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

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 RESULTS

Quarter 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 POSITION

Cash 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 STARTS

Student Population

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

As of December 31,% Change
201120102011 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 Population99,000114,800-14%

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
201120102011 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 Starts20,16026,650-24%
(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 chief executive 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)
20112010
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 OUTSTANDING73,42979,776

(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 OUTSTANDING74,49880,850
(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 31June 30September 30December 31Full 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 31June 30September 30December 31Full 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,
20112010
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,
20112010
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,
20112010
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 %
Total2.1%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,
20112010

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 Outstanding73,42979,776
For the Years Ended December 31,
20112010

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 Outstanding74,49880,850
(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.

Contacts:

Career Education Corporation
Investors:
John Springer
Vice President, Strategy and Investor Relations
(847) 585-3899
or
Media:
Mark Spencer
Director, Corporate Communications
(847) 585-3802
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