Lincoln Educational Services Corporation Reports Fourth Quarter and 2012 Year End Results

Lincoln Educational Services Corporation Reports Fourth Quarter and 2012 Year
End Results

WEST ORANGE, N.J., March 6, 2013 (GLOBE NEWSWIRE) -- Lincoln Educational
Services Corporation (Nasdaq:LINC) ("Lincoln") today reported fourth quarter
and 2012 year end results.

Highlights:

Quarterly -

  *Revenue from continuing operations of $102.5 million for the fourth
    quarter of 2012, representing a decrease of 8.3% from $111.8 million for
    the fourth quarter of 2011.
    
  *Adjusted EBITDA for the fourth quarter of 2012 of $15.6 million compared
    to Adjusted EBITDA of $20.8 million in the prior-year quarter.Diluted
    loss per share from continuing operations of $0.40 for the fourth quarter
    of 2012 as compared to diluted earnings per share from continuing
    operations of $0.33 for the fourth quarter of 2011.Loss per share for the
    fourth quarter of 2012 includes goodwill and long-lived asset non-cash
    impairment charges of $0.71.Excluding these charges, earnings per share
    for the fourth quarter was $0.31.

Yearly -

  *Revenue from continuing operations of $402.7 million for the year ended
    December 31, 2012, representing a decrease of 18.1% from $491.8 million
    for the year ended December 31, 2011.
    
  *Adjusted EBITDA for the year ended December 31, 2012 was $31.9 million
    compared to Adjusted EBITDA of $75.4 million in the prior year.Diluted
    loss per share from continuing operations was $1.08 for the year ended
    December 31, 2012 as compared to diluted earnings per share from
    continuing operations of $0.96 for the year ended December 31, 2011.Loss
    per share and earnings per share for 2012 and 2011 includes goodwill and
    long-lived asset non-cash impairment charges of $1.11 and $0.23,
    respectively.Excluding these charges, earnings per share for the year
    ended December 31, 2012 was $0.03 as compared to $1.19 for the year ended
    December 31, 2011.

2013 Guidance –

  *Revenue and Diluted EPS essentially flat with 2012, estimated at $395 to
    $405 million and a loss per share of ($0.05) to diluted earnings per share
    of $0.05, respectively.
    
  *Student starts from continuing operations in 2013 are expected to increase
    in the second half of 2013 and remain flat for the year as compared to
    2012.
    
  *For the first quarter of 2013, we expect revenues of $88.0 million to
    $92.0 million, representing a decrease of approximately 11% over the first
    quarter of 2012, and a loss per share of $0.30 to $0.35. Guidance for the
    first quarter of 2013 is based on a decrease in starts of 17% to 20%. The
    reduction in starts for the first quarter is due to the continued loss of
    ability to benefit (or ATB) students during the second half of 2012 and
    our elimination of our fully online program in the first half of 2012.
    Excluding the impact of these items, student starts from continuing
    operations are expected to be flat to down 5% as compared to the first
    quarter of 2012.
    
  *The Board of Directors has set the record and payment dates for the
    dividend for the first quarter of 2013. The cash dividend of $0.07 per
    share will be payable on March 29, 2013 to shareholders of record on March
    15, 2013.

Comment and Outlook

"We believe that 2012 was the trough in our business as we strategically
refocused the company on our skilled training programs," said Shaun McAlmont,
Lincoln's President and Chief Executive Officer. "We managed this retrenchment
while continuing to improve our key student outcomes such as job placement as
well as persistence rates and maintaining an exemplary regulatory compliance
record.From a financial point of view, we remained profitable from continuing
operations excludingimpairment chargesand generated positive cash flows for
the year.

Our long term strategy is to focus the company in areas where we can maintain
an industry leading position.This has led us to terminate our fully online
programs, and certain other undifferentiated programs, during 2012. In
addition, the elimination of ATB student enrollment as of July 1, 2012 led to
an overall decline in student starts and population. This decline led us to
cease operations in seven of our campuses which were no longer viable.
Nonetheless, our student starts from continuing operations have stabilized and
we are well positioned for 2013 as a more focused company.

During 2013, we intend to continue to drive improvements in student outcomes
which directly impact our growth and profitability. We will pursue select
acquisitions, new certificate program offerings in manufacturing and
healthcare, as well as vocational training partnerships with selected industry
associations. We also continue to look for other sources of cash to decrease
our dependency on Title IV funds, such as our acquisition of Florida Medical
Training Institute in 2012, which provides short-term cash based certificate
programs at five campuses. We expect to reap the financial benefits of our
refocused strategy in the second half of 2013 and beyond. This approach will
drive growth in our core markets, increase our percentage of non-Title IV
cash, and improve our outcomes.

Fiscal 2012 Operating Performance from continuing operations

Revenue from continuing operations decreased 18.1% to $402.7 million in 2012
from $491.8 million in 2011.This decrease was primarily due to a 22.3%
decrease in average student population.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, or DOE's, increased emphasis on
student outcomes as well as our efforts to comply with the 90/10 and cohort
default rate rules.In addition, the current economic environment, our
decision to stop enrolling fully online students in early 2012, and regulatory
changes under the Consolidated Appropriations Act of 2012, which eliminated
our ability to enroll ATB students, also contributed to the decline in our
average student population.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 that these changes, coupled with the
current economic conditions, have resulted in an increase in the number of
potential students who are hesitant to take on debt and thus have not enrolled
in our schools.This has led to a significant decline in student starts and
average student population.Average revenue per student rose 5.4% in 2012,
primarily from tuition increases that averaged 3% during the year, improved
student retention, which led to higher revenue per student, and from changes
to some of our program offerings, which shortened the delivery time of these
programs thus slightly accelerated revenue.

Operating loss from continuing operations was $27.7 million in 2012 compared
to operating income from continuing operations of $40.2 million in 2011,
primarily due to lower capacity utilization as a result of the decrease in
average population.Operating loss from continuing operations in 2012 includes
a $33.9 million impairment of goodwill and long-lived assets compared to $8.3
million in 2011.Capacity utilization decreased to 38% in 2012 from 50% in
2011.Operating loss margin was 6.9% in 2012 compared to an operating income
margin of 8.2% in 2011.

Educational services and facilities expenses decreased by 8.9% to $192.2
million for the year ended December 31, 2012 from $210.9million for the year
ended December 31, 2011. This decrease was primarily due to lower
instructional expenses and books and tools expenses necessary to serve a
smaller student population and facilities expenses primarily related to lower
depreciation 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 as well as our cost savings efforts in
anticipation of the lower student population.The decrease in books and tools
expense was attributable to a decline in student starts of approximately 1,700
for the year ended December 31, 2012, compared to the year ended December 31,
2011.Facilities expense decreased primarily due to lower depreciation
expense as a result of an impairment charge of long-lived assets that was
taken as of June 30, 2012 and lower capital expenditures during the current
year, as well as repairs and maintenance expenses and utility expenses due to
rate reductions in certain states.As a percentage of revenue, educational
services and facilities expense increased to 47.7% for the year ended December
31, 2012 from 42.9% for the year ended December 31, 2011.

Selling, general and administrative expenses decreased 12.1% to $204.3 million
for the year ended December 31, 2012 from $232.5 million for the year ended
December 31, 2011. The decrease was primarily due to a decrease in
administrative expenses, sales and marketing expenses and student services
expenses.The decrease in administrative expenses was primarily due to a
reduction in bad debt expense.The decrease in sales and marketing expenses
was primarily due to a reduction in marketing expenses as well as a reduction
in the number of admissions representatives in order to align our cost
structure to our population.Student services expenses decreased due to a
reduction in the number of financial aid employees as we aligned our cost
structure to our student population.

For the year ended December 31, 2012, our bad debt expense as a percentage of
revenue was 5.0%, compared to 5.9% for the prior year.The number of days
revenue outstanding at December 31, 2012 increased to 21.2 days, from 17.7
days at December 31, 2011.As of December 31, 2012, we had outstanding loan
commitments to our students of $34.7 million as compared to $26.4 million at
December 31, 2011.Loan commitments, net of interest that would be due on the
loans through maturity, were $25.0 million at December 31, 2012 as compared to
$20.2 million at December 31, 2011.

As a percentage of revenue, selling, general and administrative expenses
increased to 50.8% for the year ended December 31, 2012 from 47.2% in the
prior year.

At December 31, 2012, we tested our goodwill and long-lived assets for
impairment and determined that an impairment of approximately $19.7 million
existed for seven of our reporting units and four asset groups related to
long-lived assets.At June 30, 2012, we tested our goodwill and long-lived
assets for impairment and determined that an impairment charge of
approximately $23.6 million existed for five reporting units related to
goodwill and 10 asset groups related to long-lived assets ($9.4 million
included in discontinued operations).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
($2.1 million included in discontinued operations).

Loss from continuing operations was $23.9 million for the year ended December
31, 2012 compared with income from continuing operations of $21.1 million for
the year ended December 31, 2011.Diluted loss per share was $1.08 for the
year ended December 31, 2012 from a diluted income per share of $0.95 for the
year ended December 31, 2011.

We strive to align our expenses throughout the year to our student
population.As our population increases or decreases, we align our personnel
and our expenses to the extent possible to meet the needs of our existing
population.

Cash flows provided by operations was $16.0 million for the year ended
December 31, 2012 compared with $36.8 million for the year ended December 31,
2011.This decrease primarily resulted from a decrease in net income, offset
by decreases in income taxes paid and other working capital items. 

Three Months Ended December 31, 2012 Compared to Three Months Ended December
31, 2011 from continuing operations

Revenue from continuing operations decreased 8.3% to $102.5 million in the
fourth quarter of 2012 from $111.8 million in the prior-year quarter. This
decrease was primarily due to a 13.5% decrease in average student
population.The decrease in average student population was due to adjustments
in our business model to be better aligned with the Department of Education's
increased emphasis on student outcomes as well as our efforts to comply with
the 90/10 and cohort default rate rules.In addition, the current economic
environment, our decision to stop enrolling fully online students in early
2012 and regulatory changes under the Consolidated Appropriations Act of 2012,
which eliminated our ability to enroll ATB students, also contributed to the
decline in average student population.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 that
these changes, coupled with the current economic conditions, have resulted in
an increase in the number of potential students who are hesitant to take on
debt and thus not enrolling in our schools.This has led to a significant
decline in student starts and average student population. Average revenue per
student rose 6.0% in the fourth quarter of 2012 primarily from tuition
increases, which averaged 3% during the year, improved student retention,
which led to higher revenue per student, and from changes to some of our
program offerings, which shortened the delivery time of these programs and
slightly accelerated revenue.

Operating loss from continuing operations was $10.2 million in the fourth
quarter of 2012 compared to an operating income from continuing operations of
$14.0 million in the prior-year quarter. Operating loss from continuing
operations in the fourth quarter of 2012 included a $19.7 million impairment
of goodwill and long-lived assets.Capacity utilization decreased to 38% in
the fourth quarter of 2012 from 43% in the fourth quarter of 2011.Operating
loss margin was 9.9% in the fourth quarter of 2012 compared to operating
income margin of 12.5% in the prior-year quarter.

Educational services and facilities expenses decreased 5.0% to $46.6 million
in the fourth quarter of 2012 from $49.1 million in the prior-year quarter.
This decrease was primarily due to lower instructional expenses necessary to
serve a smaller student population.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 as well as our cost savings
efforts in anticipation of the lower student population.As a percentage of
revenue, educational services and facilities expense increased to 45.5% in the
fourth quarter of 2012 from 43.9% in the prior-year quarter.

Selling, general and administrative expenses decreased 4.8% to $46.4 million
in the fourth quarter of 2012 from $48.7 million in the prior-year
quarter.The decrease was primarily due to a decrease in administrative
expenses, a decrease in sales and marketing expenses and a decrease in student
services expenses.The decrease in administrative expenses was primarily due
to the reduction in bad debt expense and a reduction in compensation and
benefits.These reductions were partially offset by additional administrative
expenses.The decrease in sales and marketing expenses was primarily due to a
reduction in marketing expenses as well as a reduction in the number of
admissions representatives in order to align our cost structure to our
population.The number of days revenue outstanding for the quarter ended
December 31, 2012 increased to 20.9 days, from 19.6 days for the quarter ended
December 31, 2011.As of December 31, 2012, we had outstanding loan
commitments to our students of $34.7 million as compared to $33.7 million at
September 30, 2012.Loan commitments, net of interest that would be due on the
loans through maturity, were $25.0 million at December 31, 2012 as compared to
$25.4 million at September 30, 2012.

As a percentage of revenue, selling, general and administrative expenses
increased to 45.3% in the fourth quarter of 2012 from 43.6% in the prior-year
quarter.

At December 31, 2012, we tested our goodwill and long-lived assets for
impairment and determined that an impairment of approximately $19.7 million
existed for seven of our reporting units and four asset groups related to
long-lived assets.At December 31, 2011, we tested our goodwill for impairment
and determined no impairment charge was necessary.

Loss from continuing operations was $9.0 million in the fourth quarter of 2012
compared to income from continuing operations of $7.3 million in the
prior-year quarter. Diluted loss per share was $0.40 in the fourth quarter of
2012 compared to a diluted income per share of $0.33 in the fourth quarter of
2011.

We strive to align our expenses throughout the year to our student
population.As our population increases or decreases, we align our personnel
and our expenses to the extent possible to meet the needs of our existing
population.

Balance Sheet

We had $61.7 million of cash and cash equivalents at December 31, 2012
compared with $26.5 million at December 31, 2011.Total debt and capital lease
obligations increased to $73.5 million at December 31, 2012 from $36.5 million
at December 31, 2011, primarily as a result of the borrowings in 2012 of $37.5
million of loans outstanding at December 31, 2012.Stockholders' equity
decreased to $198.5 million at December 31, 2012 from $239.0 million at
December 31, 2011 and reflects the payment of $6.4 million of dividends in
2012.

                                                                  
Student Metrics from continuing operations
                                                                  
Starts and Population
                                                                  
                                Year Ended             Three Months Ended
                                December 31,           December 31,
                                2012    2011    Change 2012    2011    Change
                                                                  
Average population - excluding   18,086 23,276 -22.3% 17,808 20,584 -13.5%
short programs
End of period population -       16,235 18,585 -12.6% 16,235 18,585 -12.6%
excluding short programs
                                                                  
End of period population - short 305    --    100.0% 305    --    100.0%
programs
                                                                  
                                                                  
                                Year Ended             Three Months Ended
                                December 31,           December 31,
                                2012    2011    Change 2012    2011    Change
                                                                  
Student Starts                                                     
Ability to Benefit (ATB)         1,417  1,170  21.1%  28     274    -89.8%
Online                           211    906    -76.7% 3      155    -98.1%
All Other                        18,309 19,523 -6.2%  2,811  3,193  -12.0%
Total Starts - exluding short    19,937 21,599 -7.7%  2,842  3,622  -21.5%
programs
                                                                  
Student starts - short programs  1,153  --    100.0% 224    --    100.0%
                                                                  

                          
Average Population Mix by Vertical
                    December 31,
                    2012   2011
                          
Automotive           37.7%  34.9%
Health sciences      35.0%  37.0%
Skilled trades       12.0%  11.1%
Hospitality services 8.9%   9.4%
Business & IT        6.4%   7.6%
                    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 800-215-2410 (domestic) or 617-597-5410 (international) and
citing code 46826161. 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 25152109.

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: automotive technology, health sciences, skilled trades,
hospitality services and business and information technology.Lincoln has
provided the workforce with skilled technicians since its inception in
1946.Lincoln currently operates 38 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 December 31, 2012, 16,235
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. Forward-looking statements should not be read as a guarantee of
future performance or results, and will not necessarily be accurate
indications of the times at, or by, which such performance or results will be
achieved. Forward-looking statements are based on information available at the
time those statements are made and/or management's good faith belief as of
that time with respect to future events, and are subject to risks and
uncertainties that could cause actual performance or results to differ
materially from those expressed in or suggested by the forward-looking
statements. Important factors that could cause such differences include, but
are not limited to: our failure to comply with the extensive regulatory
framework applicable to our industry or our failure to obtain timely
regulatory approvals in connection with achange of control of our company or
acquisitions; 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 changes in applicable federal laws and
regulations, including final rules that took effect during 2011 and other
pending rulemaking by the U.S. Department of Education; uncertainties
regarding our ability to comply with federal laws and regulations regarding
the 90/10 rule and cohort default rates; risks associated with the opening of
new campuses; risks associated with integration of acquired schools; industry
competition; our ability to continue to execute our growth strategies;
conditions and trends in our industry; general economic conditions; and other
factors discussed in our annual report on Form 10-K for the year ended
December 31, 2012.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, 2012.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
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
                                                               
                               Three Months Ended   Year Ended
                               December 31,         December 31,
                               2012        2011       2012        2011
                                                               
REVENUE                         $102,451  $111,767 $402,697  $491,821
COSTS AND EXPENSES:                                             
Educational services and        46,609     49,057    192,205    210,892
facilities
Selling, general and            46,382     48,737    204,299    232,478
administrative
(Gain) loss on sale of assets   (40)       --       (75)       5
Impairment of goodwill and      19,681     --       33,925     8,290
long-lived assets
Total costs & expenses          112,632    97,794    430,354    451,665
OPERATING (LOSS) INCOME         (10,181)   13,973    (27,657)   40,156
OTHER:                                                          
Interest income                 1          43        2          40
Interest expense                (1,063)    (1,102)   (4,475)    (4,369)
Other income                    --        1         14         18
(LOSS) INCOME FROM CONTINUING   (11,243)   12,915    (32,116)   35,845
OPERATIONS BEFORE INCOME TAXES
(BENEFIT) PROVISION FOR INCOME  (2,290)    5,626     (8,235)    14,730
TAXES
(LOSS) INCOME FROM CONTINUING   (8,953)    7,289     (23,881)   21,115
OPERATIONS
LOSS FROM DISCONTINUED          (2,986)    (1,110)   (13,305)   (3,575)
OPERATIONS, NET OF INCOME TAXES
NET (LOSS) INCOME               $(11,939) $6,179   $(37,186) $17,540
Basic                                                           
(Loss) earnings per share from  $(0.40)   $0.33    $(1.08)   $0.96
continuing operations
Loss per share from             (0.13)     (0.05)    (0.60)     (0.16)
discontinued operations
Net (loss) income per share     $(0.54)   $0.28    $(1.68)   $0.80
Diluted                                                         
(Loss) earnings per share from  $(0.40)   $0.33    $(1.08)   $0.95
continuing operations
Loss per share from             (0.13)     (0.05)    (0.60)     (0.16)
discontinued operations
Net (loss) income per share     $(0.54)   $0.28    $(1.68)   $0.79
Weighted average number of                                      
common shares outstanding:
Basic                           22,266     22,090    22,195     22,020
Diluted                         22,266     22,160    22,195     22,155
                                                               
Other data:                                                     
                                                               
Adjusted EBITDA (1)             $15,633   $20,778  $31,874   $75,388
Depreciation and amortization   $6,133    $6,804   $25,592   $26,924
Number of campuses/training     43         39        43         39
sites
Average enrollment              17,808     20,584    18,086     23,276
Stock-based compensation        $1,731    $799     $4,339    $3,542
Net cash provided by operating  $7,885    $9,665   $15,986   $36,838
activities
Net cash used in investing      $(2,018)  $(7,268) $(10,187) $(37,389)
activities
Net cash provided by (used in)  $35,412   $(2,006) $29,385   $(38,920)
financing activities
                                                               

                                                            
Selected Consolidated Balance Sheet Data:                    December 31, 2012
(In thousands)                                              (Unaudited)
                                                            
Cash and cash equivalents                                    $61,708
Current assets                                               99,513
Working capital                                              40,939
Total assets                                                 346,774
Current liabilities                                          58,574
Long-term debt and capital lease obligations, including      73,527
current portion
Total stockholders' equity                                   198,477
                                                            

              (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 and long-lived
assets.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 December Year Ended December 31,
                        31,
                       (Unaudited)                (Unaudited)
                                                               
                       2012           2011          2012          2011
                                                               
Net (loss) income from  $(8,953)     $7,289      $(23,881)   $21,115
continuing operations
Interest expense, net   1,062         1,059        4,473        4,329
(Benefit) provision for (2,290)       5,626        (8,235)      14,730
income taxes
Depreciation and        6,133         6,804        25,592       26,924
amortization
EBITDA                  (4,048)       20,778       (2,051)      67,098
Impairment of goodwill  19,681        --          33,925       8,290
and long-lived assets
Adjusted EBITDA         $15,633      $20,778     $31,874     $75,388
                                                               

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