Perdoceo Education Corp (PRDO) 2014 Q4 法說會逐字稿

Good evening, ladies and gentlemen. Welcome to the Career Education Corporation fourth-quarter and year-end earnings conference call. My name is Bakiba, and I will be your operator for today's call.

(Operator Instructions)

Please note this conference is being recorded. I will now have the pleasure to turn the call over to your host, Mark Spencer. Mark Spencer, you may begin.

Thank you, Bakiba. Good afternoon, everyone. I'm Mark Spencer, Director of Corporate Communications. Thank you for joining us on our fourth-quarter 2014 earnings call. With me on the call this afternoon is Ron McCray, our newly appointed Interim President and Chief Executive Officer; and Reid Simpson, our Senior Vice President and Chief Financial Officer. Also joining us on the call this afternoon is Lysa Clemens, Senior Vice President and Chief Career Schools Officer; and Jason Friesen, Senior Vice President and Chief University Education Officer.

Following our remarks, the call will be open for analyst questions. This conference call is being webcast live within the investor relations section of our website at CareerEd.com. A replay of this call will be available on our site. You can also contact our investor relations support team at the Alpha IR Group at 312-445-2870. Let me remind you that this afternoon's press release and remarks made today includes forward-looking statements as defined in Section 21(e) of the Securities and Exchange Act.

These statements are based on information currently available to us and involve risks and uncertainties that could cause our actual future results, performance, and business prospects and opportunities to differ materially from those expressed in or implied by these statements. These risks and uncertainties include, but are not limited those factors identified in our annual report on Form 10-K for the year-ended December 31, 2014, and our other filings with the Securities and Exchange Commission.

Except as expressly required by the securities laws we undertake no obligation to update those factors or any forward-looking statements to reflect future events, developments, or changed circumstances, or for any other reasons. In addition, the remarks refer to non-GAAP financial measures, which is are intended to supplement but not substitute for the most directly comparable GAAP measures. Our press 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 of our website at CareerEd.com.

I'd also like to remind everyone that in mid-December, the Company announced plans to pursue the divestiture of its Le cord on blue North America colleges of culinary arts. As a result, Le Cordon Bleu's financial results have been removed from the continuing operations and have been reclassified within discontinued operations as held for sale. So with that, I'd like to turn the call over to Ron McCray. Ron?

Thanks, Mark, and thanks to everyone for joining us on the call. We appreciate your interest in Career Education, and I'm very happy to be with you today. Since this is my first opportunity to speak with many of you, I'd like to take a moment to introduce myself. Like many of our students, I'm a product of a working class family. I grew up in public housing projects in the Bronx, New York, and was lucky enough to find a path through education, the arts, and sports, which opened numerous doors to enrich both my life and ultimately my family's life as well. Education has remained very important to me.

I currently serve on the governing boards of my alma maters, Cornell University and Harvard Law School. I believe that everyone should have the opportunity to improve their own capabilities through education to open up opportunities for themselves and for their families. Everyone should have the chance to improve their prospects and enrich their lives through an education that suits their interests and talents. These are the key reasons I jumped at the chance to join Career Education's Board in late 2012.

I've been honored to be part of this team as Chairman, and I'm looking forward to working to keep our transformation on track. Enough about me. As far as Career Education goes, let's not lose sight of the value that our organization brings in enriching the lives of our students. Our overall student body is very diverse. Roughly 50% of our students are minorities, and the average age of our student population is roughly 32 years old.

So, many of our students face real world challenges. They are adults, not kids, and they often have families they need to support. They have jobs, but they are looking for more out of their careers. At Career Education, we make it our mission to enroll, educate, and place these students into careers that will both enrich their lives and help them better provide for their families.

Through our University Group, which includes American InterContinental University, or AIU, and Colorado Technical University, or CTU, we are meeting the post secondary needs of today's busy non-traditional adult learners. Approximately 90% of AIU and CTU students are pursuing their programs online, and both Universities have received strong recognition of academic success over the last few years. Most recently, CTU was selected by Instructional Technology Council which is an affiliated council of the American Association of Community Colleges, to receive its Outstanding eLearning Program Award.

CTU also received high marks on the recent US News & World Report lists for best online programs for 2015. Specifically, US news placed three of CTU's programs on its best list for online bachelor's degrees, online master of science and criminal justice, and online master of science in information technology. Last year, AIU became the first University in the US to offer an MBA driven by adaptive learning technology. In addition, both institutions, CTU and AIU, were also named a top school by Military Advanced Education. Our University programs remain a key part of the future of our organization.

Our career schools, which include Briarcliffe College, Brooks Institute, Harrington College of Design, Missouri College, and Sanford-Brown Institutes and Colleges, offer a variety of career oriented programs through ground based classes. Unlike regionally accredited colleges and universities, our nationally accredited career colleges must report job placement rates annually. Our career colleges continue to show improved job placement outcomes in the annual reports we submitted to accreditors ACCSC and ACICS in the fall.

All of our 32 ACICS accredited career colleges and culinary campuses that are not in teach-out reported placement rates greater than the compliance threshold of 60%. 26 met or exceeded the higher benchmark rate of 70%. Placements are a key indicator of the quality of our programs. They serve as evidence that we are achieving our mission to enroll and place our students in a better professional position than when they started with us.

Shifting gears, let's talk about recent developments. Then, I'll talk more specifically about some of the fourth-quarter and full-year 2014 results we have highlighted on slides 4 and 5. Our Board of Directors has launched a process to search for a permanent CEO. We are focusing on finding the right person to lead this Company through this transformation phase and beyond. I want to assure you that the Board and I are approaching this search with the highest urgency and seriousness. Please also keep in mind that we have a solid leadership team at multiple levels of this organization.

The team is engaged and focused on continuing to execute against our strategic plan and goals. This team has been instrumental in helping to transform the Company over the last few years. So let's talk about the fourth quarter and full year 2014 more specifically. As you can see in our press release today, our revenue and enrollment trends continue to stabilize across our ongoing operations, which excludes our transitional and culinary campuses. Our financial position continues to improve, and we hit our goal to be adjusted EBITDA positive in the fourth quarter as we achieved $15.6 million of adjusted EBITDA from ongoing operations during this period.

Many of you have heard us talk about our five key strategic objectives, and our strategic direction remains the same and we remain committed to these goals. The first goal is to strengthen our academic outcomes, enhance regulatory compliance, and simplify our business model. Strengthening academic outcomes remains a top priority at Career Education, and our adaptive learning tool, Intellipath, continues to serve as a powerful platform in the education of our students so they can quickly move past subjects they already know and focus their attention on subject matter that's most challenging to them.

We're seeing evidence of stronger pass rates, better engagement, and stronger retention of our University students thanks in part to our leadership in adaptive learning. Intellipath adaptive learning is a clear differentiator for our institutions. It's also helping us develop stronger relationships with employers who want to partner with us to strengthen their future workforces. Between the two institutions, the University signed more than 60 corporate agreements last year giving the Universities access to more than 4 million new potential students through those employer partners.

This last quarter, we had the opportunity to take an additional step as we think about our future and that was through a direct investment in the Company which created the Intellipath platform, CCKF. CCKF is a Dublin-based research and development company. Through our recent additional investment of $3.2 million, we have increased our ownership in the company to nearly 31%. This investment is first and foremost focused on insuring access to this valuable education technology as we continue to learn and develop even better ways to implement it across our offerings to improve students' academic outcomes.

We remain very excited about the power of the Intellipath platform to help us improve our students experience, and we are excited to have increased our related investment. Turning to slide 5. On the regulatory and compliant front of our first strategic goal, we remain committed to working with states, accreditors, and others to continue building a stronger culture of compliance. To cite a few examples, as we head into 2015, our preliminary financial responsibility ratio, or FRR, was 1.5 for full-year 2014 based on our recently filed 10-K.

From a 90/10 perspective, we believe all of our institutions will be the 90/10 ratio for 2014. We also recently received preliminary cohort default rate data the 2012 cohort, and I am pleased to report that the results showed continued improvement over the prior year and continued the trend to three years of sequential improvement. In terms of simplifying our business, the third part of our first strategic goal, we've again made tremendous strides over the last few years. This leadership team has streamlined the organization through the sale of European education properties and most recently, we announced the sale process for our culinary campuses.

Le Cordon Bleu is a great institution and we're very proud of the part we've played in building that brand in the US, but the reality is that this sale will help further strengthen our financial position and enable us to focus on and grow other parts of our education business. We anticipate completing the Le Cordon Bleu sale process by the end of 2015.

Moving to slides 6 & 7. Our second strategic goal is to continue to generate modest total enrollment growth in our University Group, which is the anchor of our business. Reid will walk you through the specific numbers but this was our fourth consecutive quarter of new student enrollment growth year over year in the University Group.

In particular, online total student enrollment grew 1%, which is significant given that more than 9 out of 10 University students are pursuing their degrees online. I believe our efforts to strengthen academic outcomes, to focus on building strong corporate relationships, and to introduce new programs combined with our efforts in 2014 to be more efficient and effective with our marketing spend, each of these things has set us up to achieve our goal of modest enrollment growth in 2015 across the University Group.

Our third strategic goal is to neutralize the negative impact of our career and culinary campuses. Slide 8 shows you five quarters of enrollment data in our career colleges. We talked to you last quarter about the impact of gainful employment, and we've taken a strategic step in delivering on this goal through our plan to sell our culinary art campuses. We continue to examine other strategies for mitigating our risk on this front as well.

The disruptions related to our Sanford-Brown consolidation and the associated marketing programs for those schools continues to be a work in process, but we are headed in the right direction. Our fourth strategic goal is to reduce our organizational cost structure, and it's one we've had significant success with over the last few years. As depicted on slide 9, we've taken out nearly $300 million in operating expense since 2012 alone, and over $100 million of that was in FY14. We see opportunity to better align our costs moving forward and have already taken actions in the back half of 2014 that will result in another $40 million in operating expense reduction in 2015.

These cost reductions help drive our positive adjusted EBITDA in the fourth quarter, and we remain committed to our goal to be adjusted EBITDA positive from ongoing operations for FY15 as well. We're also negotiating favorable exits from future lease obligations, primarily within our Transitional Group and our discontinued operations, but also in our ongoing operations. Reid and his team have done a great job leading this effort, and he will walk you through the details in a few minutes. We've executed deals on 28 properties so far that will reduce our future lease obligations by roughly $39 million over the next six years.

Much of that savings will occur in the next few years and the team sees further opportunity to address those costs in 2015. Our fifth and final strategic goal is to successfully complete the teach-outs of our Transitional Group campuses. As slide 10 shows, we have reduced the number of transitional campuses in our portfolio from 32 in third quarter of 2013 to 12 in our most recent fourth quarter. In 2014, we closed 20 campuses, divested one campus, and are scheduled to close an additional four campuses by the end of 2015.

The 20 campuses that were closed or divested as of December 31, 2014, generated approximately $33.5 million of operating losses in FY14. With that, I'll turn it over to Reid for a deeper dive into the specific results for the fourth quarter and FY14. Reid?

Thank you, Ron, and good afternoon, everyone. Let's get into the fourth-quarter financial results. All percentage variances I will mention will be comparisons to the prior-year quarter unless otherwise noted. Also, please keep in mind the earlier comments regarding the classification of our culinary business into discontinued operations since it's being held for sale.

First let's discuss the consolidated results from our ongoing businesses. Revenue, excluding that from the transitional and culinary campuses, was $168.6 million for the quarter, down 9.6% year over year due primarily to an overall 4.5% decline in total student enrollments. Operating expenses for our ongoing business decreased by $22.6 million or 12% for the fourth quarter of 2014. A portion of the expense reduction was driven by the lower student volumes, but a good portion of the year-over-year improvement was the result of continued focus on improving our cost structure.

Educational services and facility expenses were down $4.1 million or 7.6% as a result of increased operational efficiencies and optimization of real estate. General and administrative costs were down $17 million or 13.8% as a result of an insurance recovery in the current year, lower legal expenses compared to prior year, as well as certain reorganization efforts. We also kept our marketing expenses virtually flat with last year for the quarter at $45 million.

Overall, 2014 was a strong year of progress on the expense side of our right sizing and turnaround efforts. As Ron mentioned earlier, during the back part of 2014, we implemented an additional $40 million of cost reductions that will lower our cost base in 2015. Fourth-quarter operating income from our ongoing business was $2.4 million compared to a $2.3 million loss last year. The improvement was a result of the success of our cost reduction initiatives, which more than offset the quarterly decline in revenue.

Fourth-quarter adjusted EBITDA from our ongoing business, which excludes transitional and culinary campuses, and other items which we believe are not reflective of underlying operating performance, was $15.6 million, up $5.4 million or 53.3% from the prior-year quarter. Company-wide expense reductions and improved profitability from the University Group drove this improved performance. The University Group operating margins for the quarter increased 480 basis points compared to prior year.

As shown on slide 11, adjusted EBITDA from ongoing operations for the trailing 12-month period through Q4 was a positive $11.8 million compared to $6.4 million through Q3 of 2014. We expect this positive trend to continue as we continue to anticipate being adjusted EBITDA positive for full-year 2015, although not necessarily for each quarter since our advertising investments are typically heavier in the first and third quarters of each year.

Now let's turn to the financial results by operating segments. First our University Group. In the fourth quarter of 2014, CTU revenue decreased 6.1% to $82.2 million as total enrollments decreased 1.9% compared to prior year. However, online enrollments remained relatively flat. Operating income for the segment was $23.4 million, up 5.5% or $1.2 million from last year as operating margins expand 310 basis points to 28.4%.

We expect the improvement in operating margins to continue into full-year 2015 although quarterly margins will be impacted by seasonal marketing spend. Revenue at AIU of $44.7 million was 8.8% lower than the prior year quarter driven primarily by lower overall student volumes; however, we did see an increase in online enrollments, which were higher by 3%. AIU reported a small operating loss for the quarter of $300,000 compared to a loss of $3.8 million in the prior-year quarter as lower expenses offset declines in revenue.

While AIU reported operating losses for the quarter and full year, we're expecting AIU to return positive operating income for 2015. Next, our Career Colleges reporting segment, which as I pointed out earlier, now excludes culinary. Revenue for the quarter of $41.6 million decreased 16.6% or $8.3 million compared to the prior year due primarily to a 15% decrease in total enrollments. Operating losses decreased by $1.6 million to $13.7 million as a much improved expense base helped to offset the revenue declines.

Before I discuss transitional and discontinued operation results, I thought it would be helpful to give a quick summary on the culinary results for the quarter and the year. Keep in mind that these results are now part of discontinued operations from a GAAP accounting perspective since Le Cordon Bleu is being held for sale. These results are now part of the transitional and discontinued operations numbers, which I'll cover in a few minutes. For Q4, culinary revenues were $43.3 million, up $0.5 million from prior year.

Full-year revenue was $172.6 million, down $4.9 million or 2.8% compared to prior year. Total student enrollments were 8,800 as of December 31, 2014, up 11.4% from prior, and new student enrollments were 9,350 for 2014, down 12.9% from prior year. Operating loss for the quarter was $16.1 million, which included a $10.3 million impairment charge.

This compared favorably to a $28.4 million loss in Q4 of last year that included a $15.5 million legal settlement charge. For the full-year 2014, the operating loss was $66.6 million, which included $19.2 million of impairment charges. This was a $14.6 million improvement over full-year 2013, which included the $15.5 million legal settlement I just mentioned as well as $13 million of impairment charges.

Now moving on to transitional and discontinued operations. Adjusted EBITDA for this group for Q4 was a negative $13 million, an improvement of $20.1 million or 60.8% compared to the prior-year quarter. The improvement was largely due to the fact that we have 21 fewer campuses that are operating today than in the prior year. As we indicated in the past, the EBITDA burn from these schools will continue to decline over time and will eventually disappear.

As reported on slide 12, our trailing 12-month negative adjusted EBITDA for transitional and discontinued operations as of Q4 2014 was $92 million, down from $128.7 million for the 12-month period ended December 31, 2013, and down sequentially from the Q3 2014 burn rate. In 2015, we expect this favorable trend to continue and expect negative adjusted EBITDA for transitional and discontinued operations to be in the $62 million range.

Moving down the P&L, during the quarter, we recorded tax expense of $0.5 million against our pre-tax loss of $7.7 million. The expense in the quarter was primarily related to tax and interest related to settlement of various tax audits. As we've discussed on prior calls, given that the Company remains in a three-year cumulative loss position, we are not yet in a position to benefit from our current year losses. As such, our tax rate in 2015 is again to be close to zero.

Further, we continue to carry a significant valuation allowance. At the end of fourth quarter 2014, our valuation allowance was $150.4 million. Once we've returned to sustained profitability, we'll be in a position where we would be able to begin to reverse these valuation allowances and recognize benefits associated with these deferred tax assets. Our loss per fully diluted share from continuing operations for the quarter was $0.12, which included impairment charges of $0.06 and separately a $0.03 charge related to the impact of an adjustment to revenue recorded due to the accounting for students who withdraw from our institutions prior to completion of their programs.

This compared to $1.23 loss per fully diluted share in the fourth quarter of last year, which included impairment charges of $0.06, legal settlements of $0.01, and the impact of recording the tax valuation allowance of $1.08 per fully diluted share. Losses per fully diluted share from discontinued operations were $0.26 for the quarter compared to income of $0.77 per fully diluted share in the fourth quarter of last year. This year-over-year comparison was impacted by the items I just mentioned as well as the impact of the sale of our international business last year.

Let's now discuss our financial position and liquidity. As of year end, the Company had cash, cash equivalents, restricted cash, and short-term investments inclusive of discontinued operations of $239.6 million compared to $250.9 million at the end of third quarter and $363.1 million at year-end 2013. Slide 13 exhibits our cash position trends, which remain strong while the rate of our cash burn is decreasing. Net cash flow used in operating activities for the quarter was $17.5 million compared to $8 million last year.

The primary variance to prior year was our receipt in the fourth quarter of last year of approximately $9.1 million related to a tenant improvement allowance received for our corporate headquarter lease. For the full-year 2014, operating cash flow use was $118.6 million compared to $85.8 million in the prior year. This comparison was impacted by our international business in 2013, as well as real estate buyout transactions in 2014 and legal settlement payments made in 2014.

Looking forward in terms of cash, we expect continued improving cash trends in the business driven by: one, continued reductions in cash burn related to our transitional and discontinued operations; two, improved financial performance from our ongoing operations, which we expect to be EBITDA positive for the full-year 2015; and three, reduced real estate cash requirements driven by organic reductions in our lease obligations coupled with further reductions from transactions we completed during 2014.

Capital expenditures in the fourth quarter were $2.6 million. This compares to $3 million during the same period last year and $3.5 million during the third quarter of 2014. As we mentioned last quarter, we expect our cash position during 2015 to fluctuate in a range close to $200 million impacted by the timing of marketing spend and certain working capital items, but we do not expect to have any issues related to the financial covenants of our revolver in 2015 and expect to close the year above the $190 million covenant threshold.

Slide 14 walks you through the major components of these expectations more visually. These projections may be impacted by further real estate transactions; however, any such transactions would be economically accretive to the business, and we do have a basket for such transactions as part of our revolver agreement. I'd like to wrap up my discussion with some thoughts about 2015. First, we are focused on driving modest growth and total student enrollments for the year within our University Group.

One item to note as we move into Q1 2015, you may recall specific to new enrollments in the second quarter of 2014, we made an adjustment for proof of graduation cancels. This had the impact of higher Q1 2014 new enrollments by approximately 470 students and lower Q2 2014 by the same amount. Second, our plans for 2015 seek to continue to drive positive adjusted EBITDA from ongoing operations. The drivers of these plans include improved EBITDA from CTU and expanding adjusted EBITDA margins, two, AIU moving from flat adjusted EBITDA to a more positive contribution in 2015 driven primarily by an improved cost structure.

Three, we will benefit from the $40 million of expense reductions we took in the back half of 2014, a portion of which will drive the CTU and AIU improvement I just mentioned; and four, we will continue to focus on stemming our losses in the career campuses. However, it is important to note that in 2015, we will be absorbing the management allocations for our culinary business that is now included in our transitional discontinued grouping. These allocations are substantial and will offset a significant portion of the items I just mentioned.

Therefore, growth off our 2014 adjusted EBITDA exit rate will be minimal. Lastly, as you can see on slide 15, we continue to make excellent progress on reductions of real estate obligations within our transitional and discontinued operations portfolio. In this regard during the past 12 months, we completed 28 early termination lease buyout and sublease transactions, which required an initial cash outlay of approximately $9 million, but will result in lease cash savings over $39 million over the life of those leases.

While the economics of the remaining portfolio may not match the economics realized last year, we do expect continued progress on this front. I'll now turn the call back to Ron to walk us through slide 16 and to offer some quick closing comments before Q&A. Ron?

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

Great. Thank you.

(Operator Instructions)

And now our first question is going to come from Jeff Lee from Wells Fargo.

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

Quarterly free cash flow for the consolidated Company?

Yes.

Well, we haven't provided guidance but I would expect as we progress through 2015 that as we enter 2016, assuming that the trends continue to see it in that time frame but I can't give you a specific quarter.

Okay, thank you, and then one more. Were there any differences in timing of student starts this quarter that might have benefited or negatively impacted student starts?

No. No.

Okay, thank you. I'll turn it back over.

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

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

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

I think that's accurate. The process is recently under way, and we'll provide continued color as the quarters progress. But I think it's our hypothesis that there's a valid group of prospective buyers, and we're optimistic that we'll have a transaction completed along the timeliness that we discussed.

Got it, and in terms of the CEO search, I know may be early, but do you have an estimated time frame in mind or a target time frame of when you hope to, I guess, maybe come up with a list -- a short list or hopefully you have a CEO in place?

Well, as I indicated in the opening remarks, we have launched the search process. I should also point out that we are conducting the search with -- the Board is, with the utmost urgency and seriousness. We are in the early phase of this process and we'll be looking for a leader.

I can tell you that we'll help support the Company and lead the Company through this transformation period but we have a solid bench that's focused on the strategic plan and meeting our financial objectives. We are sufficiently early in the process that it would be difficult to predict where we might have someone occupy the seat permanently.

Got it. Okay, thanks so much.

You're welcome.

Thank you. Our next question is going to come from Jason Anderson out of Stifel.

Good evening, guys.

Hi.

In regards to the EBITDA numbers you've given for the Transitional Group, is there any way you could break those out? Maybe it would be interesting to see where culinary is, and then for fourth quarter but also maybe what your assumptions are there for FY15. You mentioned the $62 million, and in addition to that, is the assumption -- am I reading it right that culinary might be neutral EBITDA contribution?

As you know, you switched culinary goes into that group now and the guidance did not really change from last quarter, and any help you could give us there?

It's a good question. We did not provide a break out of LCB in that grouping. We may do so going forward. I think your assumption as to the general direction of LCB within that bucket is directionally accurate. One of the reasons is, as I pointed out in my comments, that from an accounting perspective, you can't bring with you to discontinued operations any management allocations being provided to the business, so those stay as they related to the culinary business. Those stay up in the continuing operations, so the fully loaded, in other words, the fully loaded P&L of LCB does not move down into that category.

Great, thanks, and then a little bit further on that. I don't know if we can press you on how to look at EBITDA losses going into 2016. Should we think about it the same trickle down as what happens with the campuses or would it divert from that trend in any way?

You're talking about from continuing or from the discontinuing segment?

I'm sorry, from the Transitional Group, culinary, disco, other disco, transitional as you've rolled that up as of now.

We haven't given any guidance beyond the 2015 number, but if you look at the teach-out slide that's included in the materials, those feather down and so the burn associated with those feather down 2015 off of 2016 and then they're at zero in 2017. That pace could also be favorably impacted by a culinary transaction and it could also be favorably affected by further real estate transactions. But I can't give you a specific year-over-year number.

Okay, thanks, and I had one other here. It was helpful to give us your thoughts on the University enrollment expectation in 2015. Do you have anything -- I guess, maybe you could provide some color on the career piece. Obviously, there's a lot going on there. Do you feel like that's stabilized or will stabilize into 2015?

And again, I know a lot of moving parts, but I guess we're just trying to think about how's that business, is there a potential to deteriorate further or not. And then also, if you could add on to that, do you have any thoughts about also looking for potential divestiture in that business, too? Not including the culinary.

I assume you're asking about career schools?

Yes, yes.

Okay, there were a bunch of questions there. You had a question about University enrollment?

I don't think it was University enrollment. I think it was related to career school enrollment and then secondly, with respect to any potential divestitures of that unit. Was that accurate restatement?

That is accurate, thank you.

Do you want to talk about any strategic stuff on career?

In terms of strategic opportunities as a ways to career schools, we regularly examine all aspects of our portfolio for strategic opportunities and career schools, of course, would be among them.

Okay, thank you.

This is Lysa Clemens. I'll answer the enrollment question for career colleges. So our objective with career colleges is to stabilize the result and reduce the rate of decline in the new student enrollments. As you noticed throughout 2014, the path was quite choppy and the expectation for 2015 would be that it may continue to be choppy, as we continue to deemphasize certain programs, add programs, and continue to gauge our marketing to marketplace trends.

Great, thanks for the color.

Okay. Thank you.

Our next question is going to come from Corey Greendale from First Analysis.

Hi, good afternoon.

Hi, Corey.

So a few clarifications. Reid, the comment about absorbing the corporate overhead from the culinary, could you quantify that?

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

Okay, you know where I was going with that is assuming that that overhead goes away once Le Cordon Bleu is divested, understanding the kind of the underlying performance would be?

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

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

Hello, Corey. This is Jason. All that was doing is just so that when you look at your comps as you see Q1 2015 and Q2 2015 for University, specifically AIU, you make sure that you adjust your comps so that you can see kind of what the year over year was, so that was just trying to remind that we had that adjustment that occurred in last year's Q2.

It normalizes for Q2. It's just you're going to get some quarterly comp issues on the individual quarters.

And Jason, as long as you're addressing that, the new student growth at AIU in Q4 was very strong. Is there anything you'd highlight as to what drove that and whether -- I'm not imagining that's sustainable but maybe you could comment on that?

I think we clearly been focused on trying to drive sustainable growth across the University segment. I think when you look at the online growth, that specifically total enrollment growth as we laid out in those slides was really driven by a series of actions that we were working on and initiatives that we were working on through all of last year around a combination of our marketing efforts.

For example, in Q1 2015, AIU will be on TV for the first time in a number of years from a marketing perspective, and then as Ron went on to point out, we worked hard on developing more corporate partnerships last year and how that growth drove, focused on relevant new programs that we could introduce, as well as the impact of Intellipath and strengthening our academic outcome. So it was really a byproduct of all of those initiatives together that drove our total enrollment growth.

Okay, and then next clarification. I think I know the answer to this from the way the slide is drawn but Reid, just to clarify, when you're talking about your cash level throughout 2015, you are not receiving any proceeds from Le Cordon Bleu on that?

That's correct. That's correct. I should have made that clarification but that does not assume -- it doesn't assume any proceeds from -- potential proceeds from LCB. It also does not, as I mentioned, it doesn't assume any material cash outlays for additional real estate transactions, but if we had the opportunity to do those, we would do them, but from a covenant perspective related to the revolver, as I mentioned in my prepared comments, there's a basket that we get to offset on those types of transactions, but that's correct. That's sort of -- consider that the major components of cash movement during the year.

Okay, and then I just had two other quick ones. Thanks for taking all these questions, but on the $40 million cost savings, from the way that you described it, it sound the like a fair am would actually be in AIU. Is that accurate or is it more weighted towards the career colleges?

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

Got it, and last quick one. Can you comment on revenue per student expectations in the University business in 2015?

I don't think, Corey, we've given any specific guidance, this is Jason, any specific guidance on revenue per student, but I think as you modeled and well know, based on historical trends that's probably as good as any baseline to use on a go forward basis.

Okay, thanks very much.

(Operator Instructions)

Our next question is going to come from Peter Appert from Piper Jaffrey.

Yes, you've got John Crowther on for Peter. Just following up on that revenue per student comment. It looked like there was a little bit of a down tic in the way that we actually can calculate it here in the University category this last quarter. Just wondering if there's any sort of timing issues that would account for that, or as you said, looking back on a historical basis, is there anything that we should be thinking about as we try to judge that historical pricing growth as we look forward to 2015 and 2016?

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

Okay, great. Thank you.

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

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

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