CAREER EDUCATION CORPORATION the year of the graduate Lehman Brothers Education Day June 7, 2006
Safe Harbor Statement This presentation contains certain 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 risks and uncertainties that could cause our actual growth, results of operations, performance, and business prospects and opportunities to differ materially from those expressed in, or implied by, these statements. These risks and uncertainties, the outcomes 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, and other lawsuits; 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; risks related to our ability to manage and continue growth; future financial and operational results; risks related to competition, general economic conditions, and other risk factors relating to our industry and business, and the factors discussed in our Annual Report on Form 10-K for the year ended December 31, 2005, and from time to time in our other reports filed with the Securities and Exchange Commission. Career Education assumes no obligation to update these forward-looking statements.
Agenda Overview and Product Offerings Growth Opportunities Corporate Governance/Legal/Regulatory Financial Performance Bright Future
Overview and Product Offerings Jack Larson Chairman, President and CEO Founder of CEC
Growing Demand for Education Over 80% of the fastest-growing jobs require at least some post-secondary education In today s global economy, the best jobs go to the most skilled and most motivated workers
CEC s Platform for Success Consistent long-term performance Broad portfolio of educational offerings Three distinct online brands, seven highly regarded campus-based brands Technology improvements Significant innovations and student-centered programs Global presence Campuses in 5 countries Over 17,000 employees Approximately 100,000 students in 60 countries
Portfolio of Divisions Support services: Financial Accounting & Reporting Treasury Functions Student Financing Information Technology Compliance Admissions/Marketing Services Education Support A C A D E M Y C O L L E G E C U L I N A R Y G I B B S H E A L T H E D S T A R T U P U N IV E R SI T Y
The Student Life Cycle: Access = Opportunity Initial Inquiry Graduation (Career Services) Academics Admissions (Career Services) Enrolled Student Attending Class (Career Services)
Strong Student Outcomes CECO has one of the strongest graduation rates amongst its peers in the proprietary education sector GRADUATION RATES 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% 2001 2002 2003 Career Education Apollo Strayer DeVry Education Management ITT Corinthian Source: Banc of America research report dated October 4, 2004
Diverse Student Demographics Age Degree Objective Under 21 yrs. 19% 21 30 yrs. 47% Bachelor, Master, Doctorate 49% Over 30 yrs. 33% Associate 37% Certificate 14% * As of March 31, 2006
Focused in High-Growth Fields* % of Total Student Population TOTAL Business Studies 45% Visual Communication & Design Technologies Culinary Arts 22% 11% Health Education 11% Information Technology 9% * As of March 31, 2006
Growth Opportunities
An Evolving Business Model High-quality, sustainable growth company Start-up entrepreneurial private company 1994-1997 High-growth, early stage public company 1998-2005 2006-Beyond Return on investment focus New products Start-ups/acquisitions Organic growth World-class compliance
The Year of the Graduate 2006 Focus on getting students engaged and connected to the campus Emphasis on the quality of teaching and learning Administrators and faculty monitor student progress Campus leaders make student success a top priority
Marketing & Admission Implementation Plan Lead management Implement robust super websites 24/7 call center utilization Smart inquiries lead qualifying system Increase enrollments Implement auto-enrollment sites Identify and replicate best enrollment programs Increase representative staffing Higher show rate 16 step SOS Plan Review student finance alternatives Immediate assignment of students to new representative when original representative leaves Implement mandatory pre-orientation meeting
On-site Education New programs and initiatives Program migrations Educational partnerships and satellite campuses ROI focus Positive media outreach
Online Learning Fastest growing segment of for-profit education Changing consumer attitudes towards online education Perceived value Quality of product Complete experience Virtual student life cycle
Online Education: A Vast Opportunity # of Students Enrolled in 100% Online Education Programs 2,000,000 1,800,000 1,774,752 1,600,000 1,400,000 1,200,000 1,000,000 936,727 1,203,410 1,488,486 800,000 600,000 400,000 483,113 701,295 200,000-2002 (Actual) 2003 (Actual) 2004 (Actual) 2005 (Forecast) 2006 (Forecast) 2007 (Forecast) Source: Eduventures, Online Distance Education Market Update 2005: Growth in the Age of Competition, June, 2005
Hybrid Delivery Model Newest opportunity for on-ground students Combines on-ground and online learning Answers needs of students seeking additional flexibility Offered at both AIU Online and CTU Online
International Opportunities AIU London London, UK The INSEEC Group, FRANCE US, CANADA 17 million students MEXICO 2+ million students CENTRAL/SOUTH AMERICA 11 million students AFRICA 4 million students EUROPE* 24 million students MIDDLE EAST 6 million students ASIA/PACIFIC 43 million students
Enthusiast Sites and Digital Media Initiatives
Corporate Governance / Legal / Regulatory
Corporate Governance Leadership CEC s annual meeting of stockholders held May 18, 2006 Based on preliminary results, stockholders elected all three of CEC s nominees to the company's Board of Directors Proposal to declassify the board was approved Proposal to allow stockholders holding two-thirds of its shares to call a special meeting was approved
Legal Developments Securities Class Action Lawsuit JUN 2004 Securities Class Action Lawsuit FEB 2005 1 st Dismissal of Securities Class Action Suit MAR 2006 2nd Dismissal of Securities Class Action Suit MAY 2006 3 rd Amended Complaint Filed SEC JUN 2004 SEC Formal Investigation APR 2006 SEC Midwest Regional Office staff intends to recommend termination of investigation DOJ SEP 2004 Existence of DOJ investigation announced MAY 2006 Civil Division of the DOJ advises that it is reviewing allegations at certain schools BPPVE JUL 2005 BPPVE Notice Of Conditional Approval at BIP MAR 2006 California trial judge rules BPPVE improperly issues BIP Notice of Conditional Approval MAY 2006 California Dept. of Consumer Affairs rules in BIP s favor and vacates BPPVE Notice of Conditional Approval
Department Of Education Update DOE Initiates Review JUN 2005 DOE initiates review and indicates it will not approve any new locations or domestic acquisitions 1. Financial Review JUN 2005 DOE is reviewing previously announced consolidated financial statements for 2000-2003 2. Program Review JUN 2005 DOE is evaluating pending school program reviews at Collins College, PCI and Brooks College 3. Compliance Review FEB 2006 DOE indicates it is not lifting the general restrictions imposed in June 2005 as it continues its review FEB 2006 PCI Program Review Resolved FEB 2006 DOE agrees to consider and evaluate, but not necessarily approve, applications for new campus locations in San Antonio, TX & Sacramento, CA APR 2006 Collins College Program Review Resolved MAY 2006 DOE informs the company that it has satisfied certain of the issues raised in June 2005 MAY 2006 DOE determines that restatement of consolidated financial statements did not materially affect compliance with DOE financial responsibility standards MAY 2006 Brooks College Program Review Resolved closed closed JUN 2005 DOE is reviewing annual compliance audit opinions for 2000-2003 FEB 2006 DOE is reviewing audit opinions for 2004 MAY 2006 DOE advises that it has reviewed compliance audit opinions for 2001-2004. Based on this review and other specific concerns, the DOE will reevaluate the ongoing general restrictions imposed in June 2005 following its review of compliance audits for 2005
AIU / SACS Update Dr. George Miller was appointed as Chief Executive Officer of American InterContinental University (AIU) in March 2005 Prior to joining AIU, Dr. Miller served as president of two traditional colleges, one accredited by SACS and the other accredited by the Middle States Association of Colleges and Schools (MSA) Dr. Miller and his team are working closely with SACS to ensure that all recommendations are satisfied AIU is on target with its plan to address all SACS recommendations, and communicates regularly with its SACS liaison about AIU s progress with this plan
AIU / SACS Update Timetable for Addressing SACS Recommendations February - March April - June July September October December Complete third-party assessment Implement recommended changes Third-party re-assessment Submit monitoring report to COC Special Committee visit COC review and consideration
Fostering a Culture of Compliance 2005: Discipline and Infrastructure Retained full-time directors of compliance (DOC) at all CEC schools Enhanced corporate compliance structure Initiated corporate compliance policy board Established company-wide ethics training program Initiated central processing center (CPC) for financial aid Initiated government relations program 2006: Enhancements and Oversight Expand DOC training and areas of responsibility Initiate company steering committee and provide company-wide compliance review to coordinate the implementation of identified areas of remediation Expand assessments of operational controls Increase use of technology in both automation and reporting Expand the CPC Expand government relations efforts Implement campus-level compliance steering committees 2007 and Beyond: Enabling the Future Continued implementation of compliance steering committee's actions steps - corporate and school levels Increase use of technology to enhance control reporting Complete expansion of the CPC to involve all US-based schools Continue expansion of our government relations efforts, and accreditation relationships Implement third-party review and assessment of compliance efforts
Financial Performance Pat Pesch Executive Vice President and Chief Financial Officer
Industry Leading Growth Annual Revenue Growth ($ millions) $3,000 CECO $2,000 $1,000 COCO APOL EDM C ESI STRA DV $0 2000 2001 2002 2003 2004 2005
Solid Operating Margins CECO has consistently improved operating income margins 20.0% 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 11.7% 13.6% 15.7% 16.9% 18.1% 4.0% 2.0% 0.0% 2001 2002 2003 2004 2005
Gross Margin Opportunities Retention improvement efforts Data mining Advisor to student ratios Efficient capacity utililization Optimize credit policy Address underperforming assets
Strong Earnings Performance Earnings Per Share $2.50 $2.26 $2.00 $1.71 $1.50 $1.12 $1.00 $0.50 $0.39 $0.65 $0.00 2001 2002 2003 2004 2005
Attractive Long-Term Shareholder Returns Comparison of Cumulative Total Return Since January 1, 2001 Career Education Corporation, S&P 500 Index and Peer Index $500.00 $400.00 $300.00 $200.00 $100.00 Career Education $344.74 Peer Group $206.18 S&P $102.75 $0.00 1/1/01 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05 Career Education S&P 500 Peer Group
First Quarter 2006 Highlights Consolidated revenue increased 4% to $529 million University online campuses increased 23% to $193 million Cash and cash equivalents and investments totaled $489 million Since inception of the program, repurchased approximately 6.0 million shares of common stock
Bright Future
CEC s Future is Bright We have the right, student-focused business strategy We are focused on the entire student lifecycle We have significant growth potential and strong competitive advantages in all of our divisions We are building a compliance culture and are dealing effectively with pending regulatory and litigation issues We are committed to strong governance
CAREER EDUCATION CORPORATION