UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Form 8-K
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CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): August 1, 2005
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Lincoln Educational Services Corporation
(Exact Name of Registrant as Specified in Charter)
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New Jersey 000-51371 57-1150621
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) File No.)
200 Executive Drive, Suite 340
West Orange, New Jersey 07052 07052
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (973) 736-9340
Not Applicable
(Former name or former address, if changed since last report)
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Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
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Item 2.02. Results of Operations and Financial Condition
On August 1, 2005, Lincoln Educational Services Corporation issued a press
release announcing, among other things, its results of operations for the second
quarter and six months ended June 30, 2005. A copy of the press release is
furnished herewith as Exhibit 99.1 and attached hereto.
Item 9.01. Financial Statements and Exhibits
(c) Exhibits
99.1 Press release of Lincoln Educational Services Corporation dated
August 1, 2005.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
LINCOLN EDUCATIONAL SERVICES CORPORATION
Date: August 1, 2005
By: /s/ Cesar Ribeiro
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Name: Cesar Ribeiro
Title: Vice President, Chief Financial
Officer and Treasurer
Exhibit 99.1
PRESS RELEASE
Lincoln Educational Services Corporation Achieves 15.3% Revenue Growth in
Second Quarter 2005
West Orange, New Jersey, August 1, 2005 - Lincoln Educational Services
Corporation (Nasdaq: LINC) ("Lincoln") reported today its second quarter
financial results for the period ended June 30, 2005.
Comparing the second quarters 2005 and 2004:
o Revenues increased 15.3% to $68.2 million and excluding acquisitions
increased 8.9%
o Average Enrollment increased 10.9% to 16,909
o As expected Net Income declined from $0.9 million to $0.04 million
mainly as a result of higher costs to drive second half growth
Guidance for the full year:
o Revenues are expected to increase 16.0% to 21.0%
o Average Enrollment is expected to increase 11.5% to 16.0%
o Net Income is expected to increase 38.0% to 54.0%
o Earnings per fully diluted share are expected to range from $0.73 to
$0.81, which is an increase of 30.0% to 45.0% from 2004. This includes
a $0.05 per fully diluted share charge for FAS No. 123 "Accounting for
Stock-based Compensation"
Comment and Outlook
David F. Carney, Lincoln's Chairman and CEO, commented, "We are very pleased to
report continued strong growth and we intend to use the proceeds from the
initial public offering to execute our multi-pronged growth strategy. Although
we are operating in a more difficult advertising environment than last year, we
experienced an improvement in our second quarter starts over the second quarter
in the prior year and this represented a reversal of the trend we experienced in
the first quarter. We are now entering what is typically our strongest time of
the year. Historically, our schools have lower student enrollment in the first
and second quarters and significantly higher student enrollment in the third and
fourth quarters as a result of the large number of graduating high school
students entering our schools during the second half of the year. In fact,
approximately 40% of all new students usually enroll during the third quarter
and we expect this trend to continue. In order to enhance performance we are
reallocating some of our advertising budget away from television which remains
more challenging in select markets and into online advertising which has proven
to be more effective."
Mr. Carney added, "We continue to expand our product offerings. We received
approval to offer a new program, medical coding and billing, at 13 of our
campuses. In addition, three more of our campuses were recently approved to
offer associate degrees, which brings the total number of degree granting
campuses to 16. We also completed a 14,000 square foot addition to the Marietta,
Georgia campus which not only enables us to offer a new program, Electronic
Systems Technician, but also provides us with additional capacity for our allied
health programs. Also in July, we started construction on our
most recent automotive green-field campus in Queens, New York, where we expect
to start classes by the first quarter of 2006."
Mr. Carney concluded, "We continue to evaluate new acquisitions to further
expand our product offerings and geographic reach."
The Company reported third quarter and full year guidance based on its current
expectations. These statements in this release are forward-looking, and actual
results may differ materially.
3rd Quarter Year
2005 2005
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Revenue $78,000 ~ $82,000 $305,000 ~ $315,000
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Net Income $4,500 ~ $5,500 $18,000 ~ $20,000
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Earnings Per Share
Basic $0.18 ~ $0.22 $0.77 ~ $0.85
Diluted $0.17 ~ $0.21 $0.73 ~ $0.81
Operating Performance
Revenue for second quarter of 2005 was $68.2 million, a 15.3% increase from
$59.2 million from the same quarter of last year. Excluding the acquisition of
New England Technical Institute on January 11, 2005, revenues would have
increased 8.9% over the same period last year. The primary driver of this growth
was higher average student enrollment which increased 10.9% from the same
quarter last year as well as from tuition increases. Excluding the acquisition
of New England Technical Institute, average student enrollments increased 3.6%
from the same quarter last year.
Operating income for the second quarter of 2005 was $0.8 million as compared to
$2.1 million for the second quarter of 2004. This decrease was due to 22.0% and
16.4% increases, respectively, in educational services and facilities expenses
and selling, general and administrative expenses.
The increase in educational services and facilities expenses for the second
quarter of this year as compared to the 2004 quarter was due to increases in
instructional costs and books and tools expenses to service the increase in
student enrollment as well as the anticipated growth expected in the second half
of the year. In addition, our facility expenses increased during the period as a
result of our expanding several facilities.
The increase in selling, general and administrative expenses for the second
quarter of 2005 as compared to the 2004 quarter was primarily due to higher
sales and marketing expenses. During this period, sales expense increased by
21.8% due to increased compensation and benefit expenses as well as the addition
of admission representatives to fuel anticipated growth. Marketing expenses also
increased 37.2% due to increased cost of advertising (television, print and
Internet) as well as increases to drive new student enrollments.
As a result, our overall operating margin was 1.2% for second quarter of 2005 as
compared to 3.6% for the 2004 period. Net income for the second quarter of 2005
was $0.04 million, or $0.00 per diluted
share, as compared to $0.9 million or $0.04 per diluted share for the comparable
period in 2004. Earnings per share includes a charge of $0.01 and $0.02 per
share for the second quarter of 2005 and 2004, respectively, resulting from our
use of the fair value method of accounting for stock based compensation as
prescribed by Statement of Financial Accounting Standards No. 123 "Accounting
for Stock-based Compensation".
Revenue for the six months ended June 30, 2005 was $139.1 million, a 17.1%
increase over the same period in 2004. Excluding our acquisition of New England
Technical Institute, our revenue increased 11.0% over the same period in 2004.
Income from operations for the six months ended June 30, 2005 was $3.3 million,
a decrease of 42.4% as compared to the six months ended June 30, 2004. Operating
margin for the six months ended June 30, 2005 was 2.4% as compared to 4.8% for
the six months ended June 30, 2004.
Balance Sheet
As of June 30, 2005, we had $30.1 million in cash and cash equivalents, compared
to $41.4 million at December 31, 2004. During the second quarter, we received
$53.1 million in net proceeds from our initial public offering and utilized $31
million of those proceeds to pay-off all amounts outstanding under our credit
facility.
As of June 30, 2005, our stockholders' equity was $113.2 million, compared to
$58.1 million as of December 31, 2004. Cash flows used in operations was $1.7
million for the first six months of 2005 as compared to net cash provided by
operations of $3.3 million in the first half of 2004.
Student Enrollment
Average student enrollment for second quarter of 2005 was 16,909 students,
representing an increase of 10.9% from the second quarter last year. Excluding
the acquisition of New England Technical Institute, our average student
enrollment increased 3.6% over last year.
Average student enrollment for the first half of 2005 was 17,301 students,
representing an increase of 12.8% from the first half of last year. Excluding
the acquisition of New England Technical Institute, our average student
enrollment increased 6.2% over last year.
Conference Call Today
Lincoln will host a conference call today at 10:00 a.m. Eastern Standard
Time. One can access the call by going to the investor relations portion
of our website at www.lincolneducationalservices.com. Participants can also
listen to the conference call by dialing (617) 213-8842 (international) or
(866) 202-1971 (domestic) and citing code 70759673. Please log-on or dial-in
at least 10 minutes prior to the start time to ensure a connection. An
archived version of the webcast will be accessible for 90 days at
www.lincolneducationalservices.com. A replay of the call will also be available
for seven days by calling (617) 801-6888 (international) and (888) 286-8010
(domestic) citing code 28759405.
About Lincoln Educational Services Corporation
Lincoln is a leading and diversified for-profit provider of a career-oriented
post-secondary education headquartered in West Orange, New Jersey. It offers
recent high school graduates and working adults degree and diploma programs in
four principal areas of study: automotive technology, allied health (which
includes programs for medical administrative assistants, medical assistants,
pharmacy technicians and massage therapists), skilled trades and business and
information technology. Lincoln has provided the workforce with skilled
technicians since its inception in 1946. Lincoln currently operates 32 campuses
in 15 states under seven brands: Lincoln Technical Institute, The Cittone
Institute, CEI, Denver Automotive and Diesel College, Nashville Auto-Diesel
College, Southwestern College and New England Technical Institute. Lincoln has a
combined enrollment of approximately 17,000 students.
Statements in this press release regarding Lincoln's business which are not
historical facts may be "forward-looking statements" that involve risks and
uncertainties. For a discussion of such risks and uncertainties, which could
cause actual results to differ from those contained in the forward-looking
statements, see "Risk Factors" in Lincoln's registration statement on Form S-1,
as amended. All forward-looking statements are qualified in their entirety by
this cautionary statement, and Lincoln undertakes no obligation to revise or
update this news release to reflect events or circumstances after the date
hereof.
FINANCIAL STATEMENTS
LINCOLN EDUCATIONAL SERVICES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2004 AND 2005
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended June 30, Six Months Ended June 30,
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2004 2005 2004 2005
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REVENUES.................................. $59,206 $68,236 $118,780 $139,105
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COSTS AND EXPENSES:
Educational services and facilities.... 24,231 29,559 48,394 58,643
Selling, general and administrative.... 32,533 37,865 64,312 77,149
Loss on sale of assets................. 323 -- 323 --
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Total costs and expenses.......... 57,087 67,424 113,029 135,792
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OPERATING INCOME.......................... 2,119 812 5,751 3,313
INTEREST INCOME........................... 21 22 34 30
INTEREST EXPENSE.......................... (710) (763) (1,552) (1,957)
---------- ---------- ---------- ----------
INCOME BEFORE
INCOME TAXES...................... 1,430 71 4,233 1,386
PROVISION FOR
INCOME TAXES...................... 570 29 1,755 572
---------- ---------- ---------- ----------
NET INCOME................................ $860 $42 $2,478 $814
========== ========== ========== ==========
Earnings per share--basic:
Net income available to
common shareholders................... $0.04 $0.00 $0.11 $0.04
========== ========== ========== ==========
Earnings per share--diluted:
Net income available to
common shareholders................... $0.04 $0.00 $0.11 $0.04
========== ========== ========== ==========
Weighted average number of common share outstanding:
Basic.................................. 21,670 21,950 21,669 21,825
========== ========== ========== ==========
Diluted................................ 23,257 23,077 23,147 23,021
========== ========== ========== ==========
Other data:
Depreciation and amortization.......... 2,526 3,051 5,124 6,134
Number of campuses..................... 28 32 28 32
Average population..................... 15,247 16,909 15,332 17,301
Selected Consolidated Balance Sheet Data December 31, June 30,
(Unaudited) 2004 2005
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Cash and cash equivalents $ 41,445 $30,122
Current assets 64,224 56,315
Working capital 4,570 7,635
Total assets 162,729 176,679
Current liabilities 59,654 48,680
Long-term debt and capital lease
obligations, including current portion 46,829 10,922
Total stockholders' equity 58,086 113,202
Contact: Scott M. Shaw
Phone: 973-736-9340
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