Career Education Corporation Reports Second Quarter 2014 Results

08/07/2014

Company Release - 8/7/2014 8:00 AM ET

SCHAUMBURG, Ill.--(BUSINESS WIRE)-- Career Education Corporation (NASDAQ: CECO) today reported operating and financial results for the second quarter of 2014.

Second Quarter Highlights

Sixth consecutive quarter of sequential improvement in the decline of total student enrollments.
Positive new student enrollment growth within University, driven by strong growth within CTU.
Total year-over-year enrollment growth of 3.9% within Culinary Arts.
Loss per diluted share of -$0.53 from continuing operations, which included -$0.11 and -$0.02 per diluted share of trade name impairments and legal settlement charges, respectively.
The Higher Learning Commission acted to continue its regional accreditation of American InterContinental University (“AIU”).
Adjusted EBITDA for ongoing operations improvement of $8.7 million or 73.6% compared to the same quarter last year.
Lowered operating expenses by $46.5 million or 15.1% compared to the same quarter last year.
The Company has successfully completed the teach-out of 16 of the 20 Transitional campuses planned to be closed in 2014.

“The performance of our colleges, institutions and universities is very much in line with our plans as we move further along in our turnaround strategy and some of the early changes we made to the organization begin to generate results,” said President and CEO Scott W. Steffey. “We are very pleased with our progress. The new student enrollment growth we are experiencing with our universities, the total enrollment growth within culinary arts and the sequential improvement in the rate of decline of total enrollments across the organization is consistent with our 2014 goals and positions us well for 2015. Our cash position and overall liquidity also remain strong.”

REVENUE

Total revenue was $229.3 million for the second quarter of 2014 compared to $259.5 million for the second quarter of 2013, a decline of 11.6%.
For ongoing operations, which excludes Transitional Schools, total revenue was $224.5 million for the second quarter of 2014 compared to $245.2 million for the second quarter of 2013, a decline of 8.5%, due to approximately 2,400 fewer total student enrollments.


Revenue ($ in thousands)	Q2 2014		Q1 2014		Q4 2013		Q3 2013		Q2 2013

CTU	$	85,041	$	86,920	$	87,582	$	82,185	$	86,557
AIU		49,685		52,573		49,088		56,284		59,935
Total University Schools		134,726		139,493		136,670		138,469		146,492
Career Colleges		47,128		52,681		55,007		51,122		54,160
Culinary Arts		42,566		42,247		42,778		44,256		44,577
Total Career Schools		89,694		94,928		97,785		95,378		98,737
Corporate and Other		38		100		-		-		-
Total Ongoing Operations		224,458		234,521		234,455		233,847		245,229
Transitional Schools ⁽¹⁾		4,834		6,846		9,155		11,348		14,272
Total ⁽²⁾	$	229,292	$	241,367	$	243,610	$	245,195	$	259,501

__________

(1)

Campuses included in our Transitional Schools segment are currently being taught out and no longer enroll new students.

(2)

Excludes discontinued operations, which consists of the results of operations for campuses that have ceased operations or were sold and are considered distinct operations under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 205 – Presentation of Financial Statements.

TOTAL AND NEW STUDENT ENROLLMENTS

For ongoing operations, which excludes Transitional Schools, total student enrollments decreased 4.8% as of June 30, 2014 as compared to June 30, 2013. Culinary Arts reported total student enrollment growth of 3.9% as of June 30, 2014 as compared to June 30, 2013, as a result of the reintroduction of the Associate degree program which is a longer term program as compared to the Certificate program that was previously offered.
The Company expects to be total student enrollment positive year-over-year for its University and Culinary Arts segments during the second half of 2014 as a result of improving enrollment trends, including increased application volume.
For ongoing operations, which excludes Transitional Schools, new student enrollments increased 2.3% for the second quarter of 2014 compared to the prior year quarter.


Total Student Enrollments	Q2 2014	Q1 2014	Q4 2013	Q3 2013	Q2 2013

CTU	19,800	20,600	20,800	20,500	20,400
AIU	10,800	13,300	11,600	12,000	11,600
Total University Schools	30,600	33,900	32,400	32,500	32,000
Career Colleges	9,500	11,800	11,000	12,300	10,800
Culinary Arts	8,000	8,400	7,900	8,000	7,700
Total Career Schools	17,500	20,200	18,900	20,300	18,500
Total Ongoing Operations	48,100	54,100	51,300	52,800	50,500
Transitional Schools	900	1,300	1,900	2,600	2,900
Total	49,000	55,400	53,200	55,400	53,400


New Student Enrollments	Q2 2014	Q1 2014	Q4 2013	Q3 2013	Q2 2013

CTU ⁽¹⁾	5,280	4,820	5,260	4,780	4,410
AIU ⁽¹⁾	2,010	5,900	2,520	2,880	2,110
Total University Schools	7,290	10,720	7,780	7,660	6,520
Career Colleges	1,650	3,000	1,660	3,640	1,810
Culinary Arts	1,890	2,300	2,010	3,650	2,260
Total Career Schools	3,540	5,300	3,670	7,290	4,070
Total Ongoing Operations	10,830	16,020	11,450	14,950	10,590
Transitional Schools ⁽²⁾	10	-	60	390	250
Total	10,840	16,020	11,510	15,340	10,840

__________

(1)		In the first quarter of 2014, we implemented a new student orientation process, which replaced our previously provided student readiness programs; this change impacts the way we calculate new student enrollments. This internal policy change had a positive impact on 2014 new student enrollments as compared to 2013. Accordingly, the comparability of the current quarter versus the prior year quarter is impacted.
(2)		Campuses within the Transitional Schools segment no longer enroll new students; students who re-enter after 365 days are reported as new student enrollments.

OPERATING (LOSS) INCOME

Operating losses of $33.3 million and $49.7 million were reported for the second quarters of 2014 and 2013, respectively.
For ongoing operations, which excludes Transitional Schools, the Company reported an operating loss improvement of $15.4 million or 38.7% as compared to the prior year quarter. Operating expenses decreased primarily as a result of lower general and administration costs, including lower advertising and legal expenses, lower student metric driven costs and lower occupancy costs, partially offset with higher asset impairment charges in the current year quarter as compared to the prior year quarter. For ongoing operations, the operating margin was -10.9 percent for the second quarter of 2014, a 540 basis point improvement compared to the second quarter of 2013.
Within Culinary Arts, increased trade name impairment charges and legal expenses for the second quarter of 2014 as compared to the prior year quarter drove the operating margin decline. Within Career Colleges, favorability for the current quarter as compared to the prior year quarter was driven by a prior year legal settlement expense of $8.3 million ($0.08 per diluted share).


Operating (Loss) Income	Q2 2014			Q1 2014			Q4 2013			Q3 2013			Q2 2013
($ in thousands)

CTU	$	20,957		$	14,481		$	22,146		$	9,615		$	17,062
AIU		(1,331	)		(3,583	)		(3,793	)		(5,930	)		1,021
Total University Schools		19,626			10,898			18,353			3,685			18,083
Career Colleges		(18,836	)		(16,299	)		(15,614	)		(19,758	)		(29,960	)
Culinary Arts ⁽¹⁾		(19,772	)		(18,046	)		(28,409	)		(23,655	)		(17,017	)
Total Career Schools		(38,608	)		(34,345	)		(44,023	)		(43,413	)		(46,977	)
Corporate and Other		(5,513	)		(11,136	)		(8,621	)		(7,561	)		(11,050	)
Total Ongoing Operations		(24,495	)		(34,583	)		(34,291	)		(47,289	)		(39,944	)
Transitional Schools		(8,841	)		(7,308	)		(11,227	)		(9,004	)		(9,716	)
Total ⁽²⁾	$	(33,336	)	$	(41,891	)	$	(45,518	)	$	(56,293	)	$	(49,660	)

(1)

Trade name impairment charges of $7.4 million ($0.11 per diluted share), $10.7 million ($0.10 per diluted share) and $2.3 million ($0.02 per diluted share) were recorded during the second quarter of 2014, third quarter of 2013 and the second quarter of 2013, respectively.

(2)

Excludes discontinued operations, which consists of the results of operations for campuses that have ceased operations or were sold and are considered distinct operations under FASB ASC Topic 205 – Presentation of Financial Statements.

LOSS PER SHARE

Net loss per diluted share of -$0.69 and -$0.47 were reported for the second quarters of 2014 and 2013, respectively.


Loss Per Share (shares in thousands)	Q2 2014			Q1 2014			Q4 2013			Q3 2013			Q2 2013
Loss per diluted share from continuing operations	$	(0.53	)	$	(0.62	)	$	(1.48	)	$	(0.53	)	$	(0.34	)
Loss per diluted share from discontinued operations		(0.16	)		(0.25	)		1.02			(0.77	)		(0.13	)
Net loss per diluted share	$	(0.69	)	$	(0.87	)	$	(0.46	)	$	(1.30	)	$	(0.47	)
Diluted shares outstanding		67,157			66,994			66,916			66,849			66,751

ADJUSTED EBITDA

The Company believes it is useful to present non-GAAP financial measures, which exclude certain significant items, as a means to understand the performance of its ongoing operations. (See tables below and the GAAP to non-GAAP reconciliation attached to this press release for further details.)

Adjusted EBITDA for ongoing operations, which excludes Transitional Schools, has improved $8.7 million or 73.6% for the second quarter of 2014 as compared to the same quarter last year. Excluding certain non-cash items and legal settlements, adjusted EBITDA was -$3.1 million or -$0.05 per diluted share for the second quarter of 2014 as compared to -$11.9 million or -$0.18 per diluted share for the second quarter of 2013. This favorability is a result of continued efforts to align current cost structure with total student enrollments.
Adjusted EBITDA for Transitional Schools and Discontinued Operations was -$16.4 million or -$0.24 per diluted share for the second quarter of 2014 as compared to -$20.5 million or -$0.31 per diluted share for the second quarter of 2013. This favorability is a result of the completion of teach-out campus operations and continued focus on exiting lease obligations once a teach-out is complete.


Adjusted EBITDA	Q2 2014			Q1 2014			Q4 2013			Q3 2013			Q2 2013
($ in thousands)

Pre-tax loss from continuing operations	$	(33,746	)	$	(41,350	)	$	(45,319	)	$	(56,411	)	$	(49,300	)
Transitional Schools operating loss		8,841			7,308			11,227			9,004			9,716
Interest (income) expense, net		(177	)		(25	)		65			16			(548	)
Loss (gain) on sale of business		-			-			(68	)		39			222
Depreciation and amortization⁽¹⁾		12,799			13,305			14,062			14,399			14,749
Stock based compensation ⁽¹⁾		1,020			1,341			1,580			1,713			1,631
Legal settlements^{(1) (2)}		1,600			5,850			17,000			300			8,300
Asset impairments⁽¹⁾		7,403			74			4,516			11,513			3,966
Unused space charges ^{(1) (3)}		(879	)		(606	)		(2,924	)		1,184			(612	)
Adjusted EBITDA--Ongoing Operations	$	(3,139	)	$	(14,103	)	$	139		$	(18,243	)	$	(11,876	)
Adjusted EBITDA per diluted share	$	(0.05	)	$	(0.21	)	$	0.00		$	(0.27	)	$	(0.18	)

Pre-tax loss from discontinued operations	$	(10,964	)	$	(16,573	)	$	119,133		$	(20,290	)	$	(16,287	)
Transitional Schools operating loss		(8,841	)		(7,308	)		(11,227	)		(9,004	)		(9,716	)
Loss (gain) on sale of business ⁽⁴⁾		311			-			(130,109	)		-			-
International Schools operating (income) loss		-			-			(11,434	)		7,608			3,659
Interest (income) expense, net		-			-			(51	)		(22	)		(14	)
Depreciation and amortization⁽⁴⁾		1,595			2,126			2,364			2,552			2,818
Legal settlements ⁽⁴⁾		-			-			-			-			1,700
Asset impairments⁽⁴⁾		51			(7	)		2,467			72			-
Unused space charges ⁽³⁾⁽⁴⁾		1,436			3,099			5,766			(3,092	)		(2,611	)
Adjusted EBITDA--Transitional and Discontinued Operations	$	(16,412	)	$	(18,663	)	$	(23,091	)	$	(22,176	)	$	(20,451	)
Adjusted EBITDA per diluted share	$	(0.24	)	$	(0.28	)	$	(0.35	)	$	(0.33	)	$	(0.31	)

(1) Quarterly amounts relate to ongoing operations, excluding Transitional Schools.
(2) Legal settlement amounts are net of insurance recoveries.
(3) Unused space charges include initial charge and subsequent accretion.
(4) Quarterly amounts relate to Transitional Schools and Discontinued Operations.

BALANCE SHEET AND CASH FLOW

Net cash used in operating activities increased to $81.3 million for the year to date ended June 30, 2014 compared to $67.0 million for the year to date ended June 30, 2013. This increase is driven primarily by the operating loss for the current year to date, legal settlement payments of approximately $21.6 million paid during the second quarter of 2014, net payments of income taxes and timing of other payments.


Cash and Cash Flow from	Q2 2014			Q1 2014			Q4 2013			Q3 2013			Q2 2013
Operations ($ in thousands)

Consolidated Cash, Cash Equivalents, and Short-term Investments ⁽¹⁾	$	274,617		$	315,661		$	363,099		$	227,515		$	241,840

Cash Flow from Operations	$	(45,865	)	$	(35,420	)	$	(7,962	)	$	(10,867	)	$	(52,778	)

__________

(1)		Consolidated cash, cash equivalents and short-term investment balances are quarter end balances and include both continuing and discontinued operations.

CONFERENCE CALL INFORMATION

Career Education Corporation will host a conference call on Thursday, August 7, 2014 at 10:00 a.m. Eastern time. Interested parties can access the live webcast of the conference call and the related presentation materials 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 37710667. 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 37710667.

ABOUT CAREER EDUCATION CORPORATION

The colleges, institutions and universities that are part of the Career Education Corporation (“CEC”) family offer high-quality education to a diverse student population in a variety of career-oriented disciplines through online, on-ground and hybrid learning program offerings. In addition to its online offerings, Career Education serves students from campuses throughout the United States offering programs that lead to doctoral, master’s, bachelor’s and associate degrees, as well as to diplomas and certificates.

CEC’s institutions include both universities that provide degree programs through the master or doctoral level and colleges that provide programs through the associate and bachelor level. The University group includes American InterContinental University (“AIU”) and Colorado Technical University (“CTU”) – predominantly serving students online with career-focused degree programs that meet the educational demands of today’s busy adults. The Career Schools group offers career-centered education primarily through ground-based campuses and includes Briarcliffe College, Brooks Institute, Harrington College of Design, Le Cordon Bleu North America (“LCB”), Missouri College and Sanford-Brown Institutes and Colleges (“SBI” and “SBC,” respectively). Through its colleges, institutions and universities, CEC is committed to providing high-quality education, enabling students to graduate and pursue rewarding career opportunities.

A detailed listing of individual campus locations and web links to Career Education’s colleges, institutions and universities can be found at www.careered.com.

Except for the historical and present factual information contained herein, the matters set forth in this release, including statements identified by words such as “expect,” “anticipate,” “believe,” “intend,” “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 assumptions, risks, uncertainties and other factors that could cause our 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 or revise such factors or 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 outcomes of which could materially and adversely affect our financial condition and operations, include, but are not limited to, the following: declines in enrollment; rulemaking by the U.S. Department of Education or any state and increased focus by Congress, the President and governmental agencies on for-profit education institutions; our continued compliance with and eligibility to participate in Title IV Programs under the Higher Education Act of 1965, as amended, and the regulations thereunder (including the “90-10 Rule” and financial responsibility and student loan default rate standards prescribed by the U.S. Department of Education), as well as national and regional accreditation standards and state regulatory requirements; our ability to successfully defend litigation and other claims brought against us; and changes in the overall U.S. or global economy. Further information about these and other relevant risks and uncertainties may be found in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013 and its subsequent filings with the Securities and Exchange Commission.



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

		June 30, 2014 ⁽¹⁾			December 31, 2013 ⁽¹⁾

	ASSETS
CURRENT ASSETS:
	Cash and cash equivalents, unrestricted	$	138,608		$	318,471
	Restricted cash		11,929			12,564
	Short-term investments		124,080			31,592
	Total cash and cash equivalents and short-term investments		274,617			362,627

	Student receivables, net		31,283			33,632
	Receivables, other, net		9,741			27,351
	Prepaid expenses		25,294			19,738
	Inventories		6,040			6,641
	Deferred income tax assets, net		3,606			3,606
	Other current assets		3,884			3,452
	Assets of discontinued operations		573			2,970
	Total current assets		355,038			460,017

NON-CURRENT ASSETS:
	Property and equipment, net		159,090			180,385
	Goodwill		87,356			87,356
	Intangible assets, net		32,253			40,117
	Student receivables, net		4,494			5,181
	Deferred income tax assets, net		10,644			10,644
	Other assets, net		17,426			17,834
	Assets of discontinued operations		1,179			3,511
TOTAL ASSETS		$	667,480		$	805,045

	LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
	Accounts payable	$	25,498		$	24,500
	Accrued expenses:
	Payroll and related benefits		32,201			34,160
	Advertising and production costs		17,001			17,585
	Income taxes		2,221			14,994
	Other		28,205			40,747
	Deferred tuition revenue		62,219			60,070
	Liabilities of discontinued operations		16,995			15,376
	Total current liabilities		184,340			207,432

NON-CURRENT LIABILITIES:
	Deferred rent obligations		72,259			77,599
	Other liabilities		25,177			27,619
	Liabilities of discontinued operations		33,077			37,011
	Total non-current liabilities		130,513			142,229

STOCKHOLDERS' EQUITY:
	Preferred stock		-			-
	Common stock		821			819
	Additional paid-in capital		603,656			600,904
	Accumulated other comprehensive loss		(638	)		(503	)
	Retained (deficit) earnings		(36,049	)		68,658
	Cost of shares in treasury		(215,163	)		(214,494	)
	Total stockholders' equity		352,627			455,384
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY		$	667,480		$	805,045
____________

(1)	During the second quarter of 2014, the Company completed the teach-out of eight campuses; seven within the Transitional Schools segment and one within the CTU segment. In addition, the Company sold Everblue Training Institute (Career Colleges segment) and Sanford-Brown Pittsburgh (Transitional Schools segment). As a result, all current and prior periods reflect these campuses as components of discontinued operations.



CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
(In thousands, except per share amounts and percentages)


			For the Quarter Ended June 30,⁽¹⁾
			2014			% of Total Revenue		2013			% of Total Revenue

REVENUE:
	Tuition and registration fees		$	226,986		99.0	%	$	256,555		98.9	%
	Other			2,306		1.0	%		2,946		1.1	%
		Total revenue		229,292					259,501

OPERATING EXPENSES:
	Educational services and facilities			80,399		35.1	%		92,451		35.6	%
	General and administrative			160,870		70.2	%		196,631		75.8	%
	Depreciation and amortization			13,956		6.1	%		16,113		6.2	%
	Asset impairment			7,403		3.2	%		3,966		1.5	%
		Total operating expenses		262,628		114.5	%		309,161		119.1	%
Operating loss				(33,336	)	-14.5	%		(49,660	)	-19.1	%

OTHER (EXPENSE) INCOME:
	Interest income			285		0.1	%		760		0.3	%
	Interest expense			(108	)	0.0	%		(212	)	-0.1	%
	Loss on sale of business			-		0.0	%		(222	)	-0.1	%
	Miscellaneous (expense) income			(587	)	-0.3	%		34		0.0	%
		Total other (expense) income		(410	)	-0.2	%		360		0.1	%

PRETAX LOSS				(33,746	)	-14.7	%		(49,300	)	-19.0	%

Provision for (benefit from) income taxes				1,854		0.8	%		(26,528	)	-10.2	%

LOSS FROM CONTINUING OPERATIONS				(35,600	)	-15.5	%		(22,772	)	-8.8	%

Loss from discontinued operations, net of tax				(10,964	)	-4.8	%		(8,618	)	-3.3	%

NET LOSS				(46,564	)	-20.3	%		(31,390	)	-12.1	%

OTHER COMPREHENSIVE (LOSS) INCOME, net of tax:
	Foreign currency translation adjustments			-					2,811
	Unrealized (losses) gains on investments			(107	)				4
		Total other comprehensive (loss) income		(107	)				2,815

COMPREHENSIVE LOSS			$	(46,671	)			$	(28,575	)

NET LOSS PER SHARE - DILUTED:
	Loss from continuing operations		$	(0.53	)			$	(0.34	)
	Loss from discontinued operations			(0.16	)				(0.13	)
	Net loss per share		$	(0.69	)			$	(0.47	)

DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING				67,157					66,751
_____________

(1)	During 2014, the Company completed the teach-out of seventeen campuses; nine in the first quarter (Transitional Schools segment) and eight in the second quarter (seven within the Transitional Schools segment and one within the CTU segment). In addition, the Company sold Everblue Training Institute (Career Colleges segment) and Sanford-Brown Pittsburgh (Transitional Schools segment). As a result, all current and prior periods reflect these campuses as components of discontinued operations.



CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
(In thousands, except per share amounts and percentages)

			For the Year to Date Ended June 30,⁽¹⁾

			2014			% of Total Revenue		2013			% of Total Revenue

REVENUE:
	Tuition and registration fees		$	465,681		98.9	%	$	530,241		98.8	%
	Other			4,978		1.1	%		6,571		1.2	%
		Total revenue		470,659					536,812

OPERATING EXPENSES:
	Educational services and facilities			162,665		34.6	%		189,093		35.2	%
	General and administrative			347,292		73.8	%		380,528		70.9	%
	Depreciation and amortization			28,452		6.0	%		32,452		6.0	%
	Asset impairment			7,477		1.6	%		4,083		0.8	%
		Total operating expenses		545,886		116.0	%		606,156		112.9	%
Operating loss				(75,227	)	-16.0	%		(69,344	)	-12.9	%

OTHER INCOME (EXPENSE):
	Interest income			391		0.1	%		1,005		0.2	%
	Interest expense			(189	)	0.0	%		(918	)	-0.2	%
	Loss on sale of business			-		0.0	%		(6,934	)	-1.3	%
	Miscellaneous (expense) income			(71	)	0.0	%		1		0.0	%
		Total other income (expense)		131		0.0	%		(6,846	)	-1.3	%

PRETAX LOSS				(75,096	)	-16.0	%		(76,190	)	-14.2	%

Provision for (benefit from) income taxes				2,074		0.4	%		(36,356	)	-6.8	%

LOSS FROM CONTINUING OPERATIONS				(77,170	)	-16.4	%		(39,834	)	-7.4	%

Loss from discontinued operations, net of tax				(27,537	)	-5.9	%		(6,759	)	-1.3	%

NET LOSS				(104,707	)	-22.2	%		(46,593	)	-8.7	%

OTHER COMPREHENSIVE (LOSS) INCOME, net of tax:
	Foreign currency translation adjustments			-					1,068
	Unrealized (losses) gains on investments			(135	)				5
		Total other comprehensive (loss) income		(135	)				1,073

COMPREHENSIVE LOSS			$	(104,842	)			$	(45,520	)

NET LOSS PER SHARE - DILUTED:
	Loss from continuing operations		$	(1.15	)			$	(0.60	)
	Loss from discontinued operations			(0.41	)				(0.10	)
	Net loss per share		$	(1.56	)			$	(0.70	)

DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING:				67,076					66,585


(1)	During 2014, the Company completed the teach-out of seventeen campuses; nine in the first quarter (Transitional Schools segment) and eight in the second quarter (seven within the Transitional Schools segment and one within the CTU segment). In addition, the Company sold Everblue Training Institute (Career Colleges segment) and Sanford-Brown Pittsburgh (Transitional Schools segment). As a result, all current and prior periods reflect these campuses as components of discontinued operations.



CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
		For the Year to Date Ended June 30,
		2014			2013

	CASH FLOWS FROM OPERATING ACTIVITIES:
	Net loss	$	(104,707	)	$	(46,593	)
	Adjustments to reconcile net loss to net cash used in operating activities:
	Asset impairment		7,521			4,123
	Depreciation and amortization expense		29,825			38,235
	Bad debt expense		12,409			14,042
	Compensation expense related to share-based awards		2,361			3,406
	Loss on sale of businesses, net		311			6,934
	Loss on disposition of property and equipment		32			103
	Changes in operating assets and liabilities		(29,037	)		(87,225	)
	Net cash used in operating activities		(81,285	)		(66,975	)

	CASH FLOWS FROM INVESTING ACTIVITIES:
	Purchases of available-for-sale investments		(121,590	)		(34,570	)
	Sales of available-for-sale investments		28,726			34,485
	Purchases of property and equipment		(7,031	)		(10,005	)
	Payments of cash upon sale of business		(250	)		(2,525	)
	Other		(11	)		9
	Net cash used in investing activities		(100,156	)		(12,606	)

	CASH FLOWS FROM FINANCING ACTIVITIES:
	Issuance of common stock		392			565
	Payment on borrowings		-			(80,000	)
	Change in restricted cash		636			85,912
	Payments of capital lease obligations		-			(210	)
	Net cash provided by financing activities		1,028			6,267

	EFFECT OF FOREIGN CURRENCY EXCHANGE RATE
	CHANGES ON CASH AND CASH EQUIVALENTS:		78			(1,381	)

	NET DECREASE IN CASH AND CASH EQUIVALENTS		(180,335	)		(74,695	)
	DISCONTINUED OPERATIONS CASH ACTIVITY INCLUDED ABOVE:
	Add: Cash balance of discontinued operations, beginning of the period		472			128,207
	Less: Cash balance of discontinued operations, end of the period		-			102,195
	CASH AND CASH EQUIVALENTS, beginning of the period		318,471			112,415
	CASH AND CASH EQUIVALENTS, end of the period	$	138,608		$	63,732



CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED SELECTED SEGMENT INFORMATION
(In thousands, except percentages)

			For the Quarter Ended June 30,
			2014			2013

REVENUE:
	CTU⁽¹⁾		$	85,041		$	86,557
	AIU			49,685			59,935
		Total University Schools		134,726			146,492

	Career Colleges ⁽¹⁾			47,128			54,160
	Culinary Arts			42,566			44,577
		Total Career Schools		89,694			98,737

	Corporate and Other			38			-
		Subtotal		224,458			245,229

	Transitional Schools ⁽¹⁾			4,834			14,272
		Total	$	229,292		$	259,501

OPERATING (LOSS) INCOME:
	CTU⁽¹⁾		$	20,957		$	17,062
	AIU			(1,331	)		1,021
		Total University Schools		19,626			18,083

	Career Colleges ^{(1) (2)}			(18,836	)		(29,960	)
	Culinary Arts ⁽³⁾			(19,772	)		(17,017	)
		Total Career Schools		(38,608	)		(46,977	)

	Corporate and Other			(5,513	)		(11,050	)
		Subtotal		(24,495	)		(39,944	)

	Transitional Schools ⁽¹⁾			(8,841	)		(9,716	)
		Total	$	(33,336	)	$	(49,660	)

OPERATING (LOSS) MARGIN:
	CTU⁽¹⁾			24.6	%		19.7	%
	AIU			-2.7	%		1.7	%
		Total University Schools		14.6	%		12.3	%

	Career Colleges ^{(1) (2)}			-40.0	%		-55.3	%
	Culinary Arts ⁽³⁾			-46.5	%		-38.2	%
		Total Career Schools		-43.0	%		-47.6	%

	Corporate and Other			NM			NM
		Subtotal		-10.9	%		-16.3	%

	Transitional Schools ⁽¹⁾			-182.9	%		-68.1	%
		Total		-14.5	%		-19.1	%
_______________

(1)	During 2014, the Company completed the teach-out of seventeen campuses; nine in the first quarter (Transitional Schools segment) and eight in the second quarter (seven within the Transitional Schools segment and one within the CTU segment). In addition, the Company sold Everblue Training Institute (Career Colleges segment) and Sanford-Brown Pittsburgh (Transitional Schools segment). As a result, all current and prior periods reflect these campuses as components of discontinued operations.

(2)	The second quarter of 2013 includes $8.3 million related to the settlement of a legal matter and a $1.7 million trade name impairment charge.

(3)	The second quarters of 2014 and 2013 operating loss included a $7.4 million and $2.3 million trade name impairment charge, respectively.



CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED SELECTED SEGMENT INFORMATION
(In thousands, except percentages)

			For the Year to Date Ended June 30,
			2014			2013

REVENUE:
	CTU⁽¹⁾		$	171,961		$	176,319
	AIU			102,258			126,234
		Total University Schools		274,219			302,553
	Career Colleges ⁽¹⁾			99,809			113,066
	Culinary Arts			84,813			90,515
		Total Career Schools		184,622			203,581
	Corporate and Other			138			-
		Subtotal		458,979			506,134
	Transitional Schools ⁽¹⁾			11,680			30,678
		Total	$	470,659		$	536,812

OPERATING (LOSS) INCOME:
	CTU⁽¹⁾		$	35,438		$	33,317
	AIU			(4,914	)		4,167
		Total University Schools		30,524			37,484
	Career Colleges ^{(1) (2)}			(35,135	)		(44,153	)
	Culinary Arts ⁽³⁾			(37,818	)		(29,154	)
		Total Career Schools		(72,953	)		(73,307	)
	Corporate and Other			(16,649	)		(17,418	)
		Subtotal		(59,078	)		(53,241	)
	Transitional Schools ⁽¹⁾			(16,149	)		(16,103	)
		Total	$	(75,227	)	$	(69,344	)

OPERATING (LOSS) MARGIN:
	CTU⁽¹⁾			20.6	%		18.9	%
	AIU			-4.8	%		3.3	%
		Total University Schools		11.1	%		12.4	%
	Career Colleges ^{(1) (2)}			-35.2	%		-39.1	%
	Culinary Arts ⁽³⁾			-44.6	%		-32.2	%
		Total Career Schools		-39.5	%		-36.0	%
	Corporate and Other			NM			NM
		Subtotal		-12.9	%		-10.5	%
	Transitional Schools ⁽¹⁾			-138.3	%		-52.5	%
		Total		-16.0	%		-12.9	%


(1)	During 2014, the Company completed the teach-out of seventeen campuses; nine in the first quarter (Transitional Schools segment) and eight in the second quarter (seven within the Transitional Schools segment and one within the CTU segment). In addition, the Company sold Everblue Training Institute (Career Colleges segment) and Sanford-Brown Pittsburgh (Transitional Schools segment). As a result, all current and prior periods reflect these campuses as components of discontinued operations.

(2)	Year to date 2013 expenses include $8.3 million related to the settlement of a legal matter and a $1.7 million trade name impairment charge.

(3)	Year to date 2014 and 2013 expenses include a $7.4 million and $2.3 million trade name impairment charge, respectively.



CAREER EDUCATION CORPORATION AND SUBSIDIARIES
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ITEMS ⁽¹⁾
(In thousands, except per share amounts)

Adjusted EBITDA			Q2 2014			Q1 2014			Q4 2013			Q3 2013			Q2 2013

	Pre-tax loss from continuing operations		$	(33,746	)	$	(41,350	)	$	(45,319	)	$	(56,411	)	$	(49,300	)
	Transitional Schools operating loss ⁽²⁾			8,841			7,308			11,227			9,004			9,716
	Interest (income) expense, net			(177	)		(25	)		65			16			(548	)
	Loss (gain) on sale of business			-			-			(68	)		39			222
	Depreciation and amortization⁽³⁾			12,799			13,305			14,062			14,399			14,749
	Stock based compensation ⁽³⁾			1,020			1,341			1,580			1,713			1,631
	Legal settlements^{(3) (4)}			1,600			5,850			17,000			300			8,300
	Asset impairments^{(3) (5)}			7,403			74			4,516			11,513			3,966
	Unused space charges ^{(3) (6)}			(879	)		(606	)		(2,924	)		1,184			(612	)
	Adjusted EBITDA--Ongoing Operations ⁽²⁾		$	(3,139	)	$	(14,103	)	$	139		$	(18,243	)	$	(11,876	)
	Adjusted EBITDA per diluted share		$	(0.05	)	$	(0.21	)	$	0.00		$	(0.27	)	$	(0.18	)

	Pre-tax loss from discontinued operations		$	(10,964	)	$	(16,573	)	$	119,133		$	(20,290	)	$	(16,287	)
	Transitional Schools operating loss⁽²⁾			(8,841	)		(7,308	)		(11,227	)		(9,004	)		(9,716	)
	Loss (gain) on sale of business			311			-			(130,109	)		-			-
	International Schools operating (income) loss ⁽⁷⁾			-			-			(11,434	)		7,608			3,659
	Interest (income) expense, net			-			-			(51	)		(22	)		(14	)
	Depreciation and amortization⁽⁸⁾			1,595			2,126			2,364			2,552			2,818
	Legal settlements⁽⁸⁾			-			-			-			-			1,700
	Asset impairments⁽⁸⁾			51			(7	)		2,467			72			-
	Unused space charges ^{(6) (8)}			1,436			3,099			5,766			(3,092	)		(2,611	)
	Adjusted EBITDA--Transitional and Discontinued Operations ⁽²⁾		$	(16,412	)	$	(18,663	)	$	(23,091	)	$	(22,176	)	$	(20,451	)
	Adjusted EBITDA per diluted share		$	(0.24	)	$	(0.28	)	$	(0.35	)	$	(0.33	)	$	(0.31	)



(1)	The Company believes it is useful to present non-GAAP financial measures which exclude certain significant items as a means to understand the performance of its core business. As a general matter, the Company uses non-GAAP financial measures in conjunction with results presented in accordance with GAAP to help analyze the performance of its core business, assist with preparing the annual operating plan, and measure performance for some forms of compensation. In addition, the Company believes that non-GAAP financial information is used by analysts and others in the investment community to analyze the Company's historical results and to provide estimates of future performance and that failure to report non-GAAP measures could result in a misplaced perception that the Company's results have underperformed or exceeded expectations.

	We believe Adjusted EBITDA allows us to compare our current operating results with corresponding historical periods and with the operational performance of other companies in our industry because it does not give effect to potential differences caused by items we do not consider reflective of underlying operating performance. We also present Adjusted EBITDA because we believe it is frequently used by securities analysts, investors and other interested parties as a measure of performance. In evaluating Adjusted EBITDA, investors should be aware that in the future we may incur expenses similar to the adjustments presented above. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by expenses that are unusual, non-routine or non-recurring. Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for net income (loss), operating income (loss), or any other performance measure derived in accordance and reported under GAAP or as an alternative to cash flow from operating activities or as a measure of our liquidity.

	Non-GAAP financial measures when viewed in a reconciliation to corresponding GAAP financial measures, provides an additional way of viewing the Company's results of operations and the factors and trends affecting the Company's business. Non-GAAP financial measures should be considered as a supplement to, and not as a substitute for, or superior to, the corresponding financial results presented in accordance with GAAP.

(2)	Management assesses results of operations for ongoing operations, which excludes Transitional Schools, separately from Transitional Schools. As schools within the Transitional Schools segment are fully taught-out, these schools will be recast as components of Discontinued Operations. As a result, management views adjusted EBITDA from ongoing operations separately from Transitional Schools and Discontinued Operations to assess results and make decisions. Accordingly, Transitional Schools operating loss is added back to pre-tax loss from continuing operations and subtracted from pre-tax loss from discontinued operations.

(3)	Quarterly amounts relate to ongoing operations, which excludes Transitional Schools.

(4)	Legal settlement amounts are net of insurance recoveries and are recorded within the following segments:

			Q2 2014			Q1 2014			Q4 2013			Q3 2013			Q2 2013

		CTU	$	-		$	(900	)	$	1,300		$	-		$	-
		Career Colleges		-			-			200			300			8,300
		Culinary Arts		2,000			3,000			15,500			-			-
		Corporate & Other		(400	)		3,750			-			-			-

		Total	$	1,600		$	5,850		$	17,000		$	300		$	8,300

(5)	Asset impairments primarily relate to trade name impairment charges within Culinary Arts of $7.4 million, $10.7 million and $2.3 million which were recorded during the second quarter of 2014, third quarter of 2013 and the second quarter of 2013, respectively, and within Career Colleges of $1.7 million during the second quarter of 2013.

(6)	Unused space charges represent the net present value of remaining lease obligations less an estimated amount for sublease income as well as the subsequent accretion of these charges.

(7)	The International Schools segment was sold during the fourth quarter of 2013. As such, management excludes operations from the International Schools when assessing results and trends of Transitional Schools and Discontinued Operations.

(8)	Quarterly amounts relate to Transitional Schools and Discontinued Operations, excluding International.

Career Education Corporation
Investors:
Doug Craney
Vice President, Investor Relations and Business Development
(847) 585-3899
or
Media:
Mark Spencer
Director, Corporate Communications
(847) 585-3802

Source: Career Education Corporation

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