Attached files
| file | filename |
|---|---|
| 8-K - 8-K - PERDOCEO EDUCATION Corp | d815466d8k.htm |
| EX-99.2 - EX-99.2 - PERDOCEO EDUCATION Corp | d815466dex992.htm |
Exhibit 99.1
CAREER EDUCATION CORPORATION REPORTS
THIRD QUARTER 2014 RESULTS
Improved enrollment trends, continued strong profitability of the University group and execution against strategic plan key objectives positions the Company for continued progress in 2015
Schaumburg, Ill. (November 6, 2014) – Career Education Corporation (NASDAQ: CECO) today reported operating and financial results for the third quarter of 2014.
Third Quarter Highlights
| • | Seventh consecutive quarter of sequential improvement in the decline of total student enrollments. |
| • | For the first time in over three years, Colorado Technical University (“CTU”) experienced revenue growth compared to the prior year quarter, driven by positive new student enrollment growth. |
| • | For the first time in over three years, Culinary Arts experienced revenue growth compared to the prior year quarter, driven by positive total student enrollment growth. |
| • | Revenue from ongoing operations, which excludes Transitional Schools, was down 3.9% to $219.6 million. |
| • | Lowered operating expenses by $26.7 million or 8.9% compared to the same quarter last year. |
| • | Ended the third quarter with $250.9 million in cash, cash equivalents and short-term investments and increased the borrowing capacity under the Company’s existing revolving credit facility from $70 million to $120 million with our existing lender. |
| • | Adjusted EBITDA from ongoing operations, which excludes Transitional Schools, improved nearly 7% to negative $15.0 million in the quarter, despite declines in revenue as compared to the prior year quarter. |
“The results of our hard work to stabilize and transform Career Education were quite visible in this quarter’s results as we witnessed another period of solid sequential improvement across our organization,” said President and CEO Scott W. Steffey. “In particular our University group has delivered over $55 million in operating income over the last twelve months and is experiencing year-over-year fundamental new student growth which provides a strong base of support that anchors our future. We have reduced our operating expenses by over $84 million for the current year to date, surpassing our $75 million annual goal in just nine months. Further, we see numerous opportunities to continue to lower our cost base, while simultaneously improving our organization’s commitment to enroll, educate and place our students to succeed professionally in the future. We expect to be adjusted EBITDA positive in our ongoing operations for the fourth quarter of this year. Additionally, we will enter 2015 as a much stronger organization and we believe we are well positioned to achieve our objective of ongoing operations being adjusted EBITDA positive for the full year 2015.”
CEC ANNOUNCES 3Q14 RESULTS …PG 2
REVENUE
| • | Total revenue was $227.5 million for the third quarter of 2014 compared to $244.2 million for the third quarter of 2013, a decline of 6.8%. |
| • | For ongoing operations, which excludes Transitional Schools, total revenue was $219.6 million for the third quarter of 2014 compared to $228.6 million for the third quarter of 2013, a decline of 3.9%, due to approximately 300 fewer total student enrollments. Both CTU and Culinary Arts grew revenue for the third quarter of 2014 as compared to the third quarter of 2013. |
| Q3 2014 | Q2 2014 | Q1 2014 | Q4 2013 | Q3 2013 | ||||||||||||||||
| Revenue ($ in thousands) |
||||||||||||||||||||
| CTU (1) |
$ | 82,410 | $ | 85,041 | $ | 86,920 | $ | 87,582 | $ | 82,185 | ||||||||||
| AIU (2) |
51,889 | 49,685 | 52,573 | 49,088 | 56,284 | |||||||||||||||
| Total University Schools |
134,299 | 134,726 | 139,493 | 136,670 | 138,469 | |||||||||||||||
| Career Colleges |
40,799 | 42,589 | 47,832 | 49,924 | 45,900 | |||||||||||||||
| Culinary Arts |
44,499 | 42,566 | 42,247 | 42,778 | 44,256 | |||||||||||||||
| Total Career Schools |
85,298 | 85,155 | 90,079 | 92,702 | 90,156 | |||||||||||||||
| Corporate and Other |
52 | 38 | 100 | — | — | |||||||||||||||
| Total Ongoing Operations |
|
219,649
|
|
|
219,919
|
|
|
229,672
|
|
|
229,372
|
|
|
228,625
|
| |||||
| Transitional Schools (3) |
7,803 | 9,115 | 11,233 | 13,500 | 15,545 | |||||||||||||||
| Total (4) |
$ | 227,452 | $ | 229,034 | $ | 240,905 | $ | 242,872 | $ | 244,170 | ||||||||||
| (1) | Revenue of $0.5 million, $0.7 million, $0.9 million, $1.0 million and $1.0 million for each of the sequential quarters presented above beginning with the third quarter of 2014, respectively, are attributed to a campus in the process of being closed that is still reported within the CTU segment in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 280 – Segment Reporting. |
| (2) | Revenue of $0.3 million, $0.4 million, $0.6 million, $0.7 million and $1.0 million for each of the sequential quarters presented above beginning with the third quarter of 2014, respectively, are attributed to a campus in the process of being closed that is still reported within the AIU segment in accordance with FASB ASC Topic 280 – Segment Reporting. |
| (3) | Campuses included in our Transitional Schools segment are currently being taught out and no longer enroll new students. |
| (4) | Excludes discontinued operations, which consists of the results of operations for campuses that have ceased operations or were sold and are considered distinct operations under FASB ASC Topic 205 – Presentation of Financial Statements. |
CEC ANNOUNCES 3Q14 RESULTS…PG 3
TOTAL STUDENT ENROLLMENT
| • | For ongoing operations, which excludes Transitional Schools, total student enrollment decreased 0.6% as of September 30, 2014 as compared to September 30, 2013. Culinary Arts reported total student enrollment growth of 26.3% as of September 30, 2014 as compared to September 30, 2013, as a result of the reintroduction of the Associate degree program which is a longer term program as compared to the Certificate program. Total student enrollments for ongoing operations increased 8.9% sequentially from the second quarter of 2014. |
| Q3 2014 | Q2 2014 | Q1 2014 | Q4 2013 | Q3 2013 | ||||||||||||||||
| Total Student Enrollment |
||||||||||||||||||||
| CTU (1) |
19,800 | 19,800 | 20,600 | 20,800 | 20,500 | |||||||||||||||
| AIU (2) |
11,500 | 10,800 | 13,300 | 11,600 | 12,000 | |||||||||||||||
| Total University Schools |
31,300 | 30,600 | 33,900 | 32,400 | 32,500 | |||||||||||||||
| Career Colleges |
10,000 | 8,600 | 10,700 | 10,000 | 11,200 | |||||||||||||||
| Culinary Arts |
10,100 | 8,000 | 8,400 | 7,900 | 8,000 | |||||||||||||||
| Total Career Schools |
20,100 | 16,600 | 19,100 | 17,900 | 19,200 | |||||||||||||||
| Total Ongoing Operations |
|
51,400
|
|
|
47,200
|
|
|
53,000
|
|
|
50,300
|
|
|
51,700
|
| |||||
| Transitional Schools |
1,300 | 1,800 | 2,300 | 2,800 | 3,500 | |||||||||||||||
| Total |
52,700 | 49,000 | 55,300 | 53,100 | 55,200 | |||||||||||||||
| (1) | Total student enrollments of 100 for each of the third and second quarters of 2014 and 200 for each of the first quarter of 2014 and the fourth and third quarter of 2013 are attributed to a campus in the process of being closed that is still reported within the CTU segment in accordance with FASB ASC Topic 280 – Segment Reporting. |
| (2) | Total student enrollments of less than 100 for each of the third and second quarters of 2014, 100 for each of the first quarter of 2014 and fourth quarter of 2013 and 200 for the third quarter of 2013 are attributed to a campus in the process of being closed that is still reported within the AIU segment in accordance with FASB ASC Topic 280 – Segment Reporting. |
CEC ANNOUNCES 3Q14 RESULTS…PG 4
NEW STUDENT ENROLLMENTS
| • | For ongoing operations, which excludes Transitional Schools, new student enrollments increased 9.2% for the third quarter of 2014 compared to the prior year quarter. CTU, AIU and Culinary Arts each showed new student enrollment growth for the current quarter as compared to the prior year quarter. The new student enrollment growth of 14.5% for Culinary Arts is a result of timing of start dates in the prior year quarter as compared to the current year quarter. Excluding the impact of this shift in timing, new student enrollments would have declined 10.6% as compared to the prior year quarter for Culinary Arts. |
| Q3 2014 | Q2 2014 | Q1 2014 | Q4 2013 | Q3 2013 | ||||||||||||||||
| New Student Enrollments |
||||||||||||||||||||
| CTU (1) |
5,460 | 5,280 | 4,820 | 5,260 | 4,780 | |||||||||||||||
| AIU (1) |
3,300 | 2,010 | 5,900 | 2,520 | 2,880 | |||||||||||||||
| Total University Schools |
8,760 | 7,290 | 10,720 | 7,780 | 7,660 | |||||||||||||||
| Career Colleges |
3,150 | 1,580 | 2,780 | 1,550 | 3,430 | |||||||||||||||
| Culinary Arts |
4,180 | 1,890 | 2,300 | 2,010 | 3,650 | |||||||||||||||
| Total Career Schools |
7,330 | 3,470 | 5,080 | 3,560 | 7,080 | |||||||||||||||
| Total Ongoing Operations |
|
16,090
|
|
|
10,760
|
|
|
15,800
|
|
|
11,340
|
|
|
14,740
|
| |||||
| Transitional Schools (2) |
140 | 80 | 220 | 170 | 600 | |||||||||||||||
| Total |
16,230 | 10,840 | 16,020 | 11,510 | 15,340 | |||||||||||||||
| (1) | The increase in new student enrollments for the current quarter as compared to the prior year quarter is driven by both underlying positive performance trends and the implementation of a new student orientation process in the first quarter of 2014, which replaced our previously provided student readiness programs; this change impacts the way we calculate new student enrollments. This internal policy change had a positive impact on 2014 new student enrollments as compared to 2013. |
| (2) | Campuses within the Transitional Schools segment no longer enroll new students; students who re-enter after 365 days are reported as new student enrollments. |
CEC ANNOUNCES 3Q14 RESULTS …PG 5
OPERATING (LOSS) INCOME
| • | Consolidated operating losses of $44.9 million for the third quarter of 2014 declined by $10.0 million compared to the third quarter of 2013. |
| • | For ongoing operations, which excludes Transitional Schools, operating losses improved by $11.3 million or 25.2% as compared to the prior year quarter, driven by reduced operating expenses and income recognized for a net insurance recovery of $8.6 million in the current year quarter as compared to the prior year quarter. |
| • | Within Career Colleges, increased asset impairment charges recorded during the third quarter of 2014 as compared to the prior year quarter drove the operating margin decline. Within Culinary Arts, favorability for the current quarter as compared to the prior year quarter was driven by higher asset impairment charges recorded during the prior year quarter. |
| Q3 2014 | Q2 2014 | Q1 2014 | Q4 2013 | Q3 2013 | ||||||||||||||||
| Operating (Loss) Income ($ in thousands) |
||||||||||||||||||||
| CTU |
$ | 10,698 | $ | 20,957 | $ | 14,481 | $ | 22,146 | $ | 9,615 | ||||||||||
|
AIU (1) |
(4,194 | ) | (1,331 | ) | (3,583 | ) | (3,793 | ) | (5,930 | ) | ||||||||||
| Total University Schools |
6,504 | 19,626 | 10,898 | 18,353 | 3,685 | |||||||||||||||
| Career Colleges (2) |
(29,908 | ) | (16,273 | ) | (13,922 | ) | (12,035 | ) | (17,242 | ) | ||||||||||
| Culinary Arts (3) |
(12,602 | ) | (19,772 | ) | (18,046 | ) | (28,409 | ) | (23,655 | ) | ||||||||||
| Total Career Schools |
(42,510 | ) | (36,045 | ) | (31,968 | ) | (40,444 | ) | (40,897 | ) | ||||||||||
| Corporate and Other (4) |
2,528 | (5,513 | ) | (11,136 | ) | (8,621 | ) | (7,561 | ) | |||||||||||
| Total Ongoing Operations |
(33,478 | ) | (21,932 | ) | (32,206 | ) | (30,712 | ) | (44,773 | ) | ||||||||||
| Transitional Schools |
(11,390 | ) | (9,642 | ) | (8,259 | ) | (12,944 | ) | (10,099 | ) | ||||||||||
| Total (5) |
$ | (44,868 | ) | $ | (31,574 | ) | $ | (40,465 | ) | $ | (43,656 | ) | $ | (54,872 | ) | |||||
| (1) | Operating losses of $1.0 million, $0.9 million and $0.7 million for the third quarter of 2014, each of the quarters from the fourth quarter of 2013 through the second quarter of 2014 and the third quarter of 2013, respectively, are attributed to a campus in the process of being closed that is still reported within the AIU segment in accordance with FASB ASC Topic 280 – Segment Reporting. |
| (2) | Asset impairment charges of $12.8 million ($0.19 per diluted share) and $2.9 million ($0.03 per diluted share) were recorded during the third quarter of 2014 and fourth quarter of 2013, respectively. |
| (3) | Trade name impairment charges of $1.5 million ($0.02 per diluted share), $7.4 million ($0.11 per diluted share) and $10.7 million ($0.10 per diluted share) were recorded during the third quarter of 2014, second quarter of 2014 and third quarter of 2013, respectively. |
| (4) | Income related to a net insurance recovery of $8.6 million ($0.13 per diluted share) was recorded during the third quarter of 2014. |
| (5) | Excludes discontinued operations, which consists of the results of operations for campuses that have ceased operations or were sold and are considered distinct operations under FASB ASC Topic 205 – Presentation of Financial Statements. |
CEC ANNOUNCES 3Q14 RESULTS …PG 6
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 ongoing operations and is viewed as an important metric to how management views the business. (See tables below and the GAAP to non-GAAP reconciliation attached to this press release for further details.)
| • | Adjusted EBITDA for ongoing operations, which excludes Transitional Schools, improved $1.1 million or 6.8% for the third quarter of 2014 as compared to the same quarter last year as revenue declines of $9.0 million were more than offset by reduced operating expenses. |
| • | Adjusted EBITDA for Transitional Schools and Discontinued Operations was negative $15.4 million, an improvement of $8.8 million as compared to the third quarter of 2013 and a $3.3 million sequential improvement compared to the second quarter of 2014. This favorability is a result of the completion of teach-out campus operations and continued focus on exiting lease obligations once a teach-out is complete. |
| Q3 2014 | Q2 2014 | Q1 2014 | Q4 2013 | Q3 2013 | ||||||||||||||||
| Adjusted EBITDA ($ in thousands) |
||||||||||||||||||||
| Ongoing Operations: |
||||||||||||||||||||
| Pre-tax loss from continuing operations |
$ | (44,787 | ) | $ | (31,984 | ) | $ | (39,930 | ) | $ | (43,458 | ) | $ | (54,989 | ) | |||||
| Transitional Schools operating loss |
11,390 | 9,642 | 8,259 | 12,944 | 10,099 | |||||||||||||||
| Interest (income) expense, net |
(120 | ) | (177 | ) | (25 | ) | 65 | 15 | ||||||||||||
| Loss (gain) on sale of business |
— | — | — | (68 | ) | 39 | ||||||||||||||
| Depreciation and amortization (1) |
11,950 | 12,554 | 13,029 | 13,661 | 13,990 | |||||||||||||||
| Stock-based compensation (1) |
950 | 1,020 | 1,341 | 1,580 | 1,713 | |||||||||||||||
| Legal settlements (1) (2) |
— | 1,600 | 5,850 | 17,000 | 300 | |||||||||||||||
| Asset impairments (1) |
14,396 | 7,403 | 74 | 3,050 | 11,513 | |||||||||||||||
| Unused space charges (1) (3) |
(226 | ) | (879 | ) | (606 | ) | (2,924 | ) | 1,184 | |||||||||||
| Insurance recovery |
(8,588 | ) | — | — | — | — | ||||||||||||||
| Adjusted EBITDA—Ongoing Operations (4) |
$ | (15,035 | ) | $ | (821 | ) | $ | (12,008 | ) | $ | 1,850 | $ | (16,136 | ) | ||||||
| Adjusted EBITDA per diluted share |
$ | (0.22 | ) | $ | (0.01 | ) | $ | (0.18 | ) | $ | 0.03 | $ | (0.24 | ) | ||||||
| Memo: Advertising Expenses (1) |
$ | 69,875 | $ | 56,224 | $ | 69,379 | $ | 56,077 | $ | 70,936 | ||||||||||
| Transitional Schools and Discontinued Operations: |
||||||||||||||||||||
| Pre-tax (loss) income from discontinued operations |
$ | (2,065 | ) | $ | (12,726 | ) | $ | (17,993 | ) | $ | 117,272 | $ | (21,712 | ) | ||||||
| Transitional Schools operating loss |
(11,390 | ) | (9,642 | ) | (8,259 | ) | (12,944 | ) | (10,099 | ) | ||||||||||
| Loss (gain) on sale of business (5) |
— | 311 | — | (130,109 | ) | — | ||||||||||||||
| International Schools operating (income) loss |
— | — | — | (11,434 | ) | 7,608 | ||||||||||||||
| Interest (income) expense, net |
— | — | — | (51 | ) | (21 | ) | |||||||||||||
| Depreciation and amortization (5) |
1,191 | 1,840 | 2,402 | 2,765 | 2,961 | |||||||||||||||
| Legal settlements (2) (5) |
225 | — | — | — | — | |||||||||||||||
| Asset impairments (5) |
89 | 51 | (7 | ) | 3,933 | 72 | ||||||||||||||
| Unused space charges (3) (5) |
(3,485 | ) | 1,436 | 3,099 | 5,766 | (3,092 | ) | |||||||||||||
| Adjusted EBITDA—Transitional and Discontinued Operations |
$ |
(15,435 |
) |
$ |
(18,730 |
) |
$ |
(20,758 |
) |
$ |
(24,802 |
) |
$ |
(24,283 |
) | |||||
| Adjusted EBITDA per diluted share |
$ | (0.23 | ) | $ | (0.28 | ) | $ | (0.31 | ) | $ | (0.37 | ) | $ | (0.36 | ) | |||||
| (1) | Quarterly amounts relate to ongoing operations, excluding Transitional Schools. |
| (2) | Legal settlement amounts are net of insurance recoveries. |
| (3) | Unused space charges include initial charge and subsequent accretion. |
| (4) | Adjusted EBITDA amounts of -$1.0 million, -$0.9 million, -$0.8 million, -$0.8 million and -$0.6 million for each of the sequential quarters presented above beginning with the third quarter of 2014, respectively, are attributed to a campus in the process of being closed that is still reported within the AIU segment in accordance with FASB ASC Topic 280 - Segment Reporting. |
| (5) | Quarterly amounts relate to Transitional Schools and Discontinued Operations. |
CEC ANNOUNCES 3Q14 RESULTS …PG 7
LOSS PER SHARE
| • | Net loss per diluted share of -$0.71 and -$1.30 were reported for the third quarters of 2014 and 2013, respectively. |
| Q3 2014 | Q2 2014 | Q1 2014 | Q4 2013 | Q3 2013 | ||||||||||||||||
| Loss Per Share (shares in thousands) |
||||||||||||||||||||
| Loss per diluted share from continuing operations |
$ | (0.68 | ) | $ | (0.50 | ) | $ | (0.60 | ) | $ | (1.45 | ) | $ | (0.52 | ) | |||||
| (Loss) income per diluted share from discontinued operations |
(0.03 | ) | (0.19 | ) | (0.27 | ) | 0.99 | (0.78 | ) | |||||||||||
| Net loss per diluted share |
$ | (0.71 | ) | $ | (0.69 | ) | $ | (0.87 | ) | $ | (0.46 | ) | $ | (1.30 | ) | |||||
| Diluted shares outstanding |
67,209 | 67,157 | 66,994 | 66,916 | 66,849 | |||||||||||||||
BALANCE SHEET AND CASH FLOW
| • | Net cash used in operating activities increased to $101.1 million for the year to date ended September 30, 2014 compared to $77.8 million for the year to date ended September 30, 2013. This increase is driven primarily by the operating loss for the current year to date, legal settlement payments of approximately $21.6 million paid during the second quarter of 2014, as well as $6.3 million of cash payments during the current year to date related to early lease terminations. |
| • | Net cash used in operating activities increased to $19.9 million for the current year quarter compared to $10.9 million in the prior year quarter primarily attributed to the prior year comparison including the seasonal impact of our International cash flow of approximately $27 million. The third quarter typically contained a seasonal peak in cash collections for that business that is not reflected in current year numbers as this business was sold in the fourth quarter of last year. |
| Q3 2014 | Q2 2014 | Q1 2014 | Q4 2013 | Q3 2013 | ||||||||||||||||
| Cash and Cash Flow from Operations ($ in thousands) |
||||||||||||||||||||
| Consolidated Cash, Cash Equivalents and Short-term Investments (1) |
$ | 250,900 | $ | 274,617 | $ | 315,661 | $ | 363,099 | $ | 227,515 | ||||||||||
| Cash Flow from Operations (2) |
$ | (19,860 | ) | $ | (45,865 | ) | $ | (35,420 | ) | $ | (7,962 | ) | $ | (10,867 | ) | |||||
| (1) | Consolidated cash, cash equivalents and short-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 $21.6 million, $5.0 million and $10.7 million during the second quarter of 2014, fourth quarter of 2013 and third quarter of 2013, respectively. |
CEC ANNOUNCES 3Q14 RESULTS …PG 8
CONFERENCE CALL INFORMATION
Career Education Corporation will host a conference call on Thursday, November 6, 2014 at 10:00 a.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 38261000. 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 38261000.
ABOUT CAREER EDUCATION CORPORATION
The colleges, institutions and universities that are part of the Career Education Corporation (“CEC”) family offer high-quality education to a diverse student population in a variety of career-oriented disciplines through online, on-ground and hybrid learning program offerings. In addition to its online offerings, Career Education serves students from campuses throughout the United States offering programs that lead to doctoral, master’s, bachelor’s and associate degrees, as well as to diplomas and certificates.
CEC’s institutions include both universities that provide degree programs through the master or doctoral level and colleges that provide programs through the associate and bachelor level. The University group includes American InterContinental University (“AIU”) and Colorado Technical University (“CTU”) – predominantly serving students online with career-focused degree programs that meet the educational demands of today’s busy adults. The Career Schools group offers career-centered education primarily through ground-based campuses and includes Briarcliffe College, Brooks Institute, Harrington College of Design, Le Cordon Bleu North America (“LCB”), Missouri College and Sanford-Brown Institutes and Colleges (“SBI” and “SBC,” respectively). Through its colleges, institutions and universities, CEC is committed to providing high-quality education, enabling students to graduate and pursue rewarding career opportunities.
A detailed listing of individual campus locations and web links to Career Education’s colleges, institutions and universities 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,” “anticipate,” “believe,” “intend,” “will,” “continue to” 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. We derive many of our forward-looking statements from our operating budgets and forecasts, which are based on many detailed assumptions, and we caution that it is very difficult to predict the impact of known factors, and it is impossible for us to anticipate all factors that could affect our actual results. 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. 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; 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 “90-10 Rule” and financial responsibility and student loan default rate standards prescribed by the U.S. Department of Education), as well as national and regional accreditation standards and state regulatory requirements; changes in the real estate leasing market and the success of our efforts to lower our ongoing lease obligations; 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 Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013 and its subsequent filings with the Securities and Exchange Commission.
###
CEC ANNOUNCES 3Q14 RESULTS …PG 9
CONTACT
| Investors: | Chris Hodges or Sam Gibbons |
Alpha IR Group
(312) 445-2870
CECO@alpha-ir.com
| Media: | Mark Spencer |
Director, Corporate Communications
(847) 585-3802
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
| September 30, 2014 (1) |
December 31, 2013 (1) |
|||||||
| ASSETS |
||||||||
| CURRENT ASSETS: |
||||||||
| Cash and cash equivalents, unrestricted |
$ | 126,926 | $ | 318,468 | ||||
| Restricted cash |
13,238 | 12,564 | ||||||
| Short-term investments |
110,734 | 31,592 | ||||||
|
|
|
|
|
|||||
| Total cash and cash equivalents and short-term investments |
250,898 | 362,624 | ||||||
| Student receivables, net |
32,463 | 33,530 | ||||||
| Receivables, other, net |
18,516 | 27,336 | ||||||
| Prepaid expenses |
20,297 | 19,649 | ||||||
| Inventories |
5,192 | 6,586 | ||||||
| Deferred income tax assets, net |
3,606 | 3,606 | ||||||
| Other current assets |
4,719 | 3,445 | ||||||
| Assets of discontinued operations |
604 | 3,241 | ||||||
|
|
|
|
|
|||||
| Total current assets |
336,295 | 460,017 | ||||||
|
|
|
|
|
|||||
| NON-CURRENT ASSETS: |
||||||||
| Property and equipment, net |
138,248 | 179,835 | ||||||
| Goodwill |
87,356 | 87,356 | ||||||
| Intangible assets, net |
29,062 | 40,117 | ||||||
| Student receivables, net |
4,235 | 5,179 | ||||||
| Deferred income tax assets, net |
10,644 | 10,644 | ||||||
| Other assets, net |
17,167 | 17,834 | ||||||
| Assets of discontinued operations |
1,029 | 4,063 | ||||||
|
|
|
|
|
|||||
| TOTAL ASSETS |
$ | 624,036 | $ | 805,045 | ||||
|
|
|
|
|
|||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| CURRENT LIABILITIES: |
||||||||
| Accounts payable |
$ | 29,660 | $ | 24,477 | ||||
| Accrued expenses: |
||||||||
| Payroll and related benefits |
34,035 | 34,160 | ||||||
| Advertising and production costs |
25,472 | 17,585 | ||||||
| Income taxes |
1,506 | 14,994 | ||||||
| Other |
26,722 | 40,609 | ||||||
| Deferred tuition revenue |
60,241 | 59,967 | ||||||
| Liabilities of discontinued operations |
16,014 | 15,640 | ||||||
|
|
|
|
|
|||||
| Total current liabilities |
193,650 | 207,432 | ||||||
|
|
|
|
|
|||||
| NON-CURRENT LIABILITIES: |
||||||||
| Deferred rent obligations |
70,578 | 77,280 | ||||||
| Other liabilities |
25,695 | 27,553 | ||||||
| Liabilities of discontinued operations |
28,429 | 37,396 | ||||||
|
|
|
|
|
|||||
| Total non-current liabilities |
124,702 | 142,229 | ||||||
|
|
|
|
|
|||||
| STOCKHOLDERS’ EQUITY: |
||||||||
| Preferred stock |
— | — | ||||||
| Common stock |
821 | 819 | ||||||
| Additional paid-in capital |
604,789 | 600,904 | ||||||
| Accumulated other comprehensive loss |
(746 | ) | (503 | ) | ||||
| Retained (deficit) earnings |
(84,017 | ) | 68,658 | |||||
| Cost of shares in treasury |
(215,163 | ) | (214,494 | ) | ||||
|
|
|
|
|
|||||
| Total stockholders’ equity |
305,684 | 455,384 | ||||||
|
|
|
|
|
|||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
$ | 624,036 | $ | 805,045 | ||||
|
|
|
|
|
|||||
| (1) | During the third quarter of 2014, the Company completed the teach-out of three Transitional Schools. As a result, all current and prior periods reflect these campuses as components of discontinued operations. |
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
(In thousands, except per share amounts and percentages)
| For the Quarter Ended September 30, (1) | ||||||||||||||||
| 2014 | % of Total Revenue |
2013 | % of Total Revenue |
|||||||||||||
| REVENUE: |
||||||||||||||||
| Tuition and registration fees |
$ | 225,626 | 99.2% | $ | 240,261 | 98.4% | ||||||||||
| Other |
1,826 | 0.8% | 3,909 | 1.6% | ||||||||||||
|
|
|
|
|
|||||||||||||
| Total revenue |
227,452 | 244,170 | ||||||||||||||
|
|
|
|
|
|||||||||||||
| OPERATING EXPENSES: |
||||||||||||||||
| Educational services and facilities |
82,892 | 36.4% | 90,308 | 37.0% | ||||||||||||
| General and administrative |
161,897 | 71.2% | 181,688 | 74.4% | ||||||||||||
| Depreciation and amortization |
13,070 | 5.7% | 15,461 | 6.3% | ||||||||||||
| Asset impairment |
14,461 | 6.4% | 11,585 | 4.7% | ||||||||||||
|
|
|
|
|
|||||||||||||
| Total operating expenses |
272,320 | 119.7% | 299,042 | 122.5% | ||||||||||||
|
|
|
|
|
|||||||||||||
| Operating loss |
(44,868 | ) | -19.7% | (54,872 | ) | -22.5% | ||||||||||
|
|
|
|
|
|||||||||||||
| OTHER INCOME (EXPENSE): |
||||||||||||||||
| Interest income |
223 | 0.1% | 194 | 0.1% | ||||||||||||
| Interest expense |
(103 | ) | 0.0% | (209 | ) | -0.1% | ||||||||||
| Loss on sale of business |
— | 0.0% | (39 | ) | 0.0% | |||||||||||
| Miscellaneous expense |
(39 | ) | 0.0% | (63 | ) | 0.0% | ||||||||||
|
|
|
|
|
|||||||||||||
| Total other income (expense) |
81 | 0.0% | (117 | ) | 0.0% | |||||||||||
|
|
|
|
|
|||||||||||||
| PRETAX LOSS |
(44,787 | ) | -19.7% | (54,989 | ) | -22.5% | ||||||||||
| Provision for (benefit from) income taxes |
1,116 | 0.5% | (20,087 | ) | -8.2% | |||||||||||
|
|
|
|
|
|||||||||||||
| LOSS FROM CONTINUING OPERATIONS |
(45,903 | ) | -20.2% | (34,902 | ) | -14.3% | ||||||||||
| Loss from discontinued operations, net of tax |
(2,065 | ) | -0.9% | (52,162 | ) | -21.4% | ||||||||||
|
|
|
|
|
|||||||||||||
| NET LOSS |
(47,968 | ) | -21.1% | (87,064 | ) | -35.7% | ||||||||||
|
|
|
|
|
|||||||||||||
| OTHER COMPREHENSIVE (LOSS) INCOME, net of tax: |
||||||||||||||||
| Foreign currency translation adjustments |
— | 6,474 | ||||||||||||||
| Unrealized (losses) gains on investments |
(108 | ) | 36 | |||||||||||||
|
|
|
|
|
|||||||||||||
| Total other comprehensive (loss) income |
(108 | ) | 6,510 | |||||||||||||
|
|
|
|
|
|||||||||||||
| COMPREHENSIVE LOSS |
$ | (48,076 | ) | $ | (80,554 | ) | ||||||||||
|
|
|
|
|
|||||||||||||
| NET LOSS PER SHARE - DILUTED: |
||||||||||||||||
| Loss from continuing operations |
$ | (0.68 | ) | $ | (0.52 | ) | ||||||||||
| Loss from discontinued operations |
(0.03 | ) | (0.78 | ) | ||||||||||||
|
|
|
|
|
|||||||||||||
| Net loss per share |
$ | (0.71 | ) | $ | (1.30 | ) | ||||||||||
|
|
|
|
|
|||||||||||||
| DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING |
67,209 | 66,849 | ||||||||||||||
|
|
|
|
|
|||||||||||||
| (1) | During the third quarter of 2014, the Company completed the teach-out of three Transitional Schools. As a result, all current and prior periods reflect these campuses as components of discontinued operations. |
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
(In thousands, except per share amounts and percentages)
| For the Year to Date Ended September 30, (1) | ||||||||||||||||
| 2014 | % of Total Revenue |
2013 | % of Total Revenue |
|||||||||||||
| REVENUE: |
||||||||||||||||
| Tuition and registration fees |
$ | 690,588 | 99.0% | $ | 767,243 | 98.7% | ||||||||||
| Other |
6,803 | 1.0% | 10,446 | 1.3% | ||||||||||||
|
|
|
|
|
|||||||||||||
| Total revenue |
697,391 | 777,689 | ||||||||||||||
|
|
|
|
|
|||||||||||||
| OPERATING EXPENSES: |
||||||||||||||||
| Educational services and facilities |
243,690 | 34.9% | 276,487 | 35.6% | ||||||||||||
| General and administrative |
507,607 | 72.8% | 559,591 | 72.0% | ||||||||||||
| Depreciation and amortization |
41,063 | 5.9% | 47,410 | 6.1% | ||||||||||||
| Asset impairment |
21,938 | 3.1% | 15,668 | 2.0% | ||||||||||||
|
|
|
|
|
|||||||||||||
| Total operating expenses |
814,298 | 116.8% | 899,156 | 115.6% | ||||||||||||
|
|
|
|
|
|||||||||||||
| Operating loss |
(116,907 | ) | -16.8% | (121,467 | ) | -15.6% | ||||||||||
|
|
|
|
|
|||||||||||||
| OTHER INCOME (EXPENSE): |
||||||||||||||||
| Interest income |
614 | 0.1% | 1,199 | 0.2% | ||||||||||||
| Interest expense |
(292 | ) | 0.0% | (1,127 | ) | -0.1% | ||||||||||
| Loss on sale of business |
— | 0.0% | (6,973 | ) | -0.9% | |||||||||||
| Miscellaneous expense |
(116 | ) | 0.0% | (62 | ) | 0.0% | ||||||||||
|
|
|
|
|
|||||||||||||
| Total other income (expense) |
206 | 0.0% | (6,963 | ) | -0.9% | |||||||||||
|
|
|
|
|
|||||||||||||
| PRETAX LOSS |
(116,701 | ) | -16.7% | (128,430 | ) | -16.5% | ||||||||||
| Provision for (benefit from) income taxes |
3,190 | 0.5% | (55,964 | ) | -7.2% | |||||||||||
|
|
|
|
|
|||||||||||||
| LOSS FROM CONTINUING OPERATIONS |
(119,891 | ) | -17.2% | (72,466 | ) | -9.3% | ||||||||||
| Loss from discontinued operations, net of tax |
(32,784 | ) | -4.7% | (61,191 | ) | -7.9% | ||||||||||
|
|
|
|
|
|||||||||||||
| NET LOSS |
(152,675 | ) | -21.9% | (133,657 | ) | -17.2% | ||||||||||
|
|
|
|
|
|||||||||||||
| OTHER COMPREHENSIVE (LOSS) INCOME, net of tax: |
||||||||||||||||
| Foreign currency translation adjustments |
— | 7,542 | ||||||||||||||
| Unrealized (losses) gains on investments |
(243 | ) | 41 | |||||||||||||
|
|
|
|
|
|||||||||||||
| Total other comprehensive (loss) income |
(243 | ) | 7,583 | |||||||||||||
|
|
|
|
|
|||||||||||||
| COMPREHENSIVE LOSS |
$ | (152,918 | ) | $ | (126,074 | ) | ||||||||||
|
|
|
|
|
|||||||||||||
| NET LOSS PER SHARE - DILUTED: |
||||||||||||||||
| Loss from continuing operations |
$ | (1.79 | ) | $ | (1.09 | ) | ||||||||||
| Loss from discontinued operations |
(0.48 | ) | (0.91 | ) | ||||||||||||
|
|
|
|
|
|||||||||||||
| Net loss per share |
$ | (2.27 | ) | $ | (2.00 | ) | ||||||||||
|
|
|
|
|
|||||||||||||
| DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING: |
67,121 | 66,663 | ||||||||||||||
|
|
|
|
|
|||||||||||||
| (1) | During 2014, the Company completed the teach-out of twenty campuses; three in the third quarter of 2014. In addition, the Company sold Everblue Training Institute (Career Colleges segment) and Sanford-Brown Pittsburgh (Transitional Schools segment). As a result, all current and prior periods reflect these campuses as components of discontinued operations. |
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
| For the Year to Date Ended September 30, |
||||||||
| 2014 | 2013 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
| Net loss |
$ | (152,675 | ) | $ | (133,657 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||
| Asset impairment |
22,006 | 15,708 | ||||||
| Depreciation and amortization expense |
42,966 | 56,619 | ||||||
| Bad debt expense |
19,107 | 22,028 | ||||||
| Compensation expense related to share-based awards |
3,311 | 5,119 | ||||||
| Loss on sale of businesses, net |
311 | 6,973 | ||||||
| Loss on disposition of property and equipment |
32 | 103 | ||||||
| Changes in operating assets and liabilities |
(36,203 | ) | (50,735 | ) | ||||
|
|
|
|
|
|||||
| Net cash used in operating activities |
(101,145 | ) | (77,842 | ) | ||||
|
|
|
|
|
|||||
| CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||
| Purchases of available-for-sale investments |
(131,487 | ) | (40,842 | ) | ||||
| Sales of available-for-sale investments |
51,540 | 52,485 | ||||||
| Purchases of property and equipment |
(10,558 | ) | (16,602 | ) | ||||
| Payments of cash upon sale of businesses |
(387 | ) | (2,525 | ) | ||||
| Other |
— | 31 | ||||||
|
|
|
|
|
|||||
| Net cash used in investing activities |
(90,892 | ) | (7,453 | ) | ||||
|
|
|
|
|
|||||
| CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||
| Issuance of common stock |
575 | 792 | ||||||
| Payment on borrowings |
— | (80,000 | ) | |||||
| Change in restricted cash |
(674 | ) | 85,314 | |||||
| Payments of capital lease obligations |
— | (210 | ) | |||||
|
|
|
|
|
|||||
| Net cash (used in) provided by financing activities |
(99 | ) | 5,896 | |||||
|
|
|
|
|
|||||
| EFFECT OF FOREIGN CURRENCY EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS: |
121 | 1,518 | ||||||
|
|
|
|
|
|||||
| NET DECREASE IN CASH AND CASH EQUIVALENTS |
(192,015 | ) | (77,881 | ) | ||||
| DISCONTINUED OPERATIONS CASH ACTIVITY INCLUDED ABOVE: |
||||||||
| Add: Cash balance of discontinued operations, beginning of the period |
475 | 128,207 | ||||||
| Less: Cash balance of discontinued operations, end of the period |
2 | 133,098 | ||||||
| CASH AND CASH EQUIVALENTS, beginning of the period |
318,468 | 112,415 | ||||||
|
|
|
|
|
|||||
| CASH AND CASH EQUIVALENTS, end of the period |
$ | 126,926 | $ | 29,643 | ||||
|
|
|
|
|
|||||
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED SELECTED SEGMENT INFORMATION
(In thousands, except percentages)
| For the Quarter Ended September 30, | ||||||||
| 2014 | 2013 | |||||||
| REVENUE: |
||||||||
| CTU |
$ | 82,410 | $ | 82,185 | ||||
| AIU |
51,889 | 56,284 | ||||||
|
|
|
|
|
|||||
| Total University Schools |
134,299 | 138,469 | ||||||
|
|
|
|
|
|||||
| Career Colleges (1) |
40,799 | 45,900 | ||||||
| Culinary Arts |
44,499 | 44,256 | ||||||
|
|
|
|
|
|||||
| Total Career Schools |
85,298 | 90,156 | ||||||
|
|
|
|
|
|||||
| Corporate and Other |
52 | — | ||||||
|
|
|
|
|
|||||
| Subtotal |
219,649 | 228,625 | ||||||
| Transitional Schools (1) (2) |
7,803 | 15,545 | ||||||
|
|
|
|
|
|||||
| Total |
$ | 227,452 | $ | 244,170 | ||||
|
|
|
|
|
|||||
| OPERATING (LOSS) INCOME: |
||||||||
| CTU |
$ | 10,698 | $ | 9,615 | ||||
| AIU |
(4,194 | ) | (5,930 | ) | ||||
|
|
|
|
|
|||||
| Total University Schools |
6,504 | 3,685 | ||||||
|
|
|
|
|
|||||
| Career Colleges (1) (3) |
(29,908 | ) | (17,242 | ) | ||||
| Culinary Arts (4) |
(12,602 | ) | (23,655 | ) | ||||
|
|
|
|
|
|||||
| Total Career Schools |
(42,510 | ) | (40,897 | ) | ||||
|
|
|
|
|
|||||
| Corporate and Other (5) |
2,528 | (7,561 | ) | |||||
|
|
|
|
|
|||||
| Subtotal |
(33,478 | ) | (44,773 | ) | ||||
| Transitional Schools (1) (2) |
(11,390 | ) | (10,099 | ) | ||||
|
|
|
|
|
|||||
| Total |
$ | (44,868 | ) | $ | (54,872 | ) | ||
|
|
|
|
|
|||||
| OPERATING (LOSS) MARGIN: |
||||||||
| CTU |
13.0% | 11.7% | ||||||
| AIU |
-8.1% | -10.5% | ||||||
| Total University Schools |
4.8% | 2.7% | ||||||
| Career Colleges (1) (3) |
-73.3% | -37.6% | ||||||
| Culinary Arts (4) |
-28.3% | -53.5% | ||||||
| Total Career Schools |
-49.8% | -45.4% | ||||||
| Corporate and Other (5) |
NM | NM | ||||||
| Subtotal |
-15.2% | -19.6% | ||||||
| Transitional Schools (1) (2) |
-146.0% | -65.0% | ||||||
| Total |
-19.7% | -22.5% | ||||||
| (1) | The Company announced the teach-out of three additional campuses during the third quarter of 2014. As a result, prior period results have been recast to report the schools being taught out within the Transitional Schools segment. |
| (2) | During the third quarter of 2014, the Company completed the teach-out of three Transitional Schools. As a result, all current and prior periods reflect these campuses as components of discontinued operations. |
| (3) | The third quarter of 2014 expenses include $11.3 million of fixed asset impairment charges and a $1.5 million trade name impairment charge. |
| (4) | The third quarters of 2014 and 2013 expenses include an $1.5 million and $10.7 million trade name impairment charge, respectively. |
| (5) | The operating income for the third quarter of 2014 includes an $8.6 million insurance recovery. |
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED SELECTED SEGMENT INFORMATION
(In thousands, except percentages)
| For the Year to Date Ended September 30, | ||||||||
| 2014 | 2013 | |||||||
| REVENUE: |
||||||||
|
CTU (1) |
$ | 254,371 | $ | 258,504 | ||||
| AIU |
154,147 | 182,518 | ||||||
|
|
|
|
|
|||||
| Total University Schools |
408,518 | 441,022 | ||||||
|
|
|
|
|
|||||
| Career Colleges (1) (2) |
131,220 | 147,065 | ||||||
| Culinary Arts |
129,312 | 134,771 | ||||||
|
|
|
|
|
|||||
| Total Career Schools |
260,532 | 281,836 | ||||||
|
|
|
|
|
|||||
| Corporate and Other |
190 | — | ||||||
|
|
|
|
|
|||||
| Subtotal |
669,240 | 722,858 | ||||||
| Transitional Schools (1) (2) |
28,151 | 54,831 | ||||||
|
|
|
|
|
|||||
| Total |
$ | 697,391 | $ | 777,689 | ||||
|
|
|
|
|
|||||
| OPERATING (LOSS) INCOME: |
||||||||
|
CTU (1) |
$ | 46,136 | $ | 42,932 | ||||
| AIU |
(9,108 | ) | (1,763 | ) | ||||
|
|
|
|
|
|||||
| Total University Schools |
37,028 | 41,169 | ||||||
|
|
|
|
|
|||||
| Career Colleges (1) (2) (3) |
(60,103 | ) | (56,617 | ) | ||||
| Culinary Arts (4) |
(50,420 | ) | (52,809 | ) | ||||
|
|
|
|
|
|||||
| Total Career Schools |
(110,523 | ) | (109,426 | ) | ||||
|
|
|
|
|
|||||
| Corporate and Other (5) |
(14,121 | ) | (24,979 | ) | ||||
|
|
|
|
|
|||||
| Subtotal |
(87,616 | ) | (93,236 | ) | ||||
| Transitional Schools (1) (2) |
(29,291 | ) | (28,231 | ) | ||||
|
|
|
|
|
|||||
| Total |
$ | (116,907 | ) | $ | (121,467 | ) | ||
|
|
|
|
|
|||||
| OPERATING (LOSS) MARGIN: |
||||||||
|
CTU (1) |
18.1% | 16.6% | ||||||
| AIU |
-5.9% | -1.0% | ||||||
| Total University Schools |
9.1% | 9.3% | ||||||
| Career Colleges (1) (2) (3) |
-45.8% | -38.5% | ||||||
| Culinary Arts (4) |
-39.0% | -39.2% | ||||||
| Total Career Schools |
-42.4% | -38.8% | ||||||
| Corporate and Other (5) |
NM | NM | ||||||
| Subtotal |
-13.1% | -12.9% | ||||||
| Transitional Schools (1) (2) |
-104.0% | -51.5% | ||||||
| Total |
-16.8% | -15.6% | ||||||
| (1) | During 2014, the Company completed the teach-out of twenty campuses; three in the third quarter. In addition, the Company sold Everblue Training Institute (Career Colleges segment) and Sanford-Brown Pittsburgh (Transitional Schools segment). As a result, all current and prior periods reflect these campuses as components of discontinued operations. |
| (2) | The Company announced the teach-out of three additional campuses. As a result, all current and prior periods reflect these campuses within the Transitional Schools segment. |
| (3) | Year to date 2014 expenses include $11.3 million of fixed asset impairment charges and a $1.5 million trade name impairment charge. Year to date 2013 expenses include $8.6 million of legal settlements and a $1.7 million trade name impairment charge. |
| (4) | Year to date 2014 and 2013 expenses include an $8.9 million and $13.0 million trade name impairment charge, respectively. |
| (5) | The operating income for the year to date ended September 30, 2014 includes an $8.6 million insurance recovery. |
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ITEMS (1)
(In thousands, except per share amounts)
| Q3 2014 | Q2 2014 | Q1 2014 | Q4 2013 | Q3 2013 | ||||||||||||||||
| Adjusted EBITDA |
||||||||||||||||||||
| Ongoing Operations: |
||||||||||||||||||||
| Pre-tax loss from continuing operations |
$ | (44,787 | ) | $ | (31,984 | ) | $ | (39,930 | ) | $ | (43,458 | ) | $ | (54,989 | ) | |||||
| Transitional Schools operating loss |
11,390 | 9,642 | 8,259 | 12,944 | 10,099 | |||||||||||||||
| Interest (income) expense, net |
(120 | ) | (177 | ) | (25 | ) | 65 | 15 | ||||||||||||
| Loss (gain) on sale of business |
— | — | — | (68 | ) | 39 | ||||||||||||||
| Depreciation and amortization (3) |
11,950 | 12,554 | 13,029 | 13,661 | 13,990 | |||||||||||||||
| Stock-based compensation (3) |
950 | 1,020 | 1,341 | 1,580 | 1,713 | |||||||||||||||
| Legal settlements (3) (4) |
— | 1,600 | 5,850 | 17,000 | 300 | |||||||||||||||
| Asset impairments (3) (5) |
14,396 | 7,403 | 74 | 3,050 | 11,513 | |||||||||||||||
| Unused space charges (3) (6) |
(226 | ) | (879 | ) | (606 | ) | (2,924 | ) | 1,184 | |||||||||||
| Insurance recovery |
(8,588 | ) | — | — | — | — | ||||||||||||||
| Adjusted EBITDA—Ongoing Operations (2) |
$ | (15,035 | ) | $ | (821 | ) | $ | (12,008 | ) | $ | 1,850 | $ | (16,136 | ) | ||||||
| Adjusted EBITDA per diluted share |
$ | (0.22 | ) | $ | (0.01 | ) | $ | (0.18 | ) | $ | 0.03 | $ | (0.24 | ) | ||||||
| Memo: Advertising Expenses (3) |
$ | 69,875 | $ | 56,224 | $ | 69,379 | $ | 56,077 | $ | 70,936 | ||||||||||
| Transitional Schools and Discontinued Operations: |
||||||||||||||||||||
| Pre-tax (loss) income from discontinued operations |
$ | (2,065 | ) | $ | (12,726 | ) | $ | (17,993 | ) | $ | 117,272 | $ | (21,712 | ) | ||||||
| Transitional Schools operating loss |
(11,390 | ) | (9,642 | ) | (8,259 | ) | (12,944 | ) | (10,099 | ) | ||||||||||
| Loss (gain) on sale of business (8) |
— | 311 | — | (130,109 | ) | — | ||||||||||||||
| International Schools operating (income) loss (7) |
— | — | — | (11,434 | ) | 7,608 | ||||||||||||||
| Interest (income) expense, net |
— | — | — | (51 | ) | (21 | ) | |||||||||||||
| Depreciation and amortization (8) |
1,191 | 1,840 | 2,402 | 2,765 | 2,961 | |||||||||||||||
| Legal settlements (8) |
225 | — | — | — | — | |||||||||||||||
| Asset impairments (8) |
89 | 51 | (7 | ) | 3,933 | 72 | ||||||||||||||
| Unused space charges (6) (8) |
(3,485 | ) | 1,436 | 3,099 | 5,766 | (3,092 | ) | |||||||||||||
| Adjusted EBITDA—Transitional and Discontinued Operations (2) |
$ |
(15,435 |
) |
$ |
(18,730 |
) |
$ |
(20,758 |
) |
$ |
(24,802 |
) |
$ |
(24,283 |
) | |||||
| Adjusted EBITDA per diluted share |
$ | (0.23 | ) | $ | (0.28 | ) | $ | (0.31 | ) | $ | (0.37 | ) | $ | (0.36 | ) | |||||
| (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 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 ongoing 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. |
| 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, 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) | Management assesses results of operations for ongoing operations, which excludes Transitional Schools, separately from Transitional Schools. As schools within the Transitional Schools segment are fully taught-out, these schools will be recast as components of Discontinued Operations. As a result, management views adjusted EBITDA from ongoing operations separately from Transitional Schools and Discontinued Operations to assess results and make decisions. Accordingly, Transitional Schools operating loss is added back to pre-tax loss from continuing operations and subtracted from pre-tax loss from discontinued operations. |
| (3) | Quarterly amounts relate to ongoing operations, which excludes Transitional Schools. |
| (4) | Legal settlement amounts are net of insurance recoveries and are recorded within the following segments: |
| Q3 2014 | Q2 2014 | Q1 2014 | Q4 2013 | Q3 2013 | ||||||||||||||||
| CTU |
$ | — | $ | — | $ | (900 | ) | $ | 1,300 | $ | — | |||||||||
| Career Colleges |
— | — | — | 200 | 300 | |||||||||||||||
| Culinary Arts |
— | 2,000 | 3,000 | 15,500 | — | |||||||||||||||
| Corporate & Other |
— | (400 | ) | 3,750 | — | — | ||||||||||||||
| Total |
$ | — | $ | 1,600 | $ | 5,850 | $ | 17,000 | $ | 300 | ||||||||||
| (5) | Asset impairments primarily relate to impairment charges within Culinary Arts of $1.5 million, $7.4 million and $10.7 million which were recorded during the third quarter of 2014, second quarter of 2014 and third quarter of 2013, respectively, and within Career Colleges of $12.8 million and $2.9 million recorded during the third quarter of 2014 and fourth quarter of 2013, respectively. |
| (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) | The International Schools segment was sold during the fourth quarter of 2013. As such, management excludes operations from the International Schools when assessing results and trends of Transitional Schools and Discontinued Operations. |
| (8) | Quarterly amounts relate to Transitional Schools and Discontinued Operations, excluding International. |