SUMMARY ANNUAL REPORT: 2004 Career Education Corporation turning dreams into futures SUMMARY ANNUAL REPORT: 2004 Career Education Corporation Mission Statement: We are a dynamic educational services company committed to quality, career-focused learning led by passionate professionals who inspire individual worth and lifelong achievement. Turning Dreams into Futures. CAREER EDUCATION CORPORATION IS ONE OF THE LARGEST PROVIDERS OF PRIVATE, FOR-PROFIT POSTSECONDARY EDUCATION AND HAS A PRESENCE IN BOTH ON-CAMPUS AND ONLINE EDUCATION. CEC’S 80-PLUS COLLEGES, SCHOOLS AND UNIVERSITIES PROVIDE STUDENTS WITH THE ON-SITE AND ONLINE EDUCATION THEY NEED FOR LONG AND SATISFYING CAREERS, AND PROSPECTIVE EMPLOYERS WITH A HIGHLY QUALIFIED POOL OF WORKERS FROM WHICH TO CHOOSE. CEC OFFERS DOCTORAL, MASTER’S, BACHELOR’S AND ASSOCIATE DEGREE PROGRAMS AND NON- DEGREE DIPLOMA AND CERTIFICATE PROGRAMS IN FIVE CORE CURRICULA: BUSINESS STUDIES; VISUAL COMMUNICATION AND DESIGN TECHNOLOGIES; HEALTH EDUCATION; INFORMATION TECHNOLOGY; AND CULINARY ARTS. CONTENTS LETTERS TO SHAREHOLDERS | 02 OPERATIONS REVIEW | 06 FINANCIAL INFORMATION | 18 DIRECTORS AND MANAGEMENT | 22 CORPORATE AND STOCKHOLDER INFORMATION | 23 2004 CAMPUSES | 24 2004 financialhighlights NASDAQ: CECO comparison of cumulative total shareholder return < *PEER INDEX INCLUDES APOLLO GROUP INC., CORINTHIAN COLLEGES, 1000 INC., DEVRY INC., EDUCATION MANAGEMENT CORPORATION, ITT 900 ceco EDUCATIONAL SERVICES, INC. AND STRAYER EDUCATION, INC. s&p 500 $839.09 800 peer index* $833.88 700 CEC 2004 starts by media source internet: 44% 600 t.v. and print: 20% referral: 19% 500 $537.52 $511.05 other: 9% $416.94 $ IN HUNDREDS direct mail: 4% 400 $357.32 high school: 4% 300 $320.95 $219.00 $255.79 200 $203.91 cec student population by degree $90.90 granting status* 100 $100.00 bachelor’s/master’s/ $80.09 $80.29 $89.03 $62.39 doctoral: 45% 0 associate: 41% certificate/diploma: 14% 1/1/00 12/31/00 12/31/01 12/31/02 12/31/03 12/31/04 revenue net income cec student population by core curriculum* 04 $1.73 Billion 04 $179.6 business studies: 41% 03 $1.18 Billion 03 $112.8 visual communication and design technologies: 26% health education: 13% $770.7 $61.8 02 02 culinary arts: 12% information technology: 8% 01 $542.1 01 $35.3 00 $330.9 00 $19.2 $ IN MILLIONS $ IN MILLIONS cec student population by age group* 21-30: 46% student population diluted earnings under 21: 28% over 30: 26% 04 100,350 04 $1.71 03 81,900 03 $1.12 02 51,600 02 $0.65 * as of january 31, 2005 01 41,100 01 $0.39 00 29,000 00 $0.25 AS OF OCTOBER 31 PER SHARE 1 to our 2004 was an important year in the evolution of Career Education Corporation. We continued to grow and prosper, delivering record revenues and earnings. We also developed and changed as an organization, dealing head-on with the opportunities JOHN M. LARSON, and challenges inherent in CHAIRMAN, PRESIDENT AND being a growth company. CHIEF EXECUTIVE OFFICER 2 shareholders During 2004, Career Education Corporation built corporations that sponsor employees who are Technology campuses in Seattle, Las Vegas on its position as one of the largest on-campus looking to enhance their education and advance and Nashville; and a Le Cordon Bleu College providers of private, for-profit postsecondary their careers. of Culinary Arts in Miami. Our 2004 campus education and greatly expanded its presence as a start-ups are performing strongly. leader in online education. CEC’s student popula- CEC enjoys distinct competitive advantages in tion now exceeds 100,000, with about a quarter online education through its proprietary technology While our CSU Group expanded in some of our students enrolled in online degree programs. and Virtual Campus that replicates a traditional markets, it contracted in two others. We sold campus environment. We are at the vanguard of the International Academy of Design and Students are attracted to our colleges, schools online education. Our challenge going forward Technology campus in Montreal, Canada and and universities because we provide a high quality, is to continually assess, refine and add to our began a teach-out of the IADT campus in career-focused educational experience that is OEG programs and the supporting technology Fairmont, West Virginia, which did not perform tuned to employer needs and provides long-term to meet changing student needs. We relish this satisfactorily despite investments in growth. An job skills. Our educational programs are focused challenge because it is the basis upon which orderly transition is underway at IADT/Fairmont so in five areas of dynamic job growth: business OEG has been built. You can learn more about that students enrolled in degree and certificate studies, visual communication and design tech- our Online Education Group and the great strides programs will be able to complete their studies. nologies, health education, information technology it made during 2004 in the Operations Review and culinary arts. of this annual report. A second major challenge for the CSU Group during 2004 was the performance of our Gibbs CEC focused on achieving significant organic CEC’s Colleges, Schools and Universities Group division. CEC acquired the Katharine Gibbs Schools growth in 2004. Our marketing programs produced (CSU) delivered a solid performance in 2004. in 1997 and a renaissance quickly followed. We record leads, and our investments in people, CSU is our on-campus operating group and it expanded the curricula from a focus on secretarial facilities, technology and programs helped fuel is comprised of a number of well-known brand sciences to offer certificate and degree programs strong growth at both our on-campus and online name educational institutions. We made signifi- in business studies, visual communication and operating groups. cant investments across our CSU schools during design technologies and information technology. 2004, including in new faculty and staff training We expanded the system to include new geo- Our Online Education Group (OEG) continued to programs, expanded degree programs, upgraded graphic markets. While some Gibbs schools are surge, broadening its reach through two platforms: facilities and enhanced technology. Several CSU doing well, others have underperformed, impacting American InterContinental University Online and schools moved to new campus facilities that the division and our overall corporate financial Colorado Technical University Online. In just its provide wireless technology and other amenities performance. We have put in motion a number of fourth year, OEG contributed nearly a quarter of conducive to an enhanced learning environment. strategies to reinvigorate the Gibbs system, and our overall revenue and delivered a 40 percent These new campuses have been built to accom- have every confidence we will succeed. A new profit margin. We are buoyed by the success modate future growth and demonstrate our management team with a track record of success of our online programs and their potential for commitment to being a world-class provider is now in place, a number of facilities have been continued growth. of quality educational services. upgraded, academic programs are being enhanced and new marketing initiatives are underway. We Online education is increasingly popular among In addition to continually revitalizing existing expect these initiatives to begin showing results working adults and others who want a high quality schools, campus start-ups are an important in 2005. education and the convenience of anytime, any- component of our growth strategy. Our approach is where access. At the same time, there is broad to benefit from the brand name recognition of our >>> continued on page 4 recognition of the value of an online degree. existing school groups by opening new campuses OEG has partnered with more than 250 major in geographic markets where our studies show demand for career education is high. In 2004, we opened International Academy of Design and 3 >>> continued from page 3 Despite its challenges, the CSU Group has much tation produced by our growth and freed our people to be proud of in 2004. Among other achievements, to provide more personal service and attention we successfully transplanted more than 75 to our students. During 2004, we shortened the academic programs throughout the CEC system, cycle time for responding to leads and enhanced creating cost-efficient organic growth for our student portals to make them more interactive campuses. We also integrated the operations of and communicative. the three school groups included in our largest transaction to-date, the 2003 acquisition of Another major area is compliance, where CEC Whitman Education Group. And in 2004 we launched a major initiative in 2004 to create continued our strong international performance, a world-class compliance organization. During successfully integrating the 2003 acquisition the year, we established a new position, Senior of INSEEC Group, owner of nine postsecondary Vice President of Compliance. The compliance Career Education Corporation grew and changed schools with campuses in Paris, Bordeaux and function at CEC is independent, reporting directly in meaningful ways during 2004. In 2005 we Lyon, France. Additional CSU 2004 highlights to the Audit Committee of CEC’s Board of Directors. expect to continue our history of growth through can be found in the Operations Review of this The mission of our compliance function is to the ongoing expansion of our Online Education annual report. promote compliance with all applicable legal, Group; the opening of campus start-ups and regulatory and accreditation requirements, as satellites; the introduction of new degree programs CEC is a large company that strives to maintain well as with our own expectations and the CEC and academic program transplants; and invest- its entrepreneurial drive. At its core, our job is Code of Business Conduct. ments in people, campuses and company-wide to help our students achieve their dreams. This support systems.