All Career Colleges to be Taught Out or
Divested; Excluding Restructuring Charges, Impact Expected to be
Accretive to 2015 Results
Career Education Corporation (NASDAQ: CECO) announced today that
it has made the strategic decision to focus its resources and
attention on its universities – Colorado Technical University (CTU)
and American InterContinental University (AIU) – where the company
has significant opportunities to continue to provide quality higher
education to the adult student market.
In conjunction with this announcement, the company is teaching
out its Sanford-Brown institutions and pursuing strategies to
divest or teach-out the remaining institutions within the Career
Colleges group. As part of the process to focus its resources on
the University Group, the company also announced that it will align
its corporate overhead to support a more streamlined and focused
operation, and to make the University Group more efficient and
effective in serving its students.
“We believe in the strength of the academic programs at our
Career Colleges, but the unfortunate reality is that a more
difficult higher education marketplace and challenging regulatory
environment have handicapped our ability to turn these institutions
around quickly and operate these programs effectively long-term.
Declining student enrollment and financial losses at our Career
College campuses, combined with the ‘Gainful Employment’
regulations issued last year factored into our decision,” said Ron
McCray, Chairman and Interim CEO. “In making this decision, we have
chosen a path of gradual discontinuation, or teach-outs, rather
than closing schools immediately. We are committed to both the
academic and personal success of the students enrolled in our
programs. Teach-outs minimize potential negative impacts on
faculty, students and staff members.”
Teach outs will begin immediately at the 14 Sanford-Brown
College and Institute campuses, as well as Sanford-Brown online.
These gradual discontinuations of operations – which can take 18
months or more, depending on the lengths of programs offered at a
particular campus – afford students a reasonable opportunity to
complete their programs of study.
Additionally, the company has already begun efforts to sell
Briarcliffe College, Brooks Institute and Missouri College. The
company has a signed definitive agreement to sell Brooks Institute,
which is pending accreditor and regulatory approval. Discussions
with interested parties continue for Briarcliffe College and
Missouri College. Institutions that are not sold will be
taught-out.
As previously announced, the company reached an agreement with
Columbia College Chicago to provide an ongoing educational pathway
for students at Harrington College of Design in Chicago. The
agreement, pending accreditor and regulatory approval, affords
certain Harrington students the opportunity to complete their
programs of study at Columbia, while others will continue their
education with Harrington but at designated classroom and office
space provided by Columbia College Chicago.
Also previously announced, the Le Cordon Bleu Colleges of
Culinary Arts in North America continue to be marketed for sale.
Career Education is engaged in discussions with numerous interested
parties and the process remains ongoing.
As part of these changes, Lysa Clemens, Senior Vice President
and Chief Career Schools Officer, today becomes Senior Vice
President, Transitional Operations and Chief Transformation
Officer, overseeing the teaching-out of campuses and right-sizing
of centralized support operations. As Career Education has
successfully accomplished in previous campus teach-outs, the
company intends to serve students well, while managing costs
through the gradual process of closing.
The Company expects to record approximately $40 million to $50
million of restructuring charges related to these teach-out and
divestiture initiatives. These estimated charges are based on
several assumptions, including timing of campus teach-outs, sales
of campuses and implementation of support services realignment, and
are subject to change. These costs primarily relate to severance
charges (approximately $20 million - $25 million) and costs
associated with exiting lease obligations (approximately $20
million - $25 million) and will result in future cash expenditures
through 2018 for severance related charges and through 2023 for
lease obligations at certain campuses which have lease terms
ranging beyond their anticipated teach-out completion
date. The severance and related charges will primarily be
recorded during the second quarter of 2015 and the lease charges
will be recorded at the time each facility is vacated. The majority
of the teach-outs are expected to be complete by 2017 and any
remaining teach-outs are expected to be complete by 2018. Excluding
restructuring charges, these initiatives are expected to be
accretive to 2015 earnings. Specific timing and impacts of these
actions on Career Education’s cash balance are currently being
approximated, but the company does not anticipate any impact on its
ability to maintain compliance with its Credit Agreement.
“The future direction and core offering of Career Education will
be driven by degree-oriented, higher education offered through our
regionally accredited universities, where we maintain a core
competitive advantage in terms of their academic platforms, brand
awareness and intellipath™ adaptive learning technology. We will
continue to invest in academic technologies, new program
development and building relationships with employers needing
qualified employees. We will emerge as a stronger company, with a
competitive margin profile, a strong balance sheet, and a
leadership position in private sector higher education,” McCray
said.
CONFERENCE CALL INFORMATION
Career Education Corporation will host a conference call on
Wednesday, May 6, 2015 at 5 p.m. Eastern time to discuss its first
quarter results and answer questions from the institutional
investment community. Interested parties can access the live
webcast of the conference call and the related presentation
materials at www.careered.com in the Investor Relations section of
the website. Participants can also listen to the conference call by
dialing 800-580-9478 (domestic) or 630-691-2769 (international) and
citing code 39490822. Please log-in or dial-in at least 10 minutes
prior to the start time to ensure a connection. An archived version
of the webcast will be accessible for 90 days at www.careered.com
in the Investor Relations section of the website. A replay of the
call will also be available for seven days by calling 888-843-7419
(domestic) or 630-652-3042 (international) and citing code
39490822.
ABOUT CAREER EDUCATION CORPORATION
Career Education’s academic institutions offer a high-quality
education to a diverse student population in a variety of
disciplines through online, on-ground and hybrid learning programs.
Our two universities – American InterContinental University (“AIU”)
and Colorado Technical University (“CTU”) – provide degree programs
through the master’s or doctoral level as well as associate and
bachelor’s levels. Both universities predominantly serve students
online with career-focused degree programs that meet the
educational demands of today’s busy adults. AIU and CTU continue to
show innovation in higher education, advancing new personalized
learning technologies like their intellipath™ adaptive learning
platform that allow students to more efficiently move toward
earning a degree by receiving course credit for knowledge they can
already demonstrate. Career Education is committed to providing
high-quality education that closes the gap between learners who
seek to advance their careers and employers needing a qualified
workforce.
A listing of individual campus locations and web links to Career
Education’s institutions can be found at www.careered.com.
Except for the historical and present factual information
contained herein, the matters set forth in this release, including
statements identified by words such as “expect,” “believe,” “will,”
“anticipate,” “intend,” “continued” and similar expressions, are
forward-looking statements as defined in Section 21E of the
Securities Exchange Act of 1934, as amended. These statements are
based on information currently available to us and are subject to
various assumptions, risks, uncertainties and other factors that
could cause our results of operations, financial condition, cash
flows, performance, business prospects and opportunities to differ
materially from those expressed in, or implied by, these
statements. Except as expressly required by the federal securities
laws, we undertake no obligation to update or revise such factors
or any of the forward-looking statements contained herein to
reflect future events, developments or changed circumstances, or
for any other reason. These risks and uncertainties, the outcomes
of which could materially and adversely affect our financial
condition and operations, include, but are not limited to, the
following: declines in enrollment; negative trends in the real
estate market which could impact the costs related to teaching out
campuses and the success of our initiatives to reduce our real
estate obligations; the success of our initiatives to divest our
remaining Career College institutions and culinary arts campuses;
rulemaking by the U.S. Department of Education or any state and
increased focus by Congress, the President and governmental
agencies on for-profit education institutions; our continued
compliance with and eligibility to participate in Title IV Programs
under the Higher Education Act of 1965, as amended, and the
regulations thereunder (including the gainful employment and
financial responsibility standards prescribed by the U.S.
Department of Education), as well as national and regional
accreditation standards and state regulatory requirements; the
impact of management changes; our ability to successfully defend
litigation and other claims brought against us; and changes in the
overall U.S. or global economy. Further information about these and
other relevant risks and uncertainties may be found in the
Company’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2014 and its subsequent filings with the
Securities and Exchange Commission.
Investors:Alpha IR GroupSam Gibbons or Chris Hodges(312)
445-2870CECO@alpha-ir.comorMedia:Career Education
CorporationMark SpencerDirector, Corporate Communications(847)
585-3802
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