Career Education Corporation (NASDAQ: CECO) today reported total revenue of $294.8 million, and a net loss of $31.4 million, or -$0.47 per diluted share, for the second quarter of 2013 compared to total revenue of $365.9 million and net loss of $100.2 million, or -$1.52 per diluted share, for the second quarter of 2012.
“Our results are very much in line with our initial projections for the quarter. We are actively taking costs out of the business as we become more efficient and adjust the organization’s size to serve a smaller overall student population,” said Scott W. Steffey, president and CEO of Career Education. “I’m encouraged by the progress we’ve made across our domestic operations on improving our interactions with students, from the initial point of contact straight through to student outcomes, which gives me confidence that the actions we’re taking will positively impact the direction of the Company.
“The University group continues to be a profitable business, and as we continue to make improvements, we expect enhanced performance. The International segment continues to perform very well, and we’ve made significant progress towards finalizing our action plan for the Career Schools group, along with any additional strategic decisions,” Steffey said.
CONSOLIDATED RESULTSQuarter Ended June 30, 2013
- Total revenue was $294.8 million for the second quarter of 2013, a 19.4 percent decrease from $365.9 million for the second quarter of 2012.
- Operating losses of $63.5 million and $105.3 million were recorded for the second quarters of 2013 and 2012, respectively. The operating margin was -21.5 percent for the second quarter of 2013 versus -28.8 percent for the second quarter of 2012. Operating loss for the quarter ended June 30, 2013 includes a $10.0 million ($0.10 per diluted share) charge related to the probable settlement of a legal matter and non-cash trade name impairment charges of $2.3 million ($0.02 per diluted share) related to the Le Cordon Bleu trade name and $1.7 million ($0.02 per diluted share) related to the Sanford-Brown trade name. The operating loss for the quarter ended June 30, 2012 included non-cash goodwill and asset impairment charges of $85.4 million ($1.24 per diluted share).
- The loss from continuing operations for the second quarter of 2013 was $29.9 million, or -$0.45 per diluted share, versus the loss from continuing operations of $85.9 million, or -$1.30 per diluted share, for the second quarter of 2012.
- Total revenue was $635.1 million for the year to date ended June 30, 2013, compared to $795.6 million for the year to date ended June 30, 2012.
- Operating losses of $80.9 million and $57.0 million were recorded for the years to date ended June 30, 2013 and 2012, respectively. The operating margin decreased to -12.7 percent for the year to date ended June 30, 2013, from -7.2 percent for the year to date ended June 30, 2012.
- The loss from continuing operations for the year to date ended June 30, 2013, was $43.9 million, or -$0.66 per diluted share, compared to the loss from continuing operations of $44.5 million, or -$0.67 per diluted share, for the year to date ended June 30, 2012.
- In addition to the significant items for the quarter ended June 30, 2012 above, the operating results for the year to date ended June 30, 2012 include a $19.0 million ($0.19 per diluted share) insurance recovery related to the settlement of claims under certain insurance policies.
- Net cash flows used in operating activities totaled $67.0 million for the year to date ended June 30, 2013, compared to net cash flows provided by operating activities of $16.6 million for the year to date ended June 30, 2012.
- Capital expenditures decreased to $10.0 million during the year to date ended June 30, 2013, from $20.0 million during the year to date ended June 30, 2012. Capital expenditures represented 1.6 percent and 2.5 percent of total revenue of continuing and discontinued operations during the years to date ended June 30, 2013 and 2012, respectively.
- As of June 30, 2013 and December 31, 2012, cash and cash equivalents and short-term investments totaled $241.8 million and $402.3 million, respectively. During the first quarter of 2013, the Company repaid the $80.0 million of outstanding borrowings under its Credit Agreement. Accordingly, restricted cash balances decreased to $12.0 million at June 30, 2013 from $97.9 million at December 31, 2012.
- During the second quarter of 2013, the Company reached a preliminary agreement regarding the monetary component of a settlement with the Attorney General of the State of New York relating to their investigation of whether the Company and certain of its schools have complied with certain New York state consumer protection, securities, finance and other laws, which is subject to negotiation of a final agreement including certain injunctive provisions. This resulted in the Company recording a $10.0 million ($0.10 per diluted share) pretax charge in the current year quarter.
- In addition, during the second quarter of 2013, the Company agreed to proposed settlements for its ongoing securities litigation and shareholder derivative actions, which are subject to negotiation of final agreements and court approval. The Company expects that the costs to settle these matters will be covered under its insurance policies.
Total student population by reportable segment as of June 30, 2013 and 2012 was as follows:
|As of June 30,||% Change|
|2013||2012||2013 vs. 2012|
|Total University Schools||32,100||37,100||-13||%|
|Design & Technology||4,700||6,600||-29||%|
|Total Career Schools||20,200||28,800||-30||%|
|Total Student Population||57,600||76,900||-25||%|
New Student Starts
New student starts by reportable segment for the quarters ended June 30, 2013 and 2012 were as follows:
For the Quarter Ended June 30,
|2013||2012||2013 vs. 2012|
New Student Starts
|Total University Schools||6,520||8,850||-26||%|
|Design & Technology||540||610||-11||%|
|Total Career Schools||4,340||4,490||-3||%|
|Transitional Schools (2)||30||1,090||NM|
|Total New Student Starts||11,260||14,940||-25||%|
During 2012 and 2013, CTU and AIU had established certain programs to enable students to assess their readiness to commit to enrolling in college-level courses. Excluding the impact of these readiness programs, new student starts for CTU and AIU are 15% and 8% lower in the second quarter of 2013 as compared to 2012, respectively.
Campuses within the Transitional Schools segment no longer enroll new students; students who re-enter after 365 days are reported as new student starts.
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