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TMCNet:  Career Education Corporation Reports Results for Fourth Quarter and Full Year 2012

[February 27, 2013]

Career Education Corporation Reports Results for Fourth Quarter and Full Year 2012

SCHAUMBURG, Ill. --(Business Wire)--

Career Education Corporation (NASDAQ: CECO) today reported total revenue of $354.7 million, and a net loss of $61.5 million, or -$0.93 per diluted share, for the fourth quarter of 2012 compared to total revenue of $438.3 million and net loss of $120.4 million, or -$1.64 per diluted share, for the fourth quarter of 2011. For the full year 2012, total revenue of $1.49 billion, and net loss of $142.8 million, or -$2.15 per diluted share decreased from total revenue of $1.87 billion and net income of $18.6 million, or $0.25 per diluted share, for the full year 2011.

"While our financial results were unacceptable and unsustainable, 2012 was a year of renewal for Career Education," said Steven H. Lesnik, chairman, president and chief executive officer. "We made significant progress on the regulatory and accreditation fronts, reinforced our leadership team, reorganized and reduced the footprint of our institutions, adopted a long-term strategy and continued our investment in cutting-edge education technology."

"Looking to 2013, we will sustain our sharp focus on student outcomes, continue to re-engineer and right-size the organization and leverage our investment in ground-breaking learning technology. The Company's return to growth and profitability will be rooted in exceptional educational experiences and strong outcomes for our students."

The Company believes it is useful to present non-GAAP financial measures, which exclude certain significant items, as a means to understand the performance of its core business. On a non-GAAP basis, the loss per diluted share from continuing operations was -$0.35 for the fourth quarter 2012 as compared to earnings per diluted share of $0.32 for the fourth quarter 2011. For the year ended December 31, 2012, on a non-GAAP basis, the loss per diluted share from continuing operations was -$0.44 as compared to earnings per diluted share of $2.14 for the year ended December 31, 2011. (See tables below and the GAAP to non-GAAP reconciliation attached to this press release for further details.)

CONSOLIDATED RESULTS

Quarter Ended December 31, 2012

  • Total revenue was $354.7 million for the fourth quarter of 2012, a 19.1 percent decrease from $438.3 million for the fourth quarter of 2011.
  • Operating losses of $77.2 million and $167.9 million were reported for the fourth quarters of 2012 and 2011, respectively. The operating margin was -21.8 percent for the fourth quarter of 2012 versus -38.3 percent for the fourth quarter of 2011.
  • The loss from continuing operations for the quarter ended December 31, 2012 was $58.7 million, or -$0.89 per diluted share compared to the loss from continuing operations of $141.6 million, or -$1.93 per diluted share, for the quarter ended December 31, 2011.
  • The operating results for the quarters ended December 31, 2012 and 2011 include the following significant items:


                 
(Loss) Earnings
Significant Items per Diluted
(In Millions) Share Impact

Quarter Ended December 31, 2012

Goodwill and Intangible Asset Impairments $ 12.1 $ 0.12
Asset Impairments 29.3 0.29
Severance and Related Costs   13.1   0.13
TOTAL $ 54.5 $ 0.54
 

Quarter Ended December 31, 2011

Goodwill and Intangible Asset Impairments $ 188.8 $ 2.25
TOTAL $ 188.8 $ 2.25
 
  • During the fourth quarter of 2012, the Company recorded non-cash trade name impairment charges of $12.1 million, primarily attributable to Culinary Arts ($8.1) and Health Education ($3.5). In addition, the Company recorded $29.3 million of non-cash asset impairments and $13.1 million of severance and related costs primarily in connection with both our campus closure and reduction in force actions. During the fourth quarter of 2011, the Company recorded $168.4 million of non-cash goodwill impairment applicable to Culinary Arts ($73.7), Health Education ($64.6), and Transitional Schools ($30.1), and a $20.4 million non-cash trade name impairment within Culinary Arts.
  • Excluding the significant items in the table above, the operating loss was $22.7 million in the fourth quarter of 2012 compared to operating income of $20.9 million in the fourth quarter of 2011. The operating margin was -6.4 percent during the fourth quarter of 2012 as compared to 4.8 percent during the fourth quarter of 2011.

Year to Date Ended December 31, 2012

  • Total revenue was $1.49 billion for the year ended December 31, 2012, compared to $1.87 billion for the year ended December 31, 2011.
  • The operating loss for the year ended December 31, 2012 was $183.8 million, versus operating income of $40.7 million for the year ended December 31, 2011. The operating margin decreased to -12.3 percent for the year ended December 31, 2012, from 2.2 percent for the year ended December 31, 2011.
  • The loss from continuing operations for the year ended December 31, 2012, was $134.9 million, or -$2.03 per diluted share, compared to the loss from continuing operations of $3.3 million, or -$0.04 per diluted share, for the year ended December 31, 2011.
  • The operating results for the years ended December 31, 2012 and 2011 include the following significant items:
                 
(Loss) Earnings
Significant Items per Diluted
(In Millions) Share Impact

Year Ended December 31, 2012

Goodwill and Intangible Asset Impairments $ 96.5 $ 1.33
Asset Impairments 30.5 0.30
Severance and Related Costs 14.9 0.15
Insurance Recoveries   (19.0 )   (0.19 )
TOTAL $ 122.9   $ 1.59  
 

Year Ended December 31, 2011

Goodwill and Intangible Asset Impairments $ 191.5 $ 2.24
Insurance Recoveries   (7.0 )   (0.06 )
TOTAL $ 184.5   $ 2.18  
 
  • During the year ended December 31, 2012, the Company recorded non-cash goodwill impairment charges of $83.4 million, primarily related to $41.9 million within Health Education and $40.8 million within Design & Technology, as well as non-cash trade name impairments of $13.1 million, primarily within Culinary Arts ($8.1), Health Education ($3.5), and Transitional Schools ($1.0). In addition, the Company recorded $30.5 million of non-cash asset impairments and $14.9 million of severance and related costs primarily related to both our campus closure and reduction in force actions. The operating results for the year ended December 31, 2011 primarily included the $188.8 million of non-cash goodwill and intangible asset impairment charges recorded in the fourth quarter of 2011 as well as $2.5 million of non-cash accreditation rights impairment.
  • During the year ended December 31, 2012, the Company recorded a $19.0 million insurance recovery related to the settlement of claims under certain insurance policies. During the year ended December 31, 2011, the Company recorded a $7.0 million insurance recovery related to previously settled legal matters.
  • Excluding the significant items in the table above, the operating loss was $60.9 million for the year ended December 31, 2012 and the operating income was $225.2 million for the year ended December 31, 2011. Operating margin was -4.1 percent and 12.0 percent for the years ended December 31, 2012 and 2011, respectively.

CONSOLIDATED CASH FLOWS AND FINANCIAL POSITION

Cash Flows

Net cash flows used in operating activities totaled $16.8 million for the year ended December 31, 2012, compared to net cash flows provided by operating activities of $230.5 million for the year ended December 31, 2011.

Capital expenditures decreased to $37.9 million during the year ended December 31, 2012, from $78.3 million for the year ended December 31, 2011. Capital expenditures represented 2.5 percent and 4.1 percent of total revenue of continuing and discontinued operations during the years ended December 31, 2012 and 2011, respectively.

Financial Position

As of December 31, 2012 and December 31, 2011, cash and cash equivalents and short-term investments totaled $402.3 million and $441.2 million, respectively. Included in the 2012 amount is $97.9 million of restricted cash, the majority of which is for amounts collateralized under our Credit Agreement as of December 31, 2012.

Credit Agreements

During the fourth quarter of 2012, the Company entered into a revolving credit facility pursuant to a Credit Agreement with BMO Harris Bank N.A. The revolving credit facility under the Credit Agreement is scheduled to mature on January 31, 2014. This Credit Agreement replaced our previous U.S. Credit Agreement, which expired on October 31, 2012. As of December 31, 2012, we have borrowed the maximum amount of $80.0 million under the Credit Agreement.

Stock Repurchase Program

During the fourth quarter of 2012, the Company did not repurchase any shares of its common stock. During the year ended December 31, 2012, the Company repurchased approximately 6.1 million shares of its common stock for approximately $56.4 million at an average price of $9.29 per share.

As of December 31, 2012, approximately $183.3 million was available under the Company's authorized stock repurchase program to repurchase outstanding shares of our 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 various factors, including market conditions and corporate and regulatory requirements.

STUDENT POPULATION AND NEW STUDENT STARTS

Student Population

Total student population by reportable segment as of December 31, 2012 and 2011, was as follows:

         
As of December 31, % Change
2012   2011 2012 vs. 2011

Student Population

CTU 21,600 23,900 -10%
AIU 14,200 17,100 -17%
Total University Schools 35,800 41,000 -13%
 
Health Education 8,800 14,000 -37%
Culinary Arts 8,500 12,200 -30%
Design & Technology 5,400 8,000 -33%
Total Career Schools 22,700 34,200 -34%
 
International 11,400 11,100 3%
Subtotal 69,900 86,300 -19%
 
Transitional Schools 6,100 12,500 -51%
Total Student Population 76,000 98,800 -23%
 

New Student Starts

New student starts by reportable segment for the quarters ended December 31, 2012 and 2011, were as follows:

         

For the Quarters Ended

December 31,

  % Change
2012   2011 2012 vs. 2011

New Student Starts

CTU 5,040 6,620 -24%
AIU 3,370 4,620 -27%
Total University Schools 8,410 11,240 -25%
 
Health Education 1,180 2,290 -48%
Culinary Arts (1) 2,810 1,320 113%
Design & Technology 490 710 -31%
Total Career Schools 4,480 4,320 4%
 
International 1,940 2,150 -10%
Subtotal 14,830 17,710 -16%
 
Transitional Schools 840 2,440 -66%
Total New Student Starts 15,670 20,150 -22%
   
 
(1)   The fourth quarter 2012 had one additional new student start as compared to the previous year quarter.
Excluding this timing impact, the change in new student starts for Culinary Arts would have been -16%.
 

CONFERENCE CALL INFORMATION

Career Education Corporation will host a conference call on Thursday, February 28, 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 34130002. 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 34130002.

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 more than 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, the United Kingdom 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, 2011 and its subsequent filings with the Securities and Exchange Commission.

   
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
(In thousands)
 
As of December 31, (1)
2012 2011
 
ASSETS
CURRENT ASSETS:
Cash and cash equivalents, unrestricted $ 240,560 $ 280,592
Restricted cash 97,878 -
Short-term investments   63,876     160,607  
Total cash and cash equivalents and short-term investments 402,314 441,199
 
Student receivables, net 68,940 59,960
Receivables, other, net 3,845 2,896
Prepaid expenses 44,440 62,176
Inventories 8,575 11,334
Deferred income tax assets, net 7,092 10,837
Other current assets 4,422 17,871
Assets of discontinued operations   3,933     4,205  
Total current assets   543,561     610,478  
 
NON-CURRENT ASSETS:
Property and equipment, net 277,571 349,719
Goodwill 133,025 212,626
Intangible assets, net 61,681 76,286
Student receivables, net 6,832 9,311
Deferred income tax assets, net 48,070 2,673
Other assets, net 33,333 30,122
Assets of discontinued operations   18,630     24,905  
TOTAL ASSETS $ 1,122,703   $ 1,316,120  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings and current maturities of capital lease obligations $ 80,211 $ 844
Accounts payable 38,440 48,362
Accrued expenses:
Payroll and related benefits 46,586 41,853
Advertising and production costs 20,963 17,717
Other 44,651 67,077
Deferred tuition revenue 112,038 144,696
Liabilities of discontinued operations   9,826     8,894  
Total current liabilities   352,715     329,443  
 
NON-CURRENT LIABILITIES:
Capital lease obligations, net of current maturities - 207
Deferred rent obligations 95,164 102,034
Other liabilities 29,931 40,365
Liabilities of discontinued operations   33,103     37,980  
Total non-current liabilities   158,198     180,586  
 
STOCKHOLDERS' EQUITY:
Preferred stock - -
Common stock 816 820
Additional paid-in capital 596,826 590,965
Accumulated other comprehensive loss (4,785 ) (5,136 )
Retained earnings 232,921 375,717
Cost of shares in treasury   (213,988 )   (156,275 )
Total stockholders' equity   611,790     806,091  
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,122,703   $ 1,316,120  
         
 
(1)   In November 2012, the Company completed the teach out activities for LCB Pittsburgh, PA. As a result, all current and
prior period results include LCB Pittsburgh as a component 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 December 31, (1)
% of % of
Total Total
2012

Revenue

2011

Revenue

 
REVENUE:
Tuition and registration fees $ 349,243 98.5 % $ 429,392 98.0 %
Other   5,448   1.5 %   8,866   2.0 %
Total revenue   354,691     438,258  
 
OPERATING EXPENSES:
Educational services and facilities 141,654 39.9 % 155,018 35.4 %
General and administrative 227,836 64.2 % 240,831 55.0 %
Depreciation and amortization 21,071 5.9 % 21,449 4.9 %
Goodwill and asset impairment   41,346   11.7 %   188,848   43.1 %
Total operating expenses   431,907   121.8 %   606,146   138.3 %
Operating loss   (77,216 ) -21.8 %   (167,888 ) -38.3 %
 
OTHER INCOME (EXPENSE):
Interest income 400 0.1 % 627 0.1 %
Interest expense (184 ) -0.1 % (443 ) -0.1 %
Miscellaneous income   483   0.1 %   3   0.0 %
Total other income   699   0.2 %   187   0.0 %
 
PRETAX LOSS (76,517 ) -21.6 % (167,701 ) -38.3 %
 
Benefit from income taxes   (17,771 ) -5.0 %   (26,063 ) -5.9 %
 
LOSS FROM CONTINUING OPERATIONS (58,746 ) -16.6 % (141,638 ) -32.3 %
 
(Loss) income from discontinued operations, net of tax   (2,746 ) -0.8 %   21,189   4.8 %
 
NET LOSS   (61,492 ) -17.3 %   (120,449 ) -27.5 %
 
OTHER COMPREHENSIVE INCOME (LOSS), net of tax:
Foreign currency translation adjustments 4,056 (4,746 )
Unrealized gains (losses) on investments   174     (80 )
Total other comprehensive income (loss)   4,230     (4,826 )
 
COMPREHENSIVE LOSS $ (57,262 ) $ (125,275 )
 
NET LOSS PER SHARE - DILUTED:
Loss from continuing operations $ (0.89 ) $ (1.93 )
(Loss) income from discontinued operations   (0.04 )   0.29  
Net loss per share $ (0.93 ) $ (1.64 )
 
DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING   66,199     73,429  
                         
 
(1)   In November 2012, the Company completed the teach out activities for LCB Pittsburgh, PA. As a result, all current and
prior period results include LCB Pittsburgh as a component 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 Year Ended December 31, (1)
% of % of
Total Total
2012

Revenue

2011

Revenue

 
REVENUE:
Tuition and registration fees $ 1,460,959 98.1 % $ 1,816,746 97.0 %
Other   28,310   1.9 %   56,623   3.0 %
Total revenue   1,489,269     1,873,369  
 
OPERATING EXPENSES:
Educational services and facilities 571,169 38.4 % 626,158 33.4 %
General and administrative 894,185 60.0 % 932,643 49.8 %
Depreciation and amortization 80,658 5.4 % 82,350 4.4 %
Goodwill and asset impairment   127,007   8.5 %   191,524   10.2 %
Total operating expenses   1,673,019   112.3 %   1,832,675   97.8 %
Operating (loss) income   (183,750 ) -12.3 %   40,694   2.2 %
 
OTHER INCOME (EXPENSE):
Interest income 1,826 0.1 % 1,376 0.1 %
Interest expense (271 ) 0.0 % (563 ) 0.0 %
Miscellaneous income   483   0.0 %   1,972   0.1 %
Total other income   2,038   0.1 %   2,785   0.1 %
 
PRETAX (LOSS) INCOME (181,712 ) -12.2 % 43,479 2.3 %
 
(Benefit from) provision for income taxes   (46,806 ) -3.1 %   46,740   2.5 %
 
LOSS FROM CONTINUING OPERATIONS (134,906 ) -9.1 % (3,261 ) -0.2 %
 
(Loss) income from discontinued operations, net of tax   (7,890 ) -0.5 %   21,834   1.2 %
 
NET (LOSS) INCOME   (142,796 ) -9.6 %   18,573   1.0 %
 
OTHER COMPREHENSIVE INCOME (LOSS), net of tax:
Foreign currency translation adjustments 503 (5,015 )
Unrealized losses on investments   (152 )   (40 )
Total other comprehensive income (loss)   351     (5,055 )
 
COMPREHENSIVE (LOSS) INCOME $ (142,445 ) $ 13,518  
 
NET (LOSS) INCOME PER SHARE - DILUTED:
Loss from continuing operations $ (2.03 ) $ (0.04 )
(Loss) income from discontinued operations   (0.12 )   0.29  
Net (loss) income per share $ (2.15 ) $ 0.25  
 
DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING   66,475     74,498  
                     
 
(1)   In November 2012, the Company completed the teach out activities for LCB Pittsburgh, PA. As a result, all current and
prior period results include LCB Pittsburgh as a component of discontinued operations.
       
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATING INCOME (LOSS) BY QUARTER
(In thousands)
     
For the 2012 Quarters Ended, (1)
 
March 31 June 30 September 30 December 31 Full Year
 
REVENUE:
Tuition and registration fees $ 422,935 $ 362,480 $ 326,301 $ 349,243 $ 1,460,959
Other   10,495   6,080     6,287     5,448     28,310  
Total revenue   433,430   368,560     332,588     354,691     1,489,269  
 
OPERATING EXPENSES:
Educational services and facilities 151,625 144,837 133,053 141,654 571,169
General and administrative 214,017 225,265 227,067 227,836 894,185
Depreciation and amortization 19,798 19,659 20,130 21,071 80,658
Goodwill and asset impairment   83   85,578     -     41,346     127,007  
Total operating expenses   385,523   475,339     380,250     431,907     1,673,019  
OPERATING INCOME (LOSS) $ 47,907 $ (106,779 ) $ (47,662 ) $ (77,216 ) $ (183,750 )
 
 
For the 2011 Quarters Ended, (1)
 
March 31 June 30 September 30 December 31 Full Year
 
REVENUE:
Tuition and registration fees $ 505,656 $ 466,588 $ 415,110 $ 429,392 $ 1,816,746
Other   21,903   14,967     10,887     8,866     56,623  
Total revenue   527,559   481,555     425,997     438,258     1,873,369  
 
OPERATING EXPENSES:
Educational services and facilities 163,594 156,376 151,170 155,018 626,158
General and administrative 235,348 223,340 233,124 240,831 932,643
Depreciation and amortization 19,576 19,721 21,604 21,449 82,350
Goodwill and asset impairment   -   2,676     -     188,848     191,524  
Total operating expenses   418,518   402,113     405,898     606,146     1,832,675  
OPERATING INCOME (LOSS) $ 109,041 $ 79,442   $ 20,099   $ (167,888 ) $ 40,694  
                                       
 
(1)   In November 2012, the Company completed the teach out activities for LCB Pittsburgh, PA. As a result, all current and prior period results include
LCB Pittsburgh as a component of discontinued operations.
   
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 

 

For the Year

Ended December 31,

2012 2011
 
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $ (142,796 ) $ 18,573
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Goodwill and asset impairment 127,007 191,524
Loss on sale of student receivables 720 -
Depreciation and amortization expense 81,813 85,367
Bad debt expense 40,022 55,721
Compensation expense related to share-based awards 9,687 14,831
Gain on sale of business - (27,085 )
Gain on bargain purchase (669 ) -
Loss (gain) on disposition of property and equipment 301 (1,711 )
Deferred income taxes (42,014 ) 14,226
Changes in operating assets and liabilities
Accrued expenses and deferred rent obligations (19,473 ) (74,075 )
Deferred tuition revenue (35,882 ) 2,595
Student receivables, net of allowance for doubtful accounts (39,995 ) (51,749 )
Other operating assets and liabilities   4,481     2,233  
Net cash (used in) provided by operating activities   (16,798 )   230,450  
 
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of available-for-sale investments (147,085 ) (189,258 )
Sales of available-for-sale investments 246,464 188,322
Purchases of property and equipment (37,944 ) (78,333 )
Proceeds on the sale of assets - 6,259
Proceeds on the sale of business, net of cash divested - 16,670
Business acquisitions, net of acquired cash (1,721 ) (9,851 )
Other   (1,359 )   (40 )
Net cash provided by (used in) investing activities   58,355     (66,231 )
 
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of treasury stock (56,431 ) (150,445 )
Issuance of common stock 1,599 4,370
Tax benefit associated with stock option exercises - 376
Payments of assumed loans upon business acquisition (318 ) -
Payments of contingent consideration (5,818 ) (16,355 )
Borrowings from credit facility 80,000 -
Restricted cash (97,878 ) -
Payments of capital lease obligations   (844 )   (989 )
Net cash used in financing activities   (79,690 )   (163,043 )
 
EFFECT OF FOREIGN CURRENCY EXCHANGE RATE
CHANGES ON CASH AND CASH EQUIVALENTS:   (1,837 )   (10,066 )
 
NET DECREASE IN CASH AND CASH EQUIVALENTS (39,970 ) (8,890 )
DISCONTINUED OPERATIONS CASH ACTIVITY INCLUDED ABOVE:
Add: Cash balance of discontinued operations, beginning of the year - 28,844
Less: Cash balance of discontinued operations, end of the year 62 -
CASH AND CASH EQUIVALENTS, beginning of the year   280,592     260,638  
CASH AND CASH EQUIVALENTS, end of the year $ 240,560   $ 280,592  
   
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED SELECTED SEGMENT INFORMATION
(In thousands, except percentages)
 
For the Quarter Ended December 31,
2012 2011
 
REVENUE:
CTU (1) $ 89,283 $ 97,161
AIU   65,223     77,111  
Total University Schools   154,506     174,272  
 
Health Education (1) 41,559 60,326
Culinary Arts (2) 49,694 64,296
Design & Technology (1)   31,888     41,285  
Total Career Schools   123,141     165,907  
 
International 49,934 47,257
Corporate and Other   5     (54 )
Subtotal   327,586     387,382  
 
Transitional Schools (1)   27,105     50,876  
Total $ 354,691   $ 438,258  
 
OPERATING (LOSS) INCOME:
CTU (1) $ 13,344 $ 25,494
AIU   (1,727 )   6,354  
Total University Schools   11,617     31,848  
 
Health Education (1) (3) (13,628 ) (63,382 )
Culinary Arts (2) (4) (21,863 ) (94,708 )
Design & Technology (1)   (6,715 )   (3,857 )
Total Career Schools   (42,206 )   (161,947 )
 
International 16,856 16,017
Corporate and Other   (9,425 )   (13,452 )
Subtotal   (23,158 )   (127,534 )
 
Transitional Schools (1) (5)   (54,058 )   (40,354 )
Total $ (77,216 ) $ (167,888 )
 
OPERATING (LOSS) MARGIN:
CTU 14.9 % 26.2 %
AIU   -2.6 %   8.2 %
Total University Schools   7.5 %   18.3 %
 
Health Education -32.8 % -105.1 %
Culinary Arts -44.0 % -147.3 %
Design & Technology   -21.1 %   -9.3 %
Total Career Schools   -34.3 %   -97.6 %
 
International 33.8 % 33.9 %
Corporate and Other   NM     NM  
Subtotal   -7.1 %   -32.9 %
 
Transitional Schools   -199.4 %   -79.3 %
Total   -21.8 %   -38.3 %
                     
 
(1)   Prior period financial results have been recast to report the schools that are currently being taught out within the Transitional
Schools segment.
 
(2) In November 2012, the Company completed the teach out activities for LCB Pittsburgh, PA. As a result, all current and prior
period results include LCB Pittsburgh as a component of discontinued operations.
 
(3) Fourth quarter 2012 includes a $3.5 million non-cash trade name impairment charge related to the Sanford-Brown and Missouri
College trade names; fourth quarter 2011 includes a $64.6 million non-cash goodwill impairment charge.
 
(4) Fourth quarters 2012 and 2011 include non-cash trade name impairment charges of $8.1 million and $20.4 million, respectively.
In addition, fourth quarter 2011 includes a $73.7 million non-cash goodwill impairment charge.
 
(5) Fourth quarter 2012 includes a $28.3 million non-cash asset impairment charge; fourth quarter 2011 includes a $30.1 million
non-cash goodwill impairment charge.
   
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED SELECTED SEGMENT INFORMATION
(In thousands, except percentages)
 
For the Year Ended December 31,
2012 2011
 
REVENUE:
CTU (1) $ 363,935 $ 415,411
AIU   304,208     365,203  
Total University Schools   668,143     780,614  
 
Health Education (1) 181,577 252,330
Culinary Arts (2) 224,842 303,135
Design & Technology (1)   141,542     186,879  
Total Career Schools   547,961     742,344  
 
International 128,568 125,887
Corporate and Other   55     (399 )
Subtotal   1,344,727     1,648,446  
 
Transitional Schools (1)   144,542     224,923  
Total $ 1,489,269   $ 1,873,369  
 
OPERATING (LOSS) INCOME:
CTU (1) $ 54,928 $ 111,119
AIU   20,896     72,738  
Total University Schools   75,824     183,857  
 
Health Education (1) (3) (78,288 ) (47,562 )
Culinary Arts (2) (4) (33,854 ) (63,452 )
Design & Technology (1) (5)   (57,627 )   14,223  
Total Career Schools   (169,769 )   (96,791 )
 
International 21,131 24,746
Corporate and Other (6)   (7,618 )   (30,132 )
Subtotal   (80,432 )   81,680  
 
Transitional Schools (1) (7)   (103,318 )   (40,986 )
Total $ (183,750 ) $ 40,694  
 
OPERATING (LOSS) MARGIN:
CTU 15.1 % 26.7 %
AIU   6.9 %   19.9 %
Total University Schools   11.3 %   23.6 %
 
Health Education -43.1 % -18.8 %
Culinary Arts -15.1 % -20.9 %
Design & Technology   -40.7 %   7.6 %
Total Career Schools   -31.0 %   -13.0 %
 
International 16.4 % 19.7 %
Corporate and Other   NM     NM  
Subtotal   -6.0 %   5.0 %
 
Transitional Schools   -71.5 %   -18.2 %
Total   -12.3 %   2.2 %
             
 
(1)   Prior period financial results have been recast to report the schools that are currently being taught out within the Transitional
Schools segment.
 
(2) In November 2012, the Company completed the teach out activities for LCB Pittsburgh, PA. As a result, all current and prior
period results include LCB Pittsburgh as a component of discontinued operations.
 
(3) 2012 expenses include non-cash goodwill and trade name impairment charges of $41.9 million and $3.5 million, respectively.
2011 includes non-cash goodwill impairment of $64.6 million and $3.7 million of non-cash impairment and amortization charges
related to accreditation rights.
 
(4) 2012 expenses include a non-cash trade name impairment of $8.1 million. 2011 expenses include $73.7 million and $20.4 million
of non-cash goodwill and trade name impairments, respectively.
 
(5) 2012 expenses include a $40.8 million non-cash goodwill impairment charge.
 
(6) During 2012, a $19.0 million insurance recovery was recorded related to the settlement of claims under certain insurance
policies. In 2011, a $7.0 million insurance recovery, related to previously settled legal matters, was recorded.
 
(7) 2012 expenses include $29.3 million of non-cash asset impairment charges, $1.0 million impairment related to the
Sanford-Brown trade name, and a $0.7 million non-cash goodwill impairment charge. 2011 includes non-cash goodwill
impairment of $30.1 million and $1.4 million of non-cash impairment and amortization charges related to accreditation rights.
       
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ITEMS (1)
(In millions, except share and per share amounts)
   
For the Quarter Ended December 31,
2012 2011
Loss per Diluted Operating (Loss) (Loss) Earnings per
Operating Loss

Share (2)

Income

Diluted Share (2)

 
As Reported $ (77.2 ) $ (0.89 ) $ (167.9 ) $ (1.93 )
Reconciling Items:
Goodwill and Intangible Asset Impairments (3) (4) 12.1 0.12 188.8 2.25
Asset Impairments (5) 29.3 0.29 - -
Severance and Related Costs (6)   13.1     0.13     -     -  
Adjusted to Exclude Significant Items $ (22.7 ) $ (0.35 ) $ 20.9   $ 0.32  
 
Diluted Weighted Average Shares Outstanding   66,199     73,429  
 
For the Year Ended December 31,
2012 2011
Loss per Diluted

Operating

(Loss) Earnings per
Operating Loss

Share (2)

Income

Diluted Share (2)

 
As Reported $ (183.8 ) $ (2.03 ) $ 40.7 $ (0.04 )
Reconciling Items:
Goodwill and Intangible Asset Impairments (4) (7) 96.5 1.33 191.5 2.24
Asset Impairments (5) 30.5 0.30 - -
Severance and Related Costs (6) 14.9 0.15 - -
Insurance Recoveries (8)   (19.0 )   (0.19 )   (7.0 )   (0.06 )
Adjusted to Exclude Significant Items $ (60.9 ) $ (0.44 ) $ 225.2   $ 2.14  
 
Diluted Weighted Average Shares Outstanding   66,475     74,498  
                           
 
(1) The Company believes it is useful to present non-GAAP financial measures which exclude certain significant items as a means to understand the performance of its core business. 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 core business, assist with preparing the annual operating plan, and measure performance for some forms of compensation. In addition, the Company believes that non-GAAP financial information is used by analysts and others in the investment community to analyze the Company's historical results and to provide estimates of future performance and that failure to report non-GAAP measures could result in a misplaced perception that the Company's results have underperformed or exceeded expectations.
 
Non-GAAP financial measures when viewed in a reconciliation to corresponding GAAP financial measures, provides an additional way of viewing the Company's results of operations and the factors and trends affecting the Company's business. Non-GAAP financial measures should be considered as a supplement to, and not as a substitute for, or superior to, the corresponding financial results presented in accordance with GAAP.
 
(2) (Loss) earnings per diluted share is based on (loss) income from continuing operations and assumes a 35% tax rate for each deductible item.
 
(3) Fourth quarter 2012 includes non-cash trade name impairment charges of $12.1 million; primarily attributable to Culinary Arts ($8.1) and Health Education ($3.5).
 
(4) Fourth quarter 2011 primarily includes non-cash goodwill impairment charges totaling $168.4 million, of which $120.6 is non-deductible for income tax purposes,
applicable to Culinary Arts ($73.7), Health Education ($64.6) and Transitional Schools ($30.1), as well as a $20.4 million non-cash trade name impairment charge
within Culinary Arts. Year to date 2011 also includes a $2.5 million non-cash impairment charge related to accreditation rights.
 
(5) In 2012, non-cash asset impairment charges of $30.5 million were recorded, primarily within Transitional Schools ($29.3) for schools being taught out,
of which $29.3 million was recorded in the fourth quarter.
 
(6) In 2012, $14.9 million of severance and related costs were recorded in connection with both our reduction in force and campus closure actions, within
Transitional Schools ($7.6), AIU ($1.8), Health Education ($1.6), Corporate ($1.6), Design & Technology ($1.4), Culinary Arts ($0.6), and CTU ($0.3).
Of the $14.9 million, $13.1 million was recorded in the fourth quarter.
 
(7) 2012 includes non-cash goodwill impairment charges of $83.4 million, of which $73.6 million is non-deductible for income tax purposes, primarily
applicable to Health Education ($41.9) and Design & Technology ($40.8), as well as a non-cash trade name impairment of $13.1 million, primarily within
Culinary Arts ($8.1), Health Education ($3.5) and Transitional Schools ($1.0).
 
(8) 2012 includes a $19.0 million insurance recovery related to the settlement of claims under certain insurance policies. 2011 includes a $7.0 million insurance
recovery related to previously settled legal matters.
 


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