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): February 24, 2006
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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) Identification 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
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On February 28, 2006, Lincoln Educational Services Corporation (the
"Company") issued a press release announcing, among other things, its results of
operations for the fourth quarter and twelve months ended December 31, 2005. A
copy of the press release is furnished herewith as Exhibit 99.1 and attached
hereto. The information contained under this Item 2.02 in this Current Report on
Form 8-K, including the exhibit attached hereto, is being furnished and shall
not be deemed to be "filed" for the purposes of Section 18 of the Securities
Exchange Act of 1934, as amended, or otherwise subject to the liabilities of
that Section. Furthermore, the information contained under this Item 2.02 in
this Current Report on Form 8-K shall not be deemed to be incorporated by
reference into any registration statement or other document filed pursuant to
the Securities Act of 1933, as amended.
Item 5.02. Departure of Directors or Principal Officers; Election of Directors;
Appointment of Principal Officers
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(d) On February 27, 2006, the Company announced that it has appointed
J. Barry Morrow and Celia Currin to its Board of Directors, effective
immediately. Mr. Morrow will serve on the Company's Nominating and Corporate
Governance Committee and Ms. Currin will serve on the Company's Audit Committee.
A copy of the press release announcing Mr. Morrow's and Ms. Currin's
appointments is attached to this report as Exhibit 99.2 and is incorporated
herein by reference.
Item 9.01. Financial Statements and Exhibits
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(c) Exhibits
99.1 Press release of Lincoln Educational Services Corporation
dated February 28, 2006
99.2 Press release of Lincoln Educational Services Corporation
dated February 27, 2006.
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: February 28, 2006
By: /s/ Cesar Ribeiro
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Name: Cesar Ribeiro
Title: Vice President, Chief Financial
Officer and Treasurer
Exhibit 99.1
FOR IMMEDIATE RELEASE
Lincoln Educational Services Corporation Reports Record
Fourth Quarter and Year-End 2005 Results
West Orange, New Jersey, February 28, 2006 - Lincoln Educational Services
Corporation (Nasdaq: LINC) ("Lincoln") today reported record results for the
year ended December 31, 2005 and for the fourth quarter of 2005. The Company
also provided guidance for full-year 2006.
Highlights:
o Year over year revenue growth of 14.5% to $299.2 million from $261.2 million
o Year over year average enrollment growth of 9.9% to 17,869
o Year over year operating income margin grew to 10.9% of revenues from 9.6%
o Year over year diluted EPS growth of 35.7% to $0.76 from $0.56.
Excluding a charge of $0.05 per share of stock based compensation
expense in accordance with SFAS No. 123R "Share-Based Payment",
earnings per diluted share would have been $0.81.
o Quarterly revenue growth of 11.5% to $81.8 million from $73.3 million
o Fourth quarter 2005 diluted EPS growth of 77.8% to $0.48 from $0.27 in
2004. Excluding a charge of $0.01 per share of stock based compensation
expense in accordance with SFAS No. 123R, earnings per diluted share
would have been $0.49.
2006 Guidance:
o Revenue of $340 to $345 million
o EPS of $0.87 to $0.93, representing an EPS growth rate of 15% to 22%.
Before accounting for stock based compensation expense of approximately
$0.05 per fully dilutive share, the Company expects EPS of $0.92 to
$0.98.
Comment and Outlook
David F. Carney, Lincoln's Chairman and CEO, commented, "We are pleased with our
full-year and fourth quarter results. Despite the softness that we and the
industry experienced throughout the year, we delivered record revenue, which
grew 14.5% over prior year, and record net income of $18.7 million, which
represents a 44.2% increase from prior year. As we enter 2006 we are beginning
to benefit from the growth initiatives we implemented in 2005 and are starting
to see evidence of an improvement in the overall operating environment. As a
result, this gives us great optimism for the future and we believe that our
on-going growth initiatives will generate tangible returns for our shareholders
in 2006."
The growth initiatives that will fuel our 2006 growth include:
o Develop Start-up Campuses - opening of our automotive school in Queens, NY
during the first quarter of 2006.
o Expansion of Existing Facilities - Grand Prairie campus expansion is on track
to open in the 3rd quarter of 2006.
o Curriculum Transplants and Replications - will add two (2) new Euphoria
programs at existing campuses and one (1) new culinary program.
o Develop New Programs - new programs will be added to three of our product
lines.
o Introduce On-line Education Initiatives - on-line program roll-out in
late 2nd quarter of 2006.
o Opportunistically Pursue Strategic Acquisitions - completed the purchase of
Euphoria in December 2005 and continue to look at other strategic
acquisitions.
o Develop Degree Programs and Convert Existing Students to Degree
Programs - increased degree offerings to17 campuses with 14.2% of total
average student population and growing.
Mr. Carney concluded, "Based on our growth initiatives we remain confident in
our ability to achieve our long term goals. The significant progress we have
made on our strategic initiatives supports our optimism."
Operating Performance
Revenues increased by $38.0 million, or 14.5%, to $299.2 million in 2005 from
$261.2 million for 2004. Of this increase approximately $16.7 million, or 6.4%,
was attributable to the acquisition of New England Technical Institute (NETI) on
January 11, 2005, while the remainder of the increase was primarily due to a
3.0% increase in our average undergraduate full-time student enrollment and from
tuition increases which ranged between 2% and 5% annually depending on the
program.
Our operating income for the year was $32.5 million, which represented a 29.6%
increase on a year over year basis. The improvement in operating income is due
to operating efficiencies as well as to decreases in our cost structure in order
to bring our costs in line with our enrollment for the year.
On an overall basis our educational services and facilities expenses increased
by $16.7 million, or 15.9%, to $121.5 million in 2005 from $104.8 million for
2004. Our acquisition of NETI accounted for 9.6%, or $10.0 million, of this
increase. Instructional expenses increased by 3.6% over the prior year primarily
due to increases in compensation and benefits. The increase in average student
population also resulted in an increase in books and tools expenses, which
increased 8.2% for the year. The remainder of the increase in educational
services and facilities was primarily due to facilities expenses which increased
$3.5 million for the year. Educational services and facilities expenses as a
percentage of revenues increased to 40.6% of revenues for 2005 from 40.1% for
2004.
Our selling, general and administrative expenses for the year ended December 31,
2005 were $145.2 million, an increase of $14.3 million, or 10.9% from $130.9
million in 2004. Approximately $5.8 million of this increase, or 4.4%, was
attributable to our acquisition of NETI in January 2005. The remainder of the
increase was primarily due to: (a) a 5.2% increase in sales expense resulting
mainly from higher salaries and benefit expenses related to additional admission
representatives, (b) a 17.3%, or $3.9 million increase in marketing costs as a
result of increased advertising expenses associated with student leads and
enrollment and (c) a 9.0% increase in student services expense as a result of
our 3.0% growth in average student population as well as increased expenses
incurred to bus our students in some of our campuses.
As a result of the above our operating margin for the year increased to 10.9% in
2005 from 9.6% in 2004.
Net income and earnings per fully dilutive share for the year was $18.7 million
and $0.76, respectively. This represents an increase of 44.2% and 35.7%,
respectively in net income and earnings per fully dilutive share over 2004.
Revenue for the fourth quarter of 2005 was $81.8 million, an 11.5% increase from
$73.3 million from the same quarter of last year. Excluding the acquisition of
New England Technical Institute on January 11, 2005, revenues would have
increased 4.9% over the same period last year. The primary driver of this growth
was from tuition increases. Excluding the acquisition of New England Technical
Institute, average student enrollments decreased 2.0% from the same quarter of
last year
On an overall basis educational services and facilities for the fourth quarter
of 2005 increased 5.5% to $30.4 million as compared to $28.8 million in the
prior period. This increase was mainly attributable to facilities expense which
increased quarter over quarter due to facility expansions at several campuses
during the year as well as rent in our new Queens, New York facility. The
increase in educational services and facilities expenses is also attributable to
increases in books and tools expenses to service the increase in student
enrollment.
Selling, general and administrative expenses for the fourth quarter of 2005
decreased by 9.8% as compared to the 2004 fourth quarter. A reduction in sales
and marketing expenses for quarter of $1.9 million from the prior quarter in
2004 represented 57.6% of this decrease. The remainder of the decrease in
selling, general and administrative expenses during the fourth quarter related
to a decrease in administrative expenses of approximately $1.4 million, which
was the result of lower levels of compensation expenses.
As a result, our overall operating margin was 26.0% for fourth quarter of 2005
as compared to 15.1% for the 2004 period.
Net income for the fourth quarter of 2005 was $12.4 million, or $0.48 per
diluted share, as compared to $6.1 million or $0.27 per diluted share for the
comparable period in 2004. Earnings per share includes a charge of $0.01 and
$0.01 per share for the fourth 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. 123R
"Share-Based Payment".
Balance Sheet
As of December 31, 2005, we had $50.3 million in cash and cash equivalents,
compared to $41.4 million at December 31, 2004.
As of December 31, 2005, our stockholders' equity was $136.0 million, compared
to $58.1 million as of December 31, 2004 with the change resulting primarily
from our initial public offering.
Student Enrollment
Average student enrollment for fourth quarter of 2005 was 18,846 students,
representing an increase of 5.9% from the fourth quarter last year. Excluding
the acquisition of New England Technical Institute, our average student
enrollment decreased 2.0% over last year.
Average student enrollment for the year ended December 31, 2005 was 17,869
students, representing an increase of 9.9% from the prior year. Excluding the
acquisition of New England Technical Institute, our average student enrollment
increased 3.0% over last year.
Conference Call Today
Lincoln will host a conference call today at 10:00 a.m. Eastern Standard Time.
The conference call can be accessed by going to the IR portion of our website at
www.lincolneducationalservices.com. Participants can also listen to the
conference call by dialing (617) 213-8052 (international) or (866)
314-5232(domestic) and citing code 41777080. 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 38472278.
About Lincoln Educational Services Corporation
Lincoln is a leading and diversified for-profit provider of career-oriented
post-secondary education. The Company offers recent high school graduates and
working adults degree and diploma programs in four principal areas of study:
automotive technology, health sciences (which includes programs for licensed
practical nursing, medical administrative assistants, medical assistants, dental
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 34
campuses in 15 states under eight brands: Lincoln Technical Institute, The
Cittone Institute, CEI, Denver Automotive and Diesel College, Nashville
Auto-Diesel College, Southwestern College, New England Technical Institute and
Euphoria. Lincoln has a combined enrollment of approximately 17,600 students as
of December 31, 2005.
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.
(Please see financial attachments.)
Contacts:
Investors: Press or Media:
John Buckley/Brad Edwards Jennifer Gery
Brainerd Communicators, Inc. Brainerd Communicators, Inc.
212-986-6667 212-986-6667
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LINCOLN EDUCATIONAL SERVICES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Year Ended
December 31, December 31,
2005 2004 2005 2004
---- ---- ---- ----
REVENUES $ 81,764 $ 73,300 $299,221 $261,233
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COSTS AND EXPENSES
Educational services and facilities 30,366 28,789 121,524 104,843
Selling, general and administrative 30,103 33,386 145,194 130,941
Loss (gain) on sale of assets (4) 45 (7) 368
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Total costs & expenses 60,465 62,220 266,711 236,152
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OPERATING INCOME 21,299 11,080 32,510 25,081
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INTEREST INCOME 467 38 775 104
INTEREST EXPENSE (464) (684) (2,892) (3,007)
OTHER INCOME 1 - 243 42
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INCOME BEFORE INCOME TAXES 21,303 10,434 30,636 22,220
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PROVISION FOR INCOME TAXES 8,893 4,327 11,927 9,242
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NET INCOME $ 12,410 $ 6,107 $ 18,709 $ 12,978
========== ========== ======== ========
Earnings per share - basic:
Net income available to common
shareholders $ 0.49 $ 0.28 $ 0.80 $ 0.60
========== ========== ======== ========
Earnings per share - diluted:
Net income available to common
shareholders $ 0.48 $ 0.27 $ 0.76 $ 0.56
========== ========== ======== ========
Other data:
Depreciation and amortization $3,462 $2,985 $13,064 $10,749
Number of campuses 34 28 34 28
Average population 18,846 17,795 17,869 16,266
Stock based compensation $ 151 $463 $1,286 $1,793
Selected Consolidated Balance Sheet Data: December 31,
(unaudited) 2005
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Cash and cash equivalents $50,257
Current assets 73,158
Working capital 9,285
Total assets 214,792
Current liabilities 63,873
Long-term debt and capital lease
Obligations, including current portion 10,485
Total stockholders' equity $135,990
# # #
FOR IMMEDIATE RELEASE Exhibit 99.2
Lincoln Educational Services Corporation Announces Two Additions to
Board of Directors
WEST ORANGE, N.J., February 27, 2006 - Lincoln Educational Services Corporation
(Nasdaq: LINC) ("Lincoln") today announced the appointment of J. Barry Morrow
and Celia Currin to its Board of Directors, effective immediately. The additions
increase the size of Lincoln's Board to nine members.
"These additions bring a valuable combination of financial, operational,
education and marketing knowledge to our already strong Board of Directors,"
stated David Carney, Chairman and CEO of Lincoln Educational Services. "We look
forward to leveraging Barry's operational and education industry background and
Celia's extensive marketing and media industry experience as we continue to
execute upon our growth plan during 2006."
Mr. Morrow brings over 25 years of product strategy and development, and
technological and operational solution experience to Lincoln. He has served as
the Chief Executive Officer of Collegiate Funding Services since 2002, and held
the position of President and Chief Operating Officer from 2000 to 2002. Prior
to joining Collegiate Funding Services, Mr. Morrow served with the U.S.
Department of Education as the General Manager of Financial Services for the
Office of Student Financial Assistance. In this capacity, Mr. Morrow was
responsible for establishing key relationships with over 2,500 public and
private entities, as well as providing capital and support for education credit.
Mr. Morrow also possesses a wealth of private industry experience including over
15 years as an operations executive with Sallie Mae.
Ms. Currin is the Founder and Principal of BenchStrength Marketing, a marketing
consultancy group focused on the information and media industries. Prior to
founding BenchStrength in 2003, Ms. Currin spent 25 years with Dow Jones &
Company in a variety of roles including as Marketing Communications Director for
The Wall Street Journal. Ms. Currin's extensive experience includes the
development and coordination of integrated marketing programs and related
strategies, marketing function management and restructuring, and brand
development and extensions.
About Lincoln Educational Services Corporation
Lincoln is a leading and diversified for-profit provider of career-oriented
post-secondary education. It offers recent high school graduates and working
adults degree and diploma programs in four principal areas of study: automotive
technology, skilled trades, business and information technology and health
sciences (which includes programs for medical administrative assistants, medical
assistants, pharmacy technicians and massage therapists). Lincoln has provided
the workforce with skilled technicians since its inception in 1946. Lincoln
currently operates 34 campuses in 15 states under eight brands: Lincoln
Technical Institute, The Cittone Institute, CEI, Denver Automotive and Diesel
College, Nashville Auto-Diesel College, Southwestern College, New England
Technical Institute and Euphoria Institute of Beauty Arts and Sciences. Lincoln
had a combined enrollment of approximately 18,000 students as of September 30,
2005.
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.
Investors: Media:
John Buckley/Brad Edwards Jennifer Gery
Brainerd Communicators Brainerd Communicators, Inc.
212-986-6667 212-986-6667
# # #