And welcome to the Career Education Corporation First Quarter 2013 Earnings Conference Call. My name is Vanessa, and I will be your operator for today's call. [Operator Instructions] Please note that this conference is being recorded. And I will now turn the call over to Matt Tschanz. You may begin.

Thank you, Vanessa. Good morning, everyone, and thank you for joining us on our first quarter 2013 earnings call. With me on the call this morning are Scott Steffey, our President and Chief Executive Officer; and Colleen O'Sullivan, our Senior Vice President and Chief Financial Officer. Following remarks made by management, the call will be open for analysts and investor 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 department at (847) 585-3899. Before I turn the call over to Scott, let me remind you that yesterday's press release and remarks made today by our executives may include forward-looking statements as defined in Section 21E of the Securities 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 to those factors identified in our annual report on Form 10-K for the year ended December 31, 2012, 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 risk factors or to publicly announce the results of any of these forward-looking statements to reflect future events, developments or changed circumstances or for any other reason. In addition, the remarks today may refer to non-GAAP financial measures, which are intended to supplement, but not substitute, for the most directly comparable GAAP measures. Our press release, which contains financial and other quantitative information to be discussed today is available within the Investor Relations section of our website at careered.com. Now let me turn the call over to Scott Steffey.

Thanks, Matt. Good morning, and thank you for joining us. I'm pleased to be participating in my first quarterly earnings call as President and Chief Executive Officer of Career Education. Today, I would like to share with you some thoughts on 4 topics that are core to our business. First, from a macro perspective, where I see both our sector and Career Education. Second, I would like to offer some early observations on what I believe are the company's key ingredients and tools for success. Third, I will discuss some highlights and trends from Q1. Fourth, and finally, I will provide an update on our rightsizing and reengineering efforts. Following my comments, Colleen O'Sullivan, Senior Vice President, Chief Financial Officer, will provide additional detail and color on first quarter results. We will then be happy to take your questions. First, let me say that it's both a privilege and a great opportunity to lead this company at such a pivotal time for Career Education and the entire private sector education industry. I've been fortunate over the past 2 decades to be directly engaged in the national dialogue on education, while serving diverse leadership roles across the sector. I had the opportunity to serve as Vice Chancellor for the State University of New York at a time when SUNY was the largest unified postsecondary system in the United States. Later, I served as Executive Vice President and Chief Operating Officer at Strayer Education during a period of extraordinary academic and institutional growth. Throughout the course of my career, I have also counseled and partnered with both nonprofit and private sector educators, as well as with individuals and institutions seeking to invest in higher education. I have a sense of urgency in addressing the challenges and opportunities that lie ahead, and I…

Thanks, Scott. Good morning, everyone. Let me first start by reminding you of a few items included in the press release and the Form 10-Q we issued last night. In the first quarter, we recognized a $6.7 million or $0.10 per share loss related to the pending sale of our AIU institution in London, England. And in the first quarter of last year, we received $19 million or $0.18 per share of proceeds from the settlement of certain insurance contracts. Excluding these items, loss per share for the quarter is $0.13 as compared to earnings per share of $0.60 in the first quarter of 2012. In addition, during the quarter, we completed the teach-out of SBC Hazelwood, which had been reported in our Transitional segment. The results of operations for SBC Hazelwood are now reported in discontinued operations. We have included recasted quarterly information for 2012 in the press release, so you can update your models accordingly. Now let me provide an overview of financial performance for the quarter. Revenue was $340 million, a decrease of 21% versus the prior year. Operating loss was $18 million, driven by declining enrollments across our domestic institutions. Overall, new student starts, excluding Transitional, were down 18% from last year, while student population declined 16% versus the first quarter of 2012. Turning to the financial results by operating segment. First, the University Education Group, which includes our predominantly-online institutions, American InterContinental University and Colorado Technical University. As Scott shared, there remains a large and growing need for postsecondary education in this country. However, the current state of the economy and uncertainty surrounding job prospects continues to impact many students' decision to return to school. In the first quarter, new student starts declined 31% and 20% in AIU and CTU, respectively. While these operating metrics…

[Operator Instructions] Our first question comes from Jeff Silber with BMO Capital Markets.

Scott, you and Colleen talked about some of the potential changes, and I know it's still early. But it seems like most of the focus, at least in terms of the reengineering, is in the back office. Do you envision any changes, I guess, more on the student-facing side? Are students going to see anything that's going on with these impacts?

Some of it is on that side. Yes, we're doing some different things with admission officers in our Career Schools. We're also doing some different things with -- we've already implemented some things on the University side with regards to student interface with people managing them through the 21-day period. And so, yes, there will be some things that impact the student-facing side, but more of it is happening on the back-office side, you're right on that.

Okay. And just so I have the numbers correct. So the changes that you announced last year would have saved the company about $45 million to $50 million in operating expenses on a run rate. These new changes give you another $25 million. And should we just add that $25 million on top of the $45 million, $50 million to see, on an annualized basis, what all the changes might impact?

The $25 million is an addition to the $45 million, yes. The $25 million though isn't the annual run rate. The $25 million, most of that is going to be realized from actions taken in the third and fourth quarter. We've already taken some actions in the first quarter, and we have some teed up for the second that will go into that total $25 million, but the majority of that is Q3 and Q4.

Okay. So on an annualized basis -- I'm sorry if I'm confused, at the end of the day, when we get all these changes done, what kind of savings are we talking about?

For 2014, it's going to be a multiple of the $25 million.

Okay. All right. That's fair.

Because you're seeing most of the expenses' taking out that will result in the $25 million will happen in the third and fourth quarter.

Okay, great. Then just a couple of other numbers question. Were there any onetime items beside the ones that you called out on the loss of the sale of the London facility? Any other onetime items that occurred in the quarter that we need to be aware of?

Jeff, this is Colleen. No other significant onetime items in the quarter, as it impacts pretax income. As disclosed in our 10-Q, we did have one discrete item in the quarter in our tax rate. So that showed some profit -- some benefit -- increased benefit in our income tax rate.

And what kind of tax rate should we expect for the rest of the year?

You should see probably not so significantly different than what we've experienced this quarter. I think it's probably about a 200 basis point impact of the discrete item in Q1.

And I'm sorry, was that a positive or negative impact?

Positive impact.

Okay, great. And then your budget for capital spending for 2013?

We continue to be in the 3% to 4% range as far as capital expenditure expectations for the full year.

All right, great. And one final one. I'll jump back in the queue. What do you think the minimum cash balance you need is to run the business?

At this point, we haven't pinpointed a number. I think as both Scott and my comments have covered, we're, obviously, very focused on ensuring that we have liquidity in the company. And at this point, feel comfortable as we look out the next 12 months.

Yes, Jeff, we watch the liquidity of the company very, very closely, and we're monitoring it very well. We feel comfortable that we have -- we're moving in all of the right directions to have the liquidity we need at the end of the year to ensure that we have a positive 2014.

Our next question comes from Trace Urdan with Wells Fargo.

I was curious, first of all, about CTU and AIU, and whether, Scott, you've sort of endorsed the strategy that had been already announced in terms of bringing CTU kind of up market and making AIU a lower cost option for students. And if that's the case, what steps have you taken on the student-facing side to communicate those changes to the market?

We're still in the beginning stages of differentiating those brands. There's a lot of work that has taken place that hasn't been brought to market yet. There's a lot of research messaging, a variety of other things that have happened. We'll start to see the impact of that in -- a little bit in the second quarter, but more in the third quarter of this year, where we'll be in sort of full mode with implementing a lot of the differentiating factors between those 2 entities. And we'll start to get a clearer idea of the traction that we'll be able to generate on that. But we definitely have some progress to make there. AIU is a great example from the standpoint of how well we're communicating, what the all-in price is of that institution relative to other competitors and who have maybe a lower tuition price, but when you add up all the fees, et cetera, time involved to a degree and so forth, are actually higher-cost options. So we still have a good ways to go in terms of how we're interfacing with our students and explaining the value proposition of both of those entities to fully evaluate how well we're differentiating those brands.

So when you describe implementing differentiated factors, are you speaking primarily of that student communication? And are we talking about just at the admissions officer level? Are we also talking about kind of marketing and advertising messages in the market?

Both, both.

Okay. Colleen, in the international, you mentioned there was one additional start in the quarter. Does that come at the expense of a different quarter during the year that we should be paying attention to?

No, it's a net add. Some new programs were introduced at the first quarter of this year at some of the institutions within our INSEEC Group.

Okay, very good. And then the last question I had was the adaptive learning changes that have been taking place, I'm wondering if that -- is that just a change in technique, or are you actually looking at the potential of reducing the amount of time it takes to complete a degree? And if the latter is the case, I'm wondering sort of how far HLC has been brought into the changes that you're making here? Is it something they had to approve ahead of time? Or is that not required here?

It's not required. It has nothing to do with the time involved in a degree. It is a -- it is both a technology, as well as a teaching methodology that gets into understanding what the core talents and knowledge base is of a student and teaching to their strengths as well as quantifying their weaknesses as to how you deliver the course content. And the results of that has been very promising. We've seen some very positive results, both from a survey standpoint -- I think the last briefing I got on that, I think 95% of our faculty and an overwhelming -- a similar number with regards to our students, were very positively impacted by their experience with adaptive learning, and it's showed some very positive results in terms of its impact on retention as well, so we're very excited about it.

And our next question comes from Bob Craig with Stifel, Nicolaus. Robert L. Craig - Stifel, Nicolaus & Co., Inc., Research Division: Scott, congratulations on your appointment.

Thanks, Bob. Robert L. Craig - Stifel, Nicolaus & Co., Inc., Research Division: If this question's been asked, I apologize. I was temporarily disconnected. But just expanding on Trace's question, I was wondering, Scott, if you could share your views on the pricing levels or pricing strategy of the organization, all in. You take a look across the various assets, are they -- are the programs adequately positioned in the market pricing-wise?

For right now, yes. Looking at our value proposition on a going-forward basis is something that everybody in the industry is having to do. And us, being in the right position for explaining the value proposition to a student is an important challenge for us just like it is everyone else. But from the standpoint of looking through this year, yes, for where we're trying to manage the company this year and into 2014, I'm comfortable with our pricing level. Robert L. Craig - Stifel, Nicolaus & Co., Inc., Research Division: Okay. And again, Colleen, if this has been asked, I apologize. But last quarter, you indicated that total population up 2% is the expectation. You did not say that this time around. Has that changed?

I did not say it, you're correct. At this point, we -- just to clarify, we said, I think, down 2%. And so we are comfortable with that being sort of in the range at this point in time.

We're in line with that right now.

And our final question comes from Corey Greendale with First Analysis.

This is actually David Warner for Corey. I was wondering if you could talk a little bit more in depth about your plans for brand consolidation -- whether, I guess, you endorse the previous statements around brands? How many that could actually come down to and sort of the timetable around that, or ...

In terms of brand consolidation on the Career College side, I'm not ready to go into detail of that right now. It's something that is of great importance to me as we start getting into our reengineering and repositioning efforts with the career college side. That's probably something I'll be in a better position to speak directly to in a couple of quarters.

Okay. And does it appear at this point that you may be able to close some of the Transitional campuses earlier than previously expected by maybe moving those students online or anything? Or, are those still closing according to your internal plan?

They're right on track with our internal plans. We are very aggressive in looking at a variety of different options we can realize to work ahead of our internal plan, online being part of it, as well as other things that we're exploring. The positive there is it is a large economic commitment, and it's performing very, very well.

Okay. And one final follow up. The $25 million of incremental savings you've mentioned, is any of that coming out of the Transitional segment?

No, it is not.

No.

And that was our final question. I will now turn the call back over to Scott Steffey, President and Chief Executive Officer, for final comments.

Yes. If any of you have any additional questions, please feel free to call our Investor Relations with any of those things. Otherwise, I look forward to speaking with you next quarter. Thanks very much.

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