Market Overview

Career Education Corporation Reports Results for Second Quarter and Year to Date 2018

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Operating income increased 68.6% as compared to the prior year to date

University Group new student enrollments increased 7.0% as compared
to the prior year quarter

Career Education Corporation (NASDAQ:CECO) today reported operating and
financial results for the second quarter and year to date ended June 30,
2018.

 

SECOND QUARTER AND YEAR TO DATE 2018 RESULTS

 
Total Company   Operating income of $31.8 million for the current year to date
increased 68.6 percent as compared to the prior year to date
Operating income of $11.3 million for the current quarter compared
to prior year quarter operating income of $9.1 million
Ended the quarter with $190.1 million in cash, cash equivalents,
restricted cash and available-for-sale short-term investments
       
 
University Group and

Corporate

Operating income of $50.3 million for the current year to date
increased 8.4 percent supported by a revenue increase of 1.4 percent
to $289.6 million as well as efficiency in our advertising expense
Operating income of $23.5 million as compared to $23.3 million in
the prior year quarter
Revenue of $141.8 million increased 3.2 percent as compared to
$137.4 million in the prior year quarter
       
 
University Group Key Metrics New student enrollments increased 7.0 percent versus the prior year
quarter
Total student enrollment decreased 2.8 percent versus the prior year
quarter but is expected to show growth during the third quarter
driven by the timing impact of the AIU academic calendar redesign
       
 

Teach-Outs

Operating loss of $12.2 million as compared to $14.2 million in the
prior year quarter, with the improvement primarily driven by
substantial completion of the teach-outs
Three campuses with approximately ten students remain as of June 30,
2018 with all programs of study expected to be completed by the end
of 2018
       

"We finished the first half with good momentum in key operating metrics,
driven by organic investments aimed at improving student onboarding and
learning experiences," said Todd Nelson, President and Chief Executive
Officer. "Given our positive momentum we will continue to pursue further
investments in technology and student-serving processes and initiatives.
Overall, we are taking a measured approach to balance our objectives of
responsible and sustainable growth with our commitments to improve
student experiences, retention and academic outcomes and we remain
confident in the long-term academic value proposition of our
Universities."

REVENUE

For the quarter and year to date ended June 30, 2018, total revenue was
$142.0 million and $290.1 million representing a decrease of 2.9 percent
and 5.9 percent, respectively, compared to total revenue of $146.2
million and $308.3 million for the prior year quarter and year to date
ended June 30, 2017. The decrease was primarily driven by declining
revenues within our teach-out campuses. As of June 30, 2018, there are
three campuses remaining to complete their teach-outs during 2018.

Total revenue for the University Group was $141.8 million and $289.6
million representing an increase of 3.2 percent and 1.4 percent,
respectively, for the quarter and year to date ended June 30, 2018 as
compared to the prior year periods.

   
For The Quarter Ended June 30, For the Year to Date Ended June 30,
Revenue ($ in thousands) 2018     2017    

Increase
(Decrease)

2018     2017    

Increase
(Decrease)

CTU $ 93,266 $ 91,204   2.3 % $ 187,873 $ 185,239   1.4 %
AIU   48,579   46,215 5.1 %   101,700   100,468 1.2 %
Total University Group 141,845 137,419 3.2 % 289,573 285,707 1.4 %
Corporate and Other     NM     NM
Subtotal 141,845 137,419 3.2 % 289,573 285,707 1.4 %
All Other Campuses (1)   191   8,803 -97.8 %   528   22,624 -97.7 %
Total $ 142,036 $ 146,222 -2.9 % $ 290,101 $ 308,331 -5.9 %
(1)   Campuses included in All Other Campuses are in the process of being
taught out or have completed their teach-out as of June 30, 2018.
Previously, these campuses were reported within two segments, the
former Transitional Group and Culinary Arts segments.
 

TOTAL AND NEW STUDENT ENROLLMENTS

For the second quarter of 2018, new student enrollments for the
University Group increased 7.0 percent as compared to the prior year
quarter. The increase in new student enrollments was positively
impacted by investments in student-serving processes, including our
admissions and advising centers in Arizona as well as the academic
calendar redesign within AIU.

   
As of June 30,

Total Student Enrollments

2018     2017    

Increase
(Decrease)

CTU   21,700   21,000   3.3 %
AIU   10,000   11,600 -13.8 %
Total University Group   31,700   32,600 -2.8 %
All Other Campuses (1)   10   1,000 NM
Total   31,710   33,600 -5.6 %
   
For The Quarter Ended June 30, For the Year to Date Ended June 30,

New Student Enrollments

2018     2017    

Increase
(Decrease)

2018     2017    

Increase
(Decrease)

CTU   5,460   5,160   5.8 %   10,720   10,190   5.2 %
AIU   3,260   2,990 9.0 %   5,650   7,920 -28.7 %
Total University Group   8,720   8,150 7.0 %   16,370   18,110 -9.6 %
 

(1) All Other Campuses no longer enroll new students.

 

OPERATING INCOME (LOSS)

For the quarter and year to date ended June 30, 2018, the Company
recorded operating income of $11.3 million and $31.8 million,
respectively, compared to operating income of $9.1 million and $18.9
million for the quarter and year to date ended June 30, 2017,
respectively. The University Group and Corporate recorded operating
income of $23.5 million and $50.3 million for the quarter and year to
date ended June 30, 2018, respectively, an increase of 1.0 percent and
8.4 percent as compared to the respective prior year periods.

   
For The Quarter Ended June 30, For the Year to Date Ended June 30,

Operating Income ($ in thousands)

2018   2017  

Increase
(Decrease)

2018   2017  

Increase
(Decrease)

CTU $ 27,116 $ 28,064   -3.4 % $ 54,301 $ 51,084   6.3 %
AIU   (1,585 )   1,075 -247.4 %   2,551   5,731 -55.5 %
Total University Group 25,531 29,139 -12.4 % 56,852 56,815 0.1 %
Corporate and Other (1)   (2,000 )   (5,847 ) 65.8 %   (6,542 )   (10,396 ) 37.1 %
Subtotal 23,531 23,292 1.0 % 50,310 46,419 8.4 %
All Other Campuses   (12,228 )   (14,188 ) 13.8 %   (18,478 )   (27,534 ) 32.9 %
Total $ 11,303 $ 9,104 24.2 % $ 31,832 $ 18,885 68.6 %
(1)   Corporate and Other benefitted from a recovery of $2.5 million for
past claims recorded during the current quarter and year to date.
 

ADJUSTED OPERATING INCOME (LOSS)

The Company believes it is useful to present non-GAAP financial
measures, which exclude certain significant and non-cash 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.)

As shown in the table below, adjusted operating income for the
University Group and Corporate was $26.8 million and $56.1 million for
the quarter and year to date ended June 30, 2018, respectively. Adjusted
operating loss for All Other Campuses was $3.0 million and $6.4 million
for the quarter and year to date ended June 30, 2018, respectively.

       
For The Quarter Ended June 30,   For the Year to Date Ended June 30,

Adjusted Operating Income (Loss)

2018   2017 2018   2017

University Group and Corporate:

Operating income $ 23,531 $ 23,292 $ 50,310 $ 46,419
Depreciation and amortization 2,085 2,559 4,552 5,090
Unused space charges (1)   1,213   -   1,213   -
Adjusted Operating Income --

University Group and Corporate

$ 26,829 $ 25,851 $ 56,075 $ 51,509
 
Increase (Decrease) 3.8 % 8.9 %
 

All Other Campuses

Operating loss $ (12,228 ) $ (14,188 ) $ (18,478 ) $ (27,534 )
Depreciation and amortization 18 1,317 133 2,696
Unused space charges (1) 3,198 1,654 2,447 3,811
Significant legal settlements   5,970   -   9,461   -
Adjusted Operating Loss --

All Other Campuses

$ (3,042 ) $ (11,217 ) $ (6,437 ) $ (21,027 )
 
Increase (Decrease) 72.9 % 69.4 %
(1)   Unused space charges represent the net present value of remaining
lease obligations for vacated space less an estimated amount for
sublease income. As terminations or subleases for leased spaces
occur, estimated amounts may be reversed or increased.
 

BALANCE SHEET AND CASH FLOW

Net cash provided by operating activities was $3.7 million compared to
net cash provided by operating activities of $4.8 million for the
quarters ended June 30, 2018 and 2017, respectively. For the year to
date ended June 30, 2018, net cash flows provided by operating
activities was $14.8 million as compared to net cash used of $34.2
million for the year to date ended June 30, 2017.

   
For The Quarter Ended June 30, For the Year to Date Ended June 30,

Selected Cash Flow Items

2018     2017    

Increase
(Decrease)

2018     2017  

Increase
(Decrease)

Net cash provided by (used in) operating activities $ 3,658 $ 4,807   -23.9 % $ 14,754 $ (34,246 )   143.1 %
Capital expenditures $ 1,377 $ 1,411 -2.4 % $ 2,737 $ 2,146 27.5 %

As of June 30, 2018 and December 31, 2017, cash, cash equivalents,
restricted cash and available-for-sale short-term investments totaled
$190.1 million and $180.1 million, respectively.

OUTLOOK

The Company currently expects the following results, subject to the key
assumptions identified below (see the GAAP to non-GAAP reconciliation
for adjusted operating income (loss) attached to this press release for
further details):

Financial Outlook:

  • Full year 2018 - total company:
    • Operating income in the range of $74.5 million to $81.5 million
    • Adjusted operating income in the range of $99.0 million to $106.0
      million in line with previously provided outlook
  • Third quarter 2018 - total company:
    • Operating income in the range of $21.0 million to $22.5 million
    • Adjusted operating income in the range of $23.5 million to $25.0
      million
  • Year end 2018 cash, cash equivalents, restricted cash and short-term
    investments ("cash balances") to be in the range of $215 million to
    $220 million, updated to include the impact of legal settlements
    recorded during the second quarter of 2018.
  • Operating income and adjusted operating income for the total company
    to grow in 2019 as compared to 2018 and our ending cash balances for
    2019 to increase as compared to 2018.

University Group Outlook:

  • CTU
    • New student enrollments for the third quarter of 2018 are expected
      to increase as compared to the prior year quarter.
  • AIU:
    • New and total student enrollments for the third quarter of 2018
      are expected to significantly increase as compared to the prior
      year quarter.
    • Third quarter and full year revenue growth for 2018.

Operating income (loss), which is the most directly comparable GAAP
measure to adjusted operating income (loss), may not follow the same
trends stated in the outlook above because of adjustments made for
unused space charges that represent the present value of future
remaining lease obligations for vacated space less an estimated amount
for sublease income as well as depreciation, amortization, asset
impairment charges and significant legal settlements. The operating
income (loss) and adjusted operating income (loss), enrollment, revenue
and cash outlook provided above for 2018 and 2019 are based on the
following key assumptions and factors, among others: (i) prospective
student interest in the Company's programs continues to trend in line
with recent experiences, (ii) initiatives and investments in
student-serving operations continue to positively impact enrollment
trends within the University Group, (iii) no material changes in the
current legal or regulatory environment, and excludes legal and
regulatory liabilities and other related impacts which are not probable
and estimable at this time, and any impact of new or proposed
regulations, including the "borrower defense to repayment" and gainful
employment regulations and any modifications thereto, and (iv) no
material changes in the estimated amount of compensation expense that
could be impacted by changes in the Company's stock price. Although
these estimates and assumptions are based upon management's good faith
beliefs regarding current events and actions that may be undertaken in
the future, actual results could differ materially from these estimates.

CONFERENCE CALL INFORMATION

Career Education Corporation will host a conference call on Wednesday,
August 1, 2018 at 5:30 p.m. Eastern time to discuss its second quarter
and year to date 2018 results. 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 844-378-6484 (domestic) or
412-542-4179 (international). 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.

ABOUT CAREER EDUCATION CORPORATION

Career Education's academic institutions offer a quality education to a
diverse student population in a variety of disciplines through online,
campus-based and blended learning programs. The Company's two
universities – American InterContinental University ("AIU") and Colorado
Technical University ("CTU") – provide degree programs through the
master's or doctoral level as well as associate and bachelor's levels.
Both universities predominantly serve students online with
career-focused degree programs that are designed to meet the educational
demands of today's busy adults. AIU and CTU continue to show innovation
in higher education, advancing new personalized learning technologies
like their intellipath® learning platform. Career
Education is committed to providing quality education that closes the
gap between learners who seek to advance their careers and employers
needing a qualified workforce.

A listing of University Group campus locations and web links to these
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 "believe," "will," "expect," "estimate,"
"continue," "outlook," "remain" 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 or interest in our programs; 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, 90-10,
financial responsibility and administrative capability standards
prescribed by the U.S. Department of Education), as well as applicable
accreditation standards and state regulatory requirements; the impact of
recently issued "defense to repayment" regulations and any modifications
thereto; rulemaking by the U.S. Department of Education or any state or
accreditor and increased focus by Congress and governmental agencies on,
or increased negative publicity about, for-profit education
institutions; our ability to successfully defend litigation and other
claims brought against us; the success of our initiatives to improve
student experiences, retention and academic outcomes; the ability of our
student admissions and advising centers in Arizona to achieve
anticipated operating performance; increased competition; the impact of
management changes; and changes in the overall U.S. 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 year ended
December 31, 2017 and its subsequent filings with the Securities and
Exchange Commission.

     
 

CAREER EDUCATION CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

 
June 30, December 31,
2018 2017
(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents, unrestricted $ 33,175 $ 18,110
Restricted cash 789 789
Restricted short-term investments 4,570 5,070
Short-term investments   151,571   156,178
Total cash and cash equivalents, restricted cash and short-term
investments
190,105 180,147
 
Student receivables, net 24,992 18,875
Receivables, other, net 1,948 1,163
Prepaid expenses 10,957 7,722
Inventories 914 1,112
Other current assets 1,607 1,319
Assets of discontinued operations   171   382
Total current assets   230,694   210,720
 
NON-CURRENT ASSETS:
Property and equipment, net 30,829 33,230
Goodwill 87,356 87,356
Intangible assets, net 7,900 7,900
Student receivables, net 2,334 2,548
Deferred income tax assets, net 91,443 98,084
Other assets 6,649 5,673
Assets of discontinued operations   1,585   1,585
TOTAL ASSETS $ 458,790 $ 447,096
 
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 11,297 $ 8,515
Accrued expenses:
Payroll and related benefits 22,895 32,910
Advertising and production costs 9,945 9,245
Income taxes 1,762 2,185
Other 33,834 31,233
Deferred revenue 23,050 22,897
Liabilities of discontinued operations   3,125   5,701
Total current liabilities   105,908   112,686
 
NON-CURRENT LIABILITIES:
Deferred rent obligations 14,827 15,277
Other liabilities 15,138 22,143
Liabilities of discontinued operations   -   785
Total non-current liabilities   29,965   38,205
 
STOCKHOLDERS' EQUITY:
Preferred stock - -
Common stock 851 843
Additional paid-in capital 624,869 621,008
Accumulated other comprehensive loss (356 ) (164 )
Accumulated deficit (81,874 ) (108,127 )
Treasury stock   (220,573 )   (217,355 )
Total stockholders' equity   322,917   296,205
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 458,790 $ 447,096
 
 

CAREER EDUCATION CORPORATION AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND

COMPREHENSIVE INCOME

(In thousands, except per share amounts and percentages)

 
 
For The Quarter Ended June 30,
2018   % of

Total

Revenue

  2017   % of

Total

Revenue

REVENUE:    
Tuition and fees $ 141,344 99.5 % $ 145,507 99.5 %
Other   692 0.5 %   715 0.5 %
Total revenue   142,036   146,222
OPERATING EXPENSES:
Educational services and facilities 30,290 21.3 % 36,406 24.9 %
General and administrative 98,340 69.2 % 96,836 66.2 %
Depreciation and amortization   2,103 1.5 %   3,876 2.7 %
Total operating expenses   130,733 92.0 %   137,118 93.8 %
Operating income   11,303 8.0 %   9,104 6.2 %
OTHER INCOME (EXPENSE):
Interest income 742 0.5 % 464 0.3 %
Interest expense (106 ) -0.1 % (113 ) -0.1 %
Miscellaneous (expense) income   (135 ) -0.1 %   253 0.2 %
Total other income   501 0.4 %   604 0.4 %
PRETAX INCOME 11,804 8.3 % 9,708 6.6 %
Provision for income taxes   2,940 2.1 %   5,045 3.5 %
 
INCOME FROM CONTINUING OPERATIONS 8,864 6.2 % 4,663 3.2 %
Loss from discontinued operations, net of tax   (113 ) -0.1 %   (377 ) -0.3 %
NET INCOME   8,751 6.2 %   4,286 2.9 %
 
OTHER COMPREHENSIVE (LOSS) INCOME, net of tax:
Foreign currency translation adjustments (168 ) 222
Unrealized gain on investments   108   11
Total other comprehensive (loss) income   (60 )   233
COMPREHENSIVE INCOME $ 8,691 $ 4,519
 
NET INCOME (LOSS) PER SHARE - BASIC:
Income from continuing operations $ 0.13 $ 0.07
Loss from discontinued operations     (0.01 )
Net income per share $ 0.13 $ 0.06
 
NET INCOME (LOSS) PER SHARE - DILUTED:
Income from continuing operations $ 0.12 $ 0.07
Loss from discontinued operations     (0.01 )
Net income per share $ 0.12 $ 0.06
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic   69,668   69,025
Diluted   71,562   70,884
 
 
 

CAREER EDUCATION CORPORATION AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND

COMPREHENSIVE INCOME

(In thousands, except per share amounts and percentages)

 
 
For the Year to Date Ended June 30,
2018   % of

Total

Revenue

  2017   % of

Total

Revenue

REVENUE:    
Tuition and fees $ 288,854 99.6 % $ 306,884 99.5 %
Other   1,247 0.4 %   1,447 0.5 %
Total revenue   290,101   308,331
OPERATING EXPENSES:
Educational services and facilities 57,236 19.7 % 76,579 24.8 %
General and administrative 196,348 67.7 % 205,081 66.5 %
Depreciation and amortization   4,685 1.6 %   7,786 2.5 %
Total operating expenses   258,269 89.0 %   289,446 93.9 %
Operating income   31,832 11.0 %   18,885 6.1 %
OTHER INCOME:
Interest income 1,376 0.5 % 854 0.3 %
Interest expense (215 ) -0.1 % (226 ) -0.1 %
Miscellaneous income   193 0.1 %   293 0.1 %
Total other income   1,354 0.5 %   921 0.3 %
PRETAX INCOME 33,186 11.4 % 19,806 6.4 %
Provision for income taxes   6,438 2.2 %   9,546 3.1 %
 
INCOME FROM CONTINUING OPERATIONS 26,748 9.2 % 10,260 3.3 %
Loss from discontinued operations, net of tax   (495 ) -0.2 %   (797 ) -0.3 %
NET INCOME   26,253 9.0 %   9,463 3.1 %
 
OTHER COMPREHENSIVE (LOSS) INCOME, net of tax:
Foreign currency translation adjustments (82 ) 263
Unrealized (loss) gain on investments   (110 )   34
Total other comprehensive (loss) income   (192 )   297
COMPREHENSIVE INCOME $ 26,061 $ 9,760
 
NET INCOME (LOSS) PER SHARE - BASIC:
Income from continuing operations $ 0.39 $ 0.15
Loss from discontinued operations   (0.01 )   (0.01 )
Net income per share $ 0.38 $ 0.14
 
NET INCOME (LOSS) PER SHARE - DILUTED:
Income from continuing operations $ 0.38 $ 0.14
Loss from discontinued operations   (0.01 )   (0.01 )
Net income per share $ 0.37 $ 0.13
 
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic   69,443   68,803
Diluted   71,239   70,590
   
 

CAREER EDUCATION CORPORATION AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

 
 
For The Year to Date Ended June 30,
2018   2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 26,253 $ 9,463
Adjustments to reconcile net income to net cash provided by (used
in) operating activities:
Depreciation and amortization expense 4,685 7,786
Bad debt expense 13,679 15,112
Compensation expense related to share-based awards 2,698 2,326
Deferred income taxes 6,641 8,744
Changes in operating assets and liabilities:   (39,202 )   (77,677 )
Net cash provided by (used in) operating activities   14,754   (34,246 )
 
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of available-for-sale investments (101,043 ) (145,088 )
Sales of available-for-sale investments 106,139 169,480
Purchases of property and equipment   (2,737 )   (2,146 )
Net cash provided by investing activities   2,359   22,246
 
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 1,170 2,459
Payments of employee tax associated with stock compensation   (3,218 )   (1,101 )
Net cash (used in) provided by financing activities   (2,048 )   1,358
 
EFFECT OF FOREIGN CURRENCY EXCHANGE RATE CHANGES ON CASH

AND CASH EQUIVALENTS:

    33
 
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 15,065 (10,609 )
CASH AND CASH EQUIVALENTS, beginning of the period   18,899   50,882
CASH AND CASH EQUIVALENTS, end of the period $ 33,964 $ 40,273
   
 

CAREER EDUCATION CORPORATION AND SUBSIDIARIES

UNAUDITED SELECTED SEGMENT INFORMATION

(In thousands, except percentages)

 
 
For The Quarter Ended June 30,
2018 2017
REVENUE:
CTU $ 93,266 $ 91,204
AIU   48,579   46,215
Total University Group 141,845 137,419
Corporate and Other    
Subtotal 141,845 137,419
All Other Campuses   191   8,803
Total $ 142,036 $ 146,222
 
OPERATING INCOME (LOSS):
CTU $ 27,116 $ 28,064
AIU   (1,585 )   1,075
Total University Group 25,531 29,139
Corporate and Other   (2,000 )   (5,847 )
Subtotal 23,531 23,292
All Other Campuses   (12,228 )   (14,188 )
Total $ 11,303 $ 9,104
 
OPERATING MARGIN (LOSS):
CTU 29.1 % 30.8 %
AIU   -3.3 %   2.3 %
Total University Group 18.0 % 21.2 %
Corporate and Other NM NM
Subtotal 16.6 % 16.9 %
All Other Campuses NM NM
Total   8.0 %   6.2 %
   
 

CAREER EDUCATION CORPORATION AND SUBSIDIARIES

UNAUDITED SELECTED SEGMENT INFORMATION

(In thousands, except percentages)

 
 
For the Year to Date Ended June 30,
2018 2017
REVENUE:
CTU $ 187,873 $ 185,239
AIU   101,700   100,468
Total University Group 289,573 285,707
Corporate and Other    
Subtotal 289,573 285,707
All Other Campuses   528   22,624
Total $ 290,101 $ 308,331
 
OPERATING INCOME (LOSS):
CTU $ 54,301 $ 51,084
AIU   2,551   5,731
Total University Group 56,852 56,815
Corporate and Other   (6,542 )   (10,396 )
Subtotal 50,310 46,419
All Other Campuses   (18,478 )   (27,534 )
Total $ 31,832 $ 18,885
 
OPERATING MARGIN (LOSS):
CTU 28.9 % 27.6 %
AIU   2.5 %   5.7 %
Total University Group 19.6 % 19.9 %
Corporate and Other NM NM
Subtotal 17.4 % 16.2 %
All Other Campuses NM NM
Total   11.0 %   6.1 %
     
 

CAREER EDUCATION CORPORATION AND SUBSIDIARIES

UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ITEMS (1)

(In thousands, unless otherwise noted)

 
For The Quarter Ended June 30, For the Year to Date Ended June 30,
ACTUAL ACTUAL

Adjusted Operating Income (Loss)

2018   2017 2018   2017

University Group and Corporate:

Operating income (2) (3) $ 23,531 $ 23,292 $ 50,310 $ 46,419
Depreciation and amortization (3) 2,085 2,559 4,552 5,090
Unused space charges (3)(4)   1,213   -   1,213   -
Adjusted Operating Income --

University Group and Corporate (5)

$ 26,829 $ 25,851 $ 56,075 $ 51,509
 

All Other Campuses:

Operating loss (2) (6) $ (12,228 ) $ (14,188 ) $ (18,478 ) $ (27,534 )
Depreciation and amortization (6) 18 1,317 133 2,696
Unused space charges (4) (6) 3,198 1,654 2,447 3,811
Significant legal settlements (6)   5,970   -   9,461   -
Adjusted Operating Loss --

All Other Campuses (5)

$ (3,042 ) $ (11,217 ) $ (6,437 ) $ (21,027 )

Total Company

Operating income $ 11,303 $ 9,104 $ 31,832 $ 18,885
Depreciation and amortization 2,103 3,876 4,685 7,786
Unused space charges (4) 4,411 1,654 3,660 3,811
Significant legal settlements   5,970   -   9,461   -
Adjusted Operating Income--

Total Company

$ 23,787 $ 14,634 $ 49,638 $ 30,482
     
For the Third Quarter Ending September 30, For the Year Ending December 31,
ACTUAL     OUTLOOK ACTUAL     OUTLOOK
2017 2018 2017 2018

Total Company

       
Operating income $4.5M $21.0M - $22.5M $34.1M $74.5M - $81.5M
Depreciation and amortization 3.6 ~2.5 14.0 ~9.7
Unused space charges (4) 7.4 - 12.2 ~5.3
Significant legal settlements   -   -   6.5   9.5
Adjusted Operating Income $15.5M $23.5M - $25.0M $66.8M $99M - $106M
(1)   The Company believes it is useful to present non-GAAP financial
measures which exclude certain significant and non-cash 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.
 
The Company believes adjusted operating income (loss) allows it to
analyze and assess its ongoing operations and compare current
operating results with the operational performance of other
companies in its industry because it does not give effect to
potential differences caused by items it does not consider
reflective of underlying operating performance, such as unused space
charges and significant legal reserves. In evaluating adjusted
operating income (loss), investors should be aware that in the
future the Company may incur expenses similar to the adjustments
presented above. The presentation of adjusted operating income
(loss) should not be construed as an inference that the Company's
future results will be unaffected by expenses that are unusual,
non-routine or non-recurring. Adjusted operating income (loss) has
limitations as an analytical tool, and it should not be considered
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 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.
 
(2) Operating income for the University Group and Corporate and
operating loss for All Other Campuses make up the components of
operating income. A reconciliation of these components for the
quarters and years to date ended June 30, 2018 and 2017 is presented
below:
     
For The Quarter Ended June 30, For the Year to Date Ended June 30,
ACTUAL ACTUAL
2018   2017 2018   2017
Operating income for University Group and Corporate $ 23,531 $ 23,292 $ 50,310 $ 46,419
Operating loss for All Other Campuses   (12,228 )   (14,188 )   (18,478 )   (27,534 )
Operating income $ 11,303 $ 9,104 $ 31,832 $ 18,885
(3)   Amounts relate to the University Group and Corporate.
 
(4) Unused space charges represent the net present value of remaining
lease obligations for vacated space less an estimated amount for
sublease income. These charges relate to exiting leased space as the
Company continues to right-size the organization and therefore are
not considered representative of ongoing operations.
 
(5) Management assesses results of operations for the University Group
and Corporate separately from All Other Campuses. Because All Other
Campuses have been announced for teach-out or have been taught out,
management views these operations as not reflective of the ongoing
business. As a result, management views adjusted operating income
from the University Group and Corporate separately from the
remainder of the organization, to assess results and make decisions.
 
(6) Amounts relate to All Other Campuses.

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