Exhibit 99.1
Career Education Corporation Reports
Results for Second Quarter 2006
HOFFMAN ESTATES, Ill.--(BUSINESS WIRE)--Aug. 3, 2006--Career
Education Corporation (NASDAQ:CECO) today reported revenue of $486.8
million and a net loss of $47.5 million for the second quarter ended
June 30, 2006. The net loss includes an estimated non-cash, after-tax
charge for goodwill impairment of $85.0 million.
"In spite of pressures on our business and our industry, our goal
continues to be long-term, strategic and sustainable growth," said
John M. Larson, Chairman, President and Chief Executive Officer of
Career Education Corporation. "We understand that we still have many
challenges ahead and are fully committed to resolving the issues that
are impacting our performance so that we can better serve our
students, grow our business, and return maximum value to our
stakeholders."
RESULTS OF OPERATIONS
Three Months Ended June 30, 2006
-- Consolidated revenue was $486.8 million during the second
quarter of 2006, a 2.1 percent decrease from $497.5 million
during the second quarter of 2005. Revenue generated by the
University segment's online platforms increased 4.2 percent,
to $166.6 million during the second quarter of 2006 from
$159.9 million during the second quarter of 2005.
-- In connection with reporting its second quarter 2006 results,
the company tested the goodwill balance for its Health
Education segment for impairment in accordance with Statement
of Financial Accounting Standards No. 142 "Goodwill and Other
Intangible Assets." The preliminary results of the test, which
was performed because the Health Education segment did not
achieve student enrollment, operating income, and cash flow
targets in the second quarter of 2006, indicated that the
value of goodwill attributable to the Health Education segment
had been impaired. The estimate of the segment's fair value
was less than the segment's carrying value as of the date of
the test. As a result, the company recognized an estimated
impairment charge of $85.0 million during the three months
ended June 30, 2006. This charge reduced the carrying value of
the Health Education segment's goodwill balance from $216.0
million to $131.0 million. The company estimates that only
$6.5 million of the Health Education segment goodwill
impairment charge will be deductible for income tax reporting
purposes. The goodwill impairment charge is based on a best
current estimate, and the ultimate amount of the impairment
charge will be determined in the third quarter of 2006 upon
finalization of the goodwill impairment testing.
-- On January 1, 2006, the company adopted Statement of Financial
Accounting Standards No. 123R "Share-Based Payment," which
requires that the costs related to share-based payment
transactions with employees be recognized as expense in the
financial statements and measured based on the estimated fair
value of the equity instruments issued. Second quarter 2006
operating results include non-cash share-based compensation
expense of $4.5 million. Share-based compensation expense
recognition was not required during the second quarter of 2005
and, thus, second quarter 2005 operating results do not
include such expense.
-- Operating loss margin percentage was 6.9 percent during the
second quarter of 2006, a 23.3 percentage point decrease
relative to an operating profit margin of 16.4 percent during
the second quarter of 2005. Of the total 23.3 percentage point
operating margin decline during the second quarter of 2006,
approximately 17.5 percentage points were attributable to
Health Education segment goodwill impairment charge. The
remainder of the decline was primarily attributable to
increases in administration expense, advertising expense, and
occupancy expense as a percentage of revenue, offset, in part,
by decreases in bad debt expense as a percentage of revenue.
-- Consolidated net loss during the second quarter of 2006 was
$47.5 million, or $0.49 per diluted share, relative to net
income of $52.8 million, or $0.50 per diluted share, during
the second quarter of 2005. As discussed above, second quarter
2006 net income includes the following non-cash charges (in
millions, except per share data):
Impact on
Earnings
Per
Pretax Tax Diluted
Charge Benefit Net Charge Share
- ----------------------------------------------------------------------
Goodwill impairment charge -
Health Education segment $(85.0) $2.4 (1) $(82.6) $(0.85)
- ----------------------------------------------------------------------
Share-based compensation
expense $(4.5) $1.7 $(2.8) $(0.03)
- ----------------------------------------------------------------------
Total $(89.5) $4.1 $(85.4) $(0.88)
- ----------------------------------------------------------------------
(1) The company estimates that only $6.5 million of the Health
Education segment goodwill impairment charge will be deductible
for income tax reporting purposes.
Six Months Ended June 30, 2006
-- Consolidated revenues were $1.02 billion during the six months
ended June 30, 2006, relative to $1.01 billion during the six
months ended June 30, 2005. Revenue generated by the
University segment's online platforms increased 13.7 percent,
to $347.5 million during the six months ended June 30, 2006,
from $305.6 million during the six months ended June 30, 2005.
-- Income from operations declined to $45.4 million during the
six months ended June 30, 2006, from $180.7 million during the
six months ended June 30, 2005. Operating income margin
decreased to 4.5 percent during the six months ended June 30,
2006, from 17.9 percent during the six months ended June 30,
2005.
-- Net income during the six months ended June 30, 2006, was $5.2
million, or $0.05 per diluted share, relative to $108.7
million, or $1.03 per diluted share, during the six months
ended June 30, 2005.
The results during the three months and six months ended June 30,
2006, were negatively impacted by a number of factors, all of which
the company is actively addressing. These factors include: the
continued probationary status of AIU, the continued negative impact of
legal and regulatory matters, recent negative publicity, the pricing
of the AIU associate's degree programs prior to the price change, and
the lower than expected conversion of some sourced internet leads.
The company continues to take proactive steps to address current
challenges:
-- Leadership at AIU is intensely focused on working actively to
resolve the concerns of its accreditor, SACS
-- During the quarter, the company adjusted the tuition price for
AIU's associate degree to make it more competitive
-- The company has engaged a new hiring firm to ensure the
highest quality of admissions representatives and is launching
new admissions representative training
-- Reputation management initiatives are underway at many schools
PROVISION FOR INCOME TAXES
Provision for income taxes during the three months and six months
ended June 30, 2006, was $18.5 million and $50.0 million,
respectively, relative to income (loss) before provision for income
taxes during the three months and six months ended June 30, 2006, of
$(29.0) million and $26.3 million. This represents an effective income
tax rate of (63.7) percent and 90.6 percent, respectively, for the
three months and six months ended June 30, 2006. The unusual
relationship between income (loss) before provision for income taxes
and our provision for income taxes for the three months and six months
ended June 30, 2006, is attributable to the fact that only $6.5
million of our total $85.0 million Health Education division goodwill
impairment charge recognized during the second quarter of 2006 is
deductible for income tax reporting purposes. As such, an income tax
benefit has not been provided for the non-deductible portion of the
charge. Excluding the effect of the second quarter Health Education
goodwill impairment charge, the company's effective income tax rate
for the three months and six months ended June 30, 2006, was 37.4%.
CASH FLOWS AND FINANCIAL POSITION
Cash Flows
-- Net cash provided by operating activities was $8.8 million
during the second quarter of 2006, compared to $69.9 million
during the second quarter of 2005. The decrease is primarily
attributable to decreases in net operating assets and net
income, excluding the non-cash effect of our second quarter
2006 goodwill impairment charge, during the second quarter of
2006.
-- Capital expenditures decreased to $25.6 million during the
second quarter of 2006 from $45.4 million during the first
quarter of 2005. Capital expenditures represented 5.3 percent
of consolidated revenue during the second quarter of 2006 and
9.1 percent of consolidated revenue during the second quarter
of 2005.
Financial Position
-- As of June 30, 2006, and March 31, 2006, cash and cash
equivalents and investments totaled $378.0 million and $489.0
million, respectively.
-- During the three months ended June 30, 2006, we repurchased
approximately 3.2 million shares of our common stock for
approximately $99.9 million at an average price of
approximately $31.63 per share. These repurchases did not have
a significant impact on the company's diluted weighted average
shares outstanding.
-- Net student receivables as of June 30, 2006, were $52.6
million, a 14.9 percent decrease from net student receivables
of $61.8 million as of March 31, 2006. Allowance for doubtful
accounts as a percentage of gross student receivables
increased to 42.4 percent as of June 30, 2006, from 39.8
percent as of March 31, 2006.
-- Quarterly days sales outstanding (DSO) were 11 days as of June
30, 2006, a one-day decrease from DSO as of March 31, 2006, of
12 days, and a two-day decrease from DSO as of June 30, 2005.
Stock Repurchase Program
Since July 2005, CEC's Board of Directors has authorized the use
of $500 million to repurchase shares of the company's outstanding
common stock. Stock repurchases under this program may be made on the
open market or in privately negotiated transactions from time to time,
depending on factors including market conditions and corporate and
regulatory requirements. The stock repurchase program does not have an
expiration date and may be suspended or discontinued at any time.
Since inception of the program, the company has repurchased
approximately 9.1 million shares of its common stock for approximately
$325.0 million at an average price of approximately $35.63 per share.
SEGMENT REPORTING
Pursuant to Statement of Financial Accounting Standards No. 131,
Disclosure about Segments of an Enterprise and Related Information, as
of January 1, 2006, CEC identified five reportable segments: the
University segment, the Culinary Arts segment, the Health Education
segment, the Gibbs segment, and the Other Schools segment. The
University segment includes AIU and CTU, including both universities'
on-ground and online campuses. The Culinary Arts segment includes the
Le Cordon Bleu Schools of North America and Kitchen Academy schools.
The Health Education segment primarily includes the Sanford-Brown
Colleges and Institutes. The Gibbs segment includes the Katharine
Gibbs Schools and Gibbs Colleges schools. The Other Schools segment
includes the Academy, College East, College West, and INSEEC division
schools.
POPULATION AND NEW STUDENT START DATA
Student Population
The company's total student population by reportable segment as of
July 31, 2006 and 2005, was as follows:
Population Population
July 31, July 31, Percentage
2006 2005 Difference
- ----------------------------------------------------------------------
University segment (1) 37,700 41,200 (8%)
- ----------------------------------------------------------------------
Culinary Arts segment 10,600 11,550 (8%)
- ----------------------------------------------------------------------
Health Education segment 10,650 10,000 6%
- ----------------------------------------------------------------------
Gibbs segment 6,200 7,450 (17%)
- ----------------------------------------------------------------------
Other Schools segment 19,550 21,800 (10%)
- ----------------------------------------------------------------------
CEC Consolidated 84,700 92,000 (8%)
- ----------------------------------------------------------------------
(1) University segment population includes approximately 28,500 and
30,000 students as of July 31, 2006 and 2005, respectively, who
are enrolled in fully-online academic programs offered by
University segment schools.
New Student Starts
New student starts by reportable segment during the second quarter
of 2006 and 2005 were as follows:
Second Second
Quarter Quarter Percentage
2006 2005 Difference
- ----------------------------------------------------------------------
University segment (1) 10,500 13,000 (19%)
- ----------------------------------------------------------------------
Culinary Arts segment 1,700 1,950 (13%)
- ----------------------------------------------------------------------
Health Education segment 3,000 2,800 7%
- ----------------------------------------------------------------------
Gibbs segment 1,200 1,250 (4%)
- ----------------------------------------------------------------------
Other Schools segment 2,600 3,100 (16%)
- ----------------------------------------------------------------------
CEC Consolidated 19,000 22,100 (14%)
- ----------------------------------------------------------------------
(1) University segment starts includes approximately 9,000 and 11,000
students as of second quarter 2006 and second quarter 2005,
respectively, who are enrolled in fully-online academic programs
offered by University segment schools.
GROWTH INITIATIVES
The company launched a significant number of new initiatives
during the quarter, all designed to enhance ease-of-use for students,
support student retention efforts and promote graduation. These new
initiatives included the following:
-- automated enrollment sites
-- mandatory pre-enrollment orientation
-- improved hiring processes and training for admissions
representatives
"In the near term, we will be executing a realistic and workable
plan, which includes these new initiatives, to stabilize our
population," said Larson. "Over the long term, our focus will be on
providing quality educational programs and flexible offerings with a
focus on return on invested capital, creating satisfied and employable
students. We remain confident that the demand for high-quality,
flexible post-secondary education options will increase and that we
will be positioned to take advantage of this demand in the future."
CONFERENCE CALL INFORMATION
Career Education Corporation will host a conference call today,
August 3, 2006 at 5:00 PM (Eastern Time). Interested parties can
access the live webcast of the conference call at www.careered.com.
Participants can also listen to the conference call by dialing
617-614-4911 (international) or 800-591-6945 (domestic) and citing
code 31528628. Please log-in or dial-in at least 10 minutes prior to
the start time to ensure a connection. An archived version of the
webcast will be accessible for 90 days at www.careered.com. A replay
of the call will also be available for seven days by calling
617-801-6888 (international) or 888-286-8010 and citing code 22576732.
About Career Education Corporation
The colleges, schools and universities that are part of the Career
Education Corporation (CEC) family offer high quality education to
approximately 90,000 students across the world in a variety of
career-oriented disciplines. The 80-plus campuses that serve these
students are located throughout the U. S., Canada, France, the United
Kingdom, and the United Arab Emirates and offer doctoral, master's,
bachelor's, and associate degrees and diploma and certificate
programs. Approximately one third of students attend the web-based
virtual campuses of American InterContinental University Online and
Colorado Technical University Online.
Career Education is an industry leader whose gold-standard brands
are recognized globally. Those brands include, among others, the Le
Cordon Bleu Schools North America, the Harrington College of Design,
the Brooks Institute of Photography, the Katharine Gibbs Schools,
American InterContinental University, Colorado Technical University
and Sanford-Brown Institutes and Colleges. The mission of CEC, through
its schools, its educators, and its employees is education - their
primary goal, to enable students to graduate successfully and pursue
rewarding careers.
For more information see www.careered.com. The company's website
also has a detailed listing of individual campus locations and web
links for more than 80 colleges, schools and universities.
Except for the historical and present factual information
contained herein, the matters set forth in this release, including
statements under "Growth Initiatives" and statements identified by
words such as "anticipate," "believe," "plan," "expect," "intend,"
"project," "will," and similar expressions, are forward-looking
statements as defined in Section 21E of the Securities Exchange Act of
1934, as amended. These statements are based on information currently
available to us and are subject to various risks, uncertainties, and
other factors, that could cause our actual growth, results of
operations, performance and business prospects, and opportunities to
differ materially from those expressed in, or implied by, these
statements. Except as expressly required by federal securities laws,
we undertake no obligation to update such factors or to publicly
announce the results of any of the forward-looking statements
contained herein to reflect future events, developments, or changed
circumstances, or for any other reason. These risks and uncertainties,
the outcome of which could materially and adversely affect our
financial condition and operations, include, but are not limited to,
the following: future financial and operational results, including the
impact of impairment of goodwill and other intangible assets; risks
related to our ability to comply with accrediting agency requirements
or obtain accrediting agency approvals, including the adverse impact
of negative publicity concerning the continued probation status of
American InterContinental University and ongoing review by its
accrediting body; risks related to our ability to comply with, and the
impact of changes in, legislation and regulations that affect our
ability to participate in student financial aid programs; costs, risks
and effects of legal and administrative proceedings and investigations
and governmental regulations, including the pending Securities and
Exchange Commission and Justice Department investigations and, class
action, derivative, and other lawsuits; costs and difficulties related
to the integration of acquired businesses; risks related to our
ability to manage and continue growth; risks related to competition,
general economic conditions, and other risk factors relating to our
industry and business, and the factors discussed in our Annual Report
on Form 10-K for the year ended December 31, 2005, and from time to
time in our other reports filed with the Securities and Exchange
Commission.
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended June 30, 2006 and 2005
(In thousands, except per share amounts and percentages)
% of % of
2006 Revenue 2005 Revenue
---------- ------- ---------- -------
REVENUE:
Tuition and registration
fees $468,401 96.2% $475,932 95.7%
Other 18,384 3.8% 21,531 4.3%
---------- ----------
Total revenue 486,785 100.0% 497,463 100.0%
---------- ----------
OPERATING EXPENSES:
Educational services and
facilities 156,539 32.2% 153,451 30.9%
General and administrative 257,144 52.7% 242,403 48.7%
Depreciation and amortization 21,942 4.5% 19,833 4.0%
Goodwill impairment charge 84,975 17.5% - - %
---------- ----------
Total operating expenses 520,600 106.9% 415,687 83.6%
---------- ----------
Income (loss) from operations (33,815) -6.9% 81,776 16.4%
---------- ----------
OTHER INCOME (EXPENSE):
Interest income 4,681 1.0% 4,280 0.9%
Interest expense (337) -0.1% (420) -0.1%
Share of affiliate earnings 696 0.1% 1,416 0.3%
Miscellaneous expense (250) -0.1% (200) 0.0%
---------- ----------
Total other income 4,790 0.9% 5,076 1.1%
---------- ----------
Income (loss) before provision
for income taxes (29,025) -6.0% 86,852 17.5%
PROVISION FOR INCOME TAXES 18,484 3.8% 34,089 6.9%
---------- ----------
NET INCOME (LOSS) $(47,509) -9.8% $52,763 10.6%
========== ==========
NET INCOME (LOSS) PER SHARE -
DILUTED: $(0.49) $0.50
========== ==========
Diluted weighted average shares
outstanding (1) 96,989 105,200
========== ==========
(1) In accordance with applicable accounting standards, weighted
average common stock equivalents of approximately 2,078 have been
excluded from diluted weighted average shares outstanding during
the three months ended June 30, 2006, as the inclusion of such
common stock equivalents would be anti-dilutive to diluted
earnings per share during the period.
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Six Months Ended June 30, 2006 and 2005
(In thousands, except per share amounts and percentages)
% of % of
2006 Revenue 2005 Revenue
---------- ------- ---------- -------
REVENUE:
Tuition and registration
fees $975,078 96.0% $960,813 95.3%
Other 40,337 4.0% 47,086 4.7%
---------- ----------
Total revenue 1,015,415 100.0% 1,007,899 100.0%
---------- ----------
OPERATING EXPENSES:
Educational services and
facilities 318,498 31.4% 309,799 30.7%
General and administrative 513,202 50.5% 480,393 47.7%
Depreciation and amortization 42,951 4.2% 37,034 3.7%
Goodwill impairment charge 95,364 9.4% - - %
---------- ----------
Total operating expenses 970,015 95.5% 827,226 82.1%
---------- ----------
Income from operations 45,400 4.5% 180,673 17.9%
---------- ----------
OTHER INCOME (EXPENSE):
Interest income 8,978 0.9% 5,987 0.6%
Interest expense (688) -0.1% (856) -0.1%
Share of affiliate earnings 1,599 0.2% 3,242 0.3%
Miscellaneous expense (129) -0.1% (758) -0.1%
---------- ----------
Total other income 9,760 0.9% 7,615 0.8%
---------- ----------
Income before provision for
income taxes 55,160 5.4% 188,288 18.7%
PROVISION FOR INCOME TAXES 49,970 4.9% 73,903 7.3%
---------- ----------
Income (loss) from continuing
operations 5,190 0.5% 114,385 11.4%
DISCONTINUED OPERATIONS:
Loss from discontinued
operations - - % (5,700) -0.6%
---------- ----------
NET INCOME $5,190 0.5% $108,685 10.8%
========== ==========
NET INCOME PER SHARE - DILUTED:
Income from continuing
operations $0.05 $1.09
Loss from discontinued
operations - (0.06)
---------- ----------
Net income $0.05 $1.03
========== ==========
Diluted weighted average shares
outstanding 99,631 105,196
========== ==========
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
(In thousands)
June 30, December 31,
2006 2005
------------ ------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $90,589 $132,308
Investments 287,369 272,093
------------ ------------
Total cash and cash equivalents
and investments 377,958 404,401
Receivables:
Students, net of allowance for
doubtful accounts of $38,716
and $44,839 as of June 30, 2006,
and December 31, 2005, respectively 52,583 76,447
Other, net 7,922 5,015
Prepaid expenses 48,805 37,412
Inventories 14,979 14,090
Deferred income tax assets 10,122 10,122
Other current assets 18,756 31,067
------------ ------------
Total current assets 531,125 578,554
------------ ------------
PROPERTY AND EQUIPMENT, net 408,266 411,144
GOODWILL 349,582 443,584
INTANGIBLE ASSETS, net 35,487 35,286
OTHER ASSETS 36,245 37,537
------------ ------------
TOTAL ASSETS $1,360,705 $1,506,105
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $584 $627
Accounts payable 26,335 28,627
Accrued expenses:
Payroll and related benefits 31,551 39,471
Income taxes - 23,509
Other 84,884 82,513
Deferred tuition revenue 131,936 152,007
------------ ------------
Total current liabilities 275,290 326,754
------------ ------------
LONG-TERM LIABILITIES:
Long-term debt, net of current maturities 17,499 16,358
Deferred rent obligations 96,387 89,680
Deferred income tax liabilities 31,212 31,212
Other 5,827 5,854
------------ ------------
Total long-term liabilities 150,925 143,104
------------ ------------
STOCKHOLDERS' EQUITY:
Common stock 1,037 1,033
Additional paid-in capital 609,230 591,287
Accumulated other comprehensive income 1,939 1,989
Retained earnings 647,287 642,096
Cost of shares in treasury (325,003) (200,158)
------------ ------------
Total stockholders' equity 934,490 1,036,247
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,360,705 $1,506,105
============ ============
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended June 30, 2006 and 2005
(In thousands)
2006 2005
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(47,509) $52,763
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Goodwill impairment charge 84,975 -
Depreciation and amortization 21,942 19,833
Compensation expense related to share-
based awards 4,471 -
Loss on disposition of property and
equipment 232 120
Share of affiliate earnings, net of
dividends received (696) (770)
Tax benefit associated with stock option
exercises - 1,790
Other 266 209
Changes in operating assets and
liabilities (54,857) (4,041)
---------- ----------
Net cash provided by operating
activities 8,824 69,904
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Business dispositions/acquisitions, net
of cash - (26)
Purchases of property and equipment (25,608) (45,359)
Purchases of available-for-sale investments (190,831) (416,624)
Sales of available-for-sale for sale
investments 293,513 174,395
Other (105) 1,458
---------- ----------
Net cash provided by (used in)
investing activities 76,969 (286,156)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchases of treasury stock (99,920) -
Issuance of common stock 4,479 4,638
Tax benefit associated with stock option
exercises 1,330 -
Payments of revolving loans - (249)
Payments of capital lease obligations and
other long-term debt (95) (797)
---------- ----------
Net cash provided by (used in)
financing activities (94,206) 3,592
---------- ----------
EFFECT OF FOREIGN CURRENCY EXCHANGE RATE
CHANGES ON CASH AND CASH EQUIVALENTS (20) (2,564)
---------- ----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (8,433) (215,224)
CASH AND CASH EQUIVALENTS, beginning of period 99,022 432,268
---------- ----------
CASH AND CASH EQUIVALENTS, end of period $90,589 $217,044
========== ==========
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2006 and 2005
(In thousands)
2006 2005
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $5,190 $108,685
Adjustments to reconcile net income to
net cash provided by operating
activities:
Goodwill impairment charge 95,364 -
Loss from discontinued operations - 5,700
Depreciation and amortization 42,951 37,034
Compensation expense related to share-
based awards 8,486 -
Loss on disposition of property and
equipment 255 550
Share of affiliate earnings, net of
dividends received (1,599) (1,382)
Tax benefit associated with stock option
exercises - 2,416
Other 470 400
Changes in operating assets and
liabilities (19,656) 27,684
---------- ----------
Net cash provided by operating
activities 131,461 181,087
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Business dispositions/acquisitions, net
of cash - (934)
Purchases of property and equipment (43,151) (70,898)
Purchases of available-for-sale investments (552,450) (416,624)
Sales of available-for-sale for sale
investments 537,285 174,395
Other (110) 1,460
---------- ----------
Net cash used in investing
activities (58,426) (312,601)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchases of treasury stock (124,845) -
Issuance of common stock 7,411 6,952
Tax benefit associated with stock option
exercises 2,050 -
Payments of revolving loans - (1,879)
Payments of capital lease obligations and
other long-term debt (184) (1,505)
---------- ----------
Net cash provided by (used in)
financing activities (115,568) 3,568
---------- ----------
EFFECT OF FOREIGN CURRENCY EXCHANGE RATE
CHANGES ON CASH AND CASH EQUIVALENTS 814 (4,468)
---------- ----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (41,719) (132,414)
CASH AND CASH EQUIVALENTS, beginning of period 132,308 349,458
---------- ----------
CASH AND CASH EQUIVALENTS, end of period $90,589 $217,044
========== ==========
CAREER EDUCATION CORPORATION
SELECTED SEGMENT INFORMATION
(Dollars in thousands)
For the Three Months
Ended June 30,
----------------------
2006 2005
---------- ----------
REVENUE:
University segment (1) $226,322 $221,030
Culinary Arts segment (2) 82,706 90,908
Health Education segment (3) 41,082 37,508
Gibbs segment (4) 26,662 33,116
Other Schools segment (5) 109,869 114,901
Corporate and other (6) 144 -
---------- ----------
$486,785 $497,463
========== ==========
SEGMENT PROFIT (LOSS) (7):
University segment $67,494 $75,682
Culinary Arts segment 8,384 15,049
Health Education segment (8) (85,225) (389)
Gibbs segment (10,465) (5,013)
Other Schools segment 6,051 11,705
Corporate and other (19,358) (13,842)
---------- ----------
$(33,119) $83,192
========== ==========
SEGMENT PROFIT (LOSS) PERCENTAGE:
University segment 29.8% 34.2%
Culinary Arts segment 10.1% 16.6%
Health Education segment -207.5% -1.0%
Gibbs segment -39.3% -15.1%
Other Schools segment 5.5% 10.2%
- ----------------------------------------------------------------------
(1) University segment includes AIU and CTU schools.
(2) Culinary Arts segment includes Le Cordon Bleu and Kitchen
Academy schools.
(3) Health Education segment primarily includes Sanford-Brown schools.
(4) Gibbs segment includes Gibbs College and Katharine Gibbs Schools
schools.
(5) Other Schools segment represents an aggregation of the Academy,
College East, College West, and INSEEC school operating divisions.
(6) Corporate and other revenue represents advertising revenue
realized by our JDV Online operating division.
(7) Segment profit equals the sum of income from operations and share
of affiliate earnings.
(8) Health Education segment loss for the three months ended June 30,
2006, includes a goodwill impairment charge of $84,975.
CAREER EDUCATION CORPORATION
SELECTED SEGMENT INFORMATION
(Dollars in thousands)
For the Six Months Ended
June 30,
--------------------------
2006 2005
------------ ------------
REVENUE:
University segment (1) $469,904 $432,749
Culinary Arts segment (2) 173,334 183,464
Health Education segment (3) 81,660 75,429
Gibbs segment (4) 56,167 71,388
Other Schools segment (5) 234,099 244,869
Corporate and other (6) 251 -
------------ ------------
$1,015,415 $1,007,899
============ ============
SEGMENT PROFIT (LOSS) (7):
University segment $149,884 $154,212
Culinary Arts segment 22,393 33,385
Health Education segment (8) (84,012) (1,392)
Gibbs segment (8) (28,018) (5,968)
Other Schools segment 21,823 31,918
Corporate and other (35,071) (28,240)
------------ ------------
$46,999 $183,915
============ ============
SEGMENT PROFIT (LOSS) PERCENTAGE:
University segment 31.9% 35.6%
Culinary Arts segment 12.9% 18.2%
Health Education segment -102.9% -1.8%
Gibbs segment -49.9% -8.4%
Other Schools segment 9.3% 13.0%
- --------------------------------------------------------
(1) University segment includes AIU and CTU schools.
(2) Culinary Arts segment includes Le Cordon Bleu and Kitchen
Academy schools.
(3) Health Education segment primarily includes Sanford-Brown schools.
(4) Gibbs segment includes Gibbs College and Katharine Gibbs Schools
schools.
(5) Other Schools segment represents an aggregation of the Academy,
College East, College West, and INSEEC school operating divisions.
(6) Corporate and other revenue represents advertising revenue
realized by our JDV Online operating division.
(7) Segment profit equals the sum of income from operations and share
of affiliate earnings.
(8) Health Education and Gibbs segment loss for the six months ended
June 30, 2006, include goodwill impairment charges of $84,975 and
$10,389, respectively.
CAREER EDUCATION CORPORATION
SELECTED OTHER INFORMATION
(Dollars in thousands)
DAYS SALES OUTSTANDING
June 30,
-------------------
2006 2005
--------- ---------
Total revenue during the
quarter ended $486,785 $497,463
Number of days in the
quarter ended 91 91
Total revenue per day $5,349 $5,467
Receivables, net $60,505 $69,767
Days sales outstanding 11 13
ALLOWANCE AS A PERCENTAGE OF STUDENT RECEIVABLES
June 30,
-------------------
2006 2005
--------- ---------
Allowance for doubtful accounts $38,716 $50,726
Gross student receivables $91,299 $114,569
Allowance as a percentage of
student receivables 42.4% 44.3%
STUDENT RECEIVABLES VALUATION ALLOWANCE
Balance,
Beginning Charges Amounts Balance,
of to Written- End of
Period Expense Off Period
--------- --------- --------- --------
For the three months ended
June 30, 2006 $40,869 $17,787 $(19,940) $38,716
For the three months ended
June 30, 2005 $50,880 $21,538 $(21,692) $50,726
For the six months ended
June 30, 2006 $44,839 $32,263 $(38,386) $38,716
For the six months ended
June 30, 2005 $61,136 $39,034 $(49,444) $50,726
For the Three
Months Ended
-------------------
STUDENT STARTS: March 31, June 30,
2006 2006
--------- ---------
University segment 17,019 10,513
Culinary Arts segment 2,545 1,693
Health Education segment 3,787 3,064
Gibbs segment 1,276 1,191
Other Schools segment 3,700 2,600
--------- ---------
28,327 19,061
========= =========
STUDENT POPULATION AS OF: April 30, July 31,
2006 2006
--------- ---------
University segment 44,016 37,734
Culinary Arts segment 10,627 10,623
Health Education segment 11,092 10,646
Gibbs segment 6,457 6,178
Other Schools segment 24,927 19,542
--------- ---------
97,119 84,723
========= =========
(1) Effective January 1, 2006, we changed the composition of our
reportable segments. The historical segment information reflected
in this table is categorized in accordance with our new segment
structure.
CAREER EDUCATION CORPORATION
HISTORICAL SEGMENT INFORMATION (1)
(Dollars in thousands)
2005:
- ----- For the
For the Three Months Ended, Year
--------------------------------------- Ended
September December December
March 31, June 30, 30, 31, 31,
--------- --------- --------- --------- -----------
REVENUE:
University
segment $211,719 $221,030 $215,281 $222,095 $870,125
Culinary Arts
segment 92,556 90,907 100,406 99,461 383,330
Health Education
segment 37,921 37,508 38,309 40,135 153,873
Gibbs segment 38,272 33,116 30,756 31,728 133,872
Other Schools
segment 129,968 114,902 112,730 135,741 493,341
Corporate and
other - - - 14 14
--------- --------- --------- --------- -----------
$510,436 $497,463 $497,482 $529,174 $2,034,555
========= ========= ========= ========= ===========
SEGMENT PROFIT:
University
segment $78,530 $75,682 $63,410 $69,887 $287,509
Culinary Arts
segment 18,336 15,049 25,439 23,847 82,671
Health Education
segment (1,003) (389) 683 1,797 1,088
Gibbs segment (955) (5,013) (6,985) (3,920) (16,873)
Other Schools
segment 20,213 11,705 13,711 23,255 68,884
Corporate and
other (14,398) (13,842) (12,119) (8,781) (49,140)
--------- --------- --------- --------- -----------
$100,723 $83,192 $84,139 $106,085 $374,139
========= ========= ========= ========= ===========
SEGMENT PROFIT PERCENTAGE:
University
segment 37.1% 34.2% 29.5% 31.5% 33.0%
Culinary Arts
segment 19.8% 16.6% 25.3% 24.0% 21.6%
Health Education
segment -2.6% -1.0% 1.8% 4.5% 0.7%
Gibbs segment -2.5% -15.1% -22.7% -12.4% -12.6%
Other Schools
segment 15.6% 10.2% 12.2% 17.1% 14.0%
NEW STUDENT STARTS:
University
segment 20,034 13,010 15,248 16,599
Culinary Arts
segment 2,708 1,940 4,298 2,098
Health Education
segment 3,217 2,833 4,045 2,573
Gibbs segment 1,616 1,254 1,652 1,804
Other Schools
segment 4,922 3,095 8,541 5,163
--------- --------- --------- ---------
32,497 22,132 33,784 28,237
========= ========= ========= =========
STUDENT POPULATION AS OF:
April 30, July 31, October 31, January 31,
2005 2005 2005 2006
--------- --------- --------- ------------
University
segment 39,401 41,193 46,378 46,401
Culinary Arts
segment 11,559 11,545 12,509 11,520
Health Education
segment 10,744 10,041 11,199 10,903
Gibbs segment 8,114 7,446 7,549 6,977
Other Schools
segment 26,897 21,799 29,760 28,416
--------- --------- --------- -----------
96,715 92,024 107,395 104,217
========= ========= ========= ===========
(1) Effective January 1, 2006, we changed the composition of our
reportable segments. The historical segment information reflected
in this table is categorized in accordance with our new segment
structure.
CAREER EDUCATION CORPORATION
HISTORICAL SEGMENT INFORMATION (1)
(Dollars in thousands)
2004:
- ----- For the
For the Three Months Ended, Year
--------------------------------------- Ended
September December December
March 31, June 30, 30, 31, 31,
--------- --------- --------- --------- -----------
REVENUE:
University
segment $123,049 $145,556 $155,840 $173,103 $597,548
Culinary Arts
segment 78,861 79,433 92,749 98,558 349,601
Health Education
segment 33,771 34,855 37,732 38,637 144,995
Gibbs segment 46,781 41,650 41,289 42,049 171,769
Other Schools
segment 114,903 102,568 108,424 138,724 464,619
--------- --------- --------- --------- -----------
$397,365 $404,062 $436,034 $491,071 $1,728,532
========= ========= ========= ========= ===========
SEGMENT PROFIT:
University
segment $41,302 $48,452 $44,737 $48,517 $183,008
Culinary Arts
segment 15,033 14,328 23,322 26,821 79,504
Health Education
segment (552) (634) 1,344 2,819 2,977
Gibbs segment 877 (3,133) (4,755) (5,191) (12,202)
Other Schools
segment 17,148 10,023 10,817 29,327 67,315
Corporate and
other (8,732) (7,558) (5,884) (2,619) (24,793)
--------- --------- --------- --------- -----------
$65,076 $61,478 $69,581 $99,674 $295,809
========= ========= ========= ========= ===========
SEGMENT PROFIT PERCENTAGE:
University
segment 33.6% 33.3% 28.7% 28.0% 30.6%
Culinary Arts
segment 19.1% 18.0% 25.1% 27.2% 22.7%
Health Education
segment -1.6% -1.8% 3.6% 7.3% 2.1%
Gibbs segment 1.9% -7.5% -11.5% -12.3% -7.1%
Other Schools
segment 14.9% 9.8% 10.0% 21.1% 14.5%
NEW STUDENT STARTS:
University
segment 12,191 9,251 12,839 14,492
Culinary Arts
segment 2,758 2,120 4,532 2,622
Health Education
segment 3,809 3,006 4,104 2,629
Gibbs segment 2,832 2,304 2,685 2,625
Other Schools
segment 5,203 3,857 9,383 6,253
--------- --------- --------- ---------
26,793 20,538 33,543 28,621
========= ========= ========= =========
STUDENT POPULATION AS OF:
April 30, July 31, October 31, January 31,
2004 2004 2004 2005
--------- --------- --------- -----------
University
segment 28,531 29,635 35,648 39,763
Culinary Arts
segment 10,523 11,048 12,673 12,204
Health Education
segment 10,831 10,438 11,114 10,793
Gibbs segment 11,028 10,202 10,298 9,255
Other Schools
segment 25,802 21,127 29,734 29,505
--------- --------- --------- -----------
86,715 82,450 99,467 101,520
========= ========= ========= ===========
(1) Effective January 1, 2006, we changed the composition of our
reportable segments. The historical segment information reflected
in this table is categorized in accordance with our new segment
structure.
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
SELECTED QUARTERLY DATA FOR UNIVERSITY SEGMENT
2006 2005
---------------------------- ---------------------------
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
------- ------ ------ ------ ------ ------ ------ ------
Revenue
earning days
AIU Online 83 84 78 70 82 84 79 70
CTU Online 77 77 77 77 77 77 77 77
------- ------ ------ ------ ------ ------ ------ ------
Total 160 161 155 147 159 161 156 147
======= ====== ====== ====== ====== ====== ====== ======
AIU Online CTU Online
---------------------------- ---------------------------
2006 2005 2006 2005
-------------- ------------- ------------- -------------
Start Grad Start Grad Start Grad Start Grad
------- ------ ------ ------ ------ ------ ------ ------
January 1/1 none 1/2 none 1/1 none 1/2 none
February 2/5 2/4 2/13 2/5 2/8 2/7 2/9 2/8
March 3/19 3/11 3/20 3/19 none 3/18 none 3/19
Total 1Q
dates 3 2 3 2 2 2 2 2
April 4/23 4/22 none 4/23 4/2 none 4/3 none
May none 5/27 5/1 none 5/17 5/9 5/11 5/10
June 6/4 none 6/5 6/4 none 6/24 none 6/18
Total 2Q
dates 2 2 2 2 2 2 2 2
July 7/9 7/8 7/17 7/9 7/2 none 7/3 none
August 8/27 8/12 8/21 8/20 8/16 8/8 8/10 8/9
September none 9/30 none 9/24 none 9/23 none 2/17
Total 3Q
dates 2 3 2 3 2 2 2 2
October 10/1 none 10/9 none 10/1 none 10/2 none
November 11/12 11/4 11/13 11/12 11/15 11/7 11/9 11/8
December none 12/16 none 12/17 none 12/23 none 12/17
Total 4Q
dates 2 2 2 2 2 2 2 2
CONTACT: Career Education Corporation
Karen M. King (Investors), 847-585-3899
www.careered.com
or
Pattie Overstreet-Miller (Media), 847-851-7351
or
Lynne Baker, 847-851-7006