PERDOCEO EDUCATION Corp - FORM 8-K - EX-99.1 - PRESS RELEASE

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Exhibit 99.1

LOGO

CAREER EDUCATION CORPORATION REPORTS

RESULTS FOR FOURTH QUARTER AND FULL YEAR 2009

- Fourth quarter revenue increased 19%, operating income increased 95%

- Fourth quarter earnings per share from continuing operations increased 80% to $0.72

Hoffman Estates, Ill. (February 17, 2010) – Career Education Corporation (NASDAQ: CECO) today reported total revenue of $507.8 million, and net income of $30.7 million, or $0.36 per diluted share, for the fourth quarter of 2009 compared to total revenue of $425.3 million and net income of $31.2 million, or $0.35 per diluted share, for the fourth quarter of 2008. For the full year 2009, total revenue was $1.84 billion, and net income of $81.2 million, or $0.94 per diluted share compared to total revenue of $1.66 billion and net income of $60.1 million, or $0.67 per diluted share, for the full year 2008.

On a non-GAAP basis, which excludes significant items, earnings per diluted share from continuing operations were $0.72 in the fourth quarter as compared to $0.45 in the fourth quarter of 2008. (See segment tables below and the GAAP to non-GAAP reconciliation attached to this press release.)

“The growth of our student population and strong financial results in 2009 clearly reflected the quality of postsecondary education provided by our institutions and the improvements we continued to make in the effectiveness and efficiency of our operations,” said Gary E. McCullough, President and Chief Executive Officer. “We are excited about the future as our organization is well positioned to achieve the next level of growth.”

During the year ended December 31, 2009 we completed the teach out activities for McIntosh College, Dover — NH, Lehigh Valley College — Center Valley, PA, Gibbs Colleges — Livingston, NJ and Norwalk, CT, Katharine Gibbs Schools — New York, NY and Norristown, PA. Accordingly, the results of operations for these six campuses are reported as a component of discontinued operations for both current and prior period financial results. Except as otherwise noted, financial data and non-financial metrics reflected in this release exclude discontinued operations. Quarterly income statements for 2008 and 2009 reflecting this change have been provided in the exhibits section of this release.

Three Months Ended December 31, 2009

•

Total revenue from continuing operations was $507.8 million during the fourth quarter of 2009, a 19.4 percent increase from $425.3 million during the fourth quarter of 2008.

•

The financial and operating results for the fourth quarter 2009 and 2008 include significant items as summarized below:

CEC ANNOUNCES 4Q09 RESULTS …PG 2


	Reconciling Items (In Millions)			Diluted Earnings per Share Impact
Three Months Ended December 31, 2009
Unused Space Charges	$	(14.3	)	$	(0.11	)
Performance-based Compensation Related to Plan Outperformance		2.2			0.02
Termination of Insurance Policies		12.0			0.09

TOTAL	$	(0.1	)	$	(0.00	)

Three Months Ended December 31, 2008
Legal Settlements	$	(3.6	)	$	(0.03	)
Unused Space Charges		(1.9	)		(0.01	)
Severance and Stay Bonus Charges		(1.5	)		(0.01	)

TOTAL	$	(7.0	)	$	(0.05	)

•

The company believes it is useful to present non-GAAP financial measures excluding these items as a means to understand the performance of its core business.

•

Operating income was $97.0 million during the fourth quarter of 2009, versus operating income of $49.6 million during the fourth quarter of 2008. Operating margin was 19.1 percent during the fourth quarter of 2009, as compared to an operating margin of 11.7 percent during the fourth quarter of 2008.

•

Excluding the reconciling items listed in the table above, operating income was $97.1 million in the fourth quarter of 2009, up 71.6 percent from $56.6 million in the fourth quarter of 2008 and operating margin was 19.1 percent during the fourth quarter of 2009, a 5.8 percentage point increase compared to an operating margin percentage of 13.3 percent during the fourth quarter of 2008.

Twelve Months Ended December 31, 2009

•

Total revenue from continuing operations was $1.84 billion during the twelve months ended December 31, 2009, a 10.6 percent increase from $1.66 billion during the twelve months ended December 31, 2008.

•

Operating income increased to $222.6 million during the twelve months ended December 31, 2009, from $108.7 million during the twelve months ended December 31, 2008. Operating margin increased to 12.1 percent during the twelve months ended December 31, 2009, from 6.5 percent during the twelve months ended December 31, 2008.

CEC ANNOUNCES 4Q09 RESULTS …PG 3

•

Income from continuing operations during the twelve months ended December 31, 2009, was $145.4 million, or $1.68 per diluted share, relative to $89.8 million, or $1.00 per diluted share, during the twelve months ended December 31, 2008.

•

The financial and operating results for the twelve months ended December 31, 2009 and 2008 include significant items as summarized below:


	Reconciling Items (In Millions)			Diluted Earnings per Share Impact
Twelve Months Ended December 31, 2009
Unused Space Charges	$	(14.3	)	$	(0.11	)
Performance-based Compensation Related to Plan Outperformance		(23.1	)		(0.17	)
Severance and Stay Bonus Charges		(1.5	)		(0.01	)
Asset Impairment Charges		(2.5	)		(0.02	)
Termination of Insurance Policies		12.0			0.09

TOTAL	$	(29.4	)	$	(0.22	)

Twelve Months Ended December 31, 2008
Legal Settlements	$	(6.3	)	$	(0.05	)
Unused Space Charges		(11.6	)		(0.08	)
Severance and Stay Bonus Charges		(7.4	)		(0.05	)
Asset Impairment Charges		(8.9	)		(0.06	)
Gain from Termination of Affiliate Relationship		—			0.03

TOTAL	$	(34.2	)	$	(0.21	)

•

Excluding the reconciling items listed in the table above, operating income was $252.0 million during the twelve months ended December 31, 2009, up 76.3 percent from $142.9 million during the twelve months ended December 31, 2008 and operating margin was 13.7 percent during the twelve months ended December 31, 2009, a 5.1 percentage point increase relative to an operating margin of 8.6 percent during the twelve months ended December 31, 2008.

CEC ANNOUNCES 4Q09 RESULTS …PG 4

CONSOLIDATED CASH FLOWS AND FINANCIAL POSITION

Cash Flows

•

Cash provided by operating activities was $288.3 million during the twelve months ended December 31, 2009, compared to cash provided by operating activities of $186.7 million during the twelve months ended December 31, 2008.

•

Capital expenditures increased to $74.1 million during the twelve months ended December 31, 2009, from $53.9 million during the twelve months ended December 31, 2008. Capital expenditures represented 4.0 percent of total revenue during the twelve months ended December 31, 2009.

Financial Position

•

As of December 31, 2009 and December 31, 2008, cash and cash equivalents and short-term investments totaled $484.9 million and $493.9 million, respectively.

•

Days sales outstanding (DSO) were 17 days as of December 31, 2009, compared to 16 days as of

December 31, 2008.

Stock Repurchase Program

During the three months ended December 31, 2009, the company repurchased approximately 800,000 shares of its common stock for approximately $20.0 million at an average price of $26.54 per share. During 2009, the company repurchased approximately 9.0 million shares of its common stock for approximately $200.0 million at an average price of $22.23 per share. Additionally, in January 2010, the company repurchased approximately 1.7 million shares of its common stock for approximately $40.0 million at an average price of $23.53 per share.

On February 16, 2010, the Board of Directors authorized the use of an additional $250.0 million to repurchase outstanding shares of its common stock under the company’s stock repurchase program. This is in addition to the $155.5 million still available under its previously authorized stock repurchase program. 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.

CEC ANNOUNCES 4Q09 RESULTS …PG 5

Revenue


	For the three months ended December 31,					% Change
	2009			2008		2009 vs. 2008
Revenue (in millions)
University	$	216.5		$	177.0	22	%
Culinary Arts		91.1			77.3	18	%
Health Education		85.5			66.4	29	%
Art & Design		69.4			67.5	3	%
International		45.1			35.7	26	%
Corporate and other		(0.2	)		—	100	%

Subtotal	$	507.4		$	423.9	20	%
Transitional Schools		0.4			1.4	(75	)%

Total Revenue	$	507.8		$	425.3	19	%

Operating Income


	For the three months ended December 31,						% Change
	2009			2008			2009 vs. 2008
Operating Income (in millions)
University	$	55.9		$	42.9		30	%
Culinary Arts		13.2			(0.6	)	NM
Health Education		17.8			9.9		81	%
Art & Design		11.5			9.0		27	%
International		8.9			8.1		10	%
Corporate and other		(3.7	)		(18.9	)	80	%

Subtotal	$	103.6		$	50.4		105	%
Transitional Schools		(6.6	)		(0.8	)	NM

Total Operating Income	$	97.0		$	49.6		95	%

Operating Margin


	For the three months ended December 31,
	2009		2008
Operating Margin
University	25.8	%	24.3	%
Culinary Arts	14.5	%	-0.8	%
Health Education	20.9	%	14.8	%
Art & Design	16.6	%	13.4	%
International	19.8	%	22.7	%
Corporate and other	NM		NM

Subtotal	20.4	%	11.9	%
Transitional Schools	NM		NM

Total	19.1	%	11.7	%

CEC ANNOUNCES 4Q09 RESULTS …PG 6

STUDENT POPULATION AND NEW STUDENT START DATA

Student Population

Total student population by reportable segment as of January 31, 2010 and 2009, were as follows:


	As of January 31,		% Change
	2010	2009	2010 vs. 2009
STUDENT POPULATION
University	56,000	45,700	23	%
Culinary Arts	12,600	9,600	31	%
Health Education	23,600	17,900	32	%
Art & Design	13,500	13,500	0	%
International	11,000	9,700	13	%

Subtotal	116,700	96,400	21	%
Transitional Schools	100	200	(50	)%

Total Student Population	116,800	96,600	21	%

ONLINE STUDENT POPULATION
Culinary Arts	200	0	NM
Art & Design	1,400	900	56	%
University	44,600	35,400	26	%

Total Online Student Population	46,200	36,300	27	%

New Student Starts

New student starts by reportable segment during the fourth quarter of 2009 and 2008, were as follows:


	For the three months ended December 31,		% Change
	2009	2008	2009 vs. 2008
NEW STUDENT STARTS
University	17,080	13,940	23	%
Culinary Arts	1,430	1,050	36	%
Health Education	5,260	4,110	28	%
Art & Design (1)	1,720	2,410	(29	)%
International	2,950	2,530	17	%

Subtotal	28,440	24,040	18	%
Transitional Schools	0	0	NM

Total New Student Starts	28,440	24,040	18	%

ONLINE NEW STUDENT STARTS
Culinary Arts	60	0	NM
Art & Design	410	310	32	%
University	14,810	11,920	24	%

Total Online New Student Starts	15,280	12,230	25	%

⁽¹⁾	Fourth quarter 2009 had approximately 750 fewer new student starts as a result of calendar shifts.

CEC ANNOUNCES 4Q09 RESULTS …PG 7

AMERICAN INTERCONTINENTAL UNIVERSITY UPDATE

American InterContinental University’s (AIU) accrediting agency, the Higher Learning Commission of the North Central Association of Colleges and Schools, or HLC, commissioned an advisory team to visit AIU in January 2010. The advisory visit was focused on AIU’s educational and business practices. The advisory team has concluded its visit and advised AIU that within the next several weeks it will provide a report to HLC containing the advisory team’s findings and recommendations, if any, concerning its review. In addition and as previously disclosed, in connection with HLC’s initial accreditation of AIU in May 2009, AIU must submit a progress report to HLC relating to curricula design and AIU’s graduate programs’ student learning outcomes and have HLC conduct a focused visit to AIU to assess the issue of credit equivalence. HLC has not yet notified AIU of the timing of the focused visit. As previously disclosed, the Department of Education conducted a program review of AIU in November 2009. AIU is currently awaiting the issuance of the program review report.

CONFERENCE CALL INFORMATION

Career Education Corporation will host a conference call today to discuss the fourth quarter 2009 results, Wednesday, February 17, 2010 at 5:00 PM ET. 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 800-588-4973 (domestic) or 847-413-2407 (international) and reference confirmation 26141100. 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 888-843-8996 (domestic) or 630-652-3044 (international) and referencing confirmation 26141100.

ANALYST AND INVESTOR DAY INFORMATION

On February 18, 2010, Career Education Corporation will hold an Analyst and Investor Day in New York City starting at approximately 1:00 p.m. ET. Management will discuss historical performance, progress against previously communicated 2010 milestones, strategic plan objectives and future expectations. For interested parties, presentation materials and a live webcast of the event will be provided on the company website under the investor relations section at www.careered.com.

BUSINESS OVERVIEW

The colleges, schools and universities that are part of the Career Education Corporation (CEC) family offer high-quality education to a diverse student population of over 116,000 students across the world in a variety of career-oriented disciplines. The approximately 90 campuses that serve these students are located throughout the U.S. and in France, Italy, and the United Kingdom, and offer doctoral, master’s, bachelor’s and associate degrees and diploma and certificate programs. Nearly 40% of our students attend the web-based virtual campuses of American InterContinental University, Colorado Technical University, International Academy of Design & Technology and Le Cordon Bleu College of Culinary Arts.

CEC ANNOUNCES 4Q09 RESULTS …PG 8

CEC is an industry leader whose brands are recognized globally. Those brands include, among others, American InterContinental University; Brooks Institute; Colorado Technical University; Harrington College of Design; INSEEC Schools; International Academy of Design & Technology; Istituto Marangoni; Le Cordon Bleu North America; and Sanford-Brown Institutes and Colleges. Through our schools, CEC is committed to providing quality education, enabling students to graduate and pursue rewarding careers.

For more information, see CEC’s website at www.careered.com. The website includes a detailed listing of individual campus locations and web links to CEC’s approximately 90 colleges, schools, and universities.

Except for the historical and present factual information contained herein, the matters set forth in this release, including statements identified by words such as “anticipate,” “believe,” “plan,” “expect,” “intend,” “project,” “will,” “potential” 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 the 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: the adverse impact and potential impacts on the availability of Title IV and private student loans for our students of (1) the willingness or ability of private lenders to make private student loans in the current U.S. credit markets, (2) new student lending related reporting and disclosure obligations on institutions that participate in Title IV federal student financial aid programs under The Higher Education Opportunity Act (“HEOA”), signed into law on August 14, 2008, in the first full reauthorization of the Higher Education Act of 1965, as amended (together with HEOA, “HEA”) or provide payment plans to students, and (3) Congress’ willingness or ability to maintain or increase funding for Title IV programs; the outcome of the current rulemaking process regulations under HEOA and HEA addressing gainful employment and other issues that may significantly impact our operations or profitability; potential higher bad debt expense or reduced revenue associated with requiring students to pay more of their educational expenses while in school or with directly providing extended payment plans to our students; increased competition; the effectiveness of our regulatory compliance efforts; impairment of goodwill and other intangible assets as we continue to redefine the company and manage our brands and marketing to improve effectiveness and reduce costs; charges and expenses associated with exiting excess facility space; our ability to comply with accrediting agency requirements or obtain accrediting agency approvals for existing or new programs, including AIU’s ability to satisfactorily address concerns of HLC which are subject to an ongoing review by HLC; our dependence on information technology systems; our ownership or use of intellectual property; costs and impacts of regulatory, legal and administrative actions, proceedings and investigations, governmental regulations, and class action and other lawsuits; our ability to manage and continue growth; and other factors discussed in our Annual Report on Form 10-K for the year ended December 31, 2008, our Quarterly Reports on Form 10-Q for the most recent fiscal quarters, and from time to time in our current reports filed with the Securities and Exchange Commission.

###


Investors:		John Springer
		847/585-3899
		www.careered.com

Media:		Jeff Leshay
		847/585-2005

CAREER EDUCATION CORPORATION AND SUBSIDIARIES

UNAUDITED CONSOLIDATED BALANCE SHEETS

(In thousands)


	As of December 31, ⁽¹⁾
	2009			2008
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	284,473		$	242,854
Short-term investments		200,379			251,078

Total cash and cash equivalents and short-term investments		484,852			493,932

Student receivables, net		57,823			50,829
Receivables, other, net		5,256			9,131
Prepaid expenses		41,090			44,150
Inventories		11,271			12,300
Deferred income tax assets		12,983			14,081
Other current assets		9,442			9,040
Assets of discontinued operations		6,118			9,582

Total current assets		628,835			643,045

NON-CURRENT ASSETS:
Property and equipment, net		306,279			302,860
Goodwill		377,515			376,072
Intangible assets, net		178,520			39,904
Assets of discontinued operations		24,401			20,872
Student receivables, net		21,455			16,651
Deferred income tax assets		3,659			—
Other assets, net		23,178			18,806

TOTAL ASSETS	$	1,563,842		$	1,418,210

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Current maturities of capital lease obligations	$	880		$	354
Accounts payable		51,108			27,606
Accrued expenses:
Payroll and related benefits		88,439			60,142
Advertising and production costs		21,436			21,504
Income taxes		17,849			29,225
Earnout payments		18,009			—
Other		46,182			45,329
Deferred tuition revenue		184,411			151,158
Liabilities of discontinued operations		13,695			16,359

Total current liabilities		442,009			351,677

NON-CURRENT LIABILITIES:
Capital lease obligations, net of current maturities		2,262			1,889
Deferred rent obligations		91,725			87,344
Deferred income tax liabilities		—			887
Liabilities of discontinued operations		62,997			16,404
Earnout payments		23,680			—
Other liabilities		19,124			11,497

Total non-current liabilities		199,788			118,021

SHARE-BASED AWARDS SUBJECT TO REDEMPTION		521			860

STOCKHOLDERS’ EQUITY:
Preferred stock		—			—
Common stock		954			933
Additional paid-in capital		244,992			222,523
Accumulated other comprehensive income		8,408			5,774
Retained earnings		889,057			807,500
Cost of shares in treasury		(221,887	)		(89,078	)

Total stockholders’ equity		921,524			947,652

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	1,563,842		$	1,418,210

(1)

We completed the teach out activities during the year ended December 31, 2009 for McIntosh College — Dover, NH, Lehigh Valley College — Center Valley, PA, Gibbs Colleges — Livingston, NJ and Norwalk, CT, Katharine Gibbs Schools — New York, NY and Norristown, PA. Accordingly, the results of operations for these six campuses are reported as a component of discontinued operations for both current and prior period financial results.

CAREER EDUCATION CORPORATION AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts and percentages)


	For the Three Months Ended December 31,⁽¹⁾
	2009			% of Revenue		2008			% of Revenue
REVENUE:

Tuition and registration fees	$	491,736		96.8	%	$	410,503		96.5	%

Other		16,072		3.2	%		14,772		3.5	%

Total revenue		507,808					425,275

OPERATING EXPENSES:

Educational services and facilities		166,849		32.9	%		148,866		35.0	%

General and administrative		226,708		44.6	%		210,005		49.4	%

Depreciation and amortization		17,252		3.4	%		16,756		3.9	%

Total operating expenses		410,809		80.9	%		375,627		88.3	%

Operating income		96,999		19.1	%		49,648		11.7	%

OTHER INCOME (EXPENSE):

Interest income		404		0.1	%		4,447		1.0	%

Interest expense		(194	)	0.0	%		(166	)	0.0	%

Miscellaneous (expense) income		(3	)	0.0	%		2,363		0.6	%

Total other income		207		0.0	%		6,644		1.6	%

Pretax income		97,206		19.1	%		56,292		13.2	%

Provision for income taxes		35,601		7.0	%		20,264		4.8	%

Income from continuing operations		61,605		12.1	%		36,028		8.5	%

Loss from discontinued operations, net of tax		(30,925	)				(4,815	)

NET INCOME	$	30,680				$	31,213

NET INCOME (LOSS) PER SHARE - DILUTED
Income from continuing operations	$	0.72				$	0.40
Loss from discontinued operations		(0.36	)				(0.05	)

Net income	$	0.36				$	0.35

DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING		85,300					89,918

(1)

CAREER EDUCATION CORPORATION AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts and percentages)


	For the Twelve Months Ended December 31, ⁽¹⁾
	2009			% of Revenue		2008			% of Revenue
REVENUE:

Tuition and registration fees	$	1,762,942		96.0	%	$	1,593,579		96.0	%

Other		73,693		4.0	%		67,163		4.0	%

Total revenue		1,836,635					1,660,742

OPERATING EXPENSES:

Educational services and facilities		611,748		33.3	%		605,474		36.5	%

General and administrative		934,131		50.9	%		866,043		52.1	%

Depreciation and amortization		65,652		3.6	%		71,636		4.3	%

Goodwill and asset impairment		2,500		0.1	%		8,925		0.5	%

Total operating expenses		1,614,031		87.9	%		1,552,078		93.5	%

Operating income		222,604		12.1	%		108,664		6.5	%

OTHER INCOME (EXPENSE):

Interest income		2,372		0.1	%		13,776		0.8	%

Interest expense		(226	)	0.0	%		(868	)	-0.1	%

Share of affiliate earnings		—		0.0	%		4,665		0.3	%

Miscellaneous (expense) income		(705	)	0.0	%		2,050		0.1	%

Total other income		1,441		0.1	%		19,623		1.2	%

Pretax income		224,045		12.2	%		128,287		7.7	%

Provision for income taxes		78,663		4.3	%		38,525		2.3	%

Income from continuing operations		145,382		7.9	%		89,762		5.4	%

Loss from discontinued operations, net of tax		(64,163	)				(29,620	)

NET INCOME	$	81,219				$	60,142

NET INCOME (LOSS) PER SHARE - DILUTED:
Income from continuing operations	$	1.68				$	1.00
Loss from discontinued operations		(0.74	)				(0.33	)

Net income	$	0.94				$	0.67

DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING		86,418					90,089

(1)

CAREER EDUCATION CORPORATION AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS BY QUARTER

(In thousands)


	For the 2009 Quarters Ended, ⁽¹⁾
	March 31		June 30		September 30		December 31		Full Year
REVENUE:
Tuition and registration fees	$	415,674	$	420,600	$	434,932	$	491,736	$	1,762,942
Other		17,189		17,073		23,359		16,072		73,693

Total revenue		432,863		437,673		458,291		507,808		1,836,635

OPERATING EXPENSES:
Educational services and facilities		146,616		148,461		149,822		166,849		611,748
General and administrative		219,191		236,101		252,131		226,708		934,131
Depreciation and amortization		16,101		16,390		15,909		17,252		65,652
Goodwill and asset impairment		—		—		2,500		—		2,500

Total operating expenses		381,908		400,952		420,362		410,809		1,614,031

Operating income	$	50,955	$	36,721	$	37,929	$	96,999	$	222,604


	For the 2008 Quarters Ended, ⁽¹⁾
	March 31		June 30		September 30		December 31		Full Year
REVENUE:
Tuition and registration fees	$	415,972	$	390,874	$	376,230	$	410,503	$	1,593,579
Other		19,132		13,756		19,503		14,772		67,163

Total revenue		435,104		404,630		395,733		425,275		1,660,742

OPERATING EXPENSES:
Educational services and facilities		151,546		148,524		156,538		148,866		605,474
General and administrative		226,532		215,678		213,828		210,005		866,043
Depreciation and amortization		19,011		17,908		17,961		16,756		71,636
Goodwill and asset impairment		2,082		—		6,843		—		8,925

Total operating expenses		399,171		382,110		395,170		375,627		1,552,078

Operating income	$	35,933	$	22,520	$	563	$	49,648	$	108,664

(1)

CAREER EDUCATION CORPORATION AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)


	For the Twelve Months Ended December 31,
	2009			2008
CASH FLOWS FROM OPERATING ACTIVITIES:

Net income	$	81,219		$	60,142
Adjustments to reconcile net income to net cash provided by operating activities:
Goodwill and asset impairment		2,500			13,600
Depreciation and amortization expense		67,596			77,688
Bad debt expense		56,718			44,278
Compensation expense related to share-based awards		16,516			11,522
Gain on sale of business		—			(1,555	)
Loss on disposition of property and equipment		1,291			573
Share of affiliate earnings, net of cash received		—			939
Deferred income taxes		(8,702	)		(749	)
Changes in operating assets and liabilities		71,113			(19,718	)

Net cash provided by operating activities		288,251			186,720

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of available-for-sale investments		(617,032	)		(580,970	)
Sales of available-for-sale investments		668,281			483,635
Purchases of property and equipment		(74,087	)		(53,854	)
Acquisition of the rights to the Le Cordon Bleu brand		(26,331	)		—
Other		(132	)		402

Net cash used in investing activities		(49,301	)		(150,787	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of treasury stock		(201,119	)		(14,055	)
Issuance of common stock		2,797			3,239
Tax benefit associated with stock option exercises		237			471
Payments on revolving loans		—			(10,113	)
Payments of capital lease obligations		(1,066	)		(590	)

Net cash used in financing activities		(199,151	)		(21,048	)

EFFECT OF FOREIGN CURRENCY EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS:		415			(7,732	)

NET INCREASE IN CASH AND CASH EQUIVALENTS		40,214			7,153
Add: Cash balance of discontinued operations, beginning of the year		2,004			26,658
Less: Cash balance of discontinued operations, end of the year		599			2,004
CASH AND CASH EQUIVALENTS, beginning of the year		242,854			211,047

CASH AND CASH EQUIVALENTS, end of the year	$	284,473		$	242,854

CAREER EDUCATION CORPORATION AND SUBSIDIARIES

SELECTED SEGMENT INFORMATION

(Dollars in thousands)


	For the Three Months Ended December 31, ⁽¹⁾
	2009			2008
REVENUE:
University	$	216,525		$	176,982
Culinary Arts		91,058			77,287
Health Education ⁽²⁾		85,549			66,438
Art & Design		69,421			67,501
International		45,069			35,686
Corporate and other		(166	)		—

Subtotal	$	507,456		$	423,894
Transitional Schools ⁽²⁾		352			1,381

Total revenue	$	507,808		$	425,275

SEGMENT OPERATING INCOME (LOSS):
University	$	55,863		$	42,949
Culinary Arts		13,190			(588	)
Health Education ⁽²⁾		17,845			9,864
Art & Design		11,506			9,052
International		8,902			8,106
Corporate and other		(3,718	)		(18,938	)

Subtotal	$	103,588		$	50,445
Transitional Schools ⁽²⁾		(6,589	)		(797	)

Total operating income	$	96,999		$	49,648

SEGMENT OPERATING MARGIN (LOSS):
University		25.8	%		24.3	%
Culinary Arts		14.5	%		-0.8	%
Health Education ⁽²⁾		20.9	%		14.8	%
Art & Design		16.6	%		13.4	%
International		19.8	%		22.7	%
Transitional Schools ⁽²⁾		NM			NM

(1)

(2)

We made the decision during 2009 to convert Gibbs College — Boston, MA, Gibbs College — Farmington, CT, and
SBI Cranston — Cranston, RI, into Health Education schools. The schools that we converted were previously scheduled to close in the fourth quarter of 2009, and their results of operations had been reflected within Transitional Schools. As a result of the decision to convert these schools, their results of operations for all periods presented are now reflected within the Health Education segment. The current quarter operating loss for Transitional Schools includes a $5.3 million pretax charge for the fair value of remaining lease obligations for vacated space at our SBI Cranston — Cranston, RI location.

CAREER EDUCATION CORPORATION AND SUBSIDIARIES

SELECTED SEGMENT INFORMATION

(Dollars in thousands)


	For the Twelve Months Ended December 31, ⁽¹⁾
	2009			2008
REVENUE:
University	$	811,420		$	702,347
Culinary Arts		332,236			328,313
Health Education ⁽²⁾		306,286			249,171
Art & Design		263,179			263,715
International		121,188			107,558
Corporate and other		(512	)		9

Subtotal	$	1,833,797		$	1,651,113
Transitional Schools ⁽²⁾		2,838			9,629

Total revenue	$	1,836,635		$	1,660,742

SEGMENT OPERATING INCOME (LOSS):
University	$	177,727		$	122,757
Culinary Arts		18,486			(5,908	)
Health Education ⁽²⁾		55,171			20,646
Art & Design		32,599			28,057
International		18,853			18,856
Corporate and other		(70,181	)		(69,816	)

Subtotal	$	232,655		$	114,592
Transitional Schools ⁽²⁾		(10,051	)		(5,928	)

Total operating income	$	222,604		$	108,664

SEGMENT OPERATING MARGIN (LOSS):
University		21.9	%		17.5	%
Culinary Arts		5.6	%		-1.8	%
Health Education ⁽²⁾		18.0	%		8.3	%
Art & Design		12.4	%		10.6	%
International		15.6	%		17.5	%
Transitional Schools ⁽²⁾		NM			NM

(1)

(2)

We made the decision during 2009 to convert Gibbs College — Boston, MA, Gibbs College — Farmington, CT, and
SBI Cranston — Cranston, RI, into Health Education schools. The schools that we converted were previously scheduled to close in the fourth quarter of 2009, and their results of operations had been reflected within Transitional Schools. As a result of the decision to convert these schools, their results of operations for all periods presented are now reflected within the Health Education segment. The current year operating loss for Transitional Schools includes a $5.3 million pretax charge for the fair value of remaining lease obligations for vacated space at our SBI Cranston — Cranston, RI location.

CAREER EDUCATION CORPORATION AND SUBSIDIARIES

SELECTED UNIVERSITY SEGMENT INFORMATION

(Dollars in thousands)


	For the Three Months Ended December 31,						For the Twelve Months Ended December 31,
	2009			2008			2009			2008
UNIVERSITY REVENUE:
AIU	$	99,768		$	87,437		$	409,043		$	374,699
Online		80,061			68,937			336,487			298,281
On-ground		19,707			18,500			72,556			76,418

CTU		105,521			79,577			368,621			294,409
Online		87,953			65,068			305,280			240,652
On-ground		17,568			14,509			63,341			53,757

Briarcliffe		11,236			9,968			33,756			33,239

Total University	$	216,525		$	176,982		$	811,420		$	702,347

UNIVERSITY SEGMENT OPERATING INCOME (LOSS):
AIU	$	21,430		$	18,813		$	90,672		$	59,152
Online		22,825			20,887			103,339			72,844
On-ground		(1,395	)		(2,074	)		(12,667	)		(13,692	)

CTU	$	32,278		$	22,585		$	86,017		$	62,719
Online		29,472			22,236			87,894			63,311
On-ground		2,806			349			(1,877	)		(592	)

Briarcliffe		2,155			1,551			1,038			886

Total University	$	55,863		$	42,949		$	177,727		$	122,757

UNIVERSITY SEGMENT OPERATING MARGIN (LOSS):
AIU		21.5	%		21.5	%		22.2	%		15.8	%
Online		28.5	%		30.3	%		30.7	%		24.4	%
On-ground		-7.1	%		-11.2	%		-17.5	%		-17.9	%

CTU		30.6	%		28.4	%		23.3	%		21.3	%
Online		33.5	%		34.2	%		28.8	%		26.3	%
On-ground		16.0	%		2.4	%		-3.0	%		-1.1	%

Briarcliffe		19.2	%		15.6	%		3.1	%		2.7	%
Total University		25.8	%		24.3	%		21.9	%		17.5	%

	Student Population as of January 31,
	2010			2009
AIU		23,800			20,600
Online		19,800			16,800
On-ground		4,000			3,800
CTU		30,400			23,500
Online		24,800			18,600
On-ground		5,600			4,900
Briarcliffe		1,800			1,600

Total University		56,000			45,700


	New Student Starts for the three months ended December 31,
	2009			2008
AIU		7,210			6,350
Online		6,180			5,440
On-ground		1,030			910
CTU		9,800			7,530
Online		8,630			6,480
On-ground		1,170			1,050
Briarcliffe		70			60

University		17,080			13,940

CAREER EDUCATION CORPORATION AND SUBSIDIARIES

Reconciliation of GAAP to Non-GAAP Items ⁽¹⁾

(dollars in millions)


	For the Three Months Ended December 31,
	2009						2008
	Operating Income			Earnings per Diluted Share ⁽²⁾			Operating Income		Earnings per Diluted Share ⁽²⁾
Reported	$	97.0		$	0.72		$	49.6	$	0.40
Reconciling Items:
Unused Space Charges		14.3			0.11			1.9		0.01
Performance-based Compensation Related to Plan Outperformance ⁽³⁾		(2.2	)		(0.02	)		—		—
Severance & Stay		—			—			1.5		0.01
Termination of Insurance Policies ⁽⁴⁾		(12.0	)		(0.09	)		—		—
Legal Settlements		—			—			3.6		0.03

Adjusted to Exclude Significant Items	$	97.1		$	0.72		$	56.6	$	0.45

Diluted Weighted Average Shares Outstanding					85,300					89,918

	For the Twelve Months Ended December 31,
	2009						2008
	Operating Income			Earnings per Diluted Share ⁽²⁾			Operating Income		Earnings per Diluted Share ⁽²⁾
Reported	$	222.6		$	1.68		$	108.7	$	1.00
Reconciling Items:
Unused Space Charges		14.3			0.11			11.6		0.08
Performance-based Compensation Related to Plan Outperformance ⁽³⁾		23.1			0.17			—		—
Severance & Stay		1.5			0.01			7.4		0.05
Asset Impairment Charges		2.5			0.02			8.9		0.06
Termination of Insurance Policies ⁽⁴⁾		(12.0	)		(0.09	)		—		—
Legal Settlements		—			—			6.3		0.05
Gain from Termination of Affiliate Relationship⁽⁵⁾		—			—			—		(0.03	)

Adjusted to Exclude Significant Items	$	252.0		$	1.90		$	142.9	$	1.21

Diluted Weighted Average Shares Outstanding					86,418					90,089

	For the Twelve Months Ended December 31,
	2009			2008
Net Cash Flows from Operating Activities	$	288.3		$	186.7
Adjust for:
Capital expenditures, net		(74.1	)		(53.9	)

Free Cash Flows	$	214.2		$	132.8

(1)

The Company has included some non-GAAP financial measures in this presentation to discuss the Company’s financial results. As a general matter, the Company uses these non-GAAP measures in addition to and in conjunction with results presented in accordance with GAAP. Among other things, the Company may use such non-GAAP financial measures in addition to and in conjunction with corresponding GAAP measures, to help analyze the performance of its core business, in connection with the preparation of annual budgets, and in measuring performance for some forms of compensation. In addition, the Company believes that non-GAAP financial information is used by analysts and others in the investment community to analyze the Company’s historical results and in providing estimates of future performance and that failure to report these non-GAAP measures could result in confusion among analysts and others and a misplaced perception that the Company’s results have underperformed or exceeded expectations.

These non-GAAP financial measures reflect an additional way of viewing aspects of the Company’s operations that, when viewed with the GAAP results and the reconciliations to corresponding GAAP financial measures, provide a more complete understanding of the Company’s results of operations and the factors and trends affecting the Company’s business. However, these non-GAAP measures should be considered as a supplement to, and not as a substitute for, or superior to, the corresponding measures calculated in accordance with GAAP.

(2)	Earnings per share based on income from continuing operations.

(3)	Performance-based Compensation Related to Plan Outperformance by segment is as follows:


	For the Twelve Months ended December 31, 2009
Corporate	$	12.4
University		4.0
Health		3.0
Culinary		2.0
Art & Design		1.7

TOTAL	$	23.1

The fourth quarter performance-based compensation related to plan outperformance represents the year-end true-up to the estimated payout based upon full-year results.

(4)	We received a $12.0 million payment in the fourth quarter 2009 related to the termination of certain insurance policies.

(5)	Gain from Termination of Affiliate Relationship is recorded within other income on the unaudited consolidated statement of operations.

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