Career Education Corporation Reports Results for the First Quarter 2015

Career Education Corporation (NASDAQ: CECO) today reported operating and financial results for the first quarter 2015. In a separate news release issued today, the company also disclosed its plan to teach-out or divest its remaining Career Colleges in order to focus resources on its University Group.

Business Highlights:

• University Group operating income increased 7.6% year-over-year to $11.7 million for the quarter
• For our continuing operations, lowered operating expenses by $13.2 million or 6.0% during the first quarter as compared to the prior year with 2015 operating expenses tracking in-line with the company’s expectations
• On track against key objectives to generate modest total student enrollment growth within our University segments; to strengthen academic outcomes, to enhance regulatory compliance and simplify our business model; to reduce the organizational cost structure; and to successfully continue to complete the teach-out of our Transitional campuses
• Adjusted EBITDA was $11.4 million for the University Group and Corporate for the first quarter of 2015, an improvement of $1.2 million as compared to the prior year quarter
• Adjusted EBITDA for Career Colleges, Transitional Group and discontinued operations improved to ($23.2) million, compared to ($43.0) million in the same quarter last year, as a result of the completion of teach-outs and continued focus on reducing lease obligations
• Company continues its sale process for Le Cordon Bleu and is engaged in discussions with numerous interested parties
• Initiated strategy to divest and/or teach-out remaining Career Colleges and expects cumulative actions to be accretive to 2015 results excluding restructuring charges

Chairman and Interim CEO Ron McCray commented, “Our first quarter results were in line with our expectations as the progress of our turnaround continues to gain traction. The announcements we are making today regarding our Career Colleges will accelerate the company’s path to profitability. This process will also enable us to right-size the company’s corporate overhead expenses and sharpen our focus on costs within the University Group to be more in line with comparable leading education peers. At the same time, the way we are approaching the dissolution of our Career Colleges through a gradual teach-out or sale of institutions provides students with a reasonable opportunity to complete their programs of study.”

“Career Education has a bright future, with a strong University platform that positions us for long-term success. Further, our strong balance sheet will enable us to responsibly invest in initiatives that will result in positive outcomes for our University students and help us grow our University Group in the future,” McCray said.

REVENUE

For the first quarter of 2015, total revenue was $182.3 million, an 8.0 percent decrease from $198.2 million for the first quarter of 2014. Total revenue for the University Group was $138.2 million for the first quarter of 2015, which was relatively flat compared to $139.5 million for the first quarter of 2014.

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TOTAL AND NEW STUDENT ENROLLMENTS

For the first quarter of 2015, total student enrollments for our University Group were 33,800, which was relatively flat year-over-year. Total student enrollments were impacted by the teach-out of two campuses within the University Group. Excluding these two campuses, total enrollments increased slightly as compared to the prior year quarter, marking the first time since 2010 that we have reported an increase for University total student enrollments. We continue to expect modest total student enrollment growth for the full year 2015. New student enrollments for the University Group were 10,130 compared to 10,720 in the first quarter of 2014. This decrease was primarily attributable to a change in the methodology used to calculate new student enrollments at AIU in 2014 related to cancelled student enrollments. Excluding the impact of this change, new student enrollments within the University Group were down only 1.2% during the first quarter as compared to the prior year quarter.

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OPERATING (LOSS) INCOME

For the first quarter of 2015, operating loss of $24.6 million increased 12.1 percent compared to an operating loss of $21.9 million in the prior year quarter primarily due to increased asset impairment charges of $5.9 million in the current year quarter versus the prior year quarter. Total University operating income increased to $11.7 million from $10.9 million in the prior year quarter, an increase of 7.6 percent. This increase was primarily driven by ongoing cost improvement initiatives.

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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 first quarter of 2015, adjusted EBITDA for the University Group and Corporate increased $1.2 million compared to the prior year quarter. Adjusted EBITDA for Career Colleges, Transitional Group and discontinued operations was ($23.2) million for the first quarter of 2015, compared to ($43.0) 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 once a teach-out is complete.

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BALANCE SHEET AND CASH FLOW

Net cash used in operating activities improved to $20.2 million for the first quarter of 2015, compared to $35.4 million in the prior year quarter. The current quarter operating cash usage included cash payments of $13.5 million of real estate payments for lease obligations of vacated facilities, of which $8.9 million was paid to exit facilities which reduced future lease obligations by $19.4 million, as well as $4.9 million of cash payments for legal settlements and separation payments for the previous CEO. We continue to expect to end 2015 with over $190 million in total cash, cash equivalents, restricted cash and short-term and long-term investments.

Capital expenditures remained relatively flat at $3.4 million during the quarter ended March 31, 2015, and $3.5 million for the quarter ended March 31, 2014.

As of March 31, 2015 and March 31, 2014, cash, cash equivalents, restricted cash and short-term and long-term investments totaled $213.7 million and $331.7 million, respectively.

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CONFERENCE CALL INFORMATION

Career Education Corporation will host a conference call on Wednesday, May 6, 2015 at 5:00 p.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 39490822. 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 39490822.

ABOUT CAREER EDUCATION CORPORATION

Career Education’s academic institutions offer a high-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 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 move toward earning a degree by receiving course credit for knowledge they can already demonstrate. Career Education is committed to providing high-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,” “believe,” “will,” “anticipate,” “continue,” “on track,” “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; 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; the success of our initiatives to divest our remaining Career College institutions and culinary arts campuses; 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.