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 ~~October~~April 27, ~~2017: 69,093,596~~2018: 69,611,001

	September 30,			December 31,			March 31,			December 31,
	2017			2016			2018			2017
ASSETS	(unaudited)						(unaudited)
CURRENT ASSETS:
Cash and cash equivalents, unrestricted	$	16,276		$	49,507		$	24,198		$	18,110
Restricted cash		789			1,375			789			789
Restricted short-term investments		7,070			8,597			4,570			5,070
Short-term investments		151,803			147,681			158,038			156,178
Total cash and cash equivalents, restricted cash and short-term investments		175,938			207,160			187,595			180,147
Student receivables, net of allowance for doubtful accounts of $22,611 and $21,376 as of September 30, 2017 and December 31, 2016, respectively		21,134			22,825
Student receivables, net of allowance for doubtful accounts of $19,986 and $20,533 as of March 31, 2018 and December 31, 2017, respectively								23,915			18,875
Receivables, other, net		996			929			1,335			1,163
Prepaid expenses		8,769			14,446			10,182			7,722
Inventories		991			1,868			1,013			1,112
Other current assets		1,112			817			833			1,319
Assets of discontinued operations		171			148			513			382
Total current assets		209,111			248,193			225,386			210,720

NON-CURRENT ASSETS:
Property and equipment, net of accumulated depreciation of $346,718 and $381,415 as of September 30, 2017 and December 31, 2016, respectively		33,278			40,512
Property and equipment, net of accumulated depreciation of $213,056 and $213,825 as of March 31, 2018 and December 31, 2017, respectively								32,027			33,230
Goodwill		87,356			87,356			87,356			87,356
Intangible assets, net of amortization of $1,400 and $800 as of September 30, 2017 and December 31, 2016, respectively		7,900			8,500
Student receivables, net of allowance for doubtful accounts of $2,051 and $1,766 as of September 30, 2017 and December 31, 2016, respectively		2,622			3,055
Intangible assets, net of amortization of $1,400 and $1,400 as of March 31, 2018 and December 31, 2017, respectively								7,900			7,900
Student receivables, net of allowance for doubtful accounts of $2,565 and $2,001 as of March 31, 2018 and December 31, 2017, respectively								2,784			2,548
Deferred income tax assets, net		147,990			158,272			94,380			98,084
Other assets		7,018			7,608			5,918			5,673
Assets of discontinued operations		5,922			6,105			1,585			1,585
TOTAL ASSETS	$	501,197		$	559,601		$	457,336		$	447,096
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable	$	11,780		$	10,099		$	11,694		$	8,515
Accrued expenses:
Payroll and related benefits		31,646			41,203			20,345			32,910
Advertising and marketing costs		10,732			10,253			13,069			9,245
Income taxes		1,898			1,830			1,730			2,185
Other		35,127			69,244			32,671			31,233
Deferred tuition revenue		22,401			28,364
Deferred revenue								30,278			22,897
Liabilities of discontinued operations		6,434			8,219			4,301			5,701
Total current liabilities		120,018			169,212			114,088			112,686

NON-CURRENT LIABILITIES:
Deferred rent obligations		16,253			30,713			14,522			15,277
Other liabilities		23,384			31,751			15,755			22,143
Liabilities of discontinued operations		2,156			6,422			-			785
Total non-current liabilities		41,793			68,886			30,277			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; 84,254,021 and 83,538,033 shares issued, 69,093,603 and 68,519,005 shares outstanding as of September 30, 2017 and December 31, 2016, respectively		843			835
Common stock, $0.01 par value; 300,000,000 shares authorized; 84,987,946 and 84,279,533 shares issued, 69,611,001 and 69,117,803 shares outstanding as of March 31, 2018 and December 31, 2017, respectively								850			843
Additional paid-in capital		619,483			613,325			623,378			621,008
Accumulated other comprehensive income (loss)		144			(258	)
Accumulated other comprehensive loss								(296	)		(164	)
Accumulated deficit		(63,745	)		(76,230	)		(90,625	)		(108,127	)
Cost of 15,160,418 and 15,019,028 shares in treasury as of September 30, 2017 and December 31, 2016, respectively		(217,339	)		(216,169	)
Treasury stock, at cost; 15,376,945 and 15,161,730 shares as of March 31, 2018 and December 31, 2017, respectively								(220,336	)		(217,355	)
Total stockholders' equity		339,386			321,503			312,971			296,205
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	501,197		$	559,601		$	457,336		$	447,096

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

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME ~~(LOSS)~~ AND COMPREHENSIVE INCOME ~~(LOSS)~~

	For the Quarter Ended September 30,						For the Year to Date Ended September 30,						For the Quarter Ended March 31,
	2017			2016			2017			2016			2018			2017
REVENUE:
Tuition and fees	$	144,408		$	166,819		$	451,292		$	546,036		$	147,510		$	161,377
Other		578			806			2,025			3,101			555			732
Total revenue		144,986			167,625			453,317			549,137			148,065			162,109

OPERATING EXPENSES:
Educational services and facilities		37,788			51,393			114,367			170,993			26,946			40,173
General and administrative		99,077			111,723			304,158			337,358			98,008			108,245
Depreciation and amortization		3,582			5,215			11,368			16,986			2,582			3,910
Asset impairment		-			-			-			237
Total operating expenses		140,447			168,331			429,893			525,574			127,536			152,328
Operating income (loss)		4,539			(706	)		23,424			23,563
Operating income														20,529			9,781

OTHER INCOME:
Interest income		474			334			1,328			900			634			390
Interest expense		(114	)		(117	)		(340	)		(469	)		(109	)		(113	)
Miscellaneous income (expense)		196			10			489			(4	)
Miscellaneous income														328			40
Total other income		556			227			1,477			427			853			317

PRETAX INCOME (LOSS)		5,095			(479	)		24,901			23,990
PRETAX INCOME														21,382			10,098
Provision for income taxes		1,597			21			11,143			8,776			3,498			4,501
INCOME (LOSS) FROM CONTINUING OPERATIONS		3,498			(500	)		13,758			15,214
INCOME FROM CONTINUING OPERATIONS														17,884			5,597

LOSS FROM DISCONTINUED OPERATIONS, net of tax		(476	)		(186	)		(1,273	)		(1,050	)		(382	)		(420	)

NET INCOME (LOSS)		3,022			(686	)		12,485			14,164
NET INCOME														17,502			5,177

OTHER COMPREHENSIVE INCOME, net of tax:
OTHER COMPREHENSIVE (LOSS) INCOME, net of tax:
Foreign currency translation adjustments		105			47			368			143			86			41
Unrealized gains on investments		-			370			34			824
Total other comprehensive income		105			417			402			967
COMPREHENSIVE INCOME (LOSS)	$	3,127		$	(269	)	$	12,887		$	15,131
Unrealized (loss) gain on investments														(218	)		23
Total other comprehensive (loss) income														(132	)		64
COMPREHENSIVE INCOME													$	17,370		$	5,241

NET INCOME (LOSS) PER SHARE - BASIC and DILUTED:
Income (loss) from continuing operations	$	0.05		$	(0.01	)	$	0.20		$	0.22
NET INCOME (LOSS) PER SHARE - BASIC:
Income from continuing operations													$	0.26		$	0.08
Loss from discontinued operations		(0.01	)		-			(0.02	)		(0.01	)		(0.01	)		-
Net income (loss) per share	$	0.04		$	(0.01	)	$	0.18		$	0.21
Net income per share													$	0.25		$	0.08

NET INCOME (LOSS) PER SHARE - DILUTED:
Income from continuing operations													$	0.25		$	0.08
Loss from discontinued operations														-			(0.01	)
Net income per share													$	0.25		$	0.07

WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic		69,082			68,460			68,897			68,328			69,216			68,578
Diluted		70,865			68,460			70,660			68,889			71,119			70,319

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

	For the Year to Date Ended September 30,						For the Quarter Ended March 31,
	2017			2016			2018			2017

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	12,485		$	14,164		$	17,502		$	5,177
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		11,368			16,986			2,582			3,910
Bad debt expense		21,516			23,201			6,982			8,224
Compensation expense related to share-based awards		3,616			2,251			1,501			1,111
Gain on disposition of property and equipment		-			(438	)
Deferred income taxes		10,282			7,373			3,704			3,792
Changes in operating assets and liabilities		(88,374	)		(47,510	)		(21,175	)		(61,267	)
Net cash (used in) provided by operating activities		(29,107	)		16,264
Net cash provided by (used in) operating activities								11,096			(39,053	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of available-for-sale investments		(202,050	)		(137,755	)		(50,799	)		(39,992	)
Sales of available-for-sale investments		199,340			99,718			49,257			44,316
Purchases of property and equipment		(3,426	)		(3,352	)		(1,360	)		(735	)
Proceeds on the sale of assets		-			3,600
Payments of cash upon sale of businesses		-			(62	)
Net cash used in investing activities		(6,136	)		(37,851	)
Net cash (used in) provided by investing activities								(2,902	)		3,589

CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock		2,548			581			875			138
Payment on borrowings		-			(38,000	)
Payments of employee tax associated with stock compensation		(1,170	)		(550	)		(2,981	)		(928	)
Net cash provided by (used in) financing activities		1,378			(37,969	)
Net cash used in financing activities								(2,106	)		(790	)

EFFECT OF FOREIGN CURRENCY EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS:		48			(150	)		-			15

NET DECREASE IN CASH AND CASH EQUIVALENTS		(33,817	)		(59,706	)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS								6,088			(36,239	)
CASH AND CASH EQUIVALENTS, beginning of the period		50,882			116,740			18,899			50,882
CASH AND CASH EQUIVALENTS, end of the period	$	17,065		$	57,034		$	24,987		$	14,643

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~~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 ~~September 30, 2017~~March 31, 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. ~~For the third quarter~~Each segment represents a group of ~~2017, we organized~~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~~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. ~~Campuses included in our Culinary Arts segment successfully completed their teach-outs as of September 30, 2017. As of~~

During the ~~fourth~~first quarter of ~~2017, Culinary Arts will no longer be its own operating segment.~~

~~During the third quarter of 2017,~~2018, the Company completed the teach-out of ~~17 campuses:~~one campus, Sanford-Brown ~~Las Vegas and the remaining 16 Le Cordon Bleu campuses,~~San Antonio, which ~~continue~~continues to be reported within the ~~Transitional Group and Culinary Arts segments, respectively,~~All Other Campuses segment as of ~~September 30, 2017~~March 31, 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.~~

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.more information.

~~In May 2017, the FASB issued ASU No. 2017-09, Compensation – Stock Compensation (Topic 718):~~ ~~Scope of Modification Accounting.~~ The amendments in this ASU provide clarity and reduce both diversity in practice and cost and complexity when applying the guidance in Topic 718, Compensation – Stock Compensation, to a change to the terms or conditions of a 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 changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. For all public entities, ASU 2017-09 is effective for annual periods and interim periods beginning after December 15, 2017; 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 is 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. The adoption did not significantly impact the presentation of our financial condition, results of operations and disclosures.

~~In January 2017, the FASB issued ASU No. 2017-03, Accounting Changes and Error Corrections (Topic 250) and Investments – Equity Method and Joint Ventures (Topic 323):~~ ~~Amendments to SEC Paragraphs Pursuant to Staff Announcements at the September 22, 2016 and November 17, 2016 EITF Meetings~~. The amendments in this ASU announced disclosure of the impact that recently issued accounting standards will have on the financial statements of a registrant when such standards are adopted in a future period. 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 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 changes 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. For all public entities, ASU 2016-18 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. We have evaluated and adopted this guidance beginning 2017 for all periods presented. 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. 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~~effective January 1, 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~~.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 further 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 allow financial statement preparers with an option to reclassify stranded tax effects within accumulated other comprehensive income (“AOCI”) to retained earnings in each period which 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 (accumulated deficit), 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 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.

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.~~

~~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 ~~September 30, 2017~~March 31, 2018 and December 31, ~~2016~~2017 (dollars in thousands):

	September 30, 2017									March 31, 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		118,111		11		(74	)		118,048	$	128,641	$	6	$	(415	)	$	128,232
Treasury and federal agencies		32,462		4		(61	)		32,405		29,964		-		(158	)		29,806
Total short-term investments		151,923		15		(135	)		151,803		158,605		6		(573	)		158,038
Restricted short-term investments (available for sale):
Non-governmental debt securities		7,070		-		-			7,070		4,570		-		-			4,570
Total investments (available for sale)	$	158,993	$	15	$	(135	)	$	158,873	$	163,175	$	6	$	(573	)	$	162,608

	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 ~~September 30, 2017~~March 31, 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 ~~September 30, 2017,~~March 31, 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 ~~September 30, 2017~~March 31, 2018 and December 31, ~~2016~~2017 were as follows (dollars in thousands):

	As of September 30, 2017								As of March 31, 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		42,097		83,021		-		125,118	$	31,500	$	101,302	$	-	$	132,802
Treasury and federal agencies		-		32,405		-		32,405		-		29,806		-		29,806
Totals	$	42,097	$	116,776	$	-	$	158,873	$	31,500	$	131,108	$	-	$	162,608

	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 ~~September 30, 2017,~~March 31, 2018, our investment in an equity affiliate equated to a 30.7%, or ~~$3.3~~$3.4 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 ~~September 30,~~March 31, 2018 and 2017, ~~and 2016,~~ we recorded approximately $0.1 million of gain and $0.2 ~~million of loss, respectively, and during the years to date ended September 30, 2017 and September 30, 2016, we recorded $0.2 million and $1.0~~ million of loss, respectively, related to our proportionate investment in CCKF within miscellaneous income ~~(expense)~~ on our unaudited condensed consolidated statements of income ~~(loss)~~ and comprehensive ~~income (loss).~~income.

We make periodic operating maintenance payments related to proprietary rights that we use in our intelli~~path~~path®^TM ~~adaptive~~ personalized learning technology. The total fees paid to CCKF for the quarters ended March 31, 2018 and ~~years to date ended September 30,~~ 2017 ~~and 2016~~ were as follows (dollars in thousands):

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 ~~September 30, 2017~~March 31, 2018 and December 31, ~~2016,~~2017, there were no outstanding borrowings under the revolving credit facility.

The following table disaggregates our revenue by major source (dollars in thousands):

	For the Quarter Ended March 31, 2018
	CTU		AIU		All Other Campuses		Total
Tuition	$	90,734	$	51,131	$	331	$	142,196
Technology fees		2,874		1,840		-		4,714
Other miscellaneous fees⁽¹⁾		500		100		-		600
Total tuition and fees		94,108		53,071		331		147,510
Other revenue⁽²⁾		499		50		6		555
Total revenue	$	94,607	$	53,121	$	337	$	148,065


	For the Quarter Ended March 31, 2017
	CTU		AIU		All Other Campuses		Total
Tuition	$	90,205	$	52,219	$	13,709	$	156,133
Technology fees		2,793		1,858		-		4,651
Other miscellaneous fees⁽¹⁾		496		88		9		593
Total tuition and fees		93,494		54,165		13,718		161,377
Other revenue⁽²⁾		541		88		103		732
Total revenue	$	94,035	$	54,253	$	13,821	$	162,109

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 March 31, 2018 were as follows (dollars in thousands):

Changes in our deferred revenue balances for the quarter ended March 31, 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 March 31, 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 $0.4 million and $0.5 million of revenue for the quarters ended March 31, 2018 and March 31, 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 ensure that the collectability threshold is met.

For the quarters ended March 31, 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. 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 ~~September 30, 2017~~March 31, 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 ~~$2.6~~$2.8 million and ~~$3.1~~$2.5 million, respectively.

Changes in our current and non-current receivables allowance for the quarters ended March 31, 2018 and ~~years to date ended September 30,~~ 2017 ~~and 2016~~ were as follows (dollars in thousands):

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 ~~continued~~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 have ceased operations as of ~~September 30, 2017,~~March 31, 2018, with the remainder expected to cease operations ~~through~~by 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 ended March 31, 2018 and ~~years to date ended September 30,~~ 2017 ~~and 2016~~ (dollars in thousands):

The current portion of the accrual for severance and related charges was ~~$3.0~~$1.2 million and ~~$7.3~~$2.1 million, respectively, as of ~~September 30, 2017~~March 31, 2018 and December 31, ~~2016,~~2017, which is recorded within current accrued expenses – payroll and related benefits; the long-term portion of $0.3 million and $1.4 million is recorded within other non-current liabilities on our condensed consolidated balance sheets as of September 30, 2017 and December 31, 2016, respectively.benefits.

In addition, as of ~~September 30, 2017,~~March 31, 2018, we have an accrual of approximately ~~$1.4~~$0.4 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 ~~(loss)~~ and comprehensive ~~income (loss).~~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 ended March 31, 2018 and ~~years to date ended September 30,~~ 2017 ~~and 2016~~ were as follows (dollars in thousands):

(1)Includes charges for newly vacated spaces and subsequent adjustments for accretion, revised estimates and ~~variances~~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.

In addition to the severance charges detailed above, ~~a number of the~~our six remaining teach-out campuses will have remaining lease obligations following the eventual campus ~~closure, with the longest lease term being through 2023.~~closure. The total remaining estimated charge as of ~~September 30, 2017,~~March 31, 2018, 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 approximately ~~$4 million - $6~~$3 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 ~~$67.5~~$68.2 million of charges related to remaining obligations for continuing operations ~~that~~which were recorded ~~during 2015 through the third quarter of 2017.~~since 2015.

An accrual for estimated legal fees and settlements of ~~$2.2~~$11.8 million and ~~$34.5~~$8.7 million at ~~September 30, 2017~~March 31, 2018 and December 31, ~~2016,~~2017, respectively, is presented within other current liabilities 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.

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 complete, sign and return 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. If more than 30 settlement class members opt out of the settlement, the Company will have the option of withdrawing from the settlement. The Company makes no admission of liability pursuant to the terms of the settlement. On February 8, 2018, the court preliminarily approved the settlement. The final approval hearing is scheduled for June 8, 2018.

The Company’s liability pursuant to the settlement will depend on how many settlement class members return valid claim forms, but is currently estimated to be $6.3 million. If all settlement class members returned valid claim forms the total amount would be approximately $14.0 million. Because it is uncertain how many class members will return valid claim forms, the Company based its best estimate upon several factors, including responses received to date, time left for class members to respond and third party estimates. Accordingly, as of March 31, 2018, the Company has a reserve of $6.3 million related to this matter, of which $3.5 million was recorded during the first 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 have agreed that the attorneys’ fees and costs awarded shall be in the range of $3.75 to $8.0 million. Because the amount of attorneys’ fees and costs that the court will determine is uncertain, the Company does not have a best estimate where in that range the liability is likely to be. Accordingly, as of March 31, 2018, the Company has a reserve of $3.75 million related to the attorneys’ fees and costs.

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 filed a seventh amended putative class complaint which seeks recovery based on a theory~~behalf is uncertain. As of ~~diminished value and contains a claim for punitive damages. Defendants’ motion to dismiss the seventh amended complaint was denied and plaintiffs~~April 27, 2018, approximately 115 individual arbitration claims have moved for class certification, which defendants oppose. If class certification is granted, the size of the class would depend on the scope certified by the court but could consist of up to 1,275 members.

Because of the many questions of fact and law that have already arisen and that may arise in the future, 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 of the inherent difficulty in assessing the appropriate measure of damages and the number of class members 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. 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.

On October 6, 2017, the United States filed its Notice of Election to Decline Intervention in the matter. On October 10, 2017, the Court ordered that the complaint be unsealed. After the federal government declines to intervene in a case, the relator may elect to pursue the litigation on behalf of the federal government. If she is successful she will receive a portion of the federal government’s recovery. It is not clear whether this relator will elect to pursue the litigation.

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.been filed.

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 and cash ~~flows and the results of operations for the period in which the effect becomes probable and reasonably estimable.~~flows.

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.

On August 20, 2015, the Company received a request for information pursuant to a Civil Investigative Demand 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 from~~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.

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 Program 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.~~adverse actions.

Our schools and universities are subject to periodic audits by various regulatory bodies, including ~~the U.S. Department of Education's~~ED’s Office of Inspector General ("OIG"). ~~The~~In June 2010, the OIG ~~audit services division~~ commenced ~~a compliance~~an audit of ~~CTU in June 2010,~~CTU’s administration of Title IV and other federal program funds 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 to the institution.which were subsequently contested by CTU ~~submitted a written response to the OIG, contesting these findings,~~ on March 2, 2012. On October 24, 2012, CTU provided a further response challenging the findings ~~of the report~~ directly to ED's Office of Federal Student Aid. ~~As a result of~~ ED’s review of ~~these materials, on January 31, 2013,~~the OIG’s audit findings and CTU’s response led them to request that CTU ~~received a request from ED that it~~ perform two complete file reviews ~~covering~~for the Audit Period to determine potential liability on two ~~discrete~~ issues associated with one of the ~~above~~three findings. The Company completed these file reviews and provided supporting documentation to ED on April 10, 2013. On April 29, 2016, ED revisited its earlier request and further directed CTU to perform these same two file reviews for an additional time period that extended from the end of the Audit Period through June 30, 2011, which CTU ~~has~~promptly 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 covers2, 2018, we received ED’s final audit determination letter which assessed liability consistent with 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 reconsiderationresults of the ~~request for this additional~~student file ~~review. In~~reviews we completed and provided to ED in 2013 and 2016 and consistent with 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 September 30, 2017, the Company has a $1.0 million reserve previously 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 September 30,						For the Year to Date Ended September 30,						For the Quarter Ended March 31,
	2017			2016			2017			2016			2018			2017
Pretax income (loss)	$	5,095		$	(479	)	$	24,901		$	23,990
Pretax income													$	21,382		$	10,098
Provision for income taxes	$	1,597		$	21		$	11,143		$	8,776		$	3,498		$	4,501
Effective rate		31.3	%		4.4	%		44.7	%		36.6	%		16.4	%		44.6	%

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 ~~September 30, 2017.~~March 31, 2018.

The effective tax rate for the quarter ended March 31, 2018, was primarily impacted by excess tax benefits associated with stock-based compensation and ~~year~~the release of previously recorded tax reserves. The effect of these discrete items decreased the effective tax rate for the quarter by 9.3%. The effective tax rate for the current quarter also reflects the reduction in the U.S. corporate

tax rate from 35% to ~~date~~21% resulting from the enactment of the Tax Cuts and Jobs Act that became effective in January 2018. For the quarter ended ~~September 30,~~March 31, 2017, the effective tax rate was primarily impacted by tax reserves recorded in the quarter and the tax effect of expenses that are not deductible for tax purposes. ~~For the current quarter we recognized less than $0.1 million of benefit associated with the adoption of ASU 2016-09,~~ ~~Compensation – Stock Compensation (Topic 718)~~, improvements to Employee Share-Based Payment Accounting, which decreased our quarterly effective tax rate by 0.6%. For the year to date ended September 30, 2017, we recognized a $1.1 million unfavorable adjustment associated with the adoption of ASU 2016-09, which increased the effective tax rate by 4.6%. For the year to date ended September 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 year to date effective tax rate by 8.8%.

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~~$1.9 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 ~~September 30, 2017~~March 31, 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 ~~September 30, 2017,~~March 31, 2018, we had accrued ~~$1.9~~$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 ~~September 30, 2017,~~March 31, 2018, there were approximately ~~4.0~~3.1 million shares of common stock available for future share-based awards under the 2016 Plan, which is net of (i) ~~0.5~~0.7 million shares issuable upon exercise of outstanding options and (ii) ~~0.3~~1.0 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 ~~September 30, 2017.~~March 31, 2018. Additionally, as of ~~September 30, 2017,~~March 31, 2018 under the previous Career Education Corporation 2008 Incentive Compensation Plan, there were approximately ~~2.4~~2.3 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 ~~September 30, 2017,~~March 31, 2018, we estimate that compensation expense of approximately ~~$6.0~~$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 after the first 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~~quarter ended ~~September 30, 2017~~March 31, 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		360			8.60		273			13.80
Exercised		(274	)		8.29		(60	)		13.32
Cancelled		(295	)		23.87		(23	)		14.03
Outstanding as of September 30, 2017		2,877		$	9.84
Exercisable as of September 30, 2017		1,779		$	12.32
Outstanding as of March 31, 2018							3,058		$	10.11
Exercisable as of March 31, 2018							1,985		$	11.29

Restricted Stock Units to be Settled in Stock. Restricted stock units to be settled in shares of stock generally ~~become fully vested~~vest as follows: 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 and~~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. 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 year and 30% after the third year. Also, certain awards granted in the second quarter of 2015 for retention purposes are subject to accelerated vesting and cash settlement in the event of an involuntary not-for-cause termination of employment by the Company.

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~~quarter ended ~~September 30, 2017~~March 31, 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		528			13.80
Vested ⁽¹⁾		(417	)		4.65		(642	)		5.01
Forfeited		(125	)		5.56		(49	)		5.57
Outstanding as of September 30, 2017		1,445		$	5.25
Outstanding as of March 31, 2018							1,291		$	8.93

Deferred Stock Units to be Settled in Stock. 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~~quarter ended ~~September 30, 2017~~March 31, 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 September 30, 2017 ⁽¹⁾		76	$	4.44
Outstanding as of March 31, 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 ~~(loss)~~ and comprehensive income ~~(loss)~~ 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~~quarter ended ~~September 30, 2017~~March 31, 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 ~~$3.3~~$1.1 million of expense for the ~~year to date 2017~~first quarter of 2018 for all cash-settled restricted stock ~~units, of which $1.4 million was recorded during the quarter ended September 30, 2017.~~units.

Stock-Based Compensation Expense. Total stock-based compensation expense for the quarters ended March 31, 2018 and ~~years to date ended September 30,~~ 2017 ~~and 2016~~ for all types of awards was as follows (dollars in thousands):

	For the Quarter Ended September 30,				For the Year to Date Ended September 30,				For the Quarter Ended March 31,
Award Type	2017		2016		2017		2016		2018		2017
Stock options	$	382	$	316	$	1,178	$	905	$	424	$	372
Restricted stock units settled in stock		904		539		2,424		1,330		1,072		733
Restricted stock units settled in cash		1,366		1,362		3,336		3,383		1,068		692
Total stock-based compensation expense	$	2,652	$	2,217	$	6,938	$	5,618	$	2,564	$	1,797

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 ~~(loss)~~ and comprehensive income ~~(loss)~~ in the current period. We recorded ~~$3.7~~$0.7 million and ~~$2.6~~$0.6 million of expense related to these awards for the ~~years to date ended September 30, 2017 and September 30, 2016, respectively, with $1.4 million and $1.7 million of expense for the~~ quarters ended ~~September 30,~~March 31, 2018 and March 31, 2017, ~~and September 30, 2016,~~ respectively.

Basic net income ~~(loss)~~ per share is calculated by dividing net income ~~(loss)~~ by the weighted average number of common shares outstanding for the period. Diluted earnings per share is computed by dividing net income ~~(loss)~~ 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 ~~(loss)~~ per share for the quarters ended March 31, 2018 and ~~years to date ended September 30,~~ 2017 ~~and 2016~~ were as follows:

	For the Quarter Ended September 30,				For the Year to Date Ended September 30,				For the Quarter Ended March 31,
	2017		2016⁽¹⁾		2017		2016		2018		2017
Basic common shares outstanding		69,082		68,460		68,897		68,328		69,216		68,578
Common stock equivalents		1,783		-		1,763		561		1,903		1,741
Diluted common shares outstanding		70,865		68,460		70,660		68,889		71,119		70,319

For the ~~quarter~~quarters ended ~~September 30,~~March 31, 2018 and 2017, ~~and the years to date ended September 30, 2017 and 2016,~~ 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 0.8 million and 1.1 million shares for the ~~quarter~~quarters ended ~~September 30,~~March 31, 2018 and 2017, ~~and 1.1 million and 2.6 million shares for the years to date ended September 30, 2017 and 2016,~~ 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 ~~September 30, 2017,~~March 31, 2018, our ~~four~~three segments are:

Our non-LCB campuses which are in teach-out or those which have been closed or sold subsequent to January 1, 2015. ~~As a result~~These non-LCB campuses offer academic programs in career-oriented disciplines complemented by certain programs in business studies and information technology. These campuses comprised our former Transitional Group segment. Campuses that have not yet ceased operations as 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 toMarch 31, 2018 will complete their ~~course~~teach-outs during 2018. As of ~~study; they no longer enroll new students.~~March 31, 2018, students enrolled at these campuses represented less than 1% of our total enrollments. During the first quarter of 2018, we completed the teach-out of one non-LCB campus.

♦

~~Culinary Arts~~ includes our Le Cordon Bleu institutions in North America (“LCB”) which offer hands-on educational programs in the career-oriented disciplines of culinary arts and patisserie and baking in the commercial-grade kitchens of Le Cordon Bleu. During the third quarter of 2017, the Company completed the teach-out activities of all remaining 16 Le Cordon Bleu campuses.

♦

~~Transitional Group~~ includes our non-LCB campuses which are in teach-out or those which have been closed or sold subsequent to January 1, 2015. Our Transitional Group offers academic programs in career-oriented disciplines complemented by certain programs in business studies and information technology. The campuses within the Transitional Group that have not yet ceased operations as of September 30, 2017 will complete their teach-outs on varying dates through 2018. As of September 30, 2017, students enrolled at the Transitional Group campuses represented approximately 1% of our total enrollments. During the third quarter of 2017, the Company completed the teach-out of 1 Transitional Group campus: Sanford-Brown Las Vegas, which continues to be reported as part of the Transitional Group as of September 30, 2017.

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

	For the Quarter Ended September 30,																For the Quarter Ended March 31,
	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	$	91,319		63.0	%	$	90,921		54.2	%	$	27,565		$	21,486		$	94,607		63.9	%	$	94,035		58.0	%	$	27,185		$	23,020
AIU		50,150		34.6	%		48,542		29.0	%		2,256			291			53,121		35.9	%		54,253		33.5	%		4,136			4,656
Total University Group		141,469		97.6	%		139,463		83.2	%		29,821			21,777			147,728		99.8	%		148,288		91.5	%		31,321			27,676
Corporate and Other		-	NM				-	NM				(6,199	)		(5,587	)		-	NM				-	NM				(4,542	)		(4,549	)
Subtotal		141,469		97.6	%		139,463		83.2	%		23,622			16,190			147,728		99.8	%		148,288		91.5	%		26,779			23,127
Culinary Arts		2,367		1.6	%		21,369		12.7	%		(14,027	)		(1,801	)
Transitional Group		1,150		0.8	%		6,793		4.1	%		(5,056	)		(15,095	)
All Other Campuses																		337		0.2	%		13,821		8.5	%		(6,250	)		(13,346	)
Total	$	144,986		100.0	%	$	167,625		100.0	%	$	4,539		$	(706	)	$	148,065		100.0	%	$	162,109		100.0	%	$	20,529		$	9,781

For the Year to Date Ended September 30,

Revenue

Operating Income (Loss)

2017

% of Total

2016

% of Total

2017

2016

CTU

$
276,558

61.0
%

$
274,623

50.0
%

$
78,649

$
70,693

AIU

150,618

33.2
%

152,123

27.7
%

7,987

9,036

Total University Group

427,176

94.2
%

426,746

77.7
%

86,636

79,729

Corporate and Other

-

NM

-

NM

(16,595
)

(17,160
)
Subtotal

427,176

94.2
%

426,746

77.7
%

70,041

62,569

Culinary Arts

19,302

4.3
%

89,990

16.4
%

(25,039
)

1,666

Transitional Group

6,839

1.5
%

32,401

5.9
%

(21,578
)

(40,672
)
Total

$
453,317

100.0
%

$
549,137

100.0
%

$
23,424

$
23,563

	Total Assets as of⁽¹⁾				Total Assets as of⁽¹⁾
	September 30, 2017		December 31, 2016		March 31, 2018		December 31, 2017
CTU	$	72,589	$	76,143	$	76,070	$	72,988
AIU		65,275		66,081		54,973		51,832
Total University Group		137,864		142,224		131,043		124,820
Corporate and Other		292,929		334,945		296,136		291,211
Subtotal		430,793		477,169		427,179		416,031
Culinary Arts ⁽²⁾		48,995		57,443
Transitional Group ⁽²⁾		15,316		18,736
All Other Campuses						28,059		29,098
Discontinued Operations		6,093		6,253		2,098		1,967
Total	$	501,197	$	559,601	$	457,336	$	447,096

As of ~~September 30, 2017,~~March 31, 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 ended March 31, 2018 and ~~years to date ended September 30,~~ 2017 ~~and 2016~~ were as follows (dollars in thousands):

	For the Quarter Ended September 30,						For the Year to Date Ended September 30,						For the Quarter Ended March 31,
	2017			2016			2017			2016			2018			2017
Total operating expenses	$	814		$	295		$	2,071		$	1,676		$	498		$	663
Loss before income tax	$	(771	)	$	(295	)	$	(2,028	)	$	(1,676	)	$	(498	)	$	(663	)
Benefit from income tax		(295	)		(109	)		(755	)		(626	)		(116	)		(243	)
Loss from discontinued operations, net of tax	$	(476	)	$	(186	)	$	(1,273	)	$	(1,050	)	$	(382	)	$	(420	)

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

	September 30,		December 31,		March 31,		December 31,
	2017		2016		2018		2017
Assets:
Current assets:
Receivables, net	$	171	$	148	$	513	$	382
Total current assets		171		148		513		382
Non-current assets:
Other assets, net		300		483
Deferred income tax assets, net		5,622		5,622		1,585		1,585
Total assets of discontinued operations	$	6,093	$	6,253	$	2,098	$	1,967
Liabilities:
Current liabilities:
Accounts payable and accrued expenses	$	179	$	76	$	113	$	185
Remaining lease obligations		6,255		8,143		4,188		5,516
Total current liabilities		6,434		8,219		4,301		5,701
Non-current liabilities:
Remaining lease obligations		2,156		6,331		-		785
Other		-		91
Total liabilities of discontinued operations	$	8,590	$	14,641	$	4,301	$	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 ended March 31, 2018 and ~~years to date ended September 30,~~ 2017, ~~and 2016,~~ were as follows (dollars in thousands):

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,” ~~“outlook,~~“intend,” “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 have fully~~All Other Campuses segment. Campuses within this segment include those which are being taught out ~~our Culinary Arts campuses.~~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 ~~third~~first quarter of ~~2017,~~2018, the Company completed the teach-out of ~~17 campuses:~~one campus, Sanford-Brown ~~Las Vegas and the remaining 16 Le Cordon Bleu campuses,~~San Antonio, which ~~continue~~continues to be reported within the ~~Transitional Group and Culinary Arts segments, respectively,~~All Other Campuses segment as part of ~~September 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.

The first quarter of 2018 operating results reflected progress against our key objectives of sustainable and responsible growth within the University Group. We continue to be encouraged by the momentum of our University Group, which we believe has been driven by our investments in student-serving processes and initiatives.

We believe the education industry continues to grow and it is important to evolve with the changing needs of students and employers. Our universities are focused on further differentiating our educational offerings and continuing to leverage technology to enhance learning, increase the depth and breadth of our program offerings and build corporate partnerships.

The University Group continues to focus on improving the effectiveness of the student recruiting and onboarding process by improving the efficiency and tenure of admissions personnel supported by strong training and development. We ~~continued to experience better than expected enrollment trends~~have also invested in faculty, advising and ~~operating performance~~admissions which have driven an approximate 12% increase in University staffing during the ~~third~~first quarter of 2017. Our third quarter operating income for the University Group and Corporate was $23.6 million and adjusted for certain items not considered reflective of underlying operating performance and certain non-cash items was $26.2 million, which was better than the high end of our operating income outlook of $21 million and adjusted operating income outlook of $24 million, respectively. We believe this performance was primarily driven by better than expected retention and new enrollment trends that positively impacted revenue as well as timing of certain operating expenses.

~~Within our CTU segment, total enrollments increased 0.9% and new enrollments increased 10.9% for the third quarter of 2017~~2018 as compared to the prior year quarter. WeAdditionally, we believe ~~the increase~~our orientation process with continued follow up in ~~total enrollments was primarily driven by~~ new ~~enrollment growth~~student outreach and ~~continued improvement in our retention trends. New enrollment growth benefitted from~~preparedness has improved ~~execution within our admissions operations, enhanced training and coaching~~student experiences after they start school as well as ~~increasing tenure~~positively impacted student retention. Our personalized graduate team model at AIU is fully rolled out with cross-functional strategies between admissions, advising and financial aid functions aimed at improving student engagement prior to beginning school and continuing through their first academic term as they adjust to their program.

Technology is also a key focus and important competitive advantage and we have focused some of our ~~admissions personnel driving higher efficiency~~investments in expanding our ~~enrollment and onboarding processes. Improvements~~capabilities in technology has also helped drive better student engagement early in their decision process. The new admissions and advising center in Arizona which was fully operational during the quarter for CTU also contributedthis area. Subsequent to the increase in new enrollments for the current quarter. Revenue increased by $0.4 million for the quarter and $1.9 million for the year to date as compared to the prior year periods while operating income increased $6.1 million and $8.0 million for the current quarter and year to date, respectively, as compared to the prior year periods.

Within our AIU segment, total enrollments increased 5.7% while new enrollments decreased 2.8%. The increase in total enrollments was primarily driven by the improvements made in our student support operations throughout the year. New enrollments for the quarter were impacted by the calendar redesign discussed in prior quarters which shifts new enrollments between quarters as compared to the prior year periods. The new admissions and advising center became fully operational at the endrollout of the ~~third~~faculty mobile application at both universities in the fourth quarter of 2017, ~~for AIU.~~CTU is now testing two-way messaging to support seamless communications between students, faculty and support services. CTU is also investing in a retention analytics tool to pinpoint areas of focus to further improve overall student retention. We expect to ~~see positive impacts in future quarters as increased resources~~learn from the CTU initiatives and benefit from these processes across the AIU platform over time. We also continue to ~~serve prospective students is expected~~expand our personalized learning platform to support our objective of sustainable and responsible growth. Revenue increased by $1.6 million for the quarter and decreased by $1.5 million for the year to date as compared to the prior year periods while operating income increased $2.0 million and decreased by $1.0 million for the current quarter and year to date, respectively, as compared to the prior year periods.additional courses at both universities.

We will continue to focus on ~~additional innovative ways~~investments and initiatives to ~~implement strategies, invest in new technology~~align our University Group with the student interest trends and appropriately staff our student support operations. During the third quarter, AIU announced a new specialization for its Bachelor of Business Administration degree program. The new program, Le Cordon Bleu Hospitality Management, provides a specialization which allows students to engage in an in-depth study in their areas of interest. Within both Universities we rolled out the faculty mobile application which allows faculty to engage more with students as well as track their progress more efficiently. We have also established advisor accountability for students based on their degree and program of study and promoted increased interaction and dialogue between advisors and faculty.

We expect to see quarterly variability driven by the timing of operating expenses and the varying impacts from our initiatives, including the ongoing impacts of the academic calendar redesign at AIU, yetgrowth enablers we believe ~~that~~are impacting the University Group is positioned well for long-term sustainable and responsible growth. In line with these expectations, we expect positive new and total enrollment growth at both AIU and CTU during the fourth quarter of 2017. This expectation is primarily driven by our ongoing initiatives and investments in student support operations, including our admissions and advising centers in Arizona as well as the academic calendar redesign at AIU.

We completed the teach-out of all remaining Culinary Arts campuses during the third quarter of 2017, which significantly lowered the remaining number of students involved in our teach-out campuses. At the end of 2017, we expect to have approximately 80 students remaining across seven teach-out campuses. Results for our teach-out campuses continue to track ahead of our expectations due to stronger than expected retention as well as better than expected occupancy costs as we work to exit leases prior to their end dates or secure sublease arrangements. We are continuing to terminate or sublease vacated space and further reduce our remaining contractual lease obligations, which will result in future cash savings.postsecondary education industry.

Revenue from continuing operations ~~declined $22.6~~in the first quarter of 2018 decreased $14.0 million or ~~13.5% due to an overall 9.9% decrease in total student enrollments for the third quarter of 2017~~8.7% as compared to the prior year quarter, ~~driven by our decision to~~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~~first quarter of 2018, we reported operating income of ~~$4.5~~$20.5 million as compared to an operating ~~loss~~income of ~~$0.7~~$9.8 million infor the prior year quarter. This improvement was driven by ~~increased revenue~~reduced operating costs at our teach-out campuses and ~~operating efficiencies~~continued efficiency in our marketing and advertising costs within our University ~~Group as well as a result of growth investments made earlier in 2017.~~Group. Lastly, we reported cash ~~used in~~provided by operations for the current quarter of $11.1 million as compared to cash used by operations of $39.1 million for the prior year ~~to date~~quarter. The prior year cash usage included a payment of ~~$29.1~~$32.0 million for legal settlements.

For our University Group, revenue decreased $0.6 million or 0.4% as compared to the prior year ~~to date’s cash provided of $16.3 million. The~~quarter. Revenue within our CTU segment increased $0.6 million or 0.6% driven by an increase in ~~cash usage for the current year to date~~total enrollments. CTU’s revenue increase was ~~primarily driven by payments~~more than offset with a decrease of ~~legal settlements of $32.0 million during the first quarter of 2017 as well as increased payments for exit of leased facilities and incentive-based compensation expenses as compared to the prior year.~~

~~For our University Group, revenue increased $2.0~~$1.1 million or ~~1.4% as compared to the prior year quarter, primarily driven by new and total enrollment growth as well as the timing impact~~2.1% within our AIU segment. AIU’s revenue decrease was a result of ~~the calendar redesign for AIU which shifted revenue from the second quarter of 2017 to the third quarter of 2017. Total enrollments for the University Group increased by 2.5% as of the current year~~

quarter end as compared to the prior year quarter end. Operating income for the University Group increased by $8.0 million, or 36.9%, for the current year quarter as compared to the prior year quarter driven by the reasons discussed above.

~~Within our teach-out segments, operating loss for the Transitional Group improved by $10.0 million or 66.5% for~~one less revenue-generating day during the current quarter as compared to the prior year quarter ~~driven by reductions in expenses, particularly within administrative, occupancy and~~due to AIU’s academic ~~expenses.~~calendar redesign. Operating ~~loss~~income for ~~Culinary Arts~~the University Group increased ~~by $12.2~~$3.6 million or 13.2% primarily as a result of ~~the reduction in revenue more than offsetting the reduction in expenses as the business completed its teach-out~~marketing and advertising cost efficiencies as well as ~~lease charges recorded~~improvements within bad debt expense, which were partially offset with ongoing investments in student-serving processes and initiatives. AIU’s operating income decreased $0.5 million or 11.2% for the quarter as a result of an increase in depreciation expense. Student support staffing at our universities is up sequentially from the previous quarter and future impacts from efficiencies in marketing and advertising costs will be less than in prior quarters and as a result we may experience some quarterly variability in operating performance in future quarters.

New and total student enrollments for our CTU segment increased 4.6% and 2.8%, respectively, as compared to the prior year quarter. CTU’s enrollment growth is a result of improving retention trends, our investment in the admissions and advising center in Arizona as well as our ongoing initiatives to enhance student engagement. New and total student enrollments for our AIU segment decreased 51.5% and 12.8%, respectively, as compared to the prior year quarter. First quarter enrollments at AIU were impacted by the academic calendar redesign which resulted in 57% fewer enrollment days for the quarter as compared to the prior year quarter. The first quarter decrease is expected to be approximately offset by new student enrollments during the second and third quarters of 2018 due to the timing impact of the calendar redesign. In general, enrollment days attributable to any given quarter are the available days during which a prospective student can apply to start school in that quarter. Additionally, the variability in quarterly enrollment days will not materially impact revenue trends which are primarily driven by the underlying long-term enrollment trends, and for the full year of 2018 we expect revenue for AIU to grow as compared to the prior year.

Within our All Other Campuses segment, operating loss of $6.3 million improved 53.2% compared to the prior year quarter as we continued to eliminate costs as campuses ~~vacated facilities during the third quarter of 2017 upon teach-out completion.~~completed their teach-outs. We ~~have eight campuses~~had approximately 60 students remaining within ~~the Transitional Group at~~six teach-out campuses as of the end of the ~~third~~first quarter of ~~2017, which will~~2018 who are scheduled to complete their programs during 2018. As the teach-out ~~at varying dates through 2018.~~campuses complete their closure in 2018, we expect to see expenses further decrease.

~~As discussed above, the~~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.) ~~Operating income and adjusted~~Adjusted operating income for the University Group and Corporate was ~~$23.6 million and $26.2~~$29.2 million for the current quarter as compared to ~~$16.2 million and $18.8~~$25.7 million in the prior year quarter, ~~respectively.~~driven by continued efficiency in marketing and advertising costs, partially offset with ongoing investments in student-serving processes and initiatives, including the new admissions and advising centers in Arizona. Adjusted operating loss for the ~~Transitional Group and Culinary Arts increased~~All Other Campuses segment improved to ~~$10.8~~$3.4 million for the current ~~year~~ quarter as compared to an adjusted operating loss of ~~$9.3~~$9.8 million in the prior year quarter as a result of ~~the fixed costs not decreasing in line with revenue~~reduced expenses as we near the end of teach-out completion.

The substantial completion of the teach-outs and continued execution against our strategy has provided us with further visibility into our anticipated operating results. As a result, we are providing an update to our previous outlook for adjusted operating losses related to our teach-out operations and for ending cash balances for 2017. 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, (iii) availability and retention of qualified personnel for ongoing investments in our student support operations, (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) 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 (vi) 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.

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

ACTUAL

ACTUAL

For the Quarter Ended
September 30,

For the Year to Date Ended
September 30,

Adjusted Operating Income (Loss)

2017

2016

2017

2016

University Group and Corporate:

Operating income ^{(1) (2)}

$
23,622

$
16,190

$
70,041

$
62,569

Depreciation and amortization⁽²⁾

2,605

2,594

7,695

8,474

Asset impairments ⁽²⁾

-

-

-

237

Unused space charges ^{(2) (3)}

-

-

-

1,118

Adjusted Operating Income -- University Group and Corporate

$
26,227

$
18,784

$
77,736

$
72,398

Transitional Group and Culinary Arts:

Operating loss ^{(1) (4)}

$
(19,083
)

$
(16,896
)

$
(46,617
)

$
(39,006
)
Depreciation and amortization ⁽⁴⁾

977

2,621

3,673

8,512

Unused space charges^{(3) (4)}

7,347

4,983

11,158

14,123

Adjusted Operating Loss -- Transitional and Culinary Arts

$
(10,759
)

$
(9,292
)

$
(31,786
)

$
(16,371
)

ACTUAL

OUTLOOK

ACTUAL

OUTLOOK

For the Second Half July-December 31,

For the Year Ended December 31,

Adjusted Operating Income (Loss)
2016

2017

2016

2017

2018

University Group and Corporate:

Operating income ⁽²⁾
$
(1,662
)

$43 - $48M

$
44,717

$90-95M

Growth vs 2017

Depreciation and amortization⁽²⁾

5,284

5M

11,164

10M

2017 Levels

Asset impairments ⁽²⁾

-

None Assumed

237

None Assumed

Unused space charges ^{(2) (3)}

16

None Assumed

1,134

None Assumed

Significant legal settlements ⁽²⁾

32,000

None Assumed

32,000

None Assumed

Adjusted Operating Income -- University Group and Corporate
$
35,638

$48 - $53M

$
89,252

$100 - $105M

Growth vs 2017

Transitional Group and Culinary Arts:

Operating loss ⁽⁴⁾
$
(54,951
)

($31 - $36M)

$
(77,061
)

($59 - $64M)

($15 - $20M)

Depreciation and amortization ⁽⁴⁾

5,692

1M

11,583

4M

-

Asset impairments ⁽⁴⁾

927

None Assumed

927

None Assumed

Unused space charges^{(3) (4)}

25,579

11M

34,719

15M

5M

Adjusted Operating Loss -- Transitional and Culinary Arts
$
(22,753
)

($19 - $24M)

$
(29,832
)

($40 - $45M)

($10 - $15M)

	ACTUAL
	For the Quarter Ended March 31,
Adjusted Operating Income (Loss)	2018			2017
University Group and Corporate:
Operating income ^{(1) (2)}	$	26,779		$	23,127
Depreciation and amortization⁽²⁾		2,467			2,531
Adjusted Operating Income -- University Group and Corporate	$	29,246		$	25,658

All Other Campuses:
Operating loss ^{(1) (4)}	$	(6,250	)	$	(13,346	)
Depreciation and amortization ⁽⁴⁾		115			1,379
Unused space charges^{(3) (4)}		(751	)		2,157
Significant legal settlements ⁽⁴⁾		3,491			-
Adjusted Operating Loss -- All Other Campuses	$	(3,395	)	$	(9,810	)

Consistent with our objective of sustainable and responsible growth, we are affirming our previously provided full year outlook for adjusted operating income for 2018 and 2019 as well as our ending cash balances for 2018 and 2019. We currently expect the following results, subject to the key assumptions identified below (see the GAAP to 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 as discussed 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 and cash outlook provided above for 2018 and 2019 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) initiatives and investments in student-serving processes and initiatives continue to positively impact enrollment trends within the University Group, (iii) achievement of anticipated recovery rates for our real estate obligations and timing of any associated lease termination payments in line with our current expectations, (iv) 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 new or proposed regulations, including the “borrower defense to repayment” and gainful employment regulations and any modifications thereto, and (v) 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 entered 2018 with positive momentum and are continuing to execute well against our objectives to drive sustainable and responsible growth. We will continue to make investments in our student-serving processes and initiatives and remain focused on

technology and delivering quality academic outcomes as key enablers of growth. We will continue to experience some variability in quarterly results driven by the timing of our operating expenses and the varying impacts from our initiatives, including the ongoing impacts of the academic calendar redesign at AIU, but remain confident in our long-term outlook. Our universities are positioned well to serve the student interest trends we expect to see in the postsecondary education industry and we will continue to balance our objectives of effective and efficient student services with our financial and operating commitments as we strive to create better experiences and academic outcomes for our students. Lastly, with anticipated cash generation in 2018 and 2019, we will continue to evaluate diverse strategies to enhance shareholder value while maintaining adequate liquidity and capital for student-serving investments at our University Group.

~~Borrower Defense~~Rulemaking Initiatives. On June 14, 2017, ED announced its intention to ~~Repayment. In response~~convene new negotiated rulemaking committees to ~~pending litigation challenging~~consider modifications to the borrower defense to repayment regulations as well as the gainful employment regulation. Committee negotiations commenced in late 2017. These two separate rulemaking committees each met several times to discuss proposed alternatives to the previous regulations and failed to reach consensus on ~~June 14, 2017~~what an alternative set of regulations should be. As a result, ED ~~announced an indefinite delay~~is able to propose its own version of alternative proposed regulations for public comment. ED has not established a final schedule for publication of proposed or final regulations; however, any regulations published in the effective date of the regulations while it conducts further review and a new negotiated rulemaking process to amend the rules. On October 24, 2017 ED published two related notices in the Federal Register. The first, again citing the pending litigation and uncertain outcome, was an interim final rule setting the effective date of the delayed regulations as July 1, 2018. The second, was a proposed extension of the delay for an extra year, through July 1, 2019, to permit ED to conclude its previously announced negotiated rulemaking to amend the rules and to provide adequate time for institutions to prepare for the implementation of its modified requirements. Comments on the proposed extension through July 1, 2019 are dueform by November ~~24, 2017. These borrower defense to repayment regulations were previously set to~~1, 2018 typically would take effect on July 1, 2017. Separately, 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~~these rulemaking initiatives and the impact of any ~~ruling may have on the future effectiveness of the existing~~new or modified regulations isare 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 the borrower defense to repayment regulations.

~~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 expires on September 30, 2018. 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.

~~Cohort Default Rates~~. In late September 2017, ED released the official three-year cohort default rates for the 2014 cohort. Each of our institutions had cohort default rates under the 30% threshold for the 2014 cohort. See Item 1, “Business – Student Financial Aid and Related Federal Regulation – Compliance with Federal Regulatory Standards and Effect of Federal Regulatory Violations – Student Loan Default Rates” in our Annual Report on Form 10-K for the year ended December 31, 2016 for more information about cohort default rates, our prior year rates and ED’s related standards.

~~HLC Policy Making Initiatives.~~ At its June 2017 board meeting, the Higher Learning Commission (“HLC”) proposed the addition of student consumer protection policies focused on recruiting, admissions and related institutional practices. Comments on the proposed policies were solicited through September 23, 2017 and the HLC Board of Trustees will consider adoption of the new policies at its November 2017 meeting. We believe our universities already substantially adhere to many of the proposed policies. However, some aspects of the policies and their application are unclear and our institutions have sought clarifications through the comment process. The proposed policies may preclude arbitration agreements in student enrollment agreements. As a result, the impact of these proposed policies, if any, is uncertain at this time, but they may require us to modify our practices and limit our ability to resolve student concerns efficiently and cost effectively. If adopted in November 2017, the new policies would be effective in December 2018.

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 ended March 31, 2018 and ~~years to date ended September 30,~~ 2017 ~~and 2016~~ (dollars in thousands):

	For the Quarter Ended September 30,												For the Year to Date Ended September 30,												For the Quarter Ended March 31,
		2017		% of Total Revenue				2016		% of Total Revenue				2017		% of Total Revenue				2016		% of Total Revenue				2018		% of Total Revenue				2017		% of Total Revenue
TOTAL REVENUE	$	144,986					$	167,625					$	453,317					$	549,137					$	148,065					$	162,109
OPERATING EXPENSES
Educational services and facilities ⁽¹⁾		37,788			26.1	%		51,393			30.7	%		114,367			25.2	%		170,993			31.1	%		26,946			18.2	%		40,173			24.8	%
General and administrative: ⁽²⁾
Advertising		33,927			23.4	%		45,272			27.0	%		105,759			23.3	%		122,088			22.2	%		31,878			21.5	%		40,136			24.8	%
Admissions		21,237			14.6	%		19,842			11.8	%		62,406			13.8	%		63,352			11.5	%		24,006			16.2	%		20,566			12.7	%
Administrative		37,493			25.9	%		38,152			22.8	%		114,363			25.2	%		128,586			23.4	%		35,111			23.7	%		39,251			24.2	%
Bad debt		6,420			4.4	%		8,457			5.0	%		21,630			4.8	%		23,332			4.2	%		7,013			4.7	%		8,292			5.1	%
Total general and administrative expense		99,077			68.3	%		111,723			66.7	%		304,158			67.1	%		337,358			61.4	%		98,008			66.2	%		108,245			66.8	%
Depreciation and amortization		3,582			2.5	%		5,215			3.1	%		11,368			2.5	%		16,986			3.1	%		2,582			1.7	%		3,910			2.4	%
Asset impairment		-			0.0	%		-			0.0	%		-			0.0	%		237			0.0	%
OPERATING INCOME (LOSS)		4,539			3.1	%		(706	)		-0.4	%		23,424			5.2	%		23,563			4.3	%
OPERATING INCOME																										20,529			13.9	%		9,781			6.0	%

PRETAX INCOME (LOSS)		5,095			3.5	%		(479	)		-0.3	%		24,901			5.5	%		23,990			4.4	%
PRETAX INCOME																										21,382			14.4	%		10,098			6.2	%
PROVISION FOR INCOME TAXES		1,597			1.1	%		21			0.0	%		11,143			2.5	%		8,776			1.6	%		3,498			2.4	%		4,501			2.8	%
Effective tax rate		31.3	%					4.4	%					44.7	%					36.6	%					16.4	%					44.6	%

INCOME (LOSS) FROM CONTINUING OPERATIONS		3,498			2.4	%		(500	)		-0.3	%		13,758			3.0	%		15,214			2.8	%
INCOME FROM CONTINUING OPERATIONS																										17,884			12.1	%		5,597			3.5	%
LOSS FROM DISCONTINUED OPERATIONS, net of tax		(476	)		-0.3	%		(186	)		-0.1	%		(1,273	)		-0.3	%		(1,050	)		-0.2	%		(382	)		-0.3	%		(420	)		-0.3	%

NET INCOME (LOSS)	$	3,022			2.1	%	$	(686	)		-0.4	%	$	12,485			2.8	%	$	14,164			2.6	%
NET INCOME																									$	17,502			11.8	%	$	5,177			3.2	%

Current quarter ~~and current year to date~~ revenue decreased ~~13.5%~~8.7% or ~~$22.6~~$14.0 million ~~and 17.4% or $95.8 million, respectively,~~ as compared to the prior ~~periods~~year quarter driven by ~~the~~an overall 8.4% 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 ~~increased approximately 1.4%~~for our ongoing operations decreased 0.4% or ~~$2.0~~$0.6 million, ~~for~~primarily driven by the ~~current quarter and 0.1% or $0.4 million for~~academic calendar redesign within AIU which impacts the ~~current year to date~~number of revenue generating days as compared to ~~the~~ prior periods. The current quarter increase when excluding the Transitional Group and Culinary Arts was primarily driven by new and total enrollment growth as well as the calendar redesign at AIU which shifted more earnings days into the third quarter of 2017 as compared to 2016. The current year to date increase when excluding the Transitional Group and Culinary Arts was primarily driven by an overall increase in new and total student enrollments.Revenue within our CTU segment increased $0.6 million or 0.6%.

	For the Quarter Ended September 30,								For the Year to Date Ended September 30,									For the Quarter Ended March 31,
		2017	% of Total Revenue			2016	% of Total Revenue			2017	% of Total Revenue			2016	% of Total Revenue				2018	% of Total Revenue		2017	% of Total Revenue
Educational services and facilities:
Academics & student related	$	21,319		14.7%	$	29,941		17.9%	$	72,700		16.0%	$	103,652		18.9%	��	$	22,599	15.3%	$	26,959	16.6%
Occupancy		16,469		11.4%		21,452		12.8%		41,667		9.2%		67,341		12.3%			4,347	2.9%		13,214	8.2%
Total educational services and facilities	$	37,788		26.1%	$	51,393		30.7%	$	114,367		25.2%	$	170,993		31.1%		$	26,946	18.2%	$	40,173	24.8%

The decrease in educational services and facilities expense ~~for the current quarter and current year to date~~ as compared to the ~~respective~~ prior year ~~periods is~~quarter was primarily driven by a decrease within occupancy expense 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. The current quarter also benefitted from lower academics and student related ~~expenses for~~costs within our teach-out campuses as ~~these campuses continue to wind-down their operations, which was slightly~~a result of the campus closures, partially offset with ~~an increase in academics and student related expenses for~~increases within the University Group to support the ~~increases in~~growing total ~~student~~ enrollment. Occupancy expenses also decreased for the current quarter and current year to date as compared to the respective prior year periods primarily due to decreases within our teach-out segments as a result of exiting facilities as campuses complete their teach-out.

	For the Quarter Ended September 30,								For the Year to Date Ended September 30,								For the Quarter Ended March 31,
		2017	% of Total Revenue			2016	% of Total Revenue			2017	% of Total Revenue			2016	% of Total Revenue			2018	% of Total Revenue		2017	% of Total Revenue
General and administrative:
Advertising	$	33,927		23.4%	$	45,272		27.0%	$	105,759		23.3%	$	122,088		22.2%	$	31,878	21.5%	$	40,136	24.8%
Admissions		21,237		14.6%		19,842		11.8%		62,406		13.8%		63,352		11.5%		24,006	16.2%		20,566	12.7%
Administrative		37,493		25.9%		38,152		22.8%		114,363		25.2%		128,586		23.4%		35,111	23.7%		39,251	24.2%
Bad Debt		6,420		4.4%		8,457		5.0%		21,630		4.8%		23,332		4.2%		7,013	4.7%		8,292	5.1%
Total general and administrative expense	$	99,077		68.3%	$	111,723		66.7%	$	304,158		67.1%	$	337,358		61.4%	$	98,008	66.2%	$	108,245	66.8%

General and administrative ~~expenses~~expense decreased by ~~11.3%~~9.5% or ~~$12.6~~$10.2 million for the current quarter as compared to the prior year quarter primarily driven by decreases in advertising and ~~bad debt~~administrative expenses. The lower advertising expense iswas substantially related to decreased expenses ~~for both AIU and CTU due~~within our University Group related to efficiencies developed within certain marketing channels that optimized our processes related to receiving prospective student inquiries. Administrative expense was lower as compared to the prior year quarter due to reductions associated with the teach-out campuses as well as reductions in corporate expenses. Admissions ~~expenses~~expense increased ~~slightly~~ for the current quarter as compared to the prior year quarter primarily due to increased salary and related expenses within the University Group to enhance student onboarding and investments in ~~our~~ new admissions and advising centers in Arizona. Administrative expenses for the current quarter as compared to the prior year quarter decreased slightly primarily driven by reductions within Culinary Arts which completed their teach-outs during the current quarter.

General and administrative expenses decreased by 9.8% or $33.2 million for the current year to date as compared to the prior year to date primarily driven by advertising and administrative expenses. The lower advertising expenses and administrative expenses decreased for the reasons mentioned above. Admissions expenses decreased by approximately 1.5% or $0.9 million for the current year to date as compared to the prior year to date as the costs related to the investments in the admission and advising centers in Arizona during the past two quarters were more than offset with decreases in admissions expenses for our teach-out campuses as well as decreased costs within University in the early part of the current year. As a percentage of revenue, administrative expenses have increased for the current year periods as compared to the prior year periods due to certain fixed administrative costs for the consolidated organization that do not decline upon teach-out of campuses..

Bad debt expense incurred by each of our segments during the quarters ended March 31, 2018 and ~~years to date ended September 30,~~ 2017 ~~and 2016~~ was as follows (dollars in thousands):

	For the Quarter Ended September 30,												For the Year to Date Ended September 30,												For the Quarter Ended March 31,
		2017		% of Segment Revenue				2016		% of Segment Revenue				2017		% of Segment Revenue				2016		% of Segment Revenue				2018		% of Segment Revenue				2017		% of Segment Revenue
Bad debt expense:
CTU	$	4,262			4.7	%	$	5,758			6.3	%	$	15,087			5.5	%	$	15,599			5.7	%	$	4,488			4.7	%	$	6,039			6.4	%
AIU		2,129			4.2	%		1,497			3.1	%		6,654			4.4	%		5,259			3.5	%		2,543			4.8	%		2,354			4.3	%
Total University Group		6,391			4.5	%		7,255			5.2	%		21,741			5.1	%		20,858			4.9	%		7,031			4.8	%		8,393			5.7	%
Corporate and Other		(140	)	NM				(57	)	NM				(270	)	NM				(3	)	NM				137		NM				140		NM
Sub Total		6,251			4.4	%		7,198			5.2	%		21,471			5.0	%		20,855			4.9	%		7,168			4.9	%		8,533			5.8	%
Culinary Arts		57			2.4	%		862			4.0	%		80			0.4	%		1,861			2.1	%
Transitional Group		112			9.7	%		397			5.8	%		79			1.2	%		616			1.9	%
All Other Campuses																										(155	)		-46.0	%		(241	)		-1.7	%
Total bad debt expense	$	6,420			4.4	%	$	8,457			5.0	%	$	21,630			4.8	%	$	23,332			4.2	%	$	7,013			4.7	%	$	8,292			5.1	%

Bad debt expenses decreased by ~~24.1%~~15.4% or ~~$2.0 million and 7.3% or $1.7~~$1.3 million for the current quarter ~~and current year to date, respectively,~~ as compared to the prior year ~~periods~~quarter primarily driven by decreases related to ~~our teach-out campuses as our total student enrollment continues to decrease~~improvements within those campuses as they wind-down their teach-out operations. Additionally, CTU decreased by $1.5 million and $0.5 million for the current quarter and current year to date, respectively, as compared to the prior year periods due to improvements inCTU’s collections as well as increased efforts to assist students with completing their funding packages at the beginning of their academic year. ~~CTU’s improvement was slightly offset with increased bad debt expense within AIU for the current quarter and current year to date 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 for the current quarter improved ~~to $4.5~~by 109.9% or $10.7 million ~~and remained relatively flat at $23.4 million for the current year to date, as~~ compared to the ~~respective~~ prior ~~periods. Operating losses~~year quarter. Improvements within ~~our Culinary Arts campuses, due to teach-outs and fixed costs associated with each campus, contributed to the decline in consolidated operating income. The~~ operating losses from teach-out campuses were ~~more than offset with operating~~a result of fewer teach-out campuses remaining in the current quarter as compared to the prior year quarter. Operating income generated within our University Group ~~which~~ was primarily driven by continued improvements in operating efficiencies within CTU which was partially offset with increased depreciation expenses within AIU. Initiatives to align expenses with the new organizational structure, changes in marketing strategies and ~~increased revenues.~~implementation of efficiencies in our support functions continue to drive improvements in operating margins within our University Group.

For the quarter ended ~~September 30, 2017,~~March 31, 2018, we recorded a provision for income taxes of ~~$1.6~~$3.5 million or ~~31.3%~~16.4% as compared to a provision for income taxes of ~~less than $0.1~~$4.5 million or ~~4.4%~~44.6% for the prior year quarter. We recorded $11.1 million or 44.7% of provision for income taxes for the year to date ended September 30, 2017 as compared to a provision of $8.8 million or 36.6% for the year to date ended September 30, 2016. The effective tax rate for the quarter ended March 31, 2018 was primarily impacted by excess tax benefits associated with stock-based compensation and the release of previously recorded tax reserves. The effect of these discrete items decreased the effective tax rate for the quarter by 9.3%. The effective tax rate for the current quarter 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 ~~date~~be between 23% and 26%. For the quarter ended ~~September 30,~~March 31, 2017, the effective tax rate was primarily impacted by tax reserves recorded in the quarter and the tax effect of expenses that are not deductible for tax purposes. For the current quarter we recognized less than $0.1 million of benefit associated with the adoption of ASU 2016-09, Compensation – Stock Compensation (Topic 718), which decreased our quarterly effective tax rate by 0.6%. For the year to date ended September 30, 2017, we recognized a $1.1 million unfavorable adjustment associated with the adoption of ASU 2016-09, which increased the effective tax rate by 4.6%. The effective tax rate for the year to date ended September 30, 2016 was reduced by 8.8%, 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 March 31,
	REVENUE							OPERATING INCOME (LOSS)									OPERATING INCOME (LOSS) MARGIN
		2018		2017	% Change				2018			2017		% Change				2018			2017
REVENUE:
CTU	$	94,607	$	94,035		0.6	%	$	27,185		$	23,020			18.1	%		28.7	%		24.5	%
AIU		53,121		54,253		-2.1	%		4,136			4,656			-11.2	%		7.8	%		8.6	%
Total University Group		147,728		148,288		-0.4	%		31,321			27,676			13.2	%		21.2	%		18.7	%
Corporate and Other		-		-	NM				(4,542	)		(4,549	)		0.2	%	NM			NM
Subtotal		147,728		148,288		-0.4	%		26,779			23,127			15.8	%		18.1	%		15.6	%
All Other Campuses		337		13,821		-97.6	%		(6,250	)		(13,346	)	NM			NM			NM
Total	$	148,065	$	162,109		-8.7	%	$	20,529		$	9,781			109.9	%		13.9	%		6.0	%

For the Quarter Ended September 30,

REVENUE

OPERATING INCOME (LOSS)

OPERATING
MARGIN (LOSS)

2017

2016

% Change

2017

2016

% Change

2017

2016

REVENUE:

CTU

$
91,319

$
90,921

0.4
%

$
27,565

$
21,486

28.3
%

30.2
%

23.6
%
AIU

50,150

48,542

3.3
%

2,256

291

675.3
%

4.5
%

0.6
%
Total University Group

141,469

139,463

1.4
%

29,821

21,777

36.9
%

21.1
%

15.6
%
Corporate and Other

-

-

NM

(6,199
)

(5,587
)

-11.0
%

NM

NM

Subtotal

141,469

139,463

1.4
%

23,622

16,190

45.9
%

16.7
%

11.6
%
Culinary Arts

2,367

21,369

-88.9
%

(14,027
)

(1,801
)

NM

-592.6
%

-8.4
%
Transitional Group

1,150

6,793

-83.1
%

(5,056
)

(15,095
)

66.5
%

-439.7
%

-222.2
%
Total

$
144,986

$
167,625

-13.5
%

$
4,539

$
(706
)

742.9
%

3.1
%

-0.4
%

For the Year to Date Ended September 30,

REVENUE

OPERATING INCOME (LOSS)

OPERATING
MARGIN (LOSS)

2017

2016

% Change

2017

2016

% Change

2017

2016

REVENUE:

CTU

$
276,558

$
274,623

0.7
%

$
78,649

$
70,693

11.3
%

28.4
%

25.7
%
AIU

150,618

152,123

-1.0
%

7,987

9,036

-11.6
%

5.3
%

5.9
%
Total University Group

427,176

426,746

0.1
%

86,636

79,729

8.7
%

20.3
%

18.7
%
Corporate and Other

-

-

NM

(16,595
)

(17,160
)

3.3
%

NM

NM

Subtotal

427,176

426,746

0.1
%

70,041

62,569

11.9
%

16.4
%

14.7
%
Culinary Arts

19,302

89,990

-78.6
%

(25,039
)

1,666

NM

-129.7
%

1.9
%
Transitional Group

6,839

32,401

-78.9
%

(21,578
)

(40,672
)

46.9
%

-315.5
%

-125.5
%
Total

$
453,317

$
549,137

-17.4
%

$
23,424

$
23,563

-0.6
%

5.2
%

4.3
%

	NEW STUDENT ENROLLMENTS						TOTAL STUDENT ENROLLMENTS
	For the Quarter Ended March 31,						As of March 31,
		2018	2017	% Change				2018	2017	% Change
CTU		5,260	5,030		4.6	%		22,200	21,600		2.8	%
AIU		2,390	4,930		-51.5	%		10,900	12,500		-12.8	%
Total University Group		7,650	9,960		-23.2	%		33,100	34,100		-2.9	%
All Other Campuses ⁽¹⁾		-	-	NM				60	2,100	NM
Total		7,650	9,960		-23.2	%		33,160	36,200		-8.4	%

NEW STUDENT ENROLLMENTS

TOTAL STUDENT
ENROLLMENTS

For the Quarter Ended September 30,

For the Year to Date Ended September 30,

As of September 30,

2017

2016

% Change

2017

2016

% Change

2017

2016

% Change

CTU ⁽¹⁾

5,980

5,390

10.9
%

16,170

15,240

6.1
%

21,600

21,400

0.9
%
AIU⁽¹⁾

3,100

3,190

-2.8
%

11,020

10,600

4.0
%

11,100

10,500

5.7
%
Total University Group ⁽¹⁾

9,080

8,580

5.8
%

27,190

25,840

5.2
%

32,700

31,900

2.5
%
Culinary Arts ⁽²⁾

-

-

NM

-

990

NM

-

3,500

NM

Transitional Group ⁽³⁾

-

10

NM

-

90

NM

200

1,100

NM

Total

9,080

8,590

5.7
%

27,190

26,920

1.0
%

32,900

36,500

-9.9
%

University Group. Current quarter ~~and year to date~~ revenue ~~increased~~decreased by ~~$2.0~~$0.6 million or ~~1.4% and $0.4 million or 0.1%, respectively,~~0.4% as compared to the ~~respective~~ prior ~~periods. The overall increase~~year quarter. This decrease in revenue was primarily driven by one less revenue-generating day for AIU, for the ~~improvement in total student enrollments. AIU experienced positive total enrollments of 5.7%~~current quarter as compared to the prior ~~period, while revenue decreased by $1.5~~year quarter, which drove a decrease of $1.1 million or ~~1.0%~~2.1% for this segment. AIU’s decline in new and total enrollments for the ~~current year~~quarter was primarily related to ~~date~~quarterly variability in new student enrollments as ~~compared to prior period, partially due to changes in course~~

~~sequencing made to assist students in progressing through their course~~a result of ~~study. AIU experienced improvement in quarterly revenue by $1.6 million or 3.3% as compared to prior year quarter, primarily attributed to~~ the ~~shift in earnings days during the current quarter due to the~~academic calendar ~~redesign as well as improved total student enrollments.~~redesign. We expect to experience continued quarterly variability in comparisons for AIU as a result of the academic calendar redesign. CTU ~~contributed $0.4~~experienced positive total enrollment growth of 2.8% as compared to the prior year quarter, which drove an increase to revenue of $0.6 million or ~~0.4% and $1.9 million or 0.7%~~0.6% as compared to the ~~increase for~~prior year quarter. Additionally, AIU and CTU continue to focus on initiatives and investments in student-serving functions, including the ~~current quarter~~admissions and ~~year to date, respectively, while total enrollments increased 0.9%.~~advising centers in Arizona, as 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 increased ~~$8.0~~$3.6 million or 36.9%, and $6.9 million or 8.7%, respectively, as compared to the respective prior year periods. Operating income increased within both segments for the current quarter with AIU contributing $2.0 million of the increase and CTU contributing $6.0 million of the increase13.2% as compared to the prior year quarter. ~~CTU’s~~Current year operating income ~~improved by $8.0~~for CTU increased $4.2 million or ~~11.3% for the current year to date as compared to the prior period. AIU’s operating income decreased $1.0 million or 11.6% for the current year to date~~18.1% as compared to the prior year quarter. The increase in revenue, improved efficiencies in advertising costs and improvements in bad debt drove operating margin to improve by 4.2% for the CTU segment. AIU’s operating income decreased $0.5 million or 11.2% for the current quarter as compared to the prior year quarter primarily driven by increases in depreciation expense.

Advertising expenses within our University Group decreased 20.6% or $8.3 million for the current quarter as compared to the prior year quarter due to efficiencies across various marketing channels while maintaining the level of student inquiries.

All Other Campuses. This segment includes our campuses that are currently being taught out or have completed their teach-outs since January 1, 2015.

The current quarter decline in revenue as compared to the prior year quarter is primarily a result of the decrease in ~~revenue and the investments in our admissions and advising center in Phoenix. Operating margins for CTU and AIU have increased~~total student enrollments as campuses complete their closures. The operating loss improved by ~~6.6% and 3.9%~~$7.1 million or 53.2% for the current quarter as compared to the prior year quarter primarily due to ~~increased revenues~~overall decreases in general and ~~improved efficiencies in advertising costs.~~administrative costs as campuses cease operations.

~~Culinary Arts.~~ ~~This segment includes our~~As of March 31, 2018, the Company had completed the teach-outs of all LCB campuses ~~which were announced for teach-out during December 2015. The current quarter~~ and year to date decline in revenue as compared to the corresponding prior periods is primarily a result of the decision to teach-out the campuses. During the third quarter of 2017, the Company completed the teach-out of allhas six remaining ~~campuses and as of the fourth quarter of 2017, Culinary Arts will no longer be its own operating segment.~~

~~Transitional Group.~~ ~~This segment includes our~~ non-LCB campuses ~~that~~which are ~~currently being taught-out. The current quarter and year~~scheduled to ~~date decline in revenue as compared to the corresponding prior periods resulted from a decrease in total student enrollments.~~complete their teach-outs during 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 $0.6 million or 11.0% and improved by $0.6 million or 3.3% for the year to date, as compared to the respective prior periods. The increase in costs for the current quarter~~remained relatively flat as compared to the prior year quarter was primarily driven by timing of incentive-based compensation expenses as compared to the prior year. The year to date overall decrease in cost compared to the prior year is primarily driven by reduced staff and other expenses.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 ~~September 30, 2017,~~March 31, 2018, cash, cash equivalents, restricted cash and available-for-sale short-term investments totaled ~~$175.9~~$187.6 million. Restricted cash and investment balances as of ~~September 30, 2017~~March 31, 2018 approximate ~~$7.9~~$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 as well as payment of a legal settlement during the current year.~~years. However, as we execute on 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 ~~$160~~$220 million to ~~$165~~$225 million. These expectations are based upon, and subject to, the ~~updated~~ key assumptions and factors discussed above in the Management’s Discussion and Analysis under the heading ~~“2017 Third 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 transition CEC to a period of sustainable and responsible growth. 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~~quarter ended March 31, 2018, net cash flows provided by operating activities totaled $11.1 million compared to ~~date ended September 30, 2017,~~ net cash flows used in operating activities ~~totaled $29.1 million compared to net cash provided by operating activities~~ of ~~$16.3~~$39.1 million for the ~~year to date~~quarter ended ~~September 30, 2016.~~March 31, 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 the first quarter of 2017 as well as increased payments for exit of leased facilities and incentive-based compensation expenses as compared to~~in the prior ~~year.~~year quarter. Lower operating losses at our teach-out campuses and improved operating performance within the University Group contributed to positive cash flow from operations in the current quarter.

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~~quarters ended ~~September 30,~~March 31, 2018 and 2017, approximately 79% and ~~2016, approximately 77%~~75%, 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 ~~years to date~~quarter ended ~~September 30, 2017 and 2016,~~March 31, 2018 net cash flows used in investing activities totaled ~~$6.1~~$2.9 million and ~~$37.9 million, respectively.~~ during the quarter ended March 31, 2017 net cash flows provided totaled $3.6 million.

Purchases and Sales of Available-for-Sale Investments. Purchases and sales of available-for-sale investments resulted in a $1.5 million net cash outflow ~~of $2.7~~and a $4.3 million ~~and $38.0 million, respectively,~~net cash inflow during the ~~years to date~~quarters ended ~~September 30,~~March 31, 2018 and 2017, ~~and 2016.~~respectively.

Capital Expenditures. Capital expenditures ~~remained relatively flat~~increased to ~~$3.4~~$1.4 million for the ~~years~~quarter ended March 31, 2018 as compared to ~~date~~$0.7 million for quarter ended ~~September 30, 2017 and 2016.~~March 31, 2017. Capital expenditures represented less than 1.0% of total revenue for each of the ~~years~~quarters ended March 31, 2018 and 2017. For the full year 2018, we expect capital expenditures to ~~date ended September 30, 2017 and 2016.~~be approximately 1% to 2% of revenue.

During the ~~year to date~~quarters ended ~~September 30,~~March 31, 2018 and 2017, ~~net cash flows provided by financing activities totaled $1.4 million compared to~~ net cash flows used in financing activities ~~of $38.0~~totaled $2.1 million ~~for the prior year to date.~~ and $0.8 million, respectively.

Payments of employee tax associated with stock compensation. Payments of employee tax associated with stock compensation were ~~$1.2~~$3.0 million for quarter ended March 31, 2018 and $0.9 million for the ~~year to date~~quarter ended ~~September 30, 2017 and $0.6 million for the year to date ended September 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.~~March 31, 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 ~~September 30, 2017,~~March 31, 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 ~~September 30, 2017~~March 31, 2018 were as follows (dollars in thousands):

	September 30,		December 31,					March 31,		December 31,
	2017		2016		% Change			2018		2017		% Change
ASSETS
CURRENT ASSETS:
Total cash and cash equivalents, restricted cash and short-term investments	$	175,938	$	207,160		-15	%
Student receivables, net								$	23,915	$	18,875		27	%
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accrued expenses - payroll and related benefits		31,646		41,203		-23	%		20,345		32,910		-38	%
Accrued expenses - other		35,127		69,244		-49	%
NON-CURRENT LIABILITIES:
Deferred Rent		16,253		30,713		-47	%
Deferred revenue									30,278		22,897		32	%

~~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~~Deferred revenue: The ~~decrease~~increase is driven by ~~the payments of legal settlements during the current year.~~

~~Deferred Rent: The decrease is driven by the continued exit of leased space as campuses complete their teach-out.~~a change in how we account for contract assets under ASC Topic 606.

As of ~~September 30, 2017,~~March 31, 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⁾	$	12,399	$	12,835	$	13,089	$	10,446	$	15,555	$	64,324	$	13,081	$	13,728	$	11,125	$	7,792	$	13,443	$	59,169
Teach-out campuses and discontinued operations ⁽³⁾		58,845		29,168		14,171		7,455		5,677		115,316		26,899		10,246		5,348		1,744		-		44,237
Total gross operating lease obligations	$	71,244	$	42,003	$	27,260	$	17,901	$	21,232	$	179,640	$	39,980	$	23,974	$	16,473	$	9,536	$	13,443	$	103,406

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		4,887		3,107		1,498		229		18,153		4,988		3,718		2,484		784		-		11,974
Total sublease income	$	9,044	$	5,821	$	3,533	$	1,605	$	229	$	20,232	$	5,247	$	3,976	$	2,591	$	784	$	-	$	12,598

Net operating lease obligations
Ongoing operations ⁽²⁾	$	11,787	$	11,901	$	12,663	$	10,339	$	15,555	$	62,245	$	12,822	$	13,470	$	11,018	$	7,792	$	13,443	$	58,545
Teach-out campuses and discontinued operations ⁽³⁾		50,413		24,281		11,064		5,957		5,448		97,163		21,911		6,528		2,864		960		-		32,263
Total net contractual lease obligations	$	62,200	$	36,182	$	23,727	$	16,296	$	21,003	$	159,408	$	34,733	$	19,998	$	13,882	$	8,752	$	13,443	$	90,808

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~~had 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 March 31, 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 ~~September 30, 2017,~~March 31, 2018, we had no outstanding borrowings under this facility.

During ~~2017~~the first quarter of 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 ~~September 30, 2017~~March 31, 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 ~~Interim~~ 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 ~~Interim~~ Chief Financial Officer concluded that, as of ~~September 30, 2017~~March 31, 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 ~~September 30, 2017,~~March 31, 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~~quarter ended ~~September 30, 2017:~~March 31, 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

July 1, 2017—July 31, 2017

-

-

-

183,296,772

August 1, 2017—August 31, 2017

-

-

-

183,296,772

September 1, 2017—September 30, 2017

6,980

9.82

-

183,296,772

Total

141,390

-

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
Total		215,215				-

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.

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 ~~(Loss)~~ and Comprehensive Income ~~(Loss)~~	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	3532

Item 4.	Controls and Procedures	3532

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		3836

	Maintenance Fee Payments
For the quarter ended March 31, 2018	$	376
For the quarter ended March 31, 2017	$	325


	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

	Maintenance Fee Payments
For the quarter ended September 30, 2017	$	356
For the quarter ended September 30, 2016	$	340
For the year to date ended September 30, 2017	$	1,013
For the year to date ended September 30, 2016	$	1,027

	As of
	January 1, 2018			March 31, 2018
Gross deferred revenue	$	39,544		$	45,582
Gross contract assets		(9,984	)		(15,304	)
Deferred revenue, net	$	29,560		$	30,278

	Balance, Beginning of Period		Charges to Expense ⁽¹⁾		Amounts Written-off			Balance, End of Period
For the quarter ended September 30, 2017	$	24,574	$	6,420	$	(6,332	)	$	24,662
For the quarter ended September 30, 2016	$	21,008	$	8,457	$	(8,407	)	$	21,058
For the year to date ended September 30, 2017	$	23,142	$	21,630	$	(20,110	)	$	24,662
For the year to date ended September 30, 2016	$	20,229	$	23,332	$	(22,503	)	$	21,058

	Balance, Beginning of Period		Severance & Related Charges ^{(1) (2)}		Payments			Non-cash Adjustments ⁽³⁾			Balance, End of Period
For the quarter ended September 30, 2017	$	4,969	$	-	$	(1,715	)	$	23		$	3,277
For the quarter ended September 30, 2016	$	11,290	$	117	$	(1,546	)	$	240		$	10,101
For the year to date ended September 30, 2017	$	8,686	$	-	$	(5,166	)	$	(243	)	$	3,277
For the year to date ended September 30, 2016	$	18,985	$	389	$	(9,176	)	$	(97	)	$	10,101

	Balance, Beginning of Period		Charges Incurred ⁽¹⁾		Net Cash Payments			Other ⁽²⁾		Balance, End of Period
For the quarter ended September 30, 2017	$	27,109	$	9,422	$	(9,094	)	$	2,932	$	30,369
For the quarter ended September 30, 2016	$	17,140	$	4,912	$	(3,476	)	$	1,303	$	19,879
For the year to date ended September 30, 2017	$	36,814	$	14,628	$	(23,496	)	$	2,423	$	30,369
For the year to date ended September 30, 2016	$	12,892	$	13,994	$	(11,476	)	$	4,469	$	19,879

	Restricted Stock Units to be Settled in Cash
Outstanding as of December 31, ~~2016~~2017		~~1,192~~472
Granted		-
Vested		(~~647~~192	)
Forfeited		(6627	)
Outstanding as of ~~September 30, 2017~~March 31, 2018		~~479~~253

	ACTUAL						ACTUAL
	For the Quarter Ended September 30,						For the Year to Date Ended September 30,
Adjusted Operating Income (Loss)	2017			2016			2017			2016
University Group and Corporate:
Operating income ^{(1) (2)}	$	23,622		$	16,190		$	70,041		$	62,569
Depreciation and amortization⁽²⁾		2,605			2,594			7,695			8,474
Asset impairments ⁽²⁾		-			-			-			237
Unused space charges ^{(2) (3)}		-			-			-			1,118
Adjusted Operating Income -- University Group and Corporate	$	26,227		$	18,784		$	77,736		$	72,398

Transitional Group and Culinary Arts:
Operating loss ^{(1) (4)}	$	(19,083	)	$	(16,896	)	$	(46,617	)	$	(39,006	)
Depreciation and amortization ⁽⁴⁾		977			2,621			3,673			8,512
Unused space charges^{(3) (4)}		7,347			4,983			11,158			14,123
Adjusted Operating Loss -- Transitional and Culinary Arts	$	(10,759	)	$	(9,292	)	$	(31,786	)	$	(16,371	)

	ACTUAL			OUTLOOK	ACTUAL			OUTLOOK
	For the Second Half July-December 31,				For the Year Ended December 31,
Adjusted Operating Income (Loss)	2016			2017	2016			2017	2018
University Group and Corporate:
Operating income ⁽²⁾	$	(1,662	)	$43 - $48M	$	44,717		$90-95M	Growth vs 2017
Depreciation and amortization⁽²⁾		5,284		5M		11,164		10M	2017 Levels
Asset impairments ⁽²⁾		-		None Assumed		237		None Assumed
Unused space charges ^{(2) (3)}		16		None Assumed		1,134		None Assumed
Significant legal settlements ⁽²⁾		32,000		None Assumed		32,000		None Assumed
Adjusted Operating Income -- University Group and Corporate	$	35,638		$48 - $53M	$	89,252		$100 - $105M	Growth vs 2017

Transitional Group and Culinary Arts:
Operating loss ⁽⁴⁾	$	(54,951	)	($31 - $36M)	$	(77,061	)	($59 - $64M)	($15 - $20M)
Depreciation and amortization ⁽⁴⁾		5,692		1M		11,583		4M		-
Asset impairments ⁽⁴⁾		927		None Assumed		927		None Assumed
Unused space charges^{(3) (4)}		25,579		11M		34,719		15M	5M
Adjusted Operating Loss -- Transitional and Culinary Arts	$	(22,753	)	($19 - $24M)	$	(29,832	)	($40 - $45M)	($10 - $15M)

	For the Quarter Ending June 30,		For the Year Ending December 31,
	OUTLOOK		OUTLOOK
	2018		2018
Total Company:
Operating income	$14M - $16M		$81M - $88M
Depreciation and amortization	~2.5		~10
Unused space charges	~3		~4.5
Significant legal settlements		-		3.5
Adjusted Operating Income - Total Company	$19.5M - $21.5M		$99M - $106M

University Group and Corporate:
Operating income	$20.0M - $21.5M		$100M - $105M
Depreciation and amortization	~2.5		~10M
Adjusted Operating Income - University Group and Corporate	$22.5M - $24M		$110M - $115M

	INDEX TO EXHIBITS
Exhibit Number	Exhibit	Incorporated by Reference to:

+*10.1	2018 Annual Incentive Award Program pursuant to the Career Education Corporation 2016 Incentive Compensation Plan

+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 ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2018, filed with the SEC on ~~November~~May 2, ~~2017,~~2018, formatted in Extensible Business Reporting Language (XBRL): (i) the Condensed Consolidated Balance Sheets as of ~~September 30, 2017~~March 31, 2018 and December 31, ~~2016,~~2017, (ii) the Unaudited Condensed Consolidated Statements of Income ~~(Loss)~~ and Comprehensive Income ~~(Loss)~~ for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2018 and March 31, 2017, ~~and September 30, 2016,~~ (iii) the Unaudited Condensed Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~September 30,~~March 31, 2018 and March 31, 2017, ~~and September 30, 2016,~~ 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: ~~November~~May 2, ~~2017~~2018	By:	/s/ TODD S. NELSON
		Todd S. Nelson President and Chief Executive Officer (Principal Executive Officer)

Date: ~~November~~May 2, ~~2017~~2018	By:	/s/ ASHISH R. GHIA
		Ashish R. Ghia Senior Vice President and ~~Interim~~ Chief Financial Officer (Principal Financial Officer)