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Career Education Corporation Reports Results For Third Quarter 2012

Stocks in this article: CECO

The operating results for the years to date ended September 30, 2012 and 2011 include the following significant items:

     

Significant Items(In Millions)

 

(Loss) Earningsper DilutedShare Impact

Year to Date Ended September 30, 2012
Goodwill and Intangible Asset Impairments $ 84.4 $ 1.22
Asset Impairments 1.3 0.01
Insurance Recoveries   (19.0 )   (0.19 )
TOTAL $ 66.7   $ 1.04  
 
Year to Date Ended September 30, 2011
Goodwill and Intangible Asset Impairments $ 2.7 $ 0.02
Insurance Recoveries   (7.0 )   (0.06 )
TOTAL $ (4.3 ) $ (0.04 )
 
  • During the year to date ended September 30, 2012, the Company recorded non-cash goodwill and intangible asset impairment charges of $84.4 million, of which $42.9 million was reflected within Health Education and $41.5 million within Art & Design. In addition, $1.2 million of non-cash asset impairment charges were recorded resulting from the decision made in the second quarter of 2012 to teach out four campuses, primarily within Health Education. The operating results for the year to date ended September 30, 2011 included $2.7 million of non-cash goodwill and intangible asset impairment charges primarily related to accreditation rights impairment.
  • During the year to date ended September 30, 2012, the Company recorded a $19.0 million insurance recovery related to the settlement of claims under certain insurance policies. During the year to date ended September 30, 2011, the Company recorded a $7.0 million insurance recovery related to previously settled legal matters.
  • Excluding the significant items in the table above, the operating loss was $43.0 million for the year to date ended September 30, 2012 and the operating income was $203.8 million for the year to date ended September 30, 2011. Operating margin was -3.8 percent and 14.1 percent for the years to date ended September 30, 2012 and 2011, respectively.

CAMPUS CLOSURES AND WORKFORCE REDUCTIONS

A key component to the Company‚Äôs long-term strategy is to invest in a smaller number of institutions that have the strongest likelihood of delivering strong student outcomes, operational efficiency and strength in their market. As a result, the decision was made to close twenty-three campuses. These campuses are expected to contribute approximately $124.3 million of revenue and approximately $62.0 million of operating loss for the year ending December 31, 2012. The campuses will remain open to offer current students the ability to complete their course of study. The majority of these campuses are expected to cease operations no later than the first quarter of 2014. Along with these closures, the Company made the decision to eliminate approximately 900 positions across the organization as it reorganizes its campus and corporate functions to better align with the current student population and common operating structures across our ground campuses, most notably within our Career Schools. The position eliminations are expected to be completed by January 2013, with annual savings estimated at $45-$55 million. The fourth quarter operating results will include a pretax severance charge of approximately $7.0 million as a result of this decision.

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