UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

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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 11, 2020

(Exact Name of Registrant as Specified in Charter)

 

 

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:

 

☐	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))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Securities registered pursuant to Section 12(b) of the Act:

 

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On August 11, 2020, Lincoln Educational Services Corporation. (the “Company”) issued a press release announcing financial results for the second quarter ended June 30, 2020. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K and incorporated in this Item 2.02 by reference.

 

 The information contained under this Item 2.02 in this Current Report on Form 8-K, including Exhibit 99.1, 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, including Exhibit 99.1, 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, unless specifically identified therein as being incorporated therein by reference.  The furnishing of the information under this Item 2.02 in this Current Report is not intended to, and does not, constitute a determination or admission by the Company that the information contained under this Item 2.02 in this Current Report is material or complete, or that investors should consider this information before making an investment decision with respect to any security of the Company.

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.

Exhibit 99.1

Lincoln Generates Double-Digit Student Start Growth, Higher Earnings and Positive Cash Flow from Operations During Second Quarter of 2020

Conference call today at 10 a.m. ET

Operational and Financial Highlights for the Quarter Ended June 30, 2020 vs. June 30, 2019

“Our second quarter results continue to demonstrate that Lincoln is successfully managing through many of the challenges presented by the COVID-19 pandemic,” said Scott Shaw, President and Chief Executive Officer.  “The team’s effective execution of our plan as we first transitioned to distance learning and then re-opened our campuses for on-site instruction allowed us to achieve another strong quarter.  We grew student starts at a double-digit rate, have continued to keep our students engaged while increasing graduation rates. The uncertainty of the current economic landscape has also led to an alarmingly high unemployment rate, unlike any other period in modern times, due to its rapid onset.   I believe our past success during periods of higher unemployment positions Lincoln to help a growing number of students acquire new skills for in-demand essential careers.  As of today, each of our 22 campuses are open for limited in person instruction and more than 11,000 students are progressing towards a new career. Despite the challenges presented by the pandemic, we are excited about the future prospects for our company.”

SECOND QUARTER 2020 FINANCIAL RESULTS COMPARED TO SECOND QUARTER 2019

 

 

 

 

 

 

 

 

SECOND QUARTER 2020 SEGMENT FINANCIAL RESULTS COMPARED TO SECOND QUARTER 2019

 

Transportation and Skilled Trades Segment

 

Revenue was $42.9 million, down 2.5% from $44.0 million despite the 6.9% increase in average student population.  Student start growth increased 13.5% for the three months ended June 30, 2020 as compared to the prior year comparable period.  As a result, the Company’s ending population as of June 30, 2020 grew 8.8% compared to prior year.  After excluding students who are on leave of absence as a result of the impact of COVID-19, the ending population grew 2.3% or approximately 170 students.  Non-tuition revenue was reduced $0.8 million due to credits issued to students for Company owned dorms and meal fees resulting from campus closures caused by COVID-19.  In addition, as a result of the impact of COVID-19, graduation dates for certain programs have been extended due to restricted access to externships sites and classroom labs which resulted in $0.1 million in revenue being deferred to the second half of the year.

 

Operating income increased $2.4 million, or 96.1% to $4.9 million from $2.5 million in the prior year as a result of closed facilities in addition to managements cost savings initiatives.

Healthcare and Other Professions Segment

 

Revenue remained essentially flat at $19.5 million for the three months ended June 30, 2020 and 2019, respectively, despite the 18.9% increases in average student population.  Student start growth increased 18.8% for the three months ended June 30, 2020 as compared to the prior year comparable period.  As a result, the Company’s ending population as of June 30, 2020 grew 24.4% compared to prior year.  After excluding students who are on leave of absence as a result of the impact of COVID-19, ending population grew 17.9% or approximately 640 students. Partially offsetting student start growth was the extension of graduation dates for certain programs which have been extended due to restricted access to externships sites and classroom labs due to COVID-19.  These restrictions have resulted in $0.8 million in revenue being deferred to the second half of the year.

 

Operating income increased $0.9 million, or 48.5% to $2.7 million from $1.8 million in the prior year driven by closed facilities in addition to managements cost savings initiatives.

Corporate and Other

This category includes unallocated expenses incurred on behalf of the entire Company.  Corporate and other expenses remained essentially flat at $6.4 million for the three months ended June 30, 2020 and 2019.

 

SIX MONTHS ENDING JUNE 30, 2020 FINANCIAL RESULTS COMPARED TO PRIOR YEAR

 

Total revenue increased by $5.7 million, or 4.5%, to $132.5 million, as compared to $126.8 million for 2019.  The Transportation and Skilled Trades segment revenue increased to $92.0 million a $3.6 million increase compared to $88.4 million in 2019.   The Healthcare and Other Professions segment revenue increased to $40.5 million a $2.0 million increase compared to $38.5 million in 2019.

 

Operating loss decreased by $6.8 million, to $0.2 million compared to $7.0 million in the prior year comparable period.  Educational services and facilities expense decrease by $3.2 million, or 5.4%, to $56.5 million for the year from $59.7 million in the prior year.  Selling, general and administrative expense increased by $2.2 million, or 3.0%, to $76.3 million from $74.1 million in the prior year.

 

CARES ACT FUNDS

Through the Coronavirus Aid, Relief, and Economic Security (CARES) Act, the Federal Government and Department of Education have demonstrated their recognition that students are being adversely affected by the continued disruption caused by COVID-19.  Lincoln was awarded a grant of approximately $27.4 million to help ensure the continued education of its students.  The majority of the funds have been disbursed to students to offset their additional expenses related to the disruption of school operations including eligible expenses under a student’s cost of attendance, such as food, housing, course materials, technology, health care and childcare.

CONFERENCE CALL INFO

 

Lincoln will host a conference call today at 10:00 a.m. Eastern Daylight Time.  To access the live webcast of the conference call, please go to the Investor Relations section of Lincoln’s website at http://www.lincolntech.edu. Participants can also listen to the conference call by dialing 844-413-0946 (domestic) or 216-562-0456 (international) and providing access code 8246266. Please log in or dial into the call at least 10 minutes prior to the start time.

 

An archived version of the webcast will be accessible for 90 days at http://www.lincolntech.edu.  A replay of the call will also be available for seven days by calling 855-859-2056 (domestic) or 404-537-3406 (international) and providing access code 8246266.

 

ABOUT LINCOLN EDUCATIONAL SERVICES CORPORATION

 

Lincoln Educational Services Corporation is a provider of diversified career-oriented post-secondary education helping to provide solutions to America’s skills gap.  Lincoln offers recent high school graduates and working adults degree and diploma programs.  The Company operates under three reportable segments: Transportation and Skilled Trades, Healthcare and Other Professions and Transitional. Lincoln has provided the nation’s workforce with skilled technicians since its inception in 1946. For more information, go to www.lincolntech.edu.

 

SAFE HARBOR

 

Statements in this press release and in oral statements made from time to time by representatives of Lincoln Educational Services Corporation regarding Lincoln’s business that are not historical facts may be “forward-looking statements” as that term is defined in the federal securities law. The words “may,” “will,” “expect,” “believe,” “anticipate,” “project,” “plan,” “intend,” “estimate,” and “continue,” and their opposites and similar expressions are intended to identify forward-looking statements. Forward-looking statements should not be read as a guarantee of future performance or results and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved, if at all.  Generally, these statements relate to business plans or strategies, projected or anticipated benefits from acquisitions or dispositions to be made by the Company or projections involving anticipated revenues, earnings or other aspects of the Company’s operating results.  The Company cautions you that these statements concern current expectations about the Company’s future performance or events and are subject to a number of uncertainties, risks and other influences many of which are beyond the Company’s control, that may influence the accuracy of the statements and the projects upon which the statements are based. The events described in forward-looking statements may not occur at all. Factors which may affect the Company’s results include, but are not limited to, the risks and uncertainties discussed in the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K filed with the Securities and Exchange Commission.  Any one or more of these uncertainties, risks and other influences could materially affect the Company’s results of operations and financial condition and whether forward-looking statements made by the Company ultimately prove to be accurate and, as such, the Company’s actual results, performance and achievements could materially differ from those expressed or implied in these forward-looking statements. Forward-looking statements are based on information available at the time those statements are made and/or management’s good faith belief as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause such differences include, but are not limited to, our failure to comply with the extensive regulatory framework applicable to our industry or our failure to obtain timely regulatory approvals in connection with acquisitions or a change of control of our Company; our success in updating and expanding the content of existing programs and developing new programs for our students in a cost-effective manner or on a timely basis; risks associated with changes in applicable federal laws and regulations; uncertainties regarding our ability to comply with federal laws and regulations, such as the 90/10 rule and prescribed cohort default rates; risks associated with the opening of new campuses; risks associated with integration of acquired schools; industry competition; our ability to execute our growth strategies; conditions and trends in our industry; the COVID-19 pandemic and its impact on our business and the U.S. and global economics; general economic conditions; and other factors discussed in the “Risk Factors” section of our Annual Reports and Quarterly Reports filed with the Securities and Exchange Commission.  All forward-looking statements are qualified in their entirety by this cautionary statement, and Lincoln undertakes no obligation to publicly revise or update any forward-looking statements, whether as a result of new information, future events or otherwise after the date hereof.

 

(In Thousands)

As of June 30, 2020, the Company had a net cash balance of $7.8 million compared to $4.6 million at December 31, 2019.  The net debt/cash balance is calculated as our cash and cash equivalents and restricted cash less both the short and long-term portion under the Company’s credit agreement.  Included in cash and cash equivalents as of June 30, 2020 is $14.5 million of undistributed CARES Act funds.  Adjusted cash and cash equivalents which excludes cash in the bank from the CARES Act of $14.5 million, as of June 30, 2020, the Company had a net debt balance of $6.6 million. The decrease in cash position can mainly be attributed to the repayments of $16.0 million in borrowings under our credit facility and seasonality of our business.

 

The Company believes it is useful to present non-GAAP financial measures that exclude certain significant items as a means to understand the performance of its business. EBITDA, adjusted cash provided by (used in) operating activities, total liquidity and adjusted cash and cash equivalents are measures 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 (loss) before interest expense (net of interest income), provision for income taxes, depreciation, and amortization. We define adjusted cash provided (used in) operating activities as total cash provided by (used in) operating activities, less undistributed CARES Act funds.  We define total liquidity as total cash and cash equivalents plus restricted cash, less undistributed CARES Act funds, plus availability under the credit line. We define adjusted cash and cash equivalents as total cash and cash equivalents plus restricted cash less undistributed CARES Act funds.  EBITDA, reconciled cash provided by (used in) operating activities, total liquidity and reconciled cash and cash equivalents are presented because we believe they are useful indicators of our performance and our ability to make strategic acquisitions and meet capital expenditures and debt service requirements. However, they are not intended to represent cash flows from operations as defined by GAAP and should not be used as an alternative to net income (loss) as indicators of operating performance or cash flow as a measure of liquidity. EBITDA, reconciled cash provided by (used in) operating activities, total liquidity and reconciled cash and cash equivalents are not necessarily comparable to similarly titled measures used by other companies.

Following is a reconciliation of net income (loss) to EBITDA, adjusted cash provided by (used in) operating activities, total liquidity and adjusted cash and cash equivalents:

		Six Months Ended June 30, (Unaudited)
		2020				2019				Increase/ (decrease)
Total cash provided by (used in) operating activities		$	6,468			$	(10,782	)		$	17,250
Less: undistributed Cares Act funds			(14,463	)			-				(14,463	)
Adjusted cash (used in) operating activities		$	(7,995	)		$	(10,782	)		$	2,787

		June 30, 2020 (Unaudited)				December 31, 2019				Increase/ (decrease)
Cash and cash equivalents		$	23,342			$	23,644			$	(302	)
Restricted cash			2,626				-				2,626
Total cash and cash equicalents and restricted cash			25,968				23,644				2,324
Less: undistributed Cares Act funds			(14,463	)			-				(14,463	)
Adjusted cash and cash equivalents		$	11,505			$	23,644			$	(12,139	)

LINCOLN EDUCATIONAL SERVICES CORPORATION

 

Brian Meyers, CFO

973-736-9340

EVC GROUP LLC

Investor Relations: Doug Sherk, dsherk@evcgroup.com, 415-652-9100

Media Relations: Tom Gibson, 201-476-0322

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