Career Education Corporation Reports Results for 2005 First Quarter; Q

Career Education Corporation Reports Results for 2005 First Quarter; Quarterly Revenue Increased 29%; Income from Continuing Operations Increased 60%

    Business Editors

    HOFFMAN ESTATES, Ill.--(BUSINESS WIRE)--May 2, 2005--Career Education Corporation (Nasdaq:CECO) today reported financial results for the first quarter ended March 31, 2005.

    Three Months Ended March 31, 2005

--	First quarter 2005 total revenue increased 29% to $512.3 million, from $397.4 million for the same period last year. The increase in revenue is primarily attributable to an approximate 21% increase in student population at January 31 and an approximate 8% increase in average revenue per student during the first quarter.
--	Income from operations rose 55% to $98.9 million, from $63.7 million for the same period last year. Operating income margin rose to 19.3%, up from 16.0% in the same period last year.
--	Income from continuing operations was $61.6 million, or $0.59 per diluted share, up 60% from the same period last year. Loss from discontinued operations of $5.7 million, or $0.05 per diluted share, resulted primarily from the sale of our International Academy of Design and Technology ("IADT") campus in Montreal, Canada. The loss includes approximately $2.2 million related to the sale of the IADT Montreal campus as well as a write off of goodwill of approximately $3.5 million for the IADT Montreal and IADT Ottawa campuses.
--	Net income was $55.9 million, or $0.53 per diluted share, up 45% from last year's first quarter net income of $38.6 million, or $0.37 per diluted share. Net income includes a loss from discontinued operations mentioned above of $5.7 million, or $0.05 per diluted share. Net income includes approximately $2.4 million of pre-tax expense for legal and other costs related to the SEC investigation, the investigation being conducted by the special committee of our Board of Directors, and the shareholder securities class action and derivative lawsuits. This expense of $1.5 million, net of the related tax benefit of $0.9 million, represented $0.01 per diluted share.
--	Bad debt expense was 3.4% of total revenue for the quarter ended March 31, 2005, compared to 5.0% for the quarter ended March 31, 2004. The decrease in bad debt expense as a percentage of revenue was primarily a result of decreased accounts receivable exposure. Quarterly days sales outstanding ("DSOs") were 13 days at March 31, 2005. This represents a 10-day decrease from the quarterly DSOs of 23 days at March 31, 2004. We calculate DSOs by dividing the sum of net student receivables and net other receivables by average daily revenue. Average daily revenue is computed by dividing quarterly "total revenue" by the total number of days in the quarter.
--	Net student receivables decreased $16.7 million, from $86.0 million as of December 31, 2004 to $69.2 million as of March 31, 2005, and our allowance for doubtful accounts as a percentage of gross student receivables increased from 41.6% as of December 31, 2004, to 42.4% as of March 31, 2005.
--	At March 31, 2005, we had cash and cash equivalents of $432.3 million, up 172% from $158.7 million on March 31, 2004. Short-term and long-term debt and capital lease obligations as of March 31, 2005, totaled $21.0 million.
--	Goodwill decreased $4.3 million to $444.6 million as of March 31, 2005, from $448.9 million as of December 31, 2004. The change is attributable primarily to a $3.5 million write off of goodwill related to our IADT Montreal and IADT Ottawa campuses.
--	Accrued expenses increased $15.2 million to $128.5 million as of March 31, 2005, from $113.4 million as of December 31, 2004. The increase is due primarily to an increase in our net current income tax liability.
--	Net cash provided by operating activities for the first quarter of 2005 was $111.8 million, compared to $90.2 million for the same period of 2004. The first quarter cash flow improvement was attributable primarily to the increase in net income from continuing operations.
--	Purchases of property and equipment for the quarter was $25.5 million compared to $19.8 million for the same period last year.

    Population Data

    -- Start and population data excludes data for our Academy
    division schools that have been sold or are being taught out,
    including IADT Montreal, IADT Fairmont, and IADT Ottawa.

    -- First quarter 2005 new student starts were approximately
    32,500.

    -- Total CEC student population on April 30, 2005 was
    approximately 96,700, up 12% from approximately 86,700 on
    April 30, 2004. Total student population of CEC's Online
    Education Group on April 30, 2005 was approximately 25,500, up
    63% from approximately 15,600 students at the same date last
    year.

    Information Concerning Special Committee Investigation

    -- As previously reported, our Board of Directors formed a
    special committee to conduct an independent investigation of
    allegations of securities laws violations against us,
    including allegations relating to our accounting practices and
    reported statistics relating to starts, student population and
    placement. The special committee has informed us that it
    intends to make a report of its findings, and any proposed
    recommendations, to our Board of Directors within one to two
    weeks.

    Business Outlook

    Please note that the following is an update from previously issued guidance. While we may make further acquisitions, none are contemplated by these forward-looking statements.

    -- We expect full year 2005 revenues to be approximately $2.125
    billion and full year 2005 earnings per share to be
    approximately $2.29. The $2.29 earnings per share includes the
    $0.05 loss from discontinued operations primarily related to
    the sale of IADT Montreal. We expect the Online Education
    Group's full year 2005 revenues, included in the preceding
    amounts, to be approximately $650 million.

    -- We expect full year 2005 operating profit margin improvement
    to be approximately 150 basis points.

    -- We expect second quarter 2005 revenues to be approximately
    $510 million and second quarter 2005 earnings per share to be
    approximately $0.47. We expect diluted weighted average shares
    outstanding to be approximately 106.0 million for second
    quarter 2005.

    -- We expect our 2005 effective income tax rate will be
    approximately 39.25%.

    -- We expect that 2005 capital expenditures will be approximately
    7.5% of total revenue.

    Conference Call Information

    -- Career Education Corporation will host a conference call today
    at 5:00 PM (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
    (617) 801-9713 (international) or (800) 299-6183 (domestic)
    and citing code 84157784. Please log-in or dial-in at least 10
    minutes prior to the start time to ensure a connection. After
    7:00 PM (Eastern Time) the same day, an archived version of
    the webcast will be accessible for 90 days at
    www.careered.com. A replay of the call will also be available
    for seven days by calling (617) 801-6888 (international) or
    (888) 286-8010 and citing code 75701279.

    Career Education Corporation (www.careered.com) is one of the largest providers of private, for-profit postsecondary education and has a presence in both on-campus and online education. CEC's Colleges, Schools and Universities Group operates over 80 campuses in the U.S., Canada, France, the United Kingdom and the United Arab Emirates and offers doctoral degree, master's degree, bachelor's degree, associate degree and diploma programs in the career-oriented disciplines of business studies, visual communication and design technologies, health education, information technology, and culinary arts. The Online Education Group operates American InterContinental University Online and Colorado Technical University Online and offers a variety of degrees in information technology, business, visual communication and education. CEC's total student population on April 30, 2005 was approximately 96,700 students.

    Except for the historical and present factual information contained herein, the matters set forth in this release, including statements under "Business Outlook" and statements identified by words such as "anticipates," "expects," "projects," "plans," "will," and similar expressions, are forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. Such statements are based on information currently available to us and involve risks and uncertainties that could cause our actual growth, results, performance and business prospects and opportunities to differ materially from those expressed in, or implied by these statements. These risks and uncertainties, the outcome of which could materially and adversely affect our financial condition and operations, include, but are not limited to: risks related to our ability to comply with, and the impact of changes in, legislation and regulations that affect our ability to participate in student financial aid programs; costs, risks and effects of legal and administrative proceedings and investigations and governmental regulations, including the pending Securities and Exchange Commission and Justice Department investigations and, class action, derivative, Qui Tam, and other lawsuits; cost and potential impact of findings, and recommendations of the special committee of our Board of Directors that as a result of its investigation of allegations of securities laws violations against CEC; risks related to our ability to comply with accrediting agency requirements or obtain accrediting agency approvals; costs and difficulties related to the integration of acquired businesses; future financial and operational results; competition; general economic conditions; risks related to our ability to manage and continue growth; and other risk factors relating to our industry and business, as detailed in our Annual Report on Form 10-K for the year ended December 31, 2004, and from time to time in our other reports filed with the Securities and Exchange Commission. We disclaim any responsibility to update or revise these forward-looking statements.

CAREER EDUCATION CORPORATION AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF INCOME For the Three Months Ended March 31, 2005 and 2004 (In thousands, except per share data and percentages)

% of % of 2005 Revenue 2004 Revenue ---------- ------- ---------- ------- (Restated) Revenue: Tuition and registration fees $486,781 95.0% $366,903 92.3% Other 25,555 5.0% 30,462 7.7% ---------- ---------- Total revenue 512,336 100.0% 397,365 100.0% ---------- ----------

Operating expenses: Educational services and facilities 158,248 30.8% 128,137 32.3% General and administration 237,990 46.5% 192,790 48.5% Depreciation and amortization 17,201 3.4% 12,767 3.2% ---------- ---------- Total operating expenses 413,439 80.7% 333,694 84.0% ---------- ----------

Income from operations 98,897 19.3% 63,671 16.0%

Other income (expense): Interest income 1,707 0.3% 352 0.1% Interest expense (436) -0.1% (829) -0.2% Share of affiliate earnings 1,826 0.4% 1,405 0.4% Miscellaneous (expense) (558) -0.1% (5) 0.0% ---------- ---------- Total other income 2,539 0.5% 923 0.3% ---------- ----------

Income before provision for income taxes 101,436 19.8% 64,594 16.3%

Provision for income taxes 39,814 7.8% 26,000 6.6% ---------- ----------

Income from continuing operations 61,622 12.0% 38,594 9.7%

Loss from discontinued operations (5,700) -1.1% - 0.0% ---------- ----------

Net income $55,922 10.9% $38,594 9.7% ========== ==========

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Income per share - Diluted Income from continuing operations $0.586 $0.369 Loss from discontinued operations (0.054) - ---------- ---------- Net income $0.532 $0.369 ========== ==========

Diluted weighted average shares outstanding 105,195 104,519

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CAREER EDUCATION CORPORATION AND SUBSIDIARIES UNAUDITED CONSOLIDATED BALANCE SHEETS (In thousands)

March 31, December 31, 2005 2004 ------------ ------------

ASSETS

CURRENT ASSETS: Cash and cash equivalents $432,268 $349,458 Receivables: Students, net of allowance for doubtful accounts of $50,880 and $61,136 as of March 31, 2005 and December 31, 2004, respectively 69,233 85,982 Other, net 5,552 5,378 Inventories 19,181 17,347 Prepaid expenses 30,942 29,649 Other current assets 3,079 5,980 Deferred income tax assets 18,806 18,806 ------------ ------------ Total current assets 579,061 512,600 ------------ ------------ Property and equipment, net 358,486 351,140 Goodwill 444,623 448,896 Intangible assets, net 35,683 35,881 Other assets 36,116 38,495 ------------ ------------ TOTAL ASSETS $1,453,969 $1,387,012 ------------ ------------

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES: Current maturities of long-term debt $2,053 $2,274 Accounts payable 27,262 38,263 Accrued expenses: Payroll and related benefits 32,964 38,193 Income taxes 20,764 4,663 Other 74,815 70,520 Deferred tuition revenue 172,492 166,743 ------------ ------------ Total current liabilities 330,350 320,656 ------------ ------------

LONG-TERM LIABILITIES: Long-term debt, net of current maturities 18,970 21,591 Deferred income tax liabilities 39,938 39,972 Other 22,544 19,962 ------------ ------------ Total long-term liabilities 81,452 81,525 ------------ ------------

COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Preferred stock - - Common stock 1,027 1,025 Additional paid-in capital 574,131 571,192 Accumulated other comprehensive income 2,869 4,396 Retained earnings 464,140 408,218 ------------ ------------ Total stockholders' equity 1,042,167 984,831 ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,453,969 $1,387,012 ------------ ------------

CAREER EDUCATION CORPORATION AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS For the Three Months Ended March 31, 2005 and 2004 (In thousands)

2005 2004 ------------ ------------ (Restated)

CASH FLOWS FROM OPERATING ACTIVITIES: Net income $55,922 $38,594 Adjustments to reconcile net income to income from continuing operations: Loss from discontinued operations 5,700 - ------------ ------------ Income from continuing operations 61,622 38,594 Adjustments to reconcile income from continuing operations to net cash provided by operating activities: Depreciation and amortization 17,201 12,767 Royalty expense related to stock options 118 118 Compensation expense related to stock options - 13 Amortization of deferred financing costs 73 85 Loss on disposition of property and equipment 430 - Changes in operating assets and liabilities, net of acquisitions Tax benefit associated with option exercises 626 3,083 Other 31,725 35,579 ------------ ------------ Net cash provided by operating activities 111,795 90,239 ------------ ------------

CASH FLOWS FROM INVESTING ACTIVITIES: Business dispositions/acquisitions, net of cash (908) 35 Acquisition transaction costs - (32) Purchases of property and equipment (25,537) (19,759) Change in investment in affiliate (612) (202) ------------ ------------ Net cash used in investing activities (27,057) (19,958) ------------ ------------

CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of common stock 2,314 3,390 Net (payments of) revolving loans (1,630) (75,000) Payments of capital lease obligations and other long-term debt (708) (859) ------------ ------------ Net cash used in financing activities (24) (72,469) ------------ ------------

EFFECT OF FOREIGN CURRENCY EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (1,904) (331) ------------ ------------

NET INCREASE IN CASH AND CASH EQUIVALENTS 82,810 (2,519) CASH AND CASH EQUIVALENTS, beginning of period 349,458 161,235 ------------ ------------ CASH AND CASH EQUIVALENTS, end of period $432,268 $158,716 ============ ============

CAREER EDUCATION CORPORATION AND SUBSIDIARIES UNAUDITED SELECTED SEGMENT INFORMATION For the Three Months Ended March 31, 2005 and 2004 (Dollars in thousands)

2005 2004 ----------- ----------- Revenue CSU (1) $355,066 $321,599 OEG (2) 157,270 75,766 ----------- ----------- $512,336 $397,365 =========== ===========

Segment profit CSU $50,090 $41,790 OEG 68,639 35,544 Corporate and other (18,006) (12,258) ----------- ----------- $100,723 $65,076 =========== ===========

Segment profit percentage CSU 14.1% 13.0% OEG 43.6% 46.9%

(1) The Colleges, Schools, and Universities ("CSU") segment represents an aggregation of our campus-based operating divisions.

(2) The Online Education Group ("OEG") segment represents an aggregation of our online operating divisions.

(3) Segment profit equals the sum of income from operations and share of affiliate earnings.

CAREER EDUCATION CORPORATION AND SUBSIDIARIES UNAUDITED RESTATED QUARTERLY CONSOLIDATED STATEMENTS OF INCOME

2004 --------------------------------------- 1Q 2Q 3Q 4Q --------- --------- --------- ---------

Revenue: Tuition and registration fees $366,903 $375,627 $404,083 $461,837 Other 30,462 28,435 31,951 29,234 --------- --------- --------- --------- Total revenue 397,365 404,062 436,034 491,071 --------- --------- --------- ---------

Operating expenses: Educational services and facilities 128,137 136,932 145,433 146,642 General and administration 192,790 193,617 206,374 229,577 Depreciation and amortization 12,767 13,220 14,855 16,627 --------- --------- --------- --------- Total operating expenses 333,694 343,769 366,662 392,846 --------- --------- --------- ---------

Income from operations 63,671 60,293 69,372 98,225

Other income (expense): Interest income 352 538 651 1,411 Interest expense (829) (713) (525) (735) Share of affiliate earnings 1,405 1,185 209 1,449 Miscellaneous (expense) (5) (10) (181) (94) --------- --------- --------- --------- Total other income 923 1,000 154 2,031 --------- --------- --------- ---------

Income before provision for income taxes 64,594 61,293 69,526 100,256

Provision for income taxes 26,000 24,670 27,985 37,395 --------- --------- --------- ---------

Net Income $38,594 $36,623 $41,541 $62,861 ========= ========= ========= =========

======================================================================

Income per share - Diluted $0.37 $0.35 $0.40 $0.60

Diluted weighted average shares outstanding 104,519 105,484 104,893 104,946

CAREER EDUCATION CORPORATION AND SUBSIDIARIES UNAUDITED RESTATED QUARTERLY CONSOLIDATED STATEMENTS OF INCOME (continued)

2003 --------------------------------------- 1Q 2Q 3Q 4Q --------- --------- --------- ---------

Revenue: Tuition and registration fees $220,662 $232,208 $285,541 $340,159 Other 21,542 21,458 28,121 28,296 --------- --------- --------- --------- Total revenue 242,204 253,666 313,662 368,455 --------- --------- --------- ---------

Operating expenses: Educational services and facilities 92,055 91,969 112,511 116,980 General and administration 114,160 121,680 146,094 153,364 Depreciation and amortization 9,185 9,843 11,736 13,144 --------- --------- --------- --------- Total operating expenses 215,400 223,492 270,341 283,488 --------- --------- --------- ---------

Income from operations 26,804 30,174 43,321 84,967

Other income (expense): Interest income 549 288 37 130 Interest expense (342) (609) (423) (471) Share of affiliate earnings 1,166 905 96 1,187 Miscellaneous (expense) 884 (140) 256 334 --------- --------- --------- --------- Total other income 2,257 444 (34) 1,180 --------- --------- --------- ---------

Income before provision for income taxes 29,061 30,618 43,287 86,147

Provision for income taxes 11,837 12,450 17,572 34,450 --------- --------- --------- ---------

Net Income $17,224 $18,168 $25,715 $51,697 ========= ========= ========= =========

======================================================================

Income per share - Diluted $0.18 $0.19 $0.25 $0.50

Diluted weighted average shares outstanding 96,142 97,633 103,713 104,288

CAREER EDUCATION CORPORATION AND SUBSIDIARIES SELECTED QUARTERLY OEG SEGMENT DATA

AIU Online CTU Online --------------------------- --------------------------- 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q ------ ------ ------ ------ ------ ------ ------ ------

Revenue earning days 2005 82 84 79 70 77 77 77 72 2004 81 84 78 72 77 77 77 77

AIU Online CTU Online --------------------------- --------------------------- 2005 2004 2005 2004 ------------- ------------- ------------- ------------- Start Grad Start Grad Start Grad Start Grad ------ ------ ------ ------ ------ ------ ------ ------

January 1/2 - 1/4 - 1/2 - 1/4 - February 2/13 2/5 2/8 2/7 2/9 2/8 2/11 - March 3/20 3/19 3/21 3/13 - 3/19 - - Total 1Q dates 3 2 3 2 2 2 2 -

April - 4/23 4/25 4/24 4/3 - 4/4 - May 5/1 - - 5/29 5/11 5/10 5/12 - June 6/5 6/4 6/6 - - 6/18 - - Total 2Q dates 2 2 2 2 2 2 2 -

July 7/17 7/9 7/11 7/10 7/3 - 7/4 - August 8/21 8/20 8/29 8/14 8/10 8/9 8/11 - September - 9/24 - - - 9/17 - - Total 3Q dates 2 3 2 2 2 2 2 -

October 10/9 - 10/3 10/2 10/2 - 10/3 - November 11/3 11/12 11/14 11/6 11/9 11/8 11/10 - December - 12/17 - 12/18 - 12/17 - 12/18 Total 4Q dates 2 2 2 3 2 2 2 1

--30--VS/cg*

CONTACT: Career Education Corporation Karen M. King, 847-585-3899 www.careered.com

KEYWORD: ILLINOIS INDUSTRY KEYWORD: EDUCATION INTERNET E-COMMERCE EARNINGS CONFERENCE CALLS SOURCE: Career Education Corporation

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