-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OcRiJeji+pAxpPL+vL6bwL4Xm/nfHoryr+eXghRk99ia9IsToIqEwRdool0yAkUC 5y2eG0STX8YdNQmjnrTOfQ== 0001157523-06-004570.txt : 20060503 0001157523-06-004570.hdr.sgml : 20060503 20060503172852 ACCESSION NUMBER: 0001157523-06-004570 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20060503 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20060503 DATE AS OF CHANGE: 20060503 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CAREER EDUCATION CORP CENTRAL INDEX KEY: 0001046568 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EDUCATIONAL SERVICES [8200] IRS NUMBER: 363932190 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-23245 FILM NUMBER: 06805141 BUSINESS ADDRESS: STREET 1: 2895 GREENSPOINT STREET 2: SUITE 600 CITY: HOFFMAN ESTATES STATE: IL ZIP: 60195 BUSINESS PHONE: 8477813600 MAIL ADDRESS: STREET 1: 2800 WEST HIGGINS ROAD STREET 2: SUITE 790 CITY: HOFFMAN ESTATES STATE: IL ZIP: 60195 8-K 1 a5140160.txt CAREER EDUCATION CORPORATION 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 Date of Report (Date of Earliest Event Reported): May 3, 2006 ---------------------- Career Education Corporation -------------------------------------------------- (Exact Name of Registrant as Specified in Charter) Delaware 0-23245 36-3932190 -------- -------- ---------- (State or Other Jurisdiction (Commission (IRS Employer of Incorporation) File Number) Identification No.) 2895 Greenspoint Parkway, Suite 600, Hoffman Estates, IL 60195 -------------------------------------------------------- ----- (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code (847) 781-3600 -------------- - -------------------------------------------------------------------------------- (Former name or former address, if changed since last report.) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Item 2.02 Results of Operations and Financial Condition. On May 3, 2006, Career Education Corporation (the "Registrant") issued a press release to report the Registrant's financial results for the quarter ended March 31, 2006. A copy of the Registrant's release is attached hereto as Exhibit 99.1, and the information contained therein is incorporated herein by reference. The information contained in Item 2.02 to this Form 8-K, including the exhibit, shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and the information shall not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing. Item 9.01 Financial Statements and Exhibits. (d) Exhibits Exhibit Number Description of Exhibits - ------ ----------------------- 99.1 Press Release of Registrant dated May 3, 2006, reporting the Registrant's financial results for the quarter ended March 31, 2006. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. CAREER EDUCATION CORPORATION By: /s/ Janice L. Block ----------------------------- Janice L. Block Senior Vice President, General Counsel, and Corporate Secretary Dated: May 3, 2006 Exhibit Index ------------- Exhibit Number Description of Exhibits - ------ ----------------------- 99.1 Press Release of Registrant dated May 3, 2006, reporting the Registrant's financial results for the quarter ended March 31, 2006. EX-99.1 2 a5140160ex99-1.txt EXHIBIT 99.1 Exhibit 99.1 Career Education Corporation Reports Results for First Quarter 2006; Substantial Cash Flow Generation; Approximately $490 Million Cash and Investments on Hand HOFFMAN ESTATES, Ill.--(BUSINESS WIRE)--May 3, 2006--Career Education Corporation (NASDAQ:CECO) today reported revenue of $528.6 million and net income of $52.7 million for the first quarter ended March 31, 2006, as well as substantial cash flow generation concluding the quarter with approximately $490 million cash and investments on hand. "Our focus on quality growth, return on investment, and value for our students and our stockholders continues to drive our business forward," said John Larson, Chairman, President and Chief Executive Officer of Career Education Corporation. "In spite of outside pressures during the quarter, our business remains strong, and our momentum, substantial. We also made significant progress in addressing outstanding compliance, legal and governance issues. We are confident that we are positioning the company to capitalize on attractive growth opportunities, to the benefit of our students and, in turn, our stockholders over the long term." RESULTS OF OPERATIONS Three Months Ended March 31, 2006 -- Consolidated revenue increased 4.0 percent to $528.6 million during the first quarter of 2006. During the first quarter of 2005, consolidated revenues were $510.4 million. The increase is primarily attributable to an approximate 3.0 percent increase in student population from January 31, 2005, to January 31, 2006. Revenue for our universities' online campuses was $193.0 million during the first quarter of 2006, an increase of 22.7 percent from $157.3 million during the first quarter of 2005. -- On January 1, 2006, CEC adopted Statement of Financial Accounting Standards (SFAS) No. 123R "Share-Based Payment," which requires the costs relating to share-based payment transactions with employees be recognized as expense in the financial statements and measured based on the estimated fair value of the equity instrument issued. First quarter 2006 operating results include a non-cash share-based compensation expense of $4.0 million. Share-based compensation expense recognition was not required during the first quarter of 2005. -- In connection with reporting its results for the first quarter of 2006, the company tested the goodwill balance for its Gibbs division for impairment in accordance with SFAS 142 "Goodwill and Other Intangible Assets." The review involved the application of a fair-value-based test. Due to continued weak operating results and cash flows in our Gibbs division, the test indicated that the value of goodwill attributable to the Gibbs division had been impaired as the estimate of the division's fair value was less than the division's carrying value as of the time of the test. As a result, the entire goodwill balance related to the Gibbs division of $10.4 million was written off effective March 31, 2006. -- Operating profit margin percentage was 15.0 percent during the first quarter of 2006, a decrease of 4.4 percentage points from 19.4 percent during the first quarter of 2005. Of the total decrease, approximately 2.0 percentage points were due to the Gibbs goodwill impairment charge, approximately 0.8 percentage points were due to non-cash share-based compensation expense, and approximately 3.3 percentage points were due to an increase in advertising and admission expenses. These decreases were offset, in part, by a 0.7 percentage point reduction in bad debt expense during the quarter and a 1.6 percentage point reduction in administrative expense. -- Consolidated net income was $52.7 million, or $0.53 per diluted share, during the first quarter of 2006, a decrease of 5.7 percent from $55.9 million, or $0.53 per diluted share, during the first quarter of 2005. As discussed above, first quarter 2006 net income includes the following non-cash charges (in millions, except per share data): Impact on Earnings Per Pretax Tax Diluted Loss Benefit Net Loss Share - ---------------------------------------------------------------------- Goodwill Impairment Charge - Gibbs Division ($10.4) $3.9 ($6.5) ($0.065) - ---------------------------------------------------------------------- Share-based Compensation Expense ($4.0) $1.5 ($2.5) ($0.025) - ---------------------------------------------------------------------- Total ($14.4) $5.4 ($9.0) ($0.090) - ---------------------------------------------------------------------- -- First quarter 2005 net income included a loss from discontinued operations of $5.7 million, or $0.054 per diluted share, primarily attributable to the sale of our International Academy of Design and Technology (IADT) campus in Montreal, Canada. CASH FLOWS AND FINANCIAL POSITION Cash Flows -- Net cash provided by operating activities was $122.6 million during the first quarter of 2006, compared to net cash provided by operating activities of $111.2 million during the first quarter of 2005. -- Capital expenditures decreased to $17.5 million during the first quarter of 2006, from $25.5 million during the first quarter of 2005. Capital expenditures represented approximately 3.3 percent of consolidated revenue during the first quarter of 2006 and 5.0 percent of consolidated revenue during the first quarter of 2005. Financial Position -- As of March 31, 2006, and December 31, 2005, cash and cash equivalents and investments totaled $489.0 million and $404.4 million, respectively. -- Net student receivables as of March 31, 2006, were $61.8 million, a 19.1 percent decrease from net student receivables of $76.4 million as of December 31, 2005. Allowance for doubtful accounts as a percentage of gross student receivables increased to 39.8 percent as of March 31, 2006, as compared to 37.0 percent as of December 31, 2005. -- Quarterly days sales outstanding (DSO) were 12 days as of March 31, 2006, a two-day decrease from DSO as of December 31, 2005, of 14 days, and a one-day decrease from DSO as of March 31, 2005, of 13 days. DSO is calculated by dividing the sum of net student receivables and net other receivables by average daily revenue for the quarter. Average daily revenue for the quarter is computed by dividing total revenue by the total number of days in the quarter. -- During the three months ended March 31, 2006, we repurchased approximately 0.7 million shares of our common stock for approximately $24.9 million at an average price of approximately $36.16 per share. The repurchase did not have a significant impact on diluted weighted average shares outstanding. CORPORATE GOVERNANCE The company has adopted or proposed the following corporate governance enhancements: 2006 Actions: -- Proposal to the stockholders for a phased-in declassification of the board of directors to be voted on at the company's annual meeting on May 18, 2006 -- Proposal to enable stockholders to call a special meeting with a two-thirds affirmative vote to be voted on at the company's annual meeting on May 18, 2006 -- Adoption of a majority voting bylaw provision governing election of directors -- Appointment of Steven H. Lesnik to the board of directors, filling the seat vacated by the retirement of Wallace O. Laub 2005 Actions: -- Termination of the Shareholder Rights Plan -- Appointment of two new independent directors to the board of directors, Leslie T. Thornton and Patrick W. Gross -- Minimum stock ownership guidelines for senior management and the board of directors -- Policy requiring approval for board members to serve on other outside boards -- Mandatory continuing education for all board members Stock Repurchase Program Since July 2005, CEC's board of directors has authorized the use of approximately $500 million in the aggregate for the repurchase of shares of our outstanding common stock. Stock repurchases under this program may be made on the open market or in privately negotiated transactions from time to time, depending on factors including market conditions and corporate and regulatory requirements. The stock repurchase program does not have an expiration date and may be suspended or discontinued at any time. Since inception of the program, the company has repurchased approximately 6.0 million shares of its common stock for approximately $225.1 million at an average price of approximately $37.76 per share. SEGMENT REPORTING Previously, the company reported operating results in two reportable segments: Colleges, Schools, and Universities (CSU), which represented an aggregation of our schools on-ground campuses, and the Online Education Group (OEG), which represented an aggregation of our online campuses of American InterContinental University (AIU) and Colorado Technical University (CTU). During the fourth quarter of 2005, we reorganized our management structure with respect to the management of the University division schools, AIU and CTU, and those schools' online campuses. Upon completion of the reorganization in the first quarter of 2006, the company also evaluated its other reporting segments in accordance with the provisions SFAS 131 "Disclosures about Segments of an Enterprise and Related Information." Pursuant to SFAS 131, as of January 1, 2006, the company has identified five reportable segments: the University segment, the Culinary Arts segment, the Health Education segment, the Gibbs segment, and the Other Schools segment. The University segment includes AIU and CTU, including both universities' on-ground and online campuses. The Culinary Arts segment includes its Le Cordon Bleu Schools of North America and the Kitchen Academy schools. The Health Education segment primarily includes our Sanford-Brown Colleges and Institutes. The Gibbs segment includes our Katherine Gibbs School and Gibbs Colleges schools. The Other Schools segment includes the Academy, College East, College West, and INSEEC division schools. POPULATION AND NEW STUDENT START DATA Student Population CEC total student population as of April 30, 2006 and 2005, was as follows: - ---------------------------------------------------------------------- Population Population April 30, April 30, Percentage 2006 2005 Difference - ---------------------------------------------------------------------- - ---------------------------------------------------------------------- University segment (1) 44,000 39,400 12% - ---------------------------------------------------------------------- Culinary Arts segment 10,600 11,600 (9%) - ---------------------------------------------------------------------- Health Education segment 11,100 10,700 4% - ---------------------------------------------------------------------- Gibbs segment 6,500 8,100 (20%) - ---------------------------------------------------------------------- Other Schools segment 24,900 26,900 (7%) - ---------------------------------------------------------------------- CEC Consolidated 97,100 96,700 -% - ---------------------------------------------------------------------- (1) University segment population includes approximately 31,500 and 25,500 students as of April 30, 2006 and 2005, respectively, that are enrolled in fully online academic programs offered by University segment schools, and is presented as supplemental data. New Student Starts Total CEC new student starts during the first quarter of 2006 were approximately 28,300, compared to new student starts of approximately 32,500 during the first quarter of 2005. GROWTH INITIATIVES During the first quarter of 2006, CTU introduced Stonecliffe College Online, an academic division of CTU. Stonecliffe College Online is the company's first fully online academic program offering that is marketed specifically to students who prefer a slower pace to their online education. Presently, Stonecliffe College Online offers associate degree programs in business and criminal justice, although the introduction of additional program and degree offerings are planned. Also in the first quarter of 2006, the company's JDV Online division launched Blish.com, a new fully-digital marketplace aimed at bringing together buyers and sellers of digital content. Blish.com, which attracts millions of potential customers to its site each month, aims to establish itself as the primary source for consumers seeking to purchase digital content. "We continue to listen to the marketplace and respond with innovations that are student-centered and consumer-oriented," said Larson. "Targeted innovations and flexible academic program offerings will continue to be key to our future, along with intelligent, strategic acquisitions and long-term, sustainable organic growth." CONFERENCE CALL INFORMATION Career Education Corporation will host a conference call today, May 3, 2006 at 5:00 PM (Eastern Time). Interested parties can access the live webcast of the conference call at www.careered.com. Participants can also listen to the conference call by dialing 617-213-8060 (international) or (866) 825-1709 (domestic) and citing code 80094258. 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. A replay of the call will also be available for seven days by calling (617) 801-6888 (international) or (888) 286-8010 and citing code 93539037. About Career Education Corporation The educational institutions that are part of the Career Education Corporation (CEC) family offer high quality education to more than 97,000 students across the world in a variety of career-oriented disciplines. The 86 campuses, including the online campuses of American InterContinental University and Colorado Technical University, that serve these students are located throughout the United States and in France, Canada, and the United Kingdom, and offer doctoral, master's, bachelor's, and associate degrees and diploma and certificate programs. Career Education is an industry leader whose gold-standard brands are recognized globally. Those brands include, among others, the Le Cordon Bleu schools of North America; the Harrington School of Design; the Brooks Institute of Photography; American Intercontinental University; Colorado Technical Institute; and Sanford-Brown. The mission of CEC, through its schools, its educators, and its employees is education--their primary goal, to enable students to graduate successfully and pursue rewarding careers. For more information see www.careered.com. The company's website also has a detailed listing of individual campus locations and web links for each of its educational institutions. Except for the historical and present factual information contained herein, the matters set forth in this release, including statements under "Business Outlook" and "Innovations," statements identified by words such as "anticipate," "believe," "plan," "expect," "intend," "project," "will," 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 risks, uncertainties, and other factors, that could cause our actual growth, results of operations, performance and business prospects, and opportunities to differ materially from those expressed in, or implied by, these statements. Except as expressly required by federal securities laws, we undertake no obligation to update such factors or to publicly announce the results of 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 outcome of which could materially and adversely affect our financial condition and operations, include, but are not limited to, the following: risks related to our ability to comply with, and the impact of changes in, legislation and regulations that affect our ability to participate in student financial aid programs; costs, risks and effects of legal and administrative proceedings and investigations and governmental regulations, including the pending Securities and Exchange Commission and Justice Department investigations and, class action, derivative, and other lawsuits; risks related to our ability to comply with accrediting agency requirements or obtain accrediting agency approvals; costs and difficulties related to the integration of acquired businesses; risks related to our ability to manage and continue growth; future financial and operational results, including the impact of possible impairment of goodwill and other intangible assets; risks related to competition, general economic conditions, and other risk factors relating to our industry and business, and the factors discussed in our Annual Report on Form 10-K for the year ended December 31, 2005, and from time to time in our other reports filed with the Securities and Exchange Commission. CAREER EDUCATION CORPORATION AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF INCOME For the Three Months Ended March 31, 2006 and 2005 (In thousands, except per share amounts and percentages) % of % of 2006 Revenue 2005 Revenue --------- --------- --------- --------- REVENUE: Tuition and registration fees $506,677 95.8% $484,881 95.0% Other 21,953 4.2% 25,555 5.0% --------- --------- Total revenue 528,630 100.0% 510,436 100.0% --------- --------- OPERATING EXPENSES: Educational services and facilities 161,959 30.6% 156,348 30.6% General and administrative 256,058 48.4% 237,990 46.6% Depreciation and amortization 21,009 4.0% 17,201 3.4% Goodwill impairment charge 10,389 2.0% - - % --------- --------- Total operating expenses 449,415 85.0% 411,539 80.6% --------- --------- Income from operations 79,215 15.0% 98,897 19.4% --------- --------- OTHER INCOME (EXPENSE): Interest income 4,297 0.8% 1,707 0.3% Interest expense (351) -0.1% (436) -0.1% Share of affiliate earnings 903 0.2% 1,826 0.4% Miscellaneous income (expense) 121 - % (558) -0.1% --------- --------- Total other income 4,970 0.9% 2,539 0.5% --------- --------- Income before provision for income taxes 84,185 15.9% 101,436 19.9% PROVISION FOR INCOME TAXES 31,486 5.9% 39,814 7.8% --------- --------- Income from continuing operations 52,699 10.0% 61,622 12.1% DISCONTINUED OPERATIONS: Loss from discontinued operations - - % (5,700) -1.1% --------- --------- NET INCOME $52,699 10.0% $55,922 11.0% ========= ========= NET INCOME PER SHARE - DILUTED: Income from continuing operations $0.526 $0.586 Loss from discontinued operations - (0.054) --------- --------- Net income $0.526 $0.532 ========= ========= Diluted weighted average shares outstanding 100,220 105,195 ========= ========= CAREER EDUCATION CORPORATION AND SUBSIDIARIES UNAUDITED CONSOLIDATED BALANCE SHEETS (In thousands) March 31, December 31, 2006 2005 ------------- ------------- ASSETS CURRENT ASSETS: Cash and cash equivalents $99,022 $132,308 Investments 389,991 272,093 ------------- ------------- Total cash and cash equivalents and investments 489,013 404,401 Receivables: Students, net of allowance for doubtful accounts of $40,869 and $44,839 as of March 31, 2006, and December 31, 2005, respectively 61,836 76,447 Other, net 7,042 5,015 Prepaid expenses 37,908 37,412 Inventories 15,408 14,090 Deferred income tax assets 10,122 10,122 Other current assets 29,082 31,067 ------------- ------------- Total current assets 650,411 578,554 ------------- ------------- PROPERTY AND EQUIPMENT, net 405,272 411,144 GOODWILL 433,475 443,584 INTANGIBLE ASSETS, net 35,434 35,286 OTHER ASSETS 37,945 37,537 ------------- ------------- TOTAL ASSETS $1,562,537 $1,506,105 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current maturities of long-term debt $590 $627 Accounts payable 24,108 28,627 Accrued expenses: Payroll and related benefits 27,740 39,471 Income taxes 39,566 23,509 Other 82,643 82,513 Deferred tuition revenue 166,286 152,007 ------------- ------------- Total current liabilities 340,933 326,754 ------------- ------------- LONG-TERM LIABILITIES: Long-term debt, net of current maturities 16,673 16,358 Deferred rent obligations 95,756 89,680 Deferred income tax liabilities 31,212 31,212 Other 5,862 5,854 ------------- ------------- Total long-term liabilities 149,503 143,104 ------------- ------------- STOCKHOLDERS' EQUITY: Common stock 1,035 1,033 Additional paid-in capital 598,952 591,287 Accumulated other comprehensive income 2,402 1,989 Retained earnings 694,795 642,096 Cost of shares in treasury (225,083) (200,158) ------------- ------------- Total stockholders' equity 1,072,101 1,036,247 ------------- ------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,562,537 $1,506,105 ============= ============= CAREER EDUCATION CORPORATION AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS For the Three Months Ended March 31, 2006 and 2005 (In thousands) For the Three Months ended March 31, ---------------------- 2006 2005 ---------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $52,699 $55,922 Adjustments to reconcile net income to net cash provided by operating activities: Goodwill impairment charge 10,389 - Loss from discontinued operations - 5,700 Depreciation and amortization 21,009 17,201 Compensation expense related to share- based awards 4,015 - Loss on disposition of property and equipment 23 430 Share of affiliate earnings, net of dividends received (903) (612) Tax benefit associated with stock option exercises - 626 Other 204 191 Changes in operating assets and liabilities 35,201 31,725 ---------- ---------- Net cash provided by operating activities 122,637 111,183 ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Business dispositions/acquisitions, net of cash - (908) Purchases of property and equipment (17,543) (25,539) Purchases of available-for-sale investments (361,619) - Sales of available-for-sale for sale investments 243,772 - Other (5) 2 ---------- ---------- Net cash used in investing activities (135,395) (26,445) ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Purchases of treasury stock (24,925) - Issuance of common stock 2,932 2,314 Tax benefit associated with stock option exercises 720 - Payments of revolving loans - (1,630) Payments of capital lease obligations and other long-term debt (89) (708) ---------- ---------- Net cash used in financing activities (21,362) (24) ---------- ---------- EFFECT OF FOREIGN CURRENCY EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS 834 (1,904) ---------- ---------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (33,286) 82,810 CASH AND CASH EQUIVALENTS, beginning of period 132,308 349,458 ---------- ---------- CASH AND CASH EQUIVALENTS, end of period $99,022 $432,268 ========== ========== CAREER EDUCATION CORPORATION SELECTED SEGMENT INFORMATION (Dollars in thousands) For the Three Months Ended March 31, ---------------------- 2006 2005 ---------- ---------- REVENUE: University segment (1) $243,582 $211,719 Culinary Arts segment (2) 90,628 92,556 Health Education segment (3) 40,578 37,921 Gibbs segment (4) 29,505 38,272 Other Schools segment (5) 124,230 129,968 Corporate and other (6) 107 - ---------- ---------- $528,630 $510,436 ========== ========== SEGMENT PROFIT (7): University segment $82,390 $78,743 Culinary Arts segment 14,009 18,639 Health Education segment 1,213 (254) Gibbs segment (8) (17,553) (278) Other Schools segment 15,772 18,271 Corporate and other (15,713) (14,398) -------------------- $80,118 $100,723 ========== ========== SEGMENT PROFIT PERCENTAGE: University segment 33.8% 37.2% Culinary Arts segment 15.5% 20.1% Health Education segment 3.0% -0.7% Gibbs segment -59.5% -0.7% Other Schools segment 12.7% 14.1% - ---------------------------------------------------------- (1) University segment includes AIU and CTU branded schools. (2) Culinary Arts segment includes Le Cordon Bleu and Kitchen Academy branded schools. (3) Health Education segment primarily includes Sanford-Brown branded schools. (4) Gibbs segment includes Gibbs College and Katharine Gibbs Schools branded schools. (5) Other Schools segment represents an aggregation of the Academy, College East, College West, and INSEEC school operating divisions. (6) Corporate and other revenue represents advertising revenue realized by our JDV Online operating division. (7) Segment profit equals the sum of income from operations and share of affiliate earnings. (8) Gibbs segment profit for the three months ended March 31, 2006, includes a goodwill impairment charge of $10,389. CAREER EDUCATION CORPORATION SELECTED ACCOUNTS RECEIVABLE AND ALLOWANCE INFORMATION (Dollars in thousands) DAYS SALES OUTSTANDING March 31, ------------------- 2006 2005 --------- --------- Total revenue during the quarter ended $528,630 $510,436 Number of days in the quarter ended 90 90 Total revenue per day $5,874 $5,672 Receivables, net $68,878 $74,775 Days sales outstanding 12 13 ALLOWANCE AS A PERCENTAGE OF STUDENT RECEIVABLES March 31, ------------------- 2006 2005 --------- --------- Allowance for doubtful accounts $40,869 $50,880 Gross student receivables $102,705 $120,103 Allowance as a percentage of student receivables 39.8% 42.4% STUDENT RECEIVABLES VALUATION ALLOWANCE Balance, Beginning Charges Amounts Balance, of to Written- End of Period Expense Off Period --------- --------- --------- -------- For the three months ended March 31, 2006 $44,839 $14,476 $(18,446) 40,869 For the three months ended March 31, 2005 61,136 17,496 (27,752) 50,880 CAREER EDUCATION CORPORATION HISTORICAL SEGMENT INFORMATION (a) (Dollars in thousands) 2005: - ----- For the For the Three Months Ended, Year --------------------------------------- Ended September December December March 31, June 30, 30, 31, 31, --------- --------- --------- --------- ----------- REVENUE: University segment $211,719 $221,030 $215,281 $222,095 $870,125 Culinary Arts segment 92,556 90,907 100,406 99,461 383,330 Health Education segment 37,921 37,508 38,309 40,135 153,873 Gibbs segment 38,272 33,116 30,756 31,728 133,872 Other Schools segment 129,968 114,902 112,730 135,741 493,341 Corporate and other - - - 14 14 --------- --------- --------- --------- ----------- $510,436 $497,463 $497,482 $529,174 $2,034,555 ========= ========= ========= ========= =========== SEGMENT PROFIT: University segment $78,743 $75,469 $63,926 $69,887 $288,025 Culinary Arts segment 18,639 14,749 25,439 23,847 82,674 Health Education segment (254) (1,141) 683 1,797 1,085 Gibbs segment (278) (5,690) (5,501) (3,920) (15,389) Other Schools segment 18,271 13,637 11,875 23,255 67,038 Corporate and other (14,398) (13,832) (12,283) (8,781) (49,294) --------- --------- --------- --------- ----------- $100,723 $83,192 $84,139 $106,085 $374,139 ========= ========= ========= ========= =========== SEGMENT PROFIT PERCENTAGE: University segment 37.2% 34.1% 29.7% 31.5% 33.1% Culinary Arts segment 20.1% 16.2% 25.3% 24.0% 21.6% Health Education segment -0.7% -3.0% 1.8% 4.5% 0.7% Gibbs segment -0.7% -17.2% -17.9% -12.4% -11.5% Other Schools segment 14.1% 11.9% 10.5% 17.1% 13.6% 2004: - ----- For the For the Three Months Ended, Year --------------------------------------- Ended September December December March 31, June 30, 30, 31, 31, --------- --------- --------- --------- ----------- REVENUE: University segment $123,049 $145,556 $155,840 $173,103 $597,548 Culinary Arts segment 78,861 79,433 92,749 98,558 349,601 Health Education segment 33,771 34,855 37,732 38,637 144,995 Gibbs segment 46,781 41,650 41,289 42,049 171,769 Other Schools segment 114,903 102,568 108,424 138,724 464,619 --------- --------- --------- --------- ----------- $397,365 $404,062 $436,034 $491,071 $1,728,532 ========= ========= ========= ========= =========== SEGMENT PROFIT: University segment $41,302 $48,452 $44,737 $48,517 $183,008 Culinary Arts segment 15,033 14,328 23,322 26,821 79,504 Health Education segment (552) (634) 1,344 2,819 2,977 Gibbs segment 877 (3,133) (4,755) (5,191) (12,202) Other Schools segment 17,116 9,959 10,881 29,314 67,270 Corporate and other (8,700) (7,494) (5,948) (2,606) (24,748) --------- --------- --------- --------- ----------- $65,076 $61,478 $69,581 $99,674 $295,809 ========= ========= ========= ========= =========== SEGMENT PROFIT PERCENTAGE: University segment 33.6% 33.3% 28.7% 28.0% 30.6% Culinary Arts segment 19.1% 18.0% 25.1% 27.2% 22.7% Health Education segment -1.6% -1.8% 3.6% 7.3% 2.1% Gibbs segment 1.9% -7.5% -11.5% -12.3% -7.1% Other Schools segment 14.9% 9.7% 10.0% 21.1% 14.5% (a) Effective January 1, 2006, we changed the composition of our reportable segments. The historical segment information reflected in this table is categorized in accordance with our new segment structure. CAREER EDUCATION CORPORATION AND SUBSIDIARIES SELECTED QUARTERLY DATA FOR UNIVERSITY SEGMENT 2006 2005 --------------------------- --------------------------- 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q ------ ------ ------ ------ ------ ------ ------ ------ Revenue earning days AIU Online 83 84 78 70 82 84 79 70 CTU Online 77 77 77 77 77 77 77 77 ------ ------ ------ ------ ------ ------ ------ ------ Total 160 161 155 147 159 161 156 147 ====== ====== ====== ====== ====== ====== ====== ====== AIU Online CTU Online --------------------------- --------------------------- 2006 2005 2006 2005 ------------- ------------- ------------- ------------- Start Grad Start Grad Start Grad Start Grad ------ ------ ------ ------ ------ ------ ------ ------ January 1/1 none 1/2 none 1/1 none 1/2 none February 2/5 2/4 2/13 2/5 2/8 2/7 2/9 2/8 March 3/19 3/11 3/20 3/19 none 3/18 none 3/19 Total 1Q dates 3 2 3 2 2 2 2 2 April 4/23 4/22 none 4/23 4/2 none 4/3 none May none 5/27 5/1 none 5/10 5/9 5/11 5/10 June 6/4 none 6/5 6/4 none 6/17 none 6/18 Total 2Q dates 2 2 2 2 2 2 2 2 July 7/9 7/8 7/17 7/9 7/2 none 7/3 none August 8/27 8/12 8/21 8/20 8/9 8/8 8/10 8/9 September none 9/30 none 9/24 none 9/16 none 2/17 Total 3Q dates 2 3 2 3 2 2 2 2 October 10/1 none 10/9 none 10/1 none 10/2 none November 11/12 11/4 11/13 11/12 11/8 11/7 11/9 11/8 December none 12/16 none 12/17 none 12/16 none 12/17 Total 4Q dates 2 2 2 2 2 2 2 2 CONTACT: Career Education Corporation Karen M. King (Investors), 847-585-3899 www.careered.com or Pattie Overstreet-Miller (Media), 847-851-7351 -----END PRIVACY-ENHANCED MESSAGE-----