EX-99.1 2 a5202970ex991.txt EXHIBIT 99.1 Exhibit 99.1 Career Education Corporation Reports Results for Second Quarter 2006 HOFFMAN ESTATES, Ill.--(BUSINESS WIRE)--Aug. 3, 2006--Career Education Corporation (NASDAQ:CECO) today reported revenue of $486.8 million and a net loss of $47.5 million for the second quarter ended June 30, 2006. The net loss includes an estimated non-cash, after-tax charge for goodwill impairment of $85.0 million. "In spite of pressures on our business and our industry, our goal continues to be long-term, strategic and sustainable growth," said John M. Larson, Chairman, President and Chief Executive Officer of Career Education Corporation. "We understand that we still have many challenges ahead and are fully committed to resolving the issues that are impacting our performance so that we can better serve our students, grow our business, and return maximum value to our stakeholders." RESULTS OF OPERATIONS Three Months Ended June 30, 2006 -- Consolidated revenue was $486.8 million during the second quarter of 2006, a 2.1 percent decrease from $497.5 million during the second quarter of 2005. Revenue generated by the University segment's online platforms increased 4.2 percent, to $166.6 million during the second quarter of 2006 from $159.9 million during the second quarter of 2005. -- In connection with reporting its second quarter 2006 results, the company tested the goodwill balance for its Health Education segment for impairment in accordance with Statement of Financial Accounting Standards No. 142 "Goodwill and Other Intangible Assets." The preliminary results of the test, which was performed because the Health Education segment did not achieve student enrollment, operating income, and cash flow targets in the second quarter of 2006, indicated that the value of goodwill attributable to the Health Education segment had been impaired. The estimate of the segment's fair value was less than the segment's carrying value as of the date of the test. As a result, the company recognized an estimated impairment charge of $85.0 million during the three months ended June 30, 2006. This charge reduced the carrying value of the Health Education segment's goodwill balance from $216.0 million to $131.0 million. The company estimates that only $6.5 million of the Health Education segment goodwill impairment charge will be deductible for income tax reporting purposes. The goodwill impairment charge is based on a best current estimate, and the ultimate amount of the impairment charge will be determined in the third quarter of 2006 upon finalization of the goodwill impairment testing. -- On January 1, 2006, the company adopted Statement of Financial Accounting Standards No. 123R "Share-Based Payment," which requires that the costs related 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 instruments issued. Second quarter 2006 operating results include non-cash share-based compensation expense of $4.5 million. Share-based compensation expense recognition was not required during the second quarter of 2005 and, thus, second quarter 2005 operating results do not include such expense. -- Operating loss margin percentage was 6.9 percent during the second quarter of 2006, a 23.3 percentage point decrease relative to an operating profit margin of 16.4 percent during the second quarter of 2005. Of the total 23.3 percentage point operating margin decline during the second quarter of 2006, approximately 17.5 percentage points were attributable to Health Education segment goodwill impairment charge. The remainder of the decline was primarily attributable to increases in administration expense, advertising expense, and occupancy expense as a percentage of revenue, offset, in part, by decreases in bad debt expense as a percentage of revenue. -- Consolidated net loss during the second quarter of 2006 was $47.5 million, or $0.49 per diluted share, relative to net income of $52.8 million, or $0.50 per diluted share, during the second quarter of 2005. As discussed above, second quarter 2006 net income includes the following non-cash charges (in millions, except per share data): Impact on Earnings Per Pretax Tax Diluted Charge Benefit Net Charge Share ---------------------------------------------------------------------- Goodwill impairment charge - Health Education segment $(85.0) $2.4 (1) $(82.6) $(0.85) ---------------------------------------------------------------------- Share-based compensation expense $(4.5) $1.7 $(2.8) $(0.03) ---------------------------------------------------------------------- Total $(89.5) $4.1 $(85.4) $(0.88) ---------------------------------------------------------------------- (1) The company estimates that only $6.5 million of the Health Education segment goodwill impairment charge will be deductible for income tax reporting purposes. Six Months Ended June 30, 2006 -- Consolidated revenues were $1.02 billion during the six months ended June 30, 2006, relative to $1.01 billion during the six months ended June 30, 2005. Revenue generated by the University segment's online platforms increased 13.7 percent, to $347.5 million during the six months ended June 30, 2006, from $305.6 million during the six months ended June 30, 2005. -- Income from operations declined to $45.4 million during the six months ended June 30, 2006, from $180.7 million during the six months ended June 30, 2005. Operating income margin decreased to 4.5 percent during the six months ended June 30, 2006, from 17.9 percent during the six months ended June 30, 2005. -- Net income during the six months ended June 30, 2006, was $5.2 million, or $0.05 per diluted share, relative to $108.7 million, or $1.03 per diluted share, during the six months ended June 30, 2005. The results during the three months and six months ended June 30, 2006, were negatively impacted by a number of factors, all of which the company is actively addressing. These factors include: the continued probationary status of AIU, the continued negative impact of legal and regulatory matters, recent negative publicity, the pricing of the AIU associate's degree programs prior to the price change, and the lower than expected conversion of some sourced internet leads. The company continues to take proactive steps to address current challenges: -- Leadership at AIU is intensely focused on working actively to resolve the concerns of its accreditor, SACS -- During the quarter, the company adjusted the tuition price for AIU's associate degree to make it more competitive -- The company has engaged a new hiring firm to ensure the highest quality of admissions representatives and is launching new admissions representative training -- Reputation management initiatives are underway at many schools PROVISION FOR INCOME TAXES Provision for income taxes during the three months and six months ended June 30, 2006, was $18.5 million and $50.0 million, respectively, relative to income (loss) before provision for income taxes during the three months and six months ended June 30, 2006, of $(29.0) million and $26.3 million. This represents an effective income tax rate of (63.7) percent and 90.6 percent, respectively, for the three months and six months ended June 30, 2006. The unusual relationship between income (loss) before provision for income taxes and our provision for income taxes for the three months and six months ended June 30, 2006, is attributable to the fact that only $6.5 million of our total $85.0 million Health Education division goodwill impairment charge recognized during the second quarter of 2006 is deductible for income tax reporting purposes. As such, an income tax benefit has not been provided for the non-deductible portion of the charge. Excluding the effect of the second quarter Health Education goodwill impairment charge, the company's effective income tax rate for the three months and six months ended June 30, 2006, was 37.4%. CASH FLOWS AND FINANCIAL POSITION Cash Flows -- Net cash provided by operating activities was $8.8 million during the second quarter of 2006, compared to $69.9 million during the second quarter of 2005. The decrease is primarily attributable to decreases in net operating assets and net income, excluding the non-cash effect of our second quarter 2006 goodwill impairment charge, during the second quarter of 2006. -- Capital expenditures decreased to $25.6 million during the second quarter of 2006 from $45.4 million during the first quarter of 2005. Capital expenditures represented 5.3 percent of consolidated revenue during the second quarter of 2006 and 9.1 percent of consolidated revenue during the second quarter of 2005. Financial Position -- As of June 30, 2006, and March 31, 2006, cash and cash equivalents and investments totaled $378.0 million and $489.0 million, respectively. -- During the three months ended June 30, 2006, we repurchased approximately 3.2 million shares of our common stock for approximately $99.9 million at an average price of approximately $31.63 per share. These repurchases did not have a significant impact on the company's diluted weighted average shares outstanding. -- Net student receivables as of June 30, 2006, were $52.6 million, a 14.9 percent decrease from net student receivables of $61.8 million as of March 31, 2006. Allowance for doubtful accounts as a percentage of gross student receivables increased to 42.4 percent as of June 30, 2006, from 39.8 percent as of March 31, 2006. -- Quarterly days sales outstanding (DSO) were 11 days as of June 30, 2006, a one-day decrease from DSO as of March 31, 2006, of 12 days, and a two-day decrease from DSO as of June 30, 2005. Stock Repurchase Program Since July 2005, CEC's Board of Directors has authorized the use of $500 million to repurchase shares of the company's 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 9.1 million shares of its common stock for approximately $325.0 million at an average price of approximately $35.63 per share. SEGMENT REPORTING Pursuant to Statement of Financial Accounting Standards No. 131, Disclosure about Segments of an Enterprise and Related Information, as of January 1, 2006, CEC 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 the Le Cordon Bleu Schools of North America and Kitchen Academy schools. The Health Education segment primarily includes the Sanford-Brown Colleges and Institutes. The Gibbs segment includes the Katharine Gibbs Schools 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 The company's total student population by reportable segment as of July 31, 2006 and 2005, was as follows: Population Population July 31, July 31, Percentage 2006 2005 Difference ---------------------------------------------------------------------- University segment (1) 37,700 41,200 (8%) ---------------------------------------------------------------------- Culinary Arts segment 10,600 11,550 (8%) ---------------------------------------------------------------------- Health Education segment 10,650 10,000 6% ---------------------------------------------------------------------- Gibbs segment 6,200 7,450 (17%) ---------------------------------------------------------------------- Other Schools segment 19,550 21,800 (10%) ---------------------------------------------------------------------- CEC Consolidated 84,700 92,000 (8%) ---------------------------------------------------------------------- (1) University segment population includes approximately 28,500 and 30,000 students as of July 31, 2006 and 2005, respectively, who are enrolled in fully-online academic programs offered by University segment schools. New Student Starts New student starts by reportable segment during the second quarter of 2006 and 2005 were as follows: Second Second Quarter Quarter Percentage 2006 2005 Difference ---------------------------------------------------------------------- University segment (1) 10,500 13,000 (19%) ---------------------------------------------------------------------- Culinary Arts segment 1,700 1,950 (13%) ---------------------------------------------------------------------- Health Education segment 3,000 2,800 7% ---------------------------------------------------------------------- Gibbs segment 1,200 1,250 (4%) ---------------------------------------------------------------------- Other Schools segment 2,600 3,100 (16%) ---------------------------------------------------------------------- CEC Consolidated 19,000 22,100 (14%) ---------------------------------------------------------------------- (1) University segment starts includes approximately 9,000 and 11,000 students as of second quarter 2006 and second quarter 2005, respectively, who are enrolled in fully-online academic programs offered by University segment schools. GROWTH INITIATIVES The company launched a significant number of new initiatives during the quarter, all designed to enhance ease-of-use for students, support student retention efforts and promote graduation. These new initiatives included the following: -- automated enrollment sites -- mandatory pre-enrollment orientation -- improved hiring processes and training for admissions representatives "In the near term, we will be executing a realistic and workable plan, which includes these new initiatives, to stabilize our population," said Larson. "Over the long term, our focus will be on providing quality educational programs and flexible offerings with a focus on return on invested capital, creating satisfied and employable students. We remain confident that the demand for high-quality, flexible post-secondary education options will increase and that we will be positioned to take advantage of this demand in the future." CONFERENCE CALL INFORMATION Career Education Corporation will host a conference call today, August 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 617-614-4911 (international) or 800-591-6945 (domestic) and citing code 31528628. 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 22576732. About Career Education Corporation The colleges, schools and universities that are part of the Career Education Corporation (CEC) family offer high quality education to approximately 90,000 students across the world in a variety of career-oriented disciplines. The 80-plus campuses that serve these students are located throughout the U. S., Canada, France, the United Kingdom, and the United Arab Emirates and offer doctoral, master's, bachelor's, and associate degrees and diploma and certificate programs. Approximately one third of students attend the web-based virtual campuses of American InterContinental University Online and Colorado Technical University Online. Career Education is an industry leader whose gold-standard brands are recognized globally. Those brands include, among others, the Le Cordon Bleu Schools North America, the Harrington College of Design, the Brooks Institute of Photography, the Katharine Gibbs Schools, American InterContinental University, Colorado Technical University and Sanford-Brown Institutes and Colleges. 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 more than 80 colleges, schools and universities. Except for the historical and present factual information contained herein, the matters set forth in this release, including statements under "Growth Initiatives" and 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: future financial and operational results, including the impact of impairment of goodwill and other intangible assets; risks related to our ability to comply with accrediting agency requirements or obtain accrediting agency approvals, including the adverse impact of negative publicity concerning the continued probation status of American InterContinental University and ongoing review by its accrediting body; 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; costs and difficulties related to the integration of acquired businesses; risks related to our ability to manage and continue growth; 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 OPERATIONS For the Three Months Ended June 30, 2006 and 2005 (In thousands, except per share amounts and percentages) % of % of 2006 Revenue 2005 Revenue ---------- ------- ---------- ------- REVENUE: Tuition and registration fees $468,401 96.2% $475,932 95.7% Other 18,384 3.8% 21,531 4.3% ---------- ---------- Total revenue 486,785 100.0% 497,463 100.0% ---------- ---------- OPERATING EXPENSES: Educational services and facilities 156,539 32.2% 153,451 30.9% General and administrative 257,144 52.7% 242,403 48.7% Depreciation and amortization 21,942 4.5% 19,833 4.0% Goodwill impairment charge 84,975 17.5% - - % ---------- ---------- Total operating expenses 520,600 106.9% 415,687 83.6% ---------- ---------- Income (loss) from operations (33,815) -6.9% 81,776 16.4% ---------- ---------- OTHER INCOME (EXPENSE): Interest income 4,681 1.0% 4,280 0.9% Interest expense (337) -0.1% (420) -0.1% Share of affiliate earnings 696 0.1% 1,416 0.3% Miscellaneous expense (250) -0.1% (200) 0.0% ---------- ---------- Total other income 4,790 0.9% 5,076 1.1% ---------- ---------- Income (loss) before provision for income taxes (29,025) -6.0% 86,852 17.5% PROVISION FOR INCOME TAXES 18,484 3.8% 34,089 6.9% ---------- ---------- NET INCOME (LOSS) $(47,509) -9.8% $52,763 10.6% ========== ========== NET INCOME (LOSS) PER SHARE - DILUTED: $(0.49) $0.50 ========== ========== Diluted weighted average shares outstanding (1) 96,989 105,200 ========== ========== (1) In accordance with applicable accounting standards, weighted average common stock equivalents of approximately 2,078 have been excluded from diluted weighted average shares outstanding during the three months ended June 30, 2006, as the inclusion of such common stock equivalents would be anti-dilutive to diluted earnings per share during the period. CAREER EDUCATION CORPORATION AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS For the Six Months Ended June 30, 2006 and 2005 (In thousands, except per share amounts and percentages) % of % of 2006 Revenue 2005 Revenue ---------- ------- ---------- ------- REVENUE: Tuition and registration fees $975,078 96.0% $960,813 95.3% Other 40,337 4.0% 47,086 4.7% ---------- ---------- Total revenue 1,015,415 100.0% 1,007,899 100.0% ---------- ---------- OPERATING EXPENSES: Educational services and facilities 318,498 31.4% 309,799 30.7% General and administrative 513,202 50.5% 480,393 47.7% Depreciation and amortization 42,951 4.2% 37,034 3.7% Goodwill impairment charge 95,364 9.4% - - % ---------- ---------- Total operating expenses 970,015 95.5% 827,226 82.1% ---------- ---------- Income from operations 45,400 4.5% 180,673 17.9% ---------- ---------- OTHER INCOME (EXPENSE): Interest income 8,978 0.9% 5,987 0.6% Interest expense (688) -0.1% (856) -0.1% Share of affiliate earnings 1,599 0.2% 3,242 0.3% Miscellaneous expense (129) -0.1% (758) -0.1% ---------- ---------- Total other income 9,760 0.9% 7,615 0.8% ---------- ---------- Income before provision for income taxes 55,160 5.4% 188,288 18.7% PROVISION FOR INCOME TAXES 49,970 4.9% 73,903 7.3% ---------- ---------- Income (loss) from continuing operations 5,190 0.5% 114,385 11.4% DISCONTINUED OPERATIONS: Loss from discontinued operations - - % (5,700) -0.6% ---------- ---------- NET INCOME $5,190 0.5% $108,685 10.8% ========== ========== NET INCOME PER SHARE - DILUTED: Income from continuing operations $0.05 $1.09 Loss from discontinued operations - (0.06) ---------- ---------- Net income $0.05 $1.03 ========== ========== Diluted weighted average shares outstanding 99,631 105,196 ========== ========== CAREER EDUCATION CORPORATION AND SUBSIDIARIES UNAUDITED CONSOLIDATED BALANCE SHEETS (In thousands) June 30, December 31, 2006 2005 ------------ ------------ ASSETS CURRENT ASSETS: Cash and cash equivalents $90,589 $132,308 Investments 287,369 272,093 ------------ ------------ Total cash and cash equivalents and investments 377,958 404,401 Receivables: Students, net of allowance for doubtful accounts of $38,716 and $44,839 as of June 30, 2006, and December 31, 2005, respectively 52,583 76,447 Other, net 7,922 5,015 Prepaid expenses 48,805 37,412 Inventories 14,979 14,090 Deferred income tax assets 10,122 10,122 Other current assets 18,756 31,067 ------------ ------------ Total current assets 531,125 578,554 ------------ ------------ PROPERTY AND EQUIPMENT, net 408,266 411,144 GOODWILL 349,582 443,584 INTANGIBLE ASSETS, net 35,487 35,286 OTHER ASSETS 36,245 37,537 ------------ ------------ TOTAL ASSETS $1,360,705 $1,506,105 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current maturities of long-term debt $584 $627 Accounts payable 26,335 28,627 Accrued expenses: Payroll and related benefits 31,551 39,471 Income taxes - 23,509 Other 84,884 82,513 Deferred tuition revenue 131,936 152,007 ------------ ------------ Total current liabilities 275,290 326,754 ------------ ------------ LONG-TERM LIABILITIES: Long-term debt, net of current maturities 17,499 16,358 Deferred rent obligations 96,387 89,680 Deferred income tax liabilities 31,212 31,212 Other 5,827 5,854 ------------ ------------ Total long-term liabilities 150,925 143,104 ------------ ------------ STOCKHOLDERS' EQUITY: Common stock 1,037 1,033 Additional paid-in capital 609,230 591,287 Accumulated other comprehensive income 1,939 1,989 Retained earnings 647,287 642,096 Cost of shares in treasury (325,003) (200,158) ------------ ------------ Total stockholders' equity 934,490 1,036,247 ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,360,705 $1,506,105 ============ ============ CAREER EDUCATION CORPORATION AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS For the Three Months Ended June 30, 2006 and 2005 (In thousands) 2006 2005 ---------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $(47,509) $52,763 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Goodwill impairment charge 84,975 - Depreciation and amortization 21,942 19,833 Compensation expense related to share- based awards 4,471 - Loss on disposition of property and equipment 232 120 Share of affiliate earnings, net of dividends received (696) (770) Tax benefit associated with stock option exercises - 1,790 Other 266 209 Changes in operating assets and liabilities (54,857) (4,041) ---------- ---------- Net cash provided by operating activities 8,824 69,904 ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Business dispositions/acquisitions, net of cash - (26) Purchases of property and equipment (25,608) (45,359) Purchases of available-for-sale investments (190,831) (416,624) Sales of available-for-sale for sale investments 293,513 174,395 Other (105) 1,458 ---------- ---------- Net cash provided by (used in) investing activities 76,969 (286,156) ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Purchases of treasury stock (99,920) - Issuance of common stock 4,479 4,638 Tax benefit associated with stock option exercises 1,330 - Payments of revolving loans - (249) Payments of capital lease obligations and other long-term debt (95) (797) ---------- ---------- Net cash provided by (used in) financing activities (94,206) 3,592 ---------- ---------- EFFECT OF FOREIGN CURRENCY EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (20) (2,564) ---------- ---------- NET DECREASE IN CASH AND CASH EQUIVALENTS (8,433) (215,224) CASH AND CASH EQUIVALENTS, beginning of period 99,022 432,268 ---------- ---------- CASH AND CASH EQUIVALENTS, end of period $90,589 $217,044 ========== ========== CAREER EDUCATION CORPORATION AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS For the Six Months Ended June 30, 2006 and 2005 (In thousands) 2006 2005 ---------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $5,190 $108,685 Adjustments to reconcile net income to net cash provided by operating activities: Goodwill impairment charge 95,364 - Loss from discontinued operations - 5,700 Depreciation and amortization 42,951 37,034 Compensation expense related to share- based awards 8,486 - Loss on disposition of property and equipment 255 550 Share of affiliate earnings, net of dividends received (1,599) (1,382) Tax benefit associated with stock option exercises - 2,416 Other 470 400 Changes in operating assets and liabilities (19,656) 27,684 ---------- ---------- Net cash provided by operating activities 131,461 181,087 ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Business dispositions/acquisitions, net of cash - (934) Purchases of property and equipment (43,151) (70,898) Purchases of available-for-sale investments (552,450) (416,624) Sales of available-for-sale for sale investments 537,285 174,395 Other (110) 1,460 ---------- ---------- Net cash used in investing activities (58,426) (312,601) ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Purchases of treasury stock (124,845) - Issuance of common stock 7,411 6,952 Tax benefit associated with stock option exercises 2,050 - Payments of revolving loans - (1,879) Payments of capital lease obligations and other long-term debt (184) (1,505) ---------- ---------- Net cash provided by (used in) financing activities (115,568) 3,568 ---------- ---------- EFFECT OF FOREIGN CURRENCY EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS 814 (4,468) ---------- ---------- NET DECREASE IN CASH AND CASH EQUIVALENTS (41,719) (132,414) CASH AND CASH EQUIVALENTS, beginning of period 132,308 349,458 ---------- ---------- CASH AND CASH EQUIVALENTS, end of period $90,589 $217,044 ========== ========== CAREER EDUCATION CORPORATION SELECTED SEGMENT INFORMATION (Dollars in thousands) For the Three Months Ended June 30, ---------------------- 2006 2005 ---------- ---------- REVENUE: University segment (1) $226,322 $221,030 Culinary Arts segment (2) 82,706 90,908 Health Education segment (3) 41,082 37,508 Gibbs segment (4) 26,662 33,116 Other Schools segment (5) 109,869 114,901 Corporate and other (6) 144 - ---------- ---------- $486,785 $497,463 ========== ========== SEGMENT PROFIT (LOSS) (7): University segment $67,494 $75,682 Culinary Arts segment 8,384 15,049 Health Education segment (8) (85,225) (389) Gibbs segment (10,465) (5,013) Other Schools segment 6,051 11,705 Corporate and other (19,358) (13,842) ---------- ---------- $(33,119) $83,192 ========== ========== SEGMENT PROFIT (LOSS) PERCENTAGE: University segment 29.8% 34.2% Culinary Arts segment 10.1% 16.6% Health Education segment -207.5% -1.0% Gibbs segment -39.3% -15.1% Other Schools segment 5.5% 10.2% ---------------------------------------------------------------------- (1) University segment includes AIU and CTU schools. (2) Culinary Arts segment includes Le Cordon Bleu and Kitchen Academy schools. (3) Health Education segment primarily includes Sanford-Brown schools. (4) Gibbs segment includes Gibbs College and Katharine Gibbs Schools 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) Health Education segment loss for the three months ended June 30, 2006, includes a goodwill impairment charge of $84,975. CAREER EDUCATION CORPORATION SELECTED SEGMENT INFORMATION (Dollars in thousands) For the Six Months Ended June 30, -------------------------- 2006 2005 ------------ ------------ REVENUE: University segment (1) $469,904 $432,749 Culinary Arts segment (2) 173,334 183,464 Health Education segment (3) 81,660 75,429 Gibbs segment (4) 56,167 71,388 Other Schools segment (5) 234,099 244,869 Corporate and other (6) 251 - ------------ ------------ $1,015,415 $1,007,899 ============ ============ SEGMENT PROFIT (LOSS) (7): University segment $149,884 $154,212 Culinary Arts segment 22,393 33,385 Health Education segment (8) (84,012) (1,392) Gibbs segment (8) (28,018) (5,968) Other Schools segment 21,823 31,918 Corporate and other (35,071) (28,240) ------------ ------------ $46,999 $183,915 ============ ============ SEGMENT PROFIT (LOSS) PERCENTAGE: University segment 31.9% 35.6% Culinary Arts segment 12.9% 18.2% Health Education segment -102.9% -1.8% Gibbs segment -49.9% -8.4% Other Schools segment 9.3% 13.0% -------------------------------------------------------- (1) University segment includes AIU and CTU schools. (2) Culinary Arts segment includes Le Cordon Bleu and Kitchen Academy schools. (3) Health Education segment primarily includes Sanford-Brown schools. (4) Gibbs segment includes Gibbs College and Katharine Gibbs Schools 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) Health Education and Gibbs segment loss for the six months ended June 30, 2006, include goodwill impairment charges of $84,975 and $10,389, respectively. CAREER EDUCATION CORPORATION SELECTED OTHER INFORMATION (Dollars in thousands) DAYS SALES OUTSTANDING June 30, ------------------- 2006 2005 --------- --------- Total revenue during the quarter ended $486,785 $497,463 Number of days in the quarter ended 91 91 Total revenue per day $5,349 $5,467 Receivables, net $60,505 $69,767 Days sales outstanding 11 13 ALLOWANCE AS A PERCENTAGE OF STUDENT RECEIVABLES June 30, ------------------- 2006 2005 --------- --------- Allowance for doubtful accounts $38,716 $50,726 Gross student receivables $91,299 $114,569 Allowance as a percentage of student receivables 42.4% 44.3% STUDENT RECEIVABLES VALUATION ALLOWANCE Balance, Beginning Charges Amounts Balance, of to Written- End of Period Expense Off Period --------- --------- --------- -------- For the three months ended June 30, 2006 $40,869 $17,787 $(19,940) $38,716 For the three months ended June 30, 2005 $50,880 $21,538 $(21,692) $50,726 For the six months ended June 30, 2006 $44,839 $32,263 $(38,386) $38,716 For the six months ended June 30, 2005 $61,136 $39,034 $(49,444) $50,726 For the Three Months Ended ------------------- STUDENT STARTS: March 31, June 30, 2006 2006 --------- --------- University segment 17,019 10,513 Culinary Arts segment 2,545 1,693 Health Education segment 3,787 3,064 Gibbs segment 1,276 1,191 Other Schools segment 3,700 2,600 --------- --------- 28,327 19,061 ========= ========= STUDENT POPULATION AS OF: April 30, July 31, 2006 2006 --------- --------- University segment 44,016 37,734 Culinary Arts segment 10,627 10,623 Health Education segment 11,092 10,646 Gibbs segment 6,457 6,178 Other Schools segment 24,927 19,542 --------- --------- 97,119 84,723 ========= ========= (1) 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 HISTORICAL SEGMENT INFORMATION (1) (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 $78,530 $75,682 $63,410 $69,887 $287,509 Culinary Arts segment 18,336 15,049 25,439 23,847 82,671 Health Education segment (1,003) (389) 683 1,797 1,088 Gibbs segment (955) (5,013) (6,985) (3,920) (16,873) Other Schools segment 20,213 11,705 13,711 23,255 68,884 Corporate and other (14,398) (13,842) (12,119) (8,781) (49,140) --------- --------- --------- --------- ----------- $100,723 $83,192 $84,139 $106,085 $374,139 ========= ========= ========= ========= =========== SEGMENT PROFIT PERCENTAGE: University segment 37.1% 34.2% 29.5% 31.5% 33.0% Culinary Arts segment 19.8% 16.6% 25.3% 24.0% 21.6% Health Education segment -2.6% -1.0% 1.8% 4.5% 0.7% Gibbs segment -2.5% -15.1% -22.7% -12.4% -12.6% Other Schools segment 15.6% 10.2% 12.2% 17.1% 14.0% NEW STUDENT STARTS: University segment 20,034 13,010 15,248 16,599 Culinary Arts segment 2,708 1,940 4,298 2,098 Health Education segment 3,217 2,833 4,045 2,573 Gibbs segment 1,616 1,254 1,652 1,804 Other Schools segment 4,922 3,095 8,541 5,163 --------- --------- --------- --------- 32,497 22,132 33,784 28,237 ========= ========= ========= ========= STUDENT POPULATION AS OF: April 30, July 31, October 31, January 31, 2005 2005 2005 2006 --------- --------- --------- ------------ University segment 39,401 41,193 46,378 46,401 Culinary Arts segment 11,559 11,545 12,509 11,520 Health Education segment 10,744 10,041 11,199 10,903 Gibbs segment 8,114 7,446 7,549 6,977 Other Schools segment 26,897 21,799 29,760 28,416 --------- --------- --------- ----------- 96,715 92,024 107,395 104,217 ========= ========= ========= =========== (1) 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 HISTORICAL SEGMENT INFORMATION (1) (Dollars in thousands) 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 17,148 10,023 10,817 29,327 67,315 Corporate and other (8,732) (7,558) (5,884) (2,619) (24,793) --------- --------- --------- --------- ----------- $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% 9.8% 10.0% 21.1% 14.5% NEW STUDENT STARTS: University segment 12,191 9,251 12,839 14,492 Culinary Arts segment 2,758 2,120 4,532 2,622 Health Education segment 3,809 3,006 4,104 2,629 Gibbs segment 2,832 2,304 2,685 2,625 Other Schools segment 5,203 3,857 9,383 6,253 --------- --------- --------- --------- 26,793 20,538 33,543 28,621 ========= ========= ========= ========= STUDENT POPULATION AS OF: April 30, July 31, October 31, January 31, 2004 2004 2004 2005 --------- --------- --------- ----------- University segment 28,531 29,635 35,648 39,763 Culinary Arts segment 10,523 11,048 12,673 12,204 Health Education segment 10,831 10,438 11,114 10,793 Gibbs segment 11,028 10,202 10,298 9,255 Other Schools segment 25,802 21,127 29,734 29,505 --------- --------- --------- ----------- 86,715 82,450 99,467 101,520 ========= ========= ========= =========== (1) 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 5/17 5/9 5/11 5/10 June 6/4 none 6/5 6/4 none 6/24 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 8/16 8/8 8/10 8/9 September none 9/30 none 9/24 none 9/23 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 11/15 11/7 11/9 11/8 December none 12/16 none 12/17 none 12/23 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 or Lynne Baker, 847-851-7006