Career Education Corporation (NASDAQ: CECO) today reported total revenue of $459.9 million, and net income of $20.8 million, or $0.25 per diluted share, for the third quarter of 2009 compared to total revenue of $403.0 million and a net loss of $0.1 million, or $0.00 per diluted share, for the third quarter of 2008.
The financial and operating results for the third quarter 2009 and 2008 include revenue and operating losses associated with schools currently being taught out (Transitional Schools) as well as other significant items as itemized in the tables within this press release.
On a non-GAAP basis, which excludes the Transitional Schools and other significant items, revenue was $457.5 million in the third quarter, a 16.5 percent increase from $392.7 million in the third quarter of 2008 and earnings per diluted share were $0.47 in the third quarter as compared to $0.18 in the third quarter of 2008, an increase of over 160%. (See segment tables below and the GAAP to non-GAAP reconciliation attached to this press release.)
“We are pleased with our third-quarter results, as they reflect the progress we have made across the organization on our transformation initiatives,” said Gary E. McCullough, President and Chief Executive Officer. “Revenue growth accelerated in the third quarter, as we achieved the highest levels of new student starts and student population in our company’s history. We also delivered another meaningful increase in operating margins, positioning us well ahead of our 2009 internal plan.”
Outlook
In March 2008, the company established milestone objectives for 2010 of between $225 and $270 million in operating income. Based upon the financial performance through the first nine months, and the record level of student population as of October 31, 2009, the company is on track to achieve operating income, excluding Transitional Schools and other significant items, within the low end of the 2010 milestone objective range in 2009, a year ahead of schedule.
Three Months Ended September 30, 2009
- Total revenue from continuing operations was $459.9 million during the third quarter of 2009, a 14.1 percent increase from $403.0 million during the third quarter of 2008. Excluding the Transitional Schools, revenue was $457.5 million in the third quarter, a 16.5 percent increase from $392.7 million in the third quarter of 2008.
- The financial and operating results for the third quarter 2009 and 2008 include operating losses associated with Transitional Schools as well as other significant items as summarized below:
Diluted | ||||||||
| Reconciling Items | Earnings per | |||||||
| (In Millions) | Share Impact | |||||||
| Three Months Ended September 30, 2009 | ||||||||
| Performance-based Compensation Related To Plan Outperformance | ($18.8) | ($0.14) | ||||||
| Transitional Schools Operating Losses | (7.4) | (0.06) | ||||||
| Asset Impairment Charges | (2.5) | (0.02) | ||||||
| TOTAL | ($28.7) | ($0.22) | ||||||
| Three Months Ended September 30, 2008 | ||||||||
| Lease Exit Charges | ($9.7) | ($0.07) | ||||||
| Transitional Schools Operating Losses | (8.0) | (0.06) | ||||||
| Asset Impairment Charges | (6.8) | (0.05) | ||||||
| TOTAL | ($24.5) | ($0.18) | ||||||
- The company believes it is useful to present non-GAAP financial measures excluding these impacts as a means to understand the performance of its core business.
- Operating income was $32.3 million during the third quarter of 2009, versus an operating loss of $6.2 million during the third quarter of 2008. Operating margin was 7.0 percent during the third quarter of 2009, as compared to an operating margin loss of 1.5 percent during the third quarter of 2008.
- Excluding the reconciling items listed in the table above, operating income was $61.0 million in the third quarter of 2009, up 233.3 percent from $18.3 million in the third quarter of 2008 and operating margin was 13.3 percent during the third quarter of 2009, an 8.6 percentage point increase compared to an operating margin percentage of 4.7 percent during the third quarter of 2008.
Nine Months Ended September 30, 2009
- Total revenue from continuing operations was $1.34 billion during the nine months ended September 30, 2009, a 5.7 percent increase from $1.27 billion during the nine months ended September 30, 2008. Excluding the Transitional Schools, revenue was $1.33 billion during the nine months ended September 30, 2009, an 8.4 percent increase from $1.22 billion during the nine months ended September 30, 2008.
- Operating income increased to $86.3 million during the nine months ended September 30, 2009, from $37.1 million during the nine months ended September 30, 2008. Operating margin increased to 6.5 percent during the nine months ended September 30, 2009, from 2.9 percent during the nine months ended September 30, 2008.
- Income from continuing operations during the nine months ended September 30, 2009, was $57.9 million, or $0.66 per diluted share, relative to $37.2 million, or $0.41 per diluted share, during the nine months ended September 30, 2008.
- The financial and operating results for the nine months ended September 30, 2009 and 2008 include operating losses associated with Transitional Schools as well as other significant items as summarized below:
| Diluted | |||||||||||||
| Reconciling Items | Earnings per | ||||||||||||
| (In Millions) | Share Impact | ||||||||||||
| Nine Months Ended September 30, 2009 | |||||||||||||
| Transitional Schools Operating Losses | ($44.5 | ) | ($0.33 | ) | |||||||||
| Performance-based Compensation Related To Plan Outperformance | (25.3 | ) | (0.19 | ) | |||||||||
| Asset Impairment Charges | (2.5 | ) | (0.02 | ) | |||||||||
| Severance and Stay Bonus Charges | (1.5 | ) | (0.01 | ) | |||||||||
| TOTAL | ($73.8 | ) | ($0.55 | ) | |||||||||
| Nine Months Ended September 30, 2008 | |||||||||||||
| Transitional Schools Operating Losses | ($27.9 | ) | ($0.20 | ) | |||||||||
| Lease Exit Charges | (9.7 | ) | (0.07 | ) | |||||||||
| Asset Impairment Charges | (6.8 | ) | (0.05 | ) | |||||||||
| Severance and Stay Bonus Charges | (4.3 | ) | (0.03 | ) | |||||||||
| Gain from Termination of Affiliate Relationship | - | 0.03 | |||||||||||
| TOTAL | ($48.7 | ) | ($0.32 | ) | |||||||||
- Excluding the reconciling items listed in the table above, operating income was $160.1 million during the nine months ended September 30, 2009, up 86.6 percent from $85.8 million during the nine months ended September 30, 2008 and operating margin was 12.0 percent during the nine months ended September 30, 2009, a 5.0 percentage point increase relative to an operating margin of 7.0 percent during the nine months ended September 30, 2008.
CONSOLIDATED CASH FLOWS AND FINANCIAL POSITION
Cash Flows
- Cash provided by operating activities was $217.4 million during the nine months ended September 30, 2009, compared to cash provided by operating activities of $158.9 million during the nine months ended September 30, 2008.
- Capital expenditures increased to $50.3 million during the nine months ended September 30, 2009, from $39.9 million during the nine months ended September 30, 2008. Capital expenditures represented 3.8 percent of total revenue during the nine months ended September 30, 2009.
Financial Position
- As of September 30, 2009 and December 31, 2008, cash and cash equivalents and investments totaled $473.8 million and $508.7 million, respectively.
- Days sales outstanding (DSO) were 14 days as of September 30, 2009, compared to 13 days as of September 30, 2008.
Stock Repurchase Program
During the three months ended September 30, 2009, the company repurchased approximately 1.7 million shares of its common stock for approximately $40.0 million at an average price of $24.15 per share. During the nine months ended September 30, 2009, the company repurchased 8.2 million shares of its common stock for approximately $180.0 million at an average price of $21.84 per share.
As of September 30, 2009, approximately $215.5 million was available under the Company’s previously authorized repurchase program. This amount includes an additional $200.0 million authorized by our Board of Directors on August 4, 2009. Stock repurchases under this program may be made on the open market or in privately negotiated transactions from time to time, depending on various factors, including market conditions and corporate and regulatory requirements. The stock repurchase program does not have an expiration date and may be suspended or discontinued at any time.
Revenue
| For the three months ended | ||||||||
| September 30, | % Change | |||||||
| 2009 | 2008 | 2009 vs. 2008 | ||||||
| Revenue (in millions) | ||||||||
| University | $206.8 | $172.8 | 20 | % | ||||
| Culinary Arts | 91.6 | 86.0 | 7 | % | ||||
| Health Education | 78.0 | 59.5 | 31 | % | ||||
| Art & Design | 65.9 | 61.8 | 7 | % | ||||
| International | 15.3 | 12.6 | 22 | % | ||||
| Corporate and other | (0.1 | ) | (0.0 | ) | NM | |||
| Subtotal | $457.5 | $392.7 | 17 | % | ||||
| Transitional Schools | 2.4 | 10.3 | (77 | %) | ||||
| Total Revenue | $459.9 | $403.0 | 14 | % | ||||
Operating Income
| For the three months ended | ||||||||
| September 30, | % Change | |||||||
| 2009 | 2008 | 2009 vs. 2008 | ||||||
| Operating Income (in millions) | ||||||||
| University | $40.9 | $27.3 | 50 | % | ||||
| Culinary Arts | 7.4 | (10.4 | ) | 171 | % | |||
| Health Education | 12.9 | 3.1 | 316 | % | ||||
| Art & Design | 7.8 | 3.8 | 105 | % | ||||
| International | (4.5 | ) | (5.2 | ) | 13 | % | ||
| Corporate and other | (24.8 | ) | (16.8 | ) | (48 | %) | ||
| Subtotal | $39.7 | $1.8 | NM | |||||
| Transitional Schools | (7.4 | ) | (8.0 | ) | 8 | % | ||
| Total Operating Income | $32.3 | ($6.2 | ) | 621 | % | |||
Operating Margin
| For the three months ended | |||||
| September 30, | |||||
| 2009 | 2008 | ||||
| Operating Margin | |||||
| University | 19.8 | % | 15.8 | % | |
| Culinary Arts | 8.0 | % | -12.1 | % | |
| Health Education | 16.5 | % | 5.3 | % | |
| Art & Design | 11.8 | % | 6.2 | % | |
| International | -29.3 | % | -41.6 | % | |
| Corporate and other | NM | NM | |||
| Subtotal | 8.7 | % | 0.4 | % | |
| Transitional Schools | NM | -77.7 | % | ||
| Total | 7.0 | % | -1.5 | % | |
STUDENT POPULATION AND NEW STUDENT START DATA
Student Population
Total student population by reportable segment as of October 31, 2009 and 2008, were as follows:
| As of October 31, | % Change | ||||||
| 2009 | 2008 | 2009 vs. 2008 | |||||
| STUDENT POPULATION | |||||||
| University | 53,700 | 44,800 | 20 | % | |||
| Culinary Arts | 12,500 | 10,300 | 21 | % | |||
| Health Education | 22,900 | 17,400 | 32 | % | |||
| Art & Design | 13,900 | 14,000 | (1 | %) | |||
| International | 10,900 | 9,700 | 12 | % | |||
| Subtotal | 113,900 | 96,200 | 18 | % | |||
| Transitional Schools | 300 | 2,200 | (86 | %) | |||
| Total Student Population | 114,200 | 98,400 | 16 | % | |||
ONLINE STUDENT POPULATION | |||||||
| Culinary Arts | 100 | 0 | NM | ||||
| Art & Design | 1,400 | 800 | 75 | % | |||
| University | 42,300 | 34,400 | 23 | % | |||
| Total Online Student Population | 43,800 | 35,200 | 24 | % | |||
New Student Starts
New student starts by reportable segment during the third quarter of 2009 and 2008, were as follows:
| For the three months ended | ||||||
| September 30, | % Change | |||||
| 2009 | 2008 | 2009 vs. 2008 | ||||
| NEW STUDENT STARTS | ||||||
| University | 16,010 | 14,130 | 13 | % | ||
| Culinary Arts | 7,110 | 4,710 | 51 | % | ||
| Health Education | 7,040 | 5,600 | 26 | % | ||
| Art & Design | 3,310 | 3,080 | 7 | % | ||
| International | 4,200 | 4,070 | 3 | % | ||
| Subtotal | 37,670 | 31,590 | 19 | % | ||
| Transitional Schools | 0 | 10 | NM | |||
| Total New Student Starts | 37,670 | 31,600 | 19 | % | ||
ONLINE NEW STUDENT STARTS | ||||||
| Culinary Arts | 90 | 0 | NM | |||
| Art & Design | 370 | 320 | 16 | % | ||
| University | 13,090 | 11,480 | 14 | % | ||
| Total Online Student Starts | 13,550 | 11,800 | 15 | % | ||
CONFERENCE CALL INFORMATION
Career Education Corporation will host a conference call on November 5, 2009 at 10:00 AM (Eastern Time). Interested parties can access the live webcast of the conference call at www.careered.com. Participants can also listen to the conference call by dialing 800-471-6718 (domestic) or 630-691-2735 (international) and reference confirmation 25477681. Please log-in or dial-in at least 10 minutes prior to the start time to ensure a connection. An archived version of the webcast will be accessible for 90 days at www.careered.com. A replay of the call will also be available for seven days by calling 888-843-8996 (domestic) or 630-652-3044 (international) and reference confirmation 25477681.
About Career Education Corporation
The colleges, schools and universities that are part of the Career Education Corporation (CEC) family offer high-quality education to a diverse student population of over 110,000 students across the world in a variety of career-oriented disciplines. The more than 75 campuses that serve these students are located throughout the U.S. and in France, Italy, and the United Kingdom, and offer doctoral, master’s, bachelor’s and associate degrees, and diploma and certificate programs. Approximately one-third of CEC’s students attend the web-based virtual campuses of American InterContinental University and Colorado Technical University.
CEC is an industry leader whose gold-standard brands are recognized globally. Those brands include, among others, American InterContinental University; Brooks Institute; Colorado Technical University; Harrington College of Design; INSEEC Schools; International Academy of Design & Technology; Istituto Marangoni; Le Cordon Bleu North America; and Sanford-Brown Institutes and Colleges. CEC is committed to providing quality education, enabling students to graduate and pursue rewarding careers.
For more information, see CEC’s website at www.careered.com. The website includes a detailed listing of individual campus locations and web links to CEC’s more than 75 colleges, schools, and universities.
Except for the historical and present factual information contained herein, the matters set forth in this release, including statements identified by words such as "anticipate," "believe," "plan," "expect," "intend," "project," "will," “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 risks, uncertainties and other factors that could cause our actual growth, results of operations, performance and business prospects, and opportunities to differ materially from those expressed in, or implied by, these statements. Except as expressly required by the federal securities laws, we undertake no obligation to update such factors or to publicly announce the results of any of the forward-looking statements contained herein to reflect future events, developments, or changed circumstances or for any other reason. These risks and uncertainties, the outcome of which could materially and adversely affect our financial condition and operations, include, but are not limited to, the following: the adverse impact and potential impacts on the availability of Title IV and private student loans for our students of (1) the willingness or ability of private lenders to make private student loans in the current U.S. credit markets, (2) new student lending related reporting and disclosure obligations on institutions that participate in Title IV federal student financial aid programs under The Higher Education Opportunity Act (“HEOA”), signed into law on August 14, 2008, in the first full reauthorization of the Higher Education Act of 1965, as amended (together with HEOA, “HEA”) or provide payment plans to students and (3) pending regulations under HEOA, HEA and Congress’ willingness or ability to maintain or increase funding for Title IV programs; potential higher bad debt expense or reduced revenue associated with requiring students to pay more of their educational expenses while in school or with directly providing extended payment plans to our students; increased competition; the effectiveness of our regulatory compliance efforts; impairment of goodwill and other intangible assets as we continue to redefine the company and manage our brands and marketing to improve effectiveness and reduce costs; charges and expenses associated with exiting excess facility space, the impact on our revenues and profitability of our transitional segment; our ability to comply with accrediting agency requirements or obtain accrediting agency approvals for existing or new programs; our dependence on information technology systems; our ownership or use of intellectual property; costs and impacts of regulatory, legal and administrative actions, proceedings and investigations, governmental regulations, and class action and other lawsuits; our ability to manage and continue growth; and other factors discussed in our Annual Report on Form 10-K for the year ended December 31, 2008, our Quarterly Reports on Form 10-Q for the most recent fiscal quarters, and from time to time in our current reports filed with the Securities and Exchange Commission.
| CAREER EDUCATION CORPORATION | ||||||||
| SELECTED SEGMENT INFORMATION | ||||||||
| (Dollars in thousands) | ||||||||
| For the Three Months Ended September 30, | ||||||||
| 2009 | 2008 | |||||||
| REVENUE: | ||||||||
| University | $ 206,810 | $ 172,856 | ||||||
| Culinary Arts | 91,654 | 85,961 | ||||||
| Health Education | 77,981 | 59,514 | ||||||
| Art & Design | 65,879 | 61,766 | ||||||
| International | 15,333 | 12,595 | ||||||
| Corporate and other | (147 | ) | (1 | ) | ||||
| Subtotal | $ 457,510 | $ 392,691 | ||||||
| Transitional Schools | 2,402 | 10,273 | ||||||
| Total revenue | $ 459,912 | $ 402,964 | ||||||
| SEGMENT OPERATING INCOME (LOSS): | ||||||||
| University | $ 40,936 | $ 27,341 | ||||||
| Culinary Arts | 7,373 | (10,426 | ) | |||||
| Health Education | 12,863 | 3,142 | ||||||
| Art & Design | 7,751 | 3,835 | ||||||
| International | (4,498 | ) | (5,244 | ) | ||||
| Corporate and other | (24,764 | ) | (16,906 | ) | ||||
| Subtotal | $ 39,661 | $ 1,742 | ||||||
| Transitional Schools | (7,387 | ) | (7,978 | ) | ||||
| Total operating income | $ 32,274 | $ (6,236 | ) | |||||
| SEGMENT OPERATING INCOME (LOSS) PERCENTAGE: | ||||||||
| University | 19.8 | % | 15.8 | % | ||||
| Culinary Arts | 8.0 | % | -12.1 | % | ||||
| Health Education | 16.5 | % | 5.3 | % | ||||
| Art & Design | 11.8 | % | 6.2 | % | ||||
| International | -29.3 | % | -41.6 | % | ||||
| Transitional Schools | NM | NM | ||||||
| CAREER EDUCATION CORPORATION | ||||||||
| SELECTED SEGMENT INFORMATION | ||||||||
| (Dollars in thousands) | ||||||||
| For the Nine Months Ended September 30, | ||||||||
| 2009 | 2008 | |||||||
| REVENUE: | ||||||||
| University | $ 594,895 | $ 525,365 | ||||||
| Culinary Arts | 241,178 | 251,026 | ||||||
| Health Education | 219,480 | 177,669 | ||||||
| Art & Design | 193,758 | 196,214 | ||||||
| International | 76,119 | 71,872 | ||||||
| Corporate and other | (344 | ) | 9 | |||||
| Subtotal | $ 1,325,086 | $ 1,222,155 | ||||||
| Transitional Schools | 12,555 | 43,843 | ||||||
| Total revenue | $ 1,337,641 | $ 1,265,998 | ||||||
| SEGMENT OPERATING INCOME (LOSS): | ||||||||
| University | $ 121,864 | $ 79,806 | ||||||
| Culinary Arts | 5,296 | (5,320 | ) | |||||
| Health Education | 39,160 | 11,591 | ||||||
| Art & Design | 21,093 | 19,005 | ||||||
| International | 9,951 | 10,750 | ||||||
| Corporate and other | (66,535 | ) | (50,875 | ) | ||||
| Subtotal | $ 130,829 | $ 64,957 | ||||||
| Transitional Schools | (44,511 | ) | (27,881 | ) | ||||
| Total operating income | $ 86,318 | $ 37,076 | ||||||
| SEGMENT OPERATING INCOME (LOSS) PERCENTAGE: | ||||||||
| University | 20.5 | % | 15.2 | % | ||||
| Culinary Arts | 2.2 | % | -2.1 | % | ||||
| Health Education | 17.8 | % | 6.5 | % | ||||
| Art & Design | 10.9 | % | 9.7 | % | ||||
| International | 13.1 | % | 15.0 | % | ||||
| Transitional Schools | NM | NM | ||||||
| CAREER EDUCATION CORPORATION AND SUBSIDIARIES | |||||||
| UNAUDITED CONSOLIDATED BALANCE SHEETS | |||||||
| (In thousands) | |||||||
| September 30 | December 31, | ||||||
| 2009 | 2008 | ||||||
| ASSETS | |||||||
| CURRENT ASSETS: | |||||||
| Cash and cash equivalents | $ 248,064 | $ 244,726 | |||||
| Investments | 225,733 | 263,953 | |||||
| Total cash and cash equivalents and investments | 473,797 | 508,679 | |||||
| Receivables: | |||||||
| Students, net of allowance for doubtful accounts | |||||||
| of $43,284 and $35,068 as of September 30, 2009 | |||||||
| and December 31, 2008, respectively | 62,084 | 58,930 | |||||
| Other, net | 8,782 | 9,184 | |||||
| Prepaid expenses | 46,902 | 46,140 | |||||
| Inventories | 9,935 | 12,332 | |||||
| Deferred income tax assets | 17,344 | 17,344 | |||||
| Other current assets | 5,965 | 9,170 | |||||
| Assets of discontinued operations | 7,241 | 7,973 | |||||
| Total current assets | 632,050 | 669,752 | |||||
| NON-CURRENT ASSETS: | |||||||
| Property and equipment, net | 299,783 | 304,722 | |||||
| Goodwill | 378,374 | 376,072 | |||||
| Intangible assets, net | 184,151 | 39,904 | |||||
| Deferred income tax assets | 9,268 | 9,434 | |||||
| Other assets, net | 18,262 | 17,439 | |||||
| TOTAL ASSETS | $ 1,521,888 | $ 1,417,323 | |||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
| CURRENT LIABILITIES: | |||||||
| Current maturities of long-term debt and capital lease obligations | $ 849 | $ 354 | |||||
| Accounts payable | 51,393 | 28,330 | |||||
| Accrued expenses: | |||||||
| Payroll and related benefits | 83,967 | 63,181 | |||||
| Advertising and production costs | 27,840 | 21,504 | |||||
| Income taxes | 12,031 | 29,224 | |||||
| Royalty payments | 20,738 | 1,476 | |||||
| Other | 48,328 | 47,750 | |||||
| Deferred tuition revenue | 206,804 | 153,595 | |||||
| Liabilities of discontinued operations | 13,076 | 9,884 | |||||
| Total current liabilities | 465,026 | 355,298 | |||||
| NON-CURRENT LIABILITIES: | |||||||
| Long-term debt and capital lease obligations, net of current maturities | 3,110 | 1,889 | |||||
| Deferred rent obligations | 97,026 | 97,641 | |||||
| Royalty payments | 29,791 | - | |||||
| Other liabilities, net | 16,461 | 13,983 | |||||
| Total non-current liabilities | 146,388 | 113,513 | |||||
| SHARE-BASED AWARDS SUBJECT TO REDEMPTION | 1,524 | 860 | |||||
| STOCKHOLDERS' EQUITY: | |||||||
| Preferred stock | - | - | |||||
| Common stock | 954 | 933 | |||||
| Additional paid-in capital | 240,753 | 222,523 | |||||
| Accumulated other comprehensive income | 11,762 | 5,774 | |||||
| Retained earnings | 857,375 | 807,500 | |||||
| Cost of shares in treasury | (201,894 | ) | (89,078 | ) | |||
| Total stockholders' equity | 908,950 | 947,652 | |||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 1,521,888 | $ 1,417,323 | |||||
| CAREER EDUCATION CORPORATION AND SUBSIDIARIES | ||||||||||||||
| UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||
| (In thousands, except per share amounts and percentages) | ||||||||||||||
| For the Three Months Ended September 30, | ||||||||||||||
| % of | % of | |||||||||||||
| 2009 | Revenue | 2008 | Revenue | |||||||||||
| REVENUE: | ||||||||||||||
| Tuition and registration fees | $ 436,530 | 94.9 | % | $ 383,337 | 95.1 | % | ||||||||
| Other | 23,382 | 5.1 | % | 19,627 | 4.9 | % | ||||||||
| Total revenue | 459,912 | 402,964 | ||||||||||||
| OPERATING EXPENSES: | ||||||||||||||
| Educational services and facilities | 154,842 | 33.7 | % | 166,794 | 41.4 | % | ||||||||
| General and administrative | 254,018 | 55.2 | % | 216,949 | 53.8 | % | ||||||||
| Depreciation and amortization | 16,278 | 3.5 | % | 18,614 | 4.6 | % | ||||||||
| Goodwill and asset impairment | 2,500 | 0.5 | % | 6,843 | 1.7 | % | ||||||||
| Total operating expenses | 427,638 | 93.0 | % | 409,200 | 101.5 | % | ||||||||
| Operating income (loss) | 32,274 | 7.0 | % | (6,236 | ) | -1.5 | % | |||||||
| OTHER INCOME (EXPENSE): | ||||||||||||||
| Interest income | 326 | 0.1 | % | 2,876 | 0.7 | % | ||||||||
| Interest expense | (10 | ) | 0.0 | % | (211 | ) | -0.1 | % | ||||||
| Share of affiliate earnings | - | 0.0 | % | - | 0.0 | % | ||||||||
| Miscellaneous income (expense) | 62 | 0.0 | % | (221 | ) | -0.1 | % | |||||||
| Total other income | 378 | 0.1 | % | 2,444 | 0.6 | % | ||||||||
| Pretax income (loss) | 32,652 | 7.1 | % | (3,792 | ) | -0.9 | % | |||||||
| Provision (benefit) for income taxes | 9,681 | 2.1 | % | (5,341 | ) | -1.3 | % | |||||||
| Income from continuing operations | 22,971 | 5.0 | % | 1,549 | 0.4 | % | ||||||||
| Loss from discontinued operations, net of tax | (2,179 | ) | $ (1,696 | ) | ||||||||||
| NET INCOME (LOSS) | $ 20,792 | $ (147 | ) | |||||||||||
| NET INCOME (LOSS) PER SHARE - DILUTED | ||||||||||||||
| Income from continuing operations | $ 0.27 | $ 0.02 | ||||||||||||
| Loss from discontinued operations | (0.02 | ) | (0.02 | ) | ||||||||||
| Net income | $ 0.25 | $ (0.00 | ) | |||||||||||
| DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING | 83,669 | 89,675 | ||||||||||||
| CAREER EDUCATION CORPORATION AND SUBSIDIARIES | ||||||||||||||
| UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||
| (In thousands, except per share amounts and percentages) | ||||||||||||||
| For the Nine Months Ended September 30, | ||||||||||||||
| % of | % of | |||||||||||||
| 2009 | Revenue | 2008 | Revenue | |||||||||||
| REVENUE: | ||||||||||||||
| Tuition and registration fees | $ 1,279,919 | 95.7 | % | $ 1,213,051 | 95.8 | % | ||||||||
| Other | 57,722 | 4.3 | % | 52,947 | 4.2 | % | ||||||||
| Total revenue | 1,337,641 | 1,265,998 | ||||||||||||
| OPERATING EXPENSES: | ||||||||||||||
| Educational services and facilities | 485,624 | 36.3 | % | 488,924 | 38.6 | % | ||||||||
| General and administrative | 713,375 | 53.3 | % | 673,708 | 53.2 | % | ||||||||
| Depreciation and amortization | 49,824 | 3.7 | % | 57,365 | 4.5 | % | ||||||||
| Goodwill and asset impairment | 2,500 | 0.2 | % | 8,925 | 0.7 | % | ||||||||
| Total operating expenses | 1,251,323 | 93.5 | % | 1,228,922 | 97.1 | % | ||||||||
| Operating income | 86,318 | 6.5 | % | 37,076 | 2.9 | % | ||||||||
| OTHER INCOME (EXPENSE): | ||||||||||||||
| Interest income | 1,968 | 0.1 | % | 9,326 | 0.7 | % | ||||||||
| Interest expense | (32 | ) | 0.0 | % | (703 | ) | -0.1 | % | ||||||
| Share of affiliate earnings | - | 0.0 | % | 4,665 | 0.4 | % | ||||||||
| Miscellaneous expense | (925 | ) | -0.1 | % | (498 | ) | 0.0 | % | ||||||
| Total other income | 1,011 | 0.1 | % | 12,790 | 1.0 | % | ||||||||
| Pretax income | 87,329 | 6.5 | % | 49,866 | 3.9 | % | ||||||||
| Provision for income taxes | 29,479 | 2.2 | % | 12,651 | 1.0 | % | ||||||||
| Income from continuing operations | 57,850 | 4.3 | % | 37,215 | 2.9 | % | ||||||||
| Loss from discontinued operations, net of tax | (7,311 | ) | (8,287 | ) | ||||||||||
| NET INCOME | $ 50,539 | $ 28,928 | ||||||||||||
| NET INCOME (LOSS) PER SHARE - DILUTED | ||||||||||||||
| Income from continuing operations | $ 0.66 | $ 0.41 | ||||||||||||
| Loss from discontinued operations | (0.08 | ) | (0.09 | ) | ||||||||||
| Net income | $ 0.58 | $ 0.32 | ||||||||||||
| DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING | 87,071 | 90,144 | ||||||||||||
| CAREER EDUCATION CORPORATION AND SUBSIDIARIES | |||||||||
| UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||
| (In thousands) | |||||||||
| For the Nine Months Ending | |||||||||
| September 30, | |||||||||
| 2009 | 2008 | ||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||||
| Net income | $ 50,539 | $ 28,928 | |||||||
| Adjustments to reconcile net income to net | |||||||||
| cash provided by operating activities: | |||||||||
| Goodwill and asset impairment | 2,500 | 13,600 | |||||||
| Depreciation and amortization expense | 50,038 | 60,070 | |||||||
| Bad debt expense | 38,927 | 33,350 | |||||||
| Compensation expense related to share-based awards | 12,313 | 10,017 | |||||||
| Gain on sale of business | - | (1,555 | ) | ||||||
| Loss on disposition of property and equipment | 1,196 | 573 | |||||||
| Share of affiliate earnings, net of cash received | - | 939 | |||||||
| Deferred income taxes | - | (1,736 | ) | ||||||
| Changes in operating assets and liabilities | 61,883 | 14,758 | |||||||
| Net cash provided by operating activities | 217,396 | 158,944 | |||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||||
| Purchases of available-for-sale investments | (464,163 | ) | (470,324 | ) | |||||
| Sales of available-for-sale investments | 502,383 | 352,896 | |||||||
| Purchases of property and equipment | (50,329 | ) | (39,874 | ) | |||||
| Acquisition of the rights to the Le Cordon Bleu brand | (25,000 | ) | - | ||||||
| Other | (370 | ) | 944 | ||||||
| Net cash used in investing activities | (37,479 | ) | (156,358 | ) | |||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||
| Purchase of treasury stock | (181,126 | ) | (14,055 | ) | |||||
| Issuance of common stock | 2,166 | 3,089 | |||||||
| Tax benefit associated with stock option exercises | 194 | 433 | |||||||
| Payments on revolving loans | - | (1,492 | ) | ||||||
| Borrowings (payments) of capital lease obligations and other long-term debt | 1,214 | (479 | ) | ||||||
| Net cash used in financing activities | (177,552 | ) | (12,504 | ) | |||||
| EFFECT OF FOREIGN CURRENCY EXCHANGE RATE | |||||||||
| CHANGES ON CASH AND CASH EQUIVALENTS: | 888 | (2,815 | ) | ||||||
| NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 3,253 | (12,733 | ) | ||||||
| Add: Cash balance of discontinued operations, beginning of the year | 132 | 15,922 | |||||||
| Less: Cash balance of discontinued operations, end of the year | 47 | 739 | |||||||
| CASH AND CASH EQUIVALENTS, beginning of the year | 244,726 | 221,783 | |||||||
| CASH AND CASH EQUIVALENTS, end of the year | $ 248,064 | $ 224,233 | |||||||
| CAREER EDUCATION CORPORATION | ||||||||||||||
| SELECTED UNIVERSITY SEGMENT INFORMATION | ||||||||||||||
| (Dollars in thousands) | ||||||||||||||
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||
| 2009 | 2008 | 2009 | 2008 | |||||||||||
| UNIVERSITY REVENUE: | ||||||||||||||
| AIU | $ 107,182 | $ 94,554 | $ 309,276 | $ 287,262 | ||||||||||
| Online | 90,507 | 77,767 | 256,427 | 229,344 | ||||||||||
| On-ground | 16,675 | 16,787 | 52,849 | 57,918 | ||||||||||
| CTU | 92,849 | 71,468 | 263,100 | 214,832 | ||||||||||
| Online | 77,004 | 58,925 | 217,327 | 175,584 | ||||||||||
| On-ground | 15,845 | 12,543 | 45,773 | 39,248 | ||||||||||
| Briarcliffe | 6,779 | 6,834 | 22,519 | 23,271 | ||||||||||
| Total University | $ 206,810 | $ 172,856 | $ 594,895 | $ 525,365 | ||||||||||
| UNIVERSITY SEGMENT OPERATING INCOME (LOSS): | ||||||||||||||
| AIU | $ 23,658 | $ 16,165 | $ 69,241 | $ 40,335 | ||||||||||
| Online | 28,628 | 21,549 | 80,504 | 52,056 | ||||||||||
| On-ground | (4,970 | ) | (5,384 | ) | (11,263 | ) | (11,721 | ) | ||||||
| CTU | $ 17,076 | $ 11,640 | $ 53,740 | $ 40,134 | ||||||||||
| Online | 19,773 | 12,665 | 58,421 | 41,075 | ||||||||||
| On-ground | (2,697 | ) | (1,025 | ) | (4,681 | ) | (941 | ) | ||||||
| Briarcliffe | 202 | (464 | ) | (1,117 | ) | (663 | ) | |||||||
| Total University | $ 40,936 | $ 27,341 | $ 121,864 | $ 79,806 | ||||||||||
| UNIVERSITY SEGMENT OPERATING INCOME (LOSS) PERCENTAGE: | ||||||||||||||
| AIU | 22.1 | % | 17.1 | % | 22.4 | % | 14.0 | % | ||||||
| Online | 31.6 | % | 27.7 | % | 31.4 | % | 22.7 | % | ||||||
| On-ground | -29.8 | % | -32.1 | % | -21.3 | % | -20.2 | % | ||||||
| CTU | 18.4 | % | 16.3 | % | 20.4 | % | 18.7 | % | ||||||
| Online | 25.7 | % | 21.5 | % | 26.9 | % | 23.4 | % | ||||||
| On-ground | -17.0 | % | -8.2 | % | -10.2 | % | -2.4 | % | ||||||
| Briarcliffe | 3.0 | % | -6.8 | % | -5.0 | % | -2.8 | % | ||||||
| Total University | 19.8 | % | 15.8 | % | 20.5 | % | 15.2 | % | ||||||
| Student Population as of October 31, | ||||||||||||||
| 2009 | 2008 | |||||||||||||
| AIU | 22,700 | 19,900 | ||||||||||||
| Online | 18,600 | 16,100 | ||||||||||||
| On-ground | 4,100 | 3,800 | ||||||||||||
| CTU | 29,300 | 23,100 | ||||||||||||
| Online | 23,700 | 18,300 | ||||||||||||
| On-ground | 5,600 | 4,800 | ||||||||||||
| Briarcliffe | 1,700 | 1,800 | ||||||||||||
| Total University | 53,700 | 44,800 | ||||||||||||
| Student Starts for the three months ended September 30, | ||||||||||||||
| 2009 | 2008 | |||||||||||||
| AIU | 6,530 | 6,130 | ||||||||||||
| Online | 5,460 | 5,200 | ||||||||||||
| On-ground | 1,070 | 930 | ||||||||||||
| CTU | 8,760 | 7,300 | ||||||||||||
| Online | 7,630 | 6,280 | ||||||||||||
| On-ground | 1,130 | 1,020 | ||||||||||||
| Briarcliffe | 720 | 700 | ||||||||||||
| University | 16,010 | 14,130 | ||||||||||||
| Career Education Corporation | |||||||||||||||||
| Reconciliation of GAAP to Non-GAAP Items (1) | |||||||||||||||||
| (dollars in millions) | |||||||||||||||||
| For the Three Months Ended September 30, | |||||||||||||||||
| 2009 | 2008 | ||||||||||||||||
Operating | Earnings per | Operating | Earnings per | ||||||||||||||
| Reported | $ 32.3 | $ 0.25 | $ (6.2 | ) | $ (0.00 | ) | |||||||||||
| Reconciling Items: | |||||||||||||||||
| Performance Based Compensation Related to Plan Outperformance (2) | 18.8 | 0.14 | - | - | |||||||||||||
| Transitional Schools (3) | 7.4 | 0.06 | 8.0 | 0.06 | |||||||||||||
| Asset Impairment | 2.5 | 0.02 | 6.8 | 0.05 | |||||||||||||
| Lease Termination Charges | - | - | 9.7 | 0.07 | |||||||||||||
| Adjusted to Exclude Significant Items and Transitional Schools | $ 61.0 | $ 0.47 | $ 18.3 | $ 0.18 | |||||||||||||
| Diluted Weighted Average Shares Outstanding | 83,669 | 89,675 | |||||||||||||||
| For the Nine Months Ended September 30, | |||||||||||||||||
| 2009 | 2008 | ||||||||||||||||
Operating | Earnings per | Operating | Earnings per | ||||||||||||||
| Reported | $ 86.3 | $ 0.58 | $ 37.1 | $ 0.32 | |||||||||||||
| Reconciling Items: | |||||||||||||||||
| Transitional Schools (3) | 44.5 | 0.33 | 27.9 | 0.20 | |||||||||||||
| Performance Based Compensation Related to Plan Outperformance (2) | 25.3 | 0.19 | - | - | |||||||||||||
| Asset Impairment | 2.5 | 0.02 | 6.8 | 0.05 | |||||||||||||
| Severance and Stay | 1.5 | 0.01 | 4.3 | 0.03 | |||||||||||||
| Lease Termination Charges | - | - | 9.7 | 0.07 | |||||||||||||
| Gain from Termination of Affiliate Relationship (4) | - | - | - | (0.03 | ) | ||||||||||||
| Adjusted to Exclude Significant Items and Transitional Schools | $ 160.1 | $ 1.13 | $ 85.8 | $ 0.64 | |||||||||||||
| Diluted Weighted Average Shares Outstanding | 87,071 | 90,144 | |||||||||||||||
| For the Nine Months Ended September 30, | |||||||||||||||||
| 2009 | 2008 | ||||||||||||||||
| Net Cash Flows from Operating Activities | $ 217.4 | $ 158.9 | |||||||||||||||
| Adjust for: | |||||||||||||||||
| Capital expenditures, net | (50.3 | ) | (39.9 | ) | |||||||||||||
| Free Cash Flows | $ 167.1 | $ 119.0 | |||||||||||||||
(1) The Company has included some non-GAAP financial measures in this presentation to discuss the Company's financial results.As a general matter, the Company uses these non-GAAP measures in addition to and in conjunction with results presented in accordance with GAAP. Among other things, the Company may use such non-GAAP financial measures in addition to and in conjunction with corresponding GAAP measures, to help analyze the performance of its core business, in connection with the preparation of annual budgets, and in measuring performance for some forms of compensation. In addition, the Company believes that non-GAAP financial information is used by analysts and others in the investment community to analyze the Company's historical results and in providing estimates of future performance and that failure to report these non-GAAP measures could result in confusion among analysts and others and a misplaced perception that the Company's results have underperformed or exceeded expectations.
These non-GAAP financial measures reflect an additional way of viewing aspects of the Company's operations that, when viewed with the GAAP results and the reconciliations to corresponding GAAP financial measures, provide a more complete understanding of the Company's results of operations and the factors and trends affecting the Company's business. However, these non-GAAP measures should be considered as a supplement to, and not as a substitute for, or superior to, the corresponding measures calculated in accordance with GAAP.
(2) Performance Based Compensation Related to Plan Outperformance by segment as follows:
For the Three Months | For the Nine Months | |||||
| Corporate | 7.3 | 9.7 | ||||
| University | 4.0 | 5.3 | ||||
| Health | 3.6 | 5.0 | ||||
| Culinary | 2.0 | 2.7 | ||||
| Art & Design | 1.9 | 2.6 | ||||
| TOTAL | 18.8 | 25.3 |
(3) Reported within the Transitional Schools operating loss for the nine-months ended September 30, 2009 was $22.5 million of lease exit charges. Reported within the Transitional Schools operating loss for the nine months ended September 30, 2008 was $6.9 million of severance and stay bonus expense, $2.2 million of asset impairment charges associated with AIU - LA, and Lease Exit Costs for $1.2 million.
(4) Gain from Termination of Affiliate Relationship is recorded within other income(expense) on the unaudited consolidated statement of operations.
Contacts:
Investors:
John
Springer
847/585-3899
www.careered.com
or
Media:
Jeff
Leshay
847/585-2005