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

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8-K - FORM 8-K - PERDOCEO EDUCATION Corp	d8k.htm

Exhibit 99.1

LOGO

CAREER EDUCATION CORPORATION REPORTS

RESULTS FOR FOURTH QUARTER AND FULL YEAR 2010

Hoffman Estates, Ill. (February 17, 2011) – Career Education Corporation (NASDAQ: CECO) today reported total revenue of $542.9 million, and net income of $12.1 million, or $0.15 per diluted share, for the fourth quarter of 2010 compared to total revenue of $507.5 million and net income of $30.7 million, or $0.36 per diluted share, for the fourth quarter of 2009. For the full year 2010, total revenue of $2.12 billion, and net income of $157.8 million, or $1.95 per diluted share increased from total revenue of $1.83 billion and net income of $81.2 million, or $0.94 per diluted share, for the full year 2009.

“Our financial performance both in the fourth quarter and in 2010 was in line with our expectations,” said Gary E. McCullough, President and Chief Executive Officer. “While private sector postsecondary education is in a period of heightened scrutiny and uncertainty, we view this as a period of opportunity in which we will continue to enhance our programs, processes and systems to better meet the needs of our diverse student population.”

The Company believes it is useful to present non-GAAP financial measures, which exclude certain significant items, as a means to understand the performance of its core business. On a non-GAAP basis, earnings per diluted share from continuing operations were $0.81 in the fourth quarter 2010 as compared to $0.74 in the fourth quarter of 2009. For the years ended December 31, 2010 and 2009, earnings per diluted share from continuing operations (non-GAAP basis) were $3.00 and $1.95, respectively. (See tables below and the GAAP to non-GAAP reconciliation attached to this press release for further details.)

CONSOLIDATED RESULTS

Quarter Ended December 31, 2010

•

Total revenue was $542.9 million for the fourth quarter of 2010, a 7.0 percent increase from $507.5 million for the fourth quarter of 2009.

•

Operating income was $20.7 million for the fourth quarter of 2010, versus operating income of $98.6 million for the fourth quarter of 2009. The operating margin was 3.8 percent for the fourth quarter of 2010, compared to an operating margin of 19.4 percent for the fourth quarter of 2009.

•

Income from continuing operations for the quarter ended December 31, 2010 was $15.3 million, or $0.19 per diluted share, compared to $62.7 million, or $0.74 per diluted share, for the quarter ended December 31, 2009.

CEC ANNOUNCES 4Q10 RESULTS …PG 2

•

The operating results for the fourth quarter 2010 and 2009 include significant items as summarized below:


	Significant Items (In Millions)			Earnings per Diluted Share Impact
Three Months Ended December 31, 2010
Trade Name Impairment	$	67.8		$	0.55
Legal Settlement		0.8			0.01
Severance		7.7			0.06

TOTAL	$	76.3		$	0.62


Three Months Ended December 31, 2009
Remaining Lease Obligations for Vacated Space	$	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		$	—

•

In connection with our annual impairment testing, we recorded an impairment charge related to our Le Cordon Bleu trade name which reduced its carrying value from $139.6 million to $71.8 million. The fair value of the trade name is calculated based upon our expected future operating results for our Culinary Arts segment.

•

Excluding the significant items in the table above, operating income was $97.0 million in the fourth quarter 2010, a 1.7 percent decrease from $98.7 million in the fourth quarter of 2009. The operating margin was 17.9 percent during the fourth quarter 2010 as compared to 19.4 percent during the fourth quarter 2009.

Year Ended December 31, 2010

•

Total revenue was $2.12 billion for the year ended December 31, 2010, compared to $1.83 billion for the year ended December 31, 2009.

•

Operating income increased to $246.4 million for the year ended December 31, 2010, from $229.0 million for the year ended December 31, 2009. The operating margin decreased slightly to 11.6 percent for the year ended December 31, 2010, from 12.5 percent for the year ended December 31, 2009.

•

Income from continuing operations for the year ended December 31, 2010, was $166.6 million, or $2.06 per diluted share, compared to $149.5 million, or $1.73 per diluted share, for the year ended December 31, 2009.

CEC ANNOUNCES 4Q10 RESULTS …PG 3

•

The operating results for the years ended December 31, 2010 and 2009 include the following significant items:


	Significant Items (In Millions)			Earnings per Diluted Share Impact


Year Ended December 31, 2010
Trade Name Impairment	$	67.8		$	0.55
Legal Settlement		40.8			0.33
Severance		7.7			0.06

TOTAL	$	116.3		$	0.94


Year Ended December 31, 2009
Asset Impairment	$	2.5		$	0.02
Severance		1.5			0.01
Remaining Lease Obligations for Vacated Space		14.3			0.11
Performance-based Compensation Related to Plan Outperformance		23.1			0.17
Termination of Insurance Policies		(12.0	)		(0.09	)

TOTAL	$	29.4		$	0.22

•

Excluding the significant items in the table above, operating income was $362.7 million for the year ended December 31, 2010 and $258.4 million for the year ended December 31, 2009, an increase of 40.4 percent. Operating margin was 17.1 percent and 14.1 percent for the years ended December 31, 2010 and 2009, respectively.

CONSOLIDATED CASH FLOWS AND FINANCIAL POSITION

Cash Flows

•

Net cash flows provided by operating activities totaled $272.3 million for the year ended December 31, 2010, compared to $288.3 million for the year ended December 31, 2009. Operating cash flows remained relatively constant as compared to the prior year as strong cash flow driven by increased net income was offset by payment of prior year annual incentive compensation, and the impact of student receivables growth and related payment performance.

•

Capital expenditures increased to $127.3 million during the year ended December 31, 2010, from $74.1 million for the year ended December 31, 2009. Capital expenditures increased to 6.0 percent of total revenue during the year ended December 31, 2010 as compared to 4.0 percent for the year ended December 31, 2009 as a result of investments made in the Company’s new campus support center.

Financial Position

•

As of December 31, 2010 and December 31, 2009, cash and cash equivalents and short-term investments totaled $449.2 million and $484.7 million, respectively.

CEC ANNOUNCES 4Q10 RESULTS …PG 4

Stock Repurchase Program and Treasury Stock

During 2010, the Company repurchased approximately 5.4 million shares of its common stock for approximately $154.9 million at an average price of $28.54 per share. The Company did not repurchase shares of its common stock during the fourth quarter 2010. Under the Company’s previously authorized stock repurchase program, stock repurchases 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. As of December 31, 2010, approximately $290.5 million was available under the Company’s stock repurchase program.

During January 2011, the Company repurchased an additional 3.7 million shares of its common stock for $79.9 million at an average price of $21.47 per share through the Company’s 10b5-1 repurchase program announced by the Company on November 15, 2010.

Our unaudited consolidated balance sheet reflects the correction of an error related to the recording of the treasury share retirement which occurred in the fourth quarter 2007. The impact of this correction was to increase additional paid-in-capital and reduce retained earnings by $417.9 million, respectively. All periods presented have been adjusted accordingly. This correction does not impact operating income, net income or total stockholders’ equity.

STUDENT POPULATION AND NEW STUDENT STARTS

Student Population

Total student population by reportable segment as of December 31, 2010 and 2009, was as follows:


	As of December 31,				% Change 2010 vs. 2009
	2010		2009		% Change 2010 vs. 2009
Student Population
University		62,400		59,300		5%
Health Education		29,000		24,200		20%
Culinary Arts		13,100		10,900		20%
International		12,300		10,900		13%

Total Student Population		116,800		105,300		11%

New Student Starts

New student starts by reportable segment during the fourth quarter of 2010 and 2009, were as follows:


	For the Three Months Ended December 31,				% Change 2010 vs. 2009
	2010		2009		% Change 2010 vs. 2009
New Student Starts
University		16,510		18,550		-11%
Health Education		6,270		5,510		14%
Culinary Arts		1,390		1,430		-3%
International		3,570		2,950		21%

Total New Student Starts		27,740		28,440		-2%

CEC ANNOUNCES 4Q10 RESULTS …PG 5

CONFERENCE CALL INFORMATION

Career Education Corporation will host a conference call on Friday, February 18, 2011 at 10:00 a.m. Eastern time. Interested parties can access the live webcast of the conference call at www.careered.com in the Investor Relations section of the website. Participants can also listen to the conference call by dialing 800-580-9478 (domestic) or 630-691-2769 (international) and citing code 28756801. 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 in the Investor Relations section of the website. A replay of the call will also be available for seven days by calling 888-843-7419 (domestic) or 630-652-3042 (international) and citing code 28756801.

ABOUT CAREER EDUCATION CORPORATION

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 more than 116,000 students across the world in a variety of career-oriented disciplines through online, on-ground and hybrid learning program offerings. The more than 90 campuses that serve these students are located throughout the United States and in France, Italy, the United Kingdom and Monaco, and offer doctoral, master’s, bachelor’s and associate degrees and diploma and certificate programs.

CEC is an industry leader whose institutions are recognized globally. Those institutions include, among others, American InterContinental University (“AIU”); Brooks Institute; Colorado Technical University (“CTU”); Harrington College of Design; INSEEC Group (“INSEEC”) Schools; International University of Monaco (“IUM”); International Academy of Design & Technology (“IADT”); Istituto Marangoni; Le Cordon Bleu North America (“LCB”); and Sanford-Brown Institutes and Colleges. Through its schools, CEC is committed to providing high-quality education, enabling students to graduate and pursue rewarding career opportunities.

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 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, financial condition, cash flows, performance, 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: availability of Title IV and other student financial aid or loans for our students; Congress’ willingness or ability to maintain or increase funding for Title IV programs; the impacts of the U.S. Department of Education’s new and pending regulations addressing certain aspects of administration of Title IV federal financial aid programs (including among other matters, gainful employment, certain compensation related to recruiting and admission of students, more stringent state approval criteria that may affect current state approval and licensing processes applicable to postsecondary education institutions and distance learning programs) on our business practices, costs of compliance and of developing and implementing changes in operations, student recruitment or enrollment, program offerings that may have significant or material effects on our operations, business and 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; the outcome of any reviews and audits conducted by accrediting, state and federal agencies; 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, 2009, 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.

CEC ANNOUNCES 4Q10 RESULTS …PG 6

###

CONTACT


Investors:		Jason Friesen
		Senior Vice President of Finance, Investor Relations and Treasurer
		(847) 585-3899

Media:		Mark D. Spencer
		Senior Director, Corporate Communications
		(847) 585-3802

CAREER EDUCATION CORPORATION AND SUBSIDIARIES

UNAUDITED CONSOLIDATED BALANCE SHEETS

(In thousands)


	As of December 31, ⁽¹⁾
	2010			2009
				(Restated)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	289,482		$	284,334
Short-term investments		159,671			200,379

Total cash and cash equivalents and short-term investments		449,153			484,713

Student receivables, net		62,287			57,795
Receivables, other, net		4,132			5,255
Prepaid expenses		45,990			40,748
Inventories		13,142			11,259
Deferred income tax assets, net		31,665			12,774
Other current assets		6,246			8,790
Assets of discontinued operations		6,742			7,501

Total current assets		619,357			628,835


NON-CURRENT ASSETS:
Property and equipment, net		366,775			304,028
Goodwill		381,476			377,515
Intangible assets, net		118,763			180,520
Student receivables, net		12,522			21,455
Deferred income tax assets, net		5,092			3,187
Other assets, net		37,816			23,178
Assets of discontinued operations		19,055			25,124

TOTAL ASSETS	$	1,560,856		$	1,563,842


LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Current maturities of capital lease obligations	$	783		$	880
Accounts payable		56,013			51,100
Accrued expenses:
Payroll and related benefits		73,608			87,763
Advertising and production costs		18,846			21,436
Income taxes		8,069			17,849
Earnout payments		17,439			18,009
Other		98,113			45,923
Deferred tuition revenue		176,102			184,336
Liabilities of discontinued operations		15,100			14,713

Total current liabilities		464,073			442,009


NON-CURRENT LIABILITIES:
Capital lease obligations, net of current maturities		1,223			2,262
Deferred rent obligations		103,996			90,676
Earnout payments		7,690			23,680
Other liabilities		11,761			18,612
Liabilities of discontinued operations		37,576			64,558

Total non-current liabilities		162,246			199,788


SHARE-BASED AWARDS SUBJECT TO REDEMPTION		153			521

STOCKHOLDERS’ EQUITY:
Preferred stock		—			—
Common stock		812			954
Additional paid-in capital		576,853			662,865
Accumulated other comprehensive (loss) income		(81	)		8,408
Retained earnings		356,991			471,184
Cost of shares in treasury		(191	)		(221,887	)

Total stockholders’ equity		934,384			921,524

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	1,560,856		$	1,563,842

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In December 2010, the Transitional Schools segment ceased to exist as we completed the teach out of our last remaining Transitional School, AIU-Los Angeles, CA. As a result, all current and prior period results have been recast as a component of discontinued operations.

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⁾
	2010			% of Total Revenue		2009			% of Total Revenue
REVENUE:
Tuition and registration fees	$	526,636			97.0%	$	491,399			96.8%
Other		16,293			3.0%		16,056			3.2%

Total revenue		542,929					507,455


OPERATING EXPENSES:
Educational services and facilities		164,931			30.4%		165,587			32.6%
General and administrative		266,073			49.0%		226,048			44.5%
Depreciation and amortization		19,762			3.6%		17,176			3.4%
Goodwill and asset impairment		71,475			13.2%		—			0.0%

Total operating expenses		522,241			96.2%		408,811			80.6%

Operating income		20,688			3.8%		98,644			19.4%


OTHER INCOME (EXPENSE):
Interest income		491			0.1%		404			0.1%
Interest expense		(302	)		-0.1%		(193	)		0.0%
Miscellaneous income (expense)		182			0.0%		(2	)		0.0%

Total other income		371			0.1%		209			0.0%


PRETAX INCOME		21,059			3.9%		98,853			19.5%

Provision for income taxes		5,749			1.1%		36,151			7.1%


INCOME FROM CONTINUING OPERATIONS		15,310			2.8%		62,702			12.4%

Loss from discontinued operations, net of tax		(3,208	)		-0.6%		(32,022	)		-6.3%


NET INCOME	$	12,102			2.2%	$	30,680			6.0%


NET INCOME (LOSS) PER SHARE - DILUTED:
Income from continuing operations	$	0.19				$	0.74
Loss from discontinued operations		(0.04	)				(0.38	)

Net income per share	$	0.15				$	0.36


DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING		79,776					85,300

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CAREER EDUCATION CORPORATION AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts and percentages)


	For the Year Ended December 31, ⁽¹⁾
	2010			% of Total Revenue		2009			% of Total Revenue
REVENUE:
Tuition and registration fees	$	2,042,383			96.1%	$	1,760,237			96.0%
Other		81,853			3.9%		73,559			4.0%

Total revenue		2,124,236					1,833,796


OPERATING EXPENSES:
Educational services and facilities		639,123			30.1%		606,014			33.0%
General and administrative		1,095,519			51.6%		931,118			50.8%
Depreciation and amortization		71,372			3.4%		65,204			3.6%
Goodwill and asset impairment		71,829			3.4%		2,500			0.1%

Total operating expenses		1,877,843			88.4%		1,604,836			87.5%

Operating income		246,393			11.6%		228,960			12.5%


OTHER INCOME (EXPENSE):
Interest income		1,180			0.1%		2,372			0.1%
Interest expense		(377	)		0.0%		(225	)		0.0%
Miscellaneous expense		(319	)		0.0%		(706	)		0.0%

Total other income		484			0.0%		1,441			0.1%


PRETAX INCOME		246,877			11.6%		230,401			12.6%

Provision for income taxes		80,287			3.8%		80,894			4.4%


INCOME FROM CONTINUING OPERATIONS		166,590			7.8%		149,507			8.2%

Loss from discontinued operations, net of tax		(8,817	)		-0.4%		(68,288	)		-3.7%


NET INCOME	$	157,773			7.4%	$	81,219			4.4%


NET INCOME (LOSS) PER SHARE - DILUTED:
Income from continuing operations	$	2.06				$	1.73
Loss from discontinued operations		(0.11	)				(0.79	)

Net income per share	$	1.95				$	0.94


DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING		80,850					86,418

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CAREER EDUCATION CORPORATION AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATING INCOME BY QUARTER

(In thousands)


	For the 2010 Quarters Ended,⁽¹⁾
	March 31		June 30		September 30		December 31		Full Year
REVENUE:
Tuition and registration fees	$	509,508	$	509,129	$	497,110	$	526,636	$	2,042,383
Other		19,918		18,610		27,032		16,293		81,853

Total revenue		529,426		527,739		524,142		542,929		2,124,236


OPERATING EXPENSES:
Educational services and facilities		159,162		156,918		158,112		164,931		639,123
General and administrative		264,140		256,920		308,386		266,073		1,095,519
Depreciation and amortization		16,678		17,149		17,783		19,762		71,372
Goodwill and asset impairment		—		—		354		71,475		71,829

Total operating expenses		439,980		430,987		484,635		522,241		1,877,843

OPERATING INCOME	$	89,446	$	96,752	$	39,507	$	20,688	$	246,393


	For the 2009 Quarters Ended,⁽¹⁾
	March 31		June 30		September 30		December 31		Full Year
REVENUE:
Tuition and registration fees	$	414,632	$	419,814	$	434,392	$	491,399	$	1,760,237
Other		17,133		17,038		23,332		16,056		73,559

Total revenue		431,765		436,852		457,724		507,455		1,833,796


OPERATING EXPENSES:
Educational services and facilities		145,068		146,981		148,378		165,587		606,014
General and administrative		218,169		235,173		251,728		226,048		931,118
Depreciation and amortization		15,963		16,259		15,806		17,176		65,204
Goodwill and asset impairment		—		—		2,500		—		2,500

Total operating expenses		379,200		398,413		418,412		408,811		1,604,836

OPERATING INCOME	$	52,565	$	38,439	$	39,312	$	98,644	$	228,960

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CAREER EDUCATION CORPORATION AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)


	For the Year Ended December 31,
	2010			2009
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	157,773		$	81,219
Adjustments to reconcile net income to net cash provided by operating activities:
Goodwill and asset impairment		71,829			2,500
Depreciation and amortization expense		71,624			67,596
Bad debt expense		106,324			56,718
Compensation expense related to share-based awards		17,318			16,516
Loss on disposition of property and equipment		457			1,291
Deferred income taxes		(17,007	)		(8,702	)
Changes in operating assets and liabilities:
Accrued expenses and deferred rent obligations		(25,055	)		81,239
Deferred tuition revenue		(12,653	)		29,570
Student receivables, net of allowance for doubtful accounts		(98,920	)		(66,961	)
Other operating assets and liabilities		569			27,265

Net cash provided by operating activities		272,259			288,251


CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of available-for-sale investments		(291,864	)		(617,032	)
Sales of available-for-sale investments		332,445			668,281
Purchases of property and equipment		(127,283	)		(74,087	)
Acquisition of the rights to the Le Cordon Bleu brand		(16,852	)		(26,331	)
Business acquisition, net of acquired cash		(6,194	)		—
Other		88			(132	)

Net cash used in investing activities		(109,660	)		(49,301	)


CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of treasury stock		(154,913	)		(201,119	)
Issuance of common stock		3,109			2,797
Tax benefit associated with stock option exercises		223			237
Payments of assumed loans upon business acquisition		(4,279	)		—
Payments of capital lease obligations		(1,013	)		(1,066	)

Net cash used in financing activities		(156,873	)		(199,151	)


EFFECT OF FOREIGN CURRENCY EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS:		(1,316	)		415


NET INCREASE IN CASH AND CASH EQUIVALENTS		4,410			40,214
DISCONTINUED OPERATIONS CASH ACTIVITY INCLUDED ABOVE:
Add: Cash balance of discontinued operations, beginning of the year		738			1,945
Less: Cash balance of discontinued operations, end of the year		—			738
CASH AND CASH EQUIVALENTS, beginning of the year		284,334			242,913

CASH AND CASH EQUIVALENTS, end of the year	$	289,482		$	284,334

CAREER EDUCATION CORPORATION AND SUBSIDIARIES

UNAUDITED SELECTED SEGMENT INFORMATION

(In thousands, except percentages)


	For the Three Months Ended December 31, ⁽¹⁾
	2010			2009
REVENUE:
University	$	281,008		$	269,009
Health Education		119,352			102,486
Culinary Arts		94,003			91,058
International		48,698			45,070
Corporate and Other		(132	)		(168	)

Total	$	542,929		$	507,455


OPERATING INCOME (LOSS): ^{(2) (4)}
University ⁽³⁾	$	69,018		$	61,292
Health Education ⁽³⁾		16,594			16,020
Culinary Arts ^{(3) (5)}		(63,546	)		12,328
International		12,139			8,903
Corporate and Other ⁽³⁾ ⁽⁶⁾		(13,517	)		101

Total	$	20,688		$	98,644


OPERATING MARGIN (LOSS):
University		24.6%			22.8%
Health Education		13.9%			15.6%
Culinary Arts		-67.6%			13.5%
International		24.9%			19.8%

Total		3.8%			19.4%

(1)

(2)

Prior period financial results have been revised to account for a change in the allocation of shared service costs. Previously, shared service costs were allocated to our segments as a percentage of revenue. Improved data and analytical capabilities have allowed us to now allocate shared service costs based upon usage and consumption factors.

(3)

Fourth quarter 2009 includes pretax expense of $14.3 million related to the present value of the remaining lease obligations for vacated space within Corporate and Other ($5.3), University ($5.2), Culinary Arts ($2.9) and Health Education ($0.9).

(4)

During the fourth quarter 2010, a pretax charge of $7.7 million was recorded in association with a reduction in force to be completed during the first quarter of 2011.

(5)

Fourth quarter 2010 includes pretax expense of $67.8 million related to trade name impairment and $1.4 million related to goodwill impairment within Culinary Arts.

(6)

Fourth quarter 2010 includes pretax expense of $2.3 million related to an asset impairment charge for one of our investments within Corporate and Other. The prior year quarter results include a pretax charge of $5.3 million related to vacated space which was offset by a reduction of $12.0 million related to the termination of certain insurance policies.

CAREER EDUCATION CORPORATION AND SUBSIDIARIES

UNAUDITED SELECTED SEGMENT INFORMATION

(In thousands, except percentages)


	For the Year Ended December 31, ⁽¹⁾
	2010			2009
REVENUE:
University	$	1,159,291		$	1,018,194
Health Education		441,608			362,692
Culinary Arts		387,884			332,236
International		136,076			121,188
Corporate and Other		(623	)		(514	)

Total	$	2,124,236		$	1,833,796


OPERATING INCOME (LOSS):^{(2) (3)}
University ⁽⁴⁾	$	282,013		$	195,081
Health Education		52,028			42,072
Culinary Arts ⁽⁵⁾		(66,813	)		14,873
International		21,828			18,853
Corporate and Other ⁽⁶⁾		(42,663	)		(41,919	)

Total	$	246,393		$	228,960


OPERATING MARGIN (LOSS):
University		24.3%			19.2%
Health Education		11.8%			11.6%
Culinary Arts		-17.2%			4.5%
International		16.0%			15.6%

Total		11.6%			12.5%

(1)

(2)

(3)

During the fourth quarter 2010, a pretax charge of $7.7 million was recorded in association with a reduction in force to be completed during the first quarter of 2011.

(4)

During 2010, University recorded $7.3 million of pretax legal expenses related to the settlements of legal matters and a $0.3 million asset impairment charge for one of our leased facilities within the University reportable segment. The prior year results include a $5.2 million pretax expense related to the present value of the remaining lease obligations for vacated space.

(5)

2010 includes pretax expense of $67.8 million related to trade name impairment and $1.4 million related to goodwill impairment. Culinary Arts also recorded a $40.8 million pretax charge related to the settlement of a legal matter and additional bad debt expense for increases in reserve rates related to our student extended payment plans. The prior year results include $2.9 million pretax expense related to the present value of the remaining lease obligations for vacated space.

(6)

Fourth quarter 2010 includes pretax expense of $2.3 million related to an asset impairment charge for one of our investments within Corporate and Other. The prior year results include pretax charges including an additional $11.3 million for performance- based compensation related to plan outperformance and $5.3 million related to vacated space which were offset by a reduction of $12.0 million related to the termination of certain insurance policies.

CAREER EDUCATION CORPORATION AND SUBSIDIARIES

UNAUDITED SELECTED UNIVERSITY SEGMENT INFORMATION

(Dollars in thousands)


	For the Three Months Ended December 31,				For the Year Ended December 31,
	2010		2009		2010		2009
REVENUE:
CTU	$	123,236	$	105,520	$	465,315	$	368,621
AIU		98,647		99,767		448,581		409,043
Art & Design		59,125		63,722		245,395		240,530

Total University	$	281,008	$	269,009	$	1,159,291	$	1,018,194


OPERATING INCOME:
CTU	$	39,603	$	31,352	$	133,881	$	79,889
AIU		22,905		20,604		118,959		90,127
Art & Design		6,510		9,336		29,173		25,065

Total University	$	69,018	$	61,292	$	282,013	$	195,081


OPERATING MARGIN:
CTU		32.1%		29.7%		28.8%		21.7%
AIU		23.2%		20.7%		26.5%		22.0%
Art & Design		11.0%		14.7%		11.9%		10.4%

Total University		24.6%		22.8%		24.3%		19.2%


	As of December 31,
	2010		2009
STUDENT POPULATION:
CTU		30,900		27,300
AIU		20,000		20,300
Art & Design		11,500		11,700

Total University		62,400		59,300

	For the three months ended December 31,
	2010		2009
NEW STUDENT STARTS:
CTU		8,740		9,800
AIU		6,230		7,210
Art & Design		1,540		1,540

Total University		16,510		18,550

CAREER EDUCATION CORPORATION AND SUBSIDIARIES

UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ITEMS ⁽¹⁾

(In millions, except per share amounts)


	For the Three Months Ended December 31,
	2010				2009
	Operating Income		Earnings per Diluted Share ⁽²⁾		Operating Income			Earnings per Diluted Share ⁽²⁾
As Reported	$	20.7	$	0.19	$	98.6		$	0.74
Reconciling Items:
Trade Name Impairment ⁽³⁾		67.8		0.55		—			—
Legal Settlement ⁽⁴⁾		0.8		0.01		—			—
Severance ⁽⁵⁾		7.7		0.06		—			—
Remaining Lease Obligations for Vacated Space		—		—		14.3			0.11
Performance-based Compensation Related to Plan Outperformance ⁽⁶⁾		—		—		(2.2	)		(0.02	)
Termination of Insurance Policies ⁽⁷⁾		—		—		(12.0	)		(0.09	)

Adjusted to Exclude Significant Items	$	97.0	$	0.81	$	98.7		$	0.74


Diluted Weighted Average Shares Outstanding				79,776					85,300


	For the Year Ended December 31,
	2010				2009
	Operating Income		Earnings per Diluted Share ⁽²⁾		Operating Income			Earnings per Diluted Share ⁽²⁾
As Reported	$	246.4	$	2.06		229.0		$	1.73
Reconciling Items:
Asset Impairment ⁽³⁾		67.8		0.55		2.5			0.02
Legal Settlement ⁽⁴⁾		40.8		0.33		—			—
Severance		7.7		0.06		1.5			0.01
Remaining Lease Obligations for Vacated Space		—		—		14.3			0.11
Performance-based Compensation Related to Plan Outperformance ⁽⁶⁾		—		—		23.1			0.17
Termination of Insurance Policies ⁽⁷⁾		—		—		(12.0	)		(0.09	)

Adjusted to Exclude Significant Items	$	362.7	$	3.00	$	258.4		$	1.95


Diluted Weighted Average Shares Outstanding				80,850					86,418

(1)

The Company believes it is useful to present non-GAAP financial measures which exclude certain significant items as a means to understand the performance of its core business. As a general matter, the Company uses non-GAAP financial measures in conjunction with results presented in accordance with GAAP to help analyze the performance of its core business, assist with preparing the annual operating plan, and measure 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 to provide estimates of future performance and that failure to report non-GAAP measures could result in a misplaced perception that the Company’s results have underperformed or exceeded expectations.

Non-GAAP financial measures when viewed in a reconciliation to corresponding GAAP financial measures, provides an additional way of viewing the Company’s results of operations and the factors and trends affecting the Company’s business. Non-GAAP financial measures should be considered as a supplement to, and not as a substitute for, or superior to, the corresponding financial results presented in accordance with GAAP.

(2)

Earnings per share is based on Income from Continuing Operations.

(3)

Fourth quarter 2010 includes a $67.8 million pretax trade name impairment within Culinary Arts. The $2.5 million asset impairment in 2009 resulted from the carrying value exceeding the fair value for one of our owned facilities.

(4)

A $40.8 million charge was recorded in Culinary Arts related to the settlement of a legal matter; of which $0.8 million was recorded in the fourth quarter.

(5)

During the fourth quarter 2010, a pretax charge of $7.7 million was recorded in association with a reduction in force to be completed during the first quarter of 2011.

(6)

The fourth quarter of 2009 performance-based compensation related to plan outperformance represents the year-end adjustment to the estimated payout based upon full-year results. The full year outperformance by segment was: Corporate - $11.3, University - $5.4, Health Education - $4.3, and Culinary Arts - $2.1 million.

(7)

A $12.0 million payment was received in the fourth quarter 2009 related to the termination of certain insurance policies.

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