UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of
1934
Date of Report (Date of Earliest Event Reported): May 1, 2015
Career Education Corporation
(Exact Name of Registrant as Specified in Charter)
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Delaware |
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0-23245 |
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36-3932190 |
(State or Other Jurisdiction of Incorporation) |
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(Commission File Number) |
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(IRS Employer Identification No.) |
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231 N. Martingale Rd., Schaumburg, IL |
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60173 |
(Address of Principal Executive Offices) |
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(Zip Code) |
Registrants telephone number, including area code: (847) 781-3600
Not applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below
if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
¨ |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02. |
Results of Operations and Financial Condition. |
On May 6, 2015, Career Education Corporation (the Company) issued a press release describing the Companys financial results for the quarter ended March 31, 2015. A copy of the
press release is being furnished as Exhibit 99.1, and the information contained therein is incorporated herein by reference. Following the issuance of the press release, the Company will host a conference call and webcast on which its financial
results for the quarter ended March 31, 2015 will be discussed. The presentation materials that will be used for the call and webcast have been posted on the Companys website and are attached as Exhibit 99.2.
The information contained in Item 2.02 of this Form 8-K, including Exhibits 99.1 and 99.2, shall not be deemed filed for purposes of
Section 18 of the Securities Exchange Act of 1934, as amended, and the information shall not be deemed incorporated by reference into any filing under the Securities Act of 1933 or Securities Exchange Act of 1934, each as amended, except as
shall be expressly set forth by specific reference in such a filing.
Item 2.05. |
Costs Associated With Exit or Disposal Activities. |
The Company has made the strategic decision to focus its resources and attention on its universities Colorado Technical University (CTU) and American InterContinental University (AIU) where
the Company has significant opportunity to continue to provide quality higher education to the adult student market. In connection with that decision, on May 1, 2015, the Board of Directors of the Company approved the teach out of the
Companys remaining 15 Sanford-Brown campuses and the pursuit of divestiture options for the Companys three additional Career College campuses: Briarcliffe College, Brooks Institute and Missouri College. If a sale of the three additional
Career College campuses is not successful, they will be taught out. As part of the process to wind down the Career Colleges reporting segment, the Company also announced that it will align its corporate overhead to support a more streamlined and
focused operating entity. The Career Colleges segment contributed $172.8 million of revenue and approximately $73.8 million of operating losses for the year ended December 31, 2014. The campuses will remain open to offer current students the
reasonable opportunity to complete their course of study. The majority of these campuses are expected to cease operations by 2017 with the remainder expected to cease operations in 2018. We expect to record approximately $40 to $50 million of
restructuring charges related to these teach-out and divestiture initiatives. These costs primarily relate to severance charges (approximately $20 - $25 million) and costs associated with exiting lease obligations (approximately $20 - $25 million).
These estimated charges are based on several assumptions, including timing of campus teach-outs, sales of campuses and implementation of support services realignment, and are subject to change. These charges will result in future cash expenditures
through 2018 for the severance related charges and through 2023 for lease obligations as certain campuses have lease terms ranging beyond their anticipated teach-out completion date. The severance and related charges will primarily be recorded
during the second quarter of 2015 and the lease charges will be recorded at the time each facility is vacated.
The Company issued a press
release regarding these matters on May 6, 2015, a copy of which is attached as Exhibit 99.3.
Cautionary Statement Regarding
Forward-Looking Statements
This current report on Form 8-K contains forward-looking statements, including statements about the expected
timing and effects of the restructuring activities. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated, including, but not limited to,
uncertainties regarding the timing and future costs associated with the Companys restructuring activities and the factors described in the Companys reports filed with the Securities and Exchange Commission from time to time. Except to
the extent required by law, the Company disclaims any obligations to update any forward-looking statements.
Item 5.02. |
Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
|
In connection with the business and organizational realignment of the Company described in Item 2.05, effective
May 6, 2015, Lysa Clemens officer title has been changed from Senior Vice President, Chief Career Schools Officer to Senior Vice President, Transitional Operations and Chief Transformation Officer, overseeing the teaching out of the
Career College campuses and right-sizing of centralized support operations. No salary or other compensation changes were made in connection with Ms. Clemens change in title and responsibilities. However, on May 1, 2015, the
Compensation Committee of the Board of Directors of the Company approved a letter agreement to be entered into with Ms. Clemens which provides for a waiver of non-compete restrictions in the event that the Company terminates her employment,
other than for cause, prior to October 31, 2016. Non-solicitation restrictions and confidentiality obligations are not impacted by this waiver. The letter agreement also confirms (i) the extension to December 31, 2015 for certain
relocation benefits provided by the Company to Ms. Clemens in connection with her June 2013 offer of employment, in a total amount not to exceed $120,000 less amounts previously reimbursed and not to include any tax assistance, and
(ii) that Ms. Clemens will be not be required to reimburse the Company for these relocation costs if the Company terminates her employment, other than for misconduct.
Item 9.01. |
Financial Statements and Exhibits. |
(d)
Exhibits.
2
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Exhibit Number |
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Description of Exhibits |
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99.1 |
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Press release of the Company dated May 6, 2015 reporting the Companys financial results for the quarter ended March 31, 2015 |
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99.2 |
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Presentation materials used by the Company in connection with its May 6, 2015 earnings conference call and webcast |
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99.3 |
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Press release of the Company dated May 6, 2015 regarding the Companys strategic focus on its University Group |
3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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CAREER EDUCATION CORPORATION |
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By: |
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/s/ David Rawden |
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David Rawden |
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Interim Chief Financial Officer |
Date: May 6, 2015
4
Exhibit Index
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Exhibit Number |
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Description of Exhibits |
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99.1 |
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Press release of the Company dated May 6, 2015 reporting the Companys financial results for the quarter ended March 31, 2015 |
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99.2 |
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Presentation materials used by the Company in connection with its May 6, 2015 earnings conference call and webcast |
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99.3 |
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Press release of the Company dated May 6, 2015 regarding the Companys strategic focus on its University Group |
5
Exhibit 99.1
CAREER EDUCATION CORPORATION REPORTS
RESULTS FOR THE FIRST QUARTER 2015
First Quarter Results in Line with Our Expectations; University Group Operating Income Increases 7.6%
Schaumburg, Ill. (May 6, 2015) Career Education Corporation (NASDAQ: CECO) today reported operating and financial results for the first quarter 2015. In a separate news release issued today, the
company also disclosed its plan to teach-out or divest its remaining Career Colleges in order to focus resources on its University Group.
Business Highlights:
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University Group operating income increased 7.6% year-over-year to $11.7 million for the quarter |
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For our continuing operations, lowered operating expenses by $13.2 million or 6.0% during the first quarter as compared to the prior year with 2015
operating expenses tracking in-line with the companys expectations |
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On track against key objectives to generate modest total student enrollment growth within our University segments; to strengthen academic outcomes, to
enhance regulatory compliance and simplify our business model; to reduce the organizational cost structure; and to successfully continue to complete the teach-out of our Transitional campuses |
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Adjusted EBITDA was $11.4 million for the University Group and Corporate for the first quarter of 2015, an improvement of $1.2 million as compared to
the prior year quarter |
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|
Adjusted EBITDA for Career Colleges, Transitional Group and discontinued operations improved to ($23.2) million, compared to ($43.0) million in the
same quarter last year, as a result of the completion of teach-outs and continued focus on reducing lease obligations |
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Company continues its sale process for Le Cordon Bleu and is engaged in discussions with numerous interested parties |
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Initiated strategy to divest and/or teach-out remaining Career Colleges and expects cumulative actions to be accretive to 2015 results excluding
restructuring charges |
Chairman and Interim CEO Ron McCray commented, Our first quarter results were in line with our
expectations as the progress of our turnaround continues to gain traction. The announcements we are making today regarding our Career Colleges will accelerate the companys path to profitability. This process will also enable us to right-size
the companys corporate overhead expenses and sharpen our focus on costs within the University Group to be more in line with comparable leading education peers. At the same time, the way we are approaching the dissolution of our Career Colleges
through a gradual teach-out or sale of institutions provides students with a reasonable opportunity to complete their programs of study.
Career Education has a bright future, with a strong University platform that positions us for long-term success. Further, our strong balance sheet
will enable us to responsibly invest in initiatives that will result in positive outcomes for our University students and help us grow our University Group in the future, McCray said.
CEC ANNOUNCES 1Q15 RESULTS
PG 2
REVENUE
For the first quarter of 2015, total revenue was $182.3 million, an 8.0 percent
decrease from $198.2 million for the first quarter of 2014. Total revenue for the University Group was $138.2 million for the first quarter of 2015, which was relatively flat compared to $139.5 million for the first quarter of 2014.
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Revenue ($ in thousands) |
|
Q1 2015 (3) |
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Q4 2014 (3) |
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Q3 2014 |
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Q2 2014 |
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Q1 2014 |
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CTU |
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$ |
85,127 |
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$ |
82,202 |
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$ |
82,410 |
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$ |
85,041 |
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$ |
86,920 |
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AIU |
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53,066 |
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44,749 |
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51,889 |
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|
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49,685 |
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|
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52,573 |
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Total University Group |
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138,193 |
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|
|
126,951 |
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|
|
134,299 |
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|
|
134,726 |
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|
|
139,493 |
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Career Colleges |
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39,772 |
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41,613 |
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|
|
40,799 |
|
|
|
42,589 |
|
|
|
47,832 |
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Corporate and Other |
|
|
39 |
|
|
|
40 |
|
|
|
52 |
|
|
|
38 |
|
|
|
100 |
|
Transitional Group (1) |
|
|
4,298 |
|
|
|
5,603 |
|
|
|
7,675 |
|
|
|
8,819 |
|
|
|
10,729 |
|
Total (2) |
|
$ |
182,302 |
|
|
$ |
174,207 |
|
|
$ |
182,825 |
|
|
$ |
186,172 |
|
|
$ |
198,154 |
|
(1) |
Campuses included in the Transitional Group are in the process of being taught out and therefore no longer enroll new students or have ceased operations subsequent to
December 31, 2014 and no longer qualify for discontinued operations treatment under Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 360 Property, Plant &
Equipment. |
(2) |
Excludes discontinued operations, which consists of the results of operations for campuses that have ceased operations prior to 2015, our Le Cordon Bleu campuses which
are held for sale and campuses that were sold and are considered distinct operations under FASB ASC Topic 205 Presentation of Financial Statements. |
(3) |
Fourth quarter of 2014 total revenue was negatively impacted by approximately $9.4 million due to the accounting for students who withdraw from one of our institutions
prior to completion of their programs. This cumulative adjustment was recorded during the fourth quarter of 2014. First quarter of 2015 was negatively impacted by approximately $1.9 million related to this change in accounting.
|
TOTAL AND NEW STUDENT ENROLLMENTS
For the first quarter of 2015, total student enrollments for our University Group were 33,800, which was relatively flat year-over-year. Total student enrollments were impacted by the teach-out of two
campuses within the University Group. Excluding these two campuses, total enrollments increased slightly as compared to the prior year quarter, marking the first time since 2010 that we have reported an increase for University total student
enrollments. We continue to expect modest total student enrollment growth for the full year 2015. New student enrollments for the University Group were 10,130 compared to 10,720 in the first quarter of 2014. This decrease was primarily attributable
to a change in the methodology used to calculate new student enrollments at AIU in 2014 related to cancelled student enrollments. Excluding the impact of this change, new student enrollments within the University Group were down only 1.2% during the
first quarter as compared to the prior year quarter.
CEC ANNOUNCES 1Q15 RESULTS
PG 3
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|
|
|
|
|
|
Q1 2015 |
|
|
Q4 2014 |
|
|
Q3 2014 |
|
|
Q2 2014 |
|
|
Q1 2014 |
|
Total Student Enrollment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CTU
(1) |
|
|
20,300 |
|
|
|
20,400 |
|
|
|
19,800 |
|
|
|
19,800 |
|
|
|
20,600 |
|
AIU
(1) |
|
|
13,500 |
|
|
|
11,600 |
|
|
|
11,500 |
|
|
|
10,800 |
|
|
|
13,300 |
|
Total University Group |
|
|
33,800 |
|
|
|
32,000 |
|
|
|
31,300 |
|
|
|
30,600 |
|
|
|
33,900 |
|
Career Colleges |
|
|
8,600 |
|
|
|
8,500 |
|
|
|
10,000 |
|
|
|
8,600 |
|
|
|
10,700 |
|
Transitional Group |
|
|
900 |
|
|
|
900 |
|
|
|
1,300 |
|
|
|
1,700 |
|
|
|
2,300 |
|
Total |
|
|
43,300 |
|
|
|
41,400 |
|
|
|
42,600 |
|
|
|
40,900 |
|
|
|
46,900 |
|
|
|
|
|
|
|
|
|
Q1 2015 |
|
|
Q4 2014 |
|
|
Q3 2014 |
|
|
Q2 2014 |
|
|
Q1 2014 |
|
New Student Enrollments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CTU |
|
|
5,040 |
|
|
|
5,670 |
|
|
|
5,460 |
|
|
|
5,280 |
|
|
|
4,820 |
|
AIU
(2) |
|
|
5,090 |
|
|
|
3,370 |
|
|
|
3,300 |
|
|
|
2,010 |
|
|
|
5,900 |
|
Total University Group |
|
|
10,130 |
|
|
|
9,040 |
|
|
|
8,760 |
|
|
|
7,290 |
|
|
|
10,720 |
|
Career Colleges |
|
|
1,830 |
|
|
|
1,140 |
|
|
|
3,150 |
|
|
|
1,580 |
|
|
|
2,780 |
|
Transitional Group (3) |
|
|
|
|
|
|
10 |
|
|
|
140 |
|
|
|
80 |
|
|
|
220 |
|
Total |
|
|
11,960 |
|
|
|
10,190 |
|
|
|
12,050 |
|
|
|
8,950 |
|
|
|
13,720 |
|
(1) |
A portion of the total student enrollment decrease for the University Group resulted from campus location teach-outs which negatively impacted the comparison of the
current quarter versus the prior year quarter as a result of the wind down of operations at one location within each segment. |
(2) |
Beginning in the second quarter of 2014, AIU changed its methodology related to certain cancelled student enrollments. As a result, the decrease in the current quarter
versus the prior year quarter was partially a result of this change in methodology. |
(3) |
Campuses within the Transitional Group no longer enroll new students; students who re-enter after 365 days are reported as new student enrollments.
|
OPERATING (LOSS) INCOME
For the first quarter of 2015, operating loss of $24.6 million increased 12.1 percent compared to an operating loss of $21.9 million in the prior year quarter primarily due to increased asset impairment
charges of $5.9 million in the current year quarter versus the prior year quarter. Total University operating income increased to $11.7 million from $10.9 million in the prior year quarter, an increase of 7.6 percent. This increase was primarily
driven by ongoing cost improvement initiatives.
|
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|
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|
|
|
|
|
|
|
|
|
|
|
Q1 2015 |
|
|
Q4 2014 |
|
|
Q3 2014 |
|
|
Q2 2014 |
|
|
Q1 2014 |
|
Operating (Loss) Income ($ in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CTU |
|
$ |
14,616 |
|
|
$ |
23,356 |
|
|
$ |
10,698 |
|
|
$ |
20,957 |
|
|
$ |
14,481 |
|
AIU |
|
|
(2,887 |
) |
|
|
(304 |
) |
|
|
(4,194 |
) |
|
|
(1,331 |
) |
|
|
(3,583 |
) |
Total University Group |
|
|
11,729 |
|
|
|
23,052 |
|
|
|
6,504 |
|
|
|
19,626 |
|
|
|
10,898 |
|
Career Colleges (1) |
|
|
(22,110 |
) |
|
|
(13,650 |
) |
|
|
(29,908 |
) |
|
|
(16,273 |
) |
|
|
(13,922 |
) |
Corporate and Other (2) |
|
|
(5,860 |
) |
|
|
(7,048 |
) |
|
|
2,528 |
|
|
|
(5,513 |
) |
|
|
(11,136 |
) |
Transitional Group |
|
|
(8,360 |
) |
|
|
(10,138 |
) |
|
|
(10,856 |
) |
|
|
(9,091 |
) |
|
|
(7,789 |
) |
Total (3) |
|
$ |
(24,601 |
) |
|
$ |
(7,784 |
) |
|
$ |
(31,732 |
) |
|
$ |
(11,251 |
) |
|
$ |
(21,949 |
) |
CEC ANNOUNCES 1Q15 RESULTS
PG 4
(1) |
Asset impairment charges of $6.0 million, $3.9 million and $12.8 million were recorded during the first quarter of 2015, fourth quarter of 2014 and third quarter of
2014, respectively. |
(2) |
Income related to a net insurance recovery of $8.6 million was recorded during the third quarter of 2014. |
(3) |
Excludes discontinued operations, which consists of the results of operations for campuses that have ceased operations prior to 2015, our LCB campuses which are held
for sale and campuses that were sold and are considered distinct operations under FASB ASC Topic 205 Presentation of Financial Statements. |
ADJUSTED EBITDA
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 operations. (See tables below and the GAAP to non-GAAP reconciliation attached to this press release for further details.)
For the first quarter of 2015, adjusted EBITDA for the University Group and Corporate increased $1.2 million compared to the prior year quarter. Adjusted
EBITDA for Career Colleges, Transitional Group and discontinued operations was ($23.2) million for the first quarter of 2015, compared to ($43.0) million in the prior year quarter. This favorability is a result of the completion of teach-out campus
operations and continued focus on reducing lease obligations once a teach-out is complete.
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q1 2015 |
|
|
Q4 2014 |
|
|
Q3 2014 |
|
|
Q2 2014 |
|
|
Q1 2014 |
|
Adjusted EBITDA ($ in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
University Group and Corporate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax loss from continuing operations |
|
$ |
(24,990 |
) |
|
$ |
(7,747 |
) |
|
$ |
(31,651 |
) |
|
$ |
(11,664 |
) |
|
$ |
(21,442 |
) |
Transitional Group operating loss |
|
|
8,360 |
|
|
|
10,138 |
|
|
|
10,856 |
|
|
|
9,091 |
|
|
|
7,789 |
|
Career Colleges operating loss |
|
|
22,110 |
|
|
|
13,650 |
|
|
|
29,908 |
|
|
|
16,273 |
|
|
|
13,922 |
|
Interest expense (income), net |
|
|
2 |
|
|
|
(38 |
) |
|
|
(120 |
) |
|
|
(177 |
) |
|
|
(25 |
) |
Depreciation and amortization (1) |
|
|
4,361 |
|
|
|
5,170 |
|
|
|
5,402 |
|
|
|
5,732 |
|
|
|
6,108 |
|
Stock-based compensation (1) |
|
|
940 |
|
|
|
966 |
|
|
|
950 |
|
|
|
1,020 |
|
|
|
1,341 |
|
Legal settlements (1) (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(400 |
) |
|
|
2,850 |
|
Asset impairments (1) |
|
|
|
|
|
|
|
|
|
|
73 |
|
|
|
|
|
|
|
77 |
|
Unused space charges (1) (3) |
|
|
556 |
|
|
|
(373 |
) |
|
|
(368 |
) |
|
|
(363 |
) |
|
|
(380 |
) |
Insurance recovery |
|
|
|
|
|
|
|
|
|
|
(8,588 |
) |
|
|
|
|
|
|
|
|
Cumulative adjustment related to revenue recognition (1) |
|
|
93 |
|
|
|
1,354 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDAUniversity Group and Corporate |
|
$ |
11,432 |
|
|
$ |
23,120 |
|
|
$ |
6,462 |
|
|
$ |
19,512 |
|
|
$ |
10,240 |
|
|
|
|
|
|
|
Memo: Advertising Expenses |
|
$ |
50,587 |
|
|
$ |
36,731 |
|
|
$ |
50,410 |
|
|
$ |
37,407 |
|
|
$ |
46,655 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Career Colleges, Transitional Group and Discontinued Operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax loss from discontinued operations |
|
$ |
(102 |
) |
|
$ |
(17,195 |
) |
|
$ |
(15,201 |
) |
|
$ |
(33,046 |
) |
|
$ |
(36,481 |
) |
Transitional Group operating loss |
|
|
(8,360 |
) |
|
|
(10,138 |
) |
|
|
(10,856 |
) |
|
|
(9,091 |
) |
|
|
(7,789 |
) |
Career Colleges operating loss |
|
|
(22,110 |
) |
|
|
(13,650 |
) |
|
|
(29,908 |
) |
|
|
(16,273 |
) |
|
|
(13,922 |
) |
Loss on sale of business (4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
311 |
|
|
|
|
|
Depreciation and amortization (4) |
|
|
2,351 |
|
|
|
7,319 |
|
|
|
7,739 |
|
|
|
8,662 |
|
|
|
9,323 |
|
Legal settlements (4) |
|
|
1,485 |
|
|
|
|
|
|
|
225 |
|
|
|
2,000 |
|
|
|
3,000 |
|
Asset impairments (4) |
|
|
6,019 |
|
|
|
14,203 |
|
|
|
14,412 |
|
|
|
7,454 |
|
|
|
(10 |
) |
Unused space charges (3) (4) |
|
|
(2,424 |
) |
|
|
(2,063 |
) |
|
|
(3,343 |
) |
|
|
920 |
|
|
|
2,873 |
|
Cumulative adjustment related to revenue recognition (4) |
|
|
(67 |
) |
|
|
1,029 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDACareer Colleges, Transitional and Discontinued Operations |
|
$ |
(23,208 |
) |
|
$ |
(20,495 |
) |
|
$ |
(36,932 |
) |
|
$ |
(39,063 |
) |
|
$ |
(43,006 |
) |
Consolidated Adjusted EBITDA |
|
$ |
(11,776 |
) |
|
$ |
2,625 |
|
|
$ |
(30,470 |
) |
|
$ |
(19,551 |
) |
|
$ |
(32,766 |
) |
(1) |
Quarterly amounts relate to the University Group and Corporate |
(2) |
Legal settlement amounts are net of insurance recoveries |
(3) |
Unused space charges include initial charge and subsequent accretion |
(4) |
Quarterly amounts relate to Career Colleges, Transitional Group and discontinued operations |
CEC ANNOUNCES 1Q15 RESULTS
PG 5
BALANCE SHEET AND CASH FLOW
Net cash used in operating activities improved to $20.2
million for the first quarter of 2015, compared to $35.4 million in the prior year quarter. The current quarter operating cash usage included cash payments of $13.5 million of real estate payments for lease obligations of vacated facilities, of
which $8.9 million was paid to exit facilities which reduced future lease obligations by $19.4 million, as well as $4.9 million of cash payments for legal settlements and separation payments for the previous CEO. We continue to expect to end 2015
with over $190 million in total cash, cash equivalents, restricted cash and short-term and long-term investments.
Capital expenditures
remained relatively flat at $3.4 million during the quarter ended March 31, 2015, and $3.5 million for the quarter ended March 31, 2014.
As of March 31, 2015 and March 31, 2014, cash, cash equivalents, restricted cash and short-term and long-term investments totaled $213.7 million and $331.7 million, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q1 2015 |
|
|
Q4 2014 (3) |
|
|
Q3 2014 |
|
|
Q2 2014 |
|
|
Q1 2014 |
|
Cash and Cash Flow from Operations ($ in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Cash, Cash Equivalents, Restricted Cash and Short-Term and Long-Term Investments (1) |
|
$ |
213,739 |
|
|
$ |
247,002 |
|
|
$ |
258,274 |
|
|
$ |
281,991 |
|
|
$ |
331,741 |
|
Cash Flow from Operations (2) |
|
$ |
(20,176 |
) |
|
$ |
(17,479 |
) |
|
$ |
(19,860 |
) |
|
$ |
(45,865 |
) |
|
$ |
(35,420 |
) |
(1) |
Consolidated cash, cash equivalents, restricted cash and short-term and long-term investment balances are quarter end balances and include both continuing and
discontinued operations. |
(2) |
Cash flow from operations includes payments of legal settlements of $2.4 million, $1.3 million and $21.6 million during the first quarter of 2015, fourth quarter of
2014 and second quarter of 2014, respectively. |
(3) |
The fourth quarter of 2014 ending cash, cash equivalents, restricted cash and investment balance includes $10.0 million of restricted cash related to borrowings under
the Credit Agreement. The $10.0 million of outstanding borrowings was repaid during the first quarter of 2015. |
CONFERENCE
CALL INFORMATION
Career Education Corporation will host a conference call on Wednesday, May 6, 2015 at 5:00 p.m. Eastern time.
Interested parties can access the live webcast of the conference call and the related presentation materials 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 39490822. 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 39490822.
CEC ANNOUNCES 1Q15 RESULTS
PG 6
ABOUT CAREER EDUCATION CORPORATION
Career Educations academic institutions offer a
high-quality education to a diverse student population in a variety of disciplines through online, on-ground and hybrid learning programs. Our two universities American InterContinental University (AIU) and Colorado Technical
University (CTU) provide degree programs through the masters or doctoral level as well as associate and bachelors levels. Both universities predominantly serve students online with career-focused degree programs that
meet the educational demands of todays busy adults. AIU and CTU continue to show innovation in higher education, advancing new personalized learning technologies like their intellipath adaptive learning platform that allow students to
more efficiently move toward earning a degree by receiving course credit for knowledge they can already demonstrate. Career Education is committed to providing high-quality education that closes the gap between learners who seek to advance their
careers and employers needing a qualified workforce.
A listing of individual campus locations and web links to Career Educations
institutions can be found at www.careered.com.
Except for the historical and present factual information contained herein, the matters set
forth in this release, including statements identified by words such as expect, believe, will, anticipate, continue, on track, position us 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: declines in enrollment; negative trends in the real estate market which
could impact the costs related to teaching out campuses and the success of our initiatives to reduce our real estate obligations; the success of our initiatives to divest our remaining Career College institutions and culinary arts campuses;
rulemaking by the U.S. Department of Education or any state and increased focus by Congress, the President and governmental agencies on for-profit education institutions; 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 gainful employment and financial responsibility standards prescribed by the U.S. Department of Education), as well as national and regional
accreditation standards and state regulatory requirements; the impact of management changes; our ability to successfully defend litigation and other claims brought against us; 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 Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2014 and its subsequent filings with the Securities and Exchange Commission.
###
CONTACT
Alpha IR Group
Sam Gibbons or Chris Hodges
(312) 445-2870
CECO@alpha-ir.com
or
Career Education Corporation
Mark Spencer
Director, Corporate Communications
(847) 585-3802
Source: Career
Education Corporation
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
March 31, 2015 |
|
|
December 31, 2014 |
|
|
|
(unaudited) |
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
CURRENT ASSETS: |
|
|
|
|
|
|
|
|
Cash and cash equivalents, unrestricted |
|
$ |
69,244 |
|
|
$ |
93,832 |
|
Restricted cash |
|
|
13,938 |
|
|
|
22,938 |
|
Short-term investments |
|
|
123,183 |
|
|
|
122,858 |
|
|
|
|
|
|
|
|
|
|
Total cash and cash equivalents, restricted cash and short-term investments |
|
|
206,365 |
|
|
|
239,628 |
|
|
|
|
Student receivables, net |
|
|
26,382 |
|
|
|
24,564 |
|
Receivables, other, net |
|
|
18,938 |
|
|
|
18,925 |
|
Prepaid expenses |
|
|
14,310 |
|
|
|
14,679 |
|
Inventories |
|
|
3,066 |
|
|
|
3,305 |
|
Other current assets |
|
|
1,983 |
|
|
|
2,384 |
|
Assets held for sale (1) |
|
|
76,211 |
|
|
|
76,846 |
|
Assets of discontinued operations |
|
|
255 |
|
|
|
473 |
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
347,510 |
|
|
|
380,804 |
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-CURRENT ASSETS: |
|
|
|
|
|
|
|
|
Property and equipment, net |
|
|
65,076 |
|
|
|
73,083 |
|
Goodwill |
|
|
87,356 |
|
|
|
87,356 |
|
Intangible assets, net |
|
|
8,064 |
|
|
|
9,819 |
|
Student receivables, net |
|
|
3,011 |
|
|
|
2,926 |
|
Other assets |
|
|
17,703 |
|
|
|
18,571 |
|
Assets of discontinued operations |
|
|
914 |
|
|
|
975 |
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS |
|
$ |
529,634 |
|
|
$ |
573,534 |
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY |
|
|
|
|
|
|
|
|
CURRENT LIABILITIES: |
|
|
|
|
|
|
|
|
Short-term borrowings |
|
$ |
|
|
|
$ |
10,000 |
|
Accounts payable |
|
|
28,677 |
|
|
|
21,968 |
|
Accrued expenses: |
|
|
|
|
|
|
|
|
Payroll and related benefits |
|
|
23,877 |
|
|
|
29,545 |
|
Advertising and production costs |
|
|
21,757 |
|
|
|
13,162 |
|
Income taxes |
|
|
1,579 |
|
|
|
1,633 |
|
Other |
|
|
19,359 |
|
|
|
21,440 |
|
Deferred tuition revenue |
|
|
34,036 |
|
|
|
37,572 |
|
Liabilities held for sale (1) |
|
|
51,036 |
|
|
|
50,357 |
|
Liabilities of discontinued operations |
|
|
13,073 |
|
|
|
15,506 |
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
193,394 |
|
|
|
201,183 |
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-CURRENT LIABILITIES: |
|
|
|
|
|
|
|
|
Deferred rent obligations |
|
|
42,641 |
|
|
|
48,381 |
|
Other liabilities |
|
|
16,662 |
|
|
|
19,178 |
|
Liabilities of discontinued operations |
|
|
18,991 |
|
|
|
22,859 |
|
|
|
|
|
|
|
|
|
|
Total non-current liabilities |
|
|
78,294 |
|
|
|
90,418 |
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS EQUITY: |
|
|
|
|
|
|
|
|
Preferred stock |
|
|
|
|
|
|
|
|
Common stock |
|
|
826 |
|
|
|
823 |
|
Additional paid-in capital |
|
|
607,643 |
|
|
|
606,531 |
|
Accumulated other comprehensive loss |
|
|
(658 |
) |
|
|
(853 |
) |
Retained deficit |
|
|
(134,284 |
) |
|
|
(109,403 |
) |
Cost of shares in treasury |
|
|
(215,581 |
) |
|
|
(215,165 |
) |
|
|
|
|
|
|
|
|
|
Total stockholders equity |
|
|
257,946 |
|
|
|
281,933 |
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY |
|
$ |
529,634 |
|
|
$ |
573,534 |
|
|
|
|
|
|
|
|
|
|
(1) |
During the first quarter of 2015, the Company made the decision to sell one of its campuses which is currently reported within the Career Colleges segment. As a
result of the decision to sell this campus, the assets and liabilities for this campus are classified as held for sale within continuing operations and are presented along with the LCB campuses as held for sale on our condensed consolidated balance
sheet as of March 31, 2015. |
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
(In thousands, except per share amounts and percentages)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Quarter Ended March 31, |
|
|
|
2015 |
|
|
% of Total Revenue |
|
|
2014 |
|
|
% of Total Revenue |
|
REVENUE: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tuition and registration fees |
|
$ |
181,401 |
|
|
|
99.5% |
|
|
$ |
196,909 |
|
|
|
99.4% |
|
Other |
|
|
901 |
|
|
|
0.5% |
|
|
|
1,245 |
|
|
|
0.6% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
|
182,302 |
|
|
|
|
|
|
|
198,154 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Educational services and facilities |
|
|
54,951 |
|
|
|
30.1% |
|
|
|
61,638 |
|
|
|
31.1% |
|
General and administrative |
|
|
139,148 |
|
|
|
76.3% |
|
|
|
148,446 |
|
|
|
74.9% |
|
Depreciation and amortization |
|
|
6,785 |
|
|
|
3.7% |
|
|
|
9,945 |
|
|
|
5.0% |
|
Asset impairment |
|
|
6,019 |
|
|
|
3.3% |
|
|
|
74 |
|
|
|
0.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
206,903 |
|
|
|
113.5% |
|
|
|
220,103 |
|
|
|
111.1% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss |
|
|
(24,601 |
) |
|
|
-13.5% |
|
|
|
(21,949 |
) |
|
|
-11.1% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER (EXPENSE) INCOME: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
160 |
|
|
|
0.1% |
|
|
|
106 |
|
|
|
0.1% |
|
Interest expense |
|
|
(162 |
) |
|
|
-0.1% |
|
|
|
(81 |
) |
|
|
0.0% |
|
Miscellaneous (expense) income |
|
|
(387 |
) |
|
|
-0.2% |
|
|
|
482 |
|
|
|
0.2% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other (expense) income |
|
|
(389 |
) |
|
|
-0.2% |
|
|
|
507 |
|
|
|
0.3% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PRETAX LOSS |
|
|
(24,990 |
) |
|
|
-13.7% |
|
|
|
(21,442 |
) |
|
|
-10.8% |
|
(Benefit from) provision for income taxes |
|
|
(211 |
) |
|
|
-0.1% |
|
|
|
220 |
|
|
|
0.1% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS FROM CONTINUING OPERATIONS |
|
|
(24,779 |
) |
|
|
-13.6% |
|
|
|
(21,662 |
) |
|
|
-10.9% |
|
Loss from discontinued operations, net of tax |
|
|
(102 |
) |
|
|
-0.1% |
|
|
|
(36,481 |
) |
|
|
-18.4% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS |
|
|
(24,881 |
) |
|
|
-13.6% |
|
|
|
(58,143 |
) |
|
|
-29.3% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER COMPREHENSIVE LOSS, net of tax: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains (losses) on investments |
|
|
195 |
|
|
|
|
|
|
|
(28 |
) |
|
|
|
|
COMPREHENSIVE LOSS |
|
$ |
(24,686 |
) |
|
|
|
|
|
$ |
(58,171 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS PER SHAREDILUTED: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations |
|
$ |
(0.37 |
) |
|
|
|
|
|
$ |
(0.32 |
) |
|
|
|
|
Loss from discontinued operations |
|
|
(0.00 |
) |
|
|
|
|
|
|
(0.55 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share |
|
$ |
(0.37 |
) |
|
|
|
|
|
$ |
(0.87 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING |
|
|
67,534 |
|
|
|
|
|
|
|
66,994 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
For the Quarter Ended March 31, |
|
|
|
2015 |
|
|
2014 |
|
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(24,881 |
) |
|
$ |
(58,143 |
) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Asset impairment |
|
|
6,019 |
|
|
|
67 |
|
Depreciation and amortization expense |
|
|
6,712 |
|
|
|
15,431 |
|
Bad debt expense |
|
|
4,275 |
|
|
|
5,852 |
|
Compensation expense related to share-based awards |
|
|
940 |
|
|
|
1,341 |
|
Loss on disposition of property and equipment |
|
|
3 |
|
|
|
26 |
|
Changes in operating assets and liabilities |
|
|
(13,244 |
) |
|
|
6 |
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities |
|
|
(20,176 |
) |
|
|
(35,420 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
Purchases of available-for-sale investments |
|
|
(15,259 |
) |
|
|
(29,810 |
) |
Sales of available-for-sale investments |
|
|
14,754 |
|
|
|
14,320 |
|
Purchases of property and equipment |
|
|
(3,369 |
) |
|
|
(3,468 |
) |
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(3,874 |
) |
|
|
(18,958 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
Issuance of common stock |
|
|
174 |
|
|
|
196 |
|
Payment on borrowings |
|
|
(10,000 |
) |
|
|
|
|
Change in restricted cash |
|
|
9,000 |
|
|
|
(384 |
) |
|
|
|
|
|
|
|
|
|
Net cash used in financing activities |
|
|
(826 |
) |
|
|
(188 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
EFFECT OF FOREIGN CURRENCY EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS: |
|
|
288 |
|
|
|
10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
NET DECREASE IN CASH AND CASH EQUIVALENTS |
|
|
(24,588 |
) |
|
|
(54,556 |
) |
DISCONTINUED OPERATIONS CASH ACTIVITY INCLUDED ABOVE: |
|
|
|
|
|
|
|
|
Add: Cash balance of discontinued operations, beginning of the period |
|
|
|
|
|
|
475 |
|
Less: Cash balance of discontinued operations, end of the period |
|
|
|
|
|
|
847 |
|
CASH AND CASH EQUIVALENTS, beginning of the period |
|
|
93,832 |
|
|
|
318,468 |
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, end of the period |
|
$ |
69,244 |
|
|
$ |
263,540 |
|
|
|
|
|
|
|
|
|
|
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED SELECTED SEGMENT INFORMATION
(In thousands, except percentages)
|
|
|
|
|
|
|
|
|
|
|
For the Quarter Ended March 31, |
|
|
|
2015 |
|
|
2014 |
|
REVENUE: |
|
|
|
|
|
|
|
|
CTU |
|
$ |
85,127 |
|
|
$ |
86,920 |
|
AIU |
|
|
53,066 |
|
|
|
52,573 |
|
|
|
|
|
|
|
|
|
|
Total University Group |
|
|
138,193 |
|
|
|
139,493 |
|
|
|
|
|
|
|
|
|
|
Career Colleges |
|
|
39,772 |
|
|
|
47,832 |
|
Corporate and Other |
|
|
39 |
|
|
|
100 |
|
|
|
|
|
|
|
|
|
|
Subtotal |
|
|
178,004 |
|
|
|
187,425 |
|
Transitional Group |
|
|
4,298 |
|
|
|
10,729 |
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
182,302 |
|
|
$ |
198,154 |
|
|
|
|
|
|
|
|
|
|
OPERATING (LOSS) INCOME: |
|
|
|
|
|
|
|
|
CTU |
|
$ |
14,616 |
|
|
$ |
14,481 |
|
AIU |
|
|
(2,887 |
) |
|
|
(3,583 |
) |
|
|
|
|
|
|
|
|
|
Total University Group |
|
|
11,729 |
|
|
|
10,898 |
|
|
|
|
|
|
|
|
|
|
Career Colleges |
|
|
(22,110 |
) |
|
|
(13,922 |
) |
Corporate and Other |
|
|
(5,860 |
) |
|
|
(11,136 |
) |
|
|
|
|
|
|
|
|
|
Subtotal |
|
|
(16,241 |
) |
|
|
(14,160 |
) |
Transitional Group |
|
|
(8,360 |
) |
|
|
(7,789 |
) |
|
|
|
|
|
|
|
|
|
Total |
|
$ |
(24,601 |
) |
|
$ |
(21,949 |
) |
|
|
|
|
|
|
|
|
|
OPERATING (LOSS) MARGIN: |
|
|
|
|
|
|
|
|
CTU |
|
|
17.2% |
|
|
|
16.7% |
|
AIU |
|
|
-5.4% |
|
|
|
-6.8% |
|
Total University Group |
|
|
8.5% |
|
|
|
7.8% |
|
Career Colleges |
|
|
-55.6% |
|
|
|
-29.1% |
|
Corporate and Other |
|
|
NM |
|
|
|
NM |
|
Subtotal |
|
|
-9.1% |
|
|
|
-7.6% |
|
Transitional Group |
|
|
NM |
|
|
|
NM |
|
Total |
|
|
-13.5% |
|
|
|
-11.1% |
|
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ITEMS (1)
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA |
|
Q1 2015 |
|
|
Q4 2014 |
|
|
Q3 2014 |
|
|
Q2 2014 |
|
|
Q1 2014 |
|
University Group and Corporate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax loss from continuing operations |
|
$ |
(24,990 |
) |
|
$ |
(7,747 |
) |
|
$ |
(31,651 |
) |
|
$ |
(11,664 |
) |
|
$ |
(21,442 |
) |
Transitional Group operating loss |
|
|
8,360 |
|
|
|
10,138 |
|
|
|
10,856 |
|
|
|
9,091 |
|
|
|
7,789 |
|
Career Colleges operating loss |
|
|
22,110 |
|
|
|
13,650 |
|
|
|
29,908 |
|
|
|
16,273 |
|
|
|
13,922 |
|
Interest expense (income), net |
|
|
2 |
|
|
|
(38 |
) |
|
|
(120 |
) |
|
|
(177 |
) |
|
|
(25 |
) |
Depreciation and amortization (3) |
|
|
4,361 |
|
|
|
5,170 |
|
|
|
5,402 |
|
|
|
5,732 |
|
|
|
6,108 |
|
Stock-based compensation (3) |
|
|
940 |
|
|
|
966 |
|
|
|
950 |
|
|
|
1,020 |
|
|
|
1,341 |
|
Legal settlements (3) (5) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(400 |
) |
|
|
2,850 |
|
Asset impairments (3) |
|
|
|
|
|
|
|
|
|
|
73 |
|
|
|
|
|
|
|
77 |
|
Unused space charges (3) (6) |
|
|
556 |
|
|
|
(373 |
) |
|
|
(368 |
) |
|
|
(363 |
) |
|
|
(380 |
) |
Insurance recovery |
|
|
|
|
|
|
|
|
|
|
(8,588 |
) |
|
|
|
|
|
|
|
|
Cumulative adjustment related to revenue recognition (3) (7) |
|
|
93 |
|
|
|
1,354 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA University Group and Corporate (2) |
|
$ |
11,432 |
|
|
$ |
23,120 |
|
|
$ |
6,462 |
|
|
$ |
19,512 |
|
|
$ |
10,240 |
|
|
|
|
|
|
|
Memo: Advertising Expenses (3) |
|
$ |
50,587 |
|
|
$ |
36,731 |
|
|
$ |
50,410 |
|
|
$ |
37,407 |
|
|
$ |
46,655 |
|
|
|
|
|
|
|
Career Colleges, Transitional Group and Discontinued Operations (4): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax loss from discontinued operations |
|
$ |
(102 |
) |
|
$ |
(17,195 |
) |
|
$ |
(15,201 |
) |
|
$ |
(33,046 |
) |
|
$ |
(36,481 |
) |
Transitional Group operating loss |
|
|
(8,360 |
) |
|
|
(10,138 |
) |
|
|
(10,856 |
) |
|
|
(9,091 |
) |
|
|
(7,789 |
) |
Career Colleges operating loss |
|
|
(22,110 |
) |
|
|
(13,650 |
) |
|
|
(29,908 |
) |
|
|
(16,273 |
) |
|
|
(13,922 |
) |
Loss on sale of business (8) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
311 |
|
|
|
|
|
Depreciation and amortization (8) |
|
|
2,351 |
|
|
|
7,319 |
|
|
|
7,739 |
|
|
|
8,662 |
|
|
|
9,323 |
|
Legal settlements (8) |
|
|
1,485 |
|
|
|
|
|
|
|
225 |
|
|
|
2,000 |
|
|
|
3,000 |
|
Asset impairments (8) |
|
|
6,019 |
|
|
|
14,203 |
|
|
|
14,412 |
|
|
|
7,454 |
|
|
|
(10 |
) |
Unused space charges (6) (8) |
|
|
(2,424 |
) |
|
|
(2,063 |
) |
|
|
(3,343 |
) |
|
|
920 |
|
|
|
2,873 |
|
Cumulative adjustment related to revenue recognition (7) (8) |
|
|
(67 |
) |
|
|
1,029 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA Career Colleges, Transitional and Discontinued Operations (2) |
|
$ |
(23,208 |
) |
|
$ |
(20,495 |
) |
|
$ |
(36,932 |
) |
|
$ |
(39,063 |
) |
|
$ |
(43,006 |
) |
Consolidated Adjusted EBITDA |
|
$ |
(11,776 |
) |
|
$ |
2,625 |
|
|
$ |
(30,470 |
) |
|
$ |
(19,551 |
) |
|
$ |
(32,766 |
) |
(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
operations. 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 operations, 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 companys 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 companys results have underperformed or exceeded expectations. |
We believe adjusted EBITDA allows us to compare our current operating results with corresponding historical periods and with the
operational performance of other companies in our industry because it does not give effect to potential differences caused by items we do not consider reflective of underlying operating performance. We also present adjusted EBITDA because we believe
it is frequently used by securities analysts, investors and other interested parties as a measure of performance. In evaluating adjusted EBITDA, investors should be aware that in the future we may incur expenses similar to the adjustments presented
above. Our presentation of adjusted EBITDA should not be construed as an inference that our future results will be unaffected by expenses that are unusual, non-routine or non-recurring. Adjusted EBITDA has limitations as an analytical tool, and you
should not consider it in isolation, or as a substitute for net income (loss), operating income (loss), or any other performance measure derived in accordance and reported under GAAP or as an alternative to cash flow from operating activities or as
a measure of our liquidity.
Non-GAAP financial measures, when viewed in a reconciliation to corresponding GAAP financial
measures, provide an additional way of viewing the companys results of operations and the factors and trends affecting the companys 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) |
Management assesses results of operations for the University Group and Corporate separately from Career Colleges and the Transitional Group. As a result,
management views adjusted EBITDA from the University Group and Corporate separately from the remainder of the organization, to assess results and make decisions. Accordingly, the Career Colleges and Transitional Group operating losses are added back
to pre-tax loss from continuing operations and subtracted from pre-tax loss from discontinued operations. |
(3) |
Quarterly amounts relate to the University Group and Corporate. |
(4) |
The Company announced the Culinary Arts segment as held for sale during the fourth quarter of 2014 and it is therefore now reported within discontinued
operations. Quarterly adjusted EBITDA amounts for Culinary Arts include: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q1 2015 |
|
|
Q4 2014 |
|
|
Q3 2014 |
|
|
Q2 2014 |
|
|
Q1 2014 |
|
Pre-tax income (loss) |
|
$ |
250 |
|
|
$ |
(15,927 |
) |
|
$ |
(12,602 |
) |
|
$ |
(19,771 |
) |
|
$ |
(18,021 |
) |
Depreciation and amortization |
|
|
|
|
|
|
4,504 |
|
|
|
4,282 |
|
|
|
4,310 |
|
|
|
4,268 |
|
Legal settlements |
|
|
775 |
|
|
|
|
|
|
|
|
|
|
|
2,000 |
|
|
|
3,000 |
|
Asset impairments |
|
|
|
|
|
|
10,320 |
|
|
|
1,523 |
|
|
|
7,400 |
|
|
|
|
|
Unused space charges |
|
|
(377 |
) |
|
|
65 |
|
|
|
213 |
|
|
|
(467 |
) |
|
|
(178 |
) |
Cumulative adjustment related to revenue recognition |
|
|
54 |
|
|
|
514 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
702 |
|
|
$ |
(524 |
) |
|
$ |
(6,584 |
) |
|
$ |
(6,528 |
) |
|
$ |
(10,931 |
) |
(5) |
Legal settlement amounts are net of insurance recoveries. |
(6) |
Unused space charges represent the net present value of remaining lease obligations less an estimated amount for sublease income as well as the subsequent
accretion of these charges. |
(7) |
Revenue recognition adjustment relates to the accounting for students who withdraw from one of our institutions prior to completion of their program. This
adjustment now reflects revenue earned on a cash-basis of accounting beginning in the fourth quarter of 2014 for these students. |
(8) |
Quarterly amounts relate to Career Colleges, the Transitional Group and discontinued operations. |
|
Dave Rawden
Interim Chief Financial Officer
Ron McCray
Chairman & Interim Chief Executive Officer
Jason Friesen
Senior Vice President, Chief University Education Officer
Lysa Clemens
Senior Vice President, Transitional Operations and Chief Transformation
Officer CAREER EDUCATION CORPORATION
FIRST QUARTER 2015
INVESTOR CONFERENCE CALL
MAY 6, 2015
Exhibit 99.2 |
|
Cautionary Statements & Disclosures
Cautionary Statements & Disclosures
2
This presentation contains forward-looking statements,
as defined in Section 21E of the Securities Exchange Act of
1934, as amended, that reflect our current expectations regarding our
future growth, results of operations, cash flows, performance
and business prospects and opportunities, as well as assumptions made by, and information currently
available to, our management. We have tried to identify
forward-looking statements by using words such as believe,
anticipate, will, expect,
plan, aim, continue to and similar expressions, but these words are not the
exclusive means of identifying forward-looking statements. These
statements are based on information currently available to us
and are subject to various risks, uncertainties, and other factors, including, but not limited to, those
discussed in Item 1A,Risk Factors of our Annual Report on
Form 10-K for the year ended December 31, 2014 that could
cause our actual growth, results of operations, financial condition, cash flows, performance and 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 any of the
forward-looking statements to reflect future events, developments,
or changed circumstances or for any other reason. Certain
financial information is presented on a non-GAAP basis. 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 ongoing
operations. 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. The most directly comparable GAAP information and a
reconciliation between the non-GAAP and GAAP figures are
provided at the end of this presentation, and this presentation (including the reconciliation) has been
posted to our website. |
|
3
Agenda
Agenda
Overview of Strategy to Divest or Teach-out Remaining
Career Colleges
Snapshot of Career Educations Future
First Quarter Results & Business Highlights
Outlook/Guidance
Q&A Session |
|
4
Update on Turnaround Plan
Update on Turnaround Plan
Divest or teach-out remaining Career Colleges
Several factors handicapped the Companys ability to operate programs,
including:
A prolonged recession with depressed hiring
Increasing costs of education and corresponding student debt levels
Challenging regulatory environment
Right-size corporate overhead
Streamline University operations
Strategy focused on Universities
Colorado Technical University (CTU)
American InterContinental University (AIU)
Accelerate Companys path to profitability |
|
5
Update on Career Colleges and Le Cordon Bleu
Update on Career Colleges and Le Cordon Bleu
Planned Actions for Career Colleges and Le Cordon Bleu
Institution
Action
Status
Sanford-Brown
Teach-Out
Teach-outs announced 5/6/15
Missouri College
Pursue Divestiture
Sale process remains ongoing
Briarcliffe College
Pursue Divestiture
Sale process remains ongoing
Brooks Institute
Asset Held For Sale
Signed purchase agreement; pending
regulatory & accreditor approval
Harrington College
Teach-Out
Announced agreement on 3/31/15 with
Columbia College Chicago to transfer
certain students prior to discontinuation
of operations
Le Cordon Bleu
Asset Held For Sale
Previously announced sale process
remains ongoing; engaged in discussions
with numerous interested parties |
|
6
Update on Career Colleges (cont.)
Update on Career Colleges (cont.)
Review of Teach-Out Process
A gradual discontinuation of operations
Affords students a reasonable opportunity to complete programs
before a campus closes
Reflects our commitment to student success
Many campuses keep serving students for 18 months or more
Minimizes negative impacts on faculty, students and staff
Solid track record of regulator and accreditor satisfaction with
teach-out process |
|
7
Review of Transitional Group (Before & After)
Review of Transitional Group (Before & After)
All teach-out schools and Career Colleges for sale will move from the Career
Colleges Group to the Transitional Group. The Company expects all campuses
selected for teach-out to be closed by 2018.
16
(1) Teach-out dates are estimated based on current student enrollment and are
subject to change. |
|
8
Snapshot of Career Educations Future
Snapshot of Career Educations Future
Business Highlights
The company maintains a competitive
advantage with its online platform, brand
awareness
and
intellipath
TM
adaptive
learning technology
Team is focused on efficient and effective
spending as it continues to streamline
operations, to improve student outcomes
and to reduce costs to be more in-line
with industry peers
University Group is profitable and
generates significant positive cash flow
28,000
29,000
30,000
31,000
32,000
33,000
34,000
35,000
0
100
200
300
400
500
600
TTM 1Q
2014
TTM 2Q
2014
TTM 3Q
2014
TTM 4Q
2014
TTM 1Q
2015
Recent University Group Performance
Trailing Twelve Months
Revenue
Operating Income
Students
The core offering of the organization will be driven by degree-oriented,
higher education offered primarily online through regionally accredited
universities.
(1) Total student enrollments are reported
as of each period end date. |
|
Continue streamlining operations and strengthening academic
outcomes
Invest in technology innovation
Intellipath adaptive learning technology is a differentiating product
Developing new mobile application at CTU to enrich student experience
Introduce relevant new programs
Two new recently approved programs rolling out at CTU in May 2015
New programs at AIU possible in 3Q15
Grow corporate partnerships
65 new accounts in 2014 plus 9 additional accounts in 2015
Access to 4 million employees who are possible future students
Students from partners increased about 40% in 1Q15 versus prior year
Generate modest University total student enrollment growth
Continue reducing Career College/Transitional losses
Priorities for the University Group
Priorities for the University Group
9 |
|
10
First Quarter University Group Highlights
First Quarter University Group Highlights
Total revenue of $138.2 million
Down 0.9% year-over-year
Total enrollments fairly flat
Operating income $11.7 million
Quarterly increase of 7.6% year-over-year
Operating margins expanded 70 basis points to 8.5%
Driven by continued execution of cost control initiatives |
|
11
Total University Student Enrollments
Total University Student Enrollments
31,300
32,000
33,900
30,600
10,800
(1)
(1) AIU had three start dates in 1Q 2014 and two start dates in 2Q 2014 which explains why
there is a spike in total enrollments in 1Q 2014 and a corresponding decrease in 2Q
2014. All other periods each had two AIU start dates.
33,800 |
|
12
Total University Student Enrollments
Total University Student Enrollments
Online Only
Online Only
28,900
28,300
30,200
28,600
(1) AIU had three start dates in 1Q 2014 and two start dates in 2Q 2014 which explains why
there is a spike in total enrollments in 1Q 2014 and a corresponding decrease in 2Q
2014. All other periods each had two AIU start dates.
10,700
(1)
30,600 |
|
13
Adjusted EBITDA for Career, Transitional, and Disc. Ops
Adjusted EBITDA for Career, Transitional, and Disc. Ops |
|
14
Financial Impacts of Restructuring
Financial Impacts of Restructuring
On track with prior Adjusted EBITDA guidance for Transitional Group
Amount needs to be redefined with Career Colleges added to group
Developing new guidance on impact of Transitional and discontinued
operations
Estimating
the
restructuring
charges
will
range
from
$40
million
to
$50
million total
Approximately $20-$25 million related to severance charges will be
paid through 2018
$20-$25 million related to lease obligations will be paid through 2023,
when we anticipate exiting the last lease
Estimate for lease obligations includes an estimate for sublease
income,
which would offset our cash obligations
Excluding restructuring charges, additional teach-outs of Career Colleges
expected to be accretive to 2015 earnings |
|
15
Strong Cash Position
Strong Cash Position
(1) Balances presented above are quarter end balances and include both continuing and
discontinued operations. |
|
16
Outlook/Guidance
Outlook/Guidance
Continue to expect positive Adjusted EBITDA from University
Modest total student enrollment growth for University in 2015
Expect additional progress reducing real estate obligations for
Transitional and discontinued operations
Continue to expect more than $40 million in operating expense
reductions in 2015 based on initiatives put in place last year
Maintaining year-end cash, cash equivalents, restricted cash and
investments balance at $190 million and do not anticipate any
impact on compliance with our Credit Agreement
Enhanced profitability and liquidity profile should help to
strengthen partnerships with banking partners |
|
17
Reconciliation of GAAP to Non-GAAP Items
Reconciliation of GAAP to Non-GAAP Items
Adjusted EBITDA
Q1 2015
Q4 2014
Q3 2014
Q2 2014
Q1 2014
University Group and Corporate:
Pre-tax loss from continuing operations
(24,990)
$
(7,747)
$
(31,651)
$
(11,664)
$
(21,442)
$
Transitional Group operating loss
8,360
10,138
10,856
9,091
7,789
Career Colleges operating loss
22,110
13,650
29,908
16,273
13,922
Interest expense (income), net
2
(38)
(120)
(177)
(25)
Depreciation and amortization
(3)
4,361
5,170
5,402
5,732
6,108
Stock-based compensation
(3)
940
966
950
1,020
1,341
Legal settlements
(3) (5)
-
-
-
(400)
2,850
-
-
73
-
77
556
(373)
(368)
(363)
(380)
-
-
(8,588)
-
-
93
1,354
-
-
-
Adjusted EBITDA--University Group and Corporate
(2)
11,432
$
23,120
$
6,462
$
19,512
$
10,240
$
Memo: Advertising Expenses
(3)
50,587
$
36,731
$
50,410
$
37,407
$
46,655
$
Career Colleges, Transitional Group and Discontinued Operations
(4)
:
Pre-tax loss from discontinued operations
(102)
$
(17,195)
$
(15,201)
$
(33,046)
$
(36,481)
$
Transitional Group operating loss
(8,360)
(10,138)
(10,856)
(9,091)
(7,789)
Career Colleges operating loss
(22,110)
(13,650)
(29,908)
(16,273)
(13,922)
Loss on sale of business
(8)
-
-
-
311
-
Depreciation and amortization
(8)
2,351
7,319
7,739
8,662
9,323
Legal settlements
(8)
1,485
-
225
2,000
3,000
6,019
14,203
14,412
7,454
(10)
(2,424)
(2,063)
(3,343)
920
2,873
(67)
1,029
-
-
-
Adjusted EBITDA--Career Colleges, Transitional and Discontinued
Operations (2)
(23,208)
$
(20,495)
$
(36,932)
$
(39,063)
$
(43,006)
$
Consolidated Adjusted EBITDA
(11,776)
$
2,625
$
(30,470)
$
(19,551)
$
(32,766)
$
Asset impairments
(3)
Unused space charges
(3) (6)
Asset impairments
(8)
Unused space charges
(6) (8)
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ITEMS
(1)
(In thousands)
Insurance recovery
Cumulative adjustment related to revenue recognition
(3) (7)
Cumulative adjustment related to revenue recognition
(7) (8) |
|
18
Reconciliation of GAAP to Non-GAAP Items
Reconciliation of GAAP to Non-GAAP Items
cont
cont
(1)
(2)
(3)
Quarterly amounts relate to the University Group and Corporate.
(4)
The Company announced the Culinary Arts segment as held for sale
during the fourth quarter of 2014 and it is therefore now reported within discontinued
operations. Quarterly adjusted EBITDA amounts for Culinary Arts
include: Q1 2015
Q4 2014
Q3 2014
Q2 2014
Q1 2014
Pre-tax income (loss)
250
$
(15,927)
$
(12,602)
$
(19,771)
$
(18,021)
$
Depreciation and amortization
-
4,504
4,282
4,310
4,268
Legal settlements
775
-
-
2,000
3,000
Asset impairments
-
10,320
1,523
7,400
-
Unused space charges
(377)
65
213
(467)
(178)
Cumulative adjustment related to
revenue recognition 54
514
-
-
-
Total
702
$
(524)
$
(6,584)
$
(6,528)
$
(10,931)
$
(5)
Legal settlement amounts are net of insurance recoveries.
(6)
(7)
(8)
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 operations. 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 operations, 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. Unused space charges represent the net present
value of remaining lease obligations less an estimated amount for sublease income as well as the subsequent accretion of these charges.
Revenue recognition adjustment relates to the accounting for students
who withdraw from one of our institutions prior to completion of their program. This adjustment now reflects revenue
earned on a cash-basis of accounting beginning in the fourth
quarter of 2014 for these students. Quarterly amounts relate to
Career Colleges, the Transitional Group and discontinued operations.
We believe adjusted EBITDA allows us to compare our current operating
results with corresponding historical periods and with the operational performance of other companies in our industry
because it does not give effect to potential differences caused by
items we do not consider reflective of underlying operating performance. We also present adjusted EBITDA because we believe
it is frequently used by securities analysts, investors and other
interested parties as a measure of performance. In evaluating adjusted EBITDA, investors should be aware that in the future we may
incur expenses similar to the adjustments presented above. Our
presentation of adjusted EBITDA should not be construed as an inference that our future results will be unaffected by expenses
that are unusual, non-routine or non-recurring. Adjusted
EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for net income (loss), operating
income (loss), or any other performance measure derived in accordance
and reported under GAAP or as an alternative to cash flow from operating activities or as a measure of our liquidity.
Non-GAAP financial measures, when viewed in a reconciliation to
corresponding GAAP financial measures, provide 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.
Management assesses results of operations for the University Group and
Corporate separately from Career Colleges and the Transitional Group. As a result, management views adjusted
EBITDA from the University Group and Corporate separately from the
remainder of the organization, to assess results and make decisions. Accordingly, the Career Colleges and Transitional
Group operating losses are added back to pre-tax loss from
continuing operations and subtracted from pre-tax loss from discontinued operations. |
Exhibit 99.3
CAREER EDUCATION CORPORATION ANNOUNCES STRATEGY TO FOCUS RESOURCES ON ITS
UNIVERSITY GROUP
All Career Colleges to be Taught Out or Divested; Excluding Restructuring Charges, Impact Expected to be
Accretive to 2015 Results
Schaumburg, Ill. (May 6, 2015) Career Education
Corporation (NASDAQ: CECO) announced today that it has made the strategic decision to focus its resources and attention on its universities Colorado Technical University (CTU) and American InterContinental University (AIU) where the
company has significant opportunities to continue to provide quality higher education to the adult student market.
In conjunction with this
announcement, the company is teaching out its Sanford-Brown institutions and pursuing strategies to divest or teach-out the remaining institutions within the Career Colleges group. As part of the process to focus its resources on the University
Group, the company also announced that it will align its corporate overhead to support a more streamlined and focused operation, and to make the University Group more efficient and effective in serving its students.
We believe in the strength of the academic programs at our Career Colleges, but the unfortunate reality is that a more difficult higher education
marketplace and challenging regulatory environment have handicapped our ability to turn these institutions around quickly and operate these programs effectively long-term. Declining student enrollment and financial losses at our Career College
campuses, combined with the Gainful Employment regulations issued last year factored into our decision, said Ron McCray, Chairman and Interim CEO. In making this decision, we have chosen a path of gradual discontinuation, or
teach-outs, rather than closing schools immediately. We are committed to both the academic and personal success of the students enrolled in our programs. Teach-outs minimize potential negative impacts on faculty, students and staff members.
Teach outs will begin immediately at the 14 Sanford-Brown College and Institute campuses, as well as Sanford-Brown online. These gradual
discontinuations of operations which can take 18 months or more, depending on the lengths of programs offered at a particular campus afford students a reasonable opportunity to complete their programs of study.
Additionally, the company has already begun efforts to sell Briarcliffe College, Brooks Institute and Missouri College. The company has a signed
definitive agreement to sell Brooks Institute, which is pending accreditor and regulatory approval. Discussions with interested parties continue for Briarcliffe College and Missouri College. Institutions that are not sold will be taught-out.
As previously announced, the company reached an agreement with Columbia College Chicago to provide an ongoing educational pathway for
students at Harrington College of Design in Chicago. The agreement, pending accreditor and regulatory approval, affords certain Harrington students the opportunity to complete their programs of study at Columbia, while others will continue their
education with Harrington but at designated classroom and office space provided by Columbia College Chicago.
Also previously announced, the
Le Cordon Bleu Colleges of Culinary Arts in North America continue to be marketed for sale. Career Education is engaged in discussions with numerous interested parties and the process remains ongoing.
As part of these changes, Lysa Clemens, Senior Vice President and Chief Career Schools Officer, today becomes Senior Vice President, Transitional
Operations and Chief Transformation Officer, overseeing the teaching-out of campuses and right-sizing of centralized support operations. As Career Education has successfully accomplished in previous campus teach-outs, the company intends to serve
students well, while managing costs through the gradual process of closing.
The Company expects to record approximately $40 million to $50 million of restructuring charges related to
these teach-out and divestiture initiatives. These estimated charges are based on several assumptions, including timing of campus teach-outs, sales of campuses and implementation of support services realignment, and are subject to change. These
costs primarily relate to severance charges (approximately $20 million - $25 million) and costs associated with exiting lease obligations (approximately $20 million - $25 million) and will
result in future cash expenditures through 2018 for severance related charges and through 2023 for lease obligations at certain campuses which have lease terms ranging beyond their anticipated teach-out completion date. The severance and
related charges will primarily be recorded during the second quarter of 2015 and the lease charges will be recorded at the time each facility is vacated. The majority of the teach-outs are expected to be complete by 2017 and any remaining teach-outs
are expected to be complete by 2018. Excluding restructuring charges, these initiatives are expected to be accretive to 2015 earnings. Specific timing and impacts of these actions on Career Educations cash balance are currently being
approximated, but the company does not anticipate any impact on its ability to maintain compliance with its Credit Agreement.
The
future direction and core offering of Career Education will be driven by degree-oriented, higher education offered through our regionally accredited universities, where we maintain a core competitive advantage in terms of their academic platforms,
brand awareness and intellipath adaptive learning technology. We will continue to invest in academic technologies, new program development and building relationships with employers needing qualified employees. We will emerge as a stronger
company, with a competitive margin profile, a strong balance sheet, and a leadership position in private sector higher education, McCray said.
CONFERENCE CALL INFORMATION
Career Education Corporation will host a conference call on
Wednesday, May 6, 2015 at 5 p.m. Eastern time to discuss its first quarter results and answer questions from the institutional investment community. Interested parties can access the live webcast of the conference call and the related
presentation materials 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 39490822. 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 39490822.
ABOUT CAREER
EDUCATION CORPORATION
Career Educations academic institutions offer a high-quality education to a diverse student population in a
variety of disciplines through online, on-ground and hybrid learning programs. Our two universities American InterContinental University (AIU) and Colorado Technical University (CTU) provide degree programs
through the masters or doctoral level as well as associate and bachelors levels. Both universities predominantly serve students online with career-focused degree programs that meet the educational demands of todays busy adults. AIU
and CTU continue to show innovation in higher education, advancing new personalized learning technologies like their intellipath adaptive learning platform that allow students to more efficiently move toward earning a degree by receiving
course credit for knowledge they can already demonstrate. Career Education is committed to providing high-quality education that closes the gap between learners who seek to advance their careers and employers needing a qualified workforce.
A listing of individual campus locations and web links to Career Educations institutions can be found at www.careered.com.
Except for the historical and present factual information contained herein, the matters set forth in this
release, including statements identified by words such as expect, believe, will, anticipate, intend, continued 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: declines in enrollment; negative trends in the real estate market which could impact the costs related to teaching
out campuses and the success of our initiatives to reduce our real estate obligations; the success of our initiatives to divest our remaining Career College institutions and culinary arts campuses; rulemaking by the U.S. Department of Education or
any state and increased focus by Congress, the President and governmental agencies on for-profit education institutions; 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 gainful employment and financial responsibility standards prescribed by the U.S. Department of Education), as well as national and regional accreditation standards and state regulatory
requirements; the impact of management changes; our ability to successfully defend litigation and other claims brought against us; 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 Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2014 and its subsequent filings with the Securities and Exchange Commission.
###
CONTACT
Investors:
Alpha IR Group
Sam Gibbons or Chris Hodges
(312) 445-2870
CECO@alpha-ir.com
or
Media:
Career Education Corporation
Mark Spencer
Director, Corporate
Communications
(847) 585-3802
Source: Career Education Corporation
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