CEO Tells Stockholders That Career Education is Building Strong Momentum to Be Best-in-Class; Solid Progress on Corporate Gover
April 10 2006 - 7:35PM
Business Wire
Career Education Corporation (NASDAQ:CECO) distributed a letter to
stockholders today highlighting the company's achievements in 2005
and asking for their support in the weeks leading up to and beyond
the May 18 annual meeting of stockholders. In his letter to
stockholders, Chairman and CEO Jack Larson outlines Career
Education's strong financial performance and the solid progress the
company has made on a number of fronts, including enhancing
corporate governance policies and practices, adding three
independent members to the Board of Directors, achieving favorable
rulings on two pending legal matters, and making positive progress
on regulatory issues. A complete text of the letter follows and can
also be found on the company's website, www.careered.com. April 10,
2006 Dear Fellow Stockholder: The priority of your Board and
management continues to be generating enhanced value for Career
Education Corporation, our stockholders, our students, and all the
communities our company serves. Consistent with this priority,
Career Education has developed a sound business strategy designed
to help us grow and become best-in-class for service and compliance
in our industry, move forward with strong competitive advantages in
our markets, and benefit our students, employees and, in turn,
stockholders. Our plan for the future includes high-quality,
well-targeted growth and a focus on return on investment. We have
worked hard to position ourselves for future success through
innovation in our business models; through the flexibility and
student-focus of our online, on-ground, and planned hybrid
offerings; and through new programs and new locations. Our strategy
for the future also includes the continued strengthening of our
compliance-related processes and infrastructure and our
demonstrated commitment to sound corporate governance and to
quality in education. Over the past year, we have taken important
steps to maintain and strengthen our company's growth trajectory
and enhance corporate governance, while continuing to generate
stockholder value. Since we became a public company in 1998, this
focus on achievement has enabled us to reward stockholders who
believe that the for-profit education industry is an excellent,
long-term investment opportunity. We are committed to generating
value for our stockholders and hope that you will continue to
support us in 2006 and in the years ahead. We are performance
driven and fiscally fit. In 2005 we achieved record highs in
revenues, cash flow and earnings, even as we strengthened our
balance sheet and repurchased $200 million in common stock. Revenue
was up 18 percent versus 2004, income from operations increased 27
percent, and our operating profit margin increased 120 basis
points. Evidence shows that our strategy is working and continues
to be sound. We are pleased to report good progress on the legal
and regulatory fronts. Most significantly, the staff of the Midwest
Regional Office of the Securities and Exchange Commission notified
us that it intends to recommend to the SEC that it terminate its
investigation of the company and that no enforcement action be
taken against the company. Recommendations by the SEC staff do not
constitute final action by the SEC, as the SEC thereafter makes its
own determination as to whether to follow the recommendations of
the SEC staff. We also continue to move closer toward successful
resolution of securities class action litigation. Recently, the
United States District Court for the Northern District of Illinois
granted for a second time the company's motion to dismiss a class
action against the company and certain of its current officers,
holding that the plaintiffs once again failed to plead a violation
of securities laws. The plaintiff has one more opportunity to file
a third amended complaint by April 17, 2006. In addition, a trial
judge recently ruled that the California Bureau for Private
Postsecondary Vocational Education had improperly issued the
company's Brooks Institute of Photography a Notice of Conditional
Approval to Operate, and that the Notice is invalid. Progress is
also being made on addressing certain issues that have arisen in
the area of accreditation. In December of 2005, American
InterContinental University (AIU) was notified that its accrediting
body, the Commission on Colleges of the Southern Association of
Colleges and Schools (COC), had placed AIU on probation. The
University is committed to addressing the COC's recommendations,
and initiatives to enhance AIU's core competencies are already
underway in a number of areas, including its faculty and education
programs, its academic leadership, its student complaint process,
admissions and marketing initiatives, and its standards of
integrity as an accredited institution. A third-party assessment of
AIU's marketing and admissions process has just been completed, and
AIU will start to roll out recommended changes. After additional
third-party assessments and monitoring over the next six months,
the COC will once again review AIU. We recognize that measures of
our success include how well we serve our students, our financial
performance, our relationships with our industry and financial
regulators and the ethical and compliance standards to which we
hold ourselves. We continue to work hard to address challenges and
to strengthen our performance in each of these areas. An area of
intense focus for us has been corporate governance. As a result, we
have adopted the following progressive corporate governance
initiatives over the past year: -- increased your Board's size from
seven to nine members, including seven independent directors under
SEC and NASDAQ rules -- terminated our shareholder rights plan --
implemented minimum stock ownership guidelines for senior
management and Board members -- implemented mandatory continuing
education for all Board members -- developed a policy requiring
approval for Board members to serve on other outside Boards --
adopted majority voting for the election of directors into our
by-laws In addition, we will be proposing to you the following at
our annual stockholders' meeting: -- a phased declassification of
the Board -- the ability for stockholders to call special meetings
with a two-thirds affirmative vote We want to thank all of you for
relaying to us the various changes you wanted in our governance
policies and practices. In its most recent Corporate Governance
Quotient rankings, Institutional Shareholder Services (ISS), a
leading stockholder advisory firm, ranked Career Education
Corporation as being in the top 20 percent of our peer group in
terms of governance practices. We have also added three highly
qualified and experienced independent directors to your Board's
composition in the past few months. Our current Board members have
strong track records in running businesses, deep experience in the
education field--or both. They also have knowledge of our company
and our industry, the respect of the educational and/or business
community, and a strong commitment to the future of our company.
Our capable leadership team has a plan to ensure the future success
of our company. It includes a strong focus on return on investment,
targeted market expansion, and a student-focused,
compliance-oriented company culture. We will be mailing our proxy
statement to you shortly, and we look forward to counting on your
support in the weeks leading up to our May 18 annual meeting of
stockholders, and in the months and years to come. Sincerely, John
M. Larson Chairman, President and Chief Executive Officer Important
Information Career Education Corporation filed a preliminary Proxy
Statement with the Securities and Exchange Commission (the "SEC")
on April 5, 2006 and plans to file with the SEC and mail to its
stockholders a definitive Proxy Statement in connection with its
2006 Annual Meeting. Career Education Corporation advises its
security holders to read the Proxy Statement relating to the 2006
Annual Meeting when it becomes available because it will contain
important information. Security holders may obtain a free copy of
the Proxy Statement and any other relevant documents (when
available) that Career Education Corporation files with the SEC at
the SEC's web site at http://www.sec.gov. The Proxy Statement and
these other documents may also be obtained free from Career
Education Corporation by directing a request to Career Education
Corporation, ATTN: Investor Relations, 2895 Greenspoint Parkway,
Suite 600, Hoffman Estates, IL 60195, or to Georgeson Shareholder
Communications Inc. by toll-free telephone at (888) 206-5970, or by
mail at 17 State Street, 10th Floor, New York, NY 10004. Certain
Information Regarding Participants Career Education Corporation,
its directors and certain of its officers may be deemed to be
participants in the solicitation of Career Education Corporation's
security holders in connection with its 2006 Annual Meeting.
Security holders may obtain information regarding the names,
affiliations and interests of such individuals in Career Education
Corporation's preliminary Proxy Statement filed with the SEC on
April 5, 2006, a copy of which may be obtained as described in the
above paragraph. About Career Education Corporation The colleges,
schools and universities that are part of the Career Education
Corporation (CEC) family offer high quality education to more than
100,000 students across the world in a variety of career-oriented
disciplines. The 80-plus campuses that serve these students are
located throughout the U. S., Canada, France, the United Kingdom,
and the United Arab Emirates and offer doctoral, master's,
bachelor's, and associate degrees and diploma and certificate
programs. Approximately one third of students attend the web-based
virtual campuses of American InterContinental University Online and
Colorado Technical University Online. Career Education is an
industry leader whose gold-standard brands are recognized globally.
Those brands include, among others, the Le Cordon Bleu schools of
North America; the Harrington School of Design; the Brooks
Institute of Photography; the Katharine Gibbs schools; American
InterContinental University; Colorado Technical University 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 its 80-plus 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," and similar expressions, are
forward-looking statements within the meaning of the "safe harbor"
provisions of the Private Securities Litigation Reform Act of 1995.
These statements are based on information currently available to us
and are subject to various risks, uncertainties, and other factors,
that could cause our actual growth, results of operations,
performance and business prospects, and opportunities to differ
materially from those expressed in, or implied by, these
statements. Except as expressly required by federal securities
laws, we undertake no obligation to update such factors or to
publicly announce the results of any of the forward-looking
statements contained herein to reflect future events, developments,
or changed circumstances, or for any other reason. These risks and
uncertainties, the outcome of which could materially and adversely
affect our financial condition and operations, include, but are not
limited to, the following: risks related to our ability to comply
with, and the impact of changes in, legislation and regulations
that affect our ability to participate in student financial aid
programs; costs, risks and effects of legal and administrative
proceedings and investigations and governmental regulations,
including the pending Securities and Exchange Commission and
Justice Department investigations and, class action, derivative,
and other lawsuits; 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; risks
related to competition, general economic conditions, and other risk
factors relating to our industry and business, and the factors
discussed in our Annual Report on Form 10-K for the year ended
December 31, 2005, and from time to time in our other reports filed
with the Securities and Exchange Commission.
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