Exhibit 99.1
CAREER EDUCATION CORPORATION REPORTS
RESULTS FOR THIRD QUARTER 2007
Hoffman Estates, Ill. (November 5, 2007) – Career Education Corporation (NASDAQ: CECO) today reported consolidated revenue from continuing operations of $404.4 million and consolidated net income from continuing operations of $19.8 million, or $0.21 per diluted share, during the third quarter of 2007, compared to consolidated net income from continuing operations of $27.0 million, or $0.28 per diluted share, during the third quarter of 2006.
“During the third quarter, we continued to make progress in key metrics that serve as positive indicators for future performance,” said Gary E. McCullough, president and chief executive officer. “We have begun several key initiatives designed to produce consistent, profitable growth and long-term value. These include recruiting new experienced senior management for key roles; improving controls and procedures throughout our operations to ensure quality performance and adherence to regulatory and ethical standards; implementing new values and measurable performance principles; and completing the development of a five-year plan with performance benchmarks.”
RESULTS OF CONTINUING OPERATIONS
As previously reported in November 2006, the company entered into a process of selling 11 of its schools and campuses, including the nine campuses that comprise the Gibbs division, McIntosh College, and Lehigh Valley College. The results of these 11 schools and campuses are reflected in this release as discontinued operations. Except as otherwise noted, financial data and non-financial metrics reflected in this release exclude discontinued operations.
Three Months Ended September 30, 2007
• Consolidated revenue was $404.4 million during the third quarter of 2007, a 5.6 percent decrease from consolidated revenue of $428.6 million during the third quarter of 2006. Revenue generated by the University segment’s fully-online platforms decreased 16.7 percent to $128.8 million during the third quarter of 2007, from $154.7 million during the third quarter of 2006.
• Consolidated income from operations decreased to $23.9 million during the third quarter of 2007, from $38.4 million during the third quarter of 2006. Operating profit margin percentage was 5.9 percent during the third quarter of 2007, a 3.1 percentage point decrease relative to an operating profit margin percentage of 9.0 percent during the third quarter of 2006. The decrease in operating profit margin percentage was primarily due to:
a) a population mix change that included an increase in students in our University segment’s fully on-line associate degree program,
b) the disproportionate growth of CTU Online, which had historically operated at a lower operating profit margin percentage than that of AIU Online,
c) increased expenses for our start-up campuses, and
d) increased occupancy expense and other fixed costs as a percentage of revenue due to declines in revenue.
The decrease in third quarter 2007 operating profit margin percentage of the factors discussed above was offset, in part, by a decrease in general and administrative expense as a percentage of revenue primarily due to admissions headcount reductions, improved efficiency in advertising and a decrease in bad debt expense.
The University segment’s fully-online platforms’ income from operations decreased $15.3 million, from $41.3 million during the third quarter of 2006, to $26.0 million during the third quarter of 2007.
• Consolidated net income from continuing operations during the third quarter of 2007 was $19.8 million, or $0.21 per diluted share, compared to consolidated net income from continuing operations of $27.0 million, or $0.28 per diluted share, during the third quarter of 2006. The consolidated tax rate for the third quarter of 2007 was 29.6%. This reduction was primarily the result of an adjustment of the annual effective tax rate to reflect higher tax-exempt interest than originally estimated for the year.
Nine Months Ended September 30, 2007
• Consolidated revenue was $1.2 billion during the nine months ended September 30, 2007, relative to $1.4 billion during the nine months ended September 30, 2006. Revenue generated by the University segment’s fully-online platforms decreased 23.8 percent, to $402.5 million during the nine months ended September 30, 2007, from $528.1 million during the nine months ended September 30, 2006.
• Consolidated income from operations declined to $82.0 million during the nine months ended September 30, 2007, from $114.3 million during the nine months ended September 30, 2006. Operating income margin percentage was 6.6 percent during the nine months ended September 30, 2007, compared to 8.3 percent during the nine months ended September 30, 2006.
• Consolidated net income from continuing operations during the nine months ended September 30, 2007, was $64.1 million, or $0.67 per diluted share, relative to $51.4 million, or $0.52 per diluted share during the nine months ended September 30, 2006. During the nine months ended September 30, 2007, the annual effective tax rate was reduced from 36.5% to 34.5% due to the impact of our tax-exempt interest income versus previous estimates.
RESULTS OF DISCONTINUED OPERATIONS
Loss from discontinued operations associated with the 11 schools and campuses currently held for sale was $4.3 million, net of tax, during the third quarter of 2007, compared to loss from discontinued operations of $6.3 million, net of tax, during the third quarter of 2006.
UPDATE ON SCHOOLS HELD FOR SALE
During the third quarter of 2007, we continued negotiations with interested parties for the sale of the schools held for sale. In November of 2007, we concluded that the indications of value for the schools were not sufficient to provide an acceptable financial solution for the company nor to ensure the best potential outcome for our students. During the fourth quarter, we are examining other alternatives previously contemplated for each of the schools in the sale group including continued operation of certain schools, conversion to alternative brands, teach-outs, and sale of individual schools.
CONSOLIDATED CASH FLOWS AND FINANCIAL POSITION
Cash Flows
• Cash provided by operating activities was $105.0 million during the third quarter of 2007, compared to cash provided by operating activities of $83.2 million during the third quarter of 2006. The increase is primarily attributable to the increase in our deferred tuition revenue balance during the third quarter of 2007.
• Capital expenditures decreased to $12.8 million during the third quarter of 2007, from $16.9 million during the third quarter of 2006. Capital expenditures represented 2.9 percent of total consolidated revenue, including revenue generated by schools and campuses held for sale, during the third quarter of 2007.
Financial Position
• As of September 30, 2007, and December 31, 2006, cash and cash equivalents and investments totaled $442.8 million and $447.6 million, respectively. This decrease includes the use of approximately $149.2 million by the company during the first nine months of 2007 to repurchase approximately 4.9 million shares of its common stock, offset by net cash flow from operations.
• Quarterly days sales outstanding (DSO) were 15 days as of September 30, 2007, an increase of three days from a DSO of 12 days as of September 30, 2006.
Stock Repurchase Program
Since July of 2005, CEC’s Board of Directors has authorized the use of a total of $800.2 million to repurchase outstanding shares of the company’s common stock. Stock repurchases under this program may be made on the open market or in privately negotiated transactions from time to time, depending on 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.
During the third quarter of 2007, the company repurchased 0.9 million shares of its common stock for approximately $24.3 million at an average price of $26.86 per share. Since the inception of the program, the company has repurchased 15.6 million shares of its common stock for approximately $515.6 million.
As of September 30, 2007, approximately $284.5 million was available under the stock repurchase program to repurchase outstanding shares of the company’s common stock.
POPULATION AND NEW STUDENT START DATA
Student Population
Total student population by reportable segment as of October 31, 2007 and 2006, were as follows:
|
| Population |
| Population |
| Percentage |
|
Academy (2) |
| 10,000 |
| 9,500 |
| 5 | % |
Colleges |
| 8,100 |
| 9,200 |
| (12 | )% |
Culinary Arts |
| 12,100 |
| 11,700 |
| 3 | % |
Health Education |
| 13,500 |
| 11,600 |
| 16 | % |
International |
| 8,600 |
| 6,000 |
| 43 | % |
University (3) |
| 43,900 |
| 41,400 |
| 6 | % |
CEC Consolidated |
| 96,200 |
| 89,400 |
| 8 | % |
(1) Segment and CEC consolidated student population data does not include the student population of schools held for sale or schools in the process of a teach-out.
(2) As of October 31, 2007, the Academy segment population included approximately 300 students who were taking classes at such date in fully-online academic programs offered by Academy segment schools. There were no Academy segment fully-online students as of October 31, 2006.
(3) As of October 31, 2007 and 2006, the University segment population included approximately 31,900 students and 28,700 students, respectively, who were taking classes at such dates in fully-online academic programs offered by University segment schools.
New Student Starts
New student starts by reportable segment during the third quarter of 2007 and 2006, were as follows:
|
| Third quarter |
| Third quarter |
| Percentage |
|
Academy (2) |
| 2,200 |
| 1,730 |
| 27 | % |
Colleges |
| 2,320 |
| 2,540 |
| (9 | )% |
Culinary Arts |
| 4,450 |
| 4,320 |
| 3 | % |
Health Education |
| 4,460 |
| 4,020 |
| 11 | % |
International |
| 3,550 |
| 2,680 |
| 32 | % |
University (3) |
| 13,070 |
| 11,730 |
| 11 | % |
CEC Consolidated |
| 30,050 |
| 27,020 |
| 11 | % |
(1) Segment and CEC consolidated student starts data does not include student starts of schools held for sale or schools in the process of a teach-out.
(2) Academy segment new student starts include approximately 200 students who began taking classes in fully-online academic programs offered by Academy segment schools during the third quarter of 2007. There were no Academy segment fully-online student starts during the third quarter of 2006.
(3) University segment new student starts includes approximately 10,520 students and 9,170 students, respectively, who began taking classes in fully-online academic programs offered by the University segment schools during the third quarter of 2007 and 2006.
CONFERENCE CALL INFORMATION
Career Education Corporation will host a conference call on November 6, 2007, 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 866-831-5605 (domestic) or 617-213-8851 (international) and citing code 86867065. Please log-in or dial-in at least ten minutes prior to the conference call start time to ensure a connection. An archived version of the conference call webcast will be accessible for 90 days at www.careered.com. A replay of the conference call will also be available for seven days by calling 888-286-8010 (domestic) or 617-801-6888 (international) and citing code 73482744.
About Career Education Corporation
The colleges, schools, and universities that are part of the Career Education Corporation (CEC) family offer high quality education to approximately 90,000 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 Canada, 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 its students attend the web-based virtual campuses of American InterContinental University Online and Colorado Technical University Online.
CEC is an industry leader whose gold-standard brands are recognized globally. Those brands include, among others, the Le Cordon Bleu Schools North America; Harrington College of Design; Brooks Institute; International Academy of Design; American InterContinental University; Colorado Technical University and Sanford-Brown Institutes and Colleges. Through its schools, CEC is committed to providing quality education, enabling students to graduate and pursue rewarding careers.
For more information, see the company’s website at www.careered.com. The company’s website includes a detailed listing of individual campus locations and web links to its 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,” 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 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: future financial and operational results, including the impact of the impairment of goodwill and other intangible assets; risks related to our ability to comply with accrediting agency requirements or obtain accrediting agency approvals, including the adverse impact of negative publicity concerning the continued probation status of American InterContinental University and ongoing review by its accrediting body; risks related to our ability to comply with, and the impact of changes in, legislation and regulations that affect our ability to participate in student financial aid programs; costs, risks, and effects of legal and administrative proceedings and investigations and governmental regulations, including the pending Securities and Exchange Commission investigation and class action, and other lawsuits; costs and difficulties related to the integration of acquired businesses; risks related to our ability to manage and continue growth; risks related to the sale of any campuses; risks related to competition, general economic conditions, and other risk factors relating to our industry and business and the factors discussed in our Annual Report on Form 10-K for the year ended December 31, 2006, and from time to time in our other reports filed with the Securities and Exchange Commission.
###
Investors: |
| Karen M. King | |
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| 847/585-3899 | |
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| www.careered.com | |
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Media: | Lynne Baker | ||
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| 847/851-7006 | |
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
|
| September 30, |
| December 31, |
| ||
|
| 2007 |
| 2006 |
| ||
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|
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| ||
ASSETS |
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CURRENT ASSETS: |
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 199,631 |
| $ | 187,853 |
|
Investments |
| 243,136 |
| 259,766 |
| ||
Total cash and cash equivalents and investments |
| 442,767 |
| 447,619 |
| ||
Receivables: |
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|
|
|
| ||
Students, net of allowance for doubtful accounts of $30,495 and $28,709 as of September 30, 2007, and December 31, 2006, respectively |
| 58,414 |
| 48,564 |
| ||
Other, net |
| 7,028 |
| 8,094 |
| ||
Prepaid expenses |
| 35,755 |
| 29,621 |
| ||
Inventories |
| 16,409 |
| 16,853 |
| ||
Deferred income tax assets |
| 7,159 |
| 11,357 |
| ||
Assets held for sale |
| 59,887 |
| 63,156 |
| ||
Other current assets |
| 12,995 |
| 32,064 |
| ||
Total current assets |
| 640,414 |
| 657,328 |
| ||
PROPERTY AND EQUIPMENT, net |
| 339,275 |
| 352,270 |
| ||
GOODWILL |
| 382,914 |
| 349,760 |
| ||
INTANGIBLE ASSETS, net |
| 45,792 |
| 33,984 |
| ||
OTHER ASSETS |
| 21,799 |
| 32,321 |
| ||
TOTAL ASSETS |
| $ | 1,430,194 |
| $ | 1,425,663 |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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|
|
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| ||
CURRENT LIABILITIES: |
|
|
|
|
| ||
Current maturities of long-term debt |
| $ | 11,596 |
| $ | 12,098 |
|
Accounts payable |
| 33,606 |
| 30,095 |
| ||
Accrued expenses: |
|
|
|
|
| ||
Payroll and related benefits |
| 28,576 |
| 27,012 |
| ||
Income taxes |
| 5,344 |
| — |
| ||
Other |
| 85,887 |
| 78,885 |
| ||
Deferred tuition revenue |
| 179,303 |
| 132,186 |
| ||
Liabilities held for sale |
| 30,806 |
| 31,879 |
| ||
Total current liabilities |
| 375,118 |
| 312,155 |
| ||
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| ||
LONG-TERM LIABILITIES: |
|
|
|
|
| ||
Long-term debt, net of current maturities |
| 3,484 |
| 2,763 |
| ||
Deferred rent obligations |
| 92,143 |
| 90,360 |
| ||
Deferred income tax liabilities |
| 16,607 |
| 16,527 |
| ||
Other |
| 7,093 |
| 7,980 |
| ||
Total long-term liabilities |
| 119,327 |
| 117,630 |
| ||
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|
|
|
|
| ||
SHARE-BASED AWARDS SUBJECT TO REDEMPTION |
| 13,949 |
| 13,477 |
| ||
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|
| ||
STOCKHOLDERS’ EQUITY: |
|
|
|
|
| ||
Common stock |
| 1,077 |
| 1,069 |
| ||
Additional paid-in capital |
| 696,070 |
| 666,780 |
| ||
Accumulated other comprehensive income |
| 14,773 |
| 5,683 |
| ||
Retained earnings |
| 725,440 |
| 675,188 |
| ||
Cost of shares in treasury |
| (515,560 | ) | (366,319 | ) | ||
Total stockholders’ equity |
| 921,800 |
| 982,401 |
| ||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
| $ | 1,430,194 |
| $ | 1,425,663 |
|
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the Three Months Ended September 30, 2007 and 2006
(In thousands, except per share amounts and percentages)
|
|
|
| % of |
|
|
| % of |
| ||
|
| 2007 |
| Revenue |
| 2006 |
| Revenue |
| ||
|
|
|
|
|
|
|
|
|
| ||
REVENUE: |
|
|
|
|
|
|
|
|
| ||
Tuition and registration fees |
| $ | 380,523 |
| 94.1 | % | $ | 405,866 |
| 94.7 | % |
Other |
| 23,882 |
| 5.9 | % | 22,698 |
| 5.3 | % | ||
Total revenue |
| 404,405 |
| 100.0 | % | 428,564 |
| 100.0 | % | ||
|
|
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|
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| ||
OPERATING EXPENSES: |
|
|
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|
|
|
|
|
| ||
Educational services and facilities |
| 149,514 |
| 37.0 | % | 139,811 |
| 32.6 | % | ||
General and administrative |
| 211,642 |
| 52.3 | % | 230,180 |
| 53.7 | % | ||
Depreciation and amortization |
| 19,301 |
| 4.8 | % | 19,382 |
| 4.5 | % | ||
Goodwill impairment charge |
| — |
| 0.0 | % | 785 |
| 0.2 | % | ||
Total operating expenses |
| 380,457 |
| 94.1 | % | 390,158 |
| 91.0 | % | ||
Income from operations |
| 23,948 |
| 5.9 | % | 38,406 |
| 9.0 | % | ||
|
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OTHER INCOME (EXPENSE): |
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|
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|
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|
|
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Interest income |
| 4,269 |
| 1.1 | % | 4,475 |
| 1.0 | % | ||
Interest expense |
| (336 | ) | -0.1 | % | (322 | ) | -0.1 | % | ||
Share of affiliate earnings |
| 209 |
| 0.1 | % | 510 |
| 0.1 | % | ||
Miscellaneous income |
| 56 |
| 0.0 | % | 120 |
| 0.0 | % | ||
Total other income |
| 4,198 |
| 1.1 | % | 4,783 |
| 1.0 | % | ||
|
|
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Income before provision for income taxes |
| 28,146 |
| 7.0 | % | 43,189 |
| 10.0 | % | ||
PROVISION FOR INCOME TAXES |
| 8,316 |
| 2.1 | % | 16,153 |
| 3.7 | % | ||
|
|
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INCOME FROM CONTINUING OPERATIONS |
| $ | 19,830 |
| 4.9 | % | $ | 27,036 |
| 6.3 | % |
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DISCONTINUED OPERATIONS: |
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Loss from discontinued operations, net of income tax benefit |
| (4,269 | ) | -1.1 | % | (6,321 | ) | -1.5 | % | ||
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NET INCOME |
| $ | 15,561 |
| 3.8 | % | $ | 20,715 |
| 4.8 | % |
|
|
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|
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NET INCOME PER SHARE - DILUTED: |
|
|
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|
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| ||
Income from continuing operations |
| $ | 0.212 |
|
|
| $ | 0.281 |
|
|
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Loss from discontinued operations |
| (0.046 | ) |
|
| (0.066 | ) |
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| ||
Net income |
| $ | 0.167 |
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|
| $ | 0.215 |
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DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING: |
| 93,455 |
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|
| 96,195 |
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CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the Nine Months Ended September 30, 2007 and 2006
(In thousands, except per share amounts and percentages)
|
|
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| % of |
|
|
| % of |
| ||
|
| 2007 |
| Revenue |
| 2006 |
| Revenue |
| ||
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REVENUE: |
|
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| ||
Tuition and registration fees |
| $ | 1,178,054 |
| 95.2 | % | $ | 1,310,988 |
| 95.6 | % |
Other |
| 59,671 |
| 4.8 | % | 60,149 |
| 4.4 | % | ||
Total revenue |
| 1,237,725 |
| 100.0 | % | 1,371,137 |
| 100.0 | % | ||
|
|
|
|
|
|
|
|
|
| ||
OPERATING EXPENSES: |
|
|
|
|
|
|
|
|
| ||
Educational services and facilities |
| 437,777 |
| 35.4 | % | 418,273 |
| 30.5 | % | ||
General and administrative |
| 660,182 |
| 53.3 | % | 695,634 |
| 50.7 | % | ||
Depreciation and amortization |
| 57,744 |
| 4.7 | % | 57,142 |
| 4.2 | % | ||
Goodwill impairment charge |
| — |
| 0.0 | % | 85,760 |
| 6.3 | % | ||
Total operating expenses |
| 1,155,703 |
| 93.4 | % | 1,256,809 |
| 91.7 | % | ||
Income from operations |
| 82,022 |
| 6.6 | % | 114,328 |
| 8.3 | % | ||
|
|
|
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|
|
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OTHER INCOME (EXPENSE): |
|
|
|
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| ||
Interest income |
| 13,105 |
| 1.0 | % | 13,448 |
| 0.9 | % | ||
Interest expense |
| (899 | ) | -0.1 | % | (1,007 | ) | -0.1 | % | ||
Share of affiliate earnings |
| 2,870 |
| 0.2 | % | 2,109 |
| 0.2 | % | ||
Miscellaneous income |
| 772 |
| 0.1 | % | 25 |
| 0.0 | % | ||
Total other income |
| 15,848 |
| 1.2 | % | 14,575 |
| 1.0 | % | ||
|
|
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|
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|
|
|
|
| ||
Income before provision for income taxes |
| 97,870 |
| 7.8 | % | 128,903 |
| 9.3 | % | ||
PROVISION FOR INCOME TAXES |
| 33,765 |
| 2.7 | % | 77,548 |
| 5.6 | % | ||
|
|
|
|
|
|
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| ||
INCOME FROM CONTINUING OPERATIONS |
| $ | 64,105 |
| 5.1 | % | $ | 51,355 |
| 3.7 | % |
|
|
|
|
|
|
|
|
|
| ||
DISCONTINUED OPERATIONS: |
|
|
|
|
|
|
|
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| ||
Loss from discontinued operations, net of income tax benefit |
| (13,381 | ) | -1.1 | % | (25,450 | ) | -1.9 | % | ||
|
|
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| ||
NET INCOME |
| $ | 50,724 |
| 4.0 | % | $ | 25,905 |
| 1.8 | % |
|
|
|
|
|
|
|
|
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| ||
NET INCOME PER SHARE - DILUTED: |
|
|
|
|
|
|
|
|
| ||
Income from continuing operations |
| $ | 0.674 |
|
|
| $ | 0.521 |
|
|
|
Loss from discontinued operations |
| (0.141 | ) |
|
| (0.258 | ) |
|
| ||
Net income |
| $ | 0.535 |
|
|
| $ | 0.263 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||
DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING: |
| 95,055 |
|
|
| 98,556 |
|
|
|
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
|
| For the Three Months Ended |
| ||||
|
| September 30, |
| ||||
|
| 2007 |
| 2006 |
| ||
|
|
|
|
|
| ||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
| ||
Net income |
| $ | 15,561 |
| $ | 20,715 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
| ||
Goodwill impairment charge |
| — |
| 785 |
| ||
Depreciation and amortization expense |
| 19,301 |
| 21,886 |
| ||
Bad debt expense |
| 11,093 |
| 18,196 |
| ||
Compensation expense related to share-based awards |
| 3,475 |
| 6,163 |
| ||
(Gain)/loss on disposition of property and equipment |
| (4 | ) | 5 |
| ||
Share of affilate earnings, net of dividends received |
| (1,177 | ) | 3,633 |
| ||
Changes in operating assets and liabilities, net of acquisition |
| 56,732 |
| 11,843 |
| ||
Net cash provided by operating activities |
| 104,981 |
| 83,226 |
| ||
|
|
|
|
|
| ||
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
| ||
Acquisition transaction costs |
| (121 | ) | — |
| ||
Purchases of property and equipment |
| (12,755 | ) | (16,870 | ) | ||
Purchases of available-for-sale investments |
| (215,496 | ) | (249,160 | ) | ||
Sales of available-for-sale investments |
| 236,457 |
| 208,241 |
| ||
Other |
| (5 | ) | (254 | ) | ||
Net cash provided by (used in) investing activities |
| 8,080 |
| (58,043 | ) | ||
|
|
|
|
|
| ||
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
| ||
Purchase of treasury stock |
| (24,320 | ) | — |
| ||
Issuance of common stock |
| 3,740 |
| 1,236 |
| ||
Tax benefit associated with stock option exercises |
| 302 |
| 51 |
| ||
Payments of capital lease obligations and other long-term debt |
| (9 | ) | (3,556 | ) | ||
Net cash used in financing activities |
| (20,287 | ) | (2,269 | ) | ||
|
|
|
|
|
| ||
EFFECT OF FOREIGN CURRENCY EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS |
| 6,081 |
| 2,654 |
| ||
|
|
|
|
|
| ||
NET INCREASE IN CASH AND CASH EQUIVALENTS |
| 98,855 |
| 25,568 |
| ||
DISCONTINUED OPERATIONS CASH ACTIVIITY INCLUDED ABOVE: |
|
|
|
|
| ||
Add: Cash balance of discontinued operations at beginning of the period |
| 2,457 |
| 1,083 |
| ||
Less: Cash balance of discontinued operations at end of the period |
| 842 |
| 2,153 |
| ||
CASH AND CASH EQUIVALENTS, beginning of the period |
| 99,161 |
| 89,506 |
| ||
CASH AND CASH EQUIVALENTS, end of the period |
| $ | 199,631 |
| $ | 114,004 |
|
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
|
| For the Nine Months Ended |
| ||||
|
| September 30, |
| ||||
|
| 2007 |
| 2006 |
| ||
|
|
|
|
|
| ||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
| ||
Net income |
| $ | 50,724 |
| $ | 25,905 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
| ||
Goodwill impairment charge |
| — |
| 96,149 |
| ||
Depreciation and amortization expense |
| 57,744 |
| 64,837 |
| ||
Bad debt expense |
| 32,055 |
| 50,459 |
| ||
Compensation expense related to share-based awards |
| 11,700 |
| 14,649 |
| ||
(Gain)/loss on disposition of property and equipment |
| (220 | ) | 260 |
| ||
Share of affilate earnings, net of dividends received |
| (927 | ) | 2,034 |
| ||
Changes in operating assets and liabilities, net of acquisition |
| 42,164 |
| (39,606 | ) | ||
Net cash provided by operating activities |
| 193,240 |
| 214,687 |
| ||
|
|
|
|
|
| ||
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
| ||
Business acquisition, net of acquired cash |
| (30,324 | ) | — |
| ||
Acquisition transaction costs |
| (1,553 | ) | — |
| ||
Purchases of property and equipment |
| (44,085 | ) | (60,021 | ) | ||
Purchases of available-for-sale investments |
| (504,180 | ) | (801,610 | ) | ||
Sales of available-for-sale investments |
| 522,789 |
| 745,526 |
| ||
Other |
| (196 | ) | (364 | ) | ||
Net cash used in investing activities |
| (57,549 | ) | (116,469 | ) | ||
|
|
|
|
|
| ||
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
| ||
Purchase of treasury stock |
| (149,241 | ) | (124,845 | ) | ||
Issuance of common stock |
| 14,730 |
| 8,647 |
| ||
Tax benefit associated with stock option exercises |
| 2,868 |
| 2,101 |
| ||
Payments of capital lease obligations and other long-term debt |
| (1,385 | ) | (3,740 | ) | ||
Net cash used in financing activities |
| (133,028 | ) | (117,837 | ) | ||
|
|
|
|
|
| ||
EFFECT OF FOREIGN CURRENCY EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS |
| 7,993 |
| 3,468 |
| ||
|
|
|
|
|
| ||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |
| 10,656 |
| (16,151 | ) | ||
DISCONTINUED OPERATIONS CASH ACTIVIITY INCLUDED ABOVE: |
|
|
|
|
| ||
Add: Cash balance of discontinued operations at beginning of the period |
| 1,964 |
| 3,094 |
| ||
Less: Cash balance of discontinued operations at end of the period |
| 842 |
| 2,153 |
| ||
CASH AND CASH EQUIVALENTS, beginning of the period |
| 187,853 |
| 129,214 |
| ||
CASH AND CASH EQUIVALENTS, end of the period |
| $ | 199,631 |
| $ | 114,004 |
|
CAREER EDUCATION CORPORATION
SELECTED SEGMENT INFORMATION - CONTINUING OPERATIONS
For the Three Months Ended September 30, 2007 and 2006
(Dollars in thousands)
|
| 2007 |
| 2006 |
| ||
|
|
|
|
|
| ||
REVENUE: |
|
|
|
|
| ||
Academy segment |
| $ | 40,763 |
| $ | 37,688 |
|
Colleges segment |
| 43,867 |
| 50,527 |
| ||
Culinary Arts segment |
| 98,472 |
| 96,908 |
| ||
Health Education segment |
| 47,551 |
| 42,811 |
| ||
International segment |
| 10,891 |
| 7,045 |
| ||
University segment |
| 162,858 |
| 193,352 |
| ||
Corporate and other (1) |
| 3 |
| 233 |
| ||
|
| $ | 404,405 |
| $ | 428,564 |
|
|
|
|
|
|
| ||
SEGMENT PROFIT (LOSS): |
|
|
|
|
| ||
Academy segment |
| $ | 1,401 |
| $ | 426 |
|
Colleges segment |
| 4,136 |
| 5,739 |
| ||
Culinary Arts segment |
| 15,566 |
| 19,341 |
| ||
Health Education segment |
| 2,115 |
| 340 |
| ||
International segment |
| (3,054 | ) | 883 |
| ||
University segment (2) |
| 16,501 |
| 33,209 |
| ||
Corporate and other (1) |
| (12,508 | ) | (21,022 | ) | ||
|
| $ | 24,157 |
| $ | 38,916 |
|
|
|
|
|
|
| ||
SEGMENT PROFIT (LOSS) PERCENTAGE: |
|
|
|
|
| ||
Academy segment |
| 3.4 | % | 1.1 | % | ||
Colleges segment |
| 9.4 | % | 11.4 | % | ||
Culinary Arts segment |
| 15.8 | % | 20.0 | % | ||
Health Education segment |
| 4.4 | % | 0.8 | % | ||
International segment |
| -28.0 | % | 12.5 | % | ||
University segment |
| 10.1 | % | 17.2 | % |
(1) Operating results of Blish.com and Chefs.com are included in Corporate and other.
(2) University segment profit includes share of affiliate earnings.
CAREER EDUCATION CORPORATION
SELECTED SEGMENT INFORMATION - CONTINUING OPERATIONS
For the Nine Months Ended September 30, 2007 and 2006
(Dollars in thousands)
|
| 2007 |
| 2006 |
| ||
|
|
|
|
|
| ||
REVENUE: |
|
|
|
|
| ||
Academy segment |
| $ | 123,462 |
| $ | 120,133 |
|
Colleges segment |
| 135,781 |
| 159,997 |
| ||
Culinary Arts segment |
| 271,743 |
| 270,242 |
| ||
Health Education segment |
| 138,862 |
| 124,471 |
| ||
International segment |
| 49,322 |
| 32,554 |
| ||
University segment |
| 518,416 |
| 663,256 |
| ||
Corporate and other (1) |
| 139 |
| 484 |
| ||
|
| $ | 1,237,725 |
| $ | 1,371,137 |
|
|
|
|
|
|
| ||
SEGMENT PROFIT (LOSS): |
|
|
|
|
| ||
Academy segment |
| $ | 5,653 |
| $ | 6,827 |
|
Colleges segment |
| 1,197 |
| 22,016 |
| ||
Culinary Arts segment |
| 34,121 |
| 41,734 |
| ||
Health Education segment (2) |
| 7,967 |
| (83,672 | ) | ||
International segment |
| 3,577 |
| 5,924 |
| ||
University segment (3) |
| 71,819 |
| 183,093 |
| ||
Corporate and other (1) |
| (39,442 | ) | (59,485 | ) | ||
|
| $ | 84,892 |
| $ | 116,437 |
|
|
|
|
|
|
| ||
SEGMENT PROFIT (LOSS) PERCENTAGE: |
|
|
|
|
| ||
Academy segment |
| 4.6 | % | 5.7 | % | ||
Colleges segment |
| 0.9 | % | 13.8 | % | ||
Culinary Arts segment |
| 12.6 | % | 15.4 | % | ||
Health Education segment |
| 5.7 | % | -67.2 | % | ||
International segment |
| 7.3 | % | 18.2 | % | ||
University segment |
| 13.9 | % | 27.6 | % |
(1) Operating results of Blish.com and Chefs.com are included in Corporate and other.
(2) Health Education segment loss for the nine months ended September 30, 2006, includes a goodwill impairment charge of $85.8 million.
(3) University segment profit includes share of affiliate earnings.
CAREER EDUCATION CORPORATION
SELECTED ACCOUNTS RECEIVABLE AND ALLOWANCE INFORMATION - - CONTINUING OPERATIONS
(Dollars in thousands)
DAYS SALES OUTSTANDING
|
| September 30, |
|
|
|
|
| ||||
|
| 2007 |
| 2006 |
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
| ||
Total revenue during the quarter ended |
| $ | 404,405 |
| $ | 428,564 |
|
|
|
|
|
Number of days in the quarter ended |
| 92 |
| 92 |
|
|
|
|
| ||
Total revenue per day |
| $ | 4,396 |
| $ | 4,658 |
|
|
|
|
|
Total receivables, net (1) |
| $ | 65,442 |
| $ | 56,955 |
|
|
|
|
|
Days sales outstanding |
| 15 |
| 12 |
|
|
|
|
|
ALLOWANCE AS A PERCENTAGE OF STUDENT RECEIVABLES
|
| September 30, |
|
|
|
|
| ||||
|
| 2007 |
| 2006 |
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
| ||
Allowance for doubtful accounts |
| $ | 30,495 |
| $ | 34,044 |
|
|
|
|
|
Gross student receivables (1) |
| $ | 88,909 |
| $ | 83,582 |
|
|
|
|
|
Allowance as a percentage of student receivables |
| 34.3 | % | 40.7 | % |
|
|
|
|
STUDENT RECEIVABLES VALUATION ALLOWANCE
|
| Balance, |
|
|
| Amounts |
| Balance, |
| ||||
|
| Beginning of |
| Charges |
| Written- |
| End of |
| ||||
|
| Period |
| to Expense |
| Off |
| Period |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
For the three months ended September 30, 2007 |
| $ | 29,504 |
| $ | 9,827 |
| $ | (8,836 | ) | $ | 30,495 |
|
|
|
|
|
|
|
|
|
|
| ||||
For the three months ended September 30, 2006 |
| $ | 34,371 |
| $ | 16,467 |
| $ | (16,794 | ) | $ | 34,044 |
|
(1) Total receivables, net and gross student receivables as of September 30, 2006, have been adjusted from amounts previously reported to eliminate unearned student receivable balances attributable to our INSEEC schools. The adjustments were necessary to conform to our current presentation method.
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
SELECTED FINANCIAL DATA REGARDING ASSETS HELD FOR SALE
For the Three Months Ended September 30, 2007 and 2006
(In thousands)
|
| For the Three Months Ended September 30, 2007 |
| For the Three Months Ended September 30, 2006 |
| ||||||||||||||
|
| Gibbs |
| Colleges |
|
|
| Gibbs |
| Colleges |
|
|
| ||||||
|
| Held for Sale |
| Held for Sale |
| Total |
| Held for Sale |
| Held for Sale |
| Total |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Total revenue |
| $ | 21,655 |
| $ | 7,070 |
| $ | 28,725 |
| $ | 25,921 |
| $ | 7,900 |
| $ | 33,821 |
|
Total operating expenses |
| 27,467 |
| 7,556 |
| 35,023 |
| 34,493 |
| 9,440 |
| 43,933 |
| ||||||
Loss from operations |
| (5,812 | ) | (486 | ) | (6,298 | ) | (8,572 | ) | (1,540 | ) | (10,112 | ) | ||||||
Total other income (expense) |
| (5 | ) | — |
| (5 | ) | 15 |
| — |
| 15 |
| ||||||
Loss before income tax benefit |
| (5,817 | ) | (486 | ) | (6,303 | ) | (8,557 | ) | (1,540 | ) | (10,097 | ) | ||||||
Income tax benefit |
| (1,911 | ) | (123 | ) | (2,034 | ) | (3,200 | ) | (576 | ) | (3,776 | ) | ||||||
Net loss from discontinued operations |
| $ | (3,906 | ) | $ | (363 | ) | $ | (4,269 | ) | $ | (5,357 | ) | $ | (964 | ) | $ | (6,321 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Student starts |
| 1,547 |
| 566 |
| 2,113 |
| 1,622 |
| 488 |
| 2,110 |
| ||||||
Student population |
| 4,883 |
| 1,183 |
| 6,066 |
| 4,817 |
| 1,323 |
| 6,140 |
|
CAREER EDUCATION CORPORATION
OCTOBER 2007 SEGMENT STUDENT START INFORMATION
|
| For the One Month Ended October 31, |
| ||
|
| 2007 |
| 2006 |
|
STUDENT STARTS: |
|
|
|
|
|
Academy segment |
| 2,380 |
| 2,430 |
|
Colleges segment |
| 550 |
| 560 |
|
Culinary Arts segment |
| 1,520 |
| 1,470 |
|
Health Education segment |
| 1,690 |
| 1,330 |
|
International segment |
| 2,230 |
| 930 |
|
University segment |
| 7,820 |
| 7,450 |
|
|
| 16,190 |
| 14,170 |
|
|
|
|
|
|
|
Gibbs held for sale |
| 1,850 |
| 2,070 |
|
Colleges held for sale |
| 270 |
| 340 |
|
CAREER EDUCATION CORPORATION
2007 TEACH-OUT SEGMENT INFORMATION - CONTINUING OPERATIONS
(Dollars in thousands)
|
| For the Three Months Ended |
| |||||||
|
| March 31, 2007 |
| June 30, 2007 |
| September 30, 2007 |
| |||
REVENUE: |
|
|
|
|
|
|
| |||
Academy segment |
| $ | 1,854 |
| $ | 1,693 |
| $ | 1,355 |
|
College segment |
| 4,040 |
| 3,393 |
| 2,759 |
| |||
Health Education segment |
| 174 |
| 85 |
| 12 |
| |||
|
| $ | 6,068 |
| $ | 5,171 |
| $ | 4,126 |
|
|
|
|
|
|
|
|
| |||
SEGMENT LOSS: |
|
|
|
|
|
|
| |||
Academy segment |
| $ | (323 | ) | $ | (792 | ) | $ | (34 | ) |
College segment |
| (2,068 | ) | (6,437 | ) | (808 | ) | |||
Health Education segment (1) |
| (300 | ) | (281 | ) | (357 | ) | |||
|
| $ | (2,691 | ) | $ | (7,510 | ) | $ | (1,199 | ) |
|
|
|
|
|
|
|
| |||
SEGMENT LOSS PERCENTAGE: |
|
|
|
|
|
|
| |||
Academy segment |
| -17.4 | % | -46.8 | % | -2.5 | % | |||
College segment |
| -51.2 | % | -189.7 | % | -29.3 | % | |||
Health Education segment |
| -172.4 | % | -330.6 | % | -2975.0 | % | |||
|
|
|
|
|
|
|
| |||
STUDENT STARTS: |
|
|
|
|
|
|
| |||
Academy segment |
| 74 |
| 80 |
| 25 |
| |||
College segment |
| 78 |
| 68 |
| 2 |
| |||
Health Education segment |
| — |
| — |
| — |
| |||
|
| 152 |
| 148 |
| 27 |
|
|
| April 30, 2007 |
| July 31, 2007 |
| October 31, 2007 |
|
STUDENT POPULATION AS OF: |
|
|
|
|
|
|
|
Academy segment |
| 456 |
| 322 |
| 245 |
|
College segment |
| 692 |
| 495 |
| 387 |
|
Health Education segment |
| 36 |
| 6 |
| — |
|
|
| 1,184 |
| 823 |
| 632 |
|
(1) SBI Springfield teach-out was completed in September of 2007.
CAREER EDUCATION CORPORATION
2006 TEACH-OUT SEGMENT INFORMATION - CONTINUING OPERATIONS
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
| For the Twelve |
| ||||||
|
| For the Three Months Ended |
| Months Ended |
| ||||||||||||
|
| March 31, 2006 |
| June 30, 2006 |
| September 30, 2006 |
| December 31, 2006 |
| December 31, 2006 |
| ||||||
REVENUE: |
|
|
|
|
|
|
|
|
|
|
| ||||||
Academy segment |
| $ | 1,875 |
| $ | 1,673 |
| $ | 1,829 |
| $ | 1,899 |
| $ | 7,276 |
| |
College segment |
| 5,348 |
| 4,402 |
| 4,892 |
| 5,557 |
| 20,199 |
| ||||||
Health Education segment |
| 716 |
| 702 |
| 655 |
| 401 |
| 2,474 |
| ||||||
|
| $ | 7,939 |
| $ | 6,777 |
| $ | 7,376 |
| $ | 7,857 |
| $ | 29,949 |
| |
|
|
|
|
|
|
|
|
|
|
|
| ||||||
SEGMENT LOSS: |
|
|
|
|
|
|
|
|
|
|
| ||||||
Academy segment |
| $ | (436 | ) | $ | (735 | ) | $ | (525 | ) | $ | (279 | ) | $ | (1,975 | ) | |
College segment |
| (1,928 | ) | (2,142 | ) | (1,563 | ) | (4,038 | ) | (9,671 | ) | ||||||
Health Education segment |
| (117 | ) | (289 | ) | (322 | ) | (166 | ) | (894 | ) | ||||||
|
| $ | (2,481 | ) | $ | (3,166 | ) | $ | (2,410 | ) | $ | (4,483 | ) | $ | (12,540 | ) | |
|
|
|
|
|
|
|
|
|
|
|
| ||||||
SEGMENT LOSS PERCENTAGE: |
|
|
|
|
|
|
|
|
|
|
| ||||||
Academy segment |
| -23.3 | % | -43.9 | % | -28.7 | % | -14.7 | % | -27.1 | % | ||||||
College segment |
| -36.1 | % | -48.7 | % | -32.0 | % | -72.7 | % | -47.9 | % | ||||||
Health Education segment |
| -16.3 | % | -41.2 | % | -49.2 | % | -41.4 | % | -36.1 | % | ||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||
STUDENT STARTS: |
|
|
|
|
|
|
|
|
|
|
| ||||||
Academy segment |
| 92 |
| 87 |
| 137 |
| 102 |
| 418 |
| ||||||
College segment |
| 140 |
| 126 |
| 199 |
| 218 |
| 683 |
| ||||||
Health Education segment |
| 76 |
| 55 |
| 47 |
| 0 |
| 178 |
| ||||||
|
| 308 |
| 268 |
| 383 |
| 320 |
| 1,279 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
| April 30, 2006 |
| July 31, 2006 |
| October 31, 2006 |
| January 31, 2007 |
|
|
| ||||||
STUDENT POPULATION AS OF: |
|
|
|
|
|
|
|
|
|
|
| ||||||
Academy segment |
| 470 |
| 486 |
| 494 |
| 460 |
|
|
| ||||||
College segment |
| 890 |
| 865 |
| 953 |
| 816 |
|
|
| ||||||
Health Education segment |
| 199 |
| 187 |
| 131 |
| 67 |
|
|
| ||||||
|
| 1,559 |
| 1,538 |
| 1,578 |
| 1,343 |
|
|
| ||||||