For-profit education company Career Education Corporation (NASDAQ: CECO) seems to have put most of its ethical and regulatory problems behind it, and is now trying to repair the damage. CEO Gary McCullough insists that 3Q 2007 numbers are "positive indicators for future performance." That's good, because the current numbers are flunking.

Career Education's problem is not just a set of numbers heading in the wrong direction. Like many for-profit educational services providers, Career Education markets its programs to online students. Many online programs are cheaper to run than bricks and mortar campuses. Career Education has an increasing online enrollment, but operates online programs at a lower overall profit margin. The more online students, the lower the profit per student, therefore the bigger the decline in revenue. Online income dropped $15.3 million in 3Q 2007 alone. The drop in online income is the major factor in the YTD $200 million decline in consolidated revenue.

Career Education is currently negotiating the sale of 11 schools and campuses and has recorded a $4.3 million loss from discontinued operations as a result. The company has reduced capital expenditures by 25%, and taken steps to trim administrative, admissions and bad debt expenses. The company repurchased $150 million of its stock in 3Q 2007, part of a much larger $800 million buyback. There are a variety of for-profit educational equities capable of earning a passing grade from investors. Career Education presently is not one of them.