Career Education Corporation: A History of Growth, Challenges, and Transformation

Career Education Corporation (CEC) is an American for-profit education company with a focus on campus and online post-secondary programs. Since its founding in 1994, CEC has experienced rapid growth through an aggressive acquisition strategy. The company's most important segment is its online universities, which include American InterContinental University (AIU) and Colorado Technical University (CTU), along with "All Other Campuses." These online universities provide undergraduate, graduate, and doctoral degree programs, focusing on business, technology, management, and social services.

Beginnings and Early Acquisitions

Career Education Corporation was founded in January 1994 by John M. Larson to capitalize on consolidation opportunities within the fragmented post-secondary education industry. The company's strategy was to acquire established schools and enhance their profitability. CEC initially focused on institutions offering programs in business studies, visual design, and information technology.

The first acquisition was the Al Collins Graphic Design School in Tempe, Arizona, founded in 1978. In mid-1994, Brooks College of Long Beach, California, was also acquired. In its first year, CEC reported revenues of $7.5 million.

CEC's business strategy involved upgrading acquired schools by improving facilities and adding new course offerings. The company targeted schools that offered training in fields with strong demand for workers and that attracted motivated students. A major goal was to improve student retention and graduation rates, as well as job placement percentages. CEC also emphasized programs that would serve people throughout a lifetime of learning, with degree offerings ranging from associate's to master's levels.

In July 1995, CEC added Brown Institute of Mendota Heights, Minnesota, and Allentown Business School of Allentown, Pennsylvania. Brown had been founded in 1946, while Allentown's history went back to 1869. Both offered training in computer technology and visual design.

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Expanding into Culinary Arts and Beyond

In October 1996, CEC entered the field of culinary arts with the acquisition of the Western Culinary Institute of Portland, Oregon. The restaurant and food service field was expected to have a shortage of workers for some time to come, giving education providers in that area a solid opportunity for growth. The following spring, the School of Computer Technology of Pittsburgh, Pennsylvania, and Fairmont, West Virginia, was acquired for approximately $5 million, with an additional $1.8 million paid to the institution's former owners as part of a noncompetition agreement.

Another multi-campus operation, the Katharine Gibbs Schools, was bought in the summer from K-III Communications Corp. The 85-year-old Gibbs Schools, with a half-dozen locations in the middle Atlantic and New England states, offered business training. K-III received $19 million, as well as $7 million in non-compete payments. CEC also acquired the Academy of Merchandising and Design, which had locations in Chicago and Florida, for $6.5 million plus $2 million in non-compete money.

Initial Public Offering and Further Expansion

In the fall of 1997, CEC announced plans to issue 2.85 million shares of stock on the NASDAQ exchange to repay debt. The IPO was launched in early 1998, raising more than $45 million for the company. In March, CEC purchased the Southern California School of Culinary Arts, located in Pasadena, California, for $1 million. Another cooking school was acquired in July when the Scottsdale Culinary Institute of Scottsdale, Arizona, was bought for $10 million.

At the end of the year, plans were made to acquire the Harrington Institute of Interior Design, a 400-student school located in Chicago. The $3.5 million deal was finalized in January 1999, boosting CEC's totals to nearly 16,000 students at 21 campuses in 13 states and two Canadian provinces. Revenues stood at $144.2 million, with net income of $4.3 million, almost 20 times the amount of four years earlier.

In December 1998, the company formed the CEC Educational Foundation to fund scholarships for students enrolled in CEC schools. With many pursuing an education while working part or full-time, and with educational costs constantly rising, the foundation was intended to make it easier for CEC students to finish school. Much of its funding came from alumni and from firms that routinely recruited CEC graduates. The company also formed a Professional Education Loan program in partnership with the Student Loan Marketing Association (Sallie Mae).

Le Cordon Bleu Partnership

A major agreement was reached in late 1998 with the French culinary arts school Le Cordon Bleu to offer its first sanctioned programs in the United States through CEC schools. Le Cordon Bleu had been founded in Paris in 1895 and was renowned as one of the finest institutions of its type in the world. The Cordon Bleu training program emphasized classic French cooking techniques which could be applied to any type of cuisine. Le Cordon Bleu had schools in Paris, London, Tokyo, Australia, and Ottawa, Canada. programs would be offered at CEC’s Brown Institute campus in Minnesota, where the new Midwest Culinary Academy was set to open in January 1999, and later at other locations.

The company's acquisitions continued in the spring of 1999 when McIntosh College of New Hampshire was bought for $5 million and Briarcliffe College of New York was purchased for $20.6 million. The latter had 1,300 students at two campuses in Bethpage and Patchogue, New York. In June, Brooks Institute of Photography of Santa Barbara, California, was bought. Brooks, acquired for $6.6 million, had some 300 students enrolled in photography and filmmaking courses.

In August, an agreement to purchase another cooking school was reached. The California Culinary Academy, a publicly traded company, would be acquired for approximately $22 million when the deal was finalized the following spring. The school, like most acquired by CEC, had a relatively long history, having been founded some 20 years earlier. California Culinary, CEC’s sixth culinary arts acquisition, was headquartered in San Francisco and operated satellite campuses in Salinas and San Diego.

In December, Washington Business School was purchased. The 49-year-old school operated out of Tysons Center, Virginia, near Washington, D.C. CEC would update its programs to offer associate’s degrees and add new classes that would complement the school’s business-oriented curriculum. The deal cost the firm $3 million.

Early 2000 saw the purchase of the Culinary and Hospitality Institute of Chicago for approximately $5.5 million. Known as CHIC, the school had approximately 700 students. CEC committed $10 million to doubling its size to 40,000 square feet. During CHIC’s first year in operation as a CEC unit the school’s income more than doubled, increasing from $5 million to $11 million.

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CEC’s Le Cordon Bleu agreement was expanded during 2000 to include restaurant management training, which would be taught at the Western Culinary Institute in Portland, Oregon, beginning in January 2001. By this time six of CEC’s eight culinary arts schools were offering Le Cordon Bleu-authorized training. To prepare for the management program, CEC spent $2 million on new facilities at Western, which included computer labs, a charcuterie, and a restaurant dubbed the International Bistro, which students would operate as part of their training. The program included special attention to point-of-service technology that would record seating arrangements, process orders, track cash flow, and provide reports on labor costs and expenditures.

Expansion into Technology and International Markets

In July 2000, CEC purchased SoftTrain Institute of Toronto, Canada, which offered information technology training, for $500,000. The school had been founded in 1988, and plans were soon afoot to offer some of its programs at other CEC schools. Another small Canadian acquisition followed in the fall when Retter Business College of Ottawa was purchased for $400,000. Retter offered training in multimedia web development, software engineering, and computer network engineering.

Acquisition of American InterContinental University

In late 2000, CEC significantly expanded its reach with the acquisition of American InterContinental University (AIU). Georgia-based EduTrek owned and operated American Intercontinental University (AIU), which had some 4,700 students at campuses in Atlanta, Los Angeles, Ft. Lauderdale, Washington, D.C, London, and Dubai, United Arab Emirates. and design, business studies, and information technology. The deal involved the exchange of 1.2 million shares of CEC stock as well as assumption of debt, for a total price of approximately $70 million. The company’s plan for AIU was to cut costs by restructuring operations and to increase advertising to attract more students. CEC targeted a mix of people that included recent high school graduates, older students, and international students. The company’s marketing efforts were boosted by partnerships with college guide publisher Peterson’s and online college application service Embark.

In addition to classroom training, CEC also offered distance learning over the Internet in some disciplines. The firm’s focus on raising student retention rates was showing strong results, with an average of 76 percent remaining enrolled year-to-year in 2000. A new program, “Save Our Students” (S.O.S.), was launched in 2001 to further increase this figure. The company’s job placement record was one factor that brought its students back, with 94 percent of CEC graduates gainfully employed within six months of graduation. The rate was an even better 98 percent for the culinary arts programs.

The year 2001 also saw CEC open a new branch of the Katharine Gibbs Schools in Philadelphia. The new campus was the ninth unit for Gibbs, which had more than 8,000 students enrolled at this time. Two programs in information technology and two in business studies would be offered. Others in visual communication and design technologies were to be added later. The main campus offered a wireless multimedia learning resource center, classrooms, a bookstore, and a student lounge. Students could buy a wireless laptop computer that would connect them with faculty, educational resources, and the Internet. During the year CEC also opened a new campus of the International Academy of Design and Technology in Orlando, Florida. In August, Texas Culinary Academy was bought for $ 1.1 million, followed in December by the acquisition of the Pennsylvania Culinary Academy of Pittsburgh for $44 million, further solidifying the company’s offerings in this category.

After only eight years in business, Career Education Corporation was proving phenomenally successful, its revenues having grown more than 40-fold. The company was also scoring with its customers, boasting high student retention and job placement rates. Career Education Corporation operates 90 career-focused schools throughout the United States and Europe. CEC was looking to consolidate their operations, which were spread out in five buildings throughout the Chicagoland area, into one Campus Support Center. They chose an existing 11-story, 317,000 square-foot building on Martingale Road in Schaumburg, Illinois. Originally constructed in 1979, the new headquarters required extensive renovations. It had seen multiple occupants and primarily served as a data center for those firms.

Regulatory Scrutiny and Financial Challenges

For-profit college operator Career Education Corp. on Thursday said it reached a settlement with 49 attorneys general to resolve a five-year-old investigation over its marketing and recruitment practices. Under the settlement, Career Education - which operates American InterContinental University and Colorado Technical University - is to pay $5 million to cover state costs and won't collect on $493.7 million owed by qualifying students, according to a court document.

Career Education also committed to allowing students to withdraw free of charge for up to seven days after their first day of an on-campus class or within 21 days of starting an online program. From 2001 to 2010, Career Education's enrollment nearly tripled to 118,205. Senate report that helped prompt the investigation against it by the states.

Among other practices, the inquiry accused Career Education of failing to fully disclose that certain programs didn't have the necessary accreditation for students to find a job or obtain a license. State officials also alleged the company improperly counted job placement rates, such as by including graduates who continued working at internships after graduation or got a job outside of their degree field.

As part of compliance monitoring under the settlement, Career Education agreed to record all online chats and phone calls with prospective and current students. The company came under investigation during a period of heightened government scrutiny over the for-profit sector. As the inquiry progressed, other major operators, including Corinthian Colleges and ITT Technical Institute, shut down entirely amid steep financial problems and heightened regulatory pressure.

During those years, Career Education closed campuses and shed students. Recently, executives reported enrollment growth they believed to be sustainable. Yet the company has experienced revenue declines in recent years, and its net loss widened by more than 70% year-over-year in 2017, to $31.9 million. The troubles for the for-profit sector are not over, as the recent shutdowns of Education Corporation of America and Vatterott College in December made clear.

Delta Career Education Corporation

Delta Career Education Corporation was a Virginia-based for-profit institution of higher learning that declared bankruptcy in 2018. Twenty one of its campuses were sold to Ancora Education. Delta was founded in February 1998 by Joseph A. Kennedy. Delta's first acquisition, in February 1998, was Miller-Motte Business College, with campuses in Clarksville, TN, Wilmington, NC, and Lynchburg, VA. Delta later purchased Career Training Specialists in Monroe, Louisiana. In September 2000, Miller-Motte Business Colleges and Career Training Specialists changed their names to Miller-Motte Technical College and Career Technical College, respectively. In August 2002, Delta acquired the McCann School of Business and Technology, a school that was founded in 1897 and operates campuses in Carlisle, Allentown, Pottsville, Sunbury, Dickson City, and Hazleton, Pennsylvania. The Mahanoy City branch of McCann moved to Hazleton in May 2005. In November 2003 Delta acquired Miami-Jacobs Career College, a school that was founded in 1860 and operates in Dayton, Ohio. Delta Education opened several additional branch locations in 2004 and 2005. Miller-Motte Technical College opened in Raleigh, North Carolina in October 2004, Career Technical College in Shreveport, Louisiana opened in November 2004, and Miller-Motte Technical College in Nashville, Tennessee opened in May 2005. In May 2006, Delta was once again re-capitalized by Gryphon Investors, through Gryphon Colleges Corporation. Gryphon Investors is a $700 million San Francisco-based private equity fund that focuses on leveraged acquisitions of growth investments in middle market companies in partnership with experienced management teams that run them. Gryphon Colleges Corporation was formed at the end of 2004 by Gryphon Investors through the acquisition of National Career Education (NCE), a four campus school (Lamson College, National Career Education, Institute For Business and Technology, Tucson College) company located in Arizona and California. In March 2008, Delta Acquired its 10th school brand, Berks Technical Institute (BTI) in Wyomissing, PA. BTI, located in southeastern Pennsylvania, was founded in 1982 and is home to over 700 students. In 2018, Ancora Education acquired Delta Career Education Corporation properties as it was facing bankruptcy.

Colorado Technical University

Colorado Technical University is a private, for-profit, accredited institution of higher learning, granting associate, bachelor’s, master’s, and doctorate degrees. Over the past 50 plus years, the University has evolved from a technical training school to a university with graduate-level programs. In 2003, Career Education Corporation (CEC) assumed ownership of the University. Career Education Corporation is an educational services company committed to providing quality, career-focused learning and led by passionate professionals who inspire individual worth and lifelong achievement. The universities of the Career Education family provide degree programs through the doctoral level as well as associate, bachelor’s, and master’s levels to a diverse student population pursuing various career-oriented disciplines. CEC serves students on ground campuses and online with career-focused degree programs that meet the education demands of today’s busy adults.

Current Focus

Career Education Corporation is focusing on its online universities as it continues to reduce its on-campus program offerings. In the latter category, CEC institutions offer training certified by prestigious French cooking school Le Cordon Bleu. The company’s schools are located around the United States and in Canada, England, and the United Arab Emirates.

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