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Career Education Corporation
Career Education Corporation
05/10/2012 | Press release
Career Education Corporation Reports Results for First Quarter 2012
distributed by noodls on 05/10/2012 17:53
SCHAUMBURG, Ill.--(BUSINESS WIRE)--May. 10, 2012-- Career Education Corporation (NASDAQ: CECO) today reported total revenue of $434.1 million, and net income of $52.1 million, or $0.78 per diluted share, for the first quarter of 2012 compared to total revenue of $531.7 million and net income of $73.0 million, or $0.95 per diluted share, for the first quarter of 2011.
"I am proud of the progress we made in the first quarter. In addition, the recent decision by the Accrediting Council for Independent Colleges and Schools to remove our institutions from 'show cause' is another important step forward. It enables us to advance key elements of our long range strategic plan," said Steven H. Lesnik, Chairman, President and CEO of Career Education Corporation.
CONSOLIDATED RESULTS
Quarter Ended March 31, 2012
- Total revenue was $434.1 million for the first quarter of 2012, an 18.3 percent decrease from $531.7 million for the first quarter of 2011.
- Operating income was $46.6 million for the first quarter of 2012, versus operating income of $108.9 million for the first quarter of 2011. The operating margin was 10.7 percent for the first quarter of 2012, as compared to an operating margin of 20.5 percent for the first quarter of 2011.
- Income from continuing operations for the quarter ended March 31, 2012 was $46.4 million, or $0.69 per diluted share, compared to $70.6 million, or $0.92 per diluted share, for the quarter ended March 31, 2011. The effective tax rate was 0.9 percent and 36.3 percent for the quarters ended March 31, 2012 and 2011, respectively. The effective tax rate for the first quarter of 2012 reflects the higher relative level of operating income from non-U.S. institutions as part of anticipated annual consolidated results of operations.
- Operating income for the first quarter of 2012 included a $19.0 million ($0.18 per diluted share) insurance recovery related to the settlement of claims under certain insurance policies. Operating income for the first quarter of 2011 included a $7.0 million ($0.06 per diluted share) insurance recovery related to previously settled legal matters.
CONSOLIDATED CASH FLOWS AND FINANCIAL POSITION
Cash Flows
• Net cash flows provided by operating activities totaled $17.4 million for the quarter ended March 31, 2012, compared to $59.7 million for the quarter ended March 31, 2011.
• Capital expenditures decreased to $12.3 million during the quarter ended March 31, 2012, from $23.8 million during the quarter ended March 31, 2011. Capital expenditures represented 2.8 percent and 4.4 percent of total revenue during the quarters ended March 31, 2012 and 2011, respectively.
Financial Position
• As of March 31, 2012 and December 31, 2011, cash and cash equivalents and short-term investments totaled $389.9 million and $441.2 million, respectively.
Stock Repurchase Program
During the quarter ended March 31, 2012, the Company repurchased 6.1 million shares of its common stock for approximately $56.4 million at an average price of $9.29 per share.
As of March 31, 2012, approximately $183.3 million was available under the Company's authorized stock repurchase program to repurchase outstanding shares of its common stock. Stock repurchases under this program may be made on the open market or in privately negotiated transactions from time to time, depending on various factors, including market conditions and corporate and regulatory requirements.
STUDENT POPULATION AND NEW STUDENT STARTS
Student Population
Total student population by reportable segment as of March 31, 2012 and 2011 was as follows:
| As of March 31, | % Change | ||||||
| 2012 | 2011 | 2012 vs. 2011 | |||||
|
Student Population |
|||||||
| CTU | 24,500 | 29,100 | -16 | % | |||
| AIU | 18,900 | 22,500 | -16 | % | |||
| Health Education | 22,900 | 31,300 | -27 | % | |||
| Culinary Arts | 12,600 | 13,500 | -7 | % | |||
| Art & Design | 9,000 | 11,900 | -24 | % | |||
| International | 8,000 | 8,900 | -10 | % | |||
| Total Student Population | 95,900 | 117,200 | -18 | % | |||
New Student Starts
New student starts by reportable segment for the quarters ended March 31, 2012 and 2011 were as follows:
|
For the Quarters Ended |
|||||||
|
March 31, |
% Change | ||||||
| 2012 | 2011 | 2012 vs. 2011 | |||||
|
New Student Starts |
|||||||
| CTU (1) | 5,820 | 7,440 | -22 | % | |||
| AIU (1) | 6,640 | 8,660 | -23 | % | |||
| Health Education | 5,490 | 9,140 | -40 | % | |||
| Culinary Arts | 3,160 | 3,560 | -11 | % | |||
| Art & Design | 1,240 | 2,240 | -45 | % | |||
| International | 740 | 790 | -6 | % | |||
| Total New Student Starts | 23,090 | 31,830 | -27 | % | |||
|
(1) |
In 2011, CTU and AIU implemented the Student Orientation and Academic Readiness ("SOAR") program which identifies students who may not be prepared for the rigor of college studies. A student is not included as a new student start until successful completion of SOAR. New student start data will be comparable in the third quarter 2012. | |
CONFERENCE CALL INFORMATION
Career Education Corporation will host a conference call on Friday, May 11, 2012 at 10:00 a.m. Eastern time. Interested parties can access the live webcast of the conference call at www.careered.com in the Investor Relations section of the website. Participants can also listen to the conference call by dialing 800-580-9478 (domestic) or 630-691-2769 (international) and citing code 32370546. 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. A replay of the call will also be available for seven days by calling 888-843-7419 (domestic) or 630-652-3042 (international) and citing code 32370546.
ABOUT CAREER EDUCATION CORPORATION
The colleges, schools and universities that are part of the Career Education Corporation ("CEC") family offer high-quality education to a diverse student population of approximately 95,000 students across the world in a variety of career-oriented disciplines through online, on-ground and hybrid learning program offerings. The more than 90 campuses that serve these students are located throughout the United States and in France, the United Kingdom and Monaco, and offer doctoral, master's, bachelor's and associate degrees and diploma and certificate programs.
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 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 gainful employment regulations), as well as regional accreditation standards and state regulatory requirements; our ability to obtain accrediting agency approvals for existing 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) | ||||||||
| March 31, | December 31, | |||||||
| 2012 | 2011 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash and cash equivalents | $ | 229,388 | $ | 280,592 | ||||
| Short-term investments | 160,469 | 160,607 | ||||||
| Total cash and cash equivalents and short-term investments | 389,857 | 441,199 | ||||||
| Student receivables, net | 61,989 | 60,573 | ||||||
| Receivables, other, net | 19,689 | 2,914 | ||||||
| Prepaid expenses | 69,199 | 62,399 | ||||||
| Inventories | 9,830 | 11,356 | ||||||
| Deferred income tax assets, net | 10,940 | 10,940 | ||||||
| Other current assets | 16,205 | 17,769 | ||||||
| Assets of discontinued operations | 3,267 | 3,328 | ||||||
| Total current assets | 580,976 | 610,478 | ||||||
| NON-CURRENT ASSETS: | ||||||||
| Property and equipment, net | 341,815 | 349,788 | ||||||
| Goodwill | 213,862 | 212,626 | ||||||
| Intangible assets, net | 76,671 | 77,186 | ||||||
| Student receivables, net | 8,677 | 9,297 | ||||||
| Deferred income tax assets, net | 9,524 | 9,522 | ||||||
| Other assets, net | 30,694 | 30,122 | ||||||
| Assets of discontinued operations | 17,041 | 17,101 | ||||||
| TOTAL ASSETS | $ | 1,279,260 | $ | 1,316,120 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Current maturities of capital lease obligations | $ | 414 | $ | 844 | ||||
| Accounts payable | 34,174 | 48,408 | ||||||
| Accrued expenses: | ||||||||
| Payroll and related benefits | 40,883 | 41,853 | ||||||
| Advertising and production costs | 27,441 | 17,717 | ||||||
| Earnout payments | 3,887 | 5,735 | ||||||
| Other | 55,742 | 61,536 | ||||||
| Deferred tuition revenue | 122,496 | 144,947 | ||||||
| Liabilities of discontinued operations | 8,250 | 8,403 | ||||||
| Total current liabilities | 293,287 | 329,443 | ||||||
| NON-CURRENT LIABILITIES: | ||||||||
| Capital lease obligations, net of current maturities | 107 | 207 | ||||||
| Deferred rent obligations | 101,139 | 102,079 | ||||||
| Other liabilities | 39,947 | 40,365 | ||||||
| Liabilities of discontinued operations | 35,597 | 37,935 | ||||||
| Total non-current liabilities | 176,790 | 180,586 | ||||||
| SHARE-BASED AWARDS SUBJECT TO REDEMPTION | 105 | 110 | ||||||
| STOCKHOLDERS' EQUITY: | ||||||||
| Preferred stock | - | - | ||||||
| Common stock | 818 | 820 | ||||||
| Additional paid-in capital | 594,223 | 590,965 | ||||||
| Accumulated other comprehensive income (loss) | 292 | (5,136 | ) | |||||
| Retained earnings | 427,688 | 375,607 | ||||||
| Cost of shares in treasury | (213,943 | ) | (156,275 | ) | ||||
| Total stockholders' equity | 809,078 | 805,981 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 1,279,260 | $ | 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 March 31, | ||||||||||||||
| % of | % of | |||||||||||||
| Total | Total | |||||||||||||
| 2012 | Revenue |
2011 (1) |
Revenue | |||||||||||
| REVENUE: | ||||||||||||||
| Tuition and registration fees | $ | 423,618 | 97.6 | % | $ | 509,454 | 95.8 | % | ||||||
| Other | 10,519 | 2.4 | % | 22,246 | 4.2 | % | ||||||||
| Total revenue | 434,137 | 531,700 | ||||||||||||
| OPERATING EXPENSES: | ||||||||||||||
| Educational services and facilities | 152,685 | 35.2 | % | 165,631 | 31.2 | % | ||||||||
| General and administrative | 214,632 | 49.4 | % | 237,061 | 44.6 | % | ||||||||
| Depreciation and amortization | 20,106 | 4.6 | % | 20,133 | 3.8 | % | ||||||||
| Goodwill and asset impairment | 83 | 0.0 | % | - | 0.0 | % | ||||||||
| Total operating expenses | 387,506 | 89.3 | % | 422,825 | 79.5 | % | ||||||||
| Operating income | 46,631 | 10.7 | % | 108,875 | 20.5 | % | ||||||||
| OTHER INCOME (EXPENSE): | ||||||||||||||
| Interest income | 270 | 0.1 | % | 223 | 0.0 | % | ||||||||
| Interest expense | (37 | ) | 0.0 | % | (37 | ) | 0.0 | % | ||||||
| Miscellaneous income | - | 0.0 | % | 1,816 | 0.3 | % | ||||||||
| Total other income | 233 | 0.1 | % | 2,002 | 0.4 | % | ||||||||
| PRETAX INCOME | 46,864 | 10.8 | % | 110,877 | 20.9 | % | ||||||||
| Provision for income taxes | 431 | 0.1 | % | 40,282 | 7.6 | % | ||||||||
| INCOME FROM CONTINUING OPERATIONS | 46,433 | 10.7 | % | 70,595 | 13.3 | % | ||||||||
| Income from discontinued operations, net of tax | 5,643 | 1.3 | % | 2,440 | 0.5 | % | ||||||||
| NET INCOME | 52,076 | 12.0 | % | 73,035 | 13.7 | % | ||||||||
| OTHER COMPREHENSIVE INCOME, net of tax: | ||||||||||||||
| Foreign currency translation adjustments | 5,440 | 1.3 | % | 8,243 | 1.6 | % | ||||||||
| Unrealized (losses) gains on investments | (12 | ) | 0.0 | % | 85 | 0.0 | % | |||||||
| Total other comprehensive income | 5,428 | 1.3 | % | 8,328 | 1.6 | % | ||||||||
| COMPREHENSIVE INCOME | $ | 57,504 | 13.2 | % | $ | 81,363 | 15.3 | % | ||||||
| NET INCOME PER SHARE - DILUTED: | ||||||||||||||
| Income from continuing operations | $ | 0.69 | $ | 0.92 | ||||||||||
| Income from discontinued operations | 0.09 | 0.03 | ||||||||||||
| Net income per share | $ | 0.78 | $ | 0.95 | ||||||||||
| DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING | 66,960 | 76,753 | ||||||||||||
| (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 Quarters Ended March 31, | ||||||||
| 2012 | 2011 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net income | $ | 52,076 | $ | 73,035 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Goodwill and asset impairment | 83 | - | ||||||
| Depreciation and amortization expense | 20,106 | 20,366 | ||||||
| Bad debt expense | 9,390 | 17,151 | ||||||
| Compensation expense related to share-based awards | 2,780 | 4,200 | ||||||
| Loss (gain) on disposition of property and equipment | 32 | (1,801 | ) | |||||
| Changes in operating assets and liabilities | (67,115 | ) | (53,295 | ) | ||||
| Net cash provided by operating activities | 17,352 | 59,656 | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchases of available-for-sale investments | (40,300 | ) | (60,934 | ) | ||||
| Sales of available-for-sale investments | 40,438 | 60,774 | ||||||
| Purchases of property and equipment | (12,303 | ) | (23,792 | ) | ||||
| Earnout payments | (3,555 | ) | (4,235 | ) | ||||
| Proceeds on the sale of assets | - | 6,259 | ||||||
| Other | (12 | ) | 85 | |||||
| Net cash used in investing activities | (15,732 | ) | (21,843 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Purchase of treasury stock | (56,431 | ) | (89,915 | ) | ||||
| Issuance of common stock | 477 | 1,292 | ||||||
| Tax benefit associated with stock option exercises | - | 159 | ||||||
| Payments of capital lease obligations | (547 | ) | (641 | ) | ||||
| Net cash used in financing activities | (56,501 | ) | (89,105 | ) | ||||
| EFFECT OF FOREIGN CURRENCY EXCHANGE RATE | ||||||||
| CHANGES ON CASH AND CASH EQUIVALENTS: | 3,677 | 1,071 | ||||||
| NET DECREASE IN CASH AND CASH EQUIVALENTS | (51,204 | ) | (50,221 | ) | ||||
| 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 | - | 25,136 | ||||||
| CASH AND CASH EQUIVALENTS, beginning of the period | 280,592 | 260,644 | ||||||
| CASH AND CASH EQUIVALENTS, end of the period | $ | 229,388 | $ | 214,125 | ||||
| CAREER EDUCATION CORPORATION AND SUBSIDIARIES | ||||||||
| UNAUDITED SELECTED SEGMENT INFORMATION | ||||||||
| (In thousands, except percentages) | ||||||||
| For the Quarters Ended March 31, | ||||||||
| 2012 |
2011 (1) |
|||||||
| REVENUE: | ||||||||
| CTU | $ | 99,915 | $ | 118,065 | ||||
| AIU | 88,940 | 104,274 | ||||||
| Health Education | 91,225 | 116,309 | ||||||
| Culinary Arts | 63,546 | 91,773 | ||||||
| Art & Design | 47,668 | 64,600 | ||||||
| International | 42,829 | 36,815 | ||||||
| Corporate and Other | 14 | (136 | ) | |||||
| Total | $ | 434,137 | $ | 531,700 | ||||
| OPERATING INCOME (LOSS): | ||||||||
| CTU | $ | 19,045 | $ | 36,288 | ||||
| AIU | 14,661 | 27,617 | ||||||
| Health Education | (11,844 | ) | 11,630 | |||||
| Culinary Arts | (8 | ) | 13,767 | |||||
| Art & Design | (889 | ) | 10,395 | |||||
| International | 13,125 | 9,755 | ||||||
| Corporate and Other (2) | 12,541 | (577 | ) | |||||
| Total | $ | 46,631 | $ | 108,875 | ||||
| OPERATING MARGIN (LOSS): | ||||||||
| CTU | 19.1 | % | 30.7 | % | ||||
| AIU | 16.5 | % | 26.5 | % | ||||
| Health Education | -13.0 | % | 10.0 | % | ||||
| Culinary Arts | 0.0 | % | 15.0 | % | ||||
| Art & Design | -1.9 | % | 16.1 | % | ||||
| International | 30.6 | % | 26.5 | % | ||||
| Total | 10.7 | % | 20.5 | % | ||||
| (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) |
The Company recorded a $19.0 million insurance recovery in the first quarter of 2012 related to the settlement of claims under certain insurance policies and recorded a $7.0 million insurance recovery related to previously settled legal matters in the first quarter of 2011. |
|
Source: Career Education Corporation
Career Education Corporation
Investors:
John Springer, (847) 585-3899
Vice President, Strategy and Investor Relations
or
Media:
Mark Spencer, (847) 585-3802
Director, Corporate Communications
