career education corporation analyst day february 12, 2003 nasdaq: ceco

Career Education Corporation

ANALYST DAYFebruary 12, 2003

Nasdaq: CECO www.careered.com

Safe Harbor Statement The forward-looking statements contained in this presentation and

those statements made during this presentation are based upon various assumptions, and certain risks and uncertainties could cause actual results to differ materially from those stated. Factors that could cause such differences include costs and difficulties associated with opening new campuses and in integrating acquisitions, costs associated with the Online operations, changes in the regulatory environment and those matters disclosed in Career Education Corporation's filings with the Securities and Exchange Commission. Career Education Corporation assumes no obligation to update those forward-looking statements.

Jack LarsonChairman, President & CEO


A brief look at CEC…• Formed in 1994 to create a premium education

system • Initial Public Offering in 1998• 43 worldwide campuses• Rapidly growing Online Education presence• #1 on-campus provider in for-profit sector• 20 consecutive quarters of record revenue &

earnings• Cumulative shareholder return since IPO = 1,000%

$144.2$216.8

$325.3

$529.2

$751.0

$0

$100

$200

$300

$400

$500

$600

$700

$800

1998 1999 2000 2001 2002

Revenue (in millions)

$0.17$0.34

$0.57

$0.85

$1.42

$0.00

$0.20

$0.40

$0.60

$0.80

$1.00

$1.20

$1.40

$1.60

1998 1999 2000 2001 2002

Earnings per Share

Favorable Industry Dynamics

• $270 billion North America market

• For-profit & non-profit sectors are highly fragmented

• Strong long-term demographic trends

• Barriers to entry

• Attractive financial characteristics

To get training for a specific career 71.3%

To be able to get a better job 70.3%

To be able to make more money 69.8%

A person with a bachelor’s degree is expected to earn almost $1.0 million more in their career than a high-school grad – US Department of LaborSource: The Chronicle of Higher Education

Top 3 Reasons Why Freshman Enroll in College …

Top 2 Reasons Why Freshman Select a College …

1. College has a very good academic reputation CEC’s “Schools of Choice” & nationally recognized programs

2. College’s graduates get good jobs CEC’s Placement rate of 94.1%

Source: The Chronicle of Higher Education

Top 20 U.S. Universities by Population

Fall 1995 Fall 2001

University Population University Population1 Community College of the Air Force 89,611 1 Apollo Group 139,3002 University of Minnesota–Twin Cities 51,445 2 Community College of the Air Force 89,611

3 Ohio State University–Main Campus 48,676 3 DeVry University 58,7364 The University of Texas at Austin 47,905 4 University of Minnesota-Twin Cities

51,388

5 Miami-Dade Community College 47,060 5 Miami-Dade Community College

49,836

6 Arizona State University-Main Campus 42,040 6 Ohio State University-Main Campus 48,362

7 Texas A&M University-Main Campus 41,790 7 The University of Texas at Austin 48,008

8 Michigan State University 40,647 8 Arizona State University-Main Campus 42,483

9 Pennsylvania State University-Main Campus 39,646 9 Texas A&M University-Main Campus

41,892

10 Houston Community College System 39,641 10 Michigan State University 41,545

11 University of Florida 39,412 11 Career Education

40,80012 University of Wisconsin-Madison 39,005 12 University of Florida

39,883

13 University of Illinois-Urbana-Champaign 38,420 13 Pennsylvania State Univ-Main Campus 39,855

14 Northern Virginia Community College 37,144 14 University of Wisconsin-Madison 39,289

15 University of Michigan-Ann Arbor 36,687 15 University of Illinois-Urbana-Champaign

38,841

16 Purdue University-Main Campus 36,427 16 Houston Community College System

38,493

17 University of South Florida 36,142 17 Education Management 37,658

18 New York University 35,835 18 University of Phoenix Online

37,60019 Indiana University-Bloomington 35,083 19 Purdue University-Main Campus

36,893

20 University of Arizona 34,777 20 University of Michigan-Ann Arbor

36,625

Source: Chronicle of Higher Education

Sustainable Growth Opportunity

• Demographic trends support sustainable growth2.5 mil increase in college enrollment in the next decade –

National Center of Education Statistics

• States are cutting budgets for public postsecondary education at the same time demand is escalating19 states have cut their higher education funding midway

through the current fiscal year – National Conference of State Legislatures

CEC’s Competitive Advantages• Career-oriented curriculum• Diversification creates stable market demand:

– Curriculum in multiple high-growth demand areas– Demographics in age & gender– Various degree offerings– Geography

• Strong Marketing Expertise• Excellent Placement Success• Technology Innovation• Quality name brand institutions

CEC’s Brand Names

Global System

Onsite & Online

Start-ups/

Satellites

Acquisitions

ProgramTransplants

Largest Global Quality Provider of Postsecondary

Education

Strategic Growth Goal

AdvancedDegrees

OnlineEducation

RegionalAccreditation

InternationalExpansion

AdditionalCurricula

Poised for the Future

• Two Operating Groups– Colleges, Schools & Universities Group

– Jake Gruver - President

– Online Education Group– Nick Fluge - President

Jake GruverPresident – Colleges, Schools

& Universities Group


OperatingStrategy

“Schoolsof

Choice”

Refining Education Programs

Direct Response Marketing

ImplementingSystems & Procedures

Retention & Placement

Capital Investments

Cycle of Success

Academy Academy CollegeCollege Culinary Culinary Start-upStart-upInter-Inter-nationalnational

Health Health EducationEducation

Gibbs Gibbs UniversityUniversity

Colleges, Schools &Colleges, Schools &UniversitiesUniversities

8 Diversified 8 Diversified Platforms for Platforms for

GrowthGrowth

Visual Communication& Design Technologies

Business Studies

Culinary Arts

Health Education

43%

22%

18%

15%

2%

% of Students

Information Technology

51,100 students

Full-time degree seeking students

Current Core Curricula

Diversified Student Demographics

Student Population by Age Group

Under 21 yr.30%

21 – 30 yr.53%

Over 30 yr.17%

50%/50%

Male/Female

Diversified Degree Offerings

Student Population by degree objective

Bachelor’s/Master’s

28% Associate’s58%

Certificate14%

Superior Execution

• Attract & convert prospects using full marketing mix

• Assist students in financing their education • Deliver a superior education product• Develop new programs• Keep students in school through innovative

retention programs• Place students in their field of study by

soliciting job openings

School Operations

President

VP of Operations

VP of FinancialServices

VP of Student Services

VP Marketing/Admissions

VP of AcademicAffairs

Patrick AndrewsFirst VP of Marketing


CEC generated 1.7 million leads in 2002

60% over 2001

High Impact Marketing

• Tailored marketing at each school

Internet-based advertising

High school recruiting

TV infomercials & commercials

Direct mail

Referrals

Newspapers & print media

Effective Lead Generation

Internet

TV

Direct Mail

High School

Referral

Print

Other

Internet

36%

TV

13%

H.S.

30%

Direct Mail

10%

Other

4%

Referral

4%

2002

Leads By Media Source

Print

3%

Media Source Examples

Marketing Site

- Over 150 school marketing Web Sites

- Interactive Media Presentations & Webmercials

- Leads automatically loaded into CEC’s database

Dr. Jon CooverSenior VP of Marketing &

Admissions


Marketing & Admissions Process

1. Generate leads

2. Convert leads to enrollments (“booked futures”)

3. Convert enrollments to starts

Convert Leads to Enrollments

• Specialized Admissions Efforts

Approx. 1,000 Professionals 1. Local Area

2. High school

3. Out-of-area

4. International

5. Internet

Automated Enrollment Center- Branded Enrollment Centers

- Virtual Campus Tours/Catalog

- Multi-currency & multi-lingual

- Enrollment Agreement

- Candidate for Acceptance

Start Culture- “Start to Stay”

• 2nd Interview• Tuition planning

session• Set financial aid

deadline• Mandatory

orientation

• “Stitch-In” process• Part-time job• President’s

acceptance letter• Open house• Housing

Jeff TiceSenior VP of Student Finance


How do Students Pay for College ?

• Title IV Financial Aid

• Grants

• Cash Pay – Family– Personal Investment– Part-time Employment

• Alternative Third Party Loans

Personalized Tuition Plan • Financial Aid

– Review State & Federal Programs– Determine Eligibility– Design a Personal Financial Aid Package

• Family Commitment– Assistance from Family or Significant Other– Monthly School Payment

• Personal Investment– Tuition Deposit– Personal Responsibilities– Part-time Income

Financial Aid Online - Opportunity28% of CEC’s students completed the FAFSA online for 2002-2003

Dr. Patricia KapperSenior VP of Education


Our mission is to serve students from diverse backgrounds, seeking to enhance their individual worth and professional potential, by delivering quality educational programs and services. Our faculty and staff are committed to promoting student success as measured by graduation and career achievement.

Mission Statement for Learning

Our Education Product

• Curricula matched to long-term demographic and employment trends

• Employers help create, refine programs

• Advisory boards create lasting relationships

Focused on 21st Century Careers

Superior Education Product

• High quality faculty and staff• Approximately 4,000 faculty; industry

professionals• 62% part-time, adjunct faculty

• First class equipment, facilities• Ongoing investments• “Hands-on” education

Retention for Success

• Retention is everyone’s responsibility – from the President, to the faculty, to the staff

• A practical, institutional approach

• Weekly reporting and monitoring

Kathy BennicoffVice President of Career

Services


Our moral report card

A+

Recent placement rate 94.1%

Up from 92% in 2001

• 200 Career Service Professionals focused on securing job orders

• Students required to take a professional development class or attend seminars that discusses job search skills

• Transferred proven marketing discipline to the career services department

Placement for Success

CEC’s Career Services Website

4,000 Employers

5,200 Jobs

17,200 Applications

723 Employers

4,161 CEC Students/Alumni

116 Chat Rooms

2,500 Job postings

12 Hours

CEC’s Virtual Job Fair

Some Well-known EmployersVisComm & Design•JAK Films (Star War’s)•DDB Worldwide•Jockey•EMCI

Culinary•Hyatt•Hilton•Spago/Wolfgang Puck•Ritz Carlton

Business Studies•CIA•Bank Atlantic•Booz, Allen & Hamilton•ADP

IT•Intel•Televista•Cox Communications•Spherion

Mark GriesbaumChief Information Officer


Technology

New technologies are changing the most traditional college campuses. The conditions are finally right for these technologies on campus; the traditional classroom has found a powerful companion in Technology.

CEC’s 2003 IT Initiatives

• Online Tools & Services for Students

• Business Process Improvements

• Financial Systems Implementation

• Management Information Delivery

• Business Expansion/Integration

• Online Tools & Services– “MyCampus.Com” - where students &

faculty can communicate, share information, view academic progress, schedule & account information, make payments, register, etc.

CEC’s 2003 IT Initiatives

MyCampus.Com Login Sample

• Business Process Improvements – Leverage student database & drive

continuous business process improvements allowing CEC to scale it’s growth

• Financial Systems Implementations – Implement & convert existing financial data

to new G/L & automated T&E system

CEC’s IT 2003 Initiatives

• Management Information Delivery– Enhance delivery of online information

across our business

• Business Expansion/Integration– Work closely with the business to

incorporate new schools & integrate acquisitions into CEC’s technology infrastructure & business application suite

CEC’s IT 2003 Initiatives

Steve SotraidisExecutive VP of Administration


Support Services for Schools

• Financial Aid

• Information Technology Innovations

• Financial

• Admissions

• Education

• Student Retention

• Career Services

Reports we use to Manage our Business?

• Monthly Marketing Report

• Daily/Weekly/Monthly Flash

• Financial Reports

• Daily Cash Collection Reports

• Financial Aid Packaging Reports

• Retention Reports

• Many more…

“CEC University”- Staff Development

• CEC Online Courses• Faculty Development • AchieveGlobal / Managing Interpersonal Skills• Training at CEC• Regional, Divisional, Departmental Training

We have 7,000 employees worldwide:

4,000 faculty

1,000 marketing

2,000 administration

Todd SteeleExecutive VP of Strategic Planning & Development


Four Principal Activities

1. Strategic Planning

2. Acquisitions

3. Campus Start-ups

4. International Expansion

Potential for Market Leadership

Excellent Educational Franchise

All activities support business strategies

24 Acquisitions Completed since 1994

Broad StudentMarketability

Excellent Regulatory Compliance

Manageable Near-term EPS impact

Attractive 5-year ROIC

Attractive Long-TermFinancial Profile

Acquisitions

Acquisitions – Keys to Success

• Rigorous, structured due-diligence process

• “Conservatively honest” assessment of required investment & growth potential

• Detailed integration plans, efficient integration process

• Accurate long-term opportunity assessment

Full pipeline, many attractive opportunities

Campus Start-ups

• Means of geographic market entry

• Leverage brand equity of existing CEC brands

• Excellent returns on invested capital

Campus Start-ups • 4 start-ups to date – all operating ahead of

budget– 2 in 2001 - Gibbs in Philadelphia, IADT in Orlando– 2 in 2002 – Le Cordon Bleu in Orlando, Brooks in

Sunnyvale

• 4 start-ups in 2003– Las Vegas – Le Cordon Bleu (Summer ‘03)– Atlanta – Le Cordon Bleu (Fall ‘03)– Detroit – IADT (Fall ‘03)– Houston – AIU –University (Fall ’03)

• Dedicated divisional team

Numerous additional market opportunities

International Expansion

• Growing demand for postsecondary education

• Opportunity to leverage best practices, utilize corporate assets to grow schools overseas

• Proven success with AIU-London & AIU-Dubai

• Visited numerous properties over past 24-months

Pat PeschExecutive VP and CFO


Annual 2003 Business Outlook• Revenue to be approx. $940 to $950 mil (includes

Online of approx. $60 mil)

• Operating profit margin to increase approx. 50 basis points

• EPS to be approx. $1.80 to 1.82

• Capital expenditures to be approx. $75 to $80 mil

$144.2$216.8

$325.3

$529.2

$751.0

$945.0

$0

$200

$400

$600

$800

$1,000

1998 1999 2000 2001 2002 2003 *

* mid-range of ’03 Guidance

Revenue (in millions)

$23.2$34.9

$60.0

$101.3

$149.3

$191.8

$0$20$40$60$80

$100$120

$140$160$180$200

1998 1999 2000 2001 2002 2003 *


EBITDA (in millions)

$0.17$0.34

$0.57

$0.85

$1.42

$1.81

$0.00

$0.50

$1.00

$1.50

$2.00

1998 1999 2000 2001 2002 2003 *


Earnings per Share

Capital Expenditures$75 to $80 million expected in 2003

Maintenance Expansion

$43 mil $35 mil

Population Revenue EBITDA

59%

57%35%

’01 vs. ‘00

’00 vs. ’99

21%

24% 35%

’02 vs. ‘01

21% 34% 42%

Internal Growth Record

$11,500

$15,500

$10,700

$20,000

$20,000

$30,000

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

On-campus Online Culinary

Peer * CEC

Avg. Annual Revenue Per Student

* Apollo, EDMC, Strayer, COCO, ITT and DeVry

3.0%2.8%

3.7%3.3% 3.3%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

1998 1999 2000 2001 2002

Annual Bad Debt Expense

Oct. 7, 2000

Change in Title IV Return of Funds Policy

3133

3634

4038 36

33

0

5

10

15

20

25

30

35

40

1st Q 2nd Q 3rd Q 4th Q

2001 2002

Days Sales Outstanding

Start-up Campus Guidance

• 6 to 9 months pre-opening – $0.8 mil to $1.2 mil operating loss

• 9 to 12 months until break-even – $0.8 mil to $1.2 mil operating loss

• Capital Expenditures– Culinary school is $4.0 to $5.0 mil– All other schools are $1.0 to $2.0 mil

• 20%+ Internal Revenue Growth– 15 % population growth– 5 – 7 % pricing

• 50 to 100 basis point operating margin improvement

• 25%+ earnings per share growth

3 to 5 yr. Business Outlook

Jack LarsonChairman, President & CEO


The Future is Bright…

• Favorable industry dynamics

• Sustainable growth opportunity

• Competitive position

• Multi-faceted growth platform

• Proven track record

• Positioned for strong EPS growth

QUESTIONS

career education corporation analyst day february 12, 2003 nasdaq: ceco

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