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): November 5, 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)
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|
|
o
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|
|
|
o
|
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
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|
|
o
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
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Item
2.02
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Results of Operations
and Financial
Condition
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On November 5, 2008, Lincoln
Educational Services Corporation (the “Company”) issued a press release
announcing, among other things, its results of operations for the third quarter
and nine months ended September 30, 2008. 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.
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Item
9.01
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Financial Statements
and Exhibits
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|
(c)
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Exhibits
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99.1
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Press
release of Lincoln Educational Services Corporation dated November 5,
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:
November 5, 2008
|
||||
| By: | /s/ Cesar Ribeiro | |||
| Name: | Cesar Ribeiro | |||
| Title: | Senior Vice President, Chief Financial Officer and Treasurer | |||
Lincoln
Educational Services Corporation Reports
Record
Revenue and Enrollment in the Third Quarter
West Orange, New Jersey,
November 5, 2008 – Lincoln Educational Services Corporation (Nasdaq: LINC)
(“Lincoln”) reported third quarter 2008 results.
Highlights:
|
|
·
|
Record
revenue of $100.5 million for the third quarter of 2008, an increase of
16.1% from $86.6 million for the third quarter of
2007.
|
|
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·
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Diluted
EPS from continuing operations increased to $0.22 for the third quarter of
2008, representing an increase of 29.4% from $0.17 for the third quarter
of 2007. Diluted EPS for the third quarter of 2008 includes a
$0.01 charge incurred in connection with the filing of our registration
statements on Form S-3.
|
|
|
·
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Student
starts increased by 8.6% as compared to the third quarter of
2007. Student population at September 30, 2008 increased 15.1%
to 22,404, from 19,463 at September 30,
2007.
|
|
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·
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The
Company is raising its previously issued guidance. The Company
now expects revenues for 2008 to be in the range of $368 to $372 million,
or an increase of approximately 12% to 13% over 2007, on an increase in
annual starts of 9% to 11% over 2007 and diluted earnings per share of
$0.69 to $0.71, or an increase of approximately 30% to 34% over
2007.
|
Comment
and Outlook
“We are
very pleased with our financial performance for the third quarter,” said David
Carney, Lincoln’s Chairman & CEO. “For the second consecutive
quarter we have achieved record revenue and increased our operating margins
while exceeding our previous guidance of expected growth in
starts. More importantly, for the first time in our history our
population exceeded 22,400 students and we have entered the fourth quarter of
2008 with approximately 2,900 more students enrolled than we had at the same
time last year. We expect this momentum to continue throughout the
remainder of the year.”
Mr.
Carney added, “We believe the passage of the Higher Education Act has addressed
to a great degree the previous uncertainty regarding how students would finance
their education. The higher financial aid limits have reduced the tuition gap
between the amounts available from financial aid and amounts students have to
finance with other parties, including Lincoln. Our proprietary loan
program has enabled us to support our students without imposing an undue
financial burden on the Company. For the third quarter, cash from
operations, including cash required to fund our loan program, reached a record
of $21.6 million, which we utilized to pay off all amounts outstanding under our
credit agreement.”
Mr.
Carney concluded, “Our diversified program offerings, principally at the diploma
and associate degree level, position us well in the event of a slowdown in the
economy. The recent approval to offer Associate and Bachelor Degrees
to our automotive and skilled trade students at our Columbia, MD campus gives us
a competitive advantage in the marketplace. Furthermore, our recently
announced acquisition of Briarwood College will help us expand the scope of
online programs and degrees.
Continued
.. . .
Page 2 of 6
Briarwood
College will establish Lincoln’s first regionally accredited campus and will
serve as the platform for our online operations. Our goal is to provide lifelong
learning to our current and former students, as well as broaden our appeal to
potential new students. We expect a strong fourth quarter and
expect to begin 2009 with approximately 2,500 more students than we had in 2008,
positioning us well for 2009. ”
Third
Quarter 2008 Operating Performance
Revenues
increased by $13.9 million, or 16.1%, to $100.5 million for the quarter ended
September 30, 2008 from $86.6 million for the quarter ended September 30,
2007. The increase in revenues for the quarter was primarily attributable
to a 13.6% increase in average student population, which increased to 20,665 for
the quarter ended September 30, 2008, from 18,185 for the quarter ended
September 30, 2007. Revenues were also favorably impacted by tuition
increases, which averaged from 3.0% to 3.5% during the quarter and increases in
tool sales and interest income collected on student loans, which increased by
$0.2 million and $0.2 million, respectively, as compared to the third quarter of
2007. For the quarter ended September 30, 2008, average revenue per student
increased 2.1% as compared to the third quarter of 2007, primarily due to
tuition increases during the quarter, offset by a shift in student population to
students enrolled in lower tuition programs.
Operating
income margin for the quarter ended September 30, 2008 increased 100 basis
points to 10.3% from 9.3% in the third quarter of 2007. The
improvement in operating income margin was due to in a large measure to the
increase in our average student population, which enabled us to leverage our
educational services and facilities expenses during the period. The additional
revenues from these students contributed to the increase in operating
margins.
Educational
services and facilities expenses for the quarter ended September 30, 2008 were
$41.6 million, representing an increase of $4.5 million, or 12.1%, as compared
to $37.1 million for the quarter ended September 30, 2007. The increase in
educational services and facilities expenses was due to instructional expenses
and books and tool expenses, which increased by $1.8 million, or 9.8%, and $1.2
million, or 18.8%, respectively, over the same quarter in 2007, resulting
from an 8.6% increase in student starts during the third quarter of 2008 as
compared to the third quarter of 2007 and as a result of the overall increase in
student population and higher tool sales as compared to the third quarter of
2007. We began the third quarter of 2008 with approximately 2,400
more students than we had on July 1, 2007. The remainder of the
increase in educational services and facilities expenses was due to facilities
expenses, which increased by approximately $1.5 million over the same quarter in
2007. This increase in facilities expenses was primarily due to
a $0.6 million increase in depreciation expense resulting from capital
expenditures during 2007 and the first nine months of
2008. Capital expenditures during these periods included the
renovation and conversion of our former auto school in Grand Prairie, Texas to a
skilled trades school, the opening of a culinary school at our Columbia,
Maryland campus and the opening of our new campus, Aliante, in North Las Vegas,
Nevada. The remainder of the increase in facilities expenses was primarily
due to a $0.5 increase in repairs and maintenance at our campuses, and higher
utility and property taxes at our campuses. As a percentage of revenues,
educational services and facilities expenses for the third quarter of 2008
decreased to 41.4% from 42.8% for the third quarter of 2007.
Selling,
general and administrative expenses for the quarter ended September 30, 2008
were $48.5 million, representing an increase of $7.1 million, or 17.0%, as
compared to $41.4 million for the quarter ended September 30, 2007. The
increase in our selling, general and administrative expenses during the period
was primarily due to a $0.5 million, or 14.0%, increase in student services, a
$1.5 million, or 9.0%, increase in sales and marketing expenses and a $5.0
million, or 24.0%, increase in administrative
Page 3 of 6
expenses
for the quarter ended September 30, 2008 as compared to the quarter ended
September 30, 2007. The increase in student services was primarily
due to increases in compensation and benefit expenses, additional financial aid
personnel attributed to a larger student population during the third quarter of
2008 as compared to the third quarter of 2007 as well as the incremental costs
associated with our efforts to centralize the back office process with respect
to financial aid. During 2008, we began a pilot program to centralize
the back office administration of our financial aid department in an effort to
improve the effectiveness and timeliness of our financial aid
processing. The increase in sales and marketing expenses was due to
annual compensation increases to sales representatives, the hiring of additional
sales representatives and increased call center support as compared to the third
quarter of 2007, coupled with increased investments in marketing to continue to
grow our student population. The increase in administrative expenses was
primarily due to (a) a $2.4 million increase in compensation and benefits,
resulting from annual compensation increases, including increases in employee
bonuses and stock compensation expense and the increased cost of benefits
provided to employees; (b) a $1.7 million increase in bad debt expense; (c) $0.4
million of expenses incurred in connection with two registrations statements on
Form S-3, filed with the SEC during 2008 and certain other related expenses; and
(d) a $0.2 million increase in software maintenance expenses resulting from
increased software licenses for our student management system. As a percentage
of revenues, selling, general and administrative expenses for the third quarter
of 2008 increased to 48.3% from 47.9% for the third quarter of
2007.
For the
quarter ended September 30, 2008, our bad debt expense as a percentage of
revenue was 6.3% as compared to 5.3% for the same quarter in
2007. This increase was primarily attributable to higher accounts
receivable due to a 16.1% increase in revenues during the third quarter of 2008
as compared to the third quarter of 2007. The number of days sales
outstanding at September 30, 2008 increased to 26.3 days compared to 22.8 days
at September 30, 2007. The increase in days sales outstanding is
primarily attributable to our decision to internally finance the gap in student
tuition for which students are unable to obtain third-party
financing. As of September 30, 2008, we had made loan commitments to
our students of $22.3 million as compared to $20.1 million and $15.7 million at
June 30, 2008 and December 31, 2007, respectively. Loan commitments,
net of interest that would be due on the loans through maturity, were $15.4
million at September 30, 2008 as compared to $13.7 million and $10.8 million at
June 30, 2008 and December 31, 2007, respectively.
Income
from continuing operations for the quarter ended September 30, 2008 was $5.7
million, or $0.22 per diluted share, compared to income from continuing
operations of $4.4 million, or $0.17 per diluted share for the third quarter of
2007.
Balance
Sheet
At
September 30, 2008, the Company had $6.1 million in cash, compared to $3.5
million at December 31, 2007. We had no borrowings outstanding under
our credit facility at September 30, 2008 as compared to $5.0 million at
December 31, 2007 and $21.5 million at June 30, 2007.
On April
1, 2008, the Company’s Board of Directors approved the repurchase of up to
1,000,000 shares of our common stock. During the second quarter of
2008, the Company repurchased 600,000 shares of our common stock at an average
price of $10.63 per share for approximately $6.4 million. No
shares were repurchased during the third quarter of 2008.
At
September 30, 2008, stockholders’ equity was $165.4 million, compared to $162.5
million at December 31, 2007, with the change resulting from net income for the
period offset by the purchase of 600,000 shares of our common stock during the
second quarter of 2008.
Page 4 of 6
Student
Metrics
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Three
Months Ended
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||||||||||||
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September 30,
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||||||||||||
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2008
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2007
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Growth
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||||||||||
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Student
starts
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10,564 | 9,725 | 8.6 | % | ||||||||
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Average
population
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20,665 | 18,185 | 13.6 | % | ||||||||
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End
of period population
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22,404 | 19,463 | 15.1 | % | ||||||||
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 888-396-2384 (domestic) or
617-847-8711 (international) and citing code 82848176. 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
63003120.
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 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 35 campuses in 17 states under five
brands: Lincoln Technical Institute, Lincoln College of Technology, Nashville
Auto-Diesel College, Southwestern College and Euphoria Institute of Beauty Arts
and Sciences. Lincoln had a combined average enrollment of
approximately 20,665 students for the quarter ended September 30,
2008.
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, 2007. 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.
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212-986-6667
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212-986-6667
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Page 5 of 6
LINCOLN EDUCATIONAL SERVICES CORPORATION AND
SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(In
thousands, except per share amounts)
|
Three
Months Ended September 30,
(Unaudited)
|
Nine
Months Ended September 30,
(Unaudited)
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|||||||||||||||
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2008
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2007
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2008
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2007
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|||||||||||||
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REVENUES
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$ | 100,481 | $ | 86,566 | $ | 269,584 | $ | 237,480 | ||||||||
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COSTS
AND EXPENSES:
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||||||||||||||||
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Educational
services and facilities
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41,554 | 37,053 | 114,109 | 104,540 | ||||||||||||
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Selling,
general and administrative
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48,485 | 41,434 | 141,058 | 124,075 | ||||||||||||
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Loss
(gain)on disposal of assets
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51 | - | 91 | (15 | ) | |||||||||||
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Total
costs and expenses
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90,090 | 78,487 | 255,258 | 228,600 | ||||||||||||
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OPERATING
INCOME
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10,391 | 8,079 | 14,326 | 8,880 | ||||||||||||
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OTHER:
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||||||||||||||||
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Other
income
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- | 26 | - | 26 | ||||||||||||
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Interest
income
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33 | 66 | 96 | 149 | ||||||||||||
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Interest
expense
|
(579 | ) | (686 | ) | (1,665 | ) | (1,840 | ) | ||||||||
|
INCOME
FROM CONTINUING
OPERATIONS
BEFORE INCOME TAXES
|
9,845 | 7,485 | 12,757 | 7,215 | ||||||||||||
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PROVISION
FOR INCOME TAXES
|
4,139 | 3,115 | 5,326 | 3,008 | ||||||||||||
|
INCOME
FROM CONTINUING OPERATIONS
|
5,706 | 4,370 | 7,431 | 4,207 | ||||||||||||
|
Loss
from discontinued operations, net of income tax
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- | (2,331 | ) | - | (5,487 | ) | ||||||||||
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NET
INCOME (LOSS)
|
$ | 5,706 | $ | 2,039 | $ | 7,431 | $ | (1,280 | ) | |||||||
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Earnings
per share - Basic -
|
||||||||||||||||
|
Earnings
per share from continuing operations
|
$ | 0.23 | $ | 0.17 | $ | 0.29 | $ | 0.17 | ||||||||
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Loss
per share from discontinued operations
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- | (0.09 | ) | - | (0.22 | ) | ||||||||||
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Net
income (loss) per share
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$ | 0.23 | $ | (0.08 | ) | $ | 0.29 | $ | (0.05 | ) | ||||||
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Earnings
per share – Diluted -
|
||||||||||||||||
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Earnings
per share from continuing operations
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$ | 0.22 | $ | 0.17 | $ | 0.29 | $ | 0.16 | ||||||||
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Loss
per share from discontinued operations
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- | (0.09 | ) | - | (0.21 | ) | ||||||||||
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Net
income (loss) per share
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$ | 0.22 | $ | 0.08 | $ | 0.29 | $ | (0.05 | ) | |||||||
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Weighted
average number of common shares outstanding:
|
||||||||||||||||
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Basic
|
25,088 | 25,503 | 25,362 | 25,482 | ||||||||||||
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Diluted
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25,810 | 26,050 | 26,039 | 26,029 | ||||||||||||
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Other
data:
|
||||||||||||||||
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EBITDA
(1)
|
$ | 14,832 | $ | 11,919 | $ | 27,703 | $ | 20,010 | ||||||||
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Depreciation
and amortization from continuing operations
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4,441 | 3,814 | 13,377 | 11,104 | ||||||||||||
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Cash
flows provided by operating activities
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21,646 | 19,245 | 30,003 | 8,950 | ||||||||||||
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Capital
expenditures
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3,359 | 5,952 | 15,919 | 16,391 | ||||||||||||
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Number
of campuses
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35 | 34 | 35 | 34 | ||||||||||||
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Average
enrollment
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20,665 | 18,185 | 19,221 | 17,192 | ||||||||||||
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Stock
based compensation
|
600 | 373 | 1,771 | 1,123 | ||||||||||||
Page 6 of 6
|
Selected
Consolidated Balance Sheet Data:
|
September
30,
|
|||
|
(In
thousands)
|
2008
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|||
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Cash
|
$ | 6,145 | ||
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Current
assets
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43,115 | |||
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Working
capital/(deficit)
|
(22,892 | ) | ||
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Total
assets
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248,348 | |||
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Current
liabilities
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66,007 | |||
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Long-term
debt and lease obligations, including current
portion
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10,222 | |||
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Total
stockholders’ equity
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$ | 165,384 | ||
(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 September 30,
(Unaudited)
|
Nine
Months Ended September 30,
(Unaudited)
|
|||||||||||||||
|
2008
|
2007
|
2008
|
2007
|
|||||||||||||
|
Income
from continuing operations
|
$ | 5,706 | $ | 4,370 | $ | 7,431 | $ | 4,207 | ||||||||
|
Interest
expense,
net
|
546 | 620 | 1,569 | 1,691 | ||||||||||||
|
Provision
for income taxes
|
4,139 | 3,115 | 5,326 | 3,008 | ||||||||||||
|
Depreciation
and amortization
|
4,441 | 3,814 | 13,377 | 11,104 | ||||||||||||
|
EBITDA
|
$ | 14,832 | $ | 11,919 | $ | 27,703 | $ | 20,010 | ||||||||