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

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8-K - FORM 8-K - PERDOCEO EDUCATION Corp	d388073d8k.htm

Exhibit 99.1

LOGO

CAREER EDUCATION CORPORATION REPORTS

RESULTS FOR SECOND QUARTER 2012

Schaumburg, Ill. (July 31, 2012) – Career Education Corporation (NASDAQ: CECO) today reported total revenue of $369.0 million, and a net loss of $100.2 million, or -$1.52 per diluted share, for the second quarter of 2012 compared to total revenue of $484.9 million and net income of $55.4 million, or $0.73 per diluted share, for the second quarter of 2011. The second quarter of 2012 includes non-cash goodwill and asset impairment charges of $85.6 million.

“We are facing the same stiff headwinds as others in private sector higher education,” Chairman, President and CEO Steven H. Lesnik said. “Withering public criticism, combined with a game-changing regulatory environment aimed at reducing the role of private sector educational institutions, is effectively constraining growth. We are dealing with these headwinds like others, but progress is slow.”

“However, having rejuvenated our regulatory and compliance practices and procedures, I believe ours is an organization that sets its standards high. While 2012 will be a year of transition, our universities and schools, their faculty and staff, are a critical part of the long range solution to the shortage of Americans with needed post-secondary education credentials.”

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, loss per diluted share from continuing operations was
-$0.18 in the second quarter 2012 as compared to earnings per diluted share of $0.73 in the second quarter 2011. For the years to date ended June 30, 2012 and 2011, earnings per diluted share from continuing operations (non-GAAP basis) were $0.33 and $1.59, respectively. (See tables below and the GAAP to non-GAAP reconciliation attached to this press release for further details.)

CONSOLIDATED RESULTS

Quarter Ended June 30, 2012

•

Total revenue was $369.0 million for the second quarter of 2012, a 23.9 percent decrease from $484.9 million for the second quarter of 2011.

•

An operating loss of $108.1 million was recorded for the second quarter of 2012, compared to operating income of $79.3 million for the second quarter of 2011. The operating margin was -29.3 percent for the second quarter of 2012 versus 16.4 percent for the second quarter of 2011.

•

The loss from continuing operations for the second quarter of 2012 was $93.9 million, or -$1.42 per diluted share, versus income from continuing operations of $53.4 million, or $0.71 per diluted share, for the second quarter of 2011.

CEC ANNOUNCES 2Q12 RESULTS …PG 2

•

The operating results for the quarters ended June 30, 2012 and 2011 include the following significant items:


	Significant Items (In Millions)		(Loss) Earnings per Diluted Share Impact
Quarter Ended June 30, 2012
Goodwill and Intangible Asset Impairments	$	84.4	$	1.23
Asset Impairments		1.2		0.01

TOTAL	$	85.6	$	1.24

Quarter Ended June 30, 2011
Goodwill and Intangible Asset Impairments	$	2.7	$	0.02

TOTAL	$	2.7	$	0.02

•

During the second quarter 2012, the Company recorded non-cash goodwill and intangible asset impairment charges of $84.4 million, of which $42.9 million was reflected within Health Education and $41.5 million within Art & Design. In addition, $1.2 million of non-cash asset impairment charges were recorded resulting from the decision made in the second quarter of 2012 to teach out four campuses, primarily within Health Education. The operating results for the second quarter of 2011 included $2.7 million of non-cash goodwill and intangible asset impairment charges primarily related to accreditation rights impairment.

•

Excluding the significant items in the table above, the operating loss for the second quarter of 2012 was $22.5 million and the operating income for the second quarter of 2011 was $82.0 million. The operating margin was -6.1 percent and 16.9 percent for the second quarters of 2012 and 2011, respectively.

Year to Date Ended June 30, 2012

•

Total revenue was $803.1 million for the year to date ended June 30, 2012, compared to $1,016.6 million for the year to date ended June 30, 2011.

•

The operating loss for the year to date ended June 30, 2012 was $61.5 million, versus operating income of $188.2 million for the year to date ended June 30, 2011. The operating margin decreased to -7.7 percent for the year to date ended June 30, 2012, from 18.5 percent for the year to date ended June 30, 2011.

•

The loss from continuing operations for the year to date ended June 30, 2012, was $47.4 million, or -$0.71 per diluted share, compared to income from continuing operations of $124.0 million, or $1.63 per diluted share, for the year to date ended June 30, 2011.

CEC ANNOUNCES 2Q12 RESULTS …PG 3

•

The operating results for the years to date ended June 30, 2012 and 2011 include the following significant items:


	Significant Items (In Millions)			(Loss) Earnings per Diluted Share Impact
Year to Date Ended June 30, 2012
Goodwill and Intangible Asset Impairments	$	84.4		$	1.22
Asset Impairments		1.3			0.01
Insurance Recoveries		(19.0	)		(0.19	)

TOTAL	$	66.7		$	1.04

Year to Date Ended June 30, 2011
Goodwill and Intangible Asset Impairments	$	2.7		$	0.02
Insurance Recoveries		(7.0	)		(0.06	)

TOTAL	$	(4.3	)	$	(0.04	)

•

During the year to date ended June 30, 2012, the Company recorded a $19.0 million insurance recovery related to the settlement of claims under certain insurance policies. During the year to date ended June 30, 2011, the Company recorded a $7.0 million insurance recovery related to previously settled legal matters.

•

Excluding the significant items in the table above, operating income was $5.2 million for the year to date ended June 30, 2012 and $183.9 million for the year to date ended June 30, 2011. Operating margin was 0.6 percent and 18.1 percent for the years to date ended June 30, 2012 and 2011, respectively.

CONSOLIDATED CASH FLOWS AND FINANCIAL POSITION

Cash Flows

•

Net cash flows provided by operating activities totaled $16.6 million for the year to date ended June 30, 2012, compared to $114.8 million for the year to date ended June 30, 2011.

•

Capital expenditures decreased to $20.0 million during the year to date ended June 30, 2012, from $47.9 million during the year to date ended June 30, 2011. Capital expenditures represented 2.5 percent and 4.6 percent of total revenue of continuing and discontinued operations during the years to date ended June 30, 2012 and 2011, respectively.

Financial Position

•

As of June 30, 2012 and December 31, 2011, cash and cash equivalents and short-term investments totaled $369.9 million and $441.2 million, respectively.

Stock Repurchase Program

During the second quarter of 2012, the Company did not repurchase any shares of its common stock. Year to date through June 30, 2012, the Company repurchased 6.1 million shares of its common stock for approximately $56.4 million at an average price of $9.29 per share.

As of June 30, 2012, approximately $183.3 million was available under the Company’s authorized stock repurchase program to repurchase outstanding shares of its 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 various factors, including market conditions and corporate and regulatory requirements.

CEC ANNOUNCES 2Q12 RESULTS …PG 4

STUDENT POPULATION AND NEW STUDENT STARTS

Student Population

Total student population by reportable segment as of June 30, 2012 and 2011, was as follows:


	As of June 30,				% Change 2012 vs. 2011
	2012		2011		% Change 2012 vs. 2011
Student Population
CTU		23,500		28,100	-16%
AIU		14,500		17,600	-18%
Health Education		17,200		29,100	-41%
Culinary Arts		12,100		13,200	-8%
Art & Design		7,600		10,000	-24%
International		2,700		3,600	-25%

Total Student Population		77,600		101,600	-24%

New Student Starts

New student starts by reportable segment for the quarters ended June 30, 2012 and 2011, were as follows:


	For the Quarters Ended June 30,				% Change 2012 vs. 2011
	2012		2011		% Change 2012 vs. 2011
New Student Starts
CTU ⁽¹⁾		5,910		7,810	-24%
AIU ⁽¹⁾		3,050		4,290	-29%
Health Education ⁽²⁾		2,430		7,750	-69%
Culinary Arts ⁽²⁾		2,410		3,700	-35%
Art & Design		690		1,000	-31%
International		510		310	65%

Total New Student Starts		15,000		24,860	-40%

(1)

In 2011, CTU and AIU implemented the Student Orientation and Academic Readiness (“SOAR”) program which identifies students who may not be prepared for the rigor of college studies. A student is not included as a new student start until successful completion of SOAR. New student start data will be comparable beginning in the third quarter 2012.

(2)	The second quarter 2012 had one less new student start as compared to the previous year quarter. Excluding this timing impact, the change in new student starts for Health Education and Culinary Arts would have been -53% and -21%, respectively.

CONFERENCE CALL INFORMATION

Career Education Corporation will host a conference call on Wednesday, August 1, 2012 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 32862722. 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 32862722.

CEC ANNOUNCES 2Q12 RESULTS …PG 5

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 75,000 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, 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”); 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 assumptions, risks, uncertainties and other factors that could cause our 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 or revise such factors or 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 outcomes of which could materially and adversely affect our financial condition and operations, include, but are not limited to, the following: changes in enrollment, student mix and average registered credits taken by students; our ability to implement effective cost reduction strategies; our continued compliance with and eligibility to participate in Title IV Programs under the Higher Education Act of 1965, as amended, and the regulations thereunder (including the “90-10 Rule”), as well as national and regional accreditation standards and state regulatory requirements; our ability to obtain accrediting agency approvals for existing, changed or new programs and to successfully defend litigation and other claims brought against us; rulemaking by the U.S. Department of Education and increased focus by the U.S. Congress and governmental agencies on for-profit education institutions; and changes in the overall U.S. or global economy. Further information about these and other relevant risks and uncertainties may be found in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011 and its subsequent filings with the Securities and Exchange Commission.

###

CEC ANNOUNCES 2Q12 RESULTS …PG 6

CONTACT

Investors:

Matthew Tschanz

Director, Corporate Finance

(847) 585-3899

Media:

Mark Spencer

Director, Corporate Communications

(847) 585-3802

CAREER EDUCATION CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands)


	June 30, 2012			December 31, 2011
	(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	209,312		$	280,592
Short-term investments		160,616			160,607

Total cash and cash equivalents and short-term investments		369,928			441,199

Student receivables, net		55,582			60,573
Receivables, other, net		2,086			2,914
Prepaid expenses		73,242			62,399
Inventories		10,003			11,356
Deferred income tax assets, net		10,940			10,940
Other current assets		6,179			17,769
Assets of discontinued operations		3,282			3,328

Total current assets		531,242			610,478


NON-CURRENT ASSETS:
Property and equipment, net		327,260			349,788
Goodwill		130,885			212,626
Intangible assets, net		74,633			77,186
Student receivables, net		8,322			9,297
Deferred income tax assets, net		9,525			9,522
Other assets, net		40,242			30,122
Assets of discontinued operations		16,981			17,101

TOTAL ASSETS	$	1,139,090		$	1,316,120

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Current maturities of capital lease obligations	$	399		$	844
Accounts payable		38,380			48,408
Accrued expenses:
Payroll and related benefits		41,520			41,853
Advertising and production costs		23,680			17,717
Other		50,557			67,271
Deferred tuition revenue		104,557			144,947
Liabilities of discontinued operations		11,072			8,403

Total current liabilities		270,165			329,443


NON-CURRENT LIABILITIES:
Capital lease obligations, net of current maturities		—			207
Deferred rent obligations		99,498			102,079
Other liabilities		36,847			40,365
Liabilities of discontinued operations		30,143			37,935

Total non-current liabilities		166,488			180,586

SHARE-BASED AWARDS SUBJECT TO REDEMPTION		104			110

STOCKHOLDERS’ EQUITY:
Preferred stock		—			—
Common stock		817			820
Additional paid-in capital		597,586			590,965
Accumulated other comprehensive loss		(9,552	)		(5,136	)
Retained earnings		327,456			375,607
Cost of shares in treasury		(213,974	)		(156,275	)

Total stockholders’ equity		702,333			805,981

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	1,139,090		$	1,316,120

CAREER EDUCATION CORPORATION AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(In thousands, except per share amounts and percentages)


	For the Quarters Ended June 30,
	2012			% of Total Revenue		2011 ⁽¹⁾		% of Total Revenue
REVENUE:
Tuition and registration fees	$	362,868			98.3%	$	469,683		96.9%
Other		6,098			1.7%		15,195		3.1%

Total revenue		368,966					484,878

OPERATING EXPENSES:
Educational services and facilities		145,848			39.5%		158,012		32.6%
General and administrative		225,617			61.1%		224,605		46.3%
Depreciation and amortization		20,020			5.4%		20,274		4.2%
Goodwill and asset impairment		85,578			23.2%		2,676		0.6%

Total operating expenses		477,063			129.3%		405,567		83.6%

Operating (loss) income		(108,097	)		-29.3%		79,311		16.4%

OTHER INCOME (EXPENSE):
Interest income		470			0.1%		263		0.1%
Interest expense		(28	)		0.0%		(39)		0.0%
Miscellaneous expense		(77	)		0.0%		(31)		0.0%

Total other income		365			0.1%		193		0.0%

PRETAX (LOSS) INCOME		(107,732	)		-29.2%		79,504		16.4%
(Benefit from) provision for income taxes		(13,865	)		-3.8%		26,085		5.4%

(LOSS) INCOME FROM CONTINUING OPERATIONS		(93,867	)		-25.4%		53,419		11.0%
(Loss) income from discontinued operations, net of tax		(6,367	)		-1.7%		1,934		0.4%

NET (LOSS) INCOME		(100,234	)		-27.2%		55,353		11.4%

OTHER COMPREHENSIVE (LOSS) INCOME, net of tax:
Foreign currency translation adjustments		(9,736	)				3,249
Unrealized losses on investments		(108	)				(39)

Total other comprehensive (loss) income		(9,844	)				3,210

COMPREHENSIVE (LOSS) INCOME	$	(110,078	)			$	58,563

NET (LOSS) INCOME PER SHARE - DILUTED:
(Loss) income from continuing operations	$	(1.42	)			$	0.71
(Loss) income from discontinued operations		(0.10	)				0.02

Net (loss) income per share	$	(1.52	)			$	0.73

DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING		66,034					75,533

(1)

In November 2011, the Company sold its ownership interest in Istituto Marangoni. As a result, all prior period results have been recast to include Istituto Marangoni as a component of discontinued operations.

CAREER EDUCATION CORPORATION AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(In thousands, except per share amounts and percentages)


	For the Years to Date Ended June 30,
	2012			% of Total Revenue		2011 ⁽¹⁾		% of Total Revenue
REVENUE:
Tuition and registration fees	$	786,486			97.9%	$	979,137		96.3%
Other		16,617			2.1%		37,441		3.7%

Total revenue		803,103					1,016,578

OPERATING EXPENSES:
Educational services and facilities		298,533			37.2%		323,643		31.8%
General and administrative		440,249			54.8%		461,666		45.4%
Depreciation and amortization		40,126			5.0%		40,407		4.0%
Goodwill and asset impairment		85,661			10.7%		2,676		0.3%

Total operating expenses		864,569			107.7%		828,392		81.5%

Operating (loss) income		(61,466	)		-7.7%		188,186		18.5%

OTHER INCOME (EXPENSE):
Interest income		740			0.1%		486		0.0%
Interest expense		(65	)		0.0%		(76)		0.0%
Miscellaneous (expense) income		(77	)		0.0%		1,785		0.2%

Total other income		598			0.1%		2,195		0.2%

PRETAX (LOSS) INCOME		(60,868	)		-7.6%		190,381		18.7%
(Benefit from) provision for income taxes		(13,434	)		-1.7%		66,367		6.5%

(LOSS) INCOME FROM CONTINUING OPERATIONS		(47,434	)		-5.9%		124,014		12.2%
(Loss) income from discontinued operations, net of tax		(724	)		-0.1%		4,374		0.4%

NET (LOSS) INCOME		(48,158	)		-6.0%		128,388		12.6%

OTHER COMPREHENSIVE (LOSS) INCOME, net of tax:
Foreign currency translation adjustments		(4,296	)				11,492
Unrealized (losses) gains on investments		(120	)				46

Total other comprehensive (loss) income		(4,416	)				11,538

COMPREHENSIVE (LOSS) INCOME	$	(52,574	)			$	139,926

NET (LOSS) INCOME PER SHARE - DILUTED:
(Loss) income from continuing operations	$	(0.71	)			$	1.63
(Loss) income from discontinued operations		(0.01	)				0.06

Net (loss) income per share	$	(0.72	)			$	1.69

DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING		66,439					76,174

(1)

CAREER EDUCATION CORPORATION AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)


	For the Years to Date Ended June 30,
	2012			2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income	$	(48,158	)	$	128,388
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Goodwill and asset impairment		85,661			2,676
Depreciation and amortization expense		40,126			40,873
Bad debt expense		17,779			26,834
Compensation expense related to share-based awards		5,735			8,488
Loss (gain) on disposition of property and equipment		287			(1,777	)
Changes in operating assets and liabilities		(84,853	)		(90,730	)

Net cash provided by operating activities		16,577			114,752

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of available-for-sale investments		(108,198	)		(110,162	)
Sales of available-for-sale investments		108,188			109,894
Purchases of property and equipment		(19,990	)		(47,886	)
Earnout payments		(5,818	)		(8,509	)
Proceeds on the sale of assets		—			6,259
Business acquisition, net of acquired cash		(2,873	)		—
Other		(120	)		46

Net cash used in investing activities		(28,811	)		(50,358	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of treasury stock		(56,431	)		(129,879	)
Issuance of common stock		883			3,025
Tax benefit associated with stock option exercises		—			322
Payments of assumed loans upon business acquisition		(318	)		—
Payments of capital lease obligations		(641	)		(744	)

Net cash used in financing activities		(56,507	)		(127,276	)

EFFECT OF FOREIGN CURRENCY EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS:		(2,539	)		2,221

NET DECREASE IN CASH AND CASH EQUIVALENTS		(71,280	)		(60,661	)
DISCONTINUED OPERATIONS CASH ACTIVITY INCLUDED ABOVE:
Add: Cash balance of discontinued operations, beginning of the period		—			28,838
Less: Cash balance of discontinued operations, end of the period		—			19,908
CASH AND CASH EQUIVALENTS, beginning of the period		280,592			260,644

CASH AND CASH EQUIVALENTS, end of the period	$	209,312		$	208,913

CAREER EDUCATION CORPORATION AND SUBSIDIARIES

UNAUDITED SELECTED SEGMENT INFORMATION

(In thousands, except percentages)


	For the Quarters Ended June 30,
	2012			2011 ⁽¹⁾
REVENUE:
CTU	$	94,859		$	112,061
AIU		78,841			98,031
Health Education		75,751			109,825
Culinary Arts		58,301			83,259
Art & Design		40,054			56,676
International		21,140			25,151
Corporate and Other		20			(125	)

Total	$	368,966		$	484,878

OPERATING (LOSS) INCOME:
CTU	$	11,515		$	33,973
AIU		6,878			26,337
Health Education ⁽²⁾		(67,253	)		3,381
Culinary Arts		(4,441	)		13,174
Art & Design ⁽³⁾		(46,971	)		7,675
International		(2,406	)		2,038
Corporate and Other		(5,419	)		(7,267	)

Total	$	(108,097	)	$	79,311

OPERATING MARGIN (LOSS):
CTU		12.1%			30.3%
AIU		8.7%			26.9%
Health Education		-88.8%			3.1%
Culinary Arts		-7.6%			15.8%
Art & Design		-117.3%			13.5%
International		-11.4%			8.1%

Total		-29.3%			16.4%

(1)

(2)

Second quarter 2012 includes a $41.9 million non-cash goodwill impairment charge, a $1.1 million non-cash asset impairment charge associated with the decision to teach out three campuses and a $1.0 million non-cash trade name impairment charge. The prior year quarter results include a $2.0 million non-cash charge related to the impairment of certain accreditation rights.

(3)

Second quarter 2012 includes a $41.5 million non-cash goodwill impairment charge. The prior year quarter results include a $0.5 million non-cash charge related to the impairment of accreditation rights.

CAREER EDUCATION CORPORATION AND SUBSIDIARIES

UNAUDITED SELECTED SEGMENT INFORMATION

(In thousands, except percentages)


	For the Years to Date Ended June 30,
	2012			2011 ⁽¹⁾
REVENUE:
CTU	$	194,774		$	230,126
AIU		167,781			202,305
Health Education		166,976			226,134
Culinary Arts		121,847			175,032
Art & Design		87,722			121,276
International		63,969			61,966
Corporate and Other		34			(261	)

Total	$	803,103		$	1,016,578

OPERATING (LOSS) INCOME:
CTU	$	30,560		$	70,261
AIU		21,539			53,954
Health Education ⁽²⁾		(79,097	)		15,011
Culinary Arts		(4,449	)		26,941
Art & Design ⁽³⁾		(47,860	)		18,070
International		10,719			11,793
Corporate and Other ⁽⁴⁾		7,122			(7,844	)

Total	$	(61,466	)	$	188,186

OPERATING MARGIN (LOSS):
CTU		15.7%			30.5%
AIU		12.8%			26.7%
Health Education		-47.4%			6.6%
Culinary Arts		-3.7%			15.4%
Art & Design		-54.6%			14.9%
International		16.8%			19.0%

Total		-7.7%			18.5%

(1)

(2)

Year to date 2012 includes a $41.9 million non-cash goodwill impairment charge, a $1.1 million non-cash asset impairment charge associated with the decision to teach out three campuses and a $1.0 million non-cash trade name impairment charge. 2011 results include a $2.0 million non-cash charge related to the impairment of certain accreditation rights.

(3)

Year to date 2012 includes a $41.5 million non-cash goodwill impairment charge. 2011 results include a $0.5 million non-cash charge related to the impairment of accreditation rights.

(4)

Year to date 2012 includes a $19.0 million insurance recovery related to the settlement of claims under certain insurance policies. Year to date 2011 includes a $7.0 million insurance recovery related to previously settled legal matters.

CAREER EDUCATION CORPORATION AND SUBSIDIARIES

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

(In millions, except share and per share amounts)


	For the Quarters Ended June 30,
	2012						2011
	Operating (Loss) Income			(Loss) Earnings per Diluted Share ⁽²⁾			Operating Income			(Loss) Earnings per Diluted Share ⁽²⁾
As Reported	$	(108.1	)	$	(1.42	)	$	79.3		$	0.71
Reconciling Items:
Goodwill and Intangible Asset Impairments ⁽³⁾		84.4			1.23			2.7			0.02
Asset Impairments ⁽⁴⁾		1.2			0.01			—			—

Adjusted to Exclude Significant Items	$	(22.5	)	$	(0.18	)	$	82.0		$	0.73


Diluted Weighted Average Shares Outstanding					66,034						75,533


	For the Years to Date Ended June 30,
	2012						2011
	Operating (Loss) Income			(Loss) Earnings per Diluted Share ⁽²⁾			Operating Income			(Loss) Earnings per Diluted Share ⁽²⁾
As Reported	$	(61.5	)	$	(0.71	)	$	188.2		$	1.63
Reconciling Items:
Goodwill and Intangible Asset Impairments ⁽³⁾		84.4			1.22			2.7			0.02
Asset Impairments ⁽⁴⁾		1.3			0.01			—			—
Insurance Recoveries ⁽⁵⁾		(19.0	)		(0.19	)		(7.0	)		(0.06	)

Adjusted to Exclude Significant Items	$	5.2		$	0.33		$	183.9		$	1.59


Diluted Weighted Average Shares Outstanding					66,439						76,174

(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)

(Loss) earnings per diluted share is based on (loss) income from continuing operations and assumes a 35% tax rate for each deductible item.

(3)

Second quarter 2012 includes non-cash goodwill and intangible asset impairment charges totaling $84.4 million, of which $74.5 million is non-deductible for income tax purposes, applicable to Health Education ($42.9) and Art & Design ($41.5). Second quarter 2011 includes a $2.7 million non-cash impairment charge primarily related to accreditation rights.

(4)

Second quarter 2012 includes non-cash asset impairment charges of $1.2 million associated with the decision to teach out three Health Education campuses ($1.1) and one AIU campus ($0.1).

(5)

Year to dated ended June 30, 2012 includes a $19.0 million insurance recovery related to the settlement of claims under certain insurance policies. Year to date ended June 30, 2011 includes a $7.0 million insurance recovery related to previously settled legal matters.

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