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Corinthian Colleges Reports Second Quarter 2013 Results



Corinthian Colleges Reports Second Quarter 2013 Results

SANTA ANA, Calif., Jan. 31, 2013 (GLOBE NEWSWIRE) -- Corinthian Colleges, Inc.
(Nasdaq:COCO) reported financial results today for the second quarter ended
December 31, 2012. Results for the quarter met the company's previous guidance
ranges for revenue and earnings per share and fell below guidance for new
student enrollment growth.

"During the second quarter we continued to focus on student completion and
graduate placement, as well as several initiatives to strengthen and diversify
operations and restore growth," said Jack Massimino, Corinthian's chairman and
chief executive officer. "We maintained fiscal discipline and held margins
steady while continuing to absorb the loss of Ability-to-Benefit (ATB)
students in the ground schools."

"Our non-ATB student population has been stabilizing over the past several
quarters, and non-ATB new student growth was 5.6% in the first half of the
fiscal year compared with the same period last year," Massimino said. "In the
second quarter total new student growth was lower than expected, as we
experienced a decline in new Online Learning students. The decrease was
primarily the result of a challenging prior-year comparable and execution
issues in admissions and student finance. We expect Online Learning to return
to growth in the third quarter."

"We are pursuing a number of initiatives to achieve more consistent growth
while improving the student value proposition," Massimino said. "We have
reduced tuition for several programs, and our third-party lender substantially
reduced interest rates on gap financing for our students. We believe these
efforts helped us achieve higher-than-expected new student enrollments at most
Everest ground schools in the second quarter. In addition, we are in the
process of rolling out several new diploma programs across our schools and
began offering free GED preparation programs at most Everest U.S. ground
campuses last October. We believe the GED program will benefit the communities
we serve and has the potential to help increase our campus enrollments over
time."

Comparing the second quarter of fiscal 2013 with the same quarter of the prior
year (Note: results for continuing operations only):

  * Net revenue was $409.7 million versus $392.1 million, an increase of 4.5%.
  * Total student population at December 31, 2012 was 88,688 versus 90,910 at
    December 31, 2011, a decrease of 2.4%.
  * New student enrollments totaled 23,703 versus 24,790, a decrease of 4.4%.
  * Non-ATB new student enrollments totaled 23,269 versus 23,232.
  * Operating income was $14.1 million, compared with operating income of
    $13.4 million, which excludes $2.7 million in impairment and severance
    charges in Q2 12.
  * Income from continuing operations (after tax) was $4.3 million, compared
    with $5.5 million, excluding impairment and severance charges in Q2 12.
  * Diluted earnings per share from continuing operations were $0.05, versus
    diluted earnings per share of $0.06, excluding impairment and severance
    charges in Q2 12.

Financial Review

Educational services expenses were 61.4% of revenue in Q2 13 versus 60.3% in
Q2 12. The increase is primarily the result of an increase in bad debt. Bad
debt increased to 4.3% of revenue in Q2 13 versus 3.4% of revenue in Q2 12.
The increase in bad debt expense is primarily the result of delays in student
financial aid processing.

Marketing and admissions expenses were 24.9% of revenue in Q2 13 versus 24.6%
in Q2 12. The increase is primarily the result of higher advertising and lead
generation expenses.

General and administrative expenses were 10.3% of revenue in Q2 13 versus
11.7% in Q2 12. The decrease is primarily due to cost reduction initiatives.

The operating margin was 3.5% in Q2 13 versus 3.4% in Q2 12, excluding
impairment and severance charges in Q2 12.

Cash and cash equivalents totaled $43.6 million at December 31, 2012, compared
with $72.5 million at June 30, 2012. The decrease in cash is primarily due to
the net repayment of borrowings under our credit facility during the first
half of this fiscal year, partially offset by the timing of cash receipts and
payments.

Debt and capital leases (including current portion) totaled $47.1 million at
December 31, 2012, compared with $149.0 million at June 30, 2012.

Cash flow from operations was $102.1 million in the first six months of FY 13,
versus $137.2 million in the same period of the prior year. The decrease is
primarily due to the timing of cash payments and receipts related to working
capital.

Capital expenditures were $18.1 million for the first six months of fiscal
2013, versus $20.1 million in the same period last year. The decrease is
primarily the result of opening fewer new campuses.

Regulatory Update

On November 5, 2012, we filed an 8-K regarding a letter from the Department of
Education (ED) about its determination of our financial responsibility
composite score for fiscal 2011. The score is calculated annually by ED as a
test of whether an institution meets ED's standards of financial
responsibility. ED has calculated the company's fiscal 2011 composite score to
be .9, while we have calculated our fiscal 2011 score to be 2.1. The main
source of the difference between the two calculations is ED's interpretation
of how goodwill impairment charges should be treated in the formula. A
composite score below 1.0 subjects the company to additional monitoring and
reporting by ED, and requires the posting of a letter of credit. (For more
detail on this issue, see the 8-K referenced above:
http://investors.cci.edu/secfiling.cfm?filingID=1299933-12-2473&CIK=1066134.)

We met with ED officials and have requested reconsideration of the letter of
credit requirement. In December 2012, we filed our fiscal 2012 financials and
audits with ED, and re-filed our fiscal 2011 financials to reflect the
reclassification of certain schools into discontinued operations. Based upon
our re-filed fiscal 2011 financials and our fiscal 2012 financials, even using
ED's method for the treatment of goodwill impairment charges, we calculate our
composite score to be 1.0 for fiscal 2011 and 1.5 for fiscal 2012. Either
result could serve as a basis for ED not to impose the letter of credit
requirement. This matter is pending at ED and no assurances can be made with
respect to its final determination. As a contingency, we are pursuing
alternative sources of financing to be able to post a letter of credit if one
is required. In addition, while this matter is pending at ED, we have agreed
with our banks that we will not draw additional amounts on our credit facility
and that we will provide additional financial reporting.

During the second quarter ended December 31, 2012, we received an
investigative subpoena from the California Attorney General which requires the
production of a broad range of documents and other items related to cohort
default rates, placement and completion data, marketing, admissions,
enrollment and financial aid processes, and other matters. The subpoena
appears to be part of a broader investigation of the for-profit education
industry in California. On January 11, 2013, we received a request from the
Wisconsin Attorney General, requiring the production of information related to
the Everest Milwaukee campus, including student outcomes, employers and
externships, enrollment processes, financial aid, and marketing. Our Milwaukee
campus was placed in discontinued operations as of December 31, 2012. We
expect to provide reasonable cooperation in responding to both of these
Attorneys General.

Guidance

The following guidance is for continuing operations and excludes any one-time
charges.

 
                                              Total New      Non-ATB  
Time Period Revenue             Diluted EPS   Student Growth New Student
                                                             Growth
Q3 13       $400 - $410 million $0.04 - $0.06 (4-6%)         1-3%

Conference Call Today

We will host a conference call today at 12:00 p.m. Eastern Time (9:00 a.m.
PT), to discuss second 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, Wednesday, February 6th. The playback can be
reached by dialing (855) 859-2056 and using passcode 82915219.

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 113 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 belief that reduced tuition for several programs and lower
interest rates on third-party loans has made or will make our programs more
affordable and attractive to prospective students; our belief that launching
new diploma programs in ground schools and offering free GED preparation
programs at some Everest campuses will help increase enrollment; our
expectation that some portion of successful GED completers will enroll at
Everest or other post-secondary institutions; our expected return to growth in
Online Learning; overall enrollment growth or declines in future periods; our
ability to manage student outcomes and improve the student value proposition;
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 ED's
determination related to our financial responsibility composite score; ED's
possible responses to a U.S. District Court ruling that invalidated its
gainful employment rule, which could change the manner in which we conduct our
business; 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 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; 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  (unaudited)
                           For the three months ended For the six months ended
                           December 31,               December 31,
                           2012          2011         2012         2011
                                                                    
Net revenues                $ 409,720     $ 392,111    $ 816,110    $ 783,432
Operating expenses                                                  
Educational services       251,482       236,271      500,075      480,378
General and administrative 42,284        45,826       85,233       91,925
Marketing and admissions   101,818       96,604       201,202      194,239
Impairment, facility
closing and severance      —             2,718        760          11,943
charges
Total operating expenses   395,584       381,419      787,270      778,485
Income from operations     14,136        10,692       28,840       4,947
Interest income            162           745          365          904
Interest expense           (1,213)       (2,804)      (2,505)      (5,381)
Other expense, net         (6,163)       (2,207)      (10,409)     (3,150)
Income (loss) from
continuing operations                                               
before
Provision (benefit) for     6,922         6,426        16,291       (2,680)
income taxes
Provision (benefit) for    2,669         2,522        6,321        (1,309)
income taxes
Income (loss) from         4,253         3,904        9,970        (1,371)
continuing operations
Loss from discontinued     (4,321)       (2,110)      (8,459)      (6,471)
operations, net of tax
Net income (loss)          $ (68)        $ 1,794      $ 1,511      $ (7,842)
Income (loss) per                                                   
share—basic
Income (loss) from          $ 0.05        $ 0.05       $ 0.12      $ (0.02)
continuing operations
Loss from discontinued     $ (0.05)      $ (0.03)     $ (0.10)     $ (0.07)
operations
Income (loss) per                                                   
share—diluted
Income (loss) income from   $ 0.05        $ 0.05       $ 0.12      $ (0.02)
continuing operations
Loss from discontinued     $ (0.05)      $ (0.03)     $ (0.10)     $ (0.07)
operations
Weighted average number of                                          
common shares outstanding
Basic                      85,797        84,868       85,641       84,838
Diluted                    86,548        85,222       86,363       84,838
                                                                    
Selected Consolidated
Balance Sheet Data                                                  
(unaudited)
                           December 31,  June 30,                   
                           2012          2012                       
                                                                    
Cash and cash equivalents   $ 43,633      $ 72,525                  
Receivables, net
(including long term notes  $ 173,320     $ 197,763                 
receivable)
Current assets              $ 289,878     $ 356,345                 
Total assets                $ 996,259     $ 1,064,513               
Current liabilities         $ 313,510     $ 284,154                 
Total debt and capital      $ 47,121      $ 148,974                 
leases
Total liabilities           $ 426,840     $ 499,598                 
Total stockholders' equity  $ 569,419     $ 564,915                 

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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