Strong new enrollment growth in fourth quarter
2017
Capella Education Company (NASDAQ: CPLA), a leading
educational services company, today announced financial results for
the three months and year ended Dec. 31, 2017.
“We are pleased with our mid-single digit new enrollment growth
in the fourth quarter of 2017. After taking into consideration
adjustments for certain items in the fourth quarter, our financial
performance was consistent with our expectations,” said Kevin
Gilligan, chairman and chief executive officer. “We are executing
on our strategies to deliver the most direct path between learning
and employment and maintaining our commitment to academic
quality.”
Mr. Gilligan continued, “We are continuing to make progress on
our merger process with Strayer Education, Inc. and have achieved
key milestones, including antitrust and shareholder approvals. We
look forward to completing the transaction and creating a national
leader for adults looking for the education they need to advance
their careers in best-in-class institutions for faculty and
employees.”
Selected Financial Data for the Three Months Ended Dec. 31,
2017
Capella Education Company revenues were $112.0 million in the
fourth quarter of 2017, up 0.7 percent compared to $111.3 million
in the fourth quarter of 2016. The operating loss on a GAAP basis
was $1.6 million, compared to operating income of $18.3 million for
the same period in 2016. On an adjusted, non-GAAP basis, fourth
quarter 2017 operating income was $18.3 million. The fourth quarter
2017 period includes goodwill and intangible asset impairment
charges of $15.0 million within the Job-Ready Skills segment,
merger transaction costs of $3.7 million and the impact of tax
reform of $2.2 million for Capella Education Company, and
restructuring charges of $1.3 million within the Post-Secondary and
Job-Ready Skills segments. Diluted net loss per common share from
continuing operations on a GAAP basis was $0.63, compared to
diluted net income per common share from continuing operations of
$0.97 for the same period in 2016. On an adjusted, non-GAAP basis,
fourth quarter 2017 diluted net income per common share from
continuing operations was $0.86. In addition, other tax adjustments
reduced net income per common share from continuing operations for
fourth quarter 2017 by an additional $0.13.
Operating and Segment Highlights
The “Post-Secondary” segment is comprised of Capella University
and Sophia Learning; the “Job-Ready Skills” segment consists of
Capella Learning Solutions, Hackbright Academy and DevMountain. A
summary of adjusted items by segment is included in the notes to
the attached non-GAAP reconciliation table.
Post-Secondary Segment
- Fourth quarter 2017 revenues were
$109.8 million, up 0.4 percent compared to $109.4 million in the
same period a year ago. The increase in revenue is related to
higher revenue-per-learner primarily as a result of learners
selecting course materials made available to support their academic
needs and a slight tuition price increase implemented in July,
2017.
- Operating income was $19.8 million,
compared to operating income of $20.7 million for the same period
in 2016. The operating margin was 18.0 percent in the fourth
quarter 2017, compared to 18.9 percent in the fourth quarter of
2016. The fourth quarter 2017 period includes restructuring charges
of $0.7 million to align the organization with 2018 strategic
priorities. Post-Secondary segment operating results are primarily
attributable to Capella University.
- Capella University new enrollment
increased by 5.7 percent compared to fourth quarter 2016, including
positive new enrollment growth across all degree programs.
- Total Capella University active
enrollment decreased 1.0 percent to 37,517 learners, and early
cohort persistence improved by approximately 1 percent as
improvements moderated given gains of 21 percent over a period of
approximately 5 years.
- FlexPath, Capella University’s
fastest-growing offerings, continued to positively impact new and
total enrollment in the fourth quarter 2017, and is now 20 percent
of Capella University’s Bachelor’s and Master’s degrees total
enrollment.
Job-Ready Skills Segment
- Fourth quarter 2017 revenues were $2.2
million compared to $1.9 million in the same period of 2016.
- Operating loss was $17.7 million in the
fourth quarter 2017, compared to a loss of $2.4 million in the
fourth quarter of 2016. While the acquisitions of Hackbright and
DevMountain have positively impacted revenue growth, the
acquisitions have not achieved performance expectations, resulting
in fourth quarter 2017 goodwill and intangible asset impairment
charges of $15.0 million. In addition, the fourth quarter 2017
period includes restructuring charges of $0.6 million to right-size
the cost structure in the Job-Ready Skills segment.
Selected Financial Data for the Fiscal Year Ended Dec. 31,
2017
Capella Education Company revenues were $440.4 million in fiscal
year 2017, up 2.6 percent compared to $429.4 million in 2016.
Operating income on a GAAP basis was $45.1 million, compared to
$68.2 million for the same period in 2016. On an adjusted, non-GAAP
basis, full-year 2017 operating income was $65.1 million. The
full-year 2017 period includes goodwill and intangible asset
impairment charges of $15.0 million within the Job-Ready Skills
segment, merger transaction costs of $3.7 million and the impact of
tax reform of $2.2 million for Capella Education Company, and
restructuring charges of $1.3 million within the Post-Secondary and
Job-Ready Skills segments. Diluted net income per common share from
continuing operations on a GAAP basis was $1.96, compared to $3.58
for the same period in 2016. On an adjusted, non-GAAP basis,
full-year 2017 diluted net income per common share from continuing
operations was $3.43.
Balance Sheet and Cash Flow
At Dec. 31, 2017, Capella Education Company had cash and
marketable securities of $181.4 million, compared to $162.3 million
at Dec. 31, 2016, and no debt as of these dates.
Cash provided by operating activities from continuing operations
for 2017 was $63.7 million compared to $86.1 million in 2016.
Dividend and Share Repurchases
A quarterly cash dividend of $0.43 per outstanding share of
common stock was declared during the fourth quarter of 2017. The
dividend was paid on Jan. 18, 2018.
The Company repurchased approximately 51,000 shares of Capella
stock for total consideration of $3.5 million in fiscal year 2017.
In the fourth quarter of 2017, Capella Education Company
repurchased approximately 14,000 shares of Capella stock for total
consideration of $1.0 million. The remaining authorization as of
the end of the fourth quarter was $27.0 million.
2018 Goals and Outlook
The Company’s goal for 2018 is to deliver continued revenue
growth. To achieve this goal, annual new enrollment growth will be
needed in a continuing volatile enrollment environment, as well as
stable or improving early cohort persistence and continued revenue
growth in the Job-Ready Skills segment. In addition, the Company is
managing the Job-Ready Skills segment to be less dilutive in
2018.
The tax rate for recurring operations for Capella Education
Company in 2018 is currently expected to be about 24 to 25 percent
related to the United States tax reform legislation passed at the
end of 2017, which reduced the federal corporate tax rate.
Merger Update
As announced on October 30, 2017, Capella Education Company and
Strayer Education, Inc. (“Strayer”) (NASDAQ:STRA) agreed to combine
in an all-stock merger of equals transaction, creating a national
leader in education innovation. As previously disclosed, on
November 22, 2017, the U.S. Federal Trade Commission granted early
termination of the applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976. In addition,
on January 19, 2018, the Company and Strayer announced that
shareholders of both companies voted to approve a proposal to
effect the merger. The proposed merger remains subject to
the satisfaction of customary closing conditions, including
approvals by State regulators, and relevant accreditation bodies.
By letter dated February 26, 2018, the Department of Education
issued the results of its preacquisition review of the proposed
change in ownership of Capella. That letter confirms that, subject
to submission of additional documents following the Closing, the
University will have uninterrupted participation in the Title IV
Programs while the Department of Education completes its review of
the relevant documentation. Capella Education Company and Strayer
continue to expect that the merger will close in the third quarter
of 2018. Following the completion of the merger, Strategic
Education, Inc. will be the corporate entity under which both
Capella University and Strayer University will continue to operate
as independent and separately accredited institutions.
Conference Call
In light of the pending merger, the Company will not be
providing financial guidance or hold an investor conference
call.
Forward-Looking Statements
Certain information in this news release does not relate to
historical financial information, including statements relating to
future prospects and expectations regarding our growth, revenues,
enrollment, and operating performance, and should be considered
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. The company cautions
investors not to place undue reliance on any such forward-looking
statements, which are based on information available at the time
those statements are made or management's good faith belief as of
that time with regard to future events, and should not be read as a
guarantee of future performance or results. Such statements are
subject to risks and uncertainties which could cause the company's
actual results to differ materially from historical results and
from results presently anticipated or projected. The company
undertakes no obligation to update its forward-looking
statements.
Among these risks and uncertainties are any failure to
materially comply with the extensive regulatory framework
applicable to us, including compliance with Title IV of the Higher
Education Act and the regulations thereunder; complying with U.S.
Department of Education rules, including those regarding incentive
compensation, gainful employment, return of Title IV funds,
borrower defenses to repayment, financial responsibility standards,
state authorization, certifications and program requirements;
maintaining our business in accordance with regional and
specialized accreditation standards and state regulatory and
program approval requirements; adapting to changes in the
administration, funding and availability for Title IV programs;
successfully defending litigation and other claims; any
governmental action or review of our business, marketing, or
financial aid practices, including by any state attorneys general,
the federal Consumer Financial Protection Bureau, the Federal Trade
Commission, the Minnesota Office of Higher Education or other state
or federal regulatory bodies; successfully growing our FlexPath
programs; maintaining and expanding existing commercial
relationships with employers and developing new employer and
business partner relationships; improving our conversion rate and
effectively optimizing our marketing strategy and spend;
successfully managing our learner success, doctoral enrollment and
degree completion efforts; keeping up with advances in technology
important to the online learner experience; effectively managing
data security risks; successfully growing acquisitions and new
business lines; and managing risks associated with the overall
competitive environment and general economic conditions. The
company also faces risks and uncertainties relating to the proposed
merger transaction with Strayer Education, Inc., including the
ability to satisfy the conditions to consummation of the merger;
the risk that required governmental and regulatory approvals may
delay the merger transaction or result in the imposition of
conditions that could cause the parties to abandon the merger
transaction or materially impact the financial benefits of the
transaction; the risk that the businesses will not be integrated
successfully; the risk that the cost savings and anticipated
synergies from the merger transaction may not be fully realized or
may take longer to realize than expected; disruption from the
proposed merger transaction making it more difficult to maintain
relationships with learners, employers, employees or suppliers; the
diversion of management time on merger-related issues and the risk
of shareholder class action lawsuits against the company, its
management team and board of directors.
Other factors that could cause the company’s results to differ
materially from those contained in its forward-looking statements
include those described in the “Risk Factors” section of our most
recent Annual Report on Form 10-K on file with the Securities and
Exchange Commission (SEC) and any updates or developments described
in our Quarterly Reports on Form 10-Q, or other documents the
company files with the SEC.
About Capella Education Company
Capella Education Company (http://www.capellaeducation.com) is
an educational services company that provides access to
high-quality education through online postsecondary degree programs
and job-ready skills offerings needed in today’s market. Capella’s
portfolio of companies is dedicated to closing the skills gap by
providing the most direct path between learning and employment.
CAPELLA EDUCATION COMPANY
Consolidated Balance Sheets
(In thousands, except par
value)
As of December 31, 2017 As of December 31,
2016 ASSETS Current assets: Cash and cash equivalents $
106,566 $ 93,570 Marketable securities, current 45,226 45,458
Accounts receivable, net of allowance of $7,979 at December 31,
2017 and $6,682 at December 31, 2016 22,733 20,708 Prepaid expenses
and other current assets 9,523 17,877 Total current
assets 184,048 177,613 Marketable securities, non-current 29,570
23,320 Property and equipment, net 35,961 34,121 Goodwill 13,477
23,310 Intangibles, net 3,402 9,221 Deferred income taxes 2,839
1,853 Other assets 9,724 7,875 Total assets $ 279,021
$ 277,313
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities: Accounts payable $ 2,281 $ 4,367 Accrued
liabilities 26,619 31,302 Dividends payable 5,228 4,945 Deferred
revenue 13,849 12,398 Total current liabilities
47,977 53,012 Deferred rent 12,365 13,693 Other liabilities 3,288
2,316 Total liabilities 63,630 69,021 Shareholders’
equity: Common stock, $0.01 par value: Authorized shares — 100,000;
Issued and Outstanding shares — 11,635 at December 31, 2017 and
11,545 at December 31, 2016 116 115 Additional paid-in capital
127,804 121,581 Accumulated other comprehensive loss (110 ) (93 )
Retained earnings 87,581 86,689 Total shareholders’
equity 215,391 208,292 Total liabilities and
shareholders’ equity $ 279,021 $ 277,313
CAPELLA EDUCATION COMPANY
Consolidated Statements of
Income
(In thousands, except per share
amounts)
Three Months Ended December 31,
Year-Ended December 31, 2017 2016
2017 2016 (Unaudited) Revenues $
112,032 $ 111,308 $ 440,411 $ 429,390 Costs and expenses:
Instructional costs and services 48,679 47,526 195,081 185,995
Marketing and promotional 27,901 27,319 109,394 103,458 Admissions
advisory 6,948 7,176 29,163 29,292 General and administrative
10,179 11,027 41,714 42,438 Goodwill and intangible asset
impairment charges 14,955 — 14,955 — Merger transaction costs 3,728
— 3,728 — Restructuring charges 1,282 — 1,282
— Total costs and expenses 113,672 93,048
395,317 361,183 Operating income (loss) (1,640 ) 18,260
45,094 68,207 Other income, net 401 98 793
177 Income (loss) from continuing operations before income
taxes (1,239 ) 18,358 45,887 68,384 Income tax expense 6,031
6,891 22,477 25,980 Income (loss) from continuing
operations (7,270 ) 11,467 23,410 42,404 Income (loss) from
discontinued operations, net of tax — (41 ) 95 565
Net income (loss) $ (7,270 ) $ 11,426 $ 23,505 $
42,969 Basic net income (loss) per common share: Continuing
operations (0.63 ) 1.00 2.01 3.65 Discontinued operations —
(0.01 ) 0.01 0.05 Basic net income (loss) per common share $
(0.63 ) $ 0.99 $ 2.02 $ 3.70 Diluted net income
(loss) per common share Continuing operations (0.63 ) 0.97 1.96
3.58 Discontinued operations — — 0.01 0.04
Diluted net income (loss) per common share $ (0.63 ) $ 0.97
$ 1.97 $ 3.62 Weighted average number of common shares
outstanding: Basic 11,628 11,517 11,623 11,614 Diluted 11,628
11,812 11,950 11,856 Cash dividends declared per common share $
0.43 $ 0.41 $ 1.66 $ 1.58
CAPELLA EDUCATION COMPANY
Consolidated Statements of Cash
Flows
(In thousands)
Year-Ended December 31, 2017
2016 Operating activities Net income $ 23,505
$ 42,969 Income from discontinued operations, net of tax 95
565 Income from continuing operations 23,410 42,404
Adjustments to reconcile net income to net cash provided by
operating activities: Provision for bad debts 12,726 10,663
Depreciation and amortization 19,718 21,343 Amortization of
investment discount/premium, net 1,410 2,129 Impairment of goodwill
and intangible assets 14,955 — Impairment of property and equipment
440 442 Loss on disposal of property and equipment 414 164
Share-based compensation 6,524 6,422 Excess tax benefits from
share-based compensation — (1,136 ) Deferred income taxes (909 )
(4,280 ) Changes in operating assets and liabilities, net of assets
acquired and liabilities assumed from business acquisitions:
Accounts receivable (14,751 ) (13,568 ) Prepaid expenses and other
current assets (963 ) (470 ) Accounts payable and accrued
liabilities (6,214 ) 9,063 Income taxes payable 6,822 (2,823 )
Deferred rent (1,328 ) 11,819 Deferred revenue 1,451 3,902
Net cash provided by operating activities - continuing
operations 63,705 86,074 Net cash provided by (used in) operating
activities - discontinued operations 95 (2,874 ) Net cash
provided by operating activities 63,800 83,200
Investing
activities Acquisitions, net of cash acquired — (32,101 )
Capital expenditures (22,097 ) (20,908 ) Investment in partnership
interests (1,787 ) (3,551 ) Purchases of marketable securities
(73,680 ) (29,216 ) Maturities of marketable securities 66,220
31,430 Net cash used in investing activities -
continuing operations (31,344 ) (54,346 ) Net cash provided by
investing activities - discontinued operations 3,243 15,032
Net cash used in investing activities (28,101 ) (39,314 )
Financing activities Excess tax benefits from share-based
compensation — 1,136 Net proceeds from exercise of stock options
1,042 5,363 Taxes paid for restricted stock units (1,197 ) (931 )
Payment of dividends (19,078 ) (18,254 ) Repurchases of common
stock (3,472 ) (25,633 ) Net cash used in financing activities -
continuing operations (22,705 ) (38,319 ) Net cash used in
financing activities - discontinued operations — —
Net cash used in financing activities (22,705 ) (38,319 ) Effect of
foreign exchange rates on cash 2 (24 ) Net increase in cash
and cash equivalents 12,996 5,543 Cash and cash equivalents and
cash of business held for sale at beginning of year 93,570
88,027 Cash and cash equivalents at end of year $ 106,566
$ 93,570
Supplemental disclosures of cash flow
information Income taxes paid $ 16,616 $ 33,093 Non-cash
investing and financing activities: Purchase of equipment included
in accounts payable and accrued liabilities $ 379 $ 784 Declaration
of cash dividend to be paid 5,041 4,785 Receivable due from sale of
business — 3,084
CAPELLA EDUCATION COMPANY
Segment Reporting
(In thousands)
Three Months Ended Year-Ended
December 31, December 31, 2017
2016 2017 2016 (Unaudited)
Revenues Post-Secondary $ 109,837 $ 109,381 $ 430,665 $ 424,085
Job-Ready Skills 2,195 1,927 9,746 5,305
Consolidated revenues $ 112,032 $ 111,308 $
440,411 $ 429,390 Operating income (loss)
Post-Secondary 19,817 20,680 74,005 76,935 Job-Ready Skills (17,729
) (2,420 ) (25,183 ) (8,728 ) Merger transaction costs (3,728 ) —
(3,728 ) — Consolidated operating income (loss)
(1,640 ) 18,260 45,094 68,207 Other income, net 401 98
793 177 Income (loss) from continuing
operations before income taxes $ (1,239 ) $ 18,358 $ 45,887
$ 68,384
Within the summary of financial information by reportable
segment table above, the operating loss attributable to the
Job-Ready Skills segment for the three months and year-ended
December 31, 2017 includes goodwill and intangible asset impairment
charges of $15.0 million and restructuring charges of $0.6 million.
Additionally, the operating income attributable to the
Post-Secondary segment for the three months and year-ended December
31, 2017 includes restructuring charges of $0.7 million. Goodwill
and intangible asset impairment charges represent the excess of the
carrying value of the Coding Schools reporting unit relative to the
fair value determined as part of the goodwill and intangible asset
annual impairment analysis. Restructuring charges relate primarily
to severance costs and other termination benefits associated with
former Company employees whose employment at the Company was
involuntarily terminated during the period as we aligned the
organization with 2018 strategic priorities and right-sized the
cost structure in the Job-Ready Skills segment.
Note: The summary of financial information by reportable segment
above excludes the results of operations for Arden University,
which are presented as discontinued operations in our Consolidated
Statements of Income.
Quarterly revenues and operating income (loss) by reportable
segment for prior quarters can be found at the Capella Education
Company website at www.capellaeducation.com, under ‘Investor
Relations’, within the ‘Financial Information’ section in the
‘Fiscal Year & Quarterly Results’ spreadsheet.
CAPELLA EDUCATION
COMPANYReconciliation of Non-GAAP Financial
Information(In thousands, except per share amounts)
Reconciliation of GAAP Financial Measures to Non-GAAP
Measures
To provide additional transparency and clarity, we have provided
the following Non-GAAP measures of performance as adjusted for
certain items that we believe to be useful to readers of the
financial statements. These non-GAAP financial measures are useful
in evaluating the performance of the Company, as they provide
additional insights to users of the financial statements and
highlight the impact of goodwill and intangible asset impairment
charges, transaction-related expenses associated with the Company's
pending merger agreement, restructuring actions, and tax reform on
the financial performance and operating results of the Company.
Management uses the following Non-GAAP adjusted items as measures
of operating performance for the Company, and certain of these
Non-GAAP adjusted items (not including the impact of tax reform)
are also components in the determination of management incentive
compensation. However, these items (such as adjusted net income and
adjusted diluted net income per common share) are not recognized
measurements under U.S. generally accepted accounting principles
(GAAP) and when analyzing our operating performance, investors
should use these adjusted measures in addition to, and not as an
alternative for, the corresponding unadjusted items (including
unadjusted net income and unadjusted diluted net income per common
share, as reconciled within the tables below and reported within
the Consolidated Statement of Income) as determined in accordance
with GAAP. The adjusted Non-GAAP measures are included in the
column labeled 'As Adjusted (Non-GAAP)' and the associated most
directly comparable GAAP measures are shown within the column
labeled 'As Reported (GAAP).' Other companies may calculate these
adjusted operating performance metrics differently than we do,
limiting the usefulness of this measure for comparisons with other
companies.
Three Months Ended December 31, 2017
Three MonthsEnded
December31, 2017
Goodwill andIntangible
AssetImpairmentCharges (a)
MergerTransactionCosts (b)
RestructuringCharges
(c)
Tax ReformImpact
Three MonthsEnded
December31, 2017
As Reported(GAAP)
Non-GAAP Adjustments
As Adjusted(Non-GAAP)
(Unaudited) Operating income (loss) $ (1,640 ) $ 14,955
$ 3,728 $ 1,282 $ — $ 18,325 Other income, net
401 — — — — 401 Income (loss)
from continuing operations before income taxes (1,239 ) 14,955
3,728 1,282 — 18,726 Income tax expense (d) 6,031 3,747
390 480 (2,224 ) 8,424 Income (loss)
from continuing operations (7,270 ) 11,208 3,338 802 2,224 10,302
Income (loss) from discontinued operations, net of tax — —
— — — — Net income (loss) $
(7,270 ) $ 11,208 $ 3,338 $ 802 $ 2,224
$ 10,302 Basic net income (loss) per common share:
Continuing operations $ (0.63 ) $ 0.96 $ 0.29 $ 0.07 $ 0.19 $ 0.89
Discontinued operations — — — —
— — Basic net income (loss) per common share $ (0.63 ) $
0.96 $ 0.29 $ 0.07 $ 0.19 $ 0.89
Diluted net income (loss) per common share: Continuing operations $
(0.63 ) $ 0.94 $ 0.28 $ 0.07 $ 0.19 $ 0.86 Discontinued operations
— — — — — — Diluted net
income (loss) per common share $ (0.63 ) $ 0.94 $ 0.28
$ 0.07 $ 0.19 $ 0.86 Weighted average
number of common shares outstanding: Basic 11,628 11,628 Diluted
(e) 11,628 11,935
Note: Per share amounts for basic and diluted net income (loss)
per common share may not sum across due to rounding.
(a) Goodwill and intangible asset impairment charges relate to
non-cash expenses arising from the impairment of goodwill and
indefinite-lived intangible asset balances applicable to the Coding
Schools reporting unit (included within the Job-Ready Skills
segment) as determined during the performance of our annual
goodwill and intangible asset impairment analysis. Based on the
results of the valuation analysis performed, the fair value of the
Coding Schools reporting unit, and the fair value of the Hackbright
and DevMountain trade names, were determined to be less than their
respective carrying values as of the valuation date, and $15.0
million of impairment charges were recorded during the three months
ended December 31, 2017. Of this amount, $9.9 million relates to a
goodwill impairment charge and $5.1 million relates to an
intangible asset (trade name) impairment charge.
(b) During the three months ended December 31, 2017, the Company
incurred $3.7 million in transaction costs related to the Merger
agreement, primarily attributable to consulting, legal, and
investment banking fees incurred by the Company in connection with
the proposed Merger agreement.
(c) Restructuring charges relate primarily to severance costs
and other termination benefits associated with former Company
employees whose employment at the Company was involuntarily
terminated during the period as we aligned the organization with
2018 strategic priorities and right-sized the cost structure in the
Job-Ready Skills segment, which resulted in restructuring charges
of $1.3 million during the three months ended December 31, 2017.
Severance and related termination benefits are recorded during the
period in which no additional services are required to be performed
by the former employee in order to receive severance benefits.
(d) During the three months ended December 31, 2017, the
effective tax rate as reported was significantly impacted by
Non-GAAP adjustment items presented above. The adjusted effective
tax rate after taking into account the Non-GAAP adjustment items
included in the Non-GAAP reconciliation above was 45%, which is
higher than our historical effective tax rate due to other tax
adjustments totaling $1.5 million, which were recorded during the
fourth quarter of 2017.
(e) During quarterly periods in which the Company reports a net
loss, basic and diluted loss per share are disclosed as the same
amount, as including the impact of dilutive securities would be
antidilutive to the calculation.
Year-Ended December 31, 2017
Year EndedDecember
31,2017
Goodwill andIntangible
AssetImpairmentCharges (a)
MergerTransactionCosts (b)
RestructuringCharges
(c)
Tax ReformImpact
Year EndedDecember
31,2017
As Reported(GAAP)
Non-GAAP Adjustments
As Adjusted(Non-GAAP)
Operating income $ 45,094 $ 14,955 $ 3,728 $ 1,282
$ — $ 65,059 Other income, net 793 — —
— — 793 Income from continuing operations before
income taxes 45,887 14,955 3,728 1,282 — 65,852 Income tax expense
(d) 22,477 3,747 390 480 (2,224
) 24,870 Income from continuing operations 23,410 11,208 3,338 802
2,224 40,982 Income from discontinued operations, net of tax 95
— — — — 95 Net income $
23,505 $ 11,208 $ 3,338 $ 802 $
2,224 $ 41,077 Basic net income per common share: Continuing
operations $ 2.01 $ 0.96 $ 0.29 $ 0.07 $ 0.19 $ 3.53 Discontinued
operations 0.01 — — — — —
Basic net income per common share $ 2.02 $ 0.96 $
0.29 $ 0.07 $ 0.19 $ 3.53 Diluted net
income per common share: Continuing operations $ 1.96 $ 0.94 $ 0.28
$ 0.07 $ 0.19 $ 3.43 Discontinued operations 0.01 — —
— — 0.01 Diluted net income per common
share $ 1.97 $ 0.94 $ 0.28 $ 0.07
$ 0.19 $ 3.44 Weighted average number of common
shares outstanding: Basic 11,623 11,623 Diluted 11,950 11,950
Note: Per share amounts for basic and diluted net income per
common share may not sum across due to rounding.
(a) Goodwill and intangible asset impairment charges relate to
non-cash expenses arising from the impairment of goodwill and
indefinite-lived intangible asset balances applicable to the Coding
Schools reporting unit (included within the Job-Ready Skills
segment) as determined during the performance of our annual
goodwill and intangible asset impairment analysis. Based on the
results of the valuation analysis performed, the fair value of the
Coding Schools reporting unit, and the fair value of the Hackbright
and DevMountain trade names, were determined to be less than their
respective carrying values as of the valuation date, and $15.0
million of impairment charges were recorded during the twelve
months ended December 31, 2017. Of this amount, $9.9 million
relates to a goodwill impairment charge and $5.1 million relates to
an intangible asset (trade name) impairment charge.
(b) During the year-ended December 31, 2017, the Company
incurred $3.7 million in transaction costs related to the Merger
agreement, primarily attributable to consulting, legal, and
investment banking fees incurred by the Company in connection with
the proposed Merger agreement.
(c) Restructuring charges relate primarily to severance costs
and other termination benefits associated with former Company
employees whose employment at the Company was involuntarily
terminated during the period as we aligned the organization with
2018 strategic priorities and right-sized the cost structure in the
Job-Ready Skills segment, which resulted in restructuring charges
of $1.3 million during the year-ended December 31, 2017. Severance
and related termination benefits are recorded during the period in
which no additional services are required to be performed by the
former employee in order to receive severance benefits.
(d) During the year-ended December 31, 2017, the effective tax
rate as reported was 49.0%, of which 11.2% was driven by Non-GAAP
adjustment items. The adjusted effective tax rate after taking into
account the Non-GAAP adjustment items included in the Non-GAAP
reconciliation above was 37.8%, which is in line with our
historical effective tax rate.
CAPELLA UNIVERSITY
Other Information
December 31, Capella University Enrollment
by Degree (a): 2017 2016
% Change Doctoral 9,096 9,110 (0.2 )% Master's 17,437 17,865
(2.4 )% Bachelor's 9,856 9,791 0.7 % Other 1,128 1,116
1.1 % Total 37,517 37,882 (1.0 )%
(a) Enrollment as of December 31, 2017 and 2016 includes
learners who are actively enrolled during the last month of the
quarters ended December 31, 2017 and 2016, respectively.
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version on businesswire.com: http://www.businesswire.com/news/home/20180301006491/en/
Capella Education CompanyInvestor and Media
Contact:Heide Erickson,
612-977-5172Heide.Erickson@capella.edu
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