Career Education Corporation Reports Results for 2004 Fourth Quarter and Year-End.HOFFMAN ESTATES Hoffman Estates A village of northeast Illinois, a suburb of Chicago. Population: 49,700. , Ill. -- Career Education Corporation (Nasdaq:CECO CECO Council of Engineering Companies of Oregon CECO Cost Estimate Change Order CECO Center for Economic and Community Outreach CECO CENTCOM Engineer Contingency Organization CECO Concrete Engineering Company of Omaha (Ceco Concrete Construction LLC) ) today reported financial results for the fourth quarter and year ended December December: see month. 31, 2004. The company noted that its results include an adjustment related to an increase in the estimate for its allowance for doubtful accounts Allowance for Doubtful Accounts An estimation made by a company and documented on its balance sheet for receivables that might go uncollected. Notes: It is standard practice for a company to have funds set aside for money that cannot be collected. and a restatement Restatement A revision in a company's earlier financial statements. Notes: The need for restating financial figures can result from fraud, misrepresentation, or a simple clerical error. for a change in revenue recognition method for its Culinary cu·li·nar·y adj. Of or relating to a kitchen or to cookery. [Latin cul  n and Healthcare externships. Additionally, the
company provided updated information concerning the ongoing independent
investigation being conducted by the special committee of its Board of
Directors.Significant Items In connection with reporting its results for the fourth quarter of 2004, the company increased its estimate for its allowance for doubtful accounts. The company periodically evaluates its receivables Receivables An asset designation applicable to all debts, unsettled transactions or other monetary obligations owed to a company by its debtors or customers. Receivables are recorded by a company's accountants and reported on the balance sheet, and they and include all debts owed and establishes the allowance for doubtful accounts based on methodologies and assumptions, which the company reviews and modifies based on emerging information. The company recently analyzed an·a·lyze tr.v. an·a·lyzed, an·a·lyz·ing, an·a·lyz·es 1. To examine methodically by separating into parts and studying their interrelations. 2. Chemistry To make a chemical analysis of. 3. its receivables collection rates together with changes in financial aid funding sources and improved analytical analytical, analytic pertaining to or emanating from analysis. analytical control control of confounding by analysis of the results of a trial or test. tools, and determined it should increase its estimate for its allowance for doubtful accounts. As a result, the company recorded a non-cash, pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta charge for the change in accounting estimate of its allowance for doubtful accounts of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $18.9 million in the fourth quarter of 2004. This change in estimate does not affect prior period financial statements. This additional charge, included in General and Administrative expense, less the related tax benefit of $7.6 million, represented $0.11 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share in the quarter. The bad debt expense, excluding the charge related to the change in accounting estimate, was 4.5% of total revenue for the quarter ended December 31, 2004. In addition, the company changed its method of revenue recognition related to its Culinary and Health Education externships. These student externships are required to be taken at the end of certain academic programs, following the conclusion of in-school instruction, in order to satisfy graduation Graduation is the action of receiving or conferring an academic degree or the associated ceremony. The date of event is often called degree day. The event itself is also called commencement, convocation or invocation. requirements. The new revenue recognition method recognizes tuition For tuition fees in the United Kingdom, see . Tuition means instruction, teaching or a fee charged for educational instruction especially at a formal institution of learning or by a private tutor usually in the form of one-to-one tuition. revenue through the end of the student's externship externship holding the position of an extern. externship Acting internship, see there period, while the prior practice recognized revenue only over the period of in-school academic instruction. This change, as shown in the attached financial tables, results in a restatement of the company's financial statements for 2000 through 2004. The full-year and fourth quarter 2004 restatement resulted in a non-cash reduction of $11.5 million and $3.4 million in revenue and $0.06 and $0.02 per diluted share after taxes, respectively. This revenue will be earned and recognized in subsequent periods net of student refunds. The company noted that the restatement does not materially affect year-over-year growth percentages or trends for revenue and earnings per share as prior-period results have been restated to reflect this change. Three Months Ended December 31 --Fourth quarter 2004 total revenue increased 33% to $485.9 million from a restated $366.7 million for the same period last year. The increase in revenue is primarily attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to a 30% increase in same-school revenue driven by an increase in same-school population (21.5% increase at October October: see month. 31st) and an approximate ap·prox·i·mate v. To bring together, as cut edges of tissue. adj. 1. Relating to the contact surfaces, either proximal or distal, of two adjacent teeth; proximate. 2. Close together. 8% increase in average revenue per student during the fourth quarter. --Net income was $59.8 million, or $0.57 per diluted share, up 18% from last year's fourth quarter restated net income of $50.7 million, or $0.49 per diluted share. Fourth quarter 2004 net income includes the following items:
(In millions, except per Quarterly Quarterly Quarterly Quarterly
share data) Earnings Income Net Diluted
Before Taxes Income Earnings
Income Per Share
Taxes
----------------------------------------------------------------------
Allowance for Doubtful
Accounts Change in Estimate ($18.9) $7.6 ($11.3) ($0.11)
----------------------------------------------------------------------
Externship Revenue Recognition
Restatement ($3.4) $1.4 ($2.0) ($0.02)
----------------------------------------------------------------------
Certain Legal Fees ($4.9) $2.0 ($2.9) ($0.03)
----------------------------------------------------------------------
Self-funded Employee Benefits
Plan Charge ($2.2) $0.9 ($1.3) ($0.01)
----------------------------------------------------------------------
Lower Effective Tax Rate n/a $3.0 $3.0 $0.03
----------------------------------------------------------------------
Total ($29.4) $14.9 ($14.5) ($0.14)
----------------------------------------------------------------------
--Approximately $18.9 million of pre-tax General and Administrative expense is related to the aforementioned a·fore·men·tioned adj. Mentioned previously. n. The one or ones mentioned previously. aforementioned Adjective mentioned before Adj. 1. increase in the allowance for doubtful accounts. --Approximately $3.4 million of pre-tax revenue reduction is related to the aforementioned restatement for the externship revenue. --Approximately $4.9 million of pre-tax legal and other expenses related to the SEC investigation, investigation being conducted by the special committee of the Board of Directors, and shareholder class action and derivative derivative: see calculus. derivative In mathematics, a fundamental concept of differential calculus representing the instantaneous rate of change of a function. lawsuits. --Approximately $2.2 million of pre-tax expense is related to CEC's self-funded medical and dental dental /den·tal/ (den´t'l) pertaining to a tooth or teeth. den·tal adj. 1. Of, relating to, or for the teeth. 2. Of, relating to, or intended for dentistry. plan. The company adjusted its year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. accrual accrual, n continually recurring short-term liabilities. Examples are accrued wages, taxes, and interest. as actual costs were higher than previously anticipated for 2004, the first year these plans were self-funded. --Approximately $3.0 million of income is related to a reduction on our effective tax rate from 40.25% to 39.25%. The lower tax rate was driven by a reduction in the company's state income taxes and tax free investment earnings. The effective state income tax rate was reduced by the mix of earnings and various state tax credits generated. Twelve Months Ended December 31 --Full year 2004 revenues increased 47% to $1.73 billion from $1.18 billion for the same period last year, after reflecting the externship revenue recognition restatement. The increase in revenue is primarily attributable to a 33% increase in same-school revenue driven by an approximate average 25% increase in same-school population for the period and an approximate 4% increase in average revenue per student during the year. --Net income was $179.6 million, or $1.71 per diluted share, up 61% from $111.9 million, or $1.11 per diluted share, after adjusting for the 2-for-1 stock split effected in August 2003 and the externship revenue recognition restatement. Full year 2004 net income includes the following items:
(In millions, except per Annual Annual Annual Annual
share data) Earnings Income Net Diluted
Before Taxes Income Earnings
Income Per Share
Taxes
----------------------------------------------------------------------
Allowance for Doubtful
Accounts Change in Estimate ($18.9) $7.6 ($11.3) ($0.11)
----------------------------------------------------------------------
Externship Revenue Recognition
Restatement ($11.2) $4.5 ($6.7) ($0.06)
----------------------------------------------------------------------
Certain Legal Fees ($11.4) $4.6 ($6.8) ($0.07)
----------------------------------------------------------------------
Lower Effective Tax Rate n/a $3.0 $3.0 $0.03
----------------------------------------------------------------------
Total ($41.5) $19.7 ($21.8) ($0.21)
----------------------------------------------------------------------
Balance Sheet and Cash Flow --At December 31, 2004, we had cash and cash equivalents of $348.1 million, compared with $161.2 million on September September: see month. 30, 2004. Short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. and long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. as of December 31, 2004 was $23.9 million. --Net cash provided by operating activities for the fourth quarter of 2004 was $114.5 million compared to $113.3 million for the same period of 2003. --Purchases of property and equipment for the quarter were $48.8 million and for the year were $142.8 million. Purchases of property and equipment for 2004 represented approximately 8.3% of total revenues. --Quarterly days sales outstanding In accountancy, Days Sales Outstanding is a company's average collection period. A low figure indicates that the company collects its outstanding receivables quickly. Typically it is looked at either quarterly or yearly (90 or 365 days). (DSOs) for total net receivables Net Receivables A company's accounts receivable (money owed to the company) minus bad debts. Notes: If a company estimates that 2% of its sales are never going to be paid, then net receivables equals 98% (100% - 2%) of the accounts receivable. were 17 days at December 31, 2004. This represents a 9-day decrease from the quarterly DSOs at December 31, 2003 of 26 days, reflecting the revenue recognition restatement. Before the increase in the allowance of doubtful accounts, quarterly days sales outstanding (DSOs) for total net receivables were 20 days at December 31, 2004. We calculate DSOs by dividing the sum of net student receivables and net other receivables by average daily revenue. Average daily revenue is computed by dividing quarterly "total revenue" by the total number of days in the quarter. Population Data --Total CEC (Central Electronic Complex) The set of hardware that defines a mainframe, which includes the CPU(s), memory, channels, controllers and power supplies included in the box. Some CECs, such as IBM's Multiprise 2000 and 3000, include data storage devices as well. student population on January January: see month. 31, 2005 was approximately 101,500, up 21% compared with approximately 84,100 on January 31, 2004. On a same school basis, total CEC student population was up approximately 19.5%. --The aforementioned student population data excludes previously disclosed dis·close tr.v. dis·closed, dis·clos·ing, dis·clos·es 1. To expose to view, as by removing a cover; uncover. 2. To make known (something heretofore kept secret). teach-outs related to the Academy division, but includes the effect of the restatement of the Culinary and Healthcare externship revenue recognition. Students participating in externship programs are now included in our student population as we are recognizing revenue through the end of the externship period. These externships were previously excluded from the company's population statistics as the company was not earning revenue over the student externship period. --Total student population of CEC's Online Education Group on January 31, 2005 was approximately 24,900, up from approximately 12,200 students on January 31, 2004. --Fourth quarter 2004 new student starts were approximately 28,600. Information Concerning Special Committee Investigation --As previously reported, our Board of Directors formed a special committee to conduct an independent investigation of allegations of securities laws violations against the company, including allegations relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the company's accounting practices and reported statistics relating to starts, student population and placement. At that time, we announced that the special committee had retained the law firm of McDermott McDermott is a surname, and may refer to:
emery Granular rock consisting of a mixture of the mineral corundum (aluminum oxide, Al2O3) and iron oxides such as magnetite (Fe3O4) or hematite (Fe2O3). LLP LLP - Lower Layer Protocol to represent and assist it in its review. Additionally, it was previously reported that by the special committee's direction, McDermott, Will & Emery retained Navigant Consulting, Inc. to assist in the investigation. Navigant Consulting is providing independent forensic accounting Forensic accounting, sometimes called investigative accounting, involves the application of accounting concepts and techniques to legal problems. Forensic accountants investigate and document financial Fraud and white-collar crimes services in connection with the special committee's review of allegations relating to previously reported financial information and related matters. At the request of the special committee, Navigant reviewed the company's new methodology for estimating its allowance for doubtful accounts and found it to be reasonable. The special committee investigation has not yet been completed. Business Outlook While we may make further acquisitions, none are contemplated by these forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. . --We expect full year 2005 revenues to be approximately $2.1 billion and full year 2005 earnings per share to be approximately $2.27. Our full year earnings expectations include an approximate $0.05 per share impact for the effect of the externship revenue recognition change. Additionally, the earnings expectations include higher costs for legal and regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. matters. --We expect the Online Education Group's full year 2005 revenues, included in the preceding amounts, to be approximately $600 million. --We expect full year 2005 operating profit margin Operating profit margin The ratio of operating profit to net sales. improvement to be approximately 150 basis points. --We expect first quarter 2005 revenues to be approximately $500 million and first quarter 2005 earnings per share to be approximately $0.51. We expect diluted weighted average shares outstanding to be approximately 105 million for first quarter 2005. --We expect bad debt levels to be approximately 5% of total revenue for 2005. --We expect our 2005 effective income tax rate will be approximately 39.25%. --We expect that 2005 capital expenditures will be approximately 7.5% of total revenue. Conference Call Information --Career Education Corporation will host a conference call today at 5:30 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) 614-3673 (international) or (800) 261-3417 (domestic) and citing code 84473011. Please log-in Verb 1. log-in - enter a computer; "Have you logged in lately?" log in, log on access - obtain or retrieve from a storage device; as of information on a computer or dial-in at least 10 minutes prior to the start time to ensure a connection. After 7:30 PM (Eastern Time) the same day, 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 and citing code 75236285. Career Education Corporation (www.careered.com) is the world's largest on-campus on-campus adjective Referring to an on-site site of a medical complex with multiple buildings. Cf 'Off campus.'. provider of private, for-profit for-prof·it adj. Established or operated with the intention of making a profit: a for-profit organization. , postsecondary education and has a rapidly-growing presence in online education. CEC's Colleges, Schools and Universities Group operates 82 campuses in the U.S., Canada Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of , France, the United Kingdom and the United Arab Emirates United Arab Emirates, federation of sheikhdoms (2005 est. pop. 2,563,000), c.30,000 sq mi (77,700 sq km), SE Arabia, on the Persian Gulf and the Gulf of Oman. and offers doctoral degree, master's degree master's degree n. An academic degree conferred by a college or university upon those who complete at least one year of prescribed study beyond the bachelor's degree. Noun 1. , bachelor's bach·e·lor's n. A bachelor's degree. degree, associate degree and diploma DIPLOMA. An instrument of writing, executed by, a corporation or society, certifying that a certain person therein named is entitled to a certain distinction therein mentioned. 2. programs in the career-oriented disciplines of visual communication and design technologies, information technology, business studies, culinary arts and health education. The Online Education Group operates American InterContinental University American InterContinental University, commonly called AIU, is an international for-profit university owned by Career Education Corporation (stock symbol CECO). It was founded in 1977 as the American College of Applied Arts. Online and Colorado Technical University Colorado Technical University (CTU) is a system of proprietary for-profit colleges in the United States providing career training, accredited programs, and college degrees in a variety of areas. CTU grants bachelor's, master's and doctoral degrees. Online and offers a variety of degrees in information technology, business, visual communication and education. CEC's total student population on January 31, 2005 was approximately 101,500 students. Except for the historical and present factual information contained herein, the matters set forth in this release, including statements under "Business Outlook" and statements identified by words such as "anticipates," "expects," "projects," "plans," "will," and similar expressions, are forward-looking statements within the meaning of the "safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. " provisions of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. Such statements are based on information currently available to us and involve risks and uncertainties that could cause our actual growth, results, performance and business prospects and opportunities to differ materially from those expressed in, or implied Inferred from circumstances; known indirectly. In its legal application, the term implied is used in contrast with express, where the intention regarding the subject matter is explicitly and directly indicated. by these statements. These risks and uncertainties, the outcome of which could materially and adversely affect our financial condition and operations, include, but are not limited to: 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 An administrative proceeding is a non-judicial determination of fault or guilt and may include in some cases penalties of various forms. A "Captain's Mast", held by a commanding officer of a warship is one such proceeding. and investigations and governmental regulations, including the pending Securities and Exchange Commission and Justice Department investigations and, class action, derivative, Qui Tam QUI TAM, remedies. Who as well. When a statute imposes a penalty, for the doing or not doing an act, and gives that penalty in part to whosoever will sue for the same, and the other part to the commonwealth, or some charitable, literary, or other institution, and makes it recoverable by , and other lawsuits; cost and potential impact of findings by the special committee of our Board of Directors that is investigating allegations of securities laws violations against CEC; risks related to our ability to comply with accrediting agency requirements or obtain accrediting agency approvals; costs and difficulties related to the integration of acquired businesses; future financial and operational results; competition; general economic conditions; ability to manage and continue growth; and other risk factors relating to our industry and business, as detailed in our Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the year ended December 31, 2003, and from time to time in our other reports filed with the SEC. We disclaim dis·claim v. dis·claimed, dis·claim·ing, dis·claims v.tr. 1. To deny or renounce any claim to or connection with; disown. 2. To deny the validity of; repudiate. 3. any responsibility to update these forward-looking statements.
Career Education Corporation and Subsidiaries
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
For the Twelve Months Ended December 31, 2004 and 2003
(Amounts in thousands, except per share data and percentages)
% of
2004 Revenue
----------- ---------
Revenue:
Tuition and registration fees $1,608,433 93.0%
Other 120,082 7.0%
-----------
Total revenue 1,728,515 100.0%
-----------
Operating expenses:
Educational services and facilities 557,134 32.1%
General and administration 822,358 47.6%
Depreciation and amortization 57,469 3.4%
-----------
Total operating expenses 1,436,961 83.1%
-----------
Income from operations 291,554 16.9%
Other income (expense):
Interest income 2,952 0.2%
Interest expense (2,802) -0.2%
Share of affiliate earnings 4,248 0.2%
Miscellaneous (290) 0.0%
-----------
Total other income 4,108 0.2%
-----------
Income before provision for income taxes 295,662 17.1%
Provision for income taxes 116,047 6.7%
-----------
Net income $179,615 10.4%
===========
======================================================================
Diluted net income per share $1.71
Diluted weighted average shares outstanding 105,004
2003
------------------------------------------------------
As % of As % of
Reported Revenue Adjustment Restated Revenue
------------ -------- ----------- ---------- ---------
Revenue:
Tuition and
registration
fees $1,089,192 91.6% $(12,364) $1,076,828 91.5%
Other 99,417 8.4% - 99,417 8.5%
------------ --------- -----------
Total revenue 1,188,609 100.0% (12,364) 1,176,245 100.0%
------------ --------- -----------
Operating
expenses:
Educational
services and
facilities 413,806 34.8% (291) 413,515 35.2%
General and
administration 533,964 44.9% - 533,964 45.4%
Depreciation
and
amortization 43,908 3.7% - 43,908 3.7%
------------ --------- -----------
Total
operating
expenses 991,678 83.4% (291) 991,387 84.3%
------------ --------- -----------
Income from
operations 196,931 16.6% (12,073) 184,858 15.7%
Other income
(expense):
Interest income 1,004 0.1% - 1,004 0.1%
Interest
expense (1,845) -0.2% - (1,845) -0.2%
Share of
affiliate
earnings 3,354 0.3% - 3,354 0.3%
Miscellaneous - 0.0% - - 0.0%
------------ --------- -----------
Total other
income 2,513 0.2% - 2,513 0.2%
------------ --------- -----------
Income before
provision for
income taxes 199,444 16.8% (12,073) 187,371 15.9%
Provision for
income taxes 80,276 6.8% (4,771) 75,505 6.4%
------------ --------- -----------
Net income $119,168 10.0% $(7,302) $111,866 9.5%
============ ========= ===========
======================================================================
Diluted net
income per
share $1.19 $(0.07) $1.11
Diluted weighted
average shares
outstanding 100,522 100,522 100,522
Career Education Corporation and Subsidiaries
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
For the Three Months Ended December 31, 2004 and 2003
(Amounts in thousands, except per share data and percentages)
% of
2004 Revenue
---------- ---------
Revenue:
Tuition and registration fees $456,670 93.9%
Other 29,234 6.0%
----------
Total revenue 485,904 100.0%
----------
Operating expenses:
Educational services and facilities 146,537 30.1%
General and administration 229,577 47.3%
Depreciation and amortization 16,627 3.4%
----------
Total operating expenses 392,741 80.8%
----------
Income from operations 93,163 19.2%
Other income (expense):
Interest income 1,412 0.3%
Interest expense (734) -0.2%
Share of affiliate earnings 1,448 0.3%
Miscellaneous (94) 0.0%
----------
Total other income 2,032 0.4%
----------
Income before provision for income taxes 95,195 19.6%
Provision for income taxes 35,359 7.3%
----------
Net income $59,836 12.3%
==========
======================================================================
Diluted net income per share $0.57
Diluted weighted average shares outstanding 104,946
2003
----------------------------------------------------
As % of As % of
Reported Revenue Adjustment Restated Revenue
----------- --------- ---------- --------- ---------
Revenue:
Tuition and
registration
fees $343,000 92.4% $(4,557) $338,443 92.3%
Other 28,296 7.6% - 28,296 7.7%
----------- ---------- ---------
Total revenue 371,296 100.0% (4,557) 366,739 100.0%
----------- ---------- ---------
Operating
expenses:
Educational
services and
facilities 117,031 31.5% (124) 116,907 31.9%
General and
administration 153,030 41.2% - 153,030 41.7%
Depreciation
and
amortization 13,144 3.6% - 13,144 3.6%
----------- ---------- ---------
Total
operating
expenses 283,205 76.3% (124) 283,081 77.2%
----------- ---------- ---------
Income from
operations 88,091 23.7% (4,433) 83,658 22.8%
Other income
(expense):
Interest income 130 0.1% - 130 0.0%
Interest
expense (471) -0.1% - (471) -0.1%
Share of
affiliate
earnings 1,187 0.3% - 1,187 0.3%
Miscellaneous - 0.0% - - 0.0%
----------- ---------- ---------
Total other
income 846 0.3% - 846 0.2%
----------- ---------- ---------
Income before
provision for
income taxes 88,937 24.0% (4,433) 84,504 23.0%
Provision for
income taxes 35,521 9.6% (1,693) 33,828 9.2%
----------- ---------- ---------
Net income $53,416 14.4% $(2,740) $50,676 13.8%
=========== ========== =========
======================================================================
Diluted net
income per share $0.51 $(0.03) $0.49
Diluted weighted
average shares
outstanding 104,288 104,288 104,288
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
(In thousands)
December 31, 2003
----------------------------------
December 31, As As
2004 Reported Adjustment Restated
----------- ----------- ---------- -----------
ASSETS
CURRENT ASSETS:
Cash and cash
equivalents $348,099 $161,235 $- $161,235
Receivables:
Students, net
of allowance
for doubtful
accounts of
$63,903 and
$47,467 as of
December 31,
2004 and 2003 87,503 110,445 (6,485) 103,960
Other, net 5,378 6,915 - 6,915
Inventories 17,522 11,652 - 11,652
Prepaid expenses 44,702 35,441 - 35,441
Other current
assets 5,980 5,464 - 5,464
Deferred income tax
assets 18,341 4,639 - 4,639
----------- ----------- ---------- -----------
Total current
assets 527,525 335,791 (6,485) 329,306
----------- ----------- ---------- -----------
Property and
equipment, net 351,146 263,925 - 263,925
Goodwill, net 449,136 440,709 1,525 442,234
Intangible assets,
net 35,881 36,326 - 36,326
Other assets 38,495 42,399 - 42,399
----------- ----------- ---------- -----------
TOTAL ASSETS $1,402,183 $1,119,150 $(4,960) $1,114,190
----------- ----------- ---------- -----------
LIABILITIES AND
STOCKHOLDERS'
EQUITY
CURRENT LIABILITIES:
Current maturities
of long-term debt $2,274 $79,822 $- $79,822
Accounts payable 38,263 30,627 - 30,627
Accrued expenses:
Payroll and
related
benefits 38,193 25,671 - 25,671
Income taxes - 14,472 (13,278) 1,194
Other 70,510 42,419 (568) 41,851
Deferred tuition
revenue 169,031 113,610 28,374 141,984
----------- ----------- ---------- -----------
Total current
liabilities 318,271 306,621 14,528 321,149
----------- ----------- ---------- -----------
LONG-TEM LIABILITIES:
Long-term debt, net
of current
maturities 21,591 25,453 - 25,453
Long-term
contractual
obligations - 9,679 - 9,679
Deferred income tax
liabilities 39,374 18,366 - 18,366
Other 38,957 11,211 - 11,211
----------- ----------- ---------- -----------
Total long-tem
liabilities 99,922 64,709 - 64,709
----------- ----------- ---------- -----------
COMMITMENTS AND
CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock - - - -
Common stock 1,025 1,002 - 1,002
Additional paid-in
capital 571,192 496,582 - 496,582
Accumulated other
comprehensive
income 4,396 2,986 - 2,986
Retained earnings 407,377 247,250 (19,488) 227,762
----------- ----------- ---------- -----------
Total
stockholders'
equity 983,990 747,820 (19,488) 728,332
----------- ----------- ---------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $1,402,183 $1,119,150 $(4,960) $1,114,190
----------- ----------- ---------- -----------
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED SELECTED SEGMENT INFORMATION
(Dollars in thousands)
For the Three Months Ended December 31,
----------------------------------------------
2003
----------------------------------
As As
2004 Reported Adjustment Restated
----------- ----------- ---------- -----------
Revenue
CSU (1) $367,698 $320,251 $(4,557) $315,694
OEG (2) 118,206 51,045 - 51,045
Segment profit
CSU $59,338 $70,429 $(4,433) $65,996
OEG 41,622 23,354 - 23,354
Corporate and other (6,349) (4,505) - (4,505)
Segment profit
percentage
CSU 16.1% 22.0% 20.9%
OEG 35.2% 45.8% 45.8%
For the Twelve Months Ended December 31,
----------------------------------------------
2003
----------------------------------
As As
2004 Reported Adjustment Restated
----------- ----------- ---------- -----------
Revenue
CSU (1) $1,337,051 $1,039,798 $(12,364) $1,027,434
OEG (2) 391,464 148,811 - 148,811
Segment profit
CSU $176,055 $163,494 $(12,073) $151,421
OEG 158,815 66,659 - 66,659
Corporate and other (39,068) (29,868) - (29,868)
Segment profit
percentage
CSU 13.2% 15.7% 14.7%
OEG 40.6% 44.8% 44.8%
(1) The Colleges, Schools, and Universities ("CSU") segment represents
an aggregation of our campus-based operating divisions.
(2) The Online Education Group ("OEG") segment represents an
aggregation of our online operating divisions.
(3) Segment profit equals the sume of income from operations and share
of affiliate earnings.
Career Education Corporation and Subsidiaries
Unaudited Consolidated Statements of Income
For the Years Ended December 31, 2002, 2001 and 2000
For the Year Ended December 31, 2002
-----------------------------------------
As Reported Adjustment As Restated
------------- ------------- -------------
Total revenue $780,059 $(9,112) $770,947
Total operating expenses 666,761 (164) 666,597
Total other income 1,062 - 1,062
Income before provision for
income taxes 114,360 (8,948) 105,412
Provision for income taxes 46,888 (3,170) 43,718
------------- ------------- -------------
Net income $67,472 $(5,778) $61,694
============= ============= =============
Diluted net income per share $0.71 $0.06 $0.65
============= ============= =============
For the Year Ended December 31, 2001
-----------------------------------------
As Reported Adjustment As Restated
------------- ------------- -------------
Total revenue $547,059 $(5,000) $542,059
Total operating expenses 478,237 (45) 478,192
Total other income 915 - 915
Income before provision for
income taxes 69,737 (4,955) 64,782
Provision for income taxes 31,382 (1,908) 29,474
------------- ------------- -------------
Net income $38,355 $(3,047) $35,308
============= ============= =============
Diluted net income per share $0.42 $0.03 $0.39
============= ============= =============
For the Year Ended December 31, 2000
-----------------------------------------
As Reported Adjustment As Restated
------------- ------------- -------------
Total revenue $334,528 $(3,649) $330,879
Total operating expenses 295,148 (60) 295,088
Total other income (expense) 126 - 126
Income before provision for
income taxes and cumulative
change in accounting
principle 39,506 (3,589) 35,917
Provision for income taxes 17,322 (1,515) 15,807
Cumulative effect of change
in accounting principle, net
of income tax benefit (778) - (778)
------------- ------------- -------------
Net income $21,406 $(2,074) $19,332
============= ============= =============
Diluted net income per share $0.28 $0.03 $0.25
============= ============= =============
Note: The effect of the restatement on the previously reported full
year periods is set forth in the accompanying exhibits. The company
will file restated financial statements reflecting this change in
connection with filing its Form 10-K for 2004.
Career Education Corporation and Subsidiaries
SELECTED BALANCE SHEET & FINANCIAL DATA
As of December 31, 2004
(Dollars in thousands)
Purchases of Net Cash
Property and Provided by
Equipment, net Operating Activities
-------------------- --------------------
For the three months ended
December 31, 2004 $48,779 $114,451
For the year ended
December 31, 2004 $142,781 $374,594
Career Education Corporation and Subsidiaries
Adjusted Student Population
Culinary & Restated Academy Population
Healthcare with Division without
Population as As Externships Externships Teach- Teach-outs
of: Reported outs (1)
---------------- --------- ----------- ----------- -------- ----------
January 31, 2003 51,100 1,050 52,150 n/a n/a
April 30, 2003 54,400 1,100 55,500 n/a n/a
July 31, 2003 62,000 2,000 64,000 n/a n/a
October 31, 2003 79,500 2,400 81,900 n/a n/a
January 31, 2004 83,200 1,800 85,000 (900) 84,100
April 30, 2004 85,300 2,100 87,400 (750) 86,650
July 31, 2004 81,000 2,150 83,150 (700) 82,450
October 31, 2004 97,300 3,050 100,350 (850) 99,500
(1) We are providing this information as we will be reporting
population for 2005 and 2004 net of our previously disclosed
teach-outs for our Academy division.
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