SCHAUMBURG, Ill.--(BUSINESS WIRE)--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 | ) | |||||||
