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Lincoln Educational Services Corp. Reports Operating Results (10-Q)

November 05, 2010 | About:
10qk

10qk

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Lincoln Educational Services Corp. (LINC) filed Quarterly Report for the period ended 2010-09-30.

Lincoln Educational Services Corp. has a market cap of $408 million; its shares were traded at around $15.93 with a P/E ratio of 6.7 and P/S ratio of 0.8. Lincoln Educational Services Corp. had an annual average earning growth of 24.7% over the past 5 years.LINC is in the portfolios of Jeff Auxier of Auxier Focus Fund, Paul Tudor Jones of The Tudor Group, Jim Simons of Renaissance Technologies LLC.

Highlight of Business Operations:

Educational services and facilities expenses. Our educational services and facilities expenses increased by $5.7 million, or 9.8%, to $63.3 million for the quarter ended September 30, 2010 from $57.7 million for the quarter ended September 30, 2009. This increase in educational services and facilities expenses was primarily due to higher instructional expenses, necessary to serve a larger student population, which increased by $4.6 million, or 16.3% over the same quarter in 2009. The increase in instructional expenses was attributable to a 10.6% increase in average student population as we began the third quarter of 2010 with approximately 3,900, or 15.0%, more students than we had on July 1, 2009. Also contributing to the increase in educational services and facilities expenses were higher facilities expenses, which increased by approximately $1.0 million, or 5.5%, over the same quarter in 2009. This increase was mainly due to facility expansions and related rent and property taxes. The remainder of this increase was due to an increase in depreciation expense of $0.2 million due to higher capital expenditures for the quarter ended September 30, 2010 compared to the quarter ended September 30, 2009. Educational services and facilities expenses, as a percentage of revenue, decreased to 37.9% for the quarter ended September 30, 2010 from 38.9% for to the quarter ended September 30, 2009.

Selling, general and administrative expenses. Our selling, general and administrative expenses for the quarter ended September 30, 2010 were $71.5 million, an increase of $5.0 million, or 7.5%, from $66.6 million for the quarter ended September 30, 2009. This increase in our selling, general and administrative expenses for the quarter ended September 30, 2010 was primarily due to: (a) a $3.5 million, or 15.5%, increase in sales and marketing; (b) a $1.0 million, or 16.4%, increase in student services expenses; and (c) a $0.5 million, or 1.3%, increase in administrative expenses.

Educational services and facilities expenses. Our educational services and facilities expenses increased by $23.2 million, or 14.8%, to $180.3 million for the nine months ended September 30, 2010 from $157.1 million for the nine months ended September 30, 2009. This increase in educational services and facilities expenses was primarily due to instructional expenses which increased by $16.7 million, or 20.9%, and books and tools expenses, which increased by $1.1 million, or 4.4%, respectively, over the same period in 2009. These increases were attributable to an increase in average student population and higher book and tool sales during the nine months ended September 30, 2010 compared to the same period in 2009. We began 2010 with approximately 7,700, or 35.4%, more students than we had on January 1, 2009, and as of September 30, 2010 our student population was approximately 1,650 higher than as of September 30, 2009. Also contributing to the increase in educational services and facilities expenses were higher facilities expenses, which increased by approximately $5.5 million, or 10.4%, over the same period in 2009. This increase was primarily due to expenses incurred in connection with the relocation of two of our campuses, facility expansions and related rent and property taxes. The remainder of this increase was mainly due to an increase in depreciation expense of $1.6 million, or 9.8%, due to higher capital expenditures in 2010 compared to 2009. Educational services and facilities expenses, as a percentage of revenue, decreased to 38.2% for the nine months ended September 30, 2010 from 39.8% for the nine months ended September 30, 2009.

Selling, general and administrative expenses. Our selling, general and administrative expenses for the nine months ended September 30, 2010 were $211.5 million, an increase of $21.8 million, or 11.5%, from $189.7 million for the nine months ended September 30, 2009. The increase in our selling, general and administrative expenses for the nine months ended September 30, 2010 was primarily due to: (a) a $12.8 million, or 19.7%, increase in sales and marketing; (b) a $3.5 million, or 22.2%, increase in student services expenses; and (c) a $5.4 million, or 5.0%, increase in administrative expenses.

At September 30, 2010, we had cash and cash equivalents of $14.4 million, representing a decrease of approximately $31.6 million as compared to $46.1 million as of December 31, 2009. This decrease is primarily due to us repaying $20.0 million during the first quarter of 2010 outstanding under our credit facility and the repurchase of $50.0 million of our common stock during the second and third quarters of 2010. Historically, we have financed our operating activities and organic growth primarily through cash generated from operations. We have financed acquisitions primarily through borrowings under our credit facility and cash generated from operations. We currently anticipate that we will be able to meet both our short-term cash needs, as well as our need to fund operations and meet our obligations beyond the next twelve months with cash generated by operations, existing cash balances and, if necessary, borrowings under our credit facility. In addition, we may also consider accessing the financial markets in the future as a source of liquidity for capital requirements, acquisitions and general corporate purposes to the extent such requirements are not satisfied by cash on hand, borrowings under our credit facility or operating cash flows. However, we cannot assure you that we will be able to raise additional capital on favorable terms, if at all. At September 30, 2010, we had net borrowings available under our $115 million credit agreement of approximately $113.1 million, including a $23.1 million sub-limit on letters of credit. The credit agreement matures on December 1, 2012.

Net cash used in financing activities decreased by $82.1 million to $66.1 million for the nine months ended September 30, 2010, as compared to net cash provided by financing activities of $16.0 million for the nine months ended September 30, 2009. This decrease was primarily attributable to the repayment of $20.0 million outstanding under our credit facility and the repurchase of $50.0 million of our common stock during the second and third quarter of 2010. Additionally, in 2009 we received $14.9 million of net proceeds from an issuance of our common stock.

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