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Career Education Corporation Reports Results for First Quarter 2016

SCHAUMBURG, Ill., May 04, 2016 (BUSINESS WIRE) -- Career Education Corporation CECO, -1.71% today reported operating and financial results for the first quarter of 2016.

Consolidated Results:

  • Operating income improved to $7.0 million for the current year quarter as compared to an operating loss of $24.4 million for the prior year quarter
  • Achieved consolidated adjusted EBITDA of $13.2 million compared to a loss of $11.8 million in the prior year quarter (see reconciliation of GAAP to non-GAAP items attached to this press release)
  • First quarter cash used in operating activities was $10.6 million, an improvement versus cash usage of $20.2 million in the first quarter of 2015
  • Ended the quarter with $189.5 million in cash, cash equivalents, restricted cash and available-for-sale short-term and long-term investments, net of borrowings

University Business Highlights:

  • University Group revenue increased by 4.9 percent year-over-year
  • University Group operating income increased by $9.4 million to $21.1 million, primarily driven by increased revenue and improved efficiency in its operations
  • Achieved adjusted EBITDA of $20.2 million for the University Group and Corporate compared to $11.3 million in the prior year quarter
  • Total University Group enrollments increased slightly as compared to the prior year quarter

“Our first quarter results reflect a continuation of the trends we witnessed at the end of last year, and position us well to continue to successfully execute on our strategy for the remainder of 2016 and beyond. Improved efficiency in operations, maintaining overall University Group total enrollments and in-line performance of teach-outs, resulted in improvement of year-over-year financial performance,” said Todd Nelson, President and Chief Executive Officer. “Overall, we are executing well against our strategic initiatives and we remain confident in the outlook we provided last quarter. Our priorities for the near-term will continue to be focused on improving the strength of our University platform with investments in technology and resources which we believe will further enhance student retention and outcomes.”

REVENUE

For the first quarter of 2016, total revenue was $198.9 million, a 12.4 percent decrease from $227.0 million for the first quarter of 2015. Total revenue for the University Group was $144.9 million for the first quarter of 2016 compared to $138.2 million for the first quarter of 2015, an increase of 4.9 percent.

Revenue ($ in thousands)

Q1 2016 Q4 2015 Q3 2015 Q2 2015 Q1 2015
CTU $ 91,966 $ 91,481 $ 85,433 $ 86,174 $ 85,127
AIU 52,973 45,871 50,688 52,024 53,066
Total University Group 144,939 137,352 136,121 138,198 138,193
Corporate and Other 40 39 39 39
Subtotal 144,939 137,392 136,160 138,237 138,232
Culinary Arts [(1)] 38,623 42,020 41,410 42,048 44,712
Transitional Group [(1)] 15,324 20,535 25,914 36,543 44,070
Total $ 198,886 $ 199,947 $ 203,484 $ 216,828 $ 227,014
(1) Teach-out campuses included in the Transitional Group no longer enroll new students. The Culinary Arts campuses were announced for teach-out during December 2015 and ceased enrolling new students in January 2016.

TOTAL AND NEW STUDENT ENROLLMENTS

For the first quarter of 2016, total student enrollments for the University Group were 33,900, compared to 33,800 in the prior year quarter. New student enrollments for the University Group were 9,630 compared to 10,130 in the prior year quarter. The Company believes that continued focus on student retention has contributed to the slight increase in University Group total student enrollment as compared to the prior year.

Total Student Enrollment

Q1 2016 Q4 2015 Q3 2015 Q2 2015 Q1 2015
CTU 21,300 21,300 20,600 20,600 20,300
AIU 12,600 10,600 10,800 10,700 13,500
Total University Group 33,900 31,900 31,400 31,300 33,800
Culinary Arts 6,900 7,800 9,200 7,800 8,800
Transitional Group 2,500 3,500 5,200 7,000 9,500
Total 43,300 43,200 45,800 46,100 52,100

New Student Enrollments

Q1 2016 Q4 2015 Q3 2015 Q2 2015 Q1 2015
CTU 4,770 5,710 5,470 5,670 5,040
AIU 4,860 3,050 2,980 2,280 5,090
Total University Group 9,630 8,760 8,450 7,950 10,130
Culinary Arts [(1)] 930 690 3,290 1,450 2,040
Transitional Group [(1)] 60 90 510 830 1,830
Total 10,620 9,540 12,250 10,230 14,000
(1) Teach-out campuses within the Transitional Group and Culinary Arts no longer enroll new students, effective upon their teach-out announcement; students who re-enter after 365 days are reported as new student enrollments. For Culinary Arts, teach-outs announced in December 2015 were effective beginning after the January 2016 new enrollment.

OPERATING INCOME (LOSS)

For the first quarter of 2016, operating income of $7.0 million improved 128.7 percent compared to an operating loss of $24.4 million in the prior year quarter. Total University Group operating income increased to $21.1 million from $11.7 million in the prior year quarter, an increase of 80.3 percent. This increase in operating income was primarily driven by increased revenue and improved efficiency in operations.

Operating Income (Loss) ($ in thousands)

Q1 2016 Q4 2015 Q3 2015 Q2 2015 Q1 2015
CTU $ 19,237 $ 30,001 $ 18,616 $ 24,263 $ 14,616
AIU 1,907 1,538 1,695 5,174 (2,887 )
Total University Group 21,144 31,539 20,311 29,437 11,729
Corporate and Other (5,812 ) (6,331 ) (8,040 ) (7,036 ) (5,860 )
Subtotal 15,332 25,208 12,271 22,401 5,869
Culinary Arts [(1)] 3,106 (14,065 ) (33,195 ) (10,560 ) 243
Transitional Group [(2)] (11,459 ) (15,072 ) (23,065 ) (31,733 ) (30,470 )
Total $ 6,979 $ (3,929 ) $ (43,989 ) $ (19,892 ) $ (24,358 )
(1) Asset impairment charges of $9.0 million, $33.4 million and $9.7 million were recorded during the fourth quarter of 2015, third quarter of 2015 and second quarter of 2015, respectively.
(2) Asset impairment charges of $0.2 million, $1.7 million and $6.0 million were recorded during the fourth quarter of 2015, second quarter of 2015 and first quarter of 2015, respectively.

ADJUSTED EBITDA

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 operations. (See tables below and the GAAP to non-GAAP reconciliation attached to this press release for further details.)

As shown in the table below, for the first quarter of 2016, adjusted EBITDA for the University Group and Corporate was $20.2 million representing an increase of 78.1 percent, or $8.9 million, compared to the first quarter of 2015. Adjusted EBITDA for the Transitional Group, Culinary Arts and discontinued operations improved to negative $7.0 million for the first quarter of 2016 from negative $23.1 million for the first quarter of 2015, representing an improvement of 69.8 percent, or $16.2 million.

Adjusted EBITDA ($ in thousands)

Q1 2016 Q4 2015 [(4)] Q3 2015 [(4)] Q2 2015 [(4)] Q1 2015 [(4)]

University Group and Corporate:

Pre-tax income (loss) from continuing operations $ 7,225 $ (4,292 ) $ (44,656 ) $ (20,750 ) $ (24,740 )
Transitional Group pre-tax loss 11,316 15,182 23,724 32,624 30,470
Culinary Arts pre-tax (income) loss (3,107 ) 14,065 33,171 10,532 (250 )
Interest (income) expense, net [(1)] (28 ) 87 7 (52 ) 2
Depreciation and amortization [ (1)] 3,103 3,318 3,454 3,956 4,361
Legal settlements [(1)] 200
Stock-based compensation [ (1)] 544 404 983 530 940
Asset impairments [(1)] 237 507
Unused space charges [(1) (2)] 909 114 (385 ) (348 ) 556
Adjusted EBITDA--University Group and

Corporate

$ 20,199 $ 29,585 $ 16,298 $ 26,492 $ 11,339
Memo: Advertising Expenses [(1)] $ 43,966 $ 33,431 $ 46,194 $ 34,258 $ 50,587

Transitional Group, Culinary Arts and Discontinued Operations:

Pre-tax loss from discontinued operations $ (126 ) $ (512 ) $ (544 ) $ (720 ) $ (352 )
Transitional Group pre-tax loss (11,316 ) (15,182 ) (23,724 ) (32,624 ) (30,470 )
Culinary Arts pre-tax income (loss) 3,107 (14,065 ) (33,171 ) (10,532 ) 250
Interest income, net [(3)] (1 )
Loss on sale of business [ (3)] 161 715 917
Depreciation and amortization [(3)] 3,466 1,759 2,508 3,231 2,351
Legal settlements [(3)] (166 ) 1,485
Asset impairments [ (3)] 9,171 33,446 11,372 6,019
Unused space charges [ (2) (3)] (2,108 ) (2,002 ) 7,174 (2,305 ) (2,424 )
Adjusted EBITDA--Transitional, Culinary Arts and Discontinued Operations $ (6,978 ) $ (20,670 ) $ (13,596 ) $ (30,827 ) $ (23,141 )
Consolidated Adjusted EBITDA $ 13,221 $ 8,915 $ 2,702 $ (4,335 ) $ ...

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