Career Education Corporation Reports Results for Fourth Quarter and Full Year 2009

February 20th, 2010 | 0 Comments

HOFFMAN ESTATES, Ill., Feb 17, 2010 (BUSINESS WIRE) —– Fourth quarter earnings per share from continuing operations increased 80% to $0.72

Career Education Corporation /quotes/comstock/15*!ceco/quotes/nls/ceco (CECO 26.33, +0.33, +1.27%) today reported total revenue of $507.8 million, and net income of $30.7 million, or $0.36 per diluted share, for the fourth quarter of 2009 compared to total revenue of $425.3 million and net income of $31.2 million, or $0.35 per diluted share, for the fourth quarter of 2008. for the full year 2009, total revenue was $1.84 billion, and net income of $81.2 million, or $0.94 per diluted share compared to total revenue of $1.66 billion and net income of $60.1 million, or $0.67 per diluted share, for the full year 2008.

On a non-GAAP basis, which excludes significant items, earnings per diluted share from continuing operations were $0.72 in the fourth quarter as compared to $0.45 in the fourth quarter of 2008. (See segment tables below and the GAAP to non-GAAP reconciliation attached to this press release.)

“The growth of our student population and strong financial results in 2009 clearly reflected the quality of postsecondary education provided by our institutions and the improvements we continued to make in the effectiveness and efficiency of our operations,” said Gary E. McCullough, President and Chief Executive Officer. “We are excited about the future as our organization is well positioned to achieve the next level of growth.”

During the year ended December 31, 2009 we completed the teach out activities for McIntosh College – Dover, NH, Lehigh Valley College – Center Valley, PA, Gibbs Colleges – Livingston, NJ and Norwalk, CT, Katharine Gibbs Schools – new York, NY and Norristown, PA. Accordingly, the results of operations for these six campuses are reported as a component of discontinued operations for both current and prior period financial results. except as otherwise noted, financial data and non-financial metrics reflected in this release exclude discontinued operations. Quarterly income statements for 2008 and 2009 reflecting this change have been provided in the exhibits section of this release.

Three Months Ended December 31, 2009

– Total revenue from continuing operations was $507.8 million during the fourth quarter of 2009, a 19.4 percent increase from $425.3 million during the fourth quarter of 2008.

– The financial and operating results for the fourth quarter 2009 and 2008 include significant items as summarized below:

Reconciling Items Diluted (In Millions) Earnings per Share ImpactThree Months Ended December 31, 2009 Unused Space Charges ($14.3 ) ($0.11 ) Performance-based Compensation 2.2 0.02 Related to plan Outperformance Termination of Insurance Policies 12.0 0.09 TOTAL ($0.1 ) ($0.00 )Three Months Ended December 31, 2008 Legal Settlements ($3.6 ) ($0.03 ) Unused Space Charges (1.9 ) (0.01 ) Severance and Stay Bonus Charges (1.5 ) (0.01 ) TOTAL ($7.0 ) ($0.05 )

– The company believes it is useful to present non-GAAP financial measures excluding these items as a means to understand the performance of its core business.

– Operating income was $97.0 million during the fourth quarter of 2009, versus operating income of $49.6 million during the fourth quarter of 2008. Operating margin was 19.1 percent during the fourth quarter of 2009, as compared to an operating margin of 11.7 percent during the fourth quarter of 2008.

– Excluding the reconciling items listed in the table above, operating income was $97.1 million in the fourth quarter of 2009, up 71.6 percent from $56.6 million in the fourth quarter of 2008 and operating margin was 19.1 percent during the fourth quarter of 2009, a 5.8 percentage point increase compared to an operating margin percentage of 13.3 percent during the fourth quarter of 2008.

Twelve Months Ended December 31, 2009

– Total revenue from continuing operations was $1.84 billion during the twelve months ended December 31, 2009, a 10.6 percent increase from $1.66 billion during the twelve months ended December 31, 2008.

– Operating income increased to $222.6 million during the twelve months ended December 31, 2009, from $108.7 million during the twelve months ended December 31, 2008. Operating margin increased to 12.1 percent during the twelve months ended December 31, 2009, from 6.5 percent during the twelve months ended December 31, 2008.

– Income from continuing operations during the twelve months ended December 31, 2009, was $145.4 million, or $1.68 per diluted share, relative to $89.8 million, or $1.00 per diluted share, during the twelve months ended December 31, 2008.

– The financial and operating results for the twelve months ended December 31, 2009 and 2008 include significant items as summarized below:

Reconciling Items Diluted (In Millions) Earnings per Share ImpactTwelve Months Ended December 31, 2009 Unused Space Charges ($14.3 ) ($0.11 ) Performance-based Compensation (23.1 ) (0.17 ) Related to plan Outperformance Severance and Stay Bonus Charges (1.5 ) (0.01 ) Asset Impairment Charges (2.5 ) (0.02 ) Termination of Insurance Policies 12.0 0.09 TOTAL ($29.4 ) ($0.22 )Twelve Months Ended December 31, 2008 Legal Settlements ($6.3 ) ($0.05 ) Unused Space Charges (11.6 ) (0.08 ) Severance and Stay Bonus Charges (7.4 ) (0.05 ) Asset Impairment Charges (8.9 ) (0.06 ) Gain from Termination of Affiliate Relationship – 0.03 TOTAL ($34.2 ) ($0.21 )

– Excluding the reconciling items listed in the table above, operating income was $252.0 million during the twelve months ended December 31, 2009, up 76.3 percent from $142.9 million during the twelve months ended December 31, 2008 and operating margin was 13.7 percent during the twelve months ended December 31, 2009, a 5.1 percentage point increase relative to an operating margin of 8.6 percent during the twelve months ended December 31, 2008.

CONSOLIDATED CASH FLOWS AND FINANCIAL POSITION

– Cash provided by operating activities was $288.3 million during the twelve months ended December 31, 2009, compared to cash provided by operating activities of $186.7 million during the twelve months ended December 31, 2008.

– Capital expenditures increased to $74.1 million during the twelve months ended December 31, 2009, from $53.9 million during the twelve months ended December 31, 2008. Capital expenditures represented 4.0 percent of total revenue during the twelve months ended December 31, 2009.

Financial Position

– as of December 31, 2009 and December 31, 2008, cash and cash equivalents and short-term investments totaled $484.9 million and $493.9 million, respectively.

– Days sales outstanding (DSO) were 17 days as of December 31, 2009, compared to 16 days as of December 31, 2008.

Stock Repurchase Program

During the three months ended December 31, 2009, the company repurchased approximately 800,000 shares of its common stock for approximately $20.0 million at an average price of $26.54 per share. during 2009, the company repurchased approximately 9.0 million shares of its common stock for approximately $200.0 million at an average price of $22.23 per share. Additionally, in January 2010, the company repurchased approximately 1.7 million shares of its common stock for approximately $40.0 million at an average price of $23.53 per share.

On February 16, 2010, the Board of Directors authorized the use of an additional $250.0 million to repurchase outstanding shares of its common stock under the company’s stock repurchase program. this is in addition to the $155.5 million still available under its previously authorized stock repurchase program. Stock repurchases under this program may be made on the open market or in privately negotiated transactions from time to time, depending on factors including market conditions and corporate and regulatory requirements.

for the three months ended December 31, % Change 2009 2008 2009 vs. 2008 Revenue (in millions) University $216.5 $177.0 22 % Culinary Arts 91.1 77.3 18 % Health Education 85.5 66.4 29 % Art & Design 69.4 67.5 3 % International 45.1 35.7 26 % Corporate and other (0.2 ) – 100 % Subtotal $507.4 $423.9 20 % Transitional Schools 0.4 1.4 (75 %) Total Revenue $507.8 $425.3 19 %

Operating Income

for the three months ended December 31, % Change 2009 2008 2009 vs. 2008 Operating Income (in millions) University $55.9 $42.9 30 % Culinary Arts 13.2 (0.6 ) NM Health Education 17.8 9.9 81 % Art & Design 11.5 9.0 27 % International 8.9 8.1 10 % Corporate and other (3.7 ) (18.9 ) 80 % Subtotal $103.6 $50.4 105 % Transitional Schools (6.6 ) (0.8 ) NM Total Operating Income $97.0 $49.6 95 %

Operating Margin

for the three months ended December 31, 2009 2008 Operating Margin University 25.8% 24.3% Culinary Arts 14.5% -0.8% Health Education 20.9% 14.8% Art & Design 16.6% 13.4% International 19.8% 22.7% Corporate and other NM NM Subtotal 20.4% 11.9% Transitional Schools NM NM Total 19.1% 11.7%

STUDENT POPULATION AND NEW STUDENT START DATA

Student Population

Total student population by reportable segment as of January 31, 2010 and 2009, were as follows:

as of January 31, % Change 2010 2009 2010 vs. 2009STUDENT POPULATIONUniversity 56,000 45,700 23 %Culinary Arts 12,600 9,600 31 %Health Education 23,600 17,900 32 %Art & Design 13,500 13,500 0 %International 11,000 9,700 13 %Subtotal 116,700 96,400 21 %Transitional Schools 100 200 (50 %)Total Student Population 116,800 96,600 21 %ONLINE STUDENT POPULATIONCulinary Arts 200 0 NMArt & Design 1,400 900 56 %University 44,600 35,400 26 %Total Online Student Population 46,200 36,300 27 %

New Student Starts

New student starts by reportable segment during the fourth quarter of 2009 and 2008, were as follows:

for the three months ended % Change December 31, 2009 2008 2009 vs. 2008NEW STUDENT STARTSUniversity 17,080 13,940 23 %Culinary Arts 1,430 1,050 36 %Health Education 5,260 4,110 28 %Art & Design (1) 1,720 2,410 (29 %)International 2,950 2,530 17 %Subtotal 28,440 24,040 18 %Transitional Schools 0 0 NMTotal new Student starts 28,440 24,040 18 %ONLINE NEW STUDENT STARTSCulinary Arts 60 0 NMArt & Design 410 310 32 %University 14,810 11,920 24 %Total Online new Student starts 15,280 12,230 25 %

(1) Fourth quarter 2009 had approximately 750 fewer new student starts as a result of calendar shifts.

AMERICAN INTERCONTINENTAL UNIVERSITY UPDATE

American InterContinental University’s (AIU) accrediting agency, the Higher Learning Commission of the North Central Association of Colleges and Schools, or HLC, commissioned an advisory team to visit AIU in January 2010. The advisory visit was focused on AIU’s educational and business practices. The advisory team has concluded its visit and advised AIU that within the next several weeks it will provide a report to HLC containing the advisory team’s findings and recommendations, if any, concerning its review. in addition and as previously disclosed, in connection with HLC’s initial accreditation of AIU in may 2009, AIU must submit a progress report to HLC relating to curricula design and AIU’s graduate programs’ student learning outcomes and have HLC conduct a focused visit to AIU to assess the issue of credit equivalence. HLC has not yet notified AIU of the timing of the focused visit. as previously disclosed, the Department of Education conducted a program review of AIU in November 2009. AIU is currently awaiting the issuance of the program review report.

CONFERENCE CALL INFORMATION

Career Education Corporation will host a conference call today to discuss the fourth quarter 2009 results, Wednesday, February 17, 2010 at 5:00 PM ET. Interested parties can access the live webcast of the conference call at careered.com. Participants can also listen to the conference call by dialing 800-588-4973 (domestic) or 847-413-2407 (international) and reference confirmation 26141100. 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 careered.com. a replay of the call will also be available for seven days by calling 888-843-8996 (domestic) or 630-652-3044 (international) and referencing confirmation 26141100.

ANALYST AND INVESTOR DAY INFORMATION

On February 18, 2010, Career Education Corporation will hold an Analyst and Investor Day in new York City starting at approximately 1:00 p.m. ET. Management will discuss historical performance, progress against previously communicated 2010 milestones, strategic plan objectives and future expectations. for interested parties, presentation materials and a live webcast of the event will be provided on the company website under the investor relations section at careered.com.

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 over 116,000 students across the world in a variety of career-oriented disciplines. The approximately 90 campuses that serve these students are located throughout the U.S. and in France, Italy, and the United Kingdom, and offer doctoral, master’s, bachelor’s and associate degrees and diploma and certificate programs. nearly 40% of our students attend the web-based virtual campuses of American InterContinental University, Colorado Technical University, International Academy of Design & Technology and Le Cordon Bleu College of Culinary Arts.

CEC is an industry leader whose brands are recognized globally. those brands include, among others, American InterContinental University; Brooks Institute; Colorado Technical University; Harrington College of Design; INSEEC Schools; International Academy of Design & Technology; Istituto Marangoni; Le Cordon Bleu North America; and Sanford-Brown Institutes and Colleges. through our schools, CEC is committed to providing quality education, enabling students to graduate and pursue rewarding careers.

For more information, see CEC’s website at careered.com. The website includes a detailed listing of individual campus locations and web links to CEC’s approximately 90 colleges, schools, and universities.

Except for the historical and present factual information contained herein, the matters set forth in this release, including statements identified by words such as “anticipate,” “believe,” “plan,” “expect,” “intend,” “project,” “will,” “potential” and similar expressions, are forward-looking statements as defined in Section 21E of the Securities Exchange Act of 1934, as amended. these statements are based on information currently available to us and are subject to various risks, uncertainties and other factors that could cause our actual growth, results of operations, performance and business prospects, and opportunities to differ materially from those expressed in, or implied by, these statements. except as expressly required by the federal securities laws, we undertake no obligation to update such factors or to publicly announce the results of any of the forward-looking statements contained herein to reflect future events, developments, or changed circumstances or for any other reason. these risks and uncertainties, the outcome of which could materially and adversely affect our financial condition and operations, include, but are not limited to, the following: the adverse impact and potential impacts on the availability of Title IV and private student loans for our students of (1) the willingness or ability of private lenders to make private student loans in the current U.S. credit markets, (2) new student lending related reporting and disclosure obligations on institutions that participate in Title IV federal student financial aid programs under The Higher Education Opportunity Act (”HEOA”), signed into law on August 14, 2008, in the first full reauthorization of the Higher Education Act of 1965, as amended (together with HEOA, “HEA”) or provide payment plans to students, and (3) Congress’ willingness or ability to maintain or increase funding for Title IV programs; the outcome of the current rulemaking process regulations under HEOA and HEA addressing gainful employment and other issues that may significantly impact our operations or profitability; potential higher bad debt expense or reduced revenue associated with requiring students to pay more of their educational expenses while in school or with directly providing extended payment plans to our students; increased competition; the effectiveness of our regulatory compliance efforts; impairment of goodwill and other intangible assets as we continue to redefine the company and manage our brands and marketing to improve effectiveness and reduce costs; charges and expenses associated with exiting excess facility space; our ability to comply with accrediting agency requirements or obtain accrediting agency approvals for existing or new programs, including AIU’s ability to satisfactorily address concerns of HLC which are subject to an ongoing review by HLC; our dependence on information technology systems; our ownership or use of intellectual property; costs and impacts of regulatory, legal and administrative actions, proceedings and investigations, governmental regulations, and class action and other lawsuits; our ability to manage and continue growth; and other factors discussed in our Annual Report on Form 10-K for the year ended December 31, 2008, our Quarterly Reports on Form 10-Q for the most recent fiscal quarters, and from time to time in our current reports filed with the Securities and Exchange Commission.

CAREER EDUCATION CORPORATION AND SUBSIDIARIESUNAUDITED CONSOLIDATED BALANCE SHEETS(In thousands) as of December 31, (1) 2009 2008 ASSETSCURRENT ASSETS: Cash and cash equivalents $ 284,473 $ 242,854 Short-term investments 200,379 251,078 Total cash and cash equivalents and short-term investments 484,852 493,932 Student receivables, net 57,823 50,829 Receivables, other, net 5,256 9,131 Prepaid expenses 41,090 44,150 Inventories 11,271 12,300 Deferred income tax assets 12,983 14,081 Other current assets 9,442 9,040 Assets of discontinued operations 6,118 9,582 Total current assets 628,835 643,045NON-CURRENT ASSETS: Property and equipment, net 306,279 302,860 Goodwill 377,515 376,072 Intangible assets, net 178,520 39,904 Assets of discontinued operations 24,401 20,872 Student receivables, net 21,455 16,651 Deferred income tax assets 3,659 – Other assets, net 23,178 18,806TOTAL ASSETS $ 1,563,842 $ 1,418,210 LIABILITIES AND STOCKHOLDERS’ EQUITYCURRENT LIABILITIES: Current maturities of capital lease obligations $ 880 $ 354 Accounts payable 51,108 27,606 Accrued expenses: Payroll and related benefits 88,439 60,142 Advertising and production costs 21,436 21,504 Income taxes 17,849 29,225 Earnout payments 18,009 – Other 46,182 45,329 Deferred tuition revenue 184,411 151,158 Liabilities of discontinued operations 13,695 16,359 Total current liabilities 442,009 351,677NON-CURRENT LIABILITIES: Capital lease obligations, net of current maturities 2,262 1,889 Deferred rent obligations 91,725 87,344 Deferred income tax liabilities – 887 Liabilities of discontinued operations 62,997 16,404 Earnout payments 23,680 – Other liabilities 19,124 11,497 Total non-current liabilities 199,788 118,021SHARE-BASED AWARDS SUBJECT TO REDEMPTION 521 860STOCKHOLDERS’ EQUITY: Preferred stock – - Common stock 954 933 Additional paid-in capital 244,992 222,523 Accumulated other comprehensive income 8,408 5,774 Retained earnings 889,057 807,500 Cost of shares in treasury (221,887 ) (89,078 ) Total stockholders’ equity 921,524 947,652TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 1,563,842 $ 1,418,210(1) We completed the teach out activities during the year ended December 31, 2009 for McIntosh College – Dover , NH, Lehigh Valley College – Center Valley, PA, Gibbs Colleges – Livingston, NJ and Norwalk, CT, Katharine Gibbs Schools – new York, NY and Norristown, PA. Accordingly, the results of operations for these six campuses are reported as a component of discontinued operations for both current and prior period financial results. CAREER EDUCATION CORPORATION AND SUBSIDIARIESUNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS(In thousands, except per share amounts and percentages) for the Three Months Ended December 31, (1) % of % of 2009 Revenue 2008 RevenueREVENUE: Tuition and registration fees $ 491,736 96.8 % $ 410,503 96.5 % Other 16,072 3.2 % 14,772 3.5 % Total revenue 507,808 425,275OPERATING EXPENSES: Educational services and facilities 166,849 32.9 % 148,866 35.0 % General and administrative 226,708 44.6 % 210,005 49.4 % Depreciation and amortization 17,252 3.4 % 16,756 3.9 % Total operating expenses 410,809 80.9 % 375,627 88.3 %Operating income 96,999 19.1 % 49,648 11.7 %OTHER INCOME (EXPENSE): Interest income 404 0.1 % 4,447 1.0 % Interest expense (194 ) 0.0 % (166 ) 0.0 % Miscellaneous (expense) income (3 ) 0.0 % 2,363 0.6 % Total other income 207 0.0 % 6,644 1.6 %Pretax income 97,206 19.1 % 56,292 13.2 %Provision for income taxes 35,601 7.0 % 20,264 4.8 %Income from continuing operations 61,605 12.1 % 36,028 8.5 %Loss from discontinued operations, net of tax (30,925 ) (4,815 )NET INCOME $ 30,680 $ 31,213NET INCOME (LOSS) PER SHARE – DILUTED Income from continuing operations $ 0.72 $ 0.40 Loss from discontinued operations (0.36 ) (0.05 ) Net income $ 0.36 $ 0.35DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING 85,300 89,918(1) We completed the teach out activities during the year ended December 31, 2009 for McIntosh College – Dover , NH, Lehigh Valley College – Center Valley, PA, Gibbs Colleges – Livingston, NJ and Norwalk, CT, Katharine Gibbs Schools – new York, NY and Norristown, PA. Accordingly, the results of operations for these six campuses are reported as a component of discontinued operations for both current and prior period financial results. CAREER EDUCATION CORPORATION AND SUBSIDIARIESUNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS(In thousands, except per share amounts and percentages) for the Twelve Months Ended December 31, (1) % of % of 2009 Revenue 2008 RevenueREVENUE: Tuition and registration fees $ 1,762,942 96.0 % $ 1,593,579 96.0 % Other 73,693 4.0 % 67,163 4.0 % Total revenue 1,836,635 1,660,742OPERATING EXPENSES: Educational services and facilities 611,748 33.3 % 605,474 36.5 % General and administrative 934,131 50.9 % 866,043 52.1 % Depreciation and amortization 65,652 3.6 % 71,636 4.3 % Goodwill and asset impairment 2,500 0.1 % 8,925 0.5 % Total operating expenses 1,614,031 87.9 % 1,552,078 93.5 %Operating income 222,604 12.1 % 108,664 6.5 %OTHER INCOME (EXPENSE): Interest income 2,372 0.1 % 13,776 0.8 % Interest expense (226 ) 0.0 % (868 ) -0.1 % Share of affiliate earnings – 0.0 % 4,665 0.3 % Miscellaneous (expense) income (705 ) 0.0 % 2,050 0.1 % Total other income 1,441 0.1 % 19,623 1.2 %Pretax income 224,045 12.2 % 128,287 7.7 %Provision for income taxes 78,663 4.3 % 38,525 2.3 %Income from continuing operations 145,382 7.9 % 89,762 5.4 %Loss from discontinued operations, net of tax (64,163 ) (29,620 )NET INCOME $ 81,219 $ 60,142NET INCOME (LOSS) PER SHARE – DILUTED: Income from continuing operations $ 1.68 $ 1.00 Loss from discontinued operations (0.74 ) (0.33 ) Net income $ 0.94 $ 0.67DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING 86,418 90,089(1) We completed the teach out activities during the year ended December 31, 2009 for McIntosh College – Dover , NH, Lehigh Valley College – Center Valley, PA, Gibbs Colleges – Livingston, NJ and Norwalk, CT, Katharine Gibbs Schools – new York, NY and Norristown, PA. Accordingly, the results of operations for these six campuses are reported as a component of discontinued operations for both current and prior period financial results. CAREER EDUCATION CORPORATION AND SUBSIDIARIESUNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS BY QUARTER(In thousands, except per share amounts) for the 2009 Quarters Ended, (1) March 31 June 30 September 30 December 31 full YearREVENUE: Tuition and registration fees $ 415,674 $ 420,600 $ 434,932 $ 491,736 $ 1,762,942 Other 17,189 17,073 23,359 16,072 73,693 Total revenue 432,863 437,673 458,291 507,808 1,836,635OPERATING EXPENSES: Educational services and facilities 146,616 148,461 149,822 166,849 611,748 General and administrative 219,191 236,101 252,131 226,708 934,131 Depreciation and amortization 16,101 16,390 15,909 17,252 65,652 Goodwill and asset impairment – - 2,500 – 2,500 Total operating expenses 381,908 400,952 420,362 410,809 1,614,031Operating income 50,955 36,721 37,929 96,999 222,604 for the 2008 Quarters Ended, (1) March 31 June 30 September 30 December 31 full YearREVENUE: Tuition and registration fees $ 415,972 $ 390,874 $ 376,230 $ 410,503 $ 1,593,579 Other 19,132 13,756 19,503 14,772 67,163 Total revenue 435,104 404,630 395,733 425,275 1,660,742OPERATING EXPENSES: Educational services and facilities 151,546 148,524 156,538 148,866 605,474 General and administrative 226,532 215,678 213,828 210,005 866,043 Depreciation and amortization 19,011 17,908 17,961 16,756 71,636 Goodwill and asset impairment 2,082 – 6,843 – 8,925 Total operating expenses 399,171 382,110 395,170 375,627 1,552,078Operating income 35,933 22,520 563 49,648 108,664(1) We completed the teach out activities during the year ended December 31, 2009 for McIntosh College – Dover , NH, Lehigh Valley College – Center Valley, PA, Gibbs Colleges – Livingston, NJ and Norwalk, CT, Katharine Gibbs Schools – new York, NY and Norristown, PA. Accordingly, the results of operations for these six campuses are reported as a component of discontinued operations for both current and prior period financial results. CAREER EDUCATION CORPORATION AND SUBSIDIARIESUNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS(In thousands) for the Twelve Months Ended December 31, 2009 2008 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 81,219 $ 60,142 Adjustments to reconcile net income to net cash provided by operating activities: Goodwill and asset impairment 2,500 13,600 Depreciation and amortization expense 67,596 77,688 Bad debt expense 56,718 44,278 Compensation expense related to share-based awards 16,516 11,522 Gain on sale of business – (1,555 ) Loss on disposition of property and equipment 1,291 573 Share of affiliate earnings, net of cash received – 939 Deferred income taxes (8,702 ) (749 ) changes in operating assets and liabilities 71,113 (19,718 ) Net cash provided by operating activities 288,251 186,720 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of available-for-sale investments (617,032 ) (580,970 ) Sales of available-for-sale investments 668,281 483,635 Purchases of property and equipment (74,087 ) (53,854 ) Acquisition of the rights to the Le Cordon Bleu brand (26,331 ) – Other (132 ) 402 Net cash used in investing activities (49,301 ) (150,787 ) CASH FLOWS FROM FINANCING ACTIVITIES: Purchase of treasury stock (201,119 ) (14,055 ) Issuance of common stock 2,797 3,239 Tax benefit associated with stock option exercises 237 471 Payments on revolving loans – (10,113 ) Payments of capital lease obligations (1,066 ) (590 ) Net cash used in financing activities (199,151 ) (21,048 ) EFFECT OF FOREIGN CURRENCY EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS: 415 (7,732 ) NET INCREASE IN CASH AND CASH EQUIVALENTS 40,214 7,153 Add: Cash balance of discontinued operations, beginning of the year 2,004 26,658 less: Cash balance of discontinued operations, end of the year 599 2,004 CASH AND CASH EQUIVALENTS, beginning of the year 242,854 211,047 CASH AND CASH EQUIVALENTS, end of the year $ 284,473 $ 242,854 CAREER EDUCATION CORPORATION AND SUBSIDIARIESSELECTED SEGMENT INFORMATION(Dollars in thousands) for the Three Months Ended December 31, (1) 2009 2008REVENUE: University $ 216,525 $ 176,982 Culinary Arts 91,058 77,287 Health Education (2) 85,549 66,438 Art & Design 69,421 67,501 International 45,069 35,686 Corporate and other (166 ) – Subtotal $ 507,456 $ 423,894 Transitional Schools (2) 352 1,381 Total revenue $ 507,808 $ 425,275SEGMENT OPERATING INCOME (LOSS): University $ 55,863 $ 42,949 Culinary Arts 13,190 (588 ) Health Education (2) 17,845 9,864 Art & Design 11,506 9,052 International 8,902 8,106 Corporate and other (3,718 ) (18,938 ) Subtotal $ 103,588 $ 50,445 Transitional Schools (2) (6,589 ) (797 ) Total operating income $ 96,999 $ 49,648SEGMENT OPERATING MARGIN (LOSS): University 25.8 % 24.3 % Culinary Arts 14.5 % -0.8 % Health Education (2) 20.9 % 14.8 % Art & Design 16.6 % 13.4 % International 19.8 % 22.7 % Transitional Schools (2) NM NM(1) We completed the teach out activities during the year ended December 31, 2009 for McIntosh College – Dover , NH, Lehigh Valley College – Center Valley, PA, Gibbs Colleges – Livingston, NJ and Norwalk, CT, Katharine Gibbs Schools – new York, NY and Norristown, PA. Accordingly, the results of operations for these six campuses are reported as a component of discontinued operations for both current and prior period financial results.(2) We made the decision during 2009 to convert Gibbs College – Boston, MA, Gibbs College – Farmington, CT, and SBI Cranston – Cranston, RI, into Health Education schools. The schools that we converted were previously scheduled to close in the fourth quarter of 2009, and their results of operations had been reflected within Transitional Schools. as a result of the decision to convert these schools, their results of operations for all periods presented are now reflected within the Health Education segment. The current quarter operating loss for Transitional Schools includes a $5.3 million pretax charge for the fair value of remaining lease obligations for vacated space at our SBI Cranston – Cranston, RI location. CAREER EDUCATION CORPORATION AND SUBSIDIARIESSELECTED SEGMENT INFORMATION(Dollars in thousands) for the Twelve Months Ended December 31, (1) 2009 2008REVENUE: University $ 811,420 $ 702,347 Culinary Arts 332,236 328,313 Health Education (2) 306,286 249,171 Art & Design 263,179 263,715 International 121,188 107,558 Corporate and other (512 ) 9 Subtotal $ 1,833,797 $ 1,651,113 Transitional Schools (2) 2,838 9,629 Total revenue $ 1,836,635 $ 1,660,742SEGMENT OPERATING INCOME (LOSS): University $ 177,727 $ 122,757 Culinary Arts 18,486 (5,908 ) Health Education (2) 55,171 20,646 Art & Design 32,599 28,057 International 18,853 18,856 Corporate and other (70,181 ) (69,816 ) Subtotal $ 232,655 $ 114,592 Transitional Schools (2) (10,051 ) (5,928 ) Total operating income $ 222,604 $ 108,664SEGMENT OPERATING MARGIN (LOSS): University 21.9 % 17.5 % Culinary Arts 5.6 % -1.8 % Health Education (2) 18.0 % 8.3 % Art & Design 12.4 % 10.6 % International 15.6 % 17.5 % Transitional Schools (2) NM NM(1) We completed the teach out activities during the year ended December 31, 2009 for McIntosh College – Dover , NH, Lehigh Valley College – Center Valley, PA, Gibbs Colleges – Livingston, NJ and Norwalk, CT, Katharine Gibbs Schools – new York, NY and Norristown, PA. Accordingly, the results of operations for these six campuses are reported as a component of discontinued operations for both current and prior period financial results.(2) We made the decision during 2009 to convert Gibbs College – Boston, MA, Gibbs College – Farmington, CT, and SBI Cranston – Cranston, RI, into Health Education schools. The schools that we converted were previously scheduled to close in the fourth quarter of 2009, and their results of operations had been reflected within Transitional Schools. as a result of the decision to convert these schools, their results of operations for all periods presented are now reflected within the Health Education segment. The current year operating loss for Transitional Schools includes a $5.3 million pretax charge for the fair value of remaining lease obligations for vacated space at our SBI Cranston – Cranston, RI location. CAREER EDUCATION CORPORATION AND SUBSIDIARIESSELECTED UNIVERSITY SEGMENT INFORMATION(Dollars in thousands) for the Three Months Ended December 31, for the Twelve Months Ended December 31, 2009 2008 2009 2008UNIVERSITY REVENUE: AIU $ 99,768 $ 87,437 $ 409,043 $ 374,699 Online 80,061 68,937 336,487 298,281 On-ground 19,707 18,500 72,556 76,418 CTU 105,521 79,577 368,621 294,409 Online 87,953 65,068 305,280 240,652 On-ground 17,568 14,509 63,341 53,757 Briarcliffe 11,236 9,968 33,756 33,239 Total University $ 216,525 $ 176,982 $ 811,420 $ 702,347UNIVERSITY SEGMENT OPERATING INCOME (LOSS): AIU $ 21,430 $ 18,813 $ 90,672 $ 59,152 Online 22,825 20,887 103,339 72,844 On-ground (1,395 ) (2,074 ) (12,667 ) (13,692 ) CTU $ 32,278 $ 22,585 $ 86,017 $ 62,719 Online 29,472 22,236 87,894 63,311 On-ground 2,806 349 (1,877 ) (592 ) Briarcliffe 2,155 1,551 1,038 886 Total University $ 55,863 $ 42,949 $ 177,727 $ 122,757UNIVERSITY SEGMENT OPERATING MARGIN (LOSS): AIU 21.5 % 21.5 % 22.2 % 15.8 % Online 28.5 % 30.3 % 30.7 % 24.4 % On-ground -7.1 % -11.2 % -17.5 % -17.9 % CTU 30.6 % 28.4 % 23.3 % 21.3 % Online 33.5 % 34.2 % 28.8 % 26.3 % On-ground 16.0 % 2.4 % -3.0 % -1.1 % Briarcliffe 19.2 % 15.6 % 3.1 % 2.7 % Total University 25.8 % 24.3 % 21.9 % 17.5 % Student Population as of January 31, 2010 2009 AIU 23,800 20,600 Online 19,800 16,800 On-ground 4,000 3,800 CTU 30,400 23,500 Online 24,800 18,600 On-ground 5,600 4,900 Briarcliffe 1,800 1,600 Total University 56,000 45,700 new Student starts for the three months ended December 31, 2009 2008 AIU 7,210 6,350 Online 6,180 5,440 On-ground 1,030 910 CTU 9,800 7,530 Online 8,630 6,480 On-ground 1,170 1,050 Briarcliffe 70 60 University 17,080 13,940 CAREER EDUCATION CORPORATION AND SUBSIDIARIESReconciliation of GAAP to Non-GAAP Items (1)(dollars in millions) for the Three Months Ended December 31, 2009 2008 Operating Income Earnings per Diluted Share (2) Operating Income Earnings per Diluted Share (2)Reported $ 97.0 $ 0.72 $ 49.6 $ 0.40Reconciling Items: Unused Space Charges 14.3 0.11 1.9 0.01 Performance-based Compensation Related to plan Outperformance (3) (2.2 ) (0.02 ) – - Severance & Stay – - 1.5 0.01 Termination of Insurance Policies (4) (12.0 ) (0.09 ) – - Legal Settlements – - 3.6 0.03Adjusted to Exclude Significant Items $ 97.1 $ 0.72 $ 56.6 $ 0.45Diluted Weighted Average Shares Outstanding 85,300 89,918 for the Twelve Months Ended December 31, 2009 2008 Operating Income Earnings per Diluted Share (2) Operating Income Earnings per Diluted Share (2)Reported $ 222.6 $ 1.68 $ 108.7 $ 1.00Reconciling Items: Unused Space Charges 14.3 0.11 11.6 0.08 Performance-based Compensation Related to plan Outperformance (3) 23.1 0.17 – - Severance & Stay 1.5 0.01 7.4 0.05 Asset Impairment Charges 2.5 0.02 8.9 0.06 Termination of Insurance Policies (4) (12.0 ) (0.09 ) – - Legal Settlements – - 6.3 0.05 Gain from Termination of Affiliate Relationship (5) – - – (0.03 )Adjusted to Exclude Significant Items $ 252.0 $ 1.90 $ 142.9 $ 1.21Diluted Weighted Average Shares Outstanding 86,418 90,089 for the Twelve Months Ended December 31, 2009 2008Net Cash Flows from Operating Activities $ 288.3 $ 186.7Adjust for: Capital expenditures, net (74.1 ) (53.9 )Free Cash Flows $ 214.2 $ 132.8(1) The Company has included some non-GAAP financial measures in this presentation to discuss the Company’s financial results. as a general matter, the Company uses these non-GAAP measures in addition to and in conjunction with results presented in accordance with GAAP. Among other things, the Company may use such non-GAAP financial measures in addition to and in conjunction with corresponding GAAP measures, to help analyze the performance of its core business, in connection with the preparation of annual budgets, and in measuring 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 in providing estimates of future performance and that failure to report these non-GAAP measures could result in confusion among analysts and others and a misplaced perception that the Company’s results have underperformed or exceeded expectations. these non-GAAP financial measures reflect an additional way of viewing aspects of the Company’s operations that, when viewed with the GAAP results and the reconciliations to corresponding GAAP financial measures, provide a more complete understanding of the Company’s results of operations and the factors and trends affecting the Company’s business. However, these non-GAAP measures should be considered as a supplement to, and not as a substitute for, or superior to, the corresponding measures calculated in accordance with GAAP.(2) Earnings per share based on income from continuing operations.(3) Performance-based Compensation Related to plan Outperformance by segment is as follows: for the Twelve Months ended December 31, 2009 Corporate $12.4 University 4.0 Health 3.0 Culinary 2.0 Art & Design 1.7 TOTAL $23.1 The fourth quarter performance-based compensation related to plan outperformance represents the year-end true-up to the estimated payout based upon full-year results.(4) We received a $12.0 million payment in the fourth quarter 2009 related to the termination of certain insurance policies.(5) Gain from Termination of Affiliate Relationship is recorded within other income on the unaudited consolidated statement of operations.

SOURCE: Career Education Corporation

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Career Education Corporation Reports Results for Fourth Quarter and Full Year 2009

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Tags: ceco, diluted share, earnings per share, fourth quarter earnings, mccullough, student population