The discussion below contains "forward-looking statements," as defined in
Section 21E of the Securities Exchange Act of 1934, as amended, that reflect our current expectations regarding our future growth, results of operations, cash flows, performance and business prospects, and opportunities, as well as assumptions made by, and information currently available to, our management. We have tried to identify forward-looking statements by using words such as "anticipate," "believe," "plan," "expect," "intend," "will," and similar expressions, but these words are not the exclusive means of identifying these forward-looking statements. These statements are based on information currently available to us and are subject to various risks, uncertainties, and other factors, including, but not limited to, those discussed in Part II, Item 1A "Risk Factors" in this Quarterly Report on Form 10-Q, that could cause our actual growth, results of operations, cash flows, performance and business prospects, and opportunities to differ materially from those expressed in, or implied by, these statements. Except as expressly required by federal securities laws, we undertake no obligation to update such factors or to publicly announce the results of any of the forward-looking statements contained herein to reflect future events, developments, or changed circumstances, or for any other reason.

Overview

The colleges, schools and universities that are part of the Career Education Corporation (CEC) family offer high-quality education to a diverse student population of over 110,000 students across the world in a variety of career-oriented disciplines. The more than 75 campuses that serve these students are located throughout the U.S. and in France, Italy, and the United Kingdom, and offer doctoral, master's, bachelor's and associate degrees and diploma and certificate programs. Approximately one-third of our students attend the web-based virtual campuses of American InterContinental University and Colorado Technical University.

CEC is an industry leader whose gold-standard brands are recognized globally. Those brands include, among others, American InterContinental University; Brooks Institute; Colorado Technical University; Harrington College of Design; INSEEC Schools; International Academy of Design & Technology; Istituto Marangoni; Le Cordon Bleu North America; and Sanford-Brown Institutes and Colleges. Through our schools, CEC is committed to providing quality education, enabling students to graduate and pursue rewarding careers.

We organize our businesses across five strategic business units ("SBU"). Each SBU represents a group of post-secondary education providers that offer a variety of degree and non-degree academic programs. These SBUs are organized by key market segment to enhance brand focus and operational alignment within each segment. In addition, our Transitional Schools division includes all schools that are currently being taught out. This division is focused on winding down these operations as effectively and efficiently as possible. Our reportable segments are:

University includes our American InterContinental University ("AIU"), Colorado Technical University ("CTU") and Briarcliffe College schools that collectively offer regionally accredited academic programs in the career-oriented disciplines of business studies, visual communications and design technologies, health education, information technology, criminal justice, and education in an online, classroom, or laboratory setting.

Culinary Artsincludes our Le Cordon Bleu ("LCB") and Kitchen Academy schools that collectively offer culinary arts programs in the career-oriented disciplines of culinary arts, baking and pastry arts, and hotel and restaurant management primarily in a classroom or kitchen setting.

Health Education primarily includes our Sanford-Brown schools that collectively offer academic programs in the career-oriented disciplines of health education, complemented by certain programs in business studies, and information technology in a classroom, laboratory or online setting.

Art & Design includes our Brooks Institute, Brown College, Collins College, Harrington College of Design and International Academy of Design & Technology ("IADT") schools. Collectively these schools offer

academic programs primarily in the career-oriented disciplines of fashion design, game design, graphic design, interior design, film and video production, photography, and visual communications in a classroom, laboratory or online setting.

International includes our INSEEC Group ("INSEEC") schools and Istituto Marangoni schools located in France, Italy and the United Kingdom, which collectively offer academic programs in the career-oriented disciplines of business studies, health education, fashion and design, and visual communications and technologies in a classroom or laboratory setting.

Transitional Schools includes those schools that are currently being taught out. As of September 30, 2009, the following campuses were included within Transitional Schools: Lehigh Valley College; five of the campuses that were part of the Gibbs Division, including Gibbs Colleges in Cranston, RI; Livingston, NJ; Norwalk, CT; and Katharine Gibbs Schools in New York, NY and Norristown, PA; and AIU -Los Angeles, CA.

2009 Third Quarter Overview. During the third quarter, our work on strengthening the Company's foundation and increasing our focus on additional revenue growth drove a significant improvement in operating performance. In the third quarter 2009, revenue grew approximately 14% over the prior year quarter. Excluding our Transitional Schools segment, in the third quarter 2009, revenue grew nearly 17% over the prior year quarter, representing the first time in over four years that all of our operating reportable segments (University, Health Education, Culinary Arts, Art & Design and International) reported revenue growth over the prior year quarter. Because the schools reported within Transitional Schools are winding down their operations, we believe reporting our financial results on a GAAP basis, and then without Transitional Schools' results, provides a more informative perspective of the ongoing operations of the business.

Throughout the third quarter, we continued to experience significant growth within Health Education, which reported a 26% increase in student starts over the prior year quarter. We expect to end the year with eight new start-up locations, the majority of which are focused within Health Education, allowing us to expand the strong operating model and market opportunity that Sanford-Brown continues to capitalize upon. Year to date, we have begun instructing students at three start-up campuses, two within our Health Education segment and one within our Culinary Arts segment, specifically our Sanford-Brown campus in San Antonio, TX, our Gibbs - Boston, MA campus refocused as a Health Education school and our LCB - St. Louis, MO campus.

Within University, CTU continued to build upon its recent success, reporting nearly a 30% increase in revenue over the prior year quarter driven by a 20% increase in new student starts and growth in student population. Within AIU, revenue increased 13% over the prior year quarter as a result of higher student population, improved student retention, and a slight increase in revenue per student.

AIU was granted initial accreditation by the Higher Learning Commission of the North Central Association of Colleges and Schools, or HLC, in May 2009. In connection with the grant of accreditation, AIU is required to submit a progress report to HLC relating to AIU's principles for designing curricula and relating to student learning outcomes in AIU's graduate programs. In addition, the initial grant of accreditation called for a focused visit to AIU to assess the issue of credit equivalence.

In October 2009, in connection with AIU's request for approval of new Bachelor's and Master's programs, HLC notified AIU that until the HLC focused visit is completed and certain recommendations associated with AIU's initial grant of accreditation are satisfied, HLC would defer consideration of applications from AIU for new degree or certificate programs. Related to its review to confirm satisfaction of its recommendations, HLC has also advised AIU that it will undertake an advisory visit to AIU in January 2010 focused on AIU's educational and business practices. In addition to any action taken by the HLC in response to the advisory visit, such visit may cause a delay in the timing of the focused visit discussed above.

If AIU fails to satisfactorily address the matters subject to these reviews, or otherwise fails to receive timely approval form HLC of its ability to begin offering new degree or certificate programs, our business, financial

condition, results of operations, and growth prospects could be adversely affected. In addition, any adverse future accreditation or regulatory action, or resulting adverse publicity related to these matters may harm our business and reputation and impair our ability to attract and retain students at our AIU schools.

In addition, during the third quarter 2009, the company announced that Robert (Todd) DeYoung has joined the company as Senior Vice President Corporate Marketing and Chief Marketing Officer. He is responsible for brand development, lead generation and marketing strategies to enhance company growth. Todd brings a significant amount of experience, including customer-focused marketing and branding experience that is expected to improve our ability to attract and retain students. His organization is working closely with our admissions teams, most notably within University, to continue to improve the effectiveness of our admissions model.

Our international institutions continue to grow at both INSEEC and Istituto Marangoni. Revenue grew nearly 22% over the prior year quarter. Excluding $0.3 million of favorable foreign currency exchange rates, revenue grew 19.5% over the prior year quarter. Student enrollments in the summer program increased 3% from the prior year quarter. Operating loss decreased $0.7 million due to the favorable impact of foreign currency exchange rates of approximately $1.0 million. Excluding the impact of favorable foreign currency exchange rates, operating loss increased approximately 6%.

Within Culinary Arts, new student start growth of 51% over the prior year quarter and continued strong retention rates led to record levels of student population. As a result, Culinary Arts revenue grew 7% in the third quarter 2009 over the prior year quarter, the first year over year growth in Culinary Arts revenue in two years. We believe our introduction of the 21-month Culinary program in January 2009, along with our implementation of student support activities at each Culinary campus, has helped regain student population lost as a result of the severe contraction of the student loan market which occurred in the second quarter 2008. By assisting our students throughout their entire course of study, including providing the opportunity for an additional year of Title IV funding with the decelerated 21-month program, we have improved growth prospects of our institution and the overall experience of the student. During the third quarter 2009, we terminated our licensing agreement with Le Cordon Bleu International ("LCBI") and acquired the outright rights to the Le Cordon Bleu brand in the education services field for the U.S. and Canada. As a part of the transaction, we also acquired the right of first refusal to purchase all non-acquired brand rights and operations of Le Cordon Bleu International in the event LCBI proposes to sell such rights and operations. We acquired the Le Cordon Bleu brand rights to further our execution of our strategic plan, as it solidifies a core asset essential to the future growth of our Culinary Arts segment.

Within Art & Design, revenue increased 7% over the prior year quarter, driven primarily by the revision to academic calendars at eleven of our IADT campuses. The calendar change provided for an increase in the number of annual student starts, and a shortened enrollment cycle which is expected to improve admissions productivity through more consistent enrollment performance and increased show rates. As a result of the calendar change, we experienced higher levels of student population due to an additional start period in June, and an increase in the number of revenue days in the quarter, which increased revenue and operating profit by approximately $3.7 million and $4.6 million, respectively, in the third quarter 2009.

At the point in which each campus within Transitional Schools ceases operations or exits a facility, to the extent that the facility's lease has not ended, we will record a charge related to the estimated fair value of the remaining lease obligation. Currently, we estimate charges totaling approximately $90 - $100 million related to these real estate actions through the end of 2010. Through September 30, 2009, we have recorded approximately $39.6 million of pretax charges associated with real estate actions, with $9.5 million being recorded in 2008. We expect the majority of the remaining charges to occur in the fourth quarter 2009. $22.5 million of the $30.1 million of pretax charges recorded in the first nine months of 2009 are reflected within the results from continuing operations. The remaining costs are reflected within the loss from discontinued operations for the nine months ended 2009. During the third quarter 2009, we completed the teach-out activities for McIntosh College in Dover, NH. In connection with the teach-out of this school we recorded $7.6 million for charges related to

recording the estimated fair value of the remaining operating lease obligation for the nine months ended September 30, 2009, with $2.3 million of this charge recorded in the third quarter 2009. The results of operations for McIntosh College for all periods presented are reflected within discontinued operations.

Finally, during the third quarter, we made the decision to convert Gibbs - Farmington, CT into a health school, thus utilizing an existing school for continued expansion into the growing Health Education business. As a result, the results of operations for Gibbs - Farmington, CT for all periods presented are reflected within Health Education.

CONSOLIDATED RESULTS

The summary of selected financial data table below should be referenced in
connection with a review of the following discussion of our results of
operations for the three months ended September 30, 2009 and 2008.



                                           For the Three Months Ended September 30,                     % Change
                                                 % of Total                         % of Total
                                  2009            Revenue            2008            Revenue          2009 vs. 2008
                                                              (Dollars in thousands)
TOTAL REVENUE                   $ 459,912                          $ 402,964                                   14.1 %

OPERATING EXPENSES
Educational services and
facilities                        154,842              33.7 %        166,794              41.4 %               -7.2 %
General and administrative:
Advertising                        76,936              16.7 %         64,537              16.0 %               19.2 %
Admissions                         48,228              10.5 %         45,890              11.4 %                5.1 %
Administrative                    114,731              24.9 %         95,099              23.6 %               20.6 %
Bad debt                           14,123               3.1 %         11,423               2.8 %               23.6 %

Total general and
administrative expense            254,018              55.2 %        216,949              53.8 %               17.1 %
Depreciation and
amortization                       16,278               3.5 %         18,614               4.6 %              -12.5 %
Goodwill and asset
impairment                          2,500               0.5 %          6,843               1.7 %              -63.5 %

OPERATING INCOME (LOSS)            32,274               7.0 %         (6,236 )            -1.5 %                N/A

PRETAX INCOME (LOSS)               32,652               7.1 %         (3,792 )            -0.9 %                N/A
PROVISION (BENEFIT) FOR
INCOME TAXES                        9,681               2.1 %         (5,341 )            -1.3 %                N/A

Effective tax rate                   29.6 %                            140.8 %
INCOME FROM CONTINUING
OPERATIONS                      $  22,971               5.0 %      $   1,549               0.4 %             1383.0 %
LOSS FROM DISCONTINUED
OPERATIONS, net of tax             (2,179 )            -0.5 %         (1,696 )            -0.4 %               28.5 %

NET INCOME (LOSS)               $  20,792               4.5 %      $    (147 )             0.0 %                N/A

Educational services and facilities expense includes costs directly attributable to the educational activity of our schools, including, among other things, salaries and benefits of faculty, academic administrators, and student support personnel, costs of educational supplies and facilities, including rents on school leases, certain costs of establishing and maintaining computer laboratories, costs of student housing, and owned and leased facility costs, royalty fees paid to Le Cordon Bleu and certain student financing costs. Also included in educational services and facilities expense are costs of other goods and services provided by our schools, including, among other things, costs of textbooks, laptop computers, dormitory services, restaurant services, contract training and cafeteria services.

General and administrative expense includes salaries and benefits of personnel in corporate and school administration, marketing, admissions, financial aid, accounting, human resources, legal and compliance. Costs of promotion and development, advertising and production of marketing materials, occupancy of the corporate offices and bad debt expense are also included in this expense category.

Three Months Ended September 30, 2009 as Compared to Three Months Ended September 30, 2008

Revenue

Total revenue increased $56.9 million, or 14.1% from the prior year quarter as student population increased, and student retention and student start growth metrics significantly improved. The overall increase in revenue is primarily attributable to Health Education and University, partially offset by decreases in Transitional Schools. As campuses within Transitional Schools wind down their operations, the number of students remaining to complete their studies declines and so revenue within Transitional Schools will continue to decline. Excluding Transitional Schools' revenue of $2.4 million, total revenue increased $64.8 million, or 16.5%. Health Education's and University's revenue increases of 31.0% and 19.6%, respectively, over the prior year quarter are primarily attributable to student population and student start growth, as well as improved student retention within University.

Educational Services and Facilities Expense

Educational services and facilities expense decreased $12.0 million, or 7.2% from the prior year quarter. The prior year quarter expense includes $9.7 million of pretax charges related to lease termination expense and the fair value of remaining lease obligations for vacated space in our Culinary Arts segment, as well as a $1.2 million charge within our Transitional Schools segment for vacated space related to our location at Katharine Gibbs School - New York, NY. We continue to manage these costs, including occupancy costs, and focus our efforts on optimizing our staffing models as our revenue continues to grow across the Company.

General and Administrative Expense

General and administrative expense increased $37.1 million, or 17.1% from the prior year quarter primarily driven by a $21.6 million increase in performance-based compensation expense, $12.4 million of additional advertising expense and $2.7 million of increased bad debt expense. The increase in performance-based compensation expense over the prior year quarter was primarily due to higher expected achievement of the Company's annual business objectives and financial performance metrics of its annual cash incentive plan. The Company incurred higher advertising expense in the current year quarter as compared to the prior year quarter in all of its operating segments, most notably within University as we continue to capitalize upon market opportunities.

Bad debt expense incurred by each of our reportable segments during the quarters ended September 30, 2009 and 2008 was as follows (dollars in thousands):

                                         For the Three Months Ended September 30,
                                                 As a % of                    As a % of
                                                  Segment                      Segment
                                     2009         Revenue         2008         Revenue
    Bad debt expense by segment:
    University                     $  4,350            2.1 %    $  3,150            1.8 %
    Culinary Arts                     7,717            8.4 %       3,259            3.8 %
    Health Education                  2,107            2.7 %       3,222            5.4 %
    Art & Design                        493            0.7 %       1,874            3.0 %
    International                      (344 )         -2.2 %        (233 )         -1.8 %
    Transitional Schools               (112 )         -4.7 %         133            1.3 %

    Subtotal                         14,211                       11,405
    Corporate and other                 (88 )          N/A            18            N/A

    Total bad debt expense         $ 14,123            3.1 %    $ 11,423            2.8 %

The overall increase in bad debt expense as compared to the prior year quarter is primarily attributable to the increase in Culinary Arts, as student receivable balances grew as a result of extended payment plans being offered to certain students beginning in the third quarter 2008 as a replacement for the recourse loan program previously provided by Sallie Mae. The decrease in Art & Design's bad debt expense as compared to the prior year quarter is primarily due to timing as a result of the calendar shift as previously discussed.

Goodwill and Asset Impairment

During the third quarter 2009, we recorded a $2.5 million asset impairment charge for one of our owned facilities, resulting from its carrying value exceeding its current fair value. This noncash charge is reflected within Corporate and other. During the third quarter 2008 we recorded a noncash charge of $4.8 million related to write-offs of certain assets following the exit of a facility within Culinary Arts. In addition, during the third quarter 2008 we renamed our two Western School of Health & Business Career Campuses to Sanford-Brown Institute. As a result the $2.0 million assigned to the Western School of Health & Business Careers' trade name was written off.

Operating Income

The operating income increase of $38.5 million from the prior year quarter is primarily attributable to University and Culinary Arts, as increased student population and strong student retention drove revenue growth. Excluding Transitional Schools, the 16.5% increase in revenue over the prior year quarter, along with close monitoring of operating expenses, drove the operating income improvement.

Provision for Income Taxes

Our consolidated effective income tax rate for continuing operations was 29.6% for the three months ended September 30, 2009 compared to a tax benefit for the three months ended September 30, 2008 as we experienced a loss in the prior year quarter. The change in our effective tax rate from the prior year quarter was primarily due to the recording of a valuation allowance on the net operating losses of a foreign subsidiary and an increase in our state income taxes due to earnings mix shifts and various state law changes. In addition, the current year results include lower levels of tax-exempt interest as a percentage of pretax income and a lower level of reductions of tax reserves compared to the prior year.

Loss from Discontinued Operations

The following campuses are reflected in discontinued operations for both current and prior period financial results: Brooks College, Sunnyvale and Long Beach, CA; International Academy of Design & Technology, Pittsburgh, PA ("IADT - Pittsburgh"); International Academy of Design and Technology, Toronto, Canada ("IADT - Toronto"); Katharine Gibbs School, Piscataway, NJ; and McIntosh College, Dover, NH. These campuses have ceased operations. As additional schools within the Transitional Schools segment cease operations, the results of operations for all periods presented will be reflected within discontinued operations.

During the third quarter 2009, we completed the teach-out activities for McIntosh College. In connection with the teach-out of this school we recorded a $2.3 million charge related to recording the estimated fair value of the remaining operating lease obligation.

Nine Months Ended September 30, 2009 as Compared to Nine Months Ended
September 30, 2008



                                             For the Nine Months Ended September 30,                        % Change
                                                   % of Total                           % of Total
                                   2009             Revenue             2008             Revenue          2009 vs. 2008
                                                                (Dollars in thousands)
TOTAL REVENUE                   $ 1,337,641                          $ 1,265,998                                    5.7 %

OPERATING EXPENSES
Educational services and
facilities                          485,624              36.3 %          488,924              38.6 %               -0.7 %
General and administrative:
Advertising                         218,799              16.4 %          195,001              15.4 %               12.2 %
Admissions                          141,958              10.6 %          154,050              12.2 %               -7.8 %
Administrative                      313,694              23.5 %          291,931              23.1 %                7.5 %
Bad debt                             38,924               2.9 %           32,726               2.6 %               18.9 %

Total general and
administrative expense              713,375              53.3 %          673,708              53.2 %                5.9 %
Depreciation and
amortization                         49,824               3.7 %           57,365               4.5 %              -13.1 %
Goodwill and asset
impairment                            2,500               0.2 %            8,925               0.7 %              -72.0 %

OPERATING INCOME                     86,318               6.5 %           37,076               2.9 %              132.8 %
. . .