Good afternoon, ladies and gentlemen, and welcome to the Universal Technical Institute, Inc. second quarter fiscal 2008 conference call. (Operator Instructions) At this time I would like to turn the conference over to Jenny Swanson, Director of Investor Relations of Universal Technical Institute. Please go ahead.

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 our second quarter ended March 31, 2008 and then open the call up for your questions. The company's earnings release was issued after the market closed today and is available on UTI's website at www.UTI.edu. 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. I'll refer you to today's news release for UTI's comments on that topic. The safe harbor statement in this release, which I will not repeat here in the interest of time, also applies to all statements made during this conference call. Information in this conference call, including the initial statements by management as well as answers to questions related in any way to any projection or forward-looking statement are subject to this safe harbor statement. We have updated our historical business statistics for those who have asked for our company's trend information. We have posted a slide presentation on our website under the Investor Relations section to provide greater transparency on key operating statistics. At this time I would like to turn the call over to Kim McWaters, Chief Executive Officer. Kim?

Thank you, Jenny. Good afternoon, ladies and gentlemen. Thank you for joining us to review our second quarter results. On today's call I'll provide a high level overview of the quarter and share the progress we're making on key initiatives. Eugene Putnam, our interim CFO, will follow with a more detailed review of our financial results and an update on the lending environment before opening the call up for your questions. Before I summarize our results for the quarter let me preface my comments with the fact that the financial and business results reflected in the first half of fiscal 2008 are largely driven by an insufficient number of student contracts and starts during prior quarters. Due to the length of our business cycle, the quarter does not fully reflect the progress made in terms of lead generation, student recruitment and show rate improvement. Our net revenues for the second quarter were $88.2 million, down 3.8% from the prior year, primarily due to the decline in average undergraduate student enrollment. Net income for the second quarter was $1.9 million as compared to net income of $6.1 million for the same quarter a year ago. The decline in our operating performance in the quarter as compared to the prior year was due to decreased revenue as well as higher contract services costs, occupancy costs, advertising expense and bad debt expense, partially offset by lower compensation costs. These factors contributed to diluted earnings per share of $0.07 for the second quarter of 2008 compared to diluted earnings per share of $0.22 a year ago. Average undergraduate enrollment for the second quarter of 2008 was 15,092 compared to 16,389 a year ago, a decrease of 7.9%. This contributed to a year-over-year decrease in our capacity utilization rates from 65% to 60%. During the…

Thanks, Kim. Let me start with the income statement. Net revenues for the second quarter were down 3.8% versus the prior year. This decrease was primarily driven by a decline in average undergraduate student enrollments of 1,297 students, a decline of 7.9% from last year. That decline was partially offset by higher average tuition revenue per student of 4.5%. Both operating and net income margins for the quarter remained under pressure due to these lower revenues as well as increases in specific expense line items, specifically contract services occupancy costs, advertising and bad debt expense. For the quarter, compensation costs decreased $2.5 million to $44.3 million. This decline is primarily related to aligning our cost structure with our existing student population and maintaining an expense discipline during this challenging environment. Contract services in the same period increased $1.9 million for the quarter to $3.3 million. This is primarily related to outsourcing the front-end financial aid process as well as contract employees that we've used to fill open positions and some consultants that we've used to provide additional marketing and advertising research and creative materials as we continue to invest in our national advertising campaign that Kim discussed. Occupancy costs for the quarter were $9.3 million, up from $7.4 million for the second quarter of last year. This increase in costs was primarily related to the previously announced sales and leaseback of our Sacramento and Norwood facilities. Advertising expense increased $1.2 million for the quarter from $7.3 to $8.5 million, and it was primarily due to the additional investments in advertising in response to the positive results we've been seeing on our new national advertising campaign as well as our redesigned website. And as Kim mentioned, these expenses are investments in our core business intended to drive higher levels of contracts,…

Thanks, Eugene. In closing, I see the quarter as a mix of financial disappointment as well as signs of promise. Traditionally I've been as candid and as transparent as possible about our business and the challenges we face, and at the same time have spoken with cautious optimism when warranted. This call is no different, nor is my approach. Despite the financial results of the quarter, there is simply more to be optimistic about than I have seen in several years. Our initiatives are working, our execution is improving, and we are building momentum. We are a solid company and a quality brand. We remain industry's choice as the leading provider of auto, diesel, collision repair, motorcycle and marine technicians. And with that, we're happy to take your questions.

Thank you. (Operator Instructions) Your first question comes from Robert Craig - Stifel Nicolaus & Company, Inc. Robert Craig - Stifel Nicolaus & Company, Inc.: Kim, I apologize. You threw out an awful lot of numbers there. Could I just get a read on contracts written during the quarter and/or if you'd like to update us on where you stand in contracts written quarter-to-date so far in 3Q?

So for both Campus and Field sales combined, I said that we started the quarter down 15% and ended down 6.1%. For April we're up 19%. Robert Craig - Stifel Nicolaus & Company, Inc.: And as a follow up, could you give us some idea as to your plans and advertising spend as a percent of revenue for the balance of the year?

Well, it was in the 9% range this quarter, and I would expect it could go up another point or two if we continue to see the results that we're seeing currently. If we continue to see efficiencies on our national campaign, we may have an opportunity to reduce it, but I do think it's important to support the local market effort given our push to drive quick starts that typically originate from a 50mile radius around the campuses.

Your next question comes from Mark Marostica - Piper Jaffray.

I wanted to ask, Kim, in regards to your comment on building your admissions team as one of the key drivers here, how many reps do you currently have now and how many are you going to add in [break in audio] half of the year?

Well, we have about 159, I think, on the Field side, and we're contemplating adding maybe 10 to 15, you know, over the next six to seven months. We have about 99 Campus or close to 100 Campus, and that we could add, I don't know, up to 115 depending on how the lead flow continues. But based on what we're seeing now, I don't think that those numbers are unrealistic by the end of the fiscal year.

And how long does it take typically for a new rep to ramp up to optimal level of productivity [and] conversion rates?

Well, they're typically different. On the Campus side, those are the ones that are focused on the young adults and are located at the campuses, we can see a couple months before they get to the same productivity levels. I can tell you of the rookie class that has been trained this year, they are already producing at the average of the rest of the Campus Admissions team. So that's much faster than the Field or Military organization, because that typically takes six to nine months before you actually see the same productivity levels, especially because they have a longer lead time from enrolled to start.

Eugene, you mentioned that Q4 would see an improvement in population, and I just want to clarify that. Are you referring to a sequential improvement around Q3 versus Q2 in population?

Yes, I am. I'm referring to a sequential - I think exactly what I said was I expect to see student enrollments decline from the ending second quarter level in the third quarter, and then grow in the fourth quarter as we have seasonal stronger starts. But on a year-over-year basis, I don't expect to see year-over-year student growth until some point in 2009.

Your next question comes from [Evan Doherty] - Banc of America Securities.

I just wanted to see if you could just comment on the average revenue per student? That's come in a little higher than we were expecting now for the second quarter in a row. Maybe just what's driving that and then how shall we think about that going forward given the April price increases?

Well, as you know, the average was about $5,800 per student. That is up about 4.5%. We have a fairly long lead time, as I talked about, so one of the factors that is impacting it is even though we just had a tuition increase in April and did not have one last October, what we're seeing is the benefit of increases that were made last year because a student's tuition is locked in at the time he or she signs a contract. So part of the improvement is stemming from last spring's increases, part of it is coming from a mix shift to taking more electives, which are more expensive for our students, and part of it is coming from what we call rephase revenue, although that is fairly insignificant. It's really a combination of the first two things I'm talking about, just general tuition increases, that's really impacting it.

And then as a follow up, you had mentioned some comments on the higher Stafford loan limits; do you see that as an opportunity to get pricing later down the road?

Yes, we do, and plan on a fall increase of traditional norms between 2.5% to 4%, depending on the campus and geography.

Would you expect that to be closer to that higher end of the range, given the increases?

Yes, I'd say that you could see it higher than the typical 2.5% at some locations. Some in the more, I'd say, depressed socioeconomic regions, we would probably keep it lower, but yes, more towards the high end.

Your next question comes from Gary Bisbee - Lehman Brothers.

I wondered if you could just give us some sense, you know, order of magnitude, how you'd think about the drivers of some of the better metrics, an improvement in the metrics you talked about, between the new marketing campaign, maybe any benefit from weakening job market, and then just other things that you've been working on for longer than just the new marketing campaign, like training your reps, reorganizing the reps, etc., etc.

Yes. Inside of 2007, we had a lot of efforts around research and learning, and then started to put some of those initiatives with respect to our advertising, our lead generation efforts, as well as structural changes with the sales organization, process improvement, training and development of staff and leadership, and also did it in the areas of financial aid and future student services. So in those key, critical functions in the front end of our business we have invested more than 12 months' worth of effort to turn it around, whether it was incremental improvement or a total reinvention of processes where warranted. And in January we started to see the benefits of those across the spectrum. We had commented on certain improvements that kind of seemed to ebb and flow depending on the quarter, but January we started to see the momentum build, and then certainly March and April, from all fronts - lead generation, admissions or student recruitment, and show rate improvement - was, you know, significantly different. So we do believe that the initiatives are starting to pay off. The macro environment is certainly contributing in some way. It's difficult for me to quantify that, but I do know that our people on the fronts lines are commenting on the fact that the job market is drying up is driving some students to interact and to close the enrollment process sooner than they have in the past. And then we have campuses where we're not seeing it at all yet because the economy is strong in that local area. So it depends on the campus and the geography, but overall I'd say improved execution, sound initiatives, as well as the macro environment is starting to benefit us.

Should we be thinking about a material level of cost here over the next six months in terms of you getting up and running your own lending program? I know you're not ready to give a lot of details, but are you spending money on that or is it going to be reasonably immaterial?

It's the latter. It's going to be reasonably immaterial. The general plan is to outsource the vast majority of it. Obviously, there'll be a person or two here that - FTE that will be involved. We will clearly have some startup costs from a technology standpoint in getting systems ready, but I would put those in the immaterial category. We're certainly talking well under $1 million in total to be up and running.

You mentioned that you've got, I believe it was in the 80% somewhere of the starts from the second half of last year already contracted for the second half of this year. How confident are you in those? It sounds like the show rate's getting a little better, but I think last year that number fell apart somewhat as we got towards the end of it so I'm trying to gauge comfort level, confidence in the continued progress with the show rate and actually getting those kids in school.

Yeah, let me clarify. The number was 88%, and what the 88% really was was the percentage of contracts that are already written on our books right now versus what we think we need to have for the remainder of the year, okay? So that's kind of the inventory that we're playing with. And your follow-up question as far as show rates, I think what Kim talked about is one, we've seen, yes, it did fall apart late last year, but we've seen improvement on a year-over-year basis both in the first and second quarter, so that gives us some level of confidence that some of the things we're doing are taking hold. The items that Kim talked about as far as training and investment in both the front-end systems, the sales process, the financial aid systems are all taking hold, so that's a second thing that gives us a little bit more confidence and optimism about show rate. And the third thing is at this point versus last year, we not only have a higher percentage of our contracts written but a higher percentage of them are also campus leads, which tend to both start sooner and at a higher rate. So those are all factors that, you know, while we're not going to say our show rate's going to improve, it all gives us, you know, guarded optimism that our show rate will continue to improve and certainly improve over the second half of last year.

Your next question comes from Corey Greendale - First Analysis Corp.

It sounds like there would be a pretty nice benefit to you in terms of the student financing from the passage of the bill, for the bill getting signed. Any concern that you'd start to bump up against 90-10 limits if it does go through?

At this point, based on our analysis, we're not concerned that it's going to bump up against 90-10, certainly not in this year and the next year. So we'll continue to evaluate that, but it's not a concern given the gap that our students face today.

And Kim, I wanted to follow up on a comment that you'd made. I think you said something about local advertising not being or local marketing not being as efficient as national marketing, and I believe that the show rate tends to be higher for people who are local to a campus, so can you just elaborate on that? And when you factor in the show rate, is the cost per start still lower for locally based people as opposed to national?

The cost per start for local based people is definitely lower than those coming beyond the 50, 100-mile radius. In terms of the efficiencies that I was speaking to on the local advertising basis, that is strictly speaking to a cost per lead. So when we report on the cost per lead, you'll initially see that increase because of the local efforts. So the leads may cost us more, but the more we can get from that local population, the higher the show rate and the better off it is for that campus and the business overall. What we are still trying to crack the code on is the right balance in some of these local markets. Because even though we are investing in a national advertising campaign that is building efficiencies and momentum, you do have those programs airing in a local market. What I'm talking about specifically, inside of this quarter we also advertised on local broadcast stations or independent stations as well as radio to drive traffic to campus events, etc. And finding the right balance based on the quarter and what events are running at the campuses is something that I think we're still figuring out. Clearly, what is most efficient from a cost per lead standpoint is a nationally generated lead coming from the local area. But if we can augment with local broadcast advertising and radio to support events, we're going to do it. So some quarters we might see that higher, especially during the springtime or when we're having our midyear meetings, to get people to the site because we do know that there's a strong correlation with those students who actually tour and visit a UTI campus and then actually show to school. So the more we can drive them to the campus, the better off our starts and show rates will be.

Can you just comment on current trends in placement rates, and should we expect that placement rates could come off a bit with the economy being down or should it not be impacted?

At this point we continue to see very strong placement rates. You might see certain issues in geographies by brand, you know, specific to the manufacturer program. But out of the core program, the demand remains high, our placement rates remain strong, and we cannot supply enough graduates to meet the demands of our employers. So I don't foresee that as being a problem.

Your next question comes from Jennifer Cho - Credit Suisse.

I am curious, with Corinthian reporting that their starts were up nicely in their automotive division, do you think you might be losing some market share there? And secondly, based on what you're seeing from your lenders, your private lenders, and their underwriting standards, what percentage of your revenues might you be willing to self-fund in '08 and '09?

I'll comment on the Corinthian and market share, and then Eugene can take the latter question. In terms of the growth reported specifically for the Wyo-Tech division, I don't know what the percentage growth was based upon given that I know the strong starts are in the July-October timeframe, so I don't know what the percentage growth is based upon, the comment on that. I can tell you in the areas where we compete head-to-head with them, specifically in the Sacramento area, market share does not seem to be a problem, and we are not getting that feedback from our representatives in other regions as well. So we're not getting competitive with the for-profits as being an issue or challenge for us. With that said, I do think there remain some community college competitive issues with the cost and convenience factor that we're overcoming in certain markets.

With regard to the second part of your question, I think if you look at what we had in Sallie Mae, discount and opportunity, what we have in Genesis, that's kind of what we're looking to replace, at least initially. We have about $4 million outstanding with Genesis. The opportunity and discount pools totaled about $10 million even though we never used them. So I think if you think about it $10 million a year, that's kind of where we're starting the program or anticipate starting the program. I'm not saying that we wouldn't go beyond that. It certainly is dependent upon, as you said, one, what alternative lenders end up doing, if they are making basically payments too difficult for our students because of terms, rates or conditions and there's an opportunity for us to step in there and provide incremental funding to achieve incremental students, we'd certainly consider that. But I think initially we'll probably go out with something in the $10 million range and evaluate how it goes there. Again, it's not so much how much we put out there. We want to be there in essence as a lender of last resort for the student that can't get - that decides not to come to school because they either don't have access to funding or the access to that funding is at rates, terms and conditions that are just not palatable to them.

And maybe if you could just give us a sense of the reserves you expect to take against those loans?

Well, we're not exactly sure how we're going to account for it yet. My hope, and we have to make sure PWC is okay with this, my hope is that we'll basically do it similar to the Genesis program, where we're almost on a cash basis accounting and won't really have any, won't have to put up any reserves against it because we won't be booking any revenue until it's received. So, again, anything that we lend out, you know, those funds, that cash would not be going outside of UTI, so there's no real loss of cash here. It's an opportunity cost, there's a loss of additional revenue if at some point that student doesn't pay that back. But my hope and reasonable belief at this point in time is that we won't need to put up reserves because we won't be booking any revenue. Before we go to the next question, I need to correct one thing I said on Gary's question. I think I answered it the number we gave out was 88%. The actual number was 86%. And just to clarify, that's 86% of the - we've already written 86% of the contracts to deliver the same amount of starts in the second half of next year without any improvement in show rate over the second half of last year. So I apologize if I confused somebody by giving the wrong number there, but it's 86%.

(Operator Instructions) Your next question comes from Frank Adkins - BMO Capital Markets.

I want to go back to pricing for a minute. You had talked about some of the fall increases, you know, the 2.5% to 4%, and it would kind of depend on geography. Could you give us maybe a little bit of color on what geographies are strong and where are you seeing some weakness? And then secondly, do you think pricing to this point is having any impact on starts?

The areas where we see weakness from a pricing standpoint is typically in the South. So our Houston campus as well as some that feed into our NASCAR campus, we've had less price elasticity in those areas just based on the demographics or the populations that feed into those campuses. So those are the two specifically I'm speaking of when I say towards the lower end of the range. I don't remember the second half of your question. I'm sorry.

It was do you think that pricing is having any impact on starts at this point?

Well, I think that it's more about lack of access to affordable funding options. And what we've speaking about for the past year really has been the interest rates on especially the subprime or the private loans are higher than what they can get through the federal government. And so the students who have opted to participate in our Genesis product are willing to take loans at very high interest rates, and those who are not are saying no. So from that standpoint, yes, it does impact starts and that's why we're working as hard as we can to make certain that we put in a program that provides students with access to affordable funding with terms and conditions that are acceptable to them.

I may be splitting hairs, but it's really more the payment than the total tuition of the program. I think students understand there's a good value proposition for the total amount of the program. As Kim mentioned, it's a question of whether, depending on where they are and what they're entitled to, whether they can finance that in terms and conditions that are palatable to them.

And could I get maybe a little bit of color on this year's outlook for Capex given some of these new initiatives?

Yes. We've spent about $10.5 million year to date for the first six months in Capex. I'd expect probably about half of that again in the second half of the year. I think we'll be somewhere in the $14 to $16 million range for the full year.

Your last question comes from Mark Marostica - Piper Jaffray.

Eugene, I think you mentioned that 42% of the revenue of the company comes from students who - or perhaps 42% of the students have their entire tuition covered by Title IV programs. Assuming the - and first confirm that assuming the legislation passes, what will that metric change to?

I'll give you an answer on the first part, and you had it right the second time. It's 42% of the students, not of the revenue, but 42% of the students that we have have their entire tuition covered, either by Title IV and/or grants. The new legislation, I can't give you an answer to that yet.

And Ms. McWaters, there are no further questions at this time, so please continue.

Okay, thank you for joining us on our conference call today, and we wish you a pleasant evening.

Ladies and gentlemen, this concludes UTI's fiscal 2008 second quarter earnings call. As a reminder, this call will be available for 60 days at www.UTI.edu or alternatively, the call will be available through May 13, 2008 by dialing 8004052236 or 3035903000 and entering the passcode 11112957 and the # key. You may now disconnect, and thank you for using ACT.