Minnesota | 001-33140 | 41-1717955 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
225 South 6th Street, 9th Floor Minneapolis, Minnesota | 55402 | |
(Address of principal executive offices) | (Zip Code) |
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02. | Results of Operations and Financial Condition. |
Item 9.01. | Financial Statements and Exhibits |
CAPELLA EDUCATION COMPANY | ||||||
Date: October 25, 2016 | By | /s/ Renee L. Jackson | ||||
Renee L. Jackson | ||||||
Vice President and General Counsel |
• | The “Post-Secondary” segment is comprised of Capella University and Sophia Learning; the “Job-Ready Skills” segment consists of Capella Learning Solutions, Hackbright Academy and DevMountain. |
• | For the Post-Secondary segment, revenues were $103.5 million, up 3.4 percent compared to $100.1 million in the third quarter of 2015. The operating margin was 16.4 percent, compared to 14.8 percent for the third quarter 2015. Results are primarily attributable to Capella University. |
• | Capella University total active enrollment increased 2.8 percent to 37,708 learners, new enrollment decreased by 0.9 percent compared to third quarter 2015, and early cohort persistence improved by approximately 4 percent. |
• | Revenues for the Job-Ready Skills segment were $2.4 million compared to $0.03 million in the third quarter of 2015. The operating loss was $1.6 million, compared to $0.7 million for the third quarter 2015. |
As of September 30, 2016 | As of December 31, 2015 | ||||||
(Unaudited) | |||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 95,713 | $ | 86,104 | |||
Marketable securities, current | 44,758 | 27,522 | |||||
Accounts receivable, net of allowance of $6,583 at September 30, 2016 and $6,340 at December 31, 2015 | 20,055 | 17,081 | |||||
Prepaid expenses and other current assets | 14,883 | 14,308 | |||||
Currents assets of business held for sale | — | 4,251 | |||||
Total current assets | 175,409 | 149,266 | |||||
Marketable securities, non-current | 23,034 | 45,679 | |||||
Property and equipment, net | 33,054 | 34,306 | |||||
Goodwill | 25,312 | — | |||||
Intangibles, net | 8,674 | — | |||||
Deferred income taxes | 1,348 | — | |||||
Other assets | 7,670 | 2,397 | |||||
Noncurrent assets of business held for sale | — | 18,707 | |||||
Total assets | $ | 274,501 | $ | 250,355 | |||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 2,885 | $ | 1,470 | |||
Accrued liabilities | 32,549 | 23,658 | |||||
Dividends payable | 4,685 | 4,824 | |||||
Income taxes payable | 1,873 | — | |||||
Deferred revenue | 16,188 | 7,796 | |||||
Current liabilities of business held for sale | — | 8,291 | |||||
Total current liabilities | 58,180 | 46,039 | |||||
Deferred rent | 14,067 | 1,874 | |||||
Other liabilities | 2,069 | 3,061 | |||||
Deferred income taxes | — | 1,502 | |||||
Total liabilities | 74,316 | 52,476 | |||||
Shareholders’ equity: | |||||||
Common stock, $0.01 par value: Authorized shares — 100,000; Issued and Outstanding shares — 11,507 at September 30, 2016 and 11,824 at December 31, 2015 | 115 | 118 | |||||
Additional paid-in capital | 117,427 | 114,849 | |||||
Accumulated other comprehensive loss | (27 | ) | (272 | ) | |||
Retained earnings | 82,670 | 83,184 | |||||
Total shareholders’ equity | 200,185 | 197,879 | |||||
Total liabilities and shareholders’ equity | $ | 274,501 | $ | 250,355 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
(Unaudited) | |||||||||||||||
Revenues | $ | 105,909 | $ | 100,134 | $ | 318,082 | $ | 310,419 | |||||||
Costs and expenses: | |||||||||||||||
Instructional costs and services | 47,656 | 46,539 | 138,469 | 137,308 | |||||||||||
Marketing and promotional | 25,338 | 24,604 | 76,140 | 75,658 | |||||||||||
Admissions advisory | 7,408 | 7,141 | 22,116 | 21,210 | |||||||||||
General and administrative | 10,159 | 7,719 | 31,410 | 26,444 | |||||||||||
Total costs and expenses | 90,561 | 86,003 | 268,135 | 260,620 | |||||||||||
Operating income | 15,348 | 14,131 | 49,947 | 49,799 | |||||||||||
Other income (expense), net | 46 | (5 | ) | 79 | (28 | ) | |||||||||
Income from continuing operations before income taxes | 15,394 | 14,126 | 50,026 | 49,771 | |||||||||||
Income tax expense | 5,807 | 5,324 | 19,089 | 18,834 | |||||||||||
Income from continuing operations | 9,587 | 8,802 | 30,937 | 30,937 | |||||||||||
Income (loss) from discontinued operations, net of tax | 2,963 | (630 | ) | 606 | (2,397 | ) | |||||||||
Net income | $ | 12,550 | $ | 8,172 | $ | 31,543 | $ | 28,540 | |||||||
Basic net income (loss) per common share: | |||||||||||||||
Continuing operations | 0.83 | 0.73 | 2.66 | 2.55 | |||||||||||
Discontinued operations | 0.26 | (0.05 | ) | 0.05 | (0.20 | ) | |||||||||
Basic net income per common share | $ | 1.09 | $ | 0.68 | $ | 2.71 | $ | 2.35 | |||||||
Diluted net income (loss) per common share | |||||||||||||||
Continuing operations | 0.81 | 0.72 | 2.61 | 2.50 | |||||||||||
Discontinued operations | 0.25 | (0.05 | ) | 0.05 | (0.19 | ) | |||||||||
Diluted net income per common share | $ | 1.06 | $ | 0.67 | $ | 2.66 | $ | 2.31 | |||||||
Weighted average number of common shares outstanding: | |||||||||||||||
Basic | 11,538 | 12,027 | 11,647 | 12,146 | |||||||||||
Diluted | 11,790 | 12,237 | 11,872 | 12,373 | |||||||||||
Cash dividends declared per common share | $ | 0.39 | $ | 0.37 | $ | 1.17 | $ | 1.11 |
Nine Months Ended September 30, | |||||||
2016 | 2015 | ||||||
Operating activities | (Unaudited) | ||||||
Net income | $ | 31,543 | $ | 28,540 | |||
Income (loss) from discontinued operations, net of tax | 606 | (2,397 | ) | ||||
Income from continuing operations | 30,937 | 30,937 | |||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Provision for bad debts | 7,686 | 10,635 | |||||
Depreciation and amortization | 15,751 | 16,447 | |||||
Amortization of investment discount/premium, net | 1,608 | 1,702 | |||||
Impairment of property and equipment | 404 | — | |||||
Loss on disposal of property and equipment | 143 | 63 | |||||
Share-based compensation | 5,434 | 5,465 | |||||
Excess tax benefits from share-based compensation | (378 | ) | (422 | ) | |||
Deferred income taxes | (5,016 | ) | (788 | ) | |||
Changes in operating assets and liabilities, net of assets acquired and liabilities assumed from business acquisitions: | |||||||
Accounts receivable | (9,938 | ) | (11,542 | ) | |||
Prepaid expenses and other current assets | (1,603 | ) | (7,194 | ) | |||
Accounts payable and accrued liabilities | 7,863 | 7,481 | |||||
Income taxes payable | 4,058 | (3,728 | ) | ||||
Deferred rent | 12,193 | (341 | ) | ||||
Deferred revenue | 7,692 | 2,509 | |||||
Net cash provided by operating activities - continuing operations | 76,834 | 51,224 | |||||
Net cash provided by (used in) operating activities - discontinued operations | (2,831 | ) | 443 | ||||
Net cash provided by operating activities | 74,003 | 51,667 | |||||
Investing activities | |||||||
Acquisitions, net of cash acquired | (32,101 | ) | — | ||||
Capital expenditures | (14,703 | ) | (16,244 | ) | |||
Investment in partnership interests | (3,551 | ) | (471 | ) | |||
Purchases of marketable securities | (21,810 | ) | (25,246 | ) | |||
Maturities of marketable securities | 25,635 | 24,180 | |||||
Net cash used in investing activities - continuing operations | (46,530 | ) | (17,781 | ) | |||
Net cash provided by (used in) investing activities - discontinued operations | 13,792 | (234 | ) | ||||
Net cash used in investing activities | (32,738 | ) | (18,015 | ) | |||
Financing activities | |||||||
Excess tax benefits from share-based compensation | 378 | 422 | |||||
Net proceeds from exercise of stock options | 2,339 | 1,234 | |||||
Payment of dividends | (13,756 | ) | (13,570 | ) | |||
Repurchases of common stock | (22,517 | ) | (18,500 | ) | |||
Net cash used in financing activities - continuing operations | (33,556 | ) | (30,414 | ) | |||
Effect of foreign exchange rates on cash | (23 | ) | (28 | ) | |||
Net increase in cash and cash equivalents | 7,686 | 3,210 | |||||
Cash and cash equivalents and cash of business held for sale at beginning of period | 88,027 | 94,003 | |||||
Cash and cash equivalents and cash of business held for sale at end of period | 95,713 | 97,213 | |||||
Less cash of business held for sale at end of period | — | (1,950 | ) | ||||
Cash and cash equivalents at end of period | $ | 95,713 | $ | 95,263 | |||
Supplemental disclosures of cash flow information | |||||||
Income taxes paid | $ | 20,044 | $ | 23,331 | |||
Non-cash investing and financing activities: | |||||||
Purchase of equipment included in accounts payable and accrued liabilities | $ | 523 | $ | 382 | |||
Declaration of cash dividend to be paid | 4,554 | 4,500 | |||||
Receivable due from sale of business | 4,539 | — |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
(Unaudited) | |||||||||||||||
Revenues | |||||||||||||||
Post-Secondary | $ | 103,488 | $ | 100,100 | $ | 314,704 | $ | 309,856 | |||||||
Job-Ready Skills | 2,421 | 34 | 3,378 | 563 | |||||||||||
Consolidated revenues | $ | 105,909 | $ | 100,134 | $ | 318,082 | $ | 310,419 | |||||||
Operating income (loss) | |||||||||||||||
Post-Secondary | 16,970 | 14,781 | 56,254 | 50,958 | |||||||||||
Job-Ready Skills | (1,622 | ) | (650 | ) | (6,307 | ) | (1,159 | ) | |||||||
Consolidated operating income | 15,348 | 14,131 | 49,947 | 49,799 | |||||||||||
Other income (expense), net | 46 | (5 | ) | 79 | (28 | ) | |||||||||
Income from continuing operations before income taxes | $ | 15,394 | $ | 14,126 | $ | 50,026 | $ | 49,771 |
September 30, | ||||||||
Enrollment by Degree (a): | 2016 | 2015 | % Change | |||||
Doctoral | 9,257 | 9,559 | (3.2 | )% | ||||
Master's | 17,761 | 16,807 | 5.7 | % | ||||
Bachelor's | 9,644 | 9,361 | 3.0 | % | ||||
Other | 1,046 | 956 | 9.4 | % | ||||
Total | 37,708 | 36,683 | 2.8 | % |