UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________
Form 8-K
___________________
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 5, 2010
___________________
Lincoln Educational Services Corporation
(Exact Name of Registrant as Specified in Charter)
___________________
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New Jersey
(State or other jurisdiction
of incorporation)
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000-51371
(Commission File Number)
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57-1150621
(I.R.S. Employer
Identification No.)
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200 Executive Drive, Suite 340
West Orange, New Jersey 07052
(Address of principal executive offices)
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07052
(Zip Code)
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Registrant’s telephone number, including area code: (973)736-9340
Not Applicable
(Former name or former address, if changed since last report)
___________________
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:
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o
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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o
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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o
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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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
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Results of Operations and Financial Condition
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On August 5, 2010, Lincoln Educational Services Corporation (the “Company”) issued a press release announcing, among other things, its results of operations for the second quarter ended June 30, 2010. 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 Exhibit 99.1 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.
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Item 9.01
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Financial Statements and Exhibits
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(d)
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Exhibits
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99.1
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Press release of Lincoln Educational Services Corporation dated August 5, 2010.
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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 5, 2010 | ||||
| By: | /s/ Cesar Ribeiro | |||
| Name: | Cesar Ribeiro | |||
| Title: | Senior Vice President, Chief Financial | |||
| Officer and Treasurer | ||||
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|
 |
LINCOLN
EDUCATIONAL SERVICES CORPORATION
REPORTS
SECOND QUARTER RESULTS
Lincoln
Generates Strong Second Quarter Revenue, Operating Income and EPS
Average
Student Population Increases 17.6 Percent
West
Orange, NJ, (August 5, 2010) — Lincoln Educational Services Corporation (NASDAQ:
LINC) (Lincoln), a leading provider of diversified career-oriented
post-secondary education, today reported second quarter results.
Second Quarter 2010
Highlights
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·
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Revenue
grew 19.3 percent to $152.8 million from $128.1 million in the prior-year
quarter.
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·
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Operating
income rose 71.1 percent; operating profit margin improved to 15.0 percent
from 10.5 percent in the prior-year
quarter.
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·
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Diluted
earnings per share grew 85.2 percent to
$0.50.
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|
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·
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Average
student population rose 17.6
percent.
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·
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Student
starts were essentially flat and reflected actions to raise
outcomes.
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Comment
“We
produced a very strong quarter,” said Shaun McAlmont, Lincoln’s President and
Chief Executive Officer. “Our revenue, operating income and earnings per share
were all records for a second quarter.
“The
current regulatory environment has created uncertainty in our sector as the
Department of Education has placed a greater emphasis on regulating quality
outcomes, student debt levels and overall return on educational
investment. While the regulations have yet to be finalized, we
believe that the Department’s focus on improving outcomes is consistent with our
mission of providing students with a quality education and a high return on
their investment. Accordingly, we elected to raise our
admission standards in the first quarter of 2010 to reduce the percentage of
higher risk students in our population. While these actions contributed to
starts being essentially flat in the second quarter, we believe that the
increased admissions standards will assist us in achieving the Department’s
overall objectives by improving our graduation and placement rates while also
having a positive impact on our overall population and future profitability by
lowering our bad debt and default rates.
“We
will continue to expand our geographic presence, add new programs, develop our
online and degree initiatives and pursue strategic acquisitions. As we execute
these strategies, we look forward to raising our student outcomes as well as
continuing to deliver strong results to our shareholders.”
Outlook
“In light of the current
regulatory and economic environment, as well as our actions to reduce the
percentage of higher risk students in our enrollment and to raise student
outcomes, we are revising our previously issued guidance. We now believe student
starts will be essentially flat for the remainder of 2010,” said Mr.
McAlmont. “For the full year 2010, we now expect revenue to range
from $645 to $650 million and diluted earnings per share to range from $2.40 to
$2.50, which would be an increase of 32 to 37 percent from the $1.82 we earned
in 2009. Student starts are expected to increase approximately 4
percent for the full year.
“For the
third quarter of 2010, we expect revenue to range from $165 to $170 million.
Diluted earnings per share are expected to range from $0.60 to $0.65, which
would be an increase of 20 to 30 percent from the $0.50 earned in the third
quarter of 2009.”
Second Quarter 2010
Operating Performance
Revenue
increased 19.3 percent to $152.8 million in the second quarter from $128.1
million in the prior-year quarter. This increase was primarily due to a 17.6
percent increase in average student population. Average revenue per
student rose 1.4 percent in the second quarter primarily from tuition increases
of 3 to 5 percent annually and from a shift in program mix.
Operating
income increased 71.1 percent to $23.0 million in the second quarter from $13.4
million in the prior-year quarter. This strong operating performance reflects
improved capacity utilization as the Company served a larger student population.
Capacity utilization increased to 68 percent in the second quarter from 58
percent in the prior-year quarter. Operating income margin improved to 15.0
percent in the second quarter from 10.5 percent in the prior-year
quarter.
Educational
services and facilities expenses increased 13.7 percent to $58.1 million in the
second quarter from $51.1 million in the prior-year quarter. This increase was
primarily due to higher instructional expenses as well as books and tools
expenses necessary to serve a larger student population. The Company began the
second quarter of 2010 with approximately 5,800 more students than at the start
of the second quarter of 2009. The increase in educational services and
facilities expenses also reflects higher facilities expenses mainly due to the
relocation of two of the Company’s campuses, facility expansions and related
rent and dormitory maintenance costs. The remainder of this increase was due to
an increase in depreciation expense of $0.4 million due to higher capital
expenditures for the quarter ended June 30, 2010 compared to the quarter ended
June 30, 2009. As a percentage of revenue, educational services and
facilities expense improved to 38.0 percent in the second quarter from 39.9
percent in the prior-year quarter.
Selling,
general and administrative expenses increased 12.8 percent to $71.7 million in
the second quarter from $63.6 million in the prior-year quarter. This increase
was primarily due to sales and marketing attributable to annual compensation
increases for admissions personnel and an increased number of admissions
personnel compared with the prior-year quarter, as well as higher marketing
expenses to increase the Company’s addressable market and to grow its student
population. The increase in selling, general and administrative expenses also
reflects an
2
increased
number of employees within the career services, financial aid and default
management departments as compared with the prior-year quarter.
Administrative
expenses also increased due to annual compensation increases, higher benefits
costs and an increase in bad debt expense. Bad debt expense increased
to $10.0 million in the second quarter from $8.6 million in the prior-year
quarter, primarily reflecting the larger student population. As a percentage of
revenue, bad debt expense was 6.6 percent in the second quarter compared with
6.7 percent in the prior-year quarter. The number of days’ sales outstanding
increased to 23.6 at June 30, 2010 from 22.7 at June 30, 2009. As of June 30,
2010, the Company had outstanding loan commitments to its students of $20.5
million compared with $24.1 million at March 31, 2010. Loan commitments, net of
interest on the loans through maturity, were $16.3 million at June 30, 2010
compared with $18.1 million at March 31, 2010.
As a
percentage of revenue, selling, general and administrative expenses improved to
46.9 percent in the second quarter from 49.6 percent in the prior-year
quarter.
Net
income increased 77.7 percent to $13.2 million in the second quarter from $7.4
million in the prior-year quarter. Diluted earnings per share grew 85.2 percent
to $0.50 in the second quarter from $0.27 in the second quarter of
2009.
Cash flow
from operations was $24.9 million in the first six months of 2010 compared with
$9.8 million in the first six months of 2009. This increase primarily resulted
from an increase in net income of approximately $14.4 million.
Balance
Sheet
The
Company had $28.2 million of cash and cash equivalents at June 30, 2010 compared
with $46.1 million at December 31, 2009. Total debt and capital lease
obligations declined to $37.1 million at June 30, 2010 from $57.3 million at
December 31, 2009. Stockholders’ equity increased to $248.5 million
at June 30, 2010 from $218.6 million at December 31, 2009.
Share
Repurchase
In June
2010, the Company’s Board of Directors authorized the repurchase of up to $50
million of the Company’s outstanding common shares during a period of one year.
In the second quarter, the Company repurchased 150,796 shares at an average
price of $20.89 for a total of approximately $3.1 million.
3
Student
Metrics
Starts
and Population
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Three
Months Ended
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||||||||||||
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June
30,
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||||||||||||
| 2010 | 2009 | Change | ||||||||||
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Student
starts
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8,082 | 8,136 | (0.7 | %) | ||||||||
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Average
student population
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30,965 | 26,333 | 17.6 | % | ||||||||
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Period-end
population
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29,934 | 26,035 | 15.0 | % | ||||||||
Population
Mix by Vertical
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June
30,
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||||||||
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2010
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2009
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|||||||
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Health
sciences
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39.0 | % | 36.1 | % | ||||
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Automotive
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32.0 | % | 32.6 | % | ||||
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Skilled
trades
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11.3 | % | 13.1 | % | ||||
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Hospitality
services
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9.0 | % | 9.3 | % | ||||
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Business
& IT
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8.7 | % | 8.9 | % | ||||
| 100.0 | % | 100.0 | % | |||||
Conference
Call
Lincoln
will host a conference call today at 10:00 a.m. Eastern Time. The conference
call can be accessed by going to the Investor Relations section of its website
at www.lincolnedu.com.
Participants can also listen to the conference call by dialing 1-866-543-6408
(domestic) or 617-213-8899 (international) and using code 92397614. Please
log-in 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.lincolnedu.com. A
replay of the call will also be available for seven days by calling
1-888-286-8010 (domestic) or 617-801-6888 (international) and using code
24789681.
About Lincoln Educational
Services Corporation
Lincoln
Educational Services Corporation is a leading provider of diversified
career-oriented post-secondary education. Lincoln offers recent high school
graduates and working adults degree and diploma programs in five principal areas
of study: health sciences, automotive technology, skilled trades, hospitality
services and business and information technology. Lincoln has provided the
workforce with skilled technicians since its inception in 1946. Lincoln
currently operates 43 campuses in 17 states under 6 brands: Lincoln College of
Technology, Lincoln Technical Institute, Nashville Auto-Diesel College,
Southwestern College, Euphoria Institute of Beauty Arts and Sciences, and
Lincoln College of New England. Lincoln had an average enrollment of
approximately 31,000 students for the quarter ended June 30, 2010.
4
Safe
Harbor
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 that could cause actual results
to differ from those contained in the forward-looking statements, see “Risk
Factors” in Lincoln’s Form 10-K for the year ended December 31, 2009 and certain
of Lincoln’s other SEC filings. 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.
Contacts:
Cesar
Ribeiro, Chief Financial Officer, 973-736-9340
5
LINCOLN EDUCATIONAL SERVICES
CORPORATION AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
(In
thousands, except per share amounts)
|
Three
Months Ended June 30,
(Unaudited)
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Six
Months Ended June 30,
(Unaudited)
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|||||||||||||||
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2010
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2009
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2010
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2009
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|||||||||||||
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REVENUE
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$ | 152,795 | $ | 128,110 | $ | 305,261 | $ | 246,709 | ||||||||
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COSTS
AND EXPENSES:
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||||||||||||||||
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Educational
services and facilities
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58,118 | 51,120 | 116,987 | 99,418 | ||||||||||||
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Selling,
general and administrative
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71,705 | 63,573 | 139,978 | 123,187 | ||||||||||||
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Gain
on sale of assets
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(11 | ) | (12 | ) | (7 | ) | (14 | ) | ||||||||
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Total
costs and expenses
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129,812 | 114,681 | 256,958 | 222,591 | ||||||||||||
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OPERATING
INCOME
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22,983 | 13,429 | 48,303 | 24,118 | ||||||||||||
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OTHER:
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||||||||||||||||
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Interest
income
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19 | 7 | 21 | 9 | ||||||||||||
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Interest
expense
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(1,101 | ) | (1,098 | ) | (2,296 | ) | (2,103 | ) | ||||||||
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Other
income
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48 | 8 | 48 | 17 | ||||||||||||
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INCOME
BEFORE INCOME TAXES
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21,949 | 12,346 | 46,076 | 22,041 | ||||||||||||
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PROVISION
FOR INCOME TAXES
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8,754 | 4,920 | 18,420 | 8,791 | ||||||||||||
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NET
INCOME
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$ | 13,195 | $ | 7,426 | $ | 27,656 | $ | 13,250 | ||||||||
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Earnings
per share - Basic -
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$ | 0.51 | $ | 0.28 | $ | 1.08 | $ | 0.51 | ||||||||
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Earnings
per share – Diluted -
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$ | 0.50 | $ | 0.27 | $ | 1.05 | $ | 0.49 | ||||||||
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Weighted
average number of common shares outstanding:
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||||||||||||||||
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Basic
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25,780 | 26,477 | 25,670 | 26,093 | ||||||||||||
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Diluted
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26,439 | 27,217 | 26,387 | 26,834 | ||||||||||||
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Other
data:
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||||||||||||||||
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EBITDA
(1)
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$ | 29,798 | $ | 19,562 | $ | 61,571 | $ | 35,509 | ||||||||
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Depreciation
and amortization
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6,767 | 6,125 | 13,220 | 11,374 | ||||||||||||
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Number
of campuses
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43 | 43 | 43 | 43 | ||||||||||||
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Average
enrollment
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30,965 | 26,333 | 30,919 | 25,507 | ||||||||||||
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Stock
based compensation
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567 | 527 | 1,247 | 1,064 | ||||||||||||
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Net
cash provided by operating activities
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3,780 | 7,539 | 24,935 | 9,832 | ||||||||||||
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Net
cash used in investing activities
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(9,231 | ) | (5,872 | ) | (23,635 | ) | (32,913 | ) | ||||||||
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Net
cash (used in) provided by financing activities
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$ | (151 | ) | $ | (4,249 | ) | $ | (19,186 | ) | $ | 20,485 | |||||
6
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Selected
Consolidated Balance Sheet Data:
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June
30,
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|||
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(In
thousands, Unaudited)
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2010
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|||
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Cash
and cash equivalents
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$ | 28,190 | ||
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Current
assets
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93,377 | |||
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Working
capital
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1,386 | |||
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Total
assets
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389,260 | |||
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Current
liabilities
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91,991 | |||
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Long-term
debt and capital lease
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||||
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Obligations,
including current portion
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37,133 | |||
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Total
stockholders’ equity
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$ | 248,548 | ||
(1)
Reconciliation of Non-GAAP Financial Measures
EBITDA is
a measurement not recognized in financial statements presented in accordance
with accounting principles generally accepted in the United States of America
(“GAAP”). We define EBITDA as income from continuing operations
before interest expense (net of interest income), provision for income taxes and
depreciation and amortization. EBITDA is presented because we believe
it is a useful indicator of our performance and our ability to make strategic
acquisitions and meet capital expenditure and debt service
requirements. It is not, however, intended to represent cash flows
from operations as defined by GAAP and should not be used as an alternative to
net income (loss) as an indicator of operating performance or to cash flow as a
measure of liquidity. EBITDA is not necessarily comparable to
similarly titled measures used by other companies. Following is a
reconciliation of income from continuing operations to EBITDA:
|
Three
Months Ended June 30,
(Unaudited) |
Six
Months Ended June 30,
(Unaudited) |
|||||||||||||||
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2010
|
2009
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2010
|
2009
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|||||||||||||
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Net
Income
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$ | 13,195 | $ | 7,426 | $ | 27,656 | $ | 13,250 | ||||||||
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Interest
expense, net
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1,082 | 1,091 | 2,275 | 2,094 | ||||||||||||
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Provision
for income taxes
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8,754 | 4,920 | 18,420 | 8,791 | ||||||||||||
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Depreciation
and amortization
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6,767 | 6,125 | 13,220 | 11,374 | ||||||||||||
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EBITDA
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$ | 29,798 | $ | 19,562 | $ | 61,571 | $ | 35,509 | ||||||||
7