Exhibit 99.1
CAREER EDUCATION CORPORATION REPORTS
RESULTS FOR FOURTH QUARTER AND FULL YEAR 2012
Schaumburg, Ill. (February 27, 2013) – Career Education Corporation (NASDAQ: CECO) today reported total revenue of $354.7 million, and a net loss of $61.5 million, or -$0.93 per diluted share, for the fourth quarter of 2012 compared to total revenue of $438.3 million and net loss of $120.4 million, or -$1.64 per diluted share, for the fourth quarter of 2011. For the full year 2012, total revenue of $1.49 billion, and net loss of $142.8 million, or -$2.15 per diluted share decreased from total revenue of $1.87 billion and net income of $18.6 million, or $0.25 per diluted share, for the full year 2011.
“While our financial results were unacceptable and unsustainable, 2012 was a year of renewal for Career Education,” said Steven H. Lesnik, chairman, president and chief executive officer. “We made significant progress on the regulatory and accreditation fronts, reinforced our leadership team, reorganized and reduced the footprint of our institutions, adopted a long-term strategy and continued our investment in cutting-edge education technology.”
“Looking to 2013, we will sustain our sharp focus on student outcomes, continue to re-engineer and right-size the organization and leverage our investment in ground-breaking learning technology. The Company’s return to growth and profitability will be rooted in exceptional educational experiences and strong outcomes for our students.”
The Company believes it is useful to present non-GAAP financial measures, which exclude certain significant items, as a means to understand the performance of its core business. On a non-GAAP basis, the loss per diluted share from continuing operations was -$0.35 for the fourth quarter 2012 as compared to earnings per diluted share of $0.32 for the fourth quarter 2011. For the year ended December 31, 2012, on a non-GAAP basis, the loss per diluted share from continuing operations was -$0.44 as compared to earnings per diluted share of $2.14 for the year ended December 31, 2011. (See tables below and the GAAP to non-GAAP reconciliation attached to this press release for further details.)
CONSOLIDATED RESULTS
Quarter Ended December 31, 2012
• | Total revenue was $354.7 million for the fourth quarter of 2012, a 19.1 percent decrease from $438.3 million for the fourth quarter of 2011. |
• | Operating losses of $77.2 million and $167.9 million were reported for the fourth quarters of 2012 and 2011, respectively. The operating margin was -21.8 percent for the fourth quarter of 2012 versus -38.3 percent for the fourth quarter of 2011. |
• | The loss from continuing operations for the quarter ended December 31, 2012 was $58.7 million, or -$0.89 per diluted share compared to the loss from continuing operations of $141.6 million, or -$1.93 per diluted share, for the quarter ended December 31, 2011. |
CEC ANNOUNCES 4Q12 RESULTS …PG 2
• | The operating results for the quarters ended December 31, 2012 and 2011 include the following significant items: |
Significant Items (In Millions) | (Loss) Earnings per Diluted Share Impact | |||||||
Quarter Ended December 31, 2012 | ||||||||
Goodwill and Intangible Asset Impairments | $ | 12.1 | $ | 0.12 | ||||
Asset Impairments | 29.3 | 0.29 | ||||||
Severance and Related Costs | 13.1 | 0.13 | ||||||
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TOTAL | $ | 54.5 | $ | 0.54 | ||||
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Quarter Ended December 31, 2011 | ||||||||
Goodwill and Intangible Asset Impairments | $ | 188.8 | $ | 2.25 | ||||
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TOTAL | $ | 188.8 | $ | 2.25 | ||||
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• | During the fourth quarter of 2012, the Company recorded non-cash trade name impairment charges of $12.1 million, primarily attributable to Culinary Arts ($8.1) and Health Education ($3.5). In addition, the Company recorded $29.3 million of non-cash asset impairments and $13.1 million of severance and related costs primarily in connection with both our campus closure and reduction in force actions. During the fourth quarter of 2011, the Company recorded $168.4 million of non-cash goodwill impairment applicable to Culinary Arts ($73.7), Health Education ($64.6), and Transitional Schools ($30.1), and a $20.4 million non-cash trade name impairment within Culinary Arts. |
• | Excluding the significant items in the table above, the operating loss was $22.7 million in the fourth quarter of 2012 compared to operating income of $20.9 million in the fourth quarter of 2011. The operating margin was -6.4 percent during the fourth quarter of 2012 as compared to 4.8 percent during the fourth quarter of 2011. |
Year to Date Ended December 31, 2012
• | Total revenue was $1.49 billion for the year ended December 31, 2012, compared to $1.87 billion for the year ended December 31, 2011. |
• | The operating loss for the year ended December 31, 2012 was $183.8 million, versus operating income of $40.7 million for the year ended December 31, 2011. The operating margin decreased to -12.3 percent for the year ended December 31, 2012, from 2.2 percent for the year ended December 31, 2011. |
• | The loss from continuing operations for the year ended December 31, 2012, was $134.9 million, or -$2.03 per diluted share, compared to the loss from continuing operations of $3.3 million, or -$0.04 per diluted share, for the year ended December 31, 2011. |
CEC ANNOUNCES 4Q12 RESULTS …PG 3
• | The operating results for the years ended December 31, 2012 and 2011 include the following significant items: |
Significant Items (In Millions) | (Loss) Earnings per Diluted Share Impact | |||||||
Year Ended December 31, 2012 | ||||||||
Goodwill and Intangible Asset Impairments | $ | 96.5 | $ | 1.33 | ||||
Asset Impairments | 30.5 | 0.30 | ||||||
Severance and Related Costs | 14.9 | 0.15 | ||||||
Insurance Recoveries | (19.0 | ) | (0.19 | ) | ||||
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TOTAL | $ | 122.9 | $ | 1.59 | ||||
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Year Ended December 31, 2011 | ||||||||
Goodwill and Intangible Asset Impairments | $ | 191.5 | $ | 2.24 | ||||
Insurance Recoveries | (7.0 | ) | (0.06 | ) | ||||
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TOTAL | $ | 184.5 | $ | 2.18 | ||||
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• | During the year ended December 31, 2012, the Company recorded non-cash goodwill impairment charges of $83.4 million, primarily related to $41.9 million within Health Education and $40.8 million within Design & Technology, as well as non-cash trade name impairments of $13.1 million, primarily within Culinary Arts ($8.1), Health Education ($3.5), and Transitional Schools ($1.0). In addition, the Company recorded $30.5 million of non-cash asset impairments and $14.9 million of severance and related costs primarily related to both our campus closure and reduction in force actions. The operating results for the year ended December 31, 2011 primarily included the $188.8 million of non-cash goodwill and intangible asset impairment charges recorded in the fourth quarter of 2011 as well as $2.5 million of non-cash accreditation rights impairment. |
• | During the year ended December 31, 2012, the Company recorded a $19.0 million insurance recovery related to the settlement of claims under certain insurance policies. During the year ended December 31, 2011, the Company recorded a $7.0 million insurance recovery related to previously settled legal matters. |
• | Excluding the significant items in the table above, the operating loss was $60.9 million for the year ended December 31, 2012 and the operating income was $225.2 million for the year ended December 31, 2011. Operating margin was -4.1 percent and 12.0 percent for the years ended December 31, 2012 and 2011, respectively. |
CONSOLIDATED CASH FLOWS AND FINANCIAL POSITION
Cash Flows
Net cash flows used in operating activities totaled $16.8 million for the year ended December 31, 2012, compared to net cash flows provided by operating activities of $230.5 million for the year ended December 31, 2011.
Capital expenditures decreased to $37.9 million during the year ended December 31, 2012, from $78.3 million for the year ended December 31, 2011. Capital expenditures represented 2.5 percent and 4.1 percent of total revenue of continuing and discontinued operations during the years ended December 31, 2012 and 2011, respectively.
CEC ANNOUNCES 4Q12 RESULTS …PG 4
Financial Position
As of December 31, 2012 and December 31, 2011, cash and cash equivalents and short-term investments totaled $402.3 million and $441.2 million, respectively. Included in the 2012 amount is $97.9 million of restricted cash, the majority of which is for amounts collateralized under our Credit Agreement as of December 31, 2012.
Credit Agreements
During the fourth quarter of 2012, the Company entered into a revolving credit facility pursuant to a Credit Agreement with BMO Harris Bank N.A. The revolving credit facility under the Credit Agreement is scheduled to mature on January 31, 2014. This Credit Agreement replaced our previous U.S. Credit Agreement, which expired on October 31, 2012. As of December 31, 2012, we have borrowed the maximum amount of $80.0 million under the Credit Agreement.
Stock Repurchase Program
During the fourth quarter of 2012, the Company did not repurchase any shares of its common stock. During the year ended December 31, 2012, the Company repurchased approximately 6.1 million shares of its common stock for approximately $56.4 million at an average price of $9.29 per share.
As of December 31, 2012, approximately $183.3 million was available under the Company’s authorized stock repurchase program to repurchase outstanding shares of our 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 various factors, including market conditions and corporate and regulatory requirements.
STUDENT POPULATION AND NEW STUDENT STARTS
Student Population
Total student population by reportable segment as of December 31, 2012 and 2011, was as follows:
As of December 31, | % Change | |||||||||
2012 | 2011 | 2012 vs. 2011 | ||||||||
Student Population | ||||||||||
CTU | 21,600 | 23,900 | -10% | |||||||
AIU | 14,200 | 17,100 | -17% | |||||||
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Total University Schools | 35,800 | 41,000 | -13% | |||||||
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Health Education | 8,800 | 14,000 | -37% | |||||||
Culinary Arts | 8,500 | 12,200 | -30% | |||||||
Design & Technology | 5,400 | 8,000 | -33% | |||||||
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Total Career Schools | 22,700 | 34,200 | -34% | |||||||
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International | 11,400 | 11,100 | 3% | |||||||
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Subtotal | 69,900 | 86,300 | -19% | |||||||
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Transitional Schools | 6,100 | 12,500 | -51% | |||||||
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Total Student Population | 76,000 | 98,800 | -23% | |||||||
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CEC ANNOUNCES 4Q12 RESULTS …PG 5
New Student Starts
New student starts by reportable segment for the quarters ended December 31, 2012 and 2011, were as follows:
For the Quarters Ended December 31, | % Change | |||||||||
2012 | 2011 | 2012 vs. 2011 | ||||||||
New Student Starts | ||||||||||
CTU | 5,040 | 6,620 | -24% | |||||||
AIU | 3,370 | 4,620 | -27% | |||||||
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Total University Schools | 8,410 | 11,240 | -25% | |||||||
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Health Education | 1,180 | 2,290 | -48% | |||||||
Culinary Arts(1) | 2,810 | 1,320 | 113% | |||||||
Design & Technology | 490 | 710 | -31% | |||||||
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Total Career Schools | 4,480 | 4,320 | 4% | |||||||
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International | 1,940 | 2,150 | -10% | |||||||
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Subtotal | 14,830 | 17,710 | -16% | |||||||
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Transitional Schools | 840 | 2,440 | -66% | |||||||
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Total New Student Starts | 15,670 | 20,150 | -22% | |||||||
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(1) | The fourth quarter 2012 had one additional new student start as compared to the previous year quarter. Excluding this timing impact, the change in new student starts for Culinary Arts would have been -16%. |
CEC ANNOUNCES 4Q12 RESULTS …PG 6
CONFERENCE CALL INFORMATION
Career Education Corporation will host a conference call on Thursday, February 28, 2013 at 10:00 a.m. Eastern time. Interested parties can access the live webcast of the conference call at www.careered.com in the Investor Relations section of the website. Participants can also listen to the conference call by dialing 800-580-9478 (domestic) or 630-691-2769 (international) and citing code 34130002. Please log-in or dial-in at least 10 minutes prior to the start time to ensure a connection. An archived version of the webcast will be accessible for 90 days at www.careered.com in the Investor Relations section of the website. A replay of the call will also be available for seven days by calling 888-843-7419 (domestic) or 630-652-3042 (international) and citing code 34130002.
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 more than 75,000 students across the world in a variety of career-oriented disciplines through online, on-ground and hybrid learning program offerings. The more than 90 campuses that serve these students are located throughout the United States and in France, the United Kingdom and Monaco, and offer doctoral, master’s, bachelor’s and associate degrees and diploma and certificate programs.
CEC is an industry leader whose institutions are recognized globally. Those institutions include, among others, American InterContinental University (“AIU”); Brooks Institute; Colorado Technical University (“CTU”); Harrington College of Design; INSEEC Group (“INSEEC”) Schools; International University of Monaco (“IUM”); International Academy of Design & Technology (“IADT”); Le Cordon Bleu North America (“LCB”); and Sanford-Brown Institutes and Colleges. Through its schools, CEC is committed to providing high-quality education, enabling students to graduate and pursue rewarding career opportunities.
For more information, see CEC’s website at www.careered.com. The website includes a detailed listing of individual campus locations and web links to CEC’s colleges, schools, and universities.
Except for the historical and present factual information contained herein, the matters set forth in this release, including statements identified by words such as “anticipate,” “believe,” “plan,” “expect,” “intend,” “project,” “will,” “potential” and similar expressions, are forward-looking statements as defined in Section 21E of the Securities Exchange Act of 1934, as amended. These statements are based on information currently available to us and are subject to various assumptions, risks, uncertainties and other factors that could cause our results of operations, financial condition, cash flows, performance, business prospects and opportunities to differ materially from those expressed in, or implied by, these statements. Except as expressly required by the federal securities laws, we undertake no obligation to update or revise such factors or any of the forward-looking statements contained herein to reflect future events, developments or changed circumstances, or for any other reason. These risks and uncertainties, the outcomes of which could materially and adversely affect our financial condition and operations, include, but are not limited to, the following: declines in enrollment; our ability to implement our strategic initiatives and effective cost reduction strategies; our continued compliance with and eligibility to participate in Title IV Programs under the Higher Education Act of 1965, as amended, and the regulations thereunder (including the “90-10 Rule” and financial responsibility standards prescribed by the U.S. Department of Education), as well as national and regional accreditation standards and state regulatory requirements; our ability to successfully defend litigation and other claims brought against us; rulemaking by the U.S. Department of Education and increased focus by the U.S. Congress and governmental agencies on for-profit education institutions; and changes in the overall U.S. or global economy. Further information about these and other relevant risks and uncertainties may be found in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011 and its subsequent filings with the Securities and Exchange Commission.
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CEC ANNOUNCES 4Q12 RESULTS …PG 7
CONTACT
Investors: | Matthew Tschanz |
Director, Corporate Finance |
(847) 585-3899 |
Media: | Mark Spencer |
Director, Corporate Communications |
(847) 585-3802 |
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
(In thousands)
As of December 31,(1) | ||||||||
2012 | 2011 | |||||||
ASSETS | ||||||||
CURRENT ASSETS: | ||||||||
Cash and cash equivalents, unrestricted | $ | 240,560 | $ | 280,592 | ||||
Restricted cash | 97,878 | — | ||||||
Short-term investments | 63,876 | 160,607 | ||||||
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Total cash and cash equivalents and short-term investments | 402,314 | 441,199 | ||||||
Student receivables, net | 68,940 | 59,960 | ||||||
Receivables, other, net | 3,845 | 2,896 | ||||||
Prepaid expenses | 44,440 | 62,176 | ||||||
Inventories | 8,575 | 11,334 | ||||||
Deferred income tax assets, net | 7,092 | 10,837 | ||||||
Other current assets | 4,422 | 17,871 | ||||||
Assets of discontinued operations | 3,933 | 4,205 | ||||||
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Total current assets | 543,561 | 610,478 | ||||||
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NON-CURRENT ASSETS: | ||||||||
Property and equipment, net | 277,571 | 349,719 | ||||||
Goodwill | 133,025 | 212,626 | ||||||
Intangible assets, net | 61,681 | 76,286 | ||||||
Student receivables, net | 6,832 | 9,311 | ||||||
Deferred income tax assets, net | 48,070 | 2,673 | ||||||
Other assets, net | 33,333 | 30,122 | ||||||
Assets of discontinued operations | 18,630 | 24,905 | ||||||
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TOTAL ASSETS | $ | 1,122,703 | $ | 1,316,120 | ||||
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LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
CURRENT LIABILITIES: | ||||||||
Short-term borrowings and current maturities of capital lease obligations | $ | 80,211 | $ | 844 | ||||
Accounts payable | 38,440 | 48,362 | ||||||
Accrued expenses: | ||||||||
Payroll and related benefits | 46,586 | 41,853 | ||||||
Advertising and production costs | 20,963 | 17,717 | ||||||
Other | 44,651 | 67,077 | ||||||
Deferred tuition revenue | 112,038 | 144,696 | ||||||
Liabilities of discontinued operations | 9,826 | 8,894 | ||||||
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Total current liabilities | 352,715 | 329,443 | ||||||
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NON-CURRENT LIABILITIES: | ||||||||
Capital lease obligations, net of current maturities | — | 207 | ||||||
Deferred rent obligations | 95,164 | 102,034 | ||||||
Other liabilities | 29,931 | 40,365 | ||||||
Liabilities of discontinued operations | 33,103 | 37,980 | ||||||
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Total non-current liabilities | 158,198 | 180,586 | ||||||
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STOCKHOLDERS’ EQUITY: | ||||||||
Preferred stock | — | — | ||||||
Common stock | 816 | 820 | ||||||
Additional paid-in capital | 596,826 | 590,965 | ||||||
Accumulated other comprehensive loss | (4,785 | ) | (5,136 | ) | ||||
Retained earnings | 232,921 | 375,717 | ||||||
Cost of shares in treasury | (213,988 | ) | (156,275 | ) | ||||
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Total stockholders’ equity | 611,790 | 806,091 | ||||||
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TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 1,122,703 | $ | 1,316,120 | ||||
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(1) | In November 2012, the Company completed the teach out activities for LCB Pittsburgh, PA. As a result, all current and prior period results include LCB Pittsburgh as a component of discontinued operations. |
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(In thousands, except per share amounts and percentages)
For the Quarter Ended December 31, (1) | ||||||||||||||||
2012 | % of Total Revenue | 2011 | % of Total Revenue | |||||||||||||
REVENUE: | ||||||||||||||||
Tuition and registration fees | $ | 349,243 | 98.5% | $ | 429,392 | 98.0% | ||||||||||
Other | 5,448 | 1.5% | 8,866 | 2.0% | ||||||||||||
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Total revenue | 354,691 | 438,258 | ||||||||||||||
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OPERATING EXPENSES: | ||||||||||||||||
Educational services and facilities | 141,654 | 39.9% | 155,018 | 35.4% | ||||||||||||
General and administrative | 227,836 | 64.2% | 240,831 | 55.0% | ||||||||||||
Depreciation and amortization | 21,071 | 5.9% | 21,449 | 4.9% | ||||||||||||
Goodwill and asset impairment | 41,346 | 11.7% | 188,848 | 43.1% | ||||||||||||
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Total operating expenses | 431,907 | 121.8% | 606,146 | 138.3% | ||||||||||||
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Operating loss | (77,216 | ) | -21.8% | (167,888 | ) | -38.3% | ||||||||||
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OTHER INCOME (EXPENSE): | ||||||||||||||||
Interest income | 400 | 0.1% | 627 | 0.1% | ||||||||||||
Interest expense | (184 | ) | -0.1% | (443 | ) | -0.1% | ||||||||||
Miscellaneous income | 483 | 0.1% | 3 | 0.0% | ||||||||||||
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Total other income | 699 | 0.2% | 187 | 0.0% | ||||||||||||
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PRETAX LOSS | (76,517 | ) | -21.6% | (167,701 | ) | -38.3% | ||||||||||
Benefit from income taxes | (17,771 | ) | -5.0% | (26,063 | ) | -5.9% | ||||||||||
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LOSS FROM CONTINUING OPERATIONS | (58,746 | ) | -16.6% | (141,638 | ) | -32.3% | ||||||||||
(Loss) income from discontinued operations, net of tax | (2,746 | ) | -0.8% | 21,189 | 4.8% | |||||||||||
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NET LOSS | (61,492 | ) | -17.3% | (120,449 | ) | -27.5% | ||||||||||
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OTHER COMPREHENSIVE INCOME (LOSS), net of tax: | ||||||||||||||||
Foreign currency translation adjustments | 4,056 | (4,746 | ) | |||||||||||||
Unrealized gains (losses) on investments | 174 | (80 | ) | |||||||||||||
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Total other comprehensive income (loss) | 4,230 | (4,826 | ) | |||||||||||||
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COMPREHENSIVE LOSS | $ | (57,262 | ) | $ | (125,275 | ) | ||||||||||
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NET LOSS PER SHARE - DILUTED: | ||||||||||||||||
Loss from continuing operations | $ | (0.89 | ) | $ | (1.93 | ) | ||||||||||
(Loss) income from discontinued operations | (0.04 | ) | 0.29 | |||||||||||||
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Net loss per share | $ | (0.93 | ) | $ | (1.64 | ) | ||||||||||
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DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING | 66,199 | 73,429 | ||||||||||||||
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(1) | In November 2012, the Company completed the teach out activities for LCB Pittsburgh, PA. As a result, all current and prior period results include LCB Pittsburgh as a component of discontinued operations. |
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(In thousands, except per share amounts and percentages)
For the Year Ended December 31,(1) | ||||||||||||||||
2012 | % of Total Revenue | 2011 | % of Total Revenue | |||||||||||||
REVENUE: | ||||||||||||||||
Tuition and registration fees | $ | 1,460,959 | 98.1% | $ | 1,816,746 | 97.0% | ||||||||||
Other | 28,310 | 1.9% | 56,623 | 3.0% | ||||||||||||
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Total revenue | 1,489,269 | 1,873,369 | ||||||||||||||
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OPERATING EXPENSES: | ||||||||||||||||
Educational services and facilities | 571,169 | 38.4% | 626,158 | 33.4% | ||||||||||||
General and administrative | 894,185 | 60.0% | 932,643 | 49.8% | ||||||||||||
Depreciation and amortization | 80,658 | 5.4% | 82,350 | 4.4% | ||||||||||||
Goodwill and asset impairment | 127,007 | 8.5% | 191,524 | 10.2% | ||||||||||||
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Total operating expenses | 1,673,019 | 112.3% | 1,832,675 | 97.8% | ||||||||||||
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Operating (loss) income | (183,750 | ) | -12.3% | 40,694 | 2.2% | |||||||||||
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OTHER INCOME (EXPENSE): | ||||||||||||||||
Interest income | 1,826 | 0.1% | 1,376 | 0.1% | ||||||||||||
Interest expense | (271 | ) | 0.0% | (563 | ) | 0.0% | ||||||||||
Miscellaneous income | 483 | 0.0% | 1,972 | 0.1% | ||||||||||||
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Total other income | 2,038 | 0.1% | 2,785 | 0.1% | ||||||||||||
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PRETAX (LOSS) INCOME | (181,712 | ) | -12.2% | 43,479 | 2.3% | |||||||||||
(Benefit from) provision for income taxes | (46,806 | ) | -3.1% | 46,740 | 2.5% | |||||||||||
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LOSS FROM CONTINUING OPERATIONS | (134,906 | ) | -9.1% | (3,261 | ) | -0.2% | ||||||||||
(Loss) income from discontinued operations, net of tax | (7,890 | ) | -0.5% | 21,834 | 1.2% | |||||||||||
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NET (LOSS) INCOME | (142,796 | ) | -9.6% | 18,573 | 1.0% | |||||||||||
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OTHER COMPREHENSIVE INCOME (LOSS), net of tax: | ||||||||||||||||
Foreign currency translation adjustments | 503 | (5,015 | ) | |||||||||||||
Unrealized losses on investments | (152 | ) | (40 | ) | ||||||||||||
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Total other comprehensive income (loss) | 351 | (5,055 | ) | |||||||||||||
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COMPREHENSIVE (LOSS) INCOME | $ | (142,445 | ) | $ | 13,518 | |||||||||||
|
|
|
| |||||||||||||
NET (LOSS) INCOME PER SHARE—DILUTED: | ||||||||||||||||
Loss from continuing operations | $ | (2.03 | ) | $ | (0.04 | ) | ||||||||||
(Loss) income from discontinued operations | (0.12 | ) | 0.29 | |||||||||||||
|
|
|
| |||||||||||||
Net (loss) income per share | $ | (2.15 | ) | $ | 0.25 | |||||||||||
|
|
|
| |||||||||||||
DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING | 66,475 | 74,498 | ||||||||||||||
|
|
|
|
(1) | In November 2012, the Company completed the teach out activities for LCB Pittsburgh, PA. As a result, all current and prior period results include LCB Pittsburgh as a component of discontinued operations. |
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATING INCOME (LOSS) BY QUARTER
(In thousands)
For the 2012 Quarters Ended, (1) | ||||||||||||||||||||
March 31 | June 30 | September 30 | December 31 | Full Year | ||||||||||||||||
REVENUE: | ||||||||||||||||||||
Tuition and registration fees | $ | 422,935 | $ | 362,480 | $ | 326,301 | $ | 349,243 | $ | 1,460,959 | ||||||||||
Other | 10,495 | 6,080 | 6,287 | 5,448 | 28,310 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total revenue | 433,430 | 368,560 | 332,588 | 354,691 | 1,489,269 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
OPERATING EXPENSES: | ||||||||||||||||||||
Educational services and facilities | 151,625 | 144,837 | 133,053 | 141,654 | 571,169 | |||||||||||||||
General and administrative | 214,017 | 225,265 | 227,067 | 227,836 | 894,185 | |||||||||||||||
Depreciation and amortization | 19,798 | 19,659 | 20,130 | 21,071 | 80,658 | |||||||||||||||
Goodwill and asset impairment | 83 | 85,578 | — | 41,346 | 127,007 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total operating expenses | 385,523 | 475,339 | 380,250 | 431,907 | 1,673,019 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
OPERATING INCOME (LOSS) | $ | 47,907 | $ | (106,779 | ) | $ | (47,662 | ) | $ | (77,216 | ) | $ | (183,750 | ) | ||||||
|
|
|
|
|
|
|
|
|
|
For the 2011 Quarters Ended, (1) | ||||||||||||||||||||
March 31 | June 30 | September 30 | December 31 | Full Year | ||||||||||||||||
REVENUE: | ||||||||||||||||||||
Tuition and registration fees | $ | 505,656 | $ | 466,588 | $ | 415,110 | $ | 429,392 | $ | 1,816,746 | ||||||||||
Other | 21,903 | 14,967 | 10,887 | 8,866 | 56,623 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total revenue | 527,559 | 481,555 | 425,997 | 438,258 | 1,873,369 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
OPERATING EXPENSES: | ||||||||||||||||||||
Educational services and facilities | 163,594 | 156,376 | 151,170 | 155,018 | 626,158 | |||||||||||||||
General and administrative | 235,348 | 223,340 | 233,124 | 240,831 | 932,643 | |||||||||||||||
Depreciation and amortization | 19,576 | 19,721 | 21,604 | 21,449 | 82,350 | |||||||||||||||
Goodwill and asset impairment | — | 2,676 | — | 188,848 | 191,524 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total operating expenses | 418,518 | 402,113 | 405,898 | 606,146 | 1,832,675 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
OPERATING INCOME (LOSS) | $ | 109,041 | $ | 79,442 | $ | 20,099 | $ | (167,888 | ) | $ | 40,694 | |||||||||
|
|
|
|
|
|
|
|
|
|
(1) | In November 2012, the Company completed the teach out activities for LCB Pittsburgh, PA. As a result, all current and prior period results include LCB Pittsburgh as a component of discontinued operations. |
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
For the Year Ended December 31, | ||||||||
2012 | 2011 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net (loss) income | $ | (142,796 | ) | $ | 18,573 | |||
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: | ||||||||
Goodwill and asset impairment | 127,007 | 191,524 | ||||||
Loss on sale of student receivables | 720 | — | ||||||
Depreciation and amortization expense | 81,813 | 85,367 | ||||||
Bad debt expense | 40,022 | 55,721 | ||||||
Compensation expense related to share-based awards | 9,687 | 14,831 | ||||||
Gain on sale of business | — | (27,085 | ) | |||||
Gain on bargain purchase | (669 | ) | — | |||||
Loss (gain) on disposition of property and equipment | 301 | (1,711 | ) | |||||
Deferred income taxes | (42,014 | ) | 14,226 | |||||
Changes in operating assets and liabilities | ||||||||
Accrued expenses and deferred rent obligations | (19,473 | ) | (74,075 | ) | ||||
Deferred tuition revenue | (35,882 | ) | 2,595 | |||||
Student receivables, net of allowance for doubtful accounts | (39,995 | ) | (51,749 | ) | ||||
Other operating assets and liabilities | 4,481 | 2,233 | ||||||
|
|
|
| |||||
Net cash (used in) provided by operating activities | (16,798 | ) | 230,450 | |||||
|
|
|
| |||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Purchases of available-for-sale investments | (147,085 | ) | (189,258 | ) | ||||
Sales of available-for-sale investments | 246,464 | 188,322 | ||||||
Purchases of property and equipment | (37,944 | ) | (78,333 | ) | ||||
Proceeds on the sale of assets | — | 6,259 | ||||||
Proceeds on the sale of business, net of cash divested | — | 16,670 | ||||||
Business acquisitions, net of acquired cash | (1,721 | ) | (9,851 | ) | ||||
Other | (1,359 | ) | (40 | ) | ||||
|
|
|
| |||||
Net cash provided by (used in) investing activities | 58,355 | (66,231 | ) | |||||
|
|
|
| |||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Purchase of treasury stock | (56,431 | ) | (150,445 | ) | ||||
Issuance of common stock | 1,599 | 4,370 | ||||||
Tax benefit associated with stock option exercises | — | 376 | ||||||
Payments of assumed loans upon business acquisition | (318 | ) | — | |||||
Payments of contingent consideration | (5,818 | ) | (16,355 | ) | ||||
Borrowings from credit facility | 80,000 | — | ||||||
Restricted cash | (97,878 | ) | — | |||||
Payments of capital lease obligations | (844 | ) | (989 | ) | ||||
|
|
|
| |||||
Net cash used in financing activities | (79,690 | ) | (163,043 | ) | ||||
|
|
|
| |||||
EFFECT OF FOREIGN CURRENCY EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS: | (1,837 | ) | (10,066 | ) | ||||
|
|
|
| |||||
NET DECREASE IN CASH AND CASH EQUIVALENTS | (39,970 | ) | (8,890 | ) | ||||
DISCONTINUED OPERATIONS CASH ACTIVITY INCLUDED ABOVE: | ||||||||
Add: Cash balance of discontinued operations, beginning of the year | — | 28,844 | ||||||
Less: Cash balance of discontinued operations, end of the year | 62 | — | ||||||
CASH AND CASH EQUIVALENTS, beginning of the year | 280,592 | 260,638 | ||||||
|
|
|
| |||||
CASH AND CASH EQUIVALENTS, end of the year | $ | 240,560 | $ | 280,592 | ||||
|
|
|
|
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED SELECTED SEGMENT INFORMATION
(In thousands, except percentages)
For the Quarter Ended December 31, | ||||||||
2012 | 2011 | |||||||
REVENUE: | ||||||||
CTU(1) | $ | 89,283 | $ | 97,161 | ||||
AIU | 65,223 | 77,111 | ||||||
|
|
|
| |||||
Total University Schools | 154,506 | 174,272 | ||||||
|
|
|
| |||||
Health Education(1) | 41,559 | 60,326 | ||||||
Culinary Arts(2) | 49,694 | 64,296 | ||||||
Design & Technology(1) | 31,888 | 41,285 | ||||||
|
|
|
| |||||
Total Career Schools | 123,141 | 165,907 | ||||||
|
|
|
| |||||
International | 49,934 | 47,257 | ||||||
Corporate and Other | 5 | (54 | ) | |||||
|
|
|
| |||||
Subtotal | 327,586 | 387,382 | ||||||
|
|
|
| |||||
Transitional Schools(1) | 27,105 | 50,876 | ||||||
|
|
|
| |||||
Total | $ | 354,691 | $ | 438,258 | ||||
|
|
|
| |||||
OPERATING (LOSS) INCOME: | ||||||||
CTU(1) | $ | 13,344 | $ | 25,494 | ||||
AIU | (1,727 | ) | 6,354 | |||||
|
|
|
| |||||
Total University Schools | 11,617 | 31,848 | ||||||
|
|
|
| |||||
Health Education(1) (3) | (13,628 | ) | (63,382 | ) | ||||
Culinary Arts(2) (4) | (21,863 | ) | (94,708 | ) | ||||
Design & Technology(1) | (6,715 | ) | (3,857 | ) | ||||
|
|
|
| |||||
Total Career Schools | (42,206 | ) | (161,947 | ) | ||||
|
|
|
| |||||
International | 16,856 | 16,017 | ||||||
Corporate and Other | (9,425 | ) | (13,452 | ) | ||||
|
|
|
| |||||
Subtotal | (23,158 | ) | (127,534 | ) | ||||
|
|
|
| |||||
Transitional Schools(1) (5) | (54,058 | ) | (40,354 | ) | ||||
|
|
|
| |||||
Total | $ | (77,216 | ) | $ | (167,888 | ) | ||
|
|
|
| |||||
OPERATING (LOSS) MARGIN: | ||||||||
CTU | 14.9% | 26.2% | ||||||
AIU | -2.6% | 8.2% | ||||||
|
|
|
| |||||
Total University Schools | 7.5% | 18.3% | ||||||
|
|
|
| |||||
Health Education | -32.8% | -105.1% | ||||||
Culinary Arts | -44.0% | -147.3% | ||||||
Design & Technology | -21.1% | -9.3% | ||||||
|
|
|
| |||||
Total Career Schools | -34.3% | -97.6% | ||||||
|
|
|
| |||||
International | 33.8% | 33.9% | ||||||
Corporate and Other | NM | NM | ||||||
|
|
|
| |||||
Subtotal | -7.1% | -32.9% | ||||||
|
|
|
| |||||
Transitional Schools | -199.4% | -79.3% | ||||||
|
|
|
| |||||
Total | -21.8% | -38.3% | ||||||
|
|
|
|
(1) | Prior period financial results have been recast to report the schools that are currently being taught out within the Transitional Schools segment. |
(2) | In November 2012, the Company completed the teach out activities for LCB Pittsburgh, PA. As a result, all current and prior period results include LCB Pittsburgh as a component of discontinued operations. |
(3) | Fourth quarter 2012 includes a $3.5 million non-cash trade name impairment charge related to the Sanford-Brown and Missouri College trade names; fourth quarter 2011 includes a $64.6 million non-cash goodwill impairment charge. |
(4) | Fourth quarters 2012 and 2011 include non-cash trade name impairment charges of $8.1 million and $20.4 million, respectively. In addition, fourth quarter 2011 includes a $73.7 million non-cash goodwill impairment charge. |
(5) | Fourth quarter 2012 includes a $28.3 million non-cash asset impairment charge; fourth quarter 2011 includes a $30.1 million non-cash goodwill impairment charge. |
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED SELECTED SEGMENT INFORMATION
(In thousands, except percentages)
For the Year Ended December 31, | ||||||||
2012 | 2011 | |||||||
REVENUE: | ||||||||
CTU(1) | $ | 363,935 | $ | 415,411 | ||||
AIU | 304,208 | 365,203 | ||||||
|
|
|
| |||||
Total University Schools | 668,143 | 780,614 | ||||||
|
|
|
| |||||
Health Education(1) | 181,577 | 252,330 | ||||||
Culinary Arts(2) | 224,842 | 303,135 | ||||||
Design & Technology(1) | 141,542 | 186,879 | ||||||
|
|
|
| |||||
Total Career Schools | 547,961 | 742,344 | ||||||
|
|
|
| |||||
International | 128,568 | 125,887 | ||||||
Corporate and Other | 55 | (399 | ) | |||||
|
|
|
| |||||
Subtotal | 1,344,727 | 1,648,446 | ||||||
|
|
|
| |||||
Transitional Schools(1) | 144,542 | 224,923 | ||||||
|
|
|
| |||||
Total | $ | 1,489,269 | $ | 1,873,369 | ||||
|
|
|
| |||||
OPERATING (LOSS) INCOME: | ||||||||
CTU(1) | $ | 54,928 | $ | 111,119 | ||||
AIU | 20,896 | 72,738 | ||||||
|
|
|
| |||||
Total University Schools | 75,824 | 183,857 | ||||||
|
|
|
| |||||
Health Education(1) (3) | (78,288 | ) | (47,562 | ) | ||||
Culinary Arts(2) (4) | (33,854 | ) | (63,452 | ) | ||||
Design & Technology(1) (5) | (57,627 | ) | 14,223 | |||||
|
|
|
| |||||
Total Career Schools | (169,769 | ) | (96,791 | ) | ||||
|
|
|
| |||||
International | 21,131 | 24,746 | ||||||
Corporate and Other(6) | (7,618 | ) | (30,132 | ) | ||||
|
|
|
| |||||
Subtotal | (80,432 | ) | 81,680 | |||||
|
|
|
| |||||
Transitional Schools(1) (7) | (103,318 | ) | (40,986 | ) | ||||
|
|
|
| |||||
Total | $ | (183,750 | ) | $ | 40,694 | |||
|
|
|
| |||||
OPERATING (LOSS) MARGIN: | ||||||||
CTU | 15.1% | 26.7% | ||||||
AIU | 6.9% | 19.9% | ||||||
|
|
|
| |||||
Total University Schools | 11.3% | 23.6% | ||||||
|
|
|
| |||||
Health Education | -43.1% | -18.8% | ||||||
Culinary Arts | -15.1% | -20.9% | ||||||
Design & Technology | -40.7% | 7.6% | ||||||
|
|
|
| |||||
Total Career Schools | -31.0% | -13.0% | ||||||
|
|
|
| |||||
International | 16.4% | 19.7% | ||||||
Corporate and Other | NM | NM | ||||||
|
|
|
| |||||
Subtotal | -6.0% | 5.0% | ||||||
|
|
|
| |||||
Transitional Schools | -71.5% | -18.2% | ||||||
|
|
|
| |||||
Total | -12.3% | 2.2% | ||||||
|
|
|
|
(1) | Prior period financial results have been recast to report the schools that are currently being taught out within the Transitional Schools segment. |
(2) | In November 2012, the Company completed the teach out activities for LCB Pittsburgh, PA. As a result, all current and prior period results include LCB Pittsburgh as a component of discontinued operations. |
(3) | 2012 expenses include non-cash goodwill and trade name impairment charges of $41.9 million and $3.5 million, respectively. 2011 includes non-cash goodwill impairment of $64.6 million and $3.7 million of non-cash impairment and amortization charges related to accreditation rights. |
(4) | 2012 expenses include a non-cash trade name impairment of $8.1 million. 2011 expenses include $73.7 million and $20.4 million of non-cash goodwill and trade name impairments, respectively. |
(5) | 2012 expenses include a $40.8 million non-cash goodwill impairment charge. |
(6) | During 2012, a $19.0 million insurance recovery was recorded related to the settlement of claims under certain insurance policies. In 2011, a $7.0 million insurance recovery, related to previously settled legal matters, was recorded. |
(7) | 2012 expenses include $29.3 million of non-cash asset impairment charges, $1.0 million impairment related to the Sanford-Brown trade name, and a $0.7 million non-cash goodwill impairment charge. 2011 includes non-cash goodwill impairment of $30.1 million and $1.4 million of non-cash impairment and amortization charges related to accreditation rights. |
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ITEMS(1)
(In millions, except share and per share amounts)
For the Quarter Ended December 31, | ||||||||||||||||
2012 | 2011 | |||||||||||||||
Operating Loss | Loss per Diluted Share (2) | Operating (Loss) Income | (Loss) Earnings per Diluted Share(2) | |||||||||||||
As Reported | $ | (77.2 | ) | $ | (0.89 | ) | $ | (167.9 | ) | $ | (1.93 | ) | ||||
Reconciling Items: | ||||||||||||||||
Goodwill and Intangible Asset Impairments(3)(4) | 12.1 | 0.12 | 188.8 | 2.25 | ||||||||||||
Asset Impairments(5) | 29.3 | 0.29 | — | — | ||||||||||||
Severance and Related Costs(6) | 13.1 | 0.13 | — | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Adjusted to Exclude Significant Items | $ | (22.7 | ) | $ | (0.35 | ) | $ | 20.9 | $ | 0.32 | ||||||
|
|
|
|
|
|
|
| |||||||||
Diluted Weighted Average Shares Outstanding | 66,199 | 73,429 | ||||||||||||||
|
|
|
| |||||||||||||
For the Year Ended December 31, | ||||||||||||||||
2012 | 2011 | |||||||||||||||
Operating Loss | Loss per Diluted Share(2) | Operating Income | (Loss) Earnings per Diluted Share(2) | |||||||||||||
As Reported | $ | (183.8 | ) | $ | (2.03 | ) | $ | 40.7 | $ | (0.04 | ) | |||||
Reconciling Items: | ||||||||||||||||
Goodwill and Intangible Asset Impairments(4)(7) | 96.5 | 1.33 | 191.5 | 2.24 | ||||||||||||
Asset Impairments(5) | 30.5 | 0.30 | — | — | ||||||||||||
Severance and Related Costs(6) | 14.9 | 0.15 | — | — | ||||||||||||
Insurance Recoveries(8) | (19.0 | ) | (0.19 | ) | (7.0 | ) | (0.06 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Adjusted to Exclude Significant Items | $ | (60.9 | ) | $ | (0.44 | ) | $ | 225.2 | $ | 2.14 | ||||||
|
|
|
|
|
|
|
| |||||||||
Diluted Weighted Average Shares Outstanding | 66,475 | 74,498 | ||||||||||||||
|
|
|
|
(1) | The Company believes it is useful to present non-GAAP financial measures which exclude certain significant items as a means to understand the performance of its core business. As a general matter, the Company uses non-GAAP financial measures in conjunction with results presented in accordance with GAAP to help analyze the performance of its core business, assist with preparing the annual operating plan, and measure performance for some forms of compensation. In addition, the Company believes that non-GAAP financial information is used by analysts and others in the investment community to analyze the Company’s historical results and to provide estimates of future performance and that failure to report non-GAAP measures could result in a misplaced perception that the Company’s results have underperformed or exceeded expectations. |
Non-GAAP financial measures when viewed in a reconciliation to corresponding GAAP financial measures, provides an additional way of viewing the Company’s results of operations and the factors and trends affecting the Company’s business. Non-GAAP financial measures should be considered as a supplement to, and not as a substitute for, or superior to, the corresponding financial results presented in accordance with GAAP. |
(2) | (Loss) earnings per diluted share is based on (loss) income from continuing operations and assumes a 35% tax rate for each deductible item. |
(3) | Fourth quarter 2012 includes non-cash trade name impairment charges of $12.1 million; primarily attributable to Culinary Arts ($8.1) and Health Education ($3.5). |
(4) | Fourth quarter 2011 primarily includes non-cash goodwill impairment charges totaling $168.4 million, of which $120.6 is non-deductible for income tax purposes, applicable to Culinary Arts ($73.7), Health Education ($64.6) and Transitional Schools ($30.1), as well as a $20.4 million non-cash trade name impairment charge within Culinary Arts. Year to date 2011 also includes a $2.5 million non-cash impairment charge related to accreditation rights. |
(5) | In 2012, non-cash asset impairment charges of $30.5 million were recorded, primarily within Transitional Schools ($29.3) for schools being taught out, of which $29.3 million was recorded in the fourth quarter. |
(6) | In 2012, $14.9 million of severance and related costs were recorded in connection with both our reduction in force and campus closure actions, within Transitional Schools ($7.6), AIU ($1.8), Health Education ($1.6), Corporate ($1.6), Design & Technology ($1.4), Culinary Arts ($0.6), and CTU ($0.3). Of the 14.9 million, $13.1 million was recorded in the fourth quarter. |
(7) | 2012 includes non-cash goodwill impairment charges of $83.4 million, of which $73.6 million is non-deductible for income tax purposes, primarily applicable to Health Education ($41.9) and Design & Technology ($40.8), as well as a non-cash trade name impairment of $13.1 million, primarily within Culinary Arts ($8.1), Health Education ($3.5) and Transitional Schools ($1.0). |
(8) | 2012 includes a $19.0 million insurance recovery related to the settlement of claims under certain insurance policies. 2011 includes a $7.0 million insurance recovery related to previously settled legal matters. |