EX-99.1 2 d530712dex991.htm EX-99.1

EX-99.1

Exhibit 99.1

CAREER EDUCATION CORPORATION REPORTS

RESULTS FOR FIRST QUARTER 2013

Schaumburg, Ill. (May 6, 2013) – Career Education Corporation (NASDAQ: CECO) today reported total revenue of $340.5 million, and a net loss of $15.2 million, or -$0.23 per diluted share, for the first quarter of 2013 compared to total revenue of $431.4 million and net income of $52.1 million, or $0.78 per diluted share, for the first quarter of 2012.

“Since joining Career Education a month ago, I believe even more strongly that this organization has the right tools to achieve high levels of academic and financial success,” said Scott W. Steffey, president and chief executive officer. “We are taking the necessary steps to right-size and re-engineer our organization to become more efficient and effective, better reflecting the support structure needed at our current enrollment levels.”

“While we implement these changes, we must continue to retool and expand our academic programs for our domestic schools, foster continued educational innovation like our new adaptive learning technology, and improve our efforts and success in attracting, enrolling and retaining students. As we right-size and re-engineer the domestic schools we will also continue fostering growth in our highly successful International schools, and ensure that our Transitional Schools segment serves students with quality and integrity while teaching out those schools,” Steffey said. “We’re moving in the right direction and I look forward to leading this organization.”

CONSOLIDATED RESULTS

Quarter Ended March 31, 2013

• Total revenue was $340.5 million for the first quarter of 2013, a 21.1 percent decrease from $431.4 million for the first quarter of 2012.

• An operating loss of $18.1 million was reported for the first quarter of 2013 versus operating income of $47.9 million for the first quarter of 2012. The operating margin was -5.3 percent for the first quarter of 2013 versus 11.1 percent for the first quarter of 2012. Operating income for the first quarter of 2012 included a $19.0 million ($0.18 per diluted share) insurance recovery related to the settlement of claims under certain insurance policies.

• The loss from continuing operations for the first quarter of 2013 was $14.5 million, or -$0.22 per diluted share compared to the income from continuing operations of $41.7 million, or $0.62 per diluted share, for the first quarter of 2012.

• The net loss for the first quarter of 2013 included a $6.7 million ($0.10 per diluted share) loss related to the pending sale of the American InterContinental University campus in London, England which is reported in other (expense) income. The sale closed on April 1, 2013.

CEC ANNOUNCES 1Q13 RESULTS …PG 2

CONSOLIDATED CASH FLOWS AND FINANCIAL POSITION

Cash Flows

Net cash flows used in operating activities totaled $14.2 million for the quarter ended March 31, 2013, compared to net cash flows provided by operating activities of $17.4 million for the quarter ended March 31, 2012.

Capital expenditures decreased to $4.1 million for the quarter ended March 31, 2013, from $12.3 million for the quarter ended March 31, 2012. Capital expenditures represented 1.2 percent and 2.8 percent of total revenue of continuing and discontinued operations during the quarters ended March 31, 2013 and 2012, respectively.

Financial Position

As of March 31, 2013 and December 31, 2012, cash and cash equivalents and short-term investments totaled $299.2 million and $402.3 million, respectively. During the first quarter of 2013, the Company repaid the $80 million of outstanding borrowings under its Credit Agreement. Accordingly, restricted cash balances decreased to $11.4 million at March 31, 2013 from $97.9 million at December 31, 2012.

STUDENT POPULATION AND NEW STUDENT STARTS

Student Population

Total student population by reportable segment as of March 31, 2013 and 2012, was as follows:

		As of March 31,								% Change 2013  vs. 2012
		2013				2012
Student Population
CTU			21,500				23,500				-9%
AIU			15,500				18,900				-18%
Total University Schools			37,000				42,400				-13%
Health Education			9,500				13,600				-30%
Culinary Arts			8,600				12,500				-31%
Design & Technology			5,600				7,800				-28%
Total Career Schools			23,700				33,900				-30%
International (1)			10,000				8,000				25%
Subtotal			70,700				84,300				-16%
Transitional Schools			4,300				11,100				-61%
Total Student Population			75,000				95,400				-21%

(1) Student population as of March 31, 2013 includes approximately 900 students enrolled in the International schools acquired the second and fourth quarters of 2012. Excluding the impact of these acquisitions, student population increased 14%.

CEC ANNOUNCES 1Q13 RESULTS …PG 3

New Student Starts

New student starts by reportable segment for the quarters ended March 31, 2013 and 2012, were as follows:

		For the Quarter Ended March 31,								% Change 2013  vs. 2012
		2013				2012
New Student Starts
CTU (1)			4,520				5,670				-20%
AIU (1)			4,610				6,640				-31%
Total University Schools			9,130				12,310				-26%
Health Education			2,780				3,160				-12%
Culinary Arts			2,810				3,160				-11%
Design & Technology			980				1,080				-  9%
Total Career Schools			6,570				7,400				-11%
International (2)			1,080				740				46%
Subtotal			16,780				20,450				-18%
Transitional Schools (3)			70				2,630				NM
Total New Student Starts			16,850				23,080				-27%

(1) During 2012 and 2013, CTU and AIU had established certain programs to enable students to assess their readiness to commit to enrolling in college-level courses. Excluding the impact of these readiness programs, the change in new student starts for CTU and AIU is -10% and -22%, respectively.

(2) The first quarter of 2013 was favorably impacted when compared to the prior year quarter due to the timing of program offerings in the first quarter of 2013 versus the prior year. Excluding the impact of these items, the change in new student starts for International would have been 22%.

(3) Campuses within the Transitional Schools segment no longer enroll new students; students who re-enter after 365 days are reported as new student starts.

CONFERENCE CALL INFORMATION

Career Education Corporation will host a conference call on Tuesday, May 7, 2013 at 10:00 a.m. Eastern time. Interested parties can access the live webcast of the conference call at www.careered.com in the Investor Relations section of the website. Participants can also listen to the conference call by dialing 800-580-9478 (domestic) or 630-691-2769 (international) and citing code 34607968. 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 34607968.

CEC ANNOUNCES 1Q13 RESULTS …PG 4

ABOUT CAREER EDUCATION CORPORATION

The colleges, schools and universities that are part of the Career Education Corporation (“CEC”) family offer high-quality education to a diverse student population of approximately 75,000 students across the world in a variety of career-oriented disciplines through online, on-ground and hybrid learning program offerings. The more than 90 campuses that serve these students are located throughout the United States, and in France and Monaco, and offer doctoral, master’s, bachelor’s and associate degrees and diploma and certificate programs.

CEC is an industry leader whose institutions are recognized globally. Those institutions include, among others, American InterContinental University (“AIU”); Brooks Institute; Colorado Technical University (“CTU”); Harrington College of Design; INSEEC Group (“INSEEC”) Schools; International University of Monaco (“IUM”); International Academy of Design & Technology (“IADT”); Le Cordon Bleu North America (“LCB”); and Sanford-Brown Institutes and Colleges. Through its schools, CEC is committed to providing high-quality education, enabling students to graduate and pursue rewarding career opportunities.

For more information, see CEC’s website at www.careered.com. The website includes a detailed listing of individual campus locations and web links to CEC’s colleges, schools, and universities.

Except for the historical and present factual information contained herein, the matters set forth in this release, including statements identified by words such as “anticipate,” “believe,” “plan,” “expect,” “intend,” “project,” “will,” “potential” and similar expressions, are forward-looking statements as defined in Section 21E of the Securities Exchange Act of 1934, as amended. These statements are based on information currently available to us and are subject to various assumptions, risks, uncertainties and other factors that could cause our results of operations, financial condition, cash flows, performance, business prospects and opportunities to differ materially from those expressed in, or implied by, these statements. Except as expressly required by the federal securities laws, we undertake no obligation to update or revise such factors or any of the forward-looking statements contained herein to reflect future events, developments or changed circumstances, or for any other reason. These risks and uncertainties, the outcomes of which could materially and adversely affect our financial condition and operations, include, but are not limited to, the following: declines in enrollment; our ability to implement our strategic initiatives and effective cost reduction strategies; our continued compliance with and eligibility to participate in Title IV Programs under the Higher Education Act of 1965, as amended, and the regulations thereunder (including the “90-10 Rule” and financial responsibility standards prescribed by the U.S. Department of Education), as well as national and regional accreditation standards and state regulatory requirements; our ability to successfully defend litigation and other claims brought against us; rulemaking by the U.S. Department of Education and increased focus by the U.S. Congress and governmental agencies on for-profit education institutions; and changes in the overall U.S. or global economy. Further information about these and other relevant risks and uncertainties may be found in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2012 and its subsequent filings with the Securities and Exchange Commission.

###

CONTACT

Investors: Matthew Tschanz

Director, Corporate Finance

(847) 585-3899

Media: Mark Spencer

Director, Corporate Communications

(847) 585-3802

CAREER EDUCATION CORPORATION AND SUBSIDIARIES

UNAUDITED CONSOLIDATED BALANCE SHEETS

(In thousands)

		March 31, 2013 (1)				December 31, 2012 (1)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents, unrestricted		$	223,816			$	240,559
Restricted cash			11,408				97,878
Short-term investments			63,951				63,876
Total cash and cash equivalents and short-term investments			299,175				402,313
Student receivables, net			50,420				68,885
Receivables, other, net			4,413				3,845
Prepaid expenses			57,710				44,386
Inventories			7,500				8,514
Deferred income tax assets, net			7,125				7,092
Other current assets			6,845				4,422
Assets of discontinued operations			3,716				4,104
Total current assets			436,904				543,561
NON-CURRENT ASSETS:
Property and equipment, net			259,121				277,416
Goodwill			131,725				133,025
Intangible assets, net			61,127				61,670
Student receivables, net			6,652				6,832
Deferred income tax assets, net			48,128				47,900
Other assets, net			32,324				33,331
Assets of discontinued operations			18,643				18,968
TOTAL ASSETS		$	994,624			$	1,122,703
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Short-term borrowings and current maturities of capital lease obligations		$	103			$	80,211
Accounts payable			42,601				38,419
Accrued expenses:
Payroll and related benefits			46,124				46,586
Advertising and production costs			20,634				20,963
Other			41,171				44,630
Deferred tuition revenue			83,718				112,018
Liabilities of discontinued operations			12,306				9,888
Total current liabilities			246,657				352,715
NON-CURRENT LIABILITIES:
Deferred rent obligations			93,260				95,146
Other liabilities			30,057				29,853
Liabilities of discontinued operations			28,178				33,199
Total non-current liabilities			151,495				158,198
STOCKHOLDERS’ EQUITY:
Preferred stock			—				—
Common stock			818				816
Additional paid-in capital			598,903				596,826
Accumulated other comprehensive loss			(6,527	)			(4,785	)
Retained earnings			217,718				232,921
Cost of shares in treasury			(214,440	)			(213,988	)
Total stockholders’ equity			596,472				611,790
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	994,624			$	1,122,703

(1) During the first quarter of 2013 and the fourth quarter of 2012, the Company completed the teach-out of SBC Hazelwood and LCB Pittsburgh, respectively. As a result, all current and prior period results for these campuses are reflected as components of discontinued operations.

CAREER EDUCATION CORPORATION AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(In thousands, except per share amounts and percentages)

		For the Quarter Ended March 31, (1)
		2013				% of Total Revenue				2012				% of Total Revenue
REVENUE:
Tuition and registration fees		$	335,285				98.5%			$	420,885				97.6%
Other			5,198				1.5%				10,479				2.4%
Total revenue			340,483								431,364
OPERATING EXPENSES:
Educational services and facilities			132,883				39.0%				150,739				34.9%
General and administrative			206,419				60.6%				212,973				49.4%
Depreciation and amortization			19,125				5.6%				19,713				4.6%
Goodwill and asset impairment			157				0.0%				83				0.0%
Total operating expenses			358,584				105.3%				383,508				88.9%
Operating (loss) income			(18,101	)			-5.3%				47,856				11.1%
OTHER (EXPENSE) INCOME:
Interest income			255				0.1%				270				0.1%
Interest expense			(706	)			-0.2%				(37	)			0.0%
Loss on pending sale of business			(6,712	)			-2.0%				—				0.0%
Miscellaneous expense			(466	)			-0.1%				—				0.0%
Total other (expense) income			(7,629	)			-2.2%				233				0.1%
PRETAX (LOSS) INCOME			(25,730	)			-7.6%				48,089				11.1%
(Benefit from) provision for income taxes			(11,239	)			-3.3%				6,430				1.5%
(LOSS) INCOME FROM CONTINUING OPERATIONS			(14,491	)			-4.3%				41,659				9.7%
(Loss) income from discontinued operations, net of tax			(712	)			-0.2%				10,417				2.4%
NET (LOSS) INCOME			(15,203	)			-4.5%				52,076				12.1%
OTHER COMPREHENSIVE (LOSS) INCOME, net of tax:
Foreign currency translation adjustments			(1,743	)							5,440
Unrealized gains (losses) on investments			1								(12	)
Total other comprehensive (loss) income			(1,742	)							5,428
COMPREHENSIVE (LOSS) INCOME		$	(16,945	)						$	57,504
NET (LOSS) INCOME PER SHARE - DILUTED:
(Loss) income from continuing operations		$	(0.22	)						$	0.62
(Loss) income from discontinued operations			(0.01	)							0.16
Net (loss) income per share		$	(0.23	)						$	0.78
DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING			66,428								66,960

(1) During the first quarter of 2013 and the fourth quarter of 2012, the Company completed the teach-out of SBC Hazelwood and LCB Pittsburgh, respectively. As a result, all current and prior period results for these campuses are reflected as components of discontinued operations.

CAREER EDUCATION CORPORATION AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

		For the Quarter Ended March 31,
		2013				2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income		$	(15,203	)		$	52,076
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Goodwill and asset impairment			157				83
Depreciation and amortization expense			19,295				20,106
Bad debt expense			6,702				9,390
Compensation expense related to share-based awards			1,775				2,780
Loss on pending sale of business			6,712				—
Loss on disposition of property and equipment			94				32
Changes in operating assets and liabilities			(33,729	)			(67,115	)
Net cash (used in) provided by operating activities			(14,197	)			17,352
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of available-for-sale investments			(13,540	)			(40,300	)
Sales of available-for-sale investments			13,465				40,438
Purchases of property and equipment			(4,077	)			(12,303	)
Payments of cash upon sale of business			(1,947	)			—
Other			(1	)			(12	)
Net cash used in investing activities			(6,100	)			(12,177	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of treasury stock			—				(56,431	)
Issuance of common stock			304				477
Payments of contingent consideration			—				(3,555	)
Payment on borrowings			(80,000	)			—
Change in restricted cash			86,470				—
Payments of capital lease obligations			(74	)			(547	)
Net cash provided by (used in) financing activities			6,700				(60,056	)
EFFECT OF FOREIGN CURRENCY EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS:			(3,194	)			3,677
NET DECREASE IN CASH AND CASH EQUIVALENTS			(16,791	)			(51,204	)
DISCONTINUED OPERATIONS CASH ACTIVITY INCLUDED ABOVE:
Add: Cash balance of discontinued operations, beginning of the period			63				—
Less: Cash balance of discontinued operations, end of the period			15				—
CASH AND CASH EQUIVALENTS, beginning of the period			240,559				280,592
CASH AND CASH EQUIVALENTS, end of the period		$	223,816			$	229,388

CAREER EDUCATION CORPORATION AND SUBSIDIARIES

UNAUDITED SELECTED SEGMENT INFORMATION

(In thousands, except percentages)

		For the Quarter Ended March 31,
		2013				2012 (1)
REVENUE:
CTU		$	90,209			$	96,329
AIU			66,299				88,940
Total University Schools			156,508				185,269
Health Education			38,021				54,092
Culinary Arts (2)			45,938				62,838
Design & Technology			30,289				41,801
Total Career Schools			114,248				158,731
International			49,677				42,829
Corporate and Other			—				14
Subtotal			320,433				386,843
Transitional Schools (2)			20,050				44,521
Total		$	340,483			$	431,364
OPERATING (LOSS) INCOME:
CTU		$	15,912			$	19,079
AIU			3,146				14,661
Total University Schools			19,058				33,740
Health Education			(11,310	)			(1,672	)
Culinary Arts (2)			(12,137	)			1,266
Design & Technology			(7,156	)			334
Total Career Schools			(30,603	)			(72	)
International			13,480				13,125
Corporate and Other			(6,368	)			12,582
Subtotal			(4,433	)			59,375
Transitional Schools (2)			(13,668	)			(11,519	)
Total		$	(18,101	)		$	47,856
OPERATING (LOSS) MARGIN:
CTU			17.6%				19.8%
AIU			4.7%				16.5%
Total University Schools			12.2%				18.2%
Health Education			-29.7%				-3.1%
Culinary Arts			-26.4%				2.0%
Design & Technology			-23.6%				0.8%
Total Career Schools			-26.8%				0.0%
International			27.1%				30.6%
Corporate and Other			NM				NM
Subtotal			-1.4%				15.3%
Transitional Schools			-68.2%				-25.9%
Total			-5.3%				11.1%

(1) Prior period financial results have been recast to report the schools that are currently being taught out within the Transitional Schools segment.

(2) During the first quarter of 2013 and the fourth quarter of 2012, the Company completed the teach-out of SBC Hazelwood and LCB Pittsburgh, respectively. As a result, all current and prior period results for these campuses are reflected as components of discontinued operations.

CAREER EDUCATION CORPORATION AND SUBSIDIARIES

UNAUDITED SELECTED SEGMENT INFORMATION BY QUARTER - 2012

(In thousands)

		For the 2012 Quarters Ended (1)
		March 31				June 30				September 30				December 31				Full Year
REVENUE:
CTU		$	96,329			$	91,839			$	86,484			$	89,283			$	363,935
AIU			88,940				78,841				71,204				65,223				304,208
Total University Schools			185,269				170,680				157,688				154,506				668,143
Health Education			54,092				45,457				40,469				41,559				181,577
Culinary Arts (2)			62,838				57,895				54,415				49,694				224,842
Design & Technology			41,801				34,724				33,129				31,888				141,542
Total Career Schools			158,731				138,076				128,013				123,141				547,961
International			42,829				21,140				14,665				49,934				128,568
Corporate and Other			14				20				16				5				55
Subtotal			386,843				329,916				300,382				327,586				1,344,727
Transitional Schools (2)			44,521				37,561				31,574				26,922				140,578
Total		$	431,364			$	367,477			$	331,956			$	354,508			$	1,485,305
OPERATING (LOSS) INCOME:
CTU		$	19,079			$	12,181			$	10,324			$	13,344			$	54,928
AIU			14,661				6,878				1,084				(1,727	)			20,896
Total University Schools			33,740				19,059				11,408				11,617				75,824
Health Education			(1,672	)			(50,230	)			(12,758	)			(13,628	)			(78,288	)
Culinary Arts (2)			1,266				(3,121	)			(10,136	)			(21,863	)			(33,854	)
Design & Technology			334				(45,006	)			(6,240	)			(6,715	)			(57,627	)
Total Career Schools			(72	)			(98,357	)			(29,134	)			(42,206	)			(169,769	)
International			13,125				(2,406	)			(6,444	)			16,856				21,131
Corporate and Other			12,582				(5,373	)			(5,402	)			(9,425	)			(7,618	)
Subtotal			59,375				(87,077	)			(29,572	)			(23,158	)			(80,432	)
Transitional Schools (2)			(11,519	)			(19,158	)			(17,520	)			(53,251	)			(101,448	)
Total		$	47,856			$	(106,235	)		$	(47,092	)		$	(76,409	)		$	(181,880	)

(1) Prior period financial results have been recast to report the schools that are currently being taught out within the Transitional Schools segment.

(2) During the first quarter of 2013 and the fourth quarter of 2012, the Company completed the teach-out of SBC Hazelwood and LCB Pittsburgh, respectively. As a result, all current and prior period results for these campuses are reflected as components of discontinued operations.

CAREER EDUCATION CORPORATION AND SUBSIDIARIES

UNAUDITED SELECTED SEGMENT INFORMATION BY QUARTER - 2012

		As of the 2012 Quarters Ended (1)
		March 31				June 30				September 30				December 31
STUDENT POPULATION:
CTU			23,500				22,600				22,000				21,600
AIU			18,900				14,500				14,900				14,200
Total University Schools			42,400				37,100				36,900				35,800
Health Education			13,600				10,200				10,600				8,800
Culinary Arts (2)			12,500				12,000				11,200				8,500
Design & Technology			7,800				6,600				6,500				5,400
Total Career Schools			33,900				28,800				28,300				22,700
International			8,000				2,700				8,800				11,400
Subtotal			84,300				68,600				74,000				69,900
Transitional Schools (2)			11,100				8,700				7,500				6,100
Total			95,400				77,300				81,500				76,000
		For the 2012 Quarters Ended (1)
		March 31				June 30				September 30				December 31				Full Year
NEW STUDENT STARTS:
CTU			5,670				5,800				5,150				5,040				21,660
AIU			6,640				3,050				3,700				3,370				16,760
Total University Schools			12,310				8,850				8,850				8,410				38,420
Health Education			3,160				1,470				3,310				1,180				9,120
Culinary Arts (2)			3,160				2,410				3,920				2,810				12,300
Design & Technology			1,080				610				1,060				490				3,240
Total Career Schools			7,400				4,490				8,290				4,480				24,660
International			740				510				4,750				1,940				7,940
Subtotal			20,450				13,850				21,890				14,830				71,020
Transitional Schools (2)			2,630				1,150				1,720				840				6,340
Total			23,080				15,000				23,610				15,670				77,360

(1) Prior period financial results have been recast to report the schools that are currently being taught out within the Transitional Schools segment.

(2) During the first quarter of 2013 and the fourth quarter of 2012, the Company completed the teach-out of SBC Hazelwood and LCB Pittsburgh, respectively. As a result, all current and prior period results for these campuses are reflected as components of discontinued operations.