Operating income of $17.3 million versus prior
quarter operating loss of $19.9 million, driven by better than
expected execution of strategic initiatives
Career Education Corporation (NASDAQ: CECO) today reported
operating and financial results for the second quarter and year to
date ended June 30, 2016. The Company also updated its 2016 year
end cash and consolidated adjusted EBITDA outlook.
Second Quarter Consolidated Results:
- Revenue of $182.6 million for the
quarter as compared to $216.8 million in the prior year quarter,
with the decline driven by teach-out campuses
- Net income improved to $11.8 million as
compared to the prior year quarter net loss of $20.7 million
- Consolidated adjusted EBITDA of $25.6
million compared to negative $4.3 million in the prior year quarter
(see reconciliation of GAAP to non-GAAP items attached to this
press release)
- Cash flow generated from operations was
$16.7 million, compared to cash usage of $6.4 million in the prior
year quarter
Year to Date Consolidated Results:
- Net income improved to $14.9 million as
compared to the prior year net loss of $45.6 million
- Operating expenses decreased by $130.8
million as compared to the prior year driven by continued execution
on strategic initiatives
- Consolidated adjusted EBITDA improved
to $38.8 million as compared to negative $16.1 million in the prior
year (see reconciliation of GAAP to non-GAAP items attached to this
press release)
- As of June 30, 2016, cash, cash
equivalents, restricted cash and available-for-sale short-term and
long-term investments, net of borrowings, was $208.8 million
Key Business Highlights:
- University Group revenue increased by
3.0 percent versus the prior year quarter
- University Group operating income
increased by 25.0 percent to $36.8 million compared to the prior
year quarter, primarily driven by increased revenue and improved
efficiency of operations
- University Group total enrollments
increased by 1.0 percent as compared to the prior year
- Organization has committed incremental
investments to various student-serving operations to further its
goal of improving student retention and outcomes
- Total student enrollment at our
Transitional and Culinary Arts campuses is trending better than
estimated
“Strong student retention across most of our institutions,
better than estimated total student enrollment at our teach-out
campuses, and continued efficiency and stability at our University
Group, resulted in another quarter of improvement in year-over-year
operating performance,” said Todd Nelson, President and Chief
Executive Officer. “This improvement in our operating performance
has enabled us to make incremental investments in various
student-serving areas of operations, which we believe will
positively impact student experiences in the future. For the
remainder of this year, we are focused on optimizing our operating
processes with the goal of further enhancing student retention and
outcomes. As a result of the positive trends we have been
experiencing, we are updating our year end cash and adjusted EBITDA
outlook we provided last quarter, and are committed to continue
executing against our ongoing initiatives.”
REVENUE
For the quarter and year to date ended June 30, 2016, total
revenue was $182.6 million and $381.5 million, respectively,
representing a decrease of 15.8 percent and 14.0 percent,
respectively, compared to total revenue of $216.8 million and
$443.8 million for the quarter and year to date ended June 30,
2015, respectively. Total revenue for the University Group was
$142.3 million and $287.3 million for the quarter and year to date
ended June 30, 2016, respectively, representing an increase of 3.0
percent and 3.9 percent, respectively.
For the Quarter Ended For the Year
to Date Ended June 30, June 30,
Increase Increase
Revenue ($ in
thousands)
2016 2015 (Decrease) 2016 2015
(Decrease) CTU $ 91,736 $ 86,174 6.5 % $ 183,702 $ 171,301
7.2 % AIU 50,608 52,024 -2.7 % 103,581
105,090 -1.4 % Total University Group 142,344 138,198 3.0 % 287,283
276,391 3.9 % Corporate and Other — 39 -100.0 %
— 78 -100.0 % Subtotal 142,344 138,237 3.0 % 287,283
276,469 3.9 % Culinary Arts (1) 29,998 42,048 -28.7 % 68,621 86,760
-20.9 % Transitional Group (1) 10,284 36,543 -71.9 %
25,608 80,613 -68.2 % Total $ 182,626 $ 216,828 -15.8
% $ 381,512 $ 443,842 -14.0 % (1) 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 and ceased enrolling new students in January 2016.
TOTAL AND NEW STUDENT ENROLLMENTS
As of the end of the second quarter of 2016, total student
enrollments for the University Group were 31,600, compared to
31,300 as of the prior year quarter end, primarily driven by
improved student retention at CTU and new enrollment growth at AIU.
New student enrollments for the University Group were 7,630 and
17,260 for the quarter and year to date ended June 30, 2016,
respectively, compared to new enrollments of 7,950 and 18,080 for
the quarter and year to date ended June 30, 2015, respectively.
As of June 30,
Increase
Total Student
Enrollment
2016 2015 (Decrease) CTU 21,200
20,600 2.9 % AIU 10,400 10,700 -2.8 % Total
University Group 31,600 31,300 1.0 % Culinary Arts
5,000 7,800 -35.9 % Transitional Group 1,600 7,000
-77.1 % Total 38,200 46,100 -17.1 %
For the Quarter Ended For the Year
to Date Ended June 30, June 30,
Increase
Increase
New Student
Enrollments
2016 2015 (Decrease) 2016 2015
(Decrease) CTU 5,080 5,670 -10.4 %
9,850 10,710 -8.0 % AIU 2,550
2,280 11.8 % 7,410 7,370 0.5 % Total University Group
7,630 7,950 -4.0 % 17,260 18,080 -4.5 %
Culinary Arts (1) 60 1,450 -95.9 % 990 3,490 -71.6 % Transitional
Group (1) 20 830 -97.6 % 80 2,660 -97.0
% Total 7,710 10,230 -24.6 % 18,330
24,230 -24.3 % (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 INCOME (LOSS)
For the quarter and year to date ended June 30, 2016, operating
income was $17.3 million and $24.3 million, respectively,
representing an improvement of 186.9 percent and 154.8 percent
compared to an operating loss of $19.9 million and $44.3 million
for the quarter and year to date ended June 30, 2015, respectively.
Total University Group operating income increased to $36.8 million
and $58.0 million for the quarter and year to date ended June 30,
2016, respectively, representing an increase of 25.0 percent and
40.8 percent, respectively.
For the Quarter Ended For the Year
to Date Ended June 30, June 30,
Increase Increase
Operating Income
(Loss) ($ in thousands)
2016 2015 (Decrease) 2016 2015
(Decrease) CTU $ 29,970 $ 24,263 23.5 % $ 49,207 $
38,879 26.6 % AIU 6,838 5,174 32.2 %
8,745 2,287 282.4 % Total University Group 36,808 29,437
25.0 % 57,952 41,166 40.8 % Corporate and Other (5,761 )
(7,036 ) 18.1 % (11,573 ) (12,896 ) 10.3 %
Subtotal 31,047 22,401 38.6 % 46,379 28,270 64.1 % Culinary Arts
(1) 361 (10,560 ) 103.4 % 3,467 (10,317 ) 133.6 % Transitional
Group (2) (14,118 ) (31,733 ) 55.5 % (25,577 )
(62,203 ) 58.9 % Total $ 17,290 $ (19,892 ) 186.9 % $ 24,269
$ (44,250 ) 154.8 % (1) Asset impairment charges of
$9.7 million were recorded during the second quarter of 2015.
(2) Asset impairment charges of $7.7 million were recorded
during the year to date 2015, $1.7 million of which was recorded
during the second quarter of 2015.
NET INCOME (LOSS)
Net income was $11.8 million for the quarter ended June 30, 2016
as compared to a net loss of $20.7 million in the prior year
quarter, an improvement of 157.1 percent. For the year to date
ended June 30, 2016, net income was $14.9 million representing an
improvement of 132.6 percent as compared to net loss of $45.6
million for the prior year to date.
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.)
As shown in the table below, adjusted EBITDA for the University
Group and Corporate was $34.3 million and $54.5 million for the
quarter and year to date ended June 30, 2016, respectively,
representing an increase of 29.4 percent, or 7.8 million, and 44.0
percent, or $16.7 million, respectively, as compared to the prior
year periods. Adjusted EBITDA for the Transitional Group, Culinary
Arts and discontinued operations improved to negative $8.7 million
and negative $15.7 million for the quarter and year to date ended
June 30, 2016, respectively, representing an improvement of 71.8
percent and 71.0 percent, respectively, as compared to the prior
year periods.
For the Quarter Ended For the Year
to Date Ended June 30, June 30,
Adjusted EBITDA
($ in thousands)
2016 2015 2016 2015
University Group
and Corporate:
Income (loss) from continuing operations (1) $ 12,624 $ (20,003 ) $
15,714 $ (44,532 ) Provision for (benefit from) income taxes 4,620
(747 ) 8,755 (958 ) Transitional Group pre-tax loss 14,014 32,624
25,330 63,094 Culinary Arts pre-tax (income) loss (362 ) 10,532
(3,469 ) 10,282 Interest income, net (2) (184 ) (52 ) (212 ) (50 )
Depreciation and amortization (2) 2,777 3,956 5,880 8,317
Stock-based compensation (2) 847 530 1,391 1,470 Asset impairments
(2) — — 237 — Unused space charges (2) (3) (54 ) (348
) 855 208
Adjusted EBITDA--University Group and
Corporate
$ 34,282 $ 26,492 $
54,481 $ 37,831 Memo: Advertising
Expenses (2) $ 32,585 $
34,258 $ 76,551 $ 84,845
Transitional
Group, Culinary Arts and Discontinued Operations:
Loss from discontinued operations (1) $ (785 ) $ (720 ) $ (864 ) $
(1,072 ) Benefit from income taxes from discontinued operations
(470 ) — (517 ) — Transitional Group pre-tax loss (14,014 ) (32,624
) (25,330 ) (63,094 ) Culinary Arts pre-tax income (loss) 362
(10,532 ) 3,469 (10,282 ) Interest income, net (4) (1 ) — (2 ) —
Loss on sale of business (4) — 917 — 917 Depreciation and
amortization (4) 2,425 3,231 5,891 5,582 Legal settlements (4) —
(166 ) — 1,319 Asset impairments (4) — 11,372 — 17,391 Unused space
charges (3) (4) 3,802 (2,305 ) 1,694
(4,729 )
Adjusted EBITDA--Transitional, Culinary Arts and
Discontinued Operations $ (8,681 )
$ (30,827 ) $ (15,659 )
$ (53,968 ) Consolidated Adjusted
EBITDA $ 25,601 $ (4,335 )
$ 38,822 $ (16,137 ) (1)
Income (loss) from continuing operations and loss from
discontinued operations make up the components of net income (loss)
as reflected on the Company’s condensed consolidated statements of
income (loss) and comprehensive income (loss). (2) Amounts
relate to the University Group and Corporate. (3) Unused
space charges represent the net present value of remaining lease
obligations for vacated space less an estimated amount for sublease
income as well as the subsequent accretion of these charges.
(4) Amounts relate to Transitional Group, Culinary Arts and
discontinued operations.
BALANCE SHEET AND CASH FLOW
Net cash provided by operating activities for the quarter and
year to date ended June 30, 2016 was $16.7 million and $6.0
million, respectively, representing an improvement from cash usage
of $6.4 million and $26.6 million for the quarter and year to date
ended June 30, 2015, respectively. The Company’s continued focus on
improving operating efficiencies within the University Group and
the inherent economics at the onset of a teach-out associated with
the LCB campuses resulted in an improvement in cash usage.
As of June 30, 2016 and December 31, 2015, cash, cash
equivalents, restricted cash and available-for-sale short-term and
long-term investments, net of borrowings totaled $208.8 million and
$201.0 million, respectively.
As of June 30, As of December
Increase
Consolidated Cash
($ in thousands)
2016 31, 2015 (Decrease) Consolidated Cash,
Cash Equivalents, Restricted Cash and
Available-For-Sale Short-Term
Investments
$ 201,460 $ 231,641 -13.0 % Available-For-Sale Long-Term
Investments (1) 7,374 7,374 0.0 % Short-term borrowings (2)
— 38,000 -100.0 % Consolidated Cash, Cash Equivalents,
Restricted Cash
and Available-For-Sale Short-Term and
Long-Term
Investments, net of Borrowings (1)
$ 208,834 $ 201,015 3.9 % (1) Available-for-sale
long-term investment balances are included within non-current other
assets on the Company’s condensed consolidated balance sheets.
(2) Cash, cash equivalents, restricted cash and
available-for-sale short-term investment balances as of December
31, 2015 include $38.0 million of restricted cash related to
cash-collateralized borrowings under the Credit Agreement.
OUTLOOK
Career Education Corporation revised its consolidated adjusted
EBITDA and year end cash outlook, in order to incorporate recent
trends of improved student retention across most of its
institutions, better than estimated total enrollments at its
teach-out campuses and continued efficiency in University
operations. The Company now expects the following results, subject
to the updated key assumptions identified below:
- Consolidated adjusted EBITDA to improve
in 2016 as compared to 2015 and to be positive, to remain flat in
2017 as compared to 2016, and to increase in 2018 as compared to
2017
- 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 $160 million to $170 million for
the year ending December 31, 2016, approximately $140 million to
$155 million for the year ending December 31, 2017, and then to
increase for the year ended December 31, 2018
Forward looking adjusted EBITDA expectations are estimated on a
basis consistent with adjusted EBITDA calculations presented in the
reconciliation of GAAP to non-GAAP items attached to this press
release. Net income, which is the most directly comparable GAAP
measure to consolidated adjusted EBITDA, may not follow the same
trends as discussed in our outlook above because of adjustments
made for unused space charges that represent the present value of
future remaining lease obligations of vacated space less an
estimated amount for sublease income as well as income taxes,
depreciation, amortization, asset impairment charges, interest
income, interest expense and stock compensation. The adjusted
EBITDA and cash outlook 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 progress as expected and performance consistent
with current trends, (iii) achievement of recovery rates for the
Company’s real estate obligations and timing of any associated
lease termination payments consistent with the Company’s historical
experiences, (iv) right-sizing of the Company’s corporate expense
structure to serve primarily online institutions, (v) no material
changes in the legal or regulatory environment and excludes legal
settlements, regulatory settlements and any impact of new or
proposed regulations, 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 may be undertaken in the future, actual results could
differ materially from these estimates.
CONFERENCE CALL INFORMATION
Career Education Corporation will host a conference call on
Wednesday, August 3, 2016 at 5:30 p.m. Eastern time to discuss its
second quarter and year to date 2016 results. 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 “believe,” “will,” “expect,”
“estimate,” “continue,” “trend” 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 or accreditor 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, financial responsibility
and administrative capability 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
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
June 30, December 31,
2016 2015 (unaudited) ASSETS
CURRENT ASSETS: Cash and cash equivalents, unrestricted $
49,663 $ 66,919 Restricted cash 1,375 49,821 Restricted short-term
investments 9,610 - Short-term investments 140,812
114,901 Total cash and cash equivalents, restricted cash and
short-term investments 201,460 231,641 Student receivables,
net 27,502 31,618 Receivables, other, net 781 5,194 Prepaid
expenses 16,160 14,380 Inventories 2,107 3,353 Other current assets
1,537 2,523 Assets of discontinued operations 159 254
Total current assets 249,706 288,963
NON-CURRENT ASSETS: Property and equipment, net 48,574
58,249 Goodwill 87,356 87,356 Intangible assets, net 8,900 9,300
Student receivables, net 3,333 3,958 Deferred income tax assets,
net 130,188 137,716 Other assets 16,043 16,562 Assets of
discontinued operations 8,694 8,811
TOTAL
ASSETS $ 552,794 $ 610,915
LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT
LIABILITIES: Short-term borrowings $ - $ 38,000 Accounts
payable 13,831 25,906 Accrued expenses: Payroll and related
benefits 32,120 38,789 Advertising and production costs 10,325
11,788 Income taxes 1,600 1,061 Other 24,701 24,082 Deferred
tuition revenue 37,398 40,112 Liabilities of discontinued
operations 9,376 13,067 Total current liabilities
129,351 192,805
NON-CURRENT
LIABILITIES: Deferred rent obligations 39,152 45,927 Other
liabilities 23,192 25,197 Liabilities of discontinued operations
6,940 9,376 Total non-current liabilities
69,284 80,500
STOCKHOLDERS' EQUITY: Preferred
stock - - Common stock 834 830 Additional paid-in capital 612,449
610,784 Accumulated other comprehensive loss (330 ) (880 )
Accumulated deficit (42,668 ) (57,518 ) Cost of shares in treasury
(216,126 ) (215,606 ) Total stockholders' equity
354,159 337,610
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 552,794 $
610,915 CAREER EDUCATION CORPORATION AND
SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF
INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)
(In thousands, except per share amounts
and percentages)
For the Quarter Ended June 30, %
of % of Total Total
2016 Revenue 2015 Revenue
REVENUE: Tuition and registration fees $
181,432 99.3 % $ 215,747 99.5 % Other 1,194 0.7 %
1,081 0.5 % Total revenue 182,626 216,828
OPERATING EXPENSES: Educational services and facilities
58,062 31.8 % 73,064 33.7 % General and administrative 102,072 55.9
% 145,171 67.0 % Depreciation and amortization 5,202 2.8 % 7,113
3.3 % Asset impairment — 0.0 % 11,372 5.2 % Total
operating expenses 165,336 90.5 % 236,720 109.2 %
Operating income (loss) 17,290 9.5 % (19,892 ) -9.2 %
OTHER INCOME (EXPENSE): Interest income 301 0.2 % 224 0.1 %
Interest expense (116 ) -0.1 % (170 ) -0.1 % Loss on sale of
business — 0.0 % (917 ) -0.4 % Miscellaneous (expense) income
(231 ) -0.1 % 5 0.0 % Total other expense (46
) 0.0 % (858 ) -0.4 %
PRETAX INCOME (LOSS) 17,244 9.4
% (20,750 ) -9.6 % Provision for (benefit from) income taxes
4,620 2.5 % (747 ) -0.3 %
INCOME (LOSS) FROM
CONTINUING OPERATIONS 12,624 6.9 % (20,003 ) -9.2 % Loss from
discontinued operations, net of tax (785 ) -0.4 %
(720 ) -0.3 %
NET INCOME (LOSS) 11,839 6.5 %
(20,723 ) -9.6 %
OTHER COMPREHENSIVE INCOME (LOSS), net
of tax: Foreign currency translation adjustments (97 ) —
Unrealized gain (loss) on investments 131 (43 ) Total
other comprehensive income (loss) 34 (43 )
COMPREHENSIVE INCOME (LOSS) $ 11,873 $ (20,766 )
NET INCOME (LOSS) PER SHARE - BASIC and DILUTED: Income
(loss) from continuing operations $ 0.18 $ (0.29 ) Loss from
discontinued operations (0.01 ) (0.02 ) Net income
(loss) per share $ 0.17 $ (0.31 )
WEIGHTED AVERAGE SHARES
OUTSTANDING: Basic 68,368 67,893 Diluted
69,015 67,893
CAREER EDUCATION CORPORATION AND
SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF
INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)
(In thousands, except per share amounts
and percentages)
For the Year to Date Ended June 30,
% of % of Total Total
2016 Revenue 2015 Revenue
REVENUE: Tuition and registration fees $
379,217 99.4 % $ 441,438 99.5 % Other 2,295 0.6 %
2,404 0.5 % Total revenue 381,512 443,842
OPERATING EXPENSES: Educational services and facilities
119,600 31.3 % 147,958 33.3 % General and administrative 225,635
59.1 % 308,844 69.6 % Depreciation and amortization 11,771 3.1 %
13,899 3.1 % Asset impairment 237 0.1 % 17,391 3.9 %
Total operating expenses 357,243 93.6 % 488,092 110.0
% Operating income (loss) 24,269 6.4 % (44,250 )
-10.0 %
OTHER INCOME (EXPENSE): Interest income 566 0.1 %
384 0.1 % Interest expense (352 ) -0.1 % (332 ) -0.1 % Loss on sale
of business — 0.0 % (917 ) -0.2 % Miscellaneous expense (14
) 0.0 % (375 ) -0.1 % Total other income (expense)
200 0.1 % (1,240 ) -0.3 %
PRETAX INCOME (LOSS) 24,469
6.4 % (45,490 ) -10.2 % Provision for (benefit from) income taxes
8,755 2.3 % (958 ) -0.2 %
INCOME (LOSS)
FROM CONTINUING OPERATIONS 15,714 4.1 % (44,532 ) -10.0 % Loss
from discontinued operations, net of tax (864 ) -0.2 %
(1,072 ) -0.2 %
NET INCOME (LOSS) 14,850 3.9 %
(45,604 ) -10.3 %
OTHER COMPREHENSIVE INCOME
(LOSS), net of tax: Foreign currency translation adjustments 96
— Unrealized gain on investments 454 152 Total other
comprehensive income 550 152
COMPREHENSIVE INCOME
(LOSS) $ 15,400 $ (45,452 )
NET INCOME (LOSS) PER
SHARE - BASIC and DILUTED: Income (loss) from continuing
operations $ 0.23 $ (0.66 ) Loss from discontinued operations
(0.01 ) (0.01 ) Net income (loss) per share $ 0.22 $
(0.67 )
WEIGHTED AVERAGE SHARES OUTSTANDING: Basic
68,261 67,714 Diluted 68,627 67,714
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
For the Year to Date Ended June 30,
2016 2015 CASH FLOWS FROM OPERATING
ACTIVITIES: Net income (loss) $ 14,850 $ (45,604 ) Adjustments
to reconcile net income (loss) to net cash provided by (used in)
operating activities: Asset impairment 237 17,391 Depreciation and
amortization expense 11,771 13,899 Bad debt expense 14,769 9,138
Compensation expense related to share-based awards 1,391 1,470 Loss
on sale of business, net — 917 (Gain) loss on disposition of
property and equipment (238 ) 3 Changes in operating assets and
liabilities: (36,733 ) (23,809 ) Net cash provided by
(used in) operating activities 6,047 (26,595 )
CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of
available-for-sale investments (93,689 ) (33,707 ) Sales of
available-for-sale investments 58,330 36,051 Purchases of property
and equipment (1,970 ) (4,994 ) Proceeds on the sale of assets
3,400 — Payments of cash upon sale of businesses (62 )
(2,018 ) Net cash used in investing activities
(33,991 ) (4,668 )
CASH FLOWS FROM FINANCING
ACTIVITIES: Issuance of common stock 278 939 Payment on
borrowings (38,000 ) (10,000 ) Change in restricted cash
48,446 9,500 Net cash provided by financing activities
10,724 439
EFFECT OF FOREIGN CURRENCY
EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS:
(36 ) 258
NET DECREASE IN CASH AND CASH
EQUIVALENTS (17,256 ) (30,566 )
CASH AND CASH EQUIVALENTS,
beginning of the period 66,919 93,832
CASH AND
CASH EQUIVALENTS, end of the period $ 49,663 $ 63,266
CAREER EDUCATION CORPORATION AND SUBSIDIARIES UNAUDITED
SELECTED SEGMENT INFORMATION
(In thousands, except percentages)
For the Quarter Ended June 30, 2016
2015 REVENUE: CTU $ 91,736 $ 86,174 AIU
50,608 52,024 Total University Group 142,344 138,198
Corporate and Other — 39 Subtotal 142,344 138,237
Culinary Arts 29,998 42,048 Transitional Group 10,284
36,543 Total $ 182,626 $ 216,828
OPERATING INCOME
(LOSS): CTU $ 29,970 $ 24,263 AIU 6,838 5,174
Total University Group 36,808 29,437 Corporate and Other
(5,761 ) (7,036 ) Subtotal 31,047 22,401 Culinary Arts 361
(10,560 ) Transitional Group (14,118 ) (31,733 )
Total $ 17,290 $ (19,892 )
OPERATING MARGIN (LOSS):
CTU 32.7 % 28.2 % AIU 13.5 % 9.9 % Total University
Group 25.9 % 21.3 % Corporate and Other NM NM Subtotal 21.8 % 16.2
% Culinary Arts 1.2 % -25.1 % Transitional Group -137.3 %
-86.8 % Total 9.5 % -9.2 %
CAREER
EDUCATION CORPORATION AND SUBSIDIARIES UNAUDITED SELECTED
SEGMENT INFORMATION
(In thousands, except percentages)
For the Year to Date Ended June 30,
2016 2015 REVENUE: CTU $ 183,702
$ 171,301 AIU 103,581 105,090 Total University Group
287,283 276,391 Corporate and Other — 78 Subtotal
287,283 276,469 Culinary Arts 68,621 86,760 Transitional Group
25,608 80,613 Total $ 381,512 $ 443,842
OPERATING INCOME (LOSS): CTU $ 49,207 $ 38,879 AIU
8,745 2,287 Total University Group 57,952 41,166 Corporate
and Other (11,573 ) (12,896 ) Subtotal 46,379 28,270
Culinary Arts 3,467 (10,317 ) Transitional Group (25,577 )
(62,203 ) Total $ 24,269 $ (44,250 )
OPERATING
MARGIN (LOSS): CTU 26.8 % 22.7 % AIU 8.4 % 2.2 %
Total University Group 20.2 % 14.9 % Corporate and Other NM NM
Subtotal 16.1 % 10.2 % Culinary Arts 5.1 % -11.9 % Transitional
Group -99.9 % -77.2 % Total 6.4 % -10.0
%
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED RECONCILIATION OF GAAP TO
NON-GAAP ITEMS (1)
(In thousands)
For the Quarter Ended For the
Year to Date Ended June 30, June 30,
Adjusted
EBITDA
2016 2015 2016 2015
University Group
and Corporate:
Income (loss) from continuing operations (2) $ 12,624 $ (20,003 ) $
15,714 $ (44,532 ) Provision for (benefit from) income taxes 4,620
(747 ) 8,755 (958 ) Transitional Group pre-tax loss 14,014 32,624
25,330 63,094 Culinary Arts pre-tax (income) loss (362 ) 10,532
(3,469 ) 10,282 Interest income, net (3) (184 ) (52 ) (212 ) (50 )
Depreciation and amortization (3) 2,777 3,956 5,880 8,317
Stock-based compensation (3) 847 530 1,391 1,470 Asset impairments
(3) — — 237 — Unused space charges (3) (5) (54 ) (348
) 855 208
Adjusted EBITDA--University Group and
Corporate (6)
$ 34,282 $ 26,492 $
54,481 $ 37,831 Memo: Advertising
Expenses (3) $ 32,585 $
34,258 $ 76,551 $ 84,845
Transitional
Group, Culinary Arts and Discontinued Operations:
Loss from discontinued operations (2) $ (785 ) $ (720 ) $ (864 ) $
(1,072 ) Benefit from income taxes from discontinued operations
(470 ) — (517 ) — Transitional Group pre-tax loss (14,014 ) (32,624
) (25,330 ) (63,094 ) Culinary Arts pre-tax income (loss) 362
(10,532 ) 3,469 (10,282 ) Interest income, net (7) (1 ) — (2 ) —
Loss on sale of business (7) — 917 — 917 Depreciation and
amortization (7) 2,425 3,231 5,891 5,582 Legal settlements (4) (7)
— (166 ) — 1,319 Asset impairments (7) — 11,372 — 17,391 Unused
space charges (5) (7) 3,802 (2,305 ) 1,694
(4,729 )
Adjusted EBITDA--Transitional, Culinary Arts and
Discontinued Operations (6) (8) $ (8,681
) $ (30,827 ) $ (15,659
) $ (53,968 ) Consolidated Adjusted
EBITDA $ 25,601 $ (4,335 )
$ 38,822 $ (16,137 ) (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) Income (loss) from continuing
operations and loss from discontinued operations make up the
components of net income (loss). A reconciliation of these
components for the quarters and years to date ended June 30, 2016
and June 30, 2015 is presented below:
For the
Quarter Ended For the Year to Date Ended
June 30, June 30, 2016 2015
2016 2015 Income (loss) from continuing
operations $ 12,624 $ (20,003 ) $ 15,714 $ (44,532 ) Loss from
discontinued operations (785 ) (720 ) (864 )
(1,072 )
Net income (loss) $ 11,839
$ (20,723 ) $ 14,850 $
(45,604 ) (3) Amounts relate to the
University Group and Corporate. (4) Legal settlement amounts
are net of insurance recoveries. (5) Unused space charges
represent the net present value of remaining lease obligations for
vacated space less an estimated amount for sublease income as well
as the subsequent accretion of these charges. These charges relate
to exiting leased space as the Company continues to right-size the
organization and therefore are not considered representative of
ongoing operations. (6) Management assesses results of
operations for the University Group and Corporate separately from
the Transitional Group and Culinary Arts. As the Transitional Group
and Culinary Arts have been announced for teach-out, management
views these operations as not reflective of the ongoing business.
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 income (losses)
are added back to income (loss) from continuing operations and
subtracted from loss from discontinued operations. (7)
Amounts relate to the Transitional Group, Culinary Arts and
discontinued operations. (8) Adjusted EBITDA amounts for
Culinary Arts separate from the Transitional Group and discontinued
operations include:
For the Quarter Ended
For the Year to Date Ended June 30,
June 30, 2016 2015 2016
2015 Pre-tax income (loss) $ 362 $ (10,532 ) $
3,469 $ (10,282 ) Depreciation and amortization 1,265 — 3,226 —
Legal settlements — — — 775 Asset impairments — 9,687 — 9,687
Unused space charges 2,960 (982 ) 4,503
(1,359 )
Adjusted EBITDA for Culinary Arts $
4,587 $ (1,827 ) $ 11,198
$ (1,179 )
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160803006523/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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