This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Career Education Corporation Reports Results For Third Quarter 2012

CEC is an industry leader whose institutions are recognized globally. Those institutions include, among others, American InterContinental University (“AIU”); Brooks Institute; Colorado Technical University (“CTU”); Harrington College of Design; INSEEC Group (“INSEEC”) Schools; International University of Monaco (“IUM”); International Academy of Design & Technology (“IADT”); Le Cordon Bleu North America (“LCB”); and Sanford-Brown Institutes and Colleges. Through its schools, CEC is committed to providing high-quality education, enabling students to graduate and pursue rewarding career opportunities.

For more information, see CEC’s website at www.careered.com. The website includes a detailed listing of individual campus locations and web links to CEC’s colleges, schools, and universities.

Except for the historical and present factual information contained herein, the matters set forth in this release, including statements identified by words such as “anticipate,” “believe,” “plan,” “expect,” “intend,” “project,” “will,” “potential” 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: changes in enrollment, student mix and average registered credits taken by students; our ability to implement effective cost reduction strategies; our ability to obtain a replacement credit facility on acceptable terms; 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 “90-10 Rule” and financial responsibility standards prescribed by the U.S. Department of Education), as well as national and regional accreditation standards and state regulatory requirements; our ability to obtain accrediting agency approvals for existing, changed or new programs and to successfully defend litigation and other claims brought against us; rulemaking by the U.S. Department of Education and increased focus by the U.S. Congress and governmental agencies on for-profit education institutions; 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, 2011 and its subsequent filings with the Securities and Exchange Commission.

   
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
 
September 30,

2012

December 31, 2011

(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 242,828 $ 280,592
Short-term investments   130,495     160,607  
Total cash and cash equivalents and short-term investments 373,323 441,199
 
Student receivables, net 65,021 60,573
Student receivables held for sale 1,019 -
Receivables, other, net 1,672 2,914
Prepaid expenses 75,183 62,399
Inventories 9,157 11,356
Deferred income tax assets, net 10,940 10,940
Other current assets 5,214 17,769
Assets of discontinued operations   3,441     3,328  
Total current assets   544,970     610,478  
 
NON-CURRENT ASSETS:
Property and equipment, net 317,484 349,788
Goodwill 131,862 212,626
Intangible assets, net 74,032 77,186
Student receivables, net 8,016 9,297
Deferred income tax assets, net 9,452 9,522
Other assets, net 42,293 30,122
Assets of discontinued operations   16,920     17,101  
TOTAL ASSETS $ 1,145,029   $ 1,316,120  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of capital lease obligations $ 306 $ 844
Accounts payable 53,237 48,408
Accrued expenses:
Payroll and related benefits 39,359 41,853
Advertising and production costs 20,993 17,717
Other 48,542 67,271
Deferred tuition revenue 135,483 144,947
Liabilities of discontinued operations   12,843     8,403  
Total current liabilities   310,763     329,443  
 
NON-CURRENT LIABILITIES:
Capital lease obligations, net of current maturities - 207
Deferred rent obligations 97,766 102,079
Other liabilities 35,894 40,365
Liabilities of discontinued operations   28,842     37,935  
Total non-current liabilities   162,502     180,586  
 
SHARE-BASED AWARDS SUBJECT TO REDEMPTION 99 110
 
STOCKHOLDERS' EQUITY:
Preferred stock - -
Common stock 816 820
Additional paid-in capital 599,534 590,965
Accumulated other comprehensive loss (9,015 ) (5,136 )
Retained earnings 294,315 375,607
Cost of shares in treasury   (213,985 )   (156,275 )
Total stockholders' equity   671,665     805,981  
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,145,029   $ 1,316,120  
 
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(In thousands, except per share amounts and percentages)
         
 
For the Quarters Ended September 30,
2012

% of Total Revenue

 

2011 (1)

 

% of Total Revenue

 
REVENUE:
Tuition and registration fees $ 326,464 98.1 % $ 417,420 97.4 %
Other   6,293   1.9 %   10,991   2.6 %
Total revenue   332,757     428,411  
 
OPERATING EXPENSES:
Educational services and facilities 133,206 40.0 % 152,727 35.6 %
General and administrative 227,369 68.3 % 233,647 54.5 %
Depreciation and amortization 20,429 6.1 % 22,156 5.2 %
Goodwill and asset impairment   -   0.0 %   -   0.0 %
Total operating expenses   381,004   114.5 %   408,530   95.4 %
Operating (loss) income   (48,247 ) -14.5 %   19,881   4.6 %
 
OTHER INCOME (EXPENSE):
Interest income 686 0.2 % 263 0.1 %
Interest expense (22 ) 0.0 % (44 ) 0.0 %
Miscellaneous income   77   0.0 %   183   0.0 %
Total other income   741   0.2 %   402   0.1 %
 
PRETAX (LOSS) INCOME (47,506 ) -14.3 % 20,283 4.7 %
 
(Benefit from) provision for income taxes   (16,675 ) -5.0 %   6,215   1.5 %
 
(LOSS) INCOME FROM CONTINUING OPERATIONS (30,831 ) -9.3 % 14,068 3.3 %
 
Loss from discontinued operations, net of tax   (2,315 ) -0.7 %   (3,434 ) -0.8 %
 
NET (LOSS) INCOME   (33,146 ) -10.0 %   10,634   2.5 %
 
OTHER COMPREHENSIVE INCOME (LOSS), net of tax:
Foreign currency translation adjustments 743 (11,761 )
Unrealized losses on investments   (206 )   (6 )
Total other comprehensive income (loss)   537     (11,767 )
 
COMPREHENSIVE LOSS $ (32,609 ) $ (1,133 )
 
NET (LOSS) INCOME PER SHARE - DILUTED:
(Loss) income from continuing operations $ (0.47 ) $ 0.19
Loss from discontinued operations   (0.03 )   (0.05 )
Net (loss) income per share $ (0.50 ) $ 0.14  
 
DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING   66,100     74,058  
                     
 
(1) In November 2011, the Company sold its ownership interest in Istituto Marangoni. As a result, all prior period results
have been recast to include Istituto Marangoni as a component of discontinued operations.
 
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(In thousands, except per share amounts and percentages)
         
For the Years to Date Ended September 30,
2012

% of Total Revenue

2011 (1)

% of Total Revenue

 
REVENUE:
Tuition and registration fees $ 1,112,950 98.0 % $ 1,396,557 96.6 %
Other   22,910   2.0 %   48,432   3.4 %
Total revenue   1,135,860     1,444,989  
 
OPERATING EXPENSES:
Educational services and facilities 431,739 38.0 % 476,370 33.0 %
General and administrative 667,618 58.8 % 695,313 48.1 %
Depreciation and amortization 60,555 5.3 % 62,563 4.3 %
Goodwill and asset impairment   85,661   7.5 %   2,676   0.2 %
Total operating expenses   1,245,573   109.7 %   1,236,922   85.6 %
Operating (loss) income   (109,713 ) -9.7 %   208,067   14.4 %
 
OTHER INCOME (EXPENSE):
Interest income 1,426 0.1 % 749 0.1 %
Interest expense (87 ) 0.0 % (120 ) 0.0 %
Miscellaneous income   -   0.0 %   1,968   0.1 %
Total other income   1,339   0.1 %   2,597   0.2 %
 
PRETAX (LOSS) INCOME (108,374 ) -9.5 % 210,664 14.6 %
 
(Benefit from) provision for income taxes   (30,109 ) -2.7 %   72,582   5.0 %
 
(LOSS) INCOME FROM CONTINUING OPERATIONS (78,265 ) -6.9 % 138,082 9.6 %
 
(Loss) income from discontinued operations, net of tax   (3,039 ) -0.3 %   940   0.1 %
 
NET (LOSS) INCOME   (81,304 ) -7.2 %   139,022   9.6 %
 
OTHER COMPREHENSIVE (LOSS) INCOME, net of tax:
Foreign currency translation adjustments (3,553 ) (269 )
Unrealized (losses) gains on investments   (326 )   40  
Total other comprehensive loss   (3,879 )   (229 )
 
COMPREHENSIVE (LOSS) INCOME $ (85,183 ) $ 138,793  
 
NET (LOSS) INCOME PER SHARE - DILUTED:
(Loss) income from continuing operations $ (1.18 ) $ 1.83
(Loss) income from discontinued operations   (0.05 )   0.01  
Net (loss) income per share $ (1.23 ) $ 1.84  
 
DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING   66,325     75,518  
                     
 
(1) In November 2011, the Company sold its ownership interest in Istituto Marangoni. As a result, all prior period results
have been recast to include Istituto Marangoni as a component of discontinued operations.
 
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
   

 

For the Years to Date Ended September 30,

2012   2011
 
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $ (81,304 ) $ 139,022
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Goodwill and asset impairment 85,661 2,676
Loss on pending sale of student receivables 930 -
Depreciation and amortization expense 60,555 63,319
Bad debt expense 28,967 40,909
Compensation expense related to share-based awards 7,302 11,884
Loss (gain) on disposition of property and equipment 293 (1,794 )
Changes in operating assets and liabilities   (69,910 )   (46,599 )
Net cash provided by operating activities   32,494     209,417  
 
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of available-for-sale investments (117,188 ) (149,234 )
Sales of available-for-sale investments 146,873 148,934
Purchases of property and equipment (29,496 ) (67,444 )
Proceeds on the sale of assets - 6,259
Business acquisition, net of acquired cash (3,094 ) -
Other   (1,533 )   40  
Net cash used in investing activities   (4,438 )   (61,445 )
 
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of treasury stock (56,431 ) (137,033 )
Issuance of common stock 1,262 3,827
Tax benefit associated with stock option exercises - 377
Payments of assumed loans upon business acquisition (318 ) -
Payments of contingent consideration (5,818 ) (12,589 )
Payments of capital lease obligations   (741 )   (855 )
Net cash used in financing activities   (62,046 )   (146,273 )
 
EFFECT OF FOREIGN CURRENCY EXCHANGE RATE
CHANGES ON CASH AND CASH EQUIVALENTS:   (3,774 )   (2,080 )
 
NET DECREASE IN CASH AND CASH EQUIVALENTS (37,764 ) (381 )
DISCONTINUED OPERATIONS CASH ACTIVITY INCLUDED ABOVE:
Add: Cash balance of discontinued operations, beginning of the period - 28,838
Less: Cash balance of discontinued operations, end of the period - 36,428
CASH AND CASH EQUIVALENTS, beginning of the period   280,592     260,644  
CASH AND CASH EQUIVALENTS, end of the period $ 242,828   $ 252,673  
 
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED SELECTED SEGMENT INFORMATION
(In thousands, except percentages)
   
For the Quarters Ended September 30,

2012

2011 (1)

 
REVENUE:
CTU $ 88,976 $ 100,477
AIU 71,204 85,787
Health Education 65,399 102,195
Culinary Arts 54,583 73,686
Art & Design 37,914 49,686
International 14,665 16,664
Corporate and Other   16     (84 )
Total $ 332,757   $ 428,411  
 
OPERATING (LOSS) INCOME:
CTU (2) $ 9,712 $ 16,755
AIU 1,084 12,430
Health Education (28,468 ) (3,632 )
Culinary Arts (10,722 ) 3,800
Art & Design (7,963 ) 2,557
International (6,444 ) (3,064 )
Corporate and Other   (5,446 )   (8,965 )
Total $ (48,247 ) $ 19,881  
 
OPERATING MARGIN (LOSS):
CTU 10.9 % 16.7 %
AIU 1.5 % 14.5 %
Health Education -43.5 % -3.6 %
Culinary Arts -19.6 % 5.2 %
Art & Design -21.0 % 5.1 %
International   -43.9 %   -18.4 %
Total   -14.5 %   4.6 %
             
 
(1) In November 2011, the Company sold its ownership interest in Istituto Marangoni. As a result, all prior period results
have been recast to include Istituto Marangoni as a component of discontinued operations.
 
(2) Third quarter 2011 included a $5.0 million accrual for an estimate for potential reimbursement of government funds which
was subsequently settled in the third quarter of 2012 for approximately $3.6 million.
 
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED SELECTED SEGMENT INFORMATION
(In thousands, except percentages)
   
For the Years to Date Ended September 30,
2012

2011 (1)

 
REVENUE:
CTU $ 283,750 $ 330,603
AIU 238,985 288,092
Health Education 232,375 328,329
Culinary Arts 176,430 248,718
Art & Design 125,636 170,962
International 78,634 78,630
Corporate and Other   50     (345 )
Total $ 1,135,860   $ 1,444,989  
 
OPERATING (LOSS) INCOME:
CTU (2) $ 40,272 $ 87,016
AIU 22,623 66,384
Health Education (3) (107,565 ) 11,379
Culinary Arts (15,171 ) 30,741
Art & Design (4) (55,823 ) 20,627
International 4,275 8,729
Corporate and Other (5)   1,676     (16,809 )
Total $ (109,713 ) $ 208,067  
 
OPERATING MARGIN (LOSS):
CTU 14.2 % 26.3 %
AIU 9.5 % 23.0 %
Health Education -46.3 % 3.5 %
Culinary Arts -8.6 % 12.4 %
Art & Design -44.4 % 12.1 %
International   5.4 %   11.1 %
Total   -9.7 %   14.4 %
             
 
(1) In November 2011, the Company sold its ownership interest in Istituto Marangoni. As a result, all prior period results
have been recast to include Istituto Marangoni as a component of discontinued operations.
 
(2) Year to date 2011 included a $5.0 million accrual for an estimate for potential reimbursement of government funds which
was subsequently settled in the third quarter of 2012 for approximately $3.6 million.
 
(3) Year to date 2012 includes a $41.9 million non-cash goodwill impairment charge, a $1.1 million non-cash asset impairment
charge associated with the decision to teach out three campuses and a $1.0 million non-cash trade name impairment charge.
2011 results include a $2.0 million non-cash charge related to the impairment of certain accreditation rights.
 
(4) Year to date 2012 includes a $41.5 million non-cash goodwill impairment charge. 2011 results include a $0.5 million non-cash
charge related to the impairment of accreditation rights.
 
(5) Year to date 2012 includes a $19.0 million insurance recovery related to the settlement of claims under certain insurance
policies. Year to date 2011 includes a $7.0 million insurance recovery related to previously settled legal matters.
 
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ITEMS (1)
(In millions, except share and per share amounts)
           
For the Years to Date Ended September 30,

2012

2011
Operating Loss

Loss per Diluted Share (2)

Operating Income

Earnings per Diluted Share (2)

 
As Reported $ (109.7 ) $ (1.18 ) $ 208.1 $ 1.83
Reconciling Items:
Goodwill and Intangible Asset Impairments (3) 84.4 1.22 2.7 0.02
Asset Impairments (4) 1.3 0.01 - -
Insurance Recoveries (5)   (19.0 )   (0.19 )   (7.0 )   (0.06 )
Adjusted to Exclude Significant Items $ (43.0 ) $ (0.14 ) $ 203.8   $ 1.79  
 
Diluted Weighted Average Shares Outstanding   66,325     75,518  
                         
 
(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 core business. 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 core business, 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.
Non-GAAP financial measures when viewed in a reconciliation to corresponding GAAP financial measures, provides 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) (Loss) earnings per diluted share is based on (loss) income from continuing operations and assumes a 35% tax rate for each deductible item.
 
(3) Year to date ended September 30, 2012 includes non-cash goodwill and intangible asset impairment charges totaling $84.4 million, of which $74.5 million is
non-deductible for income tax purposes, applicable to Health Education ($42.9) and Art & Design ($41.5). Year to date ended September 30, 2011 includes a $2.7
million non-cash impairment charge primarily related to accreditation rights.
 
(4) Year to date ended September 30, 2012 primarily includes non-cash asset impairment charges of $1.2 million associated with the decision to teach out three
Health Education campuses ($1.1) and one AIU campus ($0.1).
 
(5) Year to dated ended September 30, 2012 includes a $19.0 million insurance recovery related to the settlement of claims under certain insurance policies. Year to date
ended September 30, 2011 includes a $7.0 million insurance recovery related to previously settled legal matters.
 




4 of 5

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,539.46 -23.84 -0.14%
S&P 500 1,929.04 -1.63 -0.08%
NASDAQ 4,360.3590 -9.4140 -0.22%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs