SANTA ANA, Calif., Aug. 20 /PRNewswire-FirstCall/ -- Corinthian
Colleges, Inc. (Nasdaq: COCO) reported financial results today
for the fourth quarter ended June 30,
2010. The results for the fourth quarter and fiscal
year were within previous guidance ranges for new student growth,
revenue and earnings per share.
"Our results for the quarter and the year reflect the continued
success of our initiatives to enrich the student experience and
generate sustainable growth," said Peter
Waller, Corinthian's chief executive officer. "During
the fiscal year we continued to invest in such areas as curricula
upgrades, campus and instructional technology, employee training
and development, faculty leadership, and student loan default
management," Waller said. "We also substantially expanded our
placement services for graduates during the year, which allowed us
to achieve a 73% placement rate for the 2009 cohort of graduates.
Given the lingering effects of the recession, we believe this
is a solid result."
"Our new student growth in the fourth quarter was primarily
driven by implementation of new programs at existing campuses,
continued growth in the online division, and the expansion of our
high school recruiting program," Waller said. "In addition,
the Heald College acquisition,
completed in January, contributed to growth and earnings in the
quarter."
"In fiscal 2010, marketing and bad debt expenses continued to
decline as a percent of revenue compared with the prior year,"
Waller said. "In addition, the growth in student population
allowed us to make more efficient use of our campus facilities.
Given all of these factors, our operating margin and cash
flow from operations improved compared with the prior year.
Our full year after-tax margin increased to 8.3% in fiscal
2010 from 5.4% in fiscal 2009."
"We are actively monitoring proposed changes in federal
regulation and Congressional actions which pertain to private
sector education," Waller continued. "Given the information
currently available, we are unable to gauge the full impact of
these proposals on our students and the company. We continue
to meet with policy-makers to work toward reasonable solutions and
to provide accurate information about our company, industry, the
demographic we serve and the outcomes we help our students
achieve."
"We believe we have built a stronger company over the past few
years, and that we are thus in a better position to adapt to any
changes in regulation," Waller said. "We are investing in
areas which help improve student outcomes, reduce risk and ensure
regulatory compliance now and in the future. For example, we
have implemented a major step-up in cohort default management
activity, and are in the process of reducing the risk profile of
our student population."
Comparing the fourth quarter of fiscal 2010 with the same
quarter of the prior year (Note:
Data is for continuing operations only.):
- Net revenue was $482.7 million
versus $353.5 million, up 36.6%.
- Total student population at June 30,
2010 was 110,580 versus 86,088 at June 30, 2009, an increase of 28.4%. On a
pro forma basis, including the Heald student population at both
June 30, 2010 and June 30, 2009, the total student population
increased 14.1%.
- Total new students were 34,486 versus 29,188, an increase of
18.2%. On a pro forma basis, including Heald's new students
in both Q4 09 and Q4 10, new student growth was 6.1%.
- Operating income was $55.6
million, compared with $38.0
million.
- Income from continuing operations was $33.9 million, compared with $24.7 million.
- Diluted earnings per share were $0.38, versus $0.28.
Q4 10 Financial Review
Educational services expenses were 57.3% of revenue in Q4
10 versus 56.0% in Q4 09. The increase was the result of higher
compensation expenses in the areas of faculty leadership, graduate
employment services, and student finance.
Bad debt expense was 5.1% of revenue in Q4 10, down from
7.1% in Q4 09. The improvement was primarily the result of
higher student retention and continued efficiencies in packaging
students with financial aid.
Marketing and admissions expenses were 20.6% of revenue
in Q4 10 versus 21.1% in Q4 09. Advertising costs declined as
a percent of revenue, partially offset by increased admissions
representative staffing for the Everest high school recruiting
program.
General and administrative expenses were 10.6% of revenue
in Q4 10 versus 10.9% in Q4 09.
Operating margin – As a result of the factors outlined
above, our operating margin from continuing operations was 11.5% in
Q4 10 versus 10.8% in Q4 09. Excluding Heald-related
amortization of purchase accounting intangibles and integration
costs, the operating margin was 12.5% in Q4 10.
Cash and cash equivalents totaled $209.2 million at June 30,
2010, compared with $160.3
million at June 30, 2009.
Cash flow from operations, including discontinued
operations, was $204.0 million in
fiscal 2010, versus $198.7 million in
fiscal 2009.
Capital expenditures were $83.5
million in fiscal 2010 versus $49.5
million in the prior fiscal year.
Regulatory Update
NPRM - The federal Department of Education,
pursuant to its rule-making process, recently published two Notices
of Proposed Rule Making (NPRM). The first NPRM, published on
June 18, 2010, focused on a range of
issues affecting private sector schools, including incentive
compensation for admissions representatives, misrepresentation, and
gainful employment disclosures. We filed a written response
to this NPRM with the DOE, and it can be found on our website at
www.cci.edu/investors/currentissues. The second NPRM,
published on July 23, 2010, focuses
exclusively on gainful employment. We plan to file our
written response to that NPRM by September
9, 2010, and will also post it on our website.
Senate HELP Committee - As part of its review of the
private sector education industry, the Senate Higher Education
Labor and Pensions Committee ("Committee") has requested
information from approximately 30 private sector education
companies, including Corinthian. The information requested
includes such areas as: recruiting and enrollment practices,
pricing policies, student financial aid processes, attendance
tracking, student withdrawal policies, 90/10 compliance, placement,
completion, cohort default rates, accreditation, and company
financial results, management and operations. The Committee
has requested that a portion of the information be provided by
August 26, 2010 and that the
remainder be provided by September 16,
2010. We are in the process of responding to the
Committee's request.
Accreditation Status, Everest
College Phoenix – Everest
College Phoenix (ECP) consists of two ground schools and an
online learning division and has approximately 5,800 students.
On May 9, 2009, ECP was
notified by the Higher Learning Commission of the North Central
Association of Colleges and Schools (HLC), that ECP had been placed
on probation. The probation action primarily focuses on
questions about ECP's autonomy and governance as it relates to
Corinthian's ownership.
An evaluation team from HLC visited ECP in May 2010, and, on July 27,
2010, issued a Report on a Comprehensive Evaluation Visit.
In its report, the team noted that while there had been
positive developments, deficiencies in other criteria were not
sufficient to warrant removal of ECP's probationary status.
The evaluation team has recommended the withdrawal of ECP's
accreditation. We disagree with the evaluation team's
recommendation, and intend to challenge its findings before the
Commission over the next several months. We expect HLC's
board to make a determination on ECP's probation status in
November. If we disagree with the HLC board's decision, we
could pursue an appeal that could last for several months beyond
that time.
Cohort Default Management Update
During fiscal 2010, we restructured and expanded our cohort
default management program and it was fully operational as of the
end of the third quarter. Although we believe that our
default management efforts have slowed the rate of increase for the
2009 cohort, current trend information indicates that cumulative
defaults have trended substantially higher for the 2009 cohort of
students compared with the 2008 cohort at the same time last
year. Information currently available also indicates that the
number of our OPEIDs which could exceed DOE's 25% cohort default
rate threshold for the 2009 cohort will be substantially higher
than for the 2008 cohort. In the 2008 cohort, nine of our
OPEIDs exceeded the 25% threshold.
We believe that continuing high unemployment, which is
particularly challenging for the demographic we serve, has
contributed to higher cohort default rates (CDRs). In
addition, major structural changes in the student lending industry
over the past two years have negatively impacted CDRs. Such
changes include: student lender bankruptcies in the wake of
the 2008 credit crisis; the sale of distressed student loan
portfolios to the federal government by bankrupt lenders or lenders
that could no longer fund such loans; the lack of default
management on distressed loans; the shift to direct lending and the
associated phase out of guaranty agency responsibilities for
default management.
These changes in student lending have reduced data timeliness
and trend visibility. As more data has emerged, we have
gained a more transparent view of how the changes have impacted the
2009 cohort of students. The most recent federal data
indicates that the changes in student lending have increased cohort
default rates substantially for the 2009 cohort.
Given the information recently available, we now believe that up
to three of our OPEIDs could exceed the federal threshold of 25%
for three consecutive years under the current two-year measurement
methodology. Under the current two-year methodology, OPEIDs
which exceed the federal threshold of 25% for three consecutive
years, or 40% in one year, become ineligible to participate in the
Title IV student aid program. We remain confident that none
of our OPEIDs will exceed the 40% threshold for the 2009
cohort.
We expect the higher two-year rates for the 2009 cohort to
translate into elevated three-year rates for the same cohort.
We thus expect a majority of our OPEIDs to exceed the 30%
threshold under the three-year measurement for the 2009 cohort.
Schools cannot be sanctioned under the three-year measurement
methodology until 2014 (the year the 2011 cohort data will be
final) on either the 30% or 40% thresholds, and we will
aggressively pursue default mitigation efforts between now and
then.
To help reduce cohort default rates for the 2010 cohort and
beyond, and to improve student outcomes, in fiscal 2010 we began to
reduce enrollments of students who lack a high school diploma or
equivalent. These students attend our schools under the
federal Ability to Benefit (ATB) program. At the end of
fiscal 2010, ATB students represented 15% of our total student
population, down from 24% at the same point in the prior
year.
ATB students drop out at a higher rate, are more challenging to
assist with career placement, and default on their loans at a
higher rate than high school graduates. Although serving ATB
students has historically been a part of Corinthian's mission,
given the anticipated shift to a three-year CDR measurement period,
and the impact of structural changes in the student lending
environment, we will no longer be able to serve these students at
our U.S. Everest and WyoTech campuses effective September 1, 2010. We will continue to help
currently enrolled ATB students finish their programs and find
employment.
Guidance
Please note that the following guidance pertains to continuing
operations and excludes any one-time charges.
|
|
Time Period
|
Revenue
|
Diluted EPS
|
New Student
Growth -
Pro forma
|
New Student
Growth *
|
|
Q1 11
|
$492 - $502 million
|
$0.38 - $0.41
|
0% - 2%
|
11% - 13%
|
|
|
|
|
|
|
|
|
* Excludes Heald from base calculation for Q1 10.
Conference Call Today
We will host a conference call today at 12:00 p.m. Eastern Time (9:00 a.m. PT), to discuss fourth quarter results.
The call will be open to all interested investors through a
live audio web cast at www.cci.edu (Investor Relations/Webcasts
& Presentations) and http://www.companyboardroom.com/
www.streetevents.com. The call will be archived on www.cci.edu
after the call. A telephonic playback of the conference call
will also be available through 5:00 p.m.
ET, Friday, August 27, 2010.
To hear the replay, dial (888) 286-8010 (domestic) or (617)
801-6888 (international) and enter pass code 31125253.
About Corinthian Colleges
Corinthian Colleges, Inc. is one of the largest post-secondary
education companies in North
America. The Company's mission is to prepare students for
careers in demand or for advancement in their chosen field. Through
its Everest, WyoTech and Heald campuses, Corinthian offers diploma
and associate degree programs in a variety of high-demand
occupational areas, including healthcare, business, criminal
justice, transportation technology and maintenance, construction
trades and information technology. For more information, go to
www.cci.edu.
Certain statements in this press release may be deemed to be
forward-looking statements under the Private Securities Litigation
Reform Act of 1995. The company intends that all such
statements be subject to the "safe-harbor" provisions of that Act.
Such statements include, but are not limited to, those
regarding our beliefs and expectations regarding the potential
outcomes of the NPRM, the potential resolution of the accreditation
probation for ECP, our future cohort default rates, and the
statements under the heading "Guidance" above. Many factors
may cause the company's actual results to differ materially from
those discussed in any such forward-looking statements or
elsewhere, including: the uncertain outcome of the Department of
Education's proposed rule making and pending inquiries by the
Senate HELP committee, either or both of which could result in
changes in federal regulation and legislation as well as changes in
the manner in which we conduct our business; the company's
effectiveness in its regulatory and accreditation compliance
efforts; the Company's potential inability to manage the default
rates of its students on their federal student loans; the outcome
of ongoing reviews and inquiries by accrediting, state and federal
agencies; the outcome of pending litigation against the company;
risks associated with variability in the expense and effectiveness
of the company's advertising and promotional efforts; the uncertain
future impact of the company's new student information system;
potential increased competition; bad debt expense or reduced
revenue associated with requesting students to pay more of their
educational expenses while in school; the potential inability or
failure of the company to employ underwriting guidelines that will
limit the risk of higher student loan defaults and higher bad debt
expense; changes in general macroeconomic and market conditions
(including credit and labor market conditions, the unemployment
rate and the rates of change of each such item); and the other
risks and uncertainties described in the company's filings with the
U.S. Securities and Exchange Commission. The historical
results achieved by the company are not necessarily indicative of
its future prospects. The company undertakes no obligation to
publicly update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise.
Corinthian Colleges,
Inc.
(In thousands, except per share
data)
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Statements of
Operations
|
|
|
|
|
|
|
|
|
|
|
For the three months
ended
|
|
For the twelve months
ended
|
|
|
|
June 30,
|
|
June 30,
|
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
|
|
(Unaudited)
|
|
(Unaudited)
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
$
482,744
|
|
$
353,513
|
|
$
1,763,797
|
|
$ 1,307,825
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
Educational services
|
276,683
|
|
197,838
|
|
972,910
|
|
753,707
|
|
|
General and
administrative
|
50,963
|
|
38,670
|
|
192,579
|
|
135,747
|
|
|
Marketing and
admissions
|
99,468
|
|
74,607
|
|
357,563
|
|
294,728
|
|
|
Impairment, facility closing,
and severance charges
|
-
|
|
4,378
|
|
-
|
|
4,378
|
|
Total operating
expenses
|
427,114
|
|
315,493
|
|
1,523,052
|
|
1,188,560
|
|
|
|
|
|
|
|
|
|
|
|
Income from
operations
|
55,630
|
|
38,020
|
|
240,745
|
|
119,265
|
|
|
|
|
|
|
|
|
|
|
|
Interest (income)
|
(228)
|
|
(383)
|
|
(1,190)
|
|
(1,763)
|
|
Interest expense
|
1,543
|
|
524
|
|
5,009
|
|
2,715
|
|
Other (income)
expense
|
(141)
|
|
(1,189)
|
|
(4,378)
|
|
1,170
|
|
Income from continuing
operations before provision for income taxes
|
54,456
|
|
39,068
|
|
241,304
|
|
117,143
|
|
Provision for income
taxes
|
20,606
|
|
14,406
|
|
95,333
|
|
46,015
|
|
Income from continuing
operations
|
33,850
|
|
24,662
|
|
145,971
|
|
71,128
|
|
Loss from discontinued
operations, net of tax
|
-
|
|
(1,470)
|
|
-
|
|
(2,368)
|
|
Net income
|
$
33,850
|
|
$
23,192
|
|
$
145,971
|
|
$
68,760
|
|
|
|
|
|
|
|
|
|
|
|
Income per share -
Basic:
|
|
|
|
|
|
|
|
|
|
Income from continuing
operations
|
$
0.38
|
|
$
0.28
|
|
$
1.66
|
|
$
0.82
|
|
|
Loss from discontinued
operations
|
-
|
|
(0.01)
|
|
-
|
|
(0.02)
|
|
|
Net income
|
$
0.38
|
|
$
0.27
|
|
$
1.66
|
|
$
0.80
|
|
|
|
|
|
|
|
|
|
|
|
Income per share -
Diluted:
|
|
|
|
|
|
|
|
|
|
Income from continuing
operations
|
$
0.38
|
|
$
0.28
|
|
$
1.65
|
|
$
0.81
|
|
|
Loss from discontinued
operations
|
-
|
|
(0.02)
|
|
-
|
|
(0.02)
|
|
|
Net income
|
$
0.38
|
|
$
0.26
|
|
$
1.65
|
|
$
0.79
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of
common shares outstanding:
|
|
|
|
|
|
|
|
|
|
Basic
|
88,109
|
|
87,021
|
|
87,696
|
|
86,121
|
|
|
Diluted
|
88,853
|
|
88,257
|
|
88,707
|
|
87,517
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected Consolidated Balance
Sheet Data
|
|
|
|
|
|
|
June 30,
|
|
June 30,
|
|
|
|
2010
|
|
2009
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
$
209,165
|
|
$
160,276
|
|
Receivables, net (including long
term notes receivable)
|
$
163,749
|
|
$
107,446
|
|
Current assets
|
$
437,722
|
|
$
308,531
|
|
Total assets
|
$ 1,389,420
|
|
$
798,871
|
|
Current liabilities
|
$
297,311
|
|
$
200,583
|
|
Long-term debt and capital
leases (including current portion)
|
$
314,259
|
|
$
28,558
|
|
Total liabilities
|
$
698,386
|
|
$
281,203
|
|
Total stockholders'
equity
|
$
691,034
|
|
$
517,668
|
|
|
|
|
|
|
Contacts:
|
|
|
|
|
Investors:
|
Media:
|
|
|
Anna Marie Dunlap
|
Robert Jaffe
|
|
|
SVP Investor
Relations
|
Pondel Wilkinson,
Inc.
|
|
|
Corinthian Colleges,
Inc.
|
310-279-5969
|
|
|
714-424-2678
|
|
|
|
|
|
SOURCE Corinthian Colleges, Inc.
Copyright . 20 PR Newswire