UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Form 8-K
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CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): August 3, 2006
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Lincoln Educational Services Corporation
(Exact Name of Registrant as Specified in Charter)
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New Jersey 000-51371 57-1150621
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
200 Executive Drive, Suite 340
West Orange, New Jersey 07052 07052
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (973) 736-9340
Not Applicable
(Former name or former address, if changed since last report)
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Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
|_|Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
|_|Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|_|Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
|_|Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
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Item 2.02 Results of Operations and Financial Condition
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On August 3, 2006, Lincoln Educational Services Corporation (the "Company")
issued a press release announcing, among other things, its results of operations
for the second quarter and six months ended June 30, 2006. A copy of the press
release is furnished herewith as Exhibit 99.1 and attached hereto. The
information contained under this Item 2.02 in this Current Report on Form 8-K,
including the exhibit attached hereto, is being furnished and shall not be
deemed to be "filed" for the purposes of Section 18 of the Securities Exchange
Act of 1934, as amended, or otherwise subject to the liabilities of that
Section. Furthermore, the information contained under this Item 2.02 in this
Current Report on Form 8-K shall not be deemed to be incorporated by reference
into any registration statement or other document filed pursuant to the
Securities Act of 1933, as amended.
Item 9.01 Financial Statements and Exhibits
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(c) Exhibits
99.1 Press release of Lincoln Educational Services Corporation
dated August 3, 2006.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
LINCOLN EDUCATIONAL SERVICES CORPORATION
Date: August 3, 2006
By: /s/ Cesar Ribeiro
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Name: Cesar Ribeiro
Title: Vice President, Chief Financial
Officer and Treasurer
Exhibit 99.1
Lincoln Educational Services Corporation Reports
Strong Second Quarter 2006 Results
West Orange, New Jersey, August 3, 2006 - Lincoln Educational Services
Corporation (Nasdaq: LINC) ("Lincoln") today reported strong second quarter
results for 2006.
Second Quarter Highlights:
o Diluted EPS of $0.04 increased from $0.00 in the second quarter of
2005. Excluding a charge of $0.01 per share of stock based
compensation expense in accordance with SFAS No. 123R "Share-Based
Payment," earnings per diluted share would have been $0.05.
o Revenue growth of 10.4% to $75.4 million from $68.2 million in the
second quarter of 2005.
o Operating income margin expanded to 2.4% of revenues from 1.2% in the
second quarter of 2005.
o Completed the acquisition of New England Institute of Technology at
Palm Beach, Inc. on May 22, 2006.
o Our Queens Auto School officially opened in late March and had an
average enrollment of 149 students as of June 30, 2006.
o Launched our first 100% on-line program on June 26, 2006.
Comment and Outlook
"We delivered solid revenue and net income gains this past quarter while
continuing to implement our strategic growth plan," said David F. Carney,
Lincoln's Chairman and CEO. "We held our operating margins while successfully
leveraging our corporate infrastructure and investing in capacity and programs
for the future. Despite operating in a challenging environment, the pace of our
student starts showed a mild improvement over recent quarters and we expect this
trend to accelerate in the second half of the year. We remain committed to
executing on our strategy and are diligently pursuing a very robust, yet
concerted business plan, that we believe will generate tangible operating and
financial results."
"Through our recent acquisitions in Florida and Nevada, we have expanded our
addressable markets and further diversified our product offerings," added Mr.
Carney. "We are now moving forward in replicating a number of fast-growing
programs at schools where there is ample room to increase enrollment. At the
same time, we are expanding capacity at schools where we have essentially
maximized our space and demand for current and new programs is strong. These
expansions will result in additional capacity of over 220,000 square feet across
our footprint
during the next 12 months. We believe that these initiatives, combined with the
expansion of our online and Associate Degree programs, continued growth at our
Queens campus and an active acquisition pipeline will lead to enhanced returns
for our shareholders over time."
Operating Performance
Revenues increased by $7.1 million, or 10.4%, to $75.4 million in the second
quarter of 2006 from $68.2 million for the comparable period in 2005. Of this
increase, approximately $1.2 million and $1.9 million, respectively, was
attributable to the acquisition of Euphoria Institute LLC ("Euphoria") on
December 1, 2005 and the acquisition of New England Institute of Technology at
Palm Beach, Inc. ("FLA") on May 22, 2006, while the remainder of the increase
was due to tuition increases.
Our operating income for the second quarter of 2006 was $1.8 million, which
represented a 121.6% increase compared to the second quarter of 2005. The
improvement in operating income is due to operating efficiencies as well as to
the leverage that we are able to obtain from our cost structure as we grow our
revenues.
On an overall basis, our educational services and facilities expenses increased
by $3.0 million, or 10.3%, to $32.6 million in the second quarter of 2006 from
$29.6 million in the second quarter of 2005. The acquisitions of Euphoria and
FLA accounted for $0.7 million and $0.9 million, respectively, of this increase.
Excluding the acquisitions, instructional expenses increased by 1.9% over the
comparable period in 2005 primarily due to increases in compensation and
benefits. Books and tools expenses increased 10.6% over the second quarter of
2005 primarily due to the timing of class starts. The remainder of the increase
in educational services and facilities expenses was primarily due to facilities
expenses, which increased $0.9 million for the year. Educational services and
facilities expenses as a percentage of revenues remained flat at 43.3% of
revenues for the second quarter of 2006 and 2005.
Our selling, general and administrative expenses for the second quarter of 2006
were $41.0 million, an increase of $3.1 million, or 8.2%, from $37.9 million in
the second quarter of 2005. Included in selling, general and administrative
expenses for the three months ended June 30, 2006 is $0.4 million and $0.7
million, respectively, from our acquisitions of Euphoria and FLA. Excluding
Euphoria and FLA, our selling, general and administrative expenses increased
5.4% as compared to the same period in 2005. This increase was primarily due to:
(a) a $0.4 million, or 2.9%, increase in sales and marketing expenses; and (b) a
$1.7 million, or 9.0%, increase in administrative costs primarily due to
increased bad debt expense during the period.
For the quarter ended June 30, 2006, our bad debt expense was 5.7% as compared
to 3.6% for the same quarter in 2005. This increase is primarily due to several
factors, including (1) higher accounts receivable balances at June 30, 2006 as
compared to June 30, 2005, (2) loans to our students under a recourse agreement
we entered into in 2005 with Student Marketing Association (Sallie Mae) to
provide private recourse loans to qualifying students, and (3) normal seasonal
patterns in our business. Accounts receivable at June 30, 2006 includes five new
campuses that did not exist in the prior period (our two Euphoria and two FLA
campuses as well as our new Queens New York campus, which opened on March 27,
2006). Under the terms of the Sallie Mae agreement, we are required to fund up
to 30% of all loans disbursed into a deposit account,
which may ultimately be utilized to purchase loans in default. Since
recoverability of such amounts is questionable, we reserve 100% of the amounts
on deposit. As of June 30, 2006, we had reserved $1.4 million under this
agreement, which represents an increase of approximately $1.0 million from
amounts reserved at December 31, 2005.
As a percentage of revenue, selling, general and administrative expenses
decreased to 54.3% from 55.5% in the prior period.
As a result of the above, our operating margin for the second quarter of 2006
increased to 2.4% from 1.2% in the second quarter of 2005.
Net income for the second quarter of 2006 was $1.0 million, or $0.04 per diluted
share, as compared to $0.0 million or $0.00 per diluted share for the comparable
period in 2005. Earnings per share includes a charge of $0.01 per share for the
first quarter of 2006 and 2005, respectively, resulting from our use of the fair
value method of accounting for stock based compensation as prescribed by
Statement of Financial Accounting Standards No. 123R "Share-Based Payment".
Balance Sheet
At June 30, 2006, we had $5.5 million in cash and cash equivalents, compared to
$50.3 million at December 31, 2005. The reduction in our cash balances is
primarily attributable to our acquisition of FLA, and seasonality in our
operations.
At June 30, 2006, our stockholders' equity was $141.3 million, compared to
$136.0 million at December 31, 2005, with the increase resulting primarily from
net income from the period and stock-based compensation expense.
Student Enrollment
Average student enrollment for second quarter of 2006 was 17,380 students,
representing an increase of 2.8% from the second quarter of 2005. Excluding the
acquisitions of Euphoria and FLA, our average student enrollment decreased 1.9%
as compared to the second quarter of 2005.
Conference Call Today
Lincoln will host a conference call today at 10:00 a.m. Eastern Standard Time.
The conference call can be accessed by going to the IR portion of our website at
www.lincolneducationalservices.com. Participants can also listen to the
conference call by dialing (617) 213-8051 (international) or (866) 314-5050
(domestic) and citing code 33676965. Please log-on or dial-in at least 10
minutes prior to the start time to ensure a connection. An archived version of
the webcast will be accessible for 90 days at
www.lincolneducationalservices.com. A replay of the call will also be available
for seven days by calling (617) 801-6888 (international) and (888) 286-8010
(domestic) citing code 78621113.
About Lincoln Educational Services Corporation
Lincoln is a leading and diversified for-profit provider of career-oriented
post-secondary education. The Company offers recent high school graduates and
working adults degree and diploma programs in five principal areas of study:
automotive technology, health sciences (which includes programs for licensed
practical nursing, medical administrative assistants, medical assistants, dental
assistants, and pharmacy technicians), skilled trades, business and information
technology and hospitality services. Lincoln has provided the workforce with
skilled technicians since its inception in 1946. Lincoln currently operates 37
campuses in 17 states under seven brands: Lincoln Technical Institute, CEI,
Denver Automotive and Diesel College, Nashville Auto-Diesel College,
Southwestern College, New England Technical Institute and Lincoln College of
Technology. Lincoln had a combined average enrollment of approximately 17,400
students at of June 30, 2006.
Statements in this press release regarding Lincoln's business which are not
historical facts may be "forward-looking statements" that involve risks and
uncertainties. For a discussion of such risks and uncertainties, which could
cause actual results to differ from those contained in the forward-looking
statements, see "Risk Factors" in Lincoln's Form 10-K for the year ended
December 31, 2005. All forward-looking statements are qualified in their
entirety by this cautionary statement, and Lincoln undertakes no obligation to
revise or update this news release to reflect events or circumstances after the
date hereof.
(Please see financial attachments.)
Contacts:
Investors: Press or Media:
Chris Plunkett/Brad Edwards Jennifer Gery
Brainerd Communicators, Inc. Brainerd Communicators, Inc.
212-986-6667 212-986-6667
LINCOLN EDUCATIONAL SERVICES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended
June 30,
2006 2005
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REVENUES $ 75,363 $ 68,236
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COSTS AND EXPENSES
Educational services and facilities 32,609 29,559
Selling, general and administrative 40,955 37,865
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Total costs & expenses 73,564 67,424
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OPERATING INCOME 1,799 812
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OTHER:
Interest income 306 22
Interest expense (570) (763)
Other income 54 -
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INCOME BEFORE INCOME TAXES 1,589 71
PROVISION FOR INCOME TAXES 623 29
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NET INCOME $ 966 $ 42
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Earnings per share - basic:
Net income available to common shareholders $ 0.04 $ 0.00
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Earnings per share - diluted:
Net income available to common shareholders $ 0.04 $ 0.00
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Other data:
Depreciation and amortization $ 3,679 $ 3,051
Number of campuses 37 32
Average enrollment 17,380 16,909
Stock based compensation $ 404 $ 310
Selected Consolidated Balance Sheet Data: June 30,
(unaudited) 2006
(In thousands) ------------------
Cash and cash equivalents $5,467
Current assets 37,529
Working capital/(deficit) (13,583)
Total assets 226,157
Current liabilities 51,112
Long-term debt and capital lease
Obligations, including current portion 27,785
Total stockholders' equity $141,256
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