Lincoln Educational Services Corp (LINC) 2014 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2014 Lincoln Educational Services Earnings Conference Call. My name is Jackie, and I will be our operator for today. At this time, all participants are in a listen-only mode, and we will be facilitating a question-and-answer session towards the end of today's presentation.

(Operator Instructions)

I would now like to turn the conference over to Mr. Doug Sherk, Investor Relations. Please proceed, sir.

Thank you, operator and good morning everyone. Before the open of the market today, Lincoln Educational Services issued a press release announcing its fourth quarter and full-year 2014 financial results. The release is available on the Investor Relations portion of the Company's corporate website at www.lincolnedu.com.

Before we get started, during the course of this conference call the Company will make forward-looking statements about its future plans, objectives, beliefs, expectations, and prospects. For this purpose, any statements made today that are not statements of historical fact may be deemed to be forward-looking statements. These forward-looking statements are not guarantees of future actions, outcomes, results, or performance. By their nature, these forward-looking statements are subject to many risks and uncertainties that could cause actual results to differ materially from the results discussed in or implied by the forward-looking statement.

A discussion of the risks and uncertainties that affect Lincoln's business is contained in the Company's SEC filings, particularly under the heading Risk Factors and in the press release issued this morning. Copies of these documents are available online from the SEC or on Lincoln's website. These forward-looking statements are made only as of the date this conference call was initially held, and the Company assumes no obligation and does not intend to update these forward-looking statements after the date of this conference call, whether as a result of new information, future events, developments, changes in assumptions, or otherwise.

Now I'd like to turn the call over to Shaun McAlmont, Chief Executive Officer of Lincoln Educational Services.

Thank you, Doug, and good at morning everyone. Joining me on the call today is Scott Shaw, President and Chief Operating Officer; and Brian Meyers, our Chief Financial Officer.

This morning, I'll open the call with general remarks on the full year and quarter, as well as share some of our long-term strategic opportunities. Scott will provide a more detailed review of the operations in the quarter and for the full year, highlighting our planned strategic initiatives moving into 2015. Brian will then discuss the financial results, and I will come back to summarize and provide our guidance for 2015. Following my summary, we'll open the call up for your questions.

Now in terms of a review of the fourth quarter and the year, the fourth quarter capped a year of steady progress in positioning Lincoln for future growth and sustained profitability, as we pursue our mission of providing a solution for our nation's economic skills gap issue. During the year, we took steps to adapt to the current operating environment, as well as Company-specific initiatives that we believe will further improve our operating performance and financial results as we navigate through continued changes and uncertainty in the highly regulated education market.

As highlighted in our news release issued this morning, we had several significant operating and financial achievements in the fourth quarter, which enabled us to reach our goal of finishing 2014 generating positive cash and free cash flow from operations. An important measure of success was our ability to achieve our expectations for student starts for 2014, comparing Lincoln favorably to our industry peers.

As we head into 2015, we're increasingly encouraged that we're on track to continue to reach our goals. Our Management team is stronger.

Our programs are improved through the use of technology and state-of-the-art equipment for our students. Our ability to react to regulatory changes has never been better. Importantly, we are well into the process of evaluating strategies to monetize our assets, including our real estate, which has an appraised value of approximately $80 million, while also evaluating new long-term credit line opportunities. I'll address this topic more in a few moments.

Lincoln reached a significant milestone recently, when the United States Department of Education released its 2012 three-year cohort default rates, and we came in lower than we originally projected. During the period we will finish below 17%, a considerable improvement from our 30% rate only two years ago. This rate is not only an improvement over past scores, but ranks us highly amongst the majority of our peers, be them public or private; and reflects our efforts over the last four years to admit and support students that could complete their programs and find gainful employment, all while staying current with their loans.

Over the course of our retrenchment period, we've had to make painful decisions that impacted our enrollment, but the financial performance we report today helps validate those choices in our overall proposition. We believe that our improvement in the three-year cohort default rate for the third consecutive year, and the fourth consecutive year of improvement in our graduate placement rate, combined with our improved financial performance, illustrates that our strategy of being part of the solution to the skills gap in America is working.

In the second half of 2014, we made a concerted effort across our organization to lower operating expenses, and increase affordability for our students. We were able to reduce costs by closing unprofitable campuses, rationalizing our work force, improving our capital structure, and utilizing technology. Although we have seen our total student population decrease compared to last year, start rates are beginning to stabilize, while we are at negative 3% for the year, which ranks us again favorably with our peer group.

The landscape in education is shifting, and we are working to ensure that we will be nimble enough to weather any additional storms by providing the level of skilled training that's not available elsewhere in the markets we serve. Over the course of the year, we've seen new challenges affecting starts, namely attracting students in an improving economy. We all saw the good news on Friday last, as the economy added 295,000 new jobs, and unemployment declined to 5.5%.

As the nation's economy continues its recovery, potential students are increasingly faced with the difficult decision to delay their education in favor of immediate employment. Students often have other applications such as work and family, which makes a full-time commitment to their education a challenge. We're addressing this by boosting our scholarships to increase affordability, as well as shortening programs to decrease the time it takes to move students into full-time skilled employees.

At the same time, by developing and expanding programs that help employers identify skilled, trained employees to meet the growing demands of their business, we provide students with a road map to employment, offering higher compensation than those positions not requiring certain levels of skills and training.

With the announcement of our recently completed one-year extension of our existing credit facility, we have gained new financing flexibility. The credit facility extension allows us to consider the best long-term options for utilizing our assets to maximize returns to both our students and shareholders. We are continuing to explore a variety of options to finance ongoing operations, including monetizing our real estate, which is appraised at approximately $80 million.

Since we last talked to a November, options other than mortgaging the real estate have been presented to us, including potential new, long-term line of credit and the potential sale of certain campuses. We are carefully reviewing these options in order to increase shareholder value. What's important to note here is that alternatives have emerged during the past few months, and it's a good thing that we have choices requiring thorough evaluation.

Finally, we are reporting today that our Board of Directors has decided to discontinue our cash dividend effective immediately. This action will improve our liquidity, increase our cash position, and provide additional funds to support the investments we plan to continue to make -- technology and equipment -- improve the quality of our programs, with all investments focused on student success and generating returns to our shareholders.

In terms of long-term opportunities, looking forward to 2015 and beyond, we continue to see the growing need for a highly skilled labor force, as well as the significant market opportunity to fill that gap. The issue is not isolated. It affects job seekers, employers, and trainers. Over the course of the next three years, Lincoln will work with our students and corporate partners in various ways to build a path from job seeking to skilled, full-time employment.

To bridge the skills gap and provide students with differentiating skills, we'll need to emphasize training students in the verticals that are most in demand among potential employers. For the year, automotive programs and skilled trades grew to 41.9% and 15.1%, respectively, of the average population of the students. Compared with other more traditional educational offerings, Lincoln is always focused on providing the systems, equipment, and classroom experience that provide more hands-on training and complementary studies that will best prepare students to bring immediate value to their employers.

Other educational offerings often lack the responsiveness or the resources to match the level of skilled training we provide to our students so they can effectively compete in today's economic environment. For example, a typical community college tech program will have one, maybe two machines in a given program that students can learn on, while also requiring them to take courses in liberal arts that will not adequately prepare them for a skilled career. Compare that with a Lincoln program that will provide ample hands-on-the-machine experience with knowledgeable instructors that will also provide ample skilled training, career development skills, to produce a well-rounded and highly skilled worker ready to contribute day one on the job.

To complement the increased concentration on automotive and skilled trades programs, we are actively seeking to expand our corporate partnerships to benefit both the job seeker and the potential employer by tailoring programs to specific needs of those partners.

We launched a new marketing campaign, along with a brand that clearly states who our students are and who we are to them. We've produced new commercials, developed new collateral and messaging that incorporates the millennial point of interest in how they make decisions through online peer reviews.

All of our new advertising incorporates real students and actual hiring employers, not actors. These successful prospect and employers stories will begin to position Lincoln as America's technical institute.

At this point, Scott will now detail the operational highlights from the fourth quarter and full year, as well as provide further color on the forward-looking initiatives I've touched on. Scott?

Thank you, Shaun, and good morning everyone. I will begin by commenting on our success with strengthening or outcomes, then I will review some of our operational highlights for 2014, and finally conclude with some color on our strategic initiatives.

As Shaun mentioned, we continue to take actions that strengthen our outcomes while positioning us to be a leading solution to the growing skills gap in the American economy. By providing our students both technical hard skills that make them valuable to the employers, and soft skills that make them better employees, we enable our students to stand out and secure employment. At the end of the day, job placement is our ultimate outcome, and as Shaun mentioned, we have achieved four consecutive years of placement-rate improvement, ending 2014 at 77.5%.

In our conversations with employers, it becomes quickly evident that they not only are concerned about filling open positions today, but more importantly, they are concerned about the accelerating retirement of baby boomers over the coming decade, and how they will find skilled replacements. Our conversations with employers are also increasingly focused on ways for Lincoln to provide customized training that will further enhance the skills of entry-level employees, as well as provide advanced skills to existing employees.

While these conversations are still in the beginning stages, the breadth of companies approaching us is an encouraging sign for future opportunities. Examples of some of the companies with whom we are in discussion include an automotive OEM, a European premiere home appliance maker who is looking to rapidly expand in the US, to a major real estate property manager who needs very skilled trades workers.

As Shaun highlighted, we have dramatically improved our 2012 draft three-year cohort default rates. This is a result of the tough choices Shaun mentioned earlier, as well as our strategy to boost financial aid literacy training, and outreach efforts to our former students to ensure that they stay up-to-date on their loans. We believe that over time we have established a strong regulatory record within the education industry.

We've made great strides in building an organization that is nimble and quick to adapt to the uncertainty that often occurs in areas where we have little control. We take great pride in reporting, and after completing numerous regulatory and re-accreditation audits and visits, Lincoln had no major findings, and remains completely compliant.

In addition to having strong cohort default results, our 90/10 remained safely around 80%, as we seek to have all students participate in the financing of their education and remain current on their payments. Maintaining a low 90/10 rate and seeking cohort default rates in the mid to upper teens has been a focus of ours over the past four years, and our actions have proven successful.

Now let me speak about our operations. We are beginning to see stability in our student population, an encouraging sign for future growth. New starts came in as we expected, and were down by a modest 3% for the full year. Our retention efforts throughout the year resulted in our 2015 carry-in population being down only 283 students, a dramatic improvement over last year's level of 1,752 reduction in carry-in population.

As the population declines, we trim expenses by reducing head count and seeking efficiencies. In 2014, we reorganized part of our sales force, made numerous changes to senior Management, and rationalized other areas, resulting and reducing head count by approximately 250 employees.

While these were difficult decisions to make, we now have a lower cost base and are a much leaner organization. As our industry continues to stabilize, we will be in a far better position to leverage sales growth and achieve profitability, which is clearly one of our top priorities.

We also continually evaluate the long-term viability of each campus. Midway through 2014, we made the decision to merge the students and some of the staff from two unprofitable schools, our Hamden, Connecticut, and Las Vegas, Nevada, campuses, into neighboring Lincoln campuses, which enabled us to eliminate overhead and get out of two leases.

In December 2014, we closed our five learning sites in Florida that constituted Florida Medical Training Institute, FMTI, which were part of an acquisition done in 2012. FMTI primarily offered EMT and paramedic training, and since the sites were not Title IV eligible, students funded their education 100% with cash. These campuses were losing money, and we decided to cease operations to strengthen our financial position going forward.

In addition, we have also decided to close our Fern Park, Florida, campus by the first quarter of 2016. We have stopped enrolling students, and will teach out or transfer to another school that currently enrolled students.

Fern Park has been struggling for years, and its market appears rather saturated with competition. We decided that human and financial resources could be more productively deployed at other campuses.

We continually focus on improving the student experience from the first inquiry until after placement. Our two major initiatives to improve the enrollment process center on a new customer relation management software, and further expansion of our centralized financial aid operations. The customer relationship management software will enable us to better communicate with the student from the time they first contact Lincoln to the time they are an alumnus.

Furthermore, the new system will also provide better operating metrics, which will enhance productivity. Our centralized financial aid center allows us to provide better customer service and shorter packaging times. This will enable students and their parents to know earlier in the process how they will pay for their education.

By eliminating uncertainty and more efficiently packaging students, we will increase our start rates, improve cash flow, and lower our bad debt. We anticipate that both of these initiatives will result in more students starting their careers with Lincoln, as we expect to convert more inquiries into enrollments, and more enrollments into starts.

Lastly, before I hand the call off to Brian, I'd like to share with you a deeper dive into our verticals. We offer programs in five verticals among 31 campuses at the end of 2014.

Our two largest verticals remain automotive, with 41.9% of our population, and allied health, with 29.7%. Our next largest vertical is skilled trades, at 15.1% of the population.

In 2014, skilled trades grew in both absolute numbers, as well as a percent of our total population. The demand is coming from interest in our welding program and our new CNC programs. The remaining two verticals are spa and hospitality, with 8.4%, and business and IT with 5.4%.

As we look to the future and review how we manage the operations, we see value in re-grouping our schools into three segments -- those being automotive, allied health, and transitional schools. The automotive segment will include schools that predominately teach auto and skilled trades programs.

The allied health segment will include schools that predominantly teach health sciences, hospitality, and business and information technology programs. Lastly, the transitional schools will include schools that we have announced we will close. We anticipate finalizing the realignment of our operations according with these segments, to provide greater transparency and insight into our business operating performance, starting in the first quarter of 2015.

With that, I will now hand the call over to Brian, who will cover the financial highlights from the quarter. Brian?

Thank you, Scott. As discussed on our third-quarter conference call, we began 2014 with approximately 1,800 fewer students than in the prior-year period, resulting in an average population decline of 3% for the fourth quarter of 2014. As a result, reported revenue for the fourth quarter was $85.4 million, compared to $87.4 million in the 2013 fourth quarter.

Reported revenue includes two reductions that are noteworthy. The first is an additional $1 million in scholarship discounts, and the second is refunds due to the merger of two schools, one in Las Vegas, Nevada, and the other in Hamden, Connecticut, into neighboring Lincoln campuses. Average revenue per student for the fourth quarter 2014 increased slightly to $5,950 due to tuition rate increases.

For the fourth quarter of 2014, operating income was $10.4 million, excluding a long-lived asset impairment of $1.5 million, representing an improvement over $7 million in last year's fourth quarter. Operating income margin increased over 400 basis points to 12.2%, versus 8% in last year's fourth quarter. Income from continuing operations was $7.1 million, or $0.31 per share for the fourth quarter of 2014, a significant improvement over the $3 million, or $0.13 per share, reported in the year-ago quarter, which excludes a $23.5-million valuation allowance.

The 2014 fourth-quarter results includes a $3.6 million, or $0.16 per share, in non-recurring charges, relating to an impairment of long-lived assets, executive severances, and a loss contingency relating to our Massachusetts campus. Excluding these charges, income from continuing operations for the fourth quarter would have been $10.7 million, or $0.47 per share, which exceeds previously issued guidance.

Let's now turn to our fourth quarter operating expenses. Education services and facility expenses decreased 4.8% to $39.5 million, driven by reduced cost due to lower average student population.

SG&A expenses declined 8.8% to $35.5 million, reflecting cost reductions during the third quarter of 2014 and administrative expenses as a result of salary and benefit savings. Marketing expenses also reduced to align with our lower student population and the result of the two merged campuses during 2014.

As Shaun mentioned in his remarks, we are becoming more efficient in marketing initiatives to attract new students. We also eliminated certain sales-related expenses, primarily by moving some of our sales reps into a centralized call center.

During the quarter, or bad debt expense decreased 30 basis points to 4.2% of revenue. We are starting to see early signs of the benefits of centralizing various aspects of our financial aid process to enhance the student customer service experience, improve quality control, and reduce bad debt.

Our income tax expense was $0.5 million for the fourth quarter 2014, compared to $26.3 million for the fourth quarter of 2013. As previously discussed, we recorded a $23.5-million valuation allowance in last year's fourth quarter.

In looking at our balance sheet, we achieved our expectation of continuing to generate positive cash flow from operations. In the fourth quarter, we added cash flow from operations of $12 million, and free cash flow for 2014 of $4.6 million. We finished the year with $42.3 million in cash, cash equivalents, and restricted cash, and $30 million of borrowings outstanding on our credit agreement, which we subsequently repaid in January 2015.

We paid a $0.02 quarterly dividend on December 31, 2014. Total dividends paid year to date were $4.3 million. Going forward, and given our Board's decision to discontinue the cash dividend during 2015, we now have additional funds to invest in growth initiatives designed to improve value to students and shareholders.

Capital expenditures for the year ended December 31, 2014, increased to $7.5 million, compared to $6.5 million last year, due to investments in training technology and new program build-outs. During 2014, we expanded our new computer numerical control, CNC, program into our Mahwah campus, and expect to successfully launch this program at our New Britain campus in mid to late 2015.

These investments are allowing us to maintain our leadership in helping American industry bridge the continuing skills gap that Shaun has referenced. For modeling purposes, we expect capital expenditures to be approximately 2% of revenue in 2015.

I will now turn the call over to Shaun for closing comments and guidance for 2015. Shaun?

Thanks, Brian, and thanks, Scott. Hopefully we've been able to convey our feelings of renewed optimism and encouragement as we enter 2015. We've taken significant actions that we believe will translate into improved operating performance, strengthening our value proposition, while also putting us in a position to deliver better financial results.

We are seeing signs of stabilization in the education industry. However, we're not quite ready to call it a full turn yet.

Our guidance for 2015 is as follows. We expect revenue from continuing operations and student starts to be relatively flat with 2014 levels, or approximately $320 million in revenue and 15,300 starts. This guidance excludes the Fern Park, Florida, and previously merged Las Vegas, Nevada, and Hamden, Connecticut, campuses.

We currently expect the net loss per share in 2015 to range between a loss of $0.32 to $0.47. We also expect to generate positive cash flow from operations comparable with 2014.

Our 2015 outlook is very favorable in our estimation, and we anticipate completing some of the final components of our closing under-performing campuses, which when completed, will increase our potential to return to profitability in the future.

While we're not providing quarterly guidance, we believe it's noteworthy to add that we anticipate first-quarter 2015 revenue to be slightly less than the first quarter of 2014 level for continuing operations, due to fewer start dates. However, we expect our bottom-line results to be improved over last year's first-quarter results.

With that, operator we are now open to taking questions.

(Operator Instructions)

Alex Paris, Barrington Research.

I have a couple of questions. First off, relating to guidance, I was wondering if we could dive into it a little deeper. You gave a little bit of an idea for first quarter. The guidance calls for a 1.5% decrease in revenue, and a 1.8% decrease in starts for the year, relatively flat, as you said. How do you expect that to come in seasonally? Do you expect, for example, that we could see positive new student starts in the second half of the year or by the fourth quarter of the year, or a level 1% or so decline every quarter year over year?

I'll take that, and then Scott or Brian can jump in. The way we look at the year, Alex, and without going into the deep specifics on each quarter, we really do see our starts and population fluctuating around the flat level throughout each quarter. I think in the first quarter and second quarter you might see up or down 100 or 200 students against prior year. That's really just based on the number of start opportunities per quarter.

But we really feel that the guidance anticipates flat revenue for those continuing operations, flat starts, and a benefit on the EPS line, based on some of the cost savings that are netted against other investments. In summary, you will see it fluctuating up and down over flat each quarter as we go along. Even though we're not giving guidance, we'll ultimately update that year-end guidance number each quarterly call.

All right. Then the assumption with regard to income taxes would be helpful, also, given that it's been a little bit hard to model.

For 2015, we're not expecting -- because of our valuation allowance, we do not anticipate recording any tax benefit or provision for 2015, except for state income tax minimums and non-income related taxes. For approximately the whole year we are anticipating about roughly $200,000 of income tax expense.

Good. That's helpful. Shaun, I think you alluded to the closed campuses, and as you work through those this year, are there any other campuses that might be closed in 2015, at this point?

No. The way we look at the rationalization of the campuses, Alex, we've talked about this over the last few years. In my prepared remarks, I talked about the fact we've had to make some difficult decisions over the years. Those have all related to campuses that we see as viable or non-viable. We've engaged in a process of rationalizing those assets over the last few years. We are at the point now where we can see the finish line, in terms of that effort.

For 2015, embedded in our guidance is the closure of one school. That was one of those identified, as we talked about it in our prepared remarks. We'll continue to assess the remainder of those campuses, but I'm confident to say that we have a number of schools that have not performed the way we'd like them to perform over the last few years. Many of those, we see an opportunity to turn to positivity over the next 24 months. If there is one that continues to stand out, it will be put into a transitional schools category.

But in summary, we feel that we've gotten to a point that we've rationalized the majority that we'd like to rationalize. If there are any other that are outliers, there will be very few, and they will fall into the transitional schools segment, as Scott mentioned.

The go-forward portfolio is 30 campuses, now that you've announced the closure of Fern Park, and then zero learning centers?

Correct. The learning centers are -- remember, those were cash-only, smaller facilities, but they were carrying a loss, so we closed those as of December 31.

Is that the primary culprit, in terms of the impairment in the quarter?

Yes. It was 100% for the long-lived assets. It was actually related to the Fern Park closing. Since we had the closing we had to take the lease-hold improvements long-lived asset impairment.

What is capacity utilization now with the current portfolio of 30 campuses?

It's essentially flat. Brian's got the specific number, but it's essentially flat, Alex.

Roughly 36% or so, something like that?

Correct, 36% or 36.5%.

In the student start decline for the quarter, I think in the past you've talked about the number of campuses in the portfolio that were positive. Do you have a similar comment like that today?

No, I think we've given a number in the prior quarter, and it essentially stayed the same. Instead of -- we've always tried to speak very generally about that percentage, because we've been reporting one segment, as you know, Alex, over our entire time being a public Company. As we move forward, we will move into segments where we'll be able to talk a little more freely and specifically about how those schools are performing. Then you'll essentially see what schools sit in the transitional segment, as well.

For the fourth quarter, just because you mentioned it, we had expected the decline. It was about 200 students, and that was due to less spending. We actually did a little better than we anticipated, and ended the year exactly where we thought we would, with the modest 3% down for the year.

Okay. Lastly, the buckets again were automotive, that will include skilled trades; allied health care, that will include business and IT; and then transitional?

Correct.

The last question, I have to comment, because it represents a change from the previous quarter. But you talked about the appraisal value on the real estate. I think you'd always said it was $50 million, and today you said it was $80 million. Has there been a new appraisal, or is there other things in that bucket?

No, just to clarify, the appraisal has always been up in that range. Those are official appraisals. We thought we could monetize about $50 million this year. That's the difference. We're going to monetize a certain percentage of that total appraised value.

Lastly, and I will get back in the queue, you said that there's other options besides mortgages, now, that have come to the surface. A new long-term letter of credit? Is that what it is, or line of credit? What were those?

We're looking at all options at this point. Ultimately, Alex, we want to make the best long-term decision for the Company and our shareholders. Initially, I think we have talked about a combination of perhaps mortgages or a sale lease-back. But we're looking at all options at this point, which include mortgages, sale-lease backs. It includes long-term credit facility, and also the selling of other potential assets, as well.

We are still focused on monetizing to a certain dollar amount, but it might come in a different form than we had originally anticipated. We think the good news is that we've got these additional options. But I'll just to say finally that what's allowing us to take our time to make the best decision is the extension of our credit facility, our current credit facility, which is giving us that flexibility.

Got you. One follow on to that (laughter), sorry -- you said potential sale of campuses. Is that more than just sale of real estate? Are you talking of selling of a business?

We could. We could sell a business. We know that we've got some very valuable assets. We hold them in high regard and high value. But they're options, as well.

Got you. Okay, thank you for your patience.

Alex, that was 15 questions in one. Just want to --

(laughter) I know. I apologize to those in the queue behind me. I know how that feels, sorry.

Thank you.

Jeff Silber, BMO Capital Markets.

I will start with question number 16, then.

(laughter) Hi, Jeff.

I'm curious about the decision to rescind the dividend, and what it would take for you to consider re-instituting that. What signs would you be looking for in your Business?

It's a good question. Jeff, as you know, we've always wanted to be a dividend-offering Company. When we reported today that we made the decision to discontinue it, we felt that it was prudent in these particular circumstances. It ultimately -- as we are looking to monetize our real estate and improve our cash position, it just made sense right now. In addition to that, we're at a point that we see a stability in the organization that we haven't seen in quite a while. We feel that we've got an opportunity to essentially invest. We don't want to continue to cutting our way to profitability. We'd like to do a combination of cost cutting and investment. With that said, we can use those dollars, no matter how little or great they are, at this particular time.

We'll always assess the opportunities to provide a return to the shareholders. But at this point in time, we thought that the investment in the Company at a time of stability gives us a greater opportunity to return shareholder investment. We'll always, in the future, anticipate potential time for a dividend, just not right now.

Okay, that's fair enough. A couple numbers questions, in terms of your guidance for this year. What should we be using for changes in revenue per student and for depreciation and amortization?

Revenue per student will be essentially flat. It will be flat. It's going to increase less than $10 per student.

Just on that, Brian, we were talking about revenue per student earlier, Jeff. We've added a number of scholarships to assist students, in terms of their affordability. Those scholarships are somewhat offset by modest tuition increases, which keeps our revenue per student flat for the year.

Okay. I'm sorry, depreciation and amortization?

Depreciation will be decreased. I don't have that, because all our -- I think depreciation and amortization might be fluctuating about $17 million, which is down from 2014 levels, due to our impairments that we've taken previously.

Okay. Are you going to be providing us re-stated historicals for at least 2014, based on your new continuing operations, so we can model off of those?

Well, it will be in our K, our continuing operations. What we're not going to have and I can share with you is carving out Fern Park, Hamden, and Aliante, because we're reporting on numbers in our guidance excluding those facilities. They are included in continuing operations, but I can walk you through their losses and their revenue.

Okay. We can follow up on that. Again, in your K you will be providing that data on a quarterly basis?

Yes.

Okay, great. Thanks so much.

Trace Urdan, Wells Fargo Securities.

My question is about the closed campuses, the Fern Park and the cash-paid campuses. Were they making a positive contribution to overhead? Were they generating cash or they were burning cash?

Hi, Trace, it's Scott. They were both using cash on the marginal basis, so that's why it made sense to close them at this time.

Okay, and then my next question, which you could potentially anticipate, is how many of the 30 campuses remaining are in that same position of not making a positive contribution to overhead at this point?

We have approximately -- we have six that are not contributing to overhead at this point.

Okay. Those would really be the ones that you're making a bet on being able to turn around, I think. Did Shaun said 24 months? Was that the time frame?

Yes. As we look at where their populations are and what we're doing to turn them around, and what they've achieved in 2014, we anticipate that within the next 24 months that number will go away.

Okay. I think you called out welding specifically in the skilled trade areas. I know that's -- it's a placeholder for growth in the oil industry. Are you seeing any -- are you concerned at all about the declining oil prices, and whether those might have a depressive effect on the strength that you've seen recently in skilled trades?

Yes, it definitely could impact the placement side. We're still seeing very strong growth on demand on the front side. That just means we continue to look for other opportunities. But there continues to be additional growth opportunities because of all the lower-priced oil, there's a lot of construction of facilities that are still going to go on, and they still require welders. But it is something we will need to watch very carefully.

Okay. The training of -- or the working with companies to provide advanced skill training to their employees, are you doing any of that now, and if --?

Sorry Trace.

No, go ahead.

We are doing it right now, but at a very minimal level, nothing of any great significance. What we're trying to do is really put some resources behind making that a much larger presence. But we've always done, I will say, some one-off training of that nature. Now we really want to put a little more structure behind it, just because we see really continued need for it.

Real quickly on those, too. We've seen probably more companies come to us over the last 12 months than we've maybe ever seen in this Company. The demand is very strong. It's figuring out how to tailor programs that fit their need, but we see that as a real opportunity moving forward in the Company.

Okay. Is that the kind of thing where you would make announcements as you sign those deals, or is it still more in a skunkworks mode.

I would say if it was significant enough, we would make an announcement. Otherwise, it'd probably be just a lot of incremental opportunities that we secure over time.

Okay, then last question for me. You called out the automotive and skilled trades. I understand that's a particular strength right now. Can you comment specifically on what your outlook is for allied health, what you are seeing there? I take it that's the weaker segment. Can you speak maybe more qualitatively about what you're thinking the outlook is there?

Sure. It's a weaker segment, but it still has lots of opportunity. Everything you read and see and what we hear is there is going to be more need for people in the allied health sector. We are just continuing to enhance our programs and look at adding additional programs into those campuses. The campuses are basically flat, and we anticipate that what they need is just some additional population to make them profitable. There's definitely opportunities within the allied health sect to achieve that, we believe, over the next 24 months.

When you describe the competition that you're seeing from a strengthening labor market, now, does that apply more to one segment versus another?

No. It's across the board.

Okay, great. Thank you.

(Operator Instructions)

Bill Nasgovitz, Heartland.

I came on late, so I hate to be repetitious, but today the JOLTS came out and a number of job openings is at a 14-year high. Is it a question of are we just too pricey? Are our prices too high, or do we have the wrong offerings? How come we're not selling this void?

We look at it two ways. We look at the demand on the front end and then the demand on the back end. If you look at our placement rates, you'll see that we're filling the demand quite well, in terms of our placement rate. Now the demand on the front, we are definitely seeing some competition from students choosing to take low-wage jobs.

In terms of pricing, we've chosen to temporarily lower our price through additional scholarships, versus a hard price increase. One of the reasons we do that is we found that students see it more motivational that they achieve a scholarship, versus just recognizing the benefit of a lower price not really relative to anything else. We'll continue to go that route. I think, though, you will also notice that education in general is seeing the same competition. Also, you'll see scholarships really prominently in our sector, as well as the broader education sector.

Okay, thank you.

Ladies and gentlemen, with that, that concludes our Q&A session. I would like to thank everybody for your participation in today's conference. This concludes the presentation. You may now disconnect, and have a great day.