NEW YORK, N.Y., June 30, 2014 (GLOBE NEWSWIRE) -- AlixPartners, the global business advisory firm, and Career Education Corporation (NASDAQ: CECO), a provider of postsecondary education programs and services, have been honored by the Global M &A Network, sharing the organization's Turnaround Atlas Award for "Corporate Turnaround of the Year: Middle Markets" and "Team of the Year." The AlixPartners team was led by Darin Facer and Keith Gillespie, managing directors in the firm's Enterprise Improvement group. Accepting on behalf of Career Education was President and CEO Scott W. Steffey, who also received the "2014: Turnaround Leadership Achievement Award."
AlixPartners and Career Education partnered to successfully execute a turnaround plan that saw a reduction of operating expenses by $270 million and an improvement of net cash flow of $118 million, all within a 12-month period. As of Dec. 31, 2013, these actions were seen as preserving employment for about 9,075 employees (more than 5,000 full-time and nearly 4,000 part-time) – jobs that likely would have been lost had the company not undertaken its plan – and importantly, continuing educational opportunities for Career Education's more than 50,000 students. (The organization also has more than 600,000 alumni.)
"As the result of the many changes we've put into place," said Steffey, "we've been able to implement operational efficiencies that have allowed us to right-size our infrastructure while still investing in high-priority areas, such as our innovative educational technology and the development of new and improved career-focused educational programs. We're indebted to AlixPartners for the role they played in helping us get to this point."
Said Facer: "We're very proud of the fact that we've been able to partner with Career Education to dramatically improve its financial and operational competitiveness, especially given the continued and significant pressures facing this industry. We're particularly proud of the company's renewed focus on delivering an exceptional educational experience to the thousands of students it serves throughout the U.S."
Added Gillespie, "This type of success is always predicated on management support and a bias for action. The Career Education management team was determined to act quickly to improve their financial performance while enhancing the aspects of their business that are the most valued by their students."
"We are impressed by the turnaround of Career Education, which involved analysis and improvement on all levels of the organization including finances, business operations and educational program offerings," said Shanta Kumari, chief executive officer and group editor, Global M &A Network. "Significantly, Career Education and AlixPartners teams executed the turnaround plan in less than a year to deliver meaningful and measurable results."
Global M &A Network honored winners in 48 awards categories. The winners were selected independently based on identifiable performance criteria such as restructuring style, pre-/post-financial workout, sustainability, operational/client/HR metrics, number of creditors, sector challenges, timeliness, jurisdictional intricacies, leadership, and resourcefulness, among other criteria.
Case Study
Career Education – one of the largest publicly-traded, proprietary higher-education companies in the United States – is better known through the number of nationally-recognized and highly-regarded higher education institutions it owns and operates, such as the renowned Le Cordon Bleu Colleges of Culinary Arts in North America, Colorado Technical University, American InterContinental University, Brooks Institute, Briarcliffe College and Sanford-Brown College. Students who attend one of its many institutions can earn credentials ranging from certificates, diplomas and associate degrees at some institutions to bachelor's, master's and doctoral degrees at others, in a variety of career-focused disciplines, including allied health, computer science, engineering, information technology, art and design, criminal justice, homeland security, business management and accounting, among others.
Beginning in mid-2011, several coinciding factors were impacting the higher education industry and Career Education's financial well-being: the peak of the economic recession, changes in public perception regarding the cost and value of a college education, reduced private educational lending, Congressional scrutiny of the industry and new regulatory burdens imposed by a variety of federal agencies. By January 2013, these headwinds had placed Career Education in a position of serious financial peril. From FY2010 to FY2012, Career Education's revenue had decreased $580 million (or 30%) and there was a corresponding decline in EBITDA; cash on hand had decreased $150 million (or 57%); and stock price had plunged more than 90%, from $24.57 to $2.05.
In February 2013, Career Education brought on external advisors AlixPartners to perform a deep operational and financial review of its business. Within several weeks, AlixPartners and Career Education's management team identified 90 initiatives that were executable within a 12-month period and would deliver more than $100 million in sustainable EBITDA and cash flow improvements.
In April 2013, industry veteran Scott Steffey was named as the CEO of Career Education to devise and carry out an aggressive turnaround program, which after his careful review, included the above-mentioned initiatives as well as several others. Under his leadership and with the help of AlixPartners, Career Education realigned management layers, eliminated duplicated work, continued to implement new compliance policies and procedures and outsourced non-essential activities. To help better serve its students, Career Education streamlined its admissions and enrollment processes; optimized its financial-aid processing and disbursement operations; improved its class scheduling and student advising; aligned its geographic footprint and program offerings with student and employer needs; and developed industry-leading adaptive learning technology, which it pilot-tested and implemented at scale across its university curricula.
By the end of 2013, nearly all of the 90 initiatives were enacted and Career Education had seen signs of stabilization: new student application steadily increased from 23,000 to a peak of 37,000 in the third quarter and stabilized at 31,500 by the end of the year. Total operating expenses were reduced by $270 million, which significantly decreased the cash burn rate. Furthermore, the sale of Career Education's international business in December 2013 added cash to its balance sheet, stabilizing the company's cash position.
In FY2013, Career Education reduced operating expenses by $270 million (or nearly 18%) and an improved net cash flow by $118 million (or nearly 300%), when compared to FY2012. As of early 2014, Career Education has seen its stock price increase by more than 270%, from a low of $2.05 per share in April 2013 and a high of $7.72 in April 2014. The company also accomplished a consolidation of three of its ground campus brands, thereby improving its marketing efficiencies, while more importantly expanding the educational mission and programs offerings to students nationally. Career Education anticipates continuing stabilization and predicts an EBIDTA-positive position by the end of FY2014.
Also receiving an award from Global M &A Network was work performed at Eastman Kodak Co., an engagement in which AlixPartners represented that company in its historic restructuring. Kodak won "Corporate Turnaround of the Year: Large Markets." AlixPartners also served as an advisor to award-winners Patriot Coal Corp., which won "Chapter 11 Reorganization of the Year: Large Markets"; served as an advisor to Synagro Technologies Inc., which won "Special Situations M &A Deal of the Year: Middle Markets"; and worked in the reorganization of Residential Capital, which won "Special Situations M &A Deal of the Year, Large Markets."
About AlixPartners
AlixPartners is a leading global business-advisory firm of results-oriented professionals who specialize in creating value and restoring performance at every stage of the business lifecycle. We thrive on our ability to make a difference in high-impact situations and deliver sustainable, bottom-line results. The firm's expertise covers a wide range of businesses and industries whether they are healthy, challenged or distressed. Since 1981, we have taken a unique, small-team action-oriented approach to helping corporate boards and management, law firms, investment banks and investors respond to critical business issues. For more information, visit www.alixpartners.com.