CECO CECO Environmental Corporation

University Group Operating Income Increases more than 200%

Career Education Corporation (NASDAQ: CECO) today reported operating and financial results for the third quarter of 2015.

Business Highlights:

• Increased University Group revenue by 1.4 percent year-over-year; excluding adjustments related to changes in accounting for withdrawn students, revenue would have increased 3.0 percent year-over-year
• Improved rate of cash burn year-over-year by generating $5.6 million of positive cash flow from operations during the quarter; first positive cash flow from operations in a third quarter since 2012
• Increased University Group operating income by 212.3 percent year-over-year to $20.3 million, driven by ongoing cost discipline and modest total student enrollment growth
• Third quarter 2015 operating expenses for continuing operations remain in-line with the Company’s expectations and were lowered by $41.7 million
• Adjusted EBITDA was $16.6 million for the University Group and Corporate, an improvement of 157.6 percent or $10.2 million as compared to the prior year quarter
• Adjusted EBITDA for the Transitional Group and discontinued operations improved to ($13.4) million, compared to ($36.9) million in the same quarter last year, as a result of continued progress in executing legacy teach-outs, reducing lease obligations and benefits from the accretive nature of the Career College teach-outs announced in early May
• New leadership structure within the University Group provides leadership for CTU and AIU with unique skill sets intended to address specific needs of each institution

“During the third quarter we saw a continuation of positive trends in our operating performance that have resulted from the successful implementation of our transformation initiatives. Cost reductions and previously announced restructuring actions are meeting our expectations and continue to position the Company to achieve sustained long-term profitability. I have confidence in the path that we are on as an organization and believe the strategy we are pursuing is in the best interest of students and shareholders alike,” said Todd Nelson, President and Chief Executive Officer. “At this point in our transformation, it is critical that we not take our eye off the ball with respect to our cost reduction, performance and student outcome improvement initiatives, but we must also enhance our focus on responsible growth to fulfill our long-term objectives.”

Nelson continued, “Our recent announcement of the appointments of John Kline and Andrew Hurst as Senior Vice Presidents responsible for AIU and CTU are an indication of that transition in our plan at the University Group level, and having them report directly to me will increase our speed and effectiveness as we seek to improve the long-term performance of each of their institutions. We have a great team in place here, and I have been impressed with the caliber of talent that I have encountered thus far in my tenure as CEO. We have a significant opportunity to build a best-in-class organization and I am confident that we can be successful. One of the biggest milestones on our path to success is the completion of divestitures and teach-outs of our former Career Colleges segment. At this point in time, we are progressing in exclusive discussions with one buyer for our Le Cordon Bleu campuses and we expect to execute a definitive agreement by the end of the year.”

REVENUE

For the third quarter of 2015, total revenue was $162.1 million, an 11.4 percent decrease from $182.8 million for the third quarter of 2014. Total revenue for the University Group was $136.1 million for the third quarter of 2015 compared to $134.3 million for the third quarter of 2014, an increase of 1.4 percent. Adjusting for changes related to accounting for withdrawn students, revenue increased 3.0 percent for the current quarter as compared to the prior year quarter for the University Group.

Revenue ($ in thousands)

        Q3 2015 (3)     Q2 2015 (3)     Q1 2015 (3)     Q4 2014 (3)     Q3 2014 CTU $ 85,433 $ 86,174 $ 85,127 $ 82,202 $ 82,410 AIU   50,688   52,024   53,066   44,749   51,889 Total University Group   136,121   138,198   138,193   126,951   134,299 Corporate and Other 39 39 39 40 52 Transitional Group (1)   25,914   36,543   44,070   47,216   48,474 Total (2) $ 162,074 $ 174,780 $ 182,302 $ 174,207 $ 182,825 (1)  

Teach-out campuses included in the Transitional Group are in the process of being taught out and therefore no longer enroll new students. Additionally, campuses which have ceased operations subsequent to December 31, 2014 and no longer qualify for discontinued operations treatment under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 360 – Property, Plant & Equipment or campuses that were announced for sale subsequent to December 31, 2014 are also included in the Transitional Group.

  (2) Excludes discontinued operations, which consists of the results of operations for campuses that have ceased operations prior to 2015 and the LCB campuses which are held for sale.   (3) Fourth quarter of 2014 total revenue was negatively impacted by approximately $9.4 million due to the change in how the Company accounts for revenue for students who withdrew from one of its institutions prior to completion of their programs. This cumulative adjustment was recorded during the fourth quarter of 2014. First quarter, second quarter, and third quarter of 2015 were negatively impacted by approximately $1.9 million, $2.2 million and $2.4 million, respectively, related to this change in accounting.  

TOTAL AND NEW STUDENT ENROLLMENTS

For the third quarter of 2015, total student enrollments for the University Group were 31,400, which remained relatively flat to the prior year quarter. New student enrollments for the University Group were 8,450, a decrease of 3.5 percent as compared to the prior year quarter primarily due to the decline in enrollments at AIU, while CTU remained relatively flat as compared to the prior year quarter.

Total Student Enrollment

        Q3 2015     Q2 2015     Q1 2015     Q4 2014     Q3 2014 CTU   20,600   20,600   20,300   20,400   19,800 AIU   10,800   10,700   13,500   11,600   11,500 Total University Group   31,400   31,300   33,800   32,000   31,300 Transitional Group   5,200   7,000   9,500   9,400   11,300 Total   36,600   38,300   43,300   41,400   42,600

New Student Enrollments

        Q3 2015     Q2 2015     Q1 2015     Q4 2014     Q3 2014 CTU   5,470   5,670   5,040   5,670   5,460 AIU   2,980   2,280   5,090   3,370   3,300 Total University Group   8,450   7,950   10,130   9,040   8,760 Transitional Group (1)   510   830   1,830   1,150   3,290 Total   8,960   8,780   11,960   10,190   12,050 (1)   Teach-out campuses within the Transitional Group no longer enroll new students; students who re-enter after 365 days are reported as new student enrollments.  

OPERATING (LOSS) INCOME

For the third quarter of 2015, operating loss of $10.8 million improved 66.0 percent compared to an operating loss of $31.7 million in the prior year quarter. Total University Group operating income increased to $20.3 million from $6.5 million in the prior year quarter, an increase of 212.3 percent. This increase in operating income was primarily driven by ongoing cost improvement initiatives and increased revenues.

Operating (Loss) Income ($ in thousands)

        Q3 2015   Q2 2015   Q1 2015   Q4 2014   Q3 2014 CTU $ 18,616 $ 24,263 $ 14,616 $ 23,356 $ 10,698 AIU   1,695   5,174   (2,887 )   (304 )   (4,194 ) Total University Group   20,311   29,437   11,729   23,052   6,504 Corporate and Other (1) (8,040 ) (7,036 ) (5,860 ) (7,048 ) 2,528 Transitional Group (2)   (23,065 )   (31,733 )   (30,470 )   (23,788 )   (40,764 ) Total (3) $ (10,794 ) $ (9,332 ) $ (24,601 ) $ (7,784 ) $ (31,732 ) (1)   Income related to a net insurance recovery of $8.6 million was recorded during the third quarter of 2014.   (2) Asset impairment charges of $1.7 million, $6.0 million, $3.9 million and $12.9 million were recorded during the second quarter of 2015, first quarter of 2015, fourth quarter of 2014 and third quarter of 2014, respectively.   (3) Excludes discontinued operations, which consists of the results of operations for campuses that have ceased operations prior to 2015 and the LCB campuses which are held for sale.  

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 operations. (See tables below and the GAAP to non-GAAP reconciliation attached to this press release for further details.)

For the third quarter of 2015, Adjusted EBITDA for the University Group and Corporate increased $10.2 million to $16.6 million compared to the prior year quarter, driven by increased revenue and continued cost reduction initiatives. Adjusted EBITDA for the Transitional Group and discontinued operations was ($13.4) million for the third quarter of 2015, compared to ($36.9) million in the prior year quarter. This favorability is a result of the completion of teach-out campus operations and continued focus on reducing lease obligations.

Adjusted EBITDA ($ in thousands)

      Q3 2015   Q2 2015   Q1 2015   Q4 2014   Q3 2014

University Group and Corporate:

Pre-tax loss from continuing operations $ (11,485 ) $ (10,218 ) $ (24,990 ) $ (7,747 ) $ (31,651 ) Transitional Group pre-tax loss 23,724 32,624 30,470 23,788 40,764 Interest expense (income), net 7 (52 ) 2 (38 ) (120 ) Depreciation and amortization (1) 3,454 3,956 4,361 5,170 5,402 Stock-based compensation (1) 983 530 940 966 950 Legal settlements (1) (2) — — — — — Asset impairments (1) — — — — 73 Unused space charges (1) (3) (385 ) (348 ) 556 (373 ) (368 ) Insurance recovery — — — — (8,588 ) Adjustment related to revenue recognition (1) (5)   348   94   93   1,354   — Adjusted EBITDA--University Group and

Corporate

$ 16,646 $ 26,586 $ 11,432 $ 23,120 $ 6,462   Memo: Advertising Expenses $ 46,194 $ 34,258 $ 50,587 $ 36,731 $ 50,410  

Transitional Group and Discontinued Operations:

Pre-tax loss from discontinued operations $ (33,715 ) $ (11,252 ) $ (102 ) $ (17,195 ) $ (15,201 ) Transitional Group pre-tax loss (23,724 ) (32,624 ) (30,470 ) (23,788 ) (40,764 ) Loss on sale of business (4) 715 917 — — — Depreciation and amortization (4) 2,508 3,231 2,351 7,319 7,739 Legal settlements (4) — (166 ) 1,485 — 225 Asset impairments (4) 33,446 11,372 6,019 14,203 14,412 Unused space charges (3) (4) 7,174 (2,305 ) (2,424 ) (2,063 ) (3,343 ) Adjustment related to revenue recognition (4) (5)   173   13   (67 )   1,029   — Adjusted EBITDA--Transitional and

Discontinued Operations

$ (13,423 ) $ (30,814 ) $ (23,208 ) $ (20,495 ) $ (36,932 ) Consolidated Adjusted EBITDA $ 3,223 $ (4,228 ) $ (11,776 ) $ 2,625 $ (30,470 ) (1)   Quarterly amounts relate to the University Group and Corporate   (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 Group and discontinued operations   (5) Q4 2014 amounts are cumulative for the full year 2014 recorded during the fourth quarter of 2014  

BALANCE SHEET AND CASH FLOW

Net cash provided by operating activities improved to $5.6 million for the third quarter of 2015, compared to a net cash usage of $19.9 million in the prior year quarter. The continued focus on operating margin improvements and the completion of teach-outs drove the improvement in cash usage for the current year quarter as compared to the prior year quarter. The Company continues to expect to end 2015 with approximately $190 million in total cash, cash equivalents, restricted cash and short-term and long-term investments, excluding the timing differences related to outstanding checks, deposits and other transfers.

As of September 30, 2015 and September 30, 2014, cash, cash equivalents, restricted cash and short-term and long-term investments totaled $206.8 million and $258.3 million, respectively.

Cash and Cash Flow from Operations ($ in thousands)

        Q3 2015     Q2 2015   Q1 2015 (3)   Q4 2014 (3)   Q3 2014 Consolidated Cash, Cash Equivalents, Restricted Cash

and Short-Term and Long-Term Investments (1)

$ 206,792 $ 204,104 $ 213,739 $ 247,002 $ 258,274 Cash Flow from Operations (2) $ 5,592 $ (6,419 ) $ (20,176 ) $ (17,479 ) $ (19,860 ) (1)   Consolidated cash, cash equivalents, restricted cash and short-term and long-term investment balances are quarter end balances and include both continuing and discontinued operations. Long-term investment balances of $7.4 million for each of the periods disclosed are reflected within other non-current assets on our consolidated balance sheets.   (2) Cash flow from operations includes payments of legal settlements of $2.4 million and $1.3 million during the first quarter of 2015 and fourth quarter of 2014, respectively.   (3) The fourth quarter of 2014 ending cash, cash equivalents, restricted cash and investment balance includes $10.0 million of restricted cash related to borrowings under the Credit Agreement. The $10.0 million of outstanding borrowings was repaid during the first quarter of 2015.  

CONFERENCE CALL INFORMATION

Career Education Corporation will host a conference call on Wednesday, November 4, 2015 at 9:00 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 844-378-6484 (domestic) or 412-542-4179 (international). 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.

ABOUT CAREER EDUCATION CORPORATION

Career Education’s academic institutions offer a quality education to a diverse student population in a variety of disciplines through online, on-ground and hybrid learning programs. Our two universities – American InterContinental University (“AIU”) and Colorado Technical University (“CTU”) – provide degree programs through the master’s or doctoral level as well as associate and bachelor’s levels. Both universities predominantly serve students online with career-focused degree programs that are designed to meet the educational demands of today’s busy adults. AIU and CTU continue to show innovation in higher education, advancing new personalized learning technologies like their intellipath™ adaptive learning platform that allow students to more efficiently pursue earning a degree by receiving course credit for knowledge they can already demonstrate. Career Education is committed to providing quality education that closes the gap between learners who seek to advance their careers and employers needing a qualified workforce.

A listing of individual campus locations and web links to Career Education’s institutions 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,” “intend,” “believe,” “will,” “anticipate,” “continue,” “seek,” “position us” 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; the success of our initiatives to divest our LCB culinary arts campuses and remaining Career College institutions, which could be impacted by the level of buyer interest and related valuations, required regulatory approvals, and the various factors noted in this paragraph, among other things; negative trends in the real estate market which could impact the costs related to teaching out campuses and the success of our initiatives to reduce our real estate obligations; our ability to achieve anticipated cost savings and business efficiencies; 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 gainful employment and financial responsibility standards prescribed by the U.S. Department of Education), as well as national and regional accreditation standards and state regulatory requirements; the impact of management changes; 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, 2014 and its subsequent filings with the Securities and Exchange Commission.

   

CAREER EDUCATION CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

        September 30,

2015

December 31,

2014

(unaudited)

 

ASSETS CURRENT ASSETS: Cash and cash equivalents, unrestricted $ 68,940 $ 93,832 Restricted cash 13,688 22,938 Short-term investments   116,790   122,858 Total cash and cash equivalents, restricted cash and short-term investments 199,418 239,628   Student receivables, net 27,696 24,564 Receivables, other, net 4,415 18,925 Prepaid expenses 13,360 14,679 Inventories 2,353 3,305 Other current assets 1,565 2,384 Assets held for sale 29,239 76,846 Assets of discontinued operations   347   473 Total current assets   278,393   380,804   NON-CURRENT ASSETS: Property and equipment, net 54,680 73,083 Goodwill 87,356 87,356 Intangible assets, net 7,900 9,819 Student receivables, net 2,874 2,926 Other assets 16,901 18,571 Assets of discontinued operations   780   975 TOTAL ASSETS $ 448,884 $ 573,534   LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Short-term borrowings $ — $ 10,000 Accounts payable 28,293 21,968 Accrued expenses: Payroll and related benefits 31,208 29,545 Advertising and production costs 15,026 13,162 Income taxes 1,717 1,633 Other 22,295 21,440 Deferred tuition revenue 31,004 37,572 Liabilities held for sale 45,187 50,357 Liabilities of discontinued operations   12,355   15,506 Total current liabilities   187,085   201,183   NON-CURRENT LIABILITIES: Deferred rent obligations 34,999 48,381 Other liabilities 19,760 19,178 Liabilities of discontinued operations   12,597   22,859 Total non-current liabilities   67,356   90,418 STOCKHOLDERS' EQUITY: Preferred stock — — Common stock 829 823 Additional paid-in capital 610,063 606,531 Accumulated other comprehensive loss (620 ) (853 ) Retained deficit (200,242 ) (109,403 ) Cost of shares in treasury   (215,587 )   (215,165 ) Total stockholders' equity   194,443   281,933 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 448,884 $ 573,534    

CAREER EDUCATION CORPORATION AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS

(In thousands, except per share amounts and percentages)

      For the Quarter Ended September 30, 2015   % of

Total

Revenue

  2014   % of

Total

Revenue

REVENUE:     Tuition and registration fees $ 161,358 99.6 % $ 181,761 99.4 % Other   716 0.4 %   1,064 0.6 % Total revenue   162,074   182,825 OPERATING EXPENSES: Educational services and facilities 54,201 33.4 % 60,790 33.3 % General and administrative 112,705 69.5 % 132,090 72.2 % Depreciation and amortization 5,962 3.7 % 8,739 4.8 % Asset impairment — 0.0 %   12,938 7.1 % Total operating expenses   172,868 106.7 %   214,557 117.4 % Operating loss   (10,794 ) -6.7 %   (31,732 ) -17.4 % OTHER (EXPENSE) INCOME: Interest income 163 0.1 % 223 0.1 % Interest expense (170 ) -0.1 % (103 ) -0.1 % Loss on sale of business (715 ) -0.4 % — 0.0 % Miscellaneous income (expense)   31 0.0 %   (39 ) 0.0 % Total other (expense) income   (691 ) -0.4 %   81 0.0 % PRETAX LOSS (11,485 ) -7.1 % (31,651 ) -17.3 % Provision for income taxes   35 0.0 %   1,116 0.6 %   LOSS FROM CONTINUING OPERATIONS (11,520 ) -7.1 % (32,767 ) -17.9 % Loss from discontinued operations, net of tax   (33,715 ) -20.8 %   (15,201 ) -8.3 % NET LOSS   (45,235 ) -27.9 %   (47,968 ) -26.2 %   OTHER COMPREHENSIVE LOSS, net of tax: Unrealized gain (loss) on investments   81   (108 ) COMPREHENSIVE LOSS $ (45,154 ) $ (48,076 )   NET LOSS PER SHARE - DILUTED: Loss from continuing operations $ (0.17 ) $ (0.49 ) Loss from discontinued operations   (0.50 )   (0.22 ) Net loss per share $ (0.67 ) $ (0.71 )   DILUTED WEIGHTED AVERAGE SHARES

OUTSTANDING

  67,961   67,209    

CAREER EDUCATION CORPORATION AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS

(In thousands, except per share amounts and percentages)

      For the Year to Date Ended September 30, 2015   % of

Total

Revenue

  2014   % of

Total

Revenue

REVENUE:     Tuition and registration fees $ 516,722 99.5 % $ 563,806 99.4 % Other   2,434 0.5 %   3,345 0.6 % Total revenue   519,156   567,151 OPERATING EXPENSES: Educational services and facilities 163,101 31.4 % 181,429 32.0 % General and administrative 373,218 71.9 % 409,587 72.2 % Depreciation and amortization 19,860 3.8 % 28,052 4.9 % Asset impairment   7,704 1.5 %   13,015 2.3 % Total operating expenses   563,883 108.6 %   632,083 111.4 % Operating loss   (44,727 ) -8.6 %   (64,932 ) -11.4 % OTHER (EXPENSE) INCOME: Interest income 545 0.1 % 614 0.1 % Interest expense (502 ) -0.1 % (292 ) -0.1 % Loss on sale of business (1,632 ) -0.3 % — 0.0 % Miscellaneous expense   (377 ) -0.1 %   (147 ) 0.0 % Total other (expense) income   (1,966 ) -0.4 %   175 0.0 % PRETAX LOSS (46,693 ) -9.0 % (64,757 ) -11.4 % (Benefit from) provision for income taxes   (923 ) -0.2 %   3,190 0.6 %   LOSS FROM CONTINUING OPERATIONS (45,770 ) -8.8 % (67,947 ) -12.0 % Loss from discontinued operations, net of tax   (45,069 ) -8.7 %   (84,728 ) -14.9 % NET LOSS   (90,839 ) -17.5 %   (152,675 ) -26.9 %  

OTHER COMPREHENSIVE INCOME (LOSS), net of tax:

Unrealized income (loss) on investments   233   (243 ) COMPREHENSIVE LOSS $ (90,606 ) $ (152,918 )   NET LOSS PER SHARE - DILUTED: Loss from continuing operations $ (0.68 ) $ (1.01 ) Loss from discontinued operations   (0.66 )   (1.26 ) Net loss per share $ (1.34 ) $ (2.27 )   DILUTED WEIGHTED AVERAGE SHARES

OUTSTANDING:

  67,798   67,121    

CAREER EDUCATION CORPORATION AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

      For the Year to date

Ended September 30,

2015   2014 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (90,839 ) $ (152,675 ) Adjustments to reconcile net loss to net cash used in operating activities: Asset impairment 50,837 22,006 Depreciation and amortization expense 19,861 42,966 Bad debt expense 15,526 19,107 Compensation expense related to share-based awards 2,453 3,311 Loss on sale of businesses, net 1,632 311 (Gain) loss on disposition of property and equipment (10 ) 32 Changes in operating assets and liabilities   (20,463 )   (36,203 ) Net cash used in operating activities   (21,003 )   (101,145 )   CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of available-for-sale investments (64,056 ) (131,487 ) Sales of available-for-sale investments 69,436 51,540 Purchases of property and equipment (7,926 ) (10,558 ) Proceeds on the sale of assets 2,272 — Payments of cash upon sale of businesses   (4,125 )   (387 ) Net cash used in investing activities   (4,399 )   (90,892 )   CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of common stock 1,082 575 Payment on borrowings (10,000 ) — Change in restricted cash   9,250   (674 ) Net cash provided by (used in) financing activities   332   (99 )   EFFECT OF FOREIGN CURRENCY EXCHANGE RATE CHANGES ON CASH

AND CASH EQUIVALENTS:

  178   121   NET DECREASE IN CASH AND CASH EQUIVALENTS (24,892 ) (192,015 ) DISCONTINUED OPERATIONS CASH ACTIVITY INCLUDED ABOVE: Add: Cash balance of discontinued operations, beginning of the period — 475 Less: Cash balance of discontinued operations, end of the period — — CASH AND CASH EQUIVALENTS, beginning of the period   93,832   318,468 CASH AND CASH EQUIVALENTS, end of the period $ 68,940 $ 126,928    

CAREER EDUCATION CORPORATION AND SUBSIDIARIES

UNAUDITED SELECTED SEGMENT INFORMATION

(In thousands, except percentages)

          For the Quarter Ended September 30, 2015   2014 REVENUE: CTU $ 85,433 $ 82,410 AIU   50,688   51,889 Total University Group   136,121   134,299 Corporate and Other 39 52 Transitional Group   25,914   48,474 Total $ 162,074 $ 182,825   OPERATING (LOSS) INCOME: CTU $ 18,616 $ 10,698 AIU   1,695   (4,194 ) Total University Group   20,311   6,504 Corporate and Other (8,040 ) 2,528 Transitional Group   (23,065 )   (40,764 ) Total $ (10,794 ) $ (31,732 )   OPERATING (LOSS) MARGIN: CTU 21.8 % 13.0 % AIU 3.3 % -8.1 % Total University Group 14.9 % 4.8 % Corporate and Other NM NM Transitional Group NM NM Total -6.7 % -17.4 %    

CAREER EDUCATION CORPORATION AND SUBSIDIARIES

UNAUDITED SELECTED SEGMENT INFORMATION

(In thousands, except percentages)

          For the Year to Date Ended September 30, 2015   2014 REVENUE: CTU $ 256,734 $ 254,371 AIU   155,778   154,147 Total University Group   412,512   408,518 Corporate and Other 117 190 Transitional Group   106,527   158,443 Total $ 519,156 $ 567,151 OPERATING (LOSS) INCOME: CTU $ 57,495 $ 46,136 AIU   3,982   (9,108 ) Total University Group   61,477   37,028 Corporate and Other (20,936 ) (14,121 ) Transitional Group   (85,268 )   (87,839 ) Total $ (44,727 ) $ (64,932 ) OPERATING (LOSS) MARGIN: CTU 22.4 % 18.1 % AIU 2.6 % -5.9 % Total University Group 14.9 % 9.1 % Corporate and Other NM NM Transitional Group NM NM Total -8.6 % -11.4 %    

CAREER EDUCATION CORPORATION AND SUBSIDIARIES

UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP ITEMS (1)

(In thousands)

               

Adjusted EBITDA

Q3 2015 Q2 2015 Q1 2015 Q4 2014 Q3 2014

University Group and Corporate:

Pre-tax loss from continuing operations $ (11,485 ) $ (10,218 ) $ (24,990 ) $ (7,747 ) $ (31,651 ) Transitional Group pre-tax loss 23,724 32,624 30,470 23,788 40,764 Interest expense (income), net 7 (52 ) 2 (38 ) (120 ) Depreciation and amortization (3) 3,454 3,956 4,361 5,170 5,402 Stock-based compensation (3) 983 530 940 966 950 Legal settlements (3) (5) — — — — — Asset impairments (3) — — — — 73 Unused space charges (3) (6) (385 ) (348 ) 556 (373 ) (368 ) Insurance recovery — — — — (8,588 ) Adjustment related to revenue

recognition (3) (7)

  348   94   93   1,354   — Adjusted EBITDA--University Group and

Corporate (2)

$ 16,646 $ 26,586 $ 11,432 $ 23,120 $ 6,462   Memo: Advertising Expenses (3) $ 46,194 $ 34,258 $ 50,587 $ 36,731 $ 50,410  

Transitional Group and Discontinued Operations (4):

Pre-tax loss from discontinued operations $ (33,715 ) $ (11,252 ) $ (102 ) $ (17,195 ) $ (15,201 ) Transitional Group pre-tax loss (23,724 ) (32,624 ) (30,470 ) (23,788 ) (40,764 ) Loss on sale of business (8) 715 917 — — — Depreciation and amortization (8) 2,508 3,231 2,351 7,319 7,739 Legal settlements (5) (8) — (166 ) 1,485 — 225 Asset impairments (8) 33,446 11,372 6,019 14,203 14,412 Unused space charges (6) (8) 7,174 (2,305 ) (2,424 ) (2,063 ) (3,343 ) Adjustment related to revenue

recognition (7) (8)

  173   13   (67 )   1,029   — Adjusted EBITDA--Transitional and

Discontinued Operations (2)

$ (13,423 ) $ (30,814 ) $ (23,208 ) $ (20,495 ) $ (36,932 )   Consolidated Adjusted EBITDA $ 3,223 $ (4,228 ) $ (11,776 ) $ 2,625 $ (30,470 ) (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 operations. 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 operations, 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, provide 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 the University Group and Corporate separately from the Transitional Group. As a result, management views adjusted EBITDA from the University Group and Corporate separately from the remainder of the organization, to assess results and make decisions. Accordingly, the Transitional Group pre-tax losses are added back to pre-tax loss from continuing operations and subtracted from pre-tax loss from discontinued operations.   (3) Quarterly amounts relate to the University Group and Corporate.   (4) The Company announced the Culinary Arts segment as held for sale during the fourth quarter of 2014 and it is therefore now reported within discontinued operations. Quarterly adjusted EBITDA amounts for Culinary Arts include:         Q3 2015   Q2 2015   Q1 2015   Q4 2014   Q3 2014 Pre-tax (loss) income $ (33,171 ) $ (10,532 ) $ 250 $ (15,927 ) $ (12,602 ) Depreciation and amortization — — — 4,504 4,282 Legal settlements — — 775 — — Asset impairments 33,446 9,687 — 10,320 1,523 Unused space charges 209 (982 ) (377 ) 65 213 Cumulative adjustment related to revenue recognition   150   5   54   514   — Total $ 634 $ (1,822 ) $ 702 $ (524 ) $ (6,584 ) (5)   Legal settlement amounts are net of insurance recoveries.   (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) Revenue recognition adjustment relates to the accounting for students who withdraw from one of our institutions prior to completion of their program. This adjustment now reflects revenue earned on a cash-basis of accounting beginning in the fourth quarter of 2014 for these students. Q4 2014 amounts are cumulative for the full year 2014 recorded during the fourth quarter of 2014.   (8) Quarterly amounts relate to the Transitional Group and discontinued operations.

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Investors:Alpha IR GroupSam Gibbons or Chris Hodges(312) 445-2870CECO@alpha-ir.comOrMedia:Career Education Corporation(847) 585-2600media@careered.com