63045_Output 4/4/04 9:53 AM Page c1 for the future CAREER EDUCATION CORPORATION SUMMARY ANNUAL REPORT | 2003 63045_Output 4/4/04 9:53 AM Page c2 CAREER EDUCATION CORPORATION SUMMARY ANNUAL REPORT | 2003 » 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 the world’s largest on-campus provider of private, for-profit postsecondary education and has the second largest online education group in its sector in terms of total revenues. CEC’s 78 colleges, schools qualified pool of workers from and universities provide which to choose. CEC offers students with the on-site doctoral, master’s, bachelor’s and online education they and associate degree pro- need for long and satisfying grams and non-degree diploma careers, and prospective and certificate programs in five employers with a highly core curricula: business studies visual communication and design technologies information technology health education culinary arts CONTENTS Letters to Shareholders 02 Operations Reviews 06 Financial Information 18 Directors and Management 22 Corporate and Stockholder Information 23 Career Education Corporation Campuses 24 63045_Output 4/4/04 9:53 AM Page 1 01 CEC 2003 STARTS BY MEDIA SOURCE 2003 Financial » nasdaq:ceco Highlights INTERNET: 36% COMPARISON OF CUMULATIVE REFERRAL: 20% 16% TOTAL SHAREHOLDER RETURN TV: OTHER: 9% from january 01, 1999 — december 31, 2003 PRINT: 7% DIRECT MAIL: 6% HIGH SCHOOL: 6% $1100 $1,073.33 $1000 CEC STUDENT POPULATION BY DEGREE GRANTING STATUS* $900 $800 CECO S&P 500 $700 PEER INDEX* $600 $533.33 ASSOCIATE: 48% BACHELOR’S/MASTER’S/ $500 DOCTORAL: 34% $457.07 CERTIFICATE/DIPLOMA: 18% $400 $313.11 CEC STUDENT POPULATION $300 $260.83 BY CORE CURRICULUM* $200 $196.74 $156.60 $127.92 $135.75 $100 $119.53 $107.41 $100.00 $93.40 $90.46 $60.84 $71.57 $0 1/28/981/01/99 12/31/9812/31/99 12/31/9912/31/0012/31/00 12/31/0112/31/01 12/31/0212/31/02 12/31/03 BUSINESS STUDIES: 33% VISUAL COMMUNICATION AND REVENUE NET INCOME DESIGN TECHNOLOGIES: 29% » HEALTH EDUCATION: 13% 13% *peer index includes 03 $1.19 Billion 03 $119.2 INFORMATION TECHNOLOGY: apollo group inc., CULINARY ARTS: 12% corinthian colleges, inc., 02 $780.1 02 $67.5 devry inc., education management corporation, 01 $547.1 01 $38.4 itt educational CEC STUDENT POPULATION services, inc. and 00 $334.5 00 $22.2 BY AGE GROUP* strayer education, inc. 99 $223.5 99 $10.9 $ in millions $ in millions STUDENT POPULATION DILUTED EARNINGS 03 79,500 78 03 $1.19 02 50,400 43 02 $0.71 21-30: 45% OVER 30: 28% 39 01 41,100 01 $0.42 UNDER 21: 27% 00 29,000 30 00 $0.29 99 22,500 25 99 $0.17 *AS OF JANUARY 31, 2004 as of october 31 number of per share campuses 63045_Output 4/4/04 9:53 AM Page 2 02 to our shareholders IN 2003, CAREER EDUCATION CORPORATION MADE GREAT STRIDES IN OUR QUEST TO BECOME THE WORLD’S LARGEST PROVIDER OF QUALITY EDUCATIONAL SERVICES. » We continued our history of producing record financial We succeeded in 2003 by making our students the focus of results, with revenues exceeding $1 billion for the first time and everything we do. We invested in academic programs, people, profits setting new highs in every quarter and for the year. equipment, facilities and technology. We broadened access to the Our financial performance resulted directly from the precise education we provide through online education, campus start-ups execution of our business strategy. We align our educational and acquisitions. Our marketing message resonated as never before, programs with the needs of business and industry. As a result, we generating 2.7 million leads. focus on offering an array of degree options in five core curricula — We fueled dramatic internal growth and profitability during business studies, visual communication and design technologies, 2003 through our Online Education Group, which quintupled its information technology, health education and culinary arts, both student population by expanding degree options and providing on-campus and online. innovative ways for students to experience a high quality, anytime, Our programs are in high demand because we make them anywhere education. broadly available and effectively market them to growing segments We drove organic growth in our Colleges, Schools and Universities of the population — recent high school graduates, older students who Group by opening four new start-up campuses in major markets. are seeking to advance or change their careers, and international Our start-up strategy is to build on the reputations of our existing students. Our students are highly motivated. They want an education school brands. During 2003, we opened Le Cordon Bleu College that leads to a fulfilling and rewarding 21st century career. of Culinary Arts campuses in Las Vegas and Atlanta, an American We deliver on that promise. During 2003, approximately 93 per- InterContinental University in Houston, and an International cent of our on-campus and 97 percent of our online graduates who Academy of Design and Technology in Detroit. All are performing were available for employment were employed in their field of study. beyond our expectations. 63045_Output 4/4/04 9:53 AM Page 3 03 In addition to campus start-ups, we continued to invest in the We accomplished a lot during 2003. We expect more of the same growth of our existing campuses. We transplanted more than 50 aca- in 2004. We plan to build on our success and continue the strate- demic programs throughout our system. Program transplants provide gies that have worked since our founding a decade ago. Specifically, us with an efficient way to leverage our investment in curriculum we plan to: development and reach out to a broader base of potential students. We invested in upgrades and expansions, most notably opening Continue the rapid pace of growth at our Online brand new campuses at six of our locations: Allentown Business Education Group by expanding its degree offerings and building on School, American InterContinental University/Ft. Lauderdale, Gibbs its technology edge. College/Norwalk, Harrington College of Design, Katharine Gibbs School/Providence and Western Culinary Institute. These new cam- Open six to seven start-up campuses in major puses are shining examples of our commitment to build the schools markets, including American InterContinental University we acquire and accommodate their continued growth. campuses in Dallas and San Antonio; International Academy of Technology is one of CEC’s competitive advantages. During 2003, Design and Technology campuses in Las Vegas, Nashville, we used technology to make life easier and more efficient for our Sacramento and Seattle; and a Le Cordon Bleu College of Culinary students, faculty and staff. We expanded the availability of online Arts in Miami. student enrollment, financial aid and tuition payment systems. We enhanced student and faculty portals to better track student per- formance and enhance retention efforts. We extended the reach of Start satellite campuses in major markets our information technology systems and achieved the goal of linking where we see opportunities to expand a local campus through CEC’s global network of campuses under a unified system. We made additional locations. Satellite campuses are an efficient way to grow more online training programs available to our faculty and staff. because they operate using the same management team as the Acquisitions once again played a pivotal role in our success as we primary campus. completed key transactions during the year. CEC established a strong position in health education by acquiring Whitman Education Group Launch more than 50 program transplants, much like and its three highly reputable school groups: Sanford-Brown we did in 2003. We also plan to increase the number of higher Colleges, Colorado Technical University and Ultrasound Diagnostic degree programs we offer in both our on-campus and online groups. Schools (now Sanford-Brown Institute). The Whitman acquisition Higher degrees provide our students with additional educational and also provided us with an additional online platform—CTU Online—to career options and give us a chance to recruit more students into complement the fast-growing American InterContinental University longer-term programs. (AIU) Online, which we launched in 2001. We furthered our international expansion plans by acquiring the Target two to three acquisitions, with a goal to expand INSEEC Group, owner of nine postsecondary schools with campuses our position in the five core curricula we provide, establish a strong in Paris, Bordeaux and Lyon, France. INSEEC outperformed our presence in a new curriculum, or seize an international expansion expectations and contributed to our record earnings for the year. opportunity. INSEEC underscores our ability to identify and effectively manage international expansion opportunities. This is critical given the grow- Continue making investments in our people, campuses ing demand in major global markets for the type of career-focused and systems—all with the intent to better serve our students. education we provide. 63045_Output 4/4/04 9:53 AM Page 4 04 Pictured from the left are Dr. Jon R. Coover, President of the Gibbs and Health Education Divisions; Nick Fluge, President of the Online Education Group and Chief Operating Officer of American InterContinental University (AIU) Online; Patrick K. Pesch, Executive Vice President and Chief Financial Officer; Steve B. Sotraidis, Executive Vice President of Administration; John M. Larson, Chairman of the Board, President and Chief Executive Officer; Richard Sellers, Senior Vice President of Marketing and Admissions; Jacob P. Gruver, President of the College and University Divisions; Paul R. Ryan, President of the Academy and Culinary Divisions; Dr.