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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 SEPTEMBER 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 November 1, 2019: 70,377,310

 


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 Income and Comprehensive 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)

 

 

 

September 30,

 

 

December 31,

 

 

 

2019

 

 

2018

 

ASSETS

 

(unaudited)

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

 

 

Cash and cash equivalents, unrestricted

 

$

47,411

 

 

$

32,394

 

Restricted cash

 

 

30,000

 

 

 

337

 

Short-term investments

 

 

234,415

 

 

 

196,428

 

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

 

 

311,826

 

 

 

229,159

 

Student receivables, net of allowance for doubtful accounts of $27,075 and $23,307

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

 

 

29,913

 

 

 

28,751

 

Receivables, other, net

 

 

1,336

 

 

 

2,567

 

Prepaid expenses

 

 

7,645

 

 

 

7,771

 

Inventories

 

 

665

 

 

 

763

 

Other current assets

 

 

1,640

 

 

 

437

 

Total current assets

 

 

353,025

 

 

 

269,448

 

 

 

 

 

 

 

 

 

 

NON-CURRENT ASSETS:

 

 

 

 

 

 

 

 

Property and equipment, net of accumulated depreciation of $197,070 and $198,052

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

 

 

26,698

 

 

 

30,048

 

Right of use asset

 

 

52,016

 

 

 

-

 

Goodwill

 

 

87,356

 

 

 

87,356

 

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

 

 

7,900

 

 

 

7,900

 

Student receivables, net of allowance for doubtful accounts of $1,922

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

 

 

1,131

 

 

 

942

 

Deferred income tax assets, net

 

 

65,363

 

 

 

81,628

 

Other assets

 

 

5,140

 

 

 

4,993

 

Assets of discontinued operations

 

 

178

 

 

 

178

 

TOTAL ASSETS

 

$

598,807

 

 

$

482,493

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

Lease liability-operating

 

$

12,109

 

 

$

-

 

Accounts payable

 

 

11,044

 

 

 

9,195

 

Accrued expenses:

 

 

 

 

 

 

 

 

Payroll and related benefits

 

 

25,019

 

 

 

24,530

 

Advertising and marketing costs

 

 

11,896

 

 

 

9,300

 

Income taxes

 

 

1,675

 

 

 

1,472

 

Other

 

 

46,610

 

 

 

19,668

 

Deferred revenue

 

 

23,784

 

 

 

32,351

 

Liabilities of discontinued operations

 

 

3

 

 

 

536

 

Total current liabilities

 

 

132,140

 

 

 

97,052

 

 

 

 

 

 

 

 

 

 

NON-CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

Lease liability-operating

 

 

54,904

 

 

 

-

 

Deferred rent obligations

 

 

-

 

 

 

12,745

 

Other liabilities

 

 

9,819

 

 

 

17,493

 

Total non-current liabilities

 

 

64,723

 

 

 

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; 85,876,510

   and 85,173,686 shares issued, 70,312,424 and 69,772,910 shares

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

 

 

859

 

 

 

852

 

Additional paid-in capital

 

 

633,536

 

 

 

628,295

 

Accumulated other comprehensive gain (loss)

 

 

386

 

 

 

(298

)

Accumulated deficit

 

 

(9,445

)

 

 

(52,946

)

Treasury stock, at cost; 15,564,086 and 15,400,776 shares as of September 30, 2019

   and December 31, 2018, respectively

 

 

(223,392

)

 

 

(220,700

)

Total stockholders' equity

 

 

401,944

 

 

 

355,203

 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

 

$

598,807

 

 

$

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 INCOME AND COMPREHENSIVE INCOME

(In thousands, except per share amounts)

 

 

 

For the Quarter Ended September 30,

 

 

For the Year to Date Ended September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

REVENUE:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tuition and fees

 

$

154,291

 

 

$

144,882

 

 

$

467,298

 

 

$

433,736

 

Other

 

 

668

 

 

 

808

 

 

 

1,955

 

 

 

2,055

 

Total revenue

 

 

154,959

 

 

 

145,690

 

 

 

469,253

 

 

 

435,791

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Educational services and facilities

 

 

25,318

 

 

 

27,201

 

 

 

76,995

 

 

 

84,437

 

General and administrative

 

 

103,063

 

 

 

96,842

 

 

 

331,057

 

 

 

293,190

 

Depreciation and amortization

 

 

2,284

 

 

 

2,364

 

 

 

6,752

 

 

 

7,049

 

Total operating expenses

 

 

130,665

 

 

 

126,407

 

 

 

414,804

 

 

 

384,676

 

Operating income

 

 

24,294

 

 

 

19,283

 

 

 

54,449

 

 

 

51,115

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OTHER INCOME:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

1,698

 

 

 

950

 

 

 

4,730

 

 

 

2,326

 

Interest expense

 

 

(43

)

 

 

(108

)

 

 

(125

)

 

 

(323

)

Miscellaneous income

 

 

97

 

 

 

32

 

 

 

368

 

 

 

225

 

Total other income

 

 

1,752

 

 

 

874

 

 

 

4,973

 

 

 

2,228

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PRETAX INCOME

 

 

26,046

 

 

 

20,157

 

 

 

59,422

 

 

 

53,343

 

Provision for income taxes

 

 

7,653

 

 

 

5,089

 

 

 

16,362

 

 

 

11,527

 

INCOME FROM CONTINUING OPERATIONS

 

 

18,393

 

 

 

15,068

 

 

 

43,060

 

 

 

41,816

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LOSS FROM DISCONTINUED OPERATIONS, net of tax

 

 

(159

)

 

 

(211

)

 

 

(594

)

 

 

(706

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME

 

 

18,234

 

 

 

14,857

 

 

 

42,466

 

 

 

41,110

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OTHER COMPREHENSIVE (LOSS) INCOME, net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

(113

)

 

 

(21

)

 

 

(130

)

 

 

(103

)

Unrealized gain (loss) on investments

 

 

44

 

 

 

106

 

 

 

814

 

 

 

(4

)

     Total other comprehensive (loss) income

 

 

(69

)

 

 

85

 

 

 

684

 

 

 

(107

)

COMPREHENSIVE INCOME

 

$

18,165

 

 

$

14,942

 

 

$

43,150

 

 

$

41,003

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS) PER SHARE - BASIC:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

0.26

 

 

$

0.21

 

 

$

0.62

 

 

$

0.60

 

Loss from discontinued operations

 

 

-

 

 

 

-

 

 

 

(0.01

)

 

 

(0.01

)

Net income per share

 

$

0.26

 

 

$

0.21

 

 

$

0.61

 

 

$

0.59

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS) PER SHARE - DILUTED:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

0.25

 

 

$

0.21

 

 

$

0.60

 

 

$

0.59

 

Loss from discontinued operations

 

 

-

 

 

 

-

 

 

 

(0.01

)

 

 

(0.01

)

Net income per share

 

$

0.25

 

 

$

0.21

 

 

$

0.59

 

 

$

0.58

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE SHARES OUTSTANDING:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

70,142

 

 

 

69,737

 

 

 

70,029

 

 

 

69,542

 

Diluted

 

 

72,142

 

 

 

71,790

 

 

 

71,901

 

 

 

71,425

 

 

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, July 1, 2019

 

 

85,668

 

 

$

857

 

 

 

(15,558

)

 

$

(223,263

)

 

$

630,878

 

 

$

455

 

 

$

(27,679

)

 

$

381,248

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

18,234

 

 

 

18,234

 

Foreign currency translation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(113

)

 

 

-

 

 

 

(113

)

Unrealized gain on investments

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

44

 

 

 

-

 

 

 

44

 

Share-based compensation expense

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,516

 

 

 

-

 

 

 

-

 

 

 

1,516

 

Common stock issued

 

 

209

 

 

 

2

 

 

 

(6

)

 

 

(129

)

 

 

1,142

 

 

 

-

 

 

 

-

 

 

 

1,015

 

BALANCE, September 30, 2019

 

 

85,877

 

 

$

859

 

 

 

(15,564

)

 

$

(223,392

)

 

$

633,536

 

 

$

386

 

 

$

(9,445

)

 

$

401,944

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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, July 1, 2018

 

 

85,115

 

 

$

851

 

 

 

(15,392

)

 

$

(220,573

)

 

$

624,869

 

 

$

(356

)

 

$

(81,874

)

 

$

322,917

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

14,857

 

 

 

14,857

 

Foreign currency translation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(21

)

 

 

-

 

 

 

(21

)

Unrealized gain on investments

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

106

 

 

 

-

 

 

 

106

 

Share-based compensation expense

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,445

 

 

 

-

 

 

 

-

 

 

 

1,445

 

Common stock issued

 

 

44

 

 

 

1

 

 

 

(6

)

 

 

(95

)

 

 

437

 

 

 

-

 

 

 

-

 

 

 

343

 

BALANCE, September 30, 2018

 

 

85,159

 

 

$

852

 

 

 

(15,398

)

 

$

(220,668

)

 

$

626,751

 

 

$

(271

)

 

$

(67,017

)

 

$

339,647