Archived Information
STATEMENT OF HOWARD BLOCK BEFORE THE SECRETARY OF EDUCATION’S COMMISSION ON THE FUTURE OF HIGHER EDUCATION
Howard M. Block, Ph.D.
(415) 913-5771 Howard.block@bofasecurities.com
February 7, 2006
This report has been prepared by Banc of America Securities LLC (BAS), member NASD, NYSE and SIPC. BAS is a subsidiary of Bank of America Corporation. Please see the important disclosures and analyst certification on page ___ of this report. BAS and its affiliates do and seek to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.
U.S. Postsecondary Universe
17.6 mm students; 9,497 schools
Title IV Eligible 17.0 mm students; 6,497 schools
Non-Title IV*
600k students 3,000 schools Degree and non-degree Examples: Securities Training Corp., Aspect International Language Schools,Iyengar Yoga Institute, TanteMarie’s Cooking School
*Banc of America Securities, LLC estimate.
Title IV, Degree Granting
Title IV, Non-degree Granting
16.6 mm students 4,250 schools
423k students 2,247 schools
594k For-profit students 806 For-profit schools
258k For-profit students 1,644 For-profit schools
2
Source: National Center For Education Statistics (NCES), Banc of America Securities, LLC estimates.
Publicly Traded Postsecondary Education
7.4%
1,600,000
(Share of All Postsecondary Enrollment)
$80,000 $70,000 $60,000 $50,000 $40,000
6.3%
1,400,000 1,200,000 Total Enrollment 1,000,000 800,000
5.3%
(Share of All Postsecondary Enrollment)
(Share of All Postsecondary Enrollment)
2.2%
600,000 400,000
0.8% 0.0%
(Share of All Postsecondary Enrollment) (Share of All Postsecondary Enrollment)
(Share of All Postsecondary Enrollment)
$30,000 $20,000 $10,000 $0
200,000 0
1990
1995
2000 # of Students
2005 Equity Value
2010E
2015E
Notes: We estimate 5% and 10% annual growth for total enrollment and equity value, respectively, of the publicly traded education companies. We estimate total annual enrollment growth for all institutions (public and private) of 1.5%. Source: Banc of America Securities, LLC estimates. 3
Equity Value ($ mm)
Publicly Traded Postsecondary Education
1,600,000 1,400,000 Total Enrollment 1,200,000 1,000,000 800,000 600,000 400,000 200,000 0 16 14 12 10 8 6 4 2 0 Postsecondary Equities
0E 20 1
19 9
19 9
19 9
19 9
19 9
19 9
19 9
19 9
20 0
19 9
19 9
20 0
20 0
20 0
20 0
20 0
# of Students
# of Postsecondary Equities
Source: Banc of America Securities, LLC estimates.
4
20 1
5E
0
1
5
2
6
7
8
9
3
4
0
2
3
4
1
5
Publicly Traded Postsecondary Education (Equity Value Per Student)
$50,000 $45,000 $40,000 $35,000 $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 $0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2010E 2015E
Note: The equity value of a company is calculated by multiplying the total shares of stock (equity) outstanding by the market price for each share Source: Banc of America Securities, LLC estimates.
5
Annual New Campus Openings
60 52 50 42 Number of Schools 40 33 30 20 10 2 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 3 38 39 36 39
14
Source: Banc of America Securities, LLC estimates, Company reports.
6
New Campus Openings In The Nations Largest Metropolitan Regions: Since 1996
Rank Metropolitan Region Population 21,199,865 16,373,645 9,157,540 7,608,070 7,039,362 6,188,463 5,819,100 5,456,428 5,221,801 4,669,571 4,112,198 92,846,043 281,421,906 # of Campus % of Total Campus Openings Openings 3 1% 5 2% 11 4% 13 4% 5 2% 11 4% 4 1% 5 2% 4 1% 10 3% 12 4% 83 28% 33%
1 New York 2 Los Angeles 3 Chicago 4 Washington D.C. 5 San Francisco 6 Philadelphia 7 Boston 8 Detroit 9 Dallas 10 Houston 11 Atlanta Total For Top 11 Regions Total U.S. Population Top 11 Regions As A Percent of Total Population
Source: Banc of America Securities, LLC estimates, Company reports, U.S. Census Bureau.
7
Postsecondary Enrollment By Race/Ethnicity
80% 70% 60% 50% 40% 30% 20% 10% 0% White non-Hispanic Black non-Hispanic Hispanic Asian or Pacific Islander American Indian or Alaska Native Nonresident alien 12% 11% 21% 10% 13% 6% 6% 6% 6% 1% 1% 1% 4% 6% 3% 67% 71% 57%
All Degree-Granting Public Institutions All Degree-Granting Private Not For-Profit Institutions All Degree-Granting Private For-Profit Institutions
Source: National Center For Education Statistics (NCES), Banc of America Securities, LLC estimates.
8
Postsecondary Enrollment By Race/Ethnicity
White non- Black non- Hispanic Asian or Pacific American Indian Nonresident Islander or Alaska Native Alien Hispanic Hispanic 67% 12% 10% 7% 1% 4% 70% 11% 7% 6% 1% 5% 63% 13% 15% 7% 1% 2% 67% 12% 10% 6% 1% 4% 67% 12% 11% 7% 1% 3% 63% 13% 15% 7% 1% 2% 71% 11% 6% 6% 1% 6% 71% 11% 6% 6% 1% 6% 57% 15% 13% 8% 5% 2% 57% 21% 13% 6% 1% 3% 57% 20% 12% 6% 1% 4% 57% 22% 15% 4% 1% 1% 51% 22% 14% 5% 1% 8%
All Degree Granting Institutions 4-Year 2-Year All Degree-Granting Public Institutions 4-Year 2-Year All Degree-Granting Private Not For-Profit 4-Year 2-Year All Degree-Granting Private For-Profit Institutions 4-Year 2-Year All For-Profit Postsecondary Equities
Source: National Center For Education Statistics (NCES), Banc of America Securities, LLC estimates.
9
Return On Invested Capital (ROIC)
Company Great Northern Iron Ore Apollo Group Dell Universal Technical Institute ITT Educational Services Strayer Education Exxon Mobil Microsoft Career Education Yahoo Home Depot Anheuser-Busch Education Management Lincoln Educational Services Electronic Arts Corinthian Colleges McDonald's Honeywell DeVry General Electric Jarden Average
10 Source: Banc of America Securities, LLC estimates, FactSet.
ROIC 95% 69% 55% 48% 40% 32% 32% 27% 24% 22% 21% 18% 17% 14% 13% 11% 11% 10% 5% 4% 3% 27%
Annualized Tuition: For-Profit Sector Vs. All Others
College/University University of Phoenix American Intercontinental University Bryman College DeVry The Art Institute ITT Technical Institute Lincoln Technical Institute Strayer University Universal Technical Institute For-Profit Average College Board Industry Estimates*: All Public Two-Year Colleges All Public Four-Year Colleges All Private Four-Year Colleges Annualized Tuition $7,953 20,700 10,415 16,000 22,380 16,360 16,703 9,221 20,122 $15,539 $2,933 7,333 28,000
*Annualized the academic year estimate to compare with the for-profit annual tuition.
Source: Banc of America Securities, LLC estimates, The College Board, National Center For Education Statistics (NCES).
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Sample of Leading Innovations
Company (School Brand) Innovation Apollo Group (University of Phoenix) WritePoint Details This automated writing skills feedback system was developed by the University to improve writing fluency -- crucial to both educational and employment success. After a paper is submitted to Writepoint the paper is returned with feedback on grammar, usage, and formatting (the program checks papers against a list of more than 150 grammar rules). WritePoint inserts feedback directly into the text of the paper where an error occurs, rather than at the end. University of Phoenix students submit more than 5,000 documents per day, and as of December the tool had reviewed more than one million papers. eBooks Students can acces more than 700 titles in a unified online collection and a variety of methods (read online, print, or download). The collection can be searched by author, title or keyword and the content is divided by chapter (or other relevant subsections), enabling students and faculty to access the most relevant portions in their coursework and research. Unlike hard-copy texts, eBooks can be updated as necessary without the need to replace entire volumes. System-Supported Mastery In an attempt to improve students' math competency and performance, DeVry changed its system for teaching entry-level math Learning (SSML) using the courses. Developed and piloted by a professor at the company's Ft. Washington campus, the "MyMathLab" solution (from Pearson MyMathLab Support System Education) provides a learning infrastructure that facilitates additional feedback and testing. Despite the burden on faculty and administrators managing the infrastructure (ie. multiple versions of tests, grading, retests, and additional feedback), the MyMathLab solution enables heightened tracking of student progress. DeVry's adoption of MyMathLab and its attempt to increase the math competency of students is one example of the company's efforts to remedy the disconnects between high school and college education, as well as college education and the demands of the workforce. Leveraging an International Laureate offers students the benefits of a large International network of universities through: 1) Dual-Degrees - Laureate offers a Network of Universities Universidad de Valle de Mexico/Walden University dual-degree that is accredited by both the U.S. and Mexican governments. 2) Study Abroad - While many colleges offer study abroad programs, few can boast study abroad relationships with their own universities. 3) Diverse, international learning practices - Traveling instructors and internationally transplanted programs provide a diverse mix of programs throughout the entire gobal network of schools.
DeVry
Laureate Education
Source: Banc of America Securities, LLC estimates, Company websites and company reports.
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Summary of Online Education Offerings
For-Profit Postsecondary Online Brands
Company Apollo Group Career Education Corinthian Colleges DeVry, Inc. Education Management ITT Educational Laureate Education Strayer Education Total Brand University of Phoenix American InterContinental University (1) Florida Metropolitan University DeVry Online The Art Institute Online (2) ITT Online Walden University Strayer University Online Estimated Population 150,000 32,000 4,400 10,000 4,000 5,000 26,000 15,000 246,400
(1) Career Education also operates Colorado Technical University and Stonecliffe College, which are included in estimated population. (2) Education Management also operates South University Online, which is included in estimated population.
Source: Banc of America Securities, LLC estimates, The College Board, National Center For Education Statistics (NCES).
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Calendar of Academic Start Dates
Company Apollo Group Career Education Corinthian Colleges DeVry Education Management ITT Educational Services Lincoln Educational Services Strayer Education Universal Technical Insitute School Jan University of Phoenix X American Intercontinental University X Bryman College X DeVry X The Art Institute ITT Technical Institute Lincoln Technical Institute X Strayer University Universal Technical Institute X Feb X X X X X X Mar X X X X X X X X X Apr X X X May Jun X X X X X X X X X X X X X X Jul X X X X Aug Sep Oct X X X X X X X X X X X X X X X X X X X Nov Dec X X X X X X X X X X X X X
X X
X X
Source: Banc of America Securities, LLC estimates.
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Everyone’s Talking About Higher Education’s Wage Premium
The New York Times raves: “[the wage premium] peaked in 2001 at just over 45 percent, and with the premium at more than 40 percent today, a four-year college degree is still a solid investment. Consider the median wage of full-time workers who are at least 25 years old. At the end of last year, it was $986 a week for those with a bachelor's degree or higher, versus $574 for those with only a high school education, according to the most recent calculation from the Bureau of Labor Statistics.” --Louis Uchitelle; October 2, 2005 Two thumbs up from the Chicago Tribune: “The biggest contributor to rising inequality is the erosion of wages for workers without college degrees… The world places a higher premium on skills and education.” --Barbara Rose; January 27, 2006 BusinessWeek lauds the wage premium’s stellar performance: “For two decades, from 1980 to 2000, pay for college-educated workers marched relentlessly upwards, leaving workers with a mere high school diploma in the dust.” --Michael J. Mandel; September 12, 2005 For Higher Wages, Get a Degree, and Know Your PC “…a combination of computer literacy and higher education makes a person statistically likely to earn a lot more money.”
Source: Banc of America Securities, LLC estimates, Publication websites. 15
Others are singing the praises of the wage premium: “Wage enhancement is a well-known benefit of a college diploma, and the earnings for college graduates continue to increase. In 1975, full-time workers with a bachelor's degree earned, on average, 1.5 times more than those with only a high school diploma; by 1999 this ratio had increased to 1.8. Today, college grads earn $48,000 a year, on average.” --Sandy Pappas, Pioneer Press (MN) (December 29, 2005) A Higher Degree the Key to Higher Pay? “The advantage of part-time and online degree programs, along with the cost benefits, is that you are able to apply your skills immediately, keeping you current and more attractive to employers.” --Caitlin Kneram, Salary.com College Degree Nearly Doubles Annual Earnings; Census Bureau Confirms Earning Power of Higher Education “Workers 18 and over sporting bachelors degrees earn an average of $51,206 a year, while those with a high school diploma earn $27,915. But wait, there's more. Workers with an advanced degree make an average of $74,602, and those without a high school diploma average $18,734.” --Robert Longley, About.com
--BizJournal.com (July 18, 2004)
Examples of Insider Selling
Date 23-Apr-04 27-May-04 28-May-04 28-May-04 23-Apr-04 11-May-04 18-May-04 19-May-04 20-May-04 23-Apr-04 2-Feb-04 9-Feb-04 17-Feb-04 23-Feb-04 1-Mar-04 1-Apr-04 2-Apr-04 5-Apr-04 21-Apr-04 6-Apr-05 13-Jul-05 22-Dec-05 29-Dec-04 1-Jul-05 6-Jul-05 27-Jul-05 28-Jul-05 23-Apr-04
16
Insider FLUGE, NICK FLUGE, NICK FLUGE, NICK FLUGE, NICK GRUVER, JACOB P. GRUVER, JACOB P. GRUVER, JACOB P. GRUVER, JACOB P. GRUVER, JACOB P. LARSON, JOHN M. MOORE, DAVID G. MOORE, DAVID G. MOORE, DAVID G. MOORE, DAVID G. MOORE, DAVID G. MOORE, DAVID G. MOORE, DAVID G. MOORE, DAVID G. MOORE, DAVID G. NOONE, LAURA PALMER NOONE, LAURA PALMER NOONE, LAURA PALMER SPERLING, PETER V. SPERLING, PETER V. SPERLING, PETER V. SPERLING, PETER V. SPERLING, PETER V. STEELE, TODD H.
Shares 64,500 101,000 21,988 5,512 64,500 60,000 31,200 20,000 48,000 200,000 15,000 15,000 15,000 15,000 8,000 50,000 23,100 26,900 39,800 10,000 5,000 214,259 42,000 50,578 6,908 72,122 60,000 150,000
Company Career Education Career Education Career Education Career Education Career Education Career Education Career Education Career Education Career Education Career Education Corinthian Colleges Corinthian Colleges Corinthian Colleges Corinthian Colleges Corinthian Colleges Corinthian Colleges Corinthian Colleges Corinthian Colleges Corinthian Colleges Apollo Group Apollo Group Apollo Group Apollo Group Apollo Group Apollo Group Apollo Group Apollo Group Career Education
Transaction Sale at $67.71 per share. Sale at $66 - $66.4 per share. Sale at $66.37 - $66.88 per share. Sale at $66.07 - $66.34 per share. Sale at $67.71 per share. Sale at $62.951 per share. Sale at $63.50 - $63.79 per share. Sale at $64.38 - $65.2 per share. Sale at $63.01 per share. Sale at $67.40 per share. Automatic Sale at $61.7144 - $61.723 per share. Automatic Sale at $64.22 per share. Automatic Sale at $63.24 - $63.65 per share. Automatic Sale at $60.45 per share. Automatic Sale at $60.66 - $62 per share. Automatic Sale at $33.6803 per share. Automatic Sale at $34 - $34.3 per share. Automatic Sale at $34.255 per share. Automatic Sale at $35.0231 per share. Sale at $75.65 per share. Sale at $74.1514 per share. Sale at $61.9574 - $62.1 per share. Sale at $81.3244 per share. Sale at $78.5099 per share. Sale at $77.2301 per share. Sale at $73.648 per share. Sale at $75.6745 per share. Sale at $67.71 per share.
Value $4,367,295 $6,686,000 $1,465,000 $365,000 $4,367,295 $3,777,060 $1,986,000 $1,296,000 $3,024,480 $13,480,000 $926,000 $963,300 $952,000 $906,750 $491,000 $1,684,015 $789,000 $921,459 $1,393,919 $756,500 $370,757 $13,290,000 $3,415,624 $3,970,873 $533,505 $5,311,641 $4,540,470 $10,156,499
Source: Yahoo Finance.
Contingencies and Legal Proceedings: Career Education
Litigation Type Case (Employment and Vander Vennet, et. Al. v. American InterContinental Securities Litigation) University, Inc., et. al. Taubenfeld v. Career Education Corporation et. al. Description Latest Action The lawsuit was filed on August 24, 2005 by former admissions advisors of AIU CECO filed a response on October 5, 2005 opposing the lawsuit. Online, alleging improper labor standards. The consolidation of six class action lawsuits filed between December 9, 2003 and CECO filed a response and motion to dismiss on August 8, 2005. February 5, 2004 in the United States District Court for the Northern District of Illinois. A derivative action filed under seal in the Chancery Court of New Castle County, Delaware. A derivative action filed in the United States District Court for the Northern District of Illinois.
(Student Litigation)
CECO filed a motion to dismiss the amended derivative complaint on October 26, 2005. McSparran v. John M. Larson, et. al. On March 24, 2005, the Court stayed discovery pending resolution of defendants’ motion to dismiss. On March 18, 2005, plaintiffs filed a motion to compel the production of certain documents, which the Court denied on March 24, 2005. Xiao-Qiong Huang v. John M. Larson, et. al. A derivative action filed in the Circuit Court of Cook County, Illinois, Chancery On September 12, 2005, the Court denied defendants’ motion to dismiss, but ordered Division.. a stay of the action until further order of the Court in deference to the prior-filed McSparran matter. Nicholas v. Dowdell, et. al. A derivative action filed in the Chancery Court of New Castle County, Delaware. On March 17, 2005, the Court granted the parties’ joint motion to stay the action pending final resolution of the McSparran matter described above. McCarten et. al. v. Allentown Business School, Ltd. The complaint was filed on September 28, 2005 by former students of the college who The time for CECO to respond to the lawsuit has not yet expired. t/a Lehigh Valley College received high interest private loans. Bradley et. al. v. Sanford Brown College, Inc., et. al. Eight former students of the school filed a complaint alleging misrepresentation by the CECO filed a motion to dismiss on October 13, 2005. school. Onate and Lawrence, et. al. v. The Katherine Gibbs A class action lawsuit was filed by former students alleging misleading practices. On October 11, 2005 CECO’s motion to compel arbitration was granted. Corp. – New York, the Katherine Gibbs Corp. – Melville, and Career Education Corp Benoit, et. al. v. Career Education Corporation, et. al. A class action filed in Hillsborough County, Florida against the company and On October 11, 2005 the court ordered that the lawsuit be stayed, pending the Ultrasound Technical Services, Inc. completion of arbitration. Nilsen v. Career Education Corporation, et. al. A class action complaint filed by three former students of Brooks Institute of On October 17, 2005 CECO filed a motion to stay the case, pending the outcome of Photography in the Superior Court of the State of California, County of Santa Barbara. the Brooks Institute of Photography (BIP) and the California Bureau for Private Postsecondary and Vocational Education (BPPVE). Hearings are scheduled for December 6, 2005. Thurston, et. al., v. Brooks College, Ltd., et. al. A class action complaint filed in the Superior Court for the State of California, County On June 24, 2005, the Court ruled that this action was related to the case captioned of Los Angeles, against Brooks College. Outten, et. al. vs. Career Education Corporation, et al., and stayed the lawsuit until an initial status conference. Viles v. Ultrasound Technical Services, Inc., et. al. A class action complaint filed in Broward County, Florida. On April 7, 2005, defendants filed motions to compel arbitration and transfer venue to Miami-Dade County, Florida. The parties have agreed to transfer venue to Miami-Dade County. Outten, et. al., v. Career Education Corporation, et. An amended complaint filed in the Superior Court of the State of California, County of On June 24, 2005, the court ruled that this action was related to the Thurston v. Brooks al. Los Angeles, against the company and American InterContinental University. College case. The matter is stayed until an initial status conference.
Romero v. Dowdell, et. al.
Source: Banc of America Securities, LLC estimates, Company reports. 17
Contingencies and Legal Proceedings: Career Education (Continued)
Litigation Type Case (Federal Regulatory U.S. Department of Education Actions) (State Regulatory Lehigh Valley College Actions) Brooks Institute of Photography (BIP) Sanford Brown Institute – Iselin International Academy of Design and Technology—Sacramento International Academy of Design and Technology—San Antonio American InterContinental University (AIU) Brooks College Description Latest Action The department of education is reviewing CECOs restated consolidated financial In August 2005, CECO submitted its response to the DOE’s program review of the statements. Pennsylvania Culinary Institute. The Pennsylvania attorney general is investigating the school’s business practices, CECO provided the documents requested in August 2005. including financial aid practices. An administrative hearing has been set for February 2006, regarding BIP’s conditional A hearing is also set for December 12, 2005 to review the context of the BPPVE’s approval status. renewal application. In September 2005 the school’s administration met with the New Jersey Department The school was granted verbal approval to proceed with the school’s license of Labor and Workforce Development. application submission. As a result of the DOE investigation, new applications to participate in Title IV CECO indicated that it provided the DOE with all documentation that it has requested. programs will not be approved. As a result of the DOE investigation, new applications to participate in Title IV CECO indicated that it provided the DOE with all documentation that it has requested. programs will not be approved. The Southern Associations of Colleges and Schools placed AIU on probation status at The Southern Associations of Colleges and Schools will review AIU's progress and the December 2005 meeting. make a decision at the December 2006 meeting. Brooks must submit a progress report by March 15, 2006. The Accrediting Commission for Community and Junior Colleges of the Western Association of Schools and Colleges removed Brooks from probation status on June 29, 2005 and reaffirmed accreditation through 2010. The school is scheduled to appear before the accrediting body in December 2005 to The school submitted requested information to the Accrediting Bureau of Health review the status of the show cause directive. Education Schools on October 1, 2005 in response to the agencies show cause directive.
(Accrediting Body Actions)
Sanford Brown Institute – White Plains
Source: Banc of America Securities, LLC estimates, Company reports.
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Contingencies and Legal Proceedings: Corinthian Colleges
Litigation Type Case (Student Satz v. Rhodes Colleges, Inc., Corinthian Colleges, Litigation) Inc., and Florida Metropolitan University Travis v. Rhodes Colleges, Inc., Corinthian Colleges, Inc., and Florida Metropolitan University Jennifer Baker, et al. v. Corinthian Colleges, Inc. and Florida Metropolitan University, Inc. Alan Alvarez, et al. v. Rhodes Colleges, Inc., Corinthian Colleges, Inc., and Florida Metropolitan University, Inc. Michelle Sanchez v. Corinthian Colleges, Inc., Description Complaints brought by current and former students of Florida Metropolitan University regarding the transferability of credits to other accredited institutions. Complaints brought by current and former students of Florida Metropolitan University regarding the transferability of credits to other accredited institutions. Complaints brought by current and former students of Florida Metropolitan University regarding the transferability of credits to other accredited institutions. Complaints brought by current and former students of Florida Metropolitan University regarding the transferability of credits to other accredited institutions. Latest Action The arbitrator found for the company and awarded its motion to dismiss. The arbitrator denied Satz’s motion for reconsideration. The court compelled the case to arbitration. The company filed a motion to compel arbitration. The company filed a motion to compel arbitration.
A putative class action demand in arbitration filed by a former diagnostic medical No actions have been taken. sonography student from the Bryman College campus in West Los Angeles. A lawsuit filed by twenty-four current or former medical assisting students from The Company has filed demands in arbitration against each of the the Company’s National Institute of Technology campus in Long Beach, individual plaintiffs for breach of their contractual obligation to California. arbitrate rather than litigate disputes with the Company and has prevailed on its motion with the California Superior Court to compel the plaintiffs to binding arbitration. A lawsuit filed by forty-one current or former medical assisting students from the The company prevailed on its motion to compel twenty-one of the company’s Bryman College campus in Tacoma, Washington. plaintiffs with arbitration provisions to binding arbitration. Additional individual lawsuits have been filed by the same counsel which raise the total number of students involved to approximately ninety. Derivative action filed in the Orange County California Superior Court. This consolidated action has been stayed by the court pending a Consolidated with the Davila case. decision on the company’s motion to dismiss in the federal securities action, although plaintiffs have been permitted leave to file an amended complaint. Derivative action filed in the Orange County California Superior Court. This consolidated action has been stayed by the court pending a Consolidated with the Collet case. decision on the company’s motion to dismiss in the federal securities action, although plaintiffs have been permitted leave to file an amended complaint.
Nancy Tsai v. Corinthian Colleges, Inc., et al.
Jaclyn Fisher, et al. v. Corinthian Colleges, Inc.
(Securities Litigation)
Collet, Derivatively on behalf of Corinthian Colleges, Inc., v. David Moore, et al.
Davila, Derivatively on behalf of Corinthian Colleges, Inc., v. David Moore, et al.
(State Regulatory Actions)
California Attorney General’s Office
The AG office requested that COCO provide documentation regarding three of The AG’s office has not asserted any claims against the company. its California Bryman Colleges and certain other general company policies and procedures.
19
Source: Banc of America Securities, LLC estimates, Company reports.
Contingencies and Legal Proceedings: ITT Educational Services
Litigation Type Case (Employment and Securities Litigation) City of Austin Police Retirement System, Individually and on Behalf of All Others Similarly Situated v. ITT Educational Services, Inc., et al In Re ITT Educational Services, Inc. Derivative Litigation. Alaska Electrical Pension Fund Derivatively on Behalf of ITT Educational Services, Inc. v. Rene R. Champagne, et al. Albert Reitan, derivatively on behalf of nominal defendant ITT Educational Services, Inc. v. Rand V. Araskog, et al. Description Latest Action A securities class action lawsuit filed in the U.S. District Court On October 24, 2005, the court dismissed the Austin Action with for the Southern District of Indiana. prejudice. A consolidated complaint in a shareholder derivative lawsuit filed in the Superior Court of Hamilton County, Indiana. A shareholder derivative lawsuit filed in the U.S. District Court for the Southern District of Indiana.
(State Regulatory Actions)
On September 16, 2005, the court dismissed with prejudice all of the claims against all of the defendants. On December 8, 2004, the parties agreed to stay this action pending the result of the In Re ITT Educational Services, Inc. Derivative Litigation case. A shareholder derivative lawsuit filed in the Chancery Court of On March 31, 2005, the court issued an order staying this action New Castle County, Delaware. until the result of the City of Austin Police Retirement System, Individually and on Behalf of All Others Similarly Situated v. ITT Educational Services, Inc. et al. case. United States of America ex rel. Robert Olson v. A qui tam action filed in the United States District Court for the On June 24, 2005 an amended complaint was filed. ITT Educational Services, Inc. d/b/a ITT Technical Southern District of Indiana. Institute Office of Attorney General for the State of An investigation of the ITT Technical Institutes in California, On September 30, 2005, the company agreed to settle the California initiated as a result of a qui tam action filed against the Attorney General's claims, on October 12, 2005, the court company. (United States of America ex rel. Mohamed unsealed the Mahmoud Action and the Department of Justice Mahmoud and Ed Maloney v. ITT Educational Services, Inc.) declined to intervene on September 30, 2005.
Source: Banc of America Securities, LLC estimates, Company reports.
20
Contingencies and Legal Proceedings: Apollo Group
Litigation Type Case (Employment and Securities Litigation) Description Latest Action Sekuk Global Enterprises et. al. v. Apollo Group, Consolidated class action complaints filed in the United States The Court denied Apollo's motion to dismiss on October 18, Inc. et. al., Christopher Carmona et. al. v. Apollo District Court for the District of Arizona. 2005. Group, Inc. et. al., Jack B. McBride et. al. v. Apollo Group, Inc. et. al. California qui tam action A qui tam action filed in the United States District Court for the On June 11, 2004, an appeal was filed with the United States Eastern District of California. Ninth Circuit Court of Appeals. Bryan Sanders et. al. v. University of Phoenix, Inc. A class action complaint filed in the Superior Court of the State A management conference has been set for April 2006. et. al. of California for the County of Orange.
Source: Banc of America Securities, LLC estimates, Company reports.
21
Contingencies and Legal Proceedings: Education Management Corporation
Litigation Type (Accrediting Body Actions) Case The Art Institute of Dallas Description The Art Institute of Dallas (Ai Dallas) was placed on probation by its accrediting body, the Commission on Colleges of the Southern Association for Colleges and Schools (SACS). Latest Action SACS will review AI Dallas' progress and make a decision by the December 2006 meeting.
Source: Banc of America Securities, LLC estimates, Company reports.
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