New
Jersey
|
57-1150621
|
|||
(State
or other jurisdiction of incorporation or organization)
|
(IRS
Employer Identification No.)
|
Large
accelerated filer
¨
|
Accelerated
filer
x
|
Non-accelerated
filer
¨
|
Smaller
reporting company
¨
|
PART
I.
|
1
|
||
ITEM
1.
|
1
|
||
ITEM
1A.
|
21
|
||
ITEM
1B.
|
30
|
||
ITEM
2.
|
31
|
||
ITEM
3.
|
32
|
||
ITEM
4.
|
32
|
||
PART II.
|
33
|
||
ITEM
5.
|
33
|
||
ITEM
6.
|
36
|
||
ITEM
7.
|
38
|
||
ITEM
7A.
|
52
|
||
ITEM
8
|
52
|
||
ITEM
9.
|
52
|
||
ITEM
9A.
|
53
|
||
ITEM
9B.
|
53
|
||
PART III.
|
54
|
||
ITEM
10.
|
54
|
||
ITEM
11.
|
54
|
||
ITEM
12.
|
54
|
||
ITEM
13.
|
54
|
||
ITEM
14.
|
54
|
||
PART IV.
|
55
|
||
ITEM
15.
|
55
|
·
|
actual or anticipated
fluctuations in our results of
operations;
|
·
|
our failure to comply with the
extensive regulatory framework applicable to our industry or our failure
to obtain timely regulatory approvals in connection with a change of
control of our company;
|
·
|
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;
|
·
|
risks associated with the opening
of new campuses;
|
·
|
risk associated with integration
of acquired schools;
|
·
|
industry
competition;
|
·
|
our ability to continue to
execute our growth
strategies;
|
·
|
conditions and trends in our
industry;
|
·
|
general and economic conditions;
and
|
·
|
other factors discussed under the
headings “Business,” “Risk Factors” and “Management’s Discussion and
Analysis of Financial Condition and Results of
Operations.”
|
ITEM 1.
|
BU
SIN
ESS
|
|
·
|
Lincoln
Technical Group. The Lincoln Technical Group primarily focuses
on our largest automotive technology and skilled trades
programs.
|
|
·
|
Lincoln
Education Group. The Lincoln Education Group primarily focuses
on our health sciences, spa and culinary and business and information
technology programs, as well as our online
programs.
|
Year
Ended December 31,
|
||||||||||||
2007
|
2006
|
2005
|
||||||||||
Revenue
|
$ | 4,230 | $ | 10,876 | $ | 11,853 | ||||||
Operating
expenses
|
(13,760 | ) | (13,493 | ) | (14,432 | ) | ||||||
(9,530 | ) | (2,617 | ) | (2,579 | ) | |||||||
Benefit
for income taxes
|
(4,043 | ) | (1,085 | ) | (1,004 | ) | ||||||
Loss
from discontinued operations
|
$ | (5,487 | ) | $ | (1,532 | ) | $ | (1,575 | ) |
Program
Offered
|
||||||||||||||
Area
of Study
|
Bachelor
|
Associate
|
Diploma
or Certificate
|
Average
Enrollment
|
Percent
of Total Enrollment
|
|||||||||
Automotive
Technology
|
- |
Auto
Service Management, Collision Repair, Diesel Technology, Diesel &
Truck Service Management
|
Automotive
Mechanics, Automotive Technology, Collision Repair, Diesel Truck
Mechanics, Diesel Technology, Diesel & Truck Technology, Master
Automotive Technology
|
6,840 | 39 | % | ||||||||
Health
Sciences
|
- |
Medical
Assisting Technology, Medical Administrative Assistant Technology, Dental
Office Management
|
Medical
Administrative Assisting, Medical Assisting, Pharmacy Technology, Medical
Billing and Coding, Dental Assisting, Licensed Practical
Nurse
|
5,386 | 30 | % | ||||||||
Skilled
Trades
|
- |
Mechanical
/ Architectural Drafting, Electronics Engineering Technology,
HVAC
|
Electronic
Servicing, Electronics Engineering Technology, Electronics System
Technology, HVAC, Mechanical / Architectural Drafting,
Electrician
|
2,591 | 15 | % | ||||||||
Spa
and Culinary
|
Culinary
Management
|
Culinary
Arts, Cosmetology Management, Food and Beverage, Baking and Pastry,
Culinary Management
|
Culinary
Arts, Baking & Pastry, Cosmetology, Esthetics, Nail Technician,
Therapeutic, Massage & Body Technology
|
1,640 | 9 | % | ||||||||
Business
and Information Technology
|
- |
PC
Systems & Networking Technology, Network Systems Administration,
Business Administration, Criminal Justice
|
Business
Administration, Network Systems Administrating, PC Support Technology,
Criminal Justice
|
1,230 | 7 | % | ||||||||
Total:
|
17,687 | 100 | % |
School
|
Last
Accreditation Letter
|
Next
Accreditation
|
||
Philadelphia,
PA
|
December 4,
2003
|
May 1,
2008
|
||
Union,
NJ
|
June 4,
2004
|
February 1,
2009
|
||
Mahwah,
NJ*
|
December
9, 2004
|
August 1,
2009
|
||
Melrose
Park, IL
|
March
11, 2005
|
November 1,
2009
|
||
Denver,
CO
|
September
8, 2006
|
February 1,
2011
|
||
Columbia,
MD
|
March 13,
2007
|
February 1,
2012
|
||
Grand
Prairie, TX
|
May 29,
2007
|
August 1,
2011
|
||
Allentown,
PA
|
January
1, 2007
|
January 1,
2012
|
||
Nashville,
TN
|
May
1, 2007
|
May 1,
2012
|
||
Indianapolis,
IN
|
December 9,
2002
|
November 1,
2007***
|
||
New
Britain, CT
|
June
6, 2003
|
December 31,
2008
|
||
Shelton,
CT**
|
September 3,
2005
|
September 1,
2008
|
||
Cromwell,
CT**
|
November 22,
2006
|
November 1,
2011
|
||
Hamden,
CT**
|
July
1, 2007
|
July 1,
2012
|
||
Mt.
Laurel, NJ**
|
May
1, 2007
|
May 1,
2009
|
||
Queens,
NY*
|
June
30, 2006
|
June 30,
2008
|
*
|
Branch campus of main campus in
Union
,
NJ
|
**
|
Branch campus of main campus in
New
Britain
,
CT
|
***
|
Currently going through
re-accreditation
|
School
|
Last
Accreditation Letter
|
Next
Accreditation
|
||
Brockton,
MA****
|
April 14,
2005
|
December 31,
2008
|
||
Lincoln,
RI
|
April 14,
2005
|
December 31,
2008
|
||
Lowell,
MA**
|
December 7,
2004
|
December 31,
2008
|
||
Somerville,
MA
|
December 7,
2004
|
December 31,
2008
|
||
Philadelphia
(Center City), PA*
|
April 23,
2007
|
December 31,
2012
|
||
Edison,
NJ
|
April 23,
2007
|
December 31,
2012
|
||
Marietta,
GA****
|
April 14,
2005
|
December 31,
2008
|
||
Mt.
Laurel, NJ*
|
April 23,
2007
|
December 31,
2012
|
||
Paramus,
NJ*
|
April 23,
2007
|
December 31,
2012
|
||
Philadelphia
(Northeast), PA*
|
April 23,
2007
|
December 31,
2012
|
||
Dayton,
OH
|
April 14,
2006
|
December 31,
2009
|
||
Cincinnati
(Vine Street), OH***
|
April 14,
2006
|
December 31,
2009
|
||
Cincinnati
(Northland Blvd.), OH***
|
April 14,
2006
|
December 31,
2009
|
||
Franklin,
OH***
|
April 14,
2006
|
December 31,
2009
|
||
Florence,
KY***
|
April 14,
2006
|
December 31,
2009
|
||
West
Palm Beach, FL
|
December
11, 2006
|
December
31, 2008
|
||
Summerlin,
NV
|
April
18, 2007
|
December
31, 2008
|
||
Green
Valley, NV
|
April
18, 2007
|
December
31, 2008
|
*
|
Branch campus of main campus in
Edison
,
NJ
|
**
|
Branch campus of main campus in
Somerville
,
MA
|
***
|
Branch campus of main campus in
Dayton
,
OH
|
****
|
Branch campus of main campus in
Lincoln
,
RI
|
Brand
|
Main
Campus (es)
|
Additional
Location (s)
|
||
Lincoln
Technical Institute
|
Union,
NJ
|
Mahwah,
NJ
|
||
Queens,
NY
|
||||
Philadelphia,
PA
|
||||
Columbia,
MD
|
||||
Grand
Prairie, TX
|
||||
Allentown,
PA
|
||||
Edison,
NJ
|
Mount
Laurel, NJ
|
|||
Paramus,
NJ
|
||||
Philadelphia,
PA (Center City)
|
||||
Northeast
Philadelphia, PA
|
||||
Somerville,
MA
|
Lowell,
MA
|
|||
Lincoln,
RI
|
Marietta,
GA*
|
|||
Brockton,
MA
|
||||
Henderson,
NV (Green Valley)**
|
||||
Las
Vegas, NV (Summerlin)**
|
||||
New
Britain, CT
|
Shelton,
CT
|
|||
Cromwell,
CT
|
||||
Hamden,
CT
|
||||
Mount
Laurel, NJ
|
||||
Lincoln
College of Technology
|
Indianapolis,
IN
|
|||
Melrose
Park, IL
|
||||
Denver,
CO
|
||||
West
Palm Beach, FL
|
West
Palm Beach, FL (Culinary)***
|
|||
Nashville
Auto Diesel College
|
Nashville,
TN
|
|||
Southwestern
College of Technology
|
Dayton,
OH
|
Cincinnati,
OH (Vine Street)
|
||
Franklin,
OH
|
||||
Cincinnati,
OH (Northland Blvd.)
|
||||
Florence,
KY
|
*
|
Th
is
campus
operates under the
Lincoln College of Technology
brand.
|
**
|
These campuses
operate under the
Euphoria Institute of Beauty Arts
& Sciences brands.
|
***
|
This campus
operates under the
Florida Culinary Institute
brand.
|
Institution
|
2005
|
2004
|
2003
|
|||||||||
Union,
NJ
|
9.90 | % | 7.60 | % | 7.10 | % | ||||||
Indianapolis,
IN
|
7.50 | % | 7.90 | % | 7.90 | % | ||||||
Philadelphia,
PA
|
9.20 | % | 12.80 | % | 15.40 | % | ||||||
Columbia,
MD
|
7.50 | % | 8.90 | % | 8.80 | % | ||||||
Allentown,
PA
|
11.50 | % | 7.00 | % | 3.90 | % | ||||||
Melrose
Park, IL
|
11.60 | % | 11.90 | % | 9.60 | % | ||||||
Grand
Prairie, TX
|
14.60 | % | 19.50 | % | 10.80 | % | ||||||
Edison,
NJ
|
6.70 | % | 3.30 | % | 5.00 | % | ||||||
Denver,
CO
|
7.00 | % | 8.40 | % | 9.10 | % | ||||||
Nashville,
TN
|
5.20 | % | 3.10 | % | 1.80 | % | ||||||
Lincoln,
RI
|
12.80 | % | 10.00 | % | 7.40 | % | ||||||
Somerville,
MA
|
8.50 | % | 10.60 | % | 8.90 | % | ||||||
Southwestern,
OH
|
7.60 | % | 3.20 | % | 6.20 | % | ||||||
New
England, CT
|
4.60 | % | 4.60 | % | 1.70 | % | ||||||
West
Palm Beach, FL
|
4.70 | % | 8.20 | % | 9.20 | % |
|
·
|
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 50% of the total Title IV Program funds
received by the institution during the institution's most recently
completed fiscal year;
|
|
·
|
Posting a letter of credit in an
amount equal to at least 10% of such prior year's Title IV Program
funds, 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; and/or
|
|
·
|
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.
|
|
·
|
Complies with all applicable
federal student financial aid
regulations;
|
|
·
|
Has capable and sufficient
personnel to administer the federal student financial aid
programs;
|
|
·
|
Has
adequate checks and balance in its system of internal
controls;
|
|
·
|
Divides
the function of authorizing and disbursing or delivering Title IV Program
Funds so that no office has the responsibility for both
functions;
|
|
·
|
Establishes
and maintains records required under the Title IV
regulations;
|
|
·
|
Develops
and applies an adequate system to identify and resolve discrepancies in
information from sources regarding a student’s application for financial
aid under Title IV;
|
|
·
|
Has acceptable methods of
defining and measuring the satisfactory academic progress of its
students;
|
|
·
|
Refers to the Office of the
Inspector General any credible information indicating that any applicant,
student, employee or agent of the school has been engaged in any fraud or
other illegal conduct involving Title IV
Programs;
|
|
·
|
Provides financial aid counseling
to its students; and
|
|
·
|
Submits
in a timely manner all reports and financial statements required by the
regulations.
|
Institution
|
Expiration
Date of Current
Program
Participation Agreement
|
|
Allentown,
PA
|
September 30,
2007*
|
|
Columbia,
MD
|
June 30,
2013
|
|
Philadelphia,
PA
|
December
31, 2013
|
|
Denver,
CO
|
December 31,
2009
|
|
Lincoln,
RI
|
June 30,
2008
|
|
Nashville,
TN
|
June 30,
2008
|
|
Somerville,
MA
|
June 30,
2008
|
|
Edison,
NJ
|
June 30,
2011
|
|
Union,
NJ
|
June 30,
2011
|
|
Grand
Prairie, TX
|
March 31,
2009
|
|
Indianapolis,
IN
|
March 31,
2009
|
|
Melrose
Park, IL
|
March 31,
2009
|
|
Dayton,
OH
|
June
30, 2008**
|
|
New
Britain, CT
|
March 31,
2009**
|
|
West
Palm Beach, FL
|
June 30,
2010**
|
|
·
|
Any adverse action, including a
probation or similar action, taken against the institution by its
accrediting agency;
|
|
·
|
Any event that causes the
institution, or related entity to realize any liability that was noted as
a contingent liability in the institution's or related entity's most
recent audit financial
statement;
|
|
·
|
Any violation by the institution
of any loan agreement;
|
|
·
|
Any
failure of the institution to make a payment in accordance with its debt
obligations that results in a creditor filing suit to recover funds under
those obligations;
|
|
·
|
Any withdrawal of owner's equity
from institution by any means, including declaring a dividend;
or
|
|
·
|
Any extraordinary losses, as
defined in accordance with Accounting Principles Board Opinion
No. 30.
|
Item 1A.
|
RISK
FA
CTOR
S
|
|
·
|
Comply with all applicable
Title IV regulations;
|
|
·
|
Have capable and sufficient
personnel to administer Title IV
Programs;
|
|
·
|
Has
adequate checks and balance in its system of internal
controls;
|
|
·
|
Divides
the function of authorizing and disbursing or delivering Title IV Program
Funds so that no office has the responsibility for both
functions;
|
|
·
|
Establishes
and maintains records required under the Title IV
regulations;
|
|
·
|
Develops
and applies an adequate system to identify and resolve discrepancies in
information from sources regarding a student’s application for financial
aid under Title IV;
|
|
·
|
Have acceptable methods of
defining and measuring the satisfactory academic progress of its
students;
|
|
·
|
Provide financial aid counseling
to its students; and
|
|
·
|
Submit in a timely manner all
reports and financial statements required by the
regulations.
|
|
·
|
Require the repayment of
Title IV funds;
|
|
·
|
Impose a less favorable payment
system for the institution's receipt of Title IV
funds;
|
|
·
|
Place the institution on
provisional certification status;
or
|
|
·
|
Commence a proceeding to impose a
fine or to limit, suspend or terminate the participation of the
institution in Title IV
Programs.
|
|
·
|
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 automotive, diesel, healthcare, skilled trades and IT,
and spa and culinary manufacturers and
suppliers.
|
·
|
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
stockholders;
|
·
|
prohibit stockholder action by
non-unanimous written consent and otherwise require all stockholder
actions to be taken at a meeting of the
stockholders;
|
·
|
establish advance notice
requirements for nominating candidates for election to the board of
directors or for proposing matters that can be acted upon by stockholders
at stockholders' 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.
|
ITEM 1B.
|
U
NRES
OLVED STAFF
COMMENTS
|
Location
|
Brand
|
Approximate
Square Footage
|
||
Union,
New Jersey
|
Lincoln
Technical Institute
|
56,000
|
||
Mahwah,
New Jersey
|
Lincoln
Technical Institute
|
79,000
|
||
Allentown,
Pennsylvania
|
Lincoln
Technical Institute
|
26,000
|
||
Philadelphia,
Pennsylvania
|
Lincoln
Technical Institute
|
30,000
|
||
Columbia,
Maryland
|
Lincoln
Technical Institute
|
110,000
|
||
Grand
Prairie, Texas
|
Lincoln
Technical Institute
|
146,000
|
||
Queens,
New York
|
Lincoln
Technical Institute
|
48,000
|
||
Edison,
New Jersey
|
Lincoln
Technical Institute
|
64,000
|
||
Mt.
Laurel, New Jersey
|
Lincoln
Technical Institute
|
26,000
|
||
Philadelphia,
Pennsylvania
|
Lincoln
Technical Institute
|
29,000
|
||
Northeast
Philadelphia, Pennsylvania
|
Lincoln
Technical Institute
|
25,000
|
||
Plymouth
Meeting, Pennsylvania*
|
Lincoln
Technical Institute
|
30,000
|
||
Paramus,
New Jersey
|
Lincoln
Technical Institute
|
27,000
|
||
Brockton,
Massachusetts
|
Lincoln
Technical Institute
|
10,000
|
||
Lincoln,
Rhode Island
|
Lincoln
Technical Institute
|
59,000
|
||
Lowell,
Massachusetts
|
Lincoln
Technical Institute
|
20,000
|
||
Somerville,
Massachusetts
|
Lincoln
Technical Institute
|
33,000
|
||
New
Britain, Connecticut
|
Lincoln
Technical Institute
|
47,000
|
||
Cromwell,
Connecticut
|
Lincoln
Technical Institute
|
12,000
|
||
Hamden,
Connecticut
|
Lincoln
Technical Institute
|
14,000
|
||
Shelton,
Connecticut
|
Lincoln
Technical Institute
|
41,600
|
||
Indianapolis,
Indiana
|
Lincoln College
of Technology
|
189,000
|
||
Melrose
Park, Illinois
|
Lincoln College
of Technology
|
67,000
|
||
Denver,
Colorado
|
Lincoln College
of Technology
|
78,000
|
||
Norcross,
Georgia*
|
Lincoln College
of Technology
|
27,000
|
||
Marietta,
Georgia
|
Lincoln College
of Technology
|
30,000
|
||
Henderson,
Nevada*
|
Lincoln College
of Technology
|
27,000
|
||
West
Palm Beach, Florida
|
Lincoln College of Technology and Florida Culinary Institute
|
117,000
|
||
Nashville,
Tennessee
|
Nashville Auto-Diesel College
|
278,000
|
||
Dayton,
Ohio
|
Southwestern
College
|
11,000
|
||
Franklin,
Ohio
|
Southwestern
College
|
14,000
|
||
Cincinnati,
Ohio
|
Southwestern
College
|
12,000
|
||
Cincinnati
(Tri-County), Ohio
|
Southwestern
College
|
31,000
|
||
Florence,
Kentucky
|
Southwestern
College
|
11,000
|
||
Las
Vegas, Nevada
|
Euphoria
Institute
|
13,000
|
||
Henderson,
Nevada
|
Euphoria
Institute
|
20,000
|
||
North
Las Vegas, Nevada
|
Euphoria
Institute
|
12,000
|
||
West
Orange, New Jersey
|
Corporate
Office
|
41,000
|
ITEM 3.
|
LEGAL
PR
OCE
EDINGS
|
ITEM 4.
|
SUBMI
SSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS
|
ITEM 5.
|
MA
RKE
T FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES
|
Price
Range of Common Stock
|
||||||||
High
|
Low
|
|||||||
Fiscal
Year Ended December 31, 2007:
|
||||||||
First
Quarter
|
$ | 14.21 | $ | 11.58 | ||||
Second
Quarter
|
$ | 15.79 | $ | 13.64 | ||||
Third
Quarter
|
$ | 15.60 | $ | 12.56 | ||||
Fourth
Quarter
|
$ | 15.43 | $ | 13.10 | ||||
Price
Range of Common Stock
|
||||||||
High
|
Low
|
|||||||
Fiscal
Year Ended December 31, 2006:
|
||||||||
First
Quarter
|
$ | 17.28 | $ | 14.25 | ||||
Second
Quarter
|
$ | 17.09 | $ | 15.42 | ||||
Third
Quarter
|
$ | 18.25 | $ | 16.33 | ||||
Fourth
Quarter
|
$ | 17.06 | $ | 12.14 |
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
|
|||||||||
Equity
compensation plans approved by security holders
|
1,512,163 | $ | 9.65 | 793,859 | ||||||||
Equity
compensation plans not approved by security
holders
|
- | - | - | |||||||||
Total
|
1,512,163 | $ | 9.65 | 793,859 |
2007
|
2006
|
2005
|
2004
|
2003
|
||||||||||||||||
(In
thousands, except per share amounts)
|
||||||||||||||||||||
Statement
of Operations Data, Year Ended December 31:
|
||||||||||||||||||||
Revenues
|
$ | 327,774 | $ | 310,630 | $ | 287,368 | $ | 248,508 | $ | 187,488 | ||||||||||
Cost
and expenses:
|
||||||||||||||||||||
Educational
services and facilities (1)
|
139,500 | 129,311 | 114,161 | 97,439 | 78,610 | |||||||||||||||
Selling,
general and administrative (2)
|
162,396 | 151,136 | 138,125 | 124,034 | 92,228 | |||||||||||||||
(Gain)
loss on sale of assets
|
(15 | ) | (435 | ) | (7 | ) | 368 | (22 | ) | |||||||||||
Total
costs and expenses
|
301,881 | 280,012 | 252,279 | 221,841 | 170,816 | |||||||||||||||
Operating
income
|
25,893 | 30,618 | 35,089 | 26,667 | 16,672 | |||||||||||||||
Other:
|
||||||||||||||||||||
Gain
on sale of securities
|
- | - | - | - | 211 | |||||||||||||||
Interest
income
|
180 | 981 | 775 | 104 | 133 | |||||||||||||||
Interest
expense (3)
|
(2,341 | ) | (2,291 | ) | (2,892 | ) | (3,002 | ) | (2,745 | ) | ||||||||||
Other
(loss) income
|
27 | (132 | ) | 243 | 42 | 307 | ||||||||||||||
Income
from continuing operations before income taxes
|
23,759 | 29,176 | 33,215 | 23,811 | 14,578 | |||||||||||||||
Provision
for income taxes
|
9,932 | 12,092 | 12,931 | 9,904 | 5,751 | |||||||||||||||
Income
from continuing operations
|
13,827 | 17,084 | 20,284 | 13,907 | 8,827 | |||||||||||||||
Loss
from discontinued operations, net of income taxes
|
(5,487 | ) | (1,532 | ) | (1,575 | ) | (929 | ) | (608 | ) | ||||||||||
Net
income
|
$ | 8,340 | $ | 15,552 | $ | 18,709 | $ | 12,978 | $ | 8,219 | ||||||||||
Basic
|
||||||||||||||||||||
Earnings
per share from continuing operations
|
$ | 0.54 | $ | 0.67 | $ | 0.86 | $ | 0.64 | $ | 0.41 | ||||||||||
Loss
per share from discontinued operations
|
(0.21 | ) | (0.06 | ) | (0.06 | ) | (0.04 | ) | (0.03 | ) | ||||||||||
Net
income per share
|
$ | 0.33 | $ | 0.61 | $ | 0.80 | $ | 0.60 | $ | 0.38 | ||||||||||
Diluted
|
||||||||||||||||||||
Earnings
per share from continuing operations
|
$ | 0.53 | $ | 0.65 | $ | 0.83 | $ | 0.60 | $ | 0.39 | ||||||||||
Loss
per share from discontinued operations
|
(0.21 | ) | (0.05 | ) | (0.07 | ) | (0.04 | ) | (0.02 | ) | ||||||||||
Net
income per share
|
$ | 0.32 | $ | 0.60 | $ | 0.76 | $ | 0.56 | $ | 0.37 | ||||||||||
Weighted
average number of common shares outstanding:
|
||||||||||||||||||||
Basic
|
25,479 | 25,336 | 23,475 | 21,676 | 21,667 | |||||||||||||||
Diluted
|
26,090 | 26,086 | 24,503 | 23,095 | 22,364 | |||||||||||||||
Other
Data:
|
||||||||||||||||||||
Capital
expenditures
|
$ | 24,766 | $ | 19,341 | $ | 22,621 | $ | 23,813 | $ | 13,154 | ||||||||||
Depreciation
and amortization from continuing operations
|
15,111 | 13,829 | 12,099 | 9,870 | 9,166 | |||||||||||||||
Number
of campuses
|
34 | 34 | 31 | 25 | 20 | |||||||||||||||
Average
student population
|
17,687 | 17,397 | 17,064 | 15,401 | 11,771 | |||||||||||||||
Balance
Sheet Data, At December 31:
|
||||||||||||||||||||
Cash
and cash equivalents
|
$ | 3,502 | $ | 6,461 | $ | 50,257 | $ | 41,445 | $ | 48,965 | ||||||||||
Working
(deficit) capital (4)
|
(17,952 | ) | (20,943 | ) | 8,531 | 4,570 | 13,402 | |||||||||||||
Total
assets
|
246,183 | 226,216 | 214,792 | 162,729 | 139,355 | |||||||||||||||
Total
debt (5)
|
15,378 | 9,860 | 10,768 | 46,829 | 43,060 | |||||||||||||||
Total
stockholders' equity
|
162,467 | 151,783 | 135,990 | 58,086 | 42,924 |
ITEM 7.
|
MANA
GEME
NT'S DISCUSSION
AND
ANALYSIS OF FINANCIAL CONDITION
AND
RESULTS OF OPERATIONS
|
|
·
|
Annual
federal Title IV loan limits, including grants have
increased. Title IV funds represented 80% of our 2007 revenue
on a cash basis;
|
|
·
|
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;
|
|
·
|
Funding
for students who interrupt their education is typically covered by Title
IV funds as long as they have been properly packaged for financial aid;
and
|
|
·
|
We
have an excellent collection history with our
graduates. Historically, 91% of all graduates have repaid their
balances in full.
|
|
·
|
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 and providing educational services to our
students.
|
|
·
|
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. All
marketing and student enrollment expenses are recognized in the period
incurred.
|
Year
Ended December 31,
|
||||||||||||
2007
|
2006
|
2005
|
||||||||||
Revenue
|
$ | 4,230 | $ | 10,876 | $ | 11,853 | ||||||
Operating
expenses
|
(13,760 | ) | (13,493 | ) | (14,432 | ) | ||||||
(9,530 | ) | (2,617 | ) | (2,579 | ) | |||||||
Benefit
for income taxes
|
(4,043 | ) | (1,085 | ) | (1,004 | ) | ||||||
Loss
from discontinued operations
|
$ | (5,487 | ) | $ | (1,532 | ) | $ | (1,575 | ) |
December
31,
|
||||||||||||
2007
|
2006
|
2005
|
||||||||||
Expected
volatility
|
55.42 | % | 55.10 | % | 55.10-71.35 | % | ||||||
Expected
dividend yield
|
0 | % | 0 | % | 0 | % | ||||||
Expected
life (term)
|
6
Years
|
6
Years
|
4-8
Years
|
|||||||||
Risk-free
interest rate
|
4.36 | % | 4.13-4.84 | % | 3.59-4.29 | % | ||||||
Weighted-average
exercise price during the year
|
$ | 11.96 | $ | 17.00 | $ | 17.14 |
Year
Ended December 31,
|
||||||||||||
2007
|
2006
|
2005
|
||||||||||
Revenues
|
100.0 | % | 100.0 | % | 100.0 | % | ||||||
Costs
and expenses:
|
||||||||||||
Educational
services and facilities
|
42.6 | % | 41.6 | % | 39.7 | % | ||||||
Selling,
general and administrative
|
49.5 | % | 48.7 | % | 48.1 | % | ||||||
(Gain)
loss on sale of assets
|
0.0 | % | (0.1 | )% | 0.0 | % | ||||||
Total
costs and expenses
|
92.1 | % | 90.1 | % | 87.8 | % | ||||||
Operating
income
|
7.9 | % | 9.9 | % | 12.2 | % | ||||||
Interest
expense, net
|
(0.7 | )% | (0.5 | )% | (0.7 | )% | ||||||
Other
income
|
0.0 | % | 0.0 | % | 0.1 | % | ||||||
Income
from continuing operations before income taxes
|
7.2 | % | 9.4 | % | 11.6 | % | ||||||
Provision
for income taxes
|
3.0 | % | 3.9 | % | 4.5 | % | ||||||
Income
from continuing operations
|
4.2 | % | 5.5 | % | 7.1 | % |
Cash
Flow Summary
|
||||||||||||
Year
Ended December 31,
|
||||||||||||
2007
|
2006
|
2005
|
||||||||||
(In
thousands)
|
||||||||||||
Net
cash provided by operating activities
|
$ | 15,735 | $ | 15,258 | $ | 38,966 | ||||||
Net
cash used in investing activities
|
$ | (23,830 | ) | $ | (52,160 | ) | $ | (50,397 | ) | |||
Net
cash provided by (used in) financing activities
|
$ | 5,136 | $ | (6,894 | ) | $ | 20,243 |
As
of December 31,
|
||||||||
2007
|
2006
|
|||||||
Credit
agreement
|
$ | 5,000 | $ | - | ||||
Finance
obligation
|
9,672 | 9,672 | ||||||
Automobile
loans
|
16 | 37 | ||||||
Capital
leases-computers (with rates ranging from 2.9% to 8.7%)
|
690 | 151 | ||||||
Subtotal
|
15,378 | 9,860 | ||||||
Less
current maturities
|
(204 | ) | (91 | ) | ||||
Total long-term
debt
|
$ | 15,174 | $ | 9,769 |
Payments
Due by Period
|
||||||||||||||||||||
Total
|
Less
than 1 year
|
2-3
years
|
4-5
years
|
After
5 years
|
||||||||||||||||
Credit
agreement
|
$ | 5,000 | $ | - | $ | 5,000 | $ | - | $ | - | ||||||||||
Capital
leases (including interest)
|
838 | 255 | 328 | 255 | - | |||||||||||||||
Operating
leases
|
133,433 | 16,398 | 28,380 | 24,385 | 64,270 | |||||||||||||||
Rent
on finance obligation
|
12,546 | 1,381 | 2,762 | 2,762 | 5,641 | |||||||||||||||
Automobile
loans (including interest)
|
16 | 16 | - | - | - | |||||||||||||||
Total
contractual cash obligations
|
$ | 151,833 | $ | 18,050 | $ | 36,470 | $ | 27,402 | $ | 69,911 |
Balances
Before
Adoption
of
Statement
158
|
Adjustments
|
Balances
After
Adoption
of
Statement
158
|
||||||||||
Pension
plan assets, net
|
$ | 5,169 | $ | (4,062 | ) | $ | 1,107 | |||||
Deferred
income taxes
|
1,037 | 1,651 | 2,688 | |||||||||
Accumulated
other comprehensive income
|
- | 2,411 | 2,411 |
ITEM 7A.
|
QUA
NTIT
ATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
|
ITEM 8.
|
FINA
NCIA
L STATEMENTS AND SUPPLEMENTARY
DATA
|
ITEM 9.
|
CHA
NGE
S IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
|
ITEM 9A.
|
DISC
LOSUR
E CONTROLS
AND
PROCEDURES
|
/s/ David F. Carney
|
|
David
F. Carney
|
|
Chairman
& Chief Executive Officer
|
|
March
17, 2008
|
|
/s/ Cesar Ribeiro
|
|
Cesar
Ribeiro
|
|
Chief
Financial Officer
|
|
March
17, 2008
|
ITEM 9B.
|
O
THE
R
INFORMATION
|
ITEM 10.
|
DI
RECTOR
S, EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE
|
ITEM 11.
|
EXE
CUTIV
E
COMPENSATION
|
ITEM 12.
|
SE
CURIT
Y OWNERSHIP OF CERTAIN BENEFICAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER
MATTERS
|
ITEM 13.
|
CER
TAIN
RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE
|
ITEM 14.
|
PRI
NCIPA
L ACCOUNTING FEES AND
SERVICES
|
ITEM 15.
|
EXH
IBITS
AND FINANCIAL STATEMENT
SCHEDULE
|
1.
|
Financial
Statements
|
2.
|
Financial Statement
Schedule
|
3.
|
Exhibits Required by Securities
and Exchange Commission
Regulation S-K
|
Exhibit
Number
|
Description
|
|
3.1
|
Amended
and Restated Certificate of Incorporation of the Company
(1).
|
|
3.2
|
Amended
and Restated By-laws of the Company (2).
|
|
4.1
|
Stockholders’
Agreement, dated as of September 15, 1999, among Lincoln Technical
Institute, Inc., Back to School Acquisition, L.L.C. and Five Mile River
Capital Partners LLC (1).
|
|
4.2
|
Letter
agreement, dated August 9, 2000, by Back to School Acquisition, L.L.C.,
amending the Stockholders’ Agreement (1).
|
|
4.3
|
Letter
agreement, dated August 9, 2000, by Lincoln Technical Institute, Inc.,
amending the Stockholders’ Agreement (1).
|
|
4.4
|
Management
Stockholders Agreement, dated as of January 1, 2002, by and among Lincoln
Technical Institute, Inc., Back to School Acquisition, L.L.C. and the
Stockholders and other holders of options under the Management Stock
Option Plan listed therein (1).
|
|
4.5
|
Assumption
Agreement and First Amendment to Management Stockholders Agreement, dated
as of December 20, 2007, by and among Lincoln Educational Services
Corporation, Lincoln Technical Institute, Inc., Back to School
Acquisition, L.L.C. and the Management Investors parties therein
(6).
|
|
4.6
|
Registration
Rights Agreement between the Company and Back to School Acquisition,
L.L.C. (2).
|
|
4.7
|
Specimen
Stock Certificate evidencing shares of common stock
(1).
|
|
10.1
|
Credit
Agreement, dated as of February 15, 2005, among the Company, the
Guarantors from time to time parties thereto, the Lenders from time to
time parties thereto and Harris Trust and Savings Bank, as Administrative
Agent (1).
|
|
10.2
|
Amended
and Restated Employment Agreement, dated as of February 1, 2007, between
the Company and David F. Carney (3).
|
|
10.3
|
Separation
and Release Agreement, dated as of October 15, 2007, between
the Company and Lawrence E. Brown (4).
|
|
10.4
|
Amended
and Restated Employment Agreement, dated as of February 1, 2007, between
the Company and Scott M. Shaw (3).
|
|
10.5
|
Amended
and Restated Employment Agreement, dated as of February 1, 2007, between
the Company and Cesar Ribeiro
(3).
|
10.6
|
Amended
and Restated Employment Agreement, dated as of February 1, 2007, between
the Company and Shaun E. McAlmont (3).
|
|
10.7
|
Lincoln
Educational Services Corporation 2005 Long Term Incentive Plan
(1).
|
|
10.8
|
Lincoln
Educational Services Corporation 2005 Non Employee Directors Restricted
Stock Plan (1).
|
|
10.9
|
Lincoln
Educational Services Corporation 2005 Deferred Compensation Plan
(1).
|
|
10.10
|
Lincoln
Technical Institute Management Stock Option Plan, effective January 1,
2002 (1).
|
|
10.11
|
Form
of Stock Option Agreement, dated January 1, 2002, between Lincoln
Technical Institute, Inc. and certain participants (1).
|
|
Form
of Stock Option Agreement under our 2005 Long Term Incentive
Plan.
|
||
Form
of Restricted Stock Agreement under our 2005 Long Term Incentive
Plan.
|
||
10.14
|
Management
Stock Subscription Agreement, dated January 1, 2002, among Lincoln
Technical Institute, Inc. and certain management investors
(1).
|
|
10.15
|
Stockholder’s
Agreement among Lincoln Educational Services Corporation, Back to School
Acquisition L.L.C., Steven W. Hart and Steven W. Hart 2003 Grantor
Retained Annuity Trust (2).
|
|
10.16
|
Stock
Purchase Agreement, dated as of March 30, 2006, among Lincoln Technical
Institute, Inc., and Richard I. Gouse, Andrew T. Gouse, individually and
as Trustee of the Carolyn Beth Gouse Irrevocable Trust, Seth A. Kurn and
Steven L. Meltzer (5).
|
|
Subsidiaries
of the Company.
|
||
Consent
of Independent Registered Public Accounting Firm.
|
||
Certification
of Chairman & 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 Chairman & 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.
|
(1)
|
Incorporated by reference to the
Company’s Registration Statement on Form S-1 (Registration No.
333-123664).
|
(2)
|
Incorporated
by reference to the Company’s Form 8-K dated June 28,
2005.
|
(3)
|
Incorporated
by reference to the Company’s Form 10-K for the year ended December 31,
2006.
|
(4)
|
Incorporated by reference to the
Company’s Form 8-K dated October 15,
2007.
|
(5)
|
Incorporated by reference to the
Company’s Form 10-Q for the quarterly period ended March 31,
2006.
|
(6)
|
Incorporated by reference to the
Company’s Registration Statement on Form S-3 (Registration No.
333-148406).
|
*
|
Filed
herewith.
|
LINCOLN
EDUCATIONAL SERVICES CORPORATION
|
|||
By:
|
/s/ Cesar Ribeiro
|
||
Cesar
Ribeiro
|
|||
Senior
Vice President, Chief Financial Officer and Treasurer
|
|||
(Principal
Accounting and Financial Officer)
|
Signature
|
Title
|
Date
|
||
/s/
David F. Carney
|
Chief
Executive Officer and Chairman of the Board
|
March
17, 2008
|
||
David
F. Carney
|
||||
/s/ Cesar Ribeiro
|
Senior
Vice President, Chief Financial Officer and Treasurer
|
March
17, 2008
|
||
Cesar
Ribeiro
|
(Principal Accounting and Financial Officer) | |||
/s/ Peter S. Burgess
|
Director
|
March
17, 2008
|
||
Peter S. Burgess
|
||||
/s/ James J. Burke, Jr..
|
Director
|
March
17, 2008
|
||
James
J. Burke, Jr
|
|
|||
/s/
Celia H. Currin
|
Director
|
March
17, 2008
|
||
Celia H. Currin
|
||||
/s/ Paul E. Glaske
|
Director
|
March
17, 2008
|
||
Paul
E. Glaske
|
||||
/s/ Alexis P. Michas
|
Director
|
March
17, 2008
|
||
Alexis
P. Michas
|
||||
/s/ J. Barry Morrow
|
Director
|
March
17, 2008
|
||
J.
Barry Morrow
|
||||
/s/ Jerry G. Rubenstein
|
Director
|
March
17, 2008
|
||
Jerry
G. Rubenstein
|
Page
Number
|
||
Reports
of Independent Registered Public Accounting Firm
|
F-2
|
|
Consolidated
Balance Sheets at December 31, 2007 and 2006
|
F-4
|
|
Consolidated
Statements of Income for the years ended December 31, 2007, 2006 and
2005
|
F-6
|
|
Consolidated
Statements of Changes in Stockholders' Equity for the years ended December
31, 2007, 2006 and 2005
|
F-7
|
|
Consolidated
Statements of Cash Flows for the years ended December 31, 2007, 2006 and
2005
|
F-8
|
|
Notes
to Consolidated Financial Statements
|
F-10
|
|
Item
15
|
||
Schedule
II-Valuation and Qualifying Accounts
|
F-29
|
December
31,
|
||||||||
2007
|
2006
|
|||||||
ASSETS
|
||||||||
CURRENT
ASSETS:
|
||||||||
Cash
and cash equivalents
|
$ | 3,502 | $ | 6,461 | ||||
Restricted
cash
|
- | 920 | ||||||
Accounts
receivable, less allowance of $11,244 and $11,456 at December 31, 2007
and 2006, respectively
|
23,286 | 20,473 | ||||||
Inventories
|
2,540 | 2,438 | ||||||
Deferred
income taxes, net
|
4,575 | 4,827 | ||||||
Due
from federal programs
|
6,087 | - | ||||||
Prepaid
expenses and other current assets
|
3,771 | 3,049 | ||||||
Total
current assets
|
43,761 | 38,168 | ||||||
PROPERTY,
EQUIPMENT AND FACILITIES - At cost, net of accumulated depreciation and
amortization of $82,931 and $72,871 at December 31, 2007 and 2006,
respectively
|
106,564 | 94,368 | ||||||
OTHER
ASSETS:
|
||||||||
Noncurrent
accounts receivable, less allowance of $159 and $80 at December 31, 2007
and 2006, respectively
|
1,608 | 723 | ||||||
Deferred
finance charges
|
827 | 1,019 | ||||||
Pension
plan assets, net
|
1,696 | 1,107 | ||||||
Deferred
income taxes, net
|
5,500 | 2,688 | ||||||
Goodwill
|
82,714 | 84,995 | ||||||
Other
assets, net
|
3,513 | 3,148 | ||||||
Total
other assets
|
95,858 | 93,680 | ||||||
TOTAL
|
$ | 246,183 | $ | 226,216 |
Year
Ended December 31,
|
||||||||||||
2007
|
2006
|
2005
|
||||||||||
REVENUES
|
$ | 327,774 | $ | 310,630 | $ | 287,368 | ||||||
COSTS
AND EXPENSES:
|
||||||||||||
Educational
services and facilities
|
139,500 | 129,311 | 114,161 | |||||||||
Selling,
general and administrative
|
162,396 | 151,136 | 138,125 | |||||||||
Gain
on sale of assets
|
(15 | ) | (435 | ) | (7 | ) | ||||||
Total
costs and expenses
|
301,881 | 280,012 | 252,279 | |||||||||
OPERATING
INCOME
|
25,893 | 30,618 | 35,089 | |||||||||
OTHER:
|
||||||||||||
Interest
income
|
180 | 981 | 775 | |||||||||
Interest
expense
|
(2,341 | ) | (2,291 | ) | (2,892 | ) | ||||||
Other
income (loss)
|
27 | (132 | ) | 243 | ||||||||
INCOME
FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
|
23,759 | 29,176 | 33,215 | |||||||||
PROVISION
FOR INCOME TAXES
|
9,932 | 12,092 | 12,931 | |||||||||
INCOME
FROM CONTINUING OPERATIONS
|
13,827 | 17,084 | 20,284 | |||||||||
LOSS
FROM DISCONTINUED OPERATIONS, NET OF INCOME TAXES
|
(5,487 | ) | (1,532 | ) | (1,575 | ) | ||||||
NET
INCOME
|
$ | 8,340 | $ | 15,552 | $ | 18,709 | ||||||
Basic
|
||||||||||||
Earnings
per share from continuing operations
|
$ | 0.54 | $ | 0.67 | $ | 0.86 | ||||||
Loss
per share from discontinued operations
|
(0.21 | ) | (0.06 | ) | (0.06 | ) | ||||||
Net
income per share
|
$ | 0.33 | $ | 0.61 | $ | 0.80 | ||||||
Diluted
|
||||||||||||
Earnings
per share from continuing operations
|
$ | 0.53 | $ | 0.65 | $ | 0.83 | ||||||
Loss
per share from discontinued operations
|
(0.21 | ) | (0.05 | ) | (0.07 | ) | ||||||
Net
income per share
|
$ | 0.32 | $ | 0.60 | $ | 0.76 | ||||||
Weighted
average number of common shares outstanding:
|
||||||||||||
Basic
|
25,479 | 25,336 | 23,475 | |||||||||
Diluted
|
26,090 | 26,086 | 24,503 |
Loan
|
Retained
|
Accumulated
|
||||||||||||||||||||||||||||||
Additional
|
Receivable
|
Earnings
|
Other
|
|||||||||||||||||||||||||||||
Common
Stock
|
Paid-in
|
Deferred
|
From
|
(Accumulated
|
Comprehensive
|
|||||||||||||||||||||||||||
Shares
|
Amount
|
Capital
|
Compensation
|
Stockholders
|
Deficit)
|
Loss
|
Total
|
|||||||||||||||||||||||||
BALANCE
- December 31, 2004
|
21,699 | $ | 62,482 | $ | 3,262 | $ | - | $ | (181 | ) | $ | (7,477 | ) | $ | - | $ | 58,086 | |||||||||||||||
Net
income
|
- | - | - | - | - | 18,709 | - | 18,709 | ||||||||||||||||||||||||
Issuance
of common stock, net of issuance expenses
|
3,177 | 56,255 | - | - | - | - | - | 56,255 | ||||||||||||||||||||||||
Stock-based
compensation expense:
|
||||||||||||||||||||||||||||||||
Restricted
Stock
|
21 | - | 420 | (360 | ) | - | - | - | 60 | |||||||||||||||||||||||
Stock
Options
|
- | - | 1,286 | - | - | - | - | 1,286 | ||||||||||||||||||||||||
Stockholders
loan repayment
|
- | - | - | - | 181 | - | - | 181 | ||||||||||||||||||||||||
Tax
benefit of options exercised
|
- | - | 697 | - | - | - | - | 697 | ||||||||||||||||||||||||
Exercise
of stock options
|
271 | 716 | - | - | - | - | - | 716 | ||||||||||||||||||||||||
BALANCE
- December 31, 2005
|
25,168 | 119,453 | 5,665 | (360 | ) | - | 11,232 | - | 135,990 | |||||||||||||||||||||||
Net
income
|
- | - | - | - | - | 15,552 | - | 15,552 | ||||||||||||||||||||||||
Reduction
in estimated stock issuance expenses
|
- | 150 | - | - | - | - | - | 150 | ||||||||||||||||||||||||
Stock-based
compensation expense
|
||||||||||||||||||||||||||||||||
Restricted
Stock
|
19 | - | 300 | (107 | ) | - | - | - | 193 | |||||||||||||||||||||||
Stock
Options
|
- | - | 1,231 | - | - | - | - | 1,231 | ||||||||||||||||||||||||
Tax
benefit of options exercised
|
- | - | 499 | - | - | - | - | 499 | ||||||||||||||||||||||||
Exercise
of stock options
|
264 | 579 | - | - | - | - | - | 579 | ||||||||||||||||||||||||
Initial
adoption of SFAS No. 158, net of taxes
|
- | - | - | - | - | - | (2,411 | ) | (2,411 | ) | ||||||||||||||||||||||
BALANCE
- December 31, 2006
|
25,451 | 120,182 | 7,695 | (467 | ) | - | 26,784 | (2,411 | ) | 151,783 | ||||||||||||||||||||||
Net
income
|
- | - | - | - | - | 8,340 | - | 8,340 | ||||||||||||||||||||||||
Initial
adoption of FIN 48
|
- | - | - | - | - | (100 | ) | - | (100 | ) | ||||||||||||||||||||||
Employee
pension plan
|
- | - | - | - | - | - | 325 | 325 | ||||||||||||||||||||||||
Stock-based
compensation expense
|
||||||||||||||||||||||||||||||||
Restricted
Stock
|
217 | - | 3,155 | (2,761 | ) | - | - | - | 394 | |||||||||||||||||||||||
Stock
Options
|
- | - | 1,455 | - | - | - | - | 1,455 | ||||||||||||||||||||||||
Tax
benefit of options exercised
|
- | - | 73 | - | - | - | - | 73 | ||||||||||||||||||||||||
Exercise
of stock options
|
220 | 197 | - | - | - | - | - | 197 | ||||||||||||||||||||||||
BALANCE
- December 31, 2007
|
25,888 | $ | 120,379 | $ | 12,378 | $ | (3,228 | ) | $ | - | $ | 35,024 | $ | (2,086 | ) | $ | 162,467 |
Year
Ended December 31,
|
||||||||||||
2007
|
2006
|
2005
|
||||||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||||||
Net
income
|
$ | 8,340 | $ | 15,552 | $ | 18,709 | ||||||
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
||||||||||||
Depreciation
and amortization
|
15,741 | 14,866 | 13,064 | |||||||||
Amortization
of deferred finance charges
|
192 | 192 | 215 | |||||||||
Write-off
of deferred finance costs
|
- | - | 365 | |||||||||
Deferred
income taxes
|
(2,761 | ) | (3,655 | ) | 340 | |||||||
Gain
on disposition of assets
|
(15 | ) | (437 | ) | (7 | ) | ||||||
Impairment
of goodwill and long-lived assets
|
3,099 | - | - | |||||||||
Fixed
asset donations
|
(26 | ) | (22 | ) | (243 | ) | ||||||
Provision
for doubtful accounts
|
17,767 | 15,590 | 11,188 | |||||||||
Stock-based
compensation expense
|
1,849 | 1,424 | 1,346 | |||||||||
Tax
benefit associated with exercise of stock options
|
(73 | ) | - | 697 | ||||||||
Deferred
rent
|
630 | 1,081 | 1,670 | |||||||||
(Increase)
decrease in assets, net of acquisitions:
|
||||||||||||
Accounts
receivable
|
(21,465 | ) | (21,870 | ) | (11,676 | ) | ||||||
Inventories
|
(102 | ) | (587 | ) | (65 | ) | ||||||
Prepaid
expenses and current assets
|
(1,957 | ) | (374 | ) | (300 | ) | ||||||
Due
from federal funds
|
(6,644 | ) | - | - | ||||||||
Other
assets
|
(740 | ) | 1,181 | 54 | ||||||||
Increase
(decrease) in liabilities, net of acquisitions:
|
||||||||||||
Accounts
payable
|
(284 | ) | (1,441 | ) | 1,801 | |||||||
Other
liabilities
|
1,926 | (157 | ) | (468 | ) | |||||||
Income
taxes payable/prepaid
|
(1,181 | ) | (1,225 | ) | 4,068 | |||||||
Accrued
expenses
|
(221 | ) | (870 | ) | (1,715 | ) | ||||||
Unearned
tuition
|
1,660 | (3,990 | ) | (77 | ) | |||||||
Total
adjustments
|
7,395 | (294 | ) | 20,257 | ||||||||
Net
cash provided by operating activities
|
15,735 | 15,258 | 38,966 | |||||||||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||||||||||
Restricted
cash
|
920 | (920 | ) | - | ||||||||
Capital
expenditures
|
(24,766 | ) | (19,341 | ) | (22,621 | ) | ||||||
Proceeds
from sale of property and equipment
|
16 | 973 | - | |||||||||
Acquisitions,
net of cash acquired
|
- | (32,872 | ) | (27,776 | ) | |||||||
Net
cash used in investing activities
|
(23,830 | ) | (52,160 | ) | (50,397 | ) | ||||||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||||||
Proceeds
from borrowings
|
26,500 | 14,000 | 31,000 | |||||||||
Payments
on borrowings
|
(21,500 | ) | (21,214 | ) | (66,750 | ) | ||||||
Payments
of deferred finance fees
|
- | - | (848 | ) | ||||||||
Proceeds
from exercise of stock options
|
197 | 579 | 716 | |||||||||
Tax
benefit associated with exercise of stock options
|
73 | 499 | - | |||||||||
Principal
payments under capital lease obligations
|
(134 | ) | (908 | ) | (311 | ) | ||||||
Repayment
from shareholder loans
|
- | - | 181 | |||||||||
Proceeds
from issuance of common stock, net of issuance costs of
$2,845
|
- | 150 | 56,255 | |||||||||
Net
cash provided by (used in) financing activities
|
5,136 | (6,894 | ) | 20,243 | ||||||||
NET
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
|
(2,959 | ) | (43,796 | ) | 8,812 | |||||||
CASH
AND CASH EQUIVALENTS—Beginning of year
|
6,461 | 50,257 | 41,445 | |||||||||
CASH
AND CASH EQUIVALENTS—End of year
|
$ | 3,502 | $ | 6,461 | $ | 50,257 |
Year
Ended December 31,
|
||||||||||||
2007
|
2006
|
2005
|
||||||||||
SUPPLEMENTAL
DISCLOSURES OF CASH FLOW INFORMATION:
|
||||||||||||
Cash
paid during the year for:
|
||||||||||||
Interest
|
$ | 2,305 | $ | 2,243 | $ | 2,358 | ||||||
Income
taxes
|
$ | 10,148 | $ | 15,799 | $ | 11,025 | ||||||
SUPPLEMENTAL
SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
|
||||||||||||
Cash
paid during the period for:
|
||||||||||||
Fair
value of assets acquired
|
$ | - | $ | 47,511 | $ | 32,335 | ||||||
Net
cash paid for the acquisitions
|
- | (32,872 | ) | (27,776 | ) | |||||||
Liabilities
assumed
|
$ | - | $ | 14,639 | $ | 4,559 | ||||||
Fixed
assets acquired in capital lease transactions
|
$ | 652 | $ | - | $ | - | ||||||
Fixed
assets acquired in noncash transactions
|
$ | 2,812 | $ | 101 | $ | - |
1.
|
SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
|
2.
|
RECENT ACCOUNTING
PRONOUNCEMENTS
|
Balances
Before
Adoption
of
Statement
158
|
Adjustments
|
Balances
After
Adoption
of
Statement
158
|
||||||||||
Pension
plan assets, net
|
$ | 5,169 | $ | (4,062 | ) | $ | 1,107 | |||||
Deferred
income taxes
|
1,037 | 1,651 | 2,688 | |||||||||
Accumulated
other comprehensive income
|
- | 2,411 | 2,411 |
4.
|
WEIGHTED AVERAGE COMMON
SHARES
|
Year
Ended December 31,
|
||||||||||||
2007
|
2006
|
2005
|
||||||||||
Basic
shares outstanding
|
25,479 | 25,336 | 23,475 | |||||||||
Dilutive
effect of stock options
|
611 | 750 | 1,028 | |||||||||
Diluted
shares outstanding
|
26,090 | 26,086 | 24,503 |
5.
|
BUSINESS
ACQUISITIONS
|
FLA
May
22, 2006
|
EUP
December
1, 2005
|
NETI
January
11, 2005
|
||||||||||
Property,
equipment and facilities
|
$ | 20,609 | $ | 793 | $ | 1,000 | ||||||
Goodwill
|
24,710 | 9,019 | 18,464 | |||||||||
Identified
intangibles:
|
||||||||||||
Student
contracts
|
350 | 130 | 770 | |||||||||
Trade
name
|
280 | 180 | 600 | |||||||||
Curriculum
|
- | - | 700 | |||||||||
Non-compete
|
200 | - | - | |||||||||
Other
assets
|
450 | - | - | |||||||||
Current
assets, excluding cash acquired
|
912 | 125 | 782 | |||||||||
Total
liabilities assumed
|
(14,639 | ) | (998 | ) | (3,561 | ) | ||||||
Cost
of acquisition, net of cash acquired
|
$ | 32,872 | $ | 9,249 | $ | 18,755 |
6.
|
GOODWILL AND OTHER
INTANGIBLES
|
Goodwill
balance as of December 31, 2005
|
$ | 59,467 | ||
Goodwill
acquired pursuant to business acquisition-FLA
|
24,710 | |||
Goodwill
adjustments
|
818 | |||
Goodwill
balance as of December 31, 2006
|
84,995 | |||
Goodwill
adjustments
|
(146 | ) | ||
Goodwill
impairment
|
(2,135 | ) | ||
Goodwill
balance as of December 31, 2007
|
$ | 82,714 |
At
December 31, 2007
|
At
December 31, 2006
|
|||||||||||||||||||
Weighted
Average
Amortization
Period
(years)
|
Gross
Carrying
Amount
|
Accumulated
Amortization
|
Gross
Carrying
Amount
|
Accumulated
Amortization
|
||||||||||||||||
Student
Contracts
|
1 | $ | 2,215 | $ | 2,212 | $ | 2,200 | $ | 2,010 | |||||||||||
Trade
name
|
Indefinite
|
1,270 | - | 1,270 | - | |||||||||||||||
Accreditation
|
Indefinite
|
307 | - | - | - | |||||||||||||||
Curriculum
|
10 | 700 | 208 | 700 | 138 | |||||||||||||||
Non-compete
|
5 | 201 | 65 | 201 | 25 | |||||||||||||||
Total
|
$ | 4,693 | $ | 2,485 | $ | 4,371 | $ | 2,173 |
7.
|
PROPERTY, EQUIPMENT AND
FACILITIES
|
Useful
life (years)
|
At
December 31,
|
|||||||||||
2007
|
2006
|
|||||||||||
Land
|
-
|
$ | 13,563 | $ | 13,563 | |||||||
Buildings
and improvements
|
1-25
|
104,484 | 97,914 | |||||||||
Equipment,
furniture and fixtures
|
1-12
|
61,102 | 52,311 | |||||||||
Vehicles
|
1-7
|
2,120 | 1,915 | |||||||||
Construction
in progress
|
-
|
8,226 | 1,536 | |||||||||
189,495 | 167,239 | |||||||||||
Less
accumulated depreciation and amortization
|
(82,931 | ) | (72,871 | ) | ||||||||
$ | 106,564 | $ | 94,368 |
8.
|
ACCRUED
EXPENSES
|
At
December 31,
|
||||||||
2007
|
2006
|
|||||||
Accrued
compensation and benefits
|
$ | 5,888 | $ | 6,255 | ||||
Other
accrued expenses
|
4,191 | 4,080 | ||||||
$ | 10,079 | $ | 10,335 |
9.
|
LONG-TERM DEBT AND LEASE
OBLIGATIONS
|
At
December 31,
|
||||||||
2007
|
2006
|
|||||||
Credit
agreement (a)
|
$ | 5,000 | $ | - | ||||
Finance
obligation (b)
|
9,672 | 9,672 | ||||||
Automobile
loans
|
16 | 37 | ||||||
Capital
leases-computers (with rates ranging from 2.9% to 8.7%)
|
690 | 151 | ||||||
15,378 | 9,860 | |||||||
Less
current maturities
|
(204 | ) | (91 | ) | ||||
$ | 15,174 | $ | 9,769 |
10.
|
SLM
FINANCIAL CORPORATION LOAN
AGREEMENT
|
11.
|
STOCKHOLDERS'
EQUITY
|
At
December 31,
|
||||||||||||
2007
|
2006
|
2005 | ||||||||||
Expected
volatility
|
55.42 | % | 55.10 | % | 55.10-71.35 | % | ||||||
Expected
dividend yield
|
0 | % | 0 | % | 0 | % | ||||||
Expected
life (term)
|
6
Years
|
6
Years
|
4-8
Years
|
|||||||||
Risk-free
interest rate
|
4.36 | % | 4.13-4.84 | % | 3.59-4.29 | % | ||||||
Weighted-average
exercise price during the year
|
$ | 11.96 | $ | 17.00 | $ | 17.14 |
Shares
|
Weighted
Average
Exercise
Price
Per
Share
|
Weighted
Average
Remaining
Contractual
Term
|
Aggregate
intrinsic
Value
(in
thousands)
|
||||||||||
Outstanding
December 31, 2004
|
2,022,495 | 5.92 | |||||||||||
Granted
|
189,500 | 17.14 | |||||||||||
Cancelled
|
(102,125 | ) | 11.30 | ||||||||||
Exercised
|
(270,697 | ) | 2.65 | ||||||||||
Outstanding
December 31, 2005
|
1,839,173 | 7.26 | |||||||||||
Granted
|
256,000 | 17.00 | |||||||||||
Cancelled
|
(103,072 | ) | 13.98 | ||||||||||
Exercised
|
(263,876 | ) | 3.56 | $ | 3,444 | ||||||||
Outstanding
December 31, 2006
|
1,728,225 | 8.85 |
6.31
years
|
10,255 | |||||||||
Granted
|
185,500 | 11.96 | |||||||||||
Cancelled
|
(181,474 | ) | 12.02 | ||||||||||
Exercised
|
(220,088 | ) | 3.34 | 1,811 | |||||||||
Outstanding
December 31, 2007
|
1,512,163 | 9.65 |
5.83
years
|
9,156 | |||||||||
Exercisable
as of December 31, 2007
|
1,066,215 | 7.41 |
4.83
years
|
8,514 |
At December
31, 2007
|
||||||||||||||||||||||
Stock
Options Outstanding
|
Stock
Options Exercisable
|
|||||||||||||||||||||
Range
of Exercise
Prices
|
Shares
|
Contractual
Weighted
Average
life
(years)
|
Weighted
Average
Price
|
Shares
|
Weighted
Exercise
Price
|
|||||||||||||||||
$ |
1.55
|
50,898 | 1.47 | $ | 1.55 | 50,898 | $ | 1.55 | ||||||||||||||
$ |
3.10
|
651,557 | 4.04 | 3.10 | 648,357 | 3.10 | ||||||||||||||||
$ |
4.00-$13.99
|
201,500 | 8.67 | 11.11 | 17,400 | 5.29 | ||||||||||||||||
$ |
14.00-$19.99
|
480,708 | 7.29 | 15.34 | 281,660 | 14.78 | ||||||||||||||||
$ |
20.00-$25.00
|
127,500 | 6.68 | 22.66 | 67,900 | 22.99 | ||||||||||||||||
1,512,163 | 5.83 | 9.65 | 1,066,215 | 7.41 |
12.
|
PENSION
PLAN
|
Year
Ended December 31,
|
||||||||
2007
|
2006
|
|||||||
CHANGES
IN BENEFIT OBLIGATIONS:
|
||||||||
Benefit
obligation-beginning of year
|
$ | 14,624 | $ | 13,961 | ||||
Service
cost
|
115 | 110 | ||||||
Interest
cost
|
831 | 797 | ||||||
Actuarial
(gain) loss
|
(965 | ) | 218 | |||||
Benefits
paid
|
(543 | ) | (462 | ) | ||||
Benefit
obligation at end of year
|
14,062 | 14,624 | ||||||
CHANGE
IN PLAN ASSETS:
|
||||||||
Fair
value of plan assets-beginning of year
|
15,731 | 14,330 | ||||||
Actual
return on plan assets
|
570 | 1,663 | ||||||
Employer
contribution
|
- | 200 | ||||||
Benefits
paid
|
(543 | ) | (462 | ) | ||||
Fair
value of plan assets-end of year
|
15,758 | 15,731 | ||||||
FAIR
VALUE IN EXCESS OF BENEFIT OBLIGATION FUNDED STATUS:
|
$ | 1,696 | $ | 1,107 |
At
December 31,
|
||||||||
2007
|
2006
|
|||||||
Noncurrent
assets
|
$ | 1,696 | $ | 1,107 |
Year
Ended December 31,
|
||||||||
2007
|
2006
|
|||||||
Loss
|
$ | (3,537 | ) | $ | (4,062 | ) | ||
Deferred
income taxes
|
1,451 | 1,651 | ||||||
Accumulated
other comprehensive loss
|
$ | (2,086 | ) | $ | (2,411 | ) |
Year
Ended December 31,
|
||||||||
2007
|
2006
|
|||||||
COMPONENTS
OF NET PERIODIC BENEFIT COST (INCOME)
|
||||||||
Service
cost
|
$ | 115 | $ | 110 | ||||
Interest
cost
|
831 | 797 | ||||||
Expected
return on plan assets
|
(1,233 | ) | (1,122 | ) | ||||
Amortization
of transition asset
|
- | - | ||||||
Amortization
of prior service cost
|
- | 1 | ||||||
Recognized
net actuarial loss
|
223 | 316 | ||||||
Net
periodic benefit cost (income)
|
$ | (64 | ) | $ | 102 |
2007
|
2006
|
|||||||
Equity
securities
|
49 | % | 49 | % | ||||
Fixed
income
|
37 | % | 36 | % | ||||
International
equities
|
14 | % | 14 | % | ||||
Cash
and equivalents
|
0 | % | 1 | % | ||||
Total
|
100 | % | 100 | % |
2007
|
2006
|
|||||||
Discount
rate
|
6.37 | % | 5.82 | % | ||||
Rate
of compensation increase
|
4.00 | % | 4.00 | % |
2007
|
2006
|
2005
|
||||||||||
Discount
rate
|
5.82 | % | 5.75 | % | 5.75 | % | ||||||
Rate
of compensation increase
|
4.00 | % | 4.00 | % | 4.00 | % | ||||||
Long-term
rate of return
|
8.00 | % | 8.00 | % | 8.00 | % |
13.
|
INCOME
TAXES
|
Year
Ended December 31,
|
||||||||||||
2007
|
2006
|
2005
|
||||||||||
Current:
|
||||||||||||
Federal
|
$ | 8,538 | $ | 12,585 | $ | 9,943 | ||||||
State
|
2,484 | 3,162 | 2,648 | |||||||||
Total
|
11,022 | 15,747 | 12,591 | |||||||||
Deferred:
|
||||||||||||
Federal
|
(776 | ) | (2,908 | ) | 75 | |||||||
State
|
(314 | ) | (747 | ) | 265 | |||||||
Total
|
(1,090 | ) | (3,655 | ) | 340 | |||||||
Total
provision
|
$ | 9,932 | $ | 12,092 | $ | 12,931 |
At
December 31,
|
||||||||
2007
|
2006
|
|||||||
Deferred
tax assets
|
||||||||
Current:
|
||||||||
Accrued
vacation
|
$ | 102 | $ | 94 | ||||
Allowance
for bad debts
|
4,662 | 4,683 | ||||||
Accrued
student fees
|
- | 50 | ||||||
Total
current deferred tax assets
|
4,764 | 4,827 | ||||||
Deferred
tax liabilities
|
||||||||
Current:
|
||||||||
Accrued
student fees
|
(189 | ) | - | |||||
Total
current deferred tax liabilities
|
(189 | ) | - | |||||
Total
net current deferred tax assets
|
4,575 | 4,827 | ||||||
Noncurrent:
|
||||||||
Accrued
rent
|
2,455 | 2,177 | ||||||
Stock-based
compensation
|
2,048 | 1,568 | ||||||
Depreciation
|
7,554 | 5,369 | ||||||
Sale
leaseback-deferred gain
|
2,025 | 1,889 | ||||||
Total
noncurrent deferred tax assets
|
14,082 | 11,003 | ||||||
Deferred
tax liabilities
|
||||||||
Noncurrent:
|
||||||||
Other
intangibles
|
(2,294 | ) | (3,177 | ) | ||||
Goodwill
|
(5,592 | ) | (4,687 | ) | ||||
Prepaid
pension cost
|
(696 | ) | (451 | ) | ||||
Total
deferred tax liabilities
|
(8,582 | ) | (8,315 | ) | ||||
Total
net noncurrent deferred tax assets
|
5,500 | 2,688 | ||||||
Total
net deferred tax assets
|
$ | 10,075 | $ | 7,515 |
Year
Ended December 31,
|
||||||||||||||||||||||||
2007
|
2006
|
2005
|
||||||||||||||||||||||
Income
from continuing operations before taxes
|
$ | 23,759 | $ | 29,176 | $ | 33,215 | ||||||||||||||||||
Expected
tax
|
$ | 8,316 | 35.0 | % | $ | 10,212 | 35.0 | % | $ | 11,625 | 35.0 | % | ||||||||||||
State
tax expense (net of federal benefit)
|
1,411 | 6.0 | 1,570 | 5.4 | 1,893 | 5.7 | ||||||||||||||||||
Resolution
of tax contingency (a)
|
- | - | - | - | (785 | ) | (2.4 | ) | ||||||||||||||||
Other
|
205 | 0.8 | 310 | 1.0 | 198 | 0.6 | ||||||||||||||||||
Total
|
$ | 9,932 | 41.8 | % | $ | 12,092 | 41.4 | % | $ | 12,931 | 38.9 | % |
Unrecognized
tax benefits balance at January 1, 2007
|
$ | 100 | ||
Gross
increases for tax positions of prior years
|
- | |||
Gross
decreases for tax positions of prior years
|
- | |||
Gross
increase in current period tax positions
|
- | |||
Settlements
|
- | |||
Lapse
of statue of limitations
|
- | |||
Unrecognized
tax benefits balance at December 31, 2007
|
$ | 100 |
15.
|
RELATED PARTY
TRANSACTIONS
|
16.
|
DERIVATIVE INSTRUMENTS
AND
HEDGING
ACTIVITIES
|
Year
Ending December 31,
|
Finance
Obligations
|
Operating
Leases
|
Capital
Leases
|
|||||||||
2008
|
$ | 1,381 | $ | 16,398 | $ | 256 | ||||||
2009
|
1,381 | 15,245 | 167 | |||||||||
2010
|
1,381 | 13,135 | 161 | |||||||||
2011
|
1,381 | 12,401 | 161 | |||||||||
2012
|
1,381 | 11,984 | 93 | |||||||||
Thereafter
|
5,641 | 64,270 | - | |||||||||
12,546 | 133,433 | 838 | ||||||||||
Less
amount representing interest
|
(12,546 | ) | - | (133 | ) | |||||||
$ | - | $ | 133,433 | $ | 705 |
Quarter
|
||||||||||||||||
2007
|
First
|
Second
|
Third
|
Fourth
|
||||||||||||
Revenues
|
$ | 76,170 | $ | 74,744 | $ | 86,566 | $ | 90,294 | ||||||||
Operating
(loss) income
|
(1,164 | ) | 1,966 | 8,079 | 17,013 | |||||||||||
(Loss)
income from continuing operations
|
(930 | ) | 768 | 4,370 | 9,620 | |||||||||||
Loss
from discontinued operations
|
(688 | ) | (2,468 | ) | (2,331 | ) | - | |||||||||
Net
(loss) income
|
(1,618 | ) | (1,700 | ) | 2,039 | 9,620 | ||||||||||
(Loss)
income per share:
|
||||||||||||||||
Basic
|
||||||||||||||||
(Loss)
earnings per share from continuing operations
|
$ | (0.04 | ) | $ | 0.03 | $ | 0.17 | $ | 0.38 | |||||||
Loss
per share from discontinued operations
|
(0.02 | ) | (0.10 | ) | (0.09 | ) | - | |||||||||
Net
(loss) income per share
|
$ | (0.06 | ) | $ | (0.07 | ) | $ | 0.08 | $ | 0.38 | ||||||
Diluted
|
||||||||||||||||
(Loss)
earnings per share from continuing operations
|
$ | (0.04 | ) | $ | 0.03 | $ | 0.17 | $ | 0.37 | |||||||
Loss
per share from discontinued operations
|
(0.02 | ) | (0.10 | ) | (0.09 | ) | - | |||||||||
Net
(loss) income per share
|
$ | (0.06 | ) | $ | (0.07 | ) | $ | 0.08 | $ | 0.37 |
Quarter
|
||||||||||||||||
2006
|
First
|
Second
|
Third
|
Fourth
|
||||||||||||
Revenues
|
$ | 72,612 | $ | 72,647 | $ | 81,911 | $ | 83,460 | ||||||||
Operating
income
|
5,299 | 2,523 | 5,580 | 17,219 | ||||||||||||
Income
from continuing operations
|
3,108 | 1,406 | 2,788 | 9,799 | ||||||||||||
Loss
from discontinued operations
|
(346 | ) | (440 | ) | (556 | ) | (207 | ) | ||||||||
Net
income
|
2,762 | 966 | 2,232 | 9,592 | ||||||||||||
Income
per share:
|
||||||||||||||||
Basic
|
||||||||||||||||
Earnings
per share from continuing operations
|
$ | 0.12 | $ | 0.06 | $ | 0.11 | $ | 0.39 | ||||||||
Loss
per share from discontinued operations
|
(0.01 | ) | (0.02 | ) | (0.02 | ) | (0.01 | ) | ||||||||
Net
income (loss) per share
|
$ | 0.11 | $ | 0.04 | $ | 0.09 | $ | 0.38 | ||||||||
Diluted
|
||||||||||||||||
Earnings
per share from continuing operations
|
$ | 0.12 | $ | 0.05 | $ | 0.11 | $ | 0.38 | ||||||||
Loss
per share from discontinued operations
|
(0.01 | ) | (0.01 | ) | (0.02 | ) | (0.01 | ) | ||||||||
Net
income per share
|
$ | 0.11 | $ | 0.04 | $ | 0.09 | $ | 0.37 |
19.
|
DISCONTINUED
OPERATIONS
|
Year
Ended December 31,
|
||||||||||||
2007
|
2006
|
2005
|
||||||||||
Revenue
|
$ | 4,230 | $ | 10,876 | $ | 11,853 | ||||||
Operating
expenses
|
(13,760 | ) | (13,493 | ) | (14,432 | ) | ||||||
(9,530 | ) | (2,617 | ) | (2,579 | ) | |||||||
Benefit
for income taxes
|
(4,043 | ) | (1,085 | ) | (1,004 | ) | ||||||
Loss
from discontinued operations
|
$ | (5,487 | ) | $ | (1,532 | ) | $ | (1,575 | ) |
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, 2007 Student receivable allowance
|
$ | 11,536 | $ | 17,767 | $ | (17,900 | ) | $ | 11,403 | |||||||
December
31, 2006 Student receivable allowance
|
$ | 7,647 | $ | 15,590 | $ | (11,701 | ) | $ | 11,536 | |||||||
December
31, 2005 Student receivable allowance
|
$ | 7,023 | $ | 11,188 | $ | (10,564 | ) | $ | 7,647 |
Date
of Grant
|
|
Exercise
Price per Share
|
$______________ |
Number
of Optioned Shares
|
_______________ |
Type
of Option:
|
___Incentive
Stock Option (ISO) (to the extent permitted by applicable
laws)
|
___Nonstatutory
Stock Option (NSO)
|
|
Expiration
Date:
|
10
years from the Date of
Grant
|
Event Triggering
Option Termination
|
Maximum Time to
Exercise After Triggering Event*
|
Termination
of Service, other than for Cause (except as provided
below)
|
30
days
|
Termination
of Service for Cause
|
Immediately
|
Termination
of Service due to Disability
|
6
months
|
Termination
of Service due to death
|
6
months
|
Resignation
|
Immediately
|
LINCOLN
EDUCATIONAL SERVICES CORPORATION
|
OPTIONEE
|
||
|
|
||
[Title]
|
Signed
|
||
|
|
||
Date
|
Date
|
Submitted
by:
|
Accepted
by:
|
|
OPTIONEE
|
LINCOLN
EDUCATIONAL SERVICES CORPORATION
|
|
Signature
|
By
|
|
Print
Name
|
Title
|
|
Address
:
|
||
Date
Received
|
|
(A)
|
Vesting
Schedule
.
|
|
(1)
|
Subject
to the Participant’s continued employment with the Company and its
Subsidiaries (the “
Company
Group
”), [ ____ ] of the Restricted Shares shall vest on [ ____ ]
(each, a “
Vesting
Date
”). Any fractional Restricted Shares resulting from
the application of the vesting schedule shall be aggregated and the
Restricted Shares resulting from such aggregation shall vest [
____].
|
|
(2)
|
Upon
vesting, the Restricted Shares shall no longer be subject to the transfer
restrictions pursuant to Section C or cancellation pursuant to Section
B.
|
|
(B)
|
Termination of
Employment and Change in Control
. Unless otherwise set
forth in an employment agreement between the Company and the Participant
in effect as of the Date of Grant, if, prior to a Vesting Date, the
Participant’s employment with the Company Group terminates for any reason,
the unvested Restricted Shares shall be cancelled immediately and the
Participant shall immediately forfeit any rights to the Restricted Shares;
provided
,
however
,
that in accordance with Section 6(c) of the Plan, the Committee
may elect, in its sole discretion, prior to or in connection with such
termination of employment, or upon a Change in Control,
to provide for the
vesting and payment of some or all of the Participant’s then outstanding
Restricted Shares.
|
|
(C)
|
Transferability
. Pursuant
to Section 12 of the Plan, the Restricted Shares are not transferable
other than by last will and testament or by the laws of descent and
distribution, and the Participant’s rights under this Award Agreement
shall be exercisable during the Participant’s lifetime by the Participant
only.
|
|
(D)
|
Rights as a
Stockholder
. The Participant shall have, with respect to
the Restricted Shares, all the rights of a stockholder of the Company,
including, if applicable, the right to vote the Restricted Shares and to
receive any dividends, subject to the restrictions set forth in the Plan
and this Award Agreement.
|
|
(E)
|
Dividends and
Distributions
. Any shares of Common Stock or other
securities of the Company received by the Participant as a result of a
distribution to holders of Restricted Shares or as a dividend on the
Restricted Shares shall be subject to the same restrictions as the related
Restricted Shares, and all references to Restricted Shares hereunder shall
be deemed to include such shares of Common Stock or other
securities.
|
|
(F)
|
Share
Certificates
. The certificate representing the shares of
Common Stock covered by the Restricted Shares shall be held in custody by
the Company until the restrictions thereon shall have
lapsed. As a condition of the award of Restricted Shares, the
Participant shall deliver to the Company a stock power, endorsed in blank,
relating to such shares of Common Stock. The Committee may
cause a legend or legends to be put on the certificate to make appropriate
reference to such restrictions as the Committee may deem advisable under
the Plan or as may be required by the rules, regulations, and other
requirements of the Securities and Exchange Commission, any exchange that
lists the shares of Common Stock, and any applicable federal or state
laws.
|
|
(G)
|
No
Entitlements
|
|
(1)
|
The
Restricted Shares are discretionary awards. Neither this Award
Agreement nor the Plan confers on the Participant any right or entitlement
to receive compensation or bonus in any specific amount for any future
fiscal year (including, without limitation, any grants of future Awards
under the Plan) and do not impact in any way the Company Group’s
determination of the amount, if any, of the Participant’s compensation or
bonus. The Restricted Shares do not constitute salary, wages,
regular compensation, recurrent compensation or contractual compensation
for the year of grant or any later year and shall not be included in, nor
have any effect on, the determination of employment-related rights or
benefits under law or any employee benefit plan or similar arrangement
provided by the Company Group (including, without limitation, severance,
termination of employment and pension benefits), unless otherwise
specifically provided for under the terms of such plan or arrangement or
by the Company Group. The benefits provided pursuant to the
Restricted Shares are in no way secured, guaranteed or warranted by
Company Group.
|
|
(2)
|
The
Restricted Shares are awarded to the Participant by virtue of the
Participant’s employment with, and services performed for, the Company
Group. Neither this Award Agreement nor the Plan constitutes an
employment agreement. Nothing in either this Award Agreement or
the Plan shall modify the terms of the Participant’s
employment.
|
|
(3)
|
Subject
to the terms of any applicable employment agreement, the Company reserves
the right to change the terms and conditions of the Participant’s
employment, including the division, subsidiary or department in which the
Participant is employed. This Award Agreement, the Plan, the
grant of Restricted Shares, and/or any action taken or omitted to be taken
under this Award Agreement or the Plan shall not be deemed to create or
confer on the Participant any right to be retained in the employ of the
Company Group, or to interfere with or to limit in any way the right of
the Company Group to terminate the Participant’s employment at any
time. Moreover, the termination of employment provisions set
forth in Section (B) only apply to the treatment of the Restricted Shares
in the specified circumstances and shall not otherwise affect the
Participant’s employment relationship. By accepting this Award
Agreement, the Participant waives any and all rights to compensation or
damages in consequence of the termination of the Participant’s office or
employment for any reason whatsoever insofar as those rights arise or may
arise from the Participant’s ceasing to have rights under, or be entitled
to receive payment in respect of, the Restricted Shares as a result of
such termination, or from the loss or diminution in value of such rights
or entitlements. This waiver applies whether or not such
termination amounts to a wrongful discharge or unfair
dismissal.
|
|
(H)
|
Miscellaneous
.
|
|
(1)
|
The
Committee shall have the right to impose such restrictions on the
Restricted Shares as it deems necessary or advisable under applicable
federal securities laws, the rules and regulations of any stock exchange
or market upon which such Shares are then listed and/or traded, and/or
under any blue sky or state securities laws applicable to such
Shares. It is expressly understood that the Committee is
authorized to administer, construe, and make all determinations necessary
or appropriate to administer the Plan and this Award Agreement, all of
which shall be binding upon the
Participant.
|
|
(2)
|
The
Board may, at any time, or from time to time, terminate, amend, modify or
suspend the Plan, and the Board or the Committee may amend or modify this
Award Agreement at any time;
provided
,
however
, that
no termination, amendment, modification or suspension shall materially and
adversely alter or impair the rights of the Participant under this Award
Agreement without the Participant’s written
consent.
|
|
(3)
|
Shares
of restricted stock are not subject to Section 409A of the Internal
Revenue Code of 1986, as amended (“
Section
409A
”). Notwithstanding the forgoing or any provision of
the Plan or this Award Agreement, if any provision of this Award Agreement
or the Plan contravenes Section 409A or could cause the Participant to
incur any tax, interest or penalties under Section 409A, the Committee
may, in its sole discretion and without the Participant’s consent, modify
such provision to (i) comply with, or avoid being subject to, Section
409A, or to avoid the incurrence of any taxes, interest and penalties
under Section 409A, and/or (ii) maintain, to the maximum extent
practicable, the original intent and economic benefit to the Participant
of the applicable provision without materially increasing the cost to the
Company or contravening the provisions of Section 409A. This
Section (H)(3) does not create an obligation on the part of the Company to
modify the Plan or this Award Agreement and does not guarantee that the
Restricted Shares will not be subject to taxes, interest and penalties
under Section 409A.
|
|
(4)
|
Vesting
of the Restricted Shares shall be subject to the Participant satisfying
all applicable federal, state, local and foreign taxes (including the
Participant’s FICA obligation). The Company shall have the
power and the right to (i) deduct or withhold from all amounts payable to
the Participant in connection with the Restricted Shares or otherwise, or
(ii) require the Participant to remit to the Company, an amount sufficient
to satisfy any applicable taxes required by law. Further, the
Company may permit or require the Participant to satisfy, in whole or in
part, the tax obligations by withholding Shares that would otherwise be
received upon vesting of the Restricted
Shares.
|
|
(5)
|
This
Award Agreement shall be subject to all applicable laws, rules, and
regulations, and to such approvals by any governmental agencies or
national securities exchanges as may be required, or the Committee
determines are advisable. The Participant agrees to take all
steps the Company determines are necessary to comply with all applicable
provisions of federal and state securities law in exercising his rights
under this Award Agreement.
|
|
(6)
|
All
obligations of the Company under the Plan and this Award Agreement, with
respect to the Restricted Shares, shall be binding on any successor to the
Company, whether the existence of such successor is the result of a direct
or indirect purchase, merger, consolidation, or otherwise, of all or
substantially all of the business and/or assets of the
Company.
|
|
(7)
|
To
the extent not preempted by federal law, this Award Agreement shall be
governed by, and construed in accordance with, the laws of the State of
New York.
|
|
LINCOLN EDUCATIONAL SERVICES CORPORATION | ||
By:
|
|
||
Name:
|
|||
Title:
|
Name
|
Jurisdiction
|
|
Lincoln
Technical Institute, Inc. (wholly owned)
|
New
Jersey
|
|
New
England Acquisition LLC (wholly owned)
|
Delaware
|
|
Southwestern
Acquisition LLC (wholly owned)
|
Delaware
|
|
Nashville
Acquisition, LLC (wholly owned through Lincoln Technical Institute,
Inc.)
|
Delaware
|
|
Euphoria
Acquisition, LLC (wholly owned through Lincoln Technical Institute,
Inc.)
|
Delaware
|
|
New
England Institute of Technology at Palm Beach, Inc. (wholly owned through
Lincoln Technical Institute, Inc.)
|
Florida
|
|
Florida
Acquisition, LLC (wholly owned)
|
Delaware
|
|
ComTech
Services Group Inc. (wholly owned through Lincoln Technical Institute,
Inc.)
|
New
Jersey
|
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 17, 2008
|
|
/s/ David F. Carney
|
|
David
F. Carney
|
|
Chairman
& 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;
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4.
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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:
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5.
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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):
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Date:
March 17, 2008
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/s/ Cesar Ribeiro
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Cesar
Ribeiro
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Chief
Financial Officer
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/s/ David F. Carney
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David
F. Carney
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Chairman
& Chief Executive Officer
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/s/
Cesar Ribeiro
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Cesar
Ribeiro
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Chief
Financial Officer
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