Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company, as defined in Rule 12b-2 of the Exchange Act. Yes ☐ No ☒

Number of shares of registrant’s common stock, par value $0.01, outstanding as of July ~~31, 2017: 69,076,820~~25, 2018: 69,723,488

	June 30,			December 31,			June 30,			December 31,
	2017			2016			2018			2017
ASSETS	(unaudited)						(unaudited)
CURRENT ASSETS:
Cash and cash equivalents, unrestricted	$	38,898		$	49,507		$	33,175		$	18,110
Restricted cash		1,375			1,375			789			789
Restricted short-term investments		7,097			8,597			4,570			5,070
Short-term investments		124,702			147,681			151,571			156,178
Total cash and cash equivalents, restricted cash and short-term investments		172,072			207,160			190,105			180,147
Student receivables, net of allowance for doubtful accounts of $22,542 and $21,376 as of June 30, 2017 and December 31, 2016, respectively		21,389			22,825
Student receivables, net of allowance for doubtful accounts of $22,098 and $20,533 as of June 30, 2018 and December 31, 2017, respectively								24,992			18,875
Receivables, other, net		1,163			929			1,948			1,163
Prepaid expenses		13,335			14,446			10,957			7,722
Inventories		877			1,868			914			1,112
Other current assets		791			817			1,607			1,319
Assets of discontinued operations		100			148			171			382
Total current assets		209,727			248,193			230,694			210,720

NON-CURRENT ASSETS:
Property and equipment, net of accumulated depreciation of $368,933 and $381,415 as of June 30, 2017 and December 31, 2016, respectively		35,434			40,512
Property and equipment, net of accumulated depreciation of $196,487 and $213,825 as of June 30, 2018 and December 31, 2017, respectively								30,829			33,230
Goodwill		87,356			87,356			87,356			87,356
Intangible assets, net of amortization of $1,200 and $800 as of June 30, 2017 and December 31, 2016, respectively		8,100			8,500
Student receivables, net of allowance for doubtful accounts of $2,032 and $1,766 as of June 30, 2017 and December 31, 2016, respectively		2,780			3,055
Intangible assets, net of amortization of $1,400 as of both June 30, 2018 and December 31, 2017								7,900			7,900
Student receivables, net of allowance for doubtful accounts of $2,170 and $2,001 as of June 30, 2018 and December 31, 2017, respectively								2,334			2,548
Deferred income tax assets, net		149,528			158,272			91,443			98,084
Other assets		7,563			7,608			6,649			5,673
Assets of discontinued operations		5,987			6,105			1,585			1,585
TOTAL ASSETS	$	506,475		$	559,601		$	458,790		$	447,096
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable	$	10,414		$	10,099		$	11,297		$	8,515
Accrued expenses:
Payroll and related benefits		31,485			41,203			22,895			32,910
Advertising and marketing costs		10,196			10,253			9,945			9,245
Income taxes		2,098			1,830			1,762			2,185
Other		32,923			69,244			33,834			31,233
Deferred tuition revenue		27,230			28,364
Deferred revenue								23,050			22,897
Liabilities of discontinued operations		6,667			8,219			3,125			5,701
Total current liabilities		121,013			169,212			105,908			112,686

NON-CURRENT LIABILITIES:
Deferred rent obligations		23,879			30,713			14,827			15,277
Other liabilities		23,421			31,751			15,138			22,143
Liabilities of discontinued operations		3,214			6,422			-			785
Total non-current liabilities		50,514			68,886			29,965			38,205

STOCKHOLDERS' EQUITY:
Preferred stock, $0.01 par value; 1,000,000 shares authorized; none issued or outstanding		-			-			-			-
Common stock, $0.01 par value; 300,000,000 shares authorized; 84,230,258 and 83,538,033 shares issued, 69,076,820 and 68,519,005 shares outstanding as of June 30, 2017 and December 31, 2016, respectively		842			835
Common stock, $0.01 par value; 300,000,000 shares authorized; 85,115,123 and 84,279,533 shares issued, 69,723,487 and 69,117,803 shares outstanding as of June 30, 2018 and December 31, 2017, respectively								851			843
Additional paid-in capital		618,105			613,325			624,869			621,008
Accumulated other comprehensive income (loss)		39			(258	)
Accumulated other comprehensive loss								(356	)		(164	)
Accumulated deficit		(66,767	)		(76,230	)		(81,874	)		(108,127	)
Cost of 15,153,438 and 15,019,028 shares in treasury as of June 30, 2017 and December 31, 2016, respectively		(217,271	)		(216,169	)
Treasury stock, at cost; 15,391,636 and 15,161,730 shares as of June 30, 2018 and December 31, 2017, respectively								(220,573	)		(217,355	)
Total stockholders' equity		334,948			321,503			322,917			296,205
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	506,475		$	559,601		$	458,790		$	447,096

The accompanying notes are an integral part of these condensed consolidated financial statements.

	For the Quarter Ended June 30,						For the Year to Date Ended June 30,						For the Quarter Ended June 30,						For the Year to Date Ended June 30,
	2017			2016			2017			2016			2018			2017			2018			2017
REVENUE:
Tuition and fees	$	145,507		$	181,432		$	306,884		$	379,217		$	141,344		$	145,507		$	288,854		$	306,884
Other		715			1,194			1,447			2,295			692			715			1,247			1,447
Total revenue		146,222			182,626			308,331			381,512			142,036			146,222			290,101			308,331

OPERATING EXPENSES:
Educational services and facilities		36,406			58,062			76,579			119,600			30,290			36,406			57,236			76,579
General and administrative		96,836			102,072			205,081			225,635			98,340			96,836			196,348			205,081
Depreciation and amortization		3,876			5,202			7,786			11,771			2,103			3,876			4,685			7,786
Asset impairment		-			-			-			237
Total operating expenses		137,118			165,336			289,446			357,243			130,733			137,118			258,269			289,446
Operating income		9,104			17,290			18,885			24,269			11,303			9,104			31,832			18,885

OTHER INCOME:
Interest income		464			301			854			566			742			464			1,376			854
Interest expense		(113	)		(116	)		(226	)		(352	)		(106	)		(113	)		(215	)		(226	)
Miscellaneous income (expense)		253			(231	)		293			(14	)
Total other income (expense)		604			(46	)		921			200
Miscellaneous (expense) income														(135	)		253			193			293
Total other income														501			604			1,354			921

PRETAX INCOME		9,708			17,244			19,806			24,469			11,804			9,708			33,186			19,806
Provision for income taxes		5,045			4,620			9,546			8,755			2,940			5,045			6,438			9,546
INCOME FROM CONTINUING OPERATIONS		4,663			12,624			10,260			15,714			8,864			4,663			26,748			10,260

LOSS FROM DISCONTINUED OPERATIONS, net of tax		(377	)		(785	)		(797	)		(864	)		(113	)		(377	)		(495	)		(797	)

NET INCOME		4,286			11,839			9,463			14,850			8,751			4,286			26,253			9,463

OTHER COMPREHENSIVE INCOME, net of tax:
OTHER COMPREHENSIVE (LOSS) INCOME, net of tax:
Foreign currency translation adjustments		222			(97	)		263			96			(168	)		222			(82	)		263
Unrealized gains on investments		11			131			34			454
Total other comprehensive income		233			34			297			550
Unrealized gain (loss) on investments														108			11			(110	)		34
Total other comprehensive (loss) income														(60	)		233			(192	)		297
COMPREHENSIVE INCOME	$	4,519		$	11,873		$	9,760		$	15,400		$	8,691		$	4,519		$	26,061		$	9,760

NET INCOME (LOSS) PER SHARE - BASIC:
Income from continuing operations	$	0.07		$	0.18		$	0.15		$	0.23		$	0.13		$	0.07		$	0.39		$	0.15
Loss from discontinued operations		(0.01	)		(0.01	)		(0.01	)		(0.01	)		-			(0.01	)		(0.01	)		(0.01	)
Net income per share	$	0.06		$	0.17		$	0.14		$	0.22		$	0.13		$	0.06		$	0.38		$	0.14

NET INCOME (LOSS) PER SHARE - DILUTED:
Income from continuing operations	$	0.07		$	0.18		$	0.14		$	0.23		$	0.12		$	0.07		$	0.38		$	0.14
Loss from discontinued operations		(0.01	)		(0.01	)		(0.01	)		(0.01	)		-			(0.01	)		(0.01	)		(0.01	)
Net income per share	$	0.06		$	0.17		$	0.13		$	0.22		$	0.12		$	0.06		$	0.37		$	0.13

WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic		69,025			68,368			68,803			68,261			69,668			69,025			69,443			68,803
Diluted		70,884			69,015			70,590			68,627			71,562			70,884			71,239			70,590

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

	For the Year to Date Ended June 30,						For the Year to Date Ended June 30,
	2017			2016			2018			2017

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	9,463		$	14,850		$	26,253		$	9,463
Adjustments to reconcile net income to net
cash (used in) provided by operating activities:
Asset impairment		-			237
cash provided by (used in) operating activities:
Depreciation and amortization expense		7,786			11,771			4,685			7,786
Bad debt expense		15,112			14,769			13,679			15,112
Compensation expense related to share-based awards		2,326			1,391			2,698			2,326
Gain on disposition of property and equipment		-			(238	)
Deferred income taxes		8,744			-			6,641			8,744
Changes in operating assets and liabilities		(77,677	)		(36,213	)		(39,202	)		(77,677	)
Net cash (used in) provided by operating activities		(34,246	)		6,567
Net cash provided by (used in) operating activities								14,754			(34,246	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of available-for-sale investments		(145,088	)		(93,689	)		(101,043	)		(145,088	)
Sales of available-for-sale investments		169,480			58,330			106,139			169,480
Purchases of property and equipment		(2,146	)		(1,970	)		(2,737	)		(2,146	)
Proceeds on the sale of assets		-			3,400
Payments of cash upon sale of businesses		-			(62	)
Net cash provided by (used in) investing activities		22,246			(33,991	)
Net cash provided by investing activities								2,359			22,246

CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock		2,459			278			1,170			2,459
Payment on borrowings		-			(38,000	)
Payments of employee tax associated with stock compensation		(1,101	)		(520	)		(3,218	)		(1,101	)
Net cash provided by (used in) financing activities		1,358			(38,242	)
Net cash (used in) provided by financing activities								(2,048	)		1,358

EFFECT OF FOREIGN CURRENCY EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS:		33			(36	)		-			33

NET DECREASE IN CASH AND CASH EQUIVALENTS		(10,609	)		(65,702	)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS								15,065			(10,609	)
CASH AND CASH EQUIVALENTS, beginning of the period		50,882			116,740			18,899			50,882
CASH AND CASH EQUIVALENTS, end of the period	$	40,273		$	51,038		$	33,964		$	40,273

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Career Education’s academic institutions offer a quality education to a diverse student population in a variety of disciplines through online, campus-based and blended learning programs. Our two universities – American InterContinental University (“AIU”) and Colorado Technical University (“CTU”) – provide degree programs through the master’s or doctoral level as well as associate and bachelor’s levels. Both universities predominantly serve students online with career-focused degree programs that are designed to meet the educational demands of today’s busy adults. AIU and CTU continue to show innovation in higher education, advancing new personalized learning technologies like their intellipath~~™ adaptive~~^® learning platform. Career Education is committed to providing quality education that closes the gap between learners who seek to advance their careers and employers needing a qualified workforce.

Additionally, CEC is in the process of teaching out campuses within our ~~Transitional Group and Culinary Arts segments.~~All Other Campuses segment. Students enrolled at these campuses have been afforded the reasonable opportunity to complete their program of study prior to the final teach-out date.

A listing of ~~individual campus~~our University Group locations and web links to ~~Career Education’s colleges,~~these institutions ~~and universities~~ can be found at www.careered.com.

As used in this Quarterly Report on Form 10-Q, the terms “we,” “us,” “our,” “the Company” and “CEC” refer to Career Education Corporation and our wholly-owned subsidiaries. The terms “college,” “institution” and “university” refer to an individual, branded, for-profit educational institution, owned by us and includes its campus locations. The term “campus” refers to an individual main or branch campus operated by one of our colleges, institutions or universities.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the financial statements do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments, including normal recurring accruals, considered necessary for a fair presentation have been included. Operating results for the quarter and year to date ended June 30, ~~2017~~2018 are not necessarily indicative of the results that may be expected for the full year ending December 31, ~~2017.~~2018.

The unaudited condensed consolidated financial statements presented herein include the accounts of Career Education Corporation and our wholly-owned subsidiaries (collectively “CEC”). All intercompany transactions and balances have been eliminated.

Our reporting segments are determined in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 280 – Segment Reporting and are based upon how the Company analyzes performance and makes decisions. Each segment represents a group of postsecondary education providers that offer a variety of academic programs. We organize our business across ~~four~~three reporting segments: CTU, AIU (comprises University Group); and All Other Campuses (formerly separately reported as Culinary Arts and Transitional ~~Group (comprises Career Schools~~ Group). Campuses included in our ~~Transitional Group and Culinary Arts segments~~All Other Campuses segment are currently being taught out and no longer enroll new ~~students.~~students or have completed their teach-out. These campuses employ a gradual teach-out process, enabling them to continue to operate while current students have a reasonable opportunity to complete their ~~course~~program of study.

During the second quarter of ~~2017,~~2018, the Company completed the teach-out of three ~~Transitional Group~~ campuses: Briarcliffe Bethpage, Sanford-Brown ~~Brooklyn Center, Sanford-Brown Chicago~~Seattle and Sanford-Brown ~~Orlando,~~Online, which continue to be reported within the ~~Transitional Group~~All Other Campuses segment as of June 30, ~~2017~~2018 in accordance with ASC Topic 360 – Property, Plant and Equipment, which limits discontinued operations reporting.

Effective January 2017, the Company now accounts for cash flows related to cash payments for employee taxes made by the Company on the employees’ behalf for withheld shares related to stock settlements as a financing activity within the statement of cash flows.1, 2018, we have implemented FASB ASC Topic 606 – Revenue from Contracts with Customers. This ~~change was~~guidance supersedes all previously issued revenue recognition guidance. As a result of this change in accounting guidance, we have updated our revenue recognition policies and disclosures. The guidance ~~issued by~~under Topic 606 did not impact the ~~FASB~~amount of revenue we recognized in previous periods, and also does not impact the amount of revenue recognized prospectively as our revenue recognition methodology remained relatively the same under ~~Accounting Standards Update (“ASU”) No 2016-09,~~ ~~Compensation – Stock Compensation (Topic 718). Prior period amounts were recast~~the new guidance. The guidance under Topic 606 did impact our presentation of financial condition and disclosures. Previously, a student’s entire accounts receivable balance along with their deferred revenue balance was evaluated to ~~cash flows~~determine the net position of the two and the proper reporting of that balance within student receivables, net, or within deferred revenue, net, on our condensed consolidated balance sheets. Under Topic 606, we now separate the contract asset balance from ~~financing activities from cash flows from operating activities~~the student receivable balance to ~~be comparable to current year reporting.~~determine the amount reported as deferred revenue on the condensed consolidated balance sheets for each student. See Note ~~3 “Recent Accounting Pronouncements”~~5 “Revenue Recognition” for ~~further discussion.~~more information.

Effective January 2017, the Company now accounts for cash flows related to changes in restricted cash and restricted cash equivalents within cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. This change was a result of updated guidance issued by the FASB under ASU No 2016-18, Statement of Cash Flows (Topic 230): ~~Restricted Cash~~. Prior period amounts are now included in cash and cash equivalents, beginning and end of the period, which were previously presented within cash flows from financing activities for changes in balances, to be comparable to current year reporting. See Note 3 “Recent Accounting Pronouncements” for further discussion.

In ~~May 2017,~~June 2018, the FASB issued ASU No. ~~2017-09,~~2018-07, Compensation – Stock Compensation (Topic 718): ~~Scope of Modification Accounting.~~ Improvements to Non-Employee Share-Based Payment Accounting~~The amendments~~. This amendment in this ASU ~~provide clarity and reduce both diversity in practice and cost and complexity when applying~~expanded the ~~guidance in Topic 718, Compensation – Stock Compensation,~~accounting scope to ~~a change~~include share-based payments issued to ~~the terms~~non-employees for goods or ~~conditions of a~~services to substantially align with share-based payment award. Stakeholders observed that the definition of the term modification is broad and that its interpretation results in diversity in practice. The amendments in this update provide further guidance about which changespayments issue to ~~the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718.~~employees. For ~~all~~ public entities, ASU ~~2017-09~~2018-07 is effective for annual reporting periods and interim periods beginning after December 15, ~~2017;~~2018; early adoption is permitted. We have evaluated and early adopted this ~~guidance. The adoption did not impact the presentation of our financial condition, results of operations and disclosures.~~

~~In January 2017, the FASB issued ASU No. 2017-04, Intangibles – Goodwill and Other (Topic 350):~~ ~~Simplifying the Test for Goodwill Impairment.~~ The amendments in this ASU modify the concept of impairment from the condition that exists when the carrying amount of goodwill exceeds its implied fair value to the condition that exists when the carrying amount of a reporting unit exceeds its fair value. An entity no longer will determine goodwill impairment by calculating the implied fair value of goodwill by assigning fair value of a reporting unit to all its assets and liabilities as if that reporting unit had been acquired in a business combination, eliminating Step 2 from the goodwill impairment tests. For all public entities, ASU 2017-04 isguidance effective for annual periods and interim periods beginning after December 15, 2019; early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates on or after January 1, 2017. We have evaluated and adopted this guidance beginning 2017.2018. The adoption did not significantly impact the presentation of our financial condition, results of operations and disclosures.

In ~~January 2017,~~March 2018, the FASB issued ASU No. ~~2017-03, Accounting Changes and Error Corrections~~2018-05, Income Taxes (Topic ~~250) and Investments – Equity Method and Joint Ventures (Topic 323)~~740): Amendments to SEC Paragraphs Pursuant to SEC Staff ~~Announcements at the September 22, 2016 and November 17, 2016 EITF Meetings~~Accounting Bulletin No. 118. The amendments in this ASU ~~announced disclosure of the impact that recently issued accounting standards will have on the~~allows public companies to record provisional amounts in their annual and interim financial statements ~~of a registrant when such standards are adopted~~using an approach similar to the “measurement period” that US GAAP permits in ~~a future period. The announcement applies to ASU No. 2014-09, Revenue from Contracts~~connection with Customers (Topic 606), ASU No. 2016-02 Leases (Topic 842); and ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326). The amendment provides SEC staff views that a registrant should evaluate ASUs that have not yet been adopted to determine the appropriate financial statement disclosures and the potential material effects of those ASUs on the financial statements when adopted. The changes and corrections within this guidance did not significantly impact the presentation of our financial condition, results of operations and disclosures.

~~In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718):~~ ~~Improvement to Employee Share-Based Payment Accounting. This ASU simplified several aspects of accounting for share-based payment award transactions including~~ the accounting for a recently acquired business. During the measurement period, management records provisional amounts for the effects of the tax law changes that can be reasonably estimated. If the finalization of the effect results in a different number, the adjustment to the provisional amount that was initially recorded does not represent the correction of an error. Instead, the adjustment is recorded to income ~~taxes, classification of excess~~ tax benefits on the statement of cash flows, classification of employee taxes paid on the statement of cash flows when the employer withholds shares, forfeiture policy election and payroll minimum statutory withholding. The changesexpense in the new standard eliminate the accounting for excess tax benefits to be recognized in additional paid-in capital and tax deficiencies recognized either in the income tax provision or in additional paid-in capital. We have evaluated each component of this guidance listed below and adopted the new standard beginning 2017.

~~In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230):~~ ~~Restricted Cash~~. The amendments in this ASU require that a statement of cash flows explain the change during the period in the total cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows.identified. For all ~~public~~ entities, ASU ~~2016-18~~2018-05 is effective for annual periods and interim periods ~~beginning after December 15, 2017; early adoption is permitted for all organizations for annual periods and interim periods.~~upon discovery. We have evaluated and adopted this guidance beginning ~~2017 for all periods presented.~~2018. The adoption did not significantly impact the presentation of our financial condition, results of operations and disclosures.

~~In March 2016, the FASB issued ASU No. 2016-07, Investments – Equity Method and Joint Ventures (Topic 323):~~ ~~Simplifying the Transition to the Equity Method of Accounting~~. The amendments in this ASU eliminate the requirement that when an investment qualifies for use of the equity method as a result of an increase in the level of ownership interest or degree of influence, an investor must adjust the investments, results of operations, and retained earnings retroactively on a step-by-step basis as if the equity method was in effect during all previous periods. The amendment requires an equity method investor to add the cost of acquisition and requires available-for-sale equity securities that qualify for the equity method of accounting to recognize earnings as unrealized holding gains or losses in accumulated other comprehensive income. For all entities, ASU 2016-07 is effective for annual periods and interim periods beginning after December 15, 2016. We have evaluated and adopted this guidance beginning 2017. The adoption did not materially impact the presentation of our financial condition, results of operations and disclosures.

~~In July 2015, the FASB issued ASU No. 2015-11, Inventory (Topic 330):~~ ~~Simplifying the Measurement of Inventory~~. The amendments in this ASU require an entity to measure inventory at the lower of cost and net realizable value, further clarifying consideration for net realizable value as estimated selling prices in the ordinary course of business less reasonably predictable costs of completion, disposal and transportation. This ASU more closely aligns the measurement of inventory in GAAP with the measurement of inventory in International Financial Reporting Standards (“IFRS”). For public business entities, ASU 2015-11 is effective for annual periods and interim periods beginning after December 15, 2016. The amendment in this ASU is prospectively applied. We have evaluated and adopted this guidance beginning 2017. The adoption did not significantly impact the presentation of our financial condition, results of operations and disclosures.

In February 2017, the FASB issued ASU No. 2017-05, Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial ~~Assets.~~Assets. The amendments in this ASU clarify and provide guidance for partial sales of nonfinancial assets and recognizing gains and losses from the transfer of nonfinancial assets in contracts with noncustomers. For all public entities, ASU 2017-05 is effective for annual reporting periods and interim periods beginning after December 15, ~~2017; early adoption is permitted for all organizations for annual periods~~2017. We have evaluated and ~~interim periods. We are currently evaluating~~adopted this guidance ~~and believe the~~beginning 2018. The adoption ~~will~~did not significantly impact the presentation of our financial condition, results of operations and disclosures.

In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory. The amendments in this ASU improve the accounting for the income tax consequences of intra-entity transfers of assets other than inventory by reducing complexity in accounting standards. The amendments eliminate the exception prohibiting the recognition of current and deferred income taxes for an intra-entity transfer of an asset other than inventory until the asset has been sold to an outside party. For all public entities, ASU 2016-16 is effective for annual periods and interim periods beginning after December 15, ~~2017; early adoption is permitted for all organizations for annual periods~~2017. We have evaluated and ~~interim periods. We are currently evaluating~~adopted this guidance ~~and believe the~~beginning 2018. The adoption ~~will~~did not significantly impact the presentation of our financial condition, results of operations and disclosures.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. The amendments in this ASU address eight specific cash flow issues with the objective of reducing the existing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows under Topic 230. The eight topics include debt prepayment or extinguishments costs, settlement of zero-coupon debt instruments, contingent consideration payments made after a business combination, proceeds from settlement of insurance claims, proceeds from settlement of corporate-owned life insurance policies, distributions received from equity method investees, beneficial interests in

securitization transactions and separately identifiable cash flows and application of the predominance principle. For all public business entities, ASU 2016-15 is effective for annual periods and interim periods beginning after December 15, ~~2017; early~~2017. We have evaluated and adopted this guidance beginning 2018. The adoption did not significantly impact the presentation of our financial condition, results of operations and disclosures.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), a new accounting standard intended to improve and converge the financial reporting requirements between U.S. GAAP and International Financial Reporting Standards, which supersedes virtually all existing revenue recognition guidance under GAAP. The fundamental principles of the new guidance are that companies should recognize revenue in a manner that reflects the timing of the transfer of services to customers and the amount of revenue recognized reflects the consideration that a company expects to receive for the goods and services provided. The new guidance establishes a five step approach for the recognition of revenue. For all public business entities, ASU No. 2014-09 is ~~permitted for all organizations~~effective for annual periods and interim ~~periods.~~periods beginning after December 15, 2017. We completed the assessment of our evaluation of the new standard on our accounting policies, processes and system requirements and adopted this guidance beginning 2018. We have adopted this guidance using the modified retrospective approach which applies to contracts that have remaining obligations as of January 1, 2018 and new contracts entered into subsequent to January 1, 2018. Under the modified retrospective approach, we do not restate comparative periods on our condensed consolidated financial statements. The adoption impacted the presentation of our financial condition and disclosures but did not impact our results of operations. See Note 5 “Revenue Recognition” for more information.

In February 2018, the FASB issued ASU No. 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The amendments in this ASU provide financial statement preparers with an option to reclassify stranded tax effects within accumulated other comprehensive income

(“AOCI”) to retained earnings in each period when the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recorded. For all entities, ASU 2018-02 is effective for annual periods and interim periods beginning after December 15, 2018; early adoption is permitted. We are currently evaluating this guidance and believe the adoption will not significantly impact the presentation of our financial condition, results of operations and ~~disclosures.~~disclosure.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The amendments in this ASU require a financial asset measured at amortized cost basis to be presented at the net amount expected to be collected and credit losses relating to available-for-sale debt securities to be recorded through an allowance for credit losses. For all public business entities, ASU 2016-13 is effective for annual periods and interim periods beginning after December 15, 2019; early adoption is permitted for all organizations for annual periods and interim periods beginning after December 15, 2018. We are currently evaluating this guidance and believe the adoption will not significantly impact the presentation of our financial condition, results of operations and disclosures.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The objective of Topic 842 is to establish transparency and comparability that lessees and lessors shall apply to report useful information to users of financial statements about the amount, timing, and uncertainty of cash flows arising from a lease. The core principle of Topic 842 is that lessees should recognize the assets and liabilities that arise from leases. All leases create an asset and liability for the lessee in accordance with FASB Concept Statements No. 6 Elements of Financial Statements, and, therefore, recognition of those lease assets and liabilities represents an improvement over previous GAAP. The accounting applied for lessors largely remained unchanged. The amendment in this ASU requires recognition of a lease liability and a right toof use asset at the lease inception date. For all public business entities, ASU 2016-02 is effective for annual periods and interim periods beginning after December 15, 2018; early adoption is permitted. While we are continuing to assess all potential impacts of the standard, we currently believe the most significant impact primarily relates to our accounting for real estate leases and real estate subleases. ~~The Company expects~~We expect to have a material amount now reported as a right of use asset and lease liability related to these leases as well as ~~expects~~expect to separate lease components from the non-lease components for recognition. WeBased on the current ASU, we will be required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach ~~starting fiscal year~~beginning with January 1, 2017. We are currently evaluating this guidance and believe the adoption will significantly impact the presentation of our financial condition ~~results of operations and disclosures.~~

We have assigned internal resources and are in the assessment stage of our evaluation of the impact of the new standard on our accounting policies, processes and system requirements. While we continue to assess all potential impacts under the new standard, the Company has made progress as outlined in the below discussion and remains on schedule to implement the new revenue guidelines. This standard will be effective for us beginning in January 2018. We intend to adopt the new standard based on the modified retrospective transition method and accordingly the Company expects to complete the analysis of the cumulative effect adjustment to retained earnings, if applicable, as of the start of the first period for which it applies the new standard. While the Company continues to make progress to assess all potential impacts under the new revenue standard, including the areas described below, and have reached preliminary conclusions on key accounting assessments related to the standard, we do not know or cannot reasonably estimate quantitative information related to the impact of the new revenue standard on the Company’s financial statements and disclosures, ~~at this time.~~

The Company’s revenue is derived primarily from academic programs taught to its students. Tuition and other tuition-related fees are recognized as revenue on a straight-line basis over either the academic term or the program period based on number of days within such period. Non-tuition related revenue is recognized as services are performed or goods are delivered. See Note 2 “Summary of Significant Accounting Policies,” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, which was filed with the Securities and Exchange Commission on February 23, 2017. The Company is in the process of identifying and evaluating each source of revenue stream that will remain as of the implementation date to evaluate the five step approach from the principles-based guidance (Topic 606) and develop a preliminary assessment to determine any impact to existing practices for revenue recognition. The key revenue component considerations the Company is evaluating are as follows:

The Company is currently evaluating the assessment of various contractual arrangements and performance obligations for each type of revenue stream and it reasonably expects the core contractual or performance obligations to remain similar in substance and not differ materially from considering each contract or performance obligation separate. We expect to elect and utilize the ‘portfolio’ approach when analyzing our student contracts, policies, processes and controls for revenue recognition. We reasonably expect that the impact of applying the portfolio approachbut will not ~~differ materially from considering each contract individually.~~

Our evaluation covered the collectability criteria under the new guidance. The Company believes it can apply the portfolio approach when assessing collectability due to the significant amount of historical data that the Company retains related to collection by types of funding.

The Company is currently assessing the impacts related to the accounting for contract assets separate from accounts receivable and are evaluating the point at which a student’s contract asset becomes a receivable. Currently, a student’s entire accounts receivable balance is evaluated along with their entire deferred revenue balance to determine the net position of the two. Once the Company determines the point at which a contract asset becomes a receivable, this amount will no longer be offset with a student’s deferred revenue balance. This change in presentation is expected to have an immaterialsignificantly impact to the statement of financial position as well as an immaterial impact to bad debt expense associated with the accounts receivable balance. The bad debt expense impact would be a shift in the timing of recognition as the portion of a student’s receivable balance that will no longer be offset with deferred revenue will now be reflected sooner as a receivable on our consolidated balance sheet.

~~Based on our ongoing assessment, we do not anticipate the adoption of ASU 2014-09 will have a significant material impact on the presentation of~~ our results of operations; however, we expect additional modifications on the presentation of our financial condition and disclosures around certain policies, practices and systems, but we are still finalizing our assessment.operations.

Investments consist of the following as of June 30, ~~2017~~2018 and December 31, ~~2016~~2017 (dollars in thousands):

	June 30, 2017									June 30, 2018
			Gross Unrealized									Gross Unrealized
	Cost		Gain		(Loss)			Fair Value		Cost		Gain		(Loss)			Fair Value
Short-term investments (available for sale):
Municipal bonds	$	1,350	$	-	$	-		$	1,350
Non-governmental debt securities		88,800		12		(58	)		88,754	$	128,511	$	17	$	(336	)	$	128,192
Treasury and federal agencies		34,671		5		(78	)		34,598		23,518		1		(140	)		23,379
Total short-term investments		124,821		17		(136	)		124,702		152,029		18		(476	)		151,571
Restricted short-term investments (available for sale):
Non-governmental debt securities		7,097		-		-			7,097		4,570		-		-			4,570
Total investments (available for sale)	$	131,918	$	17	$	(136	)	$	131,799	$	156,599	$	18	$	(476	)	$	156,141

	December 31, 2016									December 31, 2017
			Gross Unrealized									Gross Unrealized
	Cost		Gain		(Loss)			Fair Value		Cost		Gain		(Loss)			Fair Value
Short-term investments (available for sale):
Municipal bonds	$	4,050	$	-	$	-		$	4,050	$	830	$	-	$	-		$	830
Non-governmental debt securities		107,305		22		(113	)		107,214		125,485		7		(222	)		125,270
Treasury and federal agencies		36,480		10		(73	)		36,417		30,211		-		(133	)		30,078
Total short-term investments		147,835		32		(186	)		147,681		156,526		7		(355	)		156,178
Restricted short-term investments (available for sale):
Non-governmental debt securities		8,597		-		-			8,597		5,070		-		-			5,070
Total investments (available for sale)	$	156,432	$	32	$	(186	)	$	156,278	$	161,596	$	7	$	(355	)	$	161,248

In the table above, unrealized holding gains (losses) as of June 30, ~~2017~~2018 relate to short-term investments that have been in a continuous unrealized gain (loss) position for less than one year.

Our unrestricted non-governmental debt securities primarily consist of ~~corporate bonds~~commercial paper and ~~commercial paper.~~certificates of deposit. Our treasury and federal agencies primarily consist of U.S. Treasury bills and federal home loan debt securities. We do not intend to sell

our investments in these securities prior to maturity and it is not likely that we will be required to sell these investments before recovery of the amortized cost basis. Our restricted short-term investments are comprised entirely of certificates of deposit, which secure our letters of credit.

FASB ASC Topic 820 – Fair Value Measurements establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

As of June 30, ~~2017,~~2018, we held investments that are required to be measured at fair value on a recurring basis. These investments (available-for-sale) consist of ~~municipal bonds,~~ non-governmental debt securities, and treasury and federal agencies securities. Available for sale securities included in Level 1 are valued at quoted prices in active markets for identical assets and liabilities. Available for sale securities included in Level 2 are estimated based on observable inputs other than quoted prices in active markets for identical assets and liabilities, such as quoted prices for identical or similar assets or liabilities in inactive markets or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Investments measured at fair value on a recurring basis subject to the disclosure requirements of FASB ASC Topic 820 – Fair Value Measurements at June 30, ~~2017~~2018 and December 31, ~~2016~~2017 were as follows (dollars in thousands):

	As of June 30, 2017								As of June 30, 2018
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Municipal bonds	$	-	$	1,350	$	-	$	1,350
Non-governmental debt securities		27,097		68,754		-		95,851	$	15,000	$	117,762	$	-	$	132,762
Treasury and federal agencies		-		34,598		-		34,598		-		23,379		-		23,379
Totals	$	27,097	$	104,702	$	-	$	131,799	$	15,000	$	141,141	$	-	$	156,141

	As of December 31, 2016								As of December 31, 2017
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Municipal bonds	$	-	$	4,050	$	-	$	4,050	$	-	$	830	$	-	$	830
Non-governmental debt securities		33,597		82,214		-		115,811		31,500		98,840		-		130,340
Treasury and federal agencies		-		36,417		-		36,417		-		30,078		-		30,078
Totals	$	33,597	$	122,681	$	-	$	156,278	$	31,500	$	129,748	$	-	$	161,248

Our investment in an equity affiliate, which is recorded within other noncurrent assets on our condensed consolidated balance sheets, isrepresents an international investment in a private company. As of June 30, ~~2017,~~2018, our investment in an equity affiliate equated to a 30.7%, or ~~$3.3~~$3.0 million, non-controlling interest in CCKF, a Dublin-based educational technology company providing intelligent ~~adaptive~~ systems to power the delivery of individualized and personalized learning.

During the quarters ended June 30, ~~2017~~2018 and ~~2016,~~2017, we recorded approximately $0.2 million of loss and $0.1 million of gain, ~~and $0.7 million of loss,~~ respectively, and during the years to date ended June 30, ~~2017~~2018 and June 30, ~~2016,~~2017, we recorded $0.1 million ~~and $0.8 million~~ of loss ~~respectively,~~for each of the respective periods, related to our proportionate investment in CCKF within miscellaneous (expense) income ~~(expense)~~ on our unaudited condensed consolidated statements of income and comprehensive income.

We make periodic operating maintenance payments related to proprietary rights that we use in our intellipath^®^TM ~~adaptive~~ personalized learning technology. The total fees paid to CCKF for the quarters and years to date ended June 30, ~~2017~~2018 and ~~2016~~2017 were as follows (dollars in thousands):

	Maintenance Fee Payments		Maintenance Fee Payments
For the quarter ended June 30, 2018			$	377
For the quarter ended June 30, 2017	$	332	$	332
For the quarter ended June 30, 2016	$	345
For the year to date ended June 30, 2018			$	753
For the year to date ended June 30, 2017	$	657	$	657
For the year to date ended June 30, 2016	$	687

During the fourth quarter of 2015, the Company; its wholly-owned subsidiary, CEC Educational Services, LLC (“CEC-ES”); and the subsidiary guarantors thereunder entered into a Fourth Amendment to its Amended and Restated Credit Agreement dated as of December 30, 2013 (as amended, the “Credit Agreement”) with BMO Harris Bank N.A., in its capacities as the initial lender and letter

of credit issuer thereunder and the administrative agent for the lenders which from time to time may be parties to the Credit Agreement, to among other things, decrease the revolving credit facility to $95.0 million and require pre-approval by the lenders for each credit extension (other than letter of credit extensions) occurring after December 31, 2015. The revolving credit facility under the Credit Agreement is scheduled to mature on December 31, 2018. The loans and letter of credit obligations under the Credit Agreement are required to be secured by 100% cash collateral. As of June 30, ~~2017~~2018 and December 31, ~~2016,~~2017, there were no outstanding borrowings under the revolving credit facility.

The following tables disaggregate our revenue by major source (dollars in thousands):

	For the Quarter Ended June 30, 2018								For the Year to Date Ended June 30, 2018
	CTU		AIU		All Other Campuses		Total		CTU		AIU		All Other Campuses		Total
Tuition	$	89,291	$	46,654	$	160	$	136,105	$	180,025	$	97,785	$	491	$	278,301
Technology fees		2,857		1,784		-		4,641		5,731		3,624		-		9,355
Other miscellaneous fees⁽¹⁾		489		90		19		598		989		190		19		1,198
Total tuition and fees		92,637		48,528		179		141,344		186,745		101,599		510		288,854
Other revenue⁽²⁾		629		51		12		692		1,128		101		18		1,247
Total revenue	$	93,266	$	48,579	$	191	$	142,036	$	187,873	$	101,700	$	528	$	290,101


	For the Quarter Ended June 30, 2017								For the Year to Date Ended June 30, 2017
	CTU		AIU		All Other Campuses		Total		CTU		AIU		All Other Campuses		Total
Tuition	$	87,355	$	44,436	$	8,697	$	140,488	$	177,560	$	96,655	$	22,406	$	296,621
Technology fees		2,769		1,597		-		4,366		5,562		3,455		-		9,017
Other miscellaneous fees⁽¹⁾		526		117		10		653		1,022		205		19		1,246
Total tuition and fees		90,650		46,150		8,707		145,507		184,144		100,315		22,425		306,884
Other revenue⁽²⁾		554		65		96		715		1,095		153		199		1,447
Total revenue	$	91,204	$	46,215	$	8,803	$	146,222	$	185,239	$	100,468	$	22,624	$	308,331

Our revenue, which is derived primarily from academic programs taught to students who attend our institutions, is generally segregated into two categories: (1) tuition and fees and (2) other. Tuition and fees represent costs to our students for educational services provided by our institutions. Our institutions charge tuition and fees at varying amounts, depending on the institution, the type of program and specific curriculum. Our institutions bill students a single charge that covers tuition, fees and required program materials, such as textbooks and supplies, which we treat as a single performance obligation. Generally, we bill student tuition at the beginning of each academic term, and recognize the tuition as revenue on a straight-line basis over the academic term, which includes any applicable externship period. As part of a student’s course of instruction, certain fees, such as technology fees, graduation fees and laboratory fees, are billed to students. These fees are earned over the applicable term and are not considered separate performance obligations.

Other revenue, which consists primarily of contract training revenue and bookstore sales, is billed and recognized as goods are delivered or services are performed. Contract training revenue results from individual training courses that are stand-alone courses and not part of a degree or certificate program. Bookstore sales are primarily initiated by the student and are not included in the enrollment agreement at the onset of a student’s entrance to the institution. These types of sales constitute a separate performance obligation from classroom instruction.

Our institutions’ academic year is generally at least 30 weeks in length but varies both by institution and program of study and is divided by academic terms or payment periods. Academic terms or payment periods are determined by regulatory requirements mandated by the federal government and/or applicable accrediting body, which also vary by institution and program. Academic terms are determined by start dates, which vary by institution and program and are generally 10 – 11 weeks in length.

Prior to the adoption of ASC Topic 606, we offset our student receivable balances with deferred revenue on a student by student basis. Deferred revenue was previously stated net of outstanding student receivables on a student-by-student basis as of the end of each reporting period. Upon adoption of ASC Topic 606, we determined that a portion of the student receivable balance which was previously offset with deferred revenue now meets the definition of student receivables and is not considered a contract asset and therefore is no longer offset with deferred revenue. The previously reported balances along with the adjustment and beginning January 1, 2018 balances are provided below (dollars in thousands).

For each term, the portion of tuition and fee payments received from students but not yet earned is recorded as deferred revenue and reported as a current liability on our condensed consolidated balance sheets, as we expect to earn these revenues within the next year. A contract asset is recorded for each student for the current term for which they are enrolled for the amount charged for the current term that has not yet been received as payment and to which we do not have the unconditional right to receive payment because the student has not reached the point in the student’s current academic term at which the amount billed is no longer refundable to the student. On a student by student basis, the contract asset is offset against the deferred revenue balance for the current term and the net deferred revenue balance is reflected within current liabilities on our condensed consolidated balance sheets.

Due to the short-term nature of our academic terms, the contract asset balance which exists at the beginning of each quarter will no longer be a contract asset at the end of that quarter. The decrease in contract asset balances are a result of one of the following: it becomes a student receivable balance once a student reaches the point in a student’s academic term where the amount billed is no longer refundable to the student; a refund to withdrawn students for the portion entitled to be refunded under each institutions’ refund policy; or a student makes a change in the number of classes they are enrolled which may cause an adjustment to their previously billed amount. As of the end of each quarter, a new contract asset is determined on a student by student basis based on the most recently started term and a student’s progress within that term as compared to the date at which the student is no longer entitled to a refund under each institution’s refund policy.

The amount of contract assets which are being offset with deferred revenue balances as of January 1, 2018 and June 30, 2018 were as follows (dollars in thousands):

Changes in our deferred revenue balances for the quarter and year to date ended June 30, 2018 were as follows (dollars in thousands):

Our students finance costs through a variety of funding sources, including, among others, federal loan and grant programs, institutional payment plans, employer reimbursement, Veterans’ Administration and other military funding and grants, private and institutional scholarships and cash payments. Cash receipts from government related sources are typically received during the current academic term. We typically receive funds after the end of an academic term for students who receive employer reimbursements. Students who have not applied for any type of financial aid generally set up a payment plan with the institution and make payments on a monthly basis per the terms of the payment plan.

If a student withdraws from one of our institutions prior to the completion of the academic term or program period, we refund the portion of tuition and fees already paid that, pursuant to our refund policy and applicable federal and state law and accrediting agency standards, we are not entitled to retain. Generally, the amount to be refunded to a student is calculated based upon the percent of the term attended and the amount of tuition and fees paid by the student as of their withdrawal date. In certain circumstances, we have recognized revenue for students who have withdrawn that we are not entitled to retain. We have estimated a reserve for these limited circumstances based on historical evidence in the amount of $1.0 million as of June 30, 2018. Students are typically entitled to a partial refund through approximately halfway of their term. Pursuant to each institution’s policy, once a student reaches the point in the term where no refund is given, the student would not have a refund due if withdrawing from the institution subsequent to that date.

Management reassesses collectability when a student withdraws from the institution and has unpaid tuition charges for the current term which the institution is entitled to retain per the applicable refund policy. Such unpaid charges do not meet the threshold of reasonably collectible and are recognized as revenue in accordance with ASC Topic 606 when cash is received and the contract is terminated and neither party has further performance obligations. We have no remaining performance obligations for students who have withdrawn from our institutions, and once the refund calculation is performed and funds are returned to the student, if applicable under our refund policy, no further consideration is due back to the student. We recognized $0.3 million of revenue for each of the quarters ended June 30, 2018 and 2017 and $0.7 million and $0.8 million for the years to date ended June 30, 2018 and June 30, 2017, respectively, for payments received from withdrawn students.

We analyze revenue recognition on a portfolio approach under ASC Topic 606. Significant judgment is utilized in determining the appropriate portfolios to assess for meeting the criteria to recognize revenue under ASC Topic 606. We have determined that all of our students can be grouped into one portfolio. Based on our past experience, students at different campuses, in different programs or with different funding all behave similarly. Enrollment agreements all contain similar terms, refund policies are similar across all institutions and all students work with the campus to obtain some type of funding, for example, Title IV Program funds, Veterans Administration funds, military funding, employer reimbursement or self-pay. We have significant historical data for our students

which allows us to analyze collectability. We do not expect that revenue earned for the portfolio is significantly different as compared to revenue that would be earned if we were to assess each student contract separately.

Significant judgment is also required to assess collectability, particularly as it relates to students seeking funding under Title IV Programs. Because students are required to provide documentation, and in some cases extensive documentation, to the Department of Education to be eligible and approved for funding, the timeframe for this process can sometimes span between 90 to 120 days. We monitor the progress of students through the eligibility and approval process and assess collectability for the portfolio each reporting period to monitor that the collectability threshold is met.

For the quarters and years to date ended June 30, 2018 and 2017, we received a majority of our institutions’ cash receipts for tuition payments from various government agencies as well as our corporate partnerships which represents a substantial portion of our consolidated revenues and are all low risk of collectability.

Student receivables represent funds owed to us in exchange for the educational services provided to a student. Student receivables are reflected net of an allowance for doubtful accounts ~~and net of deferred tuition revenue as determined on a student-by-student basis~~ at the end of the reporting period. Student receivables, net, are reflected on our condensed consolidated balance sheets as components of both current and non-current assets. We do not accrue interest on past due student receivables; interest is recorded only upon collection.

Generally, a student receivable balance is written off once it reaches greater than 90 days past due. Although we analyze past due receivables, it is not practical to provide an aging of our non-current student receivable balances as a result of the methodology utilized in determining our earned student receivable balances. Student receivables are recognized on our condensed consolidated balance sheets as they are deemed earned over the course of a student’s program and/or term, and therefore cash collections are not applied against specifically dated transactions.

Our standard student receivable allowance estimation methodology considers a number of factors that, based on our collection experience, we believe have an impact on our repayment risk and ability to collect student receivables. Changes in the trends in any of these factors may impact our estimate of the allowance for doubtful accounts. These factors include, but are not limited to: internal repayment history, repayment practices of previous extended payment programs, changes in the current economic, legislative or regulatory environments and the ability to complete the federal financial aid process with ~~the student.~~students. These factors are monitored and assessed on a regular basis. Overall, our allowance estimation process for student receivables is validated by trending analysis and comparing estimated and actual performance.

To assist students in completing their educational programs, we had previously provided extended payment plans to certain students and also had loan agreements with Sallie Mae and Stillwater National Bank and Trust Company (“Stillwater”) which required us to repurchase loans originated by them to our students after a certain period of time. We discontinued providing extended payment plans to students during the first quarter of 2011 and the recourse loan agreements with Sallie Mae and Stillwater ended in March 2008 and April 2007, respectively.

As of June 30, ~~2017~~2018 and December 31, ~~2016,~~2017, the amount of non-current student receivables under these programs along with payment plans that are longer than 12 months in duration, net of allowance for doubtful accounts, was ~~$2.8~~$2.3 million and ~~$3.1~~$2.5 million, respectively.

Changes in our current and non-current receivables allowance for the quarters and years to date ended June 30, ~~2017~~2018 and ~~2016~~2017 were as follows (dollars in thousands):

	Balance, Beginning of Period		Charges to Expense ⁽¹⁾		Amounts Written-off			Balance, End of Period		Balance, Beginning of Period		Charges to Expense ⁽¹⁾		Amounts Written-off			Balance, End of Period
For the quarter ended June 30, 2018										$	22,551	$	6,730	$	(5,013	)	$	24,268
For the quarter ended June 30, 2017	$	24,153	$	6,918	$	(6,497	)	$	24,574	$	24,153	$	6,918	$	(6,497	)	$	24,574
For the quarter ended June 30, 2016	$	22,768	$	5,268	$	(7,028	)	$	21,008
For the year to date ended June 30, 2018										$	22,534	$	13,743	$	(12,009	)	$	24,268
For the year to date ended June 30, 2017	$	23,142	$	15,210	$	(13,778	)	$	24,574	$	23,142	$	15,210	$	(13,778	)	$	24,574
For the year to date ended June 30, 2016	$	20,229	$	14,875	$	(14,096	)	$	21,008

The carrying amount reported in our condensed consolidated balance sheets for the current portion of student receivables approximates fair value because of the nature of these financial instruments as they generally have short maturity periods. It is not practicable to estimate the fair value of the non-current portion of student receivables, since observable market data is not readily available, and no reasonable estimation methodology exists.

During the past several years, we have carried out reductions in force related to the continued reorganization of our corporate and campus functions to better align with ~~current~~ total enrollments and made decisions to teach out a number of campuses, meaning gradually close the campuses through an orderly process. As part of the process to wind down these teach-out campuses, the Company also announced that it will align its corporate overhead to support a more streamlined and focused operating entity. Most notably, we have recorded charges within our ~~Transitional Group and Culinary Arts segments~~All Other Campuses segment and our corporate functions as we continue to align our overall management structure. Each of our teach-out campuses offer current students the reasonable opportunity to complete their course of study. The majority of these teach-out campuses ~~are expected to cease~~have ceased operations ~~by the end~~as of ~~2017~~June 30, 2018, with the remainder expected to cease operations inby December 31, 2018.

The following table details the changes in our accrual for severance and related costs associated with all restructuring events for our continuing operations during the quarters and years to date ended June 30, ~~2017~~2018 and ~~2016~~2017 (dollars in thousands):

	Balance, Beginning of Period		Severance & Related Charges ^{(1) (2)}		Payments			Non-cash Adjustments ⁽³⁾			Balance, End of Period		Balance, Beginning of Period		Severance & Related Charges		Payments			Non-cash Adjustments ⁽¹⁾			Balance, End of Period
For the quarter ended June 30, 2018													$	1,174	$	-	$	(417	)	$	(36	)	$	721
For the quarter ended June 30, 2017	$	6,624	$	-	$	(1,562	)	$	(93	)	$	4,969	$	6,624	$	-	$	(1,562	)	$	(93	)	$	4,969
For the quarter ended June 30, 2016	$	14,353	$	57	$	(2,305	)	$	(815	)	$	11,290
For the year to date ended June 30, 2018													$	2,170	$	-	$	(1,334	)	$	(115	)	$	721
For the year to date ended June 30, 2017	$	8,686	$	-	$	(3,451	)	$	(266	)	$	4,969	$	8,686	$	-	$	(3,451	)	$	(266	)	$	4,969
For the year to date ended June 30, 2016	$	18,985	$	272	$	(7,630	)	$	(337	)	$	11,290

The current portion of the accrual for severance and related charges was ~~$4.5~~$0.7 million and ~~$7.3~~$2.1 million, respectively, as of June 30, ~~2017~~2018 and December 31, ~~2016,~~2017, which is recorded within current accrued expenses – payroll and related benefits; the long-term portion of $0.5 million and $1.4 million is recorded within other non-current liabilities on our condensed consolidated balance sheets as of June 30, 2017 and December 31, 2016, respectively.benefits.

In addition, as of June 30, ~~2017,~~2018, we have an accrual of approximately ~~$1.3~~$0.3 million related to retention bonuses that have been offered to certain employees. These amounts are recorded ratably over the period the employees are retained.

We have recorded lease exit costs associated with the exit of real estate space for certain campuses related to our continuing ~~operations.~~operations, primarily associated with our teach-out campuses. These costs are recorded within educational services and facilities expense on our unaudited condensed consolidated statements of income and comprehensive income. The current portion of the liability for these charges is reflected within other accrued expenses under current liabilities and the long-term portion of these charges are included in other liabilities under the non-current liabilities section of our condensed consolidated balance sheets. Changes in our future minimum lease obligations for ~~exited~~vacated space related to our continuing operations for the quarters and years to date ended June 30, ~~2017~~2018 and ~~2016~~2017 were as follows (dollars in thousands):

	Balance, Beginning of Period		Charges Incurred ⁽¹⁾		Net Cash Payments			Other ⁽²⁾			Balance, End of Period		Balance, Beginning of Period		Charges Incurred ⁽¹⁾		Net Cash Payments			Other ⁽²⁾			Balance, End of Period
For the quarter ended June 30, 2018													$	15,843	$	5,165	$	(6,722	)	$	41		$	14,327
For the quarter ended June 30, 2017	$	34,410	$	749	$	(8,403	)	$	353		$	27,109	$	34,410	$	749	$	(8,403	)	$	353		$	27,109
For the quarter ended June 30, 2016	$	11,618	$	5,984	$	(2,723	)	$	2,261		$	17,140
For the year to date ended June 30, 2018													$	20,763	$	5,597	$	(12,074	)	$	41		$	14,327
For the year to date ended June 30, 2017	$	36,814	$	5,206	$	(14,402	)	$	(509	)	$	27,109	$	36,814	$	5,206	$	(14,402	)	$	(509	)	$	27,109
For the year to date ended June 30, 2016	$	12,892	$	9,082	$	(8,000	)	$	3,166		$	17,140

(1)Includes charges for newly vacated spaces and subsequent adjustments for accretion, revised estimates and variances between estimated and actual charges, net of any reversals for terminated lease obligations.

(2)Includes existing prepaid rent and deferred rent liability balances for newly vacated spaces that offset the losses incurred in the period recorded.

We do not expect to ~~the~~have any significant new charges ~~detailed above, a number of the teach-out campuses will have~~for remaining lease obligations following the eventual campus closure, with the longest lease term being through 2023. The total remaining estimated charge as of June 30, 2017, for all restructuring events reported within continuing operations related to ~~the remaining lease obligation for these leases, once the campus completes the close process, and adjusted for possible lease buyouts and sublease assumptions is~~our campuses in teach-out. We have recorded approximately $15 million - $18 million. The amount related to each campus will be recorded at each campus closure date based on current estimates and assumptions related to the amount and timing of sublease income. This is in addition to approximately $58.1$73.3 million of charges related to remaining obligations for continuing operations ~~that were recorded during 2015 through the second quarter of 2017.~~since 2015.

An accrual for estimated legal fees and settlements of ~~$2.5~~$13.8 million and ~~$34.5~~$8.7 million at June 30, ~~2017~~2018 and December 31, ~~2016,~~2017, respectively, is presented within ~~other~~ current liabilities – other accrued expenses on our condensed consolidated balance sheets.

We record a liability when we believe that it is both probable that a loss will be incurred and the amount of loss can be reasonably estimated. We evaluate, at least quarterly, developments in our legal matters that could affect the amount of liability that was previously accrued, and make adjustments as appropriate. Significant judgment is required to determine both probability and the estimated amount. We may be unable to estimate a possible loss or range of possible loss due to various reasons, including, among others: (1) if the damages sought are indeterminate; (2) if the proceedings are in early stages; (3) if there is uncertainty as to the outcome of pending appeals, motions, or settlements; (4) if there are significant factual issues to be determined or resolved; and (5) if there are novel or unsettled legal theories presented. In such instances, there is considerable uncertainty regarding the ultimate resolution of such matters, including a possible eventual loss, if any.

We are, or were, a party to the following legal proceedings that we consider to be outside the scope of ordinary routine litigation incidental to our business. Due to the inherent uncertainties of litigation, we cannot predict the ultimate outcome of these matters. An unfavorable outcome of any one or more of these matters could have a material adverse impact on our business, reputation, results of operations, cash flows and financial ~~position~~position.

Surrett, et al. v. Western Culinary Institute, Ltd. and Career Education Corporation. On March 5, 2008, a complaint was filed in Portland, Oregon in the Circuit Court of the State of Oregon in and for Multnomah County naming Western Culinary Institute, Ltd. (“WCI”) and the Company as defendants. Plaintiffs filed the complaint individually and as a putative class action and alleged two claims for equitable relief: violation of Oregon’s Unlawful Trade Practices Act (“UTPA”) and unjust enrichment. Plaintiffs alleged WCI made a variety of misrepresentations to them, relating generally to WCI’s placement statistics, students’ employment prospects upon graduation from WCI, the value and quality of an education at WCI, and the amount of tuition students could expect to pay as compared to salaries they could expect to earn after graduation.

The Company entered into a settlement agreement as of February 2, 2018 pursuant to which the Company will make a payment to settlement class members who completed, signed and returned a claim form within 90 days of mailing of the claim form. The amount of the payment to each settlement class member returning a form will be 44% of the total charged to that person by WCI for tuition, books and fees, less institutional grants and scholarships received by the person, amounts charged by WCI but not paid by the person and refunds applied as a result of withdrawal by the person. The settlement class consists of 1,169 individuals who enrolled at WCI primarily from 2006-2007. The institution is no longer in operation and closed in 2017. Unless they opt out, settlement class members will release the Company from all claims against the Company alleged in the case. The Company makes no admission of liability pursuant to the terms of the settlement. The court preliminarily approved the settlement on February 8, 2018, and the final approval hearing was held on June 8, 2018.

The Company’s liability pursuant to the settlement was dependent on how many settlement class members returned valid claim forms by June 8, 2018. The final amount based on valid returned claim forms has been determined to be approximately $11.1 million, of which $4.9 million was recorded during the second quarter of 2018. An initial payment of $3.0 million was made in June 2018 and accordingly, as of June 30, 2018, the Company has a remaining reserve of $8.1 million related to this matter. These amounts are expected to be paid during the third quarter of 2018.

The settlement terms also provide that the court will determine the amount of attorneys’ fees and costs payable by the Company to counsel for plaintiffs, although the parties agreed that the attorneys’ fees and costs awarded would be in the range of $3.75 to $8.0 million. On June 8, 2018, the Court awarded $4.9 million for attorneys’ fees and costs. Accordingly, as of June 30, 2018, the Company has a reserve of $4.9 million related to the attorneys’ fees and costs, of which $1.1 million was recorded during the second quarter of 2018. This amount is expected to be paid during the third quarter of 2018.

In addition to the settlement class members, there are approximately 1,100 individuals that have been compelled to arbitration pursuant to a January 21, 2016 ~~the Oregon~~ appellate court ~~reversed an earlier circuit court denying a motion to compel arbitration and held that the claims by 1,062 individual class members should be compelled to arbitration, which~~ruling. The number of these individuals ~~would have~~who may choose to pursue their claims separately on their own ~~behalf. On May 16, 2017, plaintiffs~~behalf is uncertain. Please see “Oregon Arbitrations” below for additional information.

Oregon Arbitrations. As of July 25, 2018, 325 individual arbitration claims have been filed against WCI. These individual arbitrations allege that WCI made a ~~seventh amended putative class complaint which seeks recovery based on a theory~~variety of ~~diminished~~misrepresentations to the individual filing the arbitration, relating generally to WCI’s placement statistics, students’ employment prospects upon graduation from WCI, the value and ~~contains a claim for punitive damages. Defendants have moved~~quality of an education at WCI, and the amount of tuition students could expect to ~~dismiss this complaint. If class certification~~pay as compared to salaries they could expect to earn after graduation. The institution is ~~granted, the size~~no longer in operation and closed in 2017.

Because of the ~~class would depend on the scope certified by the court but could consist~~early stages of ~~up to 1,275 members.~~

~~Because of~~these arbitrations and the many questions of fact and law that have already arisen and that may arise in the future, the outcome of ~~this legal proceeding~~these proceedings is uncertain at this point. Based on information available to us at present, we cannot reasonably estimate a range of potential loss, if any, for ~~this action~~these actions because of the inherent difficulty in assessing the

appropriate measure of damages and the number of ~~class members~~individuals who might be entitled to recover damages, if we were to be found liable. Accordingly, we have not recognized any liability associated with ~~this action.~~

~~United States of America, ex rel. Ann Marie Rega v. Career Education Corporation, et al~~. On May 16, 2014, relator Ann Marie Rega, a former employee of Sanford-Brown Iselin, filed an action in the U.S. District Court for the District of New Jersey against the Company and almost all of the Company’s individual schools on behalf of herself and the federal government. She alleges claims under the False Claims Act, including that the defendants allegedly provided false certifications to the federal government regarding compliance with certain provisions of the Higher Education Act and accreditation standards. The plaintiff (or “relator”) claims that defendants’ conduct caused the government to pay federal funds to defendants, and to make payments to third-party lenders, which the government would not have made if not for defendants’ alleged violation of the law. Relator seeks treble damages plus civil penalties and attorneys’ fees. Relator failed to comply with the statutory requirement that all False Claims Act cases be filed under seal. On June 16, 2014, defendants filed a motion to dismiss the complaint with prejudice as to relator for failure to file her complaint under seal in accordance with the requirements of the False Claims Act.

The Company was contacted by the Civil Division of the U.S. Department of Justice (“DOJ”) with a request for certain documents and information relating to relator’s claims. The Company is cooperating with the DOJ and provided the requested information in September 2016. We have received no further inquiries from the DOJ since then.

Because of the many questions of fact and law that may arise, the outcome of this legal proceeding is uncertain at this point. Based on information available to us at present, we cannot reasonably estimate a range of potential loss, if any, for this action because the complaint does not seek a specified amount of damages and it is unclear how damages would be calculated, if we were to be found liable. Moreover, the case presents novel legal issues. Accordingly, we have not recognized any liability associated with this action.

~~Other Litigation.~~ In addition to the legal proceedings and other matters described above, we are also subject to a variety of other claims, lawsuits, arbitrations and investigations that arise from time to time out of the conduct of our business, including, but not limited to, matters involving prospective students, students or graduates, alleged violations of the Telephone Consumer Protection Act, both individually and on behalf of a putative class, and routine employment matters. While we currently believe that such claims, individually or in aggregate, will not have a material adverse impact on our financial position, cash flows or results of operations, these other matters are subject to inherent uncertainties, and management’s view of these matters may change in the future. Were an unfavorable final outcome to occur in any one or more of these matters, there exists the possibility of a material adverse impact on our business, reputation, financial position, cash flows and the results of operations for the period in which the effect becomes probable and reasonably estimable.actions.

AGs. The Attorney General of Connecticut is serving as the point of contact for inquiries received from the attorneys general of the following: Arkansas, Arizona, Connecticut, Idaho, Iowa, Kentucky, Missouri, Nebraska, North Carolina, Oregon, Pennsylvania, Washington (January 24, 2014); Illinois (December 9, 2011); Tennessee (February 7, 2014); Hawaii (May 28, 2014 ); New Mexico (May 2014); Maryland (March 16, 2015); and the District of Columbia (June 3, 2015) (these 18 attorneys general are collectively referred to as the “Multi-State AGs”). In addition, the Company has received inquiries from the attorneys general of Florida (November 5, 2010), Massachusetts (September 27, 2012), Colorado (August 27, 2013) and Minnesota (September 18, 2014, October 25, 2016). The inquiries are civil investigative demands or subpoenas which relate to the investigation by the attorneys general of whether the Company and its schools have complied with certain state consumer protection laws, and generally focus on the Company's practices relating to the recruitment of students, graduate placement statistics, graduate certification and licensing results and student lending activities, among other matters. Depending on the state, the documents and information sought by the attorneys general in connection with their investigations cover time periods as early as 2006 to the present. The Company continues to cooperate with the states involved with a view towards resolving these inquiries as promptly as possible. In this regard, the Company ~~has participated~~continues to participate in ~~several~~ meetings with representatives of the Multi-State AGs about the Company’s business and to engage in a dialogue towards a resolution of these inquiries.

We cannot predict the scope, duration or outcome of these attorneys general investigations. At the conclusion of any of these matters, the Company or certain of its schools may be subject to claims of failure to comply with state laws or regulations and may be required to pay significant financial penalties and/or curtail or modify their operations. Other state attorneys general may also initiate inquiries into the Company or its schools. Based on information available to us at present and the uncertain outcome of these investigations, we cannot reasonably estimate a range of potential monetary or non-monetary impact these investigations might have on the Company because it is uncertain what remedies, if any, these regulators might ultimately seek in connection with these investigations.

In addition to the aforementioned inquiries, from time to time, we receive informal requests from state attorneys general and other government agencies relating to specific complaints they have received from students or former students which seek information about the student, our programs, and other matters relating to our activities in the relevant state. These requests can be broad and time consuming to respond to, and there is a risk that they could expand and/or lead to a formal inquiry or investigation into our practices in a particular state.

FTC.On August 20, 2015, the Company received a request for information pursuant to a Civil Investigative Demand (“CID”) from the U.S. Federal Trade Commission (“FTC”). The request was made pursuant to a November 2013 resolution by the FTC directing an investigation to determine whether unnamed persons, partnerships, corporations, or others have engaged or are engaging in deceptive or unfair acts or practices in or affecting commerce in the advertising, marketing or sale of secondary or postsecondary educational products or services, or educational accreditation products or services. The information request requires the Company to provide documents and information regarding a broad spectrum of the business and practices of its subsidiaries and institutions for the time period of January 1, 2010 to the present. The Company ~~has responded~~continues to ~~several~~respond to supplemental requests for information, ~~but has received no further inquiries~~including a CID dated July 5, 2018 requesting specific information about telephone calls placed to prospective students from 2013 to the present, and is cooperating with the FTC ~~since March 2017.~~ ~~Given the passage of time, it is not clear what additional requests or action, if any, may be undertaken by the FTC. Should the FTC have further inquiries in~~with a view towards resolving this ~~regard,~~inquiry as promptly as possible. Based on information available to us at present, we cannot predict the outcome of this inquiry or estimate the nature or amount of possible remedies, if any, that the FTC might ultimately seek in connection with this matter.

On June 21, 2016, the Company received a request for documents and information from the Denver Regional Office of the Securities and Exchange Commission (“SEC”) regarding the Company’s fourth quarter 2014 classification of the Company’s Le Cordon Bleu Culinary Arts campuses as held for sale within discontinued operations, subsequent sales process and CEC’s related public disclosures. The Company responded to the SEC’s request on July 6, 2016. ED.~~On June 27, 2017, the SEC notified the Company that it had concluded its investigation and was not recommending any action against the Company.~~

In December 2011, ~~the U.S. Department of Education (“ED”)~~ED advised the Company that it iswas conducting an inquiry concerning possible violations of ED misrepresentation regulations related to placement rates reported by certain of the Company’s former institutions to accrediting bodies, students and potential students. This inquiry ~~stems~~stemmed from the ~~Company’s~~Company self-reporting to ED of its internal investigation into student placement determination practices at the Company’s previous Health Education segment campuses and review of placement determination practices at all of the Company’s other domestic campuses in 2011. ~~The Company has been cooperating with ED in~~In connection with ~~this inquiry. If~~the inquiry, ED determines that the Company or any of its institutions violated ED misrepresentation regulations with regard to the publication or reporting of placement rates or other disclosures to students or prospective students or finds any other basis in the materials we are providing, ED may revoke, limit, suspend, delay or deny the institution’s or all of the Company’s institutions’ Title IV eligibility, or impose fines. In addition, all of the Company’s institutions were issued provisional program participation agreements in May 2016 and this inquiry as well as other matters were cited as bases for that decision.

~~In December 2011, ED also~~ moved all of the Company’s institutions from the “advance” method of payment of Title IV Program funds to cash monitoring status (referred to as Heightened Cash Monitoring 1, or HCM1, status). The Company has cooperated with ED in connection with its inquiry; however, almost all of the schools that were the principal subjects of the inquiry are now closed. If ED finds violations of the Higher Education Act or related regulations, ED may impose monetary ~~or program level~~ sanctions, ~~impose~~ some period of delay in the Company’s future receipt of Title IV funds or transfer the Company’s schools to the “reimbursement” or Heightened Cash Monitoring 2 (“HCM2”) methods of payment of Title IV Program funds. While on HCM2 status, an institution must disburse its own funds to students, document the students’ eligibility for Title IV Program funds and comply with certain waiting period requirements before receiving such funds from ED, which may result in a delay in receiving those funds. The process of re-establishing a regular schedule of cash receipts for the Title IV Program funds if ED places our schools on “reimbursement” or HCM2 payment status could take several months, and would require us to fund ongoing operations substantially out of existing cash balances. If our existing cash balances are insufficient to sustain us through this transition period, we would need to pursue other sources of liquidity, which may not be available or may be costly.

Our schools and universities are subject to periodic audits by various regulatory bodies, including the U.S. Department of Education's Office of Inspector General ("OIG"). The OIG audit services division commenced a compliance audit of CTU in June 2010, covering the period July 5, 2009 to May 16, 2010 (the “Audit Period”), to determine whether CTU had policies and procedures to ensure that CTU administered Title IV Program and other federal program funds in accordance with applicable federal law and regulation. On January 13, 2012, the OIG issued a draft report identifying three findings, including one regarding the documentation of attendance of students enrolled in online programs and one regarding the calculation of returns of Title IV Program funds ~~arising from student withdrawals without official notice~~or other adverse actions.

Other. In addition to the ~~institution. CTU submitted~~legal proceedings and other matters described above, we receive informal requests from state attorneys general and other government agencies relating to specific complaints they have received from students or former students which seek information about the student, our programs, and other matters relating to our activities in the relevant state. These requests can be broad and time consuming to respond to, and there is a ~~written response~~risk that they could expand and/or lead to ~~the OIG, contesting these findings, on March 2, 2012. On October 24, 2012, CTU provided~~ a ~~further response challenging the findings~~formal inquiry or investigation into our practices in a particular state. We are also subject to a variety of other claims, lawsuits, arbitrations and investigations that arise from time to time out of the ~~report directly~~conduct of our business, including, but not limited to, ~~ED's Office~~matters involving prospective students, students or graduates, alleged violations of ~~Federal Student Aid. As~~the Telephone Consumer Protection Act, both individually and on behalf of a ~~result~~putative class, and employment matters. While we currently believe that these additional matters, individually or in aggregate, will not have a material adverse impact on our financial position, cash flows or results of ~~ED’s review~~operations, these additional matters are subject to inherent uncertainties, and management’s view of these ~~materials,~~matters may change in the future. Were an unfavorable final outcome to occur in any one or more of these matters, there exists the possibility of a material adverse impact on January 31, 2013, CTU received a request from ED that it perform two file reviews covering the Audit Period to determine potential liability on two discrete issues associated with one of the above findings. The Company completed these file reviewsour business, reputation, financial position and ~~provided supporting documentation to ED on April 10, 2013. On April 29, 2016, ED directed CTU to perform these same two file reviews for an additional time period that extended from~~cash flows.

the end of the Audit Period through June 30, 2011, which CTU has completed and submitted to ED. On April 29, 2016, ED also requested an additional file review related to whether CTU appropriately performed calculations regarding any required return of Title IV Program funds for students that failed to earn passing grades within a term. This additional file review covers the period from July 5, 2009 to June 30, 2011 and is a review of whether students should be deemed to have unofficially withdrawn from the institution based on each student’s last known academically-related activity. CTU is seeking reconsideration of the request for this additional file review. In the May 2017 semi-annual OIG update to Congress, the OIG reported that ED’s Office of Federal Student Aid expected to resolve the audit in about 30 days; however, we have not yet received any notification in this regard. As of June 30, 2017, the Company has a $1.0 million reserve recorded related to this matter. This reserve does not include any amount relating to the additional file review requested by ED on April 29, 2016 because it is uncertain.

The determination of the annual effective tax is based upon a number of significant estimates and judgments, including the estimated annual pretax income in each tax jurisdiction in which we operate and the ongoing development of tax planning strategies during the year. In addition, our provision for income taxes can be impacted by changes in tax rates or laws, the finalization of tax audits and reviews, as well as other factors that cannot be predicted with certainty. As such, there can be significant volatility in interim tax provisions.

The following is a summary of our provision for income taxes and effective tax rate from continuing operations (dollars in thousands):

	For the Quarter Ended June 30,						For the Year to Date Ended June 30,						For the Quarter Ended June 30,						For the Year to Date Ended June 30,
	2017			2016			2017			2016			2018			2017			2018			2017
Pretax income	$	9,708		$	17,244		$	19,806		$	24,469		$	11,804		$	9,708		$	33,186		$	19,806
Provision for income taxes	$	5,045		$	4,620		$	9,546		$	8,755		$	2,940		$	5,045		$	6,438		$	9,546
Effective rate		52.0	%		26.8	%		48.2	%		35.8	%		24.9	%		52.0	%		19.4	%		48.2	%

As of December 31, ~~2016,~~2017, a valuation allowance of ~~$49.7~~$50.5 million was maintained with respect to our foreign tax credits, ~~separate~~ state net operating losses and Illinois edge credits. After considering both positive and negative evidence related to the realization of these deferred tax assets, we have determined that it is necessary to continue to record the valuation allowance against these credits and ~~separate~~ state net operating losses as of June 30, ~~2017.~~2018.

The effective tax rate for the quarter and year to date ended June 30, 2018 was primarily impacted by tax reserves and the tax effect of stock-based compensation. The effect of these discrete items decreased the effective tax rate for the quarter and year to date by 2.1% and 6.7%, respectively. The effective tax rate for the quarter and year to date ended June 30, 2018 also reflects the reduction in the U.S. corporate tax rate from 35% to 21% resulting from the enactment of the Tax Cuts and Jobs Act that became effective in January 2018. For the quarter and year to date ended June 30, 2017, the effective tax rate was primarily impacted by tax reserves and the tax effect of expenses that are not deductible for tax purposes. The effective tax rate for the quarter and year to date ended June 30, 2017 also includes a $1.5 million and $1.2 million, respectively, ~~unfavorable adjustment~~of additional tax expense associated with ~~the adoption~~stock-based compensation. The effect of ~~ASU 2016-09,~~ ~~Compensation – Stock Compensation (Topic 718), improvements~~this discrete item was to ~~Employee Share-Based Payment Accounting. The impact from~~increase the ~~adoption of ASU 2016-09 increased our~~ quarterly and year to date effective tax rate by 15.6% and 5.9%, respectively. For the quarter and year to date ended June 30, 2016, the effective tax rate includes a $2.1 million favorable tax adjustment related to the closure of a federal tax audit for the tax years 2013 and 2014. The effect of this discrete item was to decrease the quarter and year to date effective tax rate by 12.2% and 8.6%, respectively.

We estimate that it is reasonably possible that the gross liability for unrecognized tax benefits for a variety of uncertain tax positions will decrease by up to $1.8 million in the next twelve months as a result of the completion of various tax audits currently in process and the expiration of the statute of limitations in several jurisdictions. The income tax rate for the quarter and year to date ended June 30, ~~2017~~2018 does not take into account the possible reduction of the liability for unrecognized tax benefits. The impact of a reduction to the liability will be treated as a discrete item in the period the reduction occurs. We recognize interest and penalties related to unrecognized tax benefits in tax expense. As of June 30, ~~2017,~~2018, we had accrued $1.7 million as an estimate for reasonably possible interest and accrued penalties.

Our tax returns are routinely examined by federal, state ~~local~~ and ~~foreign~~local tax authorities and these audits are at various stages of completion at any given time. The Internal Revenue Service has completed its examination of our U.S. income tax returns through our tax year ended December 31, 2014.

The Career Education Corporation 2016 Incentive Compensation Plan (the “2016 Plan”) ~~was approved by the Company’s stockholders on May 24, 2016. The 2016 Plan~~ authorizes awards of stock options, stock appreciation rights, restricted stock, restricted stock units, deferred stock, performance units, annual incentive awards, and substitute awards, which generally may be settled in cash or shares of our common stock. Any shares of our common stock that are subject to awards of stock options or stock appreciation rights payable in shares will be counted as 1.0 share for each share issued for purposes of the aggregate share limit and any shares of our common stock that are subject to any other form of award payable in shares will be counted as 1.35 shares for each share issued

for purposes of the aggregate share limit. As of June 30, ~~2017,~~2018, there were approximately ~~3.8~~3.3 million shares of common stock available for future share-based awards under the 2016 Plan, which is net of (i) ~~0.6~~0.8 million shares issuable upon exercise of outstanding options and (ii) ~~0.4~~0.9 million shares underlying restricted stock units, which will be settled in shares of our common stock if the vesting conditions are met and thus reduce the common stock available for future share-based awards under the 2016 Plan by the amount vested. These shares have been multiplied by the applicable factor under the 2016 Plan to determine the remaining shares available as of June 30, ~~2017.~~2018. Additionally, as of June 30, ~~2017,~~2018 under the previous Career Education Corporation 2008 Incentive Compensation Plan, there were approximately ~~2.4~~2.0 million shares issuable upon exercise of outstanding options and ~~1.3~~0.6 million shares underlying outstanding restricted and deferred stock units, ~~outstanding,~~ which will be settled in shares of our common stock if the vesting conditions are ~~met, under the previous Career Education Corporation 2008 Incentive Compensation Plan.~~met. This plan was replaced by the 2016 Plan and effective May 24, 2016 all future awards will be made under the 2016 Plan. The vesting of all types of equity awards (stock options, stock appreciation rights, restricted stock awards, restricted stock units and deferred stock units) is subject to possible acceleration in certain circumstances. Generally, if a

plan participant terminates employment for any reason other than by death or disability during the vesting period, the right to unvested equity awards is forfeited.

As of June 30, ~~2017,~~2018, we estimate that compensation expense of approximately ~~$6.5~~$8.0 million will be recognized over the next four years for all unvested share-based awards that have been granted to participants, including stock options, restricted stock units and deferred stock units to be settled in shares of stock but excluding restricted stock units to be settled in cash.

Stock Options. The exercise price of stock options ~~and stock appreciation rights~~ granted under each of the plans is equal to the fair market value of our common stock on the date of grant. Employee stock options generally become exercisable 25% per year over a four-year service period beginning on the date of grant and expire ten years from the date of grant. Non-employee directors’ stock options expire ten years from the date of grant and generally become 100% exercisable ~~as follows: 100%~~ after the first ~~anniversary of grant date or one-fourth on the grant date and one-fourth for each of the first through third~~ anniversary of the grant date. Grants of stock options are generally only subject to the service conditions discussed previously.

Stock option activity during the year to date ended June 30, ~~2017~~2018 under all of our plans was as follows (options in thousands):

	Options			Weighted Average Exercise Price		Options			Weighted Average Exercise Price
Outstanding as of December 31, 2016		3,086		$	11.18
Outstanding as of December 31, 2017							2,868		$	9.86
Granted		361			8.60		337			14.10
Exercised		(274	)		8.29		(137	)		7.32
Cancelled		(220	)		29.67		(225	)		20.58
Outstanding as of June 30, 2017		2,953		$	9.76
Exercisable as of June 30, 2017		1,708		$	12.67
Outstanding as of June 30, 2018							2,843		$	9.64
Exercisable as of June 30, 2018							1,789		$	10.44

Restricted Stock Units to be Settled in Stock. Restricted stock units to be settled in shares of stock generally ~~become fully vested as follows:~~vest 25% per year over a four-year service period or one-third for each of the first through third anniversary of the grant date. Certain awards granted in 2016 vest 20% after the first year, 50% after the second year and 30% after the third year andperiod. Restricted stock units which are “performance-based” ~~awards which~~ are subject to performance conditions that, even if the requisite service period is met, may reduce the number of units of restricted stock that vest at the end of the requisite service period or result in all units being forfeited. ~~Also, certain awards granted in~~The performance-based restricted stock units generally vest three years after the grant date or vest 20% after the first year, 50% after the second ~~quarter of 2015 for retention purposes are subject to accelerated vesting~~year and ~~cash settlement in~~30% after the ~~event of an involuntary not-for-cause termination of employment by the Company.~~third year.

The following table summarizes information with respect to all outstanding restricted stock units to be settled in shares of stock under our plans during the year to date ended June 30, ~~2017~~2018 (units in thousands):

	Restricted Stock Units to be Settled in Shares of Stock					Restricted Stock Units to be Settled in Shares of Stock
	Units			Weighted Average Grant-Date Fair Value Per Unit		Units			Weighted Average Grant-Date Fair Value Per Unit
Outstanding as of December 31, 2016		1,712		$	4.63
Outstanding as of December 31, 2017							1,454		$	5.32
Granted		275			8.30		530			13.81
Vested		(397	)		4.67		(687	)		4.95
Forfeited		(40	)		4.87		(95	)		6.89
Outstanding as of June 30, 2017		1,550		$	5.27
Outstanding as of June 30, 2018							1,202		$	9.15

Deferred Stock Units to be Settled in Stock. ~~During 2014, we~~We granted deferred stock units to our non-employee directors. The deferred stock units are to be settled in shares of stock and generally vest one-third per year over a three-year service period beginning on the date of grant. Settlement of the deferred stock units and delivery of the underlying shares of stock to the plan participants does not occur until he or she ceases to provide services to the Company in the capacity of a director, employee or consultant.

The following table summarizes information with respect to all deferred stock units during the year to date ended June 30, ~~2017~~2018 (units in thousands):

	Deferred Stock Units to be Settled in Shares		Weighted Average Grant-Date Fair Value Per Unit		Deferred Stock Units to be Settled in Shares		Weighted Average Grant-Date Fair Value Per Unit
Outstanding as of December 31, 2016 ⁽¹⁾		76	$	4.44
Outstanding as of December 31, 2017 ⁽¹⁾						76	$	4.44
Granted		-		-		-		-
Vested		-		-		-		-
Forfeited		-		-		-		-
Outstanding as of June 30, 2017 ⁽¹⁾		76	$	4.44
Outstanding as of June 30, 2018 ⁽¹⁾						76	$	4.44

Restricted Stock Units to be Settled in Cash. Restricted stock units to be settled in cash generally ~~become fully vested~~vest 25% per year over a four-year service period beginning on the date of grant. ~~Certain awards granted to our Chief Executive Officer in 2015 outside of the 2008 Plan vest 50% per year over a two-year service period.~~ Cash-settled restricted stock units are recorded as liabilities as the expense is recognized and the fair value for these awards is determined at each period end date with changes in fair value recorded in our unaudited condensed consolidated statements of income and comprehensive income in the current period. Cash-settled restricted stock units are settled with a cash payment for each unit vested equal to the closing price on the vesting date. Cash-settled restricted stock units are not included in common shares reserved for issuance or available for issuance under the 2016 Plan.

The following table summarizes information with respect to all cash-settled restricted stock units during the year to date ended June 30, ~~2017~~2018 (units in thousands):

Upon vesting, based on the conditions set forth in the award agreements, these units will be settled in cash. We valued these units in accordance with the guidance set forth by FASB ASC Topic 718 – Compensation-Stock Compensation and recognized ~~$2.0~~$1.6 million of expense for the year to date ~~2017~~June 30, 2018 for all cash-settled restricted stock units, of which ~~$1.3~~$0.5 million was recorded during the quarter ended June 30, ~~2017.~~2018.

Stock-Based Compensation Expense. Total stock-based compensation expense for the quarters and years to date ended June 30, ~~2017~~2018 and ~~2016~~2017 for all types of awards was as follows (dollars in thousands):

	For the Quarter Ended June 30,				For the Year to Date Ended June 30,				For the Quarter Ended June 30,				For the Year to Date Ended June 30,
Award Type	2017		2016		2017		2016		2018		2017		2018		2017
Stock options	$	424	$	348	$	796	$	589	$	483	$	424	$	907	$	796
Restricted stock units settled in stock		787		494		1,520		791		711		787		1,783		1,520
Restricted stock units settled in cash		1,278		1,088		1,970		2,021		494		1,278		1,562		1,970
Total stock-based compensation expense	$	2,489	$	1,930	$	4,286	$	3,401	$	1,688	$	2,489	$	4,252	$	4,286

Performance Unit Awards. Performance unit awards granted during ~~2015,~~ 2016 and 2017 are long-term incentive, cash-based awards. Payment of these awards is based upon a calculation of Total Shareholder Return (“TSR”) of CEC as compared to TSR across a specified peer group of our competitors over a three-year performance period ending primarily on December 31, ~~2017,~~ 2018 and 2019, respectively. These awards are recorded as liabilities as the expense is recognized and the fair value for these awards is determined at each period end date with changes in fair value recorded in our unaudited condensed consolidated statements of income

and comprehensive income in the current period. We recorded ~~$2.3~~$1.6 million and ~~$0.9~~$2.3 million of expense related to these awards for the years to date ended June 30, ~~2017~~2018 and June 30, ~~2016,~~2017, respectively, with ~~$1.7~~$0.9 million and ~~$0.6~~$1.7 million of expense for the quarters ended June 30, ~~2017~~2018 and June 30, ~~2016,~~2017, respectively.

Basic net income per share is calculated by dividing net income by the weighted average number of common shares outstanding for the period. Diluted earnings per share is computed by dividing net income by the weighted average number of shares assuming dilution. Dilutive common shares outstanding is computed using the Treasury Stock Method and reflects the additional shares that would be outstanding if dilutive stock options were exercised and restricted stock units were settled for common shares during the period.

The weighted average number of common shares used to compute basic and diluted net income per share for the quarters and years to date ended June 30, ~~2017~~2018 and ~~2016~~2017 were as follows:

	For the Quarter Ended June 30,				For the Year to Date Ended June 30,				For the Quarter Ended June 30,				For the Year to Date Ended June 30,
	2017		2016		2017		2016		2018		2017		2018		2017
Basic common shares outstanding		69,025		68,368		68,803		68,261		69,668		69,025		69,443		68,803
Common stock equivalents		1,859		647		1,787		366		1,894		1,859		1,796		1,787
Diluted common shares outstanding		70,884		69,015		70,590		68,627		71,562		70,884		71,239		70,590

For the quarters and years to date ended June 30, ~~2017~~2018 and ~~2016,~~2017, certain unexercised stock option awards are excluded from our computations of diluted earnings per share, as these shares were out-of-the-money and their effect would have been anti-dilutive. The anti-dilutive options that were excluded from our computations of diluted earnings per share were ~~1.1~~0.9 million and ~~2.8~~1.1 million shares for the quarters ended June 30, ~~2017~~2018 and ~~2016,~~2017, respectively, and ~~1.1~~0.8 million and ~~2.6~~1.1 million shares for the years to date ended June 30, ~~2017~~2018 and ~~2016,~~2017, respectively.

Our segments are determined in accordance with FASB ASC Topic 280—Segment Reporting and are based upon how the Company analyzes performance and makes decisions. Each segment represents a group of postsecondary education providers that offer a variety of degree and non-degree academic programs. These segments are organized by key market segments to enhance operational alignment and, for our two universities, to enhance brand focus within each segment to more effectively execute our strategic plan. As of June 30, ~~2017,~~2018, our ~~four~~three segments are:

Campuses included in our Career School segments include those which are currently being taught out or those which have completed their teach-out activities or have been sold subsequent to January 1, 2015. As a result of a change in accounting guidance, campuses which have closed or have been sold subsequent to January 1, 2015 no longer meet the criteria for discontinued operations and remain reported within continuing operations on our consolidated financial statements. Campuses in teach-out employ a gradual teach-out process, enabling them to continue to operate while current students have a reasonable opportunity to complete their course of study; they no longer enroll new students.

Summary financial information by reporting segment is as follows (dollars in thousands):

																	For the Quarter Ended June 30,
	For the Quarter Ended June 30,
	Revenue										Operating Income (Loss)						Revenue										Operating Income (Loss)
	2017		% of Total			2016		% of Total			2017			2016			2018		% of Total			2017		% of Total			2018			2017
CTU	$	91,204		62.4	%	$	91,736		50.2	%	$	28,064		$	29,970		$	93,266		65.7	%	$	91,204		62.4	%	$	27,116		$	28,064
AIU		46,215		31.6	%		50,608		27.7	%		1,075			6,838			48,579		34.2	%		46,215		31.6	%		(1,585	)		1,075
Total University Group		137,419		94.0	%		142,344		77.9	%		29,139			36,808			141,845		99.9	%		137,419		94.0	%		25,531			29,139
Corporate and Other		-	NM				-	NM				(5,847	)		(5,761	)
Corporate and Other ⁽¹⁾																		-	NM				-	NM				(2,000	)		(5,847	)
Subtotal		137,419		94.0	%		142,344		77.9	%		23,292			31,047			141,845		99.9	%		137,419		94.0	%		23,531			23,292
Culinary Arts		6,646		4.5	%		29,998		16.4	%		(6,753	)		361
Transitional Group		2,157		1.5	%		10,284		5.6	%		(7,435	)		(14,118	)
All Other Campuses																		191		0.1	%		8,803		6.0	%		(12,228	)		(14,188	)
Total	$	146,222		100.0	%	$	182,626		100.0	%	$	9,104		$	17,290		$	142,036		100.0	%	$	146,222		100.0	%	$	11,303		$	9,104

	For the Year to Date Ended June 30,																For the Year to Date Ended June 30,
	Revenue										Operating Income (Loss)						Revenue										Operating Income (Loss)
	2017		% of Total			2016		% of Total			2017			2016			2018		% of Total			2017		% of Total			2018			2017
CTU	$	185,239		60.1	%	$	183,702		48.2	%	$	51,084		$	49,207		$	187,873		64.8	%	$	185,239		60.1	%	$	54,301		$	51,084
AIU		100,468		32.6	%		103,581		27.2	%		5,731			8,745			101,700		35.1	%		100,468		32.6	%		2,551			5,731
Total University Group		285,707		92.7	%		287,283		75.3	%		56,815			57,952			289,573		99.8	%		285,707		92.7	%		56,852			56,815
Corporate and Other(1)		-	NM				-	NM				(10,396	)		(11,573	)		-	NM				-	NM				(6,542	)		(10,396	)
Subtotal		285,707		92.7	%		287,283		75.3	%		46,419			46,379			289,573		99.8	%		285,707		92.7	%		50,310			46,419
Culinary Arts		16,935		5.5	%		68,621		18.0	%		(11,012	)		3,467
Transitional Group		5,689		1.8	%		25,608		6.7	%		(16,522	)		(25,577	)
All Other Campuses																		528		0.2	%		22,624		7.3	%		(18,478	)		(27,534	)
Total	$	308,331		100.0	%	$	381,512		100.0	%	$	18,885		$	24,269		$	290,101		100.0	%	$	308,331		100.0	%	$	31,832		$	18,885

	Total Assets as of⁽¹⁾				Total Assets as of⁽²⁾
	June 30, 2017		December 31, 2016		June 30, 2018		December 31, 2017
CTU	$	73,081	$	76,143	$	76,332	$	72,988
AIU		68,188		66,081		54,665		51,832
Total University Group		141,269		142,224		130,997		124,820
Corporate and Other		290,811		334,945		298,726		291,211
Subtotal		432,080		477,169		429,723		416,031
Culinary Arts		52,324		57,443
Transitional Group		15,984		18,736
All Other Campuses						27,311		29,098
Discontinued Operations		6,087		6,253		1,756		1,967
Total	$	506,475	$	559,601	$	458,790	$	447,096

As of June 30, ~~2017,~~2018, the results of operations for campuses that have ceased operations prior to 2015 are presented within discontinued operations. Prior to January 1, 2015, our ~~Transitional Group~~teach-out campuses met the criteria for discontinued operations upon completion of their ~~teach-out.~~teach-out as defined under FASB ASC Topic 205 – Presentation of Financial Statements. Commencing January 1, 2015, in accordance with the new guidance under ASC Topic 360, only campuses that meet the criteria of a strategic shift upon disposal will be classified within discontinued operations, among other criteria. Since the January 2015 effective date of the updated guidance within ASC Topic 360, we have not had any campuses that met the criteria to be considered a discontinued operation.

The summary of unaudited results of operations for our discontinued operations for the quarters and years to date ended June 30, ~~2017~~2018 and ~~2016~~2017 were as follows (dollars in thousands):

	For the Quarter Ended June 30,						For the Year to Date Ended June 30,						For the Quarter Ended June 30,						For the Year to Date Ended June 30,
	2017			2016			2017			2016			2018			2017			2018			2017
Total operating expenses	$	594		$	1,255		$	1,257		$	1,381		$	147		$	594		$	645		$	1,257
Loss before income tax	$	(594	)	$	(1,255	)	$	(1,257	)	$	(1,381	)	$	(147	)	$	(594	)	$	(645	)	$	(1,257	)
Benefit from income tax		(217	)		(470	)		(460	)		(517	)		(34	)		(217	)		(150	)		(460	)
Loss from discontinued operations, net of tax	$	(377	)	$	(785	)	$	(797	)	$	(864	)	$	(113	)	$	(377	)	$	(495	)	$	(797	)

Assets and liabilities of discontinued operations on our condensed consolidated balance sheets as of June 30, ~~2017~~2018 and December 31, ~~2016~~2017 include the following (dollars in thousands):

	June 30,		December 31,		June 30,		December 31,
	2017		2016		2018		2017
Assets:
Current assets:
Receivables, net	$	100	$	148	$	171	$	382
Total current assets		100		148		171		382
Non-current assets:
Other assets, net		365		483
Deferred income tax assets, net		5,622		5,622		1,585		1,585
Total assets of discontinued operations	$	6,087	$	6,253	$	1,756	$	1,967
Liabilities:
Current liabilities:
Accounts payable and accrued expenses	$	94	$	76	$	16	$	185
Remaining lease obligations		6,573		8,143		3,109		5,516
Total current liabilities		6,667		8,219		3,125		5,701
Non-current liabilities:
Remaining lease obligations		3,125		6,331		-		785
Other		89		91
Total liabilities of discontinued operations	$	9,881	$	14,641	$	3,125	$	6,486

A number of the campuses that ceased operations prior to January 1, 2015 have remaining lease obligations that expire over time with the latest expiration in 2019. A liability is recorded representing the fair value of the remaining lease obligation at the time the space is no longer being utilized. Changes in our future remaining lease obligations, which are reflected within current and non-current liabilities of discontinued operations on our condensed consolidated balance sheets, for the quarters and years to date ended June 30, ~~2017~~2018 and ~~2016,~~2017, were as follows (dollars in thousands):

	Balance, Beginning of Period		Charges Incurred ⁽¹⁾		Net Cash Payments			Balance, End of Period		Balance, Beginning of Period		Charges Incurred ⁽¹⁾			Net Cash Payments			Balance, End of Period
For the quarter ended June 30, 2018										$	4,188	$	(61	)	$	(1,018	)	$	3,109
For the quarter ended June 30, 2017	$	12,120	$	153	$	(2,575	)	$	9,698	$	12,120	$	153		$	(2,575	)	$	9,698
For the quarter ended June 30, 2016	$	17,669	$	743	$	(2,263	)	$	16,149
For the year to date ended June 30, 2018										$	6,301	$	3		$	(3,195	)	$	3,109
For the year to date ended June 30, 2017	$	14,474	$	518	$	(5,294	)	$	9,698	$	14,474	$	518		$	(5,294	)	$	9,698
For the year to date ended June 30, 2016	$	21,751	$	401	$	(6,003	)	$	16,149

The discussion below and other items in this Quarterly Report on Form 10-Q contain “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,” “expect,” ~~“intend,~~“plan,” “should,” “will,” ~~“focused on,”~~ “continue to,” “outlook,” “focused on” and similar expressions, but these words are not the exclusive means of identifying 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 matters discussed in Item 1A, “Risk Factors,” in our Annual Report on Form 10-K for the year ended December 31, ~~2016~~2017 that could cause our actual growth, results of operations, cash flows, performance, business prospects and opportunities to differ materially from those expressed in, or implied by, these statements. Except as expressly required by the 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. Among the factors that could cause actual results to differ materially from those expressed in, or implied by, our forward-looking statements are the following:

Readers are also directed to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016~~2017 and its subsequent filings with the Securities and Exchange Commission for information about other risks and uncertainties, including, but not limited to, those matters discussed in Item 1A, “Risk Factors,” in our Form 10-K.

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the Company’s unaudited condensed consolidated financial statements and the notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q. The MD&A is intended to help investors understand the results of operations, financial condition and present business environment. The MD&A is organized as follows:

Our academic institutions offer a quality education to a diverse student population in a variety of disciplines through online, campus-based and blended learning programs. Our two universities – American InterContinental University (“AIU”) and Colorado Technical University (“CTU”) – provide degree programs through the master’s or doctoral level as well as associate and bachelor’s levels. Both universities predominantly serve students online with career-focused degree programs that are designed to meet the educational demands of today’s busy adults. AIU and CTU continue to show innovation in higher education, advancing new

personalized learning technologies like their intellipath~~™ adaptive~~^® learning platform. Career Education is committed to providing quality education that closes the gap between learners who seek to advance their careers and employers needing a qualified workforce.

~~In accordance with our strategic decision to focus our resources and attention on our two universities, we are~~Additionally, CEC is in the process of teaching out campuses within our ~~Transitional Group and Culinary Arts segments.~~All Other Campuses segment. Campuses within this segment include those which are being taught out or those which have completed their teach-out activities. Students enrolled at these campuses have been afforded the reasonable opportunity to complete their program of study prior to the final teach-out date. During the second quarter of ~~2017,~~2018, the Company completed the teach-out of three ~~Transitional Group~~ campuses: Briarcliffe Bethpage, Sanford-Brown ~~Brooklyn Center, Sanford-Brown Chicago~~Seattle and Sanford-Brown ~~Orlando,~~Online, which continue to be reported within the ~~Transitional Group~~All Other Campuses segment as part of ~~June 30, 2017~~continuing operations in accordance with ASC Topic 360 – Property, Plant and Equipment, which limits discontinued operations reporting.

We operate in a highly regulated industry, which has significant impacts on our business and creates risks and uncertainties. In recent years, ~~there has been substantial and increasing focus by various members of~~Congress, ED, states, accrediting agencies, the ~~U.S. Congress and federal agencies, including ED,~~CFPB, the ~~Consumer Financial Protection Bureau~~FTC, state attorneys general and the ~~Federal Trade Commission, on~~media have scrutinized the ~~role that~~ for-profit, ~~educational institutions play in higher education.~~postsecondary education sector. Congressional hearings and roundtable discussions ~~have been~~were held regarding various aspects of the education industry and reports ~~have been~~were issued that are highly critical of for-profit ~~institutions~~colleges and ~~include a number of recommendations to be considered by Congress in connection with the upcoming reauthorization of the Higher Education Act.~~universities. A group of influential U.S. senators, ~~has~~consumer advocacy groups and some media outlets have strongly and repeatedly encouraged the Departments of Education, Defense and Veterans Affairs to take action to limit or terminate the participation of for-profit educational institutions, including Career Education Corporation, in existing tuition assistance programs.

In addition, ED has formed an inter-agency task force focused on the for-profit sector involving multiple federal agencies and departments including the Federal Trade Commission, the U.S. Departments of Justice, Treasury and Veterans Affairs, the Consumer Financial Protection Bureau, the Securities and Exchange Commission, and numerous state Attorneys General, to coordinate activities and share information to protect students from unfair, deceptive and abusive policies and practices. We believe that the recent actions by the Federal Trade Commission and the multiple Attorney Generals’ offices may be related to or coordinated with this task force. At this time, the future direction of many of these initiatives is uncertain as they may be impacted by federal budget cuts and/or shifts in policy goals and administration priorities in connection with the new administration.

We encourage you to review Item 1, “Business,” and Item 1A, “Risk Factors,” in our Annual Report on Form 10-K to learn more about our highly regulated industry and related risks and uncertainties, in addition to the MD&A in our ~~2017~~2018 Quarterly Reports on Form 10-Q.

We believe it is useful to present non-GAAP financial measures which exclude certain significant and non-cash items as a means to understand the performance of our core business. As a general matter, we use non-GAAP financial measures in conjunction with results presented in accordance with GAAP to help analyze the performance of our core business, assist with preparing the annual operating plan, and measure performance for some forms of compensation. In addition, we believe that non-GAAP financial information is used by analysts and others in the investment community to analyze our historical results and to provide estimates of future performance.

We believe certain non-GAAP measures allow us to compare our current operating results with respective historical periods and with the operational performance of other companies in our industry because it does not give effect to potential differences caused by items we do not consider reflective of underlying operating performance, such as our teach-out campuses. In evaluating the use of non-GAAP measures, investors should be aware that in the future we may incur expenses similar to the adjustments presented below. Our presentation of non-GAAP measures should not be construed as an inference that our future results will be unaffected by expenses that are unusual, non-routine or non-recurring. A non-GAAP measure has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for net income (loss), operating income (loss), or any other performance measure derived in accordance with and reported under GAAP or as an alternative to cash flow from operating activities or as a measure of our liquidity.

Non-GAAP financial measures, when viewed in a reconciliation to respective GAAP financial measures, provide an additional way of viewing the Company's results of operations and the factors and trends affecting the Company's business. Non-GAAP financial measures should be considered as a supplement to, and not as a substitute for, or superior to, the respective financial results presented in accordance with GAAP.

~~Our second quarter~~ The first half of ~~2017 operating~~2018 results ~~were better than our expectations. Our second quarter operating income for the~~reflected improvement in University Group and Corporate was $23.3 million and adjusted for certain items not considered reflective of underlying operating performance was $25.9 million which was ahead of the high end of our outlook operating income of $19 million or adjusted operating income of $22 million. This performance was driven by better than expected enrollment trends ~~within our University segments~~and operating metrics, as well as ~~marketing efficiencies~~continued encouraging performance from the recent investments we have made in student-serving initiatives.

We believe the investments that we have made, including the admissions and ~~timing of certain operating expenses. In addition, we experienced better than expected operating efficiencies across all segments.~~

~~Within our University Group, we continued to refine and improve our operational~~advising centers near Phoenix, Arizona, have positively impacted new enrollment growth, student retention and academic outcomes. As a result of these encouraging trends, we have committed incremental investments in both Illinois and Arizona to further augment our student-serving initiatives and processes to ~~enhance~~meet the increased student ~~experiences both before~~interest we are experiencing. These investments, coupled with the marketing and ~~after they are enrolled~~advertising efficiencies being fully annualized, may drive some quarterly variability in our ~~programs. Our investments~~operating performance.

New and total student enrollments also benefitted from our growth in ~~technology and student support operations have provided us~~corporate partnerships, with the second quarter new enrollment growth for CTU being meaningfully impacted. We believe that having strong corporate partnerships is an ~~academic platform that we believe serves and educates our students well, while continuing to increase~~important component in the value proposition of our Universities. ~~We have~~For the University Group, approximately 11% of our total student enrollments are a result of corporate partnerships, with the majority of those students enrolled at CTU. CTU is further along in the process of corporate partnership development while AIU plans to further develop these relationships in future quarters.

Technology continues to be a key focus and important competitive advantage for the Universities and we continued to ~~invest in our~~implement initiatives during the second quarter. CTU began testing its two-way messaging platform within the mobile app during the first quarter and fully implemented this platform during the second quarter of 2018. The platform supports effective and efficient student outreach and communication with advising, admissions and ~~advising centers~~financial aid personnel and allows faculty members to reach students they otherwise would not reach. Students are increasingly using the messenger due to its ease and simplicity and we believe this will have a positive impact on our student retention and academic outcomes. AIU has begun testing the two-way messaging platform with the plan to also fully implement in ~~Phoenix, Arizona, which are now operational. As we~~2018. We will continue to ~~fully staff these centers, we are seeing early indicators of demand. The Phoenix centers have augmented~~advance technology initiatives to better assist our ~~capabilities to serve the demand that we are experiencing from prospective students.~~

~~We have also invested time and resources into our student onboarding process which has shown positive results~~students in impacting enrollment trends. We completed the rollout of our graduate team model at AIU, which personalizes student-facing services in the areas of financial aid, admissions and advising by providing enhanced continuity of support personnel throughout a student’s life-cycle at our Universities. We believe this structure increases accountability and ultimately improves overall student experience and engagement.

Our teach-out campuses remain on track and we expect to complete the teach-out of a majority of these campuses by the end of 2017. Since our strategic announcement in early 2015 related to our Career Schools, we have taught out or divested 43 campuses and will have eight campuses remaining after September 30, 2017, which will complete their teach outs at varying dates through 2018. Student retention trends have been better than expected across most teach-out schools and we have been able to realize operating efficiencies due to strong focus and personnel management while providing each student the reasonable opportunity to complete their course of study. We also continue to optimize our real estate obligations associated with these campuses to reduce our future lease liabilities.education life cycle.

Revenue from continuing operations ~~declined $36.4 million or 19.9% due to an overall 12.0% decrease~~ in ~~total student enrollments for~~ the second quarter of ~~2017~~2018 decreased $4.2 million or 2.9% as compared to the prior year quarter, ~~driven by our decision to divest or~~primarily as a result of the substantial completion of the teach-out ~~our Career Schools.~~of campuses within the All Other Campuses segment. For the ~~current~~second quarter of 2018, we reported operating income of ~~$9.1~~$11.3 million as compared to operating income of ~~$17.3~~$9.1 million for the prior year quarter. This ~~decrease~~improvement was driven by ~~decreased revenue within AIU due to the academic calendar redesign, investments in~~reduced operating costs at our ~~Phoenix admissions and advising centers and timing~~teach-out campuses as well as a recovery of certain operating expenses. The academic calendar redesign at AIU is intended to improve student retention and engagement by scheduling session starts and breaks that generally align better with student lives, but will impact the timing of student enrollments and the number of earnings days in any given quarter. For example, AIU had seven less earnings days$2.5 million for past claims in the ~~second~~current quarter ~~of 2017, or 77 days versus 84 days in~~partially offset with increased legal settlements during the ~~prior year~~current quarter. Lastly, we reported cash ~~used in~~provided by operations for the current year to date of $14.8 million as compared to cash used by operations of $34.2 million for the prior year period. The prior year cash usage included a payment of $32.0 million for legal settlements.

For our University Group, revenue increased $4.4 million or 3.2% as compared to the prior year ~~to date’s cash provided of $6.6 million. The~~quarter. Revenue within our CTU segment increased $2.1 million or 2.3% driven by an increase in ~~cash usage~~new and total student enrollments. AIU’s revenue increased by $2.4 million or 5.1% driven by an increase in new enrollments as well as approximately four additional revenue-generating days during the current quarter as compared to the prior year quarter. Operating income for the ~~current year~~University Group decreased $3.6 million or 12.4%, with both AIU and CTU contributing to ~~date was~~this decrease, primarily ~~driven by payments~~as a result of ~~legal settlements of $32.0 million~~investments within student-serving initiatives at both Universities during the ~~first~~current quarter as well as a non-cash charge of $1.2 million primarily recorded within AIU related to optimization of ongoing real estate facilities.

New and total student enrollments for our CTU segment increased 5.8% and 3.3%, respectively, as compared to the prior year quarter. CTU’s enrollment growth was positively impacted by investments across our student-serving processes, including the opening of our admissions and advising center in Arizona during 2017.

~~For~~Additionally, our ~~University Group, revenue decreased $4.9 million or 3.5%~~academics and advising functions are leveraging technology and have increased their student outreach with robust orientation and student engagement strategies that we believe are supporting overall student retention. New student enrollments for our AIU segment increased 9.0% as compared to the prior year quarter driven by the ~~timing impact of the~~academic calendar redesign ~~for~~as well as investments in student-serving initiatives. AIU ~~which shifted revenue from~~continues to improve its student-serving operations to further support its goal of providing quality academics and supportive student services. They have evaluated and improved their learning management sytem and continue to adopt technology enhancements. Total student enrollments at AIU for the second quarter ~~of 2017 to the third quarter of 2017. Total enrollments for the University Group increased by 3.2% as of the current year quarter end~~decreased 13.8% as compared to the prior year due to the timing impact of the academic calendar redesign which drove new enrollment decline in the first quarter ~~with~~of 2018. We expect both new and total student enrollments for AIU ~~contributing an 11.5% increase and CTU decreasing slightly by 0.9%~~to show significant growth in the third quarter of 2018 as compared to the prior year quarter. ~~New enrollments increased 5.1% for AIU for the current year quarter as compared to the prior year which was offset with a decline in new enrollments~~

Within our All Other Campuses segment, operating loss of ~~3.9% for CTU, after adjusting for the change in how the Company accounts for certain cancelled students. Operating income for the University Group decreased $7.7~~$12.2 million ~~or 20.8%, for the current year quarter as~~improved 13.8% compared to the prior year quarter ~~driven by the reasons discussed above.~~

~~Within our teach-out segments,~~as we ~~experienced better than estimated total student enrollment~~continued to eliminate costs as ~~the~~ campuses wind-down operations. Operating loss for the Transitional Group improved by $6.7 million or 47.3% for the current year quarter as compared to the prior year quarter, driven by reductions in expenses, particularly within administrative, occupancy and academic expenses. Operating loss for Culinary Arts increased by $7.1 million as a result of the reduction in revenue more than offsetting the reduction in expenses as the business nears the completion of teach-out.completed their teach-outs. We ~~have nine campuses~~had approximately 10 students remaining within ~~the Transitional Group and sixteen~~three teach-out campuses ~~within the Culinary Arts segment at~~as of the end of the second quarter of ~~2017, which will~~2018; these students are scheduled to complete their programs during 2018. As the teach-out ~~at varying dates through~~campuses complete their closure in 2018, ~~with the majority being complete by the end of 2017.~~we expect to see expenses further decrease.

The Company believes it is useful to present non-GAAP financial measures, which exclude certain significant and non-cash items, as a means to understand the performance of its operations. (See tables below for a GAAP to non-GAAP reconciliation.) ~~Adjusted~~Operating income for the University Group and Corporate was $23.5 million for the current quarter as compared to $23.3 million in the prior year quarter and adjusted operating income for the University Group and Corporate was ~~$25.9~~$26.8 million for the current ~~year~~ quarter as compared to ~~$33.8~~$25.9 million in the

prior year quarter. The quarter ~~driven by the academic calendar redesign,~~results included a recovery of $2.5 million for past claims partially offset with ongoing incremental investments in student-serving processes and initiatives, including the new admissions and advising centers in Arizona. Operating loss and ~~timing of expenses as discussed above. Adjusted~~adjusted operating loss for the ~~Transitional Group~~All Other Campuses segment improved to $12.2 million and ~~Culinary Arts increased to $11.2~~$3.0 million for the current ~~year~~ quarter as compared to anoperating loss and adjusted operating loss of ~~$4.2~~$14.2 million and $11.2 million in the prior year quarter, respectively, as a result of ~~the deleveraging of~~reduced expenses as we near the end of teach-out completion.

As we look to the remainder of 2017, we remain confident in our previously provided full year outlook.We continue to expect some variability in quarterly performance during 2017 largely due to timing-related items.We currently expect the following results, subject to the key assumptions identified below (see GAAP to non-GAAP reconciliation below):

Forward looking adjusted operating income (loss) expectations are presented in the reconciliation of GAAP to non-GAAP items below. Operating income (loss), which is the most directly comparable GAAP measure to adjusted operating income (loss), may not follow the same trends as discussed in our outlook above because of adjustments made for unused space charges that represent the present value of future remaining lease obligations for vacated space less an estimated amount for sublease income as well as depreciation, amortization, asset impairment charges and significant legal settlements. The expectations provided in the paragraph above and table below for 2017 and 2018 are based on the following key assumptions and factors, among others: (i) prospective student interest in our programs continues to trend in line with recent experiences, (ii) modest total enrollment growth within the University Group while achieving the intended University Group efficiencies, (iii) teach-outs to progress as expected and performance consistent with current trends, (iv) achievement of recovery rates for the Company’s real estate obligations and timing of any associated lease termination payments consistent with the Company’s historical experiences, (v) right-sizing of the Company’s corporate expense structure to serve primarily online institutions, (vi) no material changes in the current legal or regulatory environment and excludes legal and regulatory liabilities which are not probable and estimable at this time and any impact of new or proposed regulations, including the new “borrower defense to repayment” regulations and the gainful employment regulation, and any modifications thereto, and (vii) consistent working capital movements in line with historical operating trends and potential impacts of teach-out campuses on working capital in line with expectations. Although these estimates and assumptions are based upon management’s good faith beliefs regarding current events and actions that may be undertaken in the future, actual results could differ materially from these estimates.

We have completed the first half of 2017 with performance ahead of our expectations and we are confident in our long-term outlook. The implementation and execution against our strategic initiatives over the course of the past several years have driven increased stability within our University Group operations. We continue to remain focused on improving the market position of our Universities by strengthening the breadth of program offerings and leveraging faculty and technology, with the goal of enhancing retention and outcomes for our students. While our quarterly operating performance during 2017 will be subject to some variability as we make enhancements to our operating model and adjustments to our academic calendar, our adjusted operating income related to University Group and Corporate is expected to grow to approximately $100 million to $105 million in 2017 and our long-term outlook continues to improve. Within our University Group, we expect modest total enrollment growth for the full year and positive new enrollment growth during the second half. As our operating results continue to improve, we will continue to analyze and evaluate growth investments for the benefits of our students.

Adjusted operating income (loss) for the quarters and years to date ended June 30, ~~2017~~2018 and ~~2016 as well as an outlook for the quarter ending September 30,~~ 2017 ~~and the years ending December 31, 2017 and 2018~~ is presented below (dollars in thousands, unless otherwise noted):

	ACTUAL						ACTUAL						ACTUAL						ACTUAL
	For the Quarter Ended June 30,						For the Year to Date Ended June 30,						For the Quarter Ended June 30,						For the Year to Date Ended June 30,
Adjusted Operating Income (Loss)	2017			2016			2017			2016			2018			2017			2018			2017
University Group and Corporate:
Operating income ^{(1) (2)}	$	23,292		$	31,047		$	46,419		$	46,379		$	23,531		$	23,292		$	50,310		$	46,419
Depreciation and amortization⁽²⁾		2,559			2,777			5,090			5,880			2,085			2,559			4,552			5,090
Asset impairments ⁽²⁾		-			-			-			237
Unused space charges ^{(2) (3)}		-			-			-			1,118			1,213			-			1,213			-
Adjusted Operating Income -- University Group and Corporate	$	25,851		$	33,824		$	51,509		$	53,614		$	26,829		$	25,851		$	56,075		$	51,509

Transitional Group and Culinary Arts:
All Other Campuses:
Operating loss ^{(1) (4)}	$	(14,188	)	$	(13,757	)	$	(27,534	)	$	(22,110	)	$	(12,228	)	$	(14,188	)	$	(18,478	)	$	(27,534	)
Depreciation and amortization ⁽⁴⁾		1,317			2,425			2,696			5,891			18			1,317			133			2,696
Unused space charges^{(3) (4)}		1,654			7,128			3,811			9,140			3,198			1,654			2,447			3,811
Adjusted Operating Loss -- Transitional and Culinary Arts	$	(11,217	)	$	(4,204	)	$	(21,027	)	$	(7,079	)
Significant legal settlements ⁽⁴⁾														5,970			-			9,461			-
Adjusted Operating Loss -- All Other Campuses													$	(3,042	)	$	(11,217	)	$	(6,437	)	$	(21,027	)

	ACTUAL						ACTUAL						ACTUAL						ACTUAL
	For the Quarter Ended June 30,						For the Year to Date Ended June 30,						For the Quarter Ended June 30,						For the Year to Date Ended June 30,
	2017			2016			2017			2016			2018			2017			2018			2017
Operating income for University Group and Corporate	$	23,292		$	31,047		$	46,419		$	46,379		$	23,531		$	23,292		$	50,310		$	46,419
Operating loss for Culinary Arts and Transitional		(14,188	)		(13,757	)		(27,534	)		(22,110	)
Operating loss for All Other Campuses														(12,228	)		(14,188	)	$	(18,478	)	$	(27,534	)
Operating income	$	9,104		$	17,290		$	18,885		$	24,269		$	11,303		$	9,104		$	31,832		$	18,885

~~Rulemaking Initiatives.~~ ~~On June 14, 2017, ED announced its intention to convene new negotiated rulemaking committees to consider modifications~~We currently expect the following results, subject to the ~~borrower defense~~key assumptions identified below (see the GAAP to ~~repayment regulations~~non-GAAP reconciliation for adjusted operating income (loss) below):

Forward looking adjusted operating income (loss) expectations are presented in the reconciliation of GAAP to non-GAAP items above. Operating income (loss), which is the most directly comparable GAAP measure to adjusted operating income (loss), may not follow the same trends stated in the outlook above because of adjustments made for unused space charges that represent the present value of future remaining lease obligations for vacated space less an estimated amount for sublease income as well as depreciation, amortization, asset impairment charges and significant legal settlements. The operating income (loss) and adjusted operating income (loss), enrollment, revenue and cash outlook provided above for 2018 and 2019 are based on the ~~gainful employment regulation. ED conducted public hearings on July 10, 2017~~following key assumptions and ~~July 12, 2017~~factors, among others: (i) prospective student interest in our programs continues to ~~solicit input on proposals for modifications to these rules and indicated it expects to form the negotiating committees and begin negotiations~~trend in ~~November or December 2017~~line with ~~three to four multi-day negotiating sessions occurring every 5-8 weeks thereafter. The outcome of these rulemaking~~recent experiences, (ii) initiatives and investments in student-serving operations continue to positively impact enrollment trends within the University Group, (iii) no material changes in the legal or regulatory environment, and excludes legal and regulatory liabilities and other related impacts which are not probable and estimable at this time, and any impact of ~~any~~ new or ~~modified~~proposed regulations, are uncertain at this time. See Item 1, “Business – Student Financial Aid and Related Federal Regulation – Compliance with Federal Regulatory Standards and Effect of Federal Regulatory Violations – Borrower Defense To Repayment” and “ – Gainful Employment,” in our Annual Report on Form 10-K for more information aboutincluding the ~~current borrower~~“borrower defense to ~~repayment~~repayment” and gainful employment ~~regulations.~~regulations and any modifications thereto, and (iv) no material changes in the estimated amount of compensation expense that could be impacted by changes in our stock price. Although these estimates and assumptions are based upon management’s good faith beliefs regarding current events and actions that may be undertaken in the future, actual results could differ materially from these estimates.

We have completed a good first half in 2018 and remain confident in our ability to meet our objective of sustainable and responsible growth. The strong student interest we are experiencing as well as our operating performance is providing us with momentum for the second half of 2018 and into 2019. We are continuing to invest in student-serving initiatives, including technology enhancements, that we believe will align our Universities with long-term demand trends within the postsecondary education industry. We continue to take a measured approach to balance our objectives of responsible and sustainable growth with our commitments to improve student experiences, retention and academic outcomes. Additionally, our strategy has been focused on building a strong balance sheet while prudently investing in organic growth projects. As we further build our cash balances, we will continue to evaluate diverse strategies to enhance shareholder value while prioritizing organic student-serving investments at our Universities and maintaining adequate liquidity.

Borrower Defense to ~~Repayment~~Repayment. ~~. In~~On October 28, 2016, ED adopted new regulations that cover multiple issues including the processes and standards for the discharge of student loans, which are commonly referred to as “borrower defense to repayment” regulations. However, prior to the effective date of July 1, 2017, the previously adopted 2016 regulations were, in response to pending litigation, ~~challenging the borrower defense to repayment regulations, on June 14, 2017~~indefinitely delayed while ED ~~announced an indefinite delay in the effective date of the regulations while it conducts~~conducted a further review and a new negotiated rulemaking process. On July 25, 2018, following a process of negotiated rulemaking in which negotiators did not reach consensus on what these new regulations should include, ED announced it was proposing new regulations to ~~amend~~replace the ~~rules. Prior~~2016 regulations. ED intends to ~~this announcement,~~publish the proposed regulations ~~were set to~~in the federal register on July 31, 2018 and thereafter provide a 30-day public comment period. Any regulations published in final form by November 1, 2018 typically would take effect on July 1, 2017. A group of attorneys general filed a lawsuit on July 6, 2017 in federal court in the District of Columbia to challenge the legal authority for ED’s delay of the effectiveness of the regulations. 2019.

The outcome of this legal challenge and the impact any ruling may have on the future effectiveness of the existing or modified regulations is uncertain at this time. See Item 1, “Business – Student Financial Aid and Related Federal Regulation – Compliance with Federal Regulatory Standards and Effect of Federal Regulatory Violations – Borrower Defense to Repayment,” in our Annual Report on Form 10-K for more information about the2016 borrower defense to repayment ~~regulations.~~

~~Gainful Employment. ED previously established a~~regulations set forth categories of borrower defenses that could be asserted by students with respect to student loans disbursed on or after its proposed effective date of July 1, 2017 and established an automatic discharge process associated with closed schools. In most cases, the 2016 regulations entitle ED to seek reimbursement from the institution for any loans discharged under new standards which were designed to accommodate student claims. The 2018 proposed regulations effectively replace the 2016 regulations and are designed to generally take a measured approach to adjudicating student loan discharge claims for loans made after the new regulations become effective ~~date~~(currently proposed to be July 1, 2019). The new proposed rules provide for ~~several significant new disclosure requirements under~~ED to adjudicate claims using a single federal standard and would require claims to be made and adjudicated individually, rather than on a group basis. Additionally, institutions would have an opportunity to respond to claims submitted. We have in the ~~gainful employment~~past had claims made against us that if made in the future could result in ED determining a discharge of student loans is merited. We cannot predict the extent to which these proposed regulations ~~including~~which allow ED to seek recoupment from institutions for student loans that ~~any new~~ED discharges may impact us.

The proposed rules also make modifications to the rules governing financial responsibility and administrative capability requirements. Both the 2016 regulations and 2018 proposed regulations include discussion of triggering events that would provide ED discretion regarding periodic determinations of our financial responsibility and associated enhanced financial protection in the form of a letter of credit or re-enrolled student must receive, either in person or by email, and acknowledge program level gainful employment disclosures, prior to signing an enrollment agreement, registering for classes or entering into a financial commitment with an institution. On June 30, 2017, ED announced thatother security it ~~was further delaying aspects~~determines it needs. We are continuing our evaluation of the regulation requiring these program disclosures be distributed in person or via email until July 1, 2018. However, it did not delay the requirement that the updated program disclosures be published on an institution’s program websites. Further, ED indicated on June 30, 2017 that it was providing all programs that failed or were in the “zone” and for which a timely notice of intentproposed regulations to appeal the gainful employment debt-to-earnings rate had been filed with additional time to submit this first appeal. The new deadline for this first appeal has not yet been established. See Item 1, “Business – Student Financial Aid and Related Federal Regulation – Compliance with Federal Regulatory Standards and Effect of Federal Regulatory Violations – Gainful Employment,” in our Annual Report on Form 10-K for more information about the gainful employment regulation.

~~Program Participation Agreements.~~ All of our institutions, including AIU and CTU, are currently operating on a provisional program participation agreement. AIU and CTU each have a program participation agreement that expired on December 31, 2016 and as a result are operating on a month-to-month approval pending ED’s review and processing of their pending applications for recertification. On July 27, 2017, ED distributed a new provisional program participation agreement to CTU that would be effective through September 30, 2018. The new CTU program participation agreement, when fully signed and countersigned by ED, will take CTU off of the current month-to-month approval status. We anticipate that AIU will receive a new provisional program participation agreement from ED in the near future. During the period of provisional certification, our institutions must obtain prior ED approval to add an educational program, open a new location or make any other significant change. Our ACICS-accredited institutions all have provisional program participation agreements that extend through the duration of their respective closure dates. Although we believe our institutions are in compliance with the terms of their respective provisional program participation agreements, ED may withdraw an institution’s provisional certification without advance notice if ED determines that the institution is not fulfilling all requirements.

~~Year-Round Pell Grants. The Consolidated Appropriations Act, 2017 included funding authorization that allows students to receive year-round Federal Pell Grant (“Pell Grant~~”) funds. A year-round Pell Grant program allows students to receive up to 150% of a regular grant award over the course of the academic year, allowing students to maintain their enrollment status and receive Pell Grant funds for the entire calendar year so that they can continue taking classes and work towards graduating more quickly. We believe a year-round Pell Grant program will benefit our students who attend classes year round; however, it may have a negative impactidentify potential impacts on our ~~90-10 Rule percentages.~~operations.

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 quarters and years to date ended June 30, ~~2017~~2018 and ~~2016~~2017 (dollars in thousands):

	For the Quarter Ended June 30,												For the Year to Date Ended June 30,												For the Quarter Ended June 30,												For the Year to Date Ended June 30,
		2017		% of Total Revenue				2016		% of Total Revenue				2017		% of Total Revenue				2016		% of Total Revenue				2018		% of Total Revenue				2017		% of Total Revenue				2018		% of Total Revenue				2017		% of Total Revenue
TOTAL REVENUE	$	146,222					$	182,626					$	308,331					$	381,512					$	142,036					$	146,222					$	290,101					$	308,331
OPERATING EXPENSES
Educational services and facilities ⁽¹⁾		36,406			24.9	%		58,062			31.8	%		76,579			24.8	%		119,600			31.3	%		30,290			21.3	%		36,406			24.9	%		57,236			19.7	%		76,579			24.8	%
General and administrative: ⁽²⁾
Advertising		31,696			21.7	%		32,641			17.9	%		71,832			23.3	%		76,816			20.1	%		30,980			21.8	%		31,696			21.7	%		62,858			21.7	%		71,832			23.3	%
Admissions		20,603			14.1	%		20,484			11.2	%		41,169			13.4	%		43,510			11.4	%		23,148			16.3	%		20,603			14.1	%		47,154			16.3	%		41,169			13.4	%
Administrative		37,619			25.7	%		43,679			23.9	%		76,870			24.9	%		90,434			23.7	%		37,482			26.4	%		37,619			25.7	%		72,593			25.0	%		76,870			24.9	%
Bad debt		6,918			4.7	%		5,268			2.9	%		15,210			4.9	%		14,875			3.9	%		6,730			4.7	%		6,918			4.7	%		13,743			4.7	%		15,210			4.9	%
Total general and administrative expense		96,836			66.2	%		102,072			55.9	%		205,081			66.5	%		225,635			59.1	%		98,340			69.2	%		96,836			66.2	%		196,348			67.7	%		205,081			66.5	%
Depreciation and amortization		3,876			2.7	%		5,202			2.8	%		7,786			2.5	%		11,771			3.1	%		2,103			1.5	%		3,876			2.7	%		4,685			1.6	%		7,786			2.5	%
Asset impairment		-			0.0	%		-			0.0	%		-			0.0	%		237			0.1	%
OPERATING INCOME		9,104			6.2	%		17,290			9.5	%		18,885			6.1	%		24,269			6.4	%		11,303			8.0	%		9,104			6.2	%		31,832			11.0	%		18,885			6.1	%

PRETAX INCOME		9,708			6.6	%		17,244			9.4	%		19,806			6.4	%		24,469			6.4	%		11,804			8.3	%		9,708			6.6	%		33,186			11.4	%		19,806			6.4	%
PROVISION FOR INCOME TAXES		5,045			3.5	%		4,620			2.5	%		9,546			3.1	%		8,755			2.3	%		2,940			2.1	%		5,045			3.5	%		6,438			2.2	%		9,546			3.1	%
Effective tax rate		52.0	%					26.8	%					48.2	%					35.8	%					24.9	%					52.0	%					19.4	%					48.2	%

INCOME FROM CONTINUING OPERATIONS		4,663			3.2	%		12,624			6.9	%		10,260			3.3	%		15,714			4.1	%		8,864			6.2	%		4,663			3.2	%		26,748			9.2	%		10,260			3.3	%
LOSS FROM DISCONTINUED OPERATIONS, net of tax		(377	)		-0.3	%		(785	)		-0.4	%		(797	)		-0.3	%		(864	)		-0.2	%		(113	)		-0.1	%		(377	)		-0.3	%		(495	)		-0.2	%		(797	)		-0.3	%

NET INCOME	$	4,286			2.9	%	$	11,839			6.5	%	$	9,463			3.1	%	$	14,850			3.9	%	$	8,751			6.2	%	$	4,286			2.9	%	$	26,253			9.0	%	$	9,463			3.1	%

Current quarter and current year to date revenue decreased ~~19.9%~~2.9% or ~~$36.4~~$4.2 million and ~~19.2%~~5.9% or ~~$73.2~~$18.2 million, respectively, as compared to the prior year periods driven by the overall 5.6% decline in total student enrollments. Excluding ~~the Transitional Group and Culinary Arts,~~All Other Campuses, which no longer enroll new students as they teach out each campus, revenue ~~decreased approximately 3.5%~~for ongoing operations increased 3.2% or ~~$4.9~~$4.4 million for the current quarter and ~~0.5%~~1.4% or ~~$1.6~~$3.9 million for the current year to date as compared to the prior ~~periods,~~periods. The current quarter and year to date increase when excluding the All Other Campuses segment was primarily driven by ~~the calendar redesign~~enrollment growth at CTU as well as new enrollment growth and approximately four more revenue-generating days at AIU ~~which has resulted in less earnings days during~~for the ~~second~~current quarter ~~of 2017~~ as compared to ~~2016.~~the prior year quarter.

	For the Quarter Ended June 30,								For the Year to Date Ended June 30,								For the Quarter Ended June 30,						For the Year to Date Ended June 30,
		2017	% of Total Revenue			2016	% of Total Revenue			2017	% of Total Revenue			2016	% of Total Revenue			2018	% of Total Revenue		2017	% of Total Revenue		2018	% of Total Revenue		2017	% of Total Revenue
Educational services and facilities:
Academics & student related	$	24,422		16.7%	$	34,140		18.7%	$	51,381		16.7%	$	73,711		19.3%	$	21,340	15.0%	$	24,422	16.7%	$	43,939	15.1%	$	51,381	16.7%
Occupancy		11,984		8.2%		23,922		13.1%		25,198		8.2%		45,889		12.0%		8,950	6.3%		11,984	8.2%		13,297	4.6%		25,198	8.2%
Total educational services and facilities	$	36,406		24.9%	$	58,062		31.8%	$	76,579		24.8%	$	119,600		31.3%	$	30,290	21.3%	$	36,406	24.9%	$	57,236	19.7%	$	76,579	24.8%

The decrease in educational services and facilities expense as compared to the prior year quarter and year to date is primarily driven by a decrease within occupancy expense as a result of the continued focus over the past several quarters to exit or sublease facilities as campuses complete their teach-out. The current year quarter and year to date also benefitted from lower academic costs within our teach-out campuses, most notably faculty and bookstore costs, partially offset with a slight increase within our University Group due to investments in faculty and increase in overall total student enrollments for the University Group.

~~General and administrative expenses have decreased~~ for the current quarter and current year to date as compared to the respective prior year periods is primarily driven by a decrease within ~~administrative~~academics and ~~advertising expenses. Administrative~~student related services for teach-out campuses as these campuses continue to wind-down their operations, which was partially offset with an increase in academics and student related expenses ~~were lower~~for the University Group to support the Company’s investments in student-serving processes. Occupancy expenses also decreased for the current quarter and ~~current~~ year to date as compared to the respective prior year periods primarily due to ~~reductions associated~~decreases within our teach-out campuses as a result of the exit or subleases of facilities as campuses complete their teach-out. As campuses cease operations, a charge is recorded at the cease use date which represents the net present value of all future remaining lease obligations offset with any estimated sublease income.

General and administrative expense increased by 1.6% or $1.5 million for the ~~teach-out campuses.~~current quarter as compared to the prior year quarter primarily driven by overall increases in admissions expenses. The higher admissions expense is related to increased expenses for both AIU and CTU due to increased salary and related expenses to enhance student onboarding and investments in new admissions and advising centers in Arizona. Administrative expense remained relatively flat as an increase of $6.0 million in legal settlements during the quarter was partially offset with a recovery of $2.5 million for past claims. Advertising expense decreased by 2.3% or $0.7 million compared to the prior year quarter due to the timing of advertising expenditures to align with student interest.

General and administrative expense decreased by 4.3% or $8.7 million for the current year to date as compared to the prior year to date primarily driven by decreases in advertising and administrative expenses. The lower advertising expense ~~is substantially related to decreased expenses within our University Group related to~~was a result of efficiencies developed within certain marketing channels that optimized our ~~process~~processes related to receiving prospective student ~~applications. Admissions costs for the current quarter remained relatively flat as the University Group began to make investments~~inquiries. The decreases in new admissions and advising centers in Arizona. For the current year to date, admissions costs decreased as compared to the prior year to date primarily attributed to reduction in salary and related expenses due to the Culinary Arts campuses no longer enrolling new students. Overall, as a percentage of revenue, general and administrative expenses ~~increased 10.3% as a percent of revenue for the current quarter and 7.4% as a percent of revenue~~ for the year to date as compared to prior year was primarily related to overall decreases in corporate expenses as well as a recovery of $2.5 million for past claims which was partially offset with increased legal

settlements within the ~~respective~~All Other Campuses segment. Admissions expenses increased by 14.5% or $6.0 million for the current year to date as compared to prior ~~periods, primarily due~~year to ~~our teach-out campuses nearing~~date for the ~~end of their teach-outs. Expenses that are fixed for these campuses remain while revenue continues to decrease through the eventual campus closure date.~~reasons mentioned above.

Bad debt expense incurred by each of our segments during the quarters and years to date ended June 30, ~~2017~~2018 and ~~2016~~2017 was as follows (dollars in thousands):

	For the Quarter Ended June 30,												For the Year to Date Ended June 30,											For the Quarter Ended June 30,												For the Year to Date Ended June 30,
		2017		% of Segment Revenue				2016		% of Segment Revenue				2017		% of Segment Revenue				2016	% of Segment Revenue				2018		% of Segment Revenue				2017		% of Segment Revenue				2018		% of Segment Revenue				2017		% of Segment Revenue
Bad debt expense:
CTU	$	4,786			5.2	%	$	3,297			3.6	%	$	10,825			5.8	%	$	9,841		5.4	%	$	4,260			4.6	%	$	4,786			5.2	%	$	8,748			4.7	%	$	10,825			5.8	%
AIU		2,171			4.7	%		1,473			2.9	%		4,525			4.5	%		3,762		3.6	%		2,856			5.9	%		2,171			4.7	%		5,399			5.3	%		4,525			4.5	%
Total University Group		6,957			5.1	%		4,770			3.4	%		15,350			5.4	%		13,603		4.7	%		7,116			5.0	%		6,957			5.1	%		14,147			4.9	%		15,350			5.4	%
Corporate and Other		(270	)	NM				(70	)	NM				(130	)	NM				54	NM				(77	)	NM				(270	)	NM				60		NM				(130	)	NM
Sub Total		6,687			4.9	%		4,700			3.3	%		15,220			5.3	%		13,657		4.8	%		7,039			5.0	%		6,687			4.9	%		14,207			4.9	%		15,220			5.3	%
Culinary Arts		140			2.1	%		406			1.4	%		23			0.1	%		999		1.5	%
Transitional Group		91			4.2	%		162			1.6	%		(33	)		-0.6	%		219		0.9	%
All Other Campuses																									(309	)	NM				231		NM				(464	)	NM				(10	)	NM
Total bad debt expense	$	6,918			4.7	%	$	5,268			2.9	%	$	15,210			4.9	%	$	14,875		3.9	%	$	6,730			4.7	%	$	6,918			4.7	%	$	13,743			4.7	%	$	15,210			4.9	%

~~The current quarter~~Bad debt expenses decreased by 2.7% or $0.2 million and current year to date increase in bad debt expense as compared to the respective prior periods was primarily driven by an increase in reserve rates due to historical performance within the University Group segments.

~~The operating income reported~~9.6% or $1.5 million for the current quarter and current year to date, ~~decreased by 47.3% or $8.2 million and 22.2% or $5.4 million~~respectively, as compared to the ~~respective~~ prior ~~periods. Operating losses~~year periods primarily driven by decreases related to improvements within ~~our Culinary Arts campuses, due~~CTU’s collections and increased efforts to ~~declining~~assist students with completing their funding packages at the beginning of their academic year as well as reductions in total enrollments ~~and fixed costs associated~~at our teach-out campuses. The improvement within CTU was partially offset with each campus, contributed to the decline in consolidated operating income. Additionally, decreases in revenue within our University Group, driven by AIU’s academic calendar redesign, coupled with investment costs related to our new admissions and advising centers along with increases inincreased bad debt ~~expenses contributed to~~within AIU for the current quarter and year to date ~~decreases.~~ as compared to the prior year periods. AIU continues to focus on implementation of improvement to processes related to collection efforts and completion of funding packages for students.

The operating income reported improved by 24.2% or $2.2 million and 68.6% or $12.9 million for the current quarter and current year to date, respectively, as compared to the prior year periods driven by reduced operating losses within our teach-out campuses partially offset with increased investments in student-serving operations at our University segments. Improvements within operating losses from teach-out campuses were a result of fewer teach-out campuses remaining in the current quarter and current year to date as compared to the prior year periods. The current quarter and year to date also benefitted from a recovery for past claims of $2.5 million.

For the quarter and year to date ended June 30, ~~2017,~~2018, we recorded a provision for income taxes of $2.9 million or 24.9% and $6.4 million or 19.4%, respectively, as compared to a provision for income taxes of $5.0 million or 52.0% ~~as compared to a provision for income taxes of $4.6~~and $9.5 million or ~~26.8%~~48.2% for the prior year quarter. We recorded $9.5 million or 48.2% of provision for income taxes for the year to date ended June 30, 2017 as compared to a provision of $8.8 million or 35.8% for the year to date ended June 30, 2016.periods. The effective tax rate for the quarter and year to date ended June 30, 2018 was primarily impacted by tax reserves and the tax effect of stock-based compensation. The effect of these discrete items decreased the effective tax rate for the quarter and year to date by 2.1% and 6.7%, respectively. The effective tax rate for the quarter and year to date ended June 30, 2018 also reflects the reduction in the U.S. corporate tax rate from 35% to 21% resulting from the enactment of the Tax Cuts and Jobs Act that became effective in January 2018. For the full year 2018, we expect our effective tax rate to be between 23% and 26%. As of December 31, 2017, we had $215.5 million of federal net operating loss carry forwards which will be partially used in 2018 to offset federal taxable income. For the quarter and year to date ended June 30, 2017, the effective tax rate was primarily impacted by tax reserves and the tax effect of expenses that are not deductible for tax purposes. The effective tax rate for the quarter and year to date ended June 30, 2017 also includes a $1.5 million and $1.2 million, respectively, unfavorable adjustment associated with the adoption of ASU 2016-09, ~~Compensation – Stock Compensation (Topic 718).~~ The impact from the adoption of ASU 2016-09 increased our current quarterly and year to date effective tax rate by 15.6% and 5.9%, respectively. The effective tax rate for the quarter and year to date ended June 30, 2016 was reduced by 12.2% and 8.6%, respectively, due to a $2.1 million favorable tax adjustment upon completion of a federal tax audit.

The following tables present unaudited segment results for the reported periods (dollars in thousands):

For the Quarter Ended June 30,

REVENUE

OPERATING INCOME (LOSS)

OPERATING
MARGIN (LOSS)

2017

2016

% Change

2017

2016

% Change

2017

2016

REVENUE:

CTU

$
91,204

$
91,736

-0.6
%

$
28,064

$
29,970

-6.4
%

30.8
%

32.7
%
AIU

46,215

50,608

-8.7
%

1,075

6,838

-84.3
%

2.3
%

13.5
%
Total University Group

137,419

142,344

-3.5
%

29,139

36,808

-20.8
%

21.2
%

25.9
%
Corporate and Other

-

-

NM

(5,847
)

(5,761
)

-1.5
%

NM

NM

Subtotal

137,419

142,344

-3.5
%

23,292

31,047

-25.0
%

16.9
%

21.8
%
Culinary Arts

6,646

29,998

-77.8
%

(6,753
)

361

NM

-101.6
%

1.2
%
Transitional Group

2,157

10,284

-79.0
%

(7,435
)

(14,118
)

47.3
%

-344.7
%

-137.3
%
Total

$
146,222

$
182,626

-19.9
%

$
9,104

$
17,290

-47.3
%

6.2
%

9.5
%

	For the Year to Date Ended June 30,																						For the Quarter Ended June 30,
	REVENUE							OPERATING INCOME (LOSS)									OPERATING MARGIN (LOSS)						REVENUE							OPERATING INCOME (LOSS)									OPERATING INCOME (LOSS) MARGIN
		2017		2016	% Change				2017			2016		% Change				2017			2016			2018		2017	% Change				2018			2017		% Change				2018			2017
REVENUE:
CTU	$	185,239	$	183,702		0.8	%	$	51,084		$	49,207			3.8	%		27.6	%		26.8	%	$	93,266	$	91,204		2.3	%	$	27,116		$	28,064			-3.4	%		29.1	%		30.8	%
AIU		100,468		103,581		-3.0	%		5,731			8,745			-34.5	%		5.7	%		8.4	%		48,579		46,215		5.1	%		(1,585	)		1,075			-247.4	%		-3.3	%		2.3	%
Total University Group		285,707		287,283		-0.5	%		56,815			57,952			-2.0	%		19.9	%		20.2	%		141,845		137,419		3.2	%		25,531			29,139			-12.4	%		18.0	%		21.2	%
Corporate and Other(1)		-		-	NM				(10,396	)		(11,573	)		10.2	%	NM			NM				-		-	NM				(2,000	)		(5,847	)		65.8	%	NM			NM
Subtotal		285,707		287,283		-0.5	%		46,419			46,379			0.1	%		16.2	%		16.1	%		141,845		137,419		3.2	%		23,531			23,292			1.0	%		16.6	%		16.9	%
Culinary Arts		16,935		68,621		-75.3	%		(11,012	)		3,467		NM				-65.0	%		5.1	%
Transitional Group		5,689		25,608		-77.8	%		(16,522	)		(25,577	)		35.4	%		-290.4	%		-99.9	%
All Other Campuses																								191		8,803		-97.8	%		(12,228	)		(14,188	)	NM			NM			NM
Total	$	308,331	$	381,512		-19.2	%	$	18,885		$	24,269			22.2	%		6.1	%		6.4	%	$	142,036	$	146,222		-2.9	%	$	11,303		$	9,104			24.2	%		8.0	%		6.2	%

NEW STUDENT ENROLLMENTS

TOTAL STUDENT
ENROLLMENTS

For the Quarter Ended June 30,

For the Year to Date Ended June 30,

As of June 30,

2017

2016

% Change

2017

2016

% Change

2017

2016

% Change

CTU ⁽¹⁾

5,160

5,080

1.6
%

10,190

9,850

3.5
%

21,000

21,200

-0.9
%
AIU⁽¹⁾

2,990

2,550

17.3
%

7,920

7,410

6.9
%

11,600

10,400

11.5
%
Total University Group ⁽¹⁾

8,150

7,630

6.8
%

18,110

17,260

4.9
%

32,600

31,600

3.2
%
Culinary Arts ⁽²⁾

-

60

NM

-

990

NM

700

5,000

NM

Transitional Group ⁽²⁾

-

20

NM

-

80

NM

300

1,600

NM

Total

8,150

7,710

5.7
%

18,110

18,330

-1.2
%

33,600

38,200

-12.0
%

	For the Year to Date Ended June 30,
	REVENUE							OPERATING INCOME (LOSS)									OPERATING MARGIN (LOSS)
		2018		2017	% Change				2018			2017		% Change				2018			2017
REVENUE:
CTU	$	187,873	$	185,239		1.4	%	$	54,301		$	51,084			6.3	%		28.9	%		27.6	%
AIU		101,700		100,468		1.2	%		2,551			5,731			-55.5	%		2.5	%		5.7	%
Total University Group		289,573		285,707		1.4	%		56,852			56,815			0.1	%		19.6	%		19.9	%
Corporate and Other ⁽¹⁾		-		-	NM				(6,542	)		(10,396	)		37.1	%	NM			NM
Subtotal		289,573		285,707		1.4	%		50,310			46,419			8.4	%		17.4	%		16.2	%
All Other Campuses		528		22,624		-97.7	%		(18,478	)		(27,534	)	NM			NM			NM
Total	$	290,101	$	308,331		-5.9	%	$	31,832		$	18,885			68.6	%		11.0	%		6.1	%

University Group. Current quarter and year to date revenue ~~decreased~~increased by ~~$4.9~~3.2% or $4.4 million and 1.4% or $3.9 million, respectively, as compared to the prior year periods. CTU experienced positive total enrollment growth of 3.3% as compared to the prior year quarter, which drove an increase to revenue of $2.1 million or ~~3.5%~~2.3% and ~~$1.6~~$2.6 million or ~~0.5%,~~1.4% for the current quarter and current year to date, respectively, as compared to the prior year periods. AIU’s revenue for the current quarter and year to date increased by $2.4 million or 5.1% and $1.2 million and 1.2% as compared to the respective prior year periods. ~~This decrease in~~The revenue growth was ~~primarily~~ driven by ~~the academic calendar redesign at AIU. AIU experienced positive total~~an increase of 9.0% in new enrollments ~~of 11.5% as compared to the prior period, and revenue decreased by $4.4 million or 8.7% in~~for the current quarter ~~due to the academic calendar redesign which began in the fourth quarter of 2016. AIU’s calendar redesign shifted earnings~~as well as four additional revenue-generating days ~~from the second quarter of 2017 into the third quarter of 2017, which resulted in 77 earnings days for~~during the current quarter as compared to ~~84 earnings days in~~ the prior year ~~quarter. We expect~~quarter at AIU. Total enrollments at AIU decreased 13.8% as compared to ~~experience continued variability~~the prior year due to the timing impact of the academic calendar redesign. Additionally, AIU and CTU continue to focus on initiatives and investments in ~~comparisons for AIU~~student-serving functions, including the admissions and advising centers in Arizona, as ~~a result of this.~~well as enhanced onboarding and orientation processes that we believe positively benefit student retention.

Current quarter ~~and year to date~~ operating income for the University Group decreased ~~$7.7~~$3.6 million or ~~20.8%,~~12.4% and ~~$1.1 million or 2.0%, respectively,~~remained relatively flat for the year to date, as compared to the respective prior year periods. Operating income decreased within both ~~of our~~ segments for the current quarter with AIU contributing ~~$5.8~~$2.7 million of the decrease and CTU contributing ~~$1.9~~$0.9 million of the decrease as compared to the prior year quarter. AIU and CTU both continue to invest in student-serving processes and initiatives which drove an increase in operating expenses for the current quarter which more than offset the increase in revenue. CTU’s operating income improved by ~~$1.9~~$3.2 million or ~~3.8%~~6.3% for the current year to date as compared to the prior ~~period. The~~period, which was partially offset with decreased operating income of $3.2 million or 55.5% for the current year ~~quarter was impacted by increased investments related~~ to ~~new admissions and advising centers in Arizona as well as an increase in bad debt expense for both segments. Additionally, timing of certain operating expenses in the current quarter~~date at AIU, as compared to the prior ~~year quarter contributed to~~period. AIU’s decrease in operating income was driven by the ~~decline. Operating margins for CTU and AIU have decreased 1.9% and 11.2%~~investments discussed above as well as a ~~percent~~charge of ~~revenue for~~$1.2 million recorded during the current quarter ~~as compared~~related to ~~the prior year quarter. The timing~~optimization of ~~expenses mentioned above negatively impacted operating margins along with the impact of the academic calendar redesign at AIU.~~leased facilities and increased depreciation expense.

All Other Campuses.~~Culinary Arts.~~ This segment includes our ~~LCB~~ campuses ~~which were announced for teach-out during December~~that are currently being taught out or have completed their teach-outs since January 1, 2015.

The current quarter and current year to date decline in revenue as compared to the ~~corresponding~~respective prior periods is primarily a result of the ~~decision~~decrease in total student enrollments as campuses complete their closures. The operating loss improved by $2.0 million or 13.8% and $9.1 million or 32.9% for the current quarter and current year to ~~teach-out the campuses. We expect revenue and operating expenses to continue to decline~~date, respectively, as compared to the prior year periods primarily due to overall decreases in general and administrative costs as campuses

~~wind down their~~ cease operations, ~~through 2017. Operating losses will~~partially offset with an increase asin legal reserves during the ~~operating expenses to support and serve our students will exceed the revenue from these students as they continue to graduate.~~

~~Transitional Group.~~ ~~This segment includes our non-LCB campuses that are currently being taught-out. The~~ current quarter and year to ~~date decline in revenue as compared~~date.

During the first half of 2018, the Company completed the teach-outs of four campuses and has three remaining non-LCB campuses which are scheduled to complete their teach-outs during the ~~corresponding prior periods resulted from a decrease in total student enrollments.~~remainder of 2018. We expect revenue and operating expenses to continue to decline compared to prior periods as campuses wind down their operations through 2018.

Corporate and Other. This category includes unallocated costs that are incurred on behalf of the entire company.Corporate and Other operating loss for the current quarter ~~increased by 1.5%~~ and ~~improved by 10.2% for the~~current year to date improved by $3.8 million or 65.8% and $3.9 million or 37.1%, respectively, as ~~compared to the respective prior periods. The year to date overall decrease in cost~~ compared to the prior year ~~is primarily driven by reduced staff and ongoing efficiencies.~~periods. A recovery for past claims of $2.5 million was recorded during the current quarter.

A detailed discussion of the accounting policies and estimates that we believe are most critical to our financial condition and results of operations that require management’s most subjective and complex judgments in estimating the effect of inherent uncertainties is included under the caption “Summary of Critical Accounting Policies and Estimates” included in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2017. Note 2 “Summary of Significant Accounting Policies” of the notes to our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, ~~2016~~2017 also includes a discussion of these and other significant accounting policies.

As of June 30, ~~2017,~~2018, cash, cash equivalents, restricted cash and available-for-sale short-term investments totaled ~~$172.1~~$190.1 million. Restricted cash and investment balances as of June 30, ~~2017~~2018 approximate ~~$8.5~~$5.4 million and include restricted short-term investments for certificates of deposit in addition to restricted cash to provide securitization for letters of credit. Our cash flows from operating activities have historically been adequate to fulfill our liquidity requirements. We have historically financed our operating activities, organic growth and acquisitions primarily through cash generated from operations and existing cash ~~balances and credit facility borrowings.~~balances. The recent losses from our ~~Transitional Group and Culinary Arts campuses~~All Other Campuses segment and associated lease payments for vacated spaces have driven a net cash usage in recent years. However, as we ~~execute on~~near the end of our transformation strategy and complete the wind-down of our teach-out campuses, we expect our cash usage to moderate ~~through the remainder of 2017~~ and to begin generating cash in 2018. We expect to end ~~2017~~2018 with cash, cash equivalents, restricted cash and available-for-sale short-term investments, ~~net of borrowings,~~ in the range of ~~$155~~$215 million to ~~$160~~$220 million. These expectations are based upon, and subject to, the key ~~updated~~ assumptions and factors discussed above in the Management’s Discussion and Analysis under the heading ~~“2017 Second Quarter Overview.~~“Outlook.” We anticipate that we will be able to satisfy the cash requirements associated with, among other things, our working capital needs, capital expenditures and lease commitments through at least the next 12 months primarily with cash generated by operations and existing cash balances.

~~We continue to focus on our transformation strategy which we believe will position CEC for a return to sustainable growth and optimize our capital structure.~~ Our credit facility allows us to borrow up to a maximum amount of $95 million and is scheduled to mature on December 31, 2018. Amounts borrowed under the ~~Credit Agreement~~credit facility are required to be secured with 100% cash collateral.

The discussion above reflects management’s expectations regarding liquidity; however, we are not able to assess the effect of loss contingencies on future cash requirements and liquidity. See Note 78 “Contingencies” to our unaudited condensed consolidated financial statements. Further, as a result of the significance of the Title IV Program funds received by our students, we are highly dependent on these funds to operate our business. Any reduction in the level of Title IV Program funds that our students are eligible to receive or any impact on timing or our ability to receive ~~or retain~~ Title IV Program funds, or any requirement to post a significant letter of credit to ED, may have a significant impact on our operations and our financial condition. In addition, our financial performance is dependent on the level of student ~~enrollments~~enrollment which could be impacted by external factors. See Item 1A, “Risk Factors,” in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2017.

During the year to date ended June 30, ~~2017,~~2018, net cash flows provided by operating activities totaled $14.8 million compared to net cash flows used in operating activities ~~totaled~~of $34.2 ~~million compared to net cash provided by operating activities of $6.6~~ million for the year to date ended June 30, ~~2016.~~2017. The ~~increase~~improvement in cash ~~usage~~flow from operations as compared to the prior year is primarily driven by payment of $32.0 million of ~~payments for~~ legal settlements ~~during~~in the ~~first~~prior year quarter, ~~of 2017.~~lower operating losses at our teach-out campuses and stabilized operating performance within the University Group.

Our primary source of cash flows from operating activities is tuition collected from our students. Our students derive the ability to pay tuition costs through the use of a variety of funding sources, including, among others, federal loan and grant programs, state

grant programs, private loans and grants, ~~institution~~institutional payment plans, private and institutional scholarships and cash payments. For the year to date ended June 30, 2018 and 2017, approximately 78% and ~~2016, approximately~~ 77%, respectively, of our institutions’ cash receipts from tuition payments came from Title IV Program funding.

For further discussion of Title IV Program funding and alternative ~~private loan~~ funding sources for our students, see Item 1, “Business - Student Financial Aid and Related Federal Regulation,” in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2017.

Our primary uses of cash to support our operating activities include, among other things, cash paid and benefits provided to our employees for services, to vendors for products and services, to lessors for rents and operating costs related to leased facilities, to suppliers for textbooks and other institution supplies, and to federal, state and local governments for income and other taxes.

During the ~~year~~years to date ended June 30, 2018 and 2017, net cash flows provided by investing activities totaled $2.4 million and $22.2 million, ~~compared to net cash used in investing activities of $34.0 million for the year to date ended June 30, 2016.~~ respectively.

Purchases and Sales of Available-for-Sale Investments. Purchases and sales of available-for-sale investments resulted in a ~~$24.4 million~~ net cash inflow of $5.1 million and ~~a $35.4~~$24.4 million, ~~net cash outflow~~respectively, during the years to date ended June 30, ~~2017~~2018 and ~~2016, respectively.~~2017.

Capital Expenditures. Capital expenditures increased to ~~$2.1~~$2.7 million for the year to date ended June 30, ~~2017~~2018 as compared to ~~$2.0~~$2.1 million for year to date ended June 30, ~~2016.~~2017. Capital expenditures represented less than 1.0% of total revenue for each of the years to date ended June 30, ~~2017~~2018 and ~~2016.~~2017. For the full year 2018, we expect capital expenditures to be approximately 1% to 2% of revenue.

During the year to date ended June 30, ~~2017,~~2018, net cash flows used in financing activities totaled $2.0 million compared to net cash flows provided by financing activities ~~totaled~~of $1.4 ~~million compared to net cash flows used in financing activities of $38.2~~ million for the prior year to date.

Payments of employee tax associated with stock compensation. Payments of employee tax associated with stock compensation were $3.2 million for the year to date ended June 30, 2018 and $1.1 million for the year to date ended June 30, ~~2017 and $0.5 million for the year to date ended June 30, 2016. The~~ Company now accounts for cash flows related to cash payments for employee taxes made by the Company on the employees’ behalf for withheld shares related to stock settlements as a financing activity. This change was a result of updated guidance issued by the Financial Accounting Standards Board (“FASB”) under Accounting Standards Update (“ASU”) No. 2016-09, ~~Compensation – Stock Compensation (Topic 718). Prior period amounts were recast to cash flows from financing activities from cash flows from operating activities to be comparable to current year reporting.~~2017.

Credit ~~Agreement~~Agreement.. On December 11, 2015, we entered into ~~an amendment to our~~a $95.0 million Amended and Restated Credit Agreement with BMO Harris Bank N.A., in its capacities as the initial lender and letter of credit issuer thereunder and the administrative agent for the lenders which from time to time may be parties to the Credit ~~Agreement which, among other things, decreased the revolving credit facility to $95.0 million.~~Agreement. The revolving credit facility under the Credit Agreement is scheduled to mature on December 31, ~~2018.~~2018 and amended our previous credit agreement entered into on October 31, 2014. Amounts borrowed under the Credit Agreement are required to be secured with 100% cash collateral. The Credit Agreement, which includes certain financial covenants, requires that fees and interest are payable monthly and quarterly in arrears, respectively, and principal is payable at maturity. ~~During the first quarter of 2016, we repaid the $38.0 million borrowed as of December 31, 2015.~~ As of June 30, ~~2017,~~2018, we have no outstanding borrowings under the revolving credit facility and we remain in compliance with the covenants of the Credit Agreement.

Selected condensed consolidated balance sheet account changes from December 31, ~~2016~~2017 to June 30, ~~2017~~2018 were as follows (dollars in thousands):

~~Total cash and cash equivalents, restricted cash and short-term investments~~ Student receivables, net: The ~~decrease~~increase is driven by ~~the $32.0 million of payments related to legal settlements during the current year.~~a change in how we account for student receivables under ASC Topic 606.

Accrued expenses - payroll and related benefits: The decrease is driven by the payments during the first quarter of ~~2017~~2018 of annual incentive compensation ~~items as well as decreases in severance accruals during the current year.~~items.

~~Accrued expenses – other~~Other non-current liabilities: The decrease is driven by ~~the payments of legal settlements during the current year.~~continued reductions in liabilities associated with remaining lease obligations for our vacated facilities.

As of June 30, ~~2017,~~2018, future minimum cash payments under contractual obligations for our non-cancelable operating lease arrangements were as follows (dollars in thousands):

	2017 ⁽⁵⁾		2018		2019		2020		2021 & Thereafter		Total		2018 ⁽⁵⁾		2019		2020		2021		2022 & Thereafter		Total
Gross operating lease obligations ⁽¹⁾
Ongoing operations⁽²⁾	$	11,308	$	12,835	$	13,089	$	10,446	$	15,555	$	63,233	$	12,807	$	13,248	$	12,375	$	10,326	$	30,936	$	79,692
Teach-out campuses and discontinued operations ⁽³⁾		55,580		31,693		16,688		10,033		6,206		120,200		26,554		9,782		5,348		1,744		-		43,428
Total gross operating lease obligations	$	66,888	$	44,528	$	29,777	$	20,479	$	21,761	$	183,433	$	39,361	$	23,030	$	17,723	$	12,070	$	30,936	$	123,120

Sublease income ⁽⁴⁾
Ongoing operations ⁽²⁾	$	612	$	934	$	426	$	107	$	-	$	2,079	$	259	$	258	$	107	$	-	$	-	$	624
Teach-out campuses and discontinued operations ⁽³⁾		8,432		4,019		2,330		629		229		15,639		5,347		3,629		2,484		784		-		12,244
Total sublease income	$	9,044	$	4,953	$	2,756	$	736	$	229	$	17,718	$	5,606	$	3,887	$	2,591	$	784	$	-	$	12,868

Net operating lease obligations
Ongoing operations ⁽²⁾	$	10,696	$	11,901	$	12,663	$	10,339	$	15,555	$	61,154	$	12,548	$	12,990	$	12,268	$	10,326	$	30,936	$	79,068
Teach-out campuses and discontinued operations ⁽³⁾		47,148		27,674		14,358		9,404		5,977		104,561		21,207		6,153		2,864		960		-		31,184
Total net contractual lease obligations	$	57,844	$	39,575	$	27,021	$	19,743	$	21,532	$	165,715	$	33,755	$	19,143	$	15,132	$	11,286	$	30,936	$	110,252

We are exposed to financial market risks, including changes in interest rates and foreign currency exchange rates. We use various techniques to manage our market ~~risk, including, from time to time, the use of derivative financial instruments.~~risk. We ~~do not use~~have no derivative financial instruments or derivative commodity instruments, and believe the risk related to cash equivalents and available for ~~speculative purposes.~~sale investments is limited due to the adherence to our investment policy, which focuses on capital preservation and liquidity. In addition, we utilize asset managers who conduct initial and ongoing credit analysis on our investment portfolio and ensure that all investments are in compliance with our investment policy. Despite the investment risk mitigation strategies we employ, we may incur investment losses as a result of unusual and unpredictable market developments and may experience reduced investment earnings if the yields on investments deemed to be low risk remain low or decline further in this time of economic uncertainty.

We manage interest rate risk by investing excess funds in cash equivalents and available for sale investments bearing a combination of fixed and variable interest rates, which are tied to various market indices. Our future investment income may fall short of expectations due to changes in interest rates or we may suffer losses in principal if we are forced to sell investments that have declined in market value due to changes in interest rates. At June 30, 2018, a 10% increase or decrease in interest rates would not have a material impact on our future earnings, fair values or cash flows.

Any outstanding borrowings under our revolving credit facility bear annual interest at fluctuating rates under either the Base Rate Loan or as determined by the London Interbank Offered Rate (LIBOR) for the relevant currency, plus the applicable rate based on the type of loan. As of June 30, ~~2017,~~2018, we had no outstanding borrowings under this facility.

During ~~2017~~2018 we were subject to foreign currency exchange exposures arising from transactions denominated in currencies other than the U.S. dollar, and from the translation of foreign currency balance sheet accounts into U.S. dollar balance sheet accounts, primarily related to an equity investment. We are subject to risks associated with fluctuations in the value of the Euro ~~or British pound~~ versus the U.S. dollar.

Our financial instruments are recorded at their fair values as of June 30, ~~2017~~2018 and December 31, ~~2016.~~2017. We believe that the exposure of our consolidated financial position and results of operations and cash flows to adverse changes in interest rates or foreign currency exposure is not significant.

We completed an evaluation as of the end of the period covered by this Quarterly Report on Form 10-Q (“Report”) under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, ~~2017~~2018 our disclosure controls and procedures were effective to provide reasonable assurance that (i) the information required to be disclosed by us in this Report was recorded, processed, summarized, and reported within the time periods specified in the rules and forms provided by the U.S. Securities and Exchange Commission (“SEC”) and (ii) information required to be disclosed by us in our reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

There were no changes in our internal control over financial reporting that occurred during the quarter ended June 30, ~~2017,~~2018, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Our management does not expect that our disclosure controls and procedures or our internal controls will prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in a cost-effective control system, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within our Company have been detected.

These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

Note 78 “Contingencies” to our unaudited condensed consolidated financial statements is incorporated herein by reference.

In addition to the other information set forth in this Quarterly Report on Form 10-Q, the reader should carefully consider the factors discussed in Part I, Item 1A “Risk Factors,” in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2017, which was filed with the Securities and Exchange Commission on February ~~23, 2017.~~21, 2018.

The following table sets forth information regarding purchases made by us of shares of our common stock on a monthly basis during the year to date ended June 30, ~~2017:~~2018:

Period

Total Number
of Shares
Purchased ⁽¹⁾

Average Price
Paid per Share

Total Number
of Shares
Purchased as
Part of Publicly
Announced Plans
or Programs ⁽²⁾

Maximum
Approximate
Dollar Value of
Shares that
May Yet Be
Purchased
Under the Plans
or Programs ⁽²⁾

December 31, 2016

$
183,296,772

January 1, 2017—January 31, 2017

-

$
-

-

183,296,772

February 1, 2017—February 28, 2017

-

-

-

183,296,772

March 1, 2017—March 31, 2017

116,771

7.95

-

183,296,772

April 1, 2017—April 30, 2017

-

-

-

183,296,772

May 1, 2017—May 31, 2017

-

-

-

183,296,772

June 1, 2017—June 30, 2017

17,639

9.80

-

183,296,772

Total

134,410

-

Period	Total Number of Shares Purchased ⁽¹⁾		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs ⁽²⁾		Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs ⁽²⁾
December 31, 2017							$	183,296,772
January 1, 2018—January 31, 2018		-	$	-		-		183,296,772
February 1, 2018—February 28, 2018		-		-		-		183,296,772
March 1, 2018—March 31, 2018		215,215		13.85		-		183,296,772
April 1, 2018—April 30, 2018		-		-		-		183,296,772
May 1, 2018—May 31, 2018		-		-		-		183,296,772
June 1, 2018—June 30, 2018		14,691		16.11		-		183,296,772
Total		229,906				-

The exhibits required to be filed by Item 601 of Regulation S-K are listed in the “Exhibit Index,” which is attached hereto and incorporated by reference herein.

~~Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.~~

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Delaware	36-3932190
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

231 N. Martingale Road Schaumburg, Illinois	60173
(Address of principal executive offices)	(Zip Code)

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐ (Do not check if a smaller reporting company)	Smaller reporting company	☐
Emerging growth company	☐



		Page
PART I—FINANCIAL INFORMATION

Item 1.	Financial Statements

	Condensed Consolidated Balance Sheets	1

	Unaudited Condensed Consolidated Statements of Income and Comprehensive Income	2

	Unaudited Condensed Consolidated Statements of Cash Flows	3

	Notes to Unaudited Condensed Consolidated Financial Statements	4

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2221

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	3432

Item 4.	Controls and Procedures	3533

PART II—OTHER INFORMATION

Item 1.	Legal Proceedings	3634

Item 1A.	Risk Factors	3634

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3634
Item 6.	Exhibits	3634

SIGNATURES		3736


	December 31, 2017		Impact of Modified Retrospective Adoption of ASC 606		January 1, 2018 Post ASC 606 Adoption
Student receivables, net of allowance for doubtful accounts, current	$	18,875	$	6,663	$	25,538
Deferred revenue	$	22,897	$	6,663	$	29,560

	As of
	January 1, 2018			June 30, 2018
Gross deferred revenue	$	39,544		$	37,260
Gross contract assets		(9,984	)		(14,210	)
Deferred revenue, net	$	29,560		$	23,050

	Restricted Stock Units to be Settled in Cash
Outstanding as of December 31, ~~2016~~2017		~~1,192~~472
Granted		-
Vested		(~~371~~195	)
Forfeited		(2739	)
Outstanding as of June 30, ~~2017~~2018		~~794~~238

	ACTUAL			OUTLOOK			ACTUAL			OUTLOOK
	For The Year to Date Ended December 31,						For the Quarter Ended September 30,
Adjusted Operating Income (Loss)	2016			2017	2018		2016			2017
University Group and Corporate:
Operating income ⁽²⁾	$	44,717		$89 - $94M	Growth vs 2017		$	16,190		$19 - $21M
Depreciation and amortization⁽²⁾		11,164		~11	2017 levels			2,594		~3
Asset impairments ⁽²⁾		237		None Assumed				-		None Assumed
Unused space charges ^{(2) (3)}		1,134		None Assumed				-		None Assumed
Significant legal settlements ⁽²⁾		32,000		None Assumed				-		None Assumed
Adjusted Operating Income -- University Group and Corporate	$	89,252		$100 - $105M	Growth vs 2017		$	18,784		$22 - $24M

Transitional Group and Culinary Arts:
Operating loss ⁽⁴⁾	$	(77,061	)	($67 - $77M)	($15 - $20M)		$	(16,896	)
Depreciation and amortization ⁽⁴⁾		11,583		~5		-		2,621
Asset impairments ⁽⁴⁾		927		None Assumed				-
Unused space charges^{(3) (4)}		34,719		~17	~5			4,983
Adjusted Operating Loss -- Transitional and Culinary Arts	$	(29,832	)	($45 - $55M)	($10 - $15M)		$	(9,292	)

	NEW STUDENT ENROLLMENTS												TOTAL STUDENT ENROLLMENTS
	For the Quarter Ended June 30,						For the Year to Date Ended June 30,						As of June 30,
		2017	2016	% Change				2017	2016	% Change				2017	2016	% Change
CTU ⁽¹⁾		5,160	5,080		1.6	%		10,190	9,850		3.5	%		21,000	21,200		-0.9	%
AIU⁽¹⁾		2,990	2,550		17.3	%		7,920	7,410		6.9	%		11,600	10,400		11.5	%
Total University Group ⁽¹⁾		8,150	7,630		6.8	%		18,110	17,260		4.9	%		32,600	31,600		3.2	%
Culinary Arts ⁽²⁾		-	60	NM				-	990	NM				700	5,000	NM
Transitional Group ⁽²⁾		-	20	NM				-	80	NM				300	1,600	NM
Total		8,150	7,710		5.7	%		18,110	18,330		-1.2	%		33,600	38,200		-12.0	%

	~~CAREER EDUCATION CORPORATION~~

~~Date: August 9, 2017~~	~~By:~~	~~/s/ TODD S. NELSON~~
		~~Todd S. Nelson~~ ~~President and Chief Executive Officer~~ ~~(Principal Executive Officer)~~

~~Date: August 9, 2017~~	~~By:~~	~~/s/ ANDREW J. CEDEROTH~~
		~~Andrew J. Cederoth~~ ~~Senior Vice President and Chief Financial Officer~~ ~~(Principal Financial Officer)~~

	INDEX TO EXHIBITS
Exhibit Number	Exhibit	Incorporated by Reference to:

+31.1	Certification of CEO Pursuant to Section 302 of Sarbanes-Oxley Act of 2002

+31.2	Certification of CFO Pursuant to Section 302 of Sarbanes-Oxley Act of 2002

+32.1	Certification of CEO Pursuant to Section 906 of Sarbanes-Oxley Act of 2002

+32.2	Certification of CFO Pursuant to Section 906 of Sarbanes-Oxley Act of 2002

+101	The following financial information from our Quarterly Report on Form 10-Q for the six months ended June 30, ~~2017,~~2018, filed with the SEC on August ~~9, 2017,~~1, 2018, formatted in Extensible Business Reporting Language (XBRL): (i) the Condensed Consolidated Balance Sheets as of June 30, ~~2017~~2018 and December 31, ~~2016,~~2017, (ii) the Unaudited Condensed Consolidated Statements of Income and Comprehensive Income for the three and six months ended June 30, ~~2017~~2018 and June 30, ~~2016,~~2017, (iii) the Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended June 30, ~~2017~~2018 and June 30, ~~2016,~~2017, and (iv) Notes to Unaudited Condensed Consolidated Financial Statements
	___
	* Management contract or compensatory plan or arrangement required to be filed as an Exhibit on this Form 10-Q.
	+Filed herewith.

	CAREER EDUCATION CORPORATION

Date: August 1, 2018	By:	/s/ TODD S. NELSON
		Todd S. Nelson President and Chief Executive Officer (Principal Executive Officer)

Date: August 1, 2018	By:	/s/ ASHISH R. GHIA
		Ashish R. Ghia Senior Vice President and Chief Financial Officer (Principal Financial Officer)