All Career Colleges to be Taught Out or Divested; Excluding
Restructuring Charges, Impact Expected to be Accretive to 2015 Results
SCHAUMBURG, Ill.--(BUSINESS WIRE)--
Career Education Corporation (NASDAQ: CECO) announced today that it has
made the strategic decision to focus its resources and attention on its
universities – Colorado Technical University (CTU) and American
InterContinental University (AIU) – where the company has significant
opportunities to continue to provide quality higher education to the
adult student market.
In conjunction with this announcement, the company is teaching out its
Sanford-Brown institutions and pursuing strategies to divest or
teach-out the remaining institutions within the Career Colleges group.
As part of the process to focus its resources on the University Group,
the company also announced that it will align its corporate overhead to
support a more streamlined and focused operation, and to make the
University Group more efficient and effective in serving its students.
“We believe in the strength of the academic programs at our Career
Colleges, but the unfortunate reality is that a more difficult higher
education marketplace and challenging regulatory environment have
handicapped our ability to turn these institutions around quickly and
operate these programs effectively long-term. Declining student
enrollment and financial losses at our Career College campuses, combined
with the ‘Gainful Employment’ regulations issued last year factored into
our decision,” said Ron McCray, Chairman and Interim CEO. “In making
this decision, we have chosen a path of gradual discontinuation, or
teach-outs, rather than closing schools immediately. We are committed to
both the academic and personal success of the students enrolled in our
programs. Teach-outs minimize potential negative impacts on faculty,
students and staff members.”
Teach outs will begin immediately at the 14 Sanford-Brown College and
Institute campuses, as well as Sanford-Brown online. These gradual
discontinuations of operations – which can take 18 months or more,
depending on the lengths of programs offered at a particular campus –
afford students a reasonable opportunity to complete their programs of
study.
Additionally, the company has already begun efforts to sell Briarcliffe
College, Brooks Institute and Missouri College. The company has a signed
definitive agreement to sell Brooks Institute, which is pending
accreditor and regulatory approval. Discussions with interested parties
continue for Briarcliffe College and Missouri College. Institutions that
are not sold will be taught-out.
As previously announced, the company reached an agreement with Columbia
College Chicago to provide an ongoing educational pathway for students
at Harrington College of Design in Chicago. The agreement, pending
accreditor and regulatory approval, affords certain Harrington students
the opportunity to complete their programs of study at Columbia, while
others will continue their education with Harrington but at designated
classroom and office space provided by Columbia College Chicago.
Also previously announced, the Le Cordon Bleu Colleges of Culinary Arts
in North America continue to be marketed for sale. Career Education is
engaged in discussions with numerous interested parties and the process
remains ongoing.
As part of these changes, Lysa Clemens, Senior Vice President and Chief
Career Schools Officer, today becomes Senior Vice President,
Transitional Operations and Chief Transformation Officer, overseeing the
teaching-out of campuses and right-sizing of centralized support
operations. As Career Education has successfully accomplished in
previous campus teach-outs, the company intends to serve students well,
while managing costs through the gradual process of closing.
The Company expects to record approximately $40 million to $50 million
of restructuring charges related to these teach-out and divestiture
initiatives. These estimated charges are based on several assumptions,
including timing of campus teach-outs, sales of campuses and
implementation of support services realignment, and are subject to
change. These costs primarily relate to severance charges (approximately
$20 million - $25 million) and costs associated with exiting lease
obligations (approximately $20 million - $25 million) and will result in
future cash expenditures through 2018 for severance related charges and
through 2023 for lease obligations at certain campuses which have lease
terms ranging beyond their anticipated teach-out completion date. The
severance and related charges will primarily be recorded during the
second quarter of 2015 and the lease charges will be recorded at the
time each facility is vacated. The majority of the teach-outs are
expected to be complete by 2017 and any remaining teach-outs are
expected to be complete by 2018. Excluding restructuring charges, these
initiatives are expected to be accretive to 2015 earnings. Specific
timing and impacts of these actions on Career Education’s cash balance
are currently being approximated, but the company does not anticipate
any impact on its ability to maintain compliance with its Credit
Agreement.
“The future direction and core offering of Career Education will be
driven by degree-oriented, higher education offered through our
regionally accredited universities, where we maintain a core competitive
advantage in terms of their academic platforms, brand awareness and
intellipath™ adaptive learning technology. We will continue
to invest in academic technologies, new program development and building
relationships with employers needing qualified employees. We will emerge
as a stronger company, with a competitive margin profile, a strong
balance sheet, and a leadership position in private sector higher
education,” McCray said.
CONFERENCE CALL INFORMATION
Career Education Corporation will host a conference call on Wednesday,
May 6, 2015 at 5 p.m. Eastern time to discuss its first quarter results
and answer questions from the institutional investment community.
Interested parties can access the live webcast of the conference call
and the related presentation materials at www.careered.com
in the Investor Relations section of the website. Participants can also
listen to the conference call by dialing 800-580-9478 (domestic) or
630-691-2769 (international) and citing code 39490822. Please log-in or
dial-in at least 10 minutes prior to the start time to ensure a
connection. An archived version of the webcast will be accessible for 90
days at www.careered.com
in the Investor Relations section of the website. A replay of the call
will also be available for seven days by calling 888-843-7419 (domestic)
or 630-652-3042 (international) and citing code 39490822.
ABOUT CAREER EDUCATION CORPORATION
Career Education’s academic institutions offer a high-quality education
to a diverse student population in a variety of disciplines through
online, on-ground and hybrid learning programs. Our two universities –
American InterContinental University (“AIU”) and Colorado Technical
University (“CTU”) – provide degree programs through the master’s or
doctoral level as well as associate and bachelor’s levels. Both
universities predominantly serve students online with career-focused
degree programs that meet the educational demands of today’s busy
adults. AIU and CTU continue to show innovation in higher education,
advancing new personalized learning technologies like their intellipath™
adaptive learning platform that allow students to more efficiently move
toward earning a degree by receiving course credit for knowledge they
can already demonstrate. Career Education is committed to providing
high-quality education that closes the gap between learners who seek to
advance their careers and employers needing a qualified workforce.
A listing of individual campus locations and web links to Career
Education’s institutions can be found at www.careered.com.
Except for the historical and present factual information contained
herein, the matters set forth in this release, including statements
identified by words such as “expect,” “believe,” “will,” “anticipate,”
“intend,” “continued” and similar expressions, are forward-looking
statements as defined in Section 21E of the Securities Exchange Act of
1934, as amended. These statements are based on information currently
available to us and are subject to various assumptions, risks,
uncertainties and other factors that could cause our results of
operations, financial condition, cash flows, performance, business
prospects and opportunities to differ materially from those expressed
in, or implied by, these statements. Except as expressly required by the
federal securities laws, we undertake no obligation to update or revise
such factors or any of the forward-looking statements contained herein
to reflect future events, developments or changed circumstances, or for
any other reason. These risks and uncertainties, the outcomes of which
could materially and adversely affect our financial condition and
operations, include, but are not limited to, the following: declines in
enrollment; negative trends in the real estate market which could impact
the costs related to teaching out campuses and the success of our
initiatives to reduce our real estate obligations; the success of our
initiatives to divest our remaining Career College institutions and
culinary arts campuses; rulemaking by the U.S. Department of Education
or any state and increased focus by Congress, the President and
governmental agencies on for-profit education institutions; our
continued compliance with and eligibility to participate in Title IV
Programs under the Higher Education Act of 1965, as amended, and the
regulations thereunder (including the gainful employment and financial
responsibility standards prescribed by the U.S. Department of
Education), as well as national and regional accreditation standards and
state regulatory requirements; the impact of management changes; our
ability to successfully defend litigation and other claims brought
against us; and changes in the overall U.S. or global economy. Further
information about these and other relevant risks and uncertainties may
be found in the Company’s Annual Report on Form 10-K for the fiscal year
ended December 31, 2014 and its subsequent filings with the Securities
and Exchange Commission.
Investors:
Alpha IR Group
Sam Gibbons or Chris Hodges
(312)
445-2870
[email protected]
or
Media:
Career
Education Corporation
Mark Spencer
Director, Corporate
Communications
(847) 585-3802
Source: Career Education Corporation