Perdoceo Education (PRDO) 10-Q 5 May 10 2010 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information
	3 Months Ended Mar. 31, 2010	Apr. 30, 2010
Document Type	10-Q
Amendment Flag	false
Document Period End Date	2010-03-31
Document Fiscal Year Focus	2,010
Document Fiscal Period Focus	Q1
Trading Symbol	CECO
Entity Registrant Name	CAREER EDUCATION CORP
Entity Central Index Key	0001046568
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		81,819,798

CONSOLIDATED BALANCE SHEETS

CONSOLIDATED BALANCE SHEETS (USD $)
In Thousands	Mar. 31, 2010	Dec. 31, 2009
CURRENT ASSETS:
Cash and cash equivalents	$215,944	$284,473
Short-term investments	206,225	200,379
Total cash and cash equivalents and short-term investments	422,169	484,852
Student receivables, net of allowance for doubtful accounts of $39,216 and $34,963 as of March 31, 2010 and December 31, 2009, respectively	58,080	57,823
Receivables, other, net	4,166	5,256
Prepaid expenses	47,259	41,090
Inventories	11,320	11,271
Deferred income tax assets, net	12,983	12,983
Other current assets	6,667	9,442
Assets of discontinued operations	5,128	6,118
Total current assets	567,772	628,835
NON-CURRENT ASSETS:
Property and equipment, net	303,684	306,279
Goodwill	374,925	377,515
Intangible assets, net	177,828	178,520
Assets of discontinued operations	23,653	24,401
Student receivables, net of allowance for doubtful accounts of $25,025 and $18,394 as of March 31, 2010 and December 31, 2009, respectively	20,485	21,455
Deferred income tax assets, net	3,799	3,659
Other assets, net	23,203	23,178
TOTAL ASSETS	1,495,349	1,563,842
CURRENT LIABILITIES:
Current maturities of capital lease obligations	769	880
Accounts payable	42,203	51,108
Accrued expenses:
Payroll and related benefits	53,433	88,439
Advertising and production costs	25,254	21,436
Income taxes	47,090	17,849
Earnout payments	17,109	18,009
Other	60,281	46,182
Deferred tuition revenue	167,677	184,411
Liabilities of discontinued operations	14,677	13,695
Total current liabilities	428,493	442,009
NON-CURRENT LIABILITIES:
Capital lease obligations, net of current maturities	1,523	2,262
Deferred rent obligations	91,439	91,725
Liabilities of discontinued operations	53,667	62,997
Earnout payments	20,198	23,680
Other liabilities	16,389	19,124
Total non-current liabilities	183,216	199,788
SHARE-BASED AWARDS SUBJECT TO REDEMPTION	213	521
STOCKHOLDERS' EQUITY:
Preferred stock, $0.01 par value; 1,000,000 shares authorized; none issued or outstanding
Common stock, $0.01 par value; 300,000,000 shares authorized; 96,422,737 and 95,399,192 shares issued, 83,386,394 and 85,785,478 shares outstanding as of March 31, 2010 and December 31, 2009, respectively	964	954
Additional paid-in capital	250,923	244,992
Accumulated other comprehensive income	492	8,408
Retained earnings	944,588	889,057
Cost of 13,036,343 and 9,613,714 shares in treasury as of March 31, 2010 and December 31, 2009, respectively	(313,540)	(221,887)
Total stockholders' equity	883,427	921,524
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$1,495,349	$1,563,842

CONSOLIDATED BALANCE SHEETS (Pa

CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)
In Thousands, except Share data	Mar. 31, 2010	Dec. 31, 2009
Student receivables, allowance for doubtful accounts	$39,216	$34,963
Student receivables, allowance for doubtful accounts	$25,025	$18,394
Preferred stock, par value	0.01	0.01
Preferred stock, shares authorized	1,000,000	1,000,000
Preferred stock, issued	0	0
Preferred stock, outstanding	0	0
Common stock, par value	0.01	0.01
Common stock, shares authorized	300,000,000	300,000,000
Common stock, shares issued	96,422,737	95,399,192
Common stock, shares outstanding	83,386,394	85,785,478
Treasury, shares in treasury	13,036,343	9,613,714

CONSOLIDATED STATEMENTS OF OPER

CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)
In Thousands, except Per Share data	3 Months Ended Mar. 31, 2010	3 Months Ended Mar. 31, 2009
REVENUE:
Tuition and registration fees	$509,753	$415,674
Other	19,929	17,189
Total revenue	529,682	432,863
OPERATING EXPENSES:
Educational services and facilities	160,297	146,616
General and administrative	264,528	218,897
Depreciation and amortization	16,753	16,101
Total operating expenses	441,578	381,614
Operating income	88,104	51,249
OTHER (EXPENSE) INCOME:
Interest income	247	1,158
Interest expense	(13)	(10)
Miscellaneous expense	(275)	(37)
Total other (expense) income	(41)	1,111
PRETAX INCOME	88,063	52,360
Provision for income taxes	32,108	18,467
INCOME FROM CONTINUING OPERATIONS	55,955	33,893
LOSS FROM DISCONTINUED OPERATIONS, net of tax	(733)	(10,636)
NET INCOME	$55,222	$23,257
NET INCOME (LOSS) PER SHARE - BASIC:
Income from continuing operations	0.68	0.38
Loss from discontinued operations	-0.01	-0.12
Net income	0.67	0.26
NET INCOME (LOSS) PER SHARE - DILUTED:
Income from continuing operations	0.67	0.38
Loss from discontinued operations	-0.01	-0.12
Net income	0.66	0.26
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic	82,298	90,090
Diluted	83,116	90,162

CONSOLIDATED STATEMENTS OF CASH

CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Thousands	3 Months Ended Mar. 31, 2010	3 Months Ended Mar. 31, 2009
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$55,222	$23,257
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense	16,753	16,802
Bad debt expense	26,217	9,943
Compensation expense related to share-based awards	4,995	3,157
Loss on disposition of property and equipment	337	295
Changes in operating assets and liabilities	(50,056)	(4,755)
Net cash provided by operating activities	53,468	48,699
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of available-for-sale investments	(117,628)	(225,622)
Sales of available-for-sale investments	111,782	149,009
Purchases of property and equipment	(19,757)	(14,898)
Earnout payments	(4,382)
Other	(309)	(266)
Net cash used in investing activities	(30,294)	(91,777)
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of treasury stock	(89,637)	(40,184)
Issuance of common stock	883	520
Tax benefit associated with stock option exercises	64	21
Payments of capital lease obligations	(749)	(141)
Net cash used in financing activities	(89,439)	(39,784)
EFFECT OF FOREIGN CURRENCY EXCHANGE RATE
CHANGES ON CASH AND CASH EQUIVALENTS:	(2,857)	(2,875)
NET DECREASE IN CASH AND CASH EQUIVALENTS	(69,122)	(85,737)
DISCONTINUED OPERATIONS CASH ACTIVITY INCLUDED ABOVE:
Add: Cash balance of discontinued operations, beginning of the period	599	2,004
Less: Cash balance of discontinued operations, end of the period	6	2,258
CASH AND CASH EQUIVALENTS, beginning of the period	284,473	242,854
CASH AND CASH EQUIVALENTS, end of the period	$215,944	$156,863

DESCRIPTION OF THE COMPANY

DESCRIPTION OF THE COMPANY
	3 Months Ended Mar. 31, 2010
DESCRIPTION OF THE COMPANY	1.DESCRIPTION OF THE COMPANY 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, the United Kingdom and Monaco, and offer doctoral, masters, bachelors and associate degrees and diploma and certificate programs. Approximately 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 is an industry leader whose brands are recognized globally. Those brands include, among others, American InterContinental University (AIU); Brooks Institute; Colorado Technical University (CTU); Harrington College of Design; INSEEC Group (INSEEC) Schools, including the 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 our schools, CEC is committed to providing quality education, enabling students to graduate and pursue rewarding careers. For more information, see CECs website at www.careered.com. The website includes a detailed listing of individual campus locations and web links to CECs colleges, schools, and universities. As used in this Quarterly Report on Form 10-Q, the terms we, us, our, and CEC refer to Career Education Corporation and our wholly-owned subsidiaries. The terms school and university refer to an individual, branded, proprietary educational institution, owned by us and includes its campus locations. The term campus refers to an individual main or branch campus operated by one of our schools or universities.

BASIS OF PRESENTATION

BASIS OF PRESENTATION
	3 Months Ended Mar. 31, 2010
BASIS OF PRESENTATION	2. BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the financial statements do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments, including normal recurring accruals, considered necessary for a fair presentation have been included. Operating results for the three months ended March31, 2010, are not necessarily indicative of the results that may be expected for the year ending December31, 2010. The unaudited consolidated financial statements presented herein include the accounts of CEC and our wholly-owned subsidiaries. All inter-company transactions and balances have been eliminated. On January15, 2010, we realigned our resources to more effectively execute our new strategic growth plan. We began the integration of our schools which previously comprised the Art Design Strategic Business Unit (SBU) alongside AIU and CTU, within the University SBU. This realignment will facilitate synergies between the programs in Art Design and University, especially in the areas of fashion design, merchandising and interior design and technology.It will also enable the sharing of student-focused online platforms and expertise and aid IADT as it pursues its longer-term strategy of regional accreditation.Harrington College of Design, Collins College and Brooks Institute joined the IADT schools in the alignment of the Art Design group into the University SBU. The realignment also shifted Brown College and Briarcliffe College into the Health Education SBU. We expect Briarcliffes regional accreditation to be beneficial in providing greater opportunity for Sanford- Brown students to enroll in higher degree programs. This realignment resulted in new reportable segments, and prior period results have been revised to reflect these new reportable segments. See Note12 Segment Reporting of the notes to our unaudited consolidated financial statements for further discussion. In addition to the realignment, we completed a detailed review of our shared service costs to determine which of these costs should be charged to the SBUs as well as how these shared service costs should be allocated. These services include legal, finance, human resources, marketing, certain academic functions and certain centralized activities related to student finance, including financial aid processing, student account posting and collections. These costs, recorded within Corporate and other, were previously allocated to our SBUs based upon a percentage of revenue. Improved data and analytical capabilities have provided us insight into costs being incurred to support the SBUs versus costs being incurred to support the corporation as a whole. The new methodology allocates costs based on usage and consumption factors such as student population, employee headcount, advertising spend, number of financial aid recipients and revenue where appropr

RECENT ACCOUNTING PRONOUNCEMENT

RECENT ACCOUNTING PRONOUNCEMENTS
	3 Months Ended Mar. 31, 2010
RECENT ACCOUNTING PRONOUNCEMENTS	3. RECENT ACCOUNTING PRONOUNCEMENTS On January1, 2009, we adopted the most recent authoritative guidance issued by the Financial Accounting Standards Board Accounting Standards Codification (FASB ASC) under Topic 820 Fair Value Measurements and Disclosures for our nonfinancial assets and nonfinancial liabilities, including long-lived assets, goodwill and intangible assets. This adoption did not have a material impact on our unaudited consolidated financial statements. Furthermore, the authoritative guidance clarifies determination of fair value of a financial asset when the market for that asset is not active and what constitutes an inactive market. Additional guidance is given on measuring the fair value of financial instruments when market activity has decreased and quoted prices may not be determinative of fair value. Management has fully considered this guidance and related update when determining the fair value of our financial assets as of March31, 2010, and our adoption did not have a material impact on our unaudited consolidated financial statements. On April9, 2009, we adopted the most recent authoritative guidance issued by FASB ASC under Topic 825 Financial Instruments. Disclosures related to the fair value of financial instruments to interim periods have been expanded to improve upon the comparability and transparency of financial statements. Additionally, authoritative guidance issued under Topic 320 Investments Debt and Equity Securities provides further guidance related to other-than temporary impairment for debt securities by now requiring that an investor must assert that it has both the intent and the ability to hold a security for a period of time sufficient to allow for an anticipated recovery in its fair value to its amortized cost basis to avoid recognizing an other-than-temporary impairment. Management has fully considered this guidance when determining the fair value of our financial assets as of March31, 2010 and does not believe it has a material impact on our unaudited consolidated financial statements. In the second quarter of 2009, we adopted the most recent authoritative guidance issued by FASB ASC under Topic 855 Subsequent Events. The authoritative guidance establishes general standards of accounting and disclosure guidelines for events or transactions that occur after the balance sheet date but before financial statements are issued or are available to be issued. This guidance is effective for interim and annual periods ending after June15, 2009. Our adoption of the guidance and the related 2010 update did not have a material impact on our unaudited consolidated financial statements. In January 2009, the Securities and Exchange Commission (SEC) issued Release No.33-9002, Interactive Data to Improve Financial Reporting. The rule requires all companies to provide their financial statements and financial statement schedules to the SEC and on their corporate websites in interactive data format using the eXtensible Business Reporting Language (XBRL), which is an electronic language specifically for the communication of business and financial data. The intention of XBRL is to improve its usefulne

DISCONTINUED OPERATIONS

DISCONTINUED OPERATIONS
	3 Months Ended Mar. 31, 2010
DISCONTINUED OPERATIONS	4.DISCONTINUED OPERATIONS As of March31, 2010, the results of operations for schools that have ceased operations or were sold are presented within discontinued operations. We expect to incur approximately $7.0 million by the fourth quarter 2010 of future remaining lease obligations upon the closure of our AIU Los Angeles, CA campus. The results for this campus will be recast as a component of discontinued operations upon the completion of its teach out. Results of Discontinued Operations Combined summary results of operations for our discontinued operations for the three months ended March31, 2010 and 2009, were as follows: For the Three Months Ended March31, 2010 2009 (Dollars in thousands) Revenue $ (13 ) $ 4,597 Loss before income tax $ (1,128 ) $ (16,134 ) Income tax benefit (395 ) (5,498 ) Loss from discontinued operations $ (733 ) $ (10,636 ) Assets and Liabilities of Discontinued Operations Assets and liabilities of discontinued operations on our unaudited consolidated balance sheets as of March31, 2010 and December31, 2009 include the following: March31, 2010 December31, 2009 (Dollars in thousands) Assets: Current assets: Cash and cash equivalents $ 6 $ 599 Receivables, net 117 242 Prepaid expenses 1,539 1,813 Deferred income tax assets 3,462 3,462 Other current assets 4 2 Total current assets 5,128 6,118 Non-current assets: Deferred income tax assets 21,474 21,474 Other assets, net 2,179 2,927 Total assets of discontinued operations $ 28,781 $ 30,519 Liabilities: Current Liabilities: Accounts payable $ 39 $ 173 Accrued payroll and related benefits 76 1,722 Accrued expenses 3,025 4,190 Deferred tuition revenue 44 Remaining lease obligations 11,537 7,566 Total current liabilities 14,677 13,695 Non-current liabilities: Remaining lease obligations 53,667 62,997 Total liabilities of discontinued operations $ 68,344 $ 76,692 Remaining Lease Obligations A number of the campuses that have ceased operations in 2008 and 2009 have remaining lease obligations that range from two to nine years. A liability is recorded representing the fair value of the remaining lease obligation at the time in which the space is no longer being utilized. Changes in our future remaining lease obligations, which are reflected within current and non-current liabilities of discontinued operations on our unaudited consolidated balance sheets, for our discontinued operations for the three months ended March31, 2010 and 2009, were as follows: Balance, Beginning of Period Charges Incurred (1) Net Cash Payments Other (2) Balance, End of Period (Dollars in thousands) For the three months

FINANCIAL INSTRUMENTS

FINANCIAL INSTRUMENTS
	3 Months Ended Mar. 31, 2010
FINANCIAL INSTRUMENTS	5. FINANCIAL INSTRUMENTS Cash and Cash Equivalents and Investments Cash and cash equivalents and investments from our continuing operations consist of the following as of March31, 2010 and December31, 2009: March31, 2010 Cost (Dollarsinthousands) GrossUnrealized FairValue Gain (Loss) Cash and cash equivalents: Cash $ 127,195 $ $ $ 127,195 Money market funds 88,442 307 88,749 Total cash and cash equivalents 215,637 307 215,944 Short-term investments (available-for-sale): U.S. Treasury bills 206,265 20 (60 ) 206,225 Total cash and cash equivalents and short-term investments $ 421,902 $ 327 $ (60 ) $ 422,169 Long-term Investments: Municipal bonds $ 12,325 $ $ (783 ) $ 11,542 December 31, 2009 Cost (Dollarsinthousands) GrossUnrealized FairValue Gain (Loss) Cash and cash equivalents: Cash $ 180,571 $ $ $ 180,571 Money market funds 103,530 372 103,902 Total cash and cash equivalents 284,101 372 284,473 Short-term investments (available-for-sale): U.S. Treasury bills 200,320 61 (2 ) 200,379 Total cash and cash equivalents and short-term investments $ 484,421 $ 433 $ (2 ) $ 484,852 Long-term Investments: Municipal bonds $ 12,325 $ $ (745 ) $ 11,580 In the table above, unrealized holding losses as of March31, 2010 relate to cash equivalents and available-for-sale investments that have been in a continuous unrealized loss position for less than one year. The table also includes unrealized holding losses that relate to our long-term investments in municipal bonds, which are auction rate securities (ARS). When evaluating our investments for possible impairment, we review factors such as the length of time and extent to which fair value has been less than the cost basis, the financial condition of the investee, and our ability and intent to hold the investment for a period of time that may be sufficient for anticipated recovery in fair value. The decline in the fair value of our municipal bonds through March31, 2010 is attributable to the lack of activity in the ARS market, exposing these investments to liquidity risk. Included in cash and cash equivalents above are amounts related to certain of our European campuses that are operated on a not-for-profit basis. The cash and cash equivalents related to these schools have restrictions which require that the funds be utilized for these particular not-for-profit schools. The amount of cash and cash equivalents of our not-for-profit schools with restrictions was $43.6 million and $49.9 million at March31,

RECEIVABLES

RECEIVABLES
	3 Months Ended Mar. 31, 2010
RECEIVABLES	6. RECEIVABLES Student Receivables Valuation Allowance Changes in our short-term and long-term receivables allowance for the three months ended March31, 2010 and 2009 were as follows: Balance, Beginning of Period Chargesto Expense (1) Amounts Written-off Balance, End of Period For the three months ended March31, 2010 $ 53,357 $ 26,382 $ (15,498 ) $ 64,241 For the three months ended March31, 2009 $ 47,895 $ 9,934 $ (10,620 ) $ 47,209 (1) For the three months ended March31, 2010, amount includes pretax expense of $8.1 million related to an increase in reserve rates applied to outstanding receivable balances attributed to our extended payment plan programs and our previously terminated recourse loan program. Recourse Loan Agreements Previously, we had recourse loan agreements with Sallie Mae and Stillwater National Bank and Trust Company (Stillwater) which required us to repurchase loans originated by them to our students after a certain period of time. Our recourse loan agreement with Stillwater was terminated on April29, 2007. Our recourse loan agreement with Sallie Mae ended on March31, 2008. Sallie Mae continues to offer its non-recourse products to our students but has made its underwriting criteria stricter. Outstanding net recourse loan receivable balances for continuing operations as of March31, 2010 and December31, 2009 were $3.7 million and $8.5 million, respectively. These receivables are reported under non-current assets as a component of student receivables, net within the unaudited consolidated balance sheets.

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES
	3 Months Ended Mar. 31, 2010
COMMITMENTS AND CONTINGENCIES	7. COMMITMENTS AND CONTINGENCIES Litigation We are, or were, a party to the following legal proceedings that are outside the scope of ordinary routine litigation incidental to our business. Student Litigation Amador, et al. v. California Culinary Academy and Career Education Corporation; Adams, et al. v. California Culinary Academy and Career Education Corporation. On September27, 2007, Allison Amador and 36 other current and former students of the California Culinary Academy (CCA) filed a complaint in the California Superior Court in San Francisco. Plaintiffs plead their complaint as a putative class action and allege four causes of action: fraud; constructive fraud; violation of the California Unfair Competition Law; and violation of the California Consumer Legal Remedies Act. Plaintiffs contend that CCA made a variety of misrepresentations to them, primarily oral, during the admissions process. The alleged misrepresentations relate generally to the schools reputation, the value of the education, the competitiveness of the admissions process, the students employment prospects upon graduation from CCA and CCAs ability to arrange beneficial student loans. Plaintiffs filed a Third Amended Complaint on or about September3, 2009 that alleges claims for fraud (misrepresentations); fraud (omissions), violations of the Unfair Competition Law and Violation of the Consumer Legal Remedies Act.Plaintiffs class is defined as students who enrolled in the four years prior to the filing of the initial complaint in the Le Cordon Bleu Culinary program and/or the Baking and Pastry program.Students who enrolled in the Hotel and Restaurant Management program are not included in the class. On April3, 2008, the same counsel representing plaintiffs in the Amador action filed the Adams action on behalf of Jennifer Adams and several other unnamed members of the Amador putative class. The Adams action also is styled as a class action and is based on the same allegations underlying the Amador action and attempts to plead the same four causes of action pled in the Amador action. The Adams action has been deemed related to the Amador action and is being handled by the same judge. The Adams action has been stayed. The parties have conducted discovery on class certification issues in the Amador action, but the Court has not yet set a briefing schedule or a hearing date on a motion for class certification. Plaintiffs recently filed a fifth amended complaint alleging the same causes of action, but including new claims based on: (1)violations of the California Education Code, which was recently reinstated by the California legislature; and (2)violations of the Le Cordon Bleu license agreement. We will be filing a motion to dismiss these new claims. The motion will be heard in June 2010. The parties have also been engaged in mediation sessions and settlement discussions regarding the Amador and Adams actions. The mediation did not result in a settlement but the parties are continuing to negotiate. Lilley, et al. v. Career Education Corporation, et al. On February11, 2008, a class action complaint was filed in the Circuit Court of Madison County, Il

INCOME TAXES

INCOME TAXES
	3 Months Ended Mar. 31, 2010
INCOME TAXES	8. INCOME TAXES The determination of the annual effective tax is based upon a number of significant estimates and judgments, including the estimated annual pretax income in each tax jurisdiction in which we operate and the ongoing development of tax planning strategies during the year. In addition, our provision for income taxes can be impacted by changes in tax rates or laws, the finalization of tax audits and reviews, as well as other factors that cannot be predicted with certainty. As such, there can be significant volatility in interim tax provisions. The following is a summary of our income tax provision and effective tax rate for continuing operations: For the Three Months Ended March31, 2010 2009 Pretax income $ 88,063 $ 52,360 Provision for income taxes $ 32,108 $ 18,467 Effective tax rate 36.5 % 35.3 % The increase in our effective tax rate for the three months ended March31, 2010 as compared to the prior year quarter was primarily due to increases in our state income tax expense due to earnings mix shifts and various state law changes, less non-profit income as a percentage of pretax income. In addition, the current year quarter results include lower levels of tax-exempt interest as a percentage of pretax income and an increase of tax reserves compared to the prior year. We estimate that it is reasonably possible that the liability for unrecognized tax benefits for a variety of uncertain tax positions will decrease by up to $9.5 million in the next twelve months as a result of the completion of various tax audits currently in process and the expiration of the statute of limitations in several jurisdictions. The income tax rate for the three months ended March31, 2010 does not take into account the possible reduction of the liability for unrecognized tax benefits. The impact of a reduction to the liability will be treated as a discrete item in the period the reduction occurs. We recognize interest and penalties related to unrecognized tax benefits in tax expense. As of March31, 2010, we had accrued $3.6 million as an estimate for reasonably possible interest and accrued penalties. Our tax returns are routinely audited by federal, state and foreign tax authorities and these audits are at various stages of completion at any given time. The Internal Revenue Service completed its examination of our U.S. income tax returns through our tax year ending December31, 2004.

STOCK REPURCHASE PROGRAM

STOCK REPURCHASE PROGRAM
	3 Months Ended Mar. 31, 2010
STOCK REPURCHASE PROGRAM	9.STOCK REPURCHASE PROGRAM During the three months ended March31, 2010, we repurchased approximately 3.4million shares of our common stock for approximately $89.7 million at an average price of $26.71 per share. As of March31, 2010, approximately $355.8 million was available under our authorized stock repurchase program to repurchase outstanding shares of our 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. The stock repurchase program does not have an expiration date and may be suspended or discontinued at any time. The repurchase of shares of our common stock reduces the amount of cash available to pay cash dividends to our stockholders. We have never paid cash dividends on our common stock. On February23, 2010, the Company entered into a stock repurchase plan established in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934, as amended (the 1934 Act), in connection with its previously authorized stock repurchase program. A Rule 10b5-1 plan allows a company to repurchase its shares at times when it otherwise might be unable to do so under the 1934 Acts insider trading rules. The Companys 10b5-1 repurchase plan (the 10b5-1 Repurchase Plan) will facilitate purchases of the Companys common shares under its authorized stock repurchase program. The Companys designated broker will have authority under the 10b5-1 Repurchase Plan to repurchase up to an additional $80.0 million of the Companys common stock. Purchases under the 10b5-1 Repurchase Plan commenced on March24, 2010. Purchases of common stock under the 10b5-1 Repurchase Plan are subject to specified parameters and certain price and volume restraints as established in the Plan. Through March31, 2010, approximately $14.7 million of the $80.0 million authorized was used to repurchase stock under the Companys 10b5-1 stock repurchase program. Through the Companys 10b5-1 repurchase program announced by the Company on February 23, 2010, an additional $50.0 million, or 1.5 million shares, of our common stock was repurchased through April 30, 2010.

SHARE-BASED COMPENSATION

SHARE-BASED COMPENSATION
	3 Months Ended Mar. 31, 2010
SHARE-BASED COMPENSATION	10.SHARE-BASED COMPENSATION Overview of Share-Based Compensation Plans On May13, 2008, the stockholders of CEC approved the Career Education Corporation 2008 Incentive Compensation Plan (the 2008 Plan). The 2008 Plan authorizes awards of stock options, stock appreciation rights, restricted stock, restricted stock units, deferred stock, performance units, annual incentive awards, and substitute awards. Any shares of CEC common stock that are subject to awards of stock options or stock appreciation rights payable in shares will be counted as 1.0 share for each share granted for purposes of the aggregate share limit and any shares of CEC common stock that are subject to any other form of award will be counted as 1.67 shares for each share granted for purposes of the aggregate share limit. The 2008 Plan replaced our 1998 Employee Incentive Compensation Plan, as amended (the 1998 Employee Plan) and our 1998 Non-Employee Directors Stock Option Plan (the Directors Plan). As of March31, 2010 there were approximately 5.8million shares of common stock available for future share-based awards under the 2008 Plan. As of March31, 2010, we estimate that pretax compensation expense of $43.4 million will be recognized over the next five years for all unvested share-based awards that have been granted to participants, including both stock options and shares of restricted stock. We expect to satisfy the exercise of stock options and future distribution of shares of restricted stock by issuing new shares of common stock or by using treasury shares. Stock Options.The exercise price of stock options granted under each of the plans is equal to the fair market value of our common stock on the date of grant. Employee stock options generally become exercisable 25%per year over a four-year service period beginning on the date of grant and expire tenyears after the date of grant, unless an earlier expiration date is set at the time of the grant. Non-employee directors stock options expire tenyears after the date of grant and generally become exercisable as follows: one-third on the grant date, one-third on the first anniversary of the grant date, and one-third on the second anniversary of the grant date. Both employee stock options and non-employee director stock options are subject to possible earlier vesting and termination in certain circumstances. If a plan participant terminates his or her employment for any reason other than by death or disability during the vesting period, he or she forfeits the right to unvested stock option awards. Since the inception of the plans, grants of stock options have only been subject to the service conditions discussed previously. No stock option grants have included performance or market conditions or other factors that affect stock option vesting. Stock option activity during the three months ended March 31, 2010, under all of our stock option plans was as follows: Options WeightedAverage Exercise Price Outstanding as of December31, 2009 3,213 $ 28.30 Granted 435 29.02 Exercised (18 ) 19.78 Forfeited Cancelled (22 ) 50.23

WEIGHTED AVERAGE COMMON SHARES

WEIGHTED AVERAGE COMMON SHARES
	3 Months Ended Mar. 31, 2010
WEIGHTED AVERAGE COMMON SHARES	11.WEIGHTED AVERAGE COMMON SHARES The weighted average numbers of common shares used to compute basic and diluted net income per share for the three months ended March31, 2010 and 2009 were as follows: FortheThree Months Ended March31, 2010 2009 (In thousands) Basic common shares outstanding 82,298 90,090 Common stock equivalents 818 72 Diluted common shares outstanding 83,116 90,162 During the three months ended March31, 2010 and 2009, we issued less than 0.1million shares, each year respectively, of our common stock upon the exercise of employee stock options and the purchase of common stock pursuant to our employee stock purchase plan. Included in stock options outstanding as of March31, 2010 and 2009, are stock options to purchase 2.3million shares, each year respectively, of our common stock that were not included in the computation of diluted net income per share because the stock options exercise prices were greater than the annual average market price of our common stock and, therefore, the effect of the inclusion of such stock options would have been anti-dilutive. These stock options may become dilutive in future periods.

SEGMENT REPORTING

SEGMENT REPORTING
	3 Months Ended Mar. 31, 2010
SEGMENT REPORTING	12. SEGMENT REPORTING During the first quarter of 2010, we realigned our resources more effectively by integrating our schools which previously comprised our Art Design SBU alongside AIU and CTU within the University SBU. Harrington College of Design, Collins College and Brooks Institute joined the IADT schools in the alignment of the Art Design group into the University SBU. The realignment also shifted Brown College and Briarcliffe College into the Health Education SBU. As a result of the realignment, the Company now has five reportable segments consisting of University, Culinary Arts, Health Education, International and Transitional schools. University includes our AIU, CTU, IADT, Harrington College of Design, Collins College and Brooks Institute schools. These schools collectively offer regionally and nationally accredited academic programs in the career-oriented disciplines of business studies, visual communications and design technologies, film and video production, photography, health education, information technology, criminal justice, and education in an online, classroom or laboratory setting. Culinary Arts includes our LCB schools that collectively offer culinary arts programs in the career-oriented disciplines of culinary arts, baking and pastry arts, and hotel and restaurant management primarily in a classroom, kitchen or online setting. Health Education includes our Sanford-Brown schools, along with Brown College, Briarcliffe College, Missouri College and our Gibbs CollegesFarmington, CT and Boston, MA. These schools collectively offer academic programs in the career-oriented disciplines of health education, complemented by certain programs in business studies and information technology in a classroom, laboratory or online setting. International includes our INSEEC schools, including IUM, and Istituto Marangoni schools located in France, Italy, the United Kingdom and Monaco, which collectively offer academic programs in the career-oriented disciplines of business studies, health education, fashion and design and visual communications and technologies in a classroom or laboratory setting. Transitional Schools includes those schools that are currently being taught out. As of March31, 2010, AIU Los Angeles, CA is the only school included in Transitional Schools. We anticipate AIU-Los Angeles will complete its teach out by the fourth quarter 2010, and the results of its operations for all periods presented will be reflected within Discontinued Operations. Segment performance is evaluated by the Company and its chief operating decision maker based on operating income. Adjustments to reconcile segment results to unaudited consolidated results are included under the caption Corporate and other, which primarily includes unallocated corporate activity and eliminations. Summary financial information by reportable segment is as follows: Revenue OperatingIncome(Loss) For the Three Months Ended March31, For the Three Months Ended March31, 2010 2009 2010 2009 University $ 290,664 $ 238,939 $ 68,708 $ 4

OTHER COMPREHENSIVE INCOME

OTHER COMPREHENSIVE INCOME (LOSS)
	3 Months Ended Mar. 31, 2010
OTHER COMPREHENSIVE INCOME (LOSS)	13. OTHER COMPREHENSIVE INCOME (LOSS) The following table presents the components of other comprehensive income (loss) for the periods presented: For the Three Months Ended March31, 2010 2009 Net income $ 55,222 $ 23,257 Other comprehensive income (loss): Foreign currency translation adjustments (7,757 ) (4,937 ) Unrealized losses on investments, net of tax (159 ) (266 ) Total comprehensive income $ 47,306 $ 18,054

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS
	3 Months Ended Mar. 31, 2010
SUBSEQUENT EVENTS	14. SUBSEQUENT EVENTS On April15, 2010, the Company acquired IUM for total consideration of approximately $12.2 million, which includes $7.9 million of purchase price and $4.3 million related to the assumption of outstanding shareholder loans. Subsequent adjustments may be made upon the finalization of purchase price and related purchase accounting adjustments. IUM is a leading international business university located in Monte Carlo, offering bachelors, masters and doctoral programs in such areas as finance, international business and luxury goods and services, and its current enrollment includes nearly 400 students representing 62 countries. IUM has joined the INSEEC group and will position INSEEC for continued growth as a leader in postsecondary education in Europe.