CECO CECO Environmental Corporation

Career Education Corporation (NASDAQ: CECO) today reported total revenue of $524.2 million, and net income of $26.1 million, or $0.33 per diluted share, for the third quarter of 2010 compared to total revenue of $458.3 million and net income of $20.8 million, or $0.25 per diluted share, for the third quarter of 2009.

The operating results for the third quarter 2010 included a $40.0 million pretax charge related to the settlement of a legal matter. The operating results for the third quarter 2009 included $18.8 million of pretax performance-based compensation expense related to incentive plan outperformance.

“Our performance in the third quarter was in line with our expectations and marked a continuation of our year-over-year improvement,” said Gary E. McCullough, President and Chief Executive Officer. “While the third quarter brought intensified government and media scrutiny of our sector, I am particularly proud of the way that our company remained focused on enhancing the quality of education and student services in order to prepare students for success in their chosen careers.”

CONSOLIDATED RESULTS

Three Months Ended September 30, 2010

• Total revenue was $524.2 million for the third quarter of 2010, a 14.4 percent increase from $458.3 million for the third quarter of 2009.

• Operating income was $38.3 million for the third quarter of 2010, versus operating income of $38.1 million for the third quarter of 2009. The operating margin was 7.3 percent for the third quarter of 2010, compared to an operating margin of 8.3 percent for the third quarter of 2009. Excluding the impact of the significant items above, operating income for the third quarter of 2010 was $78.3 million versus operating income of $56.9 million for the third quarter of 2009; a 37.5 percent increase over the prior year quarter.

• Bad debt expense for the three months ended September 30, 2010 and 2009 was $31.9 million and $14.2 million, respectively. The higher level of bad debt expense is a result of increases made to the reserve rates associated with the Company’s student extended payment plans.

• Income from continuing operations for each three–month period ended September 30, 2010 and 2009 was $26.9 million, or $0.34 and $0.32 per diluted share for the three months ended September 30, 2010 and 2009, respectively. Excluding the impact of the significant items above, income from continuing operations for the three months ended September 30, 2010 was $52.9 million, or $0.66 per diluted share versus $39.1 million, or $0.47 per diluted share for the three months ended September 30, 2009.

Nine Months Ended September 30, 2010

• Total revenue was $1,581.8 million for the nine months ended September 30, 2010, compared to $1,328.8 million for the nine months ended September 30, 2009.

• Operating income increased to $221.8 million for the nine months ended September 30, 2010, from $126.5 million for the nine months ended September 30, 2009. The operating margin increased to 14.0 percent for the nine months ended September 30, 2010, from 9.5 percent for the nine months ended September 30, 2009. Operating income for the nine months ended September 30, 2010 included a $40.0 million pretax charge related to the settlement of a legal matter. In addition, increases made to the reserve rates associated with the Company’s student extended payment plans contributed to a $38.7 million increase in bad debt expense for the nine months ended September 30, 2010 as compared to the prior year. Operating income for the nine months ended September 30, 2009 included an additional $25.3 million pretax charge for performance-based compensation expense related to incentive plan outperformance.

• Income from continuing operations for the nine months ended September 30, 2010, was $148.0 million, or $1.82 per diluted share, compared to $84.3 million, or $0.97 per diluted share, for the nine months ended September 30, 2009.

CONSOLIDATED CASH FLOWS AND FINANCIAL POSITION

Cash Flows

• Cash provided by operating activities was $217.5 million for the nine months ended September 30, 2010, compared to cash provided by operating activities of $217.4 million for the nine months ended September 30, 2009. Operating cash flows remained relatively constant as compared to the prior year as strong cash flow driven by increased net income was offset by payment of prior year annual incentive compensation, lease payments attributable to our discontinued operations and the impact of student receivables growth and related payment performance.

• Capital expenditures increased to $81.9 million for the nine months ended September 30, 2010, from $50.3 million for the nine months ended September 30, 2009. Capital expenditures increased to 5.2 percent of total revenue for the nine months ended September 30, 2010 as compared to 3.8 percent for the nine months ended September 30, 2009 as a result of investments made in start-up campuses and the Company’s campus support center.

Financial Position

• As of September 30, 2010 and December 31, 2009, cash and cash equivalents and short-term investments totaled $442.5 million and $484.9 million, respectively.

• Days sales outstanding (DSO) were 15 days as of September 30, 2010, compared to 16 days as of September 30, 2009.

Stock Repurchase Program

During the nine months ended September 30, 2010, the Company repurchased approximately 5.4 million shares of its common stock for approximately $154.9 million at an average price of $28.56 per share. The Company did not repurchase shares of its common stock during the third quarter 2010.

As of September 30, 2010, approximately $290.5 million was available under the Company’s authorized stock repurchase program to repurchase outstanding shares of its 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 various factors, including market conditions and corporate and regulatory requirements.

 

STUDENT POPULATION AND NEW STUDENT STARTS

  Student Population  

Total student population by reportable segment as of September 30, 2010 and 2009, was as follows:

    As of September 30,  

% Change2010 vs. 2009

2010   2009

Student Population

University 63,500 56,400 13% Health Education 31,100 25,000 24% Culinary Arts 16,300 13,600 20% International 7,300 7,000 4% Transitional Schools 5 100 NM   Total Student Population 118,205 102,100 16%  

New Student Starts

 

New student starts by reportable segment during the third quarter of 2010 and 2009, were as follows:

 

For the Three Months EndedSeptember 30,

% Change2010 vs. 2009 2010 2009

New Student Starts

University 19,070 18,350 4% Health Education 9,440 8,000 18% Culinary Arts 7,360 7,100 4% International 4,130 4,200 -2% Transitional Schools — — N/A   Total New Student Starts 40,000 37,650 6%  

CONFERENCE CALL INFORMATION

Career Education Corporation will host a conference call on Wednesday, November 3, 2010 at 10:00 a.m. Eastern time. 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 27994422. 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 27994422.

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 more than 118,000 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, Italy, 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”); Istituto Marangoni; 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, 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 outcome 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; the impacts of the U.S. Department of Education’s new and pending regulations addressing certain aspects of administration of Title IV federal financial aid programs (including among other matters, gainful employment, 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) on our business practices, costs of compliance and of developing and implementing changes in operations, student recruitment or enrollment, and program offerings that may have significant or material effects on our operations, business and profitability; potential higher bad debt expense or reduced revenue associated with requiring students to pay more of their educational expenses while in school or with directly providing extended payment plans to our students; increased competition; the effectiveness of our regulatory compliance efforts; 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 regulations, and class action and other lawsuits; our ability to manage and continue growth; and other factors discussed in our Annual Report on Form 10-K for the year ended December 31, 2009, our Quarterly Reports on Form 10-Q for the most recent fiscal quarters, and from time to time in our current reports filed with the Securities and Exchange Commission.

  CAREER EDUCATION CORPORATION AND SUBSIDIARIES UNAUDITED CONSOLIDATED BALANCE SHEETS

(In thousands)

    September 30, December 31, 2010 2009 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 283,515 $ 284,473 Short-term investments   158,988     200,379     Total cash and cash equivalents and short-term investments 442,503 484,852   Student receivables, net 64,366 57,823 Receivables, other, net 5,514 5,256 Prepaid expenses 43,561 41,090 Inventories 11,078 11,271 Deferred income tax assets, net 12,983 12,983 Other current assets 7,810 9,442 Assets of discontinued operations   5,297     6,118     Total current assets   593,112     628,835     NON-CURRENT ASSETS: Property and equipment, net 335,836 306,279 Goodwill 383,821 377,515 Intangible assets, net 182,351 178,520 Student receivables, net 14,426 21,455 Deferred income tax assets, net 3,984 3,659 Other assets, net 36,099 23,178 Assets of discontinued operations   23,491     24,401     TOTAL ASSETS $ 1,573,120   $ 1,563,842       LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES: Current maturities of capital lease obligations $ 784 $ 880 Accounts payable 47,613 51,108 Accrued expenses: Payroll and related benefits 62,571 88,439 Advertising and production costs 25,186 21,436 Income taxes 1,206 17,849 Earnout payments 17,061 18,009 Other 92,391 46,182 Deferred tuition revenue 210,618 184,411 Liabilities of discontinued operations   19,371     13,695     Total current liabilities   476,801     442,009       NON-CURRENT LIABILITIES: Capital lease obligations, net of current maturities 1,336 2,262 Deferred rent obligations 105,011 91,725 Earnout payments 11,898 23,680 Other liabilities 13,140 19,124 Liabilities of discontinued operations   43,464     62,997     Total non-current liabilities   174,849     199,788       SHARE-BASED AWARDS SUBJECT TO REDEMPTION 160 521   STOCKHOLDERS’ EQUITY: Preferred stock — — Common stock 964 954 Additional paid-in capital 262,040 244,992 Accumulated other comprehensive income 2,356 8,408 Retained earnings 1,035,090 889,057 Cost of shares in treasury   (379,140 )   (221,887 )   Total stockholders’ equity   921,310     921,524     TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 1,573,120   $ 1,563,842     CAREER EDUCATION CORPORATION AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts and percentages)

   

For the Three Months Ended September 30, (1)

  % of     % of 2010 Revenue 2009 Revenue REVENUE: Tuition and registration fees $ 497,172 94.8 % $ 434,932 94.9 % Other   27,034   5.2 %   23,359   5.1 %   Total revenue   524,206     458,291       OPERATING EXPENSES: Educational services and facilities 159,104 30.4 % 149,822 32.7 % General and administrative 308,627 58.9 % 251,935 55.0 % Depreciation and amortization 17,843 3.4 % 15,908 3.5 % Goodwill and asset impairment   354   0.1 %   2,500   0.5 %   Total operating expenses   485,928   92.7 %   420,165   91.7 %   Operating income   38,278   7.3 %   38,126   8.3 %     OTHER INCOME: Interest income 189 0.0 % 326 0.1 % Interest expense (30 ) 0.0 % (10 ) 0.0 % Miscellaneous income   760   0.1 %   62   0.0 %   Total other income   919   0.2 %   378   0.1 %     PRETAX INCOME 39,197 7.5 % 38,504 8.4 % Provision for income taxes   12,304   2.3 %   11,626   2.5 %     INCOME FROM CONTINUING OPERATIONS 26,893 5.1 % 26,878 5.9 %   Loss from discontinued operations, net of tax   (762 ) -0.1 %   (6,086 ) -1.3 %     NET INCOME $ 26,131   5.0 % $ 20,792   4.5 %     NET INCOME (LOSS) PER SHARE – DILUTED: Income from continuing operations $ 0.34 $ 0.32 Loss from discontinued operations   (0.01 )   (0.07 )   Net income per share $ 0.33   $ 0.25       DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING   79,819     83,669     (1)   Prior period financial results have been reclassified for those campuses previously taught out or sold. They are now reflected 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 Nine Months Ended September 30, (1)   % of     % of 2010 Revenue 2009 Revenue REVENUE: Tuition and registration fees $ 1,516,181 95.9 % $ 1,271,207 95.7 % Other   65,579   4.1 %   57,620   4.3 %   Total revenue   1,581,760     1,328,827       OPERATING EXPENSES: Educational services and facilities 477,419 30.2 % 444,899 33.5 % General and administrative 830,421 52.5 % 706,566 53.2 % Depreciation and amortization 51,813 3.3 % 48,399 3.6 % Goodwill and asset impairment   354   0.0 %   2,500   0.2 %   Total operating expenses   1,360,007   86.0 %   1,202,364   90.5 %   Operating income   221,753   14.0 %   126,463   9.5 %     OTHER INCOME: Interest income 689 0.0 % 1,968 0.2 % Interest expense (75 ) 0.0 % (32 ) 0.0 % Miscellaneous expense   (506 ) 0.0 %   (704 ) -0.1 %   Total other income   108   0.0 %   1,232   0.1 %     PRETAX INCOME 221,861 14.0 % 127,695 9.6 % Provision for income taxes   73,842   4.7 %   43,351   3.3 %     INCOME FROM CONTINUING OPERATIONS 148,019 9.4 % 84,344 6.3 %   Loss from discontinued operations, net of tax   (2,348 ) -0.1 %   (33,805 ) -2.5 %     NET INCOME $ 145,671   9.2 % $ 50,539   3.8 %     NET INCOME (LOSS) PER SHARE – DILUTED: Income from continuing operations $ 1.82 $ 0.97 Loss from discontinued operations   (0.03 )   (0.39 )   Net income per share $ 1.79   $ 0.58       DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING   81,195     87,071     (1)   Prior period financial results have been reclassified for those campuses previously taught out or sold. They are now reflected as a component of Discontinued Operations.   CAREER EDUCATION CORPORATION AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

    For the Nine Months Ended September 30, 2010   2009 CASH FLOWS FROM OPERATING ACTIVITIES:   Net income $ 145,671 $ 50,539 Adjustments to reconcile net income to net cash provided by operating activities: Goodwill and asset impairment 354 2,500 Depreciation and amortization expense 51,813 50,038 Bad debt expense 77,374 38,927 Compensation expense related to share-based awards 14,390 12,313 Loss on disposition of property and equipment 546 1,196 Changes in operating assets and liabilities   (72,633 )   61,883     Net cash provided by operating activities   217,515     217,396       CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of available-for-sale investments (229,771 ) (464,163 ) Sales of available-for-sale investments 271,035 502,383 Purchases of property and equipment (81,944 ) (50,329 ) Acquisition of the rights to the Le Cordon Bleu brand (12,729 ) (25,000 ) Business acquisition, net of acquired cash (6,194 ) — Other   81     (370 )   Net cash used in investing activities   (59,522 )   (37,479 )     CASH FLOWS FROM FINANCING ACTIVITIES: Purchase of treasury stock (154,913 ) (181,126 ) Issuance of common stock 2,453 2,166 Tax benefit associated with stock option exercises 216 194 Payment of assumed loans upon business acquisition (4,279 ) — (Payments)/borrowings of capital lease obligations & other long term debt   (2,085 )   1,214     Net cash used in financing activities   (158,608 )   (177,552 )     EFFECT OF FOREIGN CURRENCY EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS:   (942 )   888       NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (1,557 ) 3,253 DISCONTINUED OPERATIONS CASH ACTIVITY INCLUDED ABOVE: Add: Cash balance of discontinued operations, beginning of the period 599 2,004 Less: Cash balance of discontinued operations, end of the period — 987 CASH AND CASH EQUIVALENTS, beginning of the period   284,473     242,854   CASH AND CASH EQUIVALENTS, end of the period $ 283,515   $ 247,124     CAREER EDUCATION CORPORATION AND SUBSIDIARIES SELECTED SEGMENT INFORMATION

(Dollars in thousands)

    For the Three Months Ended September 30, (1) 2010   2009 REVENUE: University (2) $ 290,512 $ 260,167 Health Education (2) 110,421 90,718 Culinary Arts 108,305 91,654 International 15,061 15,333 Transitional Schools   63     565     Subtotal 524,362 458,437 Corporate and Other   (156 )   (146 )   Total revenue $ 524,206   $ 458,291       OPERATING INCOME (LOSS): (3) University (2) (4) $ 64,824 $ 45,421 Health Education (2) 12,820 9,030 Culinary Arts (5) (23,867 ) 6,793 International (6,740 ) (4,498 ) Transitional Schools   (1,287 )   (1,187 )   Subtotal 45,750 55,559 Corporate and Other (6)   (7,472 )   (17,433 )   Total operating income $ 38,278   $ 38,126       OPERATING MARGIN (LOSS): University 22.3 % 17.5 % Health Education 11.6 % 10.0 % Culinary Arts -22.0 % 7.4 % International -44.8 % -29.3 % Transitional Schools NM NM   (1)   Prior period financial results have been reclassified for those campuses previously taught out or sold. They are now reflected as a component of Discontinued Operations.   (2) Prior period financial results have been reclassified to account for the realignment of our International Academy of Design and Technology (IADT) schools, Harrington College of Design, Collins College and Brooks Institute into the University SBU. Briarcliffe College and Brown College shifted into the Health Education SBU.   (3) Prior period financial results have been revised to account for a change in the allocation of shared service costs. Previously, shared service costs were allocated to our SBUs as a percentage of revenue. Improved data and analytical capabilities have allowed us to now allocate shared service costs based upon usage and consumption factors.   (4) During the third quarter 2010, University recorded $7.3 million of legal expense related to the settlements of legal matters.   (5) During the third quarter 2010, Culinary Arts recorded a $40.0 million charge related to the settlement of a legal matter, and $7.3 million of additional bad debt expense for increases in reserve rates related to our student extended payment plans.   (6) Corporate and Other costs decreased primarily due to the prior year including additional performance-based compensation expense related to incentive plan outperformance of $7.3 million for the prior year quarter.   CAREER EDUCATION CORPORATION AND SUBSIDIARIES SELECTED SEGMENT INFORMATION

(Dollars in thousands)

    For the Nine Months Ended

September 30, (1)

2010   2009 REVENUE: University (2) $ 878,283 $ 749,185 Health Education (2) 322,256 260,205 Culinary Arts 293,881 241,178 International 87,378 76,119 Transitional Schools   452     2,485     Subtotal 1,582,250 1,329,172 Corporate and Other   (490 )   (345 )   Total revenue $ 1,581,760   $ 1,328,827       OPERATING INCOME (LOSS): (3) University (2) (4) $ 212,995 $ 133,789 Health Education (2) 35,434 26,052 Culinary Arts (5) (3,267 ) 2,545 International 9,689 9,950 Transitional Schools   (4,135 )   (3,853 )   Subtotal 250,716 168,483 Corporate and Other (6)   (28,963 )   (42,020 )   Total operating income $ 221,753   $ 126,463       OPERATING MARGIN (LOSS): University 24.3 % 17.9 % Health Education 11.0 % 10.0 % Culinary Arts -1.1 % 1.1 % International 11.1 % 13.1 % Transitional Schools NM NM   (1)   Prior period financial results have been reclassified for those campuses previously taught out or sold. They are now reflected as a component of Discontinued Operations.   (2) Prior period financial results have been reclassified to account for the realignment of our International Academy of Design and Technology (IADT) schools, Harrington College of Design, Collins College and Brooks Institute into the University SBU. Briarcliffe College and Brown College shifted into the Health Education SBU.   (3) Prior period financial results have been revised to account for a change in the allocation of shared service costs. Previously, shared service costs were allocated to our SBUs as a percentage of revenue. Improved data and analytical capabilities have allowed us to now allocate shared service costs based upon usage and consumption factors.   (4) During the third quarter 2010, University recorded $7.3 million of legal expense related to the settlements of legal matters.   (5) During the third quarter 2010, Culinary Arts recorded a $40.0 million charge related to the settlement of a legal matter. For the first and third quarters 2010, Culinary Arts recorded $3.2 million and $7.3 million, respectively, of additional bad debt expense for increases in reserve rates related to our student extended payment plans.   (6)

Corporate and Other costs decreased primarily due to the prior year including additional performance-based compensation expense related to incentive plan outperformance of $9.7 million for the prior year to date.

  CAREER EDUCATION CORPORATION AND SUBSIDIARIES SELECTED UNIVERSITY SEGMENT INFORMATION

(Dollars in thousands)

   

For the Three Months Ended September 30, (1)

  For the Nine Months Ended September 30, (1) 2010   2009 2010   2009 REVENUE: AIU $ 113,119 $ 107,184 $ 349,934 $ 309,276 CTU 116,311 92,848 342,079 263,100 Art & Design   61,082     60,135     186,270     176,809     Total University $ 290,512   $ 260,167   $ 878,283   $ 749,185       OPERATING INCOME: (2) AIU $ 23,252 $ 23,716 $ 96,054 $ 69,525 CTU 32,414 15,556 94,278 48,536 Art & Design   9,158     6,149     22,663     15,728     Total University $ 64,824   $ 45,421   $ 212,995   $ 133,789       OPERATING MARGIN: AIU 20.6 % 22.1 % 27.4 % 22.5 % CTU 27.9 % 16.8 % 27.6 % 18.4 % Art & Design 15.0 % 10.2 % 12.2 % 8.9 % Total University 22.3 % 17.5 % 24.3 % 17.9 %   As of September 30, STUDENT POPULATION: 2010 2009 AIU 21,000 19,500 CTU 29,900 24,500 Art & Design   12,600     12,400     Total University   63,500     56,400       For the Three Months Ended September 30, NEW STUDENT STARTS: 2010 2009 AIU 6,760 6,530 CTU 9,180 8,760 Art & Design   3,130     3,060     Total University   19,070     18,350     (1)   Prior period results have been reclassified to account for the realignment of our International Academy of Design and Technology (IADT) schools, Harrington College of Design, Collins College and Brooks Institute into the University SBU. Briarcliffe College and Brown College shifted into the Health Education SBU.   (2) During the third quarter 2010, University recorded $7.3 million of legal expense related to the settlements of legal matters.