- Starts Up 6.3%; Earnings Below Previous Guidance
- Company Plans Divestiture of Schools; Provides Legal Update
SANTA ANA, Calif., Aug. 1 /PRNewswire-FirstCall/ -- Corinthian Colleges,
Inc. (Nasdaq: COCO) reported unaudited, preliminary FY 2007 fourth quarter
results today for new student starts, revenue, and earnings per share. The
company's starts in the fourth quarter exceeded previous guidance; the company
expects revenue to meet previous guidance and earnings per share to fall below
previous guidance. More detail is provided below.
Start Growth and Revenue
New student starts totaled 21,489 in Q4 07, an increase of 6.3% compared
with Q4 06. The company's previous guidance was 2% - 4%. The increase
primarily reflected continued rapid growth in the company's Online Learning
Division and solid growth in Corinthian's U.S. ground schools. In addition,
the company's national advertising campaign for the new Everest brand
generated record lead volume in the quarter, contributing to higher start
"We are encouraged by our positive start growth in the fourth quarter,
which puts us in a solid position moving into fiscal 2008," said Jack
Massimino, Corinthian's chief executive officer. "Based upon current trends
and the strength of our marketing campaign, we expect first quarter 2008 start
growth to be 5% to 6% for continuing operations."
"In our WyoTech division, July starts at the destination campuses
increased by 10% compared with the same month last year," Massimino continued.
"We believe the increase was primarily driven by our new 'WyoTech Guide'
customer service program and improved sales force management."
Based upon start growth and other factors, Q4 07 revenue is estimated to
be approximately $244 million, in the range of previous guidance of
$242 - $246 million.
Total student population at June 30, 2007 was 64,992, versus 64,544 at
June 30, 2006.
Q4 07 Preliminary Earnings Overview
The company expects Q4 07 diluted earnings per share to be approximately
$0.03, excluding impairment and facility closing charges of $0.11 per share,
and an increase in litigation reserves of $0.02 per share. Including these
charges, the company expects a Q4 07 loss per share of approximately $0.10.
Our previous Q4 07 guidance was $0.12 - $0.13 per share, excluding any
one-time charges. Previous and current earnings guidance includes stock-based
compensation expense. The company reported earnings per share of $0.10 in Q4
06, including $0.05 per share in one-time charges.
The primary variances between previous Q4 07 earnings guidance and
expected earnings performance are as follows:
-- Increased marketing expenditures for admissions representatives and
advertising, which helped drive higher start growth in the quarter.
-- Increased student-related expenses such as textbooks and classroom
supplies, related to higher start growth.
-- Higher bad debt expense, partially resulting from a delay in Title IV
funding. The company experienced a higher volume of student aid
applications related to: 1) an increase in federal Pell grant and
student loan limits on July 1st, which required students to reapply for
financial aid; and 2) higher start growth. The higher volume of
financial aid applications created a backlog internally and at the
company's outside processing vendor, which in turn delayed Title IV
-- Lower-than-anticipated income in the CDI Division (Canada). Plans to
improve the performance of that division are described below under
-- An unexpected increase in healthcare claims in the company's
self-insured employee benefit plan.
-- An impairment charge related to trade names which will no longer be in
use after the company establishes the national Everest brand.
-- Impairment of long-term assets associated with discontinued operations
(see "Planned Divestitures" below).
-- Expenses related to lease termination of third party dormitories in the
-- Increased litigation reserves resulting from the company's settlement
with the California Attorney General (see "Legal Update" below).
During the fourth quarter the company decided to divest the CDI campuses
outside of the Ontario, Canada province, and the WyoTech Boston campus.
In the four years since acquiring CDI, the company has consistently
invested in new programs and facilities for that division. In Ontario, where
the company has a critical mass of 17 schools, such investments have been
rewarded with higher student enrollment, higher margins and increased market
share. Outside of Ontario, where the company has fewer and more dispersed
schools, investments have not generated appropriate returns to shareholders.
The divestiture will allow the company to focus on growth in Ontario, where
CDI has more than 30% of the career training market -- the number one
The WyoTech Boston campus provides aviation technology training for about
140 students. The company plans to divest this campus because it has not
generated sufficient returns to justify inclusion in the company's portfolio
The company expects the CDI and WyoTech divestures to occur during fiscal
2008. In the interim, these campuses will be accounted for as discontinued
operations. Combined, the campuses to be divested generated revenue of
approximately $38 million in fiscal 2007, and had an operating loss of
approximately $0.03 per share, excluding the impairment of long-term assets.
In Q4 07, start growth from continuing operations was 7.5%, versus 6.3%
including discontinued operations.
On July 31, 2007, the company reached a settlement agreement with the
California Attorney General (CAG), bringing closure to an investigation that
began in June 2004. The settlement does not constitute a finding or evidence
of wrongdoing, and the company specifically denied any wrongdoing as part of
the agreement. The settlement totaled $6.5 million, which includes payments
to the company's former students, CAG administrative costs, future consumer
education and protection, and debt forgiveness for former students.
The company has provided regular updates on the CAG inquiry in its
periodic filings with the Securities and Exchange Commission. As a result of
the settlement with the CAG, the company has increased its Q4 07 litigation
reserves by $2.5 million, or $0.02 per share.
"While we disagree with the Attorney General's conclusions, we are pleased
to have this matter behind us," Massimino said. "We are fully committed to
providing quality education and job placement services for students and to
being in compliance with state law and regulation."
Additionally, on July 25, 2007, Corinthian received notice from the
Securities and Exchange Commission that the Commission had completed its
inquiry related to the company's historic stock option grants. The Commission
recommended no enforcement action at this time.
Fiscal 2008 Guidance
In fiscal 2008, the company expects start growth to be 5% - 6%, revenue to
range from $1.040 - $1.060 billion, and diluted earnings per share to be
approximately $0.40 - $0.45. This guidance pertains to continuing operations,
excludes any one-time charges, and includes stock-based compensation expense.
This guidance also includes approximately $12.0 million, or $0.09 per share,
in incremental incentive compensation related to fiscal 2008 performance. The
company did not reach the financial targets required for a significant payout
of incentive compensation in fiscal years 2006 or 2007.
The company plans to give more detailed Q1 08 and fiscal 2008 guidance
during its final Q4 07 conference call scheduled for August 28, 2007.
Conference Call Today
The company will host a conference call at 11:00 a.m. Eastern Time (8:00
a.m. Pacific Time) today, for the purpose of discussing preliminary fourth
quarter results. The call will be open to all interested investors through a
live audio web cast at http://www.cci.edu (Investor Relations/Conference
Calls) and http://www.companyboardroom.com/ http://www.fulldisclosure.com.
The call will be archived on http://www.cci.edu after the call. A telephonic
playback of the conference call will also be available through 5:00 p.m. EST,
Wednesday, August 8, 2007. To hear the replay, dial (888) 286-8010 (domestic)
or (617) 801-6888 (international) and use pass code 95937470.
About Corinthian Colleges, Inc.
Corinthian Colleges, Inc. is one of the largest post-secondary education
companies in North America, operating 94 schools in 24 states in the U.S. and
31 schools in six provinces of Canada. The Company's mission is to prepare
students for careers in demand or for advancement in their chosen field.
Corinthian offers diploma programs and associates, bachelor's, and master's
degrees in a variety of high-demand occupational areas, including healthcare,
business, criminal justice, transportation technology and maintenance,
construction trades and information technology. More information can be found
on Corinthian's website at http://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 those
pertaining to start growth, anticipated timing of divestitures, and
projections included under the heading "Fiscal 2008 Guidance" above.
Additionally, the company's statements about revenue and earnings per share
for Q4 07 are based upon unaudited data. The company's audit is ongoing and
financial results may change. Many other factors may cause the company's
actual results to differ materially from those discussed in any such
forward-looking statements, including risks associated with the uncertain
future impact of the new student information system; increased competition;
variability in the expense and effectiveness of the company's advertising and
promotional efforts; the Company's effectiveness in its regulatory compliance
efforts; the outcome of ongoing reviews and inquiries by accreditation, state
and federal agencies related to the Company's compliance efforts; and 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
Anna Marie Dunlap
SVP Investor & Corporate Communications
Corinthian Colleges, Inc.
Pondel Wilkinson, Inc.
SOURCE Corinthian Colleges, Inc.
CONTACT: investors, Anna Marie Dunlap, SVP Investor & Corporate
Communications of Corinthian Colleges, Inc., +1-714-424-2678; or media, Robert
Jaffe of Pondel Wilkinson, Inc., +1-310-279-5980, for Corinthian Colleges,
Web site: http://www.cci.edu