© Career Education Corporation 2008 © Career Education Corporation 2008 Career Education Corporation Career Education Corporation Bank of America Investment Conference Bank of America Investment Conference September 17, 2008 September 17, 2008 Exhibit 99.1 |
© Career Education Corporation 2008 © Career Education Corporation 2008 Gary E. McCullough PRESIDENT AND CHIEF EXECUTIVE OFFICER CAREER EDUCATION CORPORATION Gary E. McCullough PRESIDENT AND CHIEF EXECUTIVE OFFICER CAREER EDUCATION CORPORATION |
Except for the historical and present factual information contained herein, the matters set forth in this presentation, 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 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: risks associated with unfavorable changes in the cost or availability of financing, including alternative loans, for our students; potential higher bad debt expense or reduced revenue associated with requiring students to pay more of their educational expenses while in school; increased competition; the effectiveness of our regulatory compliance efforts; 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; 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, and class action and other lawsuits; costs, risks and uncertainties associated with our company-wide restructuring, including risks and uncertainties associated with changes in management and reporting responsibilities; 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 or teach-out of any campuses; risks related to general economic conditions including credit market 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, 2007, and from time to time in our other reports filed with the Securities and Exchange Commission. Safe Harbor Safe Harbor |
Non-GAAP Financial Information Non-GAAP Financial Information 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. |
Career Education Overview Career Education Overview Our Mission: A global educational company committed to quality outcomes and career opportunities for a diverse student population Our Mission: A global educational company committed to quality outcomes and career opportunities for a diverse student population |
Career Education Overview Career Education Overview A Leading For-Profit Post Secondary Education Company 2007 Revenue: $1.7 Billion Over 90,000 students A Leading For-Profit Post Secondary Education Company 2007 Revenue: $1.7 Billion Over 90,000 students *Demographics as of June 30, 2008 |
An Inflection Point in Our History An Inflection Point in Our History Transform Transform Strengthen Strengthen Foundation Foundation Accelerate Accelerate Growth Growth Retrenchment Retrenchment Acquire/ Acquire/ Build Build High High Performance Performance New Management Team |
Competitive Strengths Competitive Strengths Strong core institutions… Strong core institutions… delivering quality delivering quality outcomes outcomes Leading on-line platform Leading on-line platform Broad geographic presence Broad geographic presence Strong balance sheet Strong balance sheet Proven growth capability Proven growth capability |
Strong Core Institutions . . . Strong Core Institutions . . . Leading network of allied health schools Leading network of allied health schools National network of culinary schools National network of culinary schools Multi-national online and on-ground schools Multi-national online and on-ground schools Network of business schools in France Network of business schools in France Nationwide network of fashion & design schools Nationwide network of fashion & design schools TM |
… Delivering Quality Outcomes … Delivering Quality Outcomes Surgical Technology Program at Sanford-Brown Institute Iselin, NJ “PAE Elite Twenty Program” Surgical Technology Program at Sanford-Brown Institute Iselin, NJ “PAE Elite Twenty Program” Council of College and Military Educators 2007 Institution Award Wounded Warrior Scholarship Program Council of College and Military Educators 2007 Institution Award Wounded Warrior Scholarship Program Exceeded all benchmarks in the 2007 Noel-Levitz Priorities Survey for Online Learners Exceeded all benchmarks in the 2007 Exceeded all benchmarks in the 2007 Noel-Levitz Priorities Survey for Online Learners Online Learners Brian Williams – Interim Leader of Culinary Arts Business Unit, graduate of AIU First to offer 100% Spanish speaking culinary degree in United States Brian Williams – Interim Leader of Culinary Arts Business Unit, graduate of AIU First to offer 100% Spanish speaking culinary degree in United States 172,000 total graduates (2004-2007) 172,000 total graduates 172,000 total graduates (2004-2007) (2004-2007) |
Student-Centric On-Line Platform Student-Centric On-Line Platform Virtual Campus and full student services Proprietary learning management systems Rich online collaboration tools Access to the Virtual Campus using mobile devices Virtual Campus and full student services Proprietary learning management systems Rich online collaboration tools Access to the Virtual Campus using mobile devices Source: Echo Research AIU Online Brand Research 2008 |
Broad Geographic Coverage Broad Geographic Coverage Art & Design University Culinary Health International Campuses in key local markets Online businesses attract from 65 different countries Ability to further domestic presence Ability to meet student needs online and on-ground… Ability to meet student needs online and on-ground… |
Strong Balance Sheet Strong Balance Sheet Flexibility to absorb challenges along the way… Flexibility to absorb challenges along the way… /1 Free Cash Flow = Operating Cash Flow less Capital Expenditures |
Proven Growth Capability Proven Growth Capability |
Transformation Underway… Transformation Underway… Unsustainable growth Low margins Sustainable growth Margin expansion . . . Unlocking sustainable growth potential . . . Unlocking sustainable growth potential Improve Organizational Effectiveness Targeted Growth Strategies Reputation Overhang Reputation Overhang Inefficient Brand Inefficient Brand Structure Structure Independent Independent Institutions/ Operations Institutions/ Operations Performance Variability Performance Variability 2007 and Before 2010+ Optimize Value Proposition Strong Reputation Highly Differentiated Brands Leverage Scale Consistent High Performance Re-Build Reputation Reputation Create Strategic Create Strategic Business Units Business Units New Leadership New Leadership Centralize Support Centralize Support Activities Activities Teach-Out Unprofitable Schools Unprofitable Schools Brand Brand Development / Development / Rationalization Rationalization Improve Improve Marketing & Marketing & Admissions Admissions Efficiency Efficiency Re-Invest in Student Student Experience Experience |
Build reputation and external relationships Teach out unprofitable campuses Centralize support activities Create Strategic Business Units with New Leadership Improve Organizational Effectiveness Improve Organizational Effectiveness Action Progress |
Centralize Support Activities Centralize Support Activities Create shared service center Create shared service center to leverage scale to leverage scale Select admissions functions Student financial aid processing Procurement Human resource systems • Talent acquisition • Training 25% reduction in admissions reps since Q107 25% reduction in admissions reps since Q107 |
Teach Out Unprofitable Schools Teach Out Unprofitable Schools Eliminate significant losses Eliminate significant losses from underperforming, non- from underperforming, non- strategic assets strategic assets Acted decisively on 14 underperforming schools Moved to transitional segment until complete Impact on P&L until 2010 ( ) |
Strategic Business Units Strategic Business Units International International Health Education Health Education Art & Design Art & Design University University Culinary Arts Culinary Arts TM Core Institutions Total Brands 3 4 5 2 2 Enrollment /1 43,500 15,200 12,800 10,200 7,000 % Online 78% - 4% - - Ground Locations 11 24 14 16 11 TM As of March 31, 2008 |
Optimize Value Proposition Optimize Value Proposition Health Education Health Education Art & Design Art & Design University University Culinary Arts Culinary Arts Brand Strategy Marketing Focus Student Experience Local support Technology Retention and placement Longer Programs Renewal Consolidate Align Consolidate Optimize Strengthen local relationships Leverage quality and diversity Leverage Brand consolidation Optimize Value Proposition |
Growth Opportunities Growth Opportunities Health Education Health Education Art & Design Art & Design University University Culinary Arts Culinary Arts Brand Strategy Marketing Focus Student Experience Local support Technology Longer Programs Online New Locations Consolidate Align Consolidate Optimize Strengthen local relationships Leverage quality and diversity Leverage Brand consolidation New Programs Retention and placement Renewal Optimize Value Proposition Growth Strategies |
Mike Graham EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER CAREER EDUCATION CORPORATION Mike Graham EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER CAREER EDUCATION CORPORATION © Career Education Corporation 2008 © Career Education Corporation 2008 |
Financial Expectations Financial Expectations ($ millions) ($ millions) 2007 Pro Forma 2010 Milestone Revenue Revenue $1,635 $1,635 6% - 6% - 8% 8% CAGR CAGR $1,950 - $1,950 - $2,050 $2,050 Operating Income Operating Income $151 $151 Low to Mid Low to Mid Teens Teens $225 - $225 - $270 $270 Transitional Transitional Schools Schools Operating Operating Income Income ($86) ($86) N/A N/A ($10 - ($10 - $20) $20) Total Total $65 $65 $210 - $210 - $255 $255 Est. Free Cash Flow Est. Free Cash Flow $166 $166 $195 - $195 - $235 $235 |
1 st Half 2008 Results 1 st Half 2008 Results On plan through first six months On plan through first six months Effectively managing short-term challenges Effectively managing short-term challenges Solid progress on expense control Solid progress on expense control Teach-Out and Real estate initiatives ahead of plan Teach-Out and Real estate initiatives ahead of plan |
1 st Half 2008 Results 1 st Half 2008 Results Segment Performance Versus Plan Comment University = Temporary PEER model transition issue… resolved in Q3 Culinary - Transition to new student loan environment… new process in place Art & Design - Health + Strong organic start growth International + Transitional Schools + Accelerated progress CEC TOTAL = On Plan through 1 st Half |
Student Lending Student Lending Process working well Process working well Prudent front-end augmented by ongoing student Prudent front-end augmented by ongoing student support to ensure student success support to ensure student success $14.5 million in student financing outstanding balances $14.5 million in student financing outstanding balances at end of Q2 at end of Q2 Slower ramp than originally anticipated Slower ramp than originally anticipated Expect outstanding balances to be <$45 million at Expect outstanding balances to be <$45 million at end of 2008 end of 2008 |
Real Estate Efforts Real Estate Efforts Over 7 million square feet of space in global portfolio Focused on exiting unfavorable leases and Transitional segment Real estate 1H08 Released or back-filled approximately 90,000 square feet of real estate 2H08 4Q: $5.6M noncash charge Accelerated teach-out of Gibbs Piscataway Working to close several more deals to remove Transitional and excess real estate in the second half of 2008 If successful, would result in additional charges in 2H08 Over 7 million square feet of space in global portfolio Focused on exiting unfavorable leases and Transitional segment Real estate 1H08 Released or back-filled approximately 90,000 square feet of real estate 2H08 4Q: $5.6M noncash charge Accelerated teach-out of Gibbs Piscataway Working to close several more deals to remove Transitional and excess real estate in the second half of 2008 If successful, would result in additional charges in 2H08 Right long-term strategy for the business |
Summary Summary Leverage-able competitive strengths Leverage-able competitive strengths Transformation well underway Transformation well underway Strategies in place to deliver sustainable earnings Strategies in place to deliver sustainable earnings growth growth Performance on track in 2008 Performance on track in 2008 |
GAAP to Non-GAAP Reconciliation GAAP to Non-GAAP Reconciliation ($ millions) 2005 2006 2007 Net cash provided by operating activities 378 $ 216 $ 222 $ Less: purchases of property and equipment (126) (69) (56) Free Cash Flow 252 $ 147 $ 166 $ |