Career Education Corporation (NASDAQ: CECO) today reported total
revenue of $542.9 million, and net income of $12.1 million, or
$0.15 per diluted share, for the fourth quarter of 2010 compared to
total revenue of $507.5 million and net income of $30.7 million, or
$0.36 per diluted share, for the fourth quarter of 2009. For the
full year 2010, total revenue of $2.12 billion, and net income of
$157.8 million, or $1.95 per diluted share increased from total
revenue of $1.83 billion and net income of $81.2 million, or $0.94
per diluted share, for the full year 2009.
“Our financial performance both in the fourth quarter and in
2010 was in line with our expectations,” said Gary E. McCullough,
President and Chief Executive Officer. “While private sector
postsecondary education is in a period of heightened scrutiny and
uncertainty, we view this as a period of opportunity in which we
will continue to enhance our programs, processes and systems to
better meet the needs of our diverse student population.”
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. On a non-GAAP
basis, earnings per diluted share from continuing operations were
$0.81 in the fourth quarter 2010 as compared to $0.74 in the fourth
quarter of 2009. For the years ended December 31, 2010 and 2009,
earnings per diluted share from continuing operations (non-GAAP
basis) were $3.00 and $1.95, respectively. (See tables below and
the GAAP to non-GAAP reconciliation attached to this press release
for further details.)
CONSOLIDATED RESULTS
Quarter Ended December 31, 2010
- Total revenue was $542.9 million for
the fourth quarter of 2010, a 7.0 percent increase from $507.5
million for the fourth quarter of 2009.
- Operating income was $20.7 million for
the fourth quarter of 2010, versus operating income of $98.6
million for the fourth quarter of 2009. The operating margin was
3.8 percent for the fourth quarter of 2010, compared to an
operating margin of 19.4 percent for the fourth quarter of
2009.
- Income from continuing operations for
the quarter ended December 31, 2010 was $15.3 million, or $0.19 per
diluted share, compared to $62.7 million, or $0.74 per diluted
share, for the quarter ended December 31, 2009.
- The operating results for the fourth
quarter 2010 and 2009 include significant items as summarized
below:
Earnings per Significant Items Diluted (In Millions)
Share Impact
Three Months
Ended December 31, 2010
Trade Name Impairment $ 67.8 $ 0.55 Legal Settlement 0.8 0.01
Severance 7.7 0.06
TOTAL $ 76.3
$ 0.62
Three Months
Ended December 31, 2009
Remaining Lease Obligations for Vacated Space $ 14.3 $ 0.11
Performance-based Compensation Related to Plan Outperformance (2.2
) (0.02 ) Termination of Insurance Policies (12.0 )
(0.09 )
TOTAL $ 0.1 $ -
- In connection with our annual
impairment testing, we recorded an impairment charge related to our
Le Cordon Bleu trade name which reduced its carrying value from
$139.6 million to $71.8 million. The fair value of the trade name
is calculated based upon our expected future operating results for
our Culinary Arts segment.
- Excluding the significant items in the
table above, operating income was $97.0 million in the fourth
quarter 2010, a 1.7 percent decrease from $98.7 million in the
fourth quarter of 2009. The operating margin was 17.9 percent
during the fourth quarter 2010 as compared to 19.4 percent during
the fourth quarter 2009.
Year Ended December 31, 2010
- Total revenue was $2.12 billion for the
year ended December 31, 2010, compared to $1.83 billion for the
year ended December 31, 2009.
- Operating income increased to $246.4
million for the year ended December 31, 2010, from $229.0 million
for the year ended December 31, 2009. The operating margin
decreased slightly to 11.6 percent for the year ended December 31,
2010, from 12.5 percent for the year ended December 31, 2009.
- Income from continuing operations for
the year ended December 31, 2010, was $166.6 million, or $2.06 per
diluted share, compared to $149.5 million, or $1.73 per diluted
share, for the year ended December 31, 2009.
- The operating results for the years
ended December 31, 2010 and 2009 include the following significant
items:
Earnings per Significant Items Diluted (In Millions)
Share Impact
Year Ended
December 31, 2010
Trade Name Impairment $ 67.8 $ 0.55 Legal Settlement 40.8 0.33
Severance 7.7 0.06
TOTAL $ 116.3
$ 0.94
Year Ended
December 31, 2009
Asset Impairment $ 2.5 $ 0.02 Severance 1.5 0.01 Remaining Lease
Obligations for Vacated Space 14.3 0.11 Performance-based
Compensation Related to
Plan Outperformance
23.1 0.17 Termination of Insurance Policies (12.0 )
(0.09 )
TOTAL $ 29.4 $ 0.22
- Excluding the significant items in the
table above, operating income was $362.7 million for the year ended
December 31, 2010 and $258.4 million for the year ended December
31, 2009, an increase of 40.4 percent. Operating margin was 17.1
percent and 14.1 percent for the years ended December 31, 2010 and
2009, respectively.
CONSOLIDATED CASH FLOWS AND FINANCIAL POSITION
Cash Flows
• Net cash flows provided by operating activities totaled $272.3
million for the year ended December 31, 2010, compared to $288.3
million for the year ended December 31, 2009. Operating cash flows
remained relatively constant as compared to the prior year as
strong cash flow driven by increased net income was offset by
payment of prior year annual incentive compensation and the impact
of student receivables growth and related payment performance.
• Capital expenditures increased to $127.3 million during the
year ended December 31, 2010, from $74.1 million for the year ended
December 31, 2009. Capital expenditures increased to 6.0 percent of
total revenue during the year ended December 31, 2010 as compared
to 4.0 percent for the year ended December 31, 2009 as a result of
investments made in the Company’s new campus support center.
Financial Position
• As of December 31, 2010 and December 31, 2009, cash and
cash equivalents and short-term investments totaled $449.2 million
and $484.7 million, respectively.
Stock Repurchase Program and Treasury Stock
During 2010, the Company repurchased approximately 5.4 million
shares of its common stock for approximately $154.9 million at an
average price of $28.54 per share. The Company did not repurchase
shares of its common stock during the fourth quarter 2010. Under
the Company’s previously authorized stock repurchase program, stock
repurchases may be made on the open market or in privately
negotiated transactions from time to time, depending on factors
including market conditions and corporate and regulatory
requirements. As of December 31, 2010, approximately $290.5 million
was available under the Company’s stock repurchase program.
During January 2011, the Company repurchased an additional
3.7 million shares of its common stock for $79.9 million at an
average price of $21.47 per share through the Company’s 10b5-1
repurchase program announced by the Company on November 15,
2010.
Our unaudited consolidated balance sheet reflects the correction
of an error related to the recording of the treasury share
retirement which occurred in the fourth quarter 2007. The impact of
this correction was to increase additional paid-in-capital and
reduce retained earnings by $417.9 million, respectively. All
periods presented have been adjusted accordingly. This correction
does not impact operating income, net income or total stockholders’
equity.
STUDENT POPULATION AND NEW STUDENT
STARTS
Student Population
Total student population by reportable
segment as of December 31, 2010 and 2009, was as follows:
As of December 31, % Change
2010 2009 2010 vs. 2009
Student
Population
University 62,400 59,300 5% Health Education 29,000 24,200 20%
Culinary Arts 13,100 10,900 20% International 12,300 10,900 13%
Total Student Population
116,800 105,300 11%
New Student Starts
New student starts by reportable segment
during the fourth quarter of 2010 and 2009, were as follows:
For the Three Months Ended December 31,
% Change
2010 2009 2010 vs. 2009
New Student
Starts
University 16,510 18,550 -11% Health Education 6,270 5,510 14%
Culinary Arts 1,390 1,430 -3% International 3,570 2,950 21%
Total New Student Starts
27,740 28,440 -2%
CONFERENCE CALL INFORMATION
Career Education Corporation will host a conference call on
Friday, February 18, 2011 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 28756801. 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
28756801.
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 more than 116,000
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, Italy, 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”); Istituto Marangoni; 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 risks, uncertainties and
other factors that could cause our actual growth, 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 such factors or to publicly announce the results of 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 outcome of which
could materially and adversely affect our financial condition and
operations, include, but are not limited to, the following:
availability of Title IV and other student financial aid or loans
for our students; Congress’ willingness or ability to maintain or
increase funding for Title IV programs; the impacts of the U.S.
Department of Education’s new and pending regulations addressing
certain aspects of administration of Title IV federal financial aid
programs (including among other matters, gainful employment,
certain compensation related to recruiting and admission of
students, more stringent state approval criteria that may affect
current state approval and licensing processes applicable to
postsecondary education institutions and distance learning
programs) on our business practices, costs of compliance and of
developing and implementing changes in operations, student
recruitment or enrollment, program offerings that may have
significant or material effects on our operations, business and
profitability; potential higher bad debt expense or reduced revenue
associated with requiring students to pay more of their educational
expenses while in school or with directly providing extended
payment plans to our students; increased competition; the
effectiveness of our regulatory compliance efforts; impairment of
goodwill and other intangible assets as we continue to redefine the
company and manage our brands and marketing to improve
effectiveness and reduce costs; charges and expenses associated
with exiting excess facility space; our ability to comply with
accrediting agency requirements or obtain accrediting agency
approvals for existing or new programs; the outcome of any reviews
and audits conducted by accrediting, state and federal agencies;
our dependence on information technology systems; our ownership or
use of intellectual property; costs and impacts of regulatory,
legal and administrative actions, proceedings and investigations,
governmental regulations, and class action and other lawsuits; our
ability to manage and continue growth; and other factors discussed
in our Annual Report on Form 10-K for the year ended
December 31, 2009, our Quarterly Reports on Form 10-Q for the
most recent fiscal quarters, and from time to time in our current
reports filed with the Securities and Exchange Commission.
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS (In thousands)
As of December 31, (1) 2010 2009
(Restated)
ASSETS CURRENT ASSETS: Cash and cash
equivalents $ 289,482 $ 284,334 Short-term investments
159,671 200,379
Total cash and cash equivalents and
short-term investments
449,153 484,713 Student receivables, net 62,287 57,795
Receivables, other, net 4,132 5,255 Prepaid expenses 45,990 40,748
Inventories 13,142 11,259 Deferred income tax assets, net 31,665
12,774 Other current assets 6,246 8,790 Assets of discontinued
operations 6,742 7,501
Total current assets
619,357 628,835
NON-CURRENT
ASSETS: Property and equipment, net 366,775 304,028 Goodwill
381,476 377,515 Intangible assets, net 118,763 180,520 Student
receivables, net 12,522 21,455 Deferred income tax assets, net
5,092 3,187 Other assets, net 37,816 23,178 Assets of discontinued
operations 19,055 25,124
TOTAL
ASSETS $ 1,560,856 $
1,563,842 LIABILITIES AND STOCKHOLDERS'
EQUITY CURRENT LIABILITIES: Current maturities of
capital lease obligations $ 783 $ 880 Accounts payable 56,013
51,100 Accrued expenses: Payroll and related benefits 73,608 87,763
Advertising and production costs 18,846 21,436 Income taxes 8,069
17,849 Earnout payments 17,439 18,009 Other 98,113 45,923 Deferred
tuition revenue 176,102 184,336 Liabilities of discontinued
operations 15,100 14,713 Total current
liabilities 464,073 442,009
NON-CURRENT LIABILITIES: Capital lease obligations, net of
current maturities 1,223 2,262 Deferred rent obligations 103,996
90,676 Earnout payments 7,690 23,680 Other liabilities 11,761
18,612 Liabilities of discontinued operations 37,576
64,558 Total non-current liabilities 162,246
199,788
SHARE-BASED AWARDS SUBJECT
TO REDEMPTION 153 521
STOCKHOLDERS' EQUITY:
Preferred stock - - Common stock 812 954 Additional paid-in capital
576,853 662,865 Accumulated other comprehensive (loss) income (81 )
8,408 Retained earnings 356,991 471,184 Cost of shares in treasury
(191 ) (221,887 ) Total stockholders' equity
934,384 921,524
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 1,560,856 $
1,563,842 (1) In December 2010,
the Transitional Schools segment ceased to exist as we completed
the teach out of our last remaining Transitional School, AIU-Los
Angeles, CA. As a result, all current and prior period results have
been recast as a component of discontinued operations.
CAREER EDUCATION CORPORATION AND SUBSIDIARIES UNAUDITED
CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per
share amounts and percentages)
For the Three Months Ended December
31, (1)
% of % of Total Total 2010
Revenue 2009 Revenue REVENUE:
Tuition and registration fees $ 526,636 97.0 % $ 491,399 96.8 %
Other 16,293 3.0 % 16,056 3.2 % Total
revenue 542,929 507,455
OPERATING EXPENSES: Educational services and facilities
164,931 30.4 % 165,587 32.6 % General and administrative 266,073
49.0 % 226,048 44.5 % Depreciation and amortization 19,762 3.6 %
17,176 3.4 % Goodwill and asset impairment 71,475
13.2 % - 0.0 % Total operating expenses
522,241 96.2 % 408,811 80.6 % Operating income
20,688 3.8 % 98,644 19.4 %
OTHER INCOME (EXPENSE): Interest income 491 0.1 % 404 0.1 %
Interest expense (302 ) -0.1 % (193 ) 0.0 % Miscellaneous income
(expense) 182 0.0 % (2 ) 0.0 % Total other
income 371 0.1 % 209 0.0 %
PRETAX INCOME 21,059 3.9 % 98,853 19.5 % Provision
for income taxes 5,749 1.1 % 36,151 7.1
%
INCOME FROM CONTINUING OPERATIONS 15,310 2.8 %
62,702 12.4 % Loss from discontinued operations, net of tax
(3,208 ) -0.6 % (32,022 ) -6.3 %
NET
INCOME $ 12,102 2.2 %
$
30,680 6.0 %
NET INCOME (LOSS) PER SHARE -
DILUTED: Income from continuing operations $ 0.19 $ 0.74 Loss
from discontinued operations (0.04 ) (0.38 ) Net
income per share $ 0.15 $ 0.36
DILUTED
WEIGHTED AVERAGE SHARES OUTSTANDING 79,776
85,300 (1) In December
2010, the Transitional Schools segment ceased to exist as we
completed the teach out of our last remaining Transitional School,
AIU-Los Angeles, CA. As a result, all current and prior period
results have been recast as a component of discontinued operations.
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS (In
thousands, except per share amounts and percentages)
For the Year Ended December 31, (1)
% of % of Total Total 2010
Revenue 2009 Revenue REVENUE:
Tuition and registration fees $ 2,042,383 96.1 % $ 1,760,237 96.0 %
Other 81,853 3.9 % 73,559 4.0 % Total
revenue 2,124,236 1,833,796
OPERATING EXPENSES: Educational services and facilities
639,123 30.1 % 606,014 33.0 % General and administrative 1,095,519
51.6 % 931,118 50.8 % Depreciation and amortization 71,372 3.4 %
65,204 3.6 % Goodwill and asset impairment 71,829 3.4
% 2,500 0.1 % Total operating expenses
1,877,843 88.4 % 1,604,836 87.5 % Operating
income 246,393 11.6 % 228,960 12.5 %
OTHER INCOME (EXPENSE): Interest income 1,180 0.1 %
2,372 0.1 % Interest expense (377 ) 0.0 % (225 ) 0.0 %
Miscellaneous expense (319 ) 0.0 % (706 ) 0.0 % Total
other income 484 0.0 % 1,441 0.1 %
PRETAX INCOME 246,877 11.6 % 230,401 12.6 %
Provision for income taxes 80,287 3.8 % 80,894
4.4 %
INCOME FROM CONTINUING OPERATIONS
166,590 7.8 % 149,507 8.2 % Loss from discontinued
operations, net of tax (8,817 ) -0.4 % (68,288 ) -3.7
%
NET INCOME $ 157,773 7.4 %
$ 81,219 4.4 %
NET INCOME (LOSS) PER
SHARE - DILUTED: Income from continuing operations $ 2.06 $
1.73 Loss from discontinued operations (0.11 ) (0.79
) Net income per share $ 1.95 $ 0.94
DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING
80,850 86,418 (1)
In December 2010, the Transitional Schools segment ceased to
exist as we completed the teach out of our last remaining
Transitional School, AIU-Los Angeles, CA. As a result, all current
and prior period results have been recast as a component of
discontinued operations.
CAREER EDUCATION CORPORATION AND
SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF OPERATING
INCOME BY QUARTER (In thousands)
For the 2010 Quarters Ended, (1)
March 31 June 30 September 30 December
31 Full Year REVENUE: Tuition and
registration fees $ 509,508 $ 509,129 $ 497,110 $ 526,636 $
2,042,383 Other 19,918 18,610 27,032
16,293 81,853 Total revenue 529,426 527,739
524,142 542,929 2,124,236
OPERATING
EXPENSES: Educational services and facilities 159,162 156,918
158,112 164,931 639,123 General and administrative 264,140 256,920
308,386 266,073 1,095,519 Depreciation and amortization 16,678
17,149 17,783 19,762 71,372 Goodwill and asset impairment -
- 354 71,475 71,829 Total operating
expenses 439,980 430,987 484,635
522,241 1,877,843
OPERATING INCOME $
89,446 $ 96,752 $ 39,507
$ 20,688 $ 246,393 For
the 2009 Quarters Ended, (1) March 31
June 30 September 30 December 31 Full
Year REVENUE: Tuition and registration fees $
414,632 $ 419,814 $ 434,392 $ 491,399 $ 1,760,237 Other
17,133 17,038 23,332 16,056 73,559
Total revenue 431,765 436,852 457,724
507,455 1,833,796
OPERATING EXPENSES:
Educational services and facilities 145,068 146,981 148,378 165,587
606,014 General and administrative 218,169 235,173 251,728 226,048
931,118 Depreciation and amortization 15,963 16,259 15,806 17,176
65,204 Goodwill and asset impairment - - 2,500
- 2,500 Total operating expenses 379,200
398,413 418,412 408,811 1,604,836
OPERATING INCOME $ 52,565 $
38,439 $ 39,312 $ 98,644
$ 228,960 (1) In December 2010,
the Transitional Schools segment ceased to exist as we completed
the teach out of our last remaining Transitional School, AIU-Los
Angeles, CA. As a result, all current and prior period results have
been recast as a component of discontinued operations.
CAREER EDUCATION CORPORATION AND SUBSIDIARIES UNAUDITED
CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
For the Year Ended December 31, 2010
2009 CASH FLOWS FROM OPERATING ACTIVITIES: Net
income $ 157,773 $ 81,219 Adjustments to reconcile net income to
net cash provided by operating activities: Goodwill and asset
impairment 71,829 2,500 Depreciation and amortization expense
71,624 67,596 Bad debt expense 106,324 56,718 Compensation expense
related to share-based awards 17,318 16,516 Loss on disposition of
property and equipment 457 1,291 Deferred income taxes (17,007 )
(8,702 ) Changes in operating assets and liabilities: Accrued
expenses and deferred rent obligations (25,055 ) 81,239 Deferred
tuition revenue (12,653 ) 29,570 Student receivables, net of
allowance for doubtful accounts (98,920 ) (66,961 ) Other operating
assets and liabilities 569 27,265 Net
cash provided by operating activities 272,259
288,251
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of available-for-sale investments (291,864 ) (617,032 )
Sales of available-for-sale investments 332,445 668,281 Purchases
of property and equipment (127,283 ) (74,087 ) Acquisition of the
rights to the Le Cordon Bleu brand (16,852 ) (26,331 ) Business
acquisition, net of acquired cash (6,194 ) - Other 88
(132 ) Net cash used in investing activities (109,660
) (49,301 )
CASH FLOWS FROM FINANCING
ACTIVITIES: Purchase of treasury stock (154,913 ) (201,119 )
Issuance of common stock 3,109 2,797 Tax benefit associated with
stock option exercises 223 237 Payments of assumed loans upon
business acquisition (4,279 ) - Payments of capital lease
obligations (1,013 ) (1,066 ) Net cash used in
financing activities (156,873 ) (199,151 )
EFFECT OF FOREIGN CURRENCY EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS: (1,316 ) 415
NET INCREASE IN CASH AND CASH EQUIVALENTS 4,410 40,214
DISCONTINUED OPERATIONS CASH ACTIVITY INCLUDED ABOVE: Add:
Cash balance of discontinued operations, beginning of the year 738
1,945 Less: Cash balance of discontinued operations, end of the
year - 738
CASH AND CASH EQUIVALENTS, beginning of the year
284,334 242,913
CASH AND CASH
EQUIVALENTS, end of the year $ 289,482 $ 284,334
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED SELECTED SEGMENT INFORMATION (In thousands, except
percentages)
For the Three Months Ended December
31, (1) 2010 2009
REVENUE: University $ 281,008 $ 269,009 Health Education
119,352 102,486 Culinary Arts 94,003 91,058 International 48,698
45,070 Corporate and Other (132 ) (168 )
Total
$ 542,929 $ 507,455
OPERATING INCOME
(LOSS): (2) (4) University (3) $ 69,018 $ 61,292 Health
Education (3) 16,594 16,020 Culinary Arts (3) (5) (63,546 ) 12,328
International 12,139 8,903 Corporate and Other (3) (6)
(13,517 ) 101
Total $ 20,688 $ 98,644
OPERATING MARGIN (LOSS): University 24.6 %
22.8 % Health Education 13.9 % 15.6 % Culinary Arts -67.6 % 13.5 %
International 24.9 % 19.8 %
Total
3.8 % 19.4 % (1)
In December 2010, the Transitional Schools segment ceased to
exist as we completed the teach out of our last remaining
Transitional School, AIU-Los Angeles, CA. As a result, all current
and prior period results have been recast as a component of
discontinued operations.
(2) Prior period financial
results have been revised to account for a change in the allocation
of shared service costs. Previously, shared service costs were
allocated to our segments as a percentage of revenue. Improved data
and analytical capabilities have allowed us to now allocate shared
service costs based upon usage and consumption factors.
(3) Fourth quarter 2009 includes pretax expense of $14.3
million related to the present value of the remaining lease
obligations for vacated space within Corporate and Other ($5.3),
University ($5.2), Culinary Arts ($2.9) and Health Education
($0.9).
(4) During the fourth quarter 2010, a pretax
charge of $7.7 million was recorded in association with a reduction
in force to be completed during the first quarter of 2011.
(5) Fourth quarter 2010 includes pretax expense of $67.8
million related to trade name impairment and $1.4 million related
to goodwill impairment within Culinary Arts.
(6)
Fourth quarter 2010 includes pretax expense of $2.3 million related
to an asset impairment charge for one of our investments within
Corporate and Other. The prior year quarter results include a
pretax charge of $5.3 million related to vacated space which was
offset by a reduction of $12.0 million related to the termination
of certain insurance policies.
CAREER EDUCATION
CORPORATION AND SUBSIDIARIES UNAUDITED SELECTED SEGMENT
INFORMATION (In thousands, except percentages)
For the Year Ended December 31, (1) 2010
2009 REVENUE: University $ 1,159,291 $
1,018,194 Health Education 441,608 362,692 Culinary Arts 387,884
332,236 International 136,076 121,188 Corporate and Other
(623 ) (514 )
Total $ 2,124,236
$ 1,833,796 OPERATING INCOME
(LOSS):(2) (3) University (4) $ 282,013 $ 195,081 Health
Education 52,028 42,072 Culinary Arts (5)¥ (66,813 ) 14,873
International 21,828 18,853 Corporate and Other (6) (42,663
) (41,919 )
Total $ 246,393
$ 228,960 OPERATING MARGIN
(LOSS): University 24.3 % 19.2 % Health Education 11.8 % 11.6 %
Culinary Arts -17.2 % 4.5 % International 16.0 % 15.6
%
Total 11.6 % 12.5
%
(1) In December 2010, the Transitional Schools
segment ceased to exist as we completed the teach out of our last
remaining Transitional School, AIU-Los Angeles, CA. As a result,
all current and prior period results have been recast as a
component of discontinued operations.
(2) Prior
period financial results have been revised to account for a change
in the allocation of shared service costs. Previously, shared
service costs were allocated to our segments as a percentage of
revenue. Improved data and analytical capabilities have allowed us
to now allocate shared service costs based upon usage and
consumption factors.
(3) During the fourth quarter
2010, a pretax charge of $7.7 million was recorded in association
with a reduction in force to be completed during the first quarter
of 2011.
(4) During 2010, University recorded $7.3
million of pretax legal expenses related to the settlements of
legal matters and a $0.3 million asset impairment charge for one of
our leased facilities within the University reportable segment. The
prior year results include a $5.2 million pretax expense related to
the present value of the remaining lease obligations for vacated
space.
(5) 2010 includes pretax expense of $67.8
million related to trade name impairment and $1.4 million related
to goodwill impairment. Culinary Arts also recorded a $40.8 million
pretax charge related to the settlement of a legal matter and
additional bad debt expense for increases in reserve rates related
to our student extended payment plans. The prior year results
include $2.9 million pretax expense related to the present value of
the remaining lease obligations for vacated space.
(6) Fourth quarter 2010 includes pretax expense of $2.3
million related to an asset impairment charge for one of our
investments within Corporate and Other. The prior year results
include pretax charges including an additional $11.3 million for
performance- based compensation related to plan outperformance and
$5.3 million related to vacated space which were offset by a
reduction of $12.0 million related to the termination of certain
insurance policies.
CAREER EDUCATION CORPORATION AND
SUBSIDIARIES UNAUDITED SELECTED UNIVERSITY SEGMENT
INFORMATION (Dollars in thousands)
For the Three Months Ended December 31, For the Year
Ended December 31, 2010 2009 2010
2009 REVENUE: CTU $ 123,236 $ 105,520 $
465,315 $ 368,621 AIU 98,647 99,767 448,581 409,043 Art &
Design 59,125 63,722 245,395
240,530
Total University $
281,008 $ 269,009 $
1,159,291 $ 1,018,194
OPERATING INCOME: CTU $ 39,603 $ 31,352 $ 133,881 $ 79,889
AIU 22,905 20,604 118,959 90,127 Art & Design 6,510
9,336 29,173 25,065
Total University $ 69,018
$ 61,292 $ 282,013
$ 195,081 OPERATING MARGIN: CTU
32.1 % 29.7 % 28.8 % 21.7 % AIU 23.2 % 20.7 % 26.5 % 22.0 % Art
& Design 11.0 % 14.7 % 11.9 % 10.4
%
Total University 24.6 %
22.8 % 24.3 % 19.2
% As of December 31, STUDENT
POPULATION: 2010 2009 CTU 30,900 27,300 AIU
20,000 20,300 Art & Design 11,500 11,700
Total University 62,400
59,300 For the three months ended December
31, NEW STUDENT STARTS: 2010 2009 CTU
8,740 9,800 AIU 6,230 7,210 Art & Design 1,540
1,540
Total University 16,510
18,550 CAREER EDUCATION
CORPORATION AND SUBSIDIARIES UNAUDITED RECONCILIATION OF
GAAP TO NON-GAAP ITEMS (1) (In millions, except per
share amounts)
For the Three Months
Ended December 31, 2010 2009 Operating
Earnings per Operating
Earnings per
Income
Diluted Share (2)
Income
Diluted Share (2)
As Reported $ 20.7 $ 0.19 $ 98.6 $ 0.74 Reconciling
Items: Trade Name Impairment (3) 67.8 0.55 - - Legal Settlement (4)
0.8 0.01 - - Severance (5) 7.7 0.06 - - Remaining Lease Obligations
for Vacated Space - - 14.3 0.11 Performance-based Compensation
Related to Plan Outperformance (6) - - (2.2 ) (0.02 ) Termination
of Insurance Policies (7) - - (12.0 )
(0.09 )
Adjusted to Exclude Significant Items $
97.0 $ 0.81 $ 98.7
$ 0.74 Diluted Weighted Average
Shares Outstanding 79,776 85,300
For the Year Ended December 31, 2010
2009 Operating Earnings per Operating
Earnings per Income
Diluted Share (2)
Income
Diluted Share (2)
As Reported $ 246.4 $ 2.06 229.0 $ 1.73 Reconciling
Items: Asset Impairment (3) 67.8 0.55 2.5 0.02 Legal Settlement (4)
40.8 0.33 - - Severance 7.7 0.06 1.5 0.01 Remaining Lease
Obligations for Vacated Space - - 14.3 0.11 Performance-based
Compensation Related to Plan Outperformance (6) - - 23.1 0.17
Termination of Insurance Policies (7) - -
(12.0 ) (0.09 )
Adjusted to Exclude Significant Items
$ 362.7 $ 3.00 $ 258.4
$ 1.95 Diluted Weighted
Average Shares Outstanding 80,850
86,418 (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) Earnings per share is
based on Income from Continuing Operations.
(3)
Fourth quarter 2010 includes a $67.8 million pretax trade name
impairment within Culinary Arts. The $2.5 million asset impairment
in 2009 resulted from the carrying value exceeding the fair value
for one of our owned facilities.
(4) A $40.8 million
charge was recorded in Culinary Arts related to the settlement of a
legal matter; of which $0.8 million was recorded in the fourth
quarter.
(5) During the fourth quarter 2010, a pretax
charge of $7.7 million was recorded in association with a reduction
in force to be completed during the first quarter of 2011.
(6) The fourth quarter of 2009 performance-based
compensation related to plan outperformance represents the year-end
adjustment to the estimated payout based upon full-year results.
The full year outperformance by segment was: Corporate - $11.3,
University - $5.4, Health Education - $4.3, and Culinary Arts -
$2.1 million.
(7) A $12.0 million payment was
received in the fourth quarter 2009 related to the termination of
certain insurance policies.
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