Corinthian Colleges, Inc. (Nasdaq:COCO) reported financial results
today for the fourth quarter and fiscal year ended June 30, 2012.
The results for the fourth quarter met the most current guidance
for revenue and earnings per share; new student enrollment growth
of 8.4% was above guidance. (Guidance excludes all one-time
charges; the Company recorded a $1.0 million impairment, facility
closing and severance charge in the fourth quarter.) Fiscal 2012
diluted earnings per share for continuing operations were $0.32
(excluding charges of $0.13 per share), above guidance of $0.28 -
$0.30 per share.
"Fiscal 2012 was a year of progress against a backdrop of
adapting to regulatory change," said Jack Massimino, Corinthian
chairman and chief executive officer. "We continued to focus
on student completion and achieved a slight increase in our
graduate placement rate despite a weak economy. We reduced
operating expenses to align with our lower student population and
took steps to close or sell nine underperforming campuses. We
strengthened our financial position by renewing our line of credit
on favorable terms, completing a sale-leaseback of five Heald
facilities, and extending by two years our student lending
agreement with ASFG. We continued to increase the efficiency of our
back-end operations by completing the implementation of our common
student information system at Heald. We brought student financial
aid processing in-house and substantially reduced bad debt as a
percent of revenue. We also made progress in cohort default
prevention and as a result, no longer consider two-year or
three-year cohort default rates to pose an immediate risk to our
company. On the regulatory front, we continued to implement
policies and procedures in response to new federal regulations and
remained focused on compliance."
"As expected, the rate of new student enrollment growth
increased in the fourth quarter," Massimino said. "The
increase is the result of several factors, including growth at the
Everest ground schools, continued growth at Everest University
Online, and an easier comparable to the fourth quarter of last
year."
"In fiscal 2013, we continue to anticipate a number of
challenges," Massimino said. "These include 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 plan to introduce several new diploma programs across
our ground schools and offer GED preparation programs to the
general public at most of our U.S. campuses. As previously
reported, we expect these programs to begin to have a 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 fourth quarter of fiscal 2012 with the
same quarter of the prior year:
- Net revenue was $394.8 million versus $408.2 million, a
decrease of 3.3%.
- Total student population at June 30, 2012 was 91,460
versus 90,507 at June 30, 2011, an increase of 1.1%.
- Total new students were 25,839 versus 23,835, an increase of
8.4%.
- Operating income was $16.4 million, or 4.2% of revenue, which
includes a $1.0 million impairment, facility closing and severance
charge, compared with operating income of $11.3 million, or 2.8% of
revenue, which includes $11.7 million in impairment and severance
charges.
- Net loss was ($6.5) million, which includes a $0.6 million
impairment, facility closing and severance charge, and a loss from
discontinued operations of $14.8 million, compared with net income
of $3.4 million, which includes a $7.0 million impairment and
severance charge, and a loss from discontinued operations of $3.6
million.
- Diluted earnings per share from continuing operations was $0.10
in Q4 12, compared with $0.08 in Q4 11. Excluding the
impairment, facility closing and severance charges and the related
tax effect, diluted earnings per share from continuing operations
were $0.10 in Q4 12 and $0.17 in Q4 11.
Financial Review
Impairment, facility closing and severance
charge — During the fourth quarter, we recorded a charge
of $1.0 million versus $11.7 million in the prior year.
Educational services expenses were 59.8% of
revenue in Q4 12 versus 60.9% in Q4 11. The decrease is
primarily the result of lower bad debt. Bad debt expense was
2.9% of revenue in Q4 12 versus 4.5% in Q4 11. The improvement
in bad debt expense is primarily the result of continued
efficiencies associated with bringing financial aid processing
in-house.
Marketing and admissions expenses were 24.5% of
revenue in Q4 12 versus 22.5% in Q4 11. The increase is
primarily the result of higher advertising costs per start and an
increase in new student enrollment.
General and administrative expenses were 11.3%
of revenue in Q4 12 versus 11.0% in Q4 11.
The operating margin, excluding impairment,
facility closing and severance charges, was 4.4% in Q4 12 versus
5.6% in Q4 11. The decrease is primarily the result of lower
revenue and an increase in marketing expenses.
Cash and cash equivalents totaled $72.5 million
at June 30, 2012, compared with $107.4 million at
June 30, 2011. The decrease in cash is primarily the result of
a net repayment of borrowings, partially offset by an improvement
in operating cash flows.
Long term debt and capital leases (including
current portion) totaled $149.0 million at June 30, 2012,
compared with $331.8 million at June 30, 2011.
Cash flow from operations was $152.8 million
for the year-ended June 30, 2012, versus $15.0 million for the
year-ended June 30, 2011. The increase was primarily the
result of an increase in cash provided by working capital of
$138.5 million. The change in working capital was primarily
due to the timing of Title IV disbursements and other receipts and
payments.
Capital expenditures were $42.2 million for the
year-ended June 30, 2012, versus $110.7 million for fiscal
2011. The decrease is primarily the result of opening fewer
new campuses.
Regulatory & Accreditation Update
WASC Senior — As reported in June 2012,
the Western Association of Schools and Colleges Accrediting
Commission for Senior Colleges and Universities (WASC Senior) has
granted Heald College initial accreditation. Heald has been
accredited by WASC for Community and Junior Colleges (WASC Junior)
since 1983. WASC Senior accreditation allows Heald to offer
bachelor-level degree programs in addition to associate degrees and
diplomas.
Gainful Employment — As previously reported, in
late June 2012 we received informational data related to the
federal gainful employment (GE) rule. Under the Higher Education
Act, private sector schools are eligible to participate in Title IV
if their educational programs lead to "gainful employment in a
recognized occupation". The GE rule set forth quantitative
criteria that programs were required to meet in order to maintain
access to Title IV funds.
The informational GE data for Corinthian's programs was as
expected, with diploma programs faring better than associate degree
programs under the GE criteria. A small percentage of our programs
did not pass the criteria, but we had already taught out some of
these programs and made pricing adjustments to others.
The GE rule was scheduled to become effective on
July 1, 2012, but prior to that date it was struck down by a
U.S. District Court. Given the court's decision, the future of the
GE rule is uncertain. Irrespective of the rule we plan to
remain focused on ensuring that our students continue to receive
value for their educational investment.
90/10 Compliance — The 90/10 Rule requires
that no more than 90% of the company's revenue be derived from
Title IV funds. The 90/10 Rule is applied to each OPEID, of
which we have 44 in continuing operations. Each OPEID, or
institution, consists of a main campus and its branches. As
expected, two of our institutions exceeded the 90% threshold in
fiscal 2012. An OPEID must exceed the 90% threshold for two
consecutive years before it loses access to Title IV
funding. Given the information currently available, we do not
expect either of these institutions to exceed the 90% threshold for
a second year.
Cal Grant Program Changes — The California
legislature approved a budget in June 2012 which eliminated
Cal Grant eligibility for new students at certain for-profit
institutions beginning with the 2012-13 academic year. In addition,
the maximum Cal Grant award amounts for continuing students was cut
by 24 percent. Most of the company's Cal Grant funding is
concentrated at Heald College. Heald students in California
received approximately $17 million in Cal Grant funding in fiscal
2012. Given the changes in Cal Grant eligibility, new Heald
students will have to replace Cal Grant funding with other
alternatives such as additional federal or private loans.
Guidance
The following guidance is for continuing operations and excludes
one-time charges:
Time Period |
Revenue |
Diluted EPS |
New Student
Growth |
Q1 13 |
$395 - $405 million |
$0.03 - $0.05 |
(1)% - 1% (flat) |
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
(Investors/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, Monday, August 27. The playback can
be reached by dialing (800) 585-8367 and using pass code
99627124.
About Corinthian Colleges
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 chosen fields.
Our program areas include health care, business, criminal justice,
transportation technology and maintenance, construction trades and
information technology. We have 116 Everest, Heald and WyoTech
campuses, and also offer degrees 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 enrollment growth
or declines in future periods; the effect of new programs on our
financial results; our ability to strengthen operations and improve
service and value to students; our ability to manage student
outcomes; our ability to comply with new federal regulations;
potential impacts on the Company as a result of changes to Cal
Grant funding and changes by the California legislature that impact
the future receipt of such funding; our future cohort default
rates; our ability to maintain compliance with the federal 90/10
Rule; 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: potential negative effects from
the loss of ATB students; the uncertain outcome of the Department
of Education's rule making related to gainful employment,
which could change the manner in which we conduct our business; the
company's effectiveness in its regulatory and accreditation
compliance efforts; changes by the California legislature that
impact the eligibility of the Company's students to receive Cal
Grants; the Company's potential inability to affect 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 and
the company's new financial aid processing 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, |
|
2012 |
2011 |
2012 |
2011 |
|
(Unaudited) |
(Unaudited) |
|
|
|
|
|
|
|
Net revenues |
$ 394,774 |
$ 408,152 |
$ 1,605,472 |
$ 1,784,080 |
Operating expenses: |
|
|
|
|
Educational services |
235,891 |
248,455 |
974,229 |
1,046,503 |
General and administrative |
44,557 |
44,696 |
175,572 |
205,124 |
Marketing and admissions |
96,907 |
92,023 |
395,258 |
388,962 |
Impairment, facility closing, and
severance charges |
1,032 |
11,667 |
18,270 |
220,058 |
Total operating expenses |
378,387 |
396,841 |
1,563,329 |
1,860,647 |
|
|
|
|
|
Income (loss) from operations |
16,387 |
11,311 |
42,143 |
(76,567) |
|
|
|
|
|
Interest (income) |
(204) |
(309) |
(1,773) |
(896) |
Interest expense |
1,354 |
2,469 |
9,128 |
8,529 |
Other expense (income) |
5,059 |
(107) |
11,633 |
(3,418) |
Pre-tax income (loss) from continuing
operations |
10,178 |
9,258 |
23,155 |
(80,782) |
Provision (benefit) for income
taxes |
1,888 |
2,270 |
7,011 |
25,295 |
Income (loss) from continuing operations |
8,290 |
6,988 |
16,144 |
(106,077) |
(Loss) income from discontinued operations,
net of tax |
(14,782) |
(3,620) |
(26,389) |
(5,088) |
Net (loss) income |
$ (6,492) |
$ 3,368 |
$ (10,245) |
$ (111,165) |
|
|
|
|
|
Income (loss) per common share -
Basic: |
|
|
Income (loss) from continuing
operations |
$ 0.10 |
$ 0.08 |
$ 0.19 |
$ (1.24) |
Loss from discontinued operations |
$ (0.18) |
$ (0.04) |
$ (0.31) |
$ (0.06) |
Net (loss) income |
$ (0.08) |
$ 0.04 |
$ (0.12) |
$ (1.30) |
|
|
|
|
|
Income (loss) per common share -
Diluted: |
|
|
Income (loss) from continuing
operations |
$ 0.10 |
$ 0.08 |
$ 0.19 |
$ (1.24) |
Loss from discontinued operations |
$ (0.18) |
$ (0.04) |
$ (0.31) |
$ (0.06) |
Net (loss) income |
$ (0.08) |
$ 0.04 |
$ (0.12) |
$ (1.30) |
|
|
|
|
|
Weighted average number of common shares
outstanding: |
|
Basic |
85,178 |
84,612 |
84,982 |
85,388 |
Diluted |
86,112 |
84,736 |
85,581 |
85,388 |
|
|
|
|
|
|
|
|
|
|
Selected Consolidated
Balance Sheet Data |
|
|
|
June 30, |
June 30, |
|
|
|
2012 |
2011 |
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
$ 72,525 |
$ 107,430 |
|
|
Receivables, net (including long term notes
receivable) |
$ 199,094 |
$ 238,910 |
|
|
Current assets |
$ 352,607 |
$ 435,663 |
|
|
Total assets |
$ 1,064,513 |
$ 1,204,225 |
|
|
Current liabilities |
$ 282,758 |
$ 227,361 |
|
|
Debt and capital leases (including current
portion) |
$ 148,974 |
$ 331,792 |
|
|
Total liabilities |
$ 499,598 |
$ 639,158 |
|
|
Total stockholders' equity |
$ 564,915 |
$ 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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