ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from _____to
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(State or other jurisdiction of incorporation or organization)
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(IRS Employer Identification No.)
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Title of each class
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Trading Symbol (s)
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Name of exchange on which registered
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Large accelerated filer ☐
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Non-accelerated filer ☐
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Smaller reporting company
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||||||
Emerging growth company
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1
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|||
ITEM 1.
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1
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ITEM 1A.
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23
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ITEM 1B.
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33
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ITEM 2.
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34
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ITEM 3.
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34
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ITEM 4.
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36
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37
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|||
ITEM 5.
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37
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ITEM 6.
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38
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ITEM 7.
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39
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ITEM 7A.
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51
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ITEM 8
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51
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ITEM 9.
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51
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ITEM 9A.
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51
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ITEM 9B.
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52
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ITEM 9C.
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52
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52
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ITEM 10.
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52
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ITEM 11.
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52
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ITEM 12.
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52
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ITEM 13.
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52
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ITEM 14.
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52
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53
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ITEM 15.
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53
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ITEM 16.
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54
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55 |
• |
our failure to comply with the extensive existing regulatory framework applicable to our industry or our failure to obtain timely regulatory approvals in connection with a change of control of our company or
acquisitions;
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• |
the promulgation of new regulations in our industry as to which we may find compliance challenging;
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• |
our success in updating and expanding the content of existing programs and developing new programs in a cost-effective manner or on a timely basis;
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• |
our ability to implement our strategic plan;
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• |
risks associated with changes in applicable federal laws and regulations including pending rulemaking by the U.S. Department of Education;
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• |
uncertainties regarding our ability to comply with federal laws and regulations regarding the 90/10 Rule and cohort default rates;
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• |
risks associated with maintaining accreditation;
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• |
risks associated with opening new campuses and closing existing campuses;
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• |
risks associated with integration of acquired schools;
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• |
industry competition;
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• |
the effect of public health outbreaks, epidemics and pandemics including, without limitation, COVID-19
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• |
general economic conditions; and
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• |
other factors discussed under the headings “Business,” “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
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ITEM 1. |
BUSINESS
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• |
Increase Operating Efficiency. Our existing schools are a result of strategic acquisitions and expansion, and, while the programs may be very similar across the campuses, each
campus operates on its own calendar. As we move most of our curriculum to a hybrid teaching model of virtual and traditional classroom-based in-person training, we are taking this opportunity to also standardize the programs and course
calendars so that new students will begin on the same day across all campuses. In addition, we are removing certain functions from the campuses and centralizing them to remove distractions from the campuses while creating more efficient
and effective services for our students. By simplifying, centralizing and standardizing our operations, we believe we will improve our margins and be more scalable.
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• |
Replicate Programs and Expand Existing Areas of Study. Whenever possible, we seek to replicate programs across our campuses. In addition, we believe we can leverage our
operations to expand our program offerings in existing areas of study and new high-demand areas of study in both our Transportation and Skilled Trades Segment and HOPS Segment.
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• |
Maximize Utilization of Existing Facilities. We are focused on improving capacity utilization of existing facilities through increased enrollments, the introduction of new
programs and partnerships with industry. In addition, we see opportunities to reduce our real estate needs with the advancement of our hybrid teaching model that we will continue to roll out over the next two years.
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• |
Expand Geographically. We plan to deploy our resources to strengthen our brand, invest in new programs and seek opportunities to expand our footprint into new markets. We have
a solid portfolio of corporate and industry partners requesting that we explore new geographies to serve them better. Regardless of whether we expand our current campuses to take advantage of the operating leverage or establish new
campuses, our goal is to remain competitive and prudently deploy our resources. Our expansion plans may be achieved organically through the opening of new campuses with existing resources or through acquisitions.
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• |
Expand Teaching Platform. Using the lessons learned from the COVID-19 pandemic, we believe we can continue to transform our in-person education model to a hybrid teaching
model that combines instructor-facilitated online teaching and demonstrations with hands-on labs. The hybrid teaching model provides students with greater flexibility and convenience, which should help us attract more students. Moreover,
we believe blended learning will create operating efficiencies that will enable us to contain tuition increases over the coming years and thus provide our students with a higher return on investment in their education in addition to the
increased flexibility and convenience.
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• |
Expand Market. We know that many potential students do not have the time and resources to take a one-year program in order to get into the workforce. Consequently, we are
exploring opportunities for programs that are shorter in duration and less expensive but more compressed and intensive, providing skills sufficient to gain employment. We are developing programs internally as well as in concert with
industry partners.
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Current Programs Offered
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Area of Study
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Associate's Degree
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Diploma and Certificate
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Skilled Trades
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Electronic Engineering Technology, Electronics Systems Service Management
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Electrical & Electronics Systems Technology, Electrician Training, HVAC, Welding Technology, Welding and Metal Fabrication Technology, Welding with Introduction to Pipefitting, CNC Machining and Manufacturing, Advanced Manufacturing
with Robotics
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Automotive
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Automotive Service Management, Collision Repair & Refinishing Service Management, Diesel & Truck Service Management, Heavy Equipment Maintenance Service Management
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Automotive Mechanics, Automotive Technology, Automotive Technology with Audi, Automotive Technology with BMW FastTrack, Automotive Technology with Mopar X-Press, Automotive Technology with High Performance, Automotive Technology with
Volkswagen, Collision Repair and Refinishing Technology, Diesel & Truck Mechanics, Diesel & Truck Technology, Diesel & Truck Technology with Alternate Fuel Technology, Diesel & Truck Technology with Transport Refrigeration,
Diesel & Truck with Automotive Technology, Heavy Equipment Maintenance Technology, Heavy Equipment and Truck Technology
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Health Sciences
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Medical Assisting Technology
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Medical Assistant, Patient Care Technician, Dental Assistant, Licensed Practical Nursing
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Hospitality Services
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Culinary Arts & Food Services, Cosmetology, Aesthetics, International Baking and Pastry, Nail Technology, Therapeutic Massage & Bodywork Technician
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Information Technology
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Computer Networking and Support
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Computer Systems Support Technician
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School
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Last Accreditation Letter
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Next Accreditation
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Philadelphia, PA2
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November 26, 2018
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May 1, 2023
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Union, NJ1
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May 24, 2019
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February 1, 2024
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Mahwah, NJ1
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October 15, 2020
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August 1, 2024
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Melrose Park, IL2
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December 2, 2019
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November 1, 2024
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Denver, CO1
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September 6, 2022
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February 1, 2026
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Columbia, MD2
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March 8, 2017
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February 1, 20224
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Grand Prairie, TX1
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May 26, 2022
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August 1, 2026
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Allentown, PA2
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March 8, 2017
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January 1, 20224
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Nashville, TN1
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September 6, 2017
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May 1, 20224
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Indianapolis, IN
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May 15, 2018
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November 1, 20214
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New Britain, CT
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June 5, 2018
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January 1, 20234
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Shelton, CT2
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March 1, 2019
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September 1, 2023
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Queens, NY1
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September 4, 2018
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June 1, 2023
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East Windsor, CT2
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October 17, 2017
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February 1, 20234
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South Plainfield, NJ1
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December 2, 2019
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August 1, 2024
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Iselin, NJ
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May 15, 2018
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May 15, 2023
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Moorestown, NJ3
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May 15, 2018
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May 15, 2023
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Paramus, NJ3
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May 15, 2018
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May 15, 2023
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Lincoln, RI3
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May 15, 2018
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May 15, 2023
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Somerville, MA3
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May 15, 2018
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May 15, 2023
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Summerlin, NV3
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May 15, 2018
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May 15, 2023
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Marietta, GA3
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May 1, 2022
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May 1, 2027
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1 |
Branch campus of main campus in Indianapolis, IN
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2 |
Branch campus of main campus in New Britain, CT
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3 |
Branch campus of main campus in Iselin, NJ
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4 |
Campus going through reaccreditation
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Main Institution/Campus(es)
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Additional Location(s)
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Iselin, NJ
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Moorestown, NJ
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Paramus, NJ
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Somerville, MA
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Lincoln, RI
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Marietta, GA
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Las Vegas, NV (Summerlin)
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New Britain, CT
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Shelton, CT
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Philadelphia, PA
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East Windsor, CT
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Melrose Park, IL
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Allentown, PA
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Columbia, MD
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Indianapolis, IN
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Grand Prairie, TX
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Nashville, TN
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Denver, CO
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Union, NJ
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Mahwah, NJ
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Queens, NY
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South Plainfield, NJ
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Institution
|
Expiration Date of Current
Program Participation
Agreement
|
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Iselin, NJ
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December 31, 20241
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Indianapolis, IN
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December 31, 20241
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New Britain, CT
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December 31, 20241
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1 |
Provisionally certified.
|
•
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the equity ratio, which measures the institution's capital resources, ability to borrow and financial viability;
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• |
the primary reserve ratio, which measures the institution's ability to support current operations from expendable resources; and
|
• |
the net income ratio, which measures the institution's ability to operate at a profit.
|
• |
posting a letter of credit in an amount equal to at least 50% of the total Title IV Program funds received by the institution during the institution's most recently completed fiscal year; or
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• |
posting a letter of credit in an amount equal to at least 10% of the Title IV Program funds received by the institution during its most recently completed fiscal year accepting provisional certification;
complying with additional DOE monitoring requirements and agreeing to receive Title IV Program funds under an arrangement other than the DOE's standard advance funding arrangement.
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• |
the institution’s recalculated composite score is less than 1.0 as determined by the DOE as a result of an institutional liability from a settlement, final judgment, or final determination in an
administrative or judicial action or proceeding brought by a federal or state entity;
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• |
the institution’s recalculated composite score goes from less than 1.5 to less than 1.0 as determined by the DOE as a result of a withdrawal of owner’s equity from the institution;
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• |
the SEC takes certain actions against the institution or the institution fails to comply with certain filing requirements; or
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• |
the occurrence of two or more discretionary triggering events (as described below) within a certain time period.
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• |
a show cause or similar order from the institution’s accrediting agency that could result in the withdrawal, revocation or suspension of institutional accreditation;
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• |
a notice from the institution’s state licensing agency of an intent to withdraw or terminate the institution’s state licensure if the institution does not take steps to comply with state requirements;
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• |
a default, delinquency, or other event occurs as a result of an institutional violation of a security or loan agreement that enables the creditor to require an increase in collateral, a change in
contractual obligations, an increase in interest rates or payment, or other sanctions, penalties or fees;
|
• |
a failure to comply with the 90/10 Rule during the institution’s most recently completed fiscal year;
|
• |
high annual drop-out rates from the institution as determined by the DOE; or
|
• |
official cohort default rates of at least 30 percent for the two most recent years unless a pending appeal could sufficiently reduce one of the rates.
|
• |
comply with all applicable federal student financial aid requirements;
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• |
have capable and sufficient personnel to administer the federal student Title IV Programs;
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• |
administer Title IV Programs with adequate checks and balances in its system of internal controls over financial reporting;
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• |
divide the function of authorizing and disbursing or delivering Title IV Program funds so that no office has the responsibility for both functions;
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• |
establish and maintain records required under the Title IV Program regulations;
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• |
develop and apply an adequate system to identify and resolve discrepancies in information from sources regarding a student’s application for financial aid under the Title IV Program;
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• |
have acceptable methods of defining and measuring the satisfactory academic progress of its students;
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• |
refer to the Office of the Inspector General any credible information indicating that any applicant, student, employee, third party servicer or other agent of the school has been engaged in any fraud or
other illegal conduct involving Title IV Programs;
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• |
not be, and not have any principal or affiliate who is, debarred or suspended from federal contracting or engaging in activity that is cause for debarment or suspension;
|
• |
provide adequate financial aid counseling to its students;
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• |
submit in a timely manner all reports and financial statements required by the Title IV Program regulations; and
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• |
not otherwise appear to lack administrative capability.
|
• |
student dissatisfaction with our programs and services;
|
• |
diminished access to high school student populations;
|
• |
our failure to maintain or expand our brand or other factors related to our marketing or advertising practices; and
|
• |
our inability to maintain relationships with employers in the automotive, diesel, skilled trades and IT services industries.
|
• |
authorize the issuance of blank check Preferred Stock that could be issued by our board of directors to thwart a takeover attempt;
|
• |
prohibit cumulative voting in the election of directors, which would otherwise allow holders of less than a majority of stock to elect some directors;
|
• |
require super-majority voting to effect amendments to certain provisions of our amended and restated certificate of incorporation;
|
• |
limit who may call special meetings of both the board of directors and shareholders;
|
• |
prohibit shareholder action by non-unanimous written consent and otherwise require all shareholder actions to be taken at a meeting of the shareholders;
|
• |
establish advance notice requirements for nominating candidates for election to the board of directors or for proposing matters that can be acted upon by shareholders at shareholders’ meetings; and
|
• |
require that vacancies on the board of directors, including newly created directorships, be filled only by a majority vote of directors then in office.
|
• |
general economic conditions;
|
• |
general conditions in the for-profit, post-secondary education industry;
|
• |
negative media coverage of the for-profit, post-secondary education industry;
|
• |
failure of certain of our schools or programs to maintain compliance under the gainful employment regulation, 90/10 Rule or with financial responsibility standards;
|
• |
the impact of DOE rulemaking and other changes in the highly regulated environment in which we operate;
|
• |
the initiation, pendency or outcome of litigation, accreditation reviews and regulatory reviews, inquiries and investigations;
|
• |
loss of key personnel;
|
• |
quarterly variations in our operating results;
|
• |
our ability to meet or exceed, or changes in, expectations of investors and analysts, or the extent of analyst coverage of us; and decisions by any significant investors to reduce their investment in our Common Stock.
|
ITEM 1B. |
UNRESOLVED STAFF COMMENTS
|
Location
|
Brand
|
Approximate Square Footage
|
||
Las Vegas, Nevada
|
Euphoria Institute
|
23,000
|
||
Columbia, Maryland
|
Lincoln College of Technology
|
111,000
|
||
Denver, Colorado
|
Lincoln College of Technology
|
213,000
|
||
Grand Prairie, Texas
|
Lincoln College of Technology
|
157,000
|
||
Indianapolis, Indiana
|
Lincoln College of Technology
|
126,000
|
||
Marietta, Georgia
|
Lincoln College of Technology
|
30,000
|
||
Melrose Park, Illinois
|
Lincoln College of Technology
|
88,000
|
||
Allentown, Pennsylvania
|
Lincoln Technical Institute
|
25,000
|
||
Atlant, Georgia*
|
Lincoln Technical Institute
|
56,000
|
||
East Windsor, Connecticut
|
Lincoln Technical Institute
|
289,000
|
||
Iselin, New Jersey
|
Lincoln Technical Institute
|
32,000
|
||
Lincoln, Rhode Island
|
Lincoln Technical Institute
|
39,000
|
||
Mahwah, New Jersey
|
Lincoln Technical Institute
|
79,000
|
||
Moorestown, New Jersey
|
Lincoln Technical Institute
|
35,000
|
||
New Britain, Connecticut
|
Lincoln Technical Institute
|
36,000
|
||
Paramus, New Jersey
|
Lincoln Technical Institute
|
30,000
|
||
Philadelphia, Pennsylvania
|
Lincoln Technical Institute
|
30,000
|
||
Queens, New York
|
Lincoln Technical Institute
|
48,000
|
||
Shelton, Connecticut
|
Lincoln Technical Institute and Lincoln Culinary Institute
|
57,000
|
||
Somerville, Massachusetts**
|
Lincoln Technical Institute
|
33,000
|
||
South Plainfield, New Jersey
|
Lincoln Technical Institute
|
60,000
|
||
Union, New Jersey
|
Lincoln Technical Institute
|
56,000
|
||
Nashville, Tennessee***
|
Lincoln College of Technology
|
350,000
|
||
Parsippany, New Jersey
|
Corporate Office
|
17,0
|
* |
On June 30, 2022, the Company executed a lease for a 55,000 square foot facility to house a second Atlanta area campus. The build-out is progressing according to plan. For the year ended December 31,
2022, the Company incurred approximately $0.4 million in capital expenditures, mostly relating to architectural fees and approximately $0.3 million in rent.
|
** |
On November 3, 2022, the Board of Directors approved a plan to close the Somerville, Massachusetts campus by the end of 2023. Total costs to close the campus including the teach-out of the remaining
students, are expected to be approximately $2.0 million.
|
*** |
The Nashville, Tennessee campus is currently subject to a property sale agreement. See Part II. Item 8. “Financial Statements and Supplemental Data - Notes to Consolidated Financial Statements – Note 7
Property Sale Agreements.”
|
ITEM 3. |
LEGAL PROCEEDINGS
|
ITEM 4. |
MINE SAFETY DISCLOSURES
|
ITEM 5. |
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
|
Period
|
Total Number of
Shares
Purchased
|
Average Price
Paid per Share
|
Total Number of
Shares Purchased
as Part of Publically
Announced Plan
|
Maximum Dollar
Value of Shares
Remaining to be
Purchased Under
the Plan
|
||||||||||||
October 1, 2022 to October 31, 2022
|
342,808
|
$
|
5.29
|
342,808
|
$
|
21,451,492
|
||||||||||
November 1, 2022 to November 30, 2022
|
123,689
|
6.25
|
123,689
|
20,678,160
|
||||||||||||
December 1, 2022 to December 31, 2022
|
22,514
|
5.48
|
22,514
|
20,554,775
|
||||||||||||
Total
|
489,011
|
5.55
|
489,011
|
Plan Category
|
Number of
Securities to be
issued upon
exercise of
outstanding
options,
warrants and
rights
|
Weighted-
average
exercise
price of
outstanding
options,
warrants and
rights
|
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
|
|||||||||
(a)
|
||||||||||||
Equity compensation plans approved by security holders
|
-
|
$
|
-
|
840,807
|
||||||||
Equity compensation plans not approved by security holders
|
-
|
-
|
-
|
|||||||||
Total
|
-
|
$
|
-
|
840,807
|
ITEM 6. |
[RESERVED]
|
ITEM 7. |
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
• |
our internal financing is provided to students only after all other funding resources have been exhausted; thus, by the time this funding is available, students have completed approximately two-thirds of their curriculum and are more
likely to graduate and, as a consequence, more likely to pay outstanding tuition amounts;
|
• |
funding for students who interrupt their education is typically covered by Title IV Program funds as long as they have been properly packaged for financial aid; and
|
• |
the requirement that students meet creditworthiness criteria to demonstrate a student’s ability to pay.
|
• |
Educational services and facilities. Major components of educational services and facilities expenses
include faculty compensation and benefits, expenses of books and tools, facility rent, maintenance, utilities, depreciation and amortization of property and equipment used in the provision of education services and other costs directly
associated with teaching our programs excluding student services which is included in selling, general and administrative expenses.
|
• |
Selling, general and administrative. Selling, general and administrative expenses include compensation and benefits of employees who are not directly associated with
the provision of educational services (such as executive management and school management, finance and central accounting, legal, human resources and business development), marketing and student enrollment expenses (including compensation
and benefits of personnel employed in sales and marketing and student admissions), costs to develop curriculum, costs of professional services, bad debt expense, rent for our corporate headquarters, depreciation and amortization of
property and equipment that is not used in the provision of educational services and other costs that are incidental to our operations. Selling, general and administrative expenses also includes the cost of all student services including
financial aid and career services. All marketing and student enrollment expenses are recognized in the period incurred.
|
Year Ended Dec 31,
|
||||||||
2022
|
2021
|
|||||||
Revenue
|
100.0
|
%
|
100.0
|
%
|
||||
Costs and expenses:
|
||||||||
Educational services and facilities
|
42.7
|
%
|
41.4
|
%
|
||||
Selling, general and administrative
|
52.4
|
%
|
50.4
|
%
|
||||
Gain on sale of assets
|
-0.1
|
%
|
-6.7
|
%
|
||||
Impairment of long-lived assets
|
0.3
|
%
|
0.2
|
%
|
||||
Total costs and expenses
|
95.3
|
%
|
85.3
|
%
|
||||
Operating income
|
4.7
|
%
|
14.7
|
%
|
||||
Interest expense, net
|
0.0
|
%
|
-0.6
|
%
|
||||
Income from operations before income taxes
|
4.7
|
%
|
14.1
|
%
|
||||
Provision for income taxes
|
1.1
|
%
|
3.7
|
%
|
||||
Net income
|
3.6
|
%
|
10.4
|
%
|
Year Ended December 31,
|
||||||||||||
2022
|
2021
|
% Change
|
||||||||||
Revenue:
|
||||||||||||
Transportation and Skilled Trades
|
$
|
249,905
|
$
|
240,531
|
3.9
|
%
|
||||||
Healthcare and Other Professions
|
91,535
|
87,998
|
4.0
|
%
|
||||||||
Transitional
|
6,847
|
6,807
|
0.6
|
%
|
||||||||
Total
|
$
|
348,287
|
$
|
335,336
|
3.9
|
%
|
||||||
Operating Income (Loss):
|
||||||||||||
Transportation and Skilled Trades
|
$
|
42,335
|
$
|
52,055
|
-18.7
|
%
|
||||||
Healthcare and Other Professions
|
7,189
|
11,740
|
-38.8
|
%
|
||||||||
Transitional
|
(430
|
)
|
105
|
-509.5
|
%
|
|||||||
Corporate
|
(32,816
|
)
|
(14,639
|
)
|
-124.2
|
%
|
||||||
Total
|
$
|
16,278
|
$
|
49,261
|
-67.0
|
%
|
||||||
Starts:
|
||||||||||||
Transportation and Skilled Trades
|
9,831
|
10,291
|
-4.5
|
%
|
||||||||
Healthcare and Other Professions
|
4,710
|
4,666
|
0.9
|
%
|
||||||||
Transitional
|
379
|
445
|
-14.8
|
%
|
||||||||
Total
|
14,920
|
15,402
|
-3.1
|
%
|
||||||||
Average Population:
|
||||||||||||
Transportation and Skilled Trades
|
8,629
|
8,505
|
1.5
|
%
|
||||||||
Leave of Absence - COVID-19
|
-
|
(12
|
)
|
100.0
|
%
|
|||||||
Transportation and Skilled Trades Excluding Leave of Absence - COVID-19
|
8,629
|
8,493
|
1.6
|
%
|
||||||||
Healthcare and Other Professions
|
3,973
|
4,123
|
-3.6
|
%
|
||||||||
Leave of Absence - COVID-19
|
-
|
(33
|
)
|
100.0
|
%
|
|||||||
Healthcare and Other Professions Excluding Leave of Absence - COVID-19
|
3,973
|
4,090
|
-2.9
|
%
|
||||||||
Transitional
|
292
|
316
|
-7.6
|
%
|
||||||||
Leave of Absence - COVID-19
|
-
|
-
|
0.0
|
%
|
||||||||
Transitional Excluding Leave of Absence - COVID-19
|
292
|
316
|
-7.6
|
%
|
||||||||
Total
|
12,894
|
12,944
|
-0.4
|
%
|
||||||||
Total Excluding Leave of Absense - COVID-19
|
12,894
|
12,899
|
0.0
|
%
|
||||||||
End of Period Population:
|
||||||||||||
Transportation and Skilled Trades
|
8,237
|
8,648
|
-4.8
|
%
|
||||||||
Healthcare and Other Professions
|
3,959
|
4,093
|
-3.3
|
%
|
||||||||
Transitional
|
192
|
318
|
-39.6
|
%
|
||||||||
Total
|
12,388
|
13,059
|
-5.1
|
%
|
• |
Revenue increased $9.4 million, or 3.9% to $249.9 million for the fiscal year ended December 31, 2022 from $240.5 million in the prior year. Revenue increased due to a 2.2% increase in average revenue per
student, driven by tuition increases and greater efficiencies realized through the Company’s new hybrid delivery model, as detailed in the consolidated results of operations. Further contributing to the additional revenue is a 1.6%
increase in average population, mainly due to a higher beginning of period population in the current year of approximately 730 students.
|
• |
Educational services and facilities expense increased $6.6 million, or 6.9% to $101.3 million for the fiscal year ended December 31, 2022 from $94.7 million in the prior year. Increased costs were
primarily concentrated in instructional expense and facilities expense. Instructional salaries increased mainly due to higher staffing levels in addition to expenses incurred in connection with the transition to our new hybrid teaching
model. Further contributing to the increase were current market conditions, program expansion and the return to normalized levels of in-person instruction following COVID-19 restrictions. In addition, consumable expense has risen as a
result of inflation and supply chain shortages. Facility expense increases were the result of approximately $2.6 million of additional rent expense relating to our Denver and Grand Prairie campuses following the consummation of the sale
leaseback transaction of these campuses in the fourth quarter of 2021. Also contributing to the increase is $0.4 million of additional cleaning services. Partially offsetting the additional facility costs are reductions in depreciation
expense.
|
• |
Selling, general and administrative expense increased $12.5 million, or 13.3% to $106.2 million for the fiscal year ended December 31, 2022, from $93.7 million in the prior year. The increase was primarily
driven by additional bad debt expense, marketing investments, sales expense and student services expenses discussed in the consolidated results of operations above.
|
• |
Revenue increased $3.5 million, or 4.0% to $91.5 million for the fiscal year ended December 31, 2022 from $88.0 million in the prior year. Additional revenue was driven by a 6.6% increase in average
revenue per student, which more than offset a 2.9% decline in average student population for the year. The higher revenue per student was driven by tuition increases and greater efficiencies realized through the Company’s new hybrid
delivery model as detailed in the consolidated results of operations.
|
• |
Educational services and facilities expense increased $3.1 million, or 7.6% to $44.3 million for the fiscal year ended December 31, 2022 from $41.2 million in the prior year. Increased costs were primarily
concentrated in instructional expense and facilities expense. Instructional salaries increased mainly due to higher staffing levels in addition to expenses incurred in connection with the transition to our new hybrid teaching model.
Further contributing to the increase were current market conditions, program expansion and the return to normalized levels of in-person instruction following COVID-19 restrictions. Facility expense increases were primarily due to
increased spending for common area maintenance and additional rent expense.
|
• |
Selling, general and administrative expense increased $3.9 million, or 11.1% to $39.0 million for the fiscal year ended December 31, 2022 from $35.1 million in the prior year. The increase was primarily
driven by additional bad debt expense, marketing investments, sales expense and student services expenses discussed in the consolidated results of operations above,
|
• |
Impairment was $1.0 million and zero for the years ended December 31, 2022 and 2021, respectively as discussed in the consolidated results above.
|
• |
Revenue remained essentially flat at $6.8 million for each of the fiscal years ended December 31, 2022 and 2021, respectively.
|
• |
Operating loss was $0.4 million for the fiscal year ended December 31, 2022 compared to operating income of $0.1 million in the prior year.
|
Cash Flow Summary
|
||||||||
Year Ended December 31,
|
||||||||
2022
|
2021
|
|||||||
(In thousands)
|
||||||||
Net cash provided by operating activities
|
$
|
882
|
$
|
27,447
|
||||
Net cash (used in) provided by investing activities
|
$
|
(21,354
|
)
|
$
|
37,848
|
|||
Net cash used in financing activities
|
$
|
(12,548
|
)
|
$
|
(20,014
|
)
|
ITEM 8. |
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|
ITEM 9. |
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|
ITEM 9A. |
CONTROLS AND PROCEDURES
|
ITEM 9B. |
OTHER INFORMATION
|
ITEM 10. |
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|
ITEM 11. |
EXECUTIVE COMPENSATION
|
ITEM 12. |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|
ITEM 13. |
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
|
ITEM 14. |
PRINCIPAL ACCOUNTANT FEES AND SERVICES
|
ITEM 15. |
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
|
1. |
Financial Statements
|
2. |
Financial Statement Schedules
|
3. |
Exhibits Required by Securities and Exchange Commission Regulation S-K
|
Exhibit
Number
|
Description
|
Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to the Company’s Registration Statement on Form S-1/A (Registration No. 333-123644) filed June 7, 2005.
|
|
Certificate of Amendment, dated November 14, 2019, to the Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.2 of the Company’s Registration Statement
on Form S-3 filed October 6, 2020).
|
|
Bylaws of the Company, as amended on March 8, 2019 (incorporated by reference to Exhibit 3.1 of the Company’s Form 8-K filed April 30, 2020).
|
|
Specimen Stock Certificate evidencing shares of Common Stock (incorporated by reference to the Company’s Registration Statement on Form S-1/A (Registration No. 333-123644) filed June 21, 2005).
|
|
Registration Rights Agreement, dated as of November 14, 2019, between the Company and the investors parties thereto (incorporated by reference to the Company’s Quarterly Report on Form 10-Q filed November
14, 2019).
|
|
Description of Securities of the Company (incorporated by reference to Exhibit 4.3 of the Company’s Annual Report on Form 10-K filed March 9, 2021)
|
|
Employment Agreement, dated as of December 13, 2022, between the Company and Scott M. Shaw (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed December 16, 2022).
|
|
Employment Agreement, dated as of December 13, 2022, between the Company and Brian K. Meyers (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed December 16, 2022).
|
|
Employment Agreement dated as of December 13, 2022 between the Company and Stephen M. Buchenot (incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed December
16, 2022).
|
|
Employment Agreement dated as of December 13, 2022 between the Company and Chad D Nyce (incorporated by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K filed December 16, 2022).
|
|
Lincoln Educational Services Corporation 2020 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.16 of the Company’s Current Report on Form 8-K filed June 5, 2020).
|
|
Lincoln Educational Services Corporation Severance and Retention Policy (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q filed November 7, 2022).
|
Securities Purchase Agreement, dated as of November 14, 2019, between the Company and the investor parties thereto (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q
filed November 14, 2019).
|
|
Credit Agreement, dated as of November 14, 2019, among the Company, Lincoln Technical Institute, Inc. and its subsidiaries, and Sterling National Bank (incorporated by reference to Exhibit 10.3 of the
Company’s Quarterly Report on Form 10-Q filed November 14, 2019).
|
|
|
First Amendment to Credit Agreement, dated as of November 10, 2020, among the Company, Lincoln Technical Institute, Inc. and its subsidiaries, and Sterling National Bank (incorporated by reference to
Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q filed November 12, 2020).
|
|
Second Amendment to Credit Agreement, dated as of May 23, 2022, among the Company, Lincoln Technical Institute, Inc. and its subsidiaries, and Webster Bank, National Bank (incorporated by reference to
Exhibit 10.1 of the Company’s Current Report on Form 8-K filed May 24, 2022).
|
|
Third Amendment to the Credit Agreement, dated as of August 5, 2022, among the Company, Lincoln Technical Institute, Inc. and its subsidiaries, and Webster Bank, National Bank (incorporated by reference to
Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q filed August 8, 2022).
|
Consent and Waiver Letter Agreement, dated as of September 23, 2021, by and among the Company and certain of its subsidiaries and Sterling National Bank (incorporated by reference to Exhibit 10.3 of the
Company’s Current Report on Form 8-K filed September 28, 2021).
|
|
|
Contract for the Purchase of Real Estate, dated as of September 24, 2021, by and between Nashville Acquisition, LLC and SLC Development, LLC (incorporated by reference to Exhibit 10.1 of the Company’s
Current Report on Form 8-K filed September 28, 2021).
|
|
Agreement for Purchase and Sale of Property, dated as of September 24, 2021 by and between Lincoln Technical Institute, Inc. and LNT Denver (Multi) LLC (incorporated by reference to Exhibit 10.2 of the
Company’s Current Report on Form 8-K filed September 28, 2021).
|
Form of Indemnification Agreement between the Company and each director of the Company (incorporated by reference to Exhibit 10.4 of the Company’s Quarterly Report on Form 10-Q filed November 14, 2019).
|
|
Indemnification Agreement between the Company and John A. Bartholdson (incorporated by reference to Exhibit 10.5 of the Company’s Quarterly Report on Form 10-Q filed November 14, 2019).
|
|
Subsidiaries of the Company.
|
|
Consent of Independent Registered Public Accounting Firm.
|
|
Power of Attorney (included on the Signature page of this Annual Report on Form 10-K).
|
|
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
101*
|
The following financial statements from Lincoln Educational Services Corporation’s Annual Report on Form 10-K for the year ended December 31, 2022, formatted in iXBRL: (i) Consolidated Statements of Operations, (ii) Consolidated
Balance Sheets, (iii) Consolidated Statements of Cash Flows, (iv) Consolidated Statements of Comprehensive (Loss) Income, (v) Consolidated Statement of Changes in Stockholders’ Equity and (vi) the Notes to Consolidated Financial
Statements, tagged as blocks of text and in detail.
|
104
|
Cover Page Interactive Data File (formatted as Inline iXBRL and contained in Exhibit 101*.
|
* |
Filed herewith.
|
+ |
Indicates management contract or compensatory plan or arrangement required to be filed or incorporated by reference as an exhibit to this Form 10-K pursuant to Item 15(b) of Form 10-K.
|
LINCOLN EDUCATIONAL SERVICES CORPORATION
|
||
By:
|
/s/ Brian Meyers
|
|
Brian Meyers
|
||
Executive Vice President, Chief Financial Officer and Treasurer
(Principal Accounting and Financial Officer)
|
||
Date:
|
March 7, 2023
|
Signature
|
Title
|
Date
|
||
/s/ Scott M. Shaw
|
Chief Executive Officer and Director
|
March 7, 2023
|
||
Scott M. Shaw
|
|
|||
/s/ Brian K. Meyers
|
Executive Vice President, Chief Financial Officer and Treasurer (Principal Accounting and Financial Officer) | March 7, 2023 | ||
Brian K. Meyers | ||||
/s/ John A. Bartholdson
|
Director
|
March 7, 2023 | ||
John A. Bartholdson
|
|
|||
/s/ James J. Burke, Jr.
|
Director
|
March 7, 2023 | ||
James J. Burke, Jr.
|
|
|||
/s/ Kevin M. Carney
|
Director
|
March 7, 2023
|
||
Kevin M. Carney | ||||
/s/ Ronald E. Harbour
|
Director
|
March 7, 2023 | ||
Ronald E. Harbour
|
|
|||
/s/ J. Barry Morrow
|
Director
|
March 7, 2023 | ||
J. Barry Morrow
|
|
|||
/s/ Michael A. Plater
|
Director
|
March 7, 2023 | ||
Michael A. Plater | ||||
/s/ Felecia J. Pryor
|
Director
|
March 7, 2023
|
||
Felecia J. Pryor
|
||||
|
||||
/s/ Carlton Rose
|
Director
|
March 7, 2023 | ||
Carlton Rose
|
|
|||
/s/ Sylvia Jean Young
|
Director
|
March 7, 2023
|
||
Sylvia Jean Young
|
Page Number
|
||||
Reports of Independent Registered Public Accounting Firm - Report of Independent Registered Public Accounting Firm (PCAOB ID No. )
|
F-2 | |||
F-5
|
||||
F-7
|
||||
F-8 | ||||
F-9 |
||||
F-10
|
||||
F-12
|
||||
F-35
|
• |
We tested the effectiveness of controls over management’s goodwill impairment evaluation, including those over the determination of the fair value of the reporting units within
the Transportation and Skilled Trades Segment such as controls related to management’s selection of the long-term growth rate, discount rate, EBITDA multiples and control premiums, as well as forecasts of future revenue, student start
growth and EBITDA margins and the determination of the fair value of certain assets.
|
• |
We evaluated the reasonableness of the determination of the fair value of certain assets by management.
|
• |
We evaluated management’s ability to accurately forecast future revenues and EBITDA margins by comparing actual results to management’s historical forecasts.
|
• |
We evaluated the reasonableness of management’s revenue and EBITDA margin forecasts by comparing the forecasts to:
|
o |
Historical revenues and EBITDA margins.
|
o |
Internal communications to management and the Board of Directors.
|
o |
Forecasted information included in Company press releases, as well as in analyst and industry reports for the Company and certain peer companies.
|
• |
With the assistance of our fair value specialists, we evaluated the reasonableness of the (1) valuation methodologies (2) EBITDA multiples (3) control premiums (4) long-term
growth rate and (5) the discount rate by:
|
o |
Testing the source information underlying the determination of the discount rate, the selection of the EBITDA multiples, control premiums, long-term growth rates and the
discount rate and the mathematical accuracy of the calculations.
|
o |
Developing a range of independent estimates and comparing those to the EBITDA multiples, control premiums, long-term growth rates and the discount rate selected by management.
|
December 31,
|
||||||||
2022
|
2021
|
|||||||
ASSETS
|
||||||||
CURRENT ASSETS:
|
||||||||
Cash and cash equivalents
|
$
|
|
$
|
|
||||
Restricted cash
|
||||||||
Short-term investments
|
||||||||
Accounts receivable, less allowance of $
|
|
|
||||||
Inventories
|
|
|
||||||
Prepaid expenses and other current assets
|
|
|
||||||
Asset held for sale
|
||||||||
Total current assets
|
|
|
||||||
PROPERTY, EQUIPMENT AND FACILITIES - At cost, net of accumulated depreciation and amortization of $
|
|
|
||||||
OTHER ASSETS:
|
||||||||
Noncurrent receivables, less allowance of $
|
|
|
||||||
Deferred income taxes, net
|
|
|
||||||
Operating lease right-of-use assets
|
|
|
||||||
Goodwill
|
|
|
||||||
Other assets, net
|
|
|
||||||
Total other assets
|
|
|
||||||
TOTAL ASSETS
|
$
|
|
$
|
|
December 31,
|
||||||||
2022
|
2021
|
|||||||
LIABILITIES, SERIES A CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY
|
||||||||
CURRENT LIABILITIES:
|
||||||||
Unearned tuition
|
$ |
|
$ |
|
||||
Accounts payable
|
|
|
||||||
Accrued expenses
|
|
|
||||||
Income taxes payable
|
|
|
||||||
Current portion of operating lease liabilities
|
|
|
||||||
Other short-term liabilities
|
|
|
||||||
Total current liabilities
|
|
|
||||||
NONCURRENT LIABILITIES:
|
||||||||
Pension plan liabilities
|
|
|
||||||
Long-term portion of operating lease liabilities
|
|
|
||||||
Total liabilities
|
|
|
||||||
COMMITMENTS AND CONTINGENCIES
|
||||||||
SERIES A CONVERTIBLE PREFERRED STOCK
|
||||||||
Preferred stock,
|
|
|
||||||
STOCKHOLDERS’ EQUITY:
|
||||||||
Common stock,
|
|
|
||||||
Additional paid-in capital
|
|
|
||||||
Treasury stock at cost -
|
|
(
|
)
|
|||||
Retained earnings
|
|
|
||||||
Accumulated other comprehensive loss
|
(
|
)
|
(
|
)
|
||||
Total stockholders’ equity
|
|
|
||||||
TOTAL LIABILITIES, SERIES A CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY
|
$
|
|
$
|
|
Year Ended December 31,
|
||||||||
2022
|
2021
|
|||||||
REVENUE
|
$
|
|
$
|
|
||||
COSTS AND EXPENSES:
|
||||||||
Educational services and facilities
|
|
|
||||||
Selling, general and administrative
|
|
|
||||||
Gain on sale of assets
|
(
|
)
|
(
|
)
|
||||
Impairment of long-lived assets
|
||||||||
Total costs and expenses
|
|
|
||||||
OPERATING INCOME
|
|
|
||||||
OTHER:
|
||||||||
Interest income
|
||||||||
Interest expense
|
(
|
)
|
(
|
)
|
||||
INCOME BEFORE INCOME TAXES
|
|
|
||||||
PROVISION FOR INCOME TAXES
|
|
|
||||||
NET INCOME
|
|
|
||||||
PREFERRED STOCK DIVIDENDS
|
|
|
||||||
INCOME AVAILABLE TO COMMON STOCKHOLDERS
|
$
|
|
$
|
|
||||
Basic and Diluted
|
||||||||
Net income per share
|
$
|
|
$
|
|
||||
Weighted average number of common shares outstanding:
|
||||||||
Basic and Diluted
|
|
|
December 31,
|
||||||||
2022
|
2021
|
|||||||
Net income
|
$
|
|
$
|
|
||||
Other comprehensive income
|
||||||||
Derivative qualifying as a cash flow hedge, net of taxes ()
|
|
|
||||||
Employee pension plan adjustments, net of taxes (a)
|
|
|
||||||
Comprehensive income
|
$
|
|
$
|
|
(a)
|
|
Stockholders’ Equity
|
||||||||||||||||||||||||||||||||||||
Accumulated | Series A | |||||||||||||||||||||||||||||||||||
Additional | Other | Convertible | ||||||||||||||||||||||||||||||||||
Common Stock | Paid-in | Treasury | Retained | Comprehensive | Preferred Stock | |||||||||||||||||||||||||||||||
Shares
|
Amount
|
Capital
|
Stock
|
Earnings
|
Loss
|
Total
|
Shares
|
Amount
|
||||||||||||||||||||||||||||
BALANCE - January 1, 2020
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
(
|
)
|
$
|
|
|
$ |
|
||||||||||||||||||
Net income
|
-
|
|
|
|
|
|
|
-
|
|
|||||||||||||||||||||||||||
Preferred stock dividend |
- | ( |
) | ( |
) | - | ||||||||||||||||||||||||||||||
Employee pension plan adjustments
|
-
|
|
|
|
|
|
|
-
|
|
|||||||||||||||||||||||||||
Derivative qualifying as cash flow hedge
|
-
|
|
|
|
|
|
|
-
|
|
|||||||||||||||||||||||||||
Stock-based compensation expense
|
||||||||||||||||||||||||||||||||||||
Restricted stock
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
Net share settlement for
equity-based compensation
|
(
|
)
|
|
(
|
)
|
|
|
|
(
|
)
|
|
|
||||||||||||||||||||||||
BALANCE - December 31, 2021
|
|
|
|
(
|
)
|
|
(
|
)
|
|
|
|
|||||||||||||||||||||||||
Net income
|
-
|
|
|
|
|
|
|
-
|
|
|||||||||||||||||||||||||||
Preferred stock dividend
|
-
|
|
|
|
(
|
)
|
|
(
|
)
|
-
|
|
|||||||||||||||||||||||||
Preferred Stock Conversion |
( |
) | ( |
) | ||||||||||||||||||||||||||||||||
Employee pension plan adjustments
|
-
|
|
|
|
|
|
|
-
|
|
|||||||||||||||||||||||||||
Stock-based compensation expense
|
||||||||||||||||||||||||||||||||||||
Restricted stock
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
Treasury stock cancellation
|
- |
( |
) | - |
||||||||||||||||||||||||||||||||
Share repurchase
|
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||
Net share settlement for
equity-based compensation
|
(
|
)
|
|
(
|
)
|
|
|
|
(
|
)
|
|
|
||||||||||||||||||||||||
BALANCE - December 31, 2022
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
|
$
|
|
Year Ended December 31,
|
||||||||
2022
|
2021
|
|||||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
Net income
|
$
|
|
$
|
|
||||
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||
Depreciation and amortization
|
|
|
||||||
Amortization of deferred finance fees
|
|
|
||||||
Write-off of deferred finance fees
|
|
|
||||||
Deferred income taxes
|
|
|
||||||
Gain on sale of assets
|
(
|
)
|
(
|
)
|
||||
Impairment of long-lived assets
|
||||||||
Fixed asset donation
|
(
|
)
|
(
|
)
|
||||
Provision for doubtful accounts
|
|
|
||||||
Stock-based compensation expense
|
|
|
||||||
(Increase) decrease in assets:
|
||||||||
Accounts receivable
|
(
|
)
|
(
|
)
|
||||
Inventories
|
|
(
|
)
|
|||||
Prepaid expenses and current assets
|
(
|
)
|
(
|
)
|
||||
Other assets
|
|
(
|
)
|
|||||
Increase (decrease) in liabilities:
|
||||||||
Accounts payable
|
(
|
)
|
(
|
)
|
||||
Accrued expenses
|
(
|
)
|
(
|
)
|
||||
Unearned tuition
|
(
|
)
|
|
|||||
Income taxes payable
|
|
|
||||||
Other liabilities
|
(
|
)
|
(
|
)
|
||||
Total adjustments
|
(
|
)
|
(
|
)
|
||||
Net cash provided by operating activities
|
|
|
||||||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
Capital expenditures
|
(
|
)
|
(
|
)
|
||||
Proceeds from sale of property and equipment
|
|
|
||||||
Purchase of short-term investment
|
( |
) | ||||||
Net cash (used in) provided by investing activities
|
(
|
)
|
|
|||||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
Payments on borrowings
|
|
(
|
)
|
|||||
Net share settlement for equity-based compensation
|
(
|
)
|
(
|
)
|
||||
Dividend payment for preferred stock
|
(
|
)
|
(
|
)
|
||||
Share repurchase
|
( |
) | ||||||
Net cash used in financing activities
|
(
|
)
|
(
|
)
|
||||
NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH
|
(
|
)
|
|
|||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH—Beginning of year
|
|
|
||||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH—End of year
|
$
|
|
$
|
|
Year Ended December 31,
|
||||||||
2022
|
2021
|
|||||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
|
||||||||
Cash paid during the year for:
|
||||||||
Interest
|
$
|
|
$
|
|
||||
Income taxes
|
$
|
|
$
|
|
||||
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
|
||||||||
Liabilities accrued for or noncash purchases of property and equipment
|
$
|
|
$
|
|
1. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
2. |
FINANCIAL AID AND REGULATORY COMPLIANCE
|
•
|
the equity ratio, which measures the institution’s capital resources, ability to borrow and financial viability; |
•
|
the primary reserve ratio, which measures the institution’s ability to support current operations from expendable resources; and |
•
|
the net income ratio, which measures the institution’s ability to operate at a profit. |
• |
posting a letter of credit in an amount equal to at least
|
• |
posting a letter of credit in an amount equal to at least
|
3. |
NET INCOME PER SHARE
|
Year Ended December 31,
|
||||||||
(in thousands, except share data)
|
2022
|
2021
|
||||||
Numerator:
|
||||||||
Net income
|
$ |
$
|
|
|||||
Less: preferred stock dividend
|
(
|
)
|
(
|
)
|
||||
Less: allocation to preferred stockholders
|
(
|
)
|
(
|
)
|
||||
Less: allocation to restricted stockholders
|
(
|
)
|
(
|
)
|
||||
Net income allocated to common stockholders
|
$
|
|
$
|
|
||||
Basic net income per share:
|
||||||||
Denominator:
|
||||||||
Weighted average common shares outstanding
|
|
|
||||||
Basic net income per share
|
$
|
|
$
|
|
||||
Diluted net income per share:
|
||||||||
Denominator:
|
||||||||
Weighted average number of:
|
||||||||
Common shares outstanding
|
|
|
||||||
Dilutive potential common shares outstanding:
|
||||||||
Series A preferred stock
|
|
|
||||||
Unvested restricted stock
|
|
|
||||||
Stock options
|
|
|
||||||
Dilutive shares outstanding
|
|
|
||||||
Diluted net income per share
|
$
|
|
$
|
|
Year Ended December 31,
|
||||||||
2022
|
2021
|
|||||||
Series A preferred stock
|
|
|
||||||
Unvested restricted stock
|
|
|
||||||
|
|
4. |
REVENUE RECOGNITION
|
Year ended December 31, 2022 | ||||||||||||||||
Transportation and
Skilled Trades
Segment
|
Healthcare and
Other Professions
Segment
|
Transitional
Segment
|
Consolidated
|
|||||||||||||
Timing of Revenue Recognition
|
||||||||||||||||
Services transferred at a point in time
|
$
|
|
$
|
|
$ |
$
|
|
|||||||||
Services transferred over time
|
|
|
|
|||||||||||||
Total revenues
|
$
|
|
$
|
|
$ |
$
|
|
Year ended December 31, 2021 | ||||||||||||||||
Transportation and
Skilled Trades
Segment
|
Healthcare and
Other Professions
Segment
|
Transitional
Segment
|
Consolidated
|
|||||||||||||
Timing of Revenue Recognition
|
||||||||||||||||
Services transferred at a point in time
|
$
|
|
$
|
|
$ |
$
|
|
|||||||||
Services transferred over time
|
|
|
|
|||||||||||||
Total revenues
|
$
|
|
$
|
|
$ |
$
|
|
5. |
LEASES
|
December 31,
|
||||||||
2022
|
2021
|
|||||||
Operating cash flow information:
|
||||||||
Cash paid for amounts included in the measurement of operating lease liabilities
|
$
|
|
$
|
|
||||
Non-cash activity:
|
||||||||
Lease liabilities arising from obtaining right-of-use assets
|
$
|
|
$
|
|
Year Ended
December 31,
|
||||||||
2022
|
2021
|
|||||||
Weighted-average remaining lease term
|
|
|
||||||
Weighted-average discount rate
|
|
%
|
|
%
|
Year ending December 31,
|
||||
2023
|
$ |
|
||
2024
|
|
|||
2025
|
|
|||
2026
|
|
|||
2027
|
|
|||
Thereafter
|
|
|||
Total lease payments
|
|
|||
Less: imputed interest
|
(
|
)
|
||
Present value of lease liabilities
|
$
|
|
6. |
GOODWILL
|
Gross
Goodwill
Balance
|
Accumulated
Impairment
Losses
|
Net
Goodwill
Balance
|
||||||||||
Balance as of January 1, 2021
|
$
|
|
$
|
|
$
|
|
||||||
Adjustments
|
|
|
|
|||||||||
Balance as of December 31, 2021
|
|
|
|
|||||||||
Adjustments
|
|
|
|
|||||||||
Balance as of December 31, 2022
|
$
|
|
$
|
|
$
|
|
7.
|
PROPERTY SALE AGREEMENTS
|
8. |
PROPERTY, EQUIPMENT AND FACILITIES
|
|
At December 31,
|
|||||||||||
Useful life
(years)
|
2022
|
2021
|
||||||||||
Land
|
-
|
$
|
|
$
|
|
|||||||
Buildings and improvements (a)
|
|
|
|
|||||||||
Equipment, furniture and fixtures
|
|
|
|
|||||||||
Vehicles
|
|
|
|
|||||||||
Construction in progress (a)
|
-
|
|
|
|||||||||
|
|
|||||||||||
Less accumulated depreciation and amortization (a)
|
(
|
)
|
(
|
)
|
||||||||
$
|
|
$
|
|
(a)
|
|
9. |
ACCRUED EXPENSES
|
At December 31,
|
||||||||
2022
|
2021
|
|||||||
Accrued compensation and benefits
|
$
|
|
$
|
|
||||
Accrued real estate taxes
|
|
|
||||||
Other accrued expenses
|
|
|
||||||
$
|
|
$
|
|
10. |
LONG-TERM DEBT
|
11. |
STOCKHOLDERS’ EQUITY
|
Shares
|
Weighted
Average Grant
Date Fair Value
Per Share
|
|||||||
Nonvested restricted stock outstanding at December 31, 2020
|
|
$
|
|
|||||
Granted
|
|
|
||||||
Cancelled
|
|
|
||||||
Vested
|
(
|
)
|
|
|||||
Nonvested restricted stock outstanding at December 31, 2021
|
|
|
||||||
Granted
|
|
|
||||||
Cancelled
|
|
|
||||||
Vested
|
(
|
)
|
|
|||||
Nonvested restricted stock outstanding at December 31, 2022
|
|
|
Shares
|
Weighted
Average Exercise
Price Per Share
|
Weighted
Average
Remaining
Contractual
Term
|
Aggregate
Intrinsic Value
|
||||||||||
Outstanding January 1, 2020
|
|
$
|
|
|
$
|
|
|||||||
Cancelled
|
(
|
)
|
|
- |
|
||||||||
Outstanding December 31, 2020
|
|
|
|
|
|||||||||
Cancelled
|
|
-
|
|
||||||||||
Outstanding December 31, 2021
|
|
|
|
|
|||||||||
Cancelled
|
(
|
)
|
|
||||||||||
Outstanding December 31, 2022
|
|
|
-
|
|
|||||||||
Vested as of December 31, 2022
|
|
|
-
|
|
|||||||||
Exercisable as of December 31, 2022
|
|
|
-
|
|
12. |
PENSION PLAN
|
Year Ended December 31,
|
||||||||
2022
|
2021
|
|||||||
CHANGES IN BENEFIT OBLIGATIONS:
|
||||||||
Benefit obligation-beginning of year
|
$
|
|
$
|
|
||||
Service cost
|
|
|
||||||
Interest cost
|
|
|
||||||
Actuarial gain
|
(
|
)
|
(
|
)
|
||||
Benefits paid
|
(
|
)
|
(
|
)
|
||||
Benefit obligation at end of year
|
|
|
||||||
CHANGE IN PLAN ASSETS:
|
||||||||
Fair value of plan assets-beginning of year
|
|
|
||||||
Actual return on plan assets
|
(
|
)
|
|
|||||
Benefits paid
|
(
|
)
|
(
|
)
|
||||
Fair value of plan assets-end of year
|
|
|
||||||
BENEFIT OBLIGATION IN EXCESS OF FAIR VALUE FUNDED STATUS:
|
$
|
(
|
)
|
$
|
(
|
)
|
At December 31,
|
||||||||
2022
|
2021
|
|||||||
Noncurrent liabilities
|
$
|
(
|
)
|
$
|
(
|
)
|
Year Ended December 31,
|
||||||||
2022
|
2021
|
|||||||
Accumulated loss
|
$
|
(
|
)
|
$
|
(
|
)
|
||
Deferred income taxes
|
|
|
||||||
Accumulated other comprehensive loss
|
$
|
(
|
)
|
$
|
(
|
)
|
Year Ended December 31,
|
||||||||
2022
|
2021
|
|||||||
COMPONENTS OF NET PERIODIC BENEFIT COST
|
||||||||
Service cost
|
$
|
|
$
|
|
||||
Interest cost
|
|
|
||||||
Expected return on plan assets
|
(
|
)
|
(
|
)
|
||||
Recognized net actuarial loss
|
|
|
||||||
|
$
|
(
|
)
|
$
|
|
Quoted Prices in
Active Markets
for Identical
Assets
|
Significant Other
Observable Inputs
|
Significant
Unobservable
Inputs
|
||||||||||||||
(Level 1)
|
(Level 2)
|
(Level 3)
|
Total
|
|||||||||||||
Equity securities
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Fixed income
|
|
|
|
|
||||||||||||
International equities
|
|
|
|
|
||||||||||||
Real estate
|
|
|
|
|
||||||||||||
Cash and equivalents
|
|
|
|
|
||||||||||||
Balance at December 31, 2022
|
$
|
|
$
|
|
$
|
|
$
|
|
Quoted Prices in
Active Markets
for Identical
Assets
|
Significant Other
Observable Inputs
|
Significant
Unobservable
Inputs
|
||||||||||||||
(Level 1)
|
(Level 2)
|
(Level 3)
|
Total
|
|||||||||||||
Equity securities
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Fixed income
|
|
|
|
|
||||||||||||
International equities
|
|
|
|
|
||||||||||||
Real estate
|
|
|
|
|
||||||||||||
Cash and equivalents
|
|
|
|
|
||||||||||||
Balance at December 31, 2021
|
$
|
|
$
|
|
$
|
|
$
|
|
2022
|
2021
|
|||||||
Equity securities
|
|
%
|
|
%
|
||||
Fixed income
|
|
%
|
|
%
|
||||
International equities
|
|
%
|
|
%
|
||||
Real estate
|
|
%
|
|
%
|
||||
Cash and equivalents
|
|
%
|
|
%
|
||||
Total
|
|
%
|
|
%
|
2022
|
2021
|
|||||||
Discount rate
|
|
%
|
|
%
|
||||
Rate of compensation increase
|
|
%
|
|
%
|
2022
|
2021
|
|||||||
Discount rate
|
|
%
|
|
%
|
||||
Rate of compensation increase
|
|
%
|
|
%
|
||||
Long-term rate of return
|
|
%
|
|
%
|
Year Ending December 31,
|
||||
2023
|
$
|
|
||
2024
|
|
|||
2025
|
|
|||
2026
|
|
|||
2027
|
|
|||
Years 2028-2032
|
|
13. |
INCOME TAXES
|
Year Ended December 31,
|
||||||||
2022
|
2021
|
|||||||
Current:
|
||||||||
Federal
|
$
|
|
$
|
|
||||
State
|
|
|
||||||
Total
|
|
|
||||||
Deferred:
|
||||||||
Federal
|
|
|
||||||
State
|
|
|
||||||
Total
|
|
|
||||||
Total provision
|
$
|
|
$
|
|
Year Ended December 31,
|
||||||||||||||||
2022
|
2021
|
|||||||||||||||
Income before taxes
|
$
|
|
$
|
|
||||||||||||
Expected tax
|
$
|
|
|
%
|
$
|
|
|
%
|
||||||||
State tax (net of federal benefit)
|
|
|
%
|
|
|
%
|
||||||||||
Other
|
(
|
)
|
-
|
%
|
(
|
)
|
-
|
%
|
||||||||
Total
|
$
|
|
|
%
|
$
|
|
|
%
|
At December 31,
|
||||||||
2022
|
2021
|
|||||||
Gross noncurrent deferred tax assets (liabilities)
|
||||||||
Lease liability
|
$
|
|
$
|
|
||||
Depreciation
|
|
|
||||||
Allowance for bad debts
|
|
|
||||||
Net operating loss carryforwards
|
|
|
||||||
Accrued benefits
|
||||||||
Stock-based compensation
|
|
|
||||||
Pension plan liabilities
|
|
|
||||||
Other intangibles
|
|
|
||||||
Accrued expenses
|
||||||||
Goodwill
|
(
|
)
|
(
|
)
|
||||
Right-of-use asset
|
(
|
)
|
(
|
)
|
||||
Noncurrent deferred tax assets, net
|
$
|
|
$
|
|
14. |
FAIR VALUE
|
December 31, 2022
|
||||||||||||||||||||
Carrying
|
Quoted Prices in
Active Markets
for Identical
Assets
|
Significant Other
Observable Inputs
|
Significant
Unobservable
Inputs
|
|||||||||||||||||
Amount
|
(Level 1)
|
(Level 2)
|
(Level 3)
|
Total
|
||||||||||||||||
Cash equivalents:
|
||||||||||||||||||||
Money market fund
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||||
Treasury bill
|
|
|
|
|
|
|||||||||||||||
Short-term investments:
|
||||||||||||||||||||
Treasury bill
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Total cash equivalents and short-term investments
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
15. |
SEGMENT REPORTING
|
For the Year Ended December 31,
|
||||||||||||||||||||||||
Revenue
|
Operating Income (Loss)
|
|||||||||||||||||||||||
2022
|
% of
Total
|
2021
|
% of
Total
|
2022
|
2021
|
|||||||||||||||||||
Transportation and Skilled Trades
|
$
|
|
|
%
|
$
|
|
|
%
|
$
|
|
$
|
|
||||||||||||
Healthcare and Other Professions
|
|
|
%
|
|
|
%
|
|
|
||||||||||||||||
Transitional | % | % | ( |
) | ||||||||||||||||||||
Corporate
|
|
|
%
|
|
|
%
|
(
|
)
|
(
|
)
|
||||||||||||||
Total
|
$
|
|
|
%
|
$
|
|
|
%
|
$
|
|
$
|
|
Total Assets
|
||||||||
December 31, 2022
|
December 31, 2021
|
|||||||
Transportation and Skilled Trades
|
$
|
|
$
|
|
||||
Healthcare and Other Professions
|
|
|
||||||
Transitional | ||||||||
Corporate
|
|
|
||||||
Total
|
$
|
|
$
|
|
16. |
COMMITMENTS AND CONTINGENCIES
|
17. |
COVID-19 PANDEMIC AND CARES ACT
|
18.
|
SUBSEQUENT EVENT
|
Description
|
Balance at
Beginning of
Period
|
Charged to
Expense
|
Accounts
Written-off
|
Balance at
End of
Period
|
||||||||||||
Allowance accounts for the year ended:
|
||||||||||||||||
December 31, 2022
|
||||||||||||||||
Student receivable allowance
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||
December 31, 2021
|
||||||||||||||||
Student receivable allowance
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
Name
|
Jurisdiction
|
Lincoln Technical Institute, Inc. (wholly-owned)
|
New Jersey
|
New England Acquisition LLC (wholly-owned through Lincoln Technical Institute, Inc.)
|
Delaware
|
Nashville Acquisition, LLC (wholly-owned through Lincoln Technical Institute, Inc.)
|
Delaware
|
Euphoria Acquisition, LLC (wholly-owned through Lincoln Technical Institute, Inc.)
|
Delaware
|
LTI Holdings, LLC (wholly-owned through Lincoln Technical Institute, Inc.)
|
Colorado
|
LCT Acquisition, LLC (wholly-owned through Lincoln Technical Institute, Inc.)
|
Delaware
|
NN Acquisition, LLC (wholly-owned through Lincoln Technical Institute, Inc.)
|
Delaware
|
/s/ Deloitte & Touche LLP
|
Morristown, New Jersey
|
March 7, 2023
|
1. |
I have reviewed this Annual Report on Form 10-K of Lincoln Educational Services Corporation;
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and
for, the periods presented in this report;
|
4. |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting
(as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
5. |
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors
(or persons performing the equivalent functions):
|
Date: March 7, 2023
|
|
/s/ Scott Shaw
|
|
Scott Shaw
|
|
Chief Executive Officer
|
1. |
I have reviewed this Annual Report on Form 10-K of Lincoln Educational Services Corporation;
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and
for, the periods presented in this report;
|
4. |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting
(as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
|
(d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an Annual Report)
that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5. |
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors
(or persons performing the equivalent functions):
|
(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and
report financial information; and
|
(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: March 7, 2023
|
|
/s/ Brian Meyers
|
|
Brian Meyers
|
|
Chief Financial Officer
|
Date:
|
March 7, 2023 |
/s/ Scott Shaw
|
|
Scott Shaw
|
|
Chief Executive Officer
|
/s/ Brian Meyers
|
|
Brian Meyers
|
|
Chief Financial Officer
|