Good day, ladies and gentlemen and welcome to the Q4 2012 Lincoln Educational Services Earnings Conference Call. My name is Andrew, and I will be your operator for today. [Operator Instructions] As a reminder, this call is being recorded for replay purposes. I would like to turn the call over to Mr. Shaun McAlmont, President and Chief Executive Officer. Please proceed, sir.

Thanks, Andrew, and good morning, everyone. Joining me in the room today is Cesar Ribeiro, our Chief Financial Officer. Let me begin this morning by reading the Safe Harbor statement under the Private Securities Litigation Reform Act of 1995. Statements in this presentation concerning Lincoln Educational Services Corporation's future prospects are forward-looking statements that involve risks and uncertainties. There can be no assurance that future results will be achieved, and actual results may differ materially from forecasts, estimates and summary information contained in this earnings release. Important factors that could cause actual results to differ materially are included, but not limited to, those listed in Lincoln's annual report on Form 10-K for the year ended December 31, 2011, and other periodic reports filed with the SEC. All forward-looking statements are qualified in their entirety by this cautionary statement. This morning, I'll provide an overview of our company's operations, and Cesar will review our fourth quarter and full year financial results and also provide our outlook for the first quarter and full year of 2013. We'll then take your questions. As stated in our press release this morning, we believe that 2012 was the trough in the 2-year down cycle of our company, as we continue to strategically refocus the company on our skill training programs. We managed this retrenchment while also accomplishing improvements in our key student outcomes of job placement and persistence rates and maintaining an exemplary regulatory compliance record. Also from a financial point of view, excluding the non-charge -- noncash impairment charges from prior acquisitions, we remained profitable and generated positive cash flow for the year. Our student starts from continuing operations are stabilizing and will add an increase in certificate starts, positioning us well for 2013 as a more focused company. During 2013, we intend to…

Thank you, Shaun. Good morning, everyone. As we've disclosed in our press release earlier this morning, and as Shaun stated in his prepared remarks, our fourth quarter operational results reflect the seasonality inherent in our business and reflects the ceasing of operations at 7 of our campuses, which have been reflected as discontinued operations in the schedules and the press release released earlier this morning. My prepared remarks will thus focus only on continuing operations. Revenue for the fourth quarter of 2012 was negatively impacted by us commencing the fourth quarter with approximately 2,900 fewer students than we had on October 1, 2011. This lower in carry -- this lower carry-in population resulted in a decrease in revenue for the fourth quarter of 2012 of approximately $9.3 million, or a 13% decrease as compared to the fourth quarter of 2011. Other key highlights for the fourth quarter include: During the fourth quarter, we incurred a noncash impairment charge of goodwill and long-lived assets of $19.7 million or a loss of $0.71 per common share. Our operating margin decreased to a negative 9.9% for the fourth quarter of 2012. Excluding the noncash charge described above, our operating margin for the fourth quarter of 2012 was 9.3%, down from 12.5% operating margin in the fourth quarter of 2011. As stated above, the decrease in operating margin is a result of a decrease in our average population for the fourth quarter of approximately 13.5%. This decrease in average population resulted in our capacity utilization decreasing to 38% for the fourth quarter of 2012 from 43% in the fourth quarter of 2011. Loss per diluted share was $0.40 for the fourth quarter of 2012 compared to earnings per share of $0.33 for the fourth quarter of 2011. Excluding the noncash impairment charge described above,…

[Operator Instructions] The first question comes from Jeff Silber, BMO Capital Markets.

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

Yes. Thanks for the question, Jeff. If I go back a little ways, remember, we started our start declines probably a little earlier than the sector, because we made early changes based on the population of ATB students that we had. And so we cycled through some of those declines pretty aggressively a couple of years ago. We're to a point now where we're squarely focused on becoming skilled training leader. I mean, all of our actions are focused on this particular goal. Now what that does is it results in some discontinued operations and programs. So as we looked at Q4 spending, we realized that we couldn't buy enough advertising to really impact the loss of ATB and online starts from prior year. Additionally, Jeff, we had probably 600 GED students in classes that didn't test before the end of the year. So as we looked at the fourth quarter, I mean, it was probably a little more of decline than we anticipated because of those factors. But on a positive note, which we haven't talked about a lot, we've had an increasing number of certificate starts. There are probably about 225 in the fourth quarter, we expect over 400 in the first quarter of 2013, and we expect that number to increase marginally over time. As we look forward, the Q2 comps are still going to be challenged because of ATBs, et cetera. As you mentioned, we lapped some of the ATB and online declines in Q3. But the opportunity for growth comes from a couple of areas in particular. Number one, our high school program. We are ahead in terms of leads generated in the high schools and numbers of students enrolled for the third quarter -- third and fourth quarters. The number of students that are…

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

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

Right. And what tax rates should we be using for modeling?

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

And your next question comes from David Chu, Bank of America Merrill Lynch.

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

That's from continuing operations perspective.

Okay. Can you help us, for modeling purpose, give -- for modeling purposes, give us the starts and average enrollment for 1Q through 3Q 2012 excluding the campus closures?

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

Both, please.

Starts for Q1 2012 were 5,635. Q2 -- I'm sorry, 5,328 for Q1 2012, 4,731 for Q2 and 7,036 for Q3.

And sorry, that was average enrollment or starts?

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

Can we get average enrollment as well?

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

And lastly, revenue?

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

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

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

Your next question comes from Trace Urdan, Wells Fargo Securities.

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

That are affecting revenue per student. So obviously...

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

Well, the -- we have restructured certain of our programs in late 2011 and 2012. Basically, what we did is we took existing programs and kept the same number of hours, but shortened the delivery time. And what that did is it accelerated revenue for those students. So that will now be lapping, so that will not be recurring. So really what we have left is really tuition increases. And then the only other variable is the type of programs our students enroll in. So if it's, say, an automotive program versus a medical assistant program, there's more revenue per student on those programs. And as we expect our high school to be up in the second half of the year, that would lead you to believe that there will be more students being enrolled in higher-cost programs.

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

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

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

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

[Operator Instructions] Your next question comes from Jeff Mueler of Baird. Jeffrey P. Meuler - Robert W. Baird & Co. Incorporated, Research Division: Shaun, you talked obviously a lot about strategy and what the organization is going to look like. And as a part of that, you've laid out these 4 different models that are currently effectively operating within the organization. You also mentioned, I think, it's 48, or something like that, current total campuses and said that those are under continual reassessment. As you think about what this organization looks like over the next 2 to 3 years, how many of those exiting campuses get restructured into one of the 4 models that you laid out and how expensive of a process is that? How many more, do you think, would be potential closures? Just how you're thinking about kind of leveraging those 4 successful campus models?

Yes, let me kick it off, Jeff, and then I'll turn it over to Cesar for some more detail. But we're constantly assessing the validity of our schools, especially in this new environment. So as we sit today, we've got 43 operating units and we feel that they're all operating the way we'd like them to operate today. As we look forward 2 to 3 years, those 4 operating models that I described are really the goal that we're trying to achieve. Now the good news for us is that we're not very far off in many of our existing campuses. So we see minor adjustments. We see some facility repair and some honing of curriculum along the way and always assessing our leadership. In addition to that, the local role of how that campus sits in terms of PR and government relations is a new area of focus for us. And that factors into this -- the new foundation for these models. And then the last thing I'll talk about is are partnerships. The campus operates as it does. But we found that the stronger the partnership -- whether it's with a vendor, whether it's with an association that's related to the curriculum offer there, or an employer, a future employer of students or current employer, those partnerships are meaningful. They add validity to the schools and their local markets and also nationally. And so if you think about it, all of the improvements that we'll make to achieve those 4 models are -- they're quality-based, they're curricular-based and some facility improvement, but none are going to be a heavy burden on the company from a financial perspective. Cesar?

Yes, I agree. I think what we're looking at as the greatest opportunity is, as I stated, our capacity utilization is 38%. We have a lot of copies to increase capacity utilization. And one of the ways we look to do that is through partnerships with industry. And so we have begun a concentrated effort in the latter part of 2012 and continuing this year with a dedicated team to focus on partnerships with industry. And so, I think, we will be able to, over time, start to fill up some of that capacity, whether it be us training industry or with referrals from industry. But that's really -- the model we're focused on is skilled trades with industry partnerships. And that's where we hope to go. Jeffrey P. Meuler - Robert W. Baird & Co. Incorporated, Research Division: Okay. And then just a follow-up on your question or your statement that, in your view, the main issue at this point is affordability. If you can just expand on that? Is it -- I'm assuming you're not saying that you don't you think the value proposition is there given that you do have the good student outcomes that you highlighted. So on the affordability side, is it because of the increased cash component from when you restructured some of the programs? Is it just a sticker shock issue relative to what a community college costs? Can you just expand on that comment?

I'll start again on this one, Jeff. I think that what we've seen over time is that the demand characteristics remain strong. So students continue to inquire about our programs. They come in to see the facility. And there is a demand in the program areas that we feel are within our wheelhouse. And so from a demand perspective, we feel very good about the current and future prospects. As the student gets in and starts looking at their financing, I think what we've seen is there's a close correlation to consumer confidence. So as consumer confidence has been down, people stop spending in lots of areas. Affordability to us is not necessarily a sticker shock in terms of a $15,000 program or a $20,000 program, it's in what is the consumer willing to pay on a monthly basis if they go to school. That's the more real affordability issue that we see today. And there are just fewer people than 5 years ago who are willing to pay to $200 to $300 to $400 per month to go to school. We think the demand is still there. We think that as people understand that they've got to go back for retraining to better their life, they will make the decision to pay. It's just a longer process, a longer decision-making progress process, and one that we feel will come back as consumer confidence continues to tick back up. Cesar?

No, I mean, I think you basically said it. I think it's -- we find that in this economic environment, parents are having a difficult time being approved for PLUS Loans. We do have quite a bit of dependent students, then if the parents aren't qualified to get a PLUS loan, obviously, that financial gap becomes a much bigger burden. And then the monthly payments are just bridging the gap, becomes too much of an obstacle for a lot of students. So it's affordability and parents being able to obtain loans, and then, more so, their willingness to take on additional debt during this time until they feel that consumer confidence or at least their confidence is back on track. Jeffrey P. Meuler - Robert W. Baird & Co. Incorporated, Research Division: Okay. And then just finally, barring any future decisions around campuses, have all of the adjustments in terms of moving things into disco ops been made at this point, you were kind to give us the numbers. But just wondering, if those numbers may change as additional things could get moved into disco ops as school closures are completed, or something like that, as the year unfolds?

Well obviously, we announced 7 campuses back on July 1. Those 7 campus completely ceased operations by December 31, and they're all reflected as continued ops in the schedules that we provided to you this morning and they'll be reflected in our 10-K. To the extent, as Shaun said, we continue to evaluate all of our schools based on the projections that we have and based on the current economic environment and rules that continue to come down from the department, et cetera. If we determine that schools are no longer viable, then we will shut down additional schools and then those schools, at that time when all operations have been seized, will also be placed in discontinued ops. But as far as the ones that we've announced, they've all been reflected as discontinued ops as of December 31.

And I would now like to turn the call over to Shaun for closing remarks.

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

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