Exhibit 99.1
Career Education Corporation Reports Results for 2005 First Quarter;
Quarterly Revenue Increased 29%;
Income from Continuing Operations Increased 60%
HOFFMAN ESTATES, Ill.--(BUSINESS WIRE)--May 2, 2005--Career Education
Corporation (Nasdaq:CECO) today reported financial results for the first quarter
ended March 31, 2005.
Three Months Ended March 31, 2005
-- First quarter 2005 total revenue increased 29% to $512.3 million, from
$397.4 million for the same period last year. The increase in revenue
is primarily attributable to an approximate 21% increase in student
population at January 31 and an approximate 8% increase in average
revenue per student during the first quarter.
-- Income from operations rose 55% to $98.9 million, from $63.7 million
for the same period last year. Operating income margin rose to 19.3%,
up from 16.0% in the same period last year.
-- Income from continuing operations was $61.6 million, or $0.59 per
diluted share, up 60% from the same period last year. Loss from
discontinued operations of $5.7 million, or $0.05 per diluted share,
resulted primarily from the sale of our International Academy of
Design and Technology ("IADT") campus in Montreal, Canada. The loss
includes approximately $2.2 million related to the sale of the IADT
Montreal campus as well as a write off of goodwill of approximately
$3.5 million for the IADT Montreal and IADT Ottawa campuses.
-- Net income was $55.9 million, or $0.53 per diluted share, up 45% from
last year's first quarter net income of $38.6 million, or $0.37 per
diluted share. Net income includes a loss from discontinued operations
mentioned above of $5.7 million, or $0.05 per diluted share. Net
income includes approximately $2.4 million of pre-tax expense for
legal and other costs related to the SEC investigation, the
investigation being conducted by the special committee of our Board of
Directors, and the shareholder securities class action and derivative
lawsuits. This expense of $1.5 million, net of the related tax benefit
of $0.9 million, represented $0.01 per diluted share.
-- Bad debt expense was 3.4% of total revenue for the quarter ended March
31, 2005, compared to 5.0% for the quarter ended March 31, 2004. The
decrease in bad debt expense as a percentage of revenue was primarily
a result of decreased accounts receivable exposure. Quarterly days
sales outstanding ("DSOs") were 13 days at March 31, 2005. This
represents a 10-day decrease from the quarterly DSOs of 23 days at
March 31, 2004. We calculate DSOs by dividing the sum of net student
receivables and net other receivables by average daily revenue.
Average daily revenue is computed by dividing quarterly "total
revenue" by the total number of days in the quarter.
-- Net student receivables decreased $16.7 million, from $86.0 million as
of December 31, 2004 to $69.2 million as of March 31, 2005, and our
allowance for doubtful accounts as a percentage of gross student
receivables increased from 41.6% as of December 31, 2004, to 42.4% as
of March 31, 2005.
-- At March 31, 2005, we had cash and cash equivalents of $432.3 million,
up 172% from $158.7 million on March 31, 2004. Short-term and
long-term debt and capital lease obligations as of March 31, 2005,
totaled $21.0 million.
-- Goodwill decreased $4.3 million to $444.6 million as of March 31,
2005, from $448.9 million as of December 31, 2004. The change is
attributable primarily to a $3.5 million write off of goodwill related
to our IADT Montreal and IADT Ottawa campuses.
-- Accrued expenses increased $15.2 million to $128.5 million as of March
31, 2005, from $113.4 million as of December 31, 2004. The increase is
due primarily to an increase in our net current income tax liability.
-- Net cash provided by operating activities for the first quarter of
2005 was $111.8 million, compared to $90.2 million for the same period
of 2004. The first quarter cash flow improvement was attributable
primarily to the increase in net income from continuing operations.
-- Purchases of property and equipment for the quarter was $25.5 million
compared to $19.8 million for the same period last year.
Population Data
-- Start and population data excludes data for our Academy division
schools that have been sold or are being taught out, including IADT
Montreal, IADT Fairmont, and IADT Ottawa.
-- First quarter 2005 new student starts were approximately 32,500.
-- Total CEC student population on April 30, 2005 was approximately
96,700, up 12% from approximately 86,700 on April 30, 2004. Total
student population of CEC's Online Education Group on April 30, 2005
was approximately 25,500, up 63% from approximately 15,600 students at
the same date last year.
Information Concerning Special Committee Investigation
-- As previously reported, our Board of Directors formed a special
committee to conduct an independent investigation of allegations of
securities laws violations against us, including allegations relating
to our accounting practices and reported statistics relating to
starts, student population and placement. The special committee has
informed us that it intends to make a report of its findings, and any
proposed recommendations, to our Board of Directors within one to two
weeks.
Business Outlook
Please note that the following is an update from previously issued
guidance. While we may make further acquisitions, none are contemplated by these
forward-looking statements.
-- We expect full year 2005 revenues to be approximately $2.125 billion
and full year 2005 earnings per share to be approximately $2.29. The
$2.29 earnings per share includes the $0.05 loss from discontinued
operations primarily related to the sale of IADT Montreal. We expect
the Online Education Group's full year 2005 revenues, included in the
preceding amounts, to be approximately $650 million.
-- We expect full year 2005 operating profit margin improvement to be
approximately 150 basis points.
-- We expect second quarter 2005 revenues to be approximately $510
million and second quarter 2005 earnings per share to be approximately
$0.47. We expect diluted weighted average shares outstanding to be
approximately 106.0 million for second quarter 2005.
-- We expect our 2005 effective income tax rate will be approximately
39.25%.
-- We expect that 2005 capital expenditures will be approximately 7.5% of
total revenue.
Conference Call Information
-- Career Education Corporation will host a conference call today at 5:00
PM (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 (617) 801-9713 (international) or
(800) 299-6183 (domestic) and citing code 84157784. Please log-in or
dial-in at least 10 minutes prior to the start time to ensure a
connection. After 7:00 PM (Eastern Time) the same day, 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 (617) 801-6888 (international) or (888) 286-8010
and citing code 75701279.
Career Education Corporation (www.careered.com) is one of the largest
providers of private, for-profit postsecondary education and has a presence in
both on-campus and online education. CEC's Colleges, Schools and Universities
Group operates over 80 campuses in the U.S., Canada, France, the United Kingdom
and the United Arab Emirates and offers doctoral degree, master's degree,
bachelor's degree, associate degree and diploma programs in the career-oriented
disciplines of business studies, visual communication and design technologies,
health education, information technology, and culinary arts. The Online
Education Group operates American InterContinental University Online and
Colorado Technical University Online and offers a variety of degrees in
information technology, business, visual communication and education. CEC's
total student population on April 30, 2005 was approximately 96,700 students.
Except for the historical and present factual information contained herein,
the matters set forth in this release, including statements under "Business
Outlook" and statements identified by words such as "anticipates," "expects,"
"projects," "plans," "will," and similar expressions, are forward-looking
statements within the meaning of the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995. Such statements are based on
information currently available to us and involve risks and uncertainties that
could cause our actual growth, results, performance and business prospects and
opportunities to differ materially from those expressed in, or implied by these
statements. These risks and uncertainties, the outcome of which could materially
and adversely affect our financial condition and operations, include, but are
not limited to: risks related to our ability to comply with, and the impact of
changes in, legislation and regulations that affect our ability to participate
in student financial aid programs; costs, risks and effects of legal and
administrative proceedings and investigations and governmental regulations,
including the pending Securities and Exchange Commission and Justice Department
investigations and, class action, derivative, Qui Tam, and other lawsuits; cost
and potential impact of findings, and recommendations of the special committee
of our Board of Directors that as a result of its investigation of allegations
of securities laws violations against CEC; risks related to our ability to
comply with accrediting agency requirements or obtain accrediting agency
approvals; costs and difficulties related to the integration of acquired
businesses; future financial and operational results; competition; general
economic conditions; risks related to our ability to manage and continue growth;
and other risk factors relating to our industry and business, as detailed in our
Annual Report on Form 10-K for the year ended December 31, 2004, and from time
to time in our other reports filed with the Securities and Exchange Commission.
We disclaim any responsibility to update or revise these forward-looking
statements.
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
For the Three Months Ended March 31, 2005 and 2004
(In thousands, except per share data and percentages)
% of % of
2005 Revenue 2004 Revenue
---------- ------- ---------- -------
(Restated)
Revenue:
Tuition and registration fees $486,781 95.0% $366,903 92.3%
Other 25,555 5.0% 30,462 7.7%
---------- ----------
Total revenue 512,336 100.0% 397,365 100.0%
---------- ----------
Operating expenses:
Educational services and
facilities 158,248 30.8% 128,137 32.3%
General and administration 237,990 46.5% 192,790 48.5%
Depreciation and amortization 17,201 3.4% 12,767 3.2%
---------- ----------
Total operating expenses 413,439 80.7% 333,694 84.0%
---------- ----------
Income from operations 98,897 19.3% 63,671 16.0%
Other income (expense):
Interest income 1,707 0.3% 352 0.1%
Interest expense (436) -0.1% (829) -0.2%
Share of affiliate earnings 1,826 0.4% 1,405 0.4%
Miscellaneous (expense) (558) -0.1% (5) 0.0%
---------- ----------
Total other income 2,539 0.5% 923 0.3%
---------- ----------
Income before provision for
income taxes 101,436 19.8% 64,594 16.3%
Provision for income taxes 39,814 7.8% 26,000 6.6%
---------- ----------
Income from continuing
operations 61,622 12.0% 38,594 9.7%
Loss from discontinued
operations (5,700) -1.1% - 0.0%
---------- ----------
Net income $55,922 10.9% $38,594 9.7%
========== ==========
======================================================================
Income per share - Diluted
Income from continuing
operations $0.586 $0.369
Loss from discontinued
operations (0.054) -
---------- ----------
Net income $0.532 $0.369
========== ==========
Diluted weighted average
shares outstanding 105,195 104,519
======================================================================
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
(In thousands)
March 31, December 31,
2005 2004
------------ ------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $432,268 $349,458
Receivables:
Students, net of allowance for
doubtful accounts of $50,880 and
$61,136 as of March 31, 2005 and
December 31, 2004, respectively 69,233 85,982
Other, net 5,552 5,378
Inventories 19,181 17,347
Prepaid expenses 30,942 29,649
Other current assets 3,079 5,980
Deferred income tax assets 18,806 18,806
------------ ------------
Total current assets 579,061 512,600
------------ ------------
Property and equipment, net 358,486 351,140
Goodwill 444,623 448,896
Intangible assets, net 35,683 35,881
Other assets 36,116 38,495
------------ ------------
TOTAL ASSETS $1,453,969 $1,387,012
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $2,053 $2,274
Accounts payable 27,262 38,263
Accrued expenses:
Payroll and related benefits 32,964 38,193
Income taxes 20,764 4,663
Other 74,815 70,520
Deferred tuition revenue 172,492 166,743
------------ ------------
Total current liabilities 330,350 320,656
------------ ------------
LONG-TERM LIABILITIES:
Long-term debt, net of current maturities 18,970 21,591
Deferred income tax liabilities 39,938 39,972
Other 22,544 19,962
------------ ------------
Total long-term liabilities 81,452 81,525
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock - -
Common stock 1,027 1,025
Additional paid-in capital 574,131 571,192
Accumulated other comprehensive income 2,869 4,396
Retained earnings 464,140 408,218
------------ ------------
Total stockholders' equity 1,042,167 984,831
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,453,969 $1,387,012
------------ ------------
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2005 and 2004
(In thousands)
2005 2004
------------ ------------
(Restated)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $55,922 $38,594
Adjustments to reconcile net income
to income from continuing operations:
Loss from discontinued operations 5,700 -
------------ ------------
Income from continuing operations 61,622 38,594
Adjustments to reconcile income from
continuing operations to net cash
provided by operating activities:
Depreciation and amortization 17,201 12,767
Royalty expense related to stock
options 118 118
Compensation expense related to stock
options - 13
Amortization of deferred financing
costs 73 85
Loss on disposition of property and
equipment 430 -
Changes in operating assets and
liabilities, net of acquisitions
Tax benefit associated with
option exercises 626 3,083
Other 31,725 35,579
------------ ------------
Net cash provided by operating activities 111,795 90,239
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Business dispositions/acquisitions,
net of cash (908) 35
Acquisition transaction costs - (32)
Purchases of property and equipment (25,537) (19,759)
Change in investment in affiliate (612) (202)
------------ ------------
Net cash used in investing
activities (27,057) (19,958)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 2,314 3,390
Net (payments of) revolving loans (1,630) (75,000)
Payments of capital lease obligations
and other long-term debt (708) (859)
------------ ------------
Net cash used in financing
activities (24) (72,469)
------------ ------------
EFFECT OF FOREIGN CURRENCY EXCHANGE RATE
CHANGES ON CASH AND CASH EQUIVALENTS (1,904) (331)
------------ ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 82,810 (2,519)
CASH AND CASH EQUIVALENTS,
beginning of period 349,458 161,235
------------ ------------
CASH AND CASH EQUIVALENTS, end of period $432,268 $158,716
============ ============
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED SELECTED SEGMENT INFORMATION
For the Three Months Ended March 31, 2005 and 2004
(Dollars in thousands)
2005 2004
----------- -----------
Revenue
CSU (1) $355,066 $321,599
OEG (2) 157,270 75,766
----------- -----------
$512,336 $397,365
=========== ===========
Segment profit
CSU $50,090 $41,790
OEG 68,639 35,544
Corporate and other (18,006) (12,258)
----------- -----------
$100,723 $65,076
=========== ===========
Segment profit percentage
CSU 14.1% 13.0%
OEG 43.6% 46.9%
(1) The Colleges, Schools, and Universities ("CSU") segment represents
an aggregation of our campus-based operating divisions.
(2) The Online Education Group ("OEG") segment represents an
aggregation of our online operating divisions.
(3) Segment profit equals the sum of income from operations and share
of affiliate earnings.
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED RESTATED QUARTERLY CONSOLIDATED STATEMENTS OF INCOME
2004
---------------------------------------
1Q 2Q 3Q 4Q
--------- --------- --------- ---------
Revenue:
Tuition and registration
fees $366,903 $375,627 $404,083 $461,837
Other 30,462 28,435 31,951 29,234
--------- --------- --------- ---------
Total revenue 397,365 404,062 436,034 491,071
--------- --------- --------- ---------
Operating expenses:
Educational services and
facilities 128,137 136,932 145,433 146,642
General and administration 192,790 193,617 206,374 229,577
Depreciation and
amortization 12,767 13,220 14,855 16,627
--------- --------- --------- ---------
Total operating expenses 333,694 343,769 366,662 392,846
--------- --------- --------- ---------
Income from operations 63,671 60,293 69,372 98,225
Other income (expense):
Interest income 352 538 651 1,411
Interest expense (829) (713) (525) (735)
Share of affiliate earnings 1,405 1,185 209 1,449
Miscellaneous (expense) (5) (10) (181) (94)
--------- --------- --------- ---------
Total other income 923 1,000 154 2,031
--------- --------- --------- ---------
Income before provision for
income taxes 64,594 61,293 69,526 100,256
Provision for income taxes 26,000 24,670 27,985 37,395
--------- --------- --------- ---------
Net Income $38,594 $36,623 $41,541 $62,861
========= ========= ========= =========
======================================================================
Income per share - Diluted $0.37 $0.35 $0.40 $0.60
Diluted weighted average
shares outstanding 104,519 105,484 104,893 104,946
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED RESTATED QUARTERLY CONSOLIDATED STATEMENTS OF INCOME
(continued)
2003
---------------------------------------
1Q 2Q 3Q 4Q
--------- --------- --------- ---------
Revenue:
Tuition and registration
fees $220,662 $232,208 $285,541 $340,159
Other 21,542 21,458 28,121 28,296
--------- --------- --------- ---------
Total revenue 242,204 253,666 313,662 368,455
--------- --------- --------- ---------
Operating expenses:
Educational services and
facilities 92,055 91,969 112,511 116,980
General and administration 114,160 121,680 146,094 153,364
Depreciation and
amortization 9,185 9,843 11,736 13,144
--------- --------- --------- ---------
Total operating expenses 215,400 223,492 270,341 283,488
--------- --------- --------- ---------
Income from operations 26,804 30,174 43,321 84,967
Other income (expense):
Interest income 549 288 37 130
Interest expense (342) (609) (423) (471)
Share of affiliate earnings 1,166 905 96 1,187
Miscellaneous (expense) 884 (140) 256 334
--------- --------- --------- ---------
Total other income 2,257 444 (34) 1,180
--------- --------- --------- ---------
Income before provision for
income taxes 29,061 30,618 43,287 86,147
Provision for income taxes 11,837 12,450 17,572 34,450
--------- --------- --------- ---------
Net Income $17,224 $18,168 $25,715 $51,697
========= ========= ========= =========
======================================================================
Income per share - Diluted $0.18 $0.19 $0.25 $0.50
Diluted weighted average
shares outstanding 96,142 97,633 103,713 104,288
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
SELECTED QUARTERLY OEG SEGMENT DATA
AIU Online CTU Online
--------------------------- ---------------------------
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
------ ------ ------ ------ ------ ------ ------ ------
Revenue
earning days
2005 82 84 79 70 77 77 77 72
2004 81 84 78 72 77 77 77 77
AIU Online CTU Online
--------------------------- ---------------------------
2005 2004 2005 2004
------------- ------------- ------------- -------------
Start Grad Start Grad Start Grad Start Grad
------ ------ ------ ------ ------ ------ ------ ------
January 1/2 - 1/4 - 1/2 - 1/4 -
February 2/13 2/5 2/8 2/7 2/9 2/8 2/11 -
March 3/20 3/19 3/21 3/13 - 3/19 - -
Total 1Q
dates 3 2 3 2 2 2 2 -
April - 4/23 4/25 4/24 4/3 - 4/4 -
May 5/1 - - 5/29 5/11 5/10 5/12 -
June 6/5 6/4 6/6 - - 6/18 - -
Total 2Q
dates 2 2 2 2 2 2 2 -
July 7/17 7/9 7/11 7/10 7/3 - 7/4 -
August 8/21 8/20 8/29 8/14 8/10 8/9 8/11 -
September - 9/24 - - - 9/17 - -
Total 3Q
dates 2 3 2 2 2 2 2 -
October 10/9 - 10/3 10/2 10/2 - 10/3 -
November 11/3 11/12 11/14 11/6 11/9 11/8 11/10 -
December - 12/17 - 12/18 - 12/17 - 12/18
Total 4Q
dates 2 2 2 3 2 2 2 1
CONTACT: Career Education Corporation
Karen M. King, 847-585-3899
www.careered.com