##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE
COMMISSION

Washington, D.C. 20549


Form 10-Q

|   |  |                                                                                             
|-- |  | --------------------------------------------------------------------------------------------
|þ  |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR
    15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|  
|   |  | For the quarterly period ended
    December 31, 2003                                        
|  
|or
|  
|o  |  | 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 þ          No o

Indicate by check mark whether the registrant is
an accelerated filer (as defined in Rule 12b-2 of the
Exchange
Act.)     Yes þ          No o

At January 26, 2004, there were 44,863,019
shares of Common Stock of the Registrant outstanding.



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TABLE OF CONTENTS



|                                |                                                                                               |  |  |  |  |  |  | 
|------------------------------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I -- FINANCIAL INFORMATION
|                                | Item 1. Financial Statements                                                                 
|                                | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                                | Item 3. Quantitative and Qualitative Disclosure about Market Risk                            
|                                | Item 4. Controls and Procedures                                                              
|PART II -- OTHER INFORMATION   
|                                | Item 1. Legal Proceedings                                                                    
|                                | Item 2. Changes in Securities and Use of Proceeds                                            
|                                | Item 3. Defaults Upon Senior Securities                                                      
|                                | Item 4. Submission of Matters to a Vote of Security Holders                                  
|                                | Item 5. Other Information                                                                    
|                                | Item 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURES                     
|EXHIBIT 3.3                    
|EXHIBIT 10.68                  
|EXHIBIT 31.1                   
|EXHIBIT 31.2                   
|EXHIBIT 32.1                   
|EXHIBIT 32.2                   



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##### Table of Contents



CORINTHIAN COLLEGES, INC. AND
SUBSIDIARIES

INDEX TO FORM 10-Q

For the Second Quarter Ended December 31,
2003


|                                   |         |                                                                                                                                   |                                                                                           |          |   |    | 
|---------------------------------- | ------- | --------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------- | -------- | - | -- | 
|                                   |         |                                                                                                                                   |                                                                                           | Page No.
|                                   |         |                                                                                                                                   |                                                                                           |         
|PART I  FINANCIAL
    INFORMATION |         |                                                                                                                                   |                                                                                           |         
|                                   | Item 1. |                                                                                                                                   | Financial Statements                                                                      |          |   |    | 
|                                   |         | Condensed Consolidated Balance Sheets at
    June 30, 2003 and December 31, 2003 (Unaudited)                                      |                                                                                           |          | 1 |   
|                                   |         | Condensed Consolidated Statements of Operations
    for the three and six months ended December 31, 2002 and
    2003 (Unaudited) |                                                                                           |          | 2 |   
|                                   |         | Condensed Consolidated Statements of Cash Flows
    for the six months ended December 31, 2002 and 2003
    (Unaudited)           |                                                                                           |          | 3 |   
|                                   |         | Notes to Unaudited Condensed Consolidated
    Financial Statements                                                                |                                                                                           |          | 4 |   
|                                   | Item 2. |                                                                                                                                   | Managements Discussion and Analysis of
    Financial Condition and Results of Operations |          |   | 11 | 
|                                   | Item 3. |                                                                                                                                   | Quantitative and Qualitative Disclosure About
    Market Risk                             |          |   | 18 | 
|                                   | Item 4. |                                                                                                                                   | Controls and Procedures                                                                   |          |   | 18 | 
|PART II  OTHER
    INFORMATION    |         |                                                                                                                                   |                                                                                           |         
|                                   | Item 1. |                                                                                                                                   | Legal Proceedings                                                                         |          |   | 20 | 
|                                   | Item 2. |                                                                                                                                   | Changes in Securities and Use of Proceeds                                                 |          |   | 20 | 
|                                   | Item 3. |                                                                                                                                   | Defaults Upon Senior Securities                                                           |          |   | 20 | 
|                                   | Item 4. |                                                                                                                                   | Submission of Matters to a Vote of Security
    Holders                                   |          |   | 20 | 
|                                   | Item 5. |                                                                                                                                   | Other Information                                                                         |          |   | 21 | 
|                                   | Item 6. |                                                                                                                                   | Exhibits and Reports on Form 8-K                                                          |          |   | 22 | 
|SIGNATURES                         |         |                                                                                                                                   | 23                                                                                        |         



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##### Table of Contents






PART I  FINANCIAL
INFORMATION




Item 1.     Financial
Statements

CORINTHIAN COLLEGES, INC. AND
SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE
SHEETS

|                                                                |                                                                                                                                                 |                                                                                                                                                          |        |              |         |  |         |         |         | 
|--------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------- | ------ | ------------ | ------- |  | ------- | ------- | ------- | 
|                                                                |                                                                                                                                                 | June 30,                                                                                                                                                 |        | December 31,
|                                                                |                                                                                                                                                 | 2003                                                                                                                                                     |        | 2003        
|                                                                |                                                                                                                                                 |                                                                                                                                                          |        |             
|                                                                |                                                                                                                                                 |                                                                                                                                                         
|                                                                |                                                                                                                                                 | (In thousands)                                                                                                                                          
|                                                                |                                                                                                                                                 | (Unaudited)                                                                                                                                             
|ASSETS                                                          |                                                                                                                                                 |                                                                                                                                                          |        |              |         |  |         |        
|CURRENT ASSETS:                                                 |                                                                                                                                                 |                                                                                                                                                          |        |              |         |  |         |        
|                                                                | Cash and cash equivalents                                                                                                                       |                                                                                                                                                          | $      | 35,901       |         |  | $       | 23,098  |        
|                                                                | Restricted cash                                                                                                                                 |                                                                                                                                                          |        | 10           |         |  |         | 10      |        
|                                                                | Marketable securities                                                                                                                           |                                                                                                                                                          |        | 3,897        |         |  |         |        |        
|                                                                | Accounts receivable, net of allowance for
    doubtful accounts of $10,362 and $18,562 at June 30, 2003
    and December 31, 2003, respectively |                                                                                                                                                          |        | 36,145       |         |  |         | 52,830  |        
|                                                                | Student notes receivable, net of allowance for
    doubtful accounts of $313 and $427 at June 30, 2003 and
    December 31, 2003, respectively  |                                                                                                                                                          |        | 848          |         |  |         | 853     |        
|                                                                | Deferred income taxes                                                                                                                           |                                                                                                                                                          |        | 10,538       |         |  |         | 15,156  |        
|                                                                | Prepaid expenses and other current assets                                                                                                       |                                                                                                                                                          |        | 21,356       |         |  |         | 30,209  |        
|                                                                |                                                                                                                                                 |                                                                                                                                                          |        |              |         |  |         |        
|                                                                |                                                                                                                                                 | Total current assets                                                                                                                                     |        |              | 108,695 |  |         |         | 122,156 | 
|PROPERTY AND EQUIPMENT, net                                     |                                                                                                                                                 |                                                                                                                                                          | 77,887 |              |         |  | 105,942 |        
|OTHER ASSETS:                                                   |                                                                                                                                                 |                                                                                                                                                          |        |              |         |  |         |        
|                                                                | Goodwill, net                                                                                                                                   |                                                                                                                                                          |        | 102,565      |         |  |         | 212,139 |        
|                                                                | Other intangibles, net                                                                                                                          |                                                                                                                                                          |        | 33,885       |         |  |         | 33,168  |        
|                                                                | Student notes receivable, net of allowance for
    doubtful accounts of $608 and $825 at June 30, 2003 and
    December 31, 2003, respectively  |                                                                                                                                                          |        | 2,001        |         |  |         | 2,343   |        
|                                                                | Deposits and other assets                                                                                                                       |                                                                                                                                                          |        | 4,365        |         |  |         | 5,964   |        
|                                                                |                                                                                                                                                 |                                                                                                                                                          |        |              |         |  |         |        
|                                                                |                                                                                                                                                 | TOTAL ASSETS                                                                                                                                             |        | $            | 329,398 |  |         | $       | 481,712 | 
|                                                                |                                                                                                                                                 |                                                                                                                                                          |        |              |         |  |         |        
|LIABILITIES AND STOCKHOLDERS
    EQUITY                        |                                                                                                                                                 |                                                                                                                                                          |        |              |         |  |         |        
|CURRENT LIABILITIES:                                            |                                                                                                                                                 |                                                                                                                                                          |        |              |         |  |         |        
|                                                                | Accounts payable                                                                                                                                |                                                                                                                                                          | $      | 12,592       |         |  | $       | 17,289  |        
|                                                                | Accrued compensation and related liabilities                                                                                                    |                                                                                                                                                          |        | 26,182       |         |  |         | 27,075  |        
|                                                                | Accrued expenses                                                                                                                                |                                                                                                                                                          |        | 6,426        |         |  |         | 10,674  |        
|                                                                | Prepaid tuition                                                                                                                                 |                                                                                                                                                          |        | 21,161       |         |  |         | 42,107  |        
|                                                                | Current portion of capital lease obligations                                                                                                    |                                                                                                                                                          |        | 186          |         |  |         | 1,495   |        
|                                                                | Current portion of long-term debt                                                                                                               |                                                                                                                                                          |        | 110          |         |  |         | 199     |        
|                                                                |                                                                                                                                                 |                                                                                                                                                          |        |              |         |  |         |        
|                                                                |                                                                                                                                                 | Total current liabilities                                                                                                                                |        |              | 66,657  |  |         |         | 98,839  | 
|LONG-TERM CAPITAL LEASE OBLIGATIONS, net of
    current portion |                                                                                                                                                 |                                                                                                                                                          | 12,586 |              |         |  | 12,496  |        
|LONG-TERM DEBT, net of current portion                          |                                                                                                                                                 |                                                                                                                                                          | 1,384  |              |         |  | 48,707  |        
|DEFERRED INCOME TAXES                                           |                                                                                                                                                 |                                                                                                                                                          | 14,185 |              |         |  | 14,185  |        
|OTHER LIABILITIES                                               |                                                                                                                                                 |                                                                                                                                                          | 245    |              |         |  | 2,589   |        
|COMMITMENTS AND CONTINGENCIES                                   |                                                                                                                                                 |                                                                                                                                                          |       |              |         |  |        |        
|STOCKHOLDERS EQUITY:                                           |                                                                                                                                                 |                                                                                                                                                          |        |              |         |  |         |        
|                                                                | Common Stock, $0.0001 par value:                                                                                                                |                                                                                                                                                          |        |              |         |  |         |         |        
|                                                                |                                                                                                                                                 | Common Stock, 120,000 shares authorized and
    43,822 shares and 44,747 issued and outstanding at
    June 30, 2003 and December 31, 2003, respectively |        |              | 4       |  |         |         | 4       | 
|                                                                | Additional paid-in capital                                                                                                                      |                                                                                                                                                          |        | 84,373       |         |  |         | 113,692 |        
|                                                                | Retained earnings                                                                                                                               |                                                                                                                                                          |        | 149,964      |         |  |         | 191,284 |        
|                                                                | Accumulated other comprehensive income (loss)                                                                                                   |                                                                                                                                                          |        |             |         |  |         | (84     | )      
|                                                                |                                                                                                                                                 |                                                                                                                                                          |        |              |         |  |         |        
|                                                                |                                                                                                                                                 | TOTAL STOCKHOLDERS EQUITY                                                                                                                               |        |              | 234,341 |  |         |         | 304,896 | 
|                                                                |                                                                                                                                                 |                                                                                                                                                          |        |              |         |  |         |        
|                                                                |                                                                                                                                                 | TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                               |        | $            | 329,398 |  |         | $       | 481,712 | 
|                                                                |                                                                                                                                                 |                                                                                                                                                          |        |              |         |  |         |        

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

1



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##### Table of Contents



CORINTHIAN COLLEGES, INC. AND
SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS

|                                                          |                                                      |                                       |         |                  |         |      |         |         |         |   |         |         |         |   |         |         |         | 
|--------------------------------------------------------- | ---------------------------------------------------- | ------------------------------------- | ------- | ---------------- | ------- | ---- | ------- | ------- | ------- | - | ------- | ------- | ------- | - | ------- | ------- | ------- | 
|                                                          |                                                      |                                       |         |                 
|                                                          |                                                      | Three Months Ended                    |         | Six Months Ended
|                                                          |                                                      | December 31,                          |         | December 31,    
|                                                          |                                                      |                                       |         |                 
|                                                          |                                                      | 2002                                  |         | 2003             |         | 2002 |         | 2003   
|                                                          |                                                      |                                       |         |                  |         |      |         |        
|                                                          |                                                      |                                      
|                                                          |                                                      | (In thousands, except per share data)
|                                                          |                                                      | (Unaudited)                          
|NET REVENUES                                              |                                                      | $                                     | 127,191 |                  |         | $    | 200,648 |         |         | $ | 242,816 |         |         | $ | 369,811 |        
|OPERATING EXPENSES:                                       |                                                      |                                       |         |                  |         |      |         |         |         |   |         |         |         |   |         |        
|                                                          | Educational services                                 |                                       |         | 60,283           |         |      |         | 103,594 |         |   |         | 118,179 |         |   |         | 188,516 |        
|                                                          | General and administrative                           |                                       |         | 14,578           |         |      |         | 16,936  |         |   |         | 24,820  |         |   |         | 31,610  |        
|                                                          | Marketing and advertising                            |                                       |         | 25,323           |         |      |         | 43,034  |         |   |         | 49,631  |         |   |         | 79,923  |        
|                                                          |                                                      |                                       |         |                  |         |      |         |         |         |   |         |         |         |   |         |        
|                                                          |                                                      | Total operating expenses              |         |                  | 100,184 |      |         |         | 163,564 |   |         |         | 192,630 |   |         |         | 300,049 | 
|                                                          |                                                      |                                       |         |                  |         |      |         |         |         |   |         |         |         |   |         |        
|INCOME FROM OPERATIONS                                    |                                                      |                                       | 27,007  |                  |         |      | 37,084  |         |         |   | 50,186  |         |         |   | 69,762  |        
|                                                          | Interest (income)                                    |                                       |         | (259             | )       |      |         | (360    | )       |   |         | (544    | )       |   |         | (622    | )      
|                                                          | Interest expense                                     |                                       |         | 265              |         |      |         | 763     |         |   |         | 751     |         |   |         | 1,369   |        
|                                                          | Other (income) expense                               |                                       |         |                 |         |      |         | (22     | )       |   |         |        |         |   |         | (38     | )      
|                                                          | Minority interest in income (loss) of
    subsidiary |                                       |         |                 |         |      |         | 10      |         |   |         |        |         |   |         | (43     | )      
|                                                          |                                                      |                                       |         |                  |         |      |         |         |         |   |         |         |         |   |         |        
|INCOME BEFORE PROVISION FOR INCOME TAXES                  |                                                      |                                       | 27,001  |                  |         |      | 36,693  |         |         |   | 49,979  |         |         |   | 69,096  |        
|                                                          | Provision for income taxes                           |                                       |         | 10,855           |         |      |         | 14,751  |         |   |         | 20,092  |         |   |         | 27,776  |        
|                                                          |                                                      |                                       |         |                  |         |      |         |         |         |   |         |         |         |   |         |        
|NET INCOME                                                |                                                      | $                                     | 16,146  |                  |         | $    | 21,942  |         |         | $ | 29,887  |         |         | $ | 41,320  |        
|                                                          |                                                      |                                       |         |                  |         |      |         |         |         |   |         |         |         |   |         |        
|Income per common share:                                  |                                                      |                                       |         |                  |         |      |         |         |         |   |         |         |         |   |         |        
|                                                          | Basic                                                |                                       | $       | 0.37             |         |      | $       | 0.49    |         |   | $       | 0.69    |         |   | $       | 0.94    |        
|                                                          |                                                      |                                       |         |                  |         |      |         |         |         |   |         |         |         |   |         |        
|                                                          | Diluted                                              |                                       | $       | 0.35             |         |      | $       | 0.47    |         |   | $       | 0.65    |         |   | $       | 0.88    |        
|                                                          |                                                      |                                       |         |                  |         |      |         |         |         |   |         |         |         |   |         |        
|Weighted average number of common shares
    outstanding: |                                                      |                                       |         |                  |         |      |         |         |         |   |         |         |         |   |         |        
|                                                          | Basic                                                |                                       |         | 43,384           |         |      |         | 44,463  |         |   |         | 43,203  |         |   |         | 44,183  |        
|                                                          |                                                      |                                       |         |                  |         |      |         |         |         |   |         |         |         |   |         |        
|                                                          | Diluted                                              |                                       |         | 46,008           |         |      |         | 46,975  |         |   |         | 45,825  |         |   |         | 46,865  |        
|                                                          |                                                      |                                       |         |                  |         |      |         |         |         |   |         |         |         |   |         |        

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

2



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##### Table of Contents



CORINTHIAN COLLEGES, INC. AND
SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS

|                                                                            |                                                                                                     |                                                                          |                                   |         |         |        |         |          |          |        |  
|--------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------ | --------------------------------- | ------- | ------- | ------ | ------- | -------- | -------- | ------ | -
|                                                                            |                                                                                                     |                                                                         
|                                                                            |                                                                                                     | Six Months Ended                                                        
|                                                                            |                                                                                                     | December 31,                                                            
|                                                                            |                                                                                                     |                                                                         
|                                                                            |                                                                                                     | 2002                                                                     |                                   | 2003   
|                                                                            |                                                                                                     |                                                                          |                                   |        
|                                                                            |                                                                                                     |                                                                         
|                                                                            |                                                                                                     | (In thousands)                                                          
|                                                                            |                                                                                                     | (Unaudited)                                                             
|CASH FLOWS FROM OPERATING ACTIVITIES:                                       |                                                                                                     |                                                                          |                                   |         |         |        |         |         
|                                                                            | Net income                                                                                          |                                                                          | $                                 | 29,887  |         |        | $       | 41,320   |         
|                                                                            | Adjustments to reconcile net income to net cash
    provided by operating activities:               |                                                                          |                                   |         |         |        |         |          |         
|                                                                            |                                                                                                     | Depreciation and amortization                                            |                                   |         | 5,779   |        |         |          | 9,973    |       
|                                                                            |                                                                                                     | Changes in assets and liabilities, net of effects
    from acquisitions: |                                   |         |         |        |         |          |          |       
|                                                                            |                                                                                                     |                                                                          | Accounts receivable               |         |         | (2,041 | )       |          |          | (1,693 | )
|                                                                            |                                                                                                     |                                                                          | Student notes receivable          |         |         | (509   | )       |          |          | (345   | )
|                                                                            |                                                                                                     |                                                                          | Prepaid expenses and other assets |         |         | (285   | )       |          |          | (8,019 | )
|                                                                            |                                                                                                     |                                                                          | Accounts payable                  |         |         | (6,091 | )       |          |          | (1,356 | )
|                                                                            |                                                                                                     |                                                                          | Accrued expenses                  |         |         | 6,231  |         |          |          | (653   | )
|                                                                            |                                                                                                     |                                                                          | Income taxes payable              |         |         | (1,193 | )       |          |          | 1,119  |  
|                                                                            |                                                                                                     |                                                                          | Prepaid tuition                   |         |         | 5,730  |         |          |          | 610    |  
|                                                                            |                                                                                                     |                                                                          | Other long-term liabilities       |         |         | (45    | )       |          |          | (1,585 | )
|                                                                            |                                                                                                     |                                                                          |                                   |         |         |        |         |         
|                                                                            |                                                                                                     | Net cash provided by operating activities                                |                                   |         | 37,463  |        |         |          | 39,371   |       
|                                                                            |                                                                                                     |                                                                          |                                   |         |         |        |         |         
|CASH FLOWS FROM INVESTING ACTIVITIES:                                       |                                                                                                     |                                                                          |                                   |         |         |        |         |         
|                                                                            | Acquisitions of schools, colleges, and training
    centers, net of cash acquired                   |                                                                          |                                   | (80,788 | )       |        |         | (101,318 | )       
|                                                                            | Capital expenditures, net of disposals                                                              |                                                                          |                                   | (10,992 | )       |        |         | (27,481  | )       
|                                                                            | Sales of (investments in) marketable securities,
    net                                            |                                                                          |                                   | 7,293   |         |        |         | 3,897    |         
|                                                                            |                                                                                                     |                                                                          |                                   |         |         |        |         |         
|                                                                            |                                                                                                     | Net cash (used in) investing activities                                  |                                   |         | (84,487 | )      |         |          | (124,902 | )     
|                                                                            |                                                                                                     |                                                                          |                                   |         |         |        |         |         
|CASH FLOWS FROM FINANCING ACTIVITIES:                                       |                                                                                                     |                                                                          |                                   |         |         |        |         |         
|                                                                            | Proceeds from borrowings                                                                            |                                                                          |                                   | 58,600  |         |        |         | 50,961   |         
|                                                                            | Principal repayments on capital lease obligations
    and long-term debt                            |                                                                          |                                   | (55,187 | )       |        |         | (7,631   | )       
|                                                                            | Proceeds from exercise of stock options and
    Employee Stock Purchase Plan, including tax benefit |                                                                          |                                   | 9,537   |         |        |         | 29,319   |         
|                                                                            |                                                                                                     |                                                                          |                                   |         |         |        |         |         
|                                                                            |                                                                                                     | Net cash provided by financing activities                                |                                   |         | 12,950  |        |         |          | 72,649   |       
|                                                                            |                                                                                                     |                                                                          |                                   |         |         |        |         |         
|EFFECTS OF EXCHANGE RATE CHANGES ON CASH                                    |                                                                                                     |                                                                          |                                  |         |         |        | 79      |         
|                                                                            |                                                                                                     |                                                                          |                                   |         |         |        |         |         
|NET DECREASE IN CASH AND CASH EQUIVALENTS                                   |                                                                                                     |                                                                          | (34,074                           | )       |         |        | (12,803 | )       
|CASH AND CASH EQUIVALENTS, beginning of period                              |                                                                                                     |                                                                          | 40,761                            |         |         |        | 35,901  |         
|                                                                            |                                                                                                     |                                                                          |                                   |         |         |        |         |         
|CASH AND CASH EQUIVALENTS, end of period                                    |                                                                                                     | $                                                                        | 6,687                             |         |         | $      | 23,098  |         
|                                                                            |                                                                                                     |                                                                          |                                   |         |         |        |         |         
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:                           |                                                                                                     |                                                                          |                                   |         |         |        |         |         
|                                                                            | Cash paid during the period for:                                                                    |                                                                          |                                   |         |         |        |         |          |         
|                                                                            |                                                                                                     | Income taxes                                                             |                                   | $       | 11,747  |        |         | $        | 12,855   |       
|                                                                            |                                                                                                     |                                                                          |                                   |         |         |        |         |         
|                                                                            |                                                                                                     | Interest expense                                                         |                                   | $       | 751     |        |         | $        | 1,241    |       
|                                                                            |                                                                                                     |                                                                          |                                   |         |         |        |         |         
|SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND
    FINANCING ACTIVITIES: |                                                                                                     |                                                                          |                                   |         |         |        |         |         
|                                                                            | Acquisitions of various schools, colleges, and
    training centers                                 |                                                                          |                                   |         |         |        |         |          |         
|                                                                            |                                                                                                     | Fair value of assets acquired                                            |                                   | $       | 96,425  |        |         | $        | 140,160  |       
|                                                                            |                                                                                                     | Net cash used in acquisitions                                            |                                   |         | (80,788 | )      |         |          | (101,318 | )     
|                                                                            |                                                                                                     |                                                                          |                                   |         |         |        |         |         
|                                                                            |                                                                                                     | Liabilities assumed or incurred                                          |                                   | $       | 15,637  |        |         | $        | 38,842   |       
|                                                                            |                                                                                                     |                                                                          |                                   |         |         |        |         |         

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

3



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##### Table of Contents



CORINTHIAN COLLEGES, INC. AND
SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS

December 31, 2003


Note 1  The Company and Basis of
Presentation

At December 31, 2003, Corinthian Colleges,
Inc. (the Company) operated 83 schools and colleges
and two training centers in the for profit, post-secondary
education industry in the United States, and 46 colleges and 15
training centers in seven Canadian provinces. All of the
Companys schools grant either degrees (Associate, Bachelor
and Master) or diplomas and offer educational opportunities from
an extensive and diverse curricula library with an emphasis on
four primary concentrations: allied health, business,
technology, and criminal justice. Additionally, the Company has
an online learning alternative available to students pursuing
education exclusively online and is approved to offer nine
accredited degrees to exclusively online students.

Effective August 1, 2003, the Company
acquired all of the outstanding stock of Career Choices, Inc.
(Career Choices). Career Choices operated ten
campuses that offer both degree and diploma programs. Effective
August 6, 2003, the Company acquired substantially all of
the assets of East Coast Aero Tech., LLC. (ECAT).
ECAT operated one campus that offers programs in aviation
maintenance technology. Effective August 19, 2003, the
Company acquired approximately 89% of the outstanding shares of
common stock of CDI Education Corporation (CDI) and
completed the acquisition of the remaining outstanding shares of
common stock as of October 7, 2003. CDI operated 46
colleges and 15 training centers in Canada. The acquisitions of
Career Choices, ECAT and CDI were accounted for using the
purchase method of accounting and their respective results of
operations are included in the Companys consolidated
results of operations since their respective acquisition dates.

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 accounting principles
generally accepted in the United States. 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, 2003 consolidated
financial statements of the Company included in the
Companys 2003 Annual Report on Form 10-K/ A and notes
thereto, are adequate to make the information presented not
misleading. In managements opinion, the 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 and six months ended
December 31, 2003 are not necessarily indicative of the
results that may be expected for the fiscal year ending
June 30, 2004.

The condensed consolidated financial statements
as of December 31, 2003 and June 30, 2003 and for the
three months and six months ended December 31, 2003 and
2002 are consolidated and 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 subsidiary are measured using the
local currency as the functional currency. Assets and
liabilities of the Canadian subsidiary 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 (loss).

Certain amounts for the prior periods have been
reclassified to conform to fiscal 2004 financial statement
presentation.

4



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##### Table of Contents



CORINTHIAN COLLEGES, INC. AND
SUBSIDIARIES


NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

Note 2  Stock Options

On November 20, 2003, the Companys
stockholders approved the Companys 2003 Performance Award
Plan (the 2003 Plan), which authorized the issuance
by the Company of up to 2,700,000 additional shares of the
Companys Common Stock. In addition, the Company currently
maintains the Corinthian Colleges, Inc. 1998 Performance Award
Plan (as amended, the 1998 Plan). Upon approval of
the 2003 Plan, the Companys ability to grant new awards
under the 1998 Plan terminated. The termination of the grant
authority under the 1998 Plan did not, however, affect awards
then outstanding under the plan. As of December 31, 2003,
the number of stock options, stock appreciation rights or other
common stock based securities available for future grant to
directors, officers, employees and other eligible persons were
2,033,000 under the 2003 Plan. The expiration dates are not
longer than 10 years and options granted to employees
generally vest over a period of four years.

The Company accounts for stock-based compensation
using the intrinsic value method of APB Opinion No. 25,
Accounting for Stock Issued to Employees, and has
adopted the disclosure-only provisions of Statement of Financial
Accounting Standards (SFAS) No. 123,
Accounting for Stock-Based Compensation, related to
options issued to employees and SFAS No. 148,
Accounting for Stock-Based Compensation Transition and
Disclosure. No stock-based employee compensation cost is
reflected in net income, as all options, stock appreciation
rights or other common stock based securities granted had an
exercise price equal to the market value of the underlying
common stock on the date of grant. The following table
illustrates the effect on net income and earnings per share if
the Company had applied the fair value recognition provisions of
SFAS No. 123 to stock-based employee compensation.

|                            |                                                                                                                                            |                                       |        |                  |   |      |        |        |   |   |        |        |   |   |        |        |  
|--------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------ | ------------------------------------- | ------ | ---------------- | - | ---- | ------ | ------ | - | - | ------ | ------ | - | - | ------ | ------ | -
|                            |                                                                                                                                            |                                       |        |                 
|                            |                                                                                                                                            | Three Months Ended                    |        | Six Months Ended
|                            |                                                                                                                                            | December 31,                          |        | December 31,    
|                            |                                                                                                                                            |                                       |        |                 
|                            |                                                                                                                                            | 2002                                  |        | 2003             |   | 2002 |        | 2003  
|                            |                                                                                                                                            |                                       |        |                  |   |      |        |       
|                            |                                                                                                                                            |                                      
|                            |                                                                                                                                            | (In thousands, except per share data)
|                            |                                                                                                                                            |                                      
|                            |                                                                                                                                            | (Unaudited)                          
|Net income, as reported     |                                                                                                                                            | $                                     | 16,146 |                  |   | $    | 21,942 |        |   | $ | 29,887 |        |   | $ | 41,320 |       
|                            | Stock-based compensation included above                                                                                                    |                                       |        |                 |   |      |        |       |   |   |        |       |   |   |        |       |  
|                            | Deduct: Total stock-based employee compensation
    cost determined under fair value method for all awards, net of
    related tax effects |                                       |        | (2,384           | ) |      |        | (3,471 | ) |   |        | (4,147 | ) |   |        | (6,210 | )
|                            |                                                                                                                                            |                                       |        |                  |   |      |        |        |   |   |        |        |   |   |        |       
|                            | Pro forma net income                                                                                                                       |                                       | $      | 13,762           |   |      | $      | 18,471 |   |   | $      | 25,740 |   |   | $      | 35,110 |  
|                            |                                                                                                                                            |                                       |        |                  |   |      |        |        |   |   |        |        |   |   |        |       
|Basic earnings per share:   |                                                                                                                                            |                                       |        |                  |   |      |        |        |   |   |        |        |   |   |        |       
|                            | As reported                                                                                                                                |                                       | $      | 0.37             |   |      | $      | 0.49   |   |   | $      | 0.69   |   |   | $      | 0.94   |  
|                            | Pro forma                                                                                                                                  |                                       | $      | 0.32             |   |      | $      | 0.42   |   |   | $      | 0.60   |   |   | $      | 0.79   |  
|Diluted earnings per share: |                                                                                                                                            |                                       |        |                  |   |      |        |        |   |   |        |        |   |   |        |       
|                            | As reported                                                                                                                                |                                       | $      | 0.35             |   |      | $      | 0.47   |   |   | $      | 0.65   |   |   | $      | 0.88   |  
|                            | Pro forma                                                                                                                                  |                                       | $      | 0.30             |   |      | $      | 0.39   |   |   | $      | 0.56   |   |   | $      | 0.75   |  

5



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##### Table of Contents



CORINTHIAN COLLEGES, INC. AND
SUBSIDIARIES


NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

The effects of applying SFAS No. 123 in the
above pro forma disclosures are not necessarily indicative of
future amounts. The fair value of each option, stock
appreciation rights, and other common stock-based securities was
estimated on the date of grant using the Black-Scholes method
with the following weighted-average assumptions:

|                              |  |                    |         |                  |  |      |         |      |  |   |         |   |  |   |         |  
|----------------------------- |  | ------------------ | ------- | ---------------- |  | ---- | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|                              |  |                    |         |                 
|                              |  | Three Months Ended |         | Six Months Ended
|                              |  | December 31,       |         | December 31,    
|                              |  |                    |         |                 
|                              |  | 2002               |         | 2003             |  | 2002 |         | 2003
|                              |  |                    |         |                  |  |      |         |     
|Risk-free rate                |  |                    | 5.07    | %                |  |      | 5.15    | %    |  |   | 5.16    | % |  |   | 5.16    | %
|Expected years until exercise |  |                    | 7 years |                  |  |      | 7 years |      |  |   | 7 years |   |  |   | 7 years |  
|Expected stock volatility     |  |                    | 58      | %                |  |      | 35      | %    |  |   | 63      | % |  |   | 38      | %
|Expected dividends            |  | $                  |        |                  |  | $    |        |      |  | $ |        |   |  | $ |        |  

Note 3  Marketable
Securities

Marketable securities include primarily interest
bearing available-for-sale securities with a maturity date of
less than one year.

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 from 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. At
December 31, 2003, there were no material unrealized gains
or losses from available-for-sale securities.

Note 4  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.

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 |        | Six Months Ended
|                                  |               | December 31,       |        | December 31,    
|                                  |               |                    |        |                 
|                                  |               | 2002               |        | 2003             |  | 2002 |        | 2003 
|                                  |               |                    |        |                  |  |      |        |      
|Basic common shares outstanding   |               |                    | 43,384 |                  |  |      | 44,463 |       |  |  | 43,203 |       |  |  | 44,183 |      
|Effects of dilutive securities:   |               |                    |        |                  |  |      |        |       |  |  |        |       |  |  |        |      
|                                  | Stock options |                    |        | 2,624            |  |      |        | 2,512 |  |  |        | 2,622 |  |  |        | 2,682 | 
|                                  |               |                    |        |                  |  |      |        |       |  |  |        |       |  |  |        |      
|Diluted common shares outstanding |               |                    | 46,008 |                  |  |      | 46,975 |       |  |  | 45,825 |       |  |  | 46,865 |      
|                                  |               |                    |        |                  |  |      |        |       |  |  |        |       |  |  |        |      

Note 5  Common Stock

Effective November 20, 2003, the Company
amended and restated its certificate of incorporation to
increase the number of authorized shares of common stock with a
par value of $0.0001 per share to a total of
120,000,000 shares.

6



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##### Table of Contents



CORINTHIAN COLLEGES, INC. AND
SUBSIDIARIES


NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

Note 6  New Accounting
Pronouncements

In January 2003, the FASB issued the
Interpretation No. 46, Consolidation of Variable
Interest Entities (Interpretation
No. 46). Interpretation No. 46 requires a
company to consolidate a variable interest entity if the company
is subject to a majority of the risk of loss from the variable
interest entitys activities or is entitled to receive a
majority of the entitys residual returns. The
interpretation also requires disclosures about variable interest
entities that the company is not required to consolidate but in
which it has a significant variable interest. Interpretation
No. 46 is immediately effective for variable interest
entities created after January 31, 2003 and to variable
interest entities in which an enterprise obtains an interest
after that date. It applies in the first fiscal year or interim
period beginning after December 15, 2003, with respect to
variable interest entities in which an enterprise holds a
variable interest that is acquired before February 1, 2003.
The Company does not have variable interest entities, or special
purpose entities (SPEs) and the adoption of
Interpretation No. 46 will not have an impact on the
Companys consolidated financial position or results of
operations.

In April 2003, the FASB issued SFAS No. 149,
Amendment of Statement 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 149
amends and clarifies financial accounting and reporting for
derivative instruments, including certain derivative instruments
embedded in other contracts and for hedging activities under
SFAS No. 133, Accounting for Derivative Instruments
and Hedging Activities. SFAS No. 149 is effective for
contracts entered into or modified after June 30, 2003
except for contracts which exist in fiscal quarters that began
prior to June 15, 2003 and for hedging relationships
designated after June 30, 2003. For existing contracts for
fiscal quarters that began prior to June 15, 2003, the
provisions of this Statement that relate to Statement 133
Implementation Issues should continue to be applied in
accordance with their respective dates. SFAS No. 149
requires that contracts with comparable characteristics be
accounted for similarly. The adoption of SFAS No. 149 will
not have an adverse material impact on the Companys
consolidated financial position or results of operations.

In May 2003, the FASB issued SFAS No. 150,
Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity. This
Statement establishes standards for classification and
measurement of certain financial instruments with
characteristics of both liabilities and equity. SFAS
No. 150 is effective for financial instruments entered into
or modified after May 31, 2003. The adoption of SFAS
No. 150 will not have an adverse material impact on the
Companys consolidated financial position or results of
operations.

Note 7  Acquisitions

Effective August 1, 2003, the Company
acquired all of the outstanding stock of Career Choices, Inc.
(Career Choices). Career Choices operates ten
campuses in California, Washington, and Oregon, which grant
diplomas and degrees in the applied science, automotive
technology, HVAC technology and allied health fields. The cash
purchase price was approximately $56.0 million, subject to
certain balance sheet adjustments. The Company is currently
conducting studies to determine the amount that is assignable to
other intangible assets, such as curriculum under SFAS
No. 141. The Company purchased Career Choices to expand its
presence and strength in the Pacific Northwest and expects to
benefit from increased marketing power and operational leverage.
The ten schools operate under the Sequoia Institute, Ashmead
College, and Eton Technical Institute trade names. Sequoia
focuses on programs in the growing automotive technology field
that will expand Corinthians presence in the high demand
technology programs. Sequoia also introduces
heating/ventilation/air conditioning (HVAC) training to the
Companys technology programs. The Ashmead and Eton schools
include the fields of massage therapy, dental and medical
assisting. The acquisition is a strategic fit to the
Companys allied health program and the Company expects to
gain outstanding automotive curricula that complements the
Companys WyoTech curricula. The acquisition was accounted
for using the

7



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##### Table of Contents



CORINTHIAN COLLEGES, INC. AND
SUBSIDIARIES


NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

purchase method of accounting and Career
Choices results of operations are included in the
consolidated results of operations of the Company since its
acquisition date.

Effective August 6, 2003, the Company
acquired substantially all of the assets of East Coast Aero
Tech, LLC (ECAT). ECAT operates one campus in
Massachusetts, which offers programs in the aviation maintenance
technology field. The cash purchase price was approximately
$3.0 million, subject to certain balance sheet adjustments.
The Company is currently conducting studies to determine the
amount that is assignable to other intangible assets, such as
curriculum under SFAS No. 141. ECAT marks the
Companys entry into the growing field of aviation
maintenance technology training, providing Corinthian with an
additional platform for growth and enhancement of its technology
programs. It offers accredited programs in airframe and
powerplant, which prepare students to become Federal Aviation
Administration (FAA) certified Aviation Maintenance
Technicians. The acquisition was accounted for using the
purchase method of accounting and ECATs results of
operations are included in the consolidated results of
operations of the Company since its acquisition date.

On August 19, 2003, the Company acquired
approximately 89% of the outstanding shares of common stock of
CDI Education Corporation (CDI) through a tender
offer to acquire all of the outstanding shares of common stock.
As of October 7, 2003, the Company had acquired all shares
of CDI for approximately $42.0 million and the assumption
of approximately $10 million of debt and other liabilities.
CDI is a wholly-owned subsidiary of Corinthian Colleges, Inc.
The cash purchase price was funded with available cash and
borrowings from the Companys amended credit facility. The
Company is currently conducting studies to determine the amount
that is assignable to other intangible assets, such as
curriculum under SFAS No. 141. On October 27, 2003,
with the acquisition of the additional CMA Careers Inc. college
located in Kitchener (Ontario), Canada, CDI operates 46
post-secondary colleges offering diploma-granting programs in
the allied health, business and information technology fields.
CDIs corporate education division, which has 15 training
centers, serves as both an outsourced and e-learning provider
focused on skills development specialties such as leadership,
innovation and business analysis. This acquisition expands the
Company into the international arena with a significant presence
in the Canadian post-secondary and corporate education markets,
adding new programs that either extend or enhance the
Companys portfolio. The acquisition was accounted for
using the purchase method of accounting and CDIs results
of operations are included in the consolidated results of
operations of the Company since its acquisition date.

The Company is conducting studies for Career
Choices, ECAT and CDI to determine the amount that is assignable
to other intangible assets, if any, such as curriculum,
tradenames, and accreditation under SFAS No. 141.
Although the Company believes that its intangible assets are
fairly stated, changes in strategy or market conditions could
significantly impact these judgments and require adjustments to
asset balances.

8



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##### Table of Contents



CORINTHIAN COLLEGES, INC. AND
SUBSIDIARIES


NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

The following table provides unaudited pro forma
financial data for the Company reflecting the completion of the
acquisitions as if they had occurred July 1, 2002. These
unaudited pro forma results have been prepared for comparative
purposes only and include certain pro forma adjustments. Such
pro forma amounts are not necessarily indicative of what actual
results of operations might have been or will be in the future.
Pro forma results of operations for the prior period reflect an
increase in interest expense related to debt used to fund the
acquisitions.

|                             |  |                                       |         |                  |  |      |         |      |  |   |         |  |  |   |         | 
|---------------------------- |  | ------------------------------------- | ------- | ---------------- |  | ---- | ------- | ---- |  | - | ------- |  |  | - | ------- | 
|                             |  |                                       |         |                 
|                             |  | Three Months Ended                    |         | Six Months Ended
|                             |  | December 31,                          |         | December 31,    
|                             |  |                                       |         |                 
|                             |  | 2002                                  |         | 2003             |  | 2002 |         | 2003
|                             |  |                                       |         |                  |  |      |         |     
|                             |  |                                      
|                             |  | (In thousands, except per share data)
|                             |  | (Unaudited)                          
|Net revenue                  |  | $                                     | 157,546 |                  |  | $    | 200,648 |      |  | $ | 294,958 |  |  | $ | 381,931 | 
|Net income                   |  |                                       | 15,474  |                  |  |      | 21,942  |      |  |   | 28,753  |  |  |   | 39,359  | 
|Earnings per share  basic   |  | $                                     | 0.36    |                  |  | $    | 0.49    |      |  | $ | 0.67    |  |  | $ | 0.89    | 
|Earnings per share  diluted |  | $                                     | 0.34    |                  |  | $    | 0.47    |      |  | $ | 0.63    |  |  | $ | 0.84    | 

Note 8  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 and six month periods ended December 31, 2002 and
2003 (in thousands):

|                                         |  |                    |        |                  |  |      |        |      |  |   |        |  |  |   |        |  
|---------------------------------------- |  | ------------------ | ------ | ---------------- |  | ---- | ------ | ---- |  | - | ------ |  |  | - | ------ | -
|                                         |  |                    |        |                 
|                                         |  | Three Months Ended |        | Six Months Ended
|                                         |  | December 31,       |        | December 31,    
|                                         |  |                    |        |                 
|                                         |  | 2002               |        | 2003             |  | 2002 |        | 2003
|                                         |  |                    |        |                  |  |      |        |     
|Net income                               |  | $                  | 16,146 |                  |  | $    | 21,942 |      |  | $ | 29,887 |  |  | $ | 41,320 |  
|Foreign currency translation adjustments |  |                    |       |                  |  |      | (67    | )    |  |   |       |  |  |   | (84    | )
|                                         |  |                    |        |                  |  |      |        |      |  |   |        |  |  |   |        |  
|Comprehensive income                     |  | $                  | 16,146 |                  |  | $    | 21,875 |      |  | $ | 29,887 |  |  | $ | 41,236 |  
|                                         |  |                    |        |                  |  |      |        |      |  |   |        |  |  |   |        |  

Note 9  Commitments and
Contingencies

In the ordinary conduct of the 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 routine employment matters.
Although the Company cannot predict with certainty the ultimate
resolution of lawsuits, investigations and claims asserted
against the Company, the Company does not believe that any
currently pending legal proceedings to which the Company is a
party will have a material adverse effect on the Companys
business, results of operations or financial condition.

One of the legal actions currently pending
against the Company is Aldape, et al. v. Corinthian Schools,
Inc., et al.,originally reported in the Report on
Form 10-K/ A for the fiscal year ended June 30, 2002.
Since the date of that report, the Court has granted the
Companys motion to compel arbitration with respect to the
claims of all individual plaintiffs who are former students of
the Companys Bryman College campus in Los Angeles,
California. Accordingly, the plaintiffs claims will be
adjudicated in binding arbitration. The Company believes the
plaintiffs claims are without merit and it intends to
vigorously defend itself against them.

Another of the actions currently pending is
entitled Socorra Estrada v. Corinthian Schools, Inc., et al.,originally reported in the Report on Form 10-K/ A for
the fiscal year ended June 30, 2003. Plaintiff is a former
student in the Companys Bryman College Campus in Whittier
who enrolled in that campus prior to its acquisition by the
Company from Educorp, Inc. (Educorp) in October
2000. Plaintiffs First Amended

9



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CORINTHIAN COLLEGES, INC. AND
SUBSIDIARIES


NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

Complaint seeks injunctive relief against the
Company under California Business and Professions Code
Section  17200 plus attorneys fees incurred in the
action. Plaintiff has also added Educorp and two individuals
affiliated with Educorp as defendants in the matter. The Company
believes the plaintiffs claims are without merit and it
intends to vigorously defend itself against them.

Another action currently pending against the
Company is a purported class action complaint entitled
Montoya v. Corinthian Schools, Inc., et al.,first
reported in the Companys Report on Form 10-K/ A for
the fiscal year ended June 30, 2003. Plaintiff, a former
instructor with the Companys Bryman College campus in El
Monte, California, alleges that she and other instructors
employed by the Companys Corinthian Schools, Inc.
subsidiary in the State of California for the previous four
years were improperly classified as exempt from
Californias overtime compensation laws. Plaintiff states
causes of action under California wage orders, Californias
Labor Code, and Californias Business and Professions Code.
Plaintiff seeks certification as a class, monetary damages in
unspecified amounts, penalties, interest, attorneys fees,
exemplary damages, and injunctive relief. The Company believes
its classification of employees for overtime purposes has been
consistent with applicable law and that the plaintiffs
claims are without merit. The Company intends to vigorously
defend itself in this matter.

10



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##### Table of Contents








|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|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/ A (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 consolidated
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/A.

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 accounting principles generally accepted in the
United States. 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 income taxes and litigation. 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.We maintain a revenue recognition policy. Revenues consist
    primarily of tuition and fees derived from courses taught in our
    colleges, schools, and training centers. Revenue 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. If a student withdraws from a course or
    program, the paid but unearned portion of the student 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 condensed consolidated balance
    sheets as this amount is expected to be earned within the next
    twelve months.
|
| | Students attending our 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, bachelor or masters degree. Costs of
    programs or credit hours for courses are
    clearly identified in the Companys enrollment agreements.
    At the start of each students respective
    program or course 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 course. We recognize revenue from
    tuition and fees pro-rata over the relevant period attended by
    the student of the                                                                                                                   

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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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
    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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| | Marketing and Advertising
    Expense.We maintain an advertising
    expense recognition policy. Marketing and advertising costs are
    generally expensed as incurred. We have significant marketing
    and advertising expenses consisting primarily of payroll and
    payroll related expenses, direct-response and other advertising,
    promotional materials and other related marketing costs.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| | 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 United States
    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, not us. The guaranteed loans
    are neither guaranteed by us, nor can the student guaranteed
    loans 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 these 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
    institutions Cohort Default Rates act as a gatekeeper to
    the institutions 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.
|
| | Intangible Assets.We have significant intangible assets, including goodwill. The
    determination of related estimated useful lives and whether or
    not these assets are impaired involves significant judgments. We
    have adopted Statement of Financial Accounting Standard
    (SFAS) No. 142, Goodwill and Other
    Intangible Assets and do not amortize goodwill. We assign
    values to other intangible assets, such as curriculum, trade
    names and accreditation. The Company is conducting studies to
    determine the amount that is assignable to other intangible
    assets, if any, such as curriculum, tradenames, and
    accreditation for our recent acquisitions. Although we believe
    our intangible assets are fairly stated, changes in strategy or
    market conditions could significantly impact the reported values
    of intangible assets which could result in future reductions to
    earnings and require adjustments to asset balances.                          
|
| | Deferred Taxes.We
    currently have deferred income tax assets, which are subject to
    periodic recoverability assessments. Realization of our deferred
    income tax assets is principally dependent upon achievement of
    projected future taxable income reduced by deferred income tax
    liabilities. We evaluate the realizability of our deferred tax
    assets periodically.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| | Stock-based
    Compensation.We account for
    stock-based compensation using the intrinsic value method of
    APB Opinion No. 25, Accounting for Stock Issued
    to Employees, and have adopted the                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | disclosure-only provisions of
    SFAS No. 123, Accounting for Stock-Based
    Compensation, related to options issued to employees and
    SFAS No. 148, Accounting for Stock-Based
    Compensation Transition and Disclosure. No stock-based
    employee compensation cost is reflected in net income. All stock
    options, stock appreciation rights or other common stock based
    securities granted are accounted for under fixed accounting and
    have an exercise price equal to the market value of the
    underlying common stock on the date of grant.                            
|
| | Foreign Currency Translation.The financial position and results of
    operations of the Companys Canadian subsidiary are
    measured using the local currency as the functional currency.
    Assets and liabilities of the Canadian subsidiary 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
    (loss).

Results of Operations

Comparisons of results of operations between the
first six months of fiscal 2004 and the first six months of
fiscal 2003 are affected by the acquisitions of Learning Tree
University (LTU) and its two training centers on
January 1, 2003, Career Choices, Inc. (Career
Choices) and its ten campuses on August 1, 2003, East
Coast Aero Tech (ECAT) and its campus on
August 6, 2003, and CDI Education, Inc. (CDI)
and its 45 colleges and 15 training centers on
August 19, 2003, as well as the opening of five branch
campuses since the end of the second quarter of fiscal 2003. At
December 31, 2003, the Company operated 129 campuses
and 17 training centers, compared to 65 campuses at
December 31, 2002. The following table summarizes our
operating results as a percentage of net revenue for the periods
indicated:

|                                          |                                                      |                          |       |              |      |      |       |      |      |   |       |      |      |   |       |      |      |  
|----------------------------------------- | ---------------------------------------------------- | ------------------------ | ----- | ------------ | ---- | ---- | ----- | ---- | ---- | - | ----- | ---- | ---- | - | ----- | ---- | ---- | -
|                                          |                                                      |                          |       |             
|                                          |                                                      | Three Months             |       | Six Months  
|                                          |                                                      | Ended                    |       | Ended       
|                                          |                                                      | December 31,             |       | December 31,
|                                          |                                                      |                          |       |             
|                                          |                                                      | 2002                     |       | 2003         |      | 2002 |       | 2003
|                                          |                                                      |                          |       |              |      |      |       |     
|Statement of Operations Data (Unaudited): |                                                      |                          |       |              |      |      |       |      |      |   |       |      |      |   |       |     
|Net revenues                              |                                                      |                          | 100.0 | %            |      |      | 100.0 | %    |      |   | 100.0 | %    |      |   | 100.0 | %   
|Operating expenses:                       |                                                      |                          |       |              |      |      |       |      |      |   |       |      |      |   |       |     
|                                          | Educational services                                 |                          |       | 47.4         |      |      |       | 51.6 |      |   |       | 48.7 |      |   |       | 51.0 |     
|                                          | General and administrative                           |                          |       | 11.5         |      |      |       | 8.4  |      |   |       | 10.2 |      |   |       | 8.5  |     
|                                          | Marketing and advertising                            |                          |       | 19.9         |      |      |       | 21.5 |      |   |       | 20.4 |      |   |       | 21.6 |     
|                                          |                                                      |                          |       |              |      |      |       |      |      |   |       |      |      |   |       |     
|                                          |                                                      | Total operating expenses |       |              | 78.8 |      |       |      | 81.5 |   |       |      | 79.3 |   |       |      | 81.1 |  
|Income from operations                    |                                                      |                          | 21.2  |              |      |      | 18.5  |      |      |   | 20.7  |      |      |   | 18.9  |     
|                                          | Interest (income)                                    |                          |       | (0.2         | )    |      |       | (0.2 | )    |   |       | (0.2 | )    |   |       | (0.2 | )   
|                                          | Interest expense                                     |                          |       | 0.2          |      |      |       | 0.4  |      |   |       | 0.3  |      |   |       | 0.4  |     
|                                          | Other (income) expense                               |                          |       |             |      |      |       |     |      |   |       |     |      |   |       |     |     
|                                          | Minority interest in income (loss) of
    subsidiary |                          |       |             |      |      |       |     |      |   |       |     |      |   |       |     |     
|                                          |                                                      |                          |       |              |      |      |       |      |      |   |       |      |      |   |       |     
|Income before provision for income taxes  |                                                      |                          | 21.2  |              |      |      | 18.3  |      |      |   | 20.6  |      |      |   | 18.7  |     
|                                          | Provision for income taxes                           |                          |       | 8.5          |      |      |       | 7.4  |      |   |       | 8.3  |      |   |       | 7.5  |     
|                                          |                                                      |                          |       |              |      |      |       |      |      |   |       |      |      |   |       |     
|                                          |                                                      | Net income               |       |              | 12.7 | %    |       |      | 10.9 | % |       |      | 12.3 | % |       |      | 11.2 | %
|                                          |                                                      |                          |       |              |      |      |       |      |      |   |       |      |      |   |       |     

Three Months Ended December 31, 2003
Compared to Three Months Ended December 31, 2002

Net Revenues.Net
revenues increased $73.5 million, or 57.8%, from
$127.1 million in the second quarter of fiscal 2003 to
$200.6 million in the second quarter of fiscal 2004, due
primarily to a 48.5% increase in total student population and a
3.0% increase in the average tuition rate per student. At
December 31, 2003, student population was 59,502, compared
with 40,057 at December 31, 2002. Revenues in same schools
increased 23.9% for the second quarter of fiscal 2004 and
reflects a 16.8% increase in same school student

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population and a 5.0% increase in the average
tuition rate per student in same schools. The Company defines
same schools as those colleges, schools, and training centers
that have been owned and operated by the Company for four full
quarters. Core growth in revenues increased 27.4% in our second
quarter of fiscal 2004 ended December 31, 2003. The Company
defines core growth in revenues as the increase in revenues,
including revenues from branches opened during the last four
full quarters, but excluding revenues attributable to colleges,
schools, and training centers acquired within the last four full
quarters. Same school student starts increased 17.3% as of
December 31, 2003 when compared to second quarter of fiscal
2003. Net revenues also increased as a result of opening five
branch campuses and acquiring 57 campuses and
17 training centers since December 31, 2002.


Educational Services.Educational services expenses include
direct operating expenses of the schools consisting primarily of
payroll and payroll related expenses, occupancy and supplies
expenses, and bad debt expense. As a percentage of net revenues,
educational services expense increased from 47.4% of revenues in
the second quarter of fiscal 2003 to 51.6% of revenues for the
second quarter of fiscal 2004. The increase, as a percent of
revenues, was due primarily to higher educational services
expenses in our recently acquired campuses. Educational services
expenses increased $43.3 million, or 71.8%, from
$60.3 million in the second quarter of fiscal 2003 to
$103.6 million in the second quarter of fiscal 2004. The
increase in educational services expenses was due primarily to
additional instructional wages, consumables and occupancy
expenses relating to the 57 acquired campuses,
17 acquired training centers and five new branch campuses
opened since December 31, 2002. Bad debt expense for the
second quarter of fiscal 2004 amounted to $7.6 million and
decreased to 3.8% of revenues, compared to $5.2 million or
4.1% of revenues for the second quarter of fiscal 2003.
Additionally, during the second quarter, 38 new programs
were adopted into existing schools, including 13 program
adoptions into our campuses in the United States and
25 program adoptions into our campuses in Canada.

General and Administrative.General and administrative expenses
include performance bonuses and corporate payroll related
expenses, headquarters office occupancy expenses, professional
fees and other support related expenses. As a percentage of net
revenues, general and administrative expenses decreased from
11.5% of revenues in the second quarter of fiscal 2003 to 8.4%
of revenues for the second quarter of fiscal 2004. General and
administrative expenses increased $2.4 million, or 16.2%,
from $14.6 million in the second quarter of fiscal 2003 to
$16.9 million in the second quarter of fiscal 2004,
primarily as a result of additional headquarters staff required
to support the 57.8% increase in revenues, 48.5% increase in
student population and to support the 57 acquired campuses,
17 acquired training centers and five new branch campus
openings since December 31, 2002.

Marketing and Advertising.Marketing and advertising expenses
consist primarily of payroll and payroll related expenses,
direct-response and other advertising expenses, promotional
materials and other related marketing costs. As a percentage of
net revenues, marketing and advertising expenses increased from
19.9% of revenues in the second quarter of fiscal 2003 to 21.5%
of revenues for the second quarter of fiscal 2004. Marketing and
advertising expenses increased $17.7 million, or 69.9%,
from $25.3 million in the second quarter of fiscal 2003 to
$43.0 million in the second quarter of fiscal 2004. The
increase resulted in a 55.1% increase in total student starts
and a 17.3% increase in same school starts. The increase was due
to additional staffing and increased volume of advertising
required to support the 57 acquired campuses,
17 acquired training centers and five new branch campus
openings since December 31, 2002.

Income from Operations.Income from operations increased 37.3%
from $27.0 million in the second quarter of fiscal 2003 to
$37.1 million in the second quarter of fiscal 2004. As a
percentage of net revenues, income from operations decreased
from 21.2% of revenues in the second quarter of fiscal 2003 to
18.5% of revenues for the second quarter of fiscal 2004. The
decrease in income from operations, as a percent of revenues,
relates to the lower operating margins reported at our most
recent acquisitions.

Interest (Income) Expense, net.Interest expense (net of interest
income of $0.4 million) amounted to $0.4 million in
the second quarter of fiscal 2004. In the same period of the
prior year, interest income amounted to $0.3 million and
interest expense amounted to $0.3 million. The increase in
net interest expense from the prior year is primarily due to an
increase in interest expense related to capital lease
obligations and

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debt incurred to acquire Career Choices, ECAT and
CDI in August 2003, and a decrease in investments due to cash
used to fund acquisitions and a decline in the interest rate
earned on investments.


Minority Interest.The minority interest in income (loss) of subsidiary of $10,000
represents the minority stockholders share of the income
in the second quarter of fiscal 2004 of our recently acquired
Canadian subsidiary, CDI. As of October 7, 2003, we had
acquired all of the remaining outstanding shares of CDI.

Provision for Income
Taxes.The effective income tax rate
was 40.2% of income before taxes in both the second quarter of
fiscal 2004 and fiscal 2003.

Net Income.Net
income increased $5.8 million from $16.1 million in
the second quarter of fiscal 2003 to $21.9 million in the
second quarter of fiscal 2004. As a percentage of net revenues,
net income decreased from 12.7% of revenues in the second
quarter of fiscal 2003 to 10.9% of revenues for the second
quarter of fiscal 2004.

Income per Share.Diluted earnings per common share for the second quarter of
fiscal 2004 increased 34.3% to $0.47 per diluted common share
compared to $0.35 per diluted common share for the second
quarter of fiscal 2003.

Six Months Ended December 31, 2003
Compared to Six Months Ended December 31, 2002

Net Revenues.Net
revenues increased $127.0 million, or 52.3%, from
$242.8 million in the first six months of fiscal 2003 to
$369.8 million in the first six months of fiscal 2004, due
primarily to a 48.5% increase in total student population, a
16.8% increase in same school population and a 3.9% increase in
the average tuition rate per student. At December 31, 2003,
student population was 59,502, compared with 40,057 at
December 31, 2002. Revenues in same schools increased 25.1%
for the first six months of fiscal 2004, compared to revenues
for the same period of fiscal 2003. The Company defines same
schools as those colleges, schools, and training centers that
have been owned and operated by the Company for four full
quarters. Core growth in revenues increased 28.5% in the first
six months of fiscal 2004 ended December 31, 2003. The
Company defines core growth in revenues as the increase in
revenues, including revenues from branches opened during the
last four full quarters, but excluding revenues attributable to
colleges, schools, and training centers acquired within the last
four full quarters. Same school student starts increased 16.0%
as of December 31, 2003 when compared to the first six
months of fiscal 2003. Net revenues also increased as a result
of opening five branch campuses and acquiring 57 campuses
and 17 training centers since December 31, 2002.

Educational Services.Educational services expenses include
direct operating expenses of the schools consisting primarily of
payroll and payroll related expenses, occupancy and supplies
expenses, and bad debt expense. As a percentage of net revenues,
educational services expense increased from 48.7% of revenues in
the first six months of fiscal 2003 to 51.0% of revenues for the
first six months of fiscal 2004. Educational services expenses
increased $70.3 million, or 59.5%, from $118.2 million
in the first six months of fiscal 2003 to $188.5 million in
the first six months of fiscal 2004. The increase in educational
services expenses was due primarily to the additional
instructional wages, consumables, and occupancy expenses
required to support the 48.5% increase in student population
relating to the 57 acquired campuses, 17 acquired training
centers and five new branch campuses opened since
December 31, 2002. Bad debt expense for the first six
months of fiscal 2004 amounted to $13.9 million and
decreased to 3.8% of revenues, compared to $10.0 million or
4.1% of revenues for the first six months of fiscal 2003.
Additionally, during the first six months of fiscal 2004,
75 new programs were adopted into existing schools,
including 29 program adoptions into our campuses in the
United States and 46 program adoptions into our campuses in
Canada.

General and Administrative.General and administrative expenses
include performance bonuses and corporate payroll related
expenses, headquarters office occupancy expenses, professional
fees and other support related expenses. As a percentage of net
revenues, general and administrative expenses decreased from
10.2% of revenues in the first six months of fiscal 2003 to 8.5%
of revenues for the first six months of fiscal 2004. General and
administrative expenses increased $6.8 million, or 27.4%,
from $24.8 million in the first six

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months of fiscal 2003 to $31.6 million in
the first six months of fiscal 2004, primarily as a result of
additional headquarters staff required to support the 52.3%
increase in revenues, 48.5% increase in student population and
to support the 57 acquired campuses, 17 acquired
training centers and five new branch campus openings since
December 31, 2002.


Marketing and Advertising.Marketing and advertising expenses
consist primarily of payroll and payroll related expenses,
direct-response and other advertising expenses, promotional
materials and other related marketing costs. As a percentage of
net revenues, marketing and advertising expenses increased from
20.4% of revenues in the first six months of fiscal 2003 to
21.6% of revenues for the first six months of fiscal 2004.
Marketing and advertising expenses increased $30.3 million,
or 61.0%, from $49.6 million in the first six months of
fiscal 2003 to $79.9 million in the first six months of
fiscal 2004. The increase resulted in a 51.1% increase in total
student starts and 16.0% increase in same school starts. The
increase was due to additional staffing and increased volume of
advertising required to support the 57 acquired campuses,
17 acquired training centers and five new branch campus
openings since December 31, 2002.

Income from Operations.Income from operations increased 39.0%
from $50.2 million in the first six months of fiscal 2003
to $69.8 million in the first six months of fiscal 2004. As
a percentage of net revenues, income from operations decreased
from 20.7% of revenues in the first six months of fiscal 2003 to
18.9% of revenues in the first six months of fiscal 2004. The
decrease in income from operations, as a percent of revenues,
relates to the lower operating margins reported at our most
recent acquisitions.

Interest (Income) Expense, net.Interest expense (net of interest
income of $0.6 million) amounted to $0.7 million in
the first six months of fiscal 2004. In the same period of the
prior year, interest expense (net of interest income of
$0.5 million) amounted to $0.2 million. The increase
in net interest expense from the prior year is primarily due to
an increase in interest expense related to capital lease
obligations and debt incurred to acquire Career Choices, ECAT
and CDI in August 2003, and a decrease in investments due to
cash used to fund acquisitions and a decline in the interest
rate earned on investments.

Minority Interest.The minority interest in income (loss) of subsidiary of $43,000
represents the minority stockholders share of the loss of
our subsidiary, CDI until October 7, 2003 when we acquired
all of the remaining outstanding shares of common stock.

Provision for Income
Taxes.The effective income tax rate
was 40.2% of income before taxes in both the first six months of
fiscal 2004 and fiscal 2003.

Net Income.Net
income increased $11.4 million from $29.9 million in
the first six months of fiscal 2003 to $41.3 million in the
first six months of fiscal 2004. As a percentage of net
revenues, net income decreased from 12.3% of revenues in the
first six months of fiscal 2003 to 11.2% of revenues for the
first six months of fiscal 2004.

Income per Share.Diluted earnings per common share for the first six months of
fiscal 2004 increased 35.4% to $0.88 per diluted common share
compared to $0.65 per diluted common share for the first six
months of fiscal 2003.

Seasonality and Other Factors Affecting
Quarterly Results

Our 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 student populations 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. Such patterns may
change, however, as a result of acquisitions, new school
openings, new program introductions and increased high school
enrollments. The operating results for any quarter are not
necessarily indicative of the results for any future period.

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Liquidity and Capital Resources

On August 15, 2003, we amended our credit
facility, and increased it to $235 million, of which
$185 million is a domestic facility and $50 million is
a Canadian facility. The Amended Credit Agreement expires in
2006. The Amended 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 $25 million for domestic letters of
credit and $10 million for Canadian letters of credit.
Borrowings under the agreement bear interest at several pricing
alternatives available to the Company, including Eurodollar and
adjusted reference or base rates. The base rate is defined as
the higher of the Federal Funds rate plus  1/2 of 1% or the
Bank of America prime rate, plus a margin of 0% to 0.25%
depending on the Companys consolidated leverage ratio as
defined in the agreement. The Agreement contains customary
affirmative and negative covenants including financial covenants
requiring the maintenance of consolidated net worth, fixed
charge coverage ratios, leverage ratios, Department of Education
financial responsibility composite score ratio, and limitations
on long term student notes receivables. As of December 31,
2003, we were in compliance with all of the covenants. As of
December 31, 2003, there were borrowings outstanding of
$46.2 million under the credit facility and approximately
$10.0 million of the credit facility was used to support
performance bonds and standby letters of credit. The Amended
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 $23.3 million as
of December 31, 2003 and $42.0 million as of
June 30, 2003 and the current ratios were 1.2:1 and 1.6:1,
respectively. During the first quarter of fiscal 2004, we
completed the acquisitions of East Coast Aero Tech, Career
Choices, and CDI. The combined cash purchase price of the three
acquisitions was approximately $101.3 million, net of cash
acquired, and was funded with cash on hand and borrowings from
the credit facility. During the first quarter of fiscal 2003, we
acquired Wyo-Tech for approximately $84.4 million and
funded the acquisition by using approximately $41.4 million
in cash and borrowing $43.0 million from the credit
facility.

Cash flows provided by operating activities
amounted to $39.4 million in the first six months of fiscal
2004 compared to $37.5 million provided by operating
activities in the same period of fiscal 2003. The increase in
cash provided by operating activities for the first six months
of fiscal 2004 compared to the first six months of fiscal 2003
was due to the increases in earnings, depreciation and
amortization which were partially offset by an increase in other
assets.

Cash flows used in investing activities amounted
to $124.9 million in the first six months of fiscal 2004
compared to cash flows used in investing activities of
$84.5 million in the first six months of fiscal 2003. The
increase in cash used in investing activities was primarily due
to the acquisition of ECAT, Career Choices, and CDI for
approximately $101.3 million, net of cash acquired in the
acquisitions, partially offset by the sales of (investments in)
marketable securities, net of $3.9 million in the first six
months of fiscal 2004 compared to sales of (investments in)
marketable securities, net of $7.3 million for the same
period of fiscal 2003. Capital expenditures, net of disposals,
increased to approximately $27.5 million in the first six
months of fiscal 2004 compared to $11.0 million in the same
period in fiscal 2003. Capital expenditures in fiscal 2004 were
incurred, primarily, for relocations, remodels and enlargements
of existing campuses, to construct new branch campuses, as well
as to fund information systems expenditures. We expect capital
expenditures to be approximately $61.0 million for fiscal
2004.

Cash flows provided by financing activities for
the first six months of fiscal 2004 amounted to approximately
$72.6 million compared to $13.0 million for the first
six months of fiscal 2003. The increase in cash provided by
financing activities in the first six months of fiscal 2004 when
compared to fiscal 2003 was due primarily to a decrease in
principal payments on long-term debt and capital lease
obligations of approximately $47.6 million and increased
proceeds of approximately $19.8 million from stock option
exercises, including tax benefit, and employee stock purchases
under the employee stock purchase plan.

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Off-balance sheet arrangements

As of December 31, 2003, future minimum cash
payments due under contractual obligations, including our credit
agreement, non-cancelable operating and capital lease agreements
and other long-term arrangements, are as follows:

|                            |  |                        |         |           |  |           |         |         |  |   |        |  |  |   |         | 
|--------------------------- |  | ---------------------- | ------- | --------- |  | --------- | ------- | ------- |  | - | ------ |  |  | - | ------- | 
|                            |  |                       
|                            |  | Payments Due by Period
|                            |  |                       
|                            |  |                        |         | More     
|                            |  |                        |         | Than     
|Contractual Obligations     |  | Total                  |         | 0-3 Years |  | 4-5 Years |         | 5 Years
|                            |  |                        |         |           |  |           |         |        
|                            |  |                       
|                            |  | (In thousands)        
|Long Term Debt              |  | $                      | 47,290  |           |  | $         | 47,290  |         |  | $ |       |  |  | $ |        | 
|Capital Lease Obligations   |  |                        | 31,069  |           |  |           | 5,915   |         |  |   | 3,160  |  |  |   | 21,994  | 
|Operating Lease Obligations |  |                        | 319,154 |           |  |           | 135,173 |         |  |   | 78,204 |  |  |   | 105,777 | 
|Other Long-Term Obligations |  |                        | 1,902   |           |  |           | 787     |         |  |   | 1,115  |  |  |   |        | 
|                            |  |                        |         |           |  |           |         |         |  |   |        |  |  |   |         | 
|Total                       |  | $                      | 399,415 |           |  | $         | 189,165 |         |  | $ | 82,479 |  |  | $ | 127,771 | 
|                            |  |                        |         |           |  |           |         |         |  |   |        |  |  |   |         | 

The United States Department of Education
requires that Title IV Program funds collected in advance
of student billings be kept in a separate cash or cash
equivalent account until the students are billed for the program
portion related to those funds. In addition, all Title IV
Program funds received by our schools through electronic funds
transfer are subject to certain holding period restrictions.
These funds are also deposited into a separate account until the
restrictions are satisfied. As of December 31, 2003, we
held nominal amounts of such funds in separate accounts. The
restrictions on any cash held have not significantly affected
our ability to fund daily operations.






|        |                                                              
|------- | -------------------------------------------------------------
|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. As of
December 31, 2003, 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
$48.9 million and capital lease obligations of
$14.0 million, and (ii) student notes receivable, net,
in the aggregate amount of $3.2 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. A portion of the Companys
operations consists of its investment in a foreign subsidiary.
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

The Company maintains certain disclosure controls
and procedures designed to ensure that the information required
to be disclosed by the Company in its periodic reports filed
with the SEC is recorded, processed, summarized and reported
within the time periods specified by the SECs rules and
forms, and that the information is communicated to the
Companys management, including its Chief Executive Officer
and Chief Financial Officer, on a timely basis to permit
decisions regarding required disclosure. In designing and
evaluating the disclosure controls and procedures, the
Companys management recognizes that any controls and
procedures, no matter how well designed and implemented, can
provide only reasonable assurance of achieving the desired
control objectives, and managements duties require it to
make its best judgment regarding the design of such controls and
procedures.

The Company and its management, including the
Chief Executive Officer and Chief Financial Officer, evaluate
the effectiveness of the design and implementation of the
Companys disclosure controls and procedures on an ongoing
basis. Based on these evaluations, the Companys Chief
Executive Officer and Chief

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##### Table of Contents



Financial Officer have concluded that the
Companys disclosure controls and procedures were effective
as of December 31, 2003.


There has been no change in the Companys
internal controls over financial reporting during the
Companys most recent fiscal quarter that has materially
affected, or is reasonably likely to materially affect, the
Companys internal control over financial reporting.

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##### Table of Contents






PART II  OTHER
INFORMATION






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

See Note 9 to the attached Financial
Statements regarding Commitments and Contingencies.






|        |                                              
|------- | ---------------------------------------------
|Item 2. | Changes in Securities and Use of
    Proceeds

None






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

None






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

On November 20, 2003, the Company held its
Annual Meeting of Stockholders in Santa Ana, California.
Stockholders approved all of the initiatives put forth by the
Companys Board of Directors and elected all nominees for
Directors of the Company. The initiatives were (i) to elect
two individuals as Class II members of the Companys
Board of Directors, (ii) to approve the proposed amendment
and restatement of the Companys Certificate of
Incorporation, (iii) to approve the proposed 2003
Performance Award Plan, and (iv) to ratify the selection of
Ernst & Young LLP as the Companys independent auditors
for its fiscal year ending June 30, 2004. No other business
or actions were proposed at the Annual Meeting of the
Stockholders. A total of 40,201,302 shares were represented, in
person or by proxy, and entitled to vote at the Annual Meeting
of Stockholders. Such shares represented 91.18% of the total
number of shares entitled to vote at such meeting. The following
reflects the tabulation of votes for each initiative placed
before the stockholders of the Company:



| |    |                                                                                            
| | -- | -------------------------------------------------------------------------------------------
| | 1) | Nominees for a three year term as Class II
    members of the Companys Board of Directors:

|                    |  |  |          |              |  |  |            | 
|------------------- |  |  | -------- | ------------ |  |  | ---------- | 
|Nominee             |  |  |          | No. of Votes
|                    |  |  |          |             
|Paul R. St. Pierre  |  |  | For      |              |  |  | 24,577,795 | 
|                    |  |  | Withheld |              |  |  | 15,623,509 | 
|Linda Arey Skladany |  |  | For      |              |  |  | 36,653,837 | 
|                    |  |  | Withheld |              |  |  | 3,547,465  | 

No other persons were nominated or received votes
to be Class II Directors of the Company.



| |    |                                                                                            
| | -- | -------------------------------------------------------------------------------------------
| | 2) | To approve the amendment and restatement of the
    Companys Certificate of Incorporation:

| |  |  |         |              |  |  |            | 
| |  |  | ------- | ------------ |  |  | ---------- | 
| |  |  |         | No. of Votes
| |  |  |         |             
| |  |  | For     |              |  |  | 39,147,897 | 
| |  |  | Against |              |  |  | 975,481    | 
| |  |  | Abstain |              |  |  | 77,924     | 



| |    |                                                         
| | -- | --------------------------------------------------------
| | 3) | To approve the Companys 2003 Performance
    Award Plan

| |  |  |                  |              |  |  |            | 
| |  |  | ---------------- | ------------ |  |  | ---------- | 
| |  |  |                  | No. of Votes
| |  |  |                  |             
| |  |  | For              |              |  |  | 24,173,374 | 
| |  |  | Against          |              |  |  | 11,900,953 | 
| |  |  | Abstain          |              |  |  | 87,232     | 
| |  |  | Broker Non-Votes |              |  |  | 4,039,743  | 

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##### Table of Contents



4) To ratify the appointment of Ernst & Young
LLP as the Companys independent auditors for its fiscal
year ending June 30, 2004:

| |  |  |         |              |  |  |            | 
| |  |  | ------- | ------------ |  |  | ---------- | 
| |  |  |         | No. of Votes
| |  |  |         |             
| |  |  | For     |              |  |  | 37,883,958 | 
| |  |  | Against |              |  |  | 2,249,439  | 
| |  |  | Abstain |              |  |  | 67,905     | 






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

On October 17, 2003, the Company announced
plans to open a new Everest Institute branch campus in Ft.
Worth, Texas during the first quarter of fiscal 2005. The new
Everest Institute will offer accredited associate of applied
science degrees in medical assisting, business administration
and criminal justice.

On October 28, 2003, the Company announced
plans to open a new Bryman Institute branch campus in Chelsea,
Massachusetts, a new Las Vegas College branch campus in
Henderson, Nevada, and a new Parks College branch campus in
McLean, Virginia. The Chelsea campus will offer diploma programs
in medical assisting, massage therapy and pharmacy technology.
The Henderson and the McLean campuses will offer degree programs
in medical assisting, business administration and criminal
justice.

On December 18, 2003, the Company announced
that the opening of a Las Vegas College branch campus in
Henderson, Nevada. The new Las Vegas College will initially
offer specialized associate degrees in business administration
and criminal justice. The college intends to introduce programs
in allied health at a later date.

On December 23, 2003, the Company announced
the opening of a National Institute of Technology
(NIT) branch campus in Detroit, Michigan. The new NIT
Detroit campus will offer diploma programs in allied health.
Medical assisting will be the initial program offering, followed
by medical insurance billing/ coding and surgical technologist.

On January 8, 2004, the Company announced
plans to open a new Bryman Institute branch campus in
Minneapolis/ St. Paul, Minnesota during the fourth quarter of
fiscal 2004. The new Bryman Institute campus will offer diploma
programs in medical assisting, medical insurance billing/
coding, and massage therapy.

On January 16, 2004, the Company announced
plans to open a new National Institute of Technology
(NIT) branch campus in Houston, Texas during the fourth
quarter of fiscal 2004. The new NIT campus will be the fourth
campus in Houston and will offer diploma programs in medical
assisting, medical insurance billing/ coding and pharmacy
technician.

On January 27, 2004, the Company announced
the opening of a new Wyo-Tech branch campus in Sacramento,
California. The new Wyo-Tech campus will offer a diploma program
in Chassis Fabrication and High Performance Engines with
Automotive Technology, and an Associate in Specialized
Technology Degree in Automotive Technology and Management.

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##### Table of Contents








|        |                                     
|------- | ------------------------------------
|Item 6. | Exhibits and Reports on
    Form 8-K

(a) Exhibits:

|              |  |                                                                                                                               
|------------- |  | ------------------------------------------------------------------------------------------------------------------------------
|Exhibit  3.3  |  | Restated Certificate of Incorporation                                                                                         
|Exhibit 10.68 |  | 2003 Performance Award Plan                                                                                                   
|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

(b) Reports on Form 8-K:

On October 29, 2003, the Company filed a
Report on Form 8-K, as required by Item 12
Disclosure of Results of Operations and Financial
Condition of such form, in which it announced that the
Company had issued a press release announcing financial results
for its first quarter ended September 30, 2003 of its
current fiscal year ending June 30, 2004. The press release
was included as an exhibit to the Report on Form 8-K.

On January 28, 2004, the Company filed a
Report on Form 8-K, as required by Item 12
Disclosure of Results of Operations and Financial
Condition of such form, in which it announced that the
Company had issued a press release announcing financial results
for its second quarter ended December 31, 2003 of its
current fiscal year ending June 30, 2004. The press release
was included as an exhibit to the Report on Form 8-K.

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##### Table of Contents



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.

February 9, 2004

| |                              
| | -----------------------------
| | /s/ DAVID G. MOORE           
| |                              
| | David G. Moore               
| | Chairman of the Board and    
| | Chief Executive Officer      
| | (Principal Executive Officer)

February 9, 2004

| |                                                 
| | ------------------------------------------------
| | /s/ DENNIS N. BEAL                              
| |                                                 
| | Dennis N. Beal                                  
| | Executive Vice President and                    
| | Chief Financial Officer                         
| | (Principal Financial and Accounting
    Officer)

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##### Table of Contents



EXHIBIT INDEX

|        |                |             |  |                                                                                                                               
|------- | -------------- | ----------- |  | ------------------------------------------------------------------------------------------------------------------------------
|Exhibit |                |            
|No.     |                | Description
|        |                |            
|        | Exhibit 3.3    |             |  | Restated Certificate of Incorporation                                                                                         
|        | Exhibit  10.68 |             |  | 2003 Performance Award Plan                                                                                                   
|        | 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

24