CECO CECO Environmental Corporation

Career Education Corporation (NASDAQ: CECO) today reported total revenue of $431.3 million, and net income of $10.6 million, or $0.14 per diluted share, for the third quarter of 2011 compared to total revenue of $524.1 million and net income of $26.1 million, or $0.33 per diluted share, for the third quarter of 2010.

CONSOLIDATED RESULTS

Quarter Ended September 30, 2011

• Total revenue was $431.3 million for the third quarter of 2011, a 17.7 percent decrease from $524.1 million for the third quarter of 2010.
• Operating income was $15.8 million for the third quarter of 2011, versus operating income of $39.5 million for the third quarter of 2010. The operating margin was 3.7 percent for the third quarter of 2011, compared to an operating margin of 7.5 percent for the third quarter of 2010. Operating income for the third quarter of 2011 included $11.4 million of legal costs related to various regulatory matters. Operating income for the third quarter of 2010 included a $40.0 million charge related to the settlement of a legal matter and $8.3 million of additional bad debt expense for increases in reserve rates associated with certain extended student payment plans.
• Income from continuing operations for the quarter ended September 30, 2011, was $11.3 million, or $0.15 per diluted share, compared to $27.9 million, or $0.35 per diluted share, for the quarter ended September 30, 2010.

Year to Date Ended September 30, 2011

• Total revenue was $1,471.9 million for the year to date ended September 30, 2011, compared to $1,581.3 million for the year to date ended September 30, 2010.
• Operating income decreased to $211.7 million for the year to date ended September 30, 2011, from $225.7 million for the year to date ended September 30, 2010. The operating margin remained relatively constant at 14.4 percent and 14.3 percent for the years to date ended September 30, 2011 and 2010, respectively. Operating income for the year to date ended September 30, 2011 included $11.4 million of legal costs related to various regulatory matters, a $7.0 million insurance recovery related to previously settled legal matters and $2.7 million in non-cash goodwill and asset impairment charges. Operating income for the year to date ended September 30, 2010 included a $40.0 million charge related to the settlement of a legal matter, additional bad debt expense of $16.4 million for the increase in the allowance for doubtful accounts associated with certain extended student payment plans, and a $3.7 million lease termination charge in connection with the Company’s move to its new campus support center.
• Income from continuing operations was $140.6 million for the year to date ended September 30, 2011 compared to $151.3 million for the year to date ended September 30, 2010, or $1.86 per diluted share for both the year to dates ended September 30, 2011 and 2010.

CONSOLIDATED CASH FLOWS AND FINANCIAL POSITION

Cash Flows

• Net cash flows provided by operating activities totaled $209.4 million for the year to date ended September 30, 2011, compared to $217.5 million for the year to date ended September 30, 2010.
• Capital expenditures decreased to $67.4 million for the year to date ended September 30, 2011, from $81.9 million during the year to date ended September 30, 2010. Capital expenditures represented 4.6 percent and 5.2 percent of total revenue during the years to date ended September 30, 2011 and 2010, respectively. The decrease over the prior year to date was primarily driven by investments in our new campus support center in the prior year to date.

Financial Position

• As of September 30, 2011 and December 31, 2010, cash and cash equivalents and short-term investments totaled $449.1 million and $449.2 million, respectively.

Stock Repurchase Program

During the quarter ended September 30, 2011, the Company repurchased 0.3 million shares of its common stock for approximately $7.2 million at an average price of $21.87 per share. During the year to date ended September 30, 2011, the Company repurchased approximately 6.2 million shares of its common stock for approximately $137.0 million at an average price of $21.94 per share.

As of September 30, 2011, approximately $153.3 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, 2011 and 2010, was as follows:

      As of September 30,   % Change 2011   2010 2011 vs. 2010

Student Population

CTU 25,100 29,900 -16% AIU 17,100 21,000 -19% Health Education 28,100 31,100 -10% Culinary Arts 15,400 16,300 -6% Art & Design 10,300 12,600 -18% International 8,400 7,300 15% Total Student Population 104,400 118,200 -12%  

New Student Starts

New student starts by reportable segment for the quarters ended September 30, 2011 and 2010, were as follows:

      For the Quarters Ended   September 30, % Change 2011   2010 2011 vs. 2010

New Student Starts

CTU 6,510 9,180 -29% AIU 4,590 6,760 -32% Health Education 7,710 9,440 -18% Culinary Arts 5,480 7,360 -26% Art & Design 1,870 3,130 -40% International 5,070 4,130 23% Total New Student Starts 31,230 40,000 -22%  

UPDATE REGARDING INTERNAL INVESTIGATION RELATED TO THE DETERMINATION OF STUDENT PLACEMENT RATES

As previously reported, the Company’s Board of Directors directed outside independent legal counsel, Dewey & LeBoeuf (“Dewey”), to conduct an investigation into the determination of placement rates at its Health Education segment schools and also directed counsel to review placement rate determination practices at all of the Company’s domestic schools. Outside independent legal counsel has substantially completed its investigation of the placement rate determination practices at the Company’s Health Education segment schools, as well as its review of the placement rate determination practices at the Company’s Art & Design segment schools.

Counsel’s investigation confirmed the existence of improper placement determination practices at certain of the Company’s Health Education segment schools, and, for the Company’s Health Education and Art & Design segment schools, Dewey identified certain placements that lacked sufficient supporting documentation or otherwise did not meet applicable placement guidelines established by the Company. In accordance with their annual reporting schedule, the Company’s Health Education and Art & Design segment schools recently reported 2010-2011 placement rates to their accreditor, the Accrediting Counsel for Independent Colleges and Schools (“ACICS”), taking into account Dewey’s findings. The ACICS placement rate standard is 65%. Placement rates below this minimum standard may subject an institution to increased accreditation oversight, which may include increased reporting requirements, a requirement that the institution submit a corrective action plan or undergo an on-site evaluation, or restrictions on the addition of new locations or programs. ACICS may also initiate accreditation proceedings such as a show-cause directive, an action to defer or deny action related to an institution’s application for a new grant of accreditation, or an action to suspend an institution’s accreditation if it fails to meet this standard. Based on their recently reported 2010-2011 placement rates, 13 of the Company’s 49 ACICS-accredited Health Education and Art & Design segment schools met ACICS’ 65% minimum placement rate standard for the 2010-2011 reporting period. ACICS could determine that additional schools do not meet its minimum placement rate standard. The Company has scheduled a meeting with ACICS to address these reported rates.

At the direction of the Board of Directors, in the third quarter Career Education commenced corrective action and has implemented enhanced controls and procedures with respect to the determination of placement rates by its Health Education and Art & Design segment schools. As part of this effort, the Company has adopted new career services policies and procedures and trained all of the career services employees in its Health Education and Art & Design segment schools on those new policies and procedures.

UPDATE REGARDING NYAG INVESTIGATION

As also previously reported, Career Education received a subpoena from the Attorney General of the State of New York (“NYAG”) relating to the NYAG’s investigation of whether the Company and certain of its schools have complied with certain New York state consumer protection, securities, finance and other laws. The Company has reported the preliminary results of its internal investigation of placement rate determination practices to the NYAG as they relate to the Company’s New York-based ground schools. The Company continues to fully cooperate with the NYAG with a view towards satisfying their inquiries as promptly as possible.

CONFERENCE CALL INFORMATION

Career Education Corporation will host a conference call on Wednesday November 2, 2011 at 8:30 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 31100876. 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 31100876.

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 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, 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, 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 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; 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 of Title 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 and enrollments, student and program mix and program offerings that may have significant or material effects on our operations, business and profitability; increased competition; other regulatory developments; the effectiveness of our regulatory compliance efforts; the outcome of any state attorney general investigations, including those underway in Florida and New York; the outcome of our investigation into the determination and reporting of placement rates at our domestic schools, including any claims, sanctions, operational limitations or adverse accreditation or regulatory action initiated as a result of any adverse findings from such investigation; our ability to successfully attract and retain qualified personnel to fill key senior management positions, including the position of president and chief executive officer; changes in the overall U.S. or global economy; any 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 growth; and other factors discussed in our Annual Report on Form 10-K for the year ended December 31, 2010, 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, 2011 2010     ASSETS CURRENT ASSETS: Cash and cash equivalents $ 289,101 $ 289,482 Short-term investments   159,971     159,671   Total cash and cash equivalents and short-term investments 449,072 449,153   Student receivables, net 57,471 62,287 Receivables, other, net 3,598 4,132 Prepaid expenses 36,130 52,077 Inventories 10,691 13,142 Deferred income tax assets, net 31,665 31,665 Other current assets 21,524 6,246 Assets of discontinued operations   4,929     6,742   Total current assets   615,080     625,444     NON-CURRENT ASSETS: Property and equipment, net 360,802 366,775 Goodwill 381,319 381,476 Intangible assets, net 108,664 118,763 Student receivables, net 10,459 12,522 Deferred income tax assets, net 4,960 5,092 Other assets, net 32,269 42,752 Assets of discontinued operations   18,783     19,055   TOTAL ASSETS $ 1,532,336   $ 1,571,879     LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current maturities of capital lease obligations $ 851 $ 783 Accounts payable 47,571 56,013 Accrued expenses: Payroll and related benefits 41,292 73,608 Advertising and production costs 20,859 18,846 Income taxes 11,541 - Earnout payments 9,600 17,439 Other 53,191 98,113 Deferred tuition revenue 215,367 176,102 Liabilities of discontinued operations   13,434     15,100   Total current liabilities   413,706     456,004     NON-CURRENT LIABILITIES: Capital lease obligations, net of current maturities 315 1,223 Deferred rent obligations 103,751 103,996 Earnout payments - 7,690 Other liabilities 38,653 30,853 Liabilities of discontinued operations   28,952     37,576   Total non-current liabilities   171,671     181,338     SHARE-BASED AWARDS SUBJECT TO REDEMPTION 111 153   STOCKHOLDERS' EQUITY: Preferred stock - - Common stock 824 812 Additional paid-in capital 592,929 576,853 Accumulated other comprehensive loss (310 ) (81 ) Retained earnings 496,055 356,991 Cost of shares in treasury   (142,650 )   (191 ) Total stockholders' equity   946,848     934,384   TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,532,336   $ 1,571,879           CAREER EDUCATION CORPORATION AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts and percentages)     For the Quarters Ended September 30, % of % of Total Total

2011

Revenue

2010(1)

Revenue   REVENUE: Tuition and registration fees $ 420,302 97.4 % $ 497,110 94.8 % Other   11,012   2.6 %   27,032   5.2 % Total revenue   431,314     524,142  

 

OPERATING EXPENSES: Educational services and facilities 155,597 36.1 % 158,112 30.2 % General and administrative 237,477 55.1 % 308,386 58.8 % Depreciation and amortization 22,446 5.2 % 17,783 3.4 % Goodwill and asset impairment   -   0.0 %   354   0.1 % Total operating expenses   415,520   96.3 %   484,635   92.5 % Operating income   15,794   3.7 %   39,507   7.5 %   OTHER INCOME: Interest income 270 0.1 % 190 0.0 % Interest expense (43 ) 0.0 % (30 ) 0.0 % Miscellaneous (expense) income   (38 ) 0.0 %   764   0.1 % Total other income   189   0.0 %   924   0.2 %   PRETAX INCOME 15,983 3.7 % 40,431 7.7 %   Provision for income taxes   4,708   1.1 %   12,567   2.4 %   INCOME FROM CONTINUING OPERATIONS 11,275 2.6 % 27,864 5.3 %   Loss from discontinued operations, net of tax   (641 ) -0.1 %   (1,733 ) -0.3 %   NET INCOME $ 10,634   2.5 % $ 26,131   5.0 %   NET INCOME (LOSS) PER SHARE - DILUTED: Income from continuing operations $ 0.15 $ 0.35 Loss from discontinued operations   (0.01 )   (0.02 ) Net income per share $ 0.14   $ 0.33     DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING   74,058     79,819                           (1)

In December 2010, the Transitional Schools segment ceased to exist as the Company completed the teach out of its last remaining Transitional School, AIU-Los Angeles, CA, whose results for all periods presented 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 Years to Date Ended September 30, % of % of Total Total 2011 Revenue

2010(1)

Revenue   REVENUE: Tuition and registration fees $ 1,423,366 96.7 % $ 1,515,747 95.9 % Other   48,502   3.3 %   65,560   4.1 % Total revenue   1,471,868     1,581,307     OPERATING EXPENSES: Educational services and facilities 486,027 33.0 % 474,192 30.0 % General and administrative 708,137 48.1 % 829,446 52.5 % Depreciation and amortization 63,319 4.3 % 51,610 3.3 % Goodwill and asset impairment   2,676   0.2 %   354   0.0 % Total operating expenses   1,260,159   85.6 %   1,355,602   85.7 % Operating income   211,709   14.4 %   225,705   14.3 %   OTHER INCOME: Interest income 770 0.1 % 689 0.0 % Interest expense (93 ) 0.0 % (75 ) 0.0 % Miscellaneous income (expense)   2,031   0.1 %   (501 ) 0.0 % Total other income   2,708   0.2 %   113   0.0 %   PRETAX INCOME 214,417 14.6 % 225,818 14.3 %   Provision for income taxes   73,797   5.0 %   74,538   4.7 %   INCOME FROM CONTINUING OPERATIONS 140,620 9.6 % 151,280 9.6 %   Loss from discontinued operations, net of tax   (1,598 ) -0.1 %   (5,609 ) -0.4 %   NET INCOME $ 139,022   9.4 % $ 145,671   9.2 %   NET INCOME (LOSS) PER SHARE - DILUTED: Income from continuing operations $ 1.86 $ 1.86 Loss from discontinued operations   (0.02 )   (0.07 ) Net income per share $ 1.84   $ 1.79     DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING   75,518     81,195                        

 

(1)

In December 2010, the Transitional Schools segment ceased to exist as the Company completed the teach out of its last remaining Transitional School, AIU-Los Angeles, CA, whose results for all periods presented are now reflected as a component of discontinued operations.

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

For the Years to Date Ended September 30,

2011 2010   CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 139,022 $ 145,671 Adjustments to reconcile net income to net cash provided by operating activities: Goodwill and asset impairment 2,676 354 Depreciation and amortization expense 63,319 51,813 Bad debt expense 40,909 77,374 Compensation expense related to share-based awards 11,884 14,390 (Gain) loss on disposition of property and equipment (1,794 ) 546 Changes in operating assets and liabilities   (46,599 )   (72,633 ) Net cash provided by operating activities   209,417     217,515     CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of available-for-sale investments (149,234 ) (229,771 ) Sales of available-for-sale investments 148,934 271,035 Purchases of property and equipment (67,444 ) (81,944 ) Earnout payments (12,589 ) (12,729 ) Proceeds on the sale of assets 6,259 - Business acquisition, net of acquired cash - (6,194 ) Other   40     81   Net cash used in investing activities   (74,034 )   (59,522 )   CASH FLOWS FROM FINANCING ACTIVITIES: Purchase of treasury stock (137,033 ) (154,913 ) Issuance of common stock 3,827 2,453 Tax benefit associated with stock option exercises 377 216 Payments of assumed loans upon business acquisition - (4,279 ) Payments of capital lease obligations   (855 )   (2,085 ) Net cash used in financing activities   (133,684 )   (158,608 )   EFFECT OF FOREIGN CURRENCY EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS:   (2,080 )   (942 )   NET DECREASE IN CASH AND CASH EQUIVALENTS (381 ) (1,557 ) DISCONTINUED OPERATIONS CASH ACTIVITY INCLUDED ABOVE: Add: Cash balance of discontinued operations, beginning of the period - 738 Less: Cash balance of discontinued operations, end of the period - 91 CASH AND CASH EQUIVALENTS, beginning of the period   289,482     284,334   CASH AND CASH EQUIVALENTS, end of the period $ 289,101   $ 283,424       CAREER EDUCATION CORPORATION AND SUBSIDIARIES UNAUDITED SELECTED SEGMENT INFORMATION (In thousands, except percentages)   For the Quarters Ended September 30, 2011

2010(1)

  REVENUE: CTU (2) $ 100,477 $ 116,311 AIU (2) 85,787 113,119 Health Education 102,195 110,421 Culinary Arts 73,686 108,305 Art & Design (2) 49,686 61,082 International 19,567 15,061 Corporate and Other   (84 )   (157 ) Total $ 431,314   $ 524,142     OPERATING INCOME (LOSS): CTU (2) (3) $ 16,755 $ 32,414 AIU (2) (4) 12,430 23,252 Health Education (3,632 ) 12,820 Culinary Arts (5) 3,800 (23,867 ) Art & Design (2) 2,557 9,158 International (7,151 ) (6,740 ) Corporate and Other   (8,965 )   (7,530 ) Total $ 15,794   $ 39,507     OPERATING MARGIN (LOSS): CTU 16.7 % 27.9 % AIU 14.5 % 20.6 % Health Education -3.6 % 11.6 % Culinary Arts 5.2 % -22.0 % Art & Design 5.1 % 15.0 % International   -36.5 %   -44.8 % Total   3.7 %   7.5 %                 (1)

In December 2010, the Transitional Schools segment ceased to exist as the Company completed the teach out of its last remaining Transitional School, AIU-Los Angeles, CA, whose results for all periods presented are now reflected as a component of discontinued operations.

 

(2)

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

 

(3) Third quarter 2011 included a $5.0 million accrual for an estimate for potential reimbursements of government funds.   (4) Third quarter 2010 included a $7.0 million charge related to the settlements of legal matters.   (5)

Third quarter 2010 included 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.

    CAREER EDUCATION CORPORATION AND SUBSIDIARIES UNAUDITED SELECTED SEGMENT INFORMATION (In thousands, except percentages)   For the Years to Date Ended September 30, 2011

2010(1)

  REVENUE: CTU (2) $ 330,603 $ 342,079 AIU (2) 288,092 349,934 Health Education 328,329 322,256 Culinary Arts 248,718 293,881 Art & Design (2) 170,962 186,270 International 105,509 87,378 Corporate and Other   (345 )   (491 ) Total $ 1,471,868   $ 1,581,307     OPERATING INCOME (LOSS): CTU (2) (3) $ 87,016 $ 94,278 AIU (2) (4) 66,384 96,054 Health Education 11,379 35,434 Culinary Arts (5) 30,741 (3,267 ) Art & Design (2) 20,627 22,663 International 12,371 9,689 Corporate and Other (6)   (16,809 )   (29,146 ) Total $ 211,709   $ 225,705     OPERATING MARGIN (LOSS): CTU 26.3 % 27.6 % AIU 23.0 % 27.4 % Health Education 3.5 % 11.0 % Culinary Arts 12.4 % -1.1 % Art & Design 12.1 % 12.2 % International   11.7 %   11.1 % Total   14.4 %   14.3 %                 (1)

In December 2010, the Transitional Schools segment ceased to exist as the Company completed the teach out of its last remaining Transitional School, AIU-Los Angeles, CA, whose results for all periods presented are now reflected as a component of discontinued operations.

 

(2)

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

 

(3) Year to date 2011 included a $5.0 million accrual for an estimate for potential reimbursements of government funds.   (4) Year to date 2010 included a $7.0 million charge related to the settlements of legal matters.   (5)

Year to date 2010 included a $40.0 million charge related to the settlement of a legal matter and $10.5 million of additional bad debt expense for increases in reserve rates related to our student extended payment plans.

 

(6)

Year to date 2011 included a $7.0 million insurance recovery related to previously settled legal matters. Year to date 2010 included a $4.1 million charge for an increase in the allowance for doubtful accounts related to the Company's previously terminated recourse loan programs and a $2.4 million lease termination charge related to the Company's former corporate headquarters.