Career Education Corporation Reports Results For Second Quarter 2012

Career Education Corporation (NASDAQ: CECO) today reported total revenue of $369.0 million, and a net loss of $100.2 million, or -$1.52 per diluted share, for the second quarter of 2012 compared to total revenue of $484.9 million and net income of $55.4 million, or $0.73 per diluted share, for the second quarter of 2011. The second quarter of 2012 includes non-cash goodwill and asset impairment charges of $85.6 million.

"We are facing the same stiff headwinds as others in private sector higher education,” Chairman, President and CEO Steven H. Lesnik said. “Withering public criticism, combined with a game-changing regulatory environment aimed at reducing the role of private sector educational institutions, is effectively constraining growth. We are dealing with these headwinds like others, but progress is slow.”

“However, having rejuvenated our regulatory and compliance practices and procedures, I believe ours is an organization that sets its standards high. While 2012 will be a year of transition, our universities and schools, their faculty and staff, are a critical part of the long range solution to the shortage of Americans with needed post-secondary education credentials.”

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. On a non-GAAP basis, loss per diluted share from continuing operations was -$0.18 in the second quarter 2012 as compared to earnings per diluted share of $0.73 in the second quarter 2011. For the years to date ended June 30, 2012 and 2011, earnings per diluted share from continuing operations (non-GAAP basis) were $0.33 and $1.59, respectively. (See tables below and the GAAP to non-GAAP reconciliation attached to this press release for further details.)

CONSOLIDATED RESULTS

Quarter Ended June 30, 2012

• Total revenue was $369.0 million for the second quarter of 2012, a 23.9 percent decrease from $484.9 million for the second quarter of 2011.
• An operating loss of $108.1 million was recorded for the second quarter of 2012, compared to operating income of $79.3 million for the second quarter of 2011. The operating margin was -29.3 percent for the second quarter of 2012 versus 16.4 percent for the second quarter of 2011.
• The loss from continuing operations for the second quarter of 2012 was $93.9 million, or -$1.42 per diluted share, versus income from continuing operations of $53.4 million, or $0.71 per diluted share, for the second quarter of 2011.

• The operating results for the quarters ended June 30, 2012 and 2011 include the following significant items:

			Significant Items(In Millions)			(Loss) Earningsper DilutedShare Impact
Quarter Ended June 30, 2012
	Goodwill and Intangible Asset Impairments		$	84.4		$	1.23
	Asset Impairments			1.2			0.01
	TOTAL		$	85.6		$	1.24
Quarter Ended June 30, 2011
	Goodwill and Intangible Asset Impairments		$	2.7		$	0.02
	TOTAL		$	2.7		$	0.02

• During the second quarter 2012, the Company recorded non-cash goodwill and intangible asset impairment charges of $84.4 million, of which $42.9 million was reflected within Health Education and $41.5 million within Art & Design. In addition, $1.2 million of non-cash asset impairment charges were recorded resulting from the decision made in the second quarter of 2012 to teach out four campuses, primarily within Health Education. The operating results for the second quarter of 2011 included $2.7 million of non-cash goodwill and intangible asset impairment charges primarily related to accreditation rights impairment.
• Excluding the significant items in the table above, the operating loss for the second quarter of 2012 was $22.5 million and the operating income for the second quarter of 2011 was $82.0 million. The operating margin was -6.1 percent and 16.9 percent for the second quarters of 2012 and 2011, respectively.

Year to Date Ended June 30, 2012

• Total revenue was $803.1 million for the year to date ended June 30, 2012, compared to $1,016.6 million for the year to date ended June 30, 2011.
• The operating loss for the year to date ended June 30, 2012 was $61.5 million, versus operating income of $188.2 million for the year to date ended June 30, 2011. The operating margin decreased to -7.7 percent for the year to date ended June 30, 2012, from 18.5 percent for the year to date ended June 30, 2011.
• The loss from continuing operations for the year to date ended June 30, 2012, was $47.4 million, or -$0.71 per diluted share, compared to income from continuing operations of $124.0 million, or $1.63 per diluted share, for the year to date ended June 30, 2011.

• The operating results for the years to date ended June 30, 2012 and 2011 include the following significant items:

			Significant Items(In Millions)				(Loss) Earningsper DilutedShare Impact
Year to Date Ended June 30, 2012
	Goodwill and Intangible Asset Impairments		$	84.4			$	1.22
	Asset Impairments			1.3				0.01
	Insurance Recoveries			(19.0	)			(0.19	)
	TOTAL		$	66.7			$	1.04
Year to Date Ended June 30, 2011
	Goodwill and Intangible Asset Impairments		$	2.7			$	0.02
	Insurance Recoveries			(7.0	)			(0.06	)
	TOTAL		$	(4.3	)		$	(0.04	)

• During the year to date ended June 30, 2012, the Company recorded a $19.0 million insurance recovery related to the settlement of claims under certain insurance policies. During the year to date ended June 30, 2011, the Company recorded a $7.0 million insurance recovery related to previously settled legal matters.
• Excluding the significant items in the table above, operating income was $5.2 million for the year to date ended June 30, 2012 and $183.9 million for the year to date ended June 30, 2011. Operating margin was 0.6 percent and 18.1 percent for the years to date ended June 30, 2012 and 2011, respectively.

CONSOLIDATED CASH FLOWS AND FINANCIAL POSITION

Cash Flows

• Net cash flows provided by operating activities totaled $16.6 million for the year to date ended June 30, 2012, compared to $114.8 million for the year to date ended June 30, 2011.
• Capital expenditures decreased to $20.0 million during the year to date ended June 30, 2012, from $47.9 million during the year to date ended June 30, 2011. Capital expenditures represented 2.5 percent and 4.6 percent of total revenue of continuing and discontinued operations during the years to date ended June 30, 2012 and 2011, respectively.

Financial Position

• As of June 30, 2012 and December 31, 2011, cash and cash equivalents and short-term investments totaled $369.9 million and $441.2 million, respectively.

Stock Repurchase Program

During the second quarter of 2012, the Company did not repurchase any shares of its common stock. Year to date through June 30, 2012, the Company repurchased 6.1 million shares of its common stock for approximately $56.4 million at an average price of $9.29 per share.

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