Exhibit 99.1
Career Education Corporation Reports Second Quarter Results; Board Approves
Share Repurchase Program; CEC's Board of Directors and management demonstrate
commitment to shareholder value with share repurchase program
HOFFMAN ESTATES, Ill.--(BUSINESS WIRE)--Aug. 1, 2005--Career Education
Corporation (Nasdaq:CECO) today reported financial results for the second
quarter ended June 30, 2005. The company also announced that its Board of
Directors has approved a share repurchase program.
"We are pleased with our financial results in the second quarter," said
John Larson, Chairman and Chief Executive Officer of Career Education
Corporation. "In addition, we believe that our share repurchase program is a
sound use of our cash and represents an excellent shareholder value enhancement
opportunity."
Three Months Ended June 30, 2005
-- Second quarter 2005 total revenue increased 23% to $497.5 million,
from $404.1 million for the same period last year. The increase in
revenue is primarily attributable to an approximate 12% year-over-year
increase in student population at April 30 and an approximate 10%
increase in average revenue per student during the second quarter.
-- Second quarter 2005 income from operations rose 36% to $81.8 million,
from $60.3 million for the same period last year. Operating income
margin rose to 16.4%, up from 14.9% in the same period last year.
-- Second quarter 2005 net income was $52.8 million, or $0.50 per diluted
share, up 44% from last year's second quarter net income of $36.6
million, or $0.35 per diluted share. Net income includes approximately
$1.5 million of pre-tax expense for legal and other costs related to
the SEC investigation, the investigation conducted by the special
committee of our Board of Directors, and the shareholder securities
class action and derivative lawsuits. This expense of $0.9 million,
net or the related tax benefit of $0.6 million, represented $0.01 of
diluted earnings per share.
Six Months Ended June 30, 2005
-- For the six months ended June 30, 2005, revenues were $1.0 billion, up
26% from $801.4 million for the same period last year.
-- Income from operations rose 46% to $180.7 million, from $124.0 million
for the same period last year. Operating income margin rose to 17.9%,
up from 15.5% in the same period last year.
-- For the six months ended June 30, 2005, net income was $108.7 million,
or $1.03 per diluted share, up 45% from last year's first half net
income of $75.2 million, or $0.72 per diluted share. Net income
includes approximately $0.054 loss per diluted share related to the
previously disclosed discontinued operations at our IADT Montreal and
IADT Ottawa campuses. In addition, the earnings per share includes
approximately $3.9 million of pre-tax expense for legal and other
costs related to the SEC investigation, the investigation conducted by
the special committee of our Board of Directors, and the shareholder
securities class action and derivative lawsuits. This expense of $2.4
million, net or the related tax benefit of $1.5 million, represented
$0.2 of diluted earnings per share.
Balance Sheet and Cash Flow
-- Bad debt expense was 4.3% of total revenue for the quarter ended June
30, 2005, compared to 5.1% for the quarter ended June 30, 2004. The
decrease in bad debt expense as a percentage of total revenue was
primarily a result of decreased accounts receivable exposure. Net
student receivables decreased 34%, from $96.6 as of June 30, 2004 to
$63.8 million as of June 30, 2005.
-- Quarterly days sales outstanding ("DSOs") were 13 days at June 30,
2005. This represents a 10-day decrease from quarterly DSOs of 23 days
at June 30, 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.
-- Our allowance for doubtful accounts as a percentage of gross student
receivables increased from 32% as of June 30, 2004 to 44% as of June
30, 2005.
-- At June 30, 2005, we had cash, cash equivalents and available-for-sale
investments of $459.3 million, up 145% from $187.4 million on June 30,
2004. Short-term and long-term debt and capital lease obligations as
of June 30, 2005 totaled $19.2 million.
-- Net cash provided by operating activities for the second quarter of
2005 was $70.7 million, compared to $44.4 million for the same period
of 2004. The second quarter cash flow improvement was attributable
primarily to increases in net income and non-cash depreciation expense
included in net income.
-- Purchases of property and equipment for the second quarter 2005 was
$45.4 million compared to $33.7 million for the same period last year.
Share Repurchase Program
The company is pleased to announce that the Board has approved a share
repurchase program. Under the program, the company is authorized to repurchase
up to $300 million of its common stock.
"The company's superior free cash flow generation and strong balance sheet
provides Career Education with considerable financial and strategic
flexibility," said Patrick K. Pesch, Chief Financial Officer. "We have carefully
considered the capital needs of the company and we believe this is an excellent
initiative to return excess capital to shareholders."
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.
-- Total CEC student population on July 31, 2005 was approximately
92,000, up 12% from approximately 82,450 on July 31, 2004. Total
student population of CEC's Online Education Group on June 30, 2005
was approximately 30,000, up 70% from approximately 17,600 students at
the same date last year. The population includes the impact from our
schools with a traditional academic calendar, like INSEEC and AIU
Dubai that have a seasonally low summer period.
-- Total CEC student population on July 31, 2005 without the affect of
our Gibbs division would have been up 17% from July 31, 2004. As
previously disclosed, we have experienced a significant decline in
student population relative to prior year and we are devoting
increased attention to the division to improve its performance.
-- Second quarter 2005 new student starts were approximately 22,100.
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 $2.040 to $2.070
billion and full year 2005 earnings per share to be approximately
$2.20 to $2.29. The guidance represents an increase of 18% to 20% from
prior year 2004 revenues of $1.728 billion and an increase of 29% to
34% from prior year earnings per share of $1.71.
-- The $2.20 to $2.29 earnings per share include a $0.054 loss from
discontinued operations recorded in the first quarter 2005 primarily
related to the sale of IADT Montreal.
-- We expect the Online Education Group's full year 2005 revenues,
included in the $2.040 to $2.070 billion, to be approximately $660 to
$675 million.
-- We expect full year 2005 operating profit margin improvement to be
approximately 150 basis points.
-- We expect third quarter 2005 revenues to be approximately $498 to $505
million and third quarter 2005 earnings per share to be approximately
$0.50 to $0.52. The guidance represents an increase of 14% to 16% from
prior year 2004 revenues of $436 million and an increase of 25% to 30%
from prior year earnings per share of $040.
-- We expect diluted weighted average shares outstanding to be
approximately 105.0 million for third quarter 2005.
-- We expect our 2005 effective income tax rate to be approximately
39.25%.
-- We expect that 2005 capital expenditures to 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 more than 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 July 31, 2005 was approximately 92,000 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, and other lawsuits; 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; risks related to our ability to manage and continue
growth; future financial and operational results; risks related to competition,
general economic conditions, 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 June 30, 2005 and 2004
(In thousands, except per share data and percentages)
% of % of
2005 Revenue 2004 Revenue
--------- ------- ---------- -------
(Restated)
Revenue:
Tuition and registration fees $475,932 95.7% $375,627 93.0%
Other 21,531 4.3% 28,435 7.0%
--------- ----------
Total revenue 497,463 100.0% 404,062 100.0%
--------- ----------
Operating expenses:
Educational services and
facilities 153,451 30.8% 136,932 33.9%
General and administrative 242,403 48.8% 193,617 47.9%
Depreciation and amortization 19,833 4.0% 13,220 3.3%
--------- ----------
Total operating expenses 415,687 83.6% 343,769 85.1%
--------- ----------
Income from operations 81,776 16.4% 60,293 14.9%
Other income (expense):
Interest income 4,280 0.9% 538 0.1%
Interest expense (420) -0.1% (713) -0.2%
Share of affiliate earnings 1,416 0.3% 1,185 0.4%
Miscellaneous expense (200) 0.0% (10) 0.0%
--------- ----------
Total other income 5,076 1.1% 1,000 0.3%
--------- ----------
Income before provision for
income taxes 86,852 17.5% 61,293 15.2%
Provision for income taxes 34,089 6.9% 24,670 6.1%
--------- ----------
Income from continuing operations 52,763 10.6% 36,623 9.1%
Loss on disposition of
discontinued operations - 0.0% - 0.0%
Write-off of goodwill of
discontinued operations - 0.0% - 0.0%
--------- ----------
Loss from discontinued
operations - 0.0% - 0.0%
--------- ----------
Net Income $52,763 10.6% $36,623 9.1%
========= ==========
======================================================================
Income per share - Diluted
Income from continuing
operations $0.502 $0.347
Loss from discontinued
operations - -
--------- ----------
Net income $0.502 $0.347
========= ==========
Diluted weighted average shares
outstanding 105,200 105,484
======================================================================
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
For the Six Months Ended June 30, 2005 and 2004
(In thousands, except per share data and percentages)
% of % of
2005 Revenue 2004 Revenue
---------- ------- ---------- -------
(Restated)
Revenue:
Tuition and registration fees $960,813 95.3% $742,530 92.7%
Other 47,086 4.7% 58,897 7.3%
---------- ----------
Total revenue 1,007,899 100.0% 801,427 100.0%
---------- ----------
Operating expenses:
Educational services and
facilities 309,799 30.7% 265,069 33.1%
General and administrative 480,393 47.7% 386,407 48.2%
Depreciation and amortization 37,034 3.7% 25,987 3.2%
---------- ----------
Total operating expenses 827,226 82.1% 677,463 84.5%
---------- ----------
Income from operations 180,673 17.9% 123,964 15.5%
Other income (expense):
Interest income 5,987 0.6% 890 0.1%
Interest expense (856) -0.1% (1,542) -0.2%
Share of affiliate earnings 3,242 0.4% 2,590 0.3%
Miscellaneous expense (758) -0.1% (15) 0.0%
---------- ----------
Total other income 7,615 0.8% 1,923 0.2%
---------- ----------
Income before provision for
income taxes 188,288 18.7% 125,887 15.7%
Provision for income taxes 73,903 7.4% 50,670 6.3%
---------- ----------
Income from continuing
operations 114,385 11.3% 75,217 9.4%
Loss on disposition of
discontinued operations (2,179) -0.2% - 0.0%
Write-off of goodwill of
discontinued operations (3,521) -0.3% - 0.0%
---------- ----------
Loss from discontinued
operations (5,700) -0.5% - 0.0%
---------- ----------
Net Income $108,685 10.8% $75,217 9.4%
========== ==========
======================================================================
Income per share - Diluted
Income from continuing
operations $1.087 $0.716
Loss from discontinued
operations $(0.054) -
---------- ----------
Net income $1.033 $0.716
========== ==========
Diluted weighted average shares
outstanding 105,196 105,028
======================================================================
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
(In thousands)
June 30, December 31, June 30,
2005 2004 2004
------------ ------------ ------------
(Restated)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $217,044 $349,458 $187,404
Available-for-sale investments 242,230 - -
------------ ------------ ------------
Total cash, cash equivalents,
and available-for-sale
investments $459,274 $349,458 $187,404
Receivables:
Students, net of allowance
for doubtful accounts of
$50,726, $61,136, and
$44,855 as of June 30, 2005,
December 31, 2004, and June
30, 2004, respectively 63,843 85,982 96,576
Other, net 5,924 5,378 5,327
Inventories 17,863 17,347 12,858
Prepaid expenses 36,247 29,649 67,051
Other current assets 6,914 5,980 4,555
Deferred income tax assets 18,806 18,806 5,029
------------ ------------ ------------
Total current assets 608,871 512,600 378,800
------------ ------------ ------------
PROPERTY AND EQUIPMENT, net 382,709 351,140 291,531
GOODWILL 443,669 448,896 444,663
INTANGIBLE ASSETS, net 35,666 35,881 35,973
OTHER ASSETS 33,727 38,495 40,025
------------ ------------ ------------
TOTAL ASSETS $1,504,642 $1,387,012 $1,190,992
------------ ------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-
term debt $1,793 $2,274 $2,500
Accounts payable 25,286 38,263 21,555
Accrued expenses:
Payroll and related
benefits 40,608 38,193 40,711
Income taxes 16,926 4,663 -
Other 72,402 70,520 54,352
Deferred tuition revenue 145,617 166,743 136,617
------------ ------------ ------------
Total current liabilities 302,632 320,656 255,735
------------ ------------ ------------
LONG-TERM LIABILITIES:
Long-term debt, net of current
maturities 17,449 21,591 21,069
Long-term contractual
obligation - - 9,679
Deferred income tax
liabilities 39,889 39,972 18,366
Other 45,614 19,962 13,891
------------ ------------ ------------
Total long-term
liabilities 102,952 81,525 63,005
------------ ------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock $- $- $-
Common stock 1,029 1,025 1,023
Additional paid-in capital 580,557 571,192 565,738
Accumulated other
comprehensive income 569 4,396 1,676
Retained earnings 516,903 408,218 303,815
------------ ------------ ------------
Total stockholders'
equity 1,099,058 984,831 872,252
------------ ------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $1,504,642 $1,387,012 $1,190,992
------------ ------------ ------------
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- --------------------
2005 2004 2005 2004
--------- ---------- --------- ----------
(Restated) (Restated)
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net Income $52,763 $36,623 $108,685 $75,217
Adjustments to reconcile
net income to income from
continuing operations:
Loss from disposition of
discontinued operations - - 2,179 -
Write-down of goodwill
of discontinued
operations - - 3,521 -
--------- ---------- --------- ----------
Income from continuing
operations 52,763 36,623 114,385 75,217
--------- ---------- --------- ----------
Adjustments to reconcile
income from continuing
operations to net cash
provided by operating
activities:
Depreciation and
amortization 19,833 13,220 37,034 25,987
Royalty expense related
to stock options 118 118 236 236
Compensation expense
related to stock
options - 13 - 26
Amortization of deferred
financing costs 91 117 164 202
Loss on disposition of
property and equipment 120 8 550 8
Changes in operating
assets and liabilities,
net of acquisitions
Tax benefit associated
with option exercises 1,790 39,056 2,416 42,139
Other (4,041) (44,801) 27,684 (9,222)
--------- ---------- --------- ----------
Net cash provided by
operating activities 70,674 44,354 182,469 134,593
--------- ---------- --------- ----------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Business
dispositions/acquisitions,
net of cash (26) (511) (934) (476)
Acquisition transaction
costs - (289) - (321)
Purchases of property and
equipment (45,359) (33,744) (70,896) (53,503)
Purchases of available-for-
sale investments (416,624) - (416,624) -
Sales and maturities of
available-for-sale
investments 174,395 - 174,395 -
Change in investment in
affiliate 688 28 76 (174)
--------- ---------- --------- ----------
Net cash used in
investing
activities (286,926) (34,516) (313,983) (54,474)
--------- ---------- --------- ----------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Issuance of common stock 4,638 23,621 6,952 27,011
Net (payments of) revolving
loans (249) (1,119) (1,879) (76,119)
Payments of capital lease
obligations and
other long-term debt (797) (3,670) (1,505) (4,529)
--------- ---------- --------- ----------
Net cash provided by
(used in) financing
activities 3,592 18,832 3,568 (53,637)
--------- ---------- --------- ----------
EFFECT OF FOREIGN CURRENCY
EXCHANGE RATE CHANGES ON
CASH AND CASH EQUIVALENTS (2,564) 18 (4,468) (313)
--------- ---------- --------- ----------
NET INCREASE IN CASH AND
CASH EQUIVALENTS (215,224) 28,688 (132,414) 26,169
CASH AND CASH EQUIVALENTS,
beginning of period 432,268 158,716 349,458 161,235
--------- ---------- --------- ----------
CASH AND CASH EQUIVALENTS,
end of period $217,044 $187,404 $217,044 $187,404
========= ========== ========= ==========
CAREER EDUCATION CORPORATION
SELECTED SEGMENT INFORMATION
(Dollars in thousands)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
--------------------- ---------------------
2005 2004 2005 2004
---------- ---------- ---------- ----------
Revenue
CSU (1) $326,829 $310,976 $679,995 $632,575
OEG (2) 170,634 93,086 327,904 168,852
Segment profit (3)
CSU $29,785 $32,078 $79,875 $73,868
OEG 70,154 40,540 138,793 76,084
Corporate and other (16,747) (11,140) (34,753) (23,398)
Segment profit percentage
CSU 9.1% 10.3% 11.7% 11.7%
OEG 41.1% 43.6% 42.3% 45.1%
(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
SELECTED ACCOUNTS RECEIVABLE AND ALLOWANCE INFORMATION
(Dollars in thousands)
DAYS SALES OUTSTANDING
June 30,
------------------------
2005 2004
----------- -----------
Total revenue during the
quarter ended $497,463 $404,062
Number of days in the quarter
ended 91 91
Total revenue per day $5,467 $4,440
Accounts receivable, net $69,767 $101,903
Days sales outstanding 13 23
ALLOWANCE AS A PERCENTAGE OF STUDENT RECEIVABLES
June 30, December 31,
2005 2004
----------- -----------
Allowance for doubtful accounts $50,726 $61,136
Gross student receivables $114,569 $147,118
Allowance as a percentage of
student receivables 44.3% 41.6%
STUDENT RECEIVABLES VALUATION ALLOWANCE
Balance, Amounts Balance,
Beginning of Charges Written- End of
Period to Expense Off Period
------------ ---------- ---------- ---------
For the three months
ended June 30, 2005 $50,880 $21,538 $(21,692) $50,726
For the three months
ended June 30, 2004 45,462 20,756 (21,363) 44,855
For the six months
ended June 30, 2005 61,136 39,034 (49,444) 50,726
For the six months
ended June 30, 2004 47,467 40,613 (43,225) 44,855
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 77
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
------ ------ ------ ------ ------ ------ ------ ------
Total 1Q
dates 3 2 3 2 2 2 2 -
Total 2Q
dates 2 2 2 2 2 2 2 -
Total 3Q
dates 2 3 2 2 2 2 2 -
Total 4Q
dates 2 2 2 3 2 2 2 1
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 - -
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 - -
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 - -
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
CONTACT: Career Education Corporation
Karen M. King (Investor Inquiries), 847-585-3899
Tracy K. Lorenz (Media Inquiries), 847-585-3899
www.careered.com