Good evening, ladies and gentlemen. Welcome to the Career Education Corporation Fourth Quarter and Year End Earnings Conference Call. My name [indiscernible] and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. Please note, that this conference is being recorded. I will now have the pleasure to turn the call over to Mark Spencer. Mark Spencer, you may begin.

Thank you, [indiscernible]. Good afternoon, everyone. I am Mark Spencer, Director of Corporate Communications. Thank you for joining us on our fourth quarter 2014 earnings call. With me on the call this afternoon is Ron McCray, our newly appointed interim President and Chief Executive Officer; and Reid Simpson, our Senior Vice President and Chief Financial Officer. Also joining us on the call this afternoon is Lysa Clemens, Senior Vice President and Chief Career Schools Officer and Jason Friesen, Senior Vice President and Chief University Education Officer. Following our remarks, the call will be opened for analyst questions. This conference call is being webcast live within the Investor Relations section of our website at careered.com. A replay of this call will be available on our site. You can also contact our Investor Relations support team at the Alpha IR Group at (312) 445-2870. Let me remind you that afternoon's press release and remarks made today include forward-looking statements as defined in Section 21E of the Securities Exchange Act. These statements are based on information currently available to us and involve risks and uncertainties that could cause our actual future results, performance and business prospects and opportunities to differ materially from those expressed in or implied by these statements. These risks and uncertainties include but are not limited to those factors identified in our annual report on form 10-K for the year ended December 31, 2014, and our other filings with the Securities and Exchange Commission. Except as expressly required by the securities laws, we undertake no obligation to update those factors or any forward-looking statements to reflect future events, developments or changed circumstances or for any other reason. In addition, the remarks today refer to non-GAAP financial measures, which are intended to supplement but not substitute for the most directly comparable GAAP measures. Our press release and slide presentation which accompany today's call and which contains financial and other quantitative information to be discussed today, as well as the reconciliation of the GAAP to non-GAAP measures are available within the Investor Relations section of our website at careered.com. I would also like to remind everyone that in mid-December, the company announced plans to pursue the divestiture of its Le Cordon Bleu North America Colleges of culinary arts. As a result, Le Cordon Bleu's financial results have been removed from the continuing operations and been reclassified within discontinued operation in held for sale. With that I would like to turn the call over to Ron McCray. Ron?

Thanks, Mark, and thanks to everyone for joining us on the call. We appreciate your interest in Career Education and I am very happy to be with you today. Since this is my first opportunity to speak with many of you I would like to take a moment to introduce myself. Like many of our students, I am a product of a working-class family. I grew up in public housing projects in The Bronx, New York and was lucky enough to find the path through education, the arts and sports, which opened numerous doors to enrich both, my life and ultimately my family's life as well. Education has remained very important to me. I currently serve on the governing boards of my Alma Mater's Cornell University at Harvard Law School. I believe that everyone should have the opportunity to improve their own capabilities to education to open up opportunities for themselves and for their families. Everyone should have the chance to improve their prospects and enrich their lives to an education that suits their interests and talents. These are the key reasons I jumped at the chance to join Career Education's board in late 2012. I have been honored to be part of this team as Chairman and I am looking forward to working to keep on our transformation on track. Enough about me, as far as Career Education goes, let us not lose sight of the value that our organization brings in enriching the lives of our students. Our overall student body is very diverse. Roughly 50% of our students are minorities and the average age of our student population is roughly 32 years old. So many of our students face real world challenges. They are adults not kids and they often have families they need to support. They…

Thank you, Ron. Good afternoon, everyone. Let us get into the fourth quarter financial results. All percentage variances I will mention will be comparisons to the prior year quarter unless otherwise noted. Also, please keep in mind the earlier comments regarding the classification of our culinary business into discontinued operations since it is being held for sale. First, let us discuss the consolidated results from our ongoing businesses. Revenue excluding that from the transitional and culinary campuses was $168.6 million for the quarter, down 9.6% year-over-year due primarily to an overall 4.5% decline in total student enrollments. Operating expenses for our ongoing business decreased by $22.6 million or 12% for the fourth quarter of 2014. A portion of the expense reduction was driven by the lower student volumes, but a good portion of the year-over-year improvement was the result of continued focus on improving our cost structure. Educational services and facilities expenses were down $4.1 million or 7.6% as a result of increased operational efficiencies and optimization of real estate. General and administrative costs were down $17 million or 13.8% as a result of insurance recovery in the current year, lower legal expenses compared to prior year as well as certain reorganization efforts. We also kept our marketing expenses virtually flat with last year for the quarter at $45 million. Overall, 2014 was a strong year of progress on the expense side of our rightsizing and turnaround efforts. As Ron mentioned earlier, during the back part of 2014, we implemented an additional $40 million of cost reductions that will lower our cost base in 2015. Fourth-quarter operating income from our ongoing business was $2.4 million compared to a $2.3 million lost last year. The improvement was a result of the success of our cost reduction initiatives which more than offset…

Thank you, Reid. In closing, I just want to reiterate that we have a very well-rounded team here, including Lysa and Jason, who are also present on this call. We have been executing against our stated strategy for several years now and our path forward is clear. We all remain committed to smoothly executing through the strategy for this transition phase and remain committed to the goals we have talked to you about over the last year. Now, I will turn the call over to the operator for your questions. Operator?

Great. Thank you. We will now begin the question and answer session. [Operator Instructions] Now, our first question is going to come from Jet Li from Wells Fargo. Please go ahead with your question or comment.

Hi. Thank you. Could you give us any color on when you expect quarterly free cash flow for the company to turn positive?

Quarterly free cash flow for the consolidated company?

Yes.

Well, we have not provided guidance, but I would expect as we progress through 2015, as we enter 2016 assuming that the trends continue, we should see it in that timeframe, but I cannot give you a specific quarter.

Okay. Thank you. Then one more, were there any differences in timing of students starts this quarter that might have benefited or negatively impacted student starts?

No.

Okay. Thank you. I will turn it back over.

Thank you.

Thank you, Jet. Our next question is going to come from Jeff Silber from BMO Capital Markets. Please go ahead with your question or comment.

Hi. It is Henry Chien calling on for Jeff. Good afternoon. I wanted to ask about the sale of the Le Cordon Bleu, if you could provide a little bit more color. What give you confidence that that sale will be completed? Have you found a buyer or is there progress on going or just any sort of color you have on that would be appreciated? Thanks.

Yes. I will try to respond to that and turn it over to Reid as well. This is Ron McCray. The process is on track, Henry. It is very early in the process, so it would be premature to speculate on the timing and who the buyer or buyers might be. Reid?

I think that is accurate. The process is recently underway and we will provide continued color as the quarters progress so I think it is our hypothesis that there is a valid group of prospective buyers and they we are optimistic that we will have transaction completed along the timelines that we discussed.

Got it. In terms of that the CEO search. I know maybe early, but do you have an estimated timeframe in mind or a target timeframe of when you hope to maybe come up with the short list or hopefully have the CEO in place?

Well, as I indicated in the opening remarks, we have launched the search process. I should also point out that we are conducting the search with the Board is with the utmost urgency and seriousness. We are in the early phase of this process and we will be looking for a leader, I can tell you that we will help support the company and lead the company through this transformation period, but we have a solid bench that is focused on the strategic plan and meeting our financial objectives. We are sufficiently early in the process that it would be difficult to predict what we might have someone occupy the seat permanently.

Got it. Okay. Thanks so much.

You are welcome.

Thank you. Our next question is going to come from Jason Anderson of Stifel. Please go ahead with your question or comment.

Good evening, guys.

Hi.

In regards to the EBITDA numbers you have given for the transitional group. Is there any way you could break those out? Maybe it would be interesting to see where culinary is for fourth quarter, but also maybe what your assumptions are there for FY'15 you mentioned the $62 million. In addition to that, is the assumption that am I reading it right the culinary might be neutral EBITDA contribution as you switch Culinary goes into that group now and the guidance did not really change from last quarter. Any help you could give us there?

It is a good question. We did not providing a breakout of LCB in that grouping. We may do so going forward. I think your assumption as to the general direction of LCB within that bucket is directionally accurate and one of the reasons is, as I pointed out in my comments that from an accounting perspective you cannot bring with you to discontinue operations any management allocations being provided to the business, so those stay. As they are related to the culinary business, those stay up in the continuing operation. In other words, the fully loaded P&L of LCB does is not move down into that category.

Great. Thanks. A little bit further on that. I do not know if we can press you on how to look at EBITDA losses going into '16. Should we think about it the same trickle down as what happens with the campuses or would it divert from that trend in any way?

You are talking about from continuing or from the discontinuing segment?

I am sorry from the transitional group, culinary, disco, other disco transitional as you rolled that up as of now?

We have not given any guidance beyond the 2015 number, but if you look at the teach-out that is included in the materials, those feather down, so the burn associated with those feather down 2015 off of 2016 and then there are zero in 2017. That pace could also be favorably impacted by culinary transaction and that could also be favorably affected by further real estate transactions, but I cannot give you specific year-over-year number.

Okay. Thanks. Then I had one other here. It was helpful to give us your thoughts on the university enrollment expectation in '15. Do you have anything, I guess, maybe you could provide some color on the career piece. Obviously, there is a lot going on there. Do you feel like that has stabilized, or will stabilize into '15. Again, I know there a lot of moving parts, but I guess I was just trying to think about how has that business? Is there potential to deteriorate further or not? Then also if you could add onto that, do you have any thoughts about also looking for potential divestiture in that business too, now including the culinary?

I assume you are asking about the Career Schools?

Yes, yes.

Okay. There were a bunch of questions there. You had a question about University Enrollment.

I don’t think it was University Enrollment. Could you please state your question, I think it was related to Career School enrollment. Then secondly with respect to any potential divestitures of that unit, was that accurate restatement?

That is accurate. Thank you.

Ron, you want to talk any strategic stuff on Career?

Yes. In terms of strategic options as it relates to Career Schools, we regularly examine all aspects of our portfolio for strategy opportunities and Career Schools of course would be among them.

Okay. Thank you.

Okay.

Do you mind if I take on that question?

Yes please.

This is Lysa Clemens on to the enrollment question for Career Colleges. Our objective with Career Colleges is to stabilize the results and reduce the rate of the decline in the new students' enrollments. As you noticed throughout '14 the path was quite choppy and the expectation for '15 would be that it may continue to be choppy as we continue to deemphasize certain programs, add programs and continue to adapt our marketing to marketplace trends.

Great. Thanks for the color.

Okay. Thank you.

Thank you. Our next question is going to come from Cory Greendale from First Analysis. Please go ahead with your question or comment.

Hi. Good afternoon.

Hey, Cory.

Hi, Cory.

I had a few clarifications. The comment about absorbing the corporate overhead from the culinary, could you quantify that?

No. We have not historically broken out the management allocations that are embedded in each of the business segments and we do not plan on breaking those out further, but as I said they are substantial and as I said when you net them against the other improvements, they are going to have a fairly significant effect at least in 2015 on diminishing the improvement that I discussed in those other areas. With that said, there should be some modest improvement in year-over-year, but albeit minimal as we said.

Okay. Where I was going with that is assuming that that overhead goes away once Le Cordon Bleu is divested understanding kind of the underlying performance will be?

Well, I think if Culinary were - the transaction work to be completed and that overhead remains, we would certainly address that overhead as rapidly as possible. As we would address that, it would be highly accretive to the ongoing segment.

Okay. Then the next clarification you made a comment about the timing difference, the shift between Q1 and Q2 in new enrollment last year. What was that suggesting that should reverse in 2015?

Hi, Cory, this is Jason. All that was doing is just so when you look at your comps as you see Q1 '15 and Q2 '15 for University, specifically, AIU you make sure that you adjust your comps, so that you can see kind of what year-over-year was, so I was just trying to remind that we had that adjustment that occurred in last year's Q2.

It normalizes year-to-date for Q2.

That is right.

It is just you are going to get some quarterly comp issues on the individual quarters.

Okay. Jason, as long as you are addressing that, the new student growth at AIU in Q4 was very strong. Is there anything you would highlight as to what drove that and whether. I am not imagining that sustainable, but maybe you could comment on that?

We have clearly been focused on trying to drive sustainable growth across the University segment. I think when you look at the online growth that is specifically total enrollment growth as we laid out in those slides, was really driven by a series of actions that we were working on and initiatives that we are working on through all of last year around a combination of our marketing efforts. For example in Q1 '15, AIU will be on TV for the first time in a number years from a marketing perspective. Then as Ron went on to point out, we worked hard on the developing more corporate partnerships last year and how that growth drove focused on relevant new programs that we could introduce as well as the impact of intellipath and strengthening our academic outcomes, so it really was a byproduct of all of those initiatives together that drove our total enrollment growth.

Okay. Then next clarification, I think, I know the answer to this from the way the slide is, Ron, just to clarify when you are talking about your cash level throughout 2015, you are not receiving any proceeds from the Le Cordon Bleu in that?

That is correct. I should have made that clarification, but it does not assume any assume any proceeds from LCB. As I mentioned, it does not assume any material cash outlays for additional real estate transactions. If we have the opportunity to do those, we would do them, but from a covenant perspective related to the revolver as I mentioned in my prepared comments, there is a basket that we get to offset, those types of transactions, but that is correct. Consider that the major components of cash movement during the year.

Okay. Then I just had two other quick ones. Thanks for taking all these questions, but on the $40 million cost savings, from the way you described it, it sounded like a fair amount of that would actually be in AIU, is that accurate or is it more weighted towards the Career Colleges?

No. What I was trying to say is that the $40 million, which was initiated in the back half of last year has meaningful impact on virtually every component of the business, so these actions were enterprise wide. They are going to favorably affect the margins at both, AIU and CTU, they affect the corporate expense structure and they also affect the cost structure across the Career Schools as well, so not weighted disproportionate in any one bucket.

Got it, and the last quick one is, could you comment on revenue per student expectation in the University business in '15?

Yes. I do not think, Cory, we have given a specific guidance. This is Jason, any specific guidance on revenue per student but I think, as you have modeled and well know based on historical trends that are probably as good as any baseline to use on a go-forward basis.

Okay. Thanks very much.

Thank you, Cory. [Operator Instructions] Our next question is going to come from Peter Appert from Piper Jaffray. Please go ahead with your question or comment.

Yes. You have got on John Crowther on for Peter. Just following up on that revenue per student comment, it looked like there was a little bit of a downtick in the way that we actually can calculate it here in the University category this last quarter. Just wondering if there is any sort of timing issues that would account for that or as you said looking back on a historical basis, is there anything that we should be thinking about as we try to judge that historical pricing growth as we look forward to '15 and '16?

Yes. We didn’t have related to any pricing changes, we did not have any pricing changes or any other particularly unusual items that would affect that going forward. From an overall student credit load and otherwise perspective, I did not see any material changes.

Okay. Great. Thank you.

Thank you, Peter. At this time, we have no additional questions.

Okay. Well, thank you again for your continued support of Career Education. I look forward to meeting many of you over these next few months and to continue to report our progress against our stated goal as the year progresses. Have a great day. Thank you.

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.