Career Education Corporation (CECO)

Q1 2012 Earnings Conference Call

May 11, 2012 10:00 am ET


Steven H. Lesnik - Chairman, President and CEO

Michael J. Graham - EVP and CFO

John Springer - VP Strategy and IR


Jason Anderson - Stifel Nicolaus & Company, Inc

Suzanne Stein - Morgan Stanley & Co.

Jeffrey Silber - BMO Capital Markets

Gary Bisbee - Barclays Capital

Brandon Dobell - William Blair & Company LLC

Corey Greendale - First Analysis Securities Corporation

David Chu - Bank of America/Merrill Lynch

Jeffrey Meuler - Robert W. Baird & Co.

Kelly Flynn - Credit Suisse

George Tong - Piper Jaffray & Co.

James Samford - Citi Investment Research & Analysis



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Welcome to the First Quarter 2012 Earnings Conference Call. My name is Christine and I will be your operator for today’s call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded.

I will now turn the call over to VP, Strategy and Investor Relations, John Springer. You may begin.

John Springer

Thank you, Christine. Good morning, everyone and thank you for joining us on our first quarter 2012 earnings call. With me on the call this morning are Steve Lesnik, our President and Chief Executive Officer and Mike Graham, our Executive Vice President and Chief Financial Officer. Following remarks made by management, the call will be opened for analysts and investor questions. This conference call is being webcast live within our Investor Relations section of our website at A replay of this call will also be available on our site.

If we don’t get to your question during the call, please call our Investor Relations department at 847-585-3899.

Now, before I turn the call over to Steve, 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, 2011 and subsequent 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.

Now, let me turn the call over to Steve Lesnik.

Steven H. Lesnik

Thanks, John and good morning, everyone. Thanks for joining us on this call. The first quarter of 2012 reinforced our expectation that this will be a year of challenges, but also bolstered our confidence that we have great opportunities to make changes to position ourselves for success beyond 2012. That’s where our focus is.

The last several months have not been easy for the sector. At CEC we remain focused on executing our own strategic initiatives. We’re determined to take all necessary actions to build our foundation for future growth. Importantly, we’re working hard to build an educational and technological platform to deliver more consistent reliable results for our shareholders.

Let me comment a bit on the macro environment that we face currently. At the risk of stating the obvious, the near-term economic climate, job market and political dynamics remain very challenging for us. As we ended the first quarter, we continue to experience strong headwinds similar to what you’ve heard from others in the sector. Specifically, changes in student demand reflecting longer decision cycles, the hesitancy of students to take on debt, and the general level of uncertainty in the labor market.

Reduced admissions effectiveness, following the implementation of program integrity rules, market restrictions, program changes and response to gainful employment rules, and of course negative publicity. The fact of the matter is we and the entire proprietary post-secondary education sector are front page news and directly on the President’s current campaign agenda.

We can’t speculate about the magnitude of the impact each of these factors has individually. But it’s clear that overall the confluence of these currents is having a collective impact on the sector and us, that is more pronounced than anyone predicted several months ago. That’s why it’s important for us to aggressively make the changes necessary to adapt to these headwinds, which are unlikely to change in the near-term in our judgment. And we must reposition our Company to the new landscape.

During the fourth quarter call, I provided an overview of the key imperatives we’re facing, we’re focusing on in 2012, which include ameliorating our current legal accreditation and regulatory issues, establishing a well defined strategic path, and augmenting the leadership of the Company.

Let me start with our efforts to resolve the Company’s regulatory challenges. We made the first step last quarter in that regard with a closing of the independent investigation initiated by our Board of Directors without further negative action. And we progressed further with the recent ACICS decision to remove all our schools from show-cause with respect to our past internal determination of job placement rates.

The latest positive step is a testimony for the commitment of our team, and ACS’s recognition of the comprehensive processes we’ve developed over the last several months to improve the way we reported placement rates. That includes 100% third-party verification of placements, which we believe brings us to a new level of assurance matched by few if any of our peers.

We’re pleased that ACICS acknowledged the tremendous energy and attention we’ve devoted to this issue and approves of the enhanced processes and procedures that we’ve put in place to address any issues or confusion regarding our internal determination of placement rates. I’d like to thank the entire Career Ed team involved in the efforts for their hard work and dedication to implementing the required operational changes in a short period of time to get us to this point.

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