University Group revenue up mid-single
digits
Career Education Corporation (NASDAQ: CECO) today reported
operating and financial results for the fourth quarter and full
year of 2015.
Fourth Quarter Business Highlights:
- University Group revenue increased by
8.2 percent year-over-year (or 4.2 percent when adjusted for prior
year accounting change), primarily driven by a 4.4 percent increase
in total enrollments at CTU
- University Group operating income
increased 36.8 percent year-over-year to $31.5 million (or 29.6
percent when adjusted for prior year accounting change), primarily
driven by increased revenues and our transformation
initiatives
- Achieved positive total company
adjusted EBITDA for the second quarter in a row, and adjusted
EBITDA for University and Corporate was the highest it has been in
the past eight quarters
- Fourth quarter cash usage from
operations was negative $0.7 million, compared to cash usage of
negative $17.5 million in the fourth quarter of 2014
Full Year Business Highlights:
- Full year 2015 operating expenses for
continuing and discontinued operations were roughly $152 million
lower year-over-year, which was primarily driven by the impact of
the Company’s transformation efforts
- Full year adjusted EBITDA from
University and Corporate was $84.4 million, representing an
improvement of $25.0 million or 42.2 percent compared to 2014,
driven by 2.7 percent revenue growth at University and execution of
the Company’s transformation strategy
- Full year 2015 cash usage from
operations was negative $21.7 million, compared to cash usage of
negative $118.6 million for full year 2014
- Ended 2015 with $201.0 million of cash,
cash equivalents, restricted cash and available-for-sale short-term
and long-term investments, net of borrowings
University and Academic Highlights:
- Introduced four new degree programs in
2015 in the areas of Education (AIU), Business Administration
(AIU), Nursing (CTU) and Healthcare Management (CTU)
- Continued to invest in technology with
mobile capabilities now launched at both University
institutions
- CTU received the “Distance Education
Innovation Award” in September 2015 from the National University
Technology Network, which recognized CTU’s adaptive learning
platform (intellipath™) as providing an innovative,
personalized learning plan for its Master of Business
Administration (MBA) students
- AIU was listed in the U.S. News &
World Report “Best Online Programs” rankings in January 2016,
placing in the top 10 percent of programs evaluated for students
enrolling in distance education programs to earn their degrees
“Our University Group closed out the year with a solid fourth
quarter, as stable total enrollments and moderate revenue growth
resulted in improved financial performance,” said Todd Nelson,
President and Chief Executive Officer. “Our University Group and
Corporate’s adjusted EBITDA was approximately $84 million for 2015,
which provides a foundation for investments in technology and
resources to help improve student retention and outcomes. Our
transformation continues to generally track along the framework we
offered when we announced the decision to prioritize and focus our
resources on our University platform. We are encouraged by what we
accomplished in 2015, both financially and operationally. The AIU
and CTU brands continue to gain recognition for their competitive
academic offerings, as both institutions won multiple awards during
2015.”
Nelson concluded, “As we look to 2016 and beyond, we will
continue to invest in our University platform to position it for
long-term success and growth. We are focused on strengthening the
breadth of our program offerings, faculty and technological
capabilities, with the goal of continuously improving our students’
experiences and academic outcomes. We will evaluate new programs to
address the workforce skills gaps for our corporate partners. We
will continue to develop our corporate partner network, and work
closely with them about ways they can routinely engage and
articulate the value of our educational services to their key
employees. At the same time, we are honoring our commitment to the
students at our campuses in teach-out to provide them with academic
resources and education. Lastly, we will remain financially
disciplined, with an eye on improving operating efficiencies and
our cash flow generation capabilities.”
REVENUE
For the fourth quarter of 2015, total revenue was $199.9
million, an 8.1 percent decrease from $217.5 million for the fourth
quarter of 2014. Total revenue for the University Group was $137.4
million for the fourth quarter of 2015 compared to $127.0 million
for the fourth quarter of 2014, an increase of 8.2 percent.
Adjusting for changes related to accounting for withdrawn students,
revenue increased 4.2 percent for the current quarter as compared
to the prior year quarter for the University Group.
Revenue ($ in
thousands) (1)
Q4 2015 Q3 2015
Q2 2015 Q1 2015 Q4
2014 CTU $ 91,481 $ 85,433 $ 86,174 $ 85,127 $ 82,202 AIU
45,871 50,688 52,024 53,066
44,749 Total University Group 137,352 136,121 138,198 138,193
126,951 Corporate and Other 40 39 39 39
40 Subtotal 137,392 136,160 138,237 138,232 126,991 Culinary
Arts (2) 42,020 41,410 42,048 44,712 43,294 Transitional Group (2)
20,535 25,914 36,543 44,070
47,216 Total (3) $ 199,947 $ 203,484 $ 216,828 $ 227,014 $ 217,501
(1) Fourth quarter of 2014 total revenue was
negatively impacted by approximately $12.3 million due to the
change in how the Company accounts for revenue for students who
withdrew from one of its institutions prior to completion of their
programs. This cumulative adjustment was recorded during the fourth
quarter of 2014. First quarter through fourth quarter of 2015 were
negatively impacted by approximately $2.7 million, $2.9 million,
$3.1 million and $3.4 million, respectively, related to this change
in accounting. (2)
Teach-out campuses included in the
Transitional Group no longer enroll new students. The Culinary Arts
campuses were announced for teach-out during December 2015.
Additionally, campuses which have ceased operations subsequent to
December 31, 2014 and no longer qualify for discontinued operations
treatment under Financial Accounting Standards Board (“FASB”)
Accounting Standards Codification (“ASC”) Topic 360 – Property,
Plant & Equipment, or campuses that were announced for sale
subsequent to December 31, 2014, are also included in the
Transitional Group.
(3) Excludes discontinued operations which consist of the
results of operations for campuses that have ceased operations
prior to December 31, 2014.
TOTAL AND NEW STUDENT ENROLLMENTS
For the fourth quarter of 2015, total student enrollments for
the University Group were 31,900, which remained relatively flat to
the prior year quarter. New student enrollments for the University
Group were 8,760, a decrease of 3.1 percent as compared to the
prior year quarter.
Total Student
Enrollment
Q4 2015 Q3 2015
Q2 2015 Q1 2015 Q4
2014 CTU 21,300 20,600 20,600
20,300 20,400 AIU 10,600 10,800 10,700
13,500 11,600 Total University Group 31,900
31,400 31,300 33,800 32,000 Culinary
Arts 7,800 9,200 7,800 8,800 8,800 Transitional Group 3,500
5,200 7,000 9,500 9,400 Total
43,200 45,800 46,100 52,100 50,200
New Student
Enrollments
Q4 2015 Q3 2015
Q2 2015 Q1 2015 Q4
2014 CTU 5,710 5,470 5,670 5,040
5,670 AIU 3,050 2,980 2,280
5,090 3,370 Total University Group 8,760 8,450
7,950 10,130 9,040 Culinary Arts (1) 690 3,290
1,450 2,040 980 Transitional Group (1) 90 510
830 1,830 1,150 Total 9,540 12,250
10,230 14,000 11,170 (1)
Teach-out campuses within the Transitional Group and Culinary Arts
no longer enroll new students, effective upon their teach-out
announcement; students who re-enter after 365 days are reported as
new student enrollments. For Culinary Arts, teach-outs announced in
December 2015 were effective beginning after the January 2016 new
enrollment.
OPERATING (LOSS) INCOME
For the fourth quarter of 2015, operating loss of $3.9 million
improved 83.6 percent compared to an operating loss of $23.9
million in the prior year quarter. Total University Group operating
income increased to $31.5 million from $23.1 million in the prior
year quarter, an increase of 36.8 percent, or 29.6 percent when
adjusted for the prior year accounting change. This increase in
operating income was primarily driven by increased revenues and
ongoing efficiencies.
Operating Loss ($
in thousands)
Q4 2015 Q3 2015 Q2 2015
Q1 2015 Q4 2014 CTU $ 30,001 $ 18,616 $
24,263 $ 14,616 $ 23,356 AIU 1,538 1,695 5,174
(2,887 ) (304 ) Total University Group 31,539 20,311
29,437 11,729 23,052 Corporate and Other (6,331 )
(8,040 ) (7,036 ) (5,860 ) (7,048 ) Subtotal
25,208 12,271 22,401 5,869 16,004 Culinary Arts (1) (14,065 )
(33,195 ) (10,560 ) 243 (16,136 ) Transitional Group (2)
(15,072 ) (23,065 ) (31,733 ) (30,470 )
(23,788 ) Total (3) $ (3,929 ) $ (43,989 ) $ (19,892 ) $ (24,358 )
$ (23,920 ) (1) Asset impairment charges of $9.0
million, $33.4 million, $9.7 million and $10.3 million were
recorded during the fourth quarter of 2015, third quarter of 2015,
second quarter of 2015 and fourth quarter of 2014, respectively.
(2) Asset impairment charges of $0.2 million, $1.7 million,
$6.0 million and $3.9 million were recorded during the fourth
quarter of 2015, second quarter of 2015, first quarter of 2015 and
fourth quarter of 2014, respectively. (3) Excludes
discontinued operations, which consists of the results of
operations for campuses that have ceased operations prior to
December 31, 2014.
ADJUSTED EBITDA
The Company believes it is useful to present non-GAAP financial
measures, which exclude certain significant items, as a means to
understand the performance of its operations. (See tables below and
the GAAP to non-GAAP reconciliation attached to this press release
for further details.)
For the fourth quarter of 2015, adjusted EBITDA for the
University Group and Corporate was $29.7 million representing an
improvement of 28.4 percent, or $6.6 million, compared to fourth
quarter of 2014, primarily driven by increased revenue and ongoing
transformation initiatives. Adjusted EBITDA for the Transitional
Group, Culinary Arts and discontinued operations remained
relatively flat for the current quarter versus the prior year
quarter primarily due to increased severance and related charges
recorded in the current quarter for the newly announced teach-outs
offset with improvements for campuses which completed their
teach-out.
Adjusted EBITDA
($ in thousands)
Q4 2015 Q3 2015 Q2 2015 Q1 2015 Q4
2014
University Group
and Corporate:
Pre-tax loss from continuing operations $ (4,292 ) $ (44,656 ) $
(20,750 ) $ (24,740 ) $ (23,674 ) Transitional Group pre-tax loss
15,182 23,724 32,624 30,470 23,788 Culinary Arts pre-tax loss
(gain) 14,065 33,171 10,532 (250 ) 15,927 Interest expense
(income), net 87 7 (52 ) 2 (38 ) Depreciation and amortization (1)
3,318 3,454 3,956 4,361 5,170 Legal settlements (1) 200 — — — —
Stock-based compensation (1) 404 983 530 940 966 Asset impairments
(1) 507 — — — — Unused space charges (1) (2) 114 (385 ) (348 ) 556
(373 ) Adjustment related to revenue recognition (1) (3) 101
348 94 93 1,354
Adjusted EBITDA--University Group and
Corporate
$ 29,686 $ 16,646 $
26,586 $ 11,432 $ 23,120
Memo: Advertising Expenses (1) $ 33,431
$ 46,194 $ 34,258 $
50,587 $ 36,731
Transitional
Group, Culinary Arts and Discontinued Operations:
Pre-tax loss from discontinued operations $ (512 ) $ (544 ) $ (720
) $ (352 ) $ (1,268 ) Transitional Group pre-tax loss (15,182 )
(23,724 ) (32,624 ) (30,470 ) (23,788 ) Culinary Arts pre-tax
(loss) gain (14,065 ) (33,171 ) (10,532 ) 250 (15,927 ) Loss on
sale of business (4) 161 715 917 — — Depreciation and amortization
(4) 1,759 2,508 3,231 2,351 7,319 Legal settlements (4) — — (166 )
1,485 — Asset impairments (4) 9,171 33,446 11,372 6,019 14,203
Unused space charges (2) (4) (2,002 ) 7,174 (2,305 ) (2,424 )
(2,063 ) Adjustment related to revenue recognition (3) (4)
(188 ) 173 13 (67 ) 1,029
Adjusted
EBITDA--Transitional, Culinary Arts and Discontinued Operations
$ (20,858 ) $ (13,423 )
$ (30,814 ) $ (23,208 )
$ (20,495 ) Consolidated Adjusted
EBITDA $ 8,828 $ 3,223 $
(4,228 ) $ (11,776 ) $
2,625 (1) Quarterly amounts relate to the
University Group and Corporate (2) Unused space charges
represent the net present value of remaining lease obligations less
an estimated amount for sublease income as well as the subsequent
accretion of these charges (3) Q4 2014 amounts are
cumulative for the full year 2014 recorded during the fourth
quarter of 2014 (4) Quarterly amounts relate to Transitional
Group, Culinary Arts and discontinued operations
BALANCE SHEET AND CASH FLOW
Net cash used in operating activities was negative $0.7 million
for the fourth quarter of 2015, compared to a net cash usage of
negative $17.5 million in the prior year quarter. The Company’s
continued focus on its transformation efforts and the completion of
teach-outs drove the improvement in cash usage for the current year
quarter as compared to the prior year quarter.
As of December 31, 2015 and December 31, 2014, cash,
cash equivalents, restricted cash and available-for-sale short-term
and long-term investments, net of borrowings totaled $201.0 million
and $237.0 million, respectively.
Cash and Cash
Flow from Operations ($ in thousands)
Q4 2015 Q3 2015 Q2
2015 Q1 2015 Q4 2014 Consolidated
Cash, Cash Equivalents, Restricted Cash and Available-For-Sale
Short-Term and Long-Term
Investments (1)
$ 239,015 $ 206,792 $ 204,104 $ 213,739 $ 247,002 Borrowings (2) $
38,000 $ - $ - $ - $ 10,000 Consolidated Cash, Cash Equivalents,
Restricted Cash and Available-For-Sale Short-Term and Long-Term
Investments, net of Borrowings (1)
$ 201,015 $ 206,792 $ 204,104 $ 213,739 $ 237,002 Cash Flow from
Operations (3) $ (683 ) $ 5,592 $ (6,419 ) $ (20,176 ) $ (17,479 )
(1) Consolidated cash, cash equivalents, restricted
cash and available-for-sale short-term and long-term investment
balances are quarter end balances and include both continuing and
discontinued operations. Available-for-sale long-term investment
balances of $7.4 million for each of the periods disclosed are
reflected within other non-current assets on our consolidated
balance sheets. (2) The fourth quarter of 2015 and 2014
ending cash, cash equivalents, restricted cash and
available-for-sale short-term and long-term investment balances
include $38.0 million and $10.0 million, respectively, of
restricted cash related to cash-collateralized borrowings under the
Credit Agreement. The $10.0 million of outstanding borrowings as of
December 31, 2014 was repaid during the first quarter of 2015.
(3) Cash flow from operations includes payments of legal
settlements of $2.4 million and $1.3 million during the first
quarter of 2015 and fourth quarter of 2014, respectively.
OUTLOOK
We expect the following results from our transformation efforts,
subject to the key assumptions identified below:
- Adjusted EBITDA from University Group
and Corporate is expected to stay relatively flat in 2016 as
compared to 2015 and then increase modestly in 2017 and 2018
- As compared to 2015, we expect negative
adjusted EBITDA from Transitional Group, Culinary Arts and
discontinued operations to improve slightly in 2016, then to worsen
in 2017 due to the completion of the LCB teach-outs and then to
start improving in 2018
- End of year cash, cash equivalents,
restricted cash and available-for-sale short-term and long-term
investments, net of any borrowings, as reported on the consolidated
balance sheets of approximately $150 million to $160 million for
the year ending December 31, 2016 and approximately $140 million to
$150 million for the year ending December 31, 2017 and to generate
cash during 2018
The estimates provided above for 2016 and beyond are based on
the following key assumptions and factors, among others: (i)
flat-to-modest total enrollment growth within the University Group
while achieving the intended University Group efficiencies, (ii)
teach-outs to occur as planned and performance consistent with
historical experience, (iii) achievement of recovery rates for our
real estate obligations and timing of any associated lease
termination payments consistent with our historical experiences,
(iv) right-sizing of our Corporate expense structure to serve
primarily online institutions, (v) no material changes in the legal
or regulatory environment and excludes legal or regulatory
settlements, and (vi) consistent working capital movements in line
with historical operating trends and potential impacts of teach-out
campuses on working capital in line with expectations. Although
these estimates and assumptions are based upon management’s good
faith beliefs regarding current events and actions that we may
undertake in the future, actual results could differ materially
from these estimates.
CONFERENCE CALL INFORMATION
Career Education Corporation will host a conference call on
Monday, February 29, 2016 at 5:30 p.m. Eastern time to discuss its
fourth quarter and full year 2015 results and outlook. 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 844-378-6484 (domestic) or 412-542-4179 (international).
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.
ABOUT CAREER EDUCATION CORPORATION
Career Education’s academic institutions offer a quality
education to a diverse student population in a variety of
disciplines through online, campus-based 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 are designed to 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 pursue earning a degree by
receiving course credit for knowledge they can already demonstrate.
Career Education is committed to providing 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,” “continue,” 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; increased competition; 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; our ability to achieve
anticipated cost savings and business efficiencies; rulemaking by
the U.S. Department of Education or any state and increased focus
by Congress, the President and governmental agencies on, or
increased negative publicity about, 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, 90-10 and financial responsibility standards
prescribed by the U.S. Department of Education), as well as
applicable 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, 2015 and its subsequent filings
with the Securities and Exchange Commission.
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
December 31, December 31,
2015 2014
ASSETS
CURRENT ASSETS: Cash and cash equivalents, unrestricted $
66,919 $ 93,832 Restricted cash 49,821 22,938 Short-term
investments 114,901 122,858 Total cash and cash
equivalents, restricted cash and short-term investments 231,641
239,628 Student receivables, net 31,618 31,401 Receivables,
other, net 5,194 19,401 Prepaid expenses 14,380 17,453 Inventories
3,353 5,022 Other current assets 2,523 4,729 Assets of discontinued
operations 254 473 Total current assets
288,963 318,107
NON-CURRENT ASSETS: Property
and equipment, net 58,249 115,604 Goodwill 87,356 87,356 Intangible
assets, net 9,300 28,219 Student receivables, net 3,958 3,916
Deferred income tax assets, net 137,716 — Other assets 16,562
19,357 Assets of discontinued operations 8,811 975
TOTAL ASSETS $ 610,915 $ 573,534
LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT
LIABILITIES: Short-term borrowings $ 38,000 $ 10,000 Accounts
payable 25,906 23,808 Accrued expenses: Payroll and related
benefits 38,789 30,481 Advertising and production costs 11,788
15,379 Income taxes 1,061 1,633 Other 24,082 28,857 Deferred
tuition revenue 40,112 54,573 Liabilities of discontinued
operations 13,067 15,506 Total current liabilities
192,805 180,237
NON-CURRENT
LIABILITIES: Deferred rent obligations 45,927 67,433 Other
liabilities 25,197 21,072 Liabilities of discontinued operations
9,376 22,859 Total non-current liabilities
80,500 111,364
STOCKHOLDERS' EQUITY: Preferred stock
— — Common stock 830 823 Additional paid-in capital 610,784 606,531
Accumulated other comprehensive loss (880 ) (853 ) Accumulated
deficit (57,518 ) (109,403 ) Cost of shares in treasury
(215,606 ) (215,165 ) Total stockholders' equity
337,610 281,933
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 610,915 $ 573,534
CAREER EDUCATION CORPORATION AND SUBSIDIARIES UNAUDITED
CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME
(LOSS)
(In thousands, except per share amounts
and percentages)
For the Quarter Ended December 31, %
of % of Total Total
2015 Revenue 2014 Revenue
REVENUE: Tuition and registration fees $
198,445 99.2 % $ 215,818 99.2 % Other 1,502 0.8 %
1,683 0.8 % Total revenue 199,947 217,501
OPERATING EXPENSES: Educational services and facilities
66,931 33.5 % 80,774 37.1 % General and administrative 122,190 61.1
% 133,974 61.6 % Depreciation and amortization 5,077 2.5 % 12,470
5.7 % Asset impairment 9,678 4.8 % 14,203 6.5 % Total
operating expenses 203,876 102.0 % 241,421 111.0 %
Operating loss (3,929 ) -2.0 % (23,920 ) -11.0 %
OTHER (EXPENSE) INCOME: Interest income 246 0.1 % 237 0.1 %
Interest expense (333 ) -0.2 % (199 ) -0.1 % Loss on sale of
business (161 ) -0.1 % — 0.0 % Miscellaneous (expense) income
(115 ) -0.1 % 208 0.1 % Total other (expense) income
(363 ) -0.2 % 246 0.1 %
PRETAX LOSS (4,292 )
-2.1 % (23,674 ) -10.9 % (Benefit from) provision for income taxes
(146,531 ) -73.3 % 546 0.3 %
INCOME (LOSS)
FROM CONTINUING OPERATIONS 142,239 71.1 % (24,220 ) -11.1 %
Income (loss) from discontinued operations, net of tax 485
0.2 % (1,268 ) -0.6 %
NET INCOME (LOSS)
142,724 71.4 % (25,488 ) -11.7 %
OTHER
COMPREHENSIVE INCOME (LOSS), net of tax: Unrealized loss on
investments (260 ) (107 )
COMPREHENSIVE INCOME
(LOSS) $ 142,464 $ (25,595 )
NET INCOME (LOSS) PER SHARE - BASIC: Income (loss)
from continuing operations $ 2.09 $ (0.36 ) Income (loss) from
discontinued operations 0.01 (0.02 ) Net income
(loss) per share $ 2.10 $ (0.38 )
NET INCOME (LOSS) PER SHARE -
DILUTED: Income (loss) from continuing operations $ 2.08 $
(0.36 ) Income (loss) from discontinued operations —
(0.02 ) Net income (loss) per share $ 2.08 $ (0.38 )
WEIGHTED AVERAGE SHARES OUTSTANDING: Basic
68,046 67,330 Diluted
68,506
67,330 CAREER EDUCATION CORPORATION AND
SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND
COMPREHENSIVE INCOME (LOSS)
(In thousands, except per share amounts
and percentages)
For the Year Ended December 31, %
of % of Total Total
2015 Revenue 2014 Revenue
REVENUE: Tuition and registration fees $
842,062 99.4 % $ 905,482 99.1 % Other 5,211 0.6 %
8,482 0.9 % Total revenue 847,273 913,964
OPERATING EXPENSES: Educational services and facilities
289,777 34.2 % 323,259 35.4 % General and administrative 564,211
66.6 % 640,454 70.1 % Depreciation and amortization 24,938 2.9 %
53,382 5.8 % Asset impairment 60,515 7.1 % 36,141 4.0
% Total operating expenses 939,441 110.9 % 1,053,236
115.2 % Operating loss (92,168 ) -10.9 % (139,272 )
-15.2 %
OTHER (EXPENSE) INCOME: Interest income 794 0.1 %
851 0.1 % Interest expense (835 ) -0.1 % (491 ) -0.1 % Loss on sale
of business (1,793 ) -0.2 % - 0.0 % Miscellaneous (expense) income
(436 ) -0.1 % 86 0.0 % Total other (expense) income
(2,270 ) -0.3 % 446 0.0 %
PRETAX LOSS (94,438
) -11.1 % (138,826 ) -15.2 % (Benefit from) provision for income
taxes (147,454 ) -17.4 % 3,736 0.4 %
INCOME
(LOSS) FROM CONTINUING OPERATIONS 53,016 6.3 % (142,562 ) -15.6
% Loss from discontinued operations, net of tax (1,131 )
-0.1 % (35,601 ) -3.9 %
NET INCOME (LOSS)
51,885 6.1 % (178,163 ) -19.5 %
OTHER
COMPREHENSIVE INCOME (LOSS), net of tax: Unrealized loss on
investments (27 ) (350 ) Total other comprehensive
loss (27 ) (350 )
COMPREHENSIVE INCOME (LOSS)
$ 51,858 $ (178,513 )
NET INCOME (LOSS) PER SHARE - BASIC: Income (loss) from
continuing operations $ 0.78 $ (2.12 ) Loss from discontinued
operations (0.02 ) (0.53 ) Net income (loss) per
share $ 0.76 $ (2.65 )
NET INCOME (LOSS) PER SHARE -
DILUTED: Income (loss) from continuing operations $ 0.78 $
(2.12 ) Loss from discontinued operations (0.02 )
(0.53 ) Net income (loss) per share $ 0.76 $ (2.65 )
WEIGHTED AVERAGE SHARES OUTSTANDING: Basic
67,860 67,173 Diluted
68,328
67,173 CAREER EDUCATION CORPORATION AND
SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
For the Year Ended December 31,
2015 2014 CASH FLOWS FROM OPERATING
ACTIVITIES: Net income (loss) $ 51,885 $ (178,163 ) Adjustments
to reconcile net income (loss) to net cash used in operating
activities: Asset impairment 60,515 36,209 Depreciation and
amortization expense 24,938 55,455 Bad debt expense 21,980 14,841
Compensation expense related to share-based awards 2,857 4,277 Loss
on sale of businesses, net 1,793 311 Loss on disposition of
property and equipment 663 32 Deferred income taxes (145,807 )
14,250 Changes in operating assets and liabilities: Accrued
expenses and deferred rent obligations (31,104 ) (52,972 ) Deferred
tuition revenue (12,650 ) (6,314 ) Student receivables, net of
allowance for doubtful accounts (22,477 ) (10,531 ) Other operating
assets and liabilities 25,721 3,981 Net cash used in
operating activities (21,686 ) (118,624 )
CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of
available-for-sale investments (93,360 ) (157,425 ) Sales of
available-for-sale investments 100,173 64,920 Purchases of property
and equipment (11,695 ) (13,156 ) Proceeds on the sale of assets
2,272 — Payments of cash upon sale of businesses, net of cash
divested (4,013 ) (387 ) Purchase of equity method investment
(1,368 ) (1,575 ) Net cash used in investing
activities (7,991 ) (107,623 )
CASH FLOWS
FROM FINANCING ACTIVITIES: Issuance of common stock 1,401 1,354
Borrowings from credit facility 38,000 10,000 Payment on borrowings
(10,000 ) — Change in restricted cash (26,883 )
(10,374 ) Net cash provided by financing activities 2,518
980
EFFECT OF FOREIGN CURRENCY EXCHANGE RATE
CHANGES ON CASH AND CASH EQUIVALENTS: 246
156
NET DECREASE IN CASH AND CASH EQUIVALENTS (26,913
) (225,111 )
DISCONTINUED OPERATIONS CASH ACTIVITY INCLUDED
ABOVE: Add: Cash balance of discontinued operations, beginning
of the period — 475 Less: Cash balance of discontinued operations,
end of the period — —
CASH AND CASH EQUIVALENTS, beginning of
the period 93,832 318,468
CASH AND CASH
EQUIVALENTS, end of the period $ 66,919 $ 93,832
CAREER EDUCATION CORPORATION AND SUBSIDIARIES UNAUDITED
SELECTED SEGMENT INFORMATION
(In thousands, except percentages)
For the Quarter Ended December 31, 2015
2014 REVENUE: CTU $ 91,481 $ 82,202 AIU
45,871 44,749 Total University Group 137,352 126,951
Corporate and Other 40 40 Subtotal 137,392 126,991
Culinary Arts 42,020 43,294 Transitional Group 20,535
47,216 Total $ 199,947 $ 217,501
OPERATING (LOSS)
INCOME: CTU $ 30,001 $ 23,356 AIU 1,538 (304 )
Total University Group 31,539 23,052 Corporate and Other
(6,331 ) (7,048 ) Subtotal 25,208 16,004 Culinary Arts
(14,065 ) (16,136 ) Transitional Group (15,072 )
(23,788 ) Total $ (3,929 ) $ (23,920 )
OPERATING (LOSS)
MARGIN: CTU 32.8 % 28.4 % AIU 3.4 % -0.7 % Total
University Group 23.0 % 18.2 % Corporate and Other NM NM Subtotal
18.3 % 12.6 % Culinary Arts -33.5 % -37.3 % Transitional Group
-73.4 % -50.4 % Total -2.0 % -11.0 %
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED SELECTED SEGMENT INFORMATION
(In thousands, except percentages)
For the Year Ended December 31, 2015
2014 REVENUE: CTU $ 348,215 $ 336,573
AIU 201,649 198,896 Total University Group 549,864
535,469 Corporate and Other 157 230 Subtotal 550,021
535,699 Culinary Arts 170,190 172,606 Transitional Group
127,062 205,659 Total $ 847,273 $ 913,964
OPERATING (LOSS) INCOME: CTU $ 87,496 $ 69,492 AIU
5,520 (9,412 ) Total University Group 93,016 60,080
Corporate and Other (27,267 ) (21,169 ) Subtotal
65,749 38,911 Culinary Arts (57,577 ) (66,556 ) Transitional Group
(100,340 ) (111,627 ) Total $ (92,168 ) $ (139,272 )
OPERATING (LOSS) MARGIN: CTU 25.1 % 20.6 % AIU
2.7 % -4.7 % Total University Group 16.9 % 11.2 % Corporate
and Other NM NM Subtotal 12.0 % 7.3 % Culinary Arts -33.8 % -38.6 %
Transitional Group -79.0 % -54.3 % Total -10.9
% -15.2 %
CAREER EDUCATION CORPORATION AND
SUBSIDIARIES
UNAUDITED RECONCILIATION OF GAAP TO
NON-GAAP ITEMS (1)
(In thousands)
Adjusted
EBITDA
Q4 2015 Q3 2015 Q2 2015
Q1 2015 Q4 2014
University Group
and Corporate:
Pre-tax loss from continuing operations $ (4,292 ) $ (44,656 ) $
(20,750 ) $ (24,740 ) $ (23,674 ) Transitional Group pre-tax loss
15,182 23,724 32,624 30,470 23,788 Culinary Arts pre-tax loss
(gain) 14,065 33,171 10,532 (250 ) 15,927 Interest expense
(income), net 87 7 (52 ) 2 (38 ) Depreciation and amortization (2)
3,318 3,454 3,956 4,361 5,170 Legal settlements (2) (3) 200 — — — —
Stock-based compensation (2) 404 983 530 940 966 Asset impairments
(2) 507 — — — — Unused space charges (2) (4) 114 (385 ) (348 ) 556
(373 ) Adjustment related to revenue
recognition (2) (5)
101 348 94 93 1,354
Adjusted
EBITDA--University Group and
Corporate (6)
$ 29,686 $ 16,646 $
26,586 $ 11,432 $ 23,120
Memo: Advertising Expenses (2) $ 33,431
$ 46,194 $ 34,258 $
50,587 $ 36,731
Transitional
Group, Culinary Arts and Discontinued Operations:
Pre-tax loss from discontinued operations $ (512 ) $ (544 ) $ (720
) $ (352 ) $ (1,268 ) Transitional Group pre-tax loss (15,182 )
(23,724 ) (32,624 ) (30,470 ) (23,788 ) Culinary Arts pre-tax
(loss) gain (14,065 ) (33,171 ) (10,532 ) 250 (15,927 ) Loss on
sale of business (7) 161 715 917 — — Depreciation and amortization
(7) 1,759 2,508 3,231 2,351 7,319 Legal settlements (3) (7) — —
(166 ) 1,485 — Asset impairments (7) 9,171 33,446 11,372 6,019
14,203 Unused space charges (4) (7) (2,002 ) 7,174 (2,305 ) (2,424
) (2,063 ) Adjustment related to revenue
recognition (5) (7)
(188 ) 173 13 (67 ) 1,029
Adjusted EBITDA--Transitional, Culinary Arts and Discontinued
Operations (6) (8) $ (20,858 )
$ (13,423 ) $ (30,814 )
$ (23,208 ) $ (20,495 )
Consolidated Adjusted EBITDA $ 8,828 $
3,223 $ (4,228 ) $
(11,776 ) $ 2,625 (1) The
Company believes it is useful to present non-GAAP financial
measures which exclude certain significant items as a means to
understand the performance of its operations. As a general matter,
the Company uses non-GAAP financial measures in conjunction with
results presented in accordance with GAAP to help analyze the
performance of its operations, assist with preparing the annual
operating plan, and measure 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 to provide estimates of future performance and that failure to
report non-GAAP measures could result in a misplaced perception
that the Company’s results have underperformed or exceeded
expectations. We believe adjusted EBITDA allows us to
compare our current operating results with corresponding historical
periods and with the operational performance of other companies in
our industry because it does not give effect to potential
differences caused by items we do not consider reflective of
underlying operating performance. We also present adjusted EBITDA
because we believe it is frequently used by securities analysts,
investors and other interested parties as a measure of performance.
In evaluating adjusted EBITDA, investors should be aware that in
the future we may incur expenses similar to the adjustments
presented above. Our presentation of adjusted EBITDA should not be
construed as an inference that our future results will be
unaffected by expenses that are unusual, non-routine or
non-recurring. Adjusted EBITDA has limitations as an analytical
tool, and you should not consider it in isolation, or as a
substitute for net income (loss), operating income (loss), or any
other performance measure derived in accordance and reported under
GAAP or as an alternative to cash flow from operating activities or
as a measure of our liquidity. Non-GAAP financial measures,
when viewed in a reconciliation to corresponding GAAP financial
measures, provide an additional way of viewing the company’s
results of operations and the factors and trends affecting the
company’s business. Non-GAAP financial measures should be
considered as a supplement to, and not as a substitute for, or
superior to, the corresponding financial results presented in
accordance with GAAP. (2) Quarterly amounts relate to the
University Group and Corporate. (3) Legal settlement amounts
are net of insurance recoveries. (4) Unused space charges
represent the net present value of remaining lease obligations less
an estimated amount for sublease income as well as the subsequent
accretion of these charges. (5) Revenue recognition
adjustment relates to the accounting for students who withdraw from
one of our institutions prior to completion of their program. This
adjustment now reflects revenue earned on a cash-basis of
accounting beginning in the fourth quarter of 2014 for these
students. Q4 2014 amounts are cumulative for the full year 2014
recorded during the fourth quarter of 2014. (6) Management
assesses results of operations for the University Group and
Corporate separately from the Transitional Group and Culinary Arts.
As a result, management views adjusted EBITDA from the University
Group and Corporate separately from the remainder of the
organization, to assess results and make decisions. Accordingly,
the Transitional Group and Culinary Arts pre-tax losses are added
back to pre-tax loss from continuing operations and subtracted from
pre-tax loss from discontinued operations. (7) Quarterly
amounts relate to the Transitional Group, Culinary Arts and
discontinued operations. (8) Quarterly adjusted EBITDA
amounts for Culinary Arts separate from the Transitional Group and
discontinued operations include:
Q4 2015
Q3 2015 Q2 2015 Q1 2015
Q4 2014 Pre-tax (loss) income $ (14,065 ) $ (33,171 )
$ (10,532 ) $ 250 $ (15,927 ) Depreciation and amortization — — — —
4,504 Legal settlements — — — 775 — Asset impairments 9,005 33,446
9,687 — 10,320 Unused space charges 191 209 (982 ) (377 ) 65
Cumulative adjustment related to revenue recognition (97 )
150 5 54 514
Total $
(4,966 ) $ 634 $ (1,822
) $ 702 $ (524 )
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160229006876/en/
Investors:Alpha IR GroupSam Gibbons or Chris Hodges(312)
445-2870CECO@alpha-ir.comorMedia:Career Education
Corporation(847) 585-2600media@careered.com
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