Exhibit 99.1
Career Education Corporation Reports Solid Revenue and Net Income Growth
for 2005 Fourth Quarter and Full Year;
Board Authorizes Repurchase of Up to $300 Million of Company Shares
HOFFMAN ESTATES, Ill.--(BUSINESS WIRE)--Feb. 15, 2006--Career
Education Corporation (NASDAQ:CECO) today reported revenue of $529.2
million for the quarter ended December 31, 2005, an 8 percent increase
from revenue for the fourth quarter of 2004. Net income for the fourth
quarter of 2005 was $70.3 million, an increase of 12 percent from net
income for the fourth quarter of 2004. The company also announced that
its Board of Directors has approved the repurchase of up to $300
million of the outstanding shares of the company's common stock.
"Our earnings growth and cash flow continue to be significant,
driven by the worldwide demand for high-quality career education,"
said John Larson, Chairman and Chief Executive Officer of Career
Education Corporation. "Our track record of growth and innovation,
coupled with our commitment to outstanding service delivery, has
positioned us well, and we remain confident in our strategic
direction."
RESULTS OF OPERATIONS
Three Months Ended December 31, 2005
-- Consolidated revenue increased 8 percent to $529.2 million
during the fourth quarter of 2005, from $491.1 million during
the fourth quarter of 2004. The increase is primarily
attributable to an approximate 8 percent increase in student
population from October 31, 2004, to October 31, 2005.
-- Consolidated income from operations increased 7 percent to
$104.7 million during the fourth quarter of 2005, from $98.2
million during the fourth quarter of 2004. Operating profit
margin percentage was 19.8 percent during the fourth quarter
of 2005, a decrease of 20 basis points from 20.0 percent
during the fourth quarter of 2004.
-- Consolidated net income was $70.3 million, or $0.70 per
diluted share, during the fourth quarter of 2005, an increase
of 12 percent from $62.9 million, or $0.60 per diluted share,
during the fourth quarter of 2004.
Twelve Months Ended December 31, 2005
-- Consolidated revenue increased 18 percent to $2.035 billion
during 2005, from $1.729 billion during 2004.
-- Income from operations increased 27 percent to $369.1 million
during 2005, from $291.6 million during 2004. Operating profit
margin percentage for 2005 was 18.1 percent, an increase of
120 basis points from 16.9 percent for 2004.
-- The company reduced its effective income tax rate from 39.25
percent in 2004 to 37.40 percent in 2005. The change was
effected during the third quarter and fourth quarter of 2005.
Specifically, we reduced our year-to-date effective tax rate
from 39.25 percent to 38.25 percent during the third quarter
of 2005 and from 38.25 percent to 37.40 percent during the
fourth quarter of 2005. The decrease in our effective tax rate
is attributable to the impact of various tax planning
strategies and favorable changes in the proportionate
distribution of our total pretax income among the tax
jurisdictions in which we operate. The reduction of our
effective income tax rate from 39.25 percent to 37.40 percent
increased 2005 net income per diluted share by approximately
$0.07, and our fourth quarter 2005 reduction of our effective
income tax rate from 38.25 to 37.40 percent increased fourth
quarter 2005 net income per diluted share by approximately
$0.03.
-- Consolidated net income was $233.9 million, or $2.26 per
diluted share, during 2005, a 30 percent increase from $179.6
million, or $1.71 per diluted share, during 2004.
CASH FLOWS AND FINANCIAL POSITION
Cash Flows
-- Net cash provided by operating activities was $378.2 million
during 2005, compared to net cash provided by operating
activities of $376.2 million during 2004.
-- Capital expenditures decreased to $125.6 million during 2005,
from $142.8 million during 2004. Capital expenditures
represented approximately 6.2 percent of consolidated revenue
in 2005 versus 8.3 percent of consolidated revenue in 2004.
Financial Position
-- As of December 31, 2005 and 2004, cash and cash equivalents
and investments totaled $404.4 million and $349.5 million,
respectively.
-- Net student receivables as of December 31, 2005, were $76.4
million, an 11 percent decrease from $86.0 million as of
December 31, 2004. Allowance for doubtful accounts as a
percentage of gross student receivables as of December 31,
2005, decreased to 37.0 percent, from 41.6 percent as of
December 31, 2004.
-- Quarterly days sales outstanding ("DSO") were 14 days as of
December 31, 2005, a 3-day decrease from DSO as of December
31, 2004, of 17 days. DSO is calculated by dividing the sum of
net student receivables and net other receivables by average
daily revenue for the quarter. Average daily revenue for the
quarter is computed by dividing total revenue by the total
number of days in the quarter.
ADDITIONAL STOCK REPURCHASE AUTHORIZATION
In January 2006, Career Education Corporation's Board of Directors
authorized the use of an additional $200 million for the repurchase of
shares of our outstanding common stock. This authorization is in
addition to the approximately $100 million still available under CEC's
$300 million stock repurchase program authorization in July 2005.
Stock repurchases under this program may be made on the open market or
in privately negotiated transactions from time to time, depending on
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.
Since inception of the program in July 2005, the company has
repurchased approximately 5.3 million shares of its common stock for
approximately $200 million at an average price of approximately $37.97
per share. Stock repurchases during 2005 reduced 2005 diluted weighted
average shares outstanding and fourth quarter 2005 diluted weighted
average shares outstanding by approximately 2.0 million shares and 5.3
million shares, respectively, and increased 2005 net income per
diluted share and fourth quarter 2005 net income per diluted share by
approximately $0.03 and $0.02, respectively. The effect of the share
repurchases on net income per diluted share was estimated based on the
aforementioned reduction in diluted weighted average shares
outstanding and estimated interest income forgone.
POPULATION AND NEW STUDENT START DATA
CEC total student population and new student start data include
the results of both the Online Educational Group ("OEG") segment and
the Colleges, Schools, and University ("CSU") segment.
Student Population
-- CEC total student population as of January 31, 2005, was
approximately 104,200, representing a 3 percent increase from
total student population as of January 31, 2004, of
approximately 101,500.
-- OEG student population as of January 31, 2005, was
approximately 32,700, representing a 31 percent increase from
OEG student population as of January 31, 2004, of
approximately 24,900.
New Student Starts
-- New student starts during the fourth quarter of 2005,
including the results of both our OEG and CSU segments, were
approximately 28,200, compared to new student starts during
the fourth quarter of 2004 of approximately 28,600.
INNOVATIONS
Innovations during the fourth quarter of 2005 included the
advancement of Career Education's hybrid learning model, which
capitalizes on the company's strong online technology platform and
allows on-ground students to take a portion of their coursework at
their physical facility and a portion online. This model will be
introduced during the first quarter of 2006.
"Our priority will always be customer-focused innovation that
provides real value for our students and ultimately increases value
for our shareholders," said Larson. "By understanding our diverse
group of students and their needs, we can successfully target our
strategies and ensure that we maximize our investment in innovation
and service."
BUSINESS OUTLOOK
Following is guidance with respect to 2006 financial performance.
While we may make acquisitions or divestitures, none are contemplated
by these forward-looking statements.
Full Year 2006
-- We expect our consolidated 2006 revenue to increase
approximately 10 percent from consolidated 2005 revenue.
-- We expect our consolidated 2006 net income per diluted share,
excluding the effect of non-cash stock incentive compensation
expense, to increase approximately 10 - 12 percent from
consolidated 2005 net income per diluted share.
-- We expect 2006 non-cash stock incentive compensation expense
to be approximately $17.0 to $18.0 million, although actual
expense may vary from this estimate based on, among other
things, the timing, volume, and value of future stock
incentive awards.
CONFERENCE CALL INFORMATION
Career Education Corporation will host a conference call today,
February 15th, at 5:00 p.m. (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
617-224-4324 (international) or (800) 573-4752 (domestic) and citing
code 10605879. 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 (617)
801-6888 (international) or (888) 286-8010 and citing code 69012616.
Career Education Corporation (www.careered.com), through its
colleges, schools and universities, offers quality higher education to
more than 100,000 students both on-campus and online in a variety of
career-oriented disciplines. CEC reports and discusses its operating
results in two separate segments: the Colleges, Schools and
Universities segment, which represents the results of the campuses
providing education on-ground, and the Online Education Group, which
represents the results of its campuses providing education online.
The Colleges, Schools and Universities segment includes more than
70,000 students attending one of 80-plus campuses owned by CEC. The
on-ground campuses are located throughout the U.S. and in Canada,
France, the United Kingdom, and the United Arab Emirates and offer
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 segment includes more than 30,000
students attending the web-based virtual campuses of either American
InterContinental University Online or Colorado Technical University
Online. The online campuses of these two universities collectively
offer a variety of degrees in information technology, computer
science, business, visual communication, health sciences, criminal
justice, and education.
Except for the historical and present factual information
contained herein, the matters set forth in this release, including
statements under "Business Outlook" and "Innovations," statements
identified by words such as "anticipate," "believe," "plan," "expect,"
"intend," "project," "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.
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 federal securities laws, we undertake no
obligation to update such factors or to publicly announce the results
of any of the forward-looking statements contained herein to reflect
future events, developments, or changed circumstances, or for any
other reason. These risks and uncertainties, the outcome of which
could materially and adversely affect our financial condition and
operations, include, but are not limited to, the following: risks
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, and the factors
discussed 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.
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
For the Three Months Ended December 31, 2005 and 2004
(In thousands, except per share data and percentages)
% of % of
2005 Revenue 2004 Revenue
--------- -------- --------- --------
Revenue:
Tuition and registration fees $506,115 95.6% $461,837 94.1%
Other 23,059 4.4% 29,234 6.0%
--------- ---------
Total revenue 529,174 100.0% 491,071 100.0%
--------- ---------
Operating expenses:
Educational services and
facilities 164,069 31.0% 146,642 29.9%
General and administrative 239,630 45.3% 229,577 46.8%
Depreciation and amortization 20,787 3.9% 16,627 3.4%
--------- ---------
Total operating expenses 424,486 80.2% 392,846 80.0%
--------- ---------
Income from operations 104,688 19.8% 98,225 20.0%
Other income (expense):
Interest income 4,090 0.8% 1,411 0.3%
Interest expense (642) -0.2% (735) -0.2%
Share of affiliate earnings 1,397 0.3% 1,449 0.3%
Miscellaneous income (expense) (452) -0.1% (94) 0.0%
--------- ---------
Total other income 4,393 0.8% 2,031 0.4%
--------- ---------
Income before provision for
income taxes 109,081 20.6% 100,256 20.4%
Provision for income taxes 38,465 7.3% 37,395 7.6%
--------- ---------
Income from continuing
operations 70,616 13.3% 62,861 12.8%
Loss from discontinued
operations (358) 0.0% - 0.0%
--------- ---------
Net income $70,258 13.3% $62,861 12.8%
========= =========
======================================================================
Income per share - Diluted
Income from continuing
operations $0.704 $0.599
Loss from discontinued
operations $(0.004) -
--------- ---------
Net income $0.701 $0.599
========= =========
Diluted weighted average
shares outstanding 100,246 104,946
======================================================================
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
For the Year Ended December 31, 2005 and 2004
(In thousands, except per share data and percentages)
% of % of
2005 Revenue 2004 Revenue
----------- -------- ----------- --------
Revenue:
Tuition and
registration fees $1,939,159 95.3% $1,608,450 93.0%
Other 95,396 4.7% 120,082 7.0%
----------- -----------
Total revenue 2,034,555 100.0% 1,728,532 100.0%
----------- -----------
Operating expenses:
Educational services and
facilities 628,665 30.9% 557,144 32.2%
General and administrative 958,098 47.1% 822,358 47.6%
Depreciation and
amortization 78,720 3.9% 57,469 3.3%
----------- -----------
Total operating
expenses 1,665,483 81.9% 1,436,971 83.1%
----------- -----------
Income from operations 369,072 18.1% 291,561 16.9%
Other income (expense):
Interest income 11,967 0.6% 2,952 0.2%
Interest expense (1,841) -0.1% (2,802) -0.2%
Share of affiliate
earnings 5,067 0.3% 4,248 0.3%
Miscellaneous expense (982) -0.1% (290) 0.0%
----------- -----------
Total other income 14,211 0.7% 4,108 0.2%
----------- -----------
Income before provision for
income taxes 383,283 18.8% 295,669 17.1%
Provision for income taxes 143,347 7.0% 116,050 6.7%
----------- -----------
Income from continuing
operations 239,936 11.8% 179,619 10.4%
Loss from discontinued
operations (6,058) -0.3% - 0.0%
----------- -----------
Net income $233,878 11.5% $179,619 10.4%
=========== ===========
======================================================================
Income per share - Diluted
Income from continuing
operations $2.321 $1.711
Loss from discontinued
operations $(0.059) -
----------- -----------
Net income $2.262 $1.711
=========== ===========
Diluted weighted average
shares outstanding 103,383 105,004
======================================================================
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
(In thousands)
As of December 31,
--------------------------
2005 2004
------------ ------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $132,308 $349,458
Investments 272,093 -
------------ ------------
Total cash and cash equivalents and
investments $404,401 $349,458
Receivables:
Students, net of allowance for
doubtful accounts of $44,839 and
$61,136 as of December 31, 2005,
and December 31, 2004, respectively 76,447 85,982
Other, net 5,015 5,378
Prepaid expenses 37,412 29,649
Inventories 14,090 17,347
Deferred income tax assets 10,122 18,806
Other current assets 31,067 5,980
------------ ------------
Total current assets 578,554 512,600
------------ ------------
PROPERTY AND EQUIPMENT, net 411,144 351,140
GOODWILL 443,584 448,896
INTANGIBLE ASSETS, net 35,286 35,881
OTHER ASSETS 37,537 38,495
------------ ------------
TOTAL ASSETS $1,506,105 $1,387,012
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $627 $2,274
Accounts payable 28,627 38,263
Accrued expenses:
Payroll and related benefits 39,471 38,193
Income taxes 23,509 4,663
Other 82,513 70,520
Deferred tuition revenue 152,007 166,743
------------ ------------
Total current liabilities 326,754 320,656
------------ ------------
LONG-TERM LIABILITIES:
Long-term debt, net of current maturities 16,358 21,591
Deferred rent obligations 89,680 15,293
Deferred income tax liabilities 31,212 39,972
Other 5,854 4,669
------------ ------------
Total long-term liabilities 143,104 81,525
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock $1,033 $1,025
Additional paid-in capital 591,287 571,192
Accumulated other comprehensive income 1,989 4,396
Retained earnings 642,096 408,218
Cost of shares in treasury (200,158) -
------------ ------------
Total stockholders' equity 1,036,247 984,831
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,506,105 $1,387,012
============ ============
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
For the Three Months For the Year ended
ended December 31, December 31,
----------------------- -----------------------
2005 2004 2005 2004
----------- ----------- ----------- -----------
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net Income $70,258 $62,861 $233,878 $179,619
Adjustments to
reconcile net income
to income from
continuing
operations:
Loss from
discontinued
operations 358 - 6,058 -
----------- ----------- ----------- -----------
Income from
continuing
operations 70,616 62,861 239,936 179,619
----------- ----------- ----------- -----------
Adjustments to
reconcile income
from continuing
operations to net
cash provided by
operating
activities:
Depreciation and
amortization 20,787 16,627 78,720 57,469
Deferred income
taxes 22 7,439 22 7,439
Loss on
disposition of
property and
equipment 671 186 1,243 602
Tax benefit
associated with
option exercises 442 389 5,268 43,105
Other 219 214 812 821
Changes in
operating assets
and liabilities,
net of
acquisitions (3,662) 28,295 52,224 87,099
----------- ----------- ----------- -----------
Net cash
provided by
operating
activities 89,095 116,011 378,225 376,154
----------- ----------- ----------- -----------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Business dispositions/
acquisitions, net of
cash (111) 501 (1,019) (17)
Acquisition
transaction costs - 342 - (26)
Purchases of property
and equipment (26,394) (48,779) (125,626) (142,781)
Purchases of
investments in
available-for-sale
securities (490,013) - (1,190,649) -
Sales and maturities
of investments in
available-for-sale
securities 471,504 - 918,528 -
Other (465) 1,119 (771) 1,054
----------- ----------- ----------- -----------
Net cash used
in investing
activities (45,479) (46,817) (399,537) (141,770)
----------- ----------- ----------- -----------
CASH FLOWS FROM
FINANCING ACTIVITIES:
Purchases of treasury
stock - - (200,158) -
Issuance of common
stock 2,798 2,260 14,801 31,528
Net proceeds from
(payments of)
revolving loans (417) (2,844) (2,477) (78,963)
Net payments of
capital lease
obligations and
other long-term
debt (2,547) 1,870 (1,869) (3,476)
Other - (4) - (4)
----------- ----------- ----------- -----------
Net cash
provided by
(used in)
financing
activities (166) 1,282 (189,703) (50,915)
----------- ----------- ----------- -----------
EFFECT OF FOREIGN
CURRENCY EXCHANGE
RATE CHANGES ON
CASH AND CASH
EQUIVALENTS (1,383) 4,437 (6,135) 4,754
----------- ----------- ----------- -----------
NET INCREASE IN CASH
AND CASH EQUIVALENTS 42,067 74,913 (217,150) 188,223
CASH AND CASH
EQUIVALENTS,
beginning of year 90,241 274,545 349,458 161,235
----------- ----------- ----------- -----------
CASH AND CASH
EQUIVALENTS, end of
year $132,308 $349,458 $132,308 $349,458
=========== =========== =========== ===========
CAREER EDUCATION CORPORATION
SELECTED SEGMENT INFORMATION
(Dollars in thousands)
For the Three Months For the Year Ended
Ended December 31, December 31,
--------------------- -----------------------
2005 2004 2005 2004
---------- ---------- ----------- -----------
Revenue
CSU (1) $360,006 $372,865 $1,368,431 $1,337,068
OEG (2) 169,153 118,206 666,109 391,464
Corporate & other (3) 15 - 15 -
Segment profit (4)
CSU $57,097 $63,809 $173,442 $175,269
OEG 61,500 41,625 262,718 158,815
Corporate and other (12,512) (5,760) (62,021) (38,275)
Segment profit percentage
CSU 15.9% 17.1% 12.7% 13.1%
OEG 36.4% 35.2% 39.4% 40.6%
(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 schools.
(3) Corporate & other revenue represents advertising revenue realized
by our New Initiatives Group.
(4) 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
December 31,
-------------------
2005 2004
--------- ---------
Total revenue during the
quarter ended $529,174 $491,071
Number of days in the
quarter ended 92 92
Total revenue per day $5,752 $5,338
Receivables, net $81,462 $91,360
Days sales outstanding 14 17
ALLOWANCE AS A PERCENTAGE OF STUDENT RECEIVABLES
December 31,
-------------------
2005 2004
--------- ---------
Allowance for doubtful accounts $44,839 $61,136
Gross student receivables $121,286 $147,118
Allowance as a percentage of
student receivables 37.0% 41.6%
STUDENT RECEIVABLES VALUATION ALLOWANCE
Balance,
Beginning Charges Amounts Balance,
of to Written- End of
Year Expense Off Year
--------- --------- --------- --------
For the year ended December
31, 2005 $61,136 $80,348 $(96,645) 44,839
For the year ended December
31, 2004 47,467 105,676 (92,007) 61,136
CONTACT: Career Education Corporation
Karen M. King (Investors), 847-585-3899
or
Pattie Overstreet-Miller (Media), 847-851-7351
www.careered.com