Career Education Corporation Reports Results for Third Quarter 2006.HOFFMAN ESTATES Hoffman Estates A village of northeast Illinois, a suburb of Chicago. Population: 49,700. , Ill. -- Career Education Corporation (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :CECO CECO Council of Engineering Companies of Oregon CECO Cost Estimate Change Order CECO Center for Economic and Community Outreach CECO CENTCOM Engineer Contingency Organization CECO Concrete Engineering Company of Omaha (Ceco Concrete Construction LLC) ) today reported revenue of $462.4 million and net income of $20.7 million for the quarter ended September 30, 2006. "Although third quarter results were disappointing, the board and management of Career Education Corporation took a number of significant steps during the quarter to resolve our current issues, improve our operating results, and lay the foundation for future growth," said Bob Dowdell, Career Education's President and Chief Executive Officer. "The potential for our company and our industry remains very strong, and we aim to steadily build value for all of our stakeholders Stakeholders All parties that have an interest, financial or otherwise, in a firm-stockholders, creditors, bondholders, employees, customers, management, the community, and the government. going forward. Initially, we are focused on finding the best leadership for the company, specifically a permanent CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. , and strengthening key internal positions." RESULTS OF OPERATIONS Three Months Ended September 30, 2006 * Consolidated revenue was $462.4 million during the third quarter of 2006, a 7.0 percent decrease from consolidated revenue of $497.5 million during the third quarter of 2005. Revenue generated by the University segment's fully online platforms decreased 8.5 percent, to $154.7 million during the third quarter of 2006 from $169.1 million during the third quarter of 2005. * Income from operations declined to $28.3 million during the third quarter of 2006, from $83.7 million during the third quarter of 2005. Operating profit margin Operating profit margin The ratio of operating profit to net sales. percentage was 6.1 percent during the third quarter of 2006, a 10.7 percentage point decrease relative to an operating profit margin percentage of 16.8 percent during the third quarter of 2005. The decrease in operating profit margin percentage was primarily due to a decrease in operating profit margin percentage generated by our University segment's fully-online platforms and increases in administration expense, advertising expense, and occupancy expense as a percentage of revenue, offset, in part, by a decrease in bad debt expense as a percentage of revenue. University segment income from operations declined to $33.2 million during the third quarter of 2006, from $63.9 million during the third quarter of 2005. * Consolidated net income during the third quarter of 2006 was $20.7 million, or $0.22 per diluted share, relative to consolidated net income of $54.9 million, or $0.53 per diluted share, during the third quarter of 2005. Third quarter 2006 net income includes a non-cash charge Non-Cash Charge A charge off, made by a company against earnings, that does not require an initial outlay of cash. Notes: Non-cash charges are typically against the depreciation, amortization, and depletion accounts on a company's balance sheet. for share-based compensation expense of $3.9 million, net of tax benefit of $2.3 million, or $0.04 per diluted share. Share-based compensation expense recorded during the third quarter of 2005, prior to our adoption of SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System 123R, was insignificant. Nine Months Ended September 30, 2006 * Consolidated revenue was $1.48 billion during the nine months ended September 30, 2006, compared to consolidated revenue of $1.51 billion during the nine months ended September 30, 2005. Revenue generated by the University segment's online platforms increased 6.3 percent, to $528.1 million during the nine months ended September 30, 2006, from $497.0 million during the nine months ended September 30, 2005. * Income from operations decreased to $73.7 million during the nine months ended September 30, 2006, from $264.4 million during the nine months ended September 30, 2005. Operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. margin percentage decreased to 5.0 percent during the nine months ended September 30, 2006, from 17.6 percent during the nine months ended September 30, 2005. During the nine months ended September 30, 2006, we recorded goodwill and intangible asset Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. impairment charges of $96.1 million, pre-tax, attributable to our Health Education and Gibbs divisions. University segment income from operations declined to $183.1 million during the nine months ended September 30, 2006, from $218.1 million during the nine months ended September 30, 2005. The decrease in University segment income from operations is primarily attributable to the adverse impact on student population and revenue of AIU's probation status and the cost and effect of changes adopted in response to recommendations made by AIU's accrediting body. University segment operating income margin percentage decreased to 27.6 percent during the nine months ended September 30, 2006, from 33.7 percent during the nine months ended September 30, 2005. The decrease in University segment operating income margin percentage is primarily a result of the adverse impact on revenue of AIU's probation status and the disproportionate growth of CTU CTU Colorado Technical University CTU Czech Technical University in Prague CTU Counter Terrorist Unit CTU Clinical Trials Unit CTU Catholic Theological Union CTU Chicago Teachers Union CTU Computer Training Unit CTU Control Unit Online operations, which operates at a lower operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: percentage than that of AIU AIU American Intercontinental University AIU Allegheny Intermediate Unit (Homestead, PA) AIU Atlantic International University AIU Association of Indian Universities AIU Association Internationale des Universités Online. * Consolidated net income during the nine months ended September 30, 2006, was $25.9 million, or $0.26 per diluted share, relative to consolidated net income of $163.6 million, or $1.57 per diluted share, during the nine months ended September 30, 2005. Consolidated net income during the nine months ended September 30, 2006, includes the following non-cash charges (in millions, except per share data): [TABLE OMITTED] (1) The company estimates that only $7.3 million of the Health Education division goodwill and intangible asset impairment charge will be deductible for income tax reporting purposes. PROVISION FOR INCOME TAXES Provision for income taxes during the nine months ended September 30, 2006, was $62.3 million, relative to income before provision for income taxes during the nine months ended September 30, 2006, of $88.3 million. This represents an effective income tax rate of 70.6 percent for the nine months ended September 30, 3006. The unusual relationship between income before provision for income taxes and our provision for income taxes for the nine months ended September 30, 2006, is attributable to the fact that only $7.3 million of our total $85.8 million Health Education division goodwill and intangible asset impairment charge recognized during the second and third quarters of 2006 is deductible for income tax reporting purposes. Excluding the effect of the Health Education goodwill and intangible asset impairment charge, the company's effective income tax rate for the nine months ended September 30, 2006 was 37.4%. CASH FLOWS AND FINANCIAL POSITION Cash Flows * Net cash provided by operating activities was $83.2 million during the third quarter of 2006, compared to $106.2 million during the third quarter of 2005. The decrease is primarily attributable to the decrease in net income during the third quarter of 2006. * Capital expenditures decreased to $16.9 million during the third quarter of 2006, from $28.3 million during the third quarter of 2005. Capital expenditures represented 3.6 percent of consolidated revenue during the third quarter of 2006 and 5.7 percent of consolidated revenue during the third quarter of 2005. Financial Position * As of September 30, 2006, and June 30, 2006, cash and cash equivalents and investments totaled $444.5 million and $378.0 million, respectively. This increase is primarily attributable to cash generated by operating activities during the third quarter of 2006. * Accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying quarterly days sales outstanding In accountancy, Days Sales Outstanding is a company's average collection period. A low figure indicates that the company collects its outstanding receivables quickly. Typically it is looked at either quarterly or yearly (90 or 365 days). (DSO See CSO. ) were 17 days as of September 30, 2006, which represents a six-day increase from DSO as of June 30, 2006, of 11 days and is consistent with DSO as of September 30, 2005, of 17 days. Stock Repurchase Stock repurchase A firm's repurchase of outstanding shares of its common stock. Program Since July 2005, CEC's Board of Directors has authorized the use of $500.2 million to repurchase outstanding shares of the company's common stock. 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 Regulatory requirements are part of the process of drug discovery and drug development. Regulatory requirements describe what is necessary for a new drug to be approved for marketing in any particular country. . The stock repurchase program does not have an expiration date Expiration Date The day on which an options or futures contract is no longer valid and, therefore, ceases to exist. Notes: The expiration date for all listed stock options in the U.S. and may be suspended or discontinued at any time. Since the inception of the program, the company has repurchased 9.1 million shares of its common stock for approximately $325.0 million at an average price of $35.63 per share. No shares were repurchased during the third quarter of 2006. SEGMENT REPORTING segment reporting A type of financial reporting in which the firm discloses information by identifiable industry segments. For example, Union Pacific Corporation reports revenues, income, assets, depreciation, and capital expenditures for each of four Pursuant to Statement of Financial Accounting Standards No. 131, Disclosure about Segments of an Enterprise and Related Information, as of September 30, 2006, CEC (Central Electronic Complex) The set of hardware that defines a mainframe, which includes the CPU(s), memory, channels, controllers and power supplies included in the box. Some CECs, such as IBM's Multiprise 2000 and 3000, include data storage devices as well. identified seven school reportable segments: the University segment, the Culinary Arts segment, the Colleges segment, the Health Education segment, the Gibbs segment, the Academy segment, and the INSEEC INSEEC Institut de Hautes Etudes Economiques et Commerciales (French: Institute of Economic Studies) segment, and one non-school segment, the JDV JDV Juridische Dienstverlening (Dutch) Online segment. POPULATION AND NEW STUDENT START DATA Student Population Total student population by reportable segment as of October 31, 2006 and 2005, was as follows: [TABLE OMITTED] (1) As of October 31, 2006 and 2005, the University segment population includes approximately 28,800 students and 32,000 students, respectively, who were taking classes at such dates in fully-online academic programs offered by University segment schools. New Student Starts New student starts by reportable segment during the third quarter of 2006 and 2005 were as follows: [TABLE OMITTED] (1) University segment new student starts includes approximately 9,200 students and 12,200 students, respectively, who were taking classes in fully-online academic programs offered by University segment schools during the third quarter of 2006 and 2005. RECENT INITIATIVES During the third quarter of 2006, the company executed a number of initiatives aimed at fostering the sustainable growth of its student population and profitability. These initiatives included the following: * We began a search for a new Chief Marketing and Admissions Officer and continue to look for a senior-level admissions executive for our on-ground business. * We initiated a new branding effort to better leverage CEC's competitive advantages. * We instituted an incentive compensation program for admission representatives to reduce turnover. The plan rewards admission representatives for enrolling students who successfully complete all or a specified portion of their academic programs, and is fully compliant with the requirements and guidelines of the Department of Education. * We expanded financing options available to all students, which primarily impacted our Culinary Arts and Healthcare segment schools during the third quarter of 2006. * We began a program to rationalize ra·tion·al·ize v. 1. To make rational. 2. To devise self-satisfying but false or inconsistent reasons for one's behavior, especially as an unconscious defense mechanism through which irrational acts or feelings are made to appear our assets, starting with the teach-out of our Springfield, Massachusetts Springfield is a city in Massachusetts, United States. It is the county seat of Hampden County.GR6 In the 2000 census, the city population was 154,082. Sanford-Brown campus. "In the near term, we will be making a number of significant decisions related to profitability, marketing direction, and student and employee retention that we believe will position our company for future growth," said Dowdell. "We will ensure that our resources and attention are directed toward opportunities that will offer the greatest benefit to our students and provide the greatest return for our shareholders." CONFERENCE CALL INFORMATION Career Education Corporation will host a conference call today, November 7, 2006, at 5:00 PM (Eastern Time). Interested parties can access the live webcast of the conference call at www.careered.com. Participants can also listen to the conference call by dialing 617.614.2707 (international) or 866.761.0749 (domestic) and citing code 81765373. Please log-in or dial-in at least 10 minutes prior to the conference call start time to ensure a connection. An archived version of the conference call webcast will be accessible for 90 days at www.careered.com. A replay of the conference call will also be available for seven days by calling 617-801-6888 (international) or 888-286-8010 and citing code 78537381. About Career Education Corporation The colleges, schools and universities that are part of the Career Education Corporation (CEC) family offer high quality education to approximately 100,000 students across the world in a variety of career-oriented disciplines. The 80-plus campuses that serve these students are located throughout the U. S., Canada, France, and the United Kingdom, and offer doctoral, master's, bachelor's, and associate degrees and diploma and certificate programs. Many students attend the fully online educational platforms offered by American InterContinental University American InterContinental University, commonly called AIU, is an international for-profit university owned by Career Education Corporation (stock symbol CECO). It was founded in 1977 as the American College of Applied Arts. Online and Colorado Technical University Colorado Technical University (CTU) is a system of proprietary for-profit colleges in the United States providing career training, accredited programs, and college degrees in a variety of areas. CTU grants bachelor's, master's and doctoral degrees. Online. Career Education is an industry leader whose gold-standard brands are recognized globally. Those brands include, among others, Le Cordon Bleu For the Schnitzel variant, see . Le Cordon Bleu (French for "blue ribbon") is an international group of hospitality management and cooking schools teaching French cuisine. Schools North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. ; Harrington College of Design Harrington College of Design is located in the Loop area of Chicago, Illinois. It offers students programs leading to either a bachelor's or associate's degree upon completion of the Interior Design Program, Digital Photography Program, or Communication Design Program. ; Brooks Institute of Photography The Brooks Institute of Photography is a for-profit college based in Santa Barbara, California and Ventura, California. Brooks offers four majors. The Still photography program is based in Santa Barbara, and the Visual communications (Graphic Design), Motion Picture/Video and ; the Katharine Gibbs Schools; American InterContinental University; Colorado Technical University and Sanford-Brown Institutes Sanford-Brown Institute is a system of for-profit colleges in the United States providing career training programs in health care and criminal justice. Several of its campuses were originally known as the Ultrasound Diagnostic School, before the system was purchased by its current and Colleges. The mission of CEC, through its schools, its educators, and its employees is educationCotheir primary goal, to enable students to graduate successfully and pursue rewarding careers. For more information see www.careered.com. The company's website also has a detailed listing of individual campus locations and web links for its 80-plus colleges, schools and universities. Except for the historical and present factual information contained herein, the matters set forth in this release, including statements under "Recent Initiatives" and statements identified by words such as "anticipate," "believe," "plan," "expect," "intend," "project," "will," and similar expressions, are forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. 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 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: future financial and operational results, including the impact of the impairment of goodwill and other intangible assets; risks related to our ability to comply with accrediting agency requirements or obtain accrediting agency approvals, including the adverse impact of negative publicity concerning the continued probation status of American InterContinental University and ongoing review by its accrediting body; risks related to our ability to comply with, and the impact of changes in, legislation and regulations that affect our ability to participate in student financial aid programs; costs, risks, and effects of legal and administrative proceedings and investigations and governmental regulations, including the pending Securities and Exchange Commission and Justice Department investigations and class action, derivative, and other lawsuits; costs and difficulties related to the integration of acquired businesses; risks related to our ability to manage and continue growth; risks related to competition, general economic conditions, and other risk factors relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc our industry and business and the factors discussed in our Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the year ended December 31, 2005, and from time to time in our other reports filed with the Securities and Exchange Commission. [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] |
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