CECO CECO Environmental Corporation

Career Education Corporation (NASDAQ:CECO) today reported consolidated revenue from continuing operations of $437.2 million and consolidated income from continuing operations of $31.4 million, or $0.34 per diluted share, during the fourth quarter of 2007. For the full year of 2007, consolidated revenue from continuing operations was $1.7 billion and consolidated income from continuing operations was $95.5 million, or $1.01 per diluted share. �We finished 2007 with many successful accomplishments resulting in continued improvement in many of our key metrics,� said Gary E. McCullough, president and chief executive officer. �As 2008 begins, we are working aggressively to address our challenges and take advantage of our opportunities for improvement. In the past 60 days, we have made the decision to teach-out 11 schools, we have moved to streamline our operations and we are working hard to ensure that students continue to have access to affordable financing to allow them to graduate and succeed in their careers. Our aim is to create a stronger company that will deliver sustainable, long-term growth and value to all of our stakeholders.� RESULTS OF CONTINUING OPERATIONS As previously reported in November 2006, the company entered into a process of selling 11 of its schools and campuses, including McIntosh College, Lehigh Valley College and the nine campuses that comprise the Gibbs division. The results of these 11 schools and campuses are reflected in this release as discontinued operations. Except as otherwise noted, financial data and non-financial metrics reflected in this release exclude discontinued operations. Three Months Ended December 31, 2007 Consolidated revenue was $437.2 million during the fourth quarter of 2007, a 0.6 percent increase from consolidated revenue of $434.7 million during the fourth quarter of 2006. Revenue generated by the University segment�s fully-online platforms decreased 4.0 percent to $125.3 million during the fourth quarter of 2007, from $130.5 million during the fourth quarter of 2006. � Consolidated operating income decreased to $38.4 million during the fourth quarter of 2007, from $42.5 million during the fourth quarter of 2006. Operating profit margin percentage was 8.8 percent during the fourth quarter of 2007, a 1.0 percentage point decrease relative to an operating profit margin percentage of 9.8 percent during the fourth quarter of 2006. The decrease in operating profit margin percentage was primarily due to an increase in legal reserves in the Health Education segment, an increase in bad debt as a percentage of revenue and non-cash, pre-tax charges related to the impairments of certain long-lived assets of $5.8 million in the fourth quarter of 2007 compared to $4.4 million in the fourth quarter of 2006. � The decrease in the fourth quarter 2007 operating profit margin percentage was offset, in part, by a reduction in admissions representative headcount and improved representative productivity, a decline in administration expense due to a reduction in corporate spending, and improved efficiency in advertising. � The University segment's fully-online platforms' operating income decreased $1.8 million to $27.0 million during the fourth quarter of 2007, from $28.8 million during the fourth quarter of 2006. Consolidated income from continuing operations during the fourth quarter of 2007 was $31.4 million, or $0.34 per diluted share, compared to consolidated income from continuing operations of $37.1 million, or $0.39 per diluted share, during the fourth quarter of 2006. Twelve Months Ended December 31, 2007 Consolidated revenue was $1.7 billion during the twelve months ended December 31, 2007, compared to $1.8 billion during the twelve months ended December 31, 2006. Revenue generated by the University segment�s fully-online platforms decreased 19.9 percent, to $527.8 million during the twelve months ended December 31, 2007, from $658.6 million during the twelve months ended December 31, 2006. Consolidated operating income declined to $120.4 million during the twelve months ended December 31, 2007, from $156.8 million during the twelve months ended December 31, 2006. Operating income margin percentage was 7.2 percent during the twelve months ended December 31, 2007, compared to 8.7 percent during the twelve months ended December 31, 2006. Consolidated income from continuing operations during the twelve months ended December 31, 2007, was $95.5 million, or $1.01 per diluted share, relative to $88.4 million, or $0.90 per diluted share, during the twelve months ended December 31, 2006. Consolidated income from continuing operations during the twelve months ended December 31, 2006 included a goodwill and intangible asset impairment charge in the Health Education segment of $83.5 million, net of income tax benefit of $2.8 million. Provision for income taxes during 2007 was $48.2 million, compared to provision for income taxes during 2006 of $89.3 million. This represented an effective income tax rate of 50.3 percent for the twelve months ended December 31, 2006. The effective income tax rate for 2006 was attributable to the fact that only $8.0 million of the total $86.3 million Health Education segment goodwill and intangible asset impairment charges recognized during 2006 was deductible for income tax reporting purposes. Excluding the effect of the Health Education segment goodwill and intangible asset impairment charges, the company�s effective income tax rate for 2006 would have been 34.2 percent, compared to an effective income tax rate of 33.5 percent in 2007. RESULTS OF DISCONTINUED OPERATIONS Loss from discontinued operations associated with the 11 schools and campuses held for sale was $35.9 million, net of tax, during 2007, compared to a loss from discontinued operations of $41.9 million, net of tax, during 2006. During 2007, the company recorded an impairment charge of $19.9 million, net of income tax benefit of $11.0 million, to reduce the carrying value of net assets held for sale to fair value less costs to sell. During 2006, the company recorded an acceleration of rent expense for excess and unused leased space of $6.0 million, net of income tax benefit of $3.2 million, a goodwill and intangible asset impairment charge of $6.8 million, net of income tax benefit of $3.6 million and a charge of $7.3 million, net of income tax benefit of $3.9 million, to reduce the carrying value of net assets held for sale to fair value less costs to sell. UPDATE ON SCHOOLS HELD FOR SALE In November 2007, the company announced that it was examining other alternatives previously contemplated for each of the 11 schools held for sale, including continued operation of certain schools, conversion to alternative brands, teach-outs, or sale of individual schools. The company�s leadership worked diligently to attract viable buyers and through early February 2008 attempted to structure a transaction that made sense for all constituents. Despite the company�s efforts, it could not find a suitable arrangement that would be acceptable to purchasers and protect the short and long-term interests of the schools� students, faculty and staff. On February 15, 2008, the company announced plans to teach out all of the programs at nine of the 11 schools held for sale, which include: Gibbs College Livingston, Gibbs College Norwalk, Gibbs College of Boston, Gibbs College Cranston, Katharine Gibbs School New York, Katharine Gibbs School Norristown, Katharine Gibbs School Piscataway, Lehigh Valley College and McIntosh College/Atlantic Culinary Academy. The other two schools held for sale, Gibbs College Vienna and Katharine Gibbs School Melville, will remain with the company. The campuses will be converted to Sanford Brown schools focusing on allied health programs. During the first quarter of 2008, the nine schools that are being taught out will be included in continuing operations as part of a new financial reporting segment, Transitional Schools, and the two schools being converted to Sanford Brown schools will be reported within the Health Education segment. CORPORATE RESTRUCTURING On February 12, 2008, the company announced a company-wide restructuring as part of its long-term growth strategy. Estimated savings from these workforce reductions during 2008 are expected to be approximately $18 to $20 million, net of severance, from the elimination of approximately 220 positions. In addition, the company has restructured into strategic business units (SBUs), which will enhance brand focus and operational alignment within each business segment. The SBUs are: Culinary Arts, Health Education, Art & Design, University, International and Transitional Schools. UPDATE ON STUDENT LENDING On January 18, 2008, the company received notification from Sallie Mae that Sallie Mae was terminating its discount loan program. Sallie Mae has agreed to extend the termination date of the agreement to March 31, 2008, with an increased discount rate for the interim period from 25 percent to 44 percent. In addition, Sallie Mae informed the company on February 14, 2008 that it would no longer continue to offer recourse loans to our existing students entering their second or subsequent academic terms. Sallie Mae has advised the company that it intends to continue to provide loans through FFELP and private loan non-recourse programs to qualifying students. These lending changes are expected to have a material financial impact on the company. CONSOLIDATED CASH FLOWS AND FINANCIAL POSITION Cash Flows Cash provided by operating activities was $222.1 million during 2007, compared to cash provided by operating activities of $216.4 million during 2006. Capital expenditures decreased to $57.6 million during 2007, from $69.5 million during 2006. Capital expenditures represented 3.2 percent of total consolidated revenue, including revenue generated by schools and campuses held for sale, during 2007. Financial Position As of December 31, 2007 and December 31, 2006, cash and cash equivalents and investments totaled $382.1 million and $447.6 million, respectively. This decrease includes the use of approximately $224.3 million by the company during the twelve months ended December 31, 2007 to repurchase approximately 7.4 million shares of its common stock, offset by net cash flow from operations. Days sales outstanding (DSO) were 14 days as of December 31, 2007, an increase of three days from a DSO of 11 days as of December 31, 2006. Stock Repurchase Program The company�s Board of Directors has authorized the use of a total of $800.2 million to repurchase outstanding shares of the company�s 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. The stock repurchase program does not have an expiration date and may be suspended or discontinued at any time. During the fourth quarter of 2007, the company repurchased 2.5 million shares of its common stock for approximately $74.9 million at an average price of $29.47 per share. Since the inception of the program, the company has repurchased 18.2 million shares of its common stock for approximately $590.5 million. As of December 31, 2007, approximately $209.7 million was available under the stock repurchase program to repurchase outstanding shares of the company�s common stock. POPULATION AND NEW STUDENT START DATA Student Population Total student population by reportable segment as of January 31, 2008 and 2007, were as follows: � PopulationJanuary 31, 2008 (1) � PopulationJanuary 31, 2007 (1) � PercentageDifference Academy (2) 8,400 � 7,500 � 12 % Colleges 7,700 � 8,700 � (11 %) Culinary Arts 10,900 � 10,900 � - � Health Education 13,500 � 11,600 � 16 % International (3) 8,600 � 7,600 � 13 % University (4) 40,400 � 38,400 � 5 % CEC Consolidated 89,500 � 84,700 � 6 % (1) Segment and CEC consolidated student population data does not include the student population of schools held for sale or schools in the process of a teach-out. (2) As of January 31, 2008, the Academy segment population included approximately 440 students who were taking classes in fully-online academic programs offered by Academy segment schools. There were no Academy segment fully-online students as of January 31, 2007. (3) As of January 31, 2008 and 2007, the International segment population included student population for Istituto Marangoni. (4) As of January 31, 2008 and 2007, the University segment population included approximately 31,500 students and 28,600 students, respectively, who were taking classes in fully-online academic programs offered by University segment schools. New Student Starts New student starts by reportable segment during the fourth quarter of 2007 and 2006, were as follows: � Fourth quarter2007 (1) � Fourth quarter2006 (1) � PercentageDifference Academy (2) 2,060 � 1,830 � 13 % Colleges 630 � 710 � (11 %) Culinary Arts 2,410 � 2,370 � 2 % Health Education 2,940 � 2,790 � 5 % International (3) 2,340 � 1,060 � 121 % University (4) 12,310 � 11,480 � 7 % CEC Consolidated 22,690 � 20,240 � 12 % (1) Segment and CEC consolidated student starts data does not include student starts of schools held for sale or schools in the process of a teach-out. (2) Academy segment new student starts include approximately 250 students who began taking classes in fully-online academic programs offered by the Academy segment schools during the fourth quarter of 2007. There were no Academy segment fully-online student starts during the fourth quarter of 2006. (3) International segment new student starts include students who began taking classes at Istituto Marangoni schools during the fourth quarter of 2007. There were no Istituto Marangoni student starts during the fourth quarter of 2006. (4) University segment new student starts includes approximately 10,500 students and 9,380 students, respectively, who began taking classes in fully-online academic programs offered by the University segment schools during the fourth quarter of 2007 and 2006. CONFERENCE CALL INFORMATION Career Education Corporation will host a conference call on February 21, 2008 at 10:00 AM (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 866-314-4865 (domestic) or 617-213-8050 (international) and citing code 45616178. Please log-in or dial-in at least ten minutes prior to the conference call start time to ensure a connection. An archived version of the conference call webcast will be accessible for 90 days at www.careered.com. A replay of the conference call will also be available for seven days by calling 888-286-8010 (domestic) or 617-801-6888 (international) and citing code 48600506. 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 population of approximately 90,000 students across the world in a variety of career-oriented disciplines. The more than 75 campuses that serve these students are located throughout the U.S. and in France, Italy, and the United Kingdom, and offer doctoral, master's, bachelor's, and associate degrees and diploma and certificate programs. Approximately one-third of its students attend the web-based virtual campuses of American InterContinental University Online and Colorado Technical University Online. CEC is an industry leader whose gold-standard brands are recognized globally. Those brands include, among others, the Le Cordon Bleu Schools North America; Harrington College of Design; Brooks Institute; International Academy of Design; American InterContinental University; Colorado Technical University and Sanford-Brown Institutes and Colleges. Through its schools, CEC is committed to providing quality education, enabling students to graduate and pursue rewarding careers. For more information, see the company�s website at www.careered.com. The company's website includes a detailed listing of individual campus locations and web links to its more than 75 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 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, performance and 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 outcome of which could materially and adversely affect our financial condition and operations, include, but are not limited to, the following: risks associated with unfavorable changes in the cost or availability of financing, including alternative loans, for our students; potential higher bad debt expense or reduced revenue associated with requiring students to pay more of their educational expenses while in school; increased competition; the effectiveness of our regulatory compliance efforts; future financial and operational results, including the impact of the impairment of goodwill and other intangible assets; risks related to our ability to comply with accrediting agency requirements or obtain accrediting agency approvals; 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, and class action and other lawsuits; costs, risks and uncertainties associated with our company-wide restructuring, including risks and uncertainties associated with changes in management and reporting responsibilities; costs and difficulties related to the integration of acquired businesses; risks related to our ability to manage and continue growth; risks related to the sale or teach-out of any campuses; risks related to general economic conditions including credit market 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, 2006, and from time to time in our other reports filed with the Securities and Exchange Commission. CAREER EDUCATION CORPORATION AND SUBSIDIARIES UNAUDITED CONSOLIDATED BALANCE SHEETS (In thousands) � � � December 31, December 31, 2007 2006 � ASSETS CURRENT ASSETS: Cash and cash equivalents $ 215,478 $ 187,853 Investments 166,618 � 259,766 � Total cash and cash equivalents and investments 382,096 447,619 Receivables: Students, net of allowance for doubtful accounts of $32,805 and $28,709 as of December 31, 2007, and December 31, 2006, respectively 56,756 48,564 Other, net 7,948 8,094 Prepaid expenses 47,809 29,621 Inventories 15,031 16,853 Deferred income tax assets 26,842 11,357 Other current assets 16,276 32,064 Assets held for sale 47,849 � 63,156 � Total current assets 600,607 657,328 PROPERTY AND EQUIPMENT, net 332,205 352,270 GOODWILL 383,844 349,760 INTANGIBLE ASSETS, net 44,395 33,984 DEFERRED INCOME TAX ASSETS 34,113 2,096 OTHER ASSETS 17,336 � 30,225 � TOTAL ASSETS $ 1,412,500 � $ 1,425,663 � � LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current maturities of long-term debt $ 11,843 $ 12,098 Accounts payable 26,038 30,095 Accrued expenses: Payroll and related benefits 27,790 27,012 Income taxes 19,572 - Other 100,441 78,885 Deferred tuition revenue 151,626 132,186 Deferred income tax liabilities 13,212 - Liabilities held for sale 33,301 � 31,879 � Total current liabilities 383,823 � 312,155 � � LONG-TERM LIABILITIES: Long-term debt, net of current maturities 2,178 2,763 Deferred rent obligations 91,320 90,360 Deferred income tax liabilities 32,823 16,527 Other 4,633 � 7,980 � Total long-term liabilities 130,954 � 117,630 � � SHARE-BASED AWARDS SUBJECT TO REDEMPTION 11,615 13,477 � STOCKHOLDERS' EQUITY: Common stock 930 1,069 Additional paid-in capital 207,294 666,780 Accumulated other comprehensive income 16,304 5,683 Retained earnings 736,603 675,188 Cost of shares in treasury (75,023 ) (366,319 ) Total stockholders' equity 886,108 � 982,401 � TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,412,500 � $ 1,425,663 � CAREER EDUCATION CORPORATION AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share amounts and percentages) � � � � � � � For the Three MonthsEnded December 31, % of % of 2007 Revenue 2006 Revenue � REVENUE: Tuition and registration fees $ 417,273 95.5 % $ 413,883 95.2 % Other 19,885 � 4.5 % 20,797 � 4.8 % Total revenue 437,158 � 100.0 % 434,680 � 100.0 % � OPERATING EXPENSES: Educational services and facilities 155,882 35.7 % 144,972 33.3 % General and administrative 216,620 49.5 % 222,452 51.2 % Depreciation and amortization 20,439 4.7 % 20,353 4.7 % Goodwill and asset impairment 5,821 � 1.3 % 4,390 � 1.0 % Total operating expenses 398,762 � 91.2 % 392,167 � 90.2 % Operating income 38,396 � 8.8 % 42,513 � 9.8 % � OTHER INCOME (EXPENSE): Interest income 5,843 1.3 % 5,555 1.3 % Interest expense (286 ) 0.0 % (898 ) -0.2 % Share of affiliate earnings 1,865 0.4 % 1,857 0.4 % Miscellaneous expense (10 ) 0.0 % (157 ) -0.1 % Total other income, net 7,412 � 1.7 % 6,357 � 1.4 % � Income from continuing operations before provision for income taxes 45,808 10.5 % 48,870 11.2 % PROVISION FOR INCOME TAXES 14,410 � 3.3 % 11,786 � 2.7 % � INCOME FROM CONTINUING OPERATIONS $ 31,398 7.2 % $ 37,084 8.5 % � DISCONTINUED OPERATIONS: Loss from discontinued operations, net of income tax benefit (22,567 ) -5.2 % (16,422 ) -3.7 % � NET INCOME $ 8,831 � 2.0 % $ 20,662 � 4.8 % � NET INCOME PER SHARE - DILUTED: Income from continuing operations $ 0.34 $ 0.39 Loss from discontinued operations (0.24 ) (0.17 ) Net income $ 0.10 � $ 0.21 � � DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING: 92,412 � 96,333 � CAREER EDUCATION CORPORATION AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share amounts and percentages) � � � � � � � For the Year Ended December 31, % of % of 2007 Revenue 2006 Revenue � REVENUE: Tuition and registration fees $ 1,595,326 95.3 % $ 1,724,872 95.5 % Other 79,556 � 4.7 % 80,946 � 4.5 % Total revenue 1,674,882 � 100.0 % 1,805,818 � 100.0 % � OPERATING EXPENSES: Educational services and facilities 593,659 35.4 % 563,244 31.2 % General and administrative 876,801 52.4 % 918,090 50.8 % Depreciation and amortization 78,183 4.7 % 77,495 4.3 % Goodwill and asset impairment 5,821 � 0.3 % 90,150 � 5.0 % Total operating expenses 1,554,464 � 92.8 % 1,648,979 � 91.3 % Operating income 120,418 � 7.2 % 156,839 � 8.7 % � OTHER INCOME (EXPENSE): Interest income 18,948 1.1 % 19,002 1.0 % Interest expense (1,185 ) -0.1 % (1,905 ) -0.1 % Share of affiliate earnings 4,735 0.3 % 3,966 0.2 % Miscellaneous income (expense) 761 � 0.1 % (127 ) 0.0 % Total other income, net 23,259 � 1.4 % 20,936 � 1.1 % � Income from continuing operations before provision for income taxes 143,677 8.6 % 177,775 9.8 % PROVISION FOR INCOME TAXES 48,175 � 2.9 % 89,336 � 4.9 % � INCOME FROM CONTINUING OPERATIONS $ 95,502 5.7 % $ 88,439 4.9 % � DISCONTINUED OPERATIONS: Loss from discontinued operations, net of income tax benefit (35,949 ) -2.1 % (41,870 ) -2.3 % � NET INCOME $ 59,553 � 3.6 % $ 46,569 � 2.6 % � NET INCOME PER SHARE - DILUTED: Income from continuing operations $ 1.01 $ 0.90 Loss from discontinued operations (0.38 ) (0.43 ) Net income $ 0.63 � $ 0.47 � � DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING: 94,407 � 98,065 � CAREER EDUCATION CORPORATION AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) � � � � � � � For the Year EndedDecember 31, 2007 2006 � CASH FLOWS FROM OPERATING ACTIVITIES OF CONTINUING OPERATIONS: Net income $ 59,553 $ 46,569 Adjustments to reconcile net income to net cash provided by operating activities: Goodwill and asset impairment 36,765 111,725 Depreciation and amortization expense 78,183 86,415 Bad debt expense 46,619 60,654 Compensation expense related to share-based awards 15,504 17,090 (Gain) loss on disposition of property and equipment (124 ) 716 Deferred income taxes (20,832 ) (30,018 ) Share of affiliate earnings, net of dividends received (2,791 ) (1,306 ) Other 301 2,995 Changes in operating assets and liabilities: Students receivables, gross (37,519 ) 26,589 Allowance for doubtful accounts (42,842 ) (73,465 ) Other receivables, net 133 (4,251 ) Inventories, prepaid expenses, and other current assets 5,066 (837 ) Deposits and other non-current assets 20,051 1,146 Accounts payable (5,840 ) 3,026 Accrued expenses, deferred rent obligations 30,253 (25,067 ) Deferred tuition revenue 39,595 � (5,591 ) Net cash provided by operating activities 222,075 � 216,390 � � CASH FLOWS FROM INVESTING ACTIVITIES: Business acquisitions, net of acquired cash (30,324 ) - Acquisition transaction costs (1,984 ) - Purchases of property and equipment (57,586 ) (69,473 ) Purchases of available-for-sale investments (644,977 ) (938,033 ) Sales of available-for-sale investments 740,108 950,508 Other (424 ) 545 � Net cash provided by (used in) investing activities 4,813 � (56,453 ) � CASH FLOWS FROM FINANCING ACTIVITIES: Purchase of treasury stock (224,264 ) (166,161 ) Issuance of common stock 34,486 37,676 Tax benefit associated with stock option exercises 5,945 20,763 � Payments of revolving loans (1,297 ) (3,517 ) Payments of capital lease obligations and other long-term debt (588 ) - � Net cash used in financing activities (185,718 ) (111,239 ) � � EFFECT OF FOREIGN CURRENCY EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS: 6,717 � 8,810 � � NET INCREASE IN CASH AND CASH EQUIVALENTS 47,887 57,508 DISCONTINUED OPERATIONS CASH ACTIVITY INCLUDED ABOVE: Add: Cash balance of discontinued operations at beginning of the year 1,964 3,095 Less: Cash balance of discontinued operations at end of the year 22,226 1,964 CASH AND CASH EQUIVALENTS, beginning of the period 187,853 � 129,214 � CASH AND CASH EQUIVALENTS, end of the period $ 215,478 � $ 187,853 � CAREER EDUCATION CORPORATION SELECTED SEGMENT INFORMATION - CONTINUING OPERATIONS (Dollars in thousands) � � � � � For the Three Months Ended December 31, 2007 2006 � REVENUE: Academy segment $ 47,457 $ 44,416 Colleges segment 48,574 58,842 Culinary Arts segment 94,047 93,927 Health Education segment 50,155 44,426 International segment (1) 32,585 18,341 University segment 164,334 174,320 Corporate and other (2) 6 � 408 � $ 437,158 � $ 434,680 � � SEGMENT PROFIT (LOSS): Academy segment (3) $ (2,260 ) $ 6,980 Colleges segment (4) 7,805 10,313 Culinary Arts segment 15,016 18,912 Health Education segment (5) (984 ) 1,122 International segment 9,448 5,529 University segment 22,391 23,640 Corporate and other (2) (13,020 ) (23,983 ) $ 38,396 � $ 42,513 � � SEGMENT PROFIT PERCENTAGE: Academy segment -4.8 % 15.7 % Colleges segment 16.1 % 17.5 % Culinary Arts segment 16.0 % 20.1 % Health Education segment -2.0 % 2.5 % International segment 29.0 % 30.1 % University segment 13.6 % 13.6 % � � � � � � � � (1) � International segment for the three months ended December 31, 2007 includes the results of Istituto Marangoni, which we acquired in January 2007. (2) Operating results of Blish.com and Chefs.com are included in Corporate and other. (3) Academy segment loss for the three months ended December 31, 2007 includes an asset impairment charge of approximately $5.5 million. (4) Colleges segment profit for the three months ended December 31, 2007 and 2006, includes asset impairment charges of approximately $0.3 million and $3.8 million, respectively. (5) Health Education segment loss for the three months ended December 31, 2007 includes approximately $6.5 million in increased legal reserves. CAREER EDUCATION CORPORATION SELECTED SEGMENT INFORMATION - CONTINUING OPERATIONS (Dollars in thousands) � � � � � For the Year Ended December 31, 2007 2006 � REVENUE: Academy segment $ 170,917 $ 164,548 Colleges segment 184,355 218,840 Culinary Arts segment 365,789 364,169 Health Education segment 189,017 168,896 International segment (1) 81,907 50,895 University segment 682,750 837,576 Corporate and other (2) 147 � 894 � $ 1,674,882 � $ 1,805,818 � � SEGMENT PROFIT (LOSS): Academy segment (3) $ 3,390 $ 13,808 Colleges segment (4) 9,001 32,331 Culinary Arts segment 49,133 60,646 Health Education segment (5) 6,980 (82,551 ) International segment (1) 13,024 11,456 University segment (6) 91,342 204,623 Corporate and other (2) (52,452 ) (83,474 ) $ 120,418 � $ 156,839 � � SEGMENT PROFIT (LOSS) PERCENTAGE: Academy segment 2.0 % 8.4 % Colleges segment 4.9 % 14.8 % Culinary Arts segment 13.4 % 16.7 % Health Education segment 3.7 % -48.9 % International segment 15.9 % 22.5 % University segment 13.4 % 24.4 % � � � � � � � � (1) � International segment for the twelve months ended December 31, 2007 includes the results of Istituto Marangoni, which we acquired in January 2007. (2) Operating results of Blish.com and Chefs.com are included in Corporate and other. (3) Academy segment profit for the twelve months ended December 31, 2007 includes an asset impairment charge of approximately $5.5 million (4) Colleges segment profit for the twelve months ended December 31, 2007 and 2006, includes asset impairment charge of approximately $0.3 million and $3.8 million, respectively. In addition, results for the twelve months ended December 31, 2007 include approximately $8.4 million in increased legal reserves. (5) Health Education segment income (loss) for the twelve months ended December 31, 2007 and 2006, includes approximately $6.5 million in increased legal reserves and approximately $86.3 million in goodwill and other intangible asset impairment charges, respectively. (6) Operating profit margin percentage information for the University segment's on-ground and online platforms for the three and twelve months ended December 31, 2007 and 2006 were as follows: � � For the Three MonthsEnded � For the YearEnded December 31, December 31, 2007 � 2006 2007 � 2006 Operating Profit (Loss) Margin Percentage: On-ground universities -11.9 % -11.8 % -17.4 % -5.9 % AIU Online 14.9 % 25.6 % 23.9 % 32.7 % CTU Online 29.0 % 16.5 % 20.3 % 18.8 % CAREER EDUCATION CORPORATION SELECTED ACCOUNTS RECEIVABLE AND ALLOWANCE INFORMATION - CONTINUING OPERATIONS (Dollars in thousands) � � � � � � DAYS SALES OUTSTANDING � For the Year Ended December 31, 2007 2006 � � Total revenue $ 1,674,882 $ 1,805,818 Number of days in the year 365 365 Total revenue per day $ 4,589 $ 4,947 Total receivables, net $ 64,704 $ 56,658 Days sales outstanding 14 11 � � ALLOWANCE AS A PERCENTAGE OF STUDENT RECEIVABLES � December 31, 2007 2006 � � Allowance for doubtful accounts $ 32,805 $ 28,709 Gross student receivables $ 89,561 $ 77,273 Allowance as a percentage of student receivables 36.6 % 37.2 % � � STUDENT RECEIVABLES VALUATION ALLOWANCE � Balance, Beginning Charges Amounts Written- Balance, End of Period to Expense Off Other of Period � For the year ended December 31, 2007 $ 28,709 $ 42,170 $ (38,083 ) $ 9 $ 32,805 � For the year ended December 31, 2006 $ 38,223 $ 55,856 $ (65,370 ) $ - $ 28,709 � � BAD DEBT EXPENSE BY SEGMENT: � For the Year Ended December 31, % Change 2007 % of Segment Revenue 2006 % of Segment Revenue 2007 vs. 2006 � Bad debt expense by segment: University segment $ 15,006 2.2 % $ 37,083 4.4 % -60 % Culinary Arts segment 11,839 3.2 % 5,207 1.4 % 127 % Colleges segment 1,536 0.8 % 1,606 0.7 % -4 % Health Education segment 9,686 5.1 % 6,099 3.6 % 59 % Academy segment 3,630 2.1 % 2,875 1.7 % 26 % International segment 333 0.4 % 783 1.5 % -57 % Corporate and other 140 � N/A 2,203 � N/A -94 % Total bad debt expense $ 42,170 � 2.5 % $ 55,856 � 3.1 % -25 % CAREER EDUCATION CORPORATION SUMMARY OF FUNDING SOURCES � � � For the Year Ended December 31, 2007 2006 � Title IV Program funding Stafford loans 45.4 % 42.5 % Grants 11.2 % 9.1 % PLUS loans 6.5 % 7.8 % Total Title IV Program funding 63.1 % 59.4 % � Private loans Non-recourse loans 15.0 % 19.7 % Sallie Mae recourse loans 2.7 % 1.9 % Stillwater recourse loans 0.0 % 0.2 % Total private loans 17.7 % 21.8 % � Scholarships, Grants and Other 3.1 % 2.6 % Cash Payments 16.1 % 16.2 % � Total Tuition Receipts 100.0 % 100.0 % CAREER EDUCATION CORPORATION AND SUBSIDIARIES SELECTED FINANCIAL DATA REGARDING ASSETS HELD FOR SALE (In thousands) � � � � � � � � For the Three Months Ended December 31, 2007 For the Three Months Ended December 31, 2006 Gibbs Colleges Gibbs Colleges Held for Sale Held for Sale Total Held for Sale Held for Sale Total � Total revenue $ 23,577 $ 6,534 $ 30,111 $ 28,154 $ 8,162 $ 36,316 Total operating expenses (1) 54,648 10,522 65,170 46,997 12,463 59,460 Loss from operations (31,071 ) (3,988 ) (35,059 ) (18,843 ) (4,301 ) (23,144 ) Total other expense (19 ) - (19 ) (4 ) (126 ) (130 ) Loss before income tax benefit (31,090 ) (3,988 ) (35,078 ) (18,847 ) (4,427 ) (23,274 ) Income tax benefit (11,069 ) (1,442 ) (12,511 ) (5,497 ) (1,355 ) (6,852 ) Net loss from dis-continued operations $ (20,021 ) $ (2,546 ) $ (22,567 ) $ (13,350 ) $ (3,072 ) $ (16,422 ) � For the Twelve Months Ended December 31, 2007 For the Twelve Months Ended December 31, 2006 Gibbs Colleges Gibbs Colleges Held for Sale Held for Sale Total Held for Sale Held for Sale Total � Total revenue $ 95,361 $ 25,491 $ 120,852 $ 110,242 $ 32,738 $ 142,980 Total operating expenses (2) 141,906 34,452 176,358 164,291 42,464 206,755 Loss from operations (46,545 ) (8,961 ) (55,506 ) (54,049 ) (9,726 ) (63,775 ) Total other expense (8 ) 6 (2 ) (25 ) (126 ) (151 ) Loss before income tax benefit (46,553 ) (8,955 ) (55,508 ) (54,074 ) (9,852 ) (63,926 ) Income tax benefit (16,404 ) (3,155 ) (19,559 ) (18,672 ) (3,384 ) (22,056 ) Net loss from dis-continued operations $ (30,149 ) $ (5,800 ) $ (35,949 ) $ (35,402 ) $ (6,468 ) $ (41,870 ) � � (1) Included in operating expenses for the three months ended December 31, 2007 and 2006, were approximately $30.9 million and $11.2 million, respectively, of goodwill and asset impairment charges. � (2) Included in operating expenses for the twelve months ended December 31, 2007 and 2006, were approximately $30.9 million and $21.6 million, respectively, of goodwill and asset impairment charges. � CAREER EDUCATION CORPORATION SUPPLEMENTAL START-UP FINANCIAL INFORMATION (In thousands) � � � � � Revenues Operating Income (Loss) For the Three Months For the Three Months Ended December 31, Ended December 31, 2007 2006 2007 2006 Culinary Arts segment (1) $ 2,757 $ 2,022 $ (2,301 ) $ (1,335 ) Health Education segment (2) - 2,025 - 151 Academy segment (3) 3,668 - (1,485 ) (1,160 ) $ 6,425 $ 4,047 $ (3,786 ) $ (2,344 ) � � Revenues Operating Income (Loss) For the Twelve Months For the Twelve Months Ended December 31, Ended December 31, 2007 2006 2007 2006 Culinary Arts segment (1) $ 5,540 $ 5,454 $ (8,967 ) $ (6,929 ) Health Education segment (2) - 5,513 - 112 Academy segment (3) 6,282 - (7,828 ) (3,745 ) $ 11,822 $ 10,967 $ (16,795 ) $ (10,562 ) (1) � For the three and twelve months ended December 31, 2007, Culinary Arts segment start-up campuses includes LCB Dallas, TX; LCB Boston, MA; and Kitchen Academy campuses in St. Peters, MO; Seattle, WA; and Sacramento, CA. For the three and twelve months ended December 31, 2006, Culinary Arts segment start-up campuses includes LCB Dallas, TX; LCB Boston, MA; and Kitchen Academy campuses in St. Peters, MO; Seattle, WA; Hollywood, CA; and Sacramento, CA. � (2) For the three and twelve months ended December 31, 2006, Health Education segment start-up campuses include SBC Milwaukee, WI. � (3) For the three and twelve months ended December 31, 2007, Academy segment start-up campuses include IADT Sacramento, CA, San Antonio, TX, and IADT Online Tampa, FL. For the three and twelve months ended December 31, 2006, Academy segment start-up campuses includes IADT Sacramento, CA and San Antonio, TX. CAREER EDUCATION CORPORATION 2007 TEACH-OUT SEGMENT INFORMATION - CONTINUING OPERATIONS (Dollars in thousands) � � � � � � � � For the Three Months Ended, For the Twelve Months Ended March 31,2007 June 30,2007 September 30,2007 December 31,2007 December 31,2007 REVENUE: Academy segment (1) $ 8,107 $ 7,372 $ 6,507 $ 7,992 $ 29,978 Colleges segment (2) 4,040 3,393 2,759 2,742 12,934 Health Education segment (3) 174 � 85 � 12 � - � 271 � $ 12,321 � $ 10,850 � $ 9,278 � $ 10,734 � $ 43,183 � � SEGMENT INCOME (LOSS): Academy segment (1) $ 106 $ (1,125 ) $ (769 ) $ (8,278 ) $ (10,066 ) Colleges segment (2) (2,068 ) (6,437 ) (808 ) (1,195 ) (10,508 ) Health Education segment (3) (300 ) (281 ) (357 ) - � (938 ) $ (2,262 ) $ (7,843 ) $ (1,934 ) $ (9,473 ) $ (21,512 ) � SEGMENT LOSS PERCENTAGE: Academy segment 1.3 % -15.3 % -11.8 % -103.6 % -33.6 % Colleges segment -51.2 % -189.7 % -29.3 % -43.6 % -81.2 % Health Education segment -172.4 % -330.6 % -2975.0 % N/A -346.1 % � STUDENT STARTS: Academy segment 323 270 260 592 1,445 Colleges segment 78 68 2 - 148 Health Education segment - � - � N/A � N/A � - � 401 � 338 � 262 � 592 � 1,593 � � STUDENT POPULATION AS OF: April 30,2007 July 31,2007 October 31,2007 January 31,2008 Academy segment 1,825 1,479 1,747 1,319 Colleges segment 692 495 389 283 Health Education segment 36 � 6 � N/A � N/A � 2,553 � 1,980 � 2,136 � 1,602 � � (1) Academy segment revenue and segment income(loss) for the three and twelve months ended December 31, 2007 includes IADT Pittsburgh, Pennsylvania and IADT Toronto, Canada campuses. IADT Pittsburgh and IADT Toronto are expected to be taught out by December 2008 and April 2009, respectively. � (2) Colleges segment revenue and segment loss for the three and twelve months ended December 31, 2007 includes Brooks College, Long Beach and Sunnyvale, California campuses. Brooks College, Long Beach and Brooks College, Sunnyvale are expected to be taught out by December 2008 and June 2008, respectively. � (3) Health Education segment revenue and segment loss for the three and nine months ended September 30, 2007 includes SBI Springfield, Massachusetts. SBI Springfield completed its teach out in September 2007. CAREER EDUCATION CORPORATION 2006 TEACH-OUT SEGMENT INFORMATION - CONTINUING OPERATIONS (Dollars in thousands) � � � � � � � � For the Three Months Ended For the Twelve Months Ended March 31,2006 June 30,2006 September 30,2006 December 31,2006 December 31,2006 REVENUE: Academy segment (1) $ 9,127 $ 8,292 $ 7,154 $ 8,723 $ 33,296 Colleges segment (2) 5,348 4,402 4,892 5,557 20,199 Health Education segment (3) 716 � 702 � 655 � 401 � 2,474 � $ 15,191 � $ 13,396 � $ 12,701 � $ 14,681 � $ 55,969 � SEGMENT INCOME (LOSS): Academy segment (1) $ (7 ) $ (1,068 ) $ (1,260 ) $ 513 $ (1,822 ) Colleges segment (2) (1,928 ) (2,142 ) (1,563 ) (4,038 ) (9,671 ) Health Education segment (3) (117 ) (289 ) (322 ) (166 ) (894 ) $ (2,052 ) $ (3,499 ) $ (3,145 ) $ (3,691 ) $ (12,387 ) � SEGMENT LOSS PERCENTAGE: Academy segment -0.1 % -12.9 % -17.6 % 5.9 % -5.5 % College segment -36.1 % -48.7 % -32.0 % -72.7 % -47.9 % Health Education segment -16.3 % -41.2 % -49.2 % -41.4 % -36.1 % � STUDENT STARTS: Academy segment 436 333 339 691 1,799 College segment 140 126 199 218 683 Health Education segment 76 � 55 � 47 � 0 � 178 � 652 � 514 � 585 � 909 � 2,660 � � STUDENT POPULATION AS OF: April 30,2006 July 31,2006 October 31,2006 January 31,2007 Academy segment 2,142 1,777 2,177 2,031 College segment 890 865 953 816 Health Education segment 199 � 187 � 131 � 67 � 3,231 � 2,829 � 3,261 � 2,914 � � (1) Academy segment revenue and segment income(loss) for the three and twelve months ended December 31, 2006 includes IADT Pittsburgh, Pennsylvania and IADT Toronto, Canada campuses. IADT Pittsburgh and IADT Toronto are expected to be taught out by December 2008 and April 2009, respectively. � (2) Colleges segment revenue and segment loss for the three and twelve months ended December 31, 2006 includes Brooks College, Long Beach and Sunnyvale, California campuses. Brooks College, Long Beach and Brooks College, Sunnyvale are expected to be taught out by December 2008 and June 2008, respectively. � (3) Health Education segment revenue and segment loss for the three and twelve months ended December 31, 2006 include SBI Springfield, Massachusetts. SBI Springfield completed its teach out in September 2007. CAREER EDUCATION CORPORATION AND SUBSIDIARIES SELECTED QUARTERLY DATA FOR UNIVERSITY SEGMENT � � � � � � � � � 2008 2007 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Revenue earning days AIU Online 78 84 83 70 84 84 77 70 CTU Online 77 77 77 77 77 77 77 77 Total 155 161 160 147 161 161 154 147 � � AIU Online CTU Online 2008 2007 2008 2007 Start Grad Start Grad Start Grad Start Grad � January 1/7 none 1/1 none 1/6 none 1/7 none February 2/11 2/10 2/11 2/4 2/20 2/12 2/21 2/13 March 3/24 3/16 3/18 3/17 none 3/29 none 3/31 Total 1Q dates 3 2 3 2 2 2 2 2 � April 4/28 4/27 4/29 4/21 4/6 none 4/8 none May none none none none 5/21 5/13 5/23 5/15 June 6/9 6/1 6/3 6/2 none 6/28 none 6/30 Total 2Q dates 2 2 2 2 2 2 2 2 � July 7/21 7/13 7/15 7/7 7/6 none 7/8 none August 8/25 8/24 8/19 8/18 8/20 8/12 8/22 8/14 September none 9/28 none 9/22 none 9/27 none 9/29 Total 3Q dates 2 3 2 3 2 2 2 2 � October 10/6 none 10/7 none 10/5 none 10/7 none November 11/10 11/9 11/11 11/10 11/19 11/11 11/21 11/13 December none 12/14 none 12/15 none 12/27 none 12/29 Total 4Q dates 2 2 2 2 2 2 2 2