UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
___________________
Form
8-K
___________________
CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES
EXCHANGE ACT OF 1934
DATE
OF REPORT (DATE OF EARLIEST EVENT REPORTED): March 6, 2008
___________________
Lincoln
Educational Services Corporation
(Exact
Name of Registrant as Specified in Charter)
___________________
|
New
Jersey
(State
or other jurisdiction
of incorporation) |
000-51371
(Commission
File Number)
|
57-1150621
(I.R.S.
Employer
Identification No.) |
|
200
Executive Drive, Suite 340
West
Orange, New Jersey 07052
(Address
of principal executive offices)
|
07052
(Zip
Code)
|
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:
|
o
|
Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
|
|
|
o
|
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|
|
|
o
|
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
|
|
|
o
|
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
|
|
Item
2.02
|
Results of Operations
and Financial Condition
|
On March 6, 2008, Lincoln Educational
Services Corporation (the “Company”) issued a press release announcing, among
other things, its results of operations for the fourth quarter and twelve months
ended December 31, 2007. 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
|
|
(c)
|
Exhibits
|
|
99.1
|
Press
release of Lincoln Educational Services Corporation dated March 6,
2008.
|
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: March 6, 2008 | ||||
|
|
By:
|
/s/ Cesar Ribeiro | ||
| Name: | Cesar Ribeiro | |||
| Title: | Senior Vice President, Chief Financial | |||
| Officer and Treasurer | ||||
Exhibit
99.1
Lincoln
Educational Services Corporation Reports
Strong
Fourth Quarter and 2007 Year End Results
West Orange, New Jersey, March
6, 2008 – Lincoln Educational Services Corporation (Nasdaq: LINC) (“Lincoln”)
today reported fourth quarter and 2007 year end results.
Highlights:
|
|
·
|
Diluted
EPS from continuing operations of $0.37 for the fourth quarter of 2007
versus consensus estimates of
$0.34.
|
|
|
·
|
Revenue
growth of 8.2% to $90.3 million for the fourth quarter of 2007 from $83.5
million for the fourth quarter of
2006.
|
|
|
·
|
Student
starts increased by 7.7% over the fourth quarter of
2006. Student population at December 31, 2007 increased 8.5% to
18,013 from 16,598 at December 31,
2006.
|
|
|
·
|
2008
Guidance –
|
|
|
Ø
|
Revenue
of $355 million to $365 million, up 8% to 11% over
2007.
|
|
|
Ø
|
Diluted
EPS of $0.62 to $0.66, representing growth of 17% to 25% over
2007.
|
|
|
Ø
|
Guidance
based on increase in expected student starts of 6% to 7% over
2007.
|
|
|
Ø
|
For
the first quarter of 2008, we expect revenue of $81.5 million to $82.5
million, representing an increase of approximately 7.5% over the first
quarter of 2007, diluted loss per share of ($0.02) to $0.0 and an increase
in student starts of 6% to 7% over the first quarter of
2007.
|
With
respect to student lending issues, as we have previously stated, we expect these
issues to have a limited impact on the results of our operations, which is
incorporated in our guidance.
Comment
and Outlook
“We are
pleased with our fourth quarter results as the positive momentum we experienced
in the third quarter of 2007 continued into the fourth quarter,” said David
Carney, Lincoln’s Chairman & CEO. “The additional investments in
our marketing initiatives helped sustain this momentum, which enabled us to
finish the quarter with student starts up 7.7% over the fourth quarter of
2006. More importantly, as we enter 2008 we will benefit from
an 8.5% increase in our population versus the prior year.
“During
the second half of 2005, our entire industry experienced a significant slow down
in student starts. This challenging operating environment
forced us to revisit all aspects of our business and take significant steps,
including:
Continued
.. . .
Page
2 of 8
|
|
·
|
Realigning
our business and creating separate managerial oversight for the Lincoln
Technical Group and the Lincoln Educational
Group.
|
|
|
·
|
Re-branding
our schools, with 80% of our campuses now operating under the “Lincoln
Brand”.
|
|
|
·
|
Introducing
new marketing initiatives, including a state of the art
website.
|
|
|
·
|
Restructuring
our sales force.
|
|
|
·
|
Implementing
a uniform student management system across all of our
campuses.
|
|
|
·
|
Closing
three underperforming schools.
|
“This new
focus enabled us to achieve growth in spite of a difficult operating
environment. Our strong carry-in population places us in a very good
position for 2008. In 2008, we expect to achieve record revenue
levels of $355 million to $365 million and diluted EPS of $0.62 to $0.66 based
on continued strong growth in student starts of 6% to
7%. For the first quarter we expect revenues of $81.5
million to $82.5 million and diluted loss per share of ($0.02) to $0.0 on growth
in starts of 6% to 7%. We expect to maintain the momentum we have
experienced in the last six months and continue driving growth in student
starts.”
Mr.
Carney concluded, “We have built a very strong foundation for our
company. We have a talented and energized management team, a strong
regulatory record, uniform student management systems throughout our schools,
and a well positioned diversified portfolio of assets. Given our
strong foundation, and in light of the current environment we operate in, we
will also focus on acquisitions that increase shareholder value.”
Discontinued
Operations
As
previously reported, on July 31, 2007 our Board of Directors approved a plan to
cease operations at three of our campuses. As a result of that
decision, we recognized a non-cash impairment charge related to goodwill at
these three campuses of approximately $2.1 million as of June 30,
2007. Additionally, we determined that certain long-lived assets
would not be recoverable at June 30, 2007 and recorded a non-cash charge of $0.9
million to reduce the carrying value of these assets to their estimated fair
value.
As of September 30,
2007 all operations had ceased at these campuses, and accordingly, the results
of operations of these campuses have been reflected in the accompanying
statements of operations as “Discontinued Operations” for all periods
presented.
The
following amounts relate to discontinued operations (in thousands):
|
Three
Months Ended
|
Year
Ended
|
|||||||||||||||
|
December
31,
|
December
31,
|
|||||||||||||||
|
2007
|
2006
|
2007
|
2006
|
|||||||||||||
|
Revenue
|
$ | - | $ | 2,665 | $ | 4,230 | $ | 10,876 | ||||||||
|
Operating
expenses
|
- | (3,020 | ) | (13,760 | ) | (13,493 | ) | |||||||||
| - | (355 | ) | (9,530 | ) | (2,617 | ) | ||||||||||
|
Benefit
for income taxes
|
- | (148 | ) | (4,043 | ) | (1,085 | ) | |||||||||
|
Loss
from discontinued operations
|
$ | - | $ | (207 | ) | $ | (5,487 | ) | $ | (1,532 | ) | |||||
Page 3 of
8
Fiscal
2007 Operating Performance
Revenues
increased by $17.1 million, or 5.5%, to $327.8 million for 2007 from
$310.6 million for 2006. Approximately $7.4 million of this increase
was a result of our acquisition of New England Institute of Technology at Palm
Beach, Inc. (“FLA”), on May 22, 2006. The remainder of the increase was due to
tuition increases. For the year ended December 31, 2007, our
average undergraduate full-time student enrollment increased 1.7% to 17,687
compared to 17,397 for the year ended December 31, 2006. Excluding our
acquisition of FLA, our average undergraduate student enrollment decreased by
0.4% to 16,682 from 16,757 in 2006.
Our
operating income for the year ended December 31, 2007 was $25.9 million, which
represented a 15.4% decrease compared to the year ended December 31,
2006. The reduction in operating income was due primarily to lower
average enrollment between years. The loss of revenue from these
students coupled with high fixed costs of operating our business led to lower
margins.
Our
educational services and facilities expenses increased by $10.2 million, or
7.9%, to $139.5 million for 2007 from $129.3 million for 2006. Our
acquisition of FLA accounted for $3.0 million or 29.4% of this increase.
Excluding FLA, instructional expenses and books and tools expense increased by
$1.1 million or 1.7% and $1.8 million or 11.9%, respectively, over the prior
year primarily due to increased compensation and benefits expenses and due to
higher volumes of sales for books and tools. The remainder of the increase in
educational services and facilities expenses was primarily due to facilities
expenses which increased $4.3 million over the prior year. Of this amount,
approximately $3.7 million represents increases in facility costs and $0.6
million represents additional depreciation expense during the year over prior
year. The increase in facility costs is primarily due to a $1.0
million increase in rent expense in 2007 due to our expanded campus facilities
at our Rhode Island, Southwestern and Indianapolis campuses. We also
experienced increased costs for insurance and real estate taxes, which increased
approximately $0.5 million from the prior year, utilities which increased
approximately $0.5 million over the prior year and from repairs and maintenance
expenses, which increased approximately $1.4 million over the prior
year. Approximately $0.8 million of the increase in repairs and
maintenance was due to higher than normal repairs and maintenance expenses at
one of our schools. Educational services and facilities expenses as a
percentage of revenues increased to 42.6% for 2007 from 41.6% for
2006.
Our
selling, general and administrative expenses for the year ended December 31,
2007 were $162.4 million, an increase of $11.3 million, or 7.5%, from
$151.1 million for 2006. Approximately $4.1 million of this increase was
attributed to our acquisition of FLA. The remainder of the increase was
primarily due to: (a) a $1.0 million or 3.3% increase in sales expense
resulting mainly from yearly compensation increases; (b) a $0.6 million or
2.1%, increase in marketing costs as a result of increased advertising expenses
associated with student leads and enrollment; and (c) a $5.2 million or 7.0%
increase in administrative expenses, over the prior year.
The
increase in marketing expenses during 2007 included a shift from television
advertising to internet based initiatives and the re-launching of our
website. These initiatives increased student leads at a lower cost
per lead. Included in administrative expenses during the year are an
upfront non-cash charge of $0.5 million incurred in connection with termination
of certain lease agreements and a $0.6 million charge incurred in connection
with severance payments related to the separation of employment of two
executives. The remainder of the increase in administrative expenses
was attributable to a higher provision for bad debts in 2007 as compared to
2006. Bad debt expense, excluding FLA in 2007 increased $1.8 million from $14.9
million in 2006 to $16.7 million for the year ended December 31, 2007. This
increase was due to higher accounts receivable balances throughout the year as
compared to
Page 4 of
8
prior
year, resulting from increased loans to our students. The remainder
of the increase in administrative expenses is due to yearly compensation
increases to existing personnel and higher benefit costs during the
year.
As a
percentage of revenue, selling, general and administrative expenses increased to
49.5% for 2007 from 48.7% for 2006.
As a
result of the above, our operating margin for the year ended December 31, 2007
decreased to 7.9% from 9.9% in 2006.
Net
income from continuing operations for the year ended December 31, 2007 was $13.8
million, or $0.53 per diluted share, as compared to $17.1 million or $0.65 per
diluted share for 2006.
Fourth
Quarter 2007 Operating Performance
Revenues
increased by $6.8 million, or 8.2%, to $90.3 million for the
fourth quarter of 2007 from $83.5 million for the comparable period in
2006. Revenues for the fourth quarter of 2007 were positively
impacted by a 7.7% increase in student starts and an increase in our average
population of 5.4%. For the fourth quarter of 2007, our
average population was 19,167 students compared to 18,193 students in the fourth
quarter of 2006.
Our
operating income for the fourth quarter of 2007 was $17.0 million, which
represented a 1.2% decrease compared to the fourth quarter of
2006. The reduction in operating income was due to increased
investments in marketing during the fourth quarter of 2007 and severance related
charges.
Educational
services and facilities expenses increased by $1.7 million, or 5.3%, to
$34.9 million for the fourth quarter of 2007 from $33.2 million
in the fourth quarter of 2006. Approximately $0.8 million of
the increase in educational services and facilities was due to yearly
compensation increases to our instructional staff, increases in books and tool
expenses resulting from annual cost increases, and higher volumes of sales for
books and tools. The remainder of the increase is due to additional
rent expense in the fourth quarter of 2007 due to our expanded campus facilities
at our Rhode Island, Southwestern and Indianapolis campuses and higher
depreciation expense during the year. Educational services and
facilities expenses as a percentage of revenues decreased to 38.7% for the
fourth quarter of 2007 from 39.8% in the fourth quarter of 2006.
Our
selling, general and administrative expenses for the fourth quarter of 2007 were
$38.3 million, an increase of $4.8 million, or 14.6%, from $33.5
million for the fourth quarter of 2006. Of this increase
approximately $1.8 million relates to increases in advertising during the fourth
quarter of 2007 as compared to the fourth quarter of
2006. Administrative expenses during the quarter accounted for an
additional $2.7 million of the increase. Included in this increase is
approximately $1.8 million in additional bad debt expense. The
increase in bad debt expense is primarily due to the increase in day’s sales
outstanding to 25.1 days from 22.8 days in the fourth quarter of
2006. This increase was due to higher accounts receivable balances
throughout the year as compared to prior year, resulting from an increase in
funding of loans to our students. Included in administrative expenses
for the fourth quarter of 2007 is a $0.6 million charge incurred in connection
with severance payments related to the separation of employment of two
executives. The remainder of the increase in administration expenses
as well as selling and general administrative expenses is due to yearly
compensation increases and increases in the costs of employee
benefits.
Page 5 of
8
For the
quarter ended December 31, 2007, our bad debt expense was 5.7% as compared to
3.9% for the same quarter in 2006.
As of
percentage of revenue, selling, general and administrative expenses for the
fourth quarter of 2007 increased to 42.4% from 40.1% for the fourth quarter of
2006.
As a
result of the above, our operating margin for the fourth quarter of 2007
decreased to 18.8% from 20.6% in the fourth quarter of 2006.
Net
income from continuing operations for the fourth quarter of 2007 was $9.6
million, or $0.37 per diluted share, as compared to $9.8 million, or $0.38 per
diluted share, for the comparable period in 2006.
Balance
Sheet
At
December 31, 2007, we had $3.5 million in cash and cash equivalents, compared to
$6.5 million at December 31, 2006. The reduction reflects our continued
investment in our business.
At
December 31, 2007, our stockholders’ equity was $162.5 million, compared to
$151.8 million at December 31, 2006, with the increase resulting from net income
for the period and stock-based compensation expense.
Student
Metrics
|
Three
Months Ended
|
Year
Ended
|
|||||||||||||||||||||||
|
December
31,
|
December
31,
|
|||||||||||||||||||||||
|
2006
|
2007
|
Growth
|
2006
|
2007
|
Growth
|
|||||||||||||||||||
|
Student
Starts
|
4,122 | 4,440 | 7.7% | 22,581 | 24,185 | 7.1% | ||||||||||||||||||
|
Average
population
|
18,193 | 19,167 | 5.4% | 17,397 | 17,687 | 1.7% | ||||||||||||||||||
|
End
of period population
|
16,598 | 18,013 | 8.5% | 16,598 | 18,013 | 8.5% | ||||||||||||||||||
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 866-800-8651 (domestic) or
617-614-2704 (international) and citing code 77951232. Please log-in or dial-in
at least 10 minutes prior to the start time to ensure a connection. An archived
version of the webcast will be accessible for 90 days at http://www.lincolneducationalservices.com.
A replay of the call will also be available for seven days by calling
888-286-8010 (domestic) or 617-801-6888 (international) and citing code
83592369.
Page 6 of
8
About
Lincoln Educational Services Corporation
Lincoln
Educational Services Corporation is a leading and diversified for-profit
provider of career-oriented post-secondary education. Lincoln offers
recent high school graduates and working adults degree and diploma programs in
five principal areas of study: automotive technology, health sciences, 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 34 campuses
in 17 states under five brands: Lincoln College of Technology, Lincoln Technical
Institute, Nashville Auto-Diesel College, Southwestern College and Euphoria
Institute of Beauty Arts and Sciences. Lincoln had a combined average
enrollment of approximately 17,687 students as of December 31,
2007.
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, 2006. 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
|
Page 7 of
8
LINCOLN EDUCATIONAL SERVICES CORPORATION AND
SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
(In
thousands, except per share amounts)
|
Three
Months Ended December 31,
(Unaudited)
|
Years
Ended December 31,
|
|||||||||||||||
|
2007
|
2006
|
2007
|
2006
|
|||||||||||||
|
REVENUES
|
$ | 90,294 | $ | 83,460 | $ | 327,774 | $ | 310,630 | ||||||||
|
COSTS
AND EXPENSES:
|
||||||||||||||||
|
Educational
services and facilities
|
34,960 | 33,217 | 139,500 | 129,311 | ||||||||||||
|
Selling,
general and administrative
|
38,321 | 33,452 | 162,396 | 151,136 | ||||||||||||
|
Loss
(gain) on sale of assets
|
- | (428 | ) | (15 | ) | (435 | ) | |||||||||
|
Total
costs and expenses
|
73,281 | 66,241 | 301,881 | 280,012 | ||||||||||||
|
OPERATING
INCOME
|
17,013 | 17,219 | 25,893 | 30,618 | ||||||||||||
|
OTHER:
|
||||||||||||||||
|
Interest
income
|
31 | 121 | 180 | 981 | ||||||||||||
|
Interest
expense
|
(501 | ) | (551 | ) | (2,341 | ) | (2,291 | ) | ||||||||
|
Other
income (loss)
|
1 | 2 | 27 | (132 | ) | |||||||||||
|
INCOME
BEFORE INCOME TAXES
|
16,544 | 16,791 | 23,759 | 29,176 | ||||||||||||
|
PROVISION
FOR INCOME TAXES
|
6,924 | 6,992 | 9,932 | 12,092 | ||||||||||||
|
NET
INCOME FROM CONTINUING OPERATIONS
|
$ | 9,620 | $ | 9,799 | $ | 13,827 | $ | 17,084 | ||||||||
|
Loss
from discontinued operations, net of tax
|
- | (207 | ) | (5,487 | ) | (1,532 | ) | |||||||||
|
NET
INCOME
|
$ | 9,620 | $ | 9,592 | $ | 8,340 | $ | 15,552 | ||||||||
|
Earnings
per share - Basic -
|
||||||||||||||||
|
Earnings
per share from continuing operations
|
$ | 0.38 | $ | 0.39 | $ | 0.54 | $ | 0.67 | ||||||||
|
Loss
per share from discontinued operations
|
- | (0.01 | ) | (0.21 | ) | (0.06 | ) | |||||||||
|
Net
income per share
|
$ | 0.38 | $ | 0.38 | $ | 0.33 | $ | 0.61 | ||||||||
|
Earnings
per share – Diluted -
|
||||||||||||||||
|
Earnings
per share from continuing operations
|
$ | 0.37 | $ | 0.38 | $ | 0.53 | $ | 0.65 | ||||||||
|
Loss
per share from discontinued operations
|
- | (0.01 | ) | (0.21 | ) | (0.05 | ) | |||||||||
|
Net
income per share
|
$ | 0.37 | $ | 0.37 | $ | 0.32 | $ | 0.60 | ||||||||
|
Weighted
average number of common shares outstanding:
|
||||||||||||||||
|
Basic
|
25,598 | 25,440 | 25,479 | 25,336 | ||||||||||||
|
Diluted
|
26,274 | 26,104 | 26,090 | 26,086 | ||||||||||||
|
Other
data:
|
||||||||||||||||
|
EBITDA
(1)
|
21,021 | 20,723 | 41,031 | 44,315 | ||||||||||||
|
Depreciation
and amortization
|
4,007 | 3,502 | 15,111 | 13,829 | ||||||||||||
|
Number
of campuses
|
34 | 34 | 34 | 34 | ||||||||||||
|
Average
enrollment
|
19,167 | 18,193 | 17,687 | 17,397 | ||||||||||||
|
Stock
based compensation
|
500 | 291 | 1,849 | 1,424 | ||||||||||||
Page 8 of
8
|
Selected Consolidated Balance
Sheet Data:
(In
thousands)
|
December
31,
2007
|
|||
|
Cash
and cash equivalents
|
$ | 3,502 | ||
|
Current
assets
|
43,761 | |||
|
Working
capital/(deficit)
|
(17,952 | ) | ||
|
Total
assets
|
246,183 | |||
|
Current
liabilities
|
61,713 | |||
|
Long-term
debt and capital lease
|
||||
|
Obligations,
including current portion
|
15,378 | |||
|
Total
stockholders’ equity
|
$ | 162,467 | ||
(1)
Reconciliation of Non-GAAP Financial Measures
EBITDA is
a measurement not recognized in financial statements presented in accordance
with accounting principles generally accepted in the United States of America
(“GAAP”). We define EBITDA as income from continuing operations
before interest expense (net of interest income), provision for income taxes and
depreciation and amortization. EBITDA is presented because we believe
it is a useful indicator of our performance and our ability to make strategic
acquisitions and meet capital expenditure and debt service
requirements. It is not, however, intended to represent cash flows
from operations as defined by GAAP and should not be used as an alternative to
net income (loss) as an indicator of operating performance or to cash flow as a
measure of liquidity. EBITDA is not necessarily comparable to
similarly titled measures used by other companies. Following is a
reconciliation of income from continuing operations to EBITDA:
|
Three
Months Ended December 31,
(Unaudited)
|
Years
Ended December 31,
|
|||||||||||||||
|
2007
|
2006
|
2007
|
2006
|
|||||||||||||
|
Income
from continuing operations
|
$ | 9,620 | $ | 9,799 | $ | 13,827 | $ | 17,084 | ||||||||
|
Interest
expense,
net
|
470 | 430 | 2,161 | 1,310 | ||||||||||||
|
Provision
for income taxes
|
6,924 | 6,992 | 9,932 | 12,092 | ||||||||||||
|
Depreciation
and amortization
|
4,007 | 3,502 | 15,111 | 13,829 | ||||||||||||
|
EBITDA
|
$ | 21,021 | $ | 20,723 | $ | 41,031 | $ | 44,315 | ||||||||
# # #