Exhibit 99.1
CAREER EDUCATION CORPORATION REPORTS
RESULTS FOR SECOND QUARTER 2009
| | • | | Revenue increased 9% and operating income increased 70% excluding Transitional Schools and other significant items |
| | • | | Board of Directors authorized the use of an additional $200.0 million to repurchase outstanding shares of common stock |
Hoffman Estates, Ill. (August XX, 2009) – Career Education Corporation (NASDAQ: CECO) today reported total revenue of $440.7 million and net income of $6.5 million, or $0.07 per diluted share, for the second quarter of 2009 compared to total revenue of $417.0 and net income of $12.7 million, or $0.14 per diluted share, for the second quarter of 2008.
The financial and operating results for the second quarter 2009 and 2008 include operating losses associated with schools currently being taught out (Transitional Schools) as well as other significant items.
On a non-GAAP basis, which excludes the Transitional Schools and other significant items, revenue increased 9.2 percent and operating income increased 70 percent in the second quarter of 2009. (See segment tables below and the reconciliation of GAAP financial information to non-GAAP financial exhibit attached to this press release.)
“The second quarter represents another level of meaningful improvement in our financial performance,” said Gary E. McCullough, President and Chief Executive Officer. “We achieved our highest rate of student population and revenue growth since 2005, resulting in an increase in operating efficiency in the quarter. While our work is by no means complete, these results reflect the progress we have made in furthering our strategy and add to my confidence in our ability to achieve our 2010 milestones.”
CEC ANNOUNCES 2Q09 RESULTS …PG 2
Three Months Ended June 30, 2009
| | • | | Total revenue from continuing operations was $440.7 million during the second quarter of 2009, a 5.7 percent increase from $417.0 million during the second quarter of 2008. |
| | • | | Excluding the Transitional Schools, revenue was $436.1 million in the second quarter, a 9.2 percent increase from $399.5 million in the second quarter of 2008. |
| | • | | The financial and operating results for the second quarter 2009 and 2008 include operating losses associated with Transitional Schools as well as other significant items as summarized below: |
| | | | | | | | |
| | | Reconciling
Items
(In Millions) | | | Diluted Earnings
per Share Impact | |
Three Months Ended June 30, 2009 | | | | | | | | |
Transitional Schools Operating Loss | | $ | (28.1 | ) | | $ | (0.21 | ) |
Severance and Stay Bonus Charges | | | (1.5 | ) | | | (0.01 | ) |
| | | | | | | | |
TOTAL | | $ | (29.6 | ) | | $ | (0.22 | ) |
| | | | | | | | |
Three Months Ended June 30, 2008 | | | | | | | | |
Transitional Schools Operating Loss | | $ | (6.1 | ) | | $ | (0.04 | ) |
Severance and Stay Bonus Charges | | | (1.0 | ) | | | (0.01 | ) |
| | | | | | | | |
TOTAL | | $ | (7.1 | ) | | $ | (0.05 | ) |
| | | | | | | | |
| | • | | 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 $11.1 million during the second quarter of 2009, a 34 percent decrease from $16.9 million of operating income during the second quarter of 2008. Operating margin was 2.5 percent during the second quarter of 2009, a 1.6 percentage point decrease relative to an operating margin of 4.1 percent during the second quarter of 2008. |
| | • | | Excluding the reconciling items listed in the table above, operating income was $40.7 million in the second quarter of 2009, up 70 percent from $24.0 million in the second quarter of 2008. Operating margin was 9.3 percent during the second quarter of 2009, a 3.3 percentage point increase relative to an operating margin percentage of 6.0 percent during the second quarter of 2008. |
CEC ANNOUNCES 2Q09 RESULTS …PG 3
Six Months Ended June 30, 2009
| | • | | Consolidated revenue was $878.2 million during the six months ended June 30, 2009, relative to $868.9 million during the six months ended June 30, 2008. |
| | • | | Operating income increased to $46.5 million during the six months ended June 30, 2009, from $41.1 million during the six months ended June 30, 2008. Operating margin increased to 5.3 percent during the six months ended June 30, 2009, from 4.7 percent during the six months ended June 30, 2008. |
| | • | | Income from continuing operations during the six months ended June 30, 2009, was $29.9 million, or $0.33 per diluted share, relative to $34.2 million, or $0.38 per diluted share, during the six months ended June 30, 2008. |
The financial and operating results for the six months ended June 30, 2009 and 2008 include operating losses associated with Transitional Schools as well as other significant items as summarized below:
| | | | | | | | |
| | | Reconciling
Items
(In Millions) | | | Diluted
Earnings per
Share Impact | |
Six Months Ended June 30, 2009 | | | | | | | | |
Transitional Schools Operating Loss | | $ | (45.3 | ) | | $ | (0.33 | ) |
Severance and Stay Bonus Charges | | | (1.5 | ) | | | (0.01 | ) |
| | | | | | | | |
TOTAL | | $ | (46.8 | ) | | $ | (0.34 | ) |
| | | | | | | | |
Six Months Ended June 30, 2008 | | | | | | | | |
Transitional Schools Operating Loss | | $ | (21.7 | ) | | $ | (0.16 | ) |
Severance and Stay Bonus Charges | | | (4.3 | ) | | | (0.03 | ) |
Gain from Termination of Affiliate Relationship | | | — | | | | 0.03 | |
| | | | | | | | |
TOTAL | | $ | (26.0 | ) | | $ | (0.16 | ) |
| | | | | | | | |
| | • | | Excluding the reconciling items listed in the table above, operating income was $93.3 million during the six months ended June 30, 2009, up 39 percent from $67.1 million during the six months ended June 30, 2008. Operating margin was 10.8 percent during the six months ended June 30, 2009, a 2.7 percentage point increase relative to an operating margin of 8.1 percent during the six months ended June 30, 2008. |
CEC ANNOUNCES 2Q09 RESULTS …PG 4
CONSOLIDATED CASH FLOWS AND FINANCIAL POSITION
Cash Flows
| | • | | Cash provided by operating activities was $51.7 million during the six months ended June 30, 2009, compared to cash provided by operating activities of $53.7 million during the six months ended June 30, 2008. Included in operating cash flow in the six months ended June 30, 2009 was $13 million in cash paid for the exit of real estate within Transitional Schools. |
| | • | | Capital expenditures increased to $30.1 million during the six months ended June 30, 2009, from $26.5 million during the six months ended June 30, 2008. Capital expenditures represented 3.4 percent of total revenue during the six months ended June 30, 2009. |
Financial Position
| | • | | As of June 30, 2009 and December 31, 2008, cash and cash equivalents and investments totaled $392.6 million and $508.7 million, respectively. |
| | • | | Days sales outstanding (DSO) were 14 days as of June 30, 2009, compared to 13 days as of June 30, 2008. |
Stock Repurchase Program
On August 4, 2009, the Board of Directors authorized the use of an additional $200.0 million to repurchase outstanding shares of its common stock under the company’s stock repurchase program. This is in addition to the $55.5 million available under the program as of June 30, 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.
During the three months ended June 30, 2009, the company repurchased 4.8 million shares of its common stock for approximately $100.0 million at an average price of $20.69 per share.
CEC ANNOUNCES 2Q09 RESULTS …PG 5
Revenue
| | | | | | | | | | |
| | | For the three months ended
June 30, | | % Change
2009 vs. 2008 | |
| | | 2009 | | | 2008 | |
Revenue (in millions) | | | | | | | | | | |
University | | $ | 198.3 | | | $ | 175.4 | | 13 | % |
Culinary Arts | | | 74.2 | | | | 77.9 | | (5 | )% |
Health Education | | | 73.4 | | | | 57.9 | | 27 | % |
Art & Design | | | 64.0 | | | | 63.5 | | 1 | % |
International | | | 26.3 | | | | 24.8 | | 6 | % |
Corporate and other | | | (0.1 | ) | | | 0.0 | | NM | |
| | | | | | | | | | |
Subtotal | | $ | 436.1 | | | $ | 399.5 | | 9 | % |
Transitional Schools | | | 4.6 | | | | 17.5 | | (74 | )% |
| | | | | | | | | | |
Total Revenue | | $ | 440.7 | | | $ | 417.0 | | 6 | % |
| | | | | | | | | | |
Operating Income
| | | | | | | | | | | |
| | | For the three months ended
June 30, | | | % Change
2009 vs. 2008 | |
| | | 2009 | | | 2008 | | |
Operating Income (in millions) | | | | | | | | | | | |
University | | $ | 42.8 | | | $ | 27.5 | | | 56 | % |
Culinary Arts | | | (1.5 | ) | | | (0.3 | ) | | NM | |
Health Education | | | 13.4 | | | | 3.6 | | | 272 | % |
Art & Design | | | 6.0 | | | | 4.5 | | | 33 | % |
International | | | 3.1 | | | | 3.2 | | | (3 | )% |
Corporate and other | | | (24.6 | ) | | | (15.5 | ) | | (59 | )% |
| | | | | | | | | | | |
Subtotal | | $ | 39.2 | | | $ | 23.0 | | | 70 | % |
Transitional Schools | | | (28.1 | ) | | | (6.1 | ) | | NM | |
| | | | | | | | | | | |
Total Operating Income | | $ | 11.1 | | | $ | 16.9 | | | (34 | )% |
| | | | | | | | | | | |
Operating Margin
| | | | | | | | |
| | | For the three months ended
June 30, | | | |
| | | 2009 | | | 2008 | | |
Operating Margin | | | | | | | | |
University | | 21.6 | % | | 15.7 | % | | |
Culinary Arts | | (2.0 | )% | | (0.4 | )% | | |
Health Education | | 18.4 | % | | 6.3 | % | | |
Art & Design | | 9.3 | % | | 7.1 | % | | |
International | | 11.7 | % | | 12.9 | % | | |
Corporate and other | | NM | | | NM | | | |
| | | | | | | | |
Subtotal | | 9.0 | % | | 5.8 | % | | |
Transitional Schools | | NM | | | (34.7 | )% | | |
| | | | | | | | |
Total | | 2.5 | % | | 4.1 | % | | |
| | | | | | | | |
CEC ANNOUNCES 2Q09 RESULTS …PG 6
STUDENT POPULATION AND NEW STUDENT START DATA
Student Population
Total student population by reportable segment as of July 31, 2009 and 2008, were as follows:
| | | | | | | |
| | | As of July 31, | | % Change
2009 vs. 2008 | |
| | | 2009 | | 2008 | |
STUDENT POPULATION | | | | | | | |
University | | 47,900 | | 41,100 | | 17 | % |
Culinary Arts | | 10,600 | | 10,000 | | 6 | % |
Health Education | | 19,600 | | 15,400 | | 27 | % |
Art & Design | | 12,800 | | 12,600 | | 2 | % |
International | | 1,400 | | 900 | | 56 | % |
| | | | | | | |
Subtotal | | 92,300 | | 80,000 | | 15 | % |
Transitional Schools | | 800 | | 3,300 | | (76 | )% |
| | | | | | | |
Total Student Population | | 93,100 | | 83,300 | | 12 | % |
| | | | | | | |
ONLINE STUDENT POPULATION | | | | | | | |
Art & Design | | 1,200 | | 600 | | 100 | % |
University | | 38,500 | | 32,800 | | 17 | % |
| | | | | | | |
Total Online Student Population | | 39,700 | | 33,400 | | 19 | % |
| | | | | | | |
New Student Starts
New student starts by reportable segment during the second quarter of 2009 and 2008, were as follows:
| | | | | | | |
| | | For the three months ended
June 30, | | % Change
2009 vs. 2008 | |
| | | 2009 | | 2008 | |
NEW STUDENT STARTS | | | | | | | |
University | | 12,710 | | 11,590 | | 10 | % |
Culinary Arts | | 2,600 | | 1,670 | | 56 | % |
Health Education | | 6,110 | | 4,320 | | 41 | % |
Art & Design(1) | | 2,770 | | 1,460 | | 90 | % |
International | | 280 | | 300 | | (7 | )% |
| | | | | | | |
Subtotal | | 24,470 | | 19,340 | | 27 | % |
Transitional Schools | | 0 | | 20 | | NM | |
| | | | | | | |
Total New Student Starts | | 24,470 | | 19,360 | | 26 | % |
| | | | | | | |
ONLINE NEW STUDENT STARTS | | | | | | | |
Art & Design | | 510 | | 230 | | 122 | % |
University | | 11,590 | | 10,540 | | 10 | % |
| | | | | | | |
Total Online Student Starts | | 12,100 | | 10,770 | | 12 | % |
| | | | | | | |
| (1) | Art and Design new student starts comparability was impacted by additional start periods in the second quarter of 2009, which resulted in approximately 1,000 additional student starts in the quarter as compared to the second quarter 2008. |
CEC ANNOUNCES 2Q09 RESULTS …PG 7
CONFERENCE CALL INFORMATION
Career Education Corporation will host a conference call on August 6, 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 24933732. 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 24933732.
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 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 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 atwww.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,” 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, and (3) pending regulations under HEOA 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 making student loans 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, centralizing various functional areas, such as human resources and financial
CEC ANNOUNCES 2Q09 RESULTS …PG 8
aid, and continuing to align the SBUs and corporate staff to remove layers, overlaps and redundancies; the impact on our revenues and profitability of our transitional segment; our ability to comply with accrediting agency requirements or obtain accrediting agency approvals; our dependence on information technology system; our ownership or use of intellectual property ; costs and impacts of legal and administrative proceedings and investigations, governmental regulations, and class action and other lawsuits; costs and difficulties related to the integration of acquired businesses; 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 Report on Form 10-Q for the most recent fiscal quarter, 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 June 30, | |
| | | 2009 | | | 2008 | |
REVENUE: | | | | | | | | |
University | | $ | 198,311 | | | $ | 175,358 | |
Culinary Arts | | | 74,243 | | | | 77,876 | |
Health Education | | | 73,394 | | | | 57,889 | |
Art & Design | | | 64,051 | | | | 63,519 | |
International | | | 26,277 | | | | 24,810 | |
Corporate and other | | | (137 | ) | | | 9 | |
| | | | | | | | |
Subtotal | | $ | 436,139 | | | $ | 399,461 | |
Transitional Schools | | | 4,584 | | | | 17,588 | |
| | | | | | | | |
Total revenue | | $ | 440,723 | | | $ | 417,049 | |
| | | | | | | | |
SEGMENT OPERATING INCOME (LOSS): | | | | | | | | |
University | | $ | 42,820 | | | $ | 27,475 | |
Culinary Arts | | | (1,509 | ) | | | (273 | ) |
Health Education | | | 13,470 | | | | 3,631 | |
Art & Design | | | 5,974 | | | | 4,485 | |
International | | | 3,083 | | | | 3,205 | |
Corporate and other | | | (24,602 | ) | | | (15,494 | ) |
| | | | | | | | |
Subtotal | | $ | 39,236 | | | $ | 23,029 | |
Transitional Schools | | | (28,155 | ) | | | (6,109 | ) |
| | | | | | | | |
Total operating income | | $ | 11,081 | | | $ | 16,920 | |
| | | | | | | | |
SEGMENT OPERATING INCOME (LOSS) PERCENTAGE: | | | | | | | | |
University | | | 21.6 | % | | | 15.7 | % |
Culinary Arts | | | -2.0 | % | | | -0.4 | % |
Health Education | | | 18.4 | % | | | 6.3 | % |
Art & Design | | | 9.3 | % | | | 7.1 | % |
International | | | 11.7 | % | | | 12.9 | % |
Transitional Schools | | | NM | | | | NM | |
CAREER EDUCATION CORPORATION
SELECTED SEGMENT INFORMATION
(Dollars in thousands)
| | | | | | | | |
| | | For the Six Months Ended June 30, | |
| | | 2009 | | | 2008 | |
REVENUE: | | | | | | | | |
University | | $ | 388,085 | | | $ | 352,509 | |
Culinary Arts | | | 149,524 | | | | 165,065 | |
Health Education | | | 140,762 | | | | 115,686 | |
Art & Design | | | 127,879 | | | | 134,448 | |
International | | | 60,786 | | | | 59,277 | |
Corporate and other | | | (198 | ) | | | 9 | |
| | | | | | | | |
Subtotal | | $ | 866,838 | | | $ | 826,994 | |
Transitional Schools | | | 11,332 | | | | 41,939 | |
| | | | | | | | |
Total revenue | | $ | 878,170 | | | $ | 868,933 | |
| | | | | | | | |
SEGMENT OPERATING INCOME (LOSS): | | | | | | | | |
University | | $ | 80,928 | | | $ | 52,466 | |
Culinary Arts | | | (2,077 | ) | | | 5,106 | |
Health Education | | | 26,967 | | | | 8,059 | |
Art & Design | | | 13,342 | | | | 15,170 | |
International | | | 14,454 | | | | 15,994 | |
Corporate and other | | | (41,775 | ) | | | (33,976 | ) |
| | | | | | | | |
Subtotal | | $ | 91,839 | | | $ | 62,819 | |
Transitional Schools | | | (45,328 | ) | | | (21,674 | ) |
| | | | | | | | |
Total operating income | | $ | 46,511 | | | $ | 41,145 | |
| | | | | | | | |
SEGMENT OPERATING INCOME (LOSS) PERCENTAGE: | | | | | | | | |
University | | | 20.9 | % | | | 14.9 | % |
Culinary Arts | | | -1.4 | % | | | 3.1 | % |
Health Education | | | 19.2 | % | | | 7.0 | % |
Art & Design | | | 10.4 | % | | | 11.3 | % |
International | | | 23.8 | % | | | 27.0 | % |
Transitional Schools | | | NM | | | | NM | |
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
(In thousands)
| | | | | | | | |
| | | June 30,
2009 | | | December 31,
2008 | |
| ASSETS | | | | | | | | |
CURRENT ASSETS: | | | | | | | | |
Cash and cash equivalents | | $ | 243,828 | | | $ | 244,743 | |
Investments | | | 148,757 | | | | 263,953 | |
| | | | | | | | |
Total cash and cash equivalents and investments | | | 392,585 | | | | 508,696 | |
Receivables: | | | | | | | | |
Students, net of allowance for doubtful accounts of $40,721 and $35,226 as of June 30, 2009 and December 31, 2008, respectively | | | 62,036 | | | | 59,119 | |
Other, net | | | 7,769 | | | | 9,191 | |
Prepaid expenses | | | 44,232 | | | | 46,416 | |
Inventories | | | 13,056 | | | | 12,352 | |
Deferred income tax assets | | | 17,472 | | | | 17,472 | |
Other current assets | | | 5,947 | | | | 9,223 | |
Assets of discontinued operations | | | 4,839 | | | | 5,003 | |
| | | | | | | | |
Total current assets | | | 547,936 | | | | 667,472 | |
| | | | | | | | |
NON-CURRENT ASSETS: | | | | | | | | |
Property and equipment, net | | | 297,184 | | | | 304,970 | |
Goodwill | | | 376,776 | | | | 376,072 | |
Intangible assets, net | | | 39,973 | | | | 39,904 | |
Deferred income tax assets | | | 11,359 | | | | 11,440 | |
Other assets, net | | | 19,228 | | | | 17,465 | |
| | | | | | | | |
TOTAL ASSETS | | $ | 1,292,456 | | | $ | 1,417,323 | |
| | | | | | | | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | | |
CURRENT LIABILITIES: | | | | | | | | |
Current maturities of long-term debt and capital lease obligations | | $ | 356 | | | $ | 354 | |
Accounts payable | | | 37,202 | | | | 28,450 | |
Accrued expenses: | | | | | | | | |
Payroll and related benefits | | | 58,733 | | | | 63,757 | |
Advertising and production costs | | | 23,599 | | | | 21,504 | |
Income taxes | | | 11,344 | | | | 29,224 | |
Other | | | 48,320 | | | | 49,526 | |
Deferred tuition revenue | | | 131,423 | | | | 153,727 | |
Liabilities of discontinued operations | | | 5,752 | | | | 8,753 | |
| | | | | | | | |
Total current liabilities | | | 316,729 | | | | 355,295 | |
| | | | | | | | |
NON-CURRENT LIABILITIES: | | | | | | | | |
Long-term debt and capital lease obligations, net of current maturities | | | 3,140 | | | | 1,889 | |
Deferred rent obligations | | | 98,290 | | | | 97,644 | |
Other liabilities, net | | | 22,775 | | | | 13,983 | |
| | | | | | | | |
Total non-current liabilities | | | 124,205 | | | | 113,516 | |
| | | | | | | | |
SHARE-BASED AWARDS SUBJECT TO REDEMPTION | | | 1,586 | | | | 860 | |
| | |
STOCKHOLDERS’ EQUITY: | | | | | | | | |
Preferred stock | | | — | | | | — | |
Common stock | | | 953 | | | | 933 | |
Additional paid-in capital | | | 234,243 | | | | 222,523 | |
Accumulated other comprehensive income | | | 7,628 | | | | 5,774 | |
Retained earnings | | | 836,520 | | | | 807,500 | |
Cost of shares in treasury | | | (229,408 | ) | | | (89,078 | ) |
| | | | | | | | |
Total stockholders’ equity | | | 849,936 | | | | 947,652 | |
| | | | | | | | |
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | | $ | 1,292,456 | | | $ | 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 June 30, | |
| | | 2009 | | | % of
Revenue | | | 2008 | | | % of
Revenue | |
REVENUE: | | | | | | | | | | | | | | |
Tuition and registration fees | | $ | 423,613 | | | 96.1 | % | | $ | 402,906 | | | 96.6 | % |
Other | | | 17,110 | | | 3.9 | % | | | 14,143 | | | 3.4 | % |
| | | | | | | | | | | | | | |
Total revenue | | | 440,723 | | | | | | | 417,049 | | | | |
| | | | | | | | | | | | | | |
OPERATING EXPENSES: | | | | | | | | | | | | | | |
Educational services and facilities | | | 174,937 | | | 39.7 | % | | | 160,421 | | | 38.5 | % |
General and administrative | | | 237,812 | | | 54.0 | % | | | 220,981 | | | 53.0 | % |
Depreciation and amortization | | | 16,893 | | | 3.8 | % | | | 18,727 | | | 4.5 | % |
Goodwill and asset impairment | | | — | | | 0.0 | % | | | — | | | 0.0 | % |
| | | | | | | | | | | | | | |
Total operating expenses | | | 429,642 | | | 97.5 | % | | | 400,129 | | | 95.9 | % |
| | | | | | | | | | | | | | |
Operating income | | | 11,081 | | | 2.5 | % | | | 16,920 | | | 4.1 | % |
| | | | | | | | | | | | | | |
OTHER INCOME (EXPENSE): | | | | | | | | | | | | | | |
Interest income | | | 484 | | | 0.1 | % | | | 3,019 | | | 0.7 | % |
Interest expense | | | (11 | ) | | 0.0 | % | | | (264 | ) | | -0.1 | % |
Share of affiliate earnings | | | — | | | 0.0 | % | | | — | | | 0.0 | % |
Miscellaneous expense | | | (787 | ) | | -0.2 | % | | | (85 | ) | | 0.0 | % |
| | | | | | | | | | | | | | |
Total other income (expense) | | | (314 | ) | | -0.1 | % | | | 2,670 | | | 0.6 | % |
| | | | | | | | | | | | | | |
Pretax income | | | 10,767 | | | 2.4 | % | | | 19,590 | | | 4.7 | % |
| | | | |
Provision for income taxes | | | 4,160 | | | 0.9 | % | | | 6,752 | | | 1.6 | % |
| | | | | | | | | | | | | | |
Income from continuing operations | | | 6,607 | | | 1.5 | % | | | 12,838 | | | 3.1 | % |
| | | | |
Loss from discontinued operations, net of tax | | | (117 | ) | | | | | $ | (147 | ) | | | |
| | | | | | | | | | | | | | |
NET INCOME | | $ | 6,490 | | | | | | $ | 12,691 | | | | |
| | | | | | | | | | | | | | |
NET INCOME (LOSS) PER SHARE - DILUTED | | | | | | | | | | | | | | |
Income from continuing operations | | $ | 0.07 | | | | | | $ | 0.14 | | | | |
Loss from discontinued operations | | | (0.00 | ) | | | | | | (0.00 | ) | | | |
| | | | | | | | | | | | | | |
Net income | | $ | 0.07 | | | | | | $ | 0.14 | | | | |
| | | | | | | | | | | | | | |
DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING | | | 87,833 | | | | | | | 89,905 | | | | |
| | | | | | | | | | | | | | |
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts and percentages)
| | | | | | | | | | | | | | |
| | | For the Six Months Ended June 30, | |
| | | 2009 | | | % of
Revenue | | | 2008 | | | % of
Revenue | |
REVENUE: | | | | | | | | | | | | | | |
Tuition and registration fees | | $ | 843,810 | | | 96.1 | % | | $ | 834,957 | | | 96.1 | % |
Other | | | 34,360 | | | 3.9 | % | | | 33,976 | | | 3.9 | % |
| | | | | | | | | | | | | | |
Total revenue | | | 878,170 | | | | | | | 868,933 | | | | |
| | | | | | | | | | | | | | |
OPERATING EXPENSES: | | | | | | | | | | | | | | |
Educational services and facilities | | | 338,011 | | | 38.5 | % | | | 327,070 | | | 37.6 | % |
General and administrative | | | 459,953 | | | 52.4 | % | | | 459,607 | | | 52.9 | % |
Depreciation and amortization | | | 33,695 | | | 3.8 | % | | | 38,942 | | | 4.5 | % |
Goodwill and asset impairment | | | — | | | 0.0 | % | | | 2,169 | | | 0.2 | % |
| | | | | | | | | | | | | | |
Total operating expenses | | | 831,659 | | | 94.7 | % | | | 827,788 | | | 95.3 | % |
| | | | | | | | | | | | | | |
Operating income | | | 46,511 | | | 5.3 | % | | | 41,145 | | | 4.7 | % |
| | | | | | | | | | | | | | |
OTHER INCOME (EXPENSE): | | | | | | | | | | | | | | |
Interest income | | | 1,642 | | | 0.2 | % | | | 6,452 | | | 0.8 | % |
Interest expense | | | (21 | ) | | 0.0 | % | | | (491 | ) | | -0.1 | % |
Share of affiliate earnings | | | — | | | 0.0 | % | | | 4,665 | | | 0.5 | % |
Miscellaneous expense | | | (1,030 | ) | | -0.1 | % | | | (276 | ) | | 0.0 | % |
| | | | | | | | | | | | | | |
Total other income | | | 591 | | | 0.1 | % | | | 10,350 | | | 1.2 | % |
| | | | | | | | | | | | | | |
Pretax income | | | 47,102 | | | 5.4 | % | | | 51,495 | | | 5.9 | % |
| | | | |
Provision for income taxes | | | 17,168 | | | 2.0 | % | | | 17,287 | | | 2.0 | % |
| | | | | | | | | | | | | | |
Income from continuing operations | | | 29,934 | | | 3.4 | % | | | 34,208 | | | 3.9 | % |
| | | | |
Loss from discontinued operations, net of tax | | | (187 | ) | | | | | | (5,133 | ) | | | |
| | | | | | | | | | | | | | |
NET INCOME | | $ | 29,747 | | | | | | $ | 29,075 | | | | |
| | | | | | | | | | | | | | |
NET INCOME (LOSS) PER SHARE – DILUTED | | | | | | | | | | | | | | |
Income from continuing operations | | $ | 0.33 | | | | | | $ | 0.38 | | | | |
Loss from discontinued operations | | | (0.00 | ) | | | | | | (0.06 | ) | | | |
| | | | | | | | | | | | | | |
Net income | | $ | 0.33 | | | | | | $ | 0.32 | | | | |
| | | | | | | | | | | | | | |
DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING | | | 90,073 | | | | | | | 90,149 | | | | |
| | | | | | | | | | | | | | |
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
| | | | | | | | |
| | | For the Six Months Ended
June 30, | |
| | | 2009 | | | 2008 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | | | | | | | | |
| | |
Net income | | $ | 29,747 | | | $ | 29,075 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | | |
Goodwill and asset impairment | | | — | | | | 6,613 | |
Depreciation and amortization expense | | | 33,695 | | | | 41,043 | |
Bad debt expense | | | 24,842 | | | | 21,883 | |
Compensation expense related to share-based awards | | | 10,020 | | | | 6,835 | |
Gain on sale of business | | | — | | | | (1,555 | ) |
Loss on disposition of property and equipment | | | 1,086 | | | | 164 | |
Share of affiliate earnings, net of cash received | | | — | | | | 939 | |
Deferred income taxes | | | — | | | | (1,355 | ) |
Changes in operating assets and liabilities | | | (47,686 | ) | | | (49,944 | ) |
| | | | | | | | |
Net cash provided by operating activities | | | 51,704 | | | | 53,698 | |
| | | | | | | | |
CASH FLOWS FROM INVESTING ACTIVITIES: | | | | | | | | |
Purchases of available-for-sale investments | | | (263,758 | ) | | | (338,947 | ) |
Sales of available-for-sale investments | | | 378,954 | | | | 265,515 | |
Purchases of property and equipment | | | (30,136 | ) | | | (26,470 | ) |
Other | | | (322 | ) | | | 1,205 | |
| | | | | | | | |
Net cash provided by (used in) investing activities | | | 84,738 | | | | (98,697 | ) |
| | | | | | | | |
CASH FLOWS FROM FINANCING ACTIVITIES: | | | | | | | | |
Purchase of treasury stock | | | (140,330 | ) | | | (14,002 | ) |
Issuance of common stock | | | 1,058 | | | | 1,982 | |
Tax benefit associated with stock option exercises | | | 23 | | | | 103 | |
Payments on revolving loans | | | — | | | | (797 | ) |
Borrowings (payments) of capital lease obligations and other long-term debt | | | 1,249 | | | | (295 | ) |
| | | | | | | | |
Net cash used in financing activities | | | (138,000 | ) | | | (13,009 | ) |
| | | | | | | | |
EFFECT OF FOREIGN CURRENCY EXCHANGE RATE
CHANGES ON CASH AND CASH EQUIVALENTS: | | | 559 | | | | 1,689 | |
| | | | | | | | |
NET DECREASE IN CASH AND CASH EQUIVALENTS | | | (999 | ) | | | (56,319 | ) |
Add: Cash balance of discontinued operations, beginning of the year | | | 115 | | | | 15,735 | |
Less: Cash balance of discontinued operations, end of the year | | | 31 | | | | 852 | |
CASH AND CASH EQUIVALENTS, beginning of the year | | | 244,743 | | | | 221,970 | |
| | | | | | | | |
CASH AND CASH EQUIVALENTS, end of the year | | $ | 243,828 | | | $ | 180,534 | |
| | | | | | | | |
CAREER EDUCATION CORPORATION
SELECTED UNIVERSITY SEGMENT INFORMATION
(Dollars in thousands)
| | | | | | | | | | | | | | | | |
| | | For the Three Months Ended June 30, | | | For the Six Months Ended June 30, | |
| | | 2009 | | | 2008 | | | 2009 | | | 2008 | |
UNIVERSITY REVENUE: | | | | | | | | | | | | | | | | |
AIU | | $ | 104,200 | | | $ | 97,754 | | | $ | 202,093 | | | $ | 192,707 | |
Online | | | 88,157 | | | | 79,605 | | | | 165,919 | | | | 151,576 | |
On-ground | | | 16,043 | | | | 18,149 | | | | 36,174 | | | | 41,131 | |
| | | | |
CTU | | | 87,120 | | | | 70,629 | | | | 170,251 | | | | 143,365 | |
Online | | | 72,240 | | | | 57,461 | | | | 140,323 | | | | 116,659 | |
On-ground | | | 14,880 | | | | 13,168 | | | | 29,928 | | | | 26,706 | |
| | | | |
Briarcliffe | | | 6,991 | | | | 6,975 | | | | 15,741 | | | | 16,437 | |
| | | | | | | | | | | | | | | | |
Total University | | $ | 198,311 | | | $ | 175,358 | | | $ | 388,085 | | | $ | 352,509 | |
| | | | | | | | | | | | | | | | |
UNIVERSITY SEGMENT OPERATING INCOME (LOSS): | | | | | | | | | | | | | | | | |
AIU | | $ | 25,086 | | | $ | 17,223 | | | $ | 45,584 | | | $ | 24,217 | |
Online | | | 30,790 | | | | 21,968 | | | | 51,876 | | | | 30,497 | |
On-ground | | | (5,704 | ) | | | (4,745 | ) | | | (6,292 | ) | | | (6,280 | ) |
| | | | |
CTU | | $ | 18,841 | | | $ | 11,456 | | | $ | 36,666 | | | $ | 28,448 | |
Online | | | 20,158 | | | | 12,218 | | | | 38,649 | | | | 28,382 | |
On-ground | | | (1,317 | ) | | | (762 | ) | | | (1,983 | ) | | | 66 | |
| | | | |
Briarcliffe | | | (1,107 | ) | | | (1,204 | ) | | | (1,322 | ) | | | (199 | ) |
| | | | | | | | | | | | | | | | |
Total University | | $ | 42,820 | | | $ | 27,475 | | | $ | 80,928 | | | $ | 52,466 | |
| | | | | | | | | | | | | | | | |
UNIVERSITY SEGMENT OPERATING INCOME (LOSS) PERCENTAGE: | | | | | | | | | | | | | | | | |
AIU | | | 24.1 | % | | | 17.6 | % | | | 22.6 | % | | | 12.6 | % |
Online | | | 34.9 | % | | | 27.6 | % | | | 31.3 | % | | | 20.1 | % |
On-ground | | | -35.6 | % | | | -26.1 | % | | | -17.4 | % | | | -15.3 | % |
| | | | |
CTU | | | 21.6 | % | | | 16.2 | % | | | 21.5 | % | | | 19.8 | % |
Online | | | 27.9 | % | | | 21.3 | % | | | 27.5 | % | | | 24.3 | % |
On-ground | | | -8.9 | % | | | -5.8 | % | | | -6.6 | % | | | 0.2 | % |
| | | | |
Briarcliffe | | | -15.8 | % | | | -17.3 | % | | | -8.4 | % | | | -1.2 | % |
Total University | | | 21.6 | % | | | 15.7 | % | | | 20.9 | % | | | 14.9 | % |
| | | |
| | | Student Population as of July 31, | | | | | | | |
| | | 2009 | | | 2008 | | | | | | | |
AIU | | | 21,600 | | | | 19,400 | | | | | | | | | |
Online | | | 18,000 | | | | 15,900 | | | | | | | | | |
On-ground | | | 3,600 | | | | 3,500 | | | | | | | | | |
| | | | |
CTU | | | 25,300 | | | | 20,800 | | | | | | | | | |
Online | | | 20,500 | | | | 16,900 | | | | | | | | | |
On-ground | | | 4,800 | | | | 3,900 | | | | | | | | | |
| | | | |
Briarcliffe | | | 1,000 | | | | 900 | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Total University | | | 47,900 | | | | 41,100 | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | |
| | | Student Starts for the three
months ended June 30, | | | | | | | |
| | | 2009 | | | 2008 | | | | | | | |
AIU | | | 4,990 | | | | 4,700 | | | | | | | | | |
Online | | | 4,890 | | | | 4,560 | | | | | | | | | |
On-ground | | | 100 | | | | 140 | | | | | | | | | |
| | | | |
CTU | | | 7,560 | | | | 6,760 | | | | | | | | | |
Online | | | 6,700 | | | | 5,980 | | | | | | | | | |
On-ground | | | 860 | | | | 780 | | | | | | | | | |
| | | | |
Briarcliffe | | | 160 | | | | 130 | | | | | | | | | |
| | | | | | | | | | | | | | | | |
University | | | 12,710 | | | | 11,590 | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Career Education Corporation
Reconciliation of GAAP to Non-GAAP Items (1)
(dollars in millions)
| | | | | | | | | | | | | | | |
| | | For the Three Months Ended June 30, | |
| | | 2009 | | | 2008 | |
| | | Operating
Income | | | Earnings per
Diluted Share | | | Operating
Income | | Earnings per
Diluted Share | |
Reported | | $ | 11.1 | | | $ | 0.07 | | | $ | 16.9 | | $ | 0.14 | |
Reconciling Items: | | | | | | | | | | | | | | | |
Transitional Schools (2) | | | 28.1 | | | | 0.21 | | | | 6.1 | | | 0.04 | |
Severance and Stay | | | 1.5 | | | | 0.01 | | | | 1.0 | | | 0.01 | |
| | | | | | | | | | | | | | | |
Adjusted to Exclude Significant Items and Transitional Schools | | $ | 40.7 | | | $ | 0.3 | | | $ | 24.0 | | $ | 0.2 | |
| | | | | | | | | | | | | | | |
Diluted Weighted Average Shares Outstanding | | | | | | | 87,833 | | | | | | | 89,905 | |
| |
| | | For the Six Months Ended June 30, | |
| | | 2009 | | | 2008 | |
| | | Operating
Income | | | Earnings per
Diluted Share | | | Operating
Income | | Earnings per
Diluted Share | |
Reported | | $ | 46.5 | | | $ | 0.33 | | | $ | 41.1 | | $ | 0.32 | |
Reconciling Items: | | | | | | | | | | | | | | | |
Transitional Schools (2) | | | 45.3 | | | | 0.33 | | | | 21.7 | | | 0.16 | |
Severance and Stay | | | 1.5 | | | | 0.01 | | | | 4.3 | | | 0.03 | |
Gain from Termination of Affiliate Relationship (3) | | | — | | | | — | | | | — | | | (0.03 | ) |
| | | | | | | | | | | | | | | |
Adjusted to Exclude Significant Items and Transitional Schools | | $ | 93.3 | | | $ | 0.67 | | | $ | 67.1 | | $ | 0.47 | |
| | | | | | | | | | | | | | | |
Diluted Weighted Average Shares Outstanding | | | | | | | 90,073 | | | | | | | 90,149 | |
| | | |
| | | For the Six Months Ended June 30, | | | | | | |
| | | 2009 | | | 2008 | | | | | | |
Net Cash Flows from Operating Activities | | $ | 51.7 | | | $ | 53.7 | | | | | | | | |
Adjust for: | | | | | | | | | | | | | | | |
Capital expenditures, net | | | (30.1 | ) | | | (26.5 | ) | | | | | | | |
| | | | | | | | | | | | | | | |
Free Cash Flows | | $ | 21.6 | | | $ | 27.2 | | | | | | | | |
| | | | | | | | | | | | | | | |
| (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) | Reported within the Transitional Schools operating loss for the three- and six-months ended June 30, 2009 was $20.0 million and $27.8 million, respectively, of lease exit charges. Reported within the Transitional Schools operating loss for the three- and six-months ended June 30, 2008 was $0.5 million and $7.7 million, respectively, of severance and stay bonus expense. The six months ended June 30, 2008 also included $2.2 million of asset impairment charges associated with AIU - LA. |
| (3) | Gain from Termination of Affiliate Relationship is recorded within other income(expense) on the unaudited consolidated statement of operations. |
