Career Education Corporation Reports Results for Fourth Quarter and Full Year 2011

Business Wire posted: 4:30 PM 02/27/12

Career Education Corporation (NASDAQ: CECO) today reported total revenue of $439.5 million, and a net loss of $120.4 million, or ($1.64) per diluted share, for the fourth quarter of 2011 compared to total revenue of $531.6 million and net income of $12.1 million, or $0.15 per diluted share, for the fourth quarter of 2010. For the full year 2011, total revenue of $1.88 billion, and net income of $18.6 million, or $0.25 per diluted share decreased from total revenue of $2.09 billion and net income of $157.8 million, or $1.95 per diluted share, for the full year 2010. “In the past four months, we have taken steps to help move the company forward,” President, Chairman and CEO Steven H. Lesnik said. “The company-wide independent review into our placement rate practices, ordered by our Board of Directors, has been completed. We have reported to accreditors what we should; implemented extensive corrective measures to address any issues found; and have now closed the door on the review.”“While we expect a challenging business and reputational year ahead, we have put a new strategy in place to deal with our current challenges and position ourselves for success beyond 2012. It’s time for Career Education to reinvent itself for the future and resume a leadership position in higher education,” Lesnik said.

The Company believes it is useful to present non-GAAP financial measures, which exclude certain significant items, as a means to understand the performance of its core business. On a non-GAAP basis, earnings per diluted share from continuing operations were $0.31 in the fourth quarter 2011 as compared to $0.74 in the fourth quarter of 2010. For the years ended December 31, 2011 and 2010, earnings per diluted share from continuing operations (non-GAAP basis) were $2.16 and $2.89, respectively. (See tables below and the GAAP to non-GAAP reconciliation attached to this press release for further details.) CONSOLIDATED RESULTSQuarter Ended December 31, 2011

Total revenue was $439.5 million for the fourth quarter of 2011, a 17.3 percent decrease from $531.6 million for the fourth quarter of 2010.
An operating loss of $168.9 million was recorded for the fourth quarter of 2011, compared to operating income of $18.2 million for the fourth quarter of 2010.
The loss from continuing operations for the quarter ended December 31, 2011 was $142.3 million, or ($1.94) per diluted share, compared to income from continuing operations of $14.1 million, or $0.18 per diluted share, for the quarter ended December 31, 2010.
During the fourth quarter of 2011, the Company recorded a $27.1 million pretax gain in connection with the sale of its ownership interest in Istituto Marangoni. All current and prior period results have been recast to include the results of operations for Istituto Marangoni as a component of discontinued operations.

The operating results for the quarters ended December 31, 2011 and 2010 include the following significant items:

		Significant Items (In Millions)		Earnings per Diluted Share Impact
Quarter Ended December 31, 2011
	Goodwill Impairment	$	168.4	$	2.07
	Asset Impairment		20.4		0.18
	TOTAL	$	188.8	$	2.25

Quarter Ended December 31, 2010
	Asset Impairment	$	67.8	$	0.55
	Legal Settlement		0.8		0.01
	TOTAL	$	68.6	$	0.56

During the fourth quarter 2011, the Company recorded goodwill impairment charges of $94.7 million and $73.7 million in its Health Education and Culinary Arts segments, respectively. In addition, the Company recorded $20.4 million and $67.8 million of trade name impairment charges in 2011 and 2010, respectively. Both trade name impairment charges relate to the Le Cordon Bleu trade name. These impairments were a result of the fair value calculation for each declining below their respective carrying values.
Excluding the significant items in the table above, operating income was $19.9 million in the fourth quarter 2011 compared to $86.8 million in the fourth quarter of 2010. The operating margin was 4.5 percent during the fourth quarter 2011 as compared to 16.3 percent during the fourth quarter 2010.

Year Ended December 31, 2011

Total revenue was $1.88 billion for the year ended December 31, 2011, compared to $2.09 billion for the year ended December 31, 2010.
Operating income decreased to $39.2 million for the year ended December 31, 2011, from $240.9 million for the year ended December 31, 2010. The operating margin decreased to 2.1 percent for the year ended December 31, 2011, from 11.5 percent for the year ended December 31, 2010.
The loss from continuing operations for the year ended December 31, 2011, was $4.2 million, or ($0.06) per diluted share, compared to income from continuing operations of $162.8 million, or $2.01 per diluted share, for the year ended December 31, 2010.

The operating results for the years ended December 31, 2011 and 2010 include the following significant items:

		Significant Items (In Millions)		Earnings per Diluted Share Impact
Year Ended December 31, 2011
	Goodwill Impairment	$	168.4	$	2.04
	Asset Impairment		20.4		0.18
	TOTAL	$	188.8	$	2.22

Year Ended December 31, 2010
	Asset Impairment	$	67.8	$	0.55
	Legal Settlement		40.8		0.33
	TOTAL	$	108.6	$	0.88

During 2010, Culinary Arts recorded a $40.8 million charge related to the settlement of a legal matter.
Excluding the significant items in the table above, operating income was $228.0 million for the year ended December 31, 2011 and $349.5 million for the year ended December 31, 2010. Operating margin was 12.1 percent and 16.7 percent for the years ended December 31, 2011 and 2010, respectively.

CONSOLIDATED CASH FLOWS AND FINANCIAL POSITIONCash Flows

Net cash flows provided by operating activities totaled $230.5 million for the year ended December 31, 2011, compared to $272.3 million for the year ended December 31, 2010.
Capital expenditures decreased to $78.3 million during the year ended December 31, 2011, from $127.3 million for the year ended December 31, 2010. Capital expenditures decreased to 4.1 percent of total revenue during the year ended December 31, 2011 as compared to 6.0 percent for the year ended December 31, 2010 due to the investments made in the Company’s campus support center in 2010.

Financial Position

As of December 31, 2011 and December 31, 2010, cash and cash equivalents and short-term investments totaled $441.2 million and $420.3 million, respectively.

Stock Repurchase Program

During the quarter ended December 31, 2011, the Company repurchased 1.8 million shares of its common stock for approximately $13.4 million at an average price of $7.41 per share. During 2011, the Company repurchased approximately 8.1 million shares of its common stock for approximately $150.4 million at an average price of $18.67 per share. Under the Company’s previously authorized stock repurchase program, stock repurchases 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. As of December 31, 2011, approximately $239.8 million was available under the Company’s stock repurchase program.

During January 2012, the Company repurchased an additional 6.1 million shares of its common stock for $56.4 million at an average price of $9.29 per share through the Company’s 10b5-1 repurchase program announced by the Company on November 21, 2011. As a result, approximately $183.3 million was available under our previously authorized stock repurchase program to repurchase outstanding shares of our common stock as of January 31, 2012. STUDENT POPULATION AND NEW STUDENT STARTSStudent Population

Total student population by reportable segment as of December 31, 2011 and 2010, was as follows:

			As of December 31,		% Change
			2011	2010	2011 vs. 2010
Student Population
	CTU		24,900	30,900	-19	%
	AIU		17,100	20,000	-15	%
	Health Education		24,200	29,000	-17	%
	Culinary Arts		12,400	13,100	-5	%
	Art & Design		9,300	11,500	-19	%
	International		11,100	10,300	8	%
		Total Student Population	99,000	114,800	-14	%

New Student Starts

New student starts by reportable segment for the quarters ended December 31, 2011 and 2010, were as follows:

			For the Quarters Ended December 31,		% Change
			2011	2010	2011 vs. 2010
New Student Starts
	CTU ⁽¹⁾		6,810	8,740	-22	%
	AIU ⁽¹⁾		4,620	6,230	-26	%
	Health Education		4,410	6,270	-30	%
	Culinary Arts		1,330	1,390	-4	%
	Art & Design		840	1,540	-45	%
	International		2,150	2,480	-13	%
		Total New Student Starts	20,160	26,650	-24	%

(1)		In 2011, CTU and AIU implemented the Student Orientation and Academic Readiness ("SOAR") program which identifies students who may not be prepared for the rigor of college studies. A student is not included as a new student start until successful completion of SOAR.

CONFERENCE CALL INFORMATION

Career Education Corporation will host a conference call on Tuesday, February 28, 2012 at 10:00 a.m. Eastern time. In addition to discussing the results of operations for the fourth quarter and year-to-date, the Company will address the status of the independent review of student placement rates and other regulatory matters, including the 90-10 Rule, on its conference call.

Interested parties can access the live webcast of the conference call at www.careered.com in the Investor Relations section of the website. Participants can also listen to the conference call by dialing 800-580-9478 (domestic) or 630-691-2769 (international) and citing code 31668922. Please log-in or dial-in at least 10 minutes prior to the start time to ensure a connection. An archived version of the webcast will be accessible for 90 days at www.careered.com in the Investor Relations section of the website. A replay of the call will also be available for seven days by calling 888-843-7419 (domestic) or 630-652-3042 (international) and citing code 31668922. ABOUT CAREER EDUCATION CORPORATION

The colleges, schools and universities that are part of the Career Education Corporation (“CEC”) family offer high-quality education to a diverse student population of approximately 100,000 students across the world in a variety of career-oriented disciplines through online, on-ground and hybrid learning program offerings. The more than 90 campuses that serve these students are located throughout the United States and in France, the United Kingdom and Monaco, and offer doctoral, master’s, bachelor’s and associate degrees and diploma and certificate programs.

CEC is an industry leader whose institutions are recognized globally. Those institutions include, among others, American InterContinental University (“AIU”); Brooks Institute; Colorado Technical University (“CTU”); Harrington College of Design; INSEEC Group (“INSEEC”) Schools; International University of Monaco (“IUM”); International Academy of Design & Technology (“IADT”); Le Cordon Bleu North America (“LCB”); and Sanford-Brown Institutes and Colleges. Through its schools, CEC is committed to providing high-quality education, enabling students to graduate and pursue rewarding career opportunities.

For more information, see CEC’s website at www.careered.com. The website includes a detailed listing of individual campus locations and web links to CEC’s colleges, schools and universities. Except for the historical and present factual information contained herein, the matters set forth in this release, including statements identified by words such as “anticipate,”“believe,”“plan,”“expect,”“intend,”“project,”“will,”“potential” and similar expressions, are forward-looking statements as defined in Section 21E of the Securities Exchange Act of 1934, as amended. These statements are based on information currently available to us and are subject to various risks, uncertainties and other factors that could cause our actual growth, results of operations, financial condition, cash flows, performance, business prospects and opportunities to differ materially from those expressed in, or implied by, these statements. Except as expressly required by the federal securities laws, we undertake no obligation to update 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 outcomes of which could materially and adversely affect our financial condition and operations, include, but are not limited to, the following: availability of Title IV and other student financial aid or loans for our students; Congress’ willingness or ability to maintain or increase funding for Title IV Programs; our ability to maintain continued eligibility to participate in Title IV Programs, including under the “90-10 Rule” under the Higher Education Act of 1965, as amended; the impacts of the U.S. Department of Education’s regulations addressing certain aspects of administration ofTitle IV federal financial aid programs, (including among other matters, gainful employment, the 90-10 Rule and limits on cohort default rates, certain compensation related to recruiting and admission of students, more stringent state approval criteria that may affect current state approval and licensing processes applicable to postsecondary education institutions and distance learning programs, and misrepresentation liability) on our business model, marketing strategies and practices, costs of compliance, costs of developing and implementing changes in operations, student recruitment or enrollments, student and program mix and program offerings; increased competition; other regulatory developments; the effectiveness of our regulatory compliance efforts; the outcome of any state attorney general investigations, including those under way in Florida, Illinois and New York; any claims, sanctions, operational limitations or adverse accreditation or regulatory action initiated as a result of any adverse findings from our investigation into the determination and reporting of placement rates at our domestic schools; our ability to successfully attract and retain qualified personnel to fill key senior management positions, including the positions of president and chiefexecutive officer; changes in the overall U.S. or global economy; any further impairment of goodwill and other intangible assets as we continue to redefine the company and manage our brands and marketing to improve effectiveness and reduce costs; charges and expenses associated with exiting excess facility space; our ability to comply with accrediting agency requirements or obtain accrediting agency approvals for existing or new programs; the outcome of any reviews and audits conducted by accrediting, state and federal agencies; our dependence on information technology systems; our ownership or use of intellectual property; costs and impacts of regulatory, legal and administrative actions, proceedings and investigations, governmental regulation, and class action and other lawsuits; our ability to manage growth; and other factors discussed in our Annual Report on Form 10-K for the year ended December 31, 2011, and from time to time in our current reports filed with the Securities and Exchange Commission.




CAREER EDUCATION CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)

		As of December 31, ⁽¹⁾
		2011			2010

	ASSETS
CURRENT ASSETS:
	Cash and cash equivalents	$	280,592		$	260,644
	Short-term investments		160,607			159,671
	Total cash and cash equivalents and short-term investments		441,199			420,315

	Student receivables, net		60,573			62,091
	Receivables, other, net		2,914			1,861
	Prepaid expenses		62,399			51,380
	Inventories		11,356			13,142
	Deferred income tax assets, net		10,940			31,665
	Other current assets		17,769			6,089
	Assets of discontinued operations		3,328			39,982
	Total current assets		610,478			626,525

NON-CURRENT ASSETS:
	Property and equipment, net		349,788			363,516
	Goodwill		212,626			374,587
	Intangible assets, net		77,186			110,222
	Student receivables, net		9,297			12,522
	Deferred income tax assets, net		9,522			6,793
	Other assets, net		30,122			38,923
	Assets of discontinued operations		17,101			39,872
TOTAL ASSETS		$	1,316,120		$	1,572,960

	LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
	Current maturities of capital lease obligations	$	844		$	783
	Accounts payable		48,408			53,115
	Accrued expenses:
	Payroll and related benefits		41,853			72,657
	Advertising and production costs		17,717			18,846
	Earnout payments		5,735			17,439
	Other		61,536			96,664
	Deferred tuition revenue		144,947			152,590
	Liabilities of discontinued operations		8,403			44,990
	Total current liabilities		329,443			457,084

NON-CURRENT LIABILITIES:
	Capital lease obligations, net of current maturities		207			1,223
	Deferred rent obligations		102,079			103,872
	Earnout payments		-			7,690
	Other liabilities		40,365			30,047
	Liabilities of discontinued operations		37,935			38,507
	Total non-current liabilities		180,586			181,339

SHARE-BASED AWARDS SUBJECT TO REDEMPTION			110			153

STOCKHOLDERS' EQUITY:
	Preferred stock		-			-
	Common stock		820			812
	Additional paid-in capital		590,965			576,853
	Accumulated other comprehensive loss		(5,136	)		(81	)
	Retained earnings		375,607			356,991
	Cost of shares in treasury		(156,275	)		(191	)
	Total stockholders' equity		805,981			934,384
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY		$	1,316,120		$	1,572,960

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

CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts and percentages)


			For the Quarters Ended December 31,⁽¹⁾
			2011			% of Total Revenue		2010			% of Total Revenue

REVENUE:
	Tuition and registration fees		$	430,607		98.0	%	$	515,600		97.0	%
	Other			8,909		2.0	%		15,968		3.0	%
		Total revenue		439,516					531,568

OPERATING EXPENSES:
	Educational services and facilities			156,223		35.5	%		161,191		30.3	%
	General and administrative			241,401		54.9	%		261,270		49.2	%
	Depreciation and amortization			21,949		5.0	%		19,460		3.7	%
	Goodwill and asset impairment			188,848		43.0	%		71,475		13.4	%
		Total operating expenses		608,421		138.4	%		513,396		96.6	%
Operating (loss) income				(168,905	)	-38.4	%		18,172		3.4	%

OTHER INCOME (EXPENSE):
	Interest income			627		0.1	%		452		0.1	%
	Interest expense			(443	)	-0.1	%		(286	)	-0.1	%
	Miscellaneous income (expense)			4		0.0	%		(119	)	0.0	%
		Total other income		188		0.0	%		47		0.0	%

PRETAX (LOSS) INCOME				(168,717	)	-38.4	%		18,219		3.4	%

(Benefit from) provision for income taxes				(26,436	)	-6.0	%		4,141		0.8	%

(LOSS) INCOME FROM CONTINUING OPERATIONS				(142,281	)	-32.4	%		14,078		2.6	%

Income (loss) from discontinued operations, net of tax				21,832		5.0	%		(1,976	)	-0.4	%

NET (LOSS) INCOME			$	(120,449	)	-27.4	%	$	12,102		2.3	%

NET (LOSS) INCOME PER SHARE - DILUTED:
	(Loss) income from continuing operations		$	(1.94	)			$	0.18
	Income (loss) from discontinued operations			0.30					(0.03	)
	Net (loss) income per share		$	(1.64	)			$	0.15

DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING				73,429					79,776

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

CAREER EDUCATION CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts and percentages)


			For the Years Ended December 31, ⁽¹⁾
			2011			% of Total Revenue		2010			% of Total Revenue

REVENUE:
	Tuition and registration fees		$	1,827,164		97.0	%	$	2,007,903		96.1	%
	Other			57,341		3.0	%		81,270		3.9	%
		Total revenue		1,884,505					2,089,173

OPERATING EXPENSES:
	Educational services and facilities			632,593		33.6	%		626,254		30.0	%
	General and administrative			936,714		49.7	%		1,080,148		51.7	%
	Depreciation and amortization			84,512		4.5	%		70,043		3.4	%
	Goodwill and asset impairment			191,524		10.2	%		71,829		3.4	%
		Total operating expenses		1,845,343		97.9	%		1,848,274		88.5	%
Operating income				39,162		2.1	%		240,899		11.5	%

OTHER INCOME (EXPENSE):
	Interest income			1,376		0.1	%		1,138		0.1	%
	Interest expense			(563	)	0.0	%		(381	)	0.0	%
	Miscellaneous income (expense)			1,972		0.1	%		(484	)	0.0	%
		Total other income		2,785		0.1	%		273		0.0	%

PRETAX INCOME				41,947		2.2	%		241,172		11.5	%

Provision for income taxes				46,146		2.4	%		78,401		3.8	%

(LOSS) INCOME FROM CONTINUING OPERATIONS				(4,199	)	-0.2	%		162,771		7.8	%

Income (loss) from discontinued operations, net of tax				22,772		1.2	%		(4,998	)	-0.2	%

NET INCOME			$	18,573		1.0	%	$	157,773		7.6	%

NET (LOSS) INCOME PER SHARE - DILUTED:
	(Loss) income from continuing operations		$	(0.06	)			$	2.01
	Income (loss) from discontinued operations			0.31					(0.06	)
	Net income per share		$	0.25				$	1.95

DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING				74,498					80,850

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

CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATING INCOME (LOSS) BY QUARTER
(In thousands)


			For the 2011 Quarters Ended,⁽¹⁾

			March 31		June 30		September 30		December 31			Full Year

REVENUE:
	Tuition and registration fees		$	509,454	$	469,683	$	417,420	$	430,607		$	1,827,164
	Other			22,246		15,195		10,991		8,909			57,341
		Total revenue		531,700		484,878		428,411		439,516			1,884,505

OPERATING EXPENSES:
	Educational services and facilities			165,631		158,012		152,727		156,223			632,593
	General and administrative			237,061		224,605		233,647		241,401			936,714
	Depreciation and amortization			20,133		20,274		22,156		21,949			84,512
	Goodwill and asset impairment			-		2,676		-		188,848			191,524
		Total operating expenses		422,825		405,567		408,530		608,421			1,845,343
OPERATING INCOME (LOSS)			$	108,875	$	79,311	$	19,881	$	(168,905	)	$	39,162


			For the 2010 Quarters Ended,⁽¹⁾

			March 31		June 30		September 30		December 31			Full Year

REVENUE:
	Tuition and registration fees		$	498,411	$	499,142	$	494,750	$	515,600		$	2,007,903
	Other			19,845		18,595		26,862		15,968			81,270
		Total revenue		518,256		517,737		521,612		531,568			2,089,173

OPERATING EXPENSES:
	Educational services and facilities			155,618		153,795		155,650		161,191			626,254
	General and administrative			260,694		253,040		305,144		261,270			1,080,148
	Depreciation and amortization			16,267		16,849		17,467		19,460			70,043
	Goodwill and asset impairment			-		-		354		71,475			71,829
		Total operating expenses		432,579		423,684		478,615		513,396			1,848,274
OPERATING INCOME			$	85,677	$	94,053	$	42,997	$	18,172		$	240,899

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

CAREER EDUCATION CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)


	For the Years Ended December 31,
	2011			2010

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	18,573		$	157,773
Adjustments to reconcile net income to net cash provided by operating activities:
Goodwill and asset impairment		191,524			71,829
Depreciation and amortization expense		85,367			71,624
Bad debt expense		55,721			106,324
Compensation expense related to share-based awards		14,831			17,318
Gain on sale of business		(27,085	)		-
(Gain) loss on disposition of property and equipment		(1,711	)		457
Deferred income taxes		14,226			(17,007	)
Changes in operating assets and liabilities
Accrued expenses and deferred rent obligations		(74,075	)		(25,055	)
Deferred tuition revenue		2,595			(12,653	)
Student receivables, net of allowance for doubtful accounts		(51,749	)		(98,920	)
Other operating assets and liabilities		2,233			569
Net cash provided by operating activities		230,450			272,259

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of available-for-sale investments		(189,258	)		(291,864	)
Sales of available-for-sale investments		188,322			332,445
Purchases of property and equipment		(78,333	)		(127,283	)
Acquisition of the rights to the Le Cordon Bleu brand		(16,355	)		(16,852	)
Proceeds on the sale of assets		6,259			-
Proceeds on the sale of business, net of cash divested		16,670			-
Business acquisition, net of acquired cash		(9,851	)		(6,194	)
Other		(40	)		88
Net cash used in investing activities		(82,586	)		(109,660	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of treasury stock		(150,445	)		(154,913	)
Issuance of common stock		4,370			3,109
Tax benefit associated with stock option exercises		376			223
Payments of assumed loans upon business acquisition		-			(4,279	)
Payments of capital lease obligations		(989	)		(1,013	)
Net cash used in financing activities		(146,688	)		(156,873	)

EFFECT OF FOREIGN CURRENCY EXCHANGE RATE
CHANGES ON CASH AND CASH EQUIVALENTS:		(10,066	)		(1,316	)

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(8,890	)		4,410
DISCONTINUED OPERATIONS CASH ACTIVITY INCLUDED ABOVE:
Add: Cash balance of discontinued operations, beginning of the year		28,838			26,824
Less: Cash balance of discontinued operations, end of the year		-			28,838
CASH AND CASH EQUIVALENTS, beginning of the year		260,644			258,248
CASH AND CASH EQUIVALENTS, end of the year	$	280,592		$	260,644

CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED SELECTED SEGMENT INFORMATION
(In thousands, except percentages)

	For the Quarters Ended December 31,
	2011			2010

REVENUE:
CTU ⁽¹⁾	$	100,985		$	123,236
AIU ⁽¹⁾		77,111			98,647
Health Education		100,658			119,352
Culinary Arts		65,554			94,003
Art & Design ⁽¹⁾		48,005			59,125
International ⁽²⁾		47,257			37,337
Corporate and Other		(54	)		(132	)
Total	$	439,516		$	531,568

OPERATING (LOSS) INCOME:
CTU ⁽¹⁾	$	25,610		$	39,603
AIU ⁽¹⁾		6,354			22,905
Health Education ⁽³⁾		(101,012	)		16,594
Culinary Arts ⁽⁴⁾		(95,725	)		(63,546	)
Art & Design ⁽¹⁾		(5,584	)		6,510
International ⁽²⁾		16,017			9,623
Corporate and Other		(14,565	)		(13,517	)
Total	$	(168,905	)	$	18,172

OPERATING MARGIN:
CTU		25.4	%		32.1	%
AIU		8.2	%		23.2	%
Health Education		-100.4	%		13.9	%
Culinary Arts		-146.0	%		-67.6	%
Art & Design		-11.6	%		11.0	%
International		33.9	%		25.8	%
Total		-38.4	%		3.4	%

(1)		Prior period financial results have been reclassified to report CTU, AIU and Art & Design as individual segments due to a change in organizational structure beginning in January, 2011. Previously, these results were reported on a combined basis as the University segment.

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

(3)		Fourth quarter 2011 includes a $94.7 million goodwill impairment charge.

(4)		Fourth quarter 2011 includes a $73.7 million goodwill impairment charge and a $20.4 million trade name impairment charge. The prior year quarter results include a $67.8 million trade name impairment charge.

CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED SELECTED SEGMENT INFORMATION
(In thousands, except percentages)

	For the Years Ended December 31,
	2011			2010

REVENUE:
CTU ⁽¹⁾	$	431,588		$	465,315
AIU ⁽¹⁾		365,203			448,581
Health Education		428,987			441,608
Culinary Arts		314,272			387,884
Art & Design ⁽¹⁾		218,967			245,395
International ⁽²⁾		125,887			101,013
Corporate and Other		(399	)		(623	)
Total	$	1,884,505		$	2,089,173

OPERATING INCOME (LOSS):
CTU ⁽¹⁾	$	112,626		$	133,881
AIU ⁽¹⁾		72,738			118,959
Health Education ⁽³⁾		(89,633	)		52,028
Culinary Arts ⁽⁴⁾		(64,984	)		(66,813	)
Art & Design ⁽¹⁾		15,043			29,173
International ⁽²⁾		24,746			16,334
Corporate and Other ⁽⁵⁾		(31,374	)		(42,663	)
Total	$	39,162		$	240,899

OPERATING MARGIN:
CTU		26.1	%		28.8	%
AIU		19.9	%		26.5	%
Health Education		-20.9	%		11.8	%
Culinary Arts		-20.7	%		-17.2	%
Art & Design		6.9	%		11.9	%
International		19.7	%		16.2	%
Total		2.1	%		11.5	%

(1)		Prior period financial results have been reclassified to report CTU, AIU and Art & Design as individual segments due to a change in organizational structure beginning in January, 2011. Previously, these results were reported on a combined basis as the University segment.

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

(3)		2011 expenses include a $94.7 million goodwill impairment charge and $5.1 million of impairment and amortization charges associated with accreditation rights.

(4)		2011 expenses include goodwill and trade name impairment charges of $73.7 million and $20.4 million, respectively. 2010 includes a $67.8 million trade name impairment charge, a $40.8 million charge related to the settlement of a legal matter and additional bad debt expense for increases in reserve rates related to our student extended payment plans.

(5)		During 2011, a $7.0 million insurance recovery was recorded related to previously settled legal matters.

CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ITEMS ⁽¹⁾
(In millions, except per share amounts)

		For the Quarters Ended December 31,
		2011						2010
		Operating (Loss) Income			Earnings per Diluted Share ⁽²⁾			Operating Income		Earnings per Diluted Share ⁽²⁾

As Reported		$	(168.9	)	$	(1.94	)	$	18.2	$	0.18
Reconciling Items:
	Goodwill Impairment ⁽³⁾		168.4			2.07			-		-
	Asset Impairments ⁽⁴⁾		20.4			0.18			67.8		0.55
	Legal Settlement ⁽⁵⁾		-			-			0.8		0.01
Adjusted to Exclude Significant Items		$	19.9		$	0.31		$	86.8	$	0.74

Diluted Weighted Average Shares Outstanding						73,429					79,776

		For the Years Ended December 31,
		2011						2010
		Operating Income			Earnings per Diluted Share ⁽²⁾			Operating Income		Earnings per Diluted Share ⁽²⁾

As Reported		$	39.2		$	(0.06	)	$	240.9	$	2.01
Reconciling Items:
	Goodwill Impairment ⁽³⁾		168.4			2.04			-		-
	Asset Impairments ⁽⁴⁾		20.4			0.18			67.8		0.55
	Legal Settlement ⁽⁵⁾		-			-			40.8		0.33
Adjusted to Exclude Significant Items		$	228.0		$	2.16		$	349.5	$	2.89

Diluted Weighted Average Shares Outstanding						74,498					80,850

(1)		The Company believes it is useful to present non-GAAP financial measures which exclude certain significant items as a means to understand the performance of its core business. As a general matter, the Company uses non-GAAP financial measures in conjunction with results presented in accordance with GAAP to help analyze the performance of its core business, assist with preparing the annual operating plan, and measure performance for some forms of compensation. In addition, the Company believes that non-GAAP financial information is used by analysts and others in the investment community to analyze the Company's historical results and to provide estimates of future performance and that failure to report non-GAAP measures could result in a misplaced perception that the Company's results have underperformed or exceeded expectations.
		Non-GAAP financial measures when viewed in a reconciliation to corresponding GAAP financial measures, provides an additional way of viewing the Company's results of operations and the factors and trends affecting the Company's business. Non-GAAP financial measures should be considered as a supplement to, and not as a substitute for, or superior to, the corresponding financial results presented in accordance with GAAP.

(2)		Earnings per share is based on (Loss) Income from Continuing Operations.

(3)		Fourth quarter 2011 includes goodwill impairment charges totaling $168.4 million applicable to Health Education ($94.7) and Culinary Arts ($73.7).

(4)		The fourth quarters 2011 and 2010 include trade name impairment charges of $20.4 million and $67.8 million, respectively, within Culinary Arts.

(5)		In 2010, a $40.8 million charge was recorded in Culinary Arts related to the settlement of a legal matter; of which $0.8 million was recorded in the fourth quarter.

2012-02-27 16:30:00

AFP / Getty Images

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