Universal Technical Institute Inc (UTI) 2005 Q4 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to Universal Technical Institute Inc.'s fourth-quarter and fiscal year 2005 conference call. At this time, all participants are in a listen-only mode. Following today's presentation, instructions will be given for the question-and-answer session. (Operator Instructions). As a reminder, today's conference is being recorded. A replay of this call will be available for 90 days at www.UTIcorp.com, or alternatively, the call will be available through December 21, 2005 by dialing 1-800405-2236 or 303-590-3000 and entering the pass code 11042178#.

At this time, I would like to turn the conference over to Ms. Jennifer Haslip, Chief Financial Officer of Universal Technical Institute. Please go ahead, ma'am.

Thank you. Hello and thank you for joining us today for Universal Technical Institute's quarterly conference call. During the call, we will discuss the results of the fourth fiscal quarter and fiscal year, which ended on September 30, 2005 and then we'll open the call up to your questions.

The Company's earnings release was issued after the market close today and is available on UTI's Web site at www.UTIcorp.com.

Before we begin, we would like to remind everyone that except for historical information presented, the matters discussed today may contain forward-looking statements under the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995. Such statements are based upon management's current expectations and are subject to a number of risks and uncertainties that could cause actual performance and results to differ materially from those discussed in the forward-looking statements. Factors that could affect actual results include changes to federal and state education funding, construction delays for new or expanded campuses, possible failure or inability to obtain regulatory consensus certifications for new campuses, potential increased competition, changes in demand for the programs offered by the Company, increased investment in management and capital resources and the effectiveness of the Company's recruiting, advertising and promotional efforts. Further information on these and other potential factors that could affect the Company's financial results may be found in the Company's filings with the Securities and Exchange Commission. The Company undertakes no obligation to publicly update any forward-looking statements whether as a result of new information, future events or otherwise.

At this time, I would like to turn the call over to Kim McWaters, Chief Executive Officer. Kim.

Thank you, Jennifer. Good afternoon, ladies and gentlemen, and thank you for joining us to review our fourth-quarter and year-end fiscal 2005 results. On today's call, I'll begin with a brief overview of our Company followed by a review of our fourth-quarter and year-end financial and operating performance. Then I will provide a brief operational update and comment on our growth initiatives. Jennifer will then provide a more detailed review of our financial results as well as an update on our forward-looking guidance. In closing, I will address some frequently asked questions that we have received from investors.

Universal Technical Institute has enjoyed 40 years of success as a respected quality brand in the education sector. We provide recruitment, training and placement services to the automotive, truck, collision repair, motorcycle and marine industries. We have 10 geographically diverse campuses serving more than 15,000 students. Our student population is primarily male with approximately 60% being recent high school graduates and the remaining 40% adult learners pursuing career changes. In addition, we have 20 manufacturer sponsored training centers, providing both graduate level training and corporate training for automotive and diesel manufacturers throughout the United States. We are pleased to announce another strong quarter of earnings and enrollment growth, which brings our fiscal year to a successful close.

Net revenues for the fourth quarter were 83.9 million, up 21% from the prior year and net income for the fourth quarter was 9.2 million, a 38% increase from the prior year. Net revenues for fiscal year 2005 were 310.8 million, an increase of approximately 22% over last year. Our revenue growth on a per student basis returned to historical levels as we ended our fiscal year and grew at approximately 4.9% for the fourth quarter and 3.5% for the full fiscal year as compared to a year ago.

Expansion costs associated with Norwood, Massachusetts, Sacramento, California and Exton, Pennsylvania, as well as compliance costs associated with Sarbanes-Oxley and slightly higher bad debt expense were the primary drivers of lower operating margins during the year. For fiscal 2005, we reported operating margin of 17.9% as compared to 19.6% in fiscal 2004. Net income improved by more than 24% as compared to a year ago and our net income margin increased by approximately 20 basis points, resulting from lower tax rates and higher interest income. As we fill in capacity during fiscal 2006, we expect that operating margins will begin to improve as compared to the prior year. Our expectation is that margin improvement will occur during the fourth quarter of fiscal 2006.

Average undergraduate enrollment for the fiscal year was 15,390 compared to fiscal year 2004 of 13,076, an increase of approximately 18% year-over-year. We ended the year at approximately 70% capacity utilization, including the opening of our Norwood, Massachusetts campus and the expansion of our collision repair program at our Houston Texas campus. We plan to continue our expansion into fiscal 2006 by adding approximately 4300 seats at a variety of new and existing campus locations.

Recently, the Bureau of Labor Statistics released new employment projections through 2014. Total employment for these industries is expected to grow between 10 and 15% for the 10-year period of 2004 through 2014, adding more than 190,000 positions. This increases the annual need for auto techs from 31,887 to 33,900. Comparing the year 2002 to 2004, the number of technicians employed as automotive technicians decreased by approximately 1.9%, which equates to 15,368. The majority of these jobs have come from independent auto repair shops. The number of dealership technicians actually increased. That is consistent with the data reported from both the Automotive Service Association and the National Automotive Dealers Association. According to the NADA, their technicians, including service and collision repair, increased 5.7% from 2003 to 2004. This supports our belief that as vehicles become more complex, employment grows at dealers and franchise independents at the expense of the less sophisticated independents. This suggests that formal training is required and that in order for the independents to remain competitive with the dealers, they will need to hire more qualified technicians or train their existing workforce.

Next I will provide a brief update on new campus openings and campus expansions. In October of 2005, we started our first class of students at our newest campus in Sacramento, California. Today, the student population at this campus is approximately 150 after three successful start dates, which is in line with our expectations.

Our plan is to remain in a current temporary facility for approximately three quarters and then relocate to our permanent site located approximately one mile from our temporary location. We have finally received our building permits from the City of Sacramento and have begun construction on our permanent campus. The permanent campus will accommodate automotive, diesel and collision repair training for a total capacity of 2100 students.

At our Norwood, Massachusetts campus, we have reached a student population of approximately 475 students since its opening in late June of 2005. The campus ramp-up is consistent with our fiscal 2006 operating plan.

At our Houston, Texas campus, we expanded student capacity for our collision repair and refinish program by approximately 400 seats during the fourth quarter of fiscal 2005. Total student capacity for the program at this location is approximately 1,000. Today we have approximately 700 students in the program or roughly 70% utilization. Since we have exceeded a 60% threshold of capacity utilization, we will no longer report specifically on this expansion, which is consistent with our historical practices.

As previously mentioned, we've identified several opportunities for expansion beyond fiscal 2006. We expect our future campuses at maturity to range from 700 to 2,000 student capacities, aligned to meet the needs of employers and students in select metropolitan areas. In addition, we plan to expand existing program offerings and develop new ones throughout our campus system. We expect to be able to provide more detail on future expansion plans once we complete our research. This should occur during the third quarter of fiscal 2006. This summarizes our national footprint expansion progress and future plans.

During our outlook call in October of 2005, we provided an update on our progress with new and existing industry partners. I am pleased to report that we renewed our contract with Porsche. The contract term is for one year and also provides the ability to extend it for an additional year upon the agreement of both parties. We also entered into a written contract with Harley-Davidson, which was previously an oral agreement and this is for the training at the MMI campuses. We have received a signed contract for BMW on the automotive side for both graduate level and elective level training. The new contract term extends through December of 2008.

We were also recently notified by Jaguar that it will not renew its contract with UTI for the Jaguar Pace Program in 2006. Jaguar states the reason is due to various market factors and other priorities within their overall business strategy. They assured us their decision has been based completely on business reasons and is in no way a reflection on UTI's performance. There is no financial impact inside of fiscal 2006, as classes will be run through September of 2006.

We will continue to work with all Jaguar dealers nationwide to provide technicians, as they remain key employers for our graduates. The demand from Jaguar dealers has been strong and that demand is expected to continue. Of the 80 graduates from this program during fiscal 2005, 78 were placed within Jaguar dealerships, which equates to a 97.44% employment rate.

We have also signed an agreement with FedEx for training during the first quarter of fiscal 2006. The agreement includes the development of curriculum, as well as offering training to a portion of their fleet on air-conditioning technology. The training is scheduled to be provided in FedEx service centers by our instructors. In addition, we recently signed a two-year contract to provide dealer training to Kawasaki Motors Corporation. The training has recently commenced and is being provided at existing Kawasaki locations. The contract is anticipated to generate approximately 100,000 in revenue for each of the next two years.

We have also completed a proof of concept pilot with Thermo King, a manufacturer of transport refrigeration units to provide training to their customers. We expect the training to begin after the first of the year. This training is planned to occur at UTI campuses when the transportation course schedule permits. These new training opportunities are a direct result of our business-to-business sales efforts and are line with our strategy to provide updated training to technicians currently employed in the industry.

And now I would like to turn the call over to Jennifer Haslip, our CFO, for a detailed review of our financial results for the quarter and fiscal year. Jennifer?

Thank you, Kim. As noted in our press release, net revenues for the fourth quarter of fiscal 2005 were 83.9 million, up 20.8% from 69.5 million reported in the same quarter last year. Net revenues for the fiscal year increased to 310.8 million as compared to 255.1 million, a 21.8% increase. Revenue growth was driven primarily by higher student enrollment as well as tuition increases and program extensions for the fiscal year and fourth quarter's results.

Income from operations for the fourth quarter was 14.4 million or 22.8% higher than the same quarter last year. The year-over-year increase for the quarter is primarily attributable to growth in overall revenue and efficiencies in educational and services and facilities costs. The increase was partially offset by expansion losses at our new Norwood, Massachusetts and Sacramento campus of $2.7 million as compared to expansion losses associated with our Exton, Pennsylvania campus and Orlando automotive facilities in the same quarter a year ago of approximately 2.1 million.

Income from operations for the fiscal year ending September 30, 2005 was 55.8 million as compared to 50.1 million a year ago, an improvement of 11.3%. We incurred preopening losses of 4.2 million related to our Norwood, Massachusetts campus and 2 million related to our Sacramento, California campus. This compares to expansion losses of 4.8 million to Exton, Pennsylvania and 405,000 related to our Orlando automotive expansion during fiscal 2004. Our Exton, Pennsylvania campus is profitable. However, not at the same rate as mature campuses, which also created pressure on our operating margins for the year.

We also incurred costs associated with Sarbanes-Oxley compliance of roughly $1.5 million during the fiscal year. In addition, bad debt expense turned in slightly higher for fiscal 2005 year to 1.4% of net revenue as compared to 0.9% in the prior year. Net interest income for the fourth quarter was $526,000 compared with net interest expense of $8,000 for the same period last year due to favorable interest income and a lower average balance of total debt. At September 30, 2005, we had a restricted investment of $16.2 million related to a letter of credit that was released by the Department of Education during October of 2005.

Our tax rate for the fourth quarter was 38.2% compared to 41.2% for the same quarter last year and 37.4% for the fiscal year ending September 30, 2005. The lower effective rate for the three-month period in 2004 as compared to the same quarter a year ago is primarily attributable to tax incentives related or received from the purchase of our Massachusetts campus and nondeductible fees in the prior year. We expect our tax rate to range from 38 to 40% for fiscal 2006.

Our net income for the fourth quarter was 9.2 million or $0.32 per diluted share. This represents a 38.3% increase from 6.7 million or $0.23 per diluted share for the same quarter last year. Net income margin was 11% for the fourth quarter as compared to 9.6% in the prior year. Our net income margin improved to 11.5% as compared to 11.3% for the twelve-month period of fiscal 2004.

Turning now to our balance sheet, we increased cash and cash equivalents to 52 million at September 30, 2005 compared with 42.6 million at September 30, 2004. We generated 20.1 million in additional cash flow from operations for the fiscal year as compared to the prior year.

Capital expenditures for the 12 months ended September 30, 2005 were approximately 45.8 million compared with approximately 16.9 million for the same period last year. Our capital expenditures typically vary with our student population, as well as planned program enhancements and expansions. Assets are placed in service slightly ahead of when they are required for training purposes. We expect capital expenditures to increase over the coming quarters as we upgrade current equipment, expand existing facilities and open new locations. We anticipate ongoing capital expenditures to range from 5 to 6% of total revenue. New and expanded facilities add to our ongoing or maintenance capital expenditures.

The primary driver for our Company's solid performance is growth in average enrollment. Our average undergraduate enrollment for the three months ended September 30, 2005 was 16,169 students, an increase of 15.1% from 14,048 students for the same period a year ago. Average undergraduate enrollment for the 12 months ended September 30, 2005 was 15,390, an increase of 17.7% from 13,076 students for the same period a year ago.

Undergraduate enrollment at September 30, 2005 was 17,368 students compared with 15,212 students at the end of the prior year.

Next, I would like to summarize our capacity at our campus locations.

At September 30, 2005, we had approximately 22,000 seats throughout our nine campus locations compared to 18,600 at September 30, 2004. We had a utilization rate of approximately 70% as we ended fiscal 2005, which was consistent with fiscal 2004.

Next, I will quickly summarize the expansions and ending (ph) capacities at the five campuses that changed during our 2005 fiscal year.

At Avondale, we increased capacity by 240 seats to total capacity of 3,420 seats. Currently, the campus can accommodate 2,850 students on ground and 500 students for our flex tech night program that is a blended program, both online and on ground. We increased the Houston, Texas facility by 420 students in the collision program, taking total campus capacity to 3,160. In addition, we increased our Glendale Heights, Illinois campus by approximately 150 seats, taking total capacity to 2400 seats.

And we also increased the Rancho Cucamonga campus seat capacity by 540, taking total campus capacity to 2640. The Rancho Cucamonga campus seats were primarily due to increase in availability in the night program. In addition, we increased the automotive program capacity at our Orlando, Florida campus by 130 seats, taking total campus capacity to approximately 2540 seats.

And lastly, we opened our Norwood, Massachusetts campus that can initially accommodate 1920 seats. This summarizes our campus footprint additions for fiscal 2005.

Now I will update forward-looking guidance for our fiscal year ending September 30, 2006, which is broken down into the following categories -- fiscal year 2006 expected revenue growth and annual margin targets, fiscal year 2006 ranges for capital expenditures, quarter one 2006 revenue growth targets, seasonality in the business, and fiscal year 2007 ranges for revenue and net income margin.

Our target for fiscal 2006 year-over-year net revenue growth ranges from 19 to 21%. Our net income target, excluding equity-based compensation ranges from 11.5% to 12%. Our net income target, including equity-based compensation ranges from 10.5 to 11%. Our targets, excluding equity-based compensation remain unchanged from the outlook call during October, 2005. Our capital expenditure target for fiscal 2006 range from 73 to 75 million, which includes approximately 55 to 57 million of expansion costs. Our cash position is sufficient to fund our operations and we will selectively consider leasing versus purchasing as we continue to expand our business.

Turning to our first fiscal quarter 2006, we anticipate year-over-year revenue growth ranging from 17 to 18% as compared to the first quarter of fiscal 2005.

As we have discussed on previous calls, operating income typically is the lowest during our third fiscal quarter ending June 30 due to a lower population of students. As our program length continues to expand and our adult population grows, we are seeing better utilization of our facilities during our non-peak periods of the year. The Company's costs do not vary significantly with changes in the student population. We expect quarterly fluctuations in operating results to continue as the result of seasonal enrollment patterns. These patterns may change, however, as a result of new school openings, new program introductions and increased enrollments of adult students.

Looking farther ahead, we expect net revenue growth in the 20% range. We expect that revenue growth will come from three primary sources -- average enrollment at growth, program extensions and new elective growth, and tuition increases of approximately 3 to 5% per annum. In years when we add 2,000 seats or less, it is expected that net income margins will improve slightly. During periods of more aggressive growth, net income margin improvement may slow or there could be slight margin compression for short time frames. The timing of expansion-related expenses in most cases will be incurred prior to generating revenue.

Now I will turn it back to Kim for a quick summary.

Thanks, Jennifer. Before we open the call for questions, I'd like to comment on a few topics that seem to be top of mind with our investors. We have received several questions related to our student population growth and have been asked what we believe the best measure is to evaluate same school growth. We add seat capacity in two ways. First, we build new campus locations as we have done recently with Norwood and Sacramento. Second, we expand existing locations to accommodate excess demand, new manufacturer electives or additional programs. The fact that we continue to create additional capacity at some of our existing locations does make it difficult to calculate a same school growth statistic. We believe the best measure of same school growth is determined by starting with our average undergraduate student population for the full fiscal year, less our average undergraduate student population for the newest locations during the year. This same statistics should be calculated for the prior year to arrive at comparative data. Our average undergraduate student population for fiscal 2005 was 15,390 and for fiscal 2004, it was 13,076. For fiscal 2005, our two newest locations were Norwood, Massachusetts and Exton, Pennsylvania. The average undergraduate student population for fiscal 2005 for the two new locations were approximately 890 and for fiscal 2004, were approximately 60. For fiscal 2005, this calculation would have resulted in approximately 11.4% growth at our mature locations. This percentage is quite high due to the number of expansions that have occurred in the last few years at our mature locations. It is important to use average undergraduate enrollment statistics for the whole year versus a point in time because the result can be misleading. This could result from the timing of opening new campuses, the startup of expansions at existing sites, and high capacity utilization rates at mature campuses except during the non-peak start times ranging from February through June.

We expect very high utilization rates at our mature sites unless we have created new capacity. As a result, we would not expect to see double-digit same school growth year-over-year unless our capacity utilization were lower at mature locations. This focused effort on improving non-peak starts at mature sites and the opportunity to add new curricula, and tuition rate increases, we believe that we will continue to see some growth at these locations. However, we do expect that new locations will become our main driver of growth over time.

We have also been asked to comment on cannibalization at mature locations throughout our system. In our last conference call, we highlighted that we expected our Avondale, Arizona campus to experience slight cannibalizations from our recently expanded Rancho Cucamonga, California campus and our recently opened Sacramento, California campus. This is typical when new locations are added as students from the local area are less likely to relocate to a regional campus if there is a location more convenient to their needs. However, additional students gained by opening new sites typically will surpass the cannibalization of the original campus. As students attend a campus nearer to them, we backfill these seats with additional advertising and recruitment efforts around the original regional campus.

One of the best examples of this was at our Rancho Cucamonga campus that opened in 1998. The first year, the new campus cannibalized the Phoenix campus by more than 200 students, which was roughly equivalent to half of Rancho Cucamonga's enrollment. The Phoenix campus was also negatively impacted by an additional 300 student loss when we discontinued a computer aided drafting program during fiscal 2001. In 2002, we discontinued a heating ventilation and air-conditioning program that had a student population of approximately 400. Our Phoenix campus would have been lower by approximately 900 students had we not been able to effectively backfill the campus. Today, our Rancho Cucamonga campus has more than 1900 automotive students in the school and UTI Arizona was able to backfill all 900 seats with automotive students and has also expanded the school during the same time frame.

I am happy to report as we've progressed into our fiscal year that we have come back into alignment with our prior fiscal year student population at the Arizona location. However, we're still experiencing some cannibalization at Glendale Heights, Illinois and at our NASCAR Technical Institute campus from opening our Norwood, Mass. and continuing to build our Exton, Pennsylvania campus student population.

Students attending these new campuses historically attended the mature campuses. We expect that Glendale Heights would eventually be cannibalized with the opening of our newest location and a few years ago, we entered into a short-term lease that would enable us to accommodate the growing student demand at that time and provide us the ability to downsize in the future as our national footprint plans dictated a slightly smaller campus.

Our NASCAR location is the most extensive program in our system and also drew from the regional areas where new locations have been opened. We will begin additional advertising in the surrounding areas as well as on a national basis to backfill these open seats and evaluate the appropriate size of these locations once our national footprint research is completed. Overall, we are pleased that our seven mature campuses during a peak time of year with 85% utilization grew by more than 550 students or 3.7%. This utilization rate includes newly created capacity at five of the seven campuses.

Another question we have received recently is whether we would consider enhancing margins in the short term by reducing sales and marketing spending. And the answer is no. We are focused on the long-term health of the Company, not quarterly margin targets. If we stop to reduce spending required to generate prospective students, it would hinder our ability to grow into fiscal 2006 and 2007. We do incur sales and marketing costs associated with our growth and expansion as do most growing companies. While our sales and marketing costs typically lead our revenue stream, the return on our investment, once realized, is very solid.

And with that, we would now be happy to take your questions. Operator?

(Operator Instructions). Greg Cappelli, Credit Suisse.

Good afternoon. This is actually Steve on the call for Greg today. I guess just to pick up on the capacity comments that you made, specifically for mature campuses, could you maybe comment a little bit on the opportunities for similar expansions as what you did at Rancho Cucamonga maybe sounds like there aren't that many opportunities going forward to do something like that.

I would say that for the other campuses that we have out in the system, that future expansion would be driven by the opportunity to add additional manufacturer electives, such as taking Toyota out to other campuses or bringing on a new OEM. The other opportunity to expand those sites would be driven by curriculum enhancements, as we have talked about lengthening the program to adequately cover electronics content. That could possibly result in an expansion or creating additional capacity.

The reality is at these sites, there's opportunity to take collision and diesel, as we've talked about, moving into the Sacramento campus most recently. And where the campuses are located, we can acquire additional space to accommodate those types of expansions. However, if that need is not driving the expansion, we would rather focus our efforts and energies on expanding our national footprint.

Great. And then I was just hoping -- on the last call, you talked about, I think you quantified 300 students from the impact of the hurricanes. Just wondering if you can provide an update in terms of students returning to school and their starting?

We've made some progress on the students that were out of school and at that point in time I think we had spoke of about 100 were out of school and we've returned about 30 of those students, so we're still down about 70. As for the 200 students that are still on the books, we will have better clarity around those start numbers after the January start date. So we haven't really had any big starts where we would be able to impact that number and so I will give you more details after our January starts.

Mark Hughes, SunTrust.

Thank you very much. Any change in expectations for the December quarter net margin? You gave some explicit guidance during the preview conference call, but you just gave revenue this quarter. Any reason for us to think those would be different?

No, actually, it's not our typical practice to give quarterly margins but we would be remaining consistent with what we had previously reported.

Right. The you had, obviously, pretty good margin results this quarter but it looks like your margin expectation year over year is more modest in the Q1. Any particular reason for that?

I think it's a contributor from several of our expansions that we have got going on, primarily our Sacramento campus that we are in a temporary facility and paying rent for that particular facility along with needing to build the pipeline of students for both that opening temporary campus as well as the larger campus that we will take occupancy of in the fourth quarter of the fiscal year, combined with ramp-up costs associated with Massachusetts and in several of our other expansions, both at Exton, Pennsylvania, the 500 seats that we added there for diesel, as well as continuing to ramp our collision repair and refinish program expansion.

Right. Kim, you had talked about margin improvement through the year and I think you had made a comment about Q4 '06 margin improvement. What was the point there? Are margins expected to be down year-over-year through the first three quarters and up in 4Q?

What we had talked about, previously, Mark, is that we will still see pressure in the first half of the year, even into the third quarter. But by the time we hit our fourth quarter, you will see the margins rebound. And so I just wanted people to know the timing of when we really expect to see the margins rebound and it's toward the latter part of the year.

right, exactly. Final question, you had commented about seasonality of the Q3 or historically the seasonally weaker period may be stronger. Is that a related comment, what you just said about the margins? I guess that's the point, that they will be down or flat to down through the first three quarters and then rebound in the fourth quarter?

The seasonality comment that we raise is just very similar to what we have experienced historically, where our third quarter typically tends to be lowering margin because our student population is lower during that time frame, and so that would really be consistent with our historical practices.

Mark Marostica, Piper Jaffray.

Good afternoon. This is actually Ajay Casterbad (ph) for Mark. Kim, if I could ask you -- just can you talk to us about why the acceleration in enrollment as you look past beyond 2006? I'm sure it has to do with some of the increases in capacity, but could you give us a little more color there?

In terms of the acceleration of our student enrollment?

That's correct.

I think what you are commenting on is the 2007 period?

That's correct.

It didn't really change then.

Okay, no, just versus the kind of fiscal year '06, it just seems as though you're talking about a bit of a stronger enrollment trend. Does it have to do with just increase in seats and capacities and are these new elective programs?

Well we are opening up additional capacity and you are seeing the full rollout of four (ph) to the other locations, so that creates some programming (inaudible) and impact capacity. In addition, the guidance for '06 has been negatively impacted at least from the hurricanes -- numerous hurricanes and the impact there on the Houston campus and the Gulf states. And we would expect to have rebounded from that going into the subsequent period plus gaining traction in the East Coast areas where we have new representatives this year.

Okay, I just had a couple other questions. Just regarding diesel's rollout, kind of the auto diesel, I know that's been kind of an area of strength lately. Can you kind of talk to us a little bit more about how diesel did in the quarter? I'm not sure if you can maybe just qualify it or even quantify it?

I can just tell you from -- if you look at the campus where we had the auto/diesel combination, that the rate of students taking the combination program range between 40 to 50% of all auto students try to take the diesel program. So we have continued to see consistent rates there. Where we are seeing increased interest is from the employer side, which is in large part starting to drive our expansions out to the other campuses. So as we start to do that out at Exton, we will see a similar ramp-up that we have had at the other campuses and would hope to see similar percentages of students taking the combination of auto/diesel. It actually helps them from an employment standpoint, where they can be more selective as to which industries they seek employment in.

Okay. And then just lastly, just regarding persistence and sarbates (ph), kind of any changes or any updates regarding persistence of sarbates at your campuses?

Yes. During our last call, I believe we reported a decline in persistence of approximately 200 basis points and our trend for persistence has improved over the last two months as we've aggregated that additional data by about 30 basis points. So we are making slight progress on that, but we are not back to our historical levels and this will continue to remain a focus for us as we move into the next quarters.

Jennifer, thanks for the additional color. How long do you think that would take? Do you guys give any kind of guideline as to how long that would take to get persistence back to a more normalized level?

I would say that we are seeing -- we report persistence in a couple of different ways, where we have new starts that we measure as well as like a historical time frame that we would look at. I think that because we are seeing retake rates return to more normal levels that we are going to be a little bit more balanced or evening out from a persistence rate in those newer students. And then the older group is just a little bit more challenging to return that back to historical levels, although we are seeing slight progress on that. I'd expect it would take us a couple quarters to get back, even maybe nine months, to get back to historical levels.

Michael Lasser, Lehman Brothers.

Good afternoon, Kim and Jennifer, and nice job on a solid quarter and a very fine year. Quick question on growth in revenue per average enrollment. It rebounded quite nicely this quarter. And I was wondering if you could talk a bit about the trend there, what impact the number of retakes had on it, and importantly, do you see that as being largely addressed or will it continue to be volatile moving forward?

I would say that we've been working on that particular statistic really for about nine months and we have looked at a number of different factors, primarily academic content in the higher electrically focused quarters. And as we have moved into the latter part of the third quarter and then into the fourth quarter, we started to see it return to very historical levels. And we are basically right in line with what we have seen historically. I do think you are going to see a slight uptick as we go into this 2006 fiscal year, particularly at the Houston campus. But overall, I don't think we're going to see a major tick-up in that area. I also know that we are considering moving to offering one retake as opposed to two on the UTI campus side. We have not yet made that change. It takes a period of time to work through that but that is our intention, is to shift that to one, which would be consistent with our MMI location.

Could you also comment perhaps on the impact that it had on -- the impact that the return to more normalized levels had on profitability?

Sure, I think that when you're earning more on a per-student basis that that number does drop down to the bottom line and has a significant impact on it. I can't give you the exact dollar amount that that was, but I can tell you that that was a contributor to our outperformance during the quarter.

The other piece that's contributing to the higher student rate is that as you work in through the fall starts and you have some time to accumulate the new students and previous students are graduating during that time, those newer students are starting at a higher tuition rate. So that starts to offset the graduates who are now exiting the system at a lower rate, and that contributes to driving that up.

Two quick last ones. Jennifer, you mentioned something about some higher or better utilization because of the night program at Rancho Cucamonga and that positively affected profitability. Could you give a little bit more color on there and what impact that might have across the whole system of schools in the future?

I think what you're asking is why the expansion at Rancho Cucamonga? And really what we saw was that when we moved into that facility, we have the ability to train about 500 more students in the night program there. We don't have to take on additional space to do that. We will have to obviously equip that as we need to and that is built into our fiscal 2006 plan. So, it should add that basic capacity into our system, which ultimately will lead to better profitability at that particular location. But it's a configuration issue as well as historically, there had not been that much demand to the night program and now we're seeing much more penetration on that side and so we're able to raise that capacity level.

Finally, do you know what stock option expense would have been in Q4 '05 should you have expensed it?

I don't have that particular statistic handy. But I could certainly follow up with you at a later time.

Trace Urdan, Robert W. Baird.

Good afternoon. I wanted to ask about the Jaguar decision and maybe a little bit more color as to what was behind it. Is this something that they regard as some kind of a marketing expense and given their performance, is this a way for them to cut costs? And if that is in fact how they look at it or even if it's not, are there any connection points to the Volvo and Ford agreements that would sort of connect to the corporate dotted line to Jaguar?

Those are great a great questions, Trace. We are in the very initial stages of working through this with Jaguar. We just learned of this very late last week. And this is a decision that they see as -- at the cost center, anything that has to do with training is the cost center. The pressures have been felt throughout all of our OEM partners and we have tried to be as creative as possible in trying to address their training requirements with the best value proposition that we could. And with Jaguar, I think that the market conditions that they are faced with and the costs, we were not able to get to I guess any type of understanding that would be helpful for them. At this point, they just are not in the position to run the program. And, what we have offered to them is if they choose to run it on their own, which they have not committed to do at this point, we would serve as a recruitment or primary feeder to that program. We would work with them to create an elective spin with the Ford FACT program, if that's of interest to them. And I think the reality is they are just digesting this information at the corporate level, have not worked through the communication and strategies with their dealers at this point and it's a very in-demand program from their dealers. So I'm not certain how all of that will flush out.

All I can tell you is we have a very good working relationship with them and we're going to work through the tough times with them to see how we can best meet their technician needs. And what structure that takes in terms of the program, the way I look at it is we have basically through September to come up with something that works for both of us. But it's just not going to be under the structure we currently have today.

Okay. Just as a follow-up, have you or would you or would you even want to look at charging the students to participate in the program? It seems like it must be a pretty hot ticket. Maybe they would bear some of the cost of the program?

As I said before, we're just in the initial conversations with them. So of course we have pitched a number of different alternatives to them and I don't think that they have had opportunity to digest it fully. The situation with Jaguar is that it's at one site in the Orlando area, not even at the Orlando campus. So it might be something that we could integrate back into the Ford program.

I do think that students would pay for it. It will come down to an accounting treatment of how they would have to account for the cars, vehicles, etc. that they would provide. And so we will pursue all of those various strategies with them as we work through this but it's too early to comment on it but I did feel I had an obligation to share with all of you that they were not intent on renewing the contract as it existed today.

Richard Close, Jefferies & Co.

Yes, thank you, congratulations. Kim, I was wondering if you could give us sort of your perspective on placement rates and if you look across all your graduates' seats this year that you placed, how many would you say have gone into dealerships versus -- I hate to say the normal businesses -- but just regular businesses?

From our placement statistics, 53% this past year went into dealers. And roughly 11% were going into the aftermarket franchise, the franchise independents. And I would say somewhere between 10 to 14% were going into the independent or self-employed, more of like just the smaller independents, the less sophisticated independents that I talked about. And then you have the balance going into trucking companies or fleets as well as municipalities, heavy equipment, etc. So, the largest percentage of our auto diesel graduates continue to go to the automotive dealers at this point. And I believe that is in large part driven by our recruitment efforts and direction and relationships that we have with industry in addition to the demand that currently exists with those employers.

Do you see the last area, the trucking and heavy equipment area is becoming a larger percentage? I noticed you mentioned two relationships this quarter, I think FedEx and Thermo King, I guess. So would you see more and more of your graduates going into non dealership roles?

I think that as we begin to address the needs of the dealers and we continue to gain traction over the next several years, it's important for us to branch out into these other industries. And especially when we are seeing starting wages and potential income levels that rival what's occurring at the dealerships, it is an area that we are focusing on. If you compare the Bureau of Labor Statistics in terms of the 2002 timeframe to the 2004 timeframe, the diesel technician employment actually grew by about 3,000 jobs. And that's the type of feedback we're getting from our employers, as well. There's a lot of excitement and interest around the national fleet companies and large transportation companies to regain access to UTI's graduates, which it has been very limited in the past due to the strong relationships that we have had with the OEM. And what's very nice to see is what they're offering the graduates is actually very appealing and so our students are very interested in it and I would assume that they will start moving down that path as they evaluate what their career path and earning potential truly is in this other segment.

Okay. And then quick question for you guys. Can you give us the number of seats that you are going to be adding here in fiscal 2006 again?

That's going to be 4300, roughly. And do you want me to break that down by site for you?

And quickly, that would be awesome.

Sacramento is expected to add 2100 seats, and that is a combination of diesel and collision, as well as the automotive component. We have got 880 that are coming in from the Orlando expansion, roughly 700 that are coming in from MMI Arizona and 500 from Exton and then about 180 for Texas that will also occur.

Okay. And then, how is that disbursed through the year?

I would say that 400 seats from a Sacramento standpoint is what the temporary facility is expected to be able to accommodate, and so we won't take possession of those additional seats until the fourth quarter. We may wind up with a staged construction on that particular facility, where collision and diesel students start in existing constructed building and then we finish that up as we cross over the fiscal year. And we'll just have to look at how construction works for that particular facility.

Orlando and MMI Arizona both are planned for very close to the fourth quarter, very late part of the third, early part of the fourth quarter. Exton is the first quarter of fiscal 2006. And Texas, I believe, is planned for the third quarter.

Okay, thank you very much.

Howard Block, Banc of America Securities.

Thanks, operator. Jennifer and Kim, great job on the quarter and the year. First question actually, just in regards to the Richard question as a follow-up. How dynamic are the proportions that you just mentioned in terms of employers and their share of your graduates?

On the bus and -- so I just said the trucking companies or truck service companies today with U-Haul International, those types, right now, that would be about 6% of our graduates.

Okay, but I meant in terms of like the 53% number. Has that changed a lot over time? Or are these numbers pretty static?

I understand. If you look back several years before we added the OEM partnerships, Howard, you would see the graduates entering the marketplace at very consistent with what the market had. So if for example automotive dealerships account for about 25%, about 25% of our graduates were going to the automotive dealerships. So the point is when we focus on an industry, we can influence students from a recruitment standpoint and from a placement standpoint to drive them to take opportunities or take advantage of the new opportunities. So in the past, the trucking companies or truck service centers were a much higher population of percentage of our graduates as were the independents and we shifted that to the dealers as we started to add more OEMs to meet their needs.

Okay. And then the upward revision that you offered from the Bureau of Labor Statistics, do you have any sense of what drove that?

I think what actually drove the percentage increase is that for some reason between 2002 and 2004 -- and they haven't published all of the statistics so I don't have all of the detail yet -- but the automotive technicians lost (ph) ground of 15,368 and that's employment, not necessarily jobs that total employment. And that was being driven from the independent auto repair shops as well as some other categories that have just been accumulated or added together. The auto dealers actually increased as did some of the self-employed. And then in the auto body repairs, the bus and diesel truck mechanics, the motor cycle and motorboat or marine mechanics, all of those increased in a positive way. But I think the actual percentage increase is because they're starting from a lower base in 2004 than they did from 2002, which to me says the demand is continuing to be strong, it's just there are not as many people working in the field at the beginning or the starting point of how this data has been figured.

Okay. In the past, we've asked you about the average program length and you mentioned it's been trending up and I think it was north of 15 months? Any change to that average enrollment?

We actually picked up about a week and a half on that statistic and so it still is right around 15.5 months, so it's a little over 15.5 months.

Is the growth in the average enrollment or the lengthening of the enrollment period, is that a material contributor to the year-over-year enrollment growth yet?

I think that it's certainly a contributor but it's a small one, I think. I think what really helps us is if you start to see students cross over in the periods of time that they hadn't historically been, then you wind up getting margin improvement during those cycles because you're winding up running a more even flow of students throughout the fiscal year.

Okay, so you don't really sort of track the statistics in terms of saying that we have a -- our 16-month cohort had 50 students a year ago and today it has 200 students or anything along those lines?

We measure how long the program length is and we really look at that more annually than we do on a quarterly basis and take a look at program mix and look at all of those factors. And we are seeing it climb but it's climbing slowly. And certainly I think Ford adds to that as well as we continue to see a maturation of that across our system, adding 15 weeks onto their training. We've got different areas at different campuses at different maturity levels and so I think that builds that side as well.

I do think you'll see some additional -- as we roll out diesel because so many students want to take diesel -- that you will see that impact as well as the diesel program rolls out to some new sites.

And you mentioned you had 500 student capacity in Avondale flex tech. Did you mention how many students were on flex tech?

It's still right around 100. We have had a graduating class and also had an additional start and so they've kind of replaced one another.

Any update in terms of being able to expand that to other campuses?

We are working on that across the country with a number of the state regulatory agencies, and we are continue to bump into barriers with the state regulators and we're proposing different alternatives using the flex tech technology or delivery methodology to see if we can overcome some of their issues, but we have not made great progress there. With that being said, it's something that we believe is critical to not only our future growth from a student standpoint but more so to the employer markets because more and more of them are looking at e-learning as being a key educational and delivery model. So we do believe it needs to be a core competency of ours, whether it's integrated into our curriculum as it exists today or is offered in some variation and we're going to continue to be persistent to get this rolled out to the other sites.

We're also very hopeful with the reauthorization that is scheduled to occur in the later part of 2006, where the proposal today is to potentially eliminate some of the restrictions surrounding this 50-50 rule that's out there between online and on ground. But until that's approved and then the states absorb that, it is a bit of a challenge in certain areas.

Okay. And Jennifer, did you or would you consider offering sort of Q1 and Q2 startup expense guidance?

We really have not provided that in a lot of detail. We've tried to give ranges surrounding what ending-year margins are. We can certainly take that under advisement and consider doing that in an upcoming quarter.

Okay. And then lastly, any update on sort of the UTI light campus, rumors of one perhaps on the outskirts of L.A. or circling. Wondered if you could comment on that.

I would say that the three markets that we've continued to talk about, Virginia, New York and Southern California, are still on the radar screen and we are pursuing those three areas in conjunction with the research project. So it is still a site that we are considering. But I would not expect a new campus in any of those sites until the latter part of '07.

I'm sorry, let me just sneak one last one in. Can you just define cannibalization?

Sure.

In the context of your business, of course.

When you look at a regional campus, such as Arizona, when you rely on a large region to support the enrollment, so we are recruiting students from many different states and cities to fill that campus. When a new campus goes up in a densely populated area, it tends to draw some piece of that student population to the new sites. That has a negative impact on the enrollment at the regional campus; in this case, let's say the Arizona campus. As we look to backfill that, what happens is we go deeper with our marketing and advertising efforts in the surrounding markets that we typically would not have done. So in the case of Arizona, where we expanded Southern California and opened up the Sacramento markets, we have increased the representatives in the regional areas, supporting the new campus locations, as well as increasing advertising in markets that we typically would not have advertised in, such as the Vegas market and in Colorado and New Mexico and Utah, to help drive a stronger regional pull from those campuses. In the past, we didn't need to do that because we had it coming from the California areas.

Got you. So it's really based on your speculation on new student ZIP codes or something that they would have enrolled in a legacy campus if not for a new campus. This isn't actually a body leaving one campus and going to another.

It is not a body leaving one campus and going to another. It's just if you look in historical years, you could say typically the percentages come from this area -- ZIP code is a good example -- that student would have come to Phoenix. And so, therefore, we would have lost or we lost 2 or 300 students from these ZIP codes that are now going to this area. You can also balance it and say look at all the additional students coming from the ZIP codes that we obviously were not able to get from a regional pull, and that's where we think these local campuses in these metropolitan areas make a lot of sense because we can see the additional pickup that you can't get with the regional pull.

Kirsten Edwards, ThinkEquity Partners.

My first question is for Kim. Are there any OEM relationships or contracts up for renewal this year that we should be aware of?

The ones that were up for renewal were the Porsche and then the BMW and then Jaguar was coming up in May. So we have been commenting on all of those. I do not believe that there are others. I think that the Volkswagen, Audi and those start again in 2007. So we did renew a number of them in 2005 and have addressed those coming up in 2006.

Okay, great. And then you mentioned that Sarbanes costs were 1.5 million this year. Can you quantify what portion of that was maybe onetime set up costs and what you expect for next year?

Sure. Most of that relates to infrastructure, honestly, that will continue into the next fiscal year. I do think that we may be able to become more efficient in -- the way that we do that I think is to provide automation in some of our systems. And that will be a key focus I think for SOX for year two. But I don't see a significant amount of those dollars going away for fiscal 2006.

Okay, great. And then can you give me what cash flow from operations was again for the fourth quarter?

Sure. Cash flow from operations -- our net cash flow provided by operating activities was $67.8 million for the fiscal 2005 period. That's for the full year.

And then really quickly, can you talk about any trends you're seeing in television advertising rate, if you're still mitigating any increases by shifting over to the Internet lead generation or presenting new updates on those trends?

I would say that the information really hasn't changed since our last call. We continue just to see the same thing from a television standpoint and that was we had increases in the select market areas, where we are opening new campuses, as well as on some of the cable programs. But it has been offset or at least mitigated to a 5 to 6% increase with the balance coming from the Internet. So, we have shifted a lot of lead flow through the Internet, but the majority of our advertising spend is still on TV.

Avi Fisher (ph), Harris Nesbitt.

Thanks for taking my question. You talked briefly about sales and marketing costs. I was wondering if you could talk about some trends and expectations in the marketing admissions costs going forward and also how they've been looking.

I think that we'll continue to see normal television cost increases as well as print that typically are going to run anywhere from 5 to 15%. And the fact that we have been able to offset those increases with the Internet bringing our total advertising increases within the 5 to 6% range is good. I think that the team -- our internal marketing team has been very creative in how they're handling the Internet marketing activities and have been very resourceful in doing that. While it sometimes creates a different type of lead, I think our sales team has handled this very well and we continue to see strong closing rates. And I'm especially pleased with that given the newness of our sales team, that we continue to see very strong close rates. And I think that's an indication of the quality of lead that's coming through the Internet, and that could be leads that have been generated on the Internet or those that are just being sourced through the Internet because in many ways the Internet has replaced the telephone as the connection source coming from other advertising mediums.

Right. Those increases are 5 to 6%; do you know if that's on a net basis?

On a net basis --?

That the advertising costs are going up 5 to 6%?

In that total category for us, that's what we were experiencing was the 5 to 6% increases from an advertising cost standpoint. If you looked at the specifics around television or print, you're going to see higher increases that have been offset by our Internet advertising and marketing campaign.

And if you could add some clarification, where does that stand as a percent of revenues?

Where does the Internet stand as a percent of revenue?

Just marketing and admissions costs.

Oh. I would say that all costs related to sales and marketing efforts, which would be what we categorize as student acquisition costs is 23% of revenue -- 23 to 24%.

Right.

And that's going up 5 to 6% or just the advertising component?

Just the advertising component.

And could you clarify sort of where that falling number is headed or how it's been trending?

I'd say it's been fluctuating between the 23 and 25% range for the last couple of years, and it just depends on what time of year we are in, where the ramp-up is of our sales teams, etc., relative to revenue. But it's been pretty steady and constant at 23 to 25%, in that range. Would you like to add anything, Jennifer?

The only thing I would add is to say that we are going to continue a significant amount of expansion and so I wouldn't expect to see a lot of leverage coming off of the sales and advertising line. I do think that over time, as we see our sales force mature, that at some point you are going to see that occur. In addition, when you wind up having a much broader geographical reach, you're going to have more brand loyalty and just penetration from that particular side. But I think that's a few years away for us. I think you are going to see the improvement is going to be more on the general administrative side.

Right. So it sort of falls in line with the rest of the group. I just have one final question. If you could just talk about the competitive marketplace for student acquisitions with your big competitors, how that has been trending, how it looks, what the competitive environment looks like.

Well, in listening to I would say all of the competitors and from our own representatives, we are doing very well and they are doing very well. And I think that speaks to the demand on the employment side as well as the student supply side. There is strong interest for what we offer and at this point, I think all of the key players are doing well. The ones that seem to be most impacted are the community colleges and the state or public schools, if you will. Even with budget increases, they still don't have a comparable program to those that the for-profits offer nor can the students get in and out of the programs with very specific training to their potential career. And so, the for-profits continue to have a significant advantage over the community college system. But I think in general, the rest of the players are doing well. That's the reports that we hear from the Street and UTI is too.

Trey Cowan, the Stanford Group.

Hi, I was wondering if I was going to get in. Glad to be here. With respect to, if you look out in adding more capacity each year, can you sort of go into your philosophy of how you -- you talked about some of your sales force being newer. Can you sort of talk about how you -- what's your perspective as to when to add new sales force with respect to your capacity, how that sort of transitions over time? And then specifically, about how many new salespeople do you look to add in '06?

Okay. The opportune time to add field representatives is in the summer, and the field representatives are those that are out working in the high school, so we'll typically have a very large start of new trainees in the summer months and typically we will follow with a subsequent training class sometime in the fall. And that allows us to make certain that we have the newer reps trained in advance of the school season opening, if you will. So that continues to be the primary focus as far as when we hire those field reps. And it used to be that we wouldn't hire them throughout the year. If we turned one over, we wouldn't necessarily replace them. And that philosophy has changed as we've reduced our span of control between management and the number of reps on the ground because we are able to establish a relationship with the regional admissions director and that specific territory in the high school, so it is easier now to replace, should we need to midyear. But again, the majority are hired in the summer and fall.

When you look at the campus reps, and these are the ones that are dealing with the walk-in traffic at the campuses or the adult market via the phone, responding to traditional marketing and advertising, these people are typically hired in advance of the capacity startup, at least I'd say 90 days to 120 days out. As we start to add additional capacity on new campuses, we'll start to add those people. Some will get up to speed six months in advance and then we'll hire the bulk at least 90 days before the new capacity rolls on.

And when we determine capacity, it's driven by the growth rates that we believe that the Company can handle, the requirements that our customers have set forth and the ability to assess the supply and demand equation and how that's to capitalize on I guess the market opportunities.

Okay. So I guess what I hear you saying is, of this 4300 new students, as a majority of it comes on in the latter half of the year, leading up to that time frame, you would also add more campus reps at that point? Is that a good representation?

Yes ,we will continue to add campus reps throughout the year. The majority of the field reps have already been hired and are in place for that new expansion. What would be left to be added would be campus reps towards I would say the third quarter.

Mark Hughes, SunTrust.

Thank you very much. What's the total student count when you take into consideration Ford and Volvo? And then how many in Jaguar specifically?

I would have to check on the Volvo count, Mark, and even Ford for that matter because what I could -- I could give you a couple of statistics. One that have the students who have elected it as part of their program but have not taken it, and then we have a graduating number and I would like to just make certain I give you the same data. So I can pull the number of graduates that have come out of Ford. And out of Jaguar this past year, it was 80. And my guess is Volvo is not much bigger than the Jaguar program.

Right. Relative magnitude, is that Ford -- I think your total graduate revenue is maybe 5 to 6% of the total; is that fair?

I think it's closer to 2.5% of total revenue for Ford.

Okay, right, so Ford --

Five to 6% for the combined MSAST programs.

Right, so it's about half or less than half. Any provision for early withdrawal from that Ford contract?

From Jaguar, you mean?

Ford in general with that program. I know it's not up for renewal but what flexibility do they have to change the contract or to withdraw if they choose?

I'd have to look at the details on it but that one isn't as specific because they are not paying us in the same way that Jaguar is, so they would honor the students that we have contractile agreements to deliver the training. Because Ford is at an elective level, the students are paying for it so it's viewed in a little different way. But, there are provisions inside of all of the agreements. I would just have to pull that specific contract for you to give you the details on it. I just wanted you to know it's a little different then how Jaguar is treated.

And then those students, that Ford revenue is treated as undergraduate revenue, not the broken out MSAT revenue because it's not paid by the employer.

Right. Now the Ford ends up footing the bill for it eventually, don't they?

Well, I would think -- I mean as far as the Jaguar program or the Ford FACT program?

The Ford FACT program.

Ford at a corporate level does not -- the dealers who hire the graduates who choose to reimburse the student's tuition or make their student loan payments, in fact do.

Right. And so when they enroll in the Ford FACT program, the students are paying out of their own pocket for that training?

That is correct.

And it is a title for a funded program.

And then a follow-up question that I -- any changes in policy on retakes? Certainly, the number sounds like it's gone down. Is that something you have implemented or required?

There has not been a change in policy to date as far as the retakes rates go. I can tell you there has been a lot of focus on it with retraining of the instructors and actually really looking at the electrical content, how best to deliver that; helping with tutoring, etc., for the students in a number of different ways at the campuses. But we've not changed the policy. As Jennifer mentioned earlier in the call, it is something that we are looking at for next year but it will take a full year to really implement such a change because of the contract that the students have signed. So we will honor the contracts that we have with these students and those contracts allow for two free retakes. But in time, we would like to change it to the one free retake that will mirror what we do at the MMI campuses. It will just take us a good year to see that policy change.

The outlook for margin declines in the first three quarters, that was before equity comp; is that right?

That is correct.

Michael Lasser, Lehman Brothers.

Just real quickly, could you comment on your history of relationships with OEMs and have there been others nonrenewed like Jaguar? Thank you.

This has been the first contract that has not been renewed with motorcycle and automotive manufacturers, and some of the motorcycle relationships go back to the early '80s. And the oldest automotive relationship started in I think '95 or '96, yes, '95 with BMW. And we have had numerous renewals with these OEMs and Jaguar is the first to not renew. And again, I think it's a reflection of the difficulties that Jaguar is facing given the market conditions.

Richard Close, Jefferies & Co.

Just really quickly, on the tax rate, what do you envision that being again in fiscal 2006, just to be clear?

Thirty-eight to 40% is what we are expecting. It was a bit lower in 2005, primarily because of the tax incentives that we got for purchasing our Boston facility.

Ms. McWaters, there are no further questions at this time. Please continue.

I would just like to thank everyone for participating on the call and wish everyone a very happy holiday season and we look forward to seeing you next year.

Ladies and gentlemen, this concludes the Universal Technical Institute Inc.'s fourth-quarter and fiscal year end 2005 conference call. Thank you again for your participation. You may now disconnect.