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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark one)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2019

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM          TO             

Commission File Number: 0-23245

 

CAREER EDUCATION CORPORATION

(Exact name of registrant as specified in its charter)

 

 

Delaware

36-3932190

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

 

 

231 N. Martingale Road

Schaumburg, Illinois

60173

(Address of principal executive offices)

(Zip Code)

 

Registrant’s telephone number, including area code: (847781-3600

Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report: N/A

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

 

Trading symbol(s)

 

Name of each exchange on which registered

Common Stock, $0.01 par value

 

CECO

 

Nasdaq Global Select Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

 

 

Accelerated filer

Non-accelerated filer

 

 

Smaller reporting company

Emerging growth company

 

  

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   

Indicate by check mark whether the registrant is a shell company, as defined in Rule 12b-2 of the Exchange Act.    Yes      No  

Number of shares of registrant’s common stock, par value $0.01, outstanding as of August 2, 2019: 70,110,543

 


CAREER EDUCATION CORPORATION

FORM 10-Q

TABLE OF CONTENTS

 

 

 

 

 

 

Page

PART I—FINANCIAL INFORMATION

 

 

 

 

Item 1.

Financial Statements

 

 

 

 

 

Condensed Consolidated Balance Sheets

1

 

 

 

 

Unaudited Condensed Consolidated Statements of (Loss) Income and Comprehensive (Loss) Income

2

 

 

 

 

Unaudited Condensed Consolidated Statements of Stockholders’ Equity

3

 

 

Unaudited Condensed Consolidated Statements of Cash Flows

4

 

 

 

 

Notes to Unaudited Condensed Consolidated Financial Statements

5

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

23

 

 

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

37

 

 

 

Item 4.

Controls and Procedures

38

 

 

PART II—OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

39

 

 

 

Item 1A.

Risk Factors

39

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

39

Item 5.

Other Information

39

Item 6.

Exhibits

40

 

 

SIGNATURES

42

 

 

 


CAREER EDUCATION CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

 

 

 

June 30,

 

 

December 31,

 

 

 

2019

 

 

2018

 

ASSETS

 

(unaudited)

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

 

 

Cash and cash equivalents, unrestricted

 

$

51,104

 

 

$

32,394

 

Restricted cash

 

 

337

 

 

 

337

 

Short-term investments

 

 

228,795

 

 

 

196,428

 

Total cash and cash equivalents, restricted cash and short-term investments

 

 

280,236

 

 

 

229,159

 

Student receivables, net of allowance for doubtful accounts of $30,173 and $23,307

   as of June 30, 2019 and December 31, 2018, respectively

 

 

27,870

 

 

 

28,751

 

Receivables, other, net

 

 

2,677

 

 

 

2,567

 

Prepaid expenses

 

 

9,013

 

 

 

7,771

 

Inventories

 

 

660

 

 

 

763

 

Other current assets

 

 

364

 

 

 

437

 

Assets of discontinued operations

 

 

120

 

 

 

-

 

Total current assets

 

 

320,940

 

 

 

269,448

 

 

 

 

 

 

 

 

 

 

NON-CURRENT ASSETS:

 

 

 

 

 

 

 

 

Property and equipment, net of accumulated depreciation of $194,787 and $198,052

   as of June 30, 2019 and December 31, 2018, respectively

 

 

27,507

 

 

 

30,048

 

Right of use asset

 

 

40,049

 

 

 

-

 

Goodwill

 

 

87,356

 

 

 

87,356

 

Intangible assets, net of amortization of $1,400 as of both June 30, 2019 and December 31, 2018

 

 

7,900

 

 

 

7,900

 

Student receivables, net of allowance for doubtful accounts of $557

   and $1,529 as of June 30, 2019 and December 31, 2018, respectively

 

 

503

 

 

 

942

 

Deferred income tax assets, net

 

 

72,415

 

 

 

81,628

 

Other assets

 

 

4,951

 

 

 

4,993

 

Assets of discontinued operations

 

 

178

 

 

 

178

 

TOTAL ASSETS

 

$

561,799

 

 

$

482,493

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

Lease liability-operating

 

$

13,390

 

 

$

-

 

Accounts payable

 

 

12,382

 

 

 

9,195

 

Accrued expenses:

 

 

 

 

 

 

 

 

Payroll and related benefits

 

 

22,270

 

 

 

24,530

 

Advertising and marketing costs

 

 

11,142

 

 

 

9,300

 

Income taxes

 

 

1,135

 

 

 

1,472

 

Other

 

 

39,496

 

 

 

19,668

 

Deferred revenue

 

 

28,664

 

 

 

32,351

 

Liabilities of discontinued operations

 

 

3

 

 

 

536

 

Total current liabilities

 

 

128,482

 

 

 

97,052

 

 

 

 

 

 

 

 

 

 

NON-CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

Lease liability-operating

 

 

42,215

 

 

 

-

 

Deferred rent obligations

 

 

-

 

 

 

12,745

 

Other liabilities

 

 

9,854

 

 

 

17,493

 

Total non-current liabilities

 

 

52,069

 

 

 

30,238

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS' EQUITY:

 

 

 

 

 

 

 

 

Preferred stock, $0.01 par value; 1,000,000 shares authorized; none issued or outstanding

 

 

-

 

 

 

-

 

Common stock, $0.01 par value; 300,000,000 shares authorized; 85,668,036

   and 85,173,686 shares issued, 70,110,543 and 69,772,910 shares

   outstanding as of June 30, 2019 and December 31, 2018, respectively

 

 

857

 

 

 

852

 

Additional paid-in capital

 

 

630,878

 

 

 

628,295

 

Accumulated other comprehensive gain (loss)

 

 

455

 

 

 

(298

)

Accumulated deficit

 

 

(27,679

)

 

 

(52,946

)

Treasury stock, at cost; 15,557,493 and 15,400,776 shares as of June 30, 2019

   and December 31, 2018, respectively

 

 

(223,263

)

 

 

(220,700

)

Total stockholders' equity

 

 

381,248

 

 

 

355,203

 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

 

$

561,799

 

 

$

482,493

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

1


CAREER EDUCATION CORPORATION AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF (LOSS) INCOME AND COMPREHENSIVE (LOSS) INCOME           (In thousands, except per share amounts)

 

 

 

For the Quarter Ended June 30,

 

 

For the Year to Date Ended June 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

REVENUE:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tuition and fees

 

$

155,779

 

 

$

141,344

 

 

$

313,007

 

 

$

288,854

 

Other

 

 

662

 

 

 

692

 

 

 

1,287

 

 

 

1,247

 

Total revenue

 

 

156,441

 

 

 

142,036

 

 

 

314,294

 

 

 

290,101

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Educational services and facilities

 

 

25,350

 

 

 

30,290

 

 

 

51,677

 

 

 

57,236

 

General and administrative

 

 

128,672

 

 

 

98,340

 

 

 

227,994

 

 

 

196,348

 

Depreciation and amortization

 

 

2,235

 

 

 

2,103

 

 

 

4,468

 

 

 

4,685

 

Total operating expenses

 

 

156,257

 

 

 

130,733

 

 

 

284,139

 

 

 

258,269

 

Operating income

 

 

184

 

 

 

11,303

 

 

 

30,155

 

 

 

31,832

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OTHER INCOME:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

1,592

 

 

 

742

 

 

 

3,032

 

 

 

1,376

 

Interest expense

 

 

(40

)

 

 

(106

)

 

 

(82

)

 

 

(215

)

Miscellaneous income (expense)

 

 

45

 

 

 

(135

)

 

 

271

 

 

 

193

 

Total other income

 

 

1,597

 

 

 

501

 

 

 

3,221

 

 

 

1,354

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PRETAX INCOME

 

 

1,781

 

 

 

11,804

 

 

 

33,376

 

 

 

33,186

 

Provision for income taxes

 

 

2,302

 

 

 

2,940

 

 

 

8,709

 

 

 

6,438

 

(LOSS) INCOME FROM CONTINUING OPERATIONS

 

 

(521

)

 

 

8,864

 

 

 

24,667

 

 

 

26,748

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LOSS FROM DISCONTINUED OPERATIONS, net of tax

 

 

(38

)

 

 

(113

)

 

 

(435

)

 

 

(495

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET (LOSS) INCOME

 

 

(559

)

 

 

8,751

 

 

 

24,232

 

 

 

26,253

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OTHER COMPREHENSIVE INCOME (LOSS), net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

35

 

 

 

(168

)

 

 

(17

)

 

 

(82

)

Unrealized gain (loss) on investments

 

 

371

 

 

 

108

 

 

 

770

 

 

 

(110

)

     Total other comprehensive income (loss)

 

 

406

 

 

 

(60

)

 

 

753

 

 

 

(192

)

COMPREHENSIVE (LOSS) INCOME

 

$

(153

)

 

$

8,691

 

 

$

24,985

 

 

$

26,061

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET (LOSS) INCOME PER SHARE - BASIC:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Loss) income from continuing operations

 

$

(0.01

)

 

$

0.13

 

 

$

0.35

 

 

$

0.39

 

Loss from discontinued operations

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(0.01

)

Net (loss) income per share

 

$

(0.01

)

 

$

0.13

 

 

$

0.35

 

 

$

0.38

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET (LOSS) INCOME PER SHARE - DILUTED:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Loss) income from continuing operations

 

$

(0.01

)

 

$

0.12

 

 

$

0.34

 

 

$

0.38

 

Loss from discontinued operations

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(0.01

)

Net (loss) income per share

 

$

(0.01

)

 

$

0.12

 

 

$

0.34

 

 

$

0.37

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE SHARES OUTSTANDING:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

70,105

 

 

 

69,668

 

 

 

69,972

 

 

 

69,443

 

Diluted

 

 

70,105

 

 

 

71,562

 

 

 

71,782

 

 

 

71,239

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

 

2


CAREER EDUCATION CORPORATION AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

 

 

 

 

Common Stock

 

 

Treasury Stock

 

 

 

 

 

 

Accumulated Other

 

 

 

 

 

 

 

 

 

 

 

Issued Shares

 

 

$0.01 Par

Value

 

 

Purchased Shares

 

 

Cost

 

 

Additional Paid-in Capital

 

 

Comprehensive Gain (Loss)

 

 

Accumulated Deficit

 

 

Total

 

BALANCE, April 1, 2019

 

 

85,659

 

 

$

857

 

 

 

(15,556

)

 

$

(223,232

)

 

$

629,768

 

 

$

49

 

 

$

(27,120

)

 

$

380,322

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(559

)

 

 

(559

)

Foreign currency translation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

35

 

 

 

-

 

 

 

35

 

Unrealized gain on investments

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

371

 

 

 

-

 

 

 

371

 

Share-based compensation expense

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,037

 

 

 

-

 

 

 

-

 

 

 

1,037

 

Common stock issued

 

 

9

 

 

 

-

 

 

 

(2

)

 

 

(31

)

 

 

73

 

 

 

-

 

 

 

-

 

 

 

42

 

BALANCE, June 30, 2019

 

 

85,668

 

 

$

857

 

 

 

(15,558

)

 

$

(223,263

)

 

$

630,878

 

 

$

455

 

 

$

(27,679

)

 

$

381,248

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Treasury Stock

 

 

 

 

 

 

Accumulated Other

 

 

 

 

 

 

 

 

 

 

 

Issued Shares

 

 

$0.01 Par

Value

 

 

Purchased Shares

 

 

Cost

 

 

Additional Paid-in Capital

 

 

Comprehensive Gain (Loss)

 

 

Accumulated Deficit

 

 

Total

 

BALANCE, April 1, 2018

 

 

84,988

 

 

$

850

 

 

 

(15,377

)

 

$

(220,336

)

 

$

623,378

 

 

$

(296

)

 

$

(90,625

)

 

$

312,971

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

8,751

 

 

 

8,751

 

Foreign currency translation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(168

)

 

 

-

 

 

 

(168

)

Unrealized gain on investments

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

108

 

 

 

-

 

 

 

108

 

Share-based compensation expense

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,198

 

 

 

-

 

 

 

-

 

 

 

1,198

 

Common stock issued

 

 

127

 

 

 

1

 

 

 

(15

)

 

 

(237

)

 

 

293

 

 

 

-

 

 

 

-

 

 

 

57

 

BALANCE, June 30, 2018

 

 

85,115

 

 

$

851

 

 

 

(15,392

)

 

$

(220,573

)

 

$

624,869

 

 

$

(356

)

 

$

(81,874

)

 

$

322,917