Corinthian Colleges, Inc. (Nasdaq:COCO) reported
financial results today for the third quarter ended March 31, 2012.
The results were within the previous guidance range for earnings
per share; above guidance for new enrollment growth; and below
guidance for revenue. In keeping with past practice, the company's
guidance excluded extraordinary charges.
"In the third quarter we continued to focus on student outcomes,
fiscal discipline, and operational efficiency," said Jack
Massimino, Corinthian's Chairman and Chief Executive Officer. "Our
student attrition and graduate employment trends continue to make
incremental improvement compared with the prior year, primarily the
result of reducing the risk profile of our students, closing
underperforming programs and schools, and our ongoing efforts to
help students succeed."
"As anticipated, our new student enrollment growth improved in
the third quarter this year compared to the same quarter last
year," Massimino said. "The improvement is the result of
several factors, including gradual stabilization in ground school
new enrollments, continued strong growth at Everest University
Online, and a less challenging comparison to the third quarter last
year. We expect the rate of new enrollment growth to remain
positive in the fourth quarter."
"We continue to pursue several initiatives to reduce expenses,
improve operational efficiency, and strengthen our balance sheet,"
Massimino said. "Over the past 18 months we have reduced
annualized operating expenses by approximately $150 million. We
have implemented systems and process efficiencies in the areas of
financial aid and cohort default prevention which have
substantially reduced bad debt and improved default rates. In
addition, we completed the sale-leaseback of five Heald campuses
and we are in the process of selling or teaching out seven Everest
campuses."
"As we move into fiscal 2013, we are anticipating a number of
challenges," Massimino said. "These include changes in general
economic conditions and the loss of federal funding for students
who lack a high school diploma or GED, or 'Ability-to-Benefit'
(ATB) students. To help offset the loss of ATB students, we are
introducing several new diploma programs across our ground schools
and making our GED preparation programs available to the general
public at selected U.S. campuses. We expect these programs to begin
to have a significant positive impact on our financial results in
the second half of fiscal 2013. In addition, we expect continued
enrollment increases at our new campuses and solid enrollment
growth in our online learning programs throughout the fiscal
year."
Comparing the third quarter of fiscal 2012 with the same
quarter of the prior year (Note – all
results are for continuing operations only):
- Net revenues were $424.1 million versus $455.5 million, a
decrease of 6.9%.
- The total student population at March 31, 2012 was 96,631
versus 100,914 at March 31, 2011, a decrease of 4.2%.
- New student enrollments totaled 29,427 versus 28,895, an
increase of 1.8%.
- Operating income was $26.1 million, excluding impairment and
severance charges of $5.3 million, compared with operating income
of $31.2 million, excluding severance charges of $2.4 million in
the third quarter of fiscal 2011.
- Income from continuing operations, excluding impairment and
severance for both periods, was $12.5 million, compared with $18.7
million in the prior year.
- Diluted earnings per share from continuing operations were
$0.11 per share versus $0.20. Excluding the impairment and
severance charges and the related tax effect, diluted earnings per
share from continuing operations were $0.15 in Q3 12 and $0.22 in
Q3 11.
Financial Review
Educational services expense decreased $12.8
million, or 4.8%, from $268.8 million in Q3 11 to $256.0 million in
Q3 12. As a percent of net revenues, educational services
expenses increased from 59.0% in Q3 11 to 60.3% in Q3 12. The
increase as a percent of net revenue is primarily due to an
increase in facilities and compensation expense, reflecting the
fixed nature of these expenses against a lower revenue base,
partially offset by improvement in bad debt expense.
Bad debt expense decreased to $10.5 million or 2.5% of net
revenues for Q3 12 compared to $21.7 million or 4.8% of net
revenues for Q3 11. The improvement in bad debt expense is
primarily the result of continued efficiencies in packaging
students with financial aid as a result of bringing processing
in-house.
Marketing and admissions expenses decreased
$1.9 million, or 1.8%, from $104.9 million in Q3 11 to $103.0
million in Q3 12. As a percent of net revenues, marketing and
admissions expenses increased from 23.0% in Q3 11 to 24.3% in Q3
12. The increase as a percent of revenue is primarily
attributable to an increase in unit advertising costs against a
lower revenue base offset partially by a decrease in compensation
expense.
General and administrative expenses decreased
$11.6 million, or 22.9% from $50.7 million in Q3 11 to $39.1
million in Q3 12. As a percent of net revenues, G&A
expenses decreased from 11.1% in Q3 11 to 9.2% in Q3 12. The
decrease reflects the company's cost reduction initiatives.
Impairment and severance charges – During Q3
12, we recorded and paid severance of $3.1 million and recorded a
long-lived asset impairment charge of $2.2 million versus $2.4
million in severance expenses in Q3 11.
The operating margin, excluding the impairment,
facility closing and severance charges, was 6.1% in Q3 12 versus
6.8% in Q3 11. The decline is primarily the result of a lower
student population in the ground schools, and fixed compensation
and facilities expenses against a lower revenue base.
Cash and cash equivalents totaled $79.6 million
at March 31, 2012, compared with $107.4 million at June 30,
2011. The decrease results from the repayment of debt,
partially offset by proceeds from the sale-leaseback transaction
(discussed in "Other" below) and cash flows from operations.
Total debt and capital leases totaled $98.3
million at March 31, 2012, compared with $331.8 million at June 30,
2011.
Cash flows from operations were $195.7 million
in the first nine months of fiscal 2012, versus $53.6 million in
the same period last year. The increase in cash flow is primarily
related to the timing of cash payments and receipts related to
working capital.
Capital expenditures were $31.0 million for the
first nine months of fiscal 2012, versus $88.9 million in the same
period last year. The decrease is primarily the result of opening
fewer new campuses.
Other
As reported on March 1, 2012, the company completed the
sale-leaseback of five of its Heald College facilities to
affiliates of STORE Capital Acquisitions, LLC. The transaction was
completed on February 29, 2012, and generated proceeds of $39.9
million.
As reported on March 5, 2012, the company completed a review of
the five-year performance of each of its schools in terms of
student outcomes and financials. Based on that review, the Board
approved a plan to sell four campuses and teach out three others.
The company is in the process of soliciting bids from potential
buyers for the four Everest campuses in California for sale –
Hayward, San Jose, San Francisco, and Los Angeles. In addition, the
teach-out of the Everest Ft. Lauderdale campus has been completed,
and the teach-outs of Everest Decatur and Everest Arlington are in
process. The four schools for sale and Everest Ft. Lauderdale are
being accounted for as discontinued operations.
Guidance
Note: Guidance is based upon continuing
operations and excludes extraordinary charges:
|
Period |
Revenue |
Diluted EPS |
New Student
Growth |
Cash Flow from
Operations |
Q4 12 |
$395 - $405 million |
$0.10 - $0.12 |
4% - 6% |
N/A |
FY 12 |
N/A |
$0.28 - $0.30 |
N/A |
$225 million |
Conference Call Today
We will host a conference call today at 12:00 p.m. Eastern Time
(9:00 a.m. PT), to discuss third quarter results. The call
will be open to all interested investors through a live audio web
cast at www.cci.edu (Investor Relations/Events &
Presentations.) The call will be archived on www.cci.edu after the
call. A telephonic playback of the conference call will also
be available through 11:00 p.m. PT, Thursday, May 10th. The
playback can be reached by dialing (855) 859-2056 and using
passcode 68002869.
About Corinthian
Corinthian is one of the largest post-secondary education
companies in North America. Our mission is to change students'
lives. We offer diploma and degree programs that prepare students
for careers in demand or for advancement in their fields. Our
program areas include health care, business, criminal justice,
transportation technology and maintenance, construction trades and
information technology. We have 119 Everest, Heald and WyoTech
campuses, and also offer degrees exclusively online. For more
information, go to http://www.cci.edu/.
The Corinthian Colleges, Inc. logo is available at
http://www.globenewswire.com/newsroom/prs/?pkgid=8848
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 student outcomes;
new student enrollment growth or declines in future periods; the
success of our initiatives to increase new enrollments now and in
the future, including the introduction of new diploma programs, GED
preparation programs available to the general public, continued
increases in enrollment at our new campuses; and continued growth
in our online learning programs; statements regarding future
operational performance, including the statements under the heading
"Guidance" above, and the expected financial and operational impact
of selling four Everest campuses in California and teaching out
three other Everest campuses. 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 effect
of new Department of Education rules; the company's effectiveness
in its regulatory and accreditation compliance efforts; the outcome
of ongoing reviews and inquiries by accrediting, state and federal
agencies, including state attorneys general, the U.S. Department of
Education's Office of the Inspector General, the U.S. Attorney's
office in Georgia, and the CFPB; 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; potential increased competition; bad debt
expense or reduced revenue associated with requesting students to
pay more of their educational expenses while in school; risks
associated with the company's student lending program through ASFG;
risks associated with the sale and/or teach-out of seven Everest
campuses; 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) |
|
|
|
|
|
Condensed Consolidated Statements of
Operations |
|
|
|
|
|
For the three months
ended |
For the nine months
ended |
|
March 31, |
March 31, |
|
2012 |
2011 |
2012 |
2011 |
|
(Unaudited) |
(Unaudited) |
(Unaudited) |
(Unaudited) |
|
|
|
|
|
Net revenues |
$ 424,057 |
$ 455,502 |
$ 1,242,792 |
$ 1,422,056 |
Operating expenses: |
|
|
|
|
Educational services |
255,953 |
268,782 |
767,378 |
830,136 |
General and administrative |
39,089 |
50,693 |
131,015 |
160,427 |
Marketing and admissions |
102,964 |
104,854 |
307,809 |
310,298 |
Impairment, facility closing,
and severance charges |
5,294 |
2,402 |
17,878 |
208,391 |
Total operating expenses |
403,300 |
426,731 |
1,224,080 |
1,509,252 |
|
|
|
|
|
Income (loss) from operations |
20,757 |
28,771 |
18,712 |
(87,196) |
|
|
|
|
|
Interest (income) |
(665) |
(203) |
(1,570) |
(613) |
Interest expense |
2,394 |
1,899 |
7,775 |
6,061 |
Other expense (income), net |
3,419 |
(1,513) |
6,568 |
(3,324) |
Pre-tax income (loss) from continuing
operations |
15,609 |
28,588 |
5,939 |
(89,320) |
Provision for income taxes |
6,244 |
11,292 |
2,328 |
23,281 |
Income (loss) from continuing operations |
9,365 |
17,296 |
3,611 |
(112,601) |
Loss from discontinued operations, net of
tax |
(5,276) |
(1,226) |
(7,364) |
(1,932) |
Net income (loss) |
$ 4,089 |
$ 16,070 |
$ (3,753) |
$ (114,533) |
|
|
|
|
|
Income (loss) per common share -- Basic: |
|
|
|
|
Income (loss) from continuing
operations |
$ 0.11 |
$ 0.20 |
$ 0.04 |
$ (1.31) |
Loss from discontinued
operations |
$ (0.06) |
$ (0.01) |
$ (0.08) |
$ (0.02) |
Net income (loss) |
$ 0.05 |
$ 0.19 |
$ (0.04) |
$ (1.33) |
|
|
|
|
|
Income (loss) per common share --
Diluted: |
|
|
|
|
Income (loss) from continuing
operations |
$ 0.11 |
$ 0.20 |
$ 0.04 |
$ (1.31) |
Loss from discontinued
operations |
$ (0.06) |
$ (0.01) |
$ (0.08) |
$ (0.02) |
Net income (loss) |
$ 0.05 |
$ 0.19 |
$ (0.04) |
$ (1.33) |
|
|
|
|
|
Weighted average number of common shares
outstanding: |
|
|
|
|
Basic |
85,080 |
84,577 |
84,918 |
85,646 |
Diluted |
86,124 |
84,715 |
85,446 |
85,646 |
|
|
|
|
|
Selected Consolidated Balance Sheet
Data |
|
|
|
|
|
March 31, |
June 30, |
|
|
|
2012 |
2011 |
|
|
|
(Unaudited) |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
$ 79,578 |
$ 107,430 |
|
|
Receivables, net (including long term notes
receivable) |
$ 170,547 |
$ 244,413 |
|
|
Current assets |
$ 315,882 |
$ 421,662 |
|
|
Total assets |
$ 1,052,404 |
$ 1,204,225 |
|
|
Current liabilities |
$ 379,003 |
$ 222,981 |
|
|
Debt and capital leases (including current
portion) |
$ 98,266 |
$ 331,792 |
|
|
Total liabilities |
$ 482,537 |
$ 639,158 |
|
|
Total stockholders' equity |
$ 569,867 |
$ 565,067 |
|
|
CONTACT: Investors:
Anna Marie Dunlap
SVP Investor Relations
714-424-2678
Media:
Kent Jenkins
VP Public Affairs Communications
202-682-9494
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