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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2006

OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the transition period from  to

Commission
file number 0-25283

CORINTHIAN COLLEGES, INC.

(Exact name of registrant as specified in its charter)



|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 33-0717312                          
|(State or other jurisdiction of Incorporation or organization) |  | (I.R.S. Employer Identification No.)

6 Hutton Centre Drive, Suite 400, Santa Ana, California

(Address of principal executive offices)

92707

(Zip Code)

(714) 427-3000

(Registrants telephone number, including area code)

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  x    No ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer
and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  x                Accelerated filer ̈Non-accelerated filer ̈

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act.):    Yes ̈No  x

At November 1, 2006, there were 86,342,553 shares of Common Stock of the Registrant outstanding.



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CORINTHIAN COLLEGES, INC. AND SUBSIDIARIES

INDEX TO FORM 10-Q

For the First Quarter Ended September 30, 2006



|                               |  |          |  |                                                                                                                    |  |   
|------------------------------ |  | -------- |  | ------------------------------------------------------------------------------------------------------------------ |  | --
|                               |  | Page No.
|                               | 
|PART I - FINANCIAL INFORMATION |  |         
|                               |  |          | 
|                               |  | Item 1.  |  | Financial Statements                                                                                               |  |   
|                               |  |          | 
|                               |  |          |  | Condensed Consolidated Balance Sheets at September 30, 2006 (Unaudited) and June 30, 2006                          |  | 3 
|                               |  |          | 
|                               |  |          |  | Condensed Consolidated Statements of Operations for the three months ended September 30, 2006 and 2005 (Unaudited) |  | 4 
|                               |  |          | 
|                               |  |          |  | Condensed Consolidated Statements of Cash Flows for the three months ended September 30, 2006 and 2005 (Unaudited) |  | 5 
|                               |  |          | 
|                               |  |          |  | Notes to Unaudited Condensed Consolidated Financial Statements                                                     |  | 6 
|                               |  |          | 
|                               |  | Item 2.  |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                              |  | 12
|                               |  |          | 
|                               |  | Item 3.  |  | Quantitative and Qualitative Disclosure about Market Risk                                                          |  | 17
|                               |  |          | 
|                               |  | Item 4.  |  | Controls and Procedures                                                                                            |  | 17
|                               | 
|PART II - OTHER INFORMATION    |  |         
|                               |  |          | 
|                               |  | Item 1.  |  | Legal Proceedings                                                                                                  |  | 18
|                               |  |          | 
|                               |  | Item 1A. |  | Risk Factors                                                                                                       |  | 18
|                               |  |          | 
|                               |  | Item 2.  |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                        |  | 18
|                               |  |          | 
|                               |  | Item 3.  |  | Defaults Upon Senior Securities                                                                                    |  | 18
|                               |  |          | 
|                               |  | Item 4.  |  | Submission of Matters to a Vote of Security Holders                                                                |  | 18
|                               |  |          | 
|                               |  | Item 5.  |  | Other Information                                                                                                  |  | 18
|                               |  |          | 
|                               |  | Item 6.  |  | Exhibits                                                                                                           |  | 18
|                               | 
|SIGNATURES                     |  | 19      



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PART I - FINANCIAL INFORMATION



|Item 1. | Financial Statements
|------- | --------------------

CORINTHIAN COLLEGES, INC. AND
SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS



|                                                                                                                                               |  |                    |         |              |   |        
|---------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------ | ------- | ------------ | - | -------
|                                                                                                                                               |  | September 30, 2006 |         | June 30,2006
|                                                                                                                                               |  | (In thousands)    
|                                                                                                                                               |  | (Unaudited)        |         |             
|ASSETS                                                                                                                                         |  |                    |         |              |   |        
|CURRENT ASSETS:                                                                                                                                |  |                    |         |              |   |        
|Cash and cash equivalents                                                                                                                      |  | $                  | 16,297  |              | $ | 36,795 
|Restricted cash                                                                                                                                |  |                    |        |              |   | 10     
|Marketable securities                                                                                                                          |  |                    | 77,900  |              |   | 55,900 
|Accounts receivable, net of allowance for doubtful accounts of $20,496 and $19,633 at September 30, 2006 and June 30, 2006,
respectively       |  |                    | 65,874  |              |   | 54,221 
|Student notes receivable, net of allowance for doubtful accounts of $803 and $595 at September 30, 2006 and June 30, 2006,
respectively        |  |                    | 2,632   |              |   | 2,488  
|Deferred income taxes                                                                                                                          |  |                    | 20,943  |              |   | 20,943 
|Prepaid expenses and other current assets                                                                                                      |  |                    | 42,115  |              |   | 44,646 
|                                                                                                                                               |  |                    |         |              |   |        
|Total current assets                                                                                                                           |  |                    | 225,761 |              |   | 215,003
|PROPERTY AND EQUIPMENT, net                                                                                                                    |  |                    | 211,733 |              |   | 199,085
|OTHER ASSETS:                                                                                                                                  |  |                    |         |              |   |        
|Goodwill, net                                                                                                                                  |  |                    | 198,369 |              |   | 198,374
|Other intangibles, net                                                                                                                         |  |                    | 48,599  |              |   | 48,983 
|Student notes receivable, net of allowance for doubtful accounts of $2,186 and $1,660 at September 30, 2006 and June 30, 2006,
respectively    |  |                    | 3,317   |              |   | 3,385  
|Deposits and other assets                                                                                                                      |  |                    | 5,350   |              |   | 5,177  
|                                                                                                                                               |  |                    |         |              |   |        
|TOTAL ASSETS                                                                                                                                   |  | $                  | 693,129 |              | $ | 670,007
|                                                                                                                                               |  |                    |         |              |   |        
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                           |  |                    |         |              |   |        
|CURRENT LIABILITIES:                                                                                                                           |  |                    |         |              |   |        
|Accounts payable                                                                                                                               |  | $                  | 39,284  |              | $ | 34,828 
|Accrued compensation and related liabilities                                                                                                   |  |                    | 30,371  |              |   | 39,813 
|Accrued expenses                                                                                                                               |  |                    | 28,790  |              |   | 22,745 
|Prepaid tuition                                                                                                                                |  |                    | 73,499  |              |   | 62,187 
|Current portion of capital lease obligations                                                                                                   |  |                    | 333     |              |   | 325    
|Current portion of long-term debt                                                                                                              |  |                    | 1,153   |              |   | 1,183  
|                                                                                                                                               |  |                    |         |              |   |        
|Total current liabilities                                                                                                                      |  |                    | 173,430 |              |   | 161,081
|LONG-TERM CAPITAL LEASE OBLIGATIONS, net of current portion                                                                                    |  |                    | 14,067  |              |   | 14,151 
|LONG-TERM DEBT, net of current portion                                                                                                         |  |                    | 31,387  |              |   | 31,402 
|DEFERRED INCOME TAXES                                                                                                                          |  |                    | 27,265  |              |   | 27,265 
|OTHER LIABILITIES                                                                                                                              |  |                    | 43,484  |              |   | 36,580 
|COMMITMENTS AND CONTINGENCIES                                                                                                                  |  |                    |         |              |   |        
|STOCKHOLDERS EQUITY:                                                                                                                          |  |                    |         |              |   |        
|Common Stock, $0.0001 par value:                                                                                                               |  |                    |         |              |   |        
|Common Stock, 120,000 shares authorized, 86,340 and 86,238 shares issued and outstanding at September 30, 2006 and June 30, 2006,
respectively |  |                    | 9       |              |   | 9      
|Additional paid-in capital                                                                                                                     |  |                    | 152,801 |              |   | 150,225
|Retained earnings                                                                                                                              |  |                    | 249,762 |              |   | 248,362
|Accumulated other comprehensive income                                                                                                         |  |                    | 924     |              |   | 932    
|                                                                                                                                               |  |                    |         |              |   |        
|TOTAL STOCKHOLDERS EQUITY                                                                                                                     |  |                    | 403,496 |              |   | 399,528
|                                                                                                                                               |  |                    |         |              |   |        
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                     |  | $                  | 693,129 |              | $ | 670,007
|                                                                                                                                               |  |                    |         |              |   |        

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



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CORINTHIAN COLLEGES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS



|                                                      |  |                                       |         |   |      |   |         |  
|----------------------------------------------------- |  | ------------------------------------- | ------- | - | ---- | - | ------- | -
|                                                      |  | Three Months Ended September 30,      |        
|                                                      |  | 2006                                  |         |   | 2005 |  
|                                                      |  | (In thousands, except per share data) |        
|                                                      |  | (Unaudited)                           |        
|NET REVENUES                                          |  | $                                     | 231,802 |   |      | $ | 236,294 |  
|OPERATING EXPENSES:                                   |  |                                       |         |   |      |   |         |  
|Educational services                                  |  |                                       | 137,759 |   |      |   | 137,754 |  
|General and administrative                            |  |                                       | 27,930  |   |      |   | 23,658  |  
|Marketing and admissions                              |  |                                       | 64,269  |   |      |   | 63,085  |  
|                                                      |  |                                       |         |   |      |   |         |  
|Total operating expenses                              |  |                                       | 229,958 |   |      |   | 224,497 |  
|                                                      |  |                                       |         |   |      |   |         |  
|INCOME FROM OPERATIONS                                |  |                                       | 1,844   |   |      |   | 11,797  |  
|Interest (income)                                     |  |                                       | (1,493  | ) |      |   | (1,201  | )
|Interest expense                                      |  |                                       | 758     |   |      |   | 889     |  
|Other (income) expense, net                           |  |                                       | 265     |   |      |   | 14      |  
|                                                      |  |                                       |         |   |      |   |         |  
|INCOME BEFORE PROVISION FOR INCOME TAXES              |  |                                       | 2,314   |   |      |   | 12,095  |  
|Provision for income taxes                            |  |                                       | 914     |   |      |   | 4,717   |  
|                                                      |  |                                       |         |   |      |   |         |  
|NET INCOME                                            |  | $                                     | 1,400   |   |      | $ | 7,378   |  
|                                                      |  |                                       |         |   |      |   |         |  
|Income per common share:                              |  |                                       |         |   |      |   |         |  
|Basic                                                 |  | $                                     | 0.02    |   |      | $ | 0.08    |  
|                                                      |  |                                       |         |   |      |   |         |  
|Diluted                                               |  | $                                     | 0.02    |   |      | $ | 0.08    |  
|                                                      |  |                                       |         |   |      |   |         |  
|Weighted average number of common shares outstanding: |  |                                       |         |   |      |   |         |  
|Basic                                                 |  |                                       | 86,309  |   |      |   | 91,300  |  
|                                                      |  |                                       |         |   |      |   |         |  
|Diluted                                               |  |                                       | 87,540  |   |      |   | 92,870  |  
|                                                      |  |                                       |         |   |      |   |         |  

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



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CORINTHIAN COLLEGES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS



|                                                                                  |  |                                  |         |   |      |   |         |  
|--------------------------------------------------------------------------------- |  | -------------------------------- | ------- | - | ---- | - | ------- | -
|                                                                                  |  | Three Months Ended September 30, |        
|                                                                                  |  | 2006                             |         |   | 2005 |  
|                                                                                  |  | (In thousands)                   |        
|                                                                                  |  | (Unaudited)                      |        
|CASH FLOWS FROM OPERATING ACTIVITIES:                                             |  |                                  |         |   |      |   |         |  
|Net income                                                                        |  | $                                | 1,400   |   |      | $ | 7,378   |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                                  |         |   |      |   |         |  
|Depreciation and amortization                                                     |  |                                  | 10,200  |   |      |   | 9,566   |  
|Loss on disposal of assets                                                        |  |                                  | 108     |   |      |   | 31      |  
|Stock-based compensation                                                          |  |                                  | 2,189   |   |      |   | 2,020   |  
|Changes in assets and liabilities, net of effects from acquisitions:              |  |                                  |         |   |      |   |         |  
|Accounts receivable, net                                                          |  |                                  | (11,653 | ) |      |   | (5,920  | )
|Student notes receivable, net                                                     |  |                                  | (76     | ) |      |   | 998     |  
|Prepaid expenses and other assets                                                 |  |                                  | 2,362   |   |      |   | 6,193   |  
|Accounts payable                                                                  |  |                                  | 4,457   |   |      |   | (1,412  | )
|Accrued expenses, compensation and related benefits                               |  |                                  | (3,599  | ) |      |   | (2,441  | )
|Income tax payable                                                                |  |                                  |        |   |      |   | 10      |  
|Prepaid tuition                                                                   |  |                                  | 11,312  |   |      |   | 6,887   |  
|Other long-term liabilities                                                       |  |                                  | 1,161   |   |      |   | 1,653   |  
|                                                                                  |  |                                  |         |   |      |   |         |  
|Net cash provided by operating activities                                         |  |                                  | 17,861  |   |      |   | 24,963  |  
|                                                                                  |  |                                  |         |   |      |   |         |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                             |  |                                  |         |   |      |   |         |  
|Acquisitions of schools, colleges, and training centers, net of cash acquired     |  |                                  |        |   |      |   | (85     | )
|Capital expenditures, net of disposals                                            |  |                                  | (16,941 | ) |      |   | (11,017 | )
|Change in restricted cash                                                         |  |                                  | 10      |   |      |   |        |  
|Proceeds from sale of assets                                                      |  |                                  | 103     |   |      |   | 1       |  
|Purchase of (investments in) marketable securities                                |  |                                  | (57,325 | ) |      |   | (57,150 | )
|Sales of (disposition of) marketable securities                                   |  |                                  | 35,325  |   |      |   | 23,850  |  
|                                                                                  |  |                                  |         |   |      |   |         |  
|Net cash (used in) investing activities                                           |  |                                  | (38,828 | ) |      |   | (44,401 | )
|                                                                                  |  |                                  |         |   |      |   |         |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                             |  |                                  |         |   |      |   |         |  
|Principal repayments on capital lease obligations and long-term debt              |  |                                  | (120    | ) |      |   | (87     | )
|Proceeds from exercise of stock options and Employee Stock Purchase Plan          |  |                                  | 589     |   |      |   | 1,698   |  
|                                                                                  |  |                                  |         |   |      |   |         |  
|Net cash provided by (used in) financing activities                               |  |                                  | 469     |   |      |   | 1,611   |  
|                                                                                  |  |                                  |         |   |      |   |         |  
|EFFECTS OF EXCHANGE RATE CHANGES ON CASH                                          |  |                                  |        |   |      |   | 411     |  
|                                                                                  |  |                                  |         |   |      |   |         |  
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                              |  |                                  | (20,498 | ) |      |   | (17,416 | )
|CASH AND CASH EQUIVALENTS, beginning of period                                    |  |                                  | 36,795  |   |      |   | 57,853  |  
|                                                                                  |  |                                  |         |   |      |   |         |  
|CASH AND CASH EQUIVALENTS, end of period                                          |  | $                                | 16,297  |   |      | $ | 40,437  |  
|                                                                                  |  |                                  |         |   |      |   |         |  
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:                                 |  |                                  |         |   |      |   |         |  
|Cash paid/(received) during the period for:                                       |  |                                  |         |   |      |   |         |  
|Income taxes                                                                      |  | $                                | (284    | ) |      | $ | 672     |  
|                                                                                  |  |                                  |         |   |      |   |         |  
|Interest                                                                          |  | $                                | 508     |   |      | $ | 835     |  
|                                                                                  |  |                                  |         |   |      |   |         |  
|SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:           |  |                                  |         |   |      |   |         |  
|Acquisitions of various schools, colleges, and training centers                   |  |                                  |         |   |      |   |         |  
|Fair value of assets acquired                                                     |  | $                                |        |   |      | $ |        |  
|Net cash used in acquisitions                                                     |  |                                  |        |   |      |   | (85     | )
|                                                                                  |  |                                  |         |   |      |   |         |  
|Liabilities assumed or incurred                                                   |  | $                                |        |   |      | $ | (85     | )
|                                                                                  |  |                                  |         |   |      |   |         |  
|Capital lease additions                                                           |  | $                                |        |   |      | $ |        |  
|                                                                                  |  |                                  |         |   |      |   |         |  

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



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CORINTHIAN COLLEGES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2006

Note 1 - The Company and Basis of Presentation

Our
company is one of the largest for-profit, post-secondary education companies in the United States and Canada, with more than 67,100 students enrolled as of September 30, 2006. As of September 30, 2006, we operated 94 colleges in 25 states
and 33 colleges in 7 Canadian provinces, and served the large and growing segment of the population seeking to acquire career-oriented education. Our schools generally enjoy long operating histories and strong franchise value in their local markets.

We offer a variety of diploma programs and associates, bachelors and masters degrees through five operating divisions in
the U.S. and Canada concentrating on programs in allied health, business, vehicle repair and maintenance trades, criminal justice, and electronic and information technology. Additionally, the Company has an online learning alternative available to
students pursuing education exclusively online.

Historically, we have grown our business through acquisitions as well as through organic
growth. Organic growth consists of opening new branch campuses, remodeling, expanding or relocating existing campuses and adopting curricula into existing colleges. Since the Companys formation in 1995, we have acquired 95 colleges (net of
closures and consolidations) and we have opened 34 branch campuses.

The accompanying unaudited condensed consolidated financial statements
have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission and in accordance with U.S. generally accepted accounting principles. Certain information and footnote disclosures normally included in
annual financial statements have been omitted or condensed pursuant to such regulations. The Company believes the disclosures included in the unaudited condensed consolidated financial statements, when read in conjunction with the June 30, 2006
consolidated financial statements of the Company included in the Companys 2006 Annual Report on Form 10-K and notes thereto, are adequate to make the information presented not materially misleading. In managements opinion, the unaudited
condensed consolidated financial statements reflect all adjustments, consisting solely of normal recurring adjustments, necessary to summarize fairly the consolidated financial position, results of operations, and cash flows for such periods. The
results of operations for the three months ended September 30, 2006 are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2007.

The unaudited condensed consolidated financial statements as of September 30, 2006 and for the three months ended September 30, 2006 and 2005
and the audited condensed consolidated financial statements as of June 30, 2006 include the accounts of the Company and its subsidiaries that it directly or indirectly controls through majority ownership. All significant intercompany balances
and transactions have been eliminated in consolidation.

The financial position and results of operations of the Companys Canadian
subsidiaries are measured using the local currency as the functional currency. Assets and liabilities of the Canadian subsidiaries are translated to U.S. dollars using exchange rates in effect at the balance sheet dates. Income and expense items are
translated at monthly average rates of exchange. The resultant translation adjustments are included as a component of Stockholders Equity designated as accumulated other comprehensive income. Exchange gains and losses arising from transactions
denominated in a currency other than the functional currency are immediately included in earnings.

Note 2 - Weighted Average Number of Common Shares
Outstanding

Basic net income per share is calculated by dividing net income by the weighted average number of common shares outstanding
for the period. Diluted net income per share reflects the assumed conversion of all dilutive securities, consisting of stock options and restricted stock units.



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The table below reflects the calculation of the weighted average number of common shares outstanding used
in computing basic and diluted net income per common share (in thousands):



|                                         |  |                                  |  |       
|---------------------------------------- |  | -------------------------------- |  | ------
|                                         |  | Three Months Ended September 30,
|                                         |  | 2006                             |  | 2005  
|Basic common shares outstanding          |  | 86,309                           |  | 91,300
|Effects of dilutive securities:          |  |                                  |  |       
|Stock options and restricted stock units |  | 1,231                            |  | 1,570 
|                                         |  |                                  |  |       
|Diluted common shares outstanding        |  | 87,540                           |  | 92,870
|                                         |  |                                  |  |       

Note 3 - Sale of Corporate Training Division

On November 8, 2005, the Company completed the sale of substantially all the assets of its corporate training division, CDI Education for Cdn $19
million ($16 million USD).

Note 4 - Marketable Securities

Statement of Financial Accounting Standards (SFAS) No. 115, Accounting For Certain Debt and Equity Securities requires that all applicable investments be classified as trading securities,
available-for-sale securities or held-to-maturity securities. The Company does not currently have any trading securities or held-to-maturity securities.

Securities classified as available-for-sale may be sold in response to changes in interest rates, liquidity needs and for other purposes. Available-for-sale securities are carried at fair value and include all debt
and equity securities not classified as held-to-maturity or trading. Unrealized holding gains and losses for available-for-sale securities are excluded from earnings and reported, net of any income tax effect, as a separate component of
stockholders equity. Realized gains and losses for securities classified as available-for-sale are reported in earnings based on the adjusted cost of the specific security sold. At September 30, 2006 and June 30, 2006, there were no
unrealized gains or losses on available-for-sale securities.

Note 5 - Comprehensive Income (Loss)

Comprehensive income (loss) is defined as the total of net income (loss) and all changes that impact stockholders equity other than transactions
involving stockholders ownership interests. The following table details the components of comprehensive income (loss) for the three month periods ended September 30, 2006 and 2005 (in thousands):



|                                         |  |                                  |       |   |      |   |      
|---------------------------------------- |  | -------------------------------- | ----- | - | ---- | - | -----
|                                         |  | Three Months Ended September 30,
|                                         |  | 2006                             |       |   | 2005
|Net income                               |  | $                                | 1,400 |   |      | $ | 7,378
|Foreign currency translation adjustments |  |                                  | (8    | ) |      |   | 404  
|                                         |  |                                  |       |   |      |   |      
|Comprehensive income                     |  | $                                | 1,392 |   |      | $ | 7,782
|                                         |  |                                  |       |   |      |   |      

Note 6 - Impairment, Facility Closing, and Severance Charges

During the fourth quarter of 2006 the Company made the decision to consolidate multiple brands. As a result of this decision, the Company reviewed the
related intangible asset of trade name for possible impairment in accordance with SFAS 142. Based on the results of the review, the Company recognized an impairment charge of $2.3 million, which represented the entire trade name value allocated to
the schools impacted by the name change. The Company also recorded a facility closing charge of $1.0 million as a result of relocating our Rancho Cucamonga, CA campuses in the fourth quarter of 2006 and a severance charge of $0.9 million.

In June 2005, the Company decided to cease the implementation of the Peoplesoft Student Management System, as the Company concluded that
its functionality did not meet the long-term requirements of the Companys business. As a result of this decision, the Company reviewed the related long-lived asset for possible impairment in accordance with SFAS 144 and recognized an
impairment charge of $16.3 million, which approximated net book value. The Company also consolidated two campuses in Mississauga, Ontario and recorded a facility closing charge of $1.6 million and severance of $0.4 million related to
restructuring of personnel.



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The table below summarizes the liability and activity for the three month period ended September 30,
2006, relating to the impairment, facility closing and severance charges (in thousands):



|                              |  |                        |      |   |                  |   |       |       |  |   |       |  
|----------------------------- |  | ---------------------- | ---- | - | ---------------- | - | ----- | ----- |  | - | ----- | -
|                              |  | Severance and Benefits |      |   | Facility Related |   |       | Total | 
|Balance at June 30, 2006      |  | $                      | 838  |   |                  | $ | 3,643 |       |  | $ | 4,481 |  
|Charges                       |  |                        |     |   |                  |   |      |       |  |   |      |  
|Adjustments                   |  |                        |     |   |                  |   |      |       |  |   |      |  
|Cash payments                 |  |                        | (328 | ) |                  |   | (400  | )     |  |   | (728  | )
|Asset writedowns              |  |                        |     |   |                  |   |      |       |  |   |      |  
|                              |  |                        |      |   |                  |   |       |       |  |   |       |  
|Balance at September 30, 2006 |  | $                      | 510  |   |                  | $ | 3,243 |       |  | $ | 3,753 |  
|                              |  |                        |      |   |                  |   |       |       |  |   |       |  

Note 7 - Segment Information

The Companys operations are aggregated into a single reportable operating segment based upon similar economic and operating characteristics as well as similar markets. The Companys operations are also
subject to similar regulatory environments. The Company conducts its operations in the U.S. and Canada. Revenues and long-lived assets by geographic area are as follows (in thousands):



|                                     |  |                                  |         |               |   |        
|------------------------------------ |  | -------------------------------- | ------- | ------------- | - | -------
|                                     |  | Three Months Ended September 30,
|                                     |  | 2006                             |         | 2005         
|Revenues from unaffiliated customers |  |                                  |         |               |   |        
|U.S. operations                      |  | $                                | 209,896 |               | $ | 210,936
|Canadian operations                  |  |                                  | 21,906  |               |   | 25,358 
|                                     |  |                                  |         |               |   |        
|Consolidated                         |  | $                                | 231,802 |               | $ | 236,294
|                                     |  |                                  |         |               |   |        
|                                     |  |                                 
|                                     |  | September 30, 2006               |         | June 30, 2006
|Long-lived assets                    |  |                                  |         |               |   |        
|U.S. operations                      |  | $                                | 399,138 |               | $ | 368,663
|Canadian operations                  |  |                                  | 68,230  |               |   | 75,944 
|                                     |  |                                  |         |               |   |        
|Consolidated                         |  | $                                | 467,368 |               | $ | 444,607
|                                     |  |                                  |         |               |   |        

No one customer accounted for more than 10% of the Companys consolidated revenues. Revenues
are attributed to regions based on the location of customers.

Note 8 - Commitments and Contingencies

Legal Matters

In the ordinary conduct
of its business, the Company and its colleges are subject to occasional lawsuits, investigations and claims, including, but not limited to, claims involving students and graduates and employment-related matters. When the Company is aware of a claim
or potential claim, it assesses the likelihood of any loss or exposure. If it is probable that a loss will result and the amount of the loss can be reasonably estimated, the Company records a liability for the loss. If the loss is not probable or
the amount of the loss cannot be reasonably estimated, the Company discloses the nature of the specific claim if the likelihood of a potential loss is reasonably possible and the amount involved is material. There can be no assurance that the
ultimate outcome of any of the matters disclosed below will not have a material adverse effect on the Companys financial condition or results of operations.



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On March 8, 2004, the Company was served with two virtually identical putative class action
complaints entitled Travis v. Rhodes Colleges, Inc., Corinthian Colleges, Inc., and Florida Metropolitan University,and Satz v. Rhodes Colleges, Inc., Corinthian Colleges, Inc., and Florida Metropolitan University. Additionally, on
May 7, 2004, the Company received another putative class action complaint entitled Jennifer Baker, et al. v. Corinthian Colleges, Inc. and Florida Metropolitan University, Inc.and on April 15, 2005, the Company received another
complaint entitled Alan Alvarez, et al. v. Rhodes Colleges, Inc., Corinthian Colleges, Inc., and Florida Metropolitan University, Inc. The Bakercomplaint named nine plaintiffs while the Alvarezfirst amended and supplemental
complaint named ninety-nine plaintiffs. Additionally, the court in the Alvarezcase granted the plaintiffs motion to add an additional seven plaintiffs to the first amended and supplemental complaint. The named plaintiffs in these
lawsuits are current and former students in the Companys Florida Metropolitan University (FMU) campuses in Florida and online. The plaintiffs allege that FMU concealed the fact that it is not accredited by the Commission on
Colleges of the Southern Association of Colleges and Schools and that FMU credits are not transferable to other institutions. The Baker, Satzand Travisplaintiffs seek recovery of compensatory damages and attorneys fees
under common law and Floridas Deceptive and Unfair Trade Practices Act for themselves and all similarly situated people. The Alvarezplaintiffs seek damages on behalf of themselves under common law and Floridas Deceptive and
Unfair Trade Practices Act. The arbitrator in the Satzcase found for the Company on all counts in an award on the Companys motion to dismiss. The arbitrator also found that Satz breached his agreement with FMU by filing in court rather
than seeking arbitration and is therefore responsible to pay FMUs damages associated with compelling the action to arbitration. The arbitrator also declared FMU the prevailing party for purposes of the Deceptive and Unfair Trade Practices Act.
The Company believes the other complaints are likewise without merit and will vigorously defend itself, Rhodes Colleges, Inc., and FMU against these allegations. The Company has filed motions to compel arbitration in Bakerand Alvarez,
and the Traviscourt compelled that case to arbitration.

From July 8, 2004 through August 31, 2004, various putative
class action lawsuits were filed in the United States District Court for the Central District of California by certain alleged purchasers of the Companys common stock against the Company and certain of its current and former executive
officers, David Moore, Dennis Beal, Paul St. Pierre and Anthony Digiovanni. On November 5, 2004, a lead plaintiff was chosen and these cases have been consolidated into one action. A first consolidated amended complaint was filed in February
2005. The consolidated case is purportedly brought on behalf of all persons who acquired shares of the Companys common stock during a specified class period from August 27, 2003 through July 30, 2004. The consolidated complaint
alleges that, in violation of Section 10(b) of the Securities Exchange Act of 1934 (the Act) and Rule 10b-5 promulgated thereunder by the Securities and Exchange Commission, the defendants made certain material misrepresentations
and failed to disclose certain material facts about the condition of the Companys business and prospects during the putative class period, causing the plaintiffs to purchase the Companys common stock at artificially inflated prices. The
plaintiffs further claim that Messrs. Moore, Beal, St. Pierre and Digiovanni are liable under Section 20(a) of the Act. The plaintiffs seek unspecified amounts in damages, interest, and costs, as well as other relief. On April 24, 2006,
the Court granted the Companys motion to dismiss the plaintiffs third consolidated amended complaint with prejudice. The plaintiff has appealed the dismissal to the Federal Ninth Circuit Court of Appeals. The Company intends to continue
vigorously defending itself and its current and former officers in this matter.

Between July 21, 2004 and July 23, 2004, two
derivative actions captioned Collet, Derivatively on behalf of Corinthian Colleges, Inc., v. David Moore, et al.,and Davila, Derivatively on behalf of Corinthian Colleges, Inc., v. David Moore, et al., were filed in the Orange County
California Superior Court against David Moore, Dennis Beal, Dennis Devereux, Beth Wilson, Mary Barry, Stan Mortensen, Bruce Deyong, Loyal Wilson, Jack Massimino, Linda Skladany, Paul St. Pierre, Michael Berry, and Anthony Digiovanni, and against the
Company as a nominal defendant. Each individual defendant is one



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of the Companys current or former officers and/or directors. The lawsuits allege breach of fiduciary duty, abuse of
control, gross mismanagement, waste of corporate assets, unjust enrichment, and violations of the California corporations code, essentially based on the same allegations of conduct complained of in the initial federal securities class action
complaints. The Colletand Davilacases have now been consolidated into one action.

The California Attorney Generals
Office (the CAG) first requested that the Company provide documentation regarding three of its California Bryman Colleges and certain other general Company policies and procedures in June 2004. Since that time, the CAG has requested
supplemental information in September 2004, December 2004, September 2005, January 2006, March 2006 and October 2006. Additionally, the Companys attorneys received a letter from the CAG dated May 1, 2006 in which the
CAG stated that it appeared to the CAG that the Companys practices have been and are in violation of the California Business and Professions Code and the California Education Code regarding the Companys advertising, marketing and sale of
its programs to California consumers. Company representatives have met with attorneys from the CAGs office on three occasions since June 2006, most recently in September 2006. At the most recent meeting with attorneys from the CAGs
office, the Company learned that the CAGs concerns involve all of the Companys campuses in California. The CAGs office has stated its belief that the calculation methodology the Company has used regarding student placement rates
violates the California Educational Code and the California Business and Professions Code. The CAG also stated its belief that the Company has not met minimum placement requirements under California law for certain of its diploma programs. The
Company expects that if it is unable to resolve this matter through a settlement, the CAGs office will file a lawsuit against the Company alleging violations of the California Education Code and the California Business and Professions Code. In
such a suit, the CAGs office may seek restitution on behalf of the Companys former students, damages, civil penalties, fines, injunctive relief and/or revocation of the Companys schools licenses. The Company is continuing to
cooperate with the inquiry.

In February 2005, the Company received a putative class action demand in arbitration entitled Michelle
Sanchez v. Corinthian Colleges, Inc., filed by a former diagnostic medical sonography student from the Companys Bryman College campus in West Los Angeles, alleging violations of the California education code and of Californias
Business and Professions Code Section 17200. The Company believes the demand is without merit and intends to vigorously defend itself against these allegations.

In February 2005, the Company was served with a lawsuit entitled Nancy Tsai v. Corinthian Colleges, Inc., et al., filed by twenty-four current or former medical assisting students from the Companys
National Institute of Technology campus in Long Beach, California, alleging fraud in the inducement, breach of contract, breach of the implied covenant of good faith and fair dealing, and violation of California Business and Professions Code
Section 17200, regarding alleged misrepresentations about the eligibility of such students to take the Certified Medical Assistant examination. The complaint does not seek certification as a class action. The Company has filed demands in
arbitration against each of the individual plaintiffs for breach of their contractual obligation to 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. The Company intends to vigorously defend itself in this matter.

On April 6, 2005, the Company was served with
a lawsuit entitled Jaclyn Fisher, et al. v. Corinthian Colleges, Inc., filed by forty-one current or former medical assisting students from the Companys Bryman College campus in Tacoma, Washington, dating back to before the Company
acquired the campus. The plaintiffs allege negligent/intentional misrepresentations and violations of the state consumer protection act regarding alleged misrepresentations about the eligibility of such students to take the Certified Medical
Assistant exam. The complaint does not seek certification as a class action. The Company removed the case to federal court and prevailed on its motion to compel twenty-one of the plaintiffs with arbitration provisions to binding arbitration.
Additional individual lawsuits in federal and state court in Washington and demands in arbitration have been filed by the same counsel to the original forty-one plaintiffs which contain virtually identical allegations, and which raise the total
number of students involved to more than one hundred and ten. The additional students are primarily from the Companys Bryman, Tacoma campus, but are also alleged to have attended the Bryman campuses in Lynwood and Renton, Washington.
Arbitration hearings have been held regarding more than thirty students who attended the Bryman campuses in Tacoma and Renton, Washington. Of those students whose arbitrations have been resolved, the Company has prevailed in sixteen of those matters
and the plaintiffs have received awards in the other matters that have not had a material impact on the Companys financial statements or results of operations. The Company intends to continue its vigorous defense in the remaining related
cases.



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On November 17, 2005, Florida Metropolitan University, Inc. (FMUI), a wholly-owned
subsidiary of the Company, received an investigative records subpoena from the Florida Attorney Generals office regarding advertising and marketing practices of FMUI. The subpoena requested documents from the past five years generally related
to advertisements, training of admissions representatives, complaints, identity and compensation of admissions representatives, identity of directors and officers of FMUI, and pending and concluded litigation. To the Companys knowledge, the
Attorney Generals office has not asserted any claims against the Company or FMUI. The Company and FMUI expect to cooperate with the inquiry.

On January 31, 2006, the Company was served with a lawsuit captioned Mercidita Garcia, et al. v. Corinthian Colleges, Inc., filed by fourteen current or former surgical technologist students from the Companys Parks College
located in Thornton, Colorado. The counsel for the plaintiffs claims to represent an additional twelve former surgical technologist students at this campus. The plaintiffs allege negligent/intentional misrepresentations/omissions and violations of
the state consumer protection act regarding alleged misrepresentations about the program. The complaint does not seek certification as a class action. The Company has removed this case to federal court and the court has dismissed the complaint and
compelled the plaintiffs to binding arbitration. The Company intends to vigorously defend itself in this matter.

On July 7, 2006, the
Companys Board of Directors established a special committee (the Special Committee) to conduct an independent review of the Companys historic stock option grants dating back to the Companys initial public offering in
1999. The Special Committee retained independent counsel to assist with its review. The Company voluntarily informed the Securities and Exchange Commission (the SEC) of its review. On August 11, 2006, the SEC informed the Company
that it had begun an informal inquiry into the Companys practices, procedures and disclosures related to its historic stock option grants. The Company is cooperating with the SEC in its informal inquiry.

On August 2, 2006, the Company was served with two virtually identical derivative complaints captioned Adolf, Derivatively on behalf of nominal defendant
Corinthian Colleges, Inc., v. David Moore, et al.,and, Gunkel, Derivatively on behalf of nominal defendant Corinthian Colleges, Inc., v. David Moore, et al. The complaints were filed in the Orange County California Superior Court against
David Moore, Paul St. Pierre, Frank McCord, Dennis Devereux, Beth Wilson, Dennis Beal, Jack Massimino, Linda Skladany, and Hank Adler. Each individual defendant is one of the Companys current or former officers and/or directors. The lawsuits
allege breach of fiduciary duty and unjust enrichment by the individual defendants related to the Companys past option grant practices. Three other similar derivative actions have been filed in Federal District Court for the Central District
of California, one entitled Pfeiffer, derivatively on behalf of Corinthian Colleges, Inc., v. David Moore, et al., the second entitled M. Alvin Edwards, III, derivatively on behalf of Corinthian Colleges, Inc., v. David Moore, et al.
and the third entitled Lori Close, derivatively on behalf of Corinthian Colleges Inc., v. David Moore et al. The federal cases allege violation of the Securities and Exchange Act of 1934, violation of the California Corporations
Code, unjust enrichment and return of unearned compensation, and breach of fiduciary duties, based on similar factual allegations to the Adolph and Gunkel cases. The Pfeiffer case is filed against the same defendants as the two
state court cases. The CloseandEdwards cases name the following individual defendants, all of whom are current and former directors and officers of the Company: Dave Moore, Jack Massimino, Ken Ord, William Murtagh, William Buchanan,
Robert Owen, Stan Mortensen, Mark Pelesh, Mary Barry, Beth Wilson, Dennis Devereux, Paul St. Pierre, Alice Kane, Terry Hartshorn, Linda Skladany, Hank Adler, Loyal Wilson and Mike Berry.

In addition to the legal proceedings and other matters described above, the Company is or may be a party to pending or threatened lawsuits related
primarily to services currently or formerly performed by the Company. Such cases and claims raise difficult and complex factual and legal issues and are subject to many uncertainties and complexities, including, but not limited to, the facts and
circumstances of each particular case or claim, the jurisdiction in which each suit is brought, and differences in applicable law.

As of
September 30, 2006, the Company had established aggregate reserves that are immaterial to the financial condition of the Company for all of the matters disclosed above, as well as for those additional matters where the liabilities are probable
and losses estimable but for which the Company does not believe the matters are reasonably likely to have a material impact on the results of operations or financial condition of the Company. The Company regularly evaluates the reasonableness of its
accruals and makes any adjustments considered necessary. Due to the uncertainty of the outcome of litigation and claims, the Company is unable to make a reasonable estimate of the upper end of the range of potential liability for these matters. Upon
resolution of any pending legal matters, the Company may incur charges in excess of presently established reserves. While any such charge could have a material adverse impact on the Companys results of operations in the period in which it is
recorded or paid, management does not believe that any such charge would have a material adverse effect on the Companys financial position or liquidity.

Other

As a result of the issues identified in the Companys review of its past stock option
practices, certain of the Companys option grants which were previously characterized as Incentive Stock Options in accordance with Internal Revenue Code Section 422 (ISOs) are now considered to be non-qualified stock options. The
Company may have liabilities related to employment taxes resulting from the gains its employees made on the exercise of such options. The Company may also have tax liabilities associated with previously deducted compensation related to exercised
stock options which may now be considered to be non-deductible under Section 162(m) of the Internal Revenue Code. The Company may be required to pay additional taxes and interest associated with employment taxes and previous compensation deductions
in connection with such exercised stock options under Section 162(m). The Company has accrued a liability for such contingent obligations. Although the Company has based its accrual on its current estimate of these liabilities, it cannot assure that
such liabilities will not exceed its accrual.

Note 9 - New Accounting Pronouncements

In June, 2006 the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48, Accounting for Uncertainty in Income
Taxes (FIN 48). FIN 48 clarifies, among other things, the accounting for uncertain income tax positions by prescribing a minimum probability threshold that a tax position must meet before a financial statement income tax benefit is
recognized. The minimum threshold is defined as a tax position, that based solely on its technical merits is more likely than not to be sustained upon examination by the relevant taxing authority. The tax benefit to be recognized is measured as the
largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. FIN 48 must be applied to all existing tax positions upon adoption. The cumulative effect of applying FIN 48 at adoption is required to
be reported separately as an adjustment to the opening balance of retained earnings in the year of adoption. FIN 48 is required to be implemented at the beginning of a fiscal year and is effective for Corinthian Colleges for fiscal 2008, although
early adoption is permitted. We have not yet determined the impact of adopting FIN 48 on our financial statements.

In May 2005, the FASB
issued Statement of Financial Accounting Standards No. 154, Accounting Changes and Error Corrections, (SFAS 154). This statement replaces APB Opinion No. 20, Accounting Changes, and FASB Statement
No. 3, Reporting Accounting Changes in Interim Financial Statements. SFAS 154 changes the requirements for the accounting for and reporting of a change in accounting principle. For Corinthian Colleges, SFAS 154 is effective for
accounting changes made beginning in fiscal year 2007.



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In September 2006, the FASB issued Statement of Financial Accounting Standards (SFAS)
No. 158, Employers Accounting for Defined Benefit Pension and Other Postretirement Plansan amendment of FASB Statements No. 87, 88, 106 and 132(R). SFAS No. 158 requires an employer to recognize the overfunded
or underfunded status of a defined benefit postretirement plan as an asset or liability in its statement of financial position and recognize changes in the funded status in the year in which the changes occur. SFAS No. 158 is effective for
fiscal years ending after December 15, 2006. The Company does not expect the adoption of SFAS 158 to have a material effect on its financial condition or results of operations.

Effective July 1, 2005, the Company early implemented Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when
Quantifying Misstatements in Current Year Financial Statements, (SAB 108). The early implementation is more fully discussed within Note 2 of the Companys previously filed Form 10-K.

Note 10 - Subsequent Events

Share Repurchase

On October 31, 2006, Corinthians Board of Directors approved a share repurchase of up to $50 million
of the Companys common stock. Corinthian plans to repurchase shares on the open market or in private transactions from time to time, depending on the companys cash balances, general business and market conditions, and other factors,
including alternative investment opportunities.

NASDAQ Staff Determination Letter

The Company received Nasdaq Staff Determination letters in October and November 2006 stating that the Companys common stock was subject to delisting
from the Nasdaq Global Select Market for failure to file its fiscal 2006 10-K and first quarter 2007 10-Q, respectively. The Company appeared before the Nasdaq Appeals Panel on November 9, 2006 regarding its failure to file the fiscal 2006 Form 10-K
and is awaiting its determination, which is expected within 30-45 days of the hearing date. Once the 10-K and 10-Q are filed, the Company expects Nasdaq to cease delisting proceedings.

Debt Covenant Waiver

As a result of the historical stock option matter and the related delay in filing this Form 10Q, the Company has obtained a debt covenant waiver related to its requirement to file financial information and related certifications. The waiver
has extended the requirement to provide June 30, 2006 and September 30, 2006 financial information and related certifications from October 3, 2006 and November 19, 2006, respectively to December 15, 2006.



|Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------

This Quarterly Report on Form 10-Q contains statements that may constitute forward-looking statements as defined by the U.S. Private
Securities Litigation Reform Act of 1995. Such forward-looking statements can be identified by the use of forward-looking terminology such as believes, estimates, anticipates, continues,
contemplates, expects, may, will, could, should or would, or the negatives thereof. Those statements are based on the intent, belief or expectation of the Company as
of the date of this Quarterly Report. Any such forward-looking statements are not guarantees of future performance and may involve risks and uncertainties that are outside the control of the Company. Results may differ materially from the
forward-looking statements contained herein as a result of changes in governmental regulations, including those governing student financial aid, the effect of competitive pressures on the Companys tuition pricing, integration risks associated
with acquired campuses and other factors, including those discussed under the headings entitled Governmental Regulation and Financial Aid and Risks Related to Our Business in the Companys Annual Report on Form 10-K
(File No. 0-25283) and other documents periodically filed with the Securities and Exchange Commission. The Company expressly disclaims any obligation to release publicly any updates or revisions to any forward-looking statement contained herein to
reflect any change in the Companys expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. The following discussion of the Companys results of operations and financial
condition should be read in conjunction with the interim unaudited condensed financial statements of the Company and the notes thereto included herein and in conjunction with the information contained in the Annual Report on Form 10-K.

Critical Accounting Policies and Estimates

Our
discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation
of these financial statements requires us to make estimates and judgments that affect the reported amounts on those financial statements. On an on-going basis, we evaluate our estimates, including, but not limited to, those related to our allowance
for doubtful accounts, intangible assets, deferred taxes, contingencies and stock-based compensation. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different conditions or if our
assumptions change.

We believe the following critical accounting policies affect our more significant judgments and estimates used in the
preparation of our condensed consolidated financial statements:

Revenue Recognition. Revenues consist primarily of
tuition and fees derived from courses taught in our colleges, schools, and training centers. Revenues from tuition and fees are recognized pro-rata (on a straight-line basis) over the relevant period attended by the student of the applicable course
or program. Our pro-rata revenue recognition policy for diploma schools calculates revenue on a daily basis for some of the Companys schools and using a mid-month convention for other schools. If a student withdraws from a course or program,
the paid but unearned portion of the



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students tuition is refunded. Textbook sales and other revenues are recognized as sales occur or services are performed and represent less than 10% of
total revenues. Prepaid tuition is the portion of payments received but not earned and is reflected as a current liability in the accompanying consolidated balance sheets as this amount is expected to be earned within the next year.

Students attending our post-secondary institutions enroll in either (i) diploma programs, which cover a specific area of training
over a discrete length of time (averaging nine months for such programs) or (ii) courses leading to an associates, bachelors or masters degree. Costs of programs or credit hours for courses
are clearly identified in our enrollment agreements. At the start of each students respective program or courses of study leading to a degree, the student executes an enrollment agreement which specifies the field of
study, the expected length of study, and the cost of the program or courses. We recognize revenue from tuition and fees on a straight-line basis over the relevant period attended by the student of the applicable course or program of study. If a
student withdraws from an institution, we cease the recognition of revenue and the paid but unearned portion of the students tuition is refunded. Additionally, to ensure the delivery of education has occurred, either attendance is taken or
academic events are conducted at appropriate intervals to ensure that the student is completing his or her respective field of study within the acceptable time period.

Allowance for Doubtful Accounts. We maintain an allowance for doubtful accounts for estimated losses resulting from the inability,
failure or refusal of our students to make required payments. We determine the adequacy of this allowance by regularly reviewing the accounts receivable aging and applying various expected loss percentages to certain student accounts receivable
categories based upon historical bad debt experience. We generally write off accounts receivable balances deemed uncollectible as they are sent to collection agencies. We offer a variety of payment plans to help students pay that portion of their
education expense not covered by financial aid programs. These balances are unsecured and not guaranteed. We believe our reserves are adequate; however, losses related to unpaid student balances could exceed the amounts we have reserved for bad
debts.

Many of our students in the U.S. participate in federally guaranteed student loan programs. The federally guaranteed
student loans are authorized by the Higher Education Act (HEA) of 1965 and are guaranteed by an agency of the federal government. The guaranteed loans are not guaranteed by us, and the guaranteed student loans cannot become an obligation
of ours. Accordingly, we do not record an obligation to repay any of the guaranteed loans that are not repaid by our former students and we do not record either a contingent obligation or an allowance for future obligations as a result of student
defaults of federally guaranteed student loans.

The guarantee of student loans is provided by an agency of the federal
government, not by us. If an institutions former students default rate on guaranteed loans (Cohort Default Rate) equals or exceeds 25% for three consecutive years, the institution may lose participation eligibility in the guaranteed loan
program and its students would be denied access to the guaranteed loan program. Our institutions Cohort Default Rates act as a gatekeeper to their eligibility to participate in the federal student financial aid programs. We have no obligation
to repay any of the federally guaranteed loans that our former students default upon, even if the Cohort Default Rates of our students exceed permitted levels. Rather, if the Cohort Default Rates at a particular institution exceed 25% for three
consecutive years, the institutions students may lose eligibility to receive federal student financial aid.

Goodwill and Intangible Assets. We have significant goodwill and other intangible assets. Goodwill represents the excess of the cost over the fair market value of net assets acquired, including identified intangible assets. We
consider a number of factors, including valuations and appraisals from independent valuation firms, in determining the amounts that are assignable to other intangible assets, such as curriculum, accreditation, and trade names. We, however, are
ultimately responsible for the valuations. The fair value of identified intangible assets is derived using accepted valuation methodologies, including cost, market, and income approaches, as appropriate, following consultations with valuation firms
and in accordance with SFAS No. 141 Business Combinations (SFAS No. 141) and requirements set forth by the Uniform Standards of Professional Appraisal Practice.

Effective July 1, 2002, we adopted SFAS No. 142, Goodwill and Other Intangible Assets (SFAS
No. 142). This standard changed the accounting for goodwill and other indefinite-lived intangible assets from an amortization method to an impairment-only approach. As of July 1, 2002, we ceased amortization of goodwill recorded in
conjunction with past business combinations. In addition, we conducted a review of our other identifiable intangible assets and determined that accreditation and trade names met the indefinite life criteria outlined in SFAS No. 142. Our review
considered analysis of all pertinent factors, including the expected use of the asset, any legal, regulatory, or contractual provisions that may limit the useful life, the effects of obsolescence, demand, competition, and other economic factors, and
the level of maintenance expenditures required to obtain the expected future cash flows from the



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asset. Accordingly, we also ceased amortization of the accreditation and trade names as of July 1, 2002. Curricula continue to be amortized over their
useful lives ranging generally from three to ten years and the amortization is included in general and administrative expenses in the accompanying consolidated statements of operations.

Under SFAS No. 142, goodwill is tested annually or more frequently if circumstances indicate potential impairment, by comparing its
fair value to its carrying amount at the reporting unit level as defined by SFAS No. 142. We determined the fair value of our reporting units using the income approach of valuation that includes discounted cash flow as well as other generally
accepted valuation methodologies. To the extent the fair value of a reporting unit is less that the carrying amount of its assets, we record an impairment charge in the consolidated statements of operations.

Also, under SFAS No. 142, indefinite-lived intangible assets are tested annually or more frequently if circumstances indicate
potential impairment, by comparing their fair values to their carrying amounts. To the extent the fair value of an intangible asset is less than its carrying amount, we record an impairment charge in the consolidated statements of operations. For
instance, if we were to discontinue the use of a trade name or lose accreditation at one or more of our acquired schools to which we have ascribed value for trade names and accreditation, we would test the amounts we have allocated to such assets
for impairment. Such testing would include estimating the future cash flows expected to be received from the trade names and accreditation and comparing them to their carrying values. If our estimate of the present value of these future cash flows
were below the carrying values of the related assets, we would consider the assets to be impaired and take a charge against the amounts we had allocated to trade names and accreditation.

The determination of related estimated useful lives of intangible assets and whether or not these intangible assets are impaired involves
significant judgment. Although we believe our goodwill and intangible assets are fairly stated, changes in strategy or market conditions could significantly impact these judgments and require adjustments to asset balances.

Deferred Taxes. We currently have deferred income tax assets which are subject to periodic recoverability assessments. Valuation
allowances are established, when necessary, to reduce deferred tax assets to the amount that more likely than not will be realized. Realization of our deferred income tax assets is principally dependent upon achievement of projected future taxable
income offset by deferred income tax liabilities. We evaluate the realizability of our deferred income tax assets annually.

Contingencies.In the ordinary conduct of the business, we are subject to occasional lawsuits, investigations and claims, including, but not limited to, claims involving students and graduates and employment-related matters. When we
are aware of a claim or potential claim, we assess the likelihood of any loss or exposure. If it is probable that a loss will result and the amount of the loss can reasonably estimated, we record a liability for the loss. If the loss is not probable
or the amount of the loss cannot be reasonably estimated, we disclose the nature of the specific claim if the likelihood of a potential loss is reasonably possible and the amount involved is material. There can be no assurance that the ultimate
outcome of any of the matters disclosed will not have a material adverse effect on our financial condition or results of operations.

Stock-based Compensation. In fiscal 2006, we adopted Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation, in accordance with the modified prospective transition method
prescribed in SFAS No. 148, Accounting for Stock-Based CompensationTransition and Disclosureand began recognizing compensation expense for stock options which vested during the first quarter of fiscal 2006.

Results of Operations

Comparisons of results of
operations between the first three months of fiscal 2007 and the first three months of fiscal 2006 are affected by the opening of three branch campuses in fiscal 2006.



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The following table summarizes our operating results as a percentage of total revenue for the periods
indicated.



|                                          |  |                                 |   |  |       |  
|----------------------------------------- |  | ------------------------------- | - |  | ----- | -
|                                          |  | Three Months EndedSeptember 30, |  
|                                          |  | 2006                            |   |  | 2005  |  
|Statement of Operations Data (Unaudited): |  |                                 |   |  |       |  
|Net revenues                              |  | 100.0                           | % |  | 100.0 | %
|Operating expenses:                       |  |                                 |   |  |       |  
|Educational services                      |  | 59.4                            |   |  | 58.3  |  
|General and administrative                |  | 12.1                            |   |  | 10.0  |  
|Marketing and admissions                  |  | 27.7                            |   |  | 26.7  |  
|                                          |  |                                 |   |  |       |  
|Total operating expenses                  |  | 99.2                            |   |  | 95.0  |  
|Income from operations                    |  | 0.8                             |   |  | 5.0   |  
|Interest (income)                         |  | (0.6                            | ) |  | (0.5  | )
|Interest expense                          |  | 0.3                             |   |  | 0.4   |  
|Other (income) expense                    |  | 0.1                             |   |  | 0.0   |  
|                                          |  |                                 |   |  |       |  
|Income before provision for income taxes  |  | 1.0                             |   |  | 5.1   |  
|Provision for income taxes                |  | 0.4                             |   |  | 2.0   |  
|                                          |  |                                 |   |  |       |  
|Net income                                |  | 0.6                             | % |  | 3.1   | %
|                                          |  |                                 |   |  |       |  

Three Months Ended September 30, 2006 Compared to Three Months Ended September 30, 2005

Net Revenues.Net revenues decreased $4.5 million, or 1.9%, from $236.3 million in the first quarter of fiscal 2006 to $231.8
million in the first quarter of fiscal 2007, due primarily to the sale of our corporate training division, CDI Education, in October 2005. Excluding our corporate training division , CDI Education, which was sold in October 2005, revenue increased
0.4% in the first quarter of fiscal 2007 when compared to the first quarter of fiscal 2006 due to a 4.4% increase in the average tuition rate per student partially offset by a 4.1% decrease in average student population during the period. At
September 30, 2006, student population was 67,143, compared with 68,262 at September 30, 2005. Total student starts decreased 1.3% to 26,402 for the first quarter of fiscal 2006 when compared to the first quarter of last year.

Educational Services.Educational services expenses include direct operating expenses of the schools consisting primarily of payroll and
payroll related expenses, rents, occupancy costs, supply expenses, bad debt expense and other educational related expenses. Educational services expenses for both the first quarter of fiscal 2007 and for the first quarter of fiscal 2006 were $137.8
million. As a percentage of net revenues, educational services expenses increased from 58.3% of revenues in the first quarter of fiscal 2006 to 59.4% of revenues in the first quarter of fiscal 2007. The increase, as a percent of revenues, was due
primarily to a decrease in net revenue. As of September 30, 2006, we had approximately 74 square feet of school space per student as compared to 66 square feet of school space per student as of September 30, 2005. As the costs of operating
our facilities are largely fixed in nature, this lower level of capacity utilization negatively affected educational services expenses as a percent of revenues. Bad debt expense for the first quarter of fiscal 2007 amounted to $12.7 million or 5.5%
of net revenues, compared to $13.5 million or 5.7% of net revenues for the first quarter of fiscal 2006. The reduction in bad debt was a result of increased collections and recoveries, both directly from students and former students and through the
sale of a portion of our receivable portfolio to third parties. We have periodically sold receivables to third parties in the past and expect to continue to do so in the future, the timing and magnitude of which affects bad debt expense during any
given period. Additionally, during the first quarter of 2007, 21 programs from current curricula were added to our schools; 19 programs were added in the U.S. and 2 were added in Canada.

General and Administrative.General and administrative expenses include corporate compensation expenses, headquarters office rents and occupancy
expenses, professional fees and other support related expenses. General and administrative expenses increased $4.3 million, or 18.1%, from $23.7 million in the first quarter of fiscal 2006 to $27.9 million in the first quarter of fiscal 2007. As a
percentage of net revenues, general and administrative expenses increased from 10.0% of revenues in the first quarter of fiscal 2006 to 12.1% of revenues in the first quarter of fiscal 2007 primarily as a result of increases in travel related costs
associated with training and implementation of a new admissions process, and outside professional service fees of approximately $1.8 million related to the internal options investigation.

Marketing and Admissions.Marketing and admissions expenses consist primarily of direct-response and other advertising expenses, payroll and
payroll related expenses, promotional materials and other related marketing costs. Marketing and admissions expenses increased $1.2 million, or 1.9%, from $63.1 million in the first quarter of fiscal 2006 to $64.3 million in the first quarter of
fiscal 2007. As a percentage of net revenues, marketing and admissions expenses increased from 26.7% of revenues in the first quarter of fiscal 2006 to 27.7% of revenues for the first quarter of fiscal 2007 primarily as a result of increases in
advertising costs.



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Income from Operations.Income from operations decreased 84.4% from $11.8 million in the first
quarter of fiscal 2006 to $1.8 million in the first quarter of fiscal 2007. As a percentage of net revenues, income from operations decreased from 5.0% of revenues in the first quarter of fiscal 2006 to 0.8% of revenues for the first quarter of
fiscal 2007. The decrease in income from operations, as a percent of revenues, is a result of the factors discussed above.

Interest
(Income) Expense, net.Interest income (net of interest expense of $0.8 million) amounted to $0.7 million in the first quarter of fiscal 2007. In the same period of the prior year, interest income (net of interest expense of $0.9 million)
amounted to $0.3 million. The increase in net interest income compared to the prior year is primarily due to an increase in interest income due to an increase in investment yield.

Provision for Income Taxes. The effective income tax rate was 39.5% of income before taxes in the first quarter of fiscal 2007 compared to 39.0%
in the first quarter of fiscal 2006.

Net Income. Net income decreased $6.0 million from $7.4 million in the first quarter of fiscal
2006 to $1.4 million in the first quarter of fiscal 2007. As a percentage of net revenues, net income decreased from 3.1% of revenues in the first quarter of fiscal 2006 to 0.6% of revenues for the first quarter of fiscal 2007 for the reasons
previously discussed.

Income per Share. Diluted earnings per common share for the first of fiscal 2007 decreased 75.0% to $0.02 per
diluted common share compared to $0.08 per diluted common share for the first quarter of fiscal 2006.

Seasonality and Other Factors Affecting Quarterly
Results

Our net revenues normally fluctuate as a result of seasonal variations in our business. Student population varies as a result
of new student enrollments and student attrition. Historically, our colleges, schools, and training centers have had lower revenues in the first fiscal quarter than in the remainder of the year. Our expenses, however, do not vary as significantly as
student population and revenues. We expect quarterly fluctuations in operating results to continue as a result of seasonal enrollment patterns. More importantly, quarterly results may be impacted based on the timing and extent of new acquisitions,
new branch openings, relocations and remodels, new program adoptions and increased high school enrollments. The operating results for any quarter are not necessarily indicative of the results for any future period.

Liquidity and Capital Resources

On June 8,
2005, we amended and restated our credit facility. The amount of the facility remained at $235 million, of which $175 million is a domestic facility and $60 million is a Canadian facility. The second amended and restated credit agreement expires in
2010. The second amended and restated credit agreement has been established to provide available funds for acquisitions, to fund general corporate purposes, and to provide for letters of credit issuances of up to $50 million for domestic letters of
credit and $20 million for Canadian letters of credit. Borrowings under the agreement bear interest at several pricing alternatives available to us, including Eurodollar and adjusted reference or base rates. The domestic base rate is defined as the
higher of the Federal Funds rate plus 1/2 of 1% or the Bank of America prime rate. The Canadian base rate is defined as the higher of the average rate for 30 day Canadian Dollar bankers acceptances plus 3/4 of 1% or the Bank of America Canada
prime rate. The agreement contains customary affirmative and negative covenants including financial covenants requiring the maintenance of consolidated net worth, fixed charge coverage ratios, leverage ratios, and a DOE financial responsibility
composite score ratio. As of September 30, 2006, we were in compliance with all of the covenants. As of September 30, 2006, the credit facility had borrowings outstanding of $31.4 million and approximately $12.3 million was used to support
standby letters of credit. The second amended and restated credit agreement is secured by the stock of our significant operating subsidiaries and it is guaranteed by our present and future significant operating subsidiaries.

Working capital amounted to $52.3 million as of September 30, 2006 and $53.9 million as of June 30, 2006 and the current ratio was 1.3:1 for
both periods.

Cash flows provided by operating activities amounted to $17.9 million in the first three months of fiscal 2007 compared to
$25.0 million provided by operating activities in the same period of fiscal 2006. The decrease in cash provided by operating activities for the first three months of fiscal 2007 compared to the first three months of fiscal 2006 was primarily due to
a reduction in net income of $6.0 million in the first three months of fiscal 2007 when compared to the first three months of fiscal 2006.



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Cash flows used in investing activities amounted to $38.8 million in the first three months of fiscal
2007 compared to cash flows used in investing activities of $44.4 million in the first three months of fiscal 2006. Cash was used in the three months of fiscal 2007 to invest in short term investments for $22.0 million and capital expenditures net
of disposals of $16.9 million. Cash used in investing activities in the first three months of fiscal 2006 was primarily due to investments of $33.3 million and capital expenditures of $11.0 million. Capital expenditures in fiscal 2007 were incurred
primarily for relocations, remodels and enlargements of existing campuses and to fund information systems expenditures. We expect capital expenditures to be between $55 million and $65 million for fiscal 2007.

Cash flows provided by financing activities in the first three months of fiscal 2007 amounted to approximately $0.5 million compared to cash flows
provided by financing activities of $1.6 million for the first three months of fiscal 2006. The decrease in cash provided by financing activities in the first three months of fiscal 2007 compared to the same period last year was due primarily to a
decrease in proceeds from the exercise of stock options in the first three months of fiscal 2007 compared to the first three months of fiscal 2006. We funded our cash needs through cash flow provided from operations.

Update Regarding Regulatory and Accreditation Matters

As the Company has previously reported, the Companys National Institute of Technology (NIT) campus in San Antonio, Texas had received a Show Cause order from ACCSCT. In a letter dated June 9, 2006, ACCSCT continued the
Show Cause order at the NIT campus in San Antonio.

In a letter from ACCSCT dated June 9, 2006, the Company was informed of a Show Cause
action regarding our Bryman College campus at LA Wilshire. In another letter from ACCSCT dated June 27, 2006, the Company was informed of a Show Cause action regarding our NIT campus in Dearborn, Michigan.



|Item 3. | Quantitative and Qualitative Disclosure about Market Risk
|------- | ---------------------------------------------------------

We are exposed to the impact of interest rate changes and foreign currency fluctuations. We do not utilize interest rate swaps, forward or option contracts on foreign currencies or commodities, or other types of derivative financial
instruments to manage these risks.

Interest Rate Exposure.As of September 30, 2006, our only assets or liabilities subject to
risks from interest rate changes are (i) mortgage debt and debt under the credit facility in the aggregate amount of $32.5 million and capital lease obligations of $14.4 million, and (ii) student notes receivable, net, in the aggregate
amount of $5.9 million. Our mortgage debt, capital lease obligations and student notes receivable are all at fixed interest rates. We do not believe we are subject to material risks from reasonably possible near-term changes in market interest
rates.

Foreign Currency Exposure.A portion of our operations consists of an investment in a foreign subsidiary whose functional
currency is the Canadian dollars. Our investment in our foreign operations as of September 30, 2006 was CAD $47.0 million which includes borrowings outstanding under the credit facility of CAD $35.0 million. As a result, the consolidated
financial results have been and could continue to be affected by changes in foreign currency exchange rates.



|Item 4. | Controls and Procedures
|------- | -----------------------

Evaluation of Disclosure Controls and
Procedures

We carried out under the supervision and with the participation of our management, including our Chief Executive Officer and
Chief Financial Officer, an evaluation of the effectiveness of our disclosure controls and procedures, as such term is defined in Exchange Act Rule 13a-15(e), as of the end of the period covered by this report and concluded that those controls and
procedures were effective.



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Changes in Internal Controls Over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended September 30, 2006 that have materially affected or
are reasonably likely to materially affect our internal control over financial reporting.

It should be noted that any system of controls,
however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system will be met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood
of future events. Because of these and other inherent limitations of control systems, there is only the reasonable assurance that our controls will succeed in achieving their goals under all potential future conditions.

PART II - OTHER INFORMATION



|Item 1. | Legal Proceedings
|------- | -----------------

See Note 8 to the attached
condensed consolidated financial statements regarding Commitments and Contingencies.



|Item 1A. | Risk Factors
|-------- | ------------

There have been no material changes
in the risk factors disclosed in Item 1A of our Annual Report on Form 10-K for the year ended June 30, 2006.



|Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds
|------- | -----------------------------------------------------------

None



|Item 3. | Defaults Upon Senior Securities
|------- | -------------------------------

None



|Item 4. | Submission of Matters to a Vote of Security Holders
|------- | ---------------------------------------------------

None



|Item 5. | Other Information
|------- | -----------------

None



|Item 6. | Exhibits
|------- | --------

(a) Exhibits:



|             |  |                                                                                                                       
|------------ |  | ----------------------------------------------------------------------------------------------------------------------
|Exhibit 31.1 |  | Chief Executive Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                       
|             | 
|Exhibit 31.2 |  | Chief Financial Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                       
|             | 
|Exhibit 32.1 |  | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|             | 
|Exhibit 32.2 |  | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002



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CORINTHIAN COLLEGES, INC. AND SUBSIDIARIES

SIGNATURES

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



|                  |  |  |  |                                      
|----------------- |  |  |  | -------------------------------------
|                  |  |  |  | CORINTHIAN COLLEGES, INC.            
|                  |  | 
|November 22, 2006 |  |  |  | /s/    JACK D. MASSIMINO             
|                  |  |  |  | Jack D. Massimino                    
|                  |  |  |  | President and Chief Executive Officer
|                  |  |  |  | (Principal Executive Officer)        



|                  |  |  |  |                                                     
|----------------- |  |  |  | ----------------------------------------------------
|November 22, 2006 |  |  |  | /s/    KENNETH S. ORD                               
|                  |  |  |  | Kenneth S. Ord                                      
|                  |  |  |  | Executive Vice President and Chief Financial Officer
|                  |  |  |  | (Principal Financial Officer)                       



|                  |  |  |  |                                                   
|----------------- |  |  |  | --------------------------------------------------
|November 22, 2006 |  |  |  | /s/    ROBERT C. OWEN                             
|                  |  |  |  | Robert C. Owen                                    
|                  |  |  |  | Senior Vice President and Chief Accounting Officer
|                  |  |  |  | (Principal Accounting Officer)                    



19