Career Education Corporation Reports Results for First Quarter 2006; Substantial Cash Flow Generation; Approximately $490 Million Cash and Investments on Hand.HOFFMAN ESTATES Hoffman Estates A village of northeast Illinois, a suburb of Chicago. Population: 49,700. , Ill. -- Career Education Corporation (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :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 revenue of $528.6 million and net income of $52.7 million for the first quarter ended March 31, 2006, as well as substantial cash flow generation concluding the quarter with approximately $490 million cash and investments on hand. "Our focus on quality growth, return on investment, and value for our students and our stockholders continues to drive our business forward," said John Larson John B. Larson (born July 22 1948), American politician, has been a Democratic member of the United States House of Representatives since 1999, representing Connecticut's At-large congressional district (map). , Chairman, President and Chief Executive Officer of Career Education Corporation. "In spite of in opposition to all efforts of; in defiance or contempt of; notwithstanding. See also: Spite outside pressures during the quarter, our business remains strong, and our momentum, substantial. We also made significant progress in addressing outstanding compliance, legal and governance Governance makes decisions that define expectations, grant power, or verify performance. It consists either of a separate process or of a specific part of management or leadership processes. Sometimes people set up a government to administer these processes and systems. issues. We are confident that we are positioning the company to capitalize on Cap´i`tal`ize on` v. t. 1. To turn (an opportunity) to one's advantage; to take advantage of (a situation); to profit from; as, to capitalize on an opponent's mistakes s>. attractive growth opportunities, to the benefit of our students and, in turn, our stockholders over the long term." RESULTS OF OPERATIONS Three Months Ended March 31, 2006 --Consolidated revenue increased 4.0 percent to $528.6 million during the first quarter of 2006. During the first quarter of 2005, consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: revenues were $510.4 million. The increase is primarily attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to 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. 3.0 percent increase in student population from January January: see month. 31, 2005, to January 31, 2006. Revenue for our universities' online campuses was $193.0 million during the first quarter of 2006, an increase of 22.7 percent from $157.3 million during the first quarter of 2005. --On January 1, 2006, 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. adopted Statement of Financial Accounting Standards (SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System ) No. 123R "Share-Based Payment," which requires the costs relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc 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 instrument issued. First quarter 2006 operating results include a non-cash share-based compensation expense of $4.0 million. Share-based compensation expense recognition was not required during the first quarter of 2005. --In connection with reporting its results for the first quarter of 2006, the company tested the goodwill balance for its Gibbs Gibbs , Josiah Willard 1839-1903. American mathematician and physicist who formulated the theoretical foundation of physical chemistry, developed vector analysis, and conducted optical and thermodynamic research. Noun 1. division for impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with SFAS 142 "Goodwill and Other Intangible Assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. ." The review involved the application of a fair-value-based test. Due to continued weak operating results and cash flows in our Gibbs division, the test indicated that the value of goodwill attributable to the Gibbs division had been impaired See assistive technology. as the estimate of the division's fair value was less than the division's carrying value Carrying Value Also know as "book value," it is a company's total assets minus intangible assets and liabilities, such as debt. Notes: This is different than market value, as it can be higher or lower depending on the circumstances. as of the time of the test. As a result, the entire goodwill balance related to the Gibbs division of $10.4 million was written off effective March 31, 2006. --Operating profit margin percentage was 15.0 percent during the first quarter of 2006, a decrease of 4.4 percentage points from 19.4 percent during the first quarter of 2005. Of the total decrease, approximately 2.0 percentage points were due to the Gibbs goodwill impairment charge, approximately 0.8 percentage points were due to non-cash share-based compensation expense, and approximately 3.3 percentage points were due to an increase in advertising and admission expenses. These decreases were offset, in part, by a 0.7 percentage point reduction in bad debt expense during the quarter and a 1.6 percentage point reduction in administrative expense. --Consolidated net income was $52.7 million, or $0.53 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, during the first quarter of 2006, a decrease of 5.7 percent from $55.9 million, or $0.53 per diluted share, during the first quarter of 2005. As discussed above, first quarter 2006 net income includes the following non-cash charges Non-Cash Charge A charge off, made by a company against earnings, that does not require an initial outlay of cash. Notes: Non-cash charges are typically against the depreciation, amortization, and depletion accounts on a company's balance sheet. (in millions, except per share data):
Impact on
Earnings
Per
Pretax Tax Diluted
Loss Benefit Net Loss Share
----------------------------------------------------------------------
Goodwill Impairment
Charge - Gibbs Division ($10.4) $3.9 ($6.5) ($0.065)
----------------------------------------------------------------------
Share-based Compensation
Expense ($4.0) $1.5 ($2.5) ($0.025)
----------------------------------------------------------------------
Total ($14.4) $5.4 ($9.0) ($0.090)
----------------------------------------------------------------------
--First quarter 2005 net income included a loss from discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. of $5.7 million, or $0.054 per diluted share, primarily attributable to the sale of our International Academy of Design and Technology The International Academy of Design and Technology (IADT) is a for-profit private media arts college accredited by a national agency, the Accrediting Council for Independent Colleges and Schools (ACICS). (IADT IADT International Academy of Design and Technology IADT Institute of Art, Design and Technology (Dún Laoghaire, Ireland) IADT Initial Active Duty Training IADT Integrated Automatic Detection & Tracking ) campus in Montreal Montreal (mŏn'trēôl`), Fr. Montréal (môNrāäl`), city (1991 pop. 1,017,666), S Que., Canada, on Montreal island, surrounded by St. Lawrence River and Rivière des Prairies. , 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 . CASH FLOWS AND FINANCIAL POSITION Cash Flows --Net cash provided by operating activities was $122.6 million during the first quarter of 2006, compared to net cash provided by operating activities of $111.2 million during the first quarter of 2005. --Capital expenditures decreased to $17.5 million during the first quarter of 2006, from $25.5 million during the first quarter of 2005. Capital expenditures represented approximately 3.3 percent of consolidated revenue during the first quarter of 2006 and 5.0 percent of consolidated revenue during the first quarter of 2005. Financial Position --As of March 31, 2006, and December December: see month. 31, 2005, cash and cash equivalents and investments totaled $489.0 million and $404.4 million, respectively. --Net student 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 as of March 31, 2006, were $61.8 million, a 19.1 percent decrease from net student receivables of $76.4 million as of December 31, 2005. 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. as a percentage of gross student receivables increased to 39.8 percent as of March 31, 2006, as compared to 37.0 percent as of December 31, 2005. --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). (DSO See CSO. ) were 12 days as of March 31, 2006, a two-day decrease from DSO as of December 31, 2005, of 14 days, and a one-day decrease from DSO as of March 31, 2005, of 13 days. DSO is calculated by dividing the sum of net student receivables and net other receivables by average daily revenue for the quarter. Average daily revenue for the quarter is computed by dividing total revenue by the total number of days in the quarter. --During the three months ended March 31, 2006, we repurchased approximately 0.7 million shares of our common stock for approximately $24.9 million at an average price of approximately $36.16 per share. The repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. did not have a significant impact on diluted weighted average shares outstanding. CORPORATE GOVERNANCE Corporate Governance The relationship between all the stakeholders in a company. This includes the shareholders, directors, and management of a company, as defined by the corporate charter, bylaws, formal policy, and rule of law. The company has adopted or proposed the following corporate governance enhancements: 2006 Actions: --Proposal to the stockholders for a phased-in declassification de·clas·si·fy tr.v. de·clas·si·fied, de·clas·si·fy·ing, de·clas·si·fies To remove official security classification from (a document). de·clas of the board of directors to be voted on at the company's annual meeting on May 18, 2006 --Proposal to enable stockholders to call a special meeting with a two-thirds affirmative AFFIRMATIVE. Averring a fact to be true; that which is opposed to negative. (q.v.) 2. It is a general rule of evidence that the affirmative of the issue must be proved. Bull. N. P. 298 ; Peake, Ev. 2. 3. vote to be voted on at the company's annual meeting on May 18, 2006 --Adoption of a majority voting Majority voting Voting system under which corporate shareholders vote for each director separately. Related: Cumulative voting. majority voting bylaw by·law n. 1. A law or rule governing the internal affairs of an organization. 2. A secondary law. [Middle English bilawe, body of local regulations; akin to Danish provision governing gov·ern v. gov·erned, gov·ern·ing, gov·erns v.tr. 1. To make and administer the public policy and affairs of; exercise sovereign authority in. 2. election of directors --Appointment of Steven Ste´ven n. 1. Voice; speech; language. Ye have as merry a steven As any angel hath that is in heaven. - Chaucer. 2. An outcry; a loud call; a clamor. To set steven to make an appointment. H. Lesnik to the board of directors, filling the seat vacated by the retirement of Wallace Wal·lace , Alfred Russel 1823-1913. British naturalist who developed a concept of evolution that paralleled the work of Charles Darwin. O. Laub Laub (German: leaf, foliage) may refer to:
2005 Actions: --Termination of the Shareholder Rights Plan --Appointment of two new independent directors to the board of directors, Leslie Leslie (Gaelic, derived from a surname meaning 'garden of hollies,'grey fortress, or'garden by the pool')[1] can refer to any of the following: Places in Scotland:
--Minimum stock ownership guidelines guidelines, n.pl a set of standards, criteria, or specifications to be used or followed in the performance of certain tasks. for senior management and the board of directors --Policy requiring approval for board members to serve on other outside boards --Mandatory continuing education continuing education: see adult education. continuing education or adult education Any form of learning provided for adults. In the U.S. the University of Wisconsin was the first academic institution to offer such programs (1904). for all board members Stock Repurchase Stock repurchase A firm's repurchase of outstanding shares of its common stock. Program Since July July: see month. 2005, CEC's board of directors has authorized au·thor·ize tr.v. au·thor·ized, au·thor·iz·ing, au·thor·iz·es 1. To grant authority or power to. 2. To give permission for; sanction: the use of approximately $500 million in the aggregate for the repurchase of shares of our 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 Regulatory requirements are part of the process of drug discovery and drug development. Regulatory requirements describe what is necessary for a new drug to be approved for marketing in any particular country. . The stock repurchase program does not have an expiration date Expiration Date The day on which an options or futures contract is no longer valid and, therefore, ceases to exist. Notes: The expiration date for all listed stock options in the U.S. and may be suspended sus·pend v. sus·pend·ed, sus·pend·ing, sus·pends v.tr. 1. To bar for a period from a privilege, office, or position, usually as a punishment: suspend a student from school. or discontinued dis·con·tin·ue v. dis·con·tin·ued, dis·con·tin·u·ing, dis·con·tin·ues v.tr. 1. To stop doing or providing (something); end or abandon: at any time. Since inception of the program, the company has repurchased approximately 6.0 million shares of its common stock for approximately $225.1 million at an average price of approximately $37.76 per share. SEGMENT REPORTING segment reporting A type of financial reporting in which the firm discloses information by identifiable industry segments. For example, Union Pacific Corporation reports revenues, income, assets, depreciation, and capital expenditures for each of four Previously, the company reported operating results in two reportable segments: Colleges, Schools, and Universities (CSU See DSU/CSU. 1. CSU - California State University. 2. CSU - Cleveland State University. 3. CSU - Channel Service Unit. ), which represented an aggregation of our schools on-ground campuses, and the Online Education Group (OEG OEG Olfactory Ensheathing Glia OEG Oberrheinische Eisenbahn-Gesellschaft (German Railroad Company) OEG Operations Evaluation Group OEG Old English Game (chicken breed) ), which represented an aggregation of our online campuses of 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. (AIU AIU American Intercontinental University AIU Allegheny Intermediate Unit (Homestead, PA) AIU Atlantic International University AIU Association of Indian Universities AIU Association Internationale des Universités ) 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. (CTU CTU Colorado Technical University CTU Czech Technical University in Prague CTU Counter Terrorist Unit CTU Clinical Trials Unit CTU Catholic Theological Union CTU Chicago Teachers Union CTU Computer Training Unit CTU Control Unit ). During the fourth quarter of 2005, we reorganized re·or·gan·ize v. re·or·gan·ized, re·or·gan·iz·ing, re·or·gan·iz·es v.tr. To organize again or anew. v.intr. To undergo or effect changes in organization. our management structure with respect to the management of the University division schools, AIU and CTU, and those schools' online campuses. Upon completion of the reorganization The process of carrying out, through agreements and legal proceedings, a business plan for winding up the affairs of, or foreclosing a mortgage upon, the property of a corporation that has become insolvent. in the first quarter of 2006, the company also evaluated its other reporting segments in accordance with the provisions SFAS 131 "Disclosures about Segments of an Enterprise and Related Information." Pursuant to SFAS 131, as of January 1, 2006, the company has identified five reportable segments: the University segment, the Culinary cu·li·nar·y adj. Of or relating to a kitchen or to cookery. [Latin cul  n 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 its Le Cordon Bleu For the Schnitzel variant, see .Le Cordon Bleu (French for "blue ribbon") is an international group of hospitality management and cooking schools teaching French cuisine. Schools of North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. and the Kitchen Academy schools. The Health Education segment primarily includes our Sanford-Brown Colleges Sanford-Brown College is a system of for-profit colleges in the United States providing career training programs in a variety of areas, including of health care, business, criminal justice and computers. and Institutes. The Gibbs segment includes our Katherine Katherine “intolerably curst and shrewd and froward.” [Br. Lit.: The Taming of the Shrew] See : Shrewishness Gibbs School and Gibbs Colleges Katharine Gibbs College is a private for-profit institution of higher learning based in the United States of America, founded by Katharine Gibbs. As the Providence School in Rhode Island, it was originally founded by Katharine Gibbs in 1911 as a selective institution to schools. The Other Schools segment includes the Academy, College East, College West, and INSEEC INSEEC Institut de Hautes Etudes Economiques et Commerciales (French: Institute of Economic Studies) division schools. POPULATION AND NEW STUDENT START DATA Student Population CEC total student population as of April 30, 2006 and 2005, was as follows:
----------------------------------------------------------------------
Population Population
April 30, April 30, Percentage
2006 2005 Difference
----------------------------------------------------------------------
----------------------------------------------------------------------
University segment (1) 44,000 39,400 12%
----------------------------------------------------------------------
Culinary Arts segment 10,600 11,600 (9%)
----------------------------------------------------------------------
Health Education segment 11,100 10,700 4%
----------------------------------------------------------------------
Gibbs segment 6,500 8,100 (20%)
----------------------------------------------------------------------
Other Schools segment 24,900 26,900 (7%)
----------------------------------------------------------------------
CEC Consolidated 97,100 96,700 -%
----------------------------------------------------------------------
(1) University segment population includes approximately 31,500 and
25,500 students as of April 30, 2006 and 2005, respectively, that
are enrolled in fully online academic programs offered by
University segment schools, and is presented as supplemental data.
New Student Starts Total CEC new student starts during the first quarter of 2006 were approximately 28,300, compared to new student starts of approximately 32,500 during the first quarter of 2005. GROWTH INITIATIVES During the first quarter of 2006, CTU introduced Stonecliffe College Online, an academic division of CTU. Stonecliffe College Online is the company's first fully online academic program offering that is marketed specifically to students who prefer a slower pace to their online education. Presently, Stonecliffe College Online offers associate degree programs in business and criminal justice, although the introduction of additional program and degree offerings are planned. Also in the first quarter of 2006, the company's JDV JDV Juridische Dienstverlening (Dutch) Online division launched Blish.com, a new fully-digital marketplace aimed at bringing together buyers and sellers of digital content. Blish.com, which attracts millions of potential customers to its site each month, aims to establish itself as the primary source for consumers seeking to purchase digital content. "We continue to listen to the marketplace and respond with innovations that are student-centered and consumer-oriented," said Larson Larson may refer to: People with the surname Larson:
Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. , sustainable organic growth." CONFERENCE CALL INFORMATION Career Education Corporation will host a conference call today, May 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 617-213-8060 (international) or (866) 825-1709 (domestic) and citing code 80094258. 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. 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 93539037. About Career Education Corporation The educational institutions that are part of the Career Education Corporation (CEC) family offer high quality education to more than 97,000 students across the world in a variety of career-oriented disciplines. The 86 campuses, including the online campuses of American InterContinental University and Colorado Technical University, that serve these students are located throughout the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. and in France, Canada, and the United Kingdom, and offer doctoral, master's mas·ter's n. A master's degree. , bachelor's bach·e·lor's n. A bachelor's degree. , and associate degrees 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. and certificate programs. Career Education is an industry leader whose gold-standard brands are recognized globally. Those brands include, among others, the Le Cordon Bleu schools of North America; the Harrington Harrington can refer to: Places in the United Kingdom:
Colorado (kŏlərăd`ə, –răd`ō, –rä`dō), state, W central United States, one of the Rocky Mt. states. Technical Institute; and Sanford-Brown. 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 each of its educational institutions. Except for the historical and present factual information contained herein, the matters set forth in this release, including statements under "Business Outlook" and "Innovations," statements identified by words such as "anticipate," "believe," "plan," "expect," "intend," "project," "will," and similar expressions, are 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. as defined in Section 21E of the Securities Exchange Act of 1934, as amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. . 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 CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or , 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: 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 derivative: see calculus. derivative In mathematics, a fundamental concept of differential calculus representing the instantaneous rate of change of a function. , and other lawsuits; 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; risks related to our ability to manage and continue growth; future financial and operational results, including the impact of possible impairment of goodwill and other intangible assets; 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 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, 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 INCOME
For the Three Months Ended March 31, 2006 and 2005
(In thousands, except per share amounts and percentages)
% of % of
2006 Revenue 2005 Revenue
--------- --------- --------- ---------
REVENUE:
Tuition and registration
fees $506,677 95.8% $484,881 95.0%
Other 21,953 4.2% 25,555 5.0%
--------- ---------
Total revenue 528,630 100.0% 510,436 100.0%
--------- ---------
OPERATING EXPENSES:
Educational services and
facilities 161,959 30.6% 156,348 30.6%
General and administrative 256,058 48.4% 237,990 46.6%
Depreciation and
amortization 21,009 4.0% 17,201 3.4%
Goodwill impairment charge 10,389 2.0% - - %
--------- ---------
Total operating expenses 449,415 85.0% 411,539 80.6%
--------- ---------
Income from operations 79,215 15.0% 98,897 19.4%
--------- ---------
OTHER INCOME (EXPENSE):
Interest income 4,297 0.8% 1,707 0.3%
Interest expense (351) -0.1% (436) -0.1%
Share of affiliate earnings 903 0.2% 1,826 0.4%
Miscellaneous income
(expense) 121 - % (558) -0.1%
--------- ---------
Total other income 4,970 0.9% 2,539 0.5%
--------- ---------
Income before provision for
income taxes 84,185 15.9% 101,436 19.9%
PROVISION FOR INCOME TAXES 31,486 5.9% 39,814 7.8%
--------- ---------
Income from continuing
operations 52,699 10.0% 61,622 12.1%
DISCONTINUED OPERATIONS:
Loss from discontinued
operations - - % (5,700) -1.1%
--------- ---------
NET INCOME $52,699 10.0% $55,922 11.0%
========= =========
NET INCOME PER SHARE -
DILUTED:
Income from continuing
operations $0.526 $0.586
Loss from discontinued
operations - (0.054)
--------- ---------
Net income $0.526 $0.532
========= =========
Diluted weighted average
shares outstanding 100,220 105,195
========= =========
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
(In thousands)
March 31, December 31,
2006 2005
------------- -------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $99,022 $132,308
Investments 389,991 272,093
------------- -------------
Total cash and cash equivalents and
investments 489,013 404,401
Receivables:
Students, net of allowance for
doubtful accounts of $40,869 and
$44,839 as of March 31, 2006,
and December 31, 2005, respectively 61,836 76,447
Other, net 7,042 5,015
Prepaid expenses 37,908 37,412
Inventories 15,408 14,090
Deferred income tax assets 10,122 10,122
Other current assets 29,082 31,067
------------- -------------
Total current assets 650,411 578,554
------------- -------------
PROPERTY AND EQUIPMENT, net 405,272 411,144
GOODWILL 433,475 443,584
INTANGIBLE ASSETS, net 35,434 35,286
OTHER ASSETS 37,945 37,537
------------- -------------
TOTAL ASSETS $1,562,537 $1,506,105
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $590 $627
Accounts payable 24,108 28,627
Accrued expenses:
Payroll and related benefits 27,740 39,471
Income taxes 39,566 23,509
Other 82,643 82,513
Deferred tuition revenue 166,286 152,007
------------- -------------
Total current liabilities 340,933 326,754
------------- -------------
LONG-TERM LIABILITIES:
Long-term debt, net of current
maturities 16,673 16,358
Deferred rent obligations 95,756 89,680
Deferred income tax liabilities 31,212 31,212
Other 5,862 5,854
------------- -------------
Total long-term liabilities 149,503 143,104
------------- -------------
STOCKHOLDERS' EQUITY:
Common stock 1,035 1,033
Additional paid-in capital 598,952 591,287
Accumulated other comprehensive income 2,402 1,989
Retained earnings 694,795 642,096
Cost of shares in treasury (225,083) (200,158)
------------- -------------
Total stockholders' equity 1,072,101 1,036,247
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,562,537 $1,506,105
============= =============
CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2006 and 2005
(In thousands)
For the Three Months
ended March 31,
----------------------
2006 2005
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $52,699 $55,922
Adjustments to reconcile net income to net
cash provided by operating activities:
Goodwill impairment charge 10,389 -
Loss from discontinued operations - 5,700
Depreciation and amortization 21,009 17,201
Compensation expense related to share-
based awards 4,015 -
Loss on disposition of property and
equipment 23 430
Share of affiliate earnings, net of
dividends received (903) (612)
Tax benefit associated with stock option
exercises - 626
Other 204 191
Changes in operating assets and
liabilities 35,201 31,725
---------- ----------
Net cash provided by operating
activities 122,637 111,183
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Business dispositions/acquisitions, net of
cash - (908)
Purchases of property and equipment (17,543) (25,539)
Purchases of available-for-sale investments (361,619) -
Sales of available-for-sale for sale
investments 243,772 -
Other (5) 2
---------- ----------
Net cash used in investing
activities (135,395) (26,445)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchases of treasury stock (24,925) -
Issuance of common stock 2,932 2,314
Tax benefit associated with stock option
exercises 720 -
Payments of revolving loans - (1,630)
Payments of capital lease obligations and
other long-term debt (89) (708)
---------- ----------
Net cash used in financing
activities (21,362) (24)
---------- ----------
EFFECT OF FOREIGN CURRENCY EXCHANGE RATE
CHANGES ON CASH AND CASH EQUIVALENTS 834 (1,904)
---------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (33,286) 82,810
CASH AND CASH EQUIVALENTS, beginning of period 132,308 349,458
---------- ----------
CASH AND CASH EQUIVALENTS, end of period $99,022 $432,268
========== ==========
CAREER EDUCATION CORPORATION
SELECTED SEGMENT INFORMATION
(Dollars in thousands)
For the Three Months
Ended March 31,
----------------------
2006 2005
---------- ----------
REVENUE:
University segment (1) $243,582 $211,719
Culinary Arts segment (2) 90,628 92,556
Health Education segment (3) 40,578 37,921
Gibbs segment (4) 29,505 38,272
Other Schools segment (5) 124,230 129,968
Corporate and other (6) 107 -
---------- ----------
$528,630 $510,436
========== ==========
SEGMENT PROFIT (7):
University segment $82,390 $78,743
Culinary Arts segment 14,009 18,639
Health Education segment 1,213 (254)
Gibbs segment (8) (17,553) (278)
Other Schools segment 15,772 18,271
Corporate and other (15,713) (14,398)
---------- ----------
$80,118 $100,723
========== ==========
SEGMENT PROFIT PERCENTAGE:
University segment 33.8% 37.2%
Culinary Arts segment 15.5% 20.1%
Health Education segment 3.0% -0.7%
Gibbs segment -59.5% -0.7%
Other Schools segment 12.7% 14.1%
----------------------------------------------------------
(1) University segment includes AIU and CTU branded schools.
(2) Culinary Arts segment includes Le Cordon Bleu and Kitchen Academy
branded schools.
(3) Health Education segment primarily includes Sanford-Brown branded
schools.
(4) Gibbs segment includes Gibbs College and Katharine Gibbs Schools
branded 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) Gibbs segment profit for the three months ended March 31, 2006,
includes a goodwill impairment charge of $10,389.
CAREER EDUCATION CORPORATION
SELECTED ACCOUNTS RECEIVABLE AND ALLOWANCE INFORMATION
(Dollars in thousands)
DAYS SALES OUTSTANDING
March 31,
-------------------
2006 2005
--------- ---------
Total revenue during the
quarter ended $528,630 $510,436
Number of days in the
quarter ended 90 90
Total revenue per day $5,874 $5,672
Receivables, net $68,878 $74,775
Days sales outstanding 12 13
ALLOWANCE AS A PERCENTAGE OF STUDENT RECEIVABLES
March 31,
-------------------
2006 2005
--------- ---------
Allowance for doubtful accounts $40,869 $50,880
Gross student receivables $102,705 $120,103
Allowance as a percentage of
student receivables 39.8% 42.4%
STUDENT RECEIVABLES VALUATION ALLOWANCE
Balance,
Beginning Charges Amounts Balance,
of to Written- End of
Period Expense Off Period
--------- --------- --------- --------
For the three months ended
March 31, 2006 $44,839 $14,476 $(18,446) 40,869
For the three months ended
March 31, 2005 61,136 17,496 (27,752) 50,880
CAREER EDUCATION CORPORATION
HISTORICAL SEGMENT INFORMATION (a)
(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 $78,743 $75,469 $63,926 $69,887 $288,025
Culinary Arts
segment 18,639 14,749 25,439 23,847 82,674
Health Education
segment (254) (1,141) 683 1,797 1,085
Gibbs segment (278) (5,690) (5,501) (3,920) (15,389)
Other Schools
segment 18,271 13,637 11,875 23,255 67,038
Corporate and
other (14,398) (13,832) (12,283) (8,781) (49,294)
--------- --------- --------- --------- -----------
$100,723 $83,192 $84,139 $106,085 $374,139
========= ========= ========= ========= ===========
SEGMENT PROFIT
PERCENTAGE:
University
segment 37.2% 34.1% 29.7% 31.5% 33.1%
Culinary Arts
segment 20.1% 16.2% 25.3% 24.0% 21.6%
Health Education
segment -0.7% -3.0% 1.8% 4.5% 0.7%
Gibbs segment -0.7% -17.2% -17.9% -12.4% -11.5%
Other Schools
segment 14.1% 11.9% 10.5% 17.1% 13.6%
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 17,116 9,959 10,881 29,314 67,270
Corporate and
other (8,700) (7,494) (5,948) (2,606) (24,748)
--------- --------- --------- --------- -----------
$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% 9.7% 10.0% 21.1% 14.5%
(a) 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 5/10 5/9 5/11 5/10
June 6/4 none 6/5 6/4 none 6/17 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 8/9 8/8 8/10 8/9
September none 9/30 none 9/24 none 9/16 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 11/8 11/7 11/9 11/8
December none 12/16 none 12/17 none 12/16 none 12/17
Total 4Q
dates 2 2 2 2 2 2 2 2
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