Lincoln Educational Services Corporation Reports Third Quarter 2012 Results

Lincoln Educational Services Corporation Reports Third Quarter 2012 Results

WEST ORANGE, N.J., Nov. 5, 2012 (GLOBE NEWSWIRE) -- Lincoln Educational
Services Corporation (Nasdaq:LINC) ("Lincoln") today reported its third
quarter results.

Highlights:

  *Revenue of $104.1 million for the third quarter of 2012, a decrease of
    15.7% from $123.5 million for the third quarter of 2011.
    
  *Loss per share of $0.07 for the third quarter of 2012 as compared to loss
    per share of $0.18 for the third quarter of 2011.Loss per share for the
    quarter includes charges of $2.4 million related to campus
    closings.Excluding the charge, per share results were breakeven for the
    quarter.
    
  *Student starts decreased 16.7% for the third quarter of 2012 as compared
    to the third quarter of 2011.Student starts in the third quarter were
    impacted by the ceasing of operations at seven of our campuses, the
    elimination of the ability to enroll Ability to Benefit ("ATB") students
    and the early start of students who were scheduled to start in the third
    quarter but started in the second quarter of 2012.

Comment and Outlook

"Our third quarter starts were impacted by several factors that we previously
disclosed, including the ceasing of operations at seven of our campuses, the
elimination of ATB students as well as the acceleration of certain third
quarter student starts into the second quarter of 2012," said Shaun McAlmont,
Lincoln's President and Chief Executive Officer. "In addition, our starts
continue to be negatively impacted by the economy, which has resulted in
students and their parents being hesitant to assume additional debt.

Our acquisition of Florida Medical Training Institute, which focuses on
short-term programs, is now fully integrated and will reduce our dependency on
federal student aid, as students enrolled in these programs do not receive
Title IV funds. Our efforts to help students who do not have a high school
diploma are also proceeding according to plan and we expect that as these
students obtain their GED certificates, they will choose to enroll in our
institutions.Our early student engagement mentoring program is helping us
identify those students who are not ready to enroll at our campuses, which
will ultimately benefit retention and cohort default rates. We are pleased
with our progress and will continue to manage to the regulatory standards that
govern our institutions."

Mr. McAlmont concluded, "We believe that the operational challenges we have
faced over the last two years are behind us and we are beginning to see the
benefits of our initiatives. We continue to experience improvement in student
starts compared to the declines in 2011 and remain focused on our strategy of
improving student outcomes, maintaining strong regulatory compliance and
increasing the growth of new student enrollment. We continue to position
Lincoln to become the nation's leading provider of skilled training."

Campus Closings

As we previously announced, on July 31, 2012, our Board of Directors approved
a plan to cease operations at seven of our campuses.The adjustments made to
our business model to better align with the Department of Education's
increased emphasis on student outcomes and our efforts to comply with the
90/10 rule and cohort default rates greatly impacted the population at these
campuses. In addition, the current economic environment and regulatory changes
under the Consolidated Appropriations Act, 2012, which eliminated the ability
to enroll ATB students made these campuses no longer viable.Accordingly, we
have decided to cease operations at these campuses and have stopped enrolling
new students.For 2012, these campuses were expected to contribute
approximately $14.5 million in revenue and 570 students to the second half of
2012 student starts.We anticipate incurring pre-tax charges during the second
half of the year of approximately $6.9 million ($2.4 million incurred through
September 30, 2012, of which $0.6 million was a reduction of revenue) to shut
down these campuses. We hope to offset some of these cash charges by
subleasing some of the properties impacted and transferring some students to
other accredited institutions. Once all operations have ceased at these
campuses the results of operations will be reflected as discontinued
operations in our financial statements. We anticipate that the impact of this
decision will be accretive to earnings in 2013 by approximately $0.21 per
share.

2012 Guidance –

  *For the fourth quarter of 2012, we expect revenue of $102 million to $104
    million, representing a decrease of approximately 11% over the fourth
    quarter of 2012, and a loss per share, after giving effect to the shut
    down costs expected to be incurred in the fourth quarter of 2012, of up to
    $0.06 per share.Guidance for the fourth quarter of 2012 is based on an
    expected decrease in student starts of approximately 8%.
    
  *For the full year, we now expect revenue of $412 million to $418 million,
    representing a decrease of approximately 19% over 2011, and a loss per
    share of $1.14 to $1.24.Guidance for the full year includes approximately
    $1.28 in charges related to the goodwill and long-lived assets impairment
    charges as well as the effect of shutting down seven campuses.Starts for
    the year are expected to be down approximately 6% versus prior year.
    
  *The Board of Directors has set the record and payment dates for the
    dividend for the fourth quarter of 2012. The cash dividend of $0.07 per
    share will be payable on December 31, 2012 to the shareholders of record
    on December 14, 2012.

Third Quarter 2012 Operating Performance

Revenue decreased 15.7% to $104.1 million for the quarter ended September 30,
2012 from $123.5 million for the quarter ended September 30, 2011.This
decrease was primarily due to a 19.7% decrease in average student population
during the third quarter of 2012, partially offset by a 5.1% increase in
average revenue per student.The decrease in average student population was
primarily due to adjustments in our business model to be better aligned with
the Department of Education's increased emphasis on student outcomes and our
efforts to comply with the 90/10 rule and cohort default rates.In addition,
the current economic environment and regulatory changes under the Consolidated
Appropriations Act, 2012, eliminated the ability to enroll ATB students.As
part of these measures, we implemented a more selective student enrollment
policy to ensure that we enroll students who demonstrate a strong ability to
achieve successful student outcomes, including higher graduation and repayment
rates and lower student debt levels.We also restructured certain programs
and altered program offerings at some of our campuses, which resulted in lower
financial aid funding availability and higher student cash contributions.We
believe these changes, coupled with the current economic conditions, are
resulting in an increase in the number of potential students hesitant to take
on debt and thus not enrolling in our schools.This has resulted in a
significant decline in student starts and average student population.Average
revenue per student increased primarily from tuition increases that averaged
3% during the quarter and from changes to some of our program offerings, which
shortened the delivery time of these programs, thus slightly accelerating
revenue.

Operating loss was $2.5 million for the quarter ended September 30, 2012,
compared to an operating loss of $5.0 million for the quarter ended September
30, 2011.This increase was primarily due to a goodwill and long-lived assets
impairment of $10.4 million in 2011 and a $2.4 million of school closing
charges and lower capacity utilization as a result of the decrease in average
student population during the quarter.Negative operating margin decreased
from 4.1% for the quarter ended September 30, 2011 to a negative operating
margin of 2.4% for the quarter ended September 30, 2012.

Educational services and facilities expense decreased by 10.2% to $51.6
million for the quarter ended September 30, 2012 from $57.4million for the
quarter ended September 30, 2011. This decrease in educational services and
facilities expense was due to a $3.0 million, or 10.3%, decrease in
instructional expenses, a $1.1 million, or 13.9%, decrease in books and tools
expense, and a $1.8 million, or 8.6%, decrease in facilities expense.The
decrease in instructional expenses was primarily due to a reduction in the
number of instructors at most of our campuses resulting from a lower student
population.The decrease in books and tools expense was attributable to a
decline in student starts of approximately 1,400 for the quarter ended
September 30, 2012, compared to the quarter ended September 30, 2011.
Facilities expense primarily decreased due to lower electric utilities due to
rate reductions in certain states and lower repairs and maintenance expenses
and dormitory expenses.In addition, facilities expense decreased due to lower
depreciation expense related to an impairment charge of long-lived assets that
was taken as of June 30, 2012 and lower capital expenditures during the
current year. As a percentage of revenue, educational services and facilities
expense increased to 49.5% for the quarter ended September 30, 2012 from 46.5%
for the quarter ended September 30, 2011.

Selling, general and administrative expense decreased by 12.3% to $53.3
million for the quarter ended September 30, 2012 from $60.7 million for the
quarter ended September 30, 2011. The decrease was primarily due to a $2.5
million, or 8.2%, decrease in administrative expenses, a $4.0 million, or
16.9%, decrease in sales and marketing expenses and a $0.9 million, or 15.1%,
decrease in student services expenses.The decrease in administrative expenses
was primarily due to a $3.1 million reduction in bad debt expense. The
decrease in sales and marketing expenses was primarily due to a reduction in
marketing expenses and a decrease in the number of admissions
representatives.Student services expense decreased due to a reduction in the
number of financial aid employees as we aligned our cost structure to our
student population. As a percentage of revenue, selling, general and
administrative expense increased to 51.1% for the quarter ended September 30,
2012 from 49.2% in the prior-year quarter.

For the quarter ended September 30, 2012, our bad debt expense as a percentage
of revenue was 6.3% as compared to 7.8% for the quarter ended September 30,
2011.The number of days revenue outstanding at September 30, 2012 increased
to 22.1 days, compared to 19.4 days at September 30, 2011.As of September 30,
2012, we had outstanding loan commitments to our students of $33.7 million, as
compared to $29.1 million at June 30, 2012.Loan commitments, net of interest
that would be due on the loans through maturity, were $25.4 million at
September 30, 2012 as compared to $22.0 million at June 30, 2012.

At September 30, 2012, we tested our goodwill and long-lived assets for
impairment and determined that no impairment existed.At September 30, 2011,
we tested our goodwill and long-lived assets for impairment and determined
that an impairment of approximately $10.4 million existed for five reporting
units.

During the quarter ended September 30, 2012, we recorded $2.4 million of
school closings costs related to employee severance, student refunds and lease
buyouts.Student refunds of approximately $0.6 million were netted against
revenue.

Net loss for the quarter ended September 30, 2012 was $1.5 million, compared
to net loss of $3.9 million for the quarter ended September 30, 2011.Diluted
loss per share was $0.07 for the quarter ended September 30, 2012, compared to
diluted loss per share of $0.18 for the quarter ended September 30, 2011.

Cash flow from operations was $8.1 million for the nine months ended September
30, 2012, compared to $27.2 million for the nine months ended September 30,
2011.Net cash provided by operating activities decreased $19.1 million
primarily due to a reduction in net income offset, by decreases in incomes
taxes paid and other working capital items.

Balance Sheet

We had $20.4 million of cash and cash equivalents at September 30, 2012,
compared to $26.5 million at December 31, 2011.Total debt and capital lease
obligations decreased to $36.1 million at September 30, 2012 from $36.5
million at December 31, 2011.Stockholders' equity decreased to $211.1 million
at September 30, 2012 from $239.0 million at December 31, 2011.

Starts and Population

                                                   Three Months Ended
                                                   September 30,
                                                   2012    2011    Change
                                                                 
Student starts - excluding short programs           7,067  8,482  -16.7%
Average population - excluding short programs       18,233 22,712 -19.7%
End of period population - excluding short programs 19,028 22,526 -15.5%
                                                                 
Student starts - short programs                     592    --    100.0%
End of period Population - short programs           536    --    100.0%

Average Population Mix by Vertical

                    Three Months Ended
                    September 30,
                    2012      2011
                             
Automotive           38.7%     36.3%
Health sciences      34.4%     35.4%
Skilled trades       11.7%     10.5%
Hospitality services 9.2%      9.9%
Business & IT        6.0%      7.9%
                    100.0%    100.0%

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.lincolnedu.com.Participants can also listen to the conference
call by dialing 800-299-7928 (domestic) or 617-614-3926 (international) and
citing code 21515246. 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.lincolnedu.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 91215889.

About Lincoln Educational Services Corporation

Lincoln Educational Services Corporation is a provider of diversified
career-oriented post-secondary education.Lincoln offers recent high school
graduates and working adults degree and diploma programs in five principal
areas of study: health sciences, automotive technology, 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 46 campuses and 5 training sites in 17 states
under 5 brands: Lincoln College of Technology, Lincoln Technical Institute,
Euphoria Institute of Beauty Arts and Sciences, Lincoln College of New England
and Florida Medical Training Institute.As of September 30, 2012, 19,028
students were enrolled at Lincoln's campuses.

Statements in this press release regarding Lincoln's business that 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 annual report on Form 10-K for the
year ended December 31, 2011.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.

LINCOLN EDUCATIONAL SERVICES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
                                                               
                                Three Months Ended  Nine Months Ended
                                September 30,       September 30,
                                2012       2011       2012        2011
                                                               
REVENUE                          $104,144 $123,482 $309,380  $397,064
COSTS AND EXPENSES:                                             
Educational services and         51,569    57,419    153,148    171,054
facilities
Selling, general and             53,282    60,732    165,486    192,858
administrative
Loss (gain) on sale of assets    8         (3)       (32)       5
Impairment of goodwill and       --       10,377    23,683     10,377
long-lived assets
School closing costs             1,746     --       1,746      --
Total costs & expenses           106,605   128,525   344,031    374,294
OPERATING (LOSS) INCOME          (2,461)   (5,043)   (34,651)   22,770
OTHER:                                                          
Interest income                  --       2         2          8
Interest expense                 (1,051)   (1,091)   (3,412)    (3,277)
Other income                     3         4         14         17
(LOSS) INCOME BEFORE INCOME      (3,509)   (6,128)   (38,047)   19,518
TAXES
(BENEFIT) PROVISION FOR INCOME   (2,025)   (2,202)   (12,800)   8,158
TAXES
NET (LOSS) INCOME                $(1,484) $(3,926) $(25,247) $11,360
Basic                                                           
Net (loss) income per share      $(0.07)  $(0.18)  $(1.14)   $0.52
Diluted                                                         
Net (loss) income per share      $(0.07)  $(0.18)  $(1.14)   $0.51
Weighted average number of                                      
common shares outstanding:
Basic                            22,195    22,045    22,172     21,996
Diluted                          22,195    22,045    22,172     22,153
                                                               
Other data:                                                     
                                                               
Adjusted EBITDA (1)              $4,008   $12,919  $9,495    $54,433
Depreciation and amortization    $6,466   $7,581   $20,449   $21,269
Number of campuses/training      51        46        51         46
sites
Average enrollment               18,233    22,712    18,778     25,291
Stock-based compensation         $611     $613     $2,608    $2,742
Net cash provided by operating   $4,135   $8,024   $8,101    $27,173
activities
Net cash used in investing       $(1,990) $(6,785) $(8,169)  $(30,121)
activities
Net cash used in financing       $(1,710) $(5,397) $(6,027)  $(36,914)
activities

                                      

                                                           
Selected Consolidated Balance Sheet Data:                   September 30, 2012
(In thousands)                                              (Unaudited)
                                                           
Cash and cash equivalents                                   $20,429
Current assets                                              73,491
Working capital                                             2,941
Total assets                                                333,928
Current liabilities                                         70,550
Long-term debt and capital lease obligations, including     36,134
current portion
Total stockholders' equity                                  211,111

              (1) Reconciliation of Non-GAAP Financial Measures

The Company believes it is useful to present non-GAAP financial measures that
exclude certain significant items as a means to understand the performance of
its business.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.Adjusted EBITDA includes
non-cash charges related to impairment of goodwill.EBITDA and Adjusted EBITDA
are presented because we believe they are 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 net income (loss) to Adjusted
EBITDA:

                          Three Months Ended September Nine Months Ended
                           30,                          September 30,
                          (Unaudited)                 (Unaudited)
                                                                 
                          2012           2011           2012        2011
                                                                 
Net (loss) income          $(1,484)     $(3,926)     $(25,247) $11,360
Interest expense, net      1,051         1,089         3,410      3,269
(Benefit) provision for    (2,025)       (2,202)       (12,800)   8,158
income taxes
Depreciation and           6,466         7,581         20,449     21,269
amortization
EBITDA                     4,008         2,542         (14,188)   44,056
Impairment of goodwill and --           10,377        23,683     10,377
other long-lived assets
Adjusted EBITDA            $4,008       $12,919      $9,495    $54,433

CONTACT: Lincoln Educational Services Corporation
         Cesar Ribeiro, CFO
         973-736-9340