HEA") or provide payment plans to students and (3) pending regulations under HEOA, HEA and Congress' willingness or ability to maintain or increase funding for Title IV programs; potential higher bad debt expense or reduced revenue associated with requiring students to pay more of their educational expenses while in school or with directly providing extended payment plans to our students; increased competition; the effectiveness of our regulatory compliance efforts; impairment of goodwill and other intangible assets as we continue to redefine the company and manage our brands and marketing to improve effectiveness and reduce costs; charges and expenses associated with exiting excess facility space, the impact on our revenues and profitability of our transitional segment; our ability to comply with accrediting agency requirements or obtain accrediting agency approvals for existing or new programs; our dependence on information technology systems; our ownership or use of intellectual property; costs and impacts of regulatory, legal and administrative actions, proceedings and investigations, governmental regulations, and class action and other lawsuits; our ability to manage and continue growth; and other factors discussed in our Annual Report on Form 10-K for the year ended December 31, 2008, our Quarterly Reports on Form 10-Q for the most recent fiscal quarters, and from time to time in our current reports filed with the Securities and Exchange Commission.
CAREER EDUCATION CORPORATION
SELECTED SEGMENT INFORMATION
(Dollars in thousands)
For the Three Months Ended September 30,
2009 2008
REVENUE:
University $ 206,810 $ 172,856
Culinary Arts 91,654 85,961
Health Education 77,981 59,514
Art & Design 65,879 61,766
International 15,333 12,595
Corporate and other (147 ) (1 )
Subtotal $ 457,510 $ 392,691
Transitional Schools 2,402 10,273
Total revenue $ 459,912 $ 402,964
SEGMENT OPERATING INCOME (LOSS):
University $ 40,936 $ 27,341
Culinary Arts 7,373 (10,426 )
Health Education 12,863 3,142
Art & Design 7,751 3,835
International (4,498 ) (5,244 )
Corporate and other (24,764 ) (16,906 )
Subtotal $ 39,661 $ 1,742
Transitional Schools (7,387 ) (7,978 )
Total operating income $ 32,274 $ (6,236 )
SEGMENT OPERATING INCOME (LOSS)
PERCENTAGE:
University 19.8 % 15.8 %
Culinary Arts 8.0 % -12.1 %
Health Education 16.5 % 5.3 %
Art & Design 11.8 % 6.2 %
International -29.3 % -41.6 %
Transitional Schools NM NM
CAREER EDUCATION CORPORATION
SELECTED SEGMENT INFORMATION
(Dollars in thousands)
For the Nine Months Ended September 30,
2009 2008
REVENUE:
University $ 594,895 $ 525,365
Culinary Arts 241,178 251,026
Health Education 219,480 177,669
Art & Design 193,758 196,214
International 76,119 71,872
Corporate and other (344 ) 9
Subtotal $ 1,325,086 $ 1,222,155
Transitional Schools 12,555 43,843
Total revenue $ 1,337,641 $ 1,265,998
SEGMENT OPERATING INCOME (LOSS):
University $ 121,864 $ 79,806
Culinary Arts 5,296 (5,320 )
Health Education 39,160 11,591
Art & Design 21,093 19,005
International 9,951 10,750
Corporate and other (66,535 ) (50,875 )
Subtotal $ 130,829 $ 64,957
Transitional Schools (44,511 ) (27,881 )
Total operating income $ 86,318 $ 37,076
SEGMENT OPERATING INCOME (LOSS)
PERCENTAGE:
University 20.5 % 15.2 %
Culinary Arts 2.2 % -2.1 %
Health Education 17.8 % 6.5 %
Art & Design 10.9 % 9.7 %
International 13.1 % 15.0 %
Transitional Schools NM NM
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
(In thousands)
September 30 December 31,
2009 2008
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 248,064 $ 244,726
Investments 225,733 263,953
Total cash and cash equivalents and investments 473,797 508,679
Receivables:
Students, net of allowance for doubtful accounts
of $43,284 and $35,068 as of September 30, 2009
and December 31, 2008, respectively 62,084 58,930
Other, net 8,782 9,184
Prepaid expenses 46,902 46,140
Inventories 9,935 12,332
Deferred income tax assets 17,344 17,344
Other current assets 5,965 9,170
Assets of discontinued operations 7,241 7,973
Total current assets 632,050 669,752
NON-CURRENT ASSETS:
Property and equipment, net 299,783 304,722
Goodwill 378,374 376,072
Intangible assets, net 184,151 39,904
Deferred income tax assets 9,268 9,434
Other assets, net 18,262 17,439
TOTAL ASSETS $ 1,521,888 $ 1,417,323
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt and capital $ 849 $ 354
lease obligations
Accounts payable 51,393 28,330
Accrued expenses:
Payroll and related benefits 83,967 63,181
Advertising and production costs 27,840 21,504
Income taxes 12,031 29,224
Royalty payments 20,738 1,476
Other 48,328 47,750
Deferred tuition revenue 206,804 153,595
Liabilities of discontinued operations 13,076 9,884
Total current liabilities 465,026 355,298
NON-CURRENT LIABILITIES:
Long-term debt and capital lease obligations, net 3,110 1,889
of current maturities
Deferred rent obligations 97,026 97,641
Royalty payments 29,791 -
Other liabilities, net 16,461 13,983
Total non-current liabilities 146,388 113,513
SHARE-BASED AWARDS SUBJECT TO REDEMPTION 1,524 860
STOCKHOLDERS' EQUITY:
Preferred stock - -
Common stock 954 933
Additional paid-in capital 240,753 222,523
Accumulated other comprehensive income 11,762 5,774
Retained earnings 857,375 807,500
Cost of shares in treasury (201,894 ) (89,078 )
Total stockholders' equity 908,950 947,652
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,521,888 $ 1,417,323
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts and percentages)
For the Three Months Ended September 30,
% of % of
2009 Revenue 2008 Revenue
REVENUE:
Tuition and registration fees $ 436,530 94.9 % $ 383,337 95.1 %
Other 23,382 5.1 % 19,627 4.9 %
Total revenue 459,912 402,964
OPERATING EXPENSES:
Educational services and facilities 154,842 33.7 % 166,794 41.4 %
General and administrative 254,018 55.2 % 216,949 53.8 %
Depreciation and amortization 16,278 3.5 % 18,614 4.6 %
Goodwill and asset impairment 2,500 0.5 % 6,843 1.7 %
Total operating expenses 427,638 93.0 % 409,200 101.5 %
Operating income (loss) 32,274 7.0 % (6,236 ) -1.5 %
OTHER INCOME (EXPENSE):
Interest income 326 0.1 % 2,876 0.7 %
Interest expense (10 ) 0.0 % (211 ) -0.1 %
Share of affiliate earnings - 0.0 % - 0.0 %
Miscellaneous income (expense) 62 0.0 % (221 ) -0.1 %
Total other income 378 0.1 % 2,444 0.6 %
Pretax income (loss) 32,652 7.1 % (3,792 ) -0.9 %
Provision (benefit) for income taxes 9,681 2.1 % (5,341 ) -1.3 %
Income from continuing operations 22,971 5.0 % 1,549 0.4 %
Loss from discontinued operations, (2,179 ) $ (1,696 )
net of tax
NET INCOME (LOSS) $ 20,792 $ (147 )
NET INCOME (LOSS) PER SHARE -
DILUTED
Income from continuing operations $ 0.27 $ 0.02
Loss from discontinued operations (0.02 ) (0.02 )
Net income $ 0.25 $ (0.00 )
DILUTED WEIGHTED AVERAGE SHARES 83,669 89,675
OUTSTANDING
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts and percentages)
For the Nine Months Ended September 30,
% of % of
2009 Revenue 2008 Revenue
REVENUE:
Tuition and registration fees $ 1,279,919 95.7 % $ 1,213,051 95.8 %
Other 57,722 4.3 % 52,947 4.2 %
Total revenue 1,337,641 1,265,998
OPERATING EXPENSES:
Educational services and 485,624 36.3 % 488,924 38.6 %
facilities
General and administrative 713,375 53.3 % 673,708 53.2 %
Depreciation and amortization 49,824 3.7 % 57,365 4.5 %
Goodwill and asset impairment 2,500 0.2 % 8,925 0.7 %
Total operating expenses 1,251,323 93.5 % 1,228,922 97.1 %
Operating income 86,318 6.5 % 37,076 2.9 %
OTHER INCOME (EXPENSE):
Interest income 1,968 0.1 % 9,326 0.7 %
Interest expense (32 ) 0.0 % (703 ) -0.1 %
Share of affiliate earnings - 0.0 % 4,665 0.4 %
Miscellaneous expense (925 ) -0.1 % (498 ) 0.0 %
Total other income 1,011 0.1 % 12,790 1.0 %
Pretax income 87,329 6.5 % 49,866 3.9 %
Provision for income taxes 29,479 2.2 % 12,651 1.0 %
Income from continuing 57,850 4.3 % 37,215 2.9 %
operations
Loss from discontinued (7,311 ) (8,287 )
operations, net of tax
NET INCOME $ 50,539 $ 28,928
NET INCOME (LOSS) PER SHARE -
DILUTED
Income from continuing $ 0.66 $ 0.41
operations
Loss from discontinued (0.08 ) (0.09 )
operations
Net income $ 0.58 $ 0.32
DILUTED WEIGHTED AVERAGE SHARES 87,071 90,144
OUTSTANDING
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
For the Nine Months Ending
September 30,
2009 2008
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 50,539 $ 28,928
Adjustments to reconcile net income to net
cash provided by operating activities:
Goodwill and asset impairment 2,500 13,600
Depreciation and amortization expense 50,038 60,070
Bad debt expense 38,927 33,350
Compensation expense related to share-based awards 12,313 10,017
Gain on sale of business - (1,555 )
Loss on disposition of property and equipment 1,196 573
Share of affiliate earnings, net of cash received - 939
Deferred income taxes - (1,736 )
Changes in operating assets and liabilities 61,883 14,758
Net cash provided by operating activities 217,396 158,944
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of available-for-sale investments (464,163 ) (470,324 )
Sales of available-for-sale investments 502,383 352,896
Purchases of property and equipment (50,329 ) (39,874 )
Acquisition of the rights to the Le Cordon Bleu (25,000 ) -
brand
Other (370 ) 944
Net cash used in investing activities (37,479 ) (156,358 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of treasury stock (181,126 ) (14,055 )
Issuance of common stock 2,166 3,089
Tax benefit associated with stock option exercises 194 433
Payments on revolving loans - (1,492 )
Borrowings (payments) of capital lease obligations 1,214 (479 )
and other long-term debt
Net cash used in financing activities (177,552 ) (12,504 )
EFFECT OF FOREIGN CURRENCY EXCHANGE RATE
CHANGES ON CASH AND CASH EQUIVALENTS: 888 (2,815 )
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 3,253 (12,733 )
Add: Cash balance of discontinued operations, 132 15,922
beginning of the year
Less: Cash balance of discontinued operations, end 47 739
of the year
CASH AND CASH EQUIVALENTS, beginning of the year 244,726 221,783
CASH AND CASH EQUIVALENTS, end of the year $ 248,064 $ 224,233
CAREER EDUCATION CORPORATION
SELECTED UNIVERSITY SEGMENT INFORMATION
(Dollars in thousands)
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
UNIVERSITY
REVENUE:
AIU $ 107,182 $ 94,554 $ 309,276 $ 287,262
Online 90,507 77,767 256,427 229,344
On-ground 16,675 16,787 52,849 57,918
CTU 92,849 71,468 263,100 214,832
Online 77,004 58,925 217,327 175,584
On-ground 15,845 12,543 45,773 39,248
Briarcliffe 6,779 6,834 22,519 23,271
Total $ 206,810 $ 172,856 $ 594,895 $ 525,365
University
UNIVERSITY SEGMENT OPERATING INCOME (LOSS):
AIU $ 23,658 $ 16,165 $ 69,241 $ 40,335
Online 28,628 21,549 80,504 52,056
On-ground (4,970 ) (5,384 ) (11,263 ) (11,721 )
CTU $ 17,076 $ 11,640 $ 53,740 $ 40,134
Online 19,773 12,665 58,421 41,075
On-ground (2,697 ) (1,025 ) (4,681 ) (941 )
Briarcliffe 202 (464 ) (1,117 ) (663 )
Total $ 40,936 $ 27,341 $ 121,864 $ 79,806
University
UNIVERSITY SEGMENT OPERATING INCOME (LOSS)
PERCENTAGE:
AIU 22.1 % 17.1 % 22.4 % 14.0 %
Online 31.6 % 27.7 % 31.4 % 22.7 %
On-ground -29.8 % -32.1 % -21.3 % -20.2 %
CTU 18.4 % 16.3 % 20.4 % 18.7 %
Online 25.7 % 21.5 % 26.9 % 23.4 %
On-ground -17.0 % -8.2 % -10.2 % -2.4 %
Briarcliffe 3.0 % -6.8 % -5.0 % -2.8 %
Total 19.8 % 15.8 % 20.5 % 15.2 %
University
Student Population as of October
31,
2009 2008
AIU 22,700 19,900
Online 18,600 16,100
On-ground 4,100 3,800
CTU 29,300 23,100
Online 23,700 18,300
On-ground 5,600 4,800
Briarcliffe 1,700 1,800
Total 53,700 44,800
University
Student Starts for the three
months ended September 30,
2009 2008
AIU 6,530 6,130
Online 5,460 5,200
On-ground 1,070 930
CTU 8,760 7,300
Online 7,630 6,280
On-ground 1,130 1,020
Briarcliffe 720 700
University 16,010 14,130
Career Education Corporation
Reconciliation of GAAP to Non-GAAP Items (1)
(dollars in millions)
For the Three Months Ended September 30,
2009 2008
Operating Earnings per Operating Earnings per
Income Diluted Share Income Diluted
Share
Reported $ 32.3 $ 0.25 $ (6.2 ) $ )
(0.00
Reconciling
Items:
Performance Based
Compensation Related to Plan 18.8 0.14 - -
Outperformance (2)
Transitional 7.4 0.06 8.0 0.06
Schools(3)
Asset 2.5 0.02 6.8 0.05
Impairment
Lease
Termination - - 9.7 0.07
Charges
Adjusted to Exclude
Significant Items and $ 61.0 $ 0.47 $ 18.3 $ 0.18
Transitional Schools
Diluted Weighted
Average Shares 83,669 89,675
Outstanding
For the Nine Months Ended September 30,
2009 2008
Operating Earnings per Operating Earnings per
Income Diluted Share Income Diluted
Share
Reported $ 86.3 $ 0.58 $ 37.1 $ 0.32
Reconciling
Items:
Transitional 44.5 0.33 27.9 0.20
Schools(3)
Performance Based
Compensation Related to Plan 25.3 0.19 - -
Outperformance (2)
Asset 2.5 0.02 6.8 0.05
Impairment
Severance and 1.5 0.01 4.3 0.03
Stay
Lease
Termination - - 9.7 0.07
Charges
Gain from Termination of - - - (0.03 )
Affiliate Relationship(4)
Adjusted to Exclude $
Significant Items and 160.1 $ 1.13 $ 85.8 $ 0.64
Transitional Schools
Diluted Weighted
Average Shares 87,071 90,144
Outstanding
For the Nine Months
Ended September 30,
2009 2008
Net Cash Flows from $ $
Operating Activities 217.4 158.9
Adjust
for:
Capital
expenditures, (50.3 ) (39.9 )
net
Free Cash Flows $ $
167.1 119.0
(1) The Company has included some non-GAAP financial measures in this presentation to discuss the Company's financial results. As a general matter, the Company uses these non-GAAP measures in addition to and in conjunction with results presented in accordance with GAAP. Among other things, the Company may use such non-GAAP financial measures in addition to and in conjunction with corresponding GAAP measures, to help analyze the performance of its core business, in connection with the preparation of annual budgets, and in measuring 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 in providing estimates of future performance and that failure to report these non-GAAP measures could result in confusion among analysts and others and a misplaced perception that the Company's results have underperformed or exceeded expectations.
These non-GAAP financial measures reflect an additional way of viewing aspects of the Company's operations that, when viewed with the GAAP results and the reconciliations to corresponding GAAP financial measures, provide a more complete understanding of the Company's results of operations and the factors and trends affecting the Company's business. However, these non-GAAP measures should be considered as a supplement to, and not as a substitute for, or superior to, the corresponding measures calculated in accordance with GAAP.
(2) Performance Based Compensation Related to Plan Outperformance by segment as follows:
For the Three Months For the Nine Months
ended September 30, ended September 30,
2009 2009
Corporate 7.3 9.7
University 4.0 5.3
Health 3.6 5.0
Culinary 2.0 2.7
Art & Design 1.9 2.6
TOTAL 18.8 25.3
(3) Reported within the Transitional Schools operating loss for the nine-months ended September 30, 2009 was $22.5 million of lease exit charges. Reported within the Transitional Schools operating loss for the nine months ended September 30, 2008 was $6.9 million of severance and stay bonus expense, $2.2 million of asset impairment charges associated with AIU - LA, and Lease Exit Costs for $1.2 million.
(4) Gain from Termination of Affiliate Relationship is recorded within other income(expense) on the unaudited consolidated statement of operations.
Source: Career Education Corporation
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