Lincoln Educational Services Corp (LINC) 2012 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Q4 2012 Lincoln Educational Services earnings conference call. My name is Andrew, and I will be your operator for today. At this time all participants are in listen only mode. We will conduct a question and answer session towards the end of the conference.

(Operator Instructions)

As a reminder, this call is being record for replay purposes. I would like to turn the call over to Mr. Shaun McAlmont, President and Chief Executive Officer. Please proceed, sir.

Thanks, Andrew, and good morning, everyone.

Joining me in the room today is Cesar Ribeiro, our Chief Financial Officer. Let me begin this morning by reading the Safe Harbor statement under the Private Securities Litigation Reform Act of 1995. Statements in this presentation concerning Lincoln Educational Services Corporation's future prospects are forward-looking statements that involve risks and uncertainties.

There can be no assurance that future results will be achieved, and actual results may differ materially from forecasts, estimates and summary information contained in this earnings release. Important factors that could cause actual results to differ materially are included, but not limited to, those listed in Lincoln's annual report on form 10-K for the year ended December 31, 2011 and other periodic reports filed with the SEC. All forward-looking statements are qualified in their entirety by this cautionary statement.

This morning I'll provide an overview of our Company's operations and Cesar will review our fourth quarter and full year financial results and also provide our outlook for the first quarter and full year of 2013. We'll then take your questions.

As stated in our press release this morning, we believe that 2012 was the trough in the two-year down cycle of our Company as we continue to strategically refocus the Company on our skilled training programs. We managed this retrenchment while also accomplishing improvement in our key student outcomes of job placement and persistence rates and maintaining an exemplary regulatory compliance record. Also, from a financial point of view, excluding the non-charge -- non-cash impairment charges from prior acquisitions, we remained profitable and generated positive cash flow for the year. Our student starts from continuing operations are stabilizing and will add an increase in certificate starts, positioning us well for 2013 as a more focused company.

During 2013 we intend to continue to drive improvements in student outcomes. We will pursue select acquisitions, launch new certificate program offerings in manufacturing and health care and secure training partnerships with selected industry associations. We look forward to realizing successful results in these areas in the second half of 2013 and beyond.

In addition, we've identified four campus success models which are currently operating within the Company that will guide the future development of all Lincoln schools. First is our Denver model which is a big box, 250,000 square foot multiple program school training school with state of the industry equipment. This campus has received broad acclaim from industry professionals and students since opening as one of the best if not the best of its type in the country.

Our Mahwah model is a medium sized facility featuring partnership training programs both on and off site including BMW and Chrysler training. This campus also piloted our successful Lincoln Edge Program and has the best placement outcomes in the Company.

Our Queens model is a smaller box with an auto only offering sharing the facility with a direct industry partner, in this case, the Greater New York Auto Dealers Association, which exposes students to the job market while they're in school. This campus has high student outcomes across the board.

And fourth, our Paramus model, which provides health care training and medical front office and nursing. This Paramus campus has high satisfaction from its allied health students and will host the New Jersey Technology Council Conference and Expo next month for hundreds of business and general public participants.

Each of these campus models boasts strong local leadership, a focused approach to skilled training, active government relations, impressive facilities and beneficial industry partnerships. They again represent Lincoln's future model for all schools.

Now as a point of background. When the first Lincoln school opened in 1946, it did so with a simple mission, and that was to help veterans coming home from World War II develop their skills they needed to find jobs in a changing American economy. Our reach has since grown, and our business model has evolved, but the foundation is unchanged. We are here to provide training that leads to successful professional outcomes for every student who wants to change their life with a new career.

From 1946 to 2012 this has been what drives us, an unwavering commitment to excellence for our students, our employer partners included and also the industries we support and our shareholders. As I stated earlier, 2012 was a year of continued retrenchment for Lincoln Educational Services. Historically our campuses provided opportunities for the students that others forgot. We took pride in educating all students from all walks of life despite their life circumstances. Our Company's mission was to expand our reach to those needing training through geographic -- through our geographic expansion, higher degrees, and also our diversified programs.

We now operate in a new environment where there is constant scrutiny in our sector based both on perceptions and realities. However, a blanket approach has been applied from those in Washington, yet we continue to prepare automotive technicians, welders, health care workers and HVAC technicians better than most in this country. Our graduates find jobs in their field, and those who work hard find promotions and great long term careers.

The year ahead will see us expand into new areas to service the needed skills required by employers while continuing to build on our areas of strength in academic excellence, commitment to our students, strong relationships with our partners, and our commitment to a strong regulatory foundation. Our goal is to be recognized as first choice by students who want to improve their lives and by the employers who hire them. It's a goal that's broad, and it's aggressive, but to reach it, we only need to remember where we came from and why we're here. Outside influences and a new operating environment can't be ignored, but nor will they hold us back. Instead they will become part of the building blocks that set Lincoln up for success in 2013 and beyond.

Now in 2012 new starts were lower across the sector and at Lincoln. Student starts were down in total 7.7% for the total fiscal year 2012 compared to 2011, which reflects a stabilizing where start declines. If we exclude discontinued online programs and ATB, total starts were down 6.2% for the year and 12% for the fourth quarter. The first half of 2013 will continue to reflect declines due to the discontinued online programs and the loss of ATB students. These two areas of start comparisons will lap at Q3 2013, and at that time we expect starts from continuing operations to grow in the second half and be flat to slightly down for the year as compared to 2012, primarily due to affordability.

It was a difficult decision to cease enrolling fully online students. However, we had to find a niche where Lincoln could succeed long-term. In addition to the costs of recruiting in a saturated market, the nature of the programs were lengthy, costly and undifferentiated, which made this a non-compelling market for our long-term strategy. And the overall cost structure was also burdensome on the Company.

ATB students were prevalent at many of our schools, and the desire to grow and cater to this population was ultimately overshadowed by the poor results which were eroding our 90/10 and cohort default rates. And while we believed we had piloted a successful program to ensure that these students were successful, the federal rule shutting down this program forced us to stop enrolling these students. Already we're seeing improvements in student persistence, and we know this will have a positive impact on our cohort default rates in two years.

Our outlook and growth for 2013 beyond really is based on early indicators for improved high school starts in the third quarter, new programs that will launch in 2013 including manufacturing, dialysis technician and our RN programs are improved student persistence, also increasing the comfort that the admissions process is seeing and our new web site optimization, not to mention the lapping of ATB and online discontinuance, as I menaced earlier. Early indicators show our high school leads and enrollments are approximately 2% ahead of prior year at the same time, and our earliest financial aid package students are significantly ahead of prior year. The number of representatives is flat indicating at least at this point that comfort in the new process is taking hold.

Let me take a moment to expand on our regulatory emphasis. You've probably noticed that Lincoln rarely has headlines regarding regulatory issues or broad displays of student or employee dissatisfaction. We take pride in maintaining a strong regulatory track record. We look at regulatory strength two ways, first, compliance to standards of accreditation, state and federal rules, and, secondly, in our student outcomes.

Our compliance efforts include internal regulatory review and accreditation readiness process, internal audits of Company controls, curriculum review focused on student jobs readiness, credit structure and instructional delivery, the review of administrating our Title IV financial aid, proactive communications with federal state and accreditors, teach outs or closures that are student centered and the Company's legal position is strong with no open suits or class action lawsuits keeping our track record a clean one.

Student outcomes are challenged because of some of the demographics we serve. Over the past two years we've limited the highest risk students. We've managed our 90/10. We've changed our job placement leadership at the corporate level, and we've implemented financial literacy efforts as a part of our Lincoln Edge and early student engagement programs.

Risk mitigation is of critical importance to us to help us stay regulatory sound. Our Lincoln Edge Program is designed to engage students early in their stay with us in the areas of financial literacy, basic skills, mentorship, faculty, services, placement, on boarding and skills assessment. The implementation and continuing advancement of this program is showing a dramatic positive impact on student persistence. We feel this program will be a differentiating factor for Lincoln in how we manage more challenged populations down the road.

The net interrupt rate for the fourth quarter showed an improvement of 40 basis point over what was an already impressive improvement the prior year. Moreover, we saw a 260 basis point improvement for the full year, or a 21.8% net interrupt rate for the year. This is record performance for Lincoln students, and bodes well for future graduation and default rates. We recently closed seven campuses and are consistently and constantly assessing the viability of our 43 remaining schools.

We mitigate risk by taking a student oriented approach in these situations which allows students close to graduating to finish their programs or transfer to other Lincoln schools or peer schools, and we also return aid to those electing not it finish. We have had no student accrediting or federal or employee issues related to closing the seven schools or the fully online programs.

Default rates are a constant concern for Lincoln. Our last two years CBR rates for the Company were in the 18% range, and, although we anticipate slight uptick, we believe we will remain compliant. Our three year rates were high, and we expect that they will remain close to the 30% threshold until students moving through our Lincoln Edge Program hit their three-year mark.

We are increasing our external public relations, and in 2012 we further honed our partnership approach as we worked with both long time vendors and also made new associations that will assist the Company long-term. We're in the process of solidifying a number of relationships that will allow us to strengthen existing programs, find sources of new employer driven students, and also launch new programs.

Our recent manufacturing summits in Dallas and Indianapolis were packed and show high interest in our programs that will ultimately teach, especially in CNC machining which is related directly to the resurgence in the US manufacturing jobs. We have a 30-minute show running on cable channels which highlights our earlier mentioned new state of the industry campus in Denver. We launched a new web site in January to high acclaim. We've hosted a number of state and federal public officials at our campuses across the country, and we plan to continue publicly promoting Lincoln on our graduates and print publications web and television news.

At this point, I'll turn the time over to Cesar to discuss our 2012 financial results and our guidance for the first quarter and 2013. Cesar.

Thank you, Shaun. Good morning, everyone.

As we've disclosed in our press release early this morning and as Shaun stated in his prepared remarks, our fourth quarter operational results reflect the seasonality inherent in our Business and reflects the ceasing of operations at seven of our campuses which have been reflected as discontinued operations in the schedules and the press release released earlier this morning. My prepared remarks will thus focus only on continuing operations. Revenue for the fourth quarter of 2012 was negatively impacted by us commencing the fourth quarter with approximately 2900 fewer students than we had on October 1, 2011. This lower and carry -- this lower carry in population resulted in a decrease in revenue for the fourth quarter of 2012 of approximately $9.3 million or a 13% decrease as compared to the fourth quarter of 2011.

Other key highlights for the fourth quarter include, during the fourth quarter, we incurred a non-cash impairment charge of good will and long lived assets of $19.7 million, or a loss of $0.71 per common share. Our operating margin decreased to a negative 9.9% for the fourth quarter of 2012. Excluding the non-cash charge described above, our operating margin for the fourth quarter of 2012 was 9.3%, down from 12.5% operating margin in the fourth quarter of 2011.

As stated above, the decrease in operating margin is a result of a decrease in our average population for the fourth quarter of approximately 13.5%. This decrease in average population resulted in our capacity utilization decreasing to 38% for the fourth quarter of 2012 from 43% for the fourth quarter of 2011. Loss per diluted share was $0.40 for the fourth quarter of 2012 compared to earnings per share of $0.33 for the fourth quarter of 2011. Excluding the non-cash impairment charge described above, earnings per diluted share for the fourth quarter of 2012 was $0.31 per common share.

We generated free cash flow of $5.8 million for the fourth quarter of 2012, an increase from the $2.4 million generated during the fourth quarter of 2011. We paid a $0.07 quarterly dividend on December 31, 2012, and we finished the year with $61.7 million in cash and cash equivalents and $37.5 million in borrowings outstanding in our credit agreement.

Turning to our full year results, revenues from continuing operation decreased by $89.1 million, or 18.1%, to $402.7 million for 2012 from $491.8 million in 2011. Revenues were negatively impacted during the year by us entering the year with approximately 9,000 less students than we had on January 1, 2011, and continued declines in student starts throughout the year. This resulted in a 23% decrease in average population for 2012 as compared to 2011. Average revenue per student increased 5.4% in 2012 from 2011, primarily due to tuition increases which averaged 3% during the year and from better student retention and the restructuring of some of our programs which resulted in the acceleration of revenue.

Operating loss from continuing operations was $27.7 million for 2012 compared to income from continuing operations in 2011 of $40.2 million. Operating loss from 2012 includes a $33.9 million impairment of good will on long lived assets compared to $8.3 million in 2011. Impairment of good will on long lived assets in 2012 resulted in a loss per common share of $1.11.

The decrease in average population during 2012 resulted in reduced capacity utilization of 38% at December 31, 2012, versus 50% at December 31, 2011. The decrease in capacity utilization produced 160 basis points of negative leverage in educational services and facilities expenses and 340 basis points of negative leverage in selling, general and administrative expenses during the year. Costs per start decreased 8.2% for 2012 to $3,756 from $4,091 in 2011. Costs per start was positively impacted during the year by improved conversion rates as our sales force became more comfortable working in this new regulatory environment.

Bad debt expense for the year decreased to 5.1% for 2012 from 6% of revenue in 2011. The decrease is attributable to improved collections in 2012. All of the above factors resulted in diluted loss per share from continuing operations for 2012 of $1.08 from earnings of continuing operations of $0.96 in 2011. Loss per share for 2012 and EPS for 2011 includes goodwill and long lived asset impairment charges of $1.11 and $0.23 per share, respectively.

We generated cash flow from operations of $16 million for 2012 down from $36.8 million in 2011. However, free cash flow increased to $7.2 million in 2012 from negative free cash flow of $1.3 million in 2011. We finished the year with $61.7 million in cash and cash equivalents and $37.5 million of borrowings outstanding under our credit agreement. Net accounts receivable at December 31, 2012 were $23.5 million as compared to $25.3 million at December 31, 2011. Net property and equipment decreased to $154.1 million at December 31, 2012 as compared to $180 million at December 31, 2011.

And capital expenditures for 2013 are expected to be about 5% of revenue. Now turning to our loan program. As of December 31, 2012, loan commitments to our students net of interest that would be due in the loans to maturity were $25 million as compared to loan commitments of $20.2 million at December 31, 2011. For 2013 we expect that these loan commitments will increase by $2 million to $5 million.

We finished the year with shareholders equity of $198.5 million down from $239 million at December 31, 2011. Shareholders equity at December 31, 2012 reflects $6.4 million of dividends paid. Now as far as our outlook, I'll finish my prepared remarks by providing our current outlook for 2013, as well as our outlook for the first quarter. Our guidance is based on our current expectations. We expect revenue for the full year of $395 million to $405 million, essentially flat with 2012; a loss per share of $0.05 to earnings per share of $0.05, essentially flat with 2012.

Student starts from continuing operations in 2013 are expected to increase in the second half of the year and remain flat for the year as compared to 2012. For the first quarter of 2013, we expect revenues of $88 million to $92 million, representing a decrease of approximately 11% over the first quarter of 2012 and a loss per share of $0.30 to $0.35.

Guidance for the first quarter of 2013 is based on a decrease in student starts of 17% to 20%. Excluding the impact of ATB students and our elimination of our fully online programs in the first half of 2012, student starts from continuing operations are expected to be flat to down 5% as compared to the first quarter of 2012. And, finally, the board of directors has set the record and payment date for the dividend for the first quarter of 2013. The cash dividend of $0.07 per share will be payable on March 29, 2013 to shareholders of record on March 15, 2013. In conclusion, we believe that the worst is behind us, and we expect us to start to gain traction and momentum in the second half of 2013.

Now we will open the call to your questions. With that said, I'd like to turn the call back over to the operator. Andrew.

Thank you

(Operator Instructions)

Jeff Silber, BMO Capital Markets.

Shaun, in your prepared remarks you talked a little bit about some of the leading indicators that give you some confidence that the second half of the year will be better. Can you give us a little bit more color on that? I know some of it has to do with the comps, but, considering the visibility in the space and considering what's been going on, what gives you the confidence that this second half will see starts hopefully going up?

Yes, thanks for the question Jeff. If I go back a little ways, remember we started our start declines probably a little earlier than the sector, because we made early changes based on the population of ATB students that we had, and so we cycled through some of those declines pretty aggressively a couple of years ago. We're to a point now where we're squarely focused on becoming skilled training leader, and all of our actions are focused on this particular goal. Now, what that does is it results in some discontinued operations and programs. So, as we looked at Q4 spending, we realized that we couldn't buy enough advertising to really impact the loss of ATB and online starts from prior year.

Additionally, Jeff, we had probably 600 GED students in classes that didn't test before the end of the year, so, as we looked at the fourth quarter, I mean it was probably a little more of a decline than we anticipated because of those factors. But, on a positive note, which we haven't talked about a lot, we've got an increasing number of certificate starts. There were probably about 225 in the fourth quarter. We expect over 400 in the first quarter of 2013, and we expect that number to increase marginally over time. As we look forward, the Q2 comps are still going to be challenged because of ATBs, et cetera. As you mentioned we lapped some of the ATB and online declines in Q3, but the opportunity for growth comes from a couple of areas in particular.

Number 1, our high school program. We are ahead in terms of leads generated in the high schools and numbers of students enrolled for the third quarter -- third and fourth quarters. The number of students that are enrolled early and packaged is up dramatically for us, and that was just an operational focus in addition to new leadership that was brought on to focus primarily on the high school program. So we anticipate high school starts being up in the third and fourth quarters. That's one.

Secondly, we're launching new programs that are programs we still feel fall under skilled training, so dialysis tech, registered nursing, and our new manufacturing programs will provide incremental starts in the second half. As Cesar mentioned, we've seen a modest uptick in our conversions, especially in our media, those local enrollment representatives enrolling more adult students.

We've seen an uptick in their conversions, which gives us confidence. And then we also launched a new web site in January which we feel will be fully optimized and even more intuitive than the last site that we had up, which received acclaim. So with all that said, in addition to the increased certificate starts from our FMTI acquisition and other short programs that we've launched around the Company, we feel pretty good about the second half of the year. And, although we don't have those certificate starts factored into our overall start comparisons, they ultimately help support our financial model that Cesar described. So, it's a long way of giving you some background but also saying that we're confident in the second half and also 2014 in terms of comps for the Company.

Okay, great. Appreciate the color. Actually, the next one's for Cesar. Cesar, in looking at your guidance, you guided for the year for revenues to be down slightly, but EPS to be roughly flat. Which expense line items are we going to see some of the positive leverage?

I think they're going to come from both equally. I would expect that both items will stay consistent as a percentage of revenue.

All right. And what tax rate should we be using for modeling?

40%. The tax rate is all over the place this year because of the goodwill charges that were not tax affected, but 40% to 40.5% is a good number, and if you took a look at this year's numbers of revenue of $402.9 million and when you back out all the noise there's about $0.03 EPS. So, we're roughly in line -- our guidance is roughly in line where we were this year.

Okay. Great. Thanks so much.

David Chu, Bank of America Merrill Lynch.

So, in your guidance for starts in the first quarter, is that a -- from continuing operations perspective or including campus closures?

That's from continuing operations perspective.

Okay. Can you help us for modeling purposes -- give us the starts and average enrollment for Q1 through Q3 2012 excluding the campus closures.

I'm sorry. Did you want average population or starts?

Both, please.

Starts for Q1 2012 were 5635, Q2 -- I'm sorry, 5,328 for Q1 2012; 4,731 for Q2; and 7,036 for Q3.

And sorry. That was average enrollment or starts?

Those were starts for Q1, Q2, and Q3 of 2012.

Can we get average enrollment as well.

Average enrollment was 18,877 for Q1 of 2012; 17,896 for Q2; and 17,765 for Q3.

And lastly, revenue?

I don't have revenue by quarter in front of me. It will be disclosed in the quarterly that will be filed on Monday.

Okay. Great. And lastly how should we think about revenue per student for 2013?

I would expect per student to continue to increase year-over-year in the range of about 2% to 3%.

Okay. Thank you.

Trace Urdan, Wells Fargo Securities.

Just continuing on the RPS question, Cesar, the guidance is clear, but could you talk qualitatively about the factors that are affecting revenue per student from your perspective.

The factors that are affecting revenue per student, so obviously --

Yes, the 2% to 3% versus about a 5% increase in this past year, so what's underneath that?

We had restructures in certain of our programs in late 2011 and 2012. Basically what we did is we took existing programs and kept the same number of hours but shortened the delivery time, and what that did is it accelerated revenue for those students. That will now be lapping, so that will not be recurring.

Okay. And then -- go ahead. Sorry.

So really what we have left is just really tuition increases and then the only other variable is the type of program that students enroll in. So if it's an automotive program versus a medical assistant program, there's more revenue per student on those programs. And, as we expect our high school to be up in the second half of the year, that would lead you to believe that there would be more students being enrolled in higher cost programs.

Okay. And then I think that I heard Shaun say that the certificate programs are not counted in the enrollment numbers but obviously impacting revenues. So would that not be a factor that would help to lift the revenue per student.

Correct, but they were already in the numbers this year.

Got it. So not a meaningful uptick there. And then the other one, I [pause it] this is more of a mundane question, but I -- I follow your full year guidance, but it --. I find in my models to get to your EPS guidance for the first quarter, I have to lean pretty heavily on the cost side of the equation in the first quarter. So I wondered if you can maybe sort of talk a little bit about what -- I mean, not that you're responsible for my model, but maybe you could talk qualitatively about what the cost dynamic is like through the year, particularly with the SG&A line and whether there's anything we should be paying attention to in terms of how those costs are spread out.

Sure. As you probably know, Trace we're a very seasonal business and, so the first half of the year we incur -- we spend up to make sure we meet our second half of the year. So we start enrolling high school students in August. Those students don't come to us until late May, June. So, what you see in the first half of the year is you see increased costs in advertising, sales and marketing, et cetera. So the costs do -- are higher in the first half of the year than they are traditionally in the second half of the year. And that's why, as you see in the fourth quarter, it's seasonally our best quarter from an earnings perspective just because those costs have been now all absorbed, and we get the benefit of all those students being in house. Costs do traditionally go up in the first and second quarter of the year, and that's why the guidance is the way it is, and we make our money in the second half of the year.

Got it. Okay. Thank you very much.

Thank you.

(Operator Instructions)

Jeff Meuler, Baird.

Shaun, you talked obviously a lot about strategy and what the organization's going to look like. And as a part of that you laid out these four different models that are currently effectively operating within the organization. You also mentioned I think it's 48 or something like that current total campuses and said that those are under continual reassessment. As you think about what this organization looks like over the next two to three years, how many of those existing campuses get restructured into one of the four models that you laid out, and how extensive of a process is that? How many more do you think would be potential closures? Just how you're thinking about leveraging those four successful campus models?

Yes, let me kick it off, Jeff, and then I'll turn it over to Cesar for some more detail. But we're constantly assessing the validity of our schools, especially in this new environment. So, as we sit today, we've got 43 operating units, and we feel that they're all operating the way we'd like them to operate today. As we look forward on two to three years, those four operating models I described are really the goal that we're trying to achieve. Now, the good news for us is that we're not very far off in many of our existing campuses. So, we see minor adjustments. We see some facility repair, and some honing of curriculum along the way and always assessing our leadership.

In addition to that, the local role of how that campus sits in terms of PR and government relations is a new area of focus for us, and that factors into this -- the new foundation for these models. And then the last thing I'll talk about are partnerships. The campus operates as it does, but we found that the stronger the partnership, whether it's with a vendor, whether it's with an association that's related to the curriculum offered there or an employer, a future employer of student or current employer, those partnerships are meaningful. They add validity to the schools in their local markets and also nationally. And so, if you think about it, all of the improvements that we'll make to achieve those four models are -- they're quality based. They're curricular based, and some facility improvement, but none are going to be a heavy burden on the company from a financial perspective. Cesar.

Yes, I agree. I think what we're looking at as the greatest opportunity is, as I stated, our capacity utilization is at 38%. We have a lot of opportunities to increase capacity utilization, and one of the ways we look to do that is to partnerships with industry. So we have begun a concentrated effort in the latter part of 2012 and continuing this year with dedicated team to focus on partnerships with industry. And so I think we will be able to over time start to fill up some of that capacity, whether it will be us training industry or with referrals from industry. But that's really -- the model we're focused on is skill trades with industry partnerships, and that's where we hope to go.

Okay. And then just to follow up on your question or your statement that in your view the main issue at this point is affordability. If you could just expand on that, is it -- I'm assuming you're not saying that you don't think the value propositions there given you have the good student outcomes you highlighted. On the affordability side is it because of the increased cash component from when you restructured some of the programs? Is it just a sticker shock issue relative to what a community college costs? If you could just expand on that comment.

I'll start again on this one, Jeff. I think that what we've seen over time is that the demand characteristics remain strong, so students continue to inquire about our programs. They come in to see the facility, and there is a demand in the program areas that we feel are within our wheel house. And so, from a demand perspective, we feel very good about the current and future prospects. As the student gets in and starts looking at their financing, I think what we've seen is there's a close correlation to consumer confidence. So, as consumer confidence has been down, people stop spending in lots of areas. Affordability to us is not necessarily a sticker shock in terms of a $15,000 program or a $20,000 program. It's in what is a consumer willing to pay on a monthly basis to go to school.

That's the more real affordability issue that we see today. And there are just fewer people than five years ago who are willing to pay, you know, $200 to $300, to $400 per month to go to school. We think the demand is still there. We think that, as people understand that they've got to go back for retraining to better their life, they will make the decision to pay. It's just a longer process, a longer decision-making process, and one that we feel will come back as consumer confidence continues to tick back up. Cesar?

No, I mean I think you basically said it. I think it's tissue you know, we find that in this economic environment parents are having a difficult time being able approved for PLUS loans. We do have quite a bit of dependent students, and if the parents are qualified to get a PLUS loan, obviously that financial gap becomes a much bigger burden, and then the monthly payments are just bridging the gap becomes too much of an obstacle for a lot of students. So it's affordability and parents being able to obtain loans and then more so their willingness to take on additional debt during this time until they feel that consumer confidence or at least their confidence is back on track.

Okay. And then just finally, in -- barring any future decisions on campuses, have all of the adjustments in terms of moving things into disco ops been made at this point, you were trying to give us the numbers. But just wondering if those numbers may change as additional things could get moved into disco ops as school closures are completed or something like that, as the year unfolds.

Obviously we announced seven campuses back on July 1. Those campuses completely ceased operations as of December 31, and they are all reflected as discontinued ops in the schedules that we gave you this morning, and they will be reflected in our 10-K. To the extent, as Shaun, said we continue to evaluate all of our schools based on the projections that we have and based on the current economic environment and rules that keep continuing to come down from the department, et cetera. If we determine that schools are no longer viable, then we will shut down additional schools. And then those schools at that time when all operations have been ceased will also be placed in discontinued ops. As far as the ones we've announced, they have all been reflected as discontinued ops as of December 31.

Perfect. Thanks, guys.

Thank you, and I would now like to turn the call over to Shaun for closing remarks.

Thanks, Andrew. Thanks for joining us today, everyone. I think that you've all seen and you have a good idea from our press release and our comments as to where we are in terms of focus. We really are becoming a niche provider and a national leader in skilled training. And you've also seen that repositioned the company and why we feel we've made good gains in our strategy and our sources of confidence for the future. We look forward to updating you on our first quarter results in May, and, at this point, I will say, thank you, and I will talk to you next time.

Thank you for joining today's conference. This concludes the presentation. You may now disconnect and have a good day.