Good morning and welcome to the Career Education Corp., Third-Quarter 2015 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Sam Gibbons. Please go ahead.

Thank you, Amy. Good morning everyone and thank you for joining us. With me on the call today is Todd Nelson, President and Chief Executive Officer, Dave Rawden, Interim Chief Financial Officer; and Ashish Ghia, Vice President of Finance. Following today's prepared remarks the call will be open for analyst questions. This conference call is being webcast live within the Investor Relations section at careered.com and webcast replay will also be available on our site. You can also always contact the Alpha IR Group for Investor Relations support at 312-445-2870. Let me remind you that this morning's earnings release and remarks made today include forward-looking statements as defined in Section 21 E of the Securities Exchange Act. These statements are based on information currently available to Career Education and involve risks and uncertainties that could cause actual future results, performance and business prospects and opportunities to differ materially from those expressed or implied by these statements. These risks and uncertainties include but are not limited to those factors identified in Career Education's Annual Report on Form 10 K for the year ended December 31, 2014, and other filings with the Securities and Exchange Commission. Except as expressly required by the securities laws, the company undertakes 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 today's remarks refer to non-GAAP financial measures which are intended to supplement but not substitute for the most directly comparable GAAP measures. The earnings release and slide presentation which accompanies today's call and which contain 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 a careered.com. So with that, I would like to Todd Nelson. Todd?

Thank you, Sam and thanks to everyone for joining us on the call. As of today, I have officially been on the job here at Career Education for 12 weeks. And I thought I would start out today's discussion with a few key things that I've learned. First I would like to start out with a few comments about the staff and faculty we have here. I've spent much of the last 12 weeks meeting and working with the talent we have here and I've been remarkably impressed with what I've seen so far. As our investors know, our team has been through a lot in terms of restructuring and cost containment over the last few weeks. Throughout that process we have kept a focus on our students, and prioritized their needs, in many cases over their own personal and professional needs. I'm very excited about the talent we have throughout our company, and I'm energized by the opportunity we have long-term here to help them shift a career at a small organization to one that grows responsibly through its focus on student outcomes, quality and retention. I've also had a chance to spend a great deal of time analyzing each of our education systems. As all of you know this industry is undergoing a significant transformation. There will be those who will succeed and those who won't. One of the things that really attracted me to Career Education was the quality and brand names of our two award-winning universities. Both institutions are respected and have multiple areas of study and with more than 90% of our student population completing their course work online we believe we have a tremendous foundation and competitive position to build upon as we move forward. I would like to take a few moments to…

Thanks, Todd and good morning everyone. I will start first with the third quarter University results then I will discuss the results of our transitional group and discontinued operations. Then after that I will briefly review some of the consolidated results and provide an overview of our liquidity and balance sheet. I ask that you please turn to slide 5. All percentage variances I mentioned will be in comparisons to the prior year quarter unless otherwise noted. Total revenue for the University Group of $136.1 million was up 1.4% year-over-year driven by a modest increase in total enrollment. As Todd mentioned, after adjusting for the accounting of the student withdraws revenue was up approximately 3% year-over-year. Operating income was $20.3 million, up 212.3% over the prior year period as operating margins expanded 10.1% to 14.9%. This was driven by the slight increase in revenues and continued execution of various cost control initiatives across the organization. Year-over-year operating margin improvement should continue for the remainder of the year, although I also remind you that quarterly margins are impacted by seasonality and marketing spending. Our first and third quarters tend to be our highest advertising expense quarters. In the third quarter advertising expenses were $46.2 million and this compares to $50.4 million in Q3 of last year. Adjusted EBITDA for the University Group and corporate increased 157.6% to $16.6 million during the third quarter, driven by increased revenue and continued cost reduction initiatives. Total student enrollment within our University Group of 31,400 students was up slightly compared to the prior year quarter. New student enrollments for the University Group were 8,450, a decrease of 3.5% as compared to the prior quarter. Primarily, due to the declining enrollments at AIU. And as a reminder, during the prior year quarter AIU returned to television…

Thank you, Dave. I truly believe we have the right long-term platform to be successful in the education of our students and in the creation of value for our shareholders in the future. We have a well positioned organization and a strong leadership team whose transition efforts will free up even more capital for us to invest in the core University platform moving forward. With that I will now turn the time over on the call to the operator for your questions. Operator?

Thank you. [Operator Instructions] Our first question is from Corey Greendale at First Analysis.

Good morning.

Good morning Corey.

How are you?

Good.

Good. So I just wanted to start with a couple of questions on Slide 6. So I understand that a cash payment is going to be involved with the LCB sale. I was hoping you might be able to give some specificity on the magnitude of that, and obviously the guidance for 2016 cash of less than 190 million. There's a lot of room between 190 million and 0, so if you could give us some sense of what you think the low might be?

Well as we said, we are progressing in the discussions with one Le Cordon Bleu buyer at this point in time. And we made that decision based on several different potential buyers. We looked at one who we thought was a quality organization because we are obviously very – it's very important for us to maintain the good solid brand and also for our students going forward. So in that regard, again, although it is a little premature to talk about any of the things that are specific about the amounts and ranges, there will be a payment made. We certainly feel that we have the capability of handling whatever that would be.

Yes. And maybe you cannot say. Where I am going is, I think some people have been focused on the fact that the stock trade is not that far above cash. So I am just trying to get a sense of what the cash low point might be for people that look at that?

Yes. Again, we would love to be able to give a little more direction on that, but again, since we are in the middle that process it is difficult to do it. You know, again, it is – but it is something that I think if you look at the organization, the value of the organization, again we feel very comfortable that our ability to exercise and execute on our strategy going forward it allows us to do that.

Okay. I understand. And then I was hoping you could clarify. I though I understood this, but I am not sure. The third line of the table on slide six, the total CEC operating margin, does that include the transitional schools?

Yes it does.

Okay. So in so far as, I think it's a small change, but 2016 I think you had said you expected mid-single digits. Now it's low to mid. Can you just talk a little bit about what might've changed in your assumptions there?

That's correct.

That is right. As we take a look going forward we are modifying it just slightly to say low to mid rather than just pure mid.

And the big driver of the change as we have highlighted in footnote three, is now it includes the timing impact of the LCB transaction that we now expect to close in early 2016, which is the biggest driver of that change.

Correct.

Okay. And then just with the ongoing business can you talk about the start trends looked very good for University last quarter; looked a little less positive this quarter. Talk about what is going on there and is it just market volatility or anything particular you would point to?

Sure. I think you know a couple of things we want to point out here and that is despite I think what we see across the entire industry, we continue to see good strong demand for both CTU and AIU. I think that as I mentioned, though, the important part here is that CTU has been operating at a little bit stronger level. But I felt like our need to bring in somebody who has a lot of experience, especially in quality online education. And so our feeling is that we are well-positioned going forward to take advantage of the opportunities. It's hard to say to what extent. But right now we're feeling actually pretty good about our ability to in time, as we said although it is relatively flat to modest growth, our ability to eventually turn to responsible growth at both institutions.

Got it. I will turn it over. Thank you.

Thank you Corey.

The next question is from Jeff Silber at BMO Capital Markets.

Thank you so much. I just wanted to follow up on one of Corey's questions. If we were to exclude the impact of LCB, last quarter you had projected that cash would be relatively flat in 2016. Would the same assumption apply or has anything changed there again excluding any LCB divestiture?

No, that is correct.

Okay, so keep that the same. All right. Then just focusing on the quarter that you just reported, you mention that AIU starts were down because – or at least you implied that because of the three quarter 2014 pickup in TV advertising. Can you remind us how long that continued?

Yes. It was just for like a short period into the third quarter and it was a holdover from before. But it was the first time we had come back to the market in several years. So you've got a fairly large lump from the same amount of advertising spending.

So on a comparative basis going forward that should not be an issue. It only really impacted 3Q 2014 for the most part?

Yes. That's correct.

Okay, great. And then were there any one-time items in the third quarter?

Not really. No.

Other than the revenue recognition, which we called out. There is no one time items in third quarter.

Okay great. Once you get past the LCB divestiture if you could tell us maybe what you are thinking about your plans for your cash balance? Thanks.

Yes. Well, again at this point in time as you've seen with what we've talked about as far as this transformation that we have gone through and what you see happening with the University segment of our business. We are encouraged by their ability to generate cash. And our hope that as we get out through that two or three-year period that we will be in the position to be generating the cash that allows us to continue to invest in technology and enhancements and to take advantage of what we believe is a good market for university students. So we are actually feeling very optimistic about it.

Okay, great. Thanks so much.

[Operator Instructions] And our next question is from Peter Appert with Piper Jaffray & Company.

Good morning. Todd I was hoping you might give us a brief update on what you're seeing from a regulatory perspective? Any updates in terms of the various backs and forths you have had with the regulatory agencies, state investigations you know, et cetera, et cetera?

Yes, obviously the industry has had certainly a lot of change over the last several years. And we have not seen a lot of new things, other than the ones that you have reported on as those following the sector. Internally, we continue to feel that given focusing on the University business going forward, at least those things, the things like gainful employment and others that get a lot of attention that our two universities actually do quite well in that environment. So we look at that as positive. Obviously the political environment, I would say to expand on the regulatory environment right now is, a lot of that is focused on the upcoming election for next year. And as a result there seems to be a lot of positioning and posturing, but not really seeing anything at this point in time that is different you know than what is out there in the public.

Do you guys have the updated CDR numbers?

We do. We do. Is there anything in particular you would like to take a look at? There was only really one which was the LCB Austin location. But no other OPEs had [indiscernible] rates were over 30% except that one, and we are obviously, as you know you can submit information to be able to look at that to make sure that is adjusted correctly.

Do you have the totals for CTU and AIU convenient?

I don't. But we can get those to you.

Okay. Great. Thanks Todd. Oh and one more thing. So you mentioned on gainful employment you are feeling comfortable. I mean is there an expectation you might have to make some programmatic adjustments or pricing adjustments?

Not at this point. Obviously, I think we have – one of the things that has been impressive about being here at the Company is the amount of technical resources they have, the talented folks that analyze that. And at this point, Peter although it is difficult to be completely 100% sure, but you know we – at this point in time we feel comfortable that we have taken into account the impact of that on what we've said as far as where we think the business will be going forward. As we now it, I think there are unintended consequences of that regulation. But a lot of those really impact career colleges more so than the universities and the profile of students there.

Got it, thanks Todd.

Thank you. End of Q&A

This concludes our question-and-answer session. I would like to turn the conference back over to Todd Nelson for closing remarks.

Well, thank you again for joining us this early morning and your continued support of Career Education. We look forward to speaking with you again next quarter.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.